Section 8 is a federal housing program that assists low-income families. It helps close to 5 million Americans every year. These often include the elderly and people with disabilities.
Opening a property to Section 8 housing has a lot of benefits, such as a larger renter pool and reliable income. There are a lot of regulations that apply though.
This article explores one of these standards: how "reasonable rent" is calculated for Section 8. Keep reading to find out how you can get the most out of your investment while remaining in compliance with the law.
How Does Section 8 Housing Work?
Section 8 housing is a program administered by the federal Department of Housing and Urban Development (HUD). There are different types of assistance, but the most common are vouchers administered to qualified applicants.
Most Section 8 processes are handled through local public housing agencies (PHAs). While it can vary, in most cases, HUD pays 70 percent of the tenant's rent, and they must supply the remaining 30 percent.
To qualify, an applicant's income must not exceed 50 percent of the median income for the county or metropolitan area where they live. Also, PHAs are required to provide 75 percent of their vouchers to applicants whose income is at or below 30 percent of the median household income.
What Section 8 Standards Must Landlords Meet?
One common misconception with Section 8 housing is that it must be a particular type of property. This is not the case. The program allows participants to choose any property they like, as long as it meets the requirements laid out by HUD.
Likewise, there are no regulations regarding the square footage or amenities a property must have. Property owners who participate in the program must maintain a safe, decent, sanitary place for participants to live. This is confirmed through regular inspections by the local PHA.
The other main standard is that you must provide a "reasonable" asking rent. This can vary greatly among locations, including in the same county or city.
How Is "Fair Market Rent" Calculated?
To determine reasonable rent prices, HUD and local PHAs will compare your property to others in the area. They will take into account size, location, age, condition, and type of rental property. They also will look at amenities and any utilities included with the property.
Then they will compare rent levels from the previous 15 months at comparable properties. From here, they will determine a 40th percentile threshold.
That means that 40 percent of similar units were rented at or below the amount you wish to charge. Said another way: 60 percent of equivalent properties must have a rent higher than what you plan to charge.
Hire a Property Management Company for Section 8 Housing Rentals
Now that you understand the ins and outs of Section 8 rent, you can proceed with confidence. An experienced property manager can further advise you on navigating the complex world of Section 8 housing.
PMI TC Metro is a full-service real estate management company, providing professional property management and brokerage services to the Eagan, Minnesota, area. Our goal is to deliver the highest quality customer service while streamlining management and maximizing profits. Reach out to us today to see how we can help your real estate business.
