Skip to comments.Section 8 housing: Destroying home values and driving up rental prices?
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: Real estate investors
Its understood that landlords want tenants who pay at-market rent on time and in full each month. And finding renters who wont 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 8s ample waiting list means that recipients who arent 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 didnt, 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 theyd 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.
Its a boon to Section 8 renters who find themselves with amenities many working, middle-class Americans cant afford, such as granite countertops, pools and community racquetball courts and fitness centers.
Whats 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: 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, its about $1,700 in Palm Beach County, says Korte. Thats 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 programs desire to be at the equal playing field of all rentals creates a self-fulfilling prophecy of what rent is, says Korte. Its 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, its out. Also included in HUDs 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.
Youre seeing destruction of the underlying neighborhood because youve got rental communities in areas where they shouldnt 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.
Section 8 is a slum lord’s dream come true. It artificially jacks up the market price for low end rentals, and pushes mid range rents up as well.
This is news? To whom? This has been true for decades. Does ABC have a story on how welfare destroys the will to work for a living?
Yep, not news really; this program has destroyed suburban house values throughout the major metro area I live in. Forced us to sell our home, and of course, at a loss. The only buyers are investors looking to turn previously owned houses into Section 8. No one with a brain is “buying” a house in this county or any of the surrounding counties. Its a sure way to lose money.
My elderly Dad is eligible for Section 8 housing. I REFUSE to let him live there. Total dumps in our area filled with slackers and druggies.
‘The People’s Republik of Madistan’ is the Poster Child for: “If you build it, they will come!”
the reason for section 8 and low income housing is quite simple really...
when renters outnumber the homeowners, every property tax increase on the ballot will pass effortlessly...
if you do not own property, you should not be allowed to vote on property tax issues...
No one with a brain is buying a house in this county or any of the surrounding counties. Its a sure way to lose money.
Unless you are a slumlord looking to rent to section 8. Donald Trump started out this way.
Across the street from a grade school, the government inspectors of public housing swab the walls for Meth smoke residue, and post florescent signs on the doors of the childrens families who have been evicted.
I can’t even vote on property tax increases since I don’t live in the City where I own the property. However I am able to pass on any property tax increase immediately onto the renters.
If you see a new apartment complex going up, no matter how high end, it will probably have section 8 in it. The reason is low interest HUD backed financing for the construction...available only if a certain percentage of the units will be section 8.
My experience with Section 8 renters is the opposite of what is described in this article. They were the worst of tenants, had little skin in the game, didn’t maintain anything, were destructive, and the government bureaucracy made it much more time consuming and difficult to get them out. Additionally, it becomes more and more difficult to find non Section 8 renters in the same areas.
Income from selling drugs does not count.
I believe lots of foreclosures have been turned into rentals. Many of these properties are owned by banks that got TARP money. The “toxic” loans were paid off yet the banks kept the property. Then the government said “If you’ll rent them out the taxpayers will subsidize you.”
Didn’t you know that if there’s a tax increase you’re supposed to suck it up? Seriously, many college educated liberals, and even liberals who are actually somewhat intelligent, cannot understand how an increase in the landlord’s cost is passed on in higher rent. The REALLY don’t understand how it works. AND THEY VOTE! NOW THAT’S SCARY!
Here in Louisville, I have several friends who are making BIG MONEY buying SUPER CHEAP homes in the West End, and renting them to Section 8 tenants..
One guy bought a 75 yr old, 6 bedroom home for $30k. He’s renting it to an older woman for $1500 a month. He gets paid, BY THE GOVERNMENT, on time every month. He couldn’t care less if they trash the place.
But, they don’t... cause, the Lady is also renting out her rooms, for cash...
She’s making big money, My friend is making big money.... EVERYBODY is WINNING! Except.. me. :-(
“section 8” crap drives up rental prices, so government pays the rent for more and more people which drives up rental prices, so government .....
Besides the obvious wealth transfer features Section 8 ensures each neighborhood will have their quota of blacks. Our neighborhood had a home buyer default, the house was turned into section 8, and voila’ we had a Crips and/or Blood as our new neighbor. We literally had the police parked outside their Section 8 house. Eventually by some machination unknown to the rest of us they were moved out.
Yea, well I meant a buying a house to live in.
And you know what’s really just f...ing amazing is the unlimited, bottomless pool of people lined up for Section 8. One of the ways they destroy neighborhoods, (through the guise of “integration”) is to build huge Section 8 apt. complexes in exurban farm towns 60 to 80 miles from the central business district of any major urban area. Then they bus in their Section 8’ers, (we call them HUDdites) and next they’re seen wandering the roads and streets in their hoodies or driving their pimp mobiles to the local grocery store. Jobs are, of course out of the question and in some of these areas, they’ve yet to install any Metro Bus Lines so these people are, for all practical purposes, stranded. It’s absolutely amazing. Of course, the multi-family housing developers are loving it.
My fear is that eventually, the government will force landlords to accept Section 8 tenants, or face discrimination lawsuits.