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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 options available to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP agreements. The info provided here is not detailed and instead is planned to assist owners browse the choices offered to them. For complete instructions and requirements for renewal of a HAP agreement, please refer to the Section 8 Renewal Policy Guide.

For particular concern about a job's eligibility to restore a HAP agreement, please call your local HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This choice is available to owners whose contract rents are listed below similar market rents as determined by a lease comparability research study. An owner may ask for that their eligible current HAP agreement be ended and renewed under this option.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, leas 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 certain requirements to qualify under the discretionary requirements 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: Mark up to Budget

Eligibility: This alternative is available to owners whose contract rents are listed below or equivalent to comparable market leas. An owner might lower their leas to market levels to participate under Option 2.

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

Comparability Adjustment: At each 5th year anniversary of the HAP agreement renewal, the agreement leas are gotten used to existing market levels. The owner should submit 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 option is offered to specific jobs whose rents surpass market equivalent levels as determined by a lease comparability research study. Typically, this uses to jobs whose mortgages are insured by the Federal Housing Administration. Congress gave 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 projects can

Term: twenty years.

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

Mortgage Restructuring: The owner may request that their qualified mortgage be restructured into a main mortgage and subordinate debt. The new main mortgage will be sized so that market equivalent leas are adequate to support the debt service on that mortgage. Use restrictions will remain in location at the residential or commercial property so long as the subordinate debt balance remains. If the task can stay financially practical despite a lease reduction to market levels, then no mortgage restructuring may be needed.

More Information for Option 3: Information about Option 3 can be found on the About Mark-to-Market site. All queries 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 reorganizing under MAHRA. This usually suggests that the project is not subject to an FHA-insured mortgage, but rather has a traditional mortgage or is tax-credit funded.

Term: Between 1 and twenty years.

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

Annual Rent Adjustment: The contract rents will be changed up each year by the Operating expense Adjustment Factor published for the locality. This multiplicative rent adjustment is published by HUD in October of each year and is reliable in February of the following year. The OCAF is based on a variety of market indications and is meant to record the effects of inflation and other market factors on the expense of running 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 use agreement are required to restore under this Option. This usually includes projects 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 job's particular HAP contract, Use Agreement and, if appropriate, Strategy. Please review those documents and contact your HUD Account Executive with concerns regarding options for your residential or commercial property.

Annual Rent Adjustment: Which lease change systems are available to your job vary depending on the HAP contract, Use Agreement, and Strategy. Please evaluate those files and contact your HUD Account Executive with concerns regarding alternatives for your residential or commercial property. Many Preservation projects may request a budget-based lease boost to assist with unpredicted circumstances at a residential or commercial property or to address physical conditions needs.

Forms and files for Option 5:

- The task's Use Agreement need to be reviewed 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 renew their HAP agreement upon expiration. This does not use to owners subject to a legal commitment to renew the HAP contract resulting from an Usage Agreement that is connected to the residential or commercial property.

An owner must 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 boosted coupons pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wishes to choose out of restoring their HAP contract can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and local 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 advise an owner of their obligations under these laws.

If you are preparing to choose out of HAP contract renewal, please review the 8( bb) Preservation Tool. This program enables HUD to ensure that cost effective housing stays offered in your community even if you do not want to restore 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 qualified to renew their HAP agreement under Option 1 or 2 may also take part in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program supplies incentives for the assignment of a HAP contract to a not-for-profit, mission-oriented owner. The Capital Repairs program makes sure that the HAP renewal These programs provide a variety of benefits to owners who wish to make sure long-lasting preservation of the housing support at their residential or commercial property.
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