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How Subsidized Tenant Rent Works | Chicago Property Management

How Subsidized Tenant Rent Works | Chicago Property Management

Chicago has a large percentage of rental properties providing housing for tenants using HUD vouchers for subsidized rent assistance. If you buy an investment property in the Chicago area you need to be aware of how Section 8 works. 

The Housing Choice Voucher Program (commonly known as Section 8) is a federally funded HUD (Housing and Urban Development) program to assist low-income families, elderly and disabled to afford safe housing.  Typically, a tenant with a voucher will pay about 30% of their gross income toward their portion of the rent while the local Housing Authority pays the remainder. For tenants with little or no income HUD will pay up to the full rent amount.

A good question to ask is “What are the advantages of accepting a Section 8 tenant?”  The greatest reason is knowing that a major portion of the rent will be paid consistently on the first day of each month.  This is the payment made by the local Housing Authority.  During the Covid-19 months we have been able to assure owners that the rent from the subsidized units is arriving. 

In addition, the Chicago area has a large percentage of subsidized tenants. This provides a steady stream of rental candidates for your unit.  The Housing Authority pre-screens these tenants for criminal background and drug testing.  They will not provide a voucher for any tenant who has been evicted for drug-related activity within the past three years.  MF Cashflow Team performs a second screening so the candidate must pass two screenings to become eligible. 

In the City of Chicago voucher holders are included in the list of protected classes.The ordinance states that it is unlawful to discriminate as to how the rent is paid. You can’t refuse a tenant because they are a voucher holder. Cook County has approved a similar ordinance that will be in effect as of June 1, 2021.

While the process may be different for different geographic areas, the system for the Chicago area starts with making known repairs to the building and unit. The Housing Authority wants to make certain the property is safe, in good condition, clean, freshly painted (no possibility of exposure to lead-based paint) and has fully working smoke alarms and carbon monoxide detectors. For more information about the Chicago Housing Authority go to www.TheCHA.org.

Once a tenant is found for the property there are forms to be filled out and submitted to the housing authority.  The forms are processed and an inspection of the unit is scheduled.  The inspector may find items that are not in compliance with HUD standards or local building codes.  This list of ‘failed’ items is submitted to the owner or property manager for correction.  

After the repairs are completed another inspection is scheduled. It is possible that additional items fail the new inspection.  This continues until the inspector is satisfied with the results. 

At this point more paperwork is completed and the housing authority submits a ‘rent determination.’  Based on comparable rents for similar properties in the neighborhood, they determine what is considered fair rent for the unit.  If the owner feels the amount is not sufficient they can appeal the decision or reject it.  Doing either delays a tenant moving in and rent collection starting. 

To reject the rent determination amount means going back to searching for a market tenant.  At this point several weeks have been spent finding the subsidized tenant and funds have been used making repairs the housing authority has required.  To accept another subsidized tenant will start the process all over, including inspections, and the rent determination amount won’t change.  You can only accept a market tenant and there is no guarantee that the rent amount you are looking for will draw a market tenant.  

The point is, you may very well be better off accepting the original rent offer and getting the tenant moved in and your rent cash flowing. 

MF Cashflow Team is a full service property management company with 15 years of experience working with the various local Housing Authorities.  Our real estate and rental management experience has rewarded us with being named in the Top Ten Best property management companies in the Chicago area.  Check out our Five-Star Google reviews.  

MF Cashflow has substantial experience working with Section 8 tenants in the Chicago area.  We can answer any questions or concerns you may have about the program.  When one of our properties finds a subsidized tenant we submit the paperwork required, attend the required inspections and can handle the repairs the agency may request.  

We have the skills and experience necessary to find you the best possible tenant. We will handle all steps necessary to get a market or Section 8 tenant moved into the property.  Our goal is to get the property cash flowing so that your investment goals can be quickly met.

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