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Fixing Up A Foreclosure
The Challenges of Dealing With Section 8, Part II
Published on February 27, 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.

For the first part of Adam's two-part series on the challenges of dealing with the Section 8 program, click here.

I showed my house to thirty or forty voucher holders. Four signed a lease. Every time, their contract fell through because of a hold-up from the Housing Authority. I began to realize that there was a big problem with the program.

Neither of the narratives on the left nor the right of the political spectrum square with what I experienced.

Conservatives might agree with the idea of market-based vouchers, but the architects of right-wing opinion still don’t show much love for Section 8. It is a “no-strings-attached welfare program,” according to Howard Husock from the Manhattan Institute, “[through which] urban liberal Democrats waft benefits to their constituents … [resulting in] increased dependency and the undermining of neighborhoods.” Some attacks are more ad hominem: the right-leaning critics will say that voucher holders are a bunch of shiftless welfare moms armed with the privilege of a voucher and a careless disregard for other people’s property.

The idea that landlords were prejudiced against voucher holders was off, too. This is the narrative from the left. People will tell you that landlords prejudicially refuse to accept vouchers because of prejudice. Many will assume that taking a voucher means over-charging for rents and putting off repairs. Whenever land-lording comes up during coffee with one of my environmentalist friends, he always tells me about the house on his street with eight cars parked on the lawn and people sleeping outside during the day in the summer. I imagine that he feels very safe to voice this perspective, as he is on the Chapel Hill Town Council.

Charles Murray has recently written a book that goes into great detail about the two Americas. To paraphrase one of his points, he says that we have archipelagos of the richest and the most-well educated surrounded by vast stretches of physical space made up of neighborhoods full of people struggling to make ends meet. Whereas most rich people used to live in mixed-income areas, now there are thousands of neighborhoods where every home costs four or five times more than the median price in the country. Ultimately, what is lost is any social engagement between the two groups. Well-off youngsters co-mingle at Brown and Berkeley when they are young and in clusters of McMansions in their adult years. This social history came across in the advice I got from my well-off non-landlord friends. “Be sure to check their credit,” some said. “Don’t just decide you like someone.”

My landlord friends differed. “Ask for a copy of their credit score? Why? So you can see the same 580 to 620 number again and again? Credit score is meaningless. Don’t even waste their money. Go see if they kept their place in shape.”

One stereotype, that the typical Section 8 family is very large, did match with the real story. But the fact that those families were so large only underscored the scope of poverty. For many of these families, the Section 8 voucher holder was taking care not only of one generation but sometimes two. She had more stability than anyone else.

Other stereotypes were only partially true. While Section 8 says that they vet all voucher holders to filter out ex-convicts, public perception seems to tilt in the other direction. It was true that none of the voucher holders did have records. Still, when they listed the people who would be staying in the house, it was a fairly frequent event that their housemates would come with a record.

“I have no idea why the police broke down my door,” said one applicant. I suspect it may have had something to do with her 17-year old grandson’s recent arrest for possession of a firearm without a license.

As an aside, I overcame any aversion to people with a record. A record says about as much about a person as does a credit score. The truth is that we lock up too many people and an awful lot of those people are not future homebuyers from the Ivy League. I found a tenant – one without a voucher – and he had a record. He has paid his rent every month, without fail.

But going back to the operational details of Section 8, the real problem was that the people over at the Housing Authority could never get anything done in time. Getting a house is an arduous process for tenant and landlord. Time is money for the landlord. The clock is ticking for the voucher holder, because if they do not sign a lease within a few months, their voucher is revoked and they must re-apply. In Durham, the waiting list for a voucher is two years. The voucher holder has to complete one or several classes on managing money, taking care of a home, or moving from one home to another. If
the tenant is moving from one county to another, then she has to get exit approval before she can start the process in the new place. The landlord has to wait and wait. Months can pass. Even the most grizzled Section 8 landlord knows that it takes a long time. But they hold on because once a tenant is in your home, the difficulty inherent in moving makes it very unlikely that the tenant will ever leave.

The inspection, which must be passed prior to moving in and then again on every subsequent anniversary, can be a drawn-out affair. You wait weeks for your appointment. The time and date is not negotiable. If a landlord has a conflict at the assigned date and time, then the process gets kicked back for another few weeks. And did I mention that the inspection makes no sense? One of my friends has four houses. He is a good landlord. His homes are “tight.” He puts in stainless steel appliances, he refinishes floors, he buys low-e glass windows. Even though the system penalizes you for doing it, he puts in lots of insulation. Until recently, he had two of those homes occupied by voucher holders. This month, both are out. In both cases, it isn’t because the tenant caused a problem. It came down to the troubles at the housing
authority.

One had her voucher cut from three bedrooms to two. As a senior citizen supporting her daughter and grandchildren, she could not go from paying $80 to $400. Ever since HUD spotted evidence of embezzlement by the leadership of our Housing Authority a few years ago, the Housing Authority has been reducing voucher sizes. There is no justice: The Director is using his business credit card at Victoria’s Secret, so now scores of poor women have to double-up in their bedrooms with their middle-school daughters. Now my friend's tenant is going to move from a nice house to a two-bedroom apartment in a massive multi-family apartment complex.

