In recent years, we have seen a period of high interest rates, both in Chile and the United States, where the 30-year rate has reached levels of over 7% USD—a level not seen in more than 10 years. This situation impacted the real estate market. As a result, sales declined by 23.37% in 2022, according to the Census Bureau, and new housing starts fell by 24.06% during the same period. This has benefited the rental market, which, according to Zillow, saw an 11.17% increase in rent during 2022.

These events led to tighter housing market conditions, which, according to the latest estimates from Freddie Mac, affected a total of 3.8 million households in the United States. 

In light of this situation, we see an aggressive federal government that has expanded programs aimed at facilitating access to housing. Specifically, we can mention the “Housing Choice Voucher Program (Section 8),” which saw a 17.8% increase by 2022. 

The Section 8 Housing Program in the United States

Created in 1974 by the U.S. Department of Housing and Urban Development (HUD), this program is the primary means by which the federal government helps low-income families, seniors, and people with disabilities secure housing in the private market.

How does it work? When an applicant qualifies for a voucher, HUD pays between 70% and 100% of the rent directly to the landlord, and the Public Housing Authority (PHA) is responsible for administering it.

Who is eligible to apply? Families and individuals whose annual income does not exceed 51% of the median income for the county or area where they wish to live (as published by HUD) are eligible to apply. The program is open to U.S. citizens and certain specific categories of immigrants. The PHA must allocate 75% of the vouchers to applicants whose income does not exceed 30% of the area’s median income.

What is its scope? Last year, this program reached $30 billion, helping to pay rent for nearly 2.3 million households. This represents 35% of all households in Chile.

From the perspective of an investor seeking a return on real estate income, this program offers a number of benefits:

• Consistent rental income with a low risk of default.
• Annual property inspections.
• Quick placement of tenants.
• A steady tenant base; the average wait time to qualify for the program is 28 months.
• Low turnover and low delinquency rates.
• Tenants are encouraged to pay their share of the rent in order to remain in the program.
• Improving the quality of life for many disadvantaged families, while also improving conditions in the neighborhoods.
• Contribute to reducing the housing shortage by fostering a positive relationship between the public and private sectors, encouraging investment in housing, and increasing the supply of housing for those eligible for this benefit.

While this type of investment is not without risks, in times of uncertainty in the real estate market, it presents itself as a good option when working with experienced managers.

That is precisely why, through our Fynsa Upper Renta Residencial US I Investment Fund, we have established a presence in this niche segment of the rental market.

At the local level, the DS 19 subsidy program may sound more familiar; although it subsidizes home sales rather than rentals, it serves the same purpose of reducing the housing shortage. We have also taken a position here through our Fynsa Real Estate Development IV Investment Fund. 

We invite you to learn more about these and other funds at www.fynsa.com 

José Pedro Márquez

Senior Real Estate Portfolio Manager – Fynsa AGF