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How Section 8 Decides If Your Rent Is Reasonable in Savannah

How Section 8 Decides If Your Rent Is Reasonable in Savannah

Have you ever wondered what becoming a Section 8 landlord entails? There are several hoops a person has to jump through, but it all depends on whether your rent is "reasonable," according to the definition by the Department of Housing and Urban Development (HUD). So how do they determine "reasonable rent" anyway?

Defining reasonable rent is a long process in itself. Understanding how this all works can open the opportunity of renting to Section 8 tenants up to you. Read all about how this happens and some of the benefits of owning Section 8 housing in this quick guide.

How HUD Starts the Calculation

The term "reasonable" implies a bracket with a little wiggle room. HUD and your local Public Housing Authority (PHA) work together to determine that bracket.

HUD starts the process by surveying nearly all rental property prices in the US. The only places they leave out are units built within the last 15 months and serious outliers like luxury units.

Once HUD has all this data, they calculate the fair market rents (FMRs) for each area for over 2,500 neighborhoods. The fair market rent is (usually) the 40th percentile rent. This means that 40% of the units in that location are cheaper monthly, and 60% are more expensive than the given FMR.

Your Local PHA's Involvement

Your local PHA takes over by setting a payment standard for different types of rental units. The payment standard is the maximum amount the PHA will contribute per number of bedrooms (and tends to be between 90 and 110% of the FMR).

The more bedrooms a rental property has, the higher the payment standard. Other factors like the unit's location, the building's quality, and its amenities also factor into how much the PHA is willing to spend on a voucher for the place.

How Section 8 Vouchers Work

"Reasonable rent" is not exactly equal to the PHA's payment standard. Section 8 housing laws require the tenants to contribute a certain amount per month; the PHA gives the family a voucher, which means that the PHA pays the balance directly to the landlord. This means that reasonable rent will be slightly higher than the payment standard.

This can be ideal for landlords because the Section 8 housing list guarantees tenants, and those tenants tend to renew their leases many times more than the average tenant. The landlord is also guaranteed at least a portion of their monthly rental income, even if their tenants default.

Section 8's application process has benefits similar to those of private tenant screening services. The only drawback is that there are additional steps you have to take in the eviction process.

Make the Right Choice for Your Rental Property

If you have the right property, becoming a Section 8 landlord can have many benefits. You support the wider community while getting a stable stream of rental payments and tenants.

To qualify as a Section 8 landlord, your property needs to be habitable and your rent reasonable. Reasonable rent usually equates to around the mean (not median) of your community's rental rates after HUD and the PHA have crunched their numbers.

If you're on the fence about applying to be a Section 8 landlord, Savannah Property Management is here for you. We offer industry-leading customer service and landlord advice. Let us help you navigate your options today.