By David Layfield on May 10th, 2017
Important Legal Note to Landlords: Following Mashvisor's advice could land you in legal trouble. Discriminating against a Section 8 voucher holder (like including the words "No Section 8" in a rental ad) is illegal in eight states, the District of Columbia and more than three dozen cities and counties such as San Francisco, Los Angeles, NYC, Chicago, Philadelphia, Pittsburgh, Seattle, Miami-Dade County (FL) and Cook County (IL). For a complete list of places that prohibit Source of Income discrimination, visit our Source of Income Discrimination Laws page.
Before I get into Mashvisor's justifications for Source of Income discrimination, I must point out that they seem to have a fundamental misunderstanding of vouchers in the first place. In the title of their article, they identify an asset class as "Section 8 real estate investments".
The only true "Section 8 real estate investments" are Project Based Section 8 multifamily properties and they are one of the hottest investments in rental housing today. Since Mashvisor serves real estate investors in the single-family market and housing vouchers are simply a form of payment a renter uses to pay their rent and are not attached to any specific property, there is no such thing as a "Section 8 real estate investment" in their context.
Rather, it's just like every other rental real estate investment.
So what does Mashvisor claim is the reasons real estate investors should discriminate against voucher holders? I'll take each reason they provide and explain why it's not true.
Inspections
Mashvisor claims inspections are onerous and frequent and that damage caused by the renter will have to be paid for on the landlord's dime.
An initial inspection and an annual reinspection are required if the landlord and renter are renewing their lease. Inspections are required for participating properties but the physical standards are not onerous and are there to ensure the taxpayer isn't paying for substandard housing and that the renter is living in safe and sanitary conditions. It's very easy to pass an HCV Physical Standards inspection. Unfortunately, many landlords are more than willing to rent substandard properties and ignore egregious repair issues. What would the public say if those landlords were rewarded for leasing out slum properties with our tax dollars?
And Mashvisor's claim about owners having to pay for repairs caused by the renter is simply not true. If an owner of a rental property can demonstrate the physical defect was caused by the tenant, under the terms of the lease and the Housing Assistance Payment contract with the housing authority, the tenant is responsible for that repair, just like any other tenant.
First Payment Delays
First payments normally take about two weeks to arrive. Housing authorities are very efficient at processing vouchers placements. Recipients generally only have 60 days to find a rental or they have to return their voucher. This requirement is there because housing authorities have a priority to move efficiently through the process. And they carry that efficiency through to first and ongoing payments. Additionally, the two weeks for the first payment is more than offset by the typical early arrival of every payment after that.
No Security Deposits
This is a dead give away that Mashvisor does not know what they are talking about. Landlords are permitted to charge a security deposit equal to one month's rent and almost always do. Unlike what Mashvisor says, it is not "impossible" to collect a security deposit from a voucher holder. Most voucher holders will be coming to a new landlord from another landlord that required a security deposit and will simply transfer the deposit from one landlord to the other. If a landlord encounters a prospective tenant that can't make a security deposit, they aren't required to (nor should they) rent to them.
Section 8 Stereotype
Now this one is a doozy coming from a company that is supposedly serving the real estate industry. Their reasoning seems to be that Section 8 voucher holders are prone to destroying properties because they have no financial obligations towards its damages." Way to perpetuate a false narrative Mashvisor!
In fact, Section 8 voucher holders have substantial financial incentives to take good care of their rental homes.
They absolutely have responsibility for damages they cause. This responsibility lives in the lease with the landlord and their contract with the housing authority administering their voucher. They could be evicted for causing damages and if the damages were severe enough, they could possibly lose their voucher.
A housing voucher in any market in America is worth several thousands of dollars per year to any renter holding one. Losing a voucher is devastating to a family. For that reason, Section 8 voucher holders typically behave very well.
Rental Price Ceiling
This one makes zero sense. Mashvisor's logic is that because HUD has a limit to the amount of rent a landlord can charge, real estate investors should stay away. HUD does have rent limits a landlord can charge. But, the rent limits are not unreasonably low and are based on area market rent costs.
Let's take Mashvisor's home area of San Jose, California. The rent limits are $1,773 for a 1 bedroom, $2,220 for a 2 bedroom, $3,078 for a 3 bedroom and $3,545 for a 4 bedroom. Searching Mashvisor's own database of rental investment properties, many properties already fall into this range.
Some properties won't meet the threshold but most will. And if rent prices inflate in your area after you sign a lease with the voucher holder and the HUD Payment Standards don't keep pace, landlords can simply not renew the lease freeing them up to rent the property at the higher rent. And isn't that what you would do with any tenant regardless of how they were paying their rent?
Since Mashvisor is supposed to be a platform for all real estate investors, I find it appalling it would encourage this type of discrimination (that is ILLEGAL in many parts of the country).
It's difficult enough for voucher holders to find willing landlords in today's rental market. We can do without ignorant organizations like Mashvisor spreading more misinformation about the program.
Note: Just in case Mashvisor deletes the blog post once they realize it encourages some of their users to violate the law, we've taken a screenshot of it for you below.
Always check the program's income limit.
Most federal housing programs serve renters earning 80% or less of the Area Median Income (AMI), or less.Josie Shivers says:
"Affordable Housing Online is a very helpful website. I was able to put it in a Section 8 application, and received a letter that I was chosen to be on a waiting list!"