Is it good business to rent to Section 8 tenants? At a federal level, the Fair Housing Act does not bar landlords from discriminating based on Section 8– I know, incredible— isn’t fair housing in the very name of the law? But I digress, even if discriminating against Section 8 were not legally permissible (as is the case in several states and municipalities), does renting to Section 8 pencil? Well, let’s follow the money.
Corporate America
The Housing and Urban Development agency (HUD) conducted a nationwide residential housing finance survey in 2018. HUD found that less than 10% of small landlords (those owning rental houses that have 1-4 units) rent their units to tenants receiving Section 8 while 25% to 30% of large landlords (read, Corporate America— those owning apartment buildings with 100 or more units) rent to Section 8 tenants. Call me cynical, but my money is on corporations and real estate investment trusts having a better understanding of the financial benefits of renting to Section 8 tenants than small-fry landlords.
Underserved Communities
Tenants who receive housing choice vouchers (Section 8) are concentrated in poor neighborhoods (a problem for another article). The average income of a family receiving a voucher is approximately $15,000. However, families who don’t receive Section 8 often have the same income as their Section 8 neighbors (given a waiting list of as long as 8 years for some communities). Since there is no meaningful difference in the financial stability of the two households, a voucher inherently lessens a tenant’s risk profile.
High Income Communities
If your investment property is in a tight rental market or high-priced community, HUD takes particular pains (as it should) to enable voucher holders to live and prosper there. As a for instance, in the county of Santa Barbara, CA one of the wealthiest counties in CA, HUD offers first time Section 8 landlords and property managers a signing bonus of $5,000, a bonus of $2,500 for lease renewals, $5,000 in insurance against damage to the unit, $2,000 towards the security deposit, and 24-hour hotline for landlords to call if needed.
Answering the question, is it good business to rent to Section 8 tenants? Decidedly so.
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