Section 8 is a rental housing assistance program, funded by the U.S. Department of Housing (HUD), and administered by local public housing agencies. Sometimes referred to as the housing choice voucher program because it grants vouchers to eligible low-income families, people with disabilities, and seniors in order to help them obtain affordable housing.
Section 8 properties are owned by cooperating private landlords that agree to rent Section 8 approved properties to qualified voucher holders at fair market rents. The gap between fair market value and what the voucher holders pay is subsidized by the U.S. Department of Housing HUD and managed by a local public housing authority or local PHA.
It is important to mention that the responsibility for finding the rental property is up to the voucher holder, not the housing agency. There are States that are implementing regulations that mandate rental properties accept Section 8 voucher holders whether the private landlord wants to or not.
How Did it Originate?
First, a little background: the creation of Section 8 housing dates back to the Great Depression. It was first introduced as part of Franklin Delano Roosevelt's "New Deal" program back in the 1930s, In fact, the term "Section 8" comes from Section 8 of the Housing Act of 1937. As you might expect, it's evolved a lot between then and now.
The most important development came with the Housing and Community Development Act of 1974, which introduced the Housing Choice Voucher Program.
The Housing Choice Voucher Program is what most people mean when they refer to Section 8. It was established in response to criticism of government-owned public housing - people felt the government public housing program at that time, while well-intentioned, was just creating poverty-ridden areas that made the problems faced by low-income individuals and families worse, not better.
You've probably encountered the term "the projects" before. This phrase is shorthand for "public housing projects," i.e., housing that is owned by the public sector (that is, the government). This used to be the only kind of this type of housing available up until the introduction of the Housing Choice Voucher Program.
Nowadays, Section 8 housing can be in any apartment or house which passes inspection - the tenant has a choice when it comes to the type of housing. Section 8 is a private market solution to a public housing problem, and we know it works because section 8 is currently responsible for helping more than two times the number of eligible tenants as public projects.
Two Types of Section 8 Housing Vouchers
There are two types of vouchers: project-based vouchers and tenant-based vouchers.
Project-based vouchers, as their name implies, can only be used for specifically approved projects.
These are buildings, or areas that are designated to house eligible low-income families, and accept Housing Choice Vouchers. These tend to be larger multi-family buildings, more like apartment buildings than detached single-family homes.
Tenant-based vouchers, on the other hand, follow the tenant, not the project. These choice vouchers are used to pay property owners who have made their properties available to Section 8 tenants and have passed inspections. These are issued under the Housing Choice Voucher Program.
Section 8 For Tenants
Let's first take a look at this housing voucher program as it applies to tenants. If you find yourself facing financial difficulties, is applying for Section 8 housing a good idea for you? You may have become discouraged as people tell you it's too difficult to get, or that all the accommodations will be dirty and undesirable.
While the process of qualifying for the housing choice voucher program is certainly not easy, it's not impossible. there are specific steps you will need to take and plenty of paperwork you will need to fill out but at the end of the day, it's certainly worth the work.
As far as living conditions are concerned, the local housing agency inspects each unit and there is a minimum condition requirement the landlord needs to meet in order to be a part of the program. So, while the properties are certainly not brand new or luxury homes, they are clean and safe.
Section 8 won’t cover all of a voucher holder's rent. The housing choice voucher program uses something called payment standards to determine how much housing assistance payment money the public housing agency will pay the owner on behalf of the voucher holder.
A payment standard between 90% and 110% of the Fair Market Rents for a particular area is calculated by the local public housing agency. This represents the cost of leasing a moderately-priced dwelling unit in a particular area. These Fair market Rents are published regularly by HUD
The voucher holder will be required to pay 30% of their monthly adjusted gross income towards rent and utilities. If the rent exceeds the payment standard allocated for this house, the tenant would be required to pay the difference.
Pros and Cons of For Tenants
The most obvious advantage of Section 8 is that it can help you pay your bills. A lot of people can get to the point where paying for rent is their primary concern - this rental subsidy helps alleviate this rent burden so you can pay for other necessities such as food.
Section 8 affords low-income families the opportunity to improve their situation
One major drawback is that you will most likely be placed on a waiting list - it may take as long as a year or two for Housing and Urban Development to determine if you or your family qualify. However, during this time you will likely be able to use project-based vouchers.
Although you will most likely be placed on a waiting list - the demand for vouchers is greater than the number of accommodations available - Section 8 is not a first-come, first-serve system.
There are certain qualifications that can give you preference when it comes to getting housing. Some of these include:
- The family being homeless.
- The family currently living in substandard housing
- The family paying more than 50 % of their income for rent
- The family has been involuntarily displaced
If any of these conditions apply to your situation, be sure to let the PHA (Public Housing Authority) know as you may be able to get housing faster.
How Can I Qualify for as a Tenant?
