3 Reasons Section 8 Can Be Bad For Landlords

April 13, 2013 — 3 Comments

Real Estate Investors and Landlords often use Section 8 as one of their sources of income.  There are several good things about Section 8, and several bad.  Below is the way I see it, but first, what is Section 8?

Here is an abbreviated definition from Wikipedia:

Section 8 of the Housing Act of 1937 (42 U.S.C. § 1437f), often simply known as Section 8, as repeatedly amended, authorizes the payment of rental housing assistance to private landlords on behalf of approximately 3.1 million low-income households. It operates through several programs, the largest of which, the Housing Choice Voucher program, pays a large portion of the rents and utilities of about 2.1 million households. The US Department of Housing and Urban Development manages the Section 8 programs.

The Good About Section 8:

  1. Consistent payments direct deposited in your bank account.
  2. Higher than normal rents in some areas.
  3. It gives low-income families an opportunity to live in nicer neighborhoods, which is the spirit of the Act.

The Bad About Section 8:

  1. The system is routinely abused by both the occupants, and the government employees that administer it.  I believe that the money paid to HUD and the Housing Agencies is largely mismanaged, and misappropriated.  If it was a private entity, it would be in bankruptcy.
  2. According to surveys, and consensus, maintenance on Section 8 houses after the tenant moves is typically 50% – 100% more than with private payment occupants.
  3. This system has become a generational entitlement program where the government has taken the drive out of the American people and encouraged government dependency.  If an occupant of one of these houses gets married, or begins to make more money, they can lose their benefits immediately.  This discourages the drive that made America great.  The socialistic leadership of the entitlement programs should be replaced with true leaders, that create plans to get people off the programs, not stuck on them.

The Ugly About Section 8:

Last week, I wrote an article about Section 8 immediately changes rental payments.  It was amazing.  Well, in true government fashion, this week the sent out a letter that basically said, “Oh, never mind.”  I understand that sequestration is confusing these fiscally irresponsible government agencies, but come on.  You mean to tell me that in seven days, the Dallas Housing Authority went from, “Take a 10% cut or the tenant is moving” to “Everything can stay the way it is.”  I have scoured the internet.  I can’t find where they got the extra money.  All I can find is where they are reducing their hours significantly.  This leads me to believe that the choice that was originally made was, hey, let’s just cut the rich landlords, not our pay.  it seems to me they realized that if half the tenants got kicked out, they may all lose their jobs.  I’m glad the government cut their pay first, which is a trend I wish would continue into DC.

The most important takeaway for you is this:  Relying on the government (or anyone else you have no control over) to take care of you and provide for you will not work out in the long run.  Be in charge of yourself, and your own future!

TimHerriage

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I started at the bottom, worked hard and am now one of the top Real Estate Investors in the business. I learned from some of the best, excelling early as an acquisitions manager and then moved on to partner with other skilled investors to create my own portfolio of productive rental properties and later to mentor others to do the same. I am still actively involved in Real Estate, giving a current awareness to the training I share. My wife, Jennifer, and I live in Rockwall with our sons, Alex and Will.
  • http://www.facebook.com/people/Andrew-Waite/1073359539 Andrew Waite

    Great work Tim. We will relay this in an email to our subscribers on Monday. Thanks for your leadership. Andrew Waite – Publisher Personal Real EstateInvestor Magazine

    • timherriage

      Approve.

      Tim Herriage
      http://www.TimHerriage.com
      972.755.1880

    • http://www.TimHerriage.com TimHerriage

      Thanks Andrew. Sorry it was published late. I was too busy buying and selling!