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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 consists of descriptions of alternatives readily available to owners of Section 8 HAP-assisted residential or commercial properties who wish to restore their HAP agreements. The details provided here is not extensive and instead is meant to assist owners browse the alternatives readily available to them. For full guidelines and requirements for renewal of a HAP contract, please refer to the Section 8 Renewal Policy Guide.

For specific question about a project's eligibility to restore a HAP contract, please contact your regional HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This option is to owners whose contract leas are below equivalent market leas as figured out by a lease comparability study. An owner may request that their qualified existing HAP agreement be terminated and renewed under this choice.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, leas are set at market similar levels, as identified by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner satisfies certain requirements to certify under the discretionary criteria explained 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: Increase to Budget

Eligibility: This alternative is readily available to owners whose contract rents are below or equivalent to similar market rents. An owner might minimize their rents to market levels to take part 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 go beyond market equivalent levels, as demonstrated by a rent comparability study.

Comparability Adjustment: At each 5th year anniversary of the HAP agreement renewal, the contract rents are changed to present 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 files for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This choice is readily available to specific jobs whose rents surpass market similar levels as identified by a lease comparability study. Typically, this applies to tasks 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 lowered to a level that can be supported by market similar levels. If tasks can

Term: 20 years.

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

Mortgage Restructuring: The owner may ask for that their qualified mortgage be reorganized into a main mortgage and subordinate financial obligation. The new primary mortgage will be sized so that market equivalent rents suffice to support the debt service on that mortgage. Use constraints will remain in location at the residential or commercial property so long as the subordinate financial obligation balance remains. If the job can remain economically feasible in spite of a rent 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 queries concerning a HAP renewal under Option 3 should be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This option is available to projects which are exempt from restructuring under MAHRA. This normally indicates that the job is exempt to an FHA-insured mortgage, however rather has a conventional 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 (topped by market leas as identified by a Lease Comparability Study), whichever is lesser.

Annual Rent Adjustment: The contract rents will be changed upward each year by the Operating expense Adjustment Factor published for the locality. This multiplicative rent change is released by HUD in October of each year and works in February of the following year. The OCAF is based on a range of market indicators and is meant to record the impacts of inflation and other market factors 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 jobs subject to a long-term HUD usage agreement are needed to renew under this Option. This typically includes tasks 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 task's particular HAP agreement, Use Agreement and, if applicable, Strategy. Please review those files and call your HUD Account Executive with concerns relating to choices for your residential or commercial property.

Annual Rent Adjustment: Which lease adjustment mechanisms are available to your task differ depending upon the HAP contract, Use Agreement, and Plan of Action. Please examine those documents and call your HUD Account Executive with concerns regarding options for your residential or commercial property. Many Preservation projects may ask for a budget-based rent increase to help with unanticipated circumstances at a residential or commercial property or to address physical conditions needs.

Forms and files for Option 5:

- The job's Use Agreement need to be evaluated 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 apply to owners subject to a contractual obligation to renew the HAP agreement resulting from an Use Agreement that is connected to the residential or commercial property.

An owner should supply HUD and renters notice of the opt-out one year prior to expiration of the HAP contract. Upon expiration, qualified occupants will be issued improved coupons 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 local laws might impact an owner's capability to opt-out of renewing their HAP contract. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not advise an owner of their commitments under these laws.

If you are planning to pull out of HAP agreement 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 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 renew 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 incentives for the task of a HAP contract to a nonprofit, mission-oriented owner. The Capital Repairs program makes sure that the HAP renewal These programs offer a range of advantages to owners who wish to ensure long-term preservation of the housing support at their residential or commercial property.