Section 8 Housing Vouchers (Podcast #333)

In this podcast, we’ll go over Section 8 vouchers, how they are used in the rental industry and the rules behind accepting them.

We’ll also discuss how to deal with neighbors who are not fans of your tenants and compensating tenants while repairs or renovations are taking place on their apartment. Should you pay tenants for the inconvenience? Find out now.

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Show Transcription:

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 333. And I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about compensating for tenant inconvenience, accepting section eight vouchers and neighbors who complain about your tenants. We’ll get to all that right after this.

Voice Over: (00:21)
Welcome to the Rent Prep for Landlords podcast. Now your host, Andrew,

Andrew Schultz: (00:26)
Before we jump into today’s episode, don’t forget to check out the Rent Prep for Landlords Facebook group. We’re coming up on almost 12,000 members over there now, and it’s a great free resource that you can tie into. Get perspectives from landlords around the country network with people even in your own area. And so much more. Don’t forget to check that out today. Over at facebook.com/groups/rentprep

Voice Over: (00:52)
Forum quorum, where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (01:00)
So what do you do if you find yourself in a situation where you have a repair that takes longer than expected to complete, and your tenant asks for compensation, that’s the focus of today’s forum quorum. I have a single-family home, four beds, two baths that just had a major plumbing repair, which left the tenant and her four teenagers with only one bathroom for approximately three weeks. She’s asking to be compensated for the time spent with only one bathroom, as well as the inconvenience that led up to the repair needing to be done. The tenant had no fault in this situation. And since she’s paying for two bouts and only had one available for a bit, would you compensate her for the inconvenience? And if yes, how would you decide the right course of action? So there’s generally two different schools of thought when it comes to a situation like this.

Andrew Schultz: (01:42)
And the answer that you get is probably going to depend on the housing provider that you talk to. I think we’ll start by looking at the non-compensation side more often than not. If you’re thinking about the situation from a non-compensation standpoint, the argument that you’re going to be looking to make is something along the lines of, well, the tenant may be inconvenienced by not having both of their bathrooms, but they still have access to one bathroom. The homeless still usable, which I suppose does make sense. And I think that this would be a very different situation if it was only a single bathroom house. I think that you would almost be in a situation where you have to compensate in that instance, especially because we’re talking about three weeks here. Um, but with it being a multi bath home, you do have a little bit different scenario.

Andrew Schultz: (02:24)
Some of the other arguments that I see get made when it comes to non-compensation include things like, well, the mortgage company is not giving me a discount and I have to make all these repairs well, that’s part of the risk that you take as a housing provider simply put, I mean, you’re paying a mortgage on an investment. You deal rent as meant to pay for the mortgage and the repairs. And in this instance, guess what there’s mortgage to pay and there’s repairs to pay. So, so I don’t necessarily see that as being a justifiable argument when it comes to not compensating for something. So what about the pro side of the compensation argument? I think that most people on the pro compensation are going to be looking at it from a perspective of customer service and tenant relations. This may be one of those situations where you can do something very small for a tenant that makes them feel a lot better about a situation that went poorly and it doesn’t necessarily need to be really complicated.

Andrew Schultz: (03:16)
Um, when it comes to compensation, you could always ask what the tenant wants in terms of compensate. Um, you may have a number in your head and that number may be higher or, or lower than what the tenant is asking for, but you won’t know unless the tenant asks, um, you could maybe find out that they don’t want compensation in the form of cash at all. Maybe they want like a small upgrade to the home, a different exhaust fan in the bathroom or, or something like that. You know, that might be a way that you can compensate the tenant, uh, or the tenant feels compensated and you still get to do something that has a benefit to you as the housing provider, by upgrading the property. So it doesn’t necessarily need to be a direct rent compensation type of a situation. You could even do something like a gift card.

