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1. HUD Partners. 2. Multifamily Housing - Section 8 Contract Renewal Options

Section 8 Contract Renewal Options

Welcome to the Section 8 Housing Assistance Payment Contract Renewal Options web page. This resource contains descriptions of options offered to owners of Section 8 HAP-assisted residential or commercial properties who wish to restore their HAP contracts. The details offered here is not detailed and instead is planned to help owners browse the choices offered to them. For full directions and requirements for renewal of a HAP contract, please describe the Section 8 Renewal Policy Guide.

For particular concern about a task's eligibility to renew a HAP agreement, please contact your regional HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This option is readily available to owners whose contract leas are listed below similar market leas as identified by a rent comparability research study. An owner might request that their qualified existing HAP agreement be terminated and restored under this option.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, rents are set at market equivalent levels, as determined by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner meets particular requirements to qualify under the discretionary criteria described at Section 9-3.

Forms and documents for Option 1:

Worksheets for Mark-up-to-Market. Blank worksheets as PDF files

Sample worksheets as PDF files

Worksheets as Microsoft Excel files

Option 2: Increase to Budget

Eligibility: This choice is available to owners whose agreement rents are below or equivalent to equivalent market rents. An owner might minimize their rents to market levels to get involved under Option 2.

Renewal Rent Increase: At HAP renewal, rents are set at a level needed to support a HUD-approved project budget. These leas may not surpass market equivalent levels, as demonstrated by a rent comparability research study.

Comparability Adjustment: At each fifth year of the HAP contract renewal, the agreement rents are adapted to existing market levels. The owner should send a rent comparability study which is utilized to set the rents on the 5th, 10th, and 15th anniversaries of the HAP agreement.

Forms and documents for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This alternative is readily available to particular projects whose rents go beyond market similar levels as identified by a rent comparability research study. Typically, this uses to tasks whose mortgages are insured by the Federal Housing Administration. Congress gave HUD the authority to reorganize an owner's mortgage so that debt service is reduced to a level that can be supported by market comparable levels. If projects can

Term: 20 years.

Annual Rent Increase: At HAP renewal, leas are reduced to a market equivalent level as shown by a lease comparability research study.

Mortgage Restructuring: The owner might ask for that their eligible mortgage be restructured into a main mortgage and subordinate debt. The new primary mortgage will be sized so that market comparable rents are sufficient to support the debt service on that mortgage. Use limitations will remain in location at the residential or commercial property so long as the secondary debt balance remains. If the job can remain financially feasible despite a rent reduction to market levels, then no mortgage restructuring might be required.

More Information for Option 3: Information about Option 3 can be discovered on the About Mark-to-Market site. All queries regarding a HAP renewal under Option 3 ought to be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This alternative is offered to tasks which are exempt from reorganizing under MAHRA. This usually implies that the job is exempt to an FHA-insured mortgage, however rather has a standard mortgage or is tax-credit financed.

Term: Between 1 and 20 years.

Rent Increase: At HAP renewal, leas are either adjusted by the Operating expense Adjustment Factor or by a HUD-approved budget (topped by market rents as figured out by a Lease Comparability Study), whichever is lesser.

Annual Rent Adjustment: The contract leas will be changed upward each year by the Operating expense Adjustment Factor published for the area. This multiplicative rent modification is released by HUD in October of each year and works in February of the list below year. The OCAF is based on a variety of market indicators and is intended to record the impacts of inflation and other market factors on the expense of operating rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain projects based on a long-term HUD usage contract are needed to restore under this Option. This usually includes tasks with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending upon HAP contract requirements.

Rent Increase at HAP Renewal: The rents upon HAP renewal depend upon each task's particular HAP agreement, Use Agreement and, if suitable, Strategy. Please review those documents and contact your HUD Account Executive with concerns relating to choices for your residential or commercial property.

Annual Rent Adjustment: Which lease modification systems are available to your project differ depending upon the HAP agreement, Use Agreement, and Strategy. Please evaluate those documents and call your HUD Account Executive with concerns regarding choices for your residential or commercial property. Many Preservation jobs may ask for a budget-based rent boost to assist with unanticipated circumstances at a residential or commercial property or to address physical conditions requires.

Forms and documents for Option 5:

- The project's Use Agreement need to be examined to figure out HAP renewal alternatives.
HAP Renewal Request Form (HUD-9624)

HUD Handbook 4350.1 Chapter 7: Processing Budgeted Rent Increases

OCAF Adjustment Worksheet (HUD-9625)

Section 8 Renewal Policy Guidebook, Chapter 7

Option 6: Opt-out

Eligibility: An owner might elect to not restore their HAP agreement upon expiration. This does not apply to owners based on a contractual commitment to restore the HAP contract resulting from an Usage Agreement that is attached to the residential or commercial property.

An owner needs to supply HUD and tenants notification of the opt-out one year prior to expiration of the HAP contract. Upon expiration, eligible occupants will be released enhanced vouchers pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wants to pull out of restoring their HAP agreement can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and regional laws may affect an owner's ability to opt-out of restoring their HAP contract. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not advise an owner of their commitments under these laws.

If you are planning to choose out of HAP agreement renewal, please examine the 8( bb) Preservation Tool. This program permits HUD to guarantee that budget friendly housing remains available in your community even if you do not want to restore your HAP contract.

Forms and files for Option 6:

HAP Renewal Request Form (HUD-9624)

Enhanced Voucher Fact Sheet

Section 8 Renewal Policy Guidebook, Chapter 8

Section 8 Preservation Efforts

Eligibility: An owner who is eligible to renew their HAP contract under Option 1 or 2 might also take part in the Section 8 Preservation Efforts programs explained in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program supplies rewards for the project of a HAP agreement to a not-for-profit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs supply a variety of benefits to owners who want to make sure long-lasting conservation of the housing help at their residential or commercial property.