The Good, The Bad and The Ugly Truth of Government Assistance Programs
Since the pandemic, government assistance programs have grown at an all-time high due to inflation and rents around the country at an all time high. This type of assistance provides families that need temporary help they need to live and support their families. So, if this program is such a great thing for our community, why is it so hard for the recipients of the government assistance program widely known as "section 8" unable to find adequate housing for their family. In this blog, we want to provide an overview of our experiences locally and what our opinion of the issues arising with this program to better educate property owners and recipients of program to prepare them for possible outcomes and in hopes to get changes made to the program to better benefit all parties involved.
In the areas we service in Tennessee and Kentucky, it is not a requirement that a property owner has to accept the voucher for rental assistance. In other areas around the United States, they have mandated it that if you are a landlord, you must accept the voucher as rent payment. As a company, we have always accepted the voucher but since we manage for individual property owners and they are ultimately responsible for the costs and requirements of the program, that we will touch on shortly, we have left the decision to accept the voucher to the homeowner/investor. Out of over 250 owners, we only have 4 that accept the voucher, that is only 1.6% of our portfolio and it continues to decrease due to the restrictions of the program placed on landlords. Many of our competitors, don't accept the program at all. Why is this happening? Stay tuned.
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We know that this program was created to help struggling families provide housing which is a good thing and it all can't be bad right? There are some positive perks as a landlord when you accept the program.
1. You get to help someone else and your property is rented.
2. After the initial enrollment into the program, rent is paid every month, in most cases.
3. Your home on average stays rented much longer because of the difficulty in finding housing.
As a property owner/investor these are great points right? So there has to be a reason why most when given an option still will not accept the voucher or those who have in the past, decide to no longer accept the voucher.
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Historically, Government assistance recipients, have had a bad reputation placed on them. Some would say that they wouldn't maintain the home in sanitary conditions, bad credit, didn't care about the home simply because they weren't paying for the home and often would leave some Landlords properties excessively damaged. Well, as true as this has been for some, this can happen with any tenant whether they are receiving assistance or not and it is part of a risk you take when you enter the landlord business. What you can't do is judge someone based on what you heard another landlord state regarding their experience. By doing that you not only can land yourself in legal trouble by disparate impact or miss out on a great long term cash flowing tenant.
TopFlight has created a silver lining that provides our property owners a level of comfort when checking yes on that box to accept government rent assistance programs. We require that all potential tenants regardless of whether they are receiving assistance or not to meet our minimum requirements to remain fair to all potential residents. The common misconception is that residents receiving the assistance do not have income, this is not always the case, most have jobs. So how we make this work is we take the total amount of the voucher that they are provided and add that to their other income for them to meet the income requirement of our application qualifications. The potential resident must also meet our other areas of eligibility as well to include credit, criminal and rental history. We do get some inquiries that don't understand this process and think that they should be exempt due to them having this assistance, but we are being fair to all potential residents by having this rule in place, providing a level of comfort to the property owners that are willing to accept the program and all of our accepting homes are full with voucher recipients that meet these minimum requirements.
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So, everything mentioned above doesn't seem that bad right? So why is there not more availability. Here are our thoughts based on our experiences.
1. Rental Prices: Whether you are a self-managing or have your property professional managed, a rental price is set based on local comparisons in most cases. When a recipient applies for a property, they are required to provide us with a copy of their voucher. Before we begin the application process, we review the paperwork the potential tenant receives in regard to their approved rental range. The paperwork states a range that the potential tenant must find a property rent within, if the property is not in that range the tenant is instructed not to apply for the property, they are interested in. Sounds simple right, well not always, when the monthly rental amount falls within that property range, the program can come back and dictate the rent, meaning if they feel that the property is worth less rent then they will tell you that an order to move forward you as a landlord must accept the lower rent amount. Sure, you can deny to do so and look for another tenant but this takes several days to even get that information and you have wasted time and money because the property is still vacant with no tenant.
The other side to this is annual increases, we all know that rents have skyrocketed the last couple of years, and this is due to inflation costs of goods and services and the trickle effect it creates. Well with the long-term government assistance programs, you must notify them 60 days in advance of the increase of rent and wait for them to respond whether or not the increase is approved or not. If not approved, you can opt to not renew the tenant, but they also require a 60-day notice for that, so when it normally takes a 30 -60 days to send notice to vacate, it has now taken 120 days and the landlord while still receiving rent is not receiving market rent for that time and can lose several hundreds of dollars during that time frame.
