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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 website. This resource contains descriptions of alternatives available to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP agreements. The details supplied here is not detailed and rather is planned to help owners navigate the options offered to them. For full instructions and requirements for renewal of a HAP agreement, please describe the Section 8 Renewal Policy Guide.

For particular concern about a job's eligibility to renew a HAP contract, please contact your local HUD Multifamily Account Executive.

Option 1: Increase to Market

Eligibility: This choice is readily available to owners whose agreement leas are listed below similar market leas as determined by a lease comparability study. An owner might request that their eligible existing HAP agreement be terminated and restored under this alternative.

Term: Between 5 and 20 years.

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

Forms and files for Option 1:

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

Sample worksheets as PDF files

Worksheets as Microsoft Excel submits

Option 2: Mark up to Budget

Eligibility: This alternative is available to owners whose contract leas are below or equal to comparable market leas. An owner may lower their leas to market levels to take part under Option 2.
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Renewal Rent Increase: At HAP renewal, leas are set at a level needed to support a HUD-approved job spending plan. These rents might not go beyond market equivalent levels, as demonstrated by a lease comparability study.

Comparability Adjustment: At each fifth year anniversary of the HAP agreement renewal, the contract rents are gotten used to existing market levels. The owner must submit a lease comparability research study which is used to set the leas on the 5th, 10th, and 15th anniversaries of the HAP contract.

Forms and documents for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market
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Eligibility: This option is offered to particular tasks whose leas surpass market similar levels as figured out by a rent comparability research study. Typically, this applies to projects whose mortgages are guaranteed by the Federal Housing Administration. Congress approved HUD the authority to restructure an owner's mortgage so that financial obligation service is lowered to a level that can be supported by market comparable levels. If jobs can

Term: twenty years.

Annual Rent Increase: At HAP renewal, rents are lowered to a market comparable level as shown by a lease comparability study.

Mortgage Restructuring: The owner might request that their be reorganized into a main mortgage and subordinate financial obligation. The new main mortgage will be sized so that market comparable leas are adequate to support the financial obligation service on that mortgage. Use limitations will remain in place at the residential or commercial property so long as the subordinate debt balance remains. If the project can stay economically feasible in spite of a lease reduction to market levels, then no mortgage restructuring might be needed.

More Information for Option 3: Information about Option 3 can be discovered on the About Mark-to-Market website. All inquiries concerning 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 restructuring under MAHRA. This typically indicates that the job is not subject to an FHA-insured mortgage, but rather has a standard mortgage or is tax-credit financed.

Term: Between 1 and 20 years.

Rent Increase: At HAP renewal, rents are either changed by the Operating expense Adjustment Factor or by a HUD-approved spending plan (topped by market rents as determined by a Rent Comparability Study), whichever is lesser.

Annual Rent Adjustment: The contract leas will be adjusted up each year by the Operating expense Adjustment Factor published for the area. This multiplicative lease adjustment is released by HUD in October of each year and is effective in February of the list below year. The OCAF is based on a variety of market signs and is meant to catch the results of inflation and other market elements 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 tasks subject to a long-term HUD usage arrangement are needed to renew under this Option. This generally consists of tasks with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending on HAP contract requirements.

Rent Increase at HAP Renewal: The leas upon HAP renewal depend on each project's specific HAP agreement, Use Agreement and, if appropriate, Plan of Action. Please review those files and call your HUD Account Executive with concerns regarding alternatives for your residential or commercial property.

Annual Rent Adjustment: Which lease change mechanisms are available to your job differ depending upon the HAP contract, Use Agreement, and Strategy. Please evaluate those files and call your HUD Account Executive with questions regarding options for your residential or commercial property. Many Preservation tasks may ask for a budget-based lease increase to assist with unanticipated scenarios at a residential or commercial property or to resolve physical conditions requires.

Forms and documents for Option 5:

- The job's Use Agreement need to be evaluated to determine 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 may elect to not renew their HAP agreement upon expiration. This does not apply to owners based on a legal responsibility to restore the HAP agreement resulting from an Use Agreement that is connected to the residential or commercial property.

An owner must supply HUD and occupants notice of the opt-out one year prior to expiration of the HAP agreement. Upon expiration, qualified occupants will be provided boosted vouchers pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wishes to pull out of restoring their HAP contract can be discovered at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and regional laws might affect an owner's capability to opt-out of renewing their HAP agreement. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not recommend an owner of their commitments under these laws.

If you are preparing to choose out of HAP contract renewal, please evaluate the 8( bb) Preservation Tool. This program allows HUD to ensure that inexpensive housing stays available in your neighborhood even if you do not wish to restore your HAP contract.

Forms and documents 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 qualified to restore their HAP agreement under Option 1 or 2 might likewise get involved in the Section 8 Preservation Efforts programs explained in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program supplies incentives for the assignment of a HAP agreement to a not-for-profit, mission-oriented owner. The Capital Repairs program makes sure that the HAP renewal These programs provide a range of benefits to owners who want to guarantee long-term preservation of the housing help at their residential or commercial property.