How (Smart) Landlords Can Benefit from Government Programs

Government-funded programs like Section 8 and Section 42 fund your tenant’s rent and give you tax breaks, respectively. Participants don’t want to lose their funding; therefore, they work hard to comply with your contract’s guidelines.

The U.S. Department of Housing and Urban Development (HUD) has developed several programs to encourage the creation of housing that is safe and affordable for those who are elderly, disabled, or have low income. HUD does so by funding construction of restricted housing, giving tax breaks to those that cap prices, and paying rent for participants.

Section 8 – Housing Choice Voucher Program

The Housing Choice Voucher program helps participants to rent their choice of homes in the private market that meet program guidelines. The local housing agency directly pays the landlord a portion of the rent on behalf of the participant. Participants pay the remainder, which is typically about 30 percent of the participant’s adjusted gross income.

Benefits

While renting to tenants with low incomes is beneficial for the community, it’s also convenient for you. Renting to tenants using Housing Choice Vouchers gives you tenants who follow contract guidelines, stay for a long time and pay on time; you have access to a larger pool of tenants who can rent your property; you can purchase cheaper properties; and you don’t have to worry about your tenants sneaking in more people who will drive up utility bills and make a lot of noise.

 

Section 42 – Low-Income Housing Tax Credit

Section 42 is a tax liability reduction given to investors for capping rental rates for Section 42 renters. Section 42 aims to create affordable rental housing. The tax credit is for investors who are building affordable housing, not just those who own buildings with affordable housing. The code also applies to education and healthcare businesses who serve a clientele whose incomes are below 60 percent of the area’s median income.

+ Benefits

The investor receives a federal income tax reduction over the course of 10 years, they receive tax losses and deductions on accrued subordinate financing. Accrued subordinate financing means that your debt is ranked behind other debts from secured lenders. For example, if a bank loaned part of the money and you invested the rest, the bank is paid back first.

Section 515 – Rural Rental Housing Loans

Rural Rental Housing Loans are given out by the Rural Housing Service (RHS), a part of the USDA. The service is operated under the Housing Act of 1949, which is a national housing policy that aims to provide every American family with a decent home and a suitable living environment.

These loans last up to 30 years and the interest rate is only one percent. They are amortized for more than 50 years. On your promissory note, current interest rates are included to determine maximum rent payments.

Section 202 – Housing for the Elderly Program

The Supportive Housing for the Elderly Program or Section 202 provides capital advances for projects that create or acquire property for low-income elderly persons. The program also provides rent subsidies for the projects to help make them affordable. The project must help support the elderly living on the property with services like cleaning, cooking or transportation. It comes from Section 202 of the Housing Act of 1959.

Section 811 – Housing for Persons with Disabilities

The Supportive Housing for Persons with Disabilities or Section 811 program provides HUD funding to subsidize rental properties for low-income persons with disabilities. The program provides capital advances and subsidies to those building the property and disperses funds to state housing agencies for rental housing.

The program began in 1990 and has assisted in building more than 30,000 units.

https://ipropertymanagement.com/government-assistance