Should You Rent to Section 8 in Hawaii?
One of the most common questions I receive as a property manager in Oahu is whether an owner should rent to Section 8 tenants. It’s not really a question so much, it’s more of comment to NOT rent to Section 8. Should you rent to Section 8? Rental trends may vary greatly across the nation, but this is how it could pertain to renting out properties in Hawaii.
What is Section 8?
Section 8 is a government-subsidized rent program for people in need. The program will analyze a family’s income stream and determine how much they will need to contribute to the actual rent on a percentage basis. In some cases, the government may pay for 100% of the rent, but it is often either 30 or 70%. Because income levels can change over time, so can the government’s contribution levels.
Can You Say No to a Section 8 Tenant?
There are many classes of people that you can not discriminate against according to the Landlord-Tenant Code. In Hawaii, there are currently 8 different classes that can’t be denied rent if that is the only factor. These include race, color, ancestry, sex, marital status, religion, handicap status, and HIV infection. Since Section 8 qualification is a financial classification not related to the 8 mentioned earlier, it is allowed to reject a tenant for Section 8 membership.
Section 8 is often thought of like food stamps for rentals. When compared to food stamps, it is no wonder that there is a negative connotation with the program. There are many great reasons to rent to Section 8 tenants though! Should you rent to Section 8? I’ll help by comparing the good vs the bad, starting with reasons you should not.
Section 8 tenants have a bad rap. There are many stereotypes including being messy, lazy, having extremely large families, and not caring about your house because they could be renting it for free. These are of course STEREOTYPES. There are many people who fall under the umbrella of government care for varying reasons including but not limited to, a death or disability in the family, divorce, change in job, or layoffs to name the obvious. If you conduct a thorough background analysis, you should be able to tell which of your potential tenants may fit the negative stereotypes and which don’t. Section 8 negative stereotypes don’t only exist for Section 8 people and can fit ANYONE. Here are the actual bad negative aspects behind renting to Section 8:
Lengthy Move-In Process:
If you have a rental that needs to be filled NOW, then Section 8 is not for you. Even if you have approved of the Section 8 tenant of moving in, it still needs to be approved by the government. After signing the Section 8 papers, this government step 1 approval process can often take over a week, sometimes two weeks. This is even before it gets to step 2.
Section 8 Inspection:
Step 2 is the dreaded Section 8 initial inspection. The inspection consists of a Section 8 inspector coming to the property and doing their own property inspection on the property. The inspector is of course looking at the condition of the house, making sure things work, but mainly safety issues. If you can pass the inspection, then your tenant is as good as approved by Section 8.
As a property manager, I dread the Section 8 inspection. We have many Section 8 tenants, but rarely pass the inspection on our first try! There are so many reasons why you can fail, sometimes even with a new house. Sometimes, it will frustratingly seem like a completely random reason. Here are a few of the simple or random reasons that I have failed a Section 8 inspection:
- Bedroom doors have key locks instead of non-key locks
- Working smoke detector is older than 10 years old (code violation)
- Water heater drip line is closer than 3 inches from the ground
- Jalousie windows have a gap between them when closed (they must be touching)
If you fail the inspection, you can fix the problem and get an unlimited amount of re-inspections. However, if you had to wait for your first inspection you may have to wait for the re-inspection, slowing you down. If possible, I would highly recommend having a handyman with you on the day of the inspection. If you can repair the problem at the time, you can still pass the inspection on your first try.
If you pass the initial inspection, Section 8 does reinspections every year. Yippee! The reinspection is not nearly as difficult as the initial inspection and the tenant bears a lot of the responsibility to upkeep the property. There is very little consistency between inspectors though. We have instances where one of our rentals have passed inspection for years only to fail for a minor detail that was ignored for years. This is not a common example, but I had a client that had to suddenly electrically re-wire a house after having Section 8 tenants for over 4 straight years. The house had not changed in those years.
Delayed First Rent Check:
Finally, after approval, your tenants can move in, sometimes immediately after the inspection! Don’t expect to get paid by the government immediately. Section 8 still must cross their T’s and dot their I’s so it will still be a while until you get your first government check.
If your tenants have a rent contribution amount, you should get their portion immediately. There will be a minimum one month delay until you get your first check from the government, but it could be longer. It will depend on when your tenant moves in as there is an actual cut off date when the Section 8 office can cut a check. It is not uncommon to be delayed for 2 months. Once you do receive a check though, you’ll get the entire delayed amount in one lump sum. Section 8 will then pay you for each month typically on the 7th via ACH.
Long Term Tenants:
When I say long, I mean looooooooooonnnnnnngggggg! As a Section 8 tenant, it is very difficult to find a rental. Once they are in one, they don’t leave easily. It is not uncommon for a Section 8 tenant to live in the same residence for 1o+ years! We have many clients where their first tenant were Section 8 tenants, and they have yet to move out! The most common reason for a Section 8 tenant to move will be more because the landlord needs them to leave and not because the tenant wants to leave. Selling the rental is a very common example.
Monthly Rent Checks Guaranteed:
Because it’s the government paying you rent, you are guaranteed to get your rent at the same time each month at least on the Section 8 portion. If Section 8 is paying for 100% of the rent, then you will not have to worry about getting paid rent if your Section 8 tenants reside in your rental.
During the Great Recession of 2008 and COVID-19 times of 2020, my clients that had Section 8 tenants were very happy because of the stability of rent provided.
Hassle-Free Rent Increases:
All owners want to get as much rent as they can in their rentals but often don’t for various reasons. Sometimes it’s guilt, or fear, or lack of knowledge on what market rent is.
The most common reason why an owner won’t raise the rent on their tenants is because they like them or are scared that a tenant will leave once a higher rent is proposed. With Section 8, the fear or guilt is greatly decreased as the government is the one picking up the tab! Of course, the Section 8 office is going to do their own analysis to make sure the new rent is still in the market reasonable. Assuming it is, they will not disapprove. As your tenants will not be paying the full 100% of the increase, they will most likely not have a problem with the rent. We even have examples of Section 8 tenants offering to pay a higher rent then advertised to be more competitive in the market.
Section 8 is Hard on Tenants too, not just Landlords:
Everything about Section 8 is hard. You can see how it’s hard for landlords, but it’s also hard on the tenants. Getting approved is a rigorous ordeal and can take years. Once approved, you’re not given a lifetime membership.
If a Section 8 tenant does anything to jeopardize their Section 8 standing, they will lose it for good. This means that the majority of Section 8 tenants will do whatever they can to not lose their assistance. They will sometimes bend over backward to please the landlord. This includes helping with repairs, maintaining the property, and being very communicative.
The biggest fear many of these tenants have is getting notice from the landlord of lease cancellation whether due to displeasure with them or for a sale. For some, there is a thin line between that notice and homelessness.
What do You Think About Section 8?
There are many horror stories out there regarding Section 8 tenants. The most important thing to remember when deciding to rent to Section 8 tenants is to have a good screening process in place. This is where the experience of hiring a property manager really shines over managing a property on your own.
I too have horror stories of bad Section 8 examples. I can attribute many examples to the owner taking a risk on the tenants due to a desperate financial situation. In other examples, the owners brought in the tenants themselves and didn’t screen the tenants. In Hawaii, this occurs often for family friends or acquaintances.
If we are comparing stories, I have more positive stories to tell of Section 8 tenants than bad. Depending on the owner’s circumstances, I would highly recommend choosing a Section 8 tenant over a “normal” tenant if they are equal in character and on paper. If you have questions on this topic and would like to see if a property manager could help you with your rental, please don’t hesitate to reach out to our office to find out more.