Renting to Tenants in the Section 8 Program

section-8Metro Property Management is a full service real estate management company which specializes in residential properties in Santa Clara County of California. Often, we are asked by our clients if they should rent to Section 8 tenants.

There are many benefits and challenges for owners wishing to rent to tenants participating in the Section 8 program. First, an owner must recognize that the program was not created to help property owners, but to assist low-income families in obtaining decent, safe and sanitary housing.

The Housing Authority, through its Section 8 Certificate Program, is helping millions of families throughout the country obtaining housing assistance. The Section 8 Housing Program is a form of federal rent subsidy to assist low-income families with monthly rental payments.

The Housing Authority of the County of Santa Clara administers funds received from the U.S. Department of Housing and Urban Development (HUD) and distributes them in the form of Section 8 Housing Choice Vouchers to eligible families and individuals. In Santa Clara County, the Section 8 Program assists over 16,000 households. Based upon household income levels, additional households would qualify, but due to the lack of funding, the Housing Authority is unable to help them.

The Section 8 Program is designed for the tenant. The housing unit is independent of the program, which permits a tenant to select housing from the open market as opposed to public housing. The voucher permits a tenant to select housing that meets their needs. The tenant pays a portion of the rent directly to the property owner.

A property owner wishing to participate in the program must comply with procedures established by the United States Department of Housing and Urban Development (HUD) and the Housing Authority. Owners must qualify to ensure that they are honest and forthright in their dealings and do not illegally discriminate against applicants or tenants.

The property owner signs a contract with the Housing Authority and separately executes a rental agreement with the tenant. The relationship with the tenant is virtually the same as on the open market.

Section 8 bases its assistance on occupancy standards. If your rental property exceeds those standards, the Housing Authority will pay only the rent allowed for the family size. For example, if you have a four-bedroom unit but the family only qualifies for a three bedroom, the tenant can rent the unit but the most the Housing Authority will pay is the three-bedroom rent.

One of the advantages for an owner participating in the program is that the Housing Authority guarantees their portion of the rent payment will be made on time every month. In addition, because the tenant’s portion of the rent is considered affordable, the tenant is more likely to pay.

The City of San Jose and the County of Santa Clara have recently introduced SCCHousingSearch.org, a new service to streamline access to information on affordable rental housing. An owner may advertise their rental units free of charge to families registered in the program.

An owner may select the Housing Choice Voucher tenant in the same manner they would select any other tenant from the open market.

Before a rental property may qualify for Section 8 housing; it must pass an inspection conducted by a Section 8 housing inspector. The inspector checks for housing quality standards and for safety hazards. The initial inspection occurs before the family moves into the unit and then again, whenever a tenant is recertifying eligibility. Additional inspections may be conducted if there are complaints from the tenant about the condition of the property.

As long as an owner follows customary leasing practices, they may set the term of the lease such as a one-year lease or month-to-month lease.

An owner may charge the same rent as they would for a non- Section 8 tenant as long as the rent is comparable to what is being charged in the neighborhood. The rent amount is verified by the Housing Authority as reasonable. You can also charge the same security deposit and late fees that you would charge other tenants.

The owner must provide their own lease, which will include a HUD-required Lease Addendum and the signed contract with the Housing Authority.

As long as a landlord’s actions are consistently applied, the landlord may enforce their normal operating rules. An owner may terminate the lease at any point with good cause and after the initial lease period ends for any legal reason, as long as you give proper notice.

After the initial lease term, an owner may raise a tenant’s rent as long as it is not more than what you would charge other tenants and is comparable to other similar rentals in the neighborhood, as verified by the Housing Authority.

The U.S. Department of Housing and Urban Development (HUD) establishes the income limits for Santa Clara County. Household eligibility for the Housing Authority program is determined from the income limits.

Voucher Payment Standards (VPS) are used in determining the maximum allowable rent and the amount of subsidy provided to each tenant in the program. The VPS are based on the Fair Market Rents established by HUD. As of October 1, 2012, the maximum allowable rents in Santa Clara County are: Studio $1,079, 1 Bedroom $1,262, 2 Bedroom $1,610, 3 Bedroom $2,270, 4 Bedroom $2,574.

In order to receive a Section 8 Certificate the tenants must qualify with The Housing Authority. A tenant who qualifies to receive a Housing Voucher would only need to pay 30 to 40% of their income toward rent. The Housing Authority pays the difference between the tenant’s portion of the rent and the contract rent directly to the property owner.

  • Other factors that should be considered before an owner participates in the program are:
  • Ability to raise rent
  • The tenant has to be recertified each year
  • If the family becomes larger or smaller, it could trigger a reassessment of the living arrangements.
  • Restrictions on reasons to evict
  • Chances are a Legal Aid lawyer who will look for anything and everything you did wrong and use that against you will defend the tenant.
  • Terminating a tenancy after the first year requires a 90-day notice.
  • Impact on the sale or renovation of the property to achieve higher rent
  • All properties rented through the Section 8 program must qualify by unit size and are inspected by a Housing Authority inspector.
  • When the property is sold, the lease stays with it. The new owner can assume the lease if approved by the Housing Authority.

Section 8 can provide an owner with consistent rent and long-term tenants. However, an owner must treat the tenant and manage the property in the same manner as they would for a non-assisted tenant.

An owner must be amenable to the fact that there is a lot of paperwork involved, so ask yourself if you are willing to do that paperwork, and qualify with the Housing Authority before enrolling in the Section 8 program.