Posted on 02/26/2013 6:52:56 AM PST by ExxonPatrolUs
The federal government helps low-income families in need of housing by way of a program named Section 8, which issues rental vouchers for qualifying recipients. The vouchers can be used to pay rent on any property that accepts Section 8 renters.
Many factors determine what a monthly stipend rate will be, but household income and headcount are the primary factors.
In general, to qualify for Section 8, the family's income may not exceed 50 percent of the median income for the county or metropolitan area in which the family chooses to live. Public housing agencies, or PHAs, collect information on income, assets and family composition.
Like many well-meaning programs, Section 8 comes with unintended consequences. Here are the winners and losers of the Section 8 program.
Winners
Winners: Real estate investors
It’s understood that landlords want tenants who pay at-market rent on time and in full each month. And finding renters who won’t destroy property is icing on the cake.
Section 8 is serving up such renters to real estate investors.
Backed with generous government housing vouchers, Section 8 renters are cash cows for their landlords. And Section 8’s ample waiting list means that recipients who aren’t playing by the rules and doing the bare minimum required for maintaining property can be replaced by other recipients who will comply. “If property is destroyed, the landlord can go to Section 8 and report that tenants are breaching the contract,” says Brian Korte, P.A., Partner at The Law Offices of Korte &Wortman, a foreclosure defense law firm in West Palm Beach, Fla.
Section 8 will come in for remediation, and tenants would have a set time to comply, and if they didn’t, Section 8 could put another renter in. Real estate investors have much more recourse with Section 8 renters than they would with regular renters, where they’d have market their properties on their own.
“Why is every house being gobbled up and rented out by investors with ridiculous rents? Because they can hand them to the Section 8 tenants,” says Korte.
Winners: Section 8 renters
The design of Section 8 is to provide extremely low-income families with decent, safe and sanitary housing in the private market.
But a handful of Section 8 renters are getting all that and then some.
Cash investors are buying up luxury bank-owned properties and flipping them into Section 8 rentals for the guaranteed, at- or above-market rent checks issued by the government.
It’s a boon to Section 8 renters who find themselves with amenities many working, middle-class Americans can’t afford, such as granite countertops, pools and community racquetball courts and fitness centers.
What’s more for Section 8 renters with a housing stipend, there are no lifetime limits on the benefits. “As long as you qualify, you qualify,” says Korte.
There are annual checks on recipients to ensure they still meet eligibility requirements as set forth by the program, and recipients are required to report changes such as a child moving out or an increase in income. Rental reimbursements would decline if headcount declines or income increases.
Losers
Losers: Regular renters
According to Korte, Section 8 rentals play a role in driving up prices in the rental market. Section 8 vouchers are not below market value. They pay market rates, and sometimes offer even more than rental asking prices. This puts upward pressure on rents.
“If you look at a two-bedroom, two-bath Section 8 rental reimbursement, it’s about $1,700 in Palm Beach County,” says Korte. “That’s more than the advertised price for some luxury apartment complexes in the area.” Regular renters who pay out of pocket for their place are getting priced out of the rental market, and Section 8 works to their disadvantage.
“The program’s desire to be at the equal playing field of all rentals creates a self-fulfilling prophecy of what rent is,” says Korte. “It’s going to continuously move up.”
Losers: Section 8 applicants on a waiting list
Section 8 has a finite budget. According to the 2013 proposed budget published by the U.S. Department of Housing and Urban Development, or HUD, $19.1 billion is slated for tenant-based rental assistance.
“This is not an entitlement program with an unlimited budget,” says Korte. “Once the money runs out, it’s out.” Also included in HUD’s proposed budget is a clause that families currently receiving rental assistance will see no reduction in payments.
The program could get more “bang for the buck” and help more people by paying lower rental reimbursements.
Losers: Neighbors of Section 8 tenants
Section 8 rentals have a direct impact on their surrounding communities.
“You’re seeing destruction of the underlying neighborhood because you’ve got rental communities in areas where they shouldn’t be,” says Korte.
In general, the average homeowner has an emotional and financial stake in their home. But the typical investor who buys and rents.
And they wonder why education costs are now so high.....rinse, lather, repeat.
Someone a few years did an article about the correlation of section 8 properties to crime. It was practically a 1:1 match. The author was that rarest of birds, an honest liberal who didn’t expect the results obtained, but published them anyway.
Someone a few years did an article about the correlation of section 8 properties to crime. It was practically a 1:1 match. The author was that rarest of birds, an honest liberal who didn’t expect the results obtained, but published them anyway.
Two words, “rent control”. When that happens everyone loses and don’t think it can’t happen. Also when the place is filled up with drug dealers, which will happen, the property values will go down.
My wife is on a temporary assignment in Minneapolis and rents an apartment in one of the nicer suburbs. For what she is paying in rent I was shocked when she moved in that the complex looks like a third world bus station and is filled with Section 8 people who are getting their apartment for free or very cheaply on the tax payers dime. My cousin advised that in the Twin Cities you have to look for apartments as far as possible from bus routes to have any chance of escaping the Section 8 crowd.
It’s understood that landlords want tenants who pay at-market rent on time and in full each month. And finding renters who won’t destroy property is icing on the cake.
Section 8 is serving up such renters to real estate investors.
This guy is definitely smoking the wacky weed. From personal experience and from anecdotal evidence of friends who had rental property the odds of having your property un-destroyed are pretty darn slim. Approaching zero depending upon the ethnic group living in the unit.
Like when the boyfriend is released from prison, moves in and starts having gang banging parties.
this is a late reply, but.....
besides the rentals-does section 8 cover home purchase
for the low income ?
Apparently Mr. Korte hasn't read some of the property owner horror stories on the web. Report the property destroyers all you want, the Gummint isn't going to do anything about it until you have tens of thousands of $$ damage, which you will have to repair on your own dime before they'll get you another tenant.
No. This is strictly rent-support.
Let me tell you about a Section 8 person I know personally.
He is white, married for 15 years to the same woman, has 4 kids-one of whom is disabled. He has never done drugs or been arrested. Due to a very weird set of circumstances, he found himself enrolled in the Section 8 program, which allows him and his family to live in a 4-bedroom home. He makes just north of $30,000 a year. The wife can’t work because she has to take care of the disabled kid-and that’s a full-time job in itself.
The landlord is a black woman who owns several properties, most (if not all) of which are Section 8. This woman is also a real-estate lawyer and knows exactly what she can get away with. When she bought the house in which the man and his family are now living, she used inferior materials to refurbish it from the ‘party house’ it was used as before she bought it out of foreclosure. The workmanship of whoever refurbished the house was quite shoddy, and the man has had to do some repairs himself. When he brings it up to her, she threatens him with ending the contract and forcing the man and his family out.
Sadly, because housing in his area is frightfully expensive, he has found that...as much as he wants to move out into something that is NOT Section 8...he can’t. The rental houses that would accommodate his family would cost him over 2/3 of his monthly income. There wouldn’t be enough money left over to pay for food, utilities, gas to get to and from work, and the other bills he has to pay. His skillset, combined with his age (just turned 51), coupled with the bad economy preclude him from getting employment that pays more.
He didn’t vote for Obama, has never voted for any Democrat, and would love to be out from under the government program he finds himself in...but has no idea how without jeopardizing his family’s well-being. I would love to be able to give him an answer on how to proceed, but I can’t figure it out either.
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