Section 8 tips for property managers and landlords
Published on: Thursday, December 3rd, 2015
While there can be a lot of paperwork initially (and inspections, back and forth with case workers, etc.), becoming a successful Section 8 landlord can end up benefiting you as much as your tenants.
In the property management industry, Section 8 housing assistance is often looked upon with a jaded eye. Many property managers look at the program and see only the problems: too much paperwork, too much government involvement, low-quality tenants, and a host of legal issues and expenses. While there can be a lot of paperwork initially (and inspections, back and forth with caseworkers, etc.), becoming a successful Section 8 landlord or manager can end up benefiting you as much as your tenants.
What is Section 8?
Section 8 housing authorizes rental assistance on behalf of more than 4 million low-income households throughout the United States. In addition to providing affordable housing to a number of communities around the country, the programs also incentivize landlords who are willing to work with local housing authorities.
So, why are people hesitant to get involved in affordable housing management? Aty management Barnesville ohioX property management CambridgeX property management st. clairsvilleX property management ZanesvilleX rentals in ohio valleyX steubenville ohio property managementX Wheeling wv property common misconception about Section 8 is that it’s a “free ride” for participants. The truth is, tenants are required to pay rent equal to 30% of their income, and the federal money allocated for the Program pays the balance directly to the landlord or property manager. The federal portion of the payment is limited by fair market rent guidelines set by the U.S. Department of Housing and Urban Development. Guidelines are based on geographic area, unit size, and how utility payments are split between landlord and tenant. Additionally, there is no time limit for participation—a family can participate in the program as long as they have a need.
What are all of the available assistance programs?
The largest of the various assistance programs is called The Housing Choice Voucher program, and can be tenant-based or project-based.
- Project-based vouchers apply to specific apartment communities that work with the local public housing authorities (PHAs). Many of these types of programs have fallen by the wayside due to a less-than-admirable history of housing projects in the U.S.—for example Chicago’s Cabrini-Green or New York City’s Queensbridge Houses.
- Project-based housing hasn’t completely disappeared though, there are still many apartment communities that accept both voucher recipients and full-market-rate tenants. The benefits of going this route are that voucher recipients are not forced into “the projects,” and landlords have a pool of pre-screened applicants to choose from. And, managers and owners can still provide safe, affordable housing to tenants looking to rent at full-market rate.
- Tenant-based vouchers allow tenants to choose any privately rented unit, as long as the landlord participates in the Section 8 Program. Voucher recipients see the most significant benefits from this program, as they have a greater freedom of choice in housing. The most comprehensive review of the HCV program is the HUD Housing Choice Vouchers Fact Sheet.
What Section 8 is not
The Section 8 program is not easy to enroll in.Interested landlords and property managers must complete several applications, undergo a number of property inspections, and be recertified regularly. Once enrolled, landlords cannot raise rent prices whenever or however they want, and they cannot discriminate against Section 8 applicants. It is worth noting, however, that a landlord is not required to participate in the Housing Choice Voucher program.
It is not a “free ride” for tenants. They are required to pay their portion of the rent and abide by the terms and conditions of the lease documents as well as the rules of the Section 8 program. A common misconception among residents is that if
the rent is not being paid by the local housing authority (for any number of reasons, several detailed below), then they do not have to pay, either. Unpaid rent is still grounds for eviction from Section 8 housing.
It is not a mediation program. Being a part of the Section 8 program does not provide provisions for dispute resolution. The local housing authority will not intervene if there are any problems between the tenant and the landlord.
Advantages of accepting Section 8
Guaranteed, on-time rent payment. Because it’s government subsidized, the rental income is more assured than in market condition rentals. The PHA will either write a check to the landlord or direct deposit the funds into a pre-specified bank account. Because late payments could result in the loss of voucher eligibility, residents are more likely
to pay their portion on time as well. This can lead to eviction, it’s difficult to get back into any housing assistance programs after an eviction. For these reasons, Section 8 rental income is considered some of the most reliable.
Pre-screened applicants. Housing authorities pre-screen all applicants, checking income levels and criminal backgrounds—most authorities will reject any applicant with a criminal history. This provides extra protection for the owner’s property, and greatly reduces the risks of problem tenants.
Help filling vacancies. Accepting housing assistance payments increases the visibility of a rental property in markets that may have hundreds (sometimes even thousands) of potential tenants on waiting lists. In major urban markets, the resident waiting list may be far greater than the number of available properties. If landlords are willing to cooperate with the local housing authority, then the
PHA will be more willing to fill vacancies from these waiting lists.
Free advertising. The U.S. Department of Housing and Urban Development maintains a website that potential tenants can use to locate suitable low-income housing: HUD Landlord Search. Additionally, many local PHAs maintain their own websites that contain lists of available units and contact information for landlords. It’s free for tenants to use these websites, and free for owners or managers to list available units.
Disadvantages of accepting Section 8
Mandatory inspections. Units must be subjected to an initial safety inspection, and ongoing, routine inspections by the housing authority.
During these in-depth inspections, the PHA looks at the overall quality of the unit, including exterior and common areas (hallways, basements, laundry
rooms) in multi-unit properties. Additionally, units need to meet the following criteria:
- GFCI plugs for every electrical outlet
- Lockable windows with well-maintained screens.
- Working smoke and carbon monoxide detectors in specific locations
- Deadbolts on all door locks
Rent limits. Local PHAs do not specify rent prices, but they must be within the range of the area’s median income guidelines. If an approved unit is located in an area that commands higher rents, the higher market rent is probably too high. On the flip side, if a nicer unit is located in a bad area, the landlord may lose out on being able to charge a slightly higher market rent that could have been charged outside the Section 8 program.
