Podcast 242: Shutdown Impact on Section 8

On 1/5/19 HUD failed to renew 650 rental assistance programs with another 1,050 scheduled to lose funding in the coming weeks.

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Show Transcription:

00:03 Hey everybody. Welcome back to another episode of RentPrep for landlords. I’m your host Eric Worral. In today’s episode we’re going to be talking about the government shut downs impact on section eight. It’s a topic that can get pretty heated at times. It can also get a few opinions thrown in there. Section eight as it is a, but we’re going to be looking at is looking at the facts of the situation and kind of going through and trying to filter out the data and explain better what’s going on right now. So we’ll get to that right after this.

00:41 1,2,3,4 ya ya ya…. Welcome to the RentPrep for landlords podcast. And now your host, Steven White and Eric Worral. So I should do a full disclosure here that I am not the most educated person on section eight. It’s one of those things that I’ve never personally had experienced with from the renting side or the landlord side. Uh, and then I also just kind of stay away from it because every time it comes up it seems like, at least in the facebook group it’s a lot of heated opinions around the topic. So it’s something that we don’t touch upon a lot with our content, but I felt like it was necessary to talk about it in the podcast, this episode because the government shut down. That’s currently in effect as of recording this podcast on January 15th, 2019 is going to greatly impact the housing situation here in America. And then that also means it’s going to impact you, the landlord. The most obvious issue that we have is that there are a lot of government employees that are furloughed right now, so they’re not receiving a paycheck and they are going to have trouble paying rent if they’re living week to week, paycheck to paycheck. Uh, we’ve seen this pop up in the rentprep for landlords, facebook group where people are starting to get texts through know people inquiring about this or letting their landlords know that they, uh, they may be a little bit late on rent or asking for forgiveness.

01:51 And Unfortunately, this is a really tough spot to be in as a landlord because obviously the person has a pretty good excuse, but at the same time you’re probably not gonna be able to go to your mortgage company and say, Hey, can I push this mortgage payment back a month without any kind of penalty because I have my tenant is furloughed. So I think that’s kind of the most obvious situation where you’re going to have these government employees that aren’t receiving a payment at the current time. Uh, but section eight is a big piece of this and I can say, like I mentioned earlier, I’m not the most educated on section eight, so I had to do a little bit of research and one of the things that I was running into is that it’s the project base section eight that really, uh, was getting hit the hardest at the beginning. So you may not know the difference between a, what tenant based section eight is, and project based section eight, tenant based section eight, commonly known as the housing choice voucher program is attached to you the tenant, when you move, the assistance can move with you. So that’s when somebody gets a housing choice voucher, they can move from place to place to place and use that voucher to help pay for a portion of their rent. And in a project based section eight that is attached to a specific property. So if you move into a property that participates in the project based section eight program, you get the same type of financial assistance as you would with a voucher, but if you move out it stays with the property and that benefits the next resident of that home. So project based, you can kind of think of it as, um, it’s going to be attached to the building to that apartment where tenant based section eight, known as housing choice voucher program is kind of mobile and it moves with that tenant.

03:29 So when this first launched with the government shut down, uh, I did some research and one of the interesting things I found was that the project based section eight program has been hit the hardest off the bat, right? So right at the beginning, um, as of January 5th HUD failed, renews 650 rental assistance contracts that have expired in December prior to the shutdown. So the 650 contracts that hud didn’t renew and December will affect roughly 21,500 low income households. Roughly two thirds of these households are elderly or we have disability on average, these households have incomes of less than $13,000 per year. So how does determining whether it has the available funds that could be obligated to renew the contracts and working through the processing of these contracts to determine what can be signed if funding is available. But right now there is no funding available due to the shutdown of the government.