Andrew Schultz: (03:58)
I don’t know, maybe I wouldn’t do it like a restaurant or something like that right now, given everything that’s going on, but Amazon gift card, gift card for a local grocery store, or something along those lines that could go a long way. It doesn’t necessarily have to be a direct rent compensation if that’s the route that you want to go. But it definitely makes sense. If you’re thinking about compensating to talk to the tenant and ask them what they think is appropriate, you may disagree on what is appropriate, but at least, you know, what’s in the tenant’s mind at that point and you can start making some decisions from there. And then if you decided that you were going to go with a direct rent compensation, one way of calculating, that would be take the entire square footage of the unit divided by the rent so that you know, your dollar per square footage, and then figure out how many square foot that bathroom is.

Andrew Schultz: (04:44)
That would be my amount per day, that they would be inconvenienced if you will. That would be the per day amount that I would be considering when it came time to looking at compensation. So, so that’s how I would go about doing it if I were to offer compensation to a tenant in this circumstance. So I guess the real question becomes, would I, as a property manager, you offer some kind of compensation in this instance. And honestly, I think the answer would probably be no. And the reason I say that is because while the tenant wasn’t inconvenienced, by having only one bathroom, they are in trouble, bathroom home, the home was still usable. And ultimately, I don’t think that there is a need for compensation in this particular instance, as I mentioned earlier, I think that this would be a very, very different set of circumstances if you only had one bathroom and it was down for three weeks, I mean more than likely if you have one bathroom and it’s down for three weeks, you’re probably in a very, very different situation where that tenant is either going to have to move, or you’re going to be putting up a hotel for a long time, or, you know, hopefully, you have an extra vacant unit somewhere that you can move them to temporarily.

Andrew Schultz: (05:45)
But, um, you know, very, very different set of circumstances if it’s only a single bathroom home as opposed to a two-bathroom home. But in this instance, given the information presented, I don’t think that there’s a direct need to compensate here.

Voice Over: (05:58)
Water cooler wisdom, expert advice from real estate pros,

Andrew Schultz: (06:07)
Section eight vouchers are a hot topic of conversation. Just about any time landlords get together to talk. Our first water-cooler wisdom is a great example of how a little bit of knowledge in your industry can go a long way in preventing you from getting into some serious trouble. So let’s jump right in. We rent out a duplex property in New York and have started listing one of the apartments for rent. I’m getting multiple inquiries asking if we accept section eight vouchers, are we required to accept these? I feel like in the past, it wasn’t a requirement to say yes, however, I’ve been reading up on it and I seem to get different answers. I’d rather not deal with these vouchers and just want some clarification because I can’t seem to find any definitive answer again. Do we have to accept section eight vouchers? Or can I explicitly tell someone we do not accept it?

Andrew Schultz: (06:50)
So this is a set of circumstances where I’m able to give a very tailored answer because I operate in the New York state market. And the answer to that question is yes, you have to be willing to accept a section eight voucher in the state of New York. It falls under a lawful source of income, which is one of the articles that was changed in the law last year when there was a large overhaul on the landlord-tenant laws here in the state of New York, but in a more broad spectrum national setting, I can tell you that most States at this point have some sort of a lawful source of income protection law built into their books at this point. And what that generally means is you have to be willing to accept any lawful source of income of which section eight would be considered. You know, other lawful sources of income would be things like employment, social security, disability, income, retirement, income, self-employment, income, things like that.

Andrew Schultz: (07:41)
Pretty straightforward as to, as to what a lawful source of income is. But a section eight voucher does fall into lawful source of income in the state of New York. And there’s as such, you would have to be willing to accept that section eight voucher. If you were to deny someone, an apartment based on the fact that they had a section eight voucher, you could be opening yourself up to a huge fair housing violation. So that’s definitely something that you need to be aware of in this instance when you’re talking about working with section eight vouchers or not working with section eight vouchers. So at least here in the state of New York, you definitely have to be willing to work with the section eight programs. In other states, it may be a different set of circumstances. And by the way, this is one of those things where a lot of local municipalities or counties will make a law on a, on a local or a County level before a law can be made on a state level.

