3 Reasons Why It's Beneficial For Rental Property Investors To Work With Section 8 Tenants

The Housing Choice Voucher program, which nearly everyone refers to as Section 8, provides low-income families with rental assistance. It's operated by the Department of Housing and Urban Development at the federal level and managed by Public Housing Authorities at the local one — PHAs usually cover a city or county. If you're a rental property investor, working with Section 8 has a number of practical benefits. Below, you'll find three reasons why it's worth it for a landlord to work with Section 8 tenants.

1. Provides a Stable Monthly Rental Income

The main benefit of investing in low-income housing and working with the Section 8 program is that it helps make your monthly rental income more reliable. Your tenant is responsible for paying 30% to 40% of their monthly income to you as rent — the exact amount is based on calculations made by the local PHA and their household size. The rest of the rent is paid to you directly by the federal government each month.

If you live in an area with high rental costs and your Section 8 tenant doesn't make much income, the portion of the rent that the federal government pays can be quite substantial — in some cases, it can be almost all of the monthly rental fee. You're less reliant on the tenant's ability to pay rent.

Section 8 also makes it easier for tenants to pay their portion of the rent since it's capped at an absolute maximum of 40% of their monthly income. While this is a sizable amount, the cap makes it easier for tenants to keep paying their rental payments every month.

The amount also continually adjusts based on changes in the tenant's income — if they need to take a lower-paying job, for example, their expected contribution to the monthly rent will decrease. When you combine this with the guaranteed payment from the federal government, low-income housing rentals are often more reliable than other investment options.

2. Opens Up Your Tenant Pool to a Wider Number of Applicants

If you're investing in low-income housing, you'll find that many of your potential tenants have Section 8 vouchers. When you work with your local PHA to participate in the Section 8 program, you're increasing your pool of available tenants — many would be unable to secure housing in the area if they were not receiving rental assistance.

In addition, most PHAs have websites that allow you to list your property as accepting Section 8 vouchers. Tenants also use other low-income housing sites in order to find a property, and these are mostly restricted to rentals that accept Section 8. This gives your rental unit more exposure, helping you attract more potential tenants.

More applicants for your rental properties means that you can be choosier about who you select as a tenant. You're not required to rent to someone just because they have a Section 8 voucher — you can still check references and credit history like you can with any other tenant. A wider applicant pool means you have less risk of your rental unit sitting vacant and also allows you to be choosier about tenant selection.

3. Provides Low-Income Tenants With Places to Live

Finally, participating in the Section 8 program is a much-needed service in the community. Waitlists for Section 8 housing vouchers are extraordinarily long, and most PHAs are flooded with applicants the moment they open up their waiting list for applications. The main reason behind this is low availability — there just aren't many low-income housing units on the market in many areas. 

For many tenants, they would be unable to live in the area otherwise. Many Section 8 recipients are disabled or elderly, and they want to remain in the area because of nearby family. When you invest in low-income housing and participate in the Section 8 program, you're providing a valuable opportunity for them.

Overall, investing in low-income housing and participating in Section 8 is a more attractive proposition than it seems at first glance. You have access to a wider tenant pool through more advertising opportunities for your unit, and you also have a more stable monthly rental income. If you're investing in low-income housing, contact your local PHA and ask how you can begin participating.