Contrary to what some underwriters believe, insuring owners of properties with residents who participate in affordable housing programs isn't necessarily high risk.

Authors: Susan J. Patelson,Robby Kunz

When marketing submissions for Section 8, Housing and Urban Development (HUD) affordable and low-income housing risks, brokers may receive declinations for a variety of reasons. Often times, underwriters decline these types of risks due to the bad reputation unfairly associated with them.

Typically, underwriters are taught that Section 8, HUD, affordable, and low-income housing are all high risk accounts that they should avoid. The stigma associated with these assets means that coverage can be hard to find, overly restrictive, expensive, and insured through secondary markets. Through a deeper understanding of these assets, brokers can help to dispel some of these negative myths, and achieve superior outcomes for their insureds.

Section 8

Did you know? Facts from HUD1

  • HUD assisted housing falls into three types:
    • Public housing programs tie the subsidy to a unit, and households apply for that unit.
    • Privately owned multifamily programs tie the subsidy to a unit, and households apply for that unit.
    • Voucher programs tie the subsidy to the tenant rather than a unit.
  • The average annual income per public assistance household is $14,693.
  • 9.3 million Americans benefit from housing assistance. These households pay an average rent of $347/month.
  • More than 5 million Americans use the Housing Choice Vouchers (HCV) program, which allows applicants to choose their own program-approved housing. Tenants with housing vouchers pay up to 40% of their income for rent. The rest is covered by the local public housing authority.
  • Recently, there has been a shift towards voucher programs. Over a 30-year period from 1989 to 2019, voucher programs increased from 26% of HUD assisted housing to 48%.

Contrary to popular belief, anyone can apply for Section 8 housing assistance. This does not mean however, that everyone is accepted. Once someone has been approved for Section 8 assistance, that person can reside anywhere, not just pre-designated Section 8 housing assets. In some states, those with Section 8 housing assistance cannot be denied rental access in market rate housing assets, there must be other factors in the denial of housing.

Affordable housing

Private affordable housing assets (Not Housing Authorities) are typically financed through tax credits. Not only are these assets highly regulated at a federal level, but they are also regulated through the financing they receive. In order to protect the affordable housing tax credit status on their assets, lenders will add more stringent regulations on top of federal regulations.


The same type of claims that occur at affordable assets also occur at market rate assets. However, many times the claims at affordable assets settle at a much lower total than those at market assets. The income associated with claimants who are accepted into these assets tends to be lower. Therefore there is a lower loss of income price tag associated with the final payout of the claim.

Environmental, Social and Governance

As Environmental, Social, and Governance (ESG) becomes more and more intertwined with clients' financial and operational goals, delivery of affordable housing assets is one way developers can make a positive commitment to the communities they operate in.

Submission Quality: Are You Making Underwriters Aware of Risk Control Associated With the Client?

When crafting your submission, include relevant details that showcase positive risk control. For example:

Section 8 owners

  • Advantages include low vacancy rates and guaranteed payments from the government for 70% of fair market rent — even in economic downturns where market rate assets may struggle with occupancy.
  • Include written tenant criteria in the submission. Typical qualifications include:
    • Guests can't stay in unit longer than 14 days.
    • All roommates must be pre-approved.
    • Public Housing Authority inspections are allowed.
    • Strict compliance with local law and ordinances is required. The household must be crime-free and drug-free.
    • Anyone applying to live in the household must to pass a background check before approval.
    • If the housing program learns that anyone in the household has been found guilty of a crime on the premises, they're removed from the Section 8 program.

While a developer may not have any affordable housing units in their current portfolio, they very well may explore this opportunity to meet their ESG goals in the future. Low-Income Housing Tax Credits (LIHTC) are one way clients can impact their balance sheets by effecting positive change in low-income communities. It's the most common affordable housing program in the US.

To qualify for these tax credits, a project must have a specific pre-determined proportion of units set aside for lower income households. The tax credits associated with this program can last for up to ten years. However, if a property fails to meet the IRS parameters associated with these credits, the IRS can recapture the tax credits for the period of non-compliance.

Author Information

Susan J. Patelson ,  CPCU, RPLU, ASLI

Susan J. Patelson, CPCU, RPLU, ASLI

Area Executive Vice President, Managing Director – Real Estate & Hospitality Practice


1"Public Housing Statistics," iProperty Management, updated 9 May 2022.