Tenant quality is uneven. Since the tenants are not paying the majority of the rent, they may be less likely to maintain the interior of the rental unit, and may be more likely to cause problems for the owner or manager of the property. As a result, more desirable tenants (outside of the Section 8 program) may be less likely to rent in a property that accepts Section 8 payments. However, building a solid relationship with the local housing authority may allay the fears of other future tenants.
Section 8 tenants are just as much work. There’s no decrease in a landlord’s workload simply for accepting Section 8 tenants. While most local PHAs assist during the rental process, landlords and property managers still need to screen potential tenants, create and enforce leases, and maintain the property. Additionally, the PHA does not help in collect the tenant’s portion of the rent.
Still though, if a landlord is dedicated to the
program, maintains the approved units, and keeps an active watch on the property, there is no reason that they cannot be successful housing assistance providers.
How to Qualify
This section will cover the requirements to become an approved Section 8 landlord for the City of Chicago, my home base. However, the majority of the guidelines are federally established, so most housing assistance programs operate under the same set of requirements countrywide.
Note that each local PHA can create and enforce additional requirements. You can find yours with the Local PHA Finder.
- Education: The Chicago Housing Authority (CHA) requires landlords to attend a mandatory Owners Briefing seminar in order to become Section 8 managers. It includes information on required inspections, participating landlord rights, how to rental rates are determined, and how to list and market properties. They usually take less than 4 hours, and provide the opportunity for property owners to interact with CHA representatives face-to-face.
- Listing and marketing the rental unit: After completing of the seminar, the landlord is able to list and market the rental units with The CHA, in collaboration with ILHousingSearch.org, which provides a free listing service for available properties. Other options are local Craigslistpages, and posting ads in local stores and supermarkets (this works best in smaller communities). When a potential tenant expresses interest, the landlord or property manager would process the application as they would for any other tenant.
- Inspecting the rental unit: If the potential tenant is approved but the property manager or landlord, then the CHA’s Request for Tenancy Approval Packet is completed and submitted to the CHA. Once it is received and reviewed for accuracy, a Housing Quality Standards (HQS) inspection is scheduled, usually within 3 to 5 days. The HQS inspection ensures that the property meets all health and safety standards set by the federal government.
There may be multiple inspections. Obviously the most important is the Move In Inspection, which will determine compliance with the HQS guidelines. Then, annual inspections occur when leases are due for renewal, and regulary compliance inspections occur when repairs (that are landlord responsibility) are required and completed.
Emergency inspections, usually related to life-safety issues (no working smoke/carbon monoxide detectors, no utilities, lack of working plumbing, etc.). As of December 2013, the full CHA HQS Inspection Guidebook was over 190 pages long, so the CHA provides a two-pageself-inspection checklist to prepare for the initial compliance inspection.
- Establishing a Reasonable Rent for the Unit:After the unit passes the HQS inspection, the CHA works with the landlord to establish a reasonable rent when compared to similar “unassisted” units in the neighborhood. HUD uses median income guidelines to establish income limits. In Illinois, limits are indicated for households of one to eight people, and are broken into Very Low Income Limits, Extremely Low Income Limits, and Low Income Limits.
- Signing the lease: Once the rent is determined in accordance with the income guidelines, the lease is signed by both the resident and the property manager or landlord, and then the landlord signs a Housing Assistance Program contract with the CHA. This establishes the relationship between the CHA and the landlord and details the rights and responsibilities of both parties. The contract also contains the provisions the tenants are required to adhere to during their tenancy.
What if the property fails inspection?
An inspection failure does not automatically terminate participation in the program.
If the failure is on the move-in inspection, thelandlord has 30 days to make the required repairs and have the unit re-inspected.
It is the landlord’s responsibility to notify the CHA once the repairs are completed; they will not track the progress of the repairs. If the repairs have not been completed within the 30-day window (or the re-inspection cannot occur within the same 30 days), the CHA will abate the contract (withhold rent payments), effective the first of the month following the end of the 30-day window. Rent payments from the CHA will stop until a re-inspection can occur. It is common for the CHA to
pay out any abated rent once the re-inspection is completed satisfactorily.
If the unit has failed an inspection due to tenant-caused violations, the CHA will begin termination proceedings. If the tenant misses a scheduled re-inspection, the CHA offers two more rescheduled inspections. If the final inspection is missed without notice, the CHA considers the tenant in violation of the Program rules and will initiate termination proceedings.
Although this process may leave a bad taste for Section 8, the unit can remain on the market as an affordable housing options for other Section 8 participants. A re-inspection would need to be completed after repairs are made, and if the landlord has a solid working relationship with the CHA, it may be possible to reduce the likelihood of future problem tenants. Please keep in mind,
however, that by working diligently and cooperating with both the CHA and the tenant, most problems can be easily remedied, or completely avoided.
Although this process may leave a bad taste for Section 8, the landlord can (if they so choose) to continue offering the rental unit as a housing assistance unit. A re-inspection would need to be completed after any necessary repairs are made, and if the landlord has a solid working relationship with the CHA, it is possible to reduce the likelihood of future problem tenants. Please keep in mind, however, that by working diligently and cooperating with both the CHA and the tenant, most problems can be easily remedied, or completely avoided.
Originally published on Buildium.com
By: Chris Kevitz