6 Risks of Renting to Section 8 Tenants
Who Pays Security Deposit and Maximum Rent Amount
Section 8 is a rental assistance program run by the government. There are different procedures and requirements a landlord must follow when renting to a Section 8 tenant than when renting to a tenant who does not receive this housing choice voucher. Learn six risks that a landlord may face when dealing with the Section 8 program.
1.Yearly Section 8 Inspections
When you rent to a Section 8 tenant, you will have to deal with frequent inspections of your property. Your local Public Housing Authority will send a Section 8 inspector to your property once a year. This inspection has to be done even if there has been no tenant turnover.
The inspector is making sure your unit meets HUD’s Housing Quality Standards. There are 13 areas the inspector will look at to determine if the unit meets HUD’s safety and health standards. These areas include sanitary system, lead-based paint, water supply, electrical and smoke detectors.
The Section 8 program has very strict standards, so it is not unusual to fail a Section 8 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 Section 8 office. They will once again send the inspector to determine if all issues have been fixed.
2. Tenant Moves In Before You Collect Rent
A landlord traditionally collects rent before a tenant moves into the rental. Section 8 is different. You will typically not receive your first rent check from Section 8 until after the tenant moves into the property. There have even been cases where landlords have had to wait as many as three or four months to get paid by Section 8, but once you receive the first payment, you should expect consistent payment each month.
The delay in payment is something to keep in mind when considering renting to Section 8 tenants. If you are not financially able to wait a couple of months to receive rent, then Section 8 may not be the right choice for you.
3. Security Deposits Are Not Paid by Section 8
If a landlord wishes to collect a security deposit, he or she has to get this deposit directly from the tenant. This could be an issue because the tenant has already shown to have limited income by being approved for a Section 8 voucher in the first place.
As with any other tenant, you should never allow a Section 8 tenant to move in without first collecting a security deposit from them. The maximum amount you can collect is determined by your state security deposit limit.
4. Wear and Tear Concerns/Property Damage
Another risk of renting to a Section 8 tenant is the belief that Section 8 tenants are very destructive. There have been horror stories about floors being destroyed, cabinets being pulled off the walls, toilets being cracked, garbage and filth everywhere and many more people living in the unit than are listed on the lease. Certainly, this can happen. However, these problems can happen with any tenant you rent to.
There are good Section 8 tenants and there are bad Section 8 tenants. This is why it is so important to screen all tenants, including Section 8 tenants, properly.
5. Non-Section 8 Tenants May Not Want to Live at the Property
Tenants who do not collect rental assistance may be turned off by the fact that you allow Section 8 tenants in your property. They may believe that you are a “slumlord,” that the property will be dirty or that the tenants will be disrespectful and noisy.
In these situations, the only thing you can do is make sure you place quality tenants in your property and that you keep up with property maintenance. If non-Section 8 tenants see that your property is quiet and in pristine condition, they may change their opinion about Section 8.
6. Section 8 Sets Rent Amount
The final risk of renting to Section 8 tenants is that there is a maximum amount that Section 8 will pay. Each year, HUD puts together a list of Fair Market Rents for over 2,500 areas of the country. The amount that you will receive from Section 8 will be calculated using the Fair Market Rent for your area based on the number of bedrooms you are renting out, such as a one bedroom or a two bedroom.
The amount of the housing voucher will be between 90 percent and 110 percent of the Fair Market Rent. Depending on the condition of your property and the Fair Market Rent HUD has calculated for your area, you may be able to rent your property for a higher amount to a non-Section 8 tenant.