The Section 8 Housing Choice Voucher program, a housing assistance initiative that is funded by the US Department of Housing and Urban Development (HUD) identifies landlords and apartment on their data base system so you may be asking yourself how do I become a section 8 landlord. From the point of view of a landlord, joining this programme represents a big choice with a clear trade-off, you get the offer of guaranteed rent in exchange for entering into a particular set of administrative arrangements.
The Procedure: How to Lease to a Voucher Holder
Becoming a Section 8 landlord is not an overnight process, but there is a course of action to follow. A landlord has to post their rental property and screen potential tenants, just like in the private market. If a tenant with a voucher is interested, the rent will be negotiated between landlord and tenant. This agreed-upon rent, however, then needs to be approved by the local Public Housing Authority (PHA); it has to be considered "reasonable" in relation to like units without assistance in the neighborhood.
Once rent is approved, the PHA performs a very important Housing Quality Standards (HQS) inspection. This is a more thorough inspection than the one done by your average municipality, and looks at whether or not the tenant's lifestyle poses any health and safety issues. It looks at functioning utilities, secured windows and doors, the absence of lead-based paint hazards and general structural soundness. The unit has to be approved in this inspection prior to lease starting. Last, the landlord enters into a contract with the PHA (housing assistance payments contract) and a lease with the tenant.
The Great Pros: Stability and Money Security
One of the Section 8 program's most attractive aspects for landlords is this rock-solid financial stability. A sizeable percentage of rent is assured to be paid by the PHA through an electronic funds transfer each month. This offsets the default risk of rents, and gives predictable income which is a very good thing to have in times of recession.
One more big benefit is the pre-qualified tenant list. Although landlords must screen in the traditional sense, they can have peace of mind knowing that tenants previously were screened by the PHA for income eligibility. The program also mandates the property to be annually inspected for HQS (Housing Quality Standards). This may prevent damage to the property and will help ensure that it is kept in a good condition resulting in maximizing long-term values of your investment. Participation also provides a less tangible benefit—a quality community service of safe housing for low-income families, elderly and disabled individuals—that we know HUD-assisted tenants receive.
The Cons: Bureaucracy and Lack of Control
The primary disadvantage that is commonly pointed out with the Section 8 program is red tape. The process requires a lot more paperwork than a standard lease, including at the outset, an annual re-certification and any changes in between. Working with a government agency can also translate into slower approval or payment response times when it comes to the private sector. Although the compulsory HQS inspection is helpful, it can sometimes be a barrier.
Landlords also give up some of their control in managing properties. The main restriction in the program is that the rent paid by the PHA is limited by the Payment Standard of a given area. In a strong rental market, it could stop landlords from getting the very highest possible market rent. Landlords still have the ability to screen tenants for prior conduct, but the process of eviction could be complicated if a tenant is at fault.
Conclusion
The choice to accept Section 8 is just about the long-term business decision. The trade-off is obvious: the potential for a capped, in some cases lower rent and government bureaucracy in exchange for an extremely stable, reliable income stream and low vacancy rates.
