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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 includes descriptions of alternatives offered to owners of Section 8 HAP-assisted residential or commercial properties who wish to restore their HAP contracts. The info provided here is not detailed and instead is planned to assist owners navigate the alternatives readily available to them. For full directions and requirements for renewal of a HAP contract, please refer to the Section 8 Renewal Policy Guide.

For particular concern about a project's eligibility to restore a HAP contract, please call your regional HUD Multifamily Account Executive.

Option 1: Increase to Market

Eligibility: This choice is available to owners whose agreement rents are listed below comparable market rents as figured out by a lease comparability research study. An owner might request that their eligible existing HAP agreement be ended and restored under this option.

Term: Between 5 and 20 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 fulfills certain requirements 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 alternative is offered to owners whose contract leas are listed below or equivalent to equivalent market rents. An owner might minimize 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 job budget plan. These rents might not surpass market comparable levels, as shown by a rent comparability study.

Comparability Adjustment: At each 5th year anniversary of the HAP contract renewal, the agreement rents are adjusted to current market levels. The owner should submit a lease comparability research 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 particular jobs whose rents exceed market similar levels as figured out by a lease comparability research study. Typically, this applies to jobs whose mortgages are guaranteed by the Federal Housing Administration. Congress granted HUD the authority to reorganize an owner's mortgage so that debt service is minimized to a level that can be supported by market similar levels. If jobs can

Term: 20 years.

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

Mortgage Restructuring: The owner might request that their eligible mortgage be restructured into a main mortgage and secondary debt. The brand-new main mortgage will be sized so that market comparable leas are adequate to support the debt service on that mortgage. Use restrictions will stay in place at the residential or commercial property so long as the subordinate debt balance stays. If the job can stay economically viable in spite of a rent reduction to market levels, then no mortgage restructuring may be required.

More Information for Option 3: Information about Option 3 can be discovered on the About Mark-to-Market website. All questions concerning a HAP renewal under Option 3 must be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This alternative is readily available to projects which are exempt from reorganizing under MAHRA. This typically indicates that the project 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, leas are either changed by the Operating expense Adjustment Factor or by a HUD-approved budget plan (capped by market rents as figured out by a Lease 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 lease modification is published by HUD in October of each year and works in February of the following year. The OCAF is based upon a range of market indications and is planned to catch the effects of inflation and other market aspects on the expense of running rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain projects subject to a long-term HUD use agreement are required to restore under this Option. This typically consists of tasks with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending on HAP agreement requirements.

Rent Increase at HAP Renewal: The leas upon HAP renewal depend on each project's particular HAP contract, Use Agreement and, if suitable, Strategy. Please review those documents and call your HUD Account Executive with concerns regarding choices for your residential or commercial property.

Annual Rent Adjustment: Which lease adjustment systems are offered to your project differ depending on the HAP agreement, Use Agreement, and Strategy. Please review those files and call your HUD Account Executive with concerns regarding alternatives for your residential or commercial property. Many Preservation tasks might ask for a budget-based rent boost to assist with unexpected situations at a residential or commercial property or to resolve physical conditions needs.

Forms and documents for Option 5:

- The task's Use Agreement need to be examined to determine 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, 7

Option 6: Opt-out

Eligibility: An owner might elect to not restore their HAP agreement upon expiration. This does not use to owners subject to a contractual commitment to renew the HAP contract resulting from an Usage Agreement that is connected to the residential or commercial property.

An owner must offer HUD and tenants notification of the opt-out one year prior to expiration of the HAP contract. Upon expiration, qualified tenants will be released improved vouchers pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wishes to decide out of restoring their HAP agreement 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 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 responsibilities under these laws.

If you are preparing to choose out of HAP agreement renewal, please review the 8( bb) Preservation Tool. This program enables HUD to ensure that affordable housing stays readily available in your community even if you do not wish 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 qualified to renew their HAP contract under Option 1 or 2 might likewise 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 assignment of a HAP agreement to a not-for-profit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs offer a range of benefits to owners who want to ensure long-lasting conservation of the housing support at their residential or commercial property.