Qualification for housing choice vouchers is based mainly on your income, and the amount of the payment standard HUD is willing to fund varies based on your family size. It also depends on the area you live in: there are income limits, as a rule of thumb, you can not earn more than 50% of the median income of the area in which you live in order to qualify.
The tenant will also need to go through the private landlord’s standard screening process. This usually involves a credit check, a background check including a look at any criminal history, or eviction history.
The tenant will in most cases also be responsible for the security or damage deposit.
Section 8 voucher holders are responsible to report any changes in income or family composition or familial status to your local public housing authorities.
In general, you must be a US citizen in order to qualify for Section 8, though there are certain exceptions.
How To Apply
To start the application process, you will visit a Public Housing Agency office. HUD maintains a list of participating agencies, you can find the list here.
Applications are free and can be filled out in person, sent through the mail, or even submitted online.
You will most likely be placed on a waiting list for 1 to 2 years, during this waiting period, you can choose to accept project-based vouchers.
Once the tenant applicant is approved they can start to search for rental properties that accept Section 8 vouchers. Once they find a property, the local housing agency will need to inspect the housing unit and make sure it meets the section 8 criteria, this also includes a physical inspection to make sure the property is in good condition.
Each local housing authority will have a different process, and different requirements for this rental assistance program, it’s best to start with the local housing agency.
Section 8 For Landlords
If you are considering becoming a Section 8 landlord, you probably have a lot of questions. First and foremost, you'll be wondering: "should I become a Section 8 landlord?" Well, there are benefits and drawbacks to accepting Section 8 tenants. We'll start with some of the benefits.
Pros for Landlords
If you've been a landlord for any length of time, you'll know that one of the most frustrating things about being a landlord is overdue rent; you've probably heard that rent is guaranteed with a Section 8 tenant, and what could be more appealing than this? Well, it's at least partially true, and one of the biggest advantages of renting out to a Section 8 tenant.
Basically, the government will only pay a certain percentage of the rent - this you can expect to receive every month (although when first starting out with a tenant, it might take a few months to get rent; more on this below)
Given that the whole point of public housing is for the government to guarantee accommodations to those who can't afford it, it might seem strange that they're only paying a portion of the rent, but that's the way it works unless the tenant is making no income in which case they'll probably cover it completely.
As you can see, saying Section 8 means "guaranteed monthly rent" is a bit of a misnomer. As with any tenant, it's your duty to evaluate the Section 8 tenant, looking at things like their credit history.
Since the government will be paying most of the rent, market-based increases on rental units are less traumatic for tenants.
Another benefit of agreeing to accept Section 8 tenants is that you'll be able to fill up vacancies more quickly. Since there is a shortage of landlords who are willing to work with housing voucher clients, these apartments and houses are continuously in short supply and high demand: we don't want to say it's guaranteed that a vacancy will fill up in a few days, but there's a good chance that, in a lot of cases, it will be filled more quickly than if it were being rented out the normal way.
Since a lot of landlords will not accept Section 8 vouchers, this also means tenants are less likely to leave this type of housing (ideally, yours) once they've found it. Section 8 leases are usually for a minimum term of one year.
Cons for Section 8 Landlords
Above, we mentioned that apartments or houses that wish to become Section 8 housing must pass inspection. As with any federal government program, there can be a lot of red tape!
Once a year, an inspector will visit the property to ensure it meets standards and habitability requirements. You may be required to make changes at your own expense, though there are preventative measures you can take to make sure this doesn't happen.
Of course, although the government pays around 70% of the rent, the other 30% is not guaranteed. If you are an experienced landlord, you should use your standard systems for qualifying section 8 tenants. This should involve a credit check, background check, and a follow up call with any references.
It’s important to be consistent with your qualification standards from tenant to tenant. The fastest way to end up with a fair housing violation is to use different standards for approving or rejecting different tenants.
Another business practice landlords should maintain is the security or damage deposit. When leasing to a Section 8 voucher holder, it’s important to maintain your normal business standards, if you normally charge a security or damage deposit, you should use the same standards with a section 8 applicant.
So, overall, there are advantages and disadvantages to becoming a Section 8 landlord.
Determining whether or not it's right for you can seem like a balancing act of weighing the benefits against the drawbacks and vice versa.
In spite of all the myths you have heard, this is not necessarily a disaster, nor is it a magical, higher-than-average guaranteed rent situation.
We recommend really doing your research, taking your time and especially researching the experiences other landlords have had with Section 8 tenants so you can learn more about the perks but also be on the lookout for any potential problems.
Section 8 is a valuable program that benefits both tenants and landlords. It can help tenants get back on their feet, saving them from homelessness if they can't otherwise afford rent, and it helps landlords have steady access to a large supply of potential tenants.
Whether you are a person who needs cheaper housing, or a landlord who needs more tenants, Section 8 is certainly something worth looking into. If you have any questions regarding this topic, feel free to contact us.