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As a rental property owner, you may see the appeal of Section 8 housing but find the process challenging, with many hoops to jump through and paperwork to navigate. The benefit, however, is the reliability of receiving a regular subsidy payment once a qualified resident moves in.
If you’ve ever wondered exactly how Section 8 works, this guide will give you an in-depth look at what Section 8 is, how it operates, and how you can make it work best for you. Let’s get started!
What Is Section 8?
Section 8, or the Housing Choice Voucher Program, is a federal assistance program that helps low-income individuals and families afford housing in the private rental market by covering a portion of their rent. Administered by the Department of Housing and Urban Development (HUD), Section 8 requires tenants to meet income-based eligibility criteria, while landlords who participate must ensure their properties meet HUD’s safety and quality standards. The tenant pays a portion of the rent, typically 30% of their income, and the program covers the rest, sending subsidies directly to landlords. This offers landlords reliable income but comes with regulatory requirements and routine inspections to ensure compliance.
How Section 8 Works
The Section 8 program calculates subsidies based on a formula that even caseworkers often find complex. Generally, Section 8 covers a portion of the resident's rent depending on their income: the lower the resident’s income, the higher the subsidy. This subsidy amount, shown in the Request for Tenancy Approval (RFTA) document, varies and includes a breakdown of rent and utility support. Landlords should review the resident’s maximum subsidy to ensure it aligns with the rental price. If the subsidy falls short, landlords may need to adjust the rent or decline the application, as Section 8 tenants aren’t a protected class.
Types of Section 8 Housing
There are two main types of Section 8 housing: resident-based and project-based. Let’s look at what each type offers.
Resident-Based Housing
Resident-based Section 8 housing provides vouchers directly to qualified residents rather than being tied to specific properties. With this type of assistance, residents receive a voucher they can use at any rental that meets HUD’s standards and accepts Section 8. This approach gives residents the flexibility to find housing that fits their needs, whether it’s a house, apartment, or townhouse, as long as the rent is reasonable for the area and the property meets basic health and safety guidelines. Resident-based housing also offers flexibility as residents can take these vouchers with then to another qualifying property, should they choose to move.
Project-Based Section 8 Housing
Project-based Section 8 housing provides rental assistance that is tied to specific properties rather than being portable. Property owners enter into long-term contracts with HUD, setting aside a certain number of units exclusively for Section 8-eligible residents. Residents receive rental assistance as long as they live in one of these designated units, but they cannot transfer the assistance to another property if they move.
Section 8 Resident Eligibility
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To determine a resident’s eligibility for Section 8 housing, the Public Housing Authority (PHA) considers four main factors:
Income: Generally, household income cannot exceed 50% of the area median income (AMI), with priority often given to applicants earning 30% or less of the AMI.
Family Size and Composition: Family size and composition influence the amount of assistance provided, although there are no specific family requirements to qualify.
Citizenship: Applicants must be U.S. citizens or have eligible immigration status. Mixed-status families can receive partial assistance based on eligible members.
Eviction History: Applicants with serious lease violations or recent evictions due to drug-related activity in federally assisted housing may face disqualification, though exceptions can apply.
How Residents Apply for Section 8
Applying for Section 8 as a resident involves three main steps:
Visiting Their Local Public Housing Authority (PHA): Residents will start by finding their local PHA and visiting in person or online to review their application requirements and check if they’re accepting new applications.
Completing and Submitting the Application: Residents will then fill out and submit the application with all required information, including income and family details. Some PHAs may also require supporting documents upfront.
Waiting for Notification: Once their application is reviewed, the resident will typically be placed on a waiting list due to high demand, unless they qualify for immediate assistance. The PHA will notify them when their application has been accepted, or rejected, or if there are any updates regarding the waitlist.
How to Work With Section 8 as a Landlord
Now that you understand what Section 8 is and how residents operate within the system, you can learn how to work effectively with the program as a rental property owner. Let’s look at the three main considerations to keep in mind.
1. Build Key Relationships
To succeed as a Section 8 landlord, it’s essential to build strong relationships with both caseworkers and inspectors. Start by connecting with inspectors directly, as they can be your link to caseworkers and help you navigate the Section 8 process. Through these connections, inspectors can introduce you to the right people and help coordinate arrangements that may otherwise be difficult to secure on your own.
2. Do Your Homework on Guidelines
You can research Section 8 guidelines online to better understand the program requirements.
Key areas to explore include:
Housing quality standards that properties must meet
What the Housing Choice Voucher is and how it works
The specific amounts Section 8 will pay in your area, updated each February, based on bedroom size, subsidy limits, and the resident’s voucher
Maximum subsidy limits in your area
Every February, updated federal guidelines are released, setting subsidy standards for various property sizes—studios, one-bedroom units, two-bedrooms, and so on. These guidelines outline the maximum rent you can receive for your property through Section 8, regardless of the resident’s income. While these limits establish a cap, if you find a qualified resident, you may receive the full subsidy amount for your property.
3. Ensure Your House is Rent Ready Before the Inspector Visits
All Section 8 properties must be inspected and approved by a qualified inspector. These inspectors are often contractors of the local public housing agency (PHA) or inspectors contracted by HUD. These inspectors are often in high demand and have a waiting list for property inspections.
For this reason, you should have your property 100% ready before you request an inspection. Inspectors are often frustrated when investors call for an inspection before the property is truly ready. For example, if utilities like gas, water, or power are off when they arrive, inspectors will typically leave immediately. All owner-controlled utilities must be on during the inspection, as inspectors manage a high volume of inspections each day and don’t have time for repeated visits due to preventable issues. Being fully prepared shows respect for their time and fosters a cooperative working relationship, which can be beneficial for future inspections.
The main elements that inspectors will check for include:
Functioning utilities (gas, water, electricity)
Safe and secure doors, windows, and locks
Working smoke detectors and carbon monoxide detectors
Proper heating, plumbing, and electrical systems
Overall cleanliness and safety of the property
Important Considerations for Rental Property Owners
It’s essential to follow legal requirements precisely. Accepting payments beyond the approved subsidy or outside the Housing Assistance Payment (HAP) contract is illegal and can result in federal penalties, fines, and prison time. Any attempt by the resident to cover an additional portion beyond the approved amount could lead to them losing their voucher and create issues for the landlord. To avoid problems, keep all transactions transparent, legal, and in line with the contract.
Final Thoughts: Section 8 Can Pay Off - But Do Your Homework First
Understanding how Section 8 works, including the types of housing, resident eligibility, and program guidelines, is crucial for rental property owners looking to make the most of this valuable opportunity. By building strong relationships with inspectors and caseworkers, doing your homework on guidelines, and ensuring your property is ready for inspection, you can navigate the process with confidence. However, it's essential to stay aware of the legal requirements to avoid costly mistakes.
If you’re looking for expert guidance and support in managing your own Section 8 properties, hiring Evernest is a smart choice. Our team of professionals is ready to help you successfully navigate the Section 8 system, ensuring your real estate investment is profitable and compliant.
