Whether you are new to real estate investing and looking to rent your very first rental property or an experienced landlord with a robust rental portfolio, chances are you’ve considered renting to Section 8 tenants. With benefits like government-subsidized income and free advertising, it’s easy to understand the appeal. However, for many, some of the hardships that come with being a Section 8 landlord outweigh the potential rewards.
Below, we share what Section 8 Housing is, how Section 8 works for landlords, what it means to rent to Section 8 tenants, and how to use this strategy, including the pros and cons associated with accepting housing subsidies for low-income tenants. We’ll also explain how you can qualify to become a Section 8 landlord and find eligible properties for sale. Continue reading to learn more about this controversial strategy so you can decide if it is the right fit for you.
What is Section 8 Housing?
The Housing Choice Voucher Program (HVC), also known as Section 8, was founded in 1937 as an affordable housing initiative that allows landlords to rent homes at lower market rates to qualified low-income tenants. In practice, the voucher program pays the balance of the rent payment that exceeds 30% of a tenant’s monthly income. The federal program, run by Housing and Urban Development (HUD), is carried out by the local Public Housing Authority of each state.
Prior to being approved as a Section 8 landlord, units must be inspected and approved by the local housing authority, and the rental amount must be at or below the Fair Market Rent set by HUD. The local Public Housing Authority will directly pay the subsidy amount to the qualifying property/landlord. The tenants will need to pay the amount of rent not covered by the voucher.
There are two types of Section 8 Housing:
1) Tenant-Based
The tenant-based voucher is attached to the tenant. When the tenant moves, the rent assistance can move with them.
It’s important to note that the demand for Section 8 housing far exceeds the supply. In other words, tenant vouchers are extremely limited, and many individuals and families have to put themselves on long waiting lists. Once a voucher has been received, there are often strict rules that the tenant must follow to avoid losing the voucher and being forced to reapply.
2) Project-Based
The Project-Based voucher is attached to a specific property. When tenants move into a property that participates in the Project-Based Section 8 Program, they receive the same type of financial assistance as tenants with a voucher. However, if they move, the program benefits stay with the property, benefiting the next resident of that home.
In this case, the landlord must qualify for the voucher and then qualify tenants independently (the tenant does not have to work through HUD directly). Qualifying properties also tend to have long waiting lists.
Pros of Renting to Section 8 Tenants
Renting to tenants with housing vouchers is a great option for many landlords. There are a variety of reasons for this: it can be profitable, the housing authority is not as difficult to work with as many people think, and properties usually rent more quickly (lower vacancy rates mean even more profit). With that said, how Section 8 works for landlords and how well it will work for you largely depends on how you run your business.
For example, large property management companies can easily handle the extra work that accompanies Section 8 rentals, while private landlords may not have the time to invest in the program. Below are the top 11 benefits of renting to tenants with housing vouchers.
11 Benefits of Renting to Section 8 Tenants
- Consistent Rent Payments Made by the Government
- Pre-Screened Tenants
- Constant Tenant Base (Lower Vacancy Rates)
- Less Turnover (Another Reason for Lower Vacancy Rates)
- Tenants are Motivated To Pay their Portion of Rent
- Less Delinquency
- Fewer Evictions
- Better Profit Margins
- Free Advertising
- Business Support Scholarship
- The Joy of Being Able To Help People in Need
1) Consistent Rent Payments Made by the Government
The biggest perk of accepting Section 8 subsidies is that a substantial part of the rent money you are owed will show up on time each month via direct deposit or a mailed check. Also, tenants will typically pay their portion on time because failure to do so can cost them their housing voucher.
Another key factor is that, even if the tenant loses their job or receives lower wages than before, the government will continue to make up the rest of the rent that the tenant is unable to pay (after 30% of the income amount). As a landlord, this can help you avoid rental payment issues that could arise from a full-paying tenant facing a similar financial dilemma.
2) Pre-Screened Tenants
Another benefit for landlords is that tenants are pre-screened by the housing authority. In addition to qualifying a tenant’s income, the housing authority also performs criminal background checks and drug testing for all household members who are 18 years of age and older. This screening process may provide extra protection for your rental, as tenants have to pass both your tenant screening process and the housing authority’s.
3) Constant Tenant Base (Lower Vacancy Rates)
The Housing Choice Voucher Program is popular and most urban areas have hundreds (if not thousands) of tenants on their waiting lists. As such, by participating in the program, your property becomes marketable to a wider pool of tenants, which gives you a better chance of getting it rented quickly.
