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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 to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP contracts. The info offered here is not thorough and rather is intended to help owners navigate the options readily available 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 agreement, please call your regional HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This alternative is available to owners whose contract leas are below similar market leas as figured out by a lease comparability study. An owner might ask for that their eligible existing HAP contract be ended and renewed under this option.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, leas are set at market similar levels, as determined by an owner's RCS. Rents are capped at 150% of Fair Market Rents unless the owner meets certain criteria 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 files

Option 2: Mark up to Budget

Eligibility: This option is offered to owners whose contract leas are below or equal to similar market leas. An owner might decrease their rents to market levels to get involved under Option 2.

Renewal Rent Increase: At HAP renewal, leas are set at a level needed to support a HUD-approved job spending plan. These rents may not surpass market similar levels, as shown by a lease comparability study.

Comparability Adjustment: At each fifth year anniversary of the HAP contract renewal, the agreement rents are adapted to existing market levels. The owner must submit a rent comparability study which is used to set the rents 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 choice is offered to certain projects whose leas surpass market comparable levels as figured out by a rent comparability study. Typically, this applies to projects whose mortgages are insured by the Federal Housing Administration. Congress approved HUD the authority to reorganize an owner's mortgage so that financial obligation service is lowered to a level that can be supported by market equivalent levels. If tasks can

Term: 20 years.

Annual Rent Increase: At HAP renewal, leas are reduced to a market similar level as demonstrated by a rent comparability study.

Mortgage Restructuring: The owner might request that their eligible mortgage be reorganized into a primary mortgage and subordinate debt. The brand-new main mortgage will be sized so that market similar leas suffice to support the financial obligation service on that mortgage. Use restrictions will remain in location at the residential or commercial property so long as the subordinate debt balance stays. If the job can remain financially viable in spite of a lease decrease to market levels, then no mortgage restructuring may be required.

More Information for Option 3: Information about Option 3 can be found on the About Mark-to-Market website. All questions regarding a HAP renewal under Option 3 must 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 normally means that the job is not subject to an FHA-insured mortgage, but instead has a traditional mortgage or is tax-credit funded.

Term: Between 1 and 20 years.

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

Annual Rent Adjustment: The contract rents will be changed upward each year by the Operating Cost Adjustment Factor released for the locality. This multiplicative rent adjustment is released by HUD in October of each year and is effective in February of the list below year. The OCAF is based upon a variety of market indicators and is meant to capture the results of inflation and other market factors on the cost of operating rental housing.

Forms and files for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain tasks based on a long-lasting HUD usage arrangement are required to restore under this Option. This generally consists of projects 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 job's specific HAP agreement, Use Agreement and, if applicable, Plan of Action. Please examine those documents and contact your HUD Account Executive with concerns concerning options for your residential or commercial property.

Annual Rent Adjustment: Which rent adjustment systems are offered to your project differ depending upon the HAP agreement, Use Agreement, and Strategy. Please evaluate those files and call your HUD Account Executive with concerns relating to alternatives for your residential or commercial property. Many Preservation projects might ask for a budget-based rent boost to help with unexpected scenarios at a residential or commercial property or to attend to physical conditions requires.

Forms and files for Option 5:

- The job's Use Agreement should be reviewed to figure out 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 may elect to not renew their HAP agreement upon expiration. This does not use to owners based on a contractual responsibility to renew the HAP contract resulting from an Use Agreement that is connected to the residential or commercial property.

An owner should provide HUD and tenants notice of the opt-out one year prior to expiration of the HAP contract. Upon expiration, qualified renters will be provided enhanced coupons 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 local laws might impact 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 responsibilities under these laws.

If you are planning to decide out of HAP contract renewal, please examine the 8( bb) Preservation Tool. This program allows HUD to ensure that cost effective housing stays readily available in your community even if you do not want to renew your HAP agreement.

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 restore their HAP agreement under Option 1 or 2 might also get involved 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 task of a HAP contract to a nonprofit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs provide a range of benefits to owners who wish to make sure long-lasting preservation of the housing help at their residential or commercial property.