Section 8 Protected Class STATUS? Property Managers Beware

By
Services for Real Estate Pros with RE/MAX Kai Lani

Well, here it is--Back Again!   The Oahu Chapter of NARPM has informed us that two bills have now been introduced at the Hawaii State Legislature that will make "source of income" a protected class. In other words, anyone with "legal income" (welfare, Social Security, Section 8) will become a protected class.

First off, I applaud NARPM getting involved in this issue.   I think, however, we may have a problem opposing this. The signs of the times are not with the rights of property owners.      

We at RE/MAX Kai Lani have changed our Property Management Policy and will consider section 8 applicants for any and all rentals that we are offering.  We insist that the tenants meet the same qualifications that we ask other tenants to meet:  1) Credit Report.  2)  Proof of Adequate income to pay rent.  3)  Suitable References.   Most do not qualify under the current law, but no one knows what the intended and unintended consequences of the proposed legislation will unleash once passed.   

There are at least two problems with the Administration of the Section 8 Program as it now stands:

1)  The requirement that we must put a tenant on an interim rental contract that has to be approved by the government is time consuming and confusing.   The time problem is a huge impediment in that owners lose rental income waiting for the system to process.   

            a. How do you complete the interim rental contract required by the government without obligating the property to the tenant? 

            b. While the Section 8 Administrator generally gets this done in two or three days, this remains costly to the owner in terms of lost rent for those two or three . . . or ten days. 

c. The bigger issue is that the tenant has us over a barrel so to speak in that once the process is in motion and the interim rental contract is in place, the tenant can drag out their moving into the property and moving out of another section 8 unit interminably thus causing huge losses of rental income to the owner.   Section 8 cannot start paying until the tenant clears the other section 8 unit in which the tenant may have been living.   We end up holding the bag while the tenant moves at his/her convenience.

2)  Equally difficult is that the property condition inspection of the property needs to be done prior to the tenant moving in and prior to the income flow starting.   Even though this is done expeditiously in terms of normal government responses, the two three or five days lost income is significant. 

From the perspective of a Property Manager, it is imperative that Section 8 applicants not be afforded "protected class" status in fairness to our owners. 

Jerry Bangerter, RA -- Property Manager, RE/MAX Kai Lani, Kailua, Oahu, Hawaii

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Betty Fletcher
Fletcher Property Management Inc CRMC® * www.FletcherPM.com - Little Rock, AR
MPM, RMP - Little Rock Arkansas Property Manager

Jerry - Another issue we have encountered on more than one instance is when the tenant's application is approved, the Request for Inspection is submitted which states the unit rent rate and the applicances and any utilities furnished with the rent, the unit passes inspection and the tenant is allowed to take possession.  Then  4-6 weeks later we hear from Section 8 that the tenant does not actually qualify for that rent rate and unless the owner is willing to adjust the rent, the tenant will be given another voucher.  We deal with 6 different housing authorities in our area and only have had this problem with one of them.  It took going to the head of the authority and being pretty vocal to  convince them to pay the rent rate for the tenant's first year in the unit.  Of course at the end of the lease, the tenant will have to move and we will have to start all over again.  Very frustrating. 

Feb 28, 2009 05:55 PM #1
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Jerry Bangerter
RE/MAX Kai Lani - Honolulu, HI

With all the problems with the Section 8 management costing the owner money and the property manager time, time, time to sort out, I can hardly wait for them to get "protected class" status.  Jerry

Feb 28, 2009 06:03 PM #2
Rainmaker
314,191
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

We rarely deal with section 8 here, because it takes a long time to get a property approved (the last one took 2 months) and most Owners won't do it. I don't see how section 8 rent payments could actually be considered INCOME for the tenant since it isn't guaranteed to them, but is based on the property. Maybe it won't pass he legislature?

Mar 01, 2009 12:15 PM #3
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Jerry Bangerter
RE/MAX Kai Lani - Honolulu, HI

Les and Leslie, Thanks for your observation.  I am really concerned about this.  While we are doing Section 8 at this time, our recent and limited experience with Section 8 leads me to the conclusion that to process a Section 8 applicant normally, usually, generally, almost always costs the owner of the property a ton in terms of lost rental income.   I just don't think it will be helpful to make Section 8 a protected class.   Thanks again for your views.  Jerry

Mar 01, 2009 04:55 PM #4
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228,037
Diane Rice
Diane Rice, Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - South Holland, IL
SFR, SRES, CNC

Jerry, i understand how you feel... I too am concerned like you.  In Chicago, the income coming from Section 8 is and has been a protected class for a number of years.  Most of our rentals are in the Northwest Indiana and South Suburban Illinois, and we for the most part do not have Chicago owners.

Because the standard allotment for lease amounts have been lowered, most tenants will not qualify for the houses we have available.   When we tell them up front.... the prospect may ask to pay MORE that the amount allowed just to get the home... and we of course, have to turn them down.

Jerry, the "Truth About Section 8" article appeared in a Suburban Newspaper recently, and we will be posting part 2 shortly which will cover the manager/owner views in more depth.  

Mar 01, 2009 06:24 PM #5
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Jerry Bangerter
RE/MAX Kai Lani - Honolulu, HI

Thanks Diane!   It is a real concern to lose the flexibility we have had in freely choosing whether to service Section 8 clients, but I guess the problem has been that too many of us have chosen to lay down a blanket policy of no section 8 applicants at all.   This too we will survive, but it is just another complication in a complicated business.   I can't wait for your "Truth" article.   Go Girl, GO!   Jerry

Mar 03, 2009 03:36 AM #6
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Diane Rice
Diane Rice, Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - South Holland, IL
SFR, SRES, CNC

Jerry, did you read part one?  Here it is:  The TRUTH

Mar 03, 2009 04:43 PM #7
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Jerry Bangerter
RE/MAX Kai Lani - Honolulu, HI

Diane, I just did, and I loved your observations.   Thanks for sending the easy connect link along for my convenience.  Jerry

Mar 03, 2009 04:51 PM #8
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Yolanda Hoversten
Berkshire Hathaway HomeServices Elite Properties - O'Fallon, IL
Broker - O Fallon, IL Real Estate

Hi, Jerry.  You know they only have good intentions in passing this kind of legislation.  :) They should be forced to go through this process before they impose their will on to the landlords.

Apr 26, 2009 03:42 PM #9
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Jerry Bangerter
RE/MAX Kai Lani - Honolulu, HI

Hi Yolanda!   Sure, and . . . . water always runs uphill!    But, life is good, but what with the increased cost of electricity and with condo maintenance fees going up, up, up, and property taxes going up, up, up, soon there will not only be a shortage of "affordable" rentals, there will be a shortage of rentals across the board, and then prices will go up to where an investor will not cry at his property manager every month to hold down those maintenance costs.   But, then the tenans will be living five deep in these homes to be able to afford to live at all!   Cheers, Jer

Apr 28, 2009 10:07 PM #10
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