4) Tenants Often Stay Longer (Another Reason for Lower Vacancy Rates)
Because Section 8 guarantees rental assistance for individuals who qualify (as long as there isn’t a big change in income or family size), most of these tenants stay longer. This is another big contributing factor to the lower vacancy rates Section 8 landlords usually enjoy.
5) Tenants are Motivated to Pay Their Portion of Rent
HUD sets Fair Market Rent at a level that is in the 40th percentile for the rents in the area. Put simply, this means that 40% of homes in the area rent for less than this amount and 60% rent for more than this amount. As such, rents are slightly lower than the median rental price for that area. In some more expensive metropolitan areas, Fair Market rent is set at the 50th percentile.
This is important for Section 8 landlords because it means that low-income tenants will be able to afford their portion of the rent. These tenants also really want to pay their rent because they want to keep their Section 8 vouchers.
6) Less Delinquency
The Property Teams we work with at RealWealth often report that tenants using Section 8 vouchers have fewer delinquencies than non-Section 8 tenants. This makes sense, as Section 8 tenants want to keep their vouchers so they can continue enjoying the benefits the Section 8 program offers.
That said, if a Section 8 tenant is delinquent on their rent, you can evict them as you would a normal tenant. In some cases, this process can take longer, as there may be more red tape to navigate.
7) Fewer Evictions
This Section 8 benefit goes hand in hand with the one above. Most Section 8 tenants want to keep their vouchers, so they will do their best to keep your property well-maintained and to follow the lease agreement.
8) Better Profit Margins
While it might not be true in every real estate market, in many areas, the rent you can get from a tenant using a Section 8 voucher is higher than what you can get in your typical C (or even D) neighborhood. When you couple this fact with the consistent and timely rent payments you’ll receive from the government and the willingness of Section 8 tenants to pay their rent, many landlords enjoy (and some even prefer) Section 8.
9) Free Advertising
The U.S. Department of Housing and Urban Development has a website that prospective tenants can use to find qualifying low-income housing. Several local housing authorities also maintain websites or separate lists of landlords who accept housing vouchers in their areas. Both of these services are provided free of charge to tenants and landlords.
10) Business Support Scholarships
Companies offer scholarships to Section 8 landlords to obtain advanced property management training and discounts on everyday property management supplies. You can contact your local housing authority to learn about these opportunities.
11) The Joy of Being Able To Help People in Need
While there are various benefits to becoming a Section 8 landlord, one of the biggest is being able to help someone in need.
Cons of Renting to Section 8 Tenants
While renting to Section 8 tenants has many benefits, there are also some potential disadvantages. It would be wise to talk to participating landlords in your area to learn how it is going for them. In the meantime, here are 11 disadvantages to be aware of. Please note that these will not apply to all Section 8 landlords or tenants!
11 Disadvantages of Renting to Section 8 Tenants
- Rental Pricing Regulations
- Risk of Renting in Lower-Income Areas
- Restrictions of Section 8 Tenants
- Don’t Receive Voucher Payment Until Tenant Moves In
- HUD Does Not Pay Security Deposits
- Annual Property Inspections
- Potential for Difficult Tenants
- Property Damage Issues
- Harder to Evict Difficult Tenants
- Full-Paying Tenants May Turn Away
- Difficulty Selling Properties to Free Market
Please note: Section 8 varies from city to city, so make sure to check with your local housing authority about their specific rules and regulations before making any decisions about becoming a Section 8 landlord.
1) Rental Pricing Regulations
Complying with the Housing Voucher Program entails setting rental prices according to the Fair Market Rent (FMR) calculated by HUD. They make these calculations based on the number of bedrooms in a unit and sometimes the value of your property. This will vary according to your specific county.
During the screening process, HUD approves tenants for a voucher covering a one-bedroom or greater unit, depending on their family size. In order to qualify as a Section 8 landlord, your bedroom units will need to match the dollar value of these vouchers.
For example, if HUD says that the FMR in your county/community for a two-bedroom is 1000 dollars, you will be asked to keep your rental rates at $1000 or less. Therefore, if you are a landlord with a property in a higher-rent neighborhood wanting to receive market value, it may be near impossible to find renters of Section 8.