2. Communication: Another ugly truth about the program is the communication. Each recipient is assigned a case worker, these case workers are over worked and have more cases than one person should ever be able to handle efficiently, due to this caseworkers are being reassigned all the time and there is no notice of the change to the resident or the landlord. It makes meeting the programs required timelines for changes and increases impossible to meet. Which in turn makes everyone suffer, the landlord is punished usually financially which makes them not want to accept the program any longer and then the Resident, who is not doing anything wrong has to move and often times loses their voucher because they cannot find a new home in the timeframe they are given.
3. CGI Inspections: This is a 3rd party inspection service that works directly with the assistance program and to say this service is flawed is an understatement. In order to approve the assistance rent payments, your property must undergo an inspection before the tenant moves in and annually thereafter. I personally believe that this program was created to eliminate "Slum Landlords" and ensure that recipients of the program have a safe place to live for their families. That would be great if the system wasn't flawed and needed improvements.
Initial Inspection: This is the required inspection that was mentioned above before the resident moves in. This can take several weeks to get the appointment, usually they are completed within 14 business days. The landlord is usually given a 1-2 day notice of the inspection and make sure you don't have to reschedule. During this time, the landlord is not advertising the property and not receiving rents. The inspector will state items that need to be repaired before the recipient can be approved to move in and the owner to start cash flowing. Some of these items are valid and should be repaired for any tenant other items they flag can be considered cosmetic and doesn't negatively impact the health or safety of a Resident and with Residents not receiving the assistance wouldn't need to be done. This further can have a negative financial impact on the landlord. The landlord can deny those items but then the landlord will have to find another tenant.
Annual Inspections: This is required to be done annually and scheduled by CGI again with little notice to the landlord and the resident. Again, we do not think that this inspection was created to be a negative but to ensure the landlord is maintaining the property. During the inspection the inspector will mark down items that need to be corrected, not all of the items reported will be landlord responsibility, it can be tenant like burnt out light bulbs but they will send the landlord a notice saying all these items need to be repaired for rent payments to be completed. That notice is sent by USPS, and more recently emailed to avoid delays of the snail mail, since there is a small window to repair these items, great right? This part of the process yes email is fantastic but there's more. Not included in that initial mailing or email, a second document is sent by USPS only, not email which is a self certification for repairs completed. This is a required form that the tenant and landlord must sign saying required repairs have been completed and it is due back within a small-time frame. Should be easy right, would make more sense if both forms were sent together but no big deal, until it is.
Most recently we had received a mandatory list of repairs by email, we placed a work order and had the repairs completed and invoiced to the owner within 2 days of receiving the notice, so when we receive the self-certification form, we can have the tenant come in and sign it and send it back. Then we go about our day-to-day business. Well as the old saying goes, out of sight out of mind, the form was never received at our office or to the property owner. Then we receive our program payments and not only did they not send the payment for this property, they took money from another property to payback the days in the month that were paid previously from what we later learned was from when the form, we never received was due through the end of that month, talk about an accounting nightmare!
We immediately get on the phone to find out why and what happened. This particular tenant's case went into abatement and the government assistance program is blaming us and the property owner. I forwarded all of the communication we had regarding the repairs, the completed work order and invoice showing it was completed long before the requirement and stood my ground on that we never received the document, well the caseworker and persons at the CGI inspection company didn't care, this was their policy and there is nothing they will do about it, they are not a fault of the USPS. The property owner and I have called and called requesting a supervisor to no avail. The final result, the property owner was out all that money that was taken back, hundreds of dollars, we are unable to charge the tenant for that loss and are supposed to just suck it up. Well, everything in life creates a ripple effect and because of the inability for the program to reason with this error that is really no one's fault, the owner may not renew the lease to this Resident and that will create a hardship for a family that will have to try and find another home that will accommodate their family.
The program can be great, but it is seriously flawed and until we all stand up and do what we can for Government Assistance Programs to meet in the middle and not be so one-sided, recipients will continue to suffer because more and more property owners are not going to participate when it is not in their best interest or the best interest of tenant, until the program is mandated. As much as mandating the program will benefit families searching for homes, it will not help a flawed system.