Andrew Schultz: (08:29)
In fact, here in New York, Erie County did just that eerie counties where Buffalo is located. And in Erie County, they put a lawful source of income law on the books a few months before it was passed at the state level. Um, so we had a lawful source of income law already in place prior to the state’s law coming on the books, and we’d already adapted our processes to include that sort of a thing. So we were already set when the state had, had updated their law in that respect. Keep in mind that just because you have to consider a section eight voucher does not mean that you have to make that your only criteria when it comes to tenant selection, we still have a very strong set of selection criteria for our tenants that we put every tenant through the exact same criteria and they either stand up or they don’t based on the, uh, based on the number of points they score in our, in our criteria.

Andrew Schultz: (09:18)
And it’s that simple. Like we use the same criteria every single time. We know that our criteria don’t violate any of the fair housing guidelines and as such, we can run the tenants through that exact same set of criteria every single time. And we’re getting a systemized response every single time. And that’s how we run our business. There are definitely some pros and cons to accepting section eight vouchers. A couple of the pros that I would definitely want to mention is that the rent does tend to come in on time every single month. A couple of notable exceptions of that were the most recent government shutdown. Last year, there were some delays in section eight vouchers during that timeframe. And obviously, if a tenant has a maintenance concern, that’s not getting addressed, they can reach out to their caseworker. And generally speaking, they’ll send an inspector out and then put the unit into a basement where you won’t be receiving your section eight rents.

Andrew Schultz: (10:04)
If you have some sort of a repair that’s being ignored or not managed properly or something along those lines, another pro to a section eight voucher is that section eight tenants do tend to stay longer than non-section eight tenants. It’s generally a very big pain for the tenant to move their section eight voucher to another landlord. Just the same as it is for landlords to have to do the onboarding paperwork for a new section. Eight tenants that I think in itself tends to lend to section eight tenants, staying in a unit for a lot longer period of time. It’s just an easier scenario for them. A couple of cons that I will mention are definitely the inspection process. This might be different in other markets, but I can tell you that here in the Western New York market, the inspection process is kind of a headache.

Andrew Schultz: (10:48)
And the reason I say that is because our housing stock is predominantly older, especially inside city limits. You’re looking at housing stock that is well over a hundred years old. You know, it has, it’s worn, you know, there’s, it’s not a brand new house. You can’t apply the same standard to new construction as you can, to a home that was built in the late 18 hundreds or early 19 hundreds. And sometimes that leads to longer lists of repairs for section eight and things like that. So generally speaking, I would say that the inspection process as a little bit more cumbersome, if you have older housing stock, the other con that I wanted to mention, I’d already actually touched on it just a moment ago, is the paperwork, you know, getting through the section eight paperwork, the RFPA, which is called the request for tenancy approval and then getting through the inspection process, and then, you know, the lease paperwork and the hap contract, there’s several different pieces of paper that needed to be filled out and processed and dealt with during the course of a section eight, you know, once you can get through, well, the paperwork and get the tenant onboarded and moved into the property, generally speaking, it’s pretty smooth sailing at that, but it does take time.

Andrew Schultz: (11:54)
You know, it’s going to take you longer for a section eight tenant to move in rather than a cash-paying tenant. So you really just have to weigh the benefits and that sort of circumstance as to how long it’s going to take to get through the section eight process. And honestly, with things being what they are right now, I will say that at least here locally, we’ve noticed the process is taking a little bit longer than usual. Typically we’re looking at 30 to 45 days to get through all of the paperwork associated with a section eight tenant and get them moved in at this point, which is a long time. I mean, let’s be honest it’s every day that an apartment is sitting vacant is a day that that unit is not generating revenue. And when you’re waiting 30 or 45 days for a section eight tenant, to be able to move in, that definitely can, can put a damper into your operations.

