“If you look at a two-bedroom, two-bath Section 8 rental reimbursement, it’s about $1,700 in Palm Beach County,” says Korte. “That’s more than the advertised price for some luxury apartment complexes in the area.”
Regular renters who pay out of pocket for their place are getting priced out of the rental market, and Section 8 works to their disadvantage.
“The program’s desire to be at the equal playing field of all rentals creates a self-fulfilling prophecy of what rent is,” says Korte. “It’s going to continuously move up.”
Losers: Section 8 applicants on a waiting list
Section 8 has a finite budget. According to the 2013 proposed budget published by the U.S. Department of Housing and Urban Development, or HUD, $19.1 billion is slated for tenant-based rental assistance.
“This is not an entitlement program with an unlimited budget,” says Korte. “Once the money runs out, it’s out.”
Also included in HUD’s proposed budget is a clause that families currently receiving rental assistance will see no reduction in payments.
The program could get more “bang for the buck” and help more people by paying lower rental reimbursements.
Losers: Neighbors of Section 8 tenants
Section 8 rentals have a direct impact on their surrounding communities.
“You’re seeing destruction of the underlying neighborhood because you’ve got rental communities in areas where they shouldn’t be,” says Korte.
In general, the average homeowner has an emotional and financial stake in their home. But the typical investor who buys and rents out homes in bulk doesn’t care as deeply about the properties.
The incentive for Section 8 landlords isn’t to keep the home in mint condition, but to simply extract as much cash out of a house as possible.
“It’s destroying property values,” says Korte. “Owners of Section 8 housing rentals are doing the minimal amount of maintenance required.”
Homeowners who see their property values decline due in part to Section 8 housing rentals are helpless for the most part. It is illegal to discriminate against Section 8. Neighborhoods can avoid government-subsidized rentals in their community by banning all rentals.
Losers: First-time homebuyers
“Section 8 has created its own industry for acquiring foreclosed homes just to rent out to Section 8 tenants,” says Korte. “Investors can get way above-market rents from them.”
The program creates market conditions that draw in cash investors in droves, much to the detriment of typical first-time homebuyers.
Because there are no contingencies at closing, cash buyers have the upper hand when it comes to snatching up short sales or bank-owned properties. Non-cash buyers have to go through the rigmarole of financing, and even with a higher bid, their offers are often rejected in favor of the cash deal.
“We’re seeing buyers get frustrated,” says Korte. “The bank-owned home is now owned by an investor who will rent it to those same people who were bidding on the house.”
Korte says that if Section 8 had more cost controls in terms of rental vouchers, the program could have more people in need receiving benefits, and perhaps cash investors would be less incentivized to snatch up distressed properties, creating room in the real estate market for everyday buyers who require financing.