What to do with Section 8 housing vouchers?
I am re-blogging this because it is an IMPORTANT issue and I think Will has covered the what-ifs fairly well!!! Thanks Will
Alexandria VA is a city that has made a commitment to "affordable housing". One of the policy tools to achieve fair and affordable housing has been "Section 8 rent vouchers".
Section 8 was designed to make housing affordable for the poor and working poor. Sadly, I think the Section 8 program has worked counter to its stated goals, reducing the affordability of housing and at the same time increasing the number of people dependent on the government. Here's why.
As many already know in some neighborhoods, a high percentage of residents use Section 8 vouchers to suppliment or pay rent. In these neighborhoods and in any investment in America, the value of the investment is a factor of the income that investment produces. Thus, the more income a property generates, the more money a property is worth. Section 8 artificially pumps up the amount of income that a rental unit produces. A high income producing property is worth more money than a low income producing property. Thus, Section 8 increases value and reduces affordability in the neighborhoods where Section 8 housing is prevalent.
It is not uncommon in Northern Virginia to find a situation where a tenant pays $25 to $250 monthly but because of Section 8 assistance the landlord receives $1800 monthly. Because the value of a property is directly related to the income of a property, that means that instead of being worth $35k to $70k, the same property is worth $200k to $400k. These rents and sales price are out of reach for working-poor and middle income folks. They simply can't afford to pay the same the rent that Section 8 pays. Furthermore, the working poor and many middle class folks can't afford to buy at the price that Section 8 justifies.
Therefore, Section 8 hurts the economically-disadvantaged renters that would loved to own or rent a decent property close to the city.
Section 8 houses also forces workers to live in out-lying suburbs because it would be senseless for a hard-working poor to middle income person to pay top-rent for a neighborhood in an at risk neighborhood. This means that Section 8 also hurts taxpayers who have to pay for congested roads, because the working poor must live in out-lying areas.
Lastly, Section 8 hurts buyers and small-time investors because the prices in these neighborhoods are artificially propped up by the guaranteed Section 8 income.
So, what would happen if there was no Section 8?
Some Section 8 renters would be displaced. They would be forced to find housing that they could afford. That would cause hardship and pain. As I know myself through personal experience, hardship and pain create motivation. Motivation creates opportunity. Opportunity creates wealth. Many Section 8 residents would be forced to disperse to outlying areas that they could afford. This would break up poverty pockets and would weaken the influence of gangs and hopelessness.
If Section 8 were no more, the value of many formerly Section 8 properties would plummet. That's because landlords and investors would bail out of a neighborhood where they can only collect $250 to $500 rent where they used to collect $1800 rent. That would hurt the investors who are highly leveraged in those neighborhoods and freeze those who could weather the storm.
When the prices in the neighborhood bottom out, groups of people such as the working poor, minorities and small-time investors would have a huge opportunity to buy in this neighborhood. Once these people started buying in the neighborhood, the neighborhood would transform from a bastion of hopelessness into a place of hope and opportunity.
Little guys could buy and live in property that is closer to the city and this would start a cycle of empowerment rather than a cycle of impoverishment.
Tell me why I'm wrong ...
About the Author --- Will Nesbitt is the principal broker of Condo 1 Alexandria / Will Nesbitt Realty LLC. Will is a realtor who specializes in condos, townhouses and single family real estate in Alexandria, Arlington, Fairfax County, Crystal City, and Kingstowne. Will resides in Belle Haven Estates just outside Alexandria VA in Fairfax County.
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