Andrew Schultz: (12:35)
So that’s definitely something to keep in mind as well. Do the pros outweigh the cons when it comes to section eight tenants. It really depends. We’ve had really, really great section eight tenants, and we’ve also had some really, really bad section, eight tenants. I’ve also had really, really great cash tenants and I’ve had absolutely terrible cash tenants. This is one of those things that I think boils down to tenant screening more than anything else, you know, you’re never really going to know until a tenant moves in whether they’re going to be a great tenant or whether they’re going to be a nightmare. There are certainly red flags that you’ll be watching out for during your turn and screening process that might give you some clues as to whether or not you’re moving in the right direction or not. So ultimately here, I guess the answer to this question is, yes, you do have to be willing to accept section eight vouchers in the state of New York.

Andrew Schultz: (13:20)
No, that does not mean that you have to ignore all of your other tenant selection criteria, check your local state and federal laws to make sure that you’re not in violation of any of the fair housing laws, and keep in mind that lawful source of income while it hasn’t necessarily passed an all States. It is starting to pop up more and more. So definitely be sure that you’re looking specifically for those lawful source of income laws. Don’t forget to check at a local municipal and a County level as well, because sometimes you’ll find those laws will pass. Um, you know, at a more local level before they pass at a state level, our second water-cooler wisdom today comes to us from Reddit. And it begs the question. What do you do when your tenants being harassed by a neighbor? The tenants of my condo unit recently emailed me to say that they are upset by a woman living in the condo unit that faces their balcony.

Andrew Schultz: (14:08)
The woman in this other unit has been giving them dirty looks. And now the other day, yelled at my tenants to put something on their balconies. So they can’t see each other. She doesn’t like that. They spend so much time on the balcony where they can see into their windows, et cetera, et cetera. It’s my instinct to try not to get involved in this one. Are there any legal issues or responsibilities that a landlord needs to consider here? Note, I only own the one condo unit. I do not own the other unit with the woman that they are having the dispute with. This is probably the simplest landlord problem for you to have. There’s nothing that you can do. The person who’s living in the other condo, you have no control over them. Um, and this is a situation where your tenant needs to deal with the problem as an adult.

Andrew Schultz: (14:51)
Um, for lack of a better term, there’s really nothing that you can do here. You have no control over the other woman. You can’t stop the other woman from doing whatever she wants on her balcony. Your tenants definitely have the right to use their balcony in whatever capacity they’re using it in by the sounds of things. It doesn’t sound like they’re having huge parties or anything along those lines. There’s not a lot that you can do here as a landlord. It doesn’t sound to me like this has reached the point where it’s become threatening behavior or harassing behavior or something like that. But realistically speaking, if it gets to that point, your tenants need to be referred over to the local police and the local police will have to do something about the situation. But as far as you as a landlord here, I don’t see much of any reason that you need to step in.

Andrew Schultz: (15:34)
And I don’t think that it would really do any good for you to step into this situation. So I would probably just let the tenants know that they need to resolve this with the other party directly, uh, find a way of living, you know, with their neighbors. And if it gets to the point where it elevates either threatening, harassing behavior, at that point, they may want to consider calling the local police department. So that pretty much wraps things up for this week’s episode of the Rent Prep for Landlords podcast. Thank you all so much for listening. We really do appreciate it. If you found this episode beneficial, please do us a favor and share it with someone in your life that you think might benefit from hearing the same information shared on your social media. Just do us a favor and help us get the message out so that we can continue to produce these episodes of the podcast long into the future.

Andrew Schultz: (16:17)
If you’re looking to get in contact with me, I can be reached over at www.ownedbuffalo.com. There is a contact form on the front page there where you can send me a message directly. You can also schedule a free 30-minute consult over at ownbuffalo.com as well. And if you’re looking for top tier tenant screening services, head on over to rentprep.com to take a look at the different service offerings that they have, they have packages little suit just about any need that you may have when it comes to tenant screening. And last but not least, don’t forget to check out the free Rent Prep for Landlord’s Facebook group over at facebook.com/groups/rentprep. We’re coming up on almost 12,000 members there, and we’d love it for you to join us. And speaking of joining us, don’t forget to join us next Thursday for an all-new episode of the Rent Prep for Landlords podcast. Thank you all again. So much for listening. We really do appreciate it and we’ll see you next week.