In this guide, we address a topic that is of great interest to all non-U.S. citizens who invest in real estate abroad and choose the United States: Section 8 tenants.
According to the government website of the Department of Housing and Urban Development, “The Housing Choice Voucher Program (commonly known as Section 8) is the federal government’s major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Since housing assistance is provided on behalf of the family or individual, participants are able to find their own housing, including single-family homes, townhouses, and apartments. […] Housing choice vouchers are administered locally by public housing agencies (PHAs). PHAs receive federal funds from the U.S. Department of Housing and Urban Development (HUD) to administer the voucher program.”
Section 8 tenants are, therefore, renters whose rent is partially paid by the government. They are primarily single mothers, large families, veterans, the elderly, and people with disabilities. The program encompasses millions of U.S. families.
It is highly likely that the owner of a property in the United States, whether a U.S. citizen, a resident foreigner, or a foreign investor, will eventually come across Section 8 tenants and have to decide whether to rent to them or not.
What are the advantages and disadvantages of renting to Section 8 tenants?
Why Rent to Section 8 Tenants?
The primary advantage for property owners, as one would expect, is the certainty of rental income. A significant portion of the rent is covered and guaranteed by the U.S. government. What many people do not know is that the other portion is also somewhat “guaranteed”: the Section 8 program requires beneficiaries to make regular payments, which means that tenants who fail to pay their share risk losing the benefit.
Another guarantee imposed by the Section 8 program on tenants is the maintenance of the property. Tenants are responsible for taking care of the house, and government officials personally inspect and verify this. This is something that property owners, especially foreign owners, would find challenging to do.
The final advantage, and no less important, is that once a Section 8 tenant is approved, they tend to stay in the same home for years. This saves the owner the time and effort required in searching for new tenants and the expenses involved in preparing the property for new occupants.
While these are the direct advantages, it is worth considering that, although it is a form of assistance for those in need, the rent (and therefore, the income) can be at market prices. Additionally, once a Section 8 approved property is on the market, there is a high demand from program beneficiaries.
What could be the disadvantages of renting to Section 8 tenants?
Although bureaucratic procedures in the United States are faster than those in some European countries and certain South American countries, they still involve dealing with the “state machinery” and its typical bureaucratic slowness. Fortunately, once the assistance for Section 8 tenants is approved, the government also pays any arrears for the months between the application and its approval.
Another disadvantage is that, in the case of Section 8 approval or renewal, the house undergoes thorough inspection to ensure compliance with all regulations, many times this can result in having to do some works within the house, if this is not done and the standards of Section 8 are not maintained, it will not be possible to continue to rent to Section 8 tenants. While this may require some initial work to bring everything up to code, it proves to be an advantage in the medium to long term, especially for owners who do not have direct control over the condition of their property.
Have you decided to rent (or not rent) to Section 8 tenants? Talk to Opisas about it.
Depending on your preference, Opisas can recommend some properties or others. Write to contact@opisas.com to schedule an appointment with a consultant.
