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Section 8 vouchers: Do shady participants equal a bad program?

One of the great longtime subscribers to this blog, Anneliese, reached out to me via email about my recent post "Chicago's 'Ending Veterans Homelessness Initiative.'"  She had some questions about the Sec 8/Housing Choice Voucher (HCV) program and rental vouchers in general.  Anneliese made some great points and raised some great questions, so I asked for her permission to share our email conversation with you.

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Anneliese:  Read the story on the veteran's homelessness initiative - does the city off-set the rent for the veterans in the form of housing vouchers?

I have a coworker who used to be a landlord. He would allow section 8 tenants. He said that his tenants were always terrible - his wife's purse was stolen three times when she would do building tours, he was physically assaulted by a tenant, and he kicked one person out for building a meth lab in the apartment. I asked him why he would sign himself up for such a headache, and he said, 'for the money.'
See, the section 8 program pays a LOT of money to landlords. He would pocket that extra money and used it to buy a newer, better property. Then he did the bare minimum to keep his old 4-plex maintained. I told him he was just feeding into the problem of providing sub-standard housing to people on the section 8 program and pocketing the difference... he didn't care. He thought the tenants were terrible, and once he got a "nicer" property, he got "nicer" tenants.

This guy is no paragon of human virtue, to be sure. In fact, I think he's a real skeez [Urban Landlady's note: LOL!]. I personally think he deserved all the trouble he got, if that's what he was about. Do you often see other landlords being bare-faced opportunists like my coworker? I would imagine voucher programs like the veteran's program attract that type of person.

His stories do scare me away from ever having section 8 tenants though - seems like it wouldn't be worth the trouble, even though I personally know people who benefit from the program.
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Urban Landlady:  This is a great topic to blog about one day. Thanks for the good suggestion!

I have rented to families with Sec 8 vouchers in the past and I definitely would again. Some of my best tenants (always paid on time or even early, left my place clean & undamaged). And some of my worst. People can't put a whole group of tenants in one box.

Some landlords make the mistake of relying on Sec 8 to "screen" the applicants who approach the landlord. This is NOT a smart business tactic. Just because a person has a voucher you don't just look at dollar signs & accept them. You STILL do your due diligence (credit check, background check, home visit, previous landlord reference).

Then about your friend letting the place fall apart, it's confusing because Sec 8 property inspections are known for being tough to pass (at least in Chicago). Was this in recent years? There are annual inspections, plus a tenant can call any time of year to report repair issues a landlord doesn't fix. If the landlord doesn't pass inspection on the 2nd try Sec 8 suspends the payments.

Sec 8 does allow landlords to charge what's called Fair Market Rent (usually slightly higher than average). This is kind of because the landlord is required to meet HIGHER (not lower) Housing Quality Standards than landlords who don't rent to voucher holders. If Sec 8 didn't allow this expectation for slightly higher rents they would be stuck with a bunch of renters they couldn't house because no landlord would bother with the inspections & bureaucracy. You can Google FMR & HQS for some interesting insight.

Don't let this kind of stuff scare you yet. There's a LOT of false or misleading info floating around out there. Get good solid intel first then decide. Let me know what you think.  Thanks for reading.

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Anneliese: I think what he did was only do one round of Section 8, then sold the building, and used the money to buy a better building.

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Urban Landlady: Wow.  Thanks for the additional info.  If you don't mind me saying so (and I suspect you don't based on how you describe him), this guy took a boneheaded shortcut by cutting corners when a better LONG TERM strategy would have been to keep the building, maintain it, and collect a legitimate rent.  Building wealth as a real estate investor is about cash flow (regular income over time) versus a quick, shady profit.

This is a really interesting conversation, Anneliese.  Would you mind if I share it in a post in the next couple of weeks?  You present some great info and I'm sure other readers would be interested to hear.
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Anneliese: You can present me by first name. I am not friends with this guy, I think he does some shady stuff. He used all that extra money from his shady section 8 scheme to buy a new property and then didn't work for two years. But.... he's back to working now, so I'm not really sure what that got him. He's a confusing case to be sure...He is just completely, totally out for himself even when he knows he's doing dubious stuff. I don't think he even cared that he was exploiting the section eight system - "if there's a loophole, it's their own fault for not closing it" would probably be his answer. :-/
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My thanks to Anneliese for always being such an engaged and insightful subscriber.  She always exposes me to a fresh, new perspective.  She also shared with me this link to one state's program to make the process more efficient "Metro HRA's new ombudsperson helps peopld navigate rental process."
There are shady voucher holders who have passed through the program, and there are shady landlords who have managed to collect some checks until their schemes fell through.  Does this automatically make for a bad program with no value to anyone?  There's a lot of misinformation out there, so if you have had a direct connection to the Sec 8 program either as a landlord or as a tenant please add your comments below.

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