How Section 8 Determines if Your Rent Is Reasonable in Seal Beach, CA

How Section 8 Determines if Your Rent Is Reasonable in Seal Beach, CA

Every year, millions of Americans are able to keep a roof over their families' heads through the help of Section 8. Section 8 of the Housing Act gives rental assistance as an alternative to low-income housing. It also rewards landlords for lending some extra help to those in need in their community.

There are a surprising number of benefits to being a Section 8 landlord, including having guaranteed income and pseudo-screening done for you. However, local housing authorities must first determine that your rent is reasonable before you can qualify. Learn about the criteria and process they use in this quick article.

Looking at the Area

Each year, Housing and Urban Development (HUD) works out a "fair market rent" for each of the 2,500 areas surveyed nationwide. They look at the rates at which the rentals in the area have been rented out over the last 15 months.

HUD uses two-bedroom units as their standard because of the wide range of differently sized rentals. They only derive the fair market rent for other bedroom sizes once they've calculated the value for two-bedroom units. Assisted living units, units less than two years old, and units that are well below the area's average rate don't factor into the equation.

The price at the 40th percentile (meaning 40% of units go for less while 60% go for more) is the area's "fair market rent". This is low enough for the needy to afford while still being high enough for landlords to make a profit.

Determining Fair Market Value

Knowing your area's rates well can help you set a rental price at the 40th percentile. The Public Housing Authority (PHA) in California ultimately decides if your rental is within fair market value. It doesn't have to be precisely equal to HUD's recommendation, just close enough.

The PHA will also look at the area's demand, the unit's size, amenities, and the location when approving your place for Section 8. Their policy is to approve units that cost between 90% and 110% of the fair market value.

How Section 8 Works

Section 8 assistance gives Section 8 vouchers to successful applicants. That voucher plus 30% of the applicant's monthly earnings will equal your rent.

There's a list of factors the PHA considers before a person or family can access Section 8. Being more at risk or earning less bumps people up in line, but having a criminal or eviction history bumps them down again. The government effectively does a version of tenant screening for you.

The nature of section 8 means that landlords have to work with the local Public Housing Authority to do things like lease enforcement and evictions. Though this adds red tape, it also gives you some institutional backing to help you as a landlord.

Make the Right Property Management Decision Today

There are additional factors to think about when deciding to become a Section 8 landlord. You must intentionally set your rent in the bracket that gets Section 8 approval and get the approval from the PHA. You also have to decide whether you can take on Section 8 tenants.

It's best to make these property management decisions with as much information on hand as possible. At PMI Patron, we have unbeatable insights into the California rental market. Let us help you make an informed decision today.