The other tenant had her payment put in abatement after my friend put in a railing in the stairwell. The inspector found it when he came out for his annual visit. “This is not 36 inches off the ground,” he said. “It’s only 35 inches. You fail. ” My friend had it fixed the next week. The surface of the hand rail was exactly 36 inches from the stairs. When the inspector came out the following month – with the rent still being held back – the inspector clarified. “The 36 inches is measured from where the hand rail is anchored in the wall. You fail.”

Now my friend has decided to cease working with Section 8. But it isn’t that easy, it turns out. Although his lease says that if a home fails inspection, the lease is canceled, the housing authority says that he cannot evict her. If every landlord had this experience, then the system would be messed-up but completely fair. However, that doesn’t seem to be the case. The real way to make money in Section 8 is to buy ultra-cheap properties and outfit them in such a bare bones way that there is little there to pass inspection. A savvy Section 8 landlord never puts in insulation, because the housing authority ignores any effort to save on utilities.

If you read last week’s blog entry, you will remember my conversation with the termite inspector. He had 44 homes. He carved a two-bedroom home into six bedrooms. Now he is pulling in $1,100 a month from Section 8 for a $40,000 property. With taxes and insurance, his mortgage payment is $350 a month. I guarantee that this house has linoleum tile, 50-year old cabinets, and a warren of small rooms with drafty windows. That day he had an ancient refrigerator on the back of his truck. “One of my tenants made me get rid of it,” he said. “I’m going to put it into a home over on Elizabeth Street.”
***
Lonetta had a boy and a girl and a three bedroom voucher. However, since she worked as a tutor at a charter school, she was only going to get $400 from the housing authority. She was honest: “I can only afford $450 out of my own pocket.” She was willing to show me her current place. It was an odd place. She had a series of books on the wall, many about African-American history. I was impressed with that. Her home smelled of cumin and incense. There were plants everywhere. I decided that I could trust her.

I should have had a lease with me then and there. I was asking $950, but I changed my plan. “OK, let’s go with ($850). I will draw up a lease.” She had her voucher in her purse. We signed later that afternoon. The next time I saw her was three weeks later. I was mowing the lawn. My house has almost an acre of grass to cut. But I am a nut about a good lawn. I keep it well-nourished with nitrogen, lime, and iron. The only problem is that my grass will not quit once the sun comes out. She was parked inside her friend’s Toyota. Lonetta had no car, but she had come over to show off her future home.

It was the end of the following month when Lonetta's “worker” - a social worker, in Section 8 parlance - contacted me.

“Her voucher has been cut,” she said. “She is only going to get $100 from us. Will you take $500?” When I called Lonetta, she was hysterical. It was less that she was not going to move in to my place. She was over that. Her problem was that once your voucher is available, you have a deadline to make a lease. Her time was going to be up in two weeks.

The following winter I ran into her at the YMCA. She had found a one-bedroom apartment.

Next time, I will not advertise for a voucher holder. I am done with it. Maybe that is the luxury of privilege. I wish that people like Lonetta had the same opportunity, but the promise of the program does not match with its performance.

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

User Comments
Jon Daley | February 29, 2012 23:43

i recently stopped renting, after dealing with one set of renters who made bad decisions regarding boyfriends and had the police at their house often, followed by your stereotypical single, black mom of two with a grandmother helping out, on section 8.

i also lowered the rent to the section 8 maximum for a three bedroom house $928/month, which was supposed to include utilities, but the tenant failed to tell me that part originally, and so she paid the gas as well.

the inspections were quite annoying - "every closet must have a hanging clothes rod" no matter if the house has 9 closets, including two in each bedroom, and so we had removed the hanging rods when we lived in the house, because who has that many clothes???

one thing you didn't mention is the section8 pays more for a three bedroom apartment than for a three bedroom house. i'm not sure what the reasoning is for that.

i also thought section8 would help me keep the tenant paying her portion of the rent, but they didn't care at all, until the magistrate made a ruling.

i ended up with $300 profit for the year, not including the parking space that i rented to someone else.

now we are in the process of painting and fixing up the house (that wasn't cleaned since the tenant moved in) to sell it.

my recommendation is to avoid section8 tenants.

Done with Section 8 | August 25, 2013 15:38

great article and thank you for sharing. I inheritated a tenant from Section 8 - I have spent a lot $$ and time fixing up the property...and yes, again after failed 1st inspection. The second time, inspector found a loose screw in oven which is part of 4 (optional outline) screws holding the element/boiler. RHA ruled that this is unsafe as somebody could burn him/herself when inserting into oven

I offerred to fix it right away but was refused and RHA stop paying the already below market rate

What kind of a person would put his bare body parts in a heated oven, or is it safe?

This is just sick, outrageous and insane how the program is funded ans wasted its time/money. Now I am trying to get the tenant move out (yes, paying nothing for 2 months).

I wish there is somebody in our elected office who can look at the reality

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