This is what is provided for my area on the HUD site:
Final FY 2007 FMRs By Unit Bedrooms
I find these figures hard to believe as I know it would be impossible to get that much from a cash paying person. Will section 8 actually pay that much if 2bdr units in my town are $650-700? The area has some more expensive towns that are most likely dragging the average up. Does the local section 8 office usually take that into account and stop you from charging the max in towns that are cheaper? Do they do anything differently if heat is included in the rent, is an extra credit given for that or does the price including heat have to work within their program numbers?
I attended a REIA meeting that featured the head of the Columbus Section 8 office as the speaker. He said that by HUD regulation, Section 8 can not pay more than the 40th percentile of fair market rents in the area. That would mean that Section 8 pays less than the average for the area. However, as you pointed out, the average fair market value could include a variety of units. I have no independent confirmation that what he said is correct.
In my area, Section 8 usually pays a little less than private pay tenants. The amount that Section 8 will pay for any particular tenant for the same rental unit can vary DRASTICALLY. For example, I have had Section 8 offer to pay $340 and $561 for two different tenants FOR THE SAME UNIT within a one week period. The Section 8 payment is based on a variety of factors including the tenant’s income, number of children (and number of authorized bedrooms), type of heating system, inclusion of appliances in unit, inclusion of utililties, etc. There are a bunch of factors that they consider.
This is not top secret infomation. If you go to your local Section 8 office, they will give you a landlord packet that includes all of this information. REI is about meeting people. Go visit your Section 8 office and make a new friend. Having friends (or at least strong business relationships) at these various agencies is VERY IMPORTANT!
In our market section 8 will many times pay far more than what the typical renter would pay. I have seen many realtors in our area make the mistake of advising their clients to by a home based on the section 8 tenants that are currently occupying the property. Then when that tenant leaves the new landlords are very sad when instead of $850 for a 3 bedroom they are down $600 from a typical tenant.
Make sure you understand which section 8 numbers you are looking at. There are a set of figures section 8 has for how much it should cost to live in a 4 bedroom house which includes rent and utilities. As a landlord to get the maximum amount you have to provide the utilities. Make sure you understand what the numbers actually mean.