Rethinking the Public Housing Voucher Program - Compass Property Management

Author: Alex Delaney

Section 8 has a bad reputation. While not all Section 8 tenants are problematic, there are enough horror stories to keep landlords from considering this program, especially those with personal experience. Landlords, who have pulled out of the system long ago, cite problems getting the tenant’s portion of rent, overzealous inspectors with a long list of cosmetic repairs, and excessive damages at move out to justify their refusal to participate in the program. As in any subject, the bad apples get the press and little note is taken of the long term tenant who treats the property like her own.

But things have changed dramatically in a very short period of time. With the advent of Covid-19, some landlords are now struggling to make their mortgage, insurance and tax payments as tenants begin to struggle with job loss, lack of income, and the ability to pay. Stop-gap measures are being put into place with the stimulus package. Banks are gearing up to offer temporary mortgage relief through refinancing, forbearances and loans. But will it be enough?

Experts are now stating that Covid-19 may become a cyclical issue like the flu. When asked if we would see another outbreak in the Fall, Dr. Anthony Fauci recently stated, “In fact, I would anticipate that that would actually happen because of the degree of transmissibility,” While a vaccine should be developed within the next year, and testing processes should be strengthened by the Fall, the damage to our economy between now and then could be catastrophic.

Many landlords may now be reconsidering their approach to Section 8 due to the uncertainty of the times and the stability of government-paid rent. It is this subject that we will examine here.

The Plus Side of Offering Section 8:

• Section 8 portion of rent is deposited regularly as long as paperwork is complete and properties are in good standing.
• Section 8 tenants face a limited supply of housing so are more likely to stay put for years if their needs are met.
• Due to the low numbers of landlords willing to work with Section 8, properties are snatched up quickly.
• Section 8 allows for market rent levels.
• 3.8 million Americans signed up for unemployment last week bringing the total to 30 million. Georgia stats from March show 312,520 unemployment claims for the month. Yet we know many people struggled to access the on-line system and we expect April numbers, not currently available, to be significantly higher. This collapse in many industries points to huge defaults in rental payments making Section 8 look more attractive.
• If a property fails inspection, you have 30 days to meet compliance before the property goes into abatement.

The Minus Column:

• We have seen a proliferation of overzealous inspectors who have the power to stop rent until required repairs are done, despite reports citing cosmetic issues, or tenant caused issues.
• While some section 8 tenants treat the property well, others are less concerned about maintaining the home or causing damages.
• Tenants who qualify for Section 8 are generally underemployed and will struggle to meet their portion of the rent.
• Even if an annual rental increase is in the lease, it must still go through the lengthy Section 8 process and may not be approved.
• Filing an eviction on Section 8 tenants requires personal and mail service. In addition, the pay or quit notice must cover very specific information. Judges get confused with Section 8 evictions and often prolong the process.
• If a tenant is kicked off of Section 8 and cannot meet the full rental obligation, the case will end up in eviction court.
• While the current situation is dire, it is a temporary situation. Once a vaccine is developed, this situation should improve and the economy, although likely changed, will get closer to normal. Yet a difficult Section 8 tenant in place will be hard to remove.

If it weren’t for the current financial crisis, Compass would not suggest changing your strategy to include Section 8 tenants. However, these are unusual times. This is not to say we think it is a good strategy in the current climate. It is a difficult decision and one that you should only take after evaluating the pros and cons. We hope the above information is useful as you determine your next steps.

Disclaimer: At Compass, we strive to provide the most up-to-date and accurate information. However, we cannot guarantee the accuracy of the information provided in such rapidly changing times. We strongly encourage you to follow the links, conduct your own research, and determine your own best actions. Compass does not purport to be experts or official advisors in any capacity regarding the COVID-19 pandemic. We review the information and consolidate it for our readership. Compass is not responsible for any out of date, or inaccurate information provided. We will make every effort to correct errors brought to our attention.