Should you consider renting to Section 8 tenants?
I am often asked about Section 8 and if a landlord should consider renting to someone with a Section 8 certificate. They want to know if they should accept these tenants, what kind of rent they could get, and what are some of the pros and cons. of this program. Very often they initially start out with a negative view of Section 8, so I thought I’d give some pros and cons and allow you to make a better decision on this program.
What is Section 8?
The PA Section 8 program, also known as the Housing Choice Voucher Program, provides rental assistance to low-income families in the private rental sector. Funded by HUD (United States Department of Housing and Urban Development), Section 8’s housing goals are to provide better conditions for families while helping them obtain low-income housing, maintain rent payments, and promote greater freedom of choice in housing conditions. This federal program offers incentives to apartment complex and private homeowners to ensure the continued availability of government-subsidized housing. At the local level, the Pennsylvania Public Housing Authority (PHA) is responsible for qualifying applicants and distributing vouchers to eligible families.
The PHA lists low-income home rentals in each of Pennsylvania’s 67 counties, although each complex and home is privately managed. So each county, Montgomery County, Chester County, and even Philadelphia County administer their own Section 8 programs. Even within some counties there are individual towns that have Section 8 offices. For example, Chester, PA has its own Section 8 office.
Philadelphia County is a very busy office and it is very difficult to work with. To be frank, it is a struggle for Del Val and others to work with them. They try to improve their systems but they are very bureaucratic. It is very difficult to reach them by phone to get answers to simple questions. It is much easier to communicate with counties outside of Philadelphia.
But it is a partnership between three people: the landlord / landlord, the tenant, and the Section 8 office. Traditionally, there is a lease between a tenant and a landlord / landlord. That is the contract that sets out how the lease will work. But with a Section 8 tenant there is a second contract, which is a payment contract that describes the payment amounts and when they will be due. That lease is signed by the Section 8 office, the tenant, and the landlord / landlord. So this is an additional contract and in exchange for them offering to pay the rent, the landlord / landlord must agree to abide by their rules and regulations. One of those rules is that the landlord / landlord will keep the home in good repair and Section 8 inspections will be conducted on a regular basis to make sure you are doing just that.
What are some of the benefits of Section 8?
One of the advantages, obviously, is your HUD federally funded guaranteed rent, so there is no credit risk involved. Traditionally, Section 8 will probably pay 90-100% of the rent. The tenant may pay a small portion from time to time, but 90-100% of the rent will normally be paid by the Section 8 office. You will get a one-year lease, sometimes a two-year lease. Philadelphia County offers a two-year contract. So obviously once you place that tenant there for the next two years, you know that your property will be rented and you will receive your rent.
Now the question arises about the rent; Is my rent going to be higher or lower than it would be otherwise? In some cases, it will be a little higher, but I usually tell landlords that it will be within 10% + or – than other rents. Again, it depends on the county, it depends on the city and the area, so everything is a little different in each case. Typically five to 10 years ago, the Section 8 rent would probably be 15% lower than a non-Section 8 person. But I think that gap has recently narrowed to no more than 10% of what you will receive. In some cases, you may get more for Section 8 than you would for a non-Section 8.
What are some of the disadvantages of section 8?
One of the negative aspects is that they will carry out regular inspections. So initially, before the tenant moves in, they do an inspection and you must comply with what they ask you to do. They are not going to ask you to do anything out of the ordinary. So you will have to make sure your outlets are working, your smoke detectors are working, that you have fire extinguishers, stair railings are tight and secure, and outside that your hallways and things are safe and trip free.
Another downside is the fact that the tenant can call Section 8 from time to time and say something’s wrong. And if Section 8 comes out and determines that it is correct, it is not working, then they could stop paying their rent for a period of time. This is called a “rent reduction,” which means that you will not receive any rent during that period.
Why Should You Consider Section 8 Tenants?
In some areas, Section 8 may be your only option. There are certain areas where Section 8 is very prevalent and so there are not many options and you may have to go for Section 8. There are certain areas of Philadelphia, Norristown, Pottstown and Reading that have high concentrations of Section 8 Therefore , it may be your only option in those areas.
Tenants tend to stay longer. If a tenant has a Section 8 certificate and likes their home, it is being maintained, and repairs are being made, for the most part they won’t want to leave. For a reason, because there aren’t many other Section 8 homes out there. Also, it is very difficult to get around and there is a lot of paperwork involved and a lot of risk on your part. If they notify you that they are moving and cannot find another home within 60 or 90 days, they may lose their Section 8 certificate. Second, moving from one county to another is very difficult. So if you want to move from Philadelphia to Montgomery County, there is a lot of paperwork involved and the red tape is not easy. So, for the most part, Section 8 tenants stay a long time.
Section 8 requires you to keep your home in good repair, they inspect it, and that’s a good thing for you as the property owner. You want to keep your property in good condition.
There is also a lot of demand from Section 8 tenants. When we put “Welcome to Section 8” in our ads, they get a lot of attention and so obviously that’s a good reason to use Section 8.