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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 webpage. This resource contains descriptions of alternatives offered to owners of Section 8 HAP-assisted residential or commercial properties who want to restore their HAP agreements. The information supplied here is not thorough and instead is intended to help owners navigate the options readily available to them. For complete directions and requirements for renewal of a HAP agreement, please refer to the Section 8 Renewal Policy Guide.

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

Option 1: Increase to Market

Eligibility: This option is readily available to owners whose agreement rents are listed below comparable market leas as figured out by a lease comparability study. An owner might request that their qualified existing HAP contract be ended and restored under this choice.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, rents are set at market equivalent levels, as identified by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner meets particular requirements to certify 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 submits

Option 2: Increase to Budget

Eligibility: This option is available to owners whose contract leas are listed below or equivalent to comparable market rents. An owner may reduce their rents to market levels to get involved under Option 2.

Renewal Rent Increase: At HAP renewal, leas are set at a level required to support a HUD-approved job budget. These leas might not go beyond market similar levels, as demonstrated by a rent comparability study.

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

Forms and files for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This alternative is offered to certain jobs whose rents exceed market equivalent levels as identified by a lease comparability study. Typically, this uses to jobs whose mortgages are insured by the Federal Housing Administration. Congress granted HUD the authority to reorganize an owner's mortgage so that financial obligation service is decreased to a level that can be supported by market comparable levels. If projects can

Term: 20 years.

Annual Rent Increase: At HAP renewal, rents are decreased to a market similar level as demonstrated by a lease comparability research study.

Mortgage Restructuring: The owner might request that their qualified mortgage be restructured into a primary mortgage and secondary financial obligation. The new primary mortgage will be sized so that market equivalent leas are enough to support the debt service on that mortgage. Use limitations will stay in place at the residential or commercial property so long as the secondary financial obligation balance stays. If the project can remain economically feasible despite a lease reduction to market levels, then no mortgage restructuring might be needed.

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

Option 4: Exception Projects

Eligibility: This alternative is readily available to tasks which are exempt from restructuring under MAHRA. This generally means that the task is not subject to an FHA-insured mortgage, however rather has a standard mortgage or is tax-credit funded.

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 budget (capped by market leas as determined by a Lease Comparability Study), whichever is lesser.

Annual Rent Adjustment: The contract rents will be adjusted up each year by the Operating Cost Adjustment Factor released for the region. This multiplicative rent change 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 indications and is planned to capture the impacts of inflation and other market elements on the cost of operating rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain jobs based on a long-lasting HUD usage arrangement are needed to renew under this Option. This usually consists of jobs with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending upon HAP agreement requirements.

Rent Increase at HAP Renewal: The leas upon HAP renewal depend upon each project's particular HAP agreement, Use Agreement and, if appropriate, Strategy. Please examine those documents and contact your HUD Account Executive with questions regarding alternatives for your residential or commercial property.

Annual Rent Adjustment: Which lease adjustment systems are offered to your task differ depending upon the HAP agreement, Use Agreement, and Plan of Action. Please review those documents and contact your HUD Account Executive with concerns relating to alternatives for your residential or commercial property. Many Preservation tasks might request a budget-based rent boost to help with unexpected circumstances at a residential or commercial property or to attend to physical conditions requires.

Forms and documents for Option 5:

- The task's Use Agreement must be examined to determine HAP renewal choices.
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 renew their HAP agreement upon expiration. This does not use to owners subject to a contractual obligation to renew the HAP contract 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 contract. Upon expiration, eligible renters will be issued boosted vouchers pursuant to 42 U.S.C. § 1437f( t).

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

If you are preparing to pull out of HAP contract renewal, please evaluate the 8( bb) Preservation Tool. This program enables HUD to ensure that economical housing remains available in your neighborhood even if you do not want 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 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 provides rewards for the project of a HAP agreement to a not-for-profit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs provide a variety of benefits to owners who wish to ensure long-term conservation of the housing support at their residential or commercial property.