04:20 So to go a little bit further into this, um, the number of expiring contracts is going to increase as time goes on, HUD anticipates approximately 500 additional contracts affecting another 20,000 households will expire and be up for renewal in January and 550 in February. So, uh, these, uh, the project based section eight has been pretty much as of December 21st when Congress failed to provide a funding for 2019 programs including Hud. Um, they knew as of January fifth that there was going to be issues, so January fifth hits 650 contracts that weren’t going to be renewed and then an additional 500 in January are going to be a poor a nonrenewal and then another 550 in February. So altogether, if my math is correct, by February, we’re looking at roughly about 1700 rental assistance contracts that are not going to be renewed. From my understanding, the reason the numbers are so large on this is it’s that contract could be for the entire building that has many families in it. That’s why when we saw 615 contracts expire in the beginning of January fifth, uh, it affected 21,500 families. So that’s the state of section eight, project based assistance. If you’re looking at the housing choice voucher program, which is probably the program that more of us are familiar with where, uh, like I said, it’s that mobile program where that voucher travels with you. So, uh, in that particular case, uh, the, the funding of that is kind of facilitated through these public housing authority, sometimes referred to as PHA’ sand with the PHA’ s they did receive funding January and expect to receive payments in February. But if the shut down is not resolved by the end of February, these public housing authorities will not be able to make timely payments to landlords expecting rent subsidies on March 1st. This can have dire consequences for recipients or rental assistance as they will have to either pay their rent in full or face eviction.

06:16 So that’s pretty a pretty huge because, uh, the housing choice voucher program has a lot of participants to it. So what you’re going to end up with now, if this goes into effect in this travels into March, is that there’s pretty much no funding right now for housing choice voucher programs. And I’m looking at a fact sheet that I got here from the National Center for Health and public housing and uh, it says that they have some demographic information that was obtained from the US Department of Housing and Urban Development, Hud, and this was as of May 30, first 2016. Uh, they, they estimate that across the nation there are over 2 million residents living in public housing and another four point 7 million residents living in section eight housing. So between those two programs, you can see that there’s quite a few people that are living on this assistance. And it’ll just be interesting to see what happens if there isn’t if the shutdown isn’t resolved before then in funding isn’t a, uh, given to these programs because obviously it’s going to affect first and foremost the people that are living in these, uh, these units that aren’t going to have enough money to afford rent.

07:20 But then there’s also the landlords and investors who are using these programs to help subsidize the cost that these tenants can’t make up. They’re expecting the public housing authority to come in and give them a check in the housing choice voucher program that is going to subsidize the rent of their tenant and those people are still on the hook for their mortgages and their, their creditors. So, uh, it’s a pretty sticky situation that has some serious trickledown effects throughout, uh, throughout America and through investing circles left and right because everybody knows somebody who focuses on lower income housing where they may have somebody who has the housing choice voucher program and it’s a scary thing if that’s what a big portion of your portfolio is wrapped up into. So like I said, I’m not an expert by any means on these, uh, on this topic, but I’ve done a little bit of reading up on it and wanted to share with you guys on the podcast just to kind of get your take on it as well. If you go to today’s podcast on our website, I will link to the resources that I’m pulling from. And I also talked to a local public housing authority manager who, um, she oversees 6,000 families in the western New York area. And uh, yeah, she said the same thing. that the, basically there’s a lot of lack of information at this point. They don’t really know when funding’s going to run out, if it could be mid February and in February and the people at the top of the Totem Pole, uh, most of them are not working right now. So it’s a scary situation for a lot of people involved. And that’s just another great example of people who are helping to run these public housing authorities. Uh, you know, they, there’s a lot of, a lot of just questions kind of lingering out there wondering what’s going to happen with all of these tenants that they are helping to subsidize their rent and pay the landlords on their behalf of the housing choice voucher program.

09:13 So a lot to unpack here, but hopefully it all gets worked out. And again, we don’t like touching too much on the political end of things. But obviously when the government shuts down, it has a huge impact on HUD and these different programs and eventually that works its way down to the landlords and everyday people that are going to be affected by it. So it’s something to look out for. And uh, if we hear any updates, we of course, you’ll see it in the prep for landlords facebook group and perhaps we can get a, a pha on the podcasts in a future episode to kind of talk about a very impact and what they’re experiencing on there end. how this has been for them. So until next week guys, take care and thanks for listening.