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Fixing Up A Foreclosure
The Challenges of Dealing With Section 8, Part I
Published on February 26, 2012 by guest author: Adam Rust

Adam Rust is purchasing a foreclosed house and fixing it up for renters. This blog post is part of a series about that process.

During my conversation with my home inspectors last week, the topic of Section 8 came up. Some people may not know what Section 8 is, so I thought I might take advantage of a lull in the process of buying a foreclosure to talk about this program.

Section 8 is a federal housing program that pays rents for low-income households. More officially known as the “Housing Choice Voucher Program,” Section 8 is administered by local housing authorities but governed by the U.S. Department of Housing and Urban Development. The way it works is straightforward: private landlords contract with the local Housing Authority to rent to a person with a Section 8 voucher. The voucher holder picks their home, which should mean that landlords are forced to keep their homes in shape. There is a systematic check in place to make sure this happens. If a lease is signed, the housing authority sends out an inspector. If your house passes, then the lease is recognized and the tenant moves in. The amount of the voucher is factored by the income of the tenant that holds it, but the general rule is that the tenant is expected to contribute one-third of his or her income to their overall housing costs. The landlord collects a portion of the rent from the tenant and the rest is direct deposited from HUD on the 1st day of the month.

In theory, Section 8 should work out to everyone’s satisfaction. When I bought my first rental home, my entire focus was based on finding a voucher holder. My contractor was unequivocal: “Get that government money. It hits your account, rain or shine, every month.”

Understand that I lean progressive. I work for a non-profit organization that advocates for people to get a decent mortgage. I did not intend to gouge anyone. You get what you give. Make a nice house for someone and then you can expect to be treated fairly. I put a fair amount of money into a three-bedroom ranch. I doubled the size of the kitchen, I added carpet and tile, I refinished the hardwoods, and I put in lots of insulation.

Until you see the face-to-face nature of the poor, the numbers are just numbers. Section 8 taught me that poor people are really poor, and there are a lot of them. Being poor in America is a tightrope where a crisis happens every week. The numbers that our government uses to say who is poor is factored by an old formula created by the USDA fifty years ago. It understates the truth. Those numbers often use income as the input, but in my opinion it's better to think of it through the lens of wealth. Poverty is tough because there is no margin for a sudden expense. For sure, it is not easy to get by on
minimum wage. But the troubles come when you do not have any savings. Half of America has less than 6 months in savings. About one in five have less than $2,000.

If you are talking about poverty in general, or Section 8 specifically, it is hard to ignore the aspect of race. All but one of
my Section 8 voucher holders was a single black woman with children. Averages are complicated when it comes to negative numbers, but looking past my poor statistical grammar, understand the difficult number: The “average” single black woman with children has less than nothing. There is no room for a crisis. There isn’t even any room to take a day off of work if your child gets sick and needs to stay home from school.

To my second point – that a lot more families are poor than you might realize – did you know that more than half of the families in North Carolina, where I live, make less than $37,000 per year? Imagine raising two children on $700 per week. Imagine raising two children on $500 a week. Section 8 voucher holders do get by, but it is a hard road. Some conservatives say that women get pregnant in order to get benefits. There might be some people that make that mistake, but their theory doesn’t hold water against the truth. I met a series of stressed-out moms clutching their tattered college-ruled notebooks stuffed with dog-eared papers from four or five different social service agencies. My tenant applications showed people with varieties of income. Some was cash, such as Social Security, disability, or a pension. There were plenty of non-cash supports, too: food stamps, WIC, Medicaid, and then the Section 8 voucher itself. People with this profile are not going to starve. However, every day is going to be difficult.

The basic means for negotiating your life are different, not just in the quantity and complexity of your finances, but in the actual tools. Do you have a Boost mobile phone, and if you do, how many different phone numbers did you have last year? Do you use a tax refund loan? Cash a check and buy a money order in order to pay your light bill? Own a Rush Card? Has your furniture been repossessed? Do live near an ALDI? Can you identify the meaning of a “worker?” (See tomorrow's post for the answer.) These are the ways that people get by.

I meet lots of progressives but few have any knowledge of some of the finer details of personal finance of the very poor. Do you know why some people would qualify for food stamps but not WIC? How old must your child be before your voucher size will expand for one more bedroom?

To Be Continued on Tuesday ...

Adam Rust lives is a father and husband who lives in Durham, N.C. He also blogs at www.Banktalk.org

Previous Posts By This Author: Becoming a Landlord

When You Unlock the Front Door of a Foreclosure

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