Becoming a Section 8 landlord: A guide

Millions of Americans need help finding affordable living arrangements. To solve this vexing issue, many of them turn to the Section 8 Housing program to connect with landlords who can provide accommodations for them and their families.

Landlords who participate in Section 8 housing play a vital role in providing affordable housing to low-income earners. At the same time, purchasing an investment property brings perks for landlords that include consistent income and other financial benefits. There are, however, complicating factors, such as strict guidelines, that make being a landlord more of a challenge. Let’s explore what it means to be a Section 8 landlord and the process of becoming one.

Understanding the Section 8 Housing Choice Voucher program

The Housing Act of 1937, sometimes called Section 8, authorized the Section 8 Housing program. The program is designed to support low-income earners, people with a disability and aging Americans who need access to decent housing.

According to the U.S. Department of Housing and Urban Development (HUD), some 2.5 million American families receive voucher-funded assistance to pay for public housing. This program connects them to places to rent through the HUD’s Section 8 Housing Choice Voucher (HCV) program, which is administered by local public housing agencies (PHAs) that receive funding from HUD to pay private landlords directly.

What is a Section 8 landlord?

For clarity, a landlord is someone who owns a property and rents it out to tenants. A Section 8 landlord, then, is a property owner who rents to a particular type of tenant — for example, someone who receives government assistance to help pay their rent.

The designation of Section 8 landlord brings certain responsibilities — for instance, they must agree to maintain their properties according to HUD standards. That means they must submit their properties for initial — and annual — inspections to ensure they meet safety and quality requirements, including adequate heating, functional plumbing and structural integrity.

Section 8 landlords can screen their tenants and enforce lease terms, but they must also comply with additional program rules such as using HUD-approved lease agreements and obtaining housing authority approval before increasing the rent.

How to become a Section 8 landlord

Becoming a landlord and learning how to manage rental properties is a big step for any investor, but working as a Section 8 landlord involves a few more steps. If you are interested in this role, you should begin developing a plan for becoming a landlord by reviewing your finances, exploring your desired rental location and determining the types of tenants you want to serve.

Once you’ve done this legwork, contact your local Public Housing Agency (PHA) to learn about the role of a Section 8 landlord and what you’ll need to do before finding your first tenant. The local PHA can provide a detailed explanation of the expectations, as well as the specifics of their particular operation.

Eligibility for Section 8 landlords

In order to qualify as a Section 8 landlord, you'll need to take several steps and meet some key requirements:

• Your property must be in good condition and pass the Housing Quality Standards (HQS) inspection, which covers 13 key areas including sanitation, water supply and fire safety.
• You must provide key documentation to your local PHA, including:
• Proof of property ownership
• Appropriate insurance coverage
• Proof that your proposed rent aligns with fair market rates for your area
• Background documentation and rental history that prove you are a responsible property owner

There are also financial considerations to keep in mind. For starters, while you will receive reliable payments from the housing authority, you will likely need to continually invest in property updates to meet program standards. Also, the rent you can charge will be limited to fair market rates set by HUD for your area.

What is a Section 8 tenant?

Section 8 tenants must meet the requirements and also complete a thorough approval process. In addition, PHAs decide who’s eligible to pursue a rental, but landlords have the ultimate say in who they rent to. With that in mind, here’s the process for a Section 8 tenant:

Eligibility requirements

The most crucial factor in Section 8 eligibility is income, as the program is only available to very low– or low-income wage earners. Individuals who earn no more than 30% of the area’s median income qualify as very-low income. Following that, people who earn no more than 50% of the area’s median income qualify as low-income.

Tenant application process

PHAs are in charge of administering vouchers to families and individuals, so they’re also in charge of screening potential tenants. In addition to income level, PHAs also look at family size, the applicant’s age, disability status, previous home displacements and citizenship or eligible immigrant status.

The waiting list

Unfortunately, many people need the help of the Section 8 housing choice voucher program. As a result, the number of applicants typically exceeds the number of vouchers. So, once the PHA approves a person or family, that person or family goes on a waiting list.

Because of the overwhelming demand, an eligible tenant may wait years before a voucher is available. Because of this, some applicants take their chances in voucher lotteries. These sometimes offer an opportunity to get ahead in locations, such as large cities, that have the highest demand for affordable housing.

Voucher allocation

Legally, PHAs must distribute 75% of their vouchers to applicants who fit in the very low–income category. That gives people who earn 30% of their area’s median income an edge, but it also puts low-income households at a disadvantage.

Direct payments to landlord

Generally, Section 8 vouchers pay for roughly 70% of the tenant’s rent and utilities — although costs vary by location — and these bills are connected directly to the landlord’s bank account. The tenant then covers the remaining costs using their own income.

There’s a higher rent limit, though. A family can elect to pay extra for an apartment of their choice; however, the total tenant portion of rent cannot exceed 40% of their monthly adjusted gross income when they lease the unit.

How to rent out Section 8 housing

Typically, PHAs provide applicants with vouchers they can use to rent from landlords. Applicants can search for eligible housing once they receive their voucher, but several months may pass before they receive it.

Here’s a brief overview of the process.

1. Voucher holder finds a property

Once they’re approved and have their voucher, participants must find their rental. Applicants can find rental apartments through their local PHA site or listings from landlords in their area. PHAs encourage participating families to consider multiple options and advise them on potential choices.

Once they find a landlord they’re interested in renting from, the interested renter shows the landlord the voucher. Then they enter the learn of rent they will be charged.

