Property Management Blog

How Section 8 Decides If Your Rent is Reasonable

System - Tuesday, July 12, 2022

Rent is climbing uncontrollably, with the median rent in April up by 16.7% since last year!

Skyrocketing rent prices can severely impact an individual or a family's living standards, especially when rent is costing a home between 20% and 50% of its monthly income.

There are laws in place to assist struggling citizens in finding adequate and affordable housing without hurting property owners.

Section 8 of the Housing and Community Development Act of 1974 provides a voucher program to members of society who need help with paying rent. It can also be used to test how reasonable a landlord's prices are. Keep reading to find out how.

What Section 8 Does

Section 8 of the 1974 Act gives social relief to families earning below the federal poverty baseline and can therefore not afford the living costs of rent.

This relief is based on a number of factors including the fair market rent in the given area and the circumstances in an applicant's life. The housing authority issues a voucher to successful applicants and pays part or all of their rent as long as they hold the voucher.

Housing and Urban Development (HUD) aren't only looking to make sure citizens can access affordable housing. They also play a vital role in making sure landlords aren't adversely affected in the process, especially if said landlords are renting out at reasonable rates.

Calculating Fair Market Rent

To see how appropriate a landlord's rent is, HUD looks at the fair market rent for the area. They start by looking at all rental properties and their last 15 months' prices. Assisted living units and units less than 2 years old, however, are not considered in this calculation.

Using 2 bedroom units as the baseline, HUD derives the fair market value of all other properties. An area's fair market rent will either be the 40th or 50th percentile value. This means that either 60% or half of the rentals in the area will be more expensive than the fair market value, according to HUD's calculation.

Public Housing Authority Payments

Families that successfully receive a Section 8 housing voucher get their rent paid partially or fully on their behalf. The PHA will pay between 90% and 110% of the fair market value for the family and may also cover some utility expenses. However, the tenants are still responsible for the security deposit.

Section 8 can also call on voucher holders to contribute 30% of their monthly income to the rent, which means landlords can earn well above the fair market rent in their area.

How Landlords Benefit

Landlords who rent out their properties at below-average rent prices stand to gain from this program. They can earn more from participating in Section 8 housing than they would have otherwise.

Professional property management services can help set a landlord up in the Section 8 program.

Section 8 Helps Build Communities

Section 8 rent arrangements can create beneficial relationships between struggling community members and compassionate property owners. If your rent is within section 8's guidelines then such a partnership can get you more out of your property. 

If you want to find out more about professional property management, or if you are looking to buy or rent a home in Portland, contact us today. 


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