As the value of rent continues to rise in many cities across the US, affordable housing has started to become a pressing issue. This affects low-income renters who rely on Section 8 vouchers but often struggle to find landlords who are willing to accept these subsidies. On the landlord’s side, it can be difficult to manage house voucher programs as it comes with a few issues.
In this blog, we will be exploring the possibility of market-rate housing properties choosing not to allow Section 8 housing vouchers.
What is Section 8 housing?
Section 8, which is also known as the Housing Choice Voucher Program, is a subsidy offered to low-income families, senior citizens, and people with disabilities by the U.S. Department of Housing and Urban Development (HUD). It provides rent assistance where those who are eligible pay about 30% of their income towards the total rent value. The voucher will then cover the remaining cost.
What is market-rate housing?
Market rate housing is a term used to refer to properties that are rented (market rent) or sold at market rates. These rates are determined through market demand as well as the prevailing rental or sale prices. When it comes to affordable housing programs, there are income restrictions or rent controls that will affect how the rental is managed. For market-rate housing properties, there are no such restrictions or controls.
Can market-rate housing multifamily not allow section 8 housing?
From a broad perspective, there are no legal rules that can prevent a landlord from refusing Section 8 vouchers. And so, market-rate housing multifamily properties generally have the discretion to decide whether or not to accept Section 8 vouchers. However, it is important to understand the reasoning behind this choice and explore the implications that may result from it.
Factors Influencing Section 8 Acceptance
While rental properties have the ability to decline Section 8 vouchers, you need to ensure that you are in compliance with fair housing laws. You may be in violation of federal, state, or local fair housing laws for denying housing for the sole reason being the tenant’s source of income. These laws prohibit discrimination based on protected characteristics, which include income source.
If you are to start accepting Section 8 vouchers, you should know that it involves navigating administrative processes and adhering to specific requirements that are set by the program. This is why some property owners are reluctant to accept Section 8. They are put off by the perceived administrative burdens and complexities, as well as the need to adhere to additional regulations and inspections.
Market-rate housing properties tend to prioritize maximizing rental income through consistent rent payments. Rent levels for these properties are based on market rent and demand, so this can be an issue for some property owners. They believe it may impose income limits on themselves, result in compounding unpaid rent, or increase administrative work associated with processing payments and calculating the subsidies.
As mentioned, there are more rules and regulations that come with Section. This includes how property owners maintain and repair their properties on a regular basis. For subsidized housing, owners may also need to make upgrades or repairs to their properties to meet the housing authority standards. These costs will need to be paid upfront and there is no guarantee that they will be able to cover these costs through regular rent payments. As some property owners may not be able to absorb upfront costs, they would be reluctant to take part in the program.
The implications of not accepting Section 8 vouchers
Section 8 plays a vital role in providing affordable housing options for low-income individuals and families. Due to many properties opting out of accepting vouchers, the choices available to Section 8 eligible citizens are reduced. This could potentially exacerbate the situation, resulting in fewer families being able to find proper housing. While property owners do have the choice of not accepting this voucher program, promoting inclusive housing practices is essential for local communities.
How can this be mitigated?
While the following will not come without challenges, real estate investors can incorporate Section 8 rentals in more strategic ways. Here are some examples:
- You can assign a percentage of units to be used by voucher holders. This way you can avoid a blanket refusal while having other units that operate normally. Even going as low as 20% of your housing units can help alleviate the social problem.
- You can be proactive in your collaboration with the relevant housing authorities. This can streamline the paperwork and inspections, thereby improving the process from both sides.
- Taking the initiative and educating or supporting tenants upfront can prevent future issues. Having an equitable relationship with Section 8 tenants can help increase successful tenancies.
- You could also consider marginally increasing rents for non-voucher units. This can help offset any financial impacts of accepting subsidized housing. However, keep in mind that you won’t be able to increase rents substantially due to market rent.
As a property owner, you have the choice of rejecting Section 8 vouchers, but you also have a social responsibility to help families in your local area. By accepting this assistance program, you can maintain a positive image in your community and even gain some benefits from the government such as tax credits or deductions.