Owners and those investing in Los Angeles properties are keenly aware that on October 16th, tens of thousands of people will be anxiously awaiting the chance to change their lives for the better. The Housing Authority of the City of Los Angeles (“HACLA”) will be reopening the lottery for its waitlist, which has been closed since 2004.
The lottery will be open for two weeks, allowing 20,000 residents of Los Angeles the chance to “win” their spot in line. More than 600,000 people are expected to apply, leaving many uncertain of their future, as it may be another decade until the waitlist reopens again.
Section 8 is a federally funded program providing eligible very low-income families housing rental assistance. Individuals choose where they want to live, as long as the unit passes an inspection conducted by HACLA and the contract rent is approved by HACLA. HACLA then pays a portion of the contract rent in the form of a housing assistance payment to the landlord on the tenant’s behalf. The tenant’s portion of the rent is based on 30 percent of the household’s monthly adjusted income, 10 percent of monthly adjusted income, or the monthly minimum rent requirement of $50, whichever is greatest (unless the tenant is exempt from the minimum rent requirement of $50). HACLA pays the remaining portion of the contract rent to the landlord.
What does this mean for Los Angeles property owners? If the property is in a distressed neighborhood and accepts Section 8 vouchers, the pool of possible tenants will increase exponentially. Thus, more vouchers mean a larger application pool for vacant units. One of a property owner’s biggest concerns is having a unit vacant for too long, leaving the owner with a loss of income.
More people with vouchers means more people looking for a place to live that accepts the vouchers, virtually guaranteeing that vacant units are quickly occupied by new tenants.
According to the president and CEO of HACLA, Douglas Guthrie, “Rental subsidy programs reduce poverty, housing instability and homelessness.” Allowing people with low-income more choice in housing options may even bring about positive neighborhood change. Parents can seize the opportunity to use their voucher to move to a neighborhood with better schools. Working-age adults can live closer to where they work and shop, allowing them to be more involved in their community.
This is simply a matter of supply and demand. The existing housing crisis in Los Angeles mixed with limited Section 8 vouchers, combined with low vacancy rates and scarce property owners that accept said vouchers leads to an overwhelming demand for units like ours.
There is ample opportunity on the horizon to capitalize on the reopening of HACLA’s wait list. Section 8 guarantees that a portion of the rent always gets paid on time. In some cases, accepting Section 8 is the only way to get market rent in a neighborhood.
We at Golden Bee Properties get asked so many times why we take Section 8. Aren’t the tenants irresponsible? Do we get market rent? How do we know we’ll get the money every month if they have a voucher, meaning they don’t have the money for market rent? How do we know they’ll maintain the unit?
The reasoning is quite simple for a property owner savvy enough to take Section 8 vouchers:
- HACLA will approve rental amounts equal to the market in the area of the building.
- Tenants pay between 0 percent and 30 percent of their rental amount, meaning that we receive the larger portion of rent, paid directly to us by HACLA, on time.
- Receiving rent from HACLA in a timely manner keeps our rental cash flow regular.
- Vacant units stay unoccupied a shorter period of time.
- HACLA does habitability inspections before a move in and yearly thereafter. This not only keeps the property owner accountable for unit maintenance, it keeps the tenant accountable for their part of unit maintenance.
Golden Bee Properties accepts Section 8 vouchers in most buildings we own and manage. These buildings bring in over $1,000,000 a year in payments from HACLA alone. As of October 2017, Golden Bee Properties receives approximately 25 percent of its rental income from Section 8 and our average vacancy is less than one percent. The money we receive from Section 8 makes up nearly a quarter of our managed properties’ total monthly rental income, a total of more than $83,000 per month. Golden Bee Properties is proud to accept Section 8 vouchers as it both provides improved housing opportunities for low-income individuals and families, as well as guarantees our business receives rental income without having to worry it will arrive late, incomplete, or not at all.