Section 8: Nice Deal if You Can Get It


As WalletPop reported recently, property investors buying foreclosures are flocking to get a boost from U.S. Department of Housing and Urban Development's Housing Choice Voucher program, better known as Section 8. Low-income tenants approved to receive the vouchers typically have to spend no more than 30 percent of household income on rent, and the feds pay approved landlords the remainder of the bill – which usually means most of it. A tenant in Los Angeles who earns $12,000 a year would pay just $300 a month for a one-bedroom apartment whose actual rent is $1,100. The landlord gets a government check for the remaining $800.

Not surprisingly, the only people who love Section 8 more than landlords are the more than two million tenants who get to live in nice homes for a bargain price. Want to get in on the deal? A modest income is just the first thing you need. A proven need for a home can help. You should also be prepared to wait, usually for years. Nationally, only about one in four eligible households actually gets aid, according to the Center for Budget and Policy Priorities.


In theory, any tenant who earns less than 80 percent of the "area median income" for a region, as determined by HUD, can qualify to receive a Section 8 voucher. But three out of four new vouchers must go to the poorest applicants – those making 30 percent of the median. (Nationally, the median household income is about $50,000.) The odds of making the cut depend largely on where you live. HUD distributes the funds via grants to local housing authorities, and those agencies get to decide whom to give the vouchers to. Many choose to set the maximum income for tenants at half of the area median income, to make sure aid goes to the neediest. L.A. is one: the most you can earn there and still qualify is $33,650.

And even within that low-income group, cities can pick and choose who gets the vouchers. One city may devote most of its aid to getting the homeless into permanent apartments; another might have a program to help domestic violence victims relocate. As if all that isn't enough of a squeeze, many of the tenants HUD already helps are seeing their incomes decline in the recession – and as their incomes drop, the government's share of the rent must go up. With their costs mounting, many local housing authorities are being forced to cut back on the number of vouchers they distribute.

Many cities aren't taking new applicants at all. New York City's list has been closed since a brief three-month opening in 2007; currently nearly 128,000 families are on the waiting list. Atlanta isn't taking applicants either. Instead, it's using its vouchers to relocate tens of thousands of tenants from demolished public housing projects. When Birmingham, AL, opened up its waiting list this year the line to sign up stretched for more than three blocks.

Chicago may have the right idea: last year, it held a lottery for coveted spots on its 40,000-household waiting list. You'd do a lot worse at the corner store.
 

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