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Section 8 Contract Renewal Options

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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 available to owners of Section 8 HAP-assisted residential or commercial properties who want to restore their HAP contracts. The information supplied here is not extensive and rather is planned to assist owners navigate the alternatives available to them. For complete guidelines and requirements for renewal of a HAP contract, please describe the Section 8 Renewal Policy Guide.

For specific concern about a job’s eligibility to renew a HAP agreement, please contact your local HUD Multifamily Account Executive.

Option 1: Increase to Market

Eligibility: This option is readily available to owners whose contract rents are below equivalent market leas as determined by a lease comparability research study. An owner might ask for that their eligible existing HAP contract be terminated and restored under this choice.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, rents are set at market similar levels, as figured out by an owner’s RCS. Rents are topped at 150% of Fair Market Rents unless the owner meets certain criteria 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: Increase to Budget

Eligibility: This option is offered to owners whose contract leas are below or equal to comparable market rents. An owner may lower their rents to market levels to participate under Option 2.

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

Comparability Adjustment: At each fifth year anniversary of the HAP contract renewal, the agreement leas are adjusted to current market levels. The owner must submit a lease 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 alternative is offered to certain tasks whose leas go beyond market similar levels as determined by a lease comparability study. Typically, this uses to projects whose mortgages are insured by the Federal Housing Administration. Congress granted HUD the authority to reorganize an owner’s mortgage so that debt service is decreased to a level that can be supported by market equivalent levels. If tasks can

Term: twenty 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 may request that their qualified mortgage be reorganized into a primary mortgage and secondary financial obligation. The new main mortgage will be sized so that market equivalent 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 secondary debt balance stays. If the job can remain economically feasible regardless of a rent decrease 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 site. All questions concerning a HAP renewal under Option 3 must be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This choice is available to tasks which are exempt from restructuring under MAHRA. This normally means that the task is not subject to an FHA-insured mortgage, however rather has a conventional mortgage or is tax-credit financed.

Term: Between 1 and 20 years.

Rent Increase: At HAP renewal, rents are either adjusted by the Operating Cost Adjustment Factor or by a HUD-approved spending plan (topped by market leas as identified by a Rent Comparability Study), whichever is lower.

Annual Rent Adjustment: The agreement rents will be adjusted upward each year by the Operating Cost Adjustment Factor released for the locality. This multiplicative rent change is released by HUD in October of each year and is efficient in February of the following year. The OCAF is based on a range of market indicators and is meant to record the effects of inflation and other market aspects 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 jobs subject to a long-lasting HUD use contract are required to restore under this Option. This normally includes jobs 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 rents upon HAP renewal depend upon each job’s particular HAP contract, Use Agreement and, if relevant, Strategy. Please examine those documents and call your HUD Account Executive with questions regarding for your residential or commercial property.

Annual Rent Adjustment: Which lease change mechanisms are offered to your job differ depending upon the HAP agreement, Use Agreement, and Strategy. Please review those documents and call your HUD Account Executive with questions regarding options for your residential or commercial property. Many Preservation projects might ask for a budget-based lease boost to help with unanticipated situations at a residential or commercial property or to address physical conditions requires.

Forms and files for Option 5:

– The project’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 restore their HAP agreement upon expiration. This does not apply to owners subject to a contractual commitment to restore the HAP contract resulting from an Use Agreement that is connected to the residential or commercial property.

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

Full HUD requirements for an owner who wants to choose out of renewing their HAP contract can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and regional laws might impact an owner’s ability to opt-out of renewing their HAP contract. 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 planning to opt out of HAP agreement renewal, please review the 8( bb) Preservation Tool. This program permits HUD to guarantee that inexpensive housing remains readily available in your neighborhood even if you do not wish to renew your HAP agreement.

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 likewise take part in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program supplies rewards for the project of a HAP agreement to a nonprofit, mission-oriented owner. The Capital Repairs program makes sure that the HAP renewal These programs supply a range of advantages to owners who wish to ensure long-term conservation of the housing support at their residential or commercial property.