2) Risk of Renting in Lower-Income Areas
As mentioned above, if you own property in a higher-income area, it likely won’t make financial sense to accept housing vouchers. While there is considerable profit to be made from the housing program in lower-income areas, there are some risks to be aware of, including:
- More crime and drug issues
- Increased property damage
- City authorities ignoring water/safety issues in the area
- Less appeal to potential renters
3) Restrictions on Tenant Vouchers
Tenants must comply with many HUD restrictions. One restriction is the number of bedrooms in a rental unit. For example, a household of 3 people will qualify for a two-bedroom voucher; therefore, the tenants will be looking for units only with two bedrooms. HUD will subsidize this particular family on a two-bedroom rental, paying the rest after what the tenant is required to pay, which is 30% of the household’s income.
4) Don’t Receive Voucher Payment Until Tenant Moves In
A common dilemma is when you will receive your first rental payment. Typically, you will not be paid by the housing authority until after the tenant moves into the property. This is mostly due to the administrative process, which can be quite slow initially. However, once you receive the first payment, you should expect consistent payment each month.
If you do not have the financial ability to wait a couple of months to receive the first month’s rent, then you might want to reconsider renting to Section 8 tenants.
5) HUD Does Not Pay Security Deposits
HUD provides housing vouchers that pay toward the tenant’s monthly rent, but the public housing authority does not pay security deposits (which are typical for most rentals). If you wish to collect a security deposit, you’ll have to collect it directly from the tenant. This could be an issue because the tenant has already shown to have income problems.
6) Annual Property Inspections
After the initial housing inspection, you will need to be ready for the Housing Authority’s annual re-inspection. They look at 13 main safety categories, and it is not uncommon to fail in one of these areas (or more). A broken handrail is an example of a hazard that could cause you to fail an inspection.
If you do fail the inspection, you will be given a list of items that need to be fixed. Once you fix all items on the list, you can schedule a re-inspection with the housing authority. They will once again send the inspector to determine if all issues have been fixed.
If you consistently conduct your own inspections and fix issues as needed, these inspections can go smoothly. However, if you have problematic tenants or do not perform regular managerial inspections, an inspection from the housing authority might be very stressful and a nuisance.
7) Property Damage Issues
Many landlords are wary of Section 8 tenants. Since these tenants are not paying much for the rental, they have less incentive to keep the property in great shape. However, the opposite could be said because tenants have more incentive to stay in good status with the landlord’s policies to avoid losing their vouchers. The risk of property damage may or may not increase with tenants in the program.
8) Potential for Difficult Tenants
It is assumed that Section 8 tenants are in a financial bind and, even with the housing subsidy, may still have difficulties paying their percentage of rent. For example, many individuals who qualify for housing vouchers are physically or mentally unable to hold a job or much of one. This may be from complications with old age, disabilities, or other health issues. Considering their personal hardships, they may not be able to maintain a high standard of property upkeep and cleanliness. They also may require more safety features and assistance throughout their rental period.
9) More Work to Evict Difficult Tenants
In a Section 8 eviction, you will need to abide by state and local laws governing evictions, just like with any other tenant. More work to evict comes into play as you will need to send copies of documentation throughout the eviction process to your local housing authority office. This includes copies of notices sent to the tenant explaining the violation(s) and when corrections need to be made to avoid eviction.
Additionally, some states have created rules requiring notification that the landlord receives permission from the housing authority to proceed against the tenant in court. Tenants do know, however, that if they receive a court eviction order, they will lose their voucher, so they will likely try to fix the problem beforehand.
10) Full-Paying Tenants May Turn Away
If your property has Section 8 tenants, full-paying tenants may be turned off by them because of the negative stereotypes associated with low-income individuals. They may assume the worst of these tenants and not want to be your neighbors.
You cannot change the way others feel, but you can make sure your property is well-maintained and appealing. In addition, it would be wise to only accept vouchers from tenants with a good standing rent history.
11) Selling Section 8 Properties to Free Market
It may be difficult to sell your property with Section 8 tenants later down the road. Potential buyers who are not interested in accepting housing vouchers may not want to deal with the hassle of ending leases to be able to rent to the free market again.
If you want more information on this strategy and how to be a Section 8 landlord, watch this episode on Kathy Fettke’s Real Wealth Show podcast, where she chats with a Section 8 investor!