2. Landlord fills out a request for tenancy approval form

Landlords must complete a request for tenancy approval (RTA/RFTA) form detailing information about the unit, whether it be rent, the address, utility costs or all the above. The form can usually be found on the local PHA website.

3. Landlord screens the tenant applicant

While renting to Section 8 tenants requires an extra step or two, they’re still tenants. That means landlords have the same responsibilities. So, while the PHA screens participants, landlords should go through with their regular screening process as well.

4. Local PHA reviews rent

After completing the RFTA and gaining approval to rent from the landlord, the voucher holder returns to their PHA. The agency reviews the form to make sure everything is good to go.

5. Inspection is scheduled

Local PHAs must inspect rental housing before they let a voucher holder live there. They’ll ensure the unit meets HUD’s HQS before the lease can be signed. The agency may have certain requirements for the inspection, too — for example, they can request the landlord’s presence during the visit and that the utilities be turned on.

6. Rent is agreed upon by local PHA

In addition to approving the unit, the agency needs to approve the rent. They must make sure the tenant can afford the proposed amount. Remember, the voucher holder has to pay around 30% of their own income for rent and utilities. The subsidy covers the rest.

7. The lease is signed

After everything’s been approved, all involved parties — including the local PHA — sign the lease. The landlord also has to sign a Housing Assistance Payments Contract, which guarantees they directly receive the Section 8 subsidy. In return, the landlord guarantees to maintain the property’s sanitation and upkeep at a reasonable rental price.

What responsibilities does a Section 8 landlord have?

The decision of whether to become a Section 8 landlord carries both risks and potential benefits. Many Section 8 landlords enjoy a decent income from their property, making this endeavor worthwhile to them. However, working with local PHAs can create an extra challenge.

The Pros and cons of becoming a Section 8 landlord

Like every decision, the decision of whether to become a Section 8 landlord carries both some risks and potential benefits.

Pros of becoming a Section 8 landlord

Here are some benefits you might enjoy by becoming a Section 8 landlord:

• Guaranteed payments: Rent is generally guaranteed since the PHA pays the approved voucher amount directly.
• Annual rent hikes: Landlords can request approval for a rent increase once per year.
• Low vacancy rates: The demand for Section 8 housing is usually higher than the supply, so units fill quickly. Residents also tend to stay longer.
• Good profit margins: Although it might not apply in every real estate market, rent through a Section 8 voucher usually outpaces average C- or D-class neighborhoods. Combined with regular payments, this makes it a reliable source of money.
• Partially screened tenants: The PHA already screens applicants, ensuring they meet a certain level of standards.

Cons of becoming a Section 8 landlord

Here are some drawbacks to consider before becoming a Section 8 landlord:

• Local PHA bureaucracy: Landlords must comply with their local PHA, which requires extra work and communication.
• Delays in first rental payment: In Section 8 housing, landlords don’t receive the first month’s rent until after the tenant moves in.
• Annual inspections: The local PHA conducts yearly property inspections. Failing one could require repairs, or the landlord risks losing the subsidy.

Tips for becoming a Section 8 landlord

As you’ve likely inferred, becoming a Section 8 landlord requires some work. Thankfully, there are some things you can do to make your term as a Section 8 landlord go more smoothly.

Learn about your local PHA: The more you become familiar with the rules and regulations of your local PHA, the more you’ll know about your business environment. (Because, keep in mind — this is essentially a business you are running.)

The PHA is your go-to resource for everything from paperwork questions to payment issues, and having a good relationship likely means faster responses when you need help. Plus, PHAs often offer landlord training programs and can keep you updated on any local changes that might affect your property.

Maintain your property: Keeping your Section 8 property in good condition is crucial for many reasons: Regular maintenance prevents small issues from becoming expensive emergencies, and it helps avoid tenant complaints that could jeopardize your Section 8 contract.

Also, Section 8 properties must live up to HQS that have been established by HUD. Failed HQS inspections can result in payment suspensions and potential contract termination. Additionally, many local housing authorities have their own maintenance requirements that supplement federal standards.

Stay in touch with your tenants: The importance of engaging with your Section 8 tenants may sound touchy-feely, but it also makes good business sense. Regular check-ins with tenants can help you spot maintenance issues early, understand tenants’ needs and build the kind of trust that leads to longer tenancies — and fewer headaches.

From HUD's perspective, maintaining good communication helps ensure you're meeting your obligations around reasonable accommodation requests and fair housing requirements. Plus, tenants who feel heard are more likely to report small problems before they become big ones, and they're generally more cooperative during inspections and other necessary Section 8 procedures.

Keep in mind that it won’t always be easy: Running a Section 8 property means accepting that sometimes, there are complications. So while housing authorities usually pay like clockwork, there can be other issues — staff shortages, paperwork snags or inspection delays — that can create some problems.

That’s just one of the reasons smart landlords keep a healthy cash reserve to handle these hiccups and stay on top of their expenses.

Resources for Section 8 landlords

Becoming a Section 8 landlord can be complicated, but there are many organizations that can provide helpful background information, contacts and more. Here are a few:

• The U.S. General Services Administration has a great deal of information, useful links and more.
• The HUD Office of Housing can put you in touch with local offices, their blog has a great deal of engaging articles and their site links to many essential resources.
• This HUD page can help you find your local PHA.

The bottom line: Section 8 is an important market with much to offer participating landlords

Not everyone has the financial stability to find housing on their own. The Section 8 Home Choice Voucher Program is vital to the rental market for these people. And it’s worth exploring for anyone interested in becoming a rental property owner.

Ready to apply for a mortgage on an investment property? Start the mortgage process today.