HUD 223(f) Loans and HUD's Section 8 Housing Program
HUD's Section 8 program provides rental assistance payments to landlords across the U.S. in order to help low-income families find clean and safe affordable housing. According to the most recent statistics, nearly 5 million households across the country use the Section 8 program. This makes it an essential tool in HUD's mission to increase the supply of low-cost housing throughout the United States.
What Are The Benefits of the Section 8 Program for HUD 223(f) Borrowers?
For HUD 223(f) loan borrowers, having a Section 8 property can have major benefits, including a higher LTV allowance of up to 87%. Plus, HUD 223(f) properties that get Section 8 rental subsidies can also take advantage of the lower 1.15x DSCR requirement for affordable properties. Plus, whether they use a HUD multifamily loan or not, Section 8 landlords receive regular payments from their local public housing authority (PHA). This is a major incentive for them to utilize the Section 8 program.
What Are The Drawbacks of The Section 8 Program?
In addition to requiring additional documentation and inspections, the main drawback of the Section 8 program for investors is that it limits the amount of rent that they can charge tenants. In some situations, maximum rents are calculated using a specific percentage of the Area Median Income (AMI), a HUD-developed statistic intended to determine the median income for a specific geographic area. In other situations, maximum rents may be based on fair market rents, another HUD-calculated statistic designed to determine baseline rent for a location.