The Future of HUD Section 8 Changes
Real estate security and affordable housing opportunities for all are always a balancing act. There are never any guarantees with real estate or government assistance, such as in the housing program. In 2018 and 2019, government officials made budget cuts in assistance programs for low-income individuals and families. HUD also regularly proposes changes to the Fair Market Rent calculations, and in 2024, they implemented a 10% income limit increase. If you choose to be a Section 9 landlord, you’ll want to stay up-to-date and aware of any potential HUD changes to the low-income housing program.
Federal Funding Cuts
We are all aware that government leaders and the financial stability of our country are always changing. Currently, there have been substantial cuts, and According to the Center on Budget and Policy Center, “Among these are substantial cuts in low-income housing programs that would affect a broad swath of low-income households, including several million working families with children, seniors, and people with disabilities.” Having said that, there may be fewer vouchers or added regulations that will trickle down, making things more difficult for Section 8 landlords.
With budget cuts projected to continue throughout the next decade, we are left to wonder how the Housing Choice Voucher Program will be affected. If vouchers were eliminated, would you have a difficult time renting your unit to full-paying tenants? Is your rental located in an area where people want to rent and is well maintained to appeal to most renters? Real estate and federal funding are always changing; therefore, Section 8 landlords need to be extra prepared to switch gears in how they rent and what they rent.
Restrictive and Changing Laws
Laws for landlords accepting tenants receiving rental assistance can vary greatly by city. In some cases, cities have laws to prevent discrimination against those with housing vouchers, and other cities may be loose in their guidelines for Section 8 rentals. If you live in a city with many rules and laws governing low-income vouchers, then it may be more of a hassle for you as a landlord than it is worth. Whereas if you live in an area where there aren’t many rules, it may seem easier; however, loose rules can create uncertainty and a lack of organization.
In 2018, the Small Area Fair Market Rent rule was enacted by HUD. This changed the calculations of FMR in metro areas because calculations are done by zip code and not just by areas within a zip code. This means that higher-income areas are included with the lower ones when calculating fair market rent. This is intended to help increase housing options for Section 8 recipients other than just low-income areas. More recently, HUD instituted a 10% increase cap on income, which also limits rent increases. Continual changes can create uncertainty in both the minds of recipients and landlords.
How to Become a Section 8 Landlord
After reading about the pros and cons of becoming a Section 8 landlord, you may be wondering how to get started. In order to accept housing vouchers, your local housing authority must approve both you, the landlord and your property. Below is an outline of how to qualify as a Section 8 landlord in the Housing Choice Voucher Program.
- You will need to contact your local Public Housing Authority. The contact information can be found on your state’s Public Housing Authority website. Each housing authority has different preferences and requirements based on its service area’s affordable housing needs.
- The housing authority inspector will meet with you and inspect your property to ensure it meets all local building and safety codes. They will use a government inspection form. The inspector will also review your rental rates to ensure they are in line with rates for comparable dwellings in your area.
- Once the inspector approves your property, you will sign a W-9 and paperwork to then begin accepting Section 8 housing vouchers. At that point, you find your own tenants, or they find you.
- Then, once a month, the housing authority will mail you a portion of the rent or directly deposit it into your bank. The tenant will pay you the rest. Although your rental rate may stay the same, the amount paid to you by the government may fluctuate depending on the Section 8 tenant income.
How To Find Section 8 Properties for Sale
Looking to purchase preexisting Section 8 rental properties? The U.S. Department of Housing and Urban Development is a good place to begin your search. There may be properties that are currently rented and simultaneously for sale. You might just need to phone the existing landlord to find out if their property is for sale.
If you are buying a property with current voucher tenants, you may keep this status with those tenants by signing a landlord exchange on a W-9 form with both the seller and you, the buyer.
Purchasing a property with current Section 8 tenants may be a jump start; however, keep in mind that you can become a Section 8 landlord anywhere you choose if you feel it is a wise business decision. All or part of your rental property can be rented as long as you have followed the HUD guidelines.
Is Now the Time to Invest in Section 8 Housing?
As you’ve learned, there are compelling pros and cons to consider before becoming a Section 8 landlord and renting to tenants in the Housing Choice Voucher Program. With any investment property, there are advantages and disadvantages to renting, and Section 8 is no different. You’ll want to weigh out the pros and cons and determine what is important for your investment strategy and your purpose behind being a landlord. The demand for affordable housing continues to grow and now may be a great time to invest in Section 8 Housing.
