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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 includes descriptions of choices available to owners of Section 8 HAP-assisted residential or commercial properties who want to restore their HAP agreements. The info offered here is not thorough and instead is planned to assist owners browse the alternatives readily available to them. For complete guidelines and requirements for renewal of a HAP agreement, please refer to the Section 8 Renewal Policy Guide.
For specific question about a job's eligibility to restore a HAP contract, please contact your regional HUD Multifamily Account Executive.
Option 1: Mark up to Market
Eligibility: This choice is readily available to owners whose agreement leas are listed below equivalent market rents as figured out by a lease comparability research study. An owner might request that their qualified current HAP agreement be ended and restored under this choice.
Term: Between 5 and twenty years.
Renewal Rent Increase: At HAP renewal, rents are set at market comparable levels, as determined by an owner's RCS. Rents are capped at 150% of Fair Market Rents unless the owner meets specific criteria to qualify under the discretionary requirements 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 readily available to owners whose contract rents are listed below or equivalent to similar market leas. 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 required to support a HUD-approved project budget plan. These rents might not exceed market equivalent levels, as shown by a rent comparability study.
Comparability Adjustment: At each fifth year anniversary of the HAP agreement renewal, the agreement rents are adapted to current market levels. The owner needs to submit a lease comparability study which is utilized to set the rents 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 offered to certain jobs whose rents go beyond market comparable levels as determined by a lease comparability research study. Typically, this applies to tasks whose mortgages are insured by the Federal Housing Administration. Congress gave HUD the authority to restructure an owner's mortgage so that debt 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, leas are decreased to a market equivalent level as demonstrated by a lease comparability research study.
Mortgage Restructuring: The owner might ask for that their eligible mortgage be reorganized into a main mortgage and secondary financial obligation. The new primary mortgage will be sized so that market comparable rents are sufficient to support the financial obligation service on that mortgage. Use constraints will remain in location at the residential or commercial property so long as the subordinate debt balance stays. If the project can remain financially practical in spite of a rent decrease to market levels, then no mortgage restructuring might be required.
More Information for Option 3: Information about Option 3 can be discovered on the About Mark-to-Market website. All inquiries relating to 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 typically means that the job is not subject to an FHA-insured mortgage, but rather has a conventional mortgage or is tax-credit financed.
Term: Between 1 and twenty years.
Rent Increase: At HAP renewal, rents are either adjusted by the Operating Cost Adjustment Factor or by a HUD-approved budget plan (topped by market leas as determined by a Rent Comparability Study), whichever is lower.
Annual Rent Adjustment: The agreement leas will be adjusted up each year by the Operating Cost Adjustment Factor released for the region. This multiplicative rent modification is published 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 signs and is planned to record the results of inflation and other market elements on the expense of operating rental housing.
Forms and files for Option 4:
Section 8 Renewal Policy Guidebook, Chapter 6
Option 5: Preservation Projects
Eligibility: Certain projects subject to a long-lasting HUD usage arrangement are needed to renew under this Option. This normally consists of jobs 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 on each project's particular HAP agreement, Use Agreement and, if applicable, Plan of Action. Please review those files and call your HUD Account Executive with questions concerning alternatives for your residential or commercial property.
Annual Rent Adjustment: Which rent change mechanisms are available to your task vary depending on the HAP contract, Use Agreement, and Plan of Action. Please examine those files and call your HUD Account Executive with concerns regarding options for your residential or commercial property. Many Preservation tasks may ask for a budget-based rent boost to assist with unexpected scenarios at a residential or commercial property or to resolve physical conditions requires.
Forms and files for Option 5:
- The task's Use Agreement ought to be examined to figure out HAP renewal options.
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 restore the HAP agreement arising from an Use Agreement that is connected to the residential or commercial property.
An owner should provide HUD and renters notification of the opt-out one year prior to expiration of the HAP agreement. Upon expiration, qualified renters will be issued enhanced vouchers pursuant to 42 U.S.C. § 1437f( t).
Full HUD requirements for an owner who wishes to choose out of restoring their HAP agreement can be discovered at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and regional laws may affect 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 encourage an owner of their commitments under these laws.
If you are planning to decide out of HAP contract renewal, please review the 8( bb) Preservation Tool. This program allows HUD to ensure that affordable housing stays available in your community even if you do not wish to restore 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 agreement under Option 1 or 2 may likewise get involved in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program offers incentives for the project of a HAP contract to a nonprofit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs offer a range of advantages to owners who want to guarantee long-lasting preservation of the housing assistance at their residential or commercial property.
