Top 5 drawbacks when renting section 8 in the Detroit area

The demand for rental properties has never been higher. Approximately 44 Million single family residences in the United States are renter occupied. In Detroit alone, 123,129 or 46% of homes are renter-occupied with 9,000 of those units rented section 8. The Detroit Housing commission plans on adding 1000 more soon. With this demand for rental housing coupled with the security of section 8, now has never been a better time to rent to tenants with a section 8 voucher. Tenants with a section 8 voucher pay 30-40% of their income for rent and the federal government pays the rest. But be weary of the section 8 pitfalls. In this article, we examine the drawbacks to renting section 8 in the city of Detroit.

Annual Inspections

If you want to rent your Detroit property with section 8 then you must abide by the yearly inspections. The Detroit housing commission will send an inspector to the property to ensure everything is up to code. Even if there is not a tenant residing in the property, you must allow for this inspection.

The standards for the inspection have strict guidelines, many inspections result in landlords forced to make updates and repairs. All inspection must meet the HUD’s Housing Quality Standards. The inspection checklist includes electrical hazards, wall conditions, lead based paint, ceiling conditions, security, smoke detectors, fire safety and more. Once updates are made, a reinspection must take place to verify the standards are met.

As of the date of this article, the Detroit Housing Commission is still working remotely and scheduling your inspection can be done via email. The suspension of evictions in the City of Detroit are to be lifted July 24th 2021. Though with the uncertainty with the COVID virus, another eviction suspension could take place in the future.

Tenant property damage

One of the risks having tenants with section 8 or not is the wear and tear by tenants. This can be a a landlord’s nightmare. Your rental property is your investment and like many landlords, you take pride in the properties you put on the rental market. Unfortunately, some tenants will not treat it as such and when someone is facing an eviction the amount of care will diminish quickly.

Some may argue that there is less risk for damage when renting section 8. Acquiring a section 8 voucher requires a long process and resulting in adequate housing for greatly reduced price. Therefore, increasing the incentives of maintaining their section 8 status. Either way this is to be expected whenever you have someone occupying the residence.

Section 8 regulates the rent amount

If you want to rent section 8 in Detroit then you must play by their rules, including how much you charge rent. There is a cap in how much section 8 will pay. This is determined by HUD, who makes a collective list of fair market rents. Fair market rents represent the cost to rent an average priced home in the local housing market. Small area fair market rents (SAFMRs) are FMRs that are determined by the zip codes within the metro Detroit area. The means that your investment into remodeling your home may not have a return when HUD determines the dollar amount you can rent your property. The housing voucher amount is between 90-110% of the FMR.

Potential for difficult renters

When a person holds a section 8 voucher, it can be safe to assume that there is some sort of financial hardship there. A lot of times that hardship can be outside the control of the renter, like medical issues where they cannot physically work or even mental health problems. One major job source surrounding the Detroit area is the automotive industry. Market crashes, like the ones seen in the early 2000s and local area markets greatly affect the housing market. If you were renting during the initial COVID outbreak you probably suffered some sort of setback to your rental income. Though there is security when federal government covers the majority of the rent bill, section 8 may supply tenants with predisposed hardships.

HUD does not pay security deposits

The federal government fits the bill (partially) when it comes to the monthly Detroit rental check. However, HUD does not cover security deposits. Earlier in this article we discussed the risk of damage to your property from a renter (and sometimes this is just normal wear and tear). HUD will not cover that initial security blanket you can use when a tenant breaks an appliance or makes a big hole in the drywall. Additionally, this security deposit can be a difficult check to collect considering that renters with a section 8 voucher are suffering some sort of hardship.

How to become a section 8 landlord in Detroit

As stated in the beginning, Detroit is a great place to be a landlord. However, it is important to preplan for when things go wrong. Section 8 is a great option that provides a security blanket during these uncertain times. If you read this article and still want to go down this route then you need to contact the Detroit Housing Commission and start on the forms listed below, click here to access the website.

You will then meet with your housing inspector and ensure the property is up to code and HUD’s standard. Once this is approved, you will complete your W-9 and documents and then accept section 8 vouchers. Finally, the housing authority will deposit their portion of the rent into your bank account and the tenant will pay the rest!

Forms section for section 8 (Detroit Housing commission):

Forms Section Request for Tenancy Approval (copy)

Rental Information Sheet (copy)

Lead Based Information Sheet (copy)

Landlord Property Information Sheet

W-9 (if you are a reintegrating ad an entity, you may not use your SSN for 1099 purpose)

Direct Deposit Enrollment Form

Assignment of Housing Assistance Payments

Web Resources for more information

General Information on Voucher Programs

HUD Housing Assistance Payment Contract

Defective and Lead Based Paint Information

Request for Tenancy Approval

Tenancy Addendum

IRS W-9 Form

Did I miss anything? Is there a bigger drawback you experienced as a landlord? Leave a comment or send me an email at chris@andersonhomepaths.com. Also, if you would consider selling your home at all then give me a call. I work exclusively in the Detroit/Metro Detroit area. We buy houses and pay all cash. If you would like a free no obligation quote then give me a call at 586-991-1875.

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