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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 renew their HAP contracts. The details supplied here is not detailed and rather is planned to help owners browse the choices offered to them. For complete directions and requirements for renewal of a HAP agreement, please describe the Section 8 Renewal Policy Guide.

For particular question about a job's eligibility to renew a HAP agreement, please call your regional HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This alternative is offered to owners whose contract rents are listed below similar market leas as determined by a rent comparability study. An owner might request that their eligible present HAP agreement be terminated and restored under this choice.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, rents are set at market equivalent levels, as identified by an owner's RCS. Rents are capped at 150% of Fair Market Rents unless the owner meets particular criteria 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 choice is readily available to owners whose contract rents are below or equivalent to similar market rents. An owner may reduce their rents to market levels to take part under Option 2.

Renewal Rent Increase: At HAP renewal, rents are set at a level required to support a HUD-approved job budget plan. These rents might not surpass market comparable levels, as demonstrated by a rent comparability research study.

Comparability Adjustment: At each 5th year anniversary of the HAP contract renewal, the agreement rents are adapted to present market levels. The owner should submit a lease comparability research study which is utilized to set the rents on the 5th, 10th, and 15th anniversaries of the HAP contract.

Forms and documents for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This option is available to specific tasks whose leas go beyond market comparable levels as determined by a lease comparability study. Typically, this applies to projects whose mortgages are guaranteed by the Federal Housing Administration. Congress gave HUD the authority to reorganize 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 reduced to a market comparable level as demonstrated by a rent comparability research study.

Mortgage Restructuring: The owner may ask for that their qualified mortgage be reorganized into a primary mortgage and secondary debt. The new primary mortgage will be sized so that market comparable rents suffice to support the financial obligation service on that mortgage. Use restrictions will remain in place at the residential or commercial property so long as the secondary debt balance remains. If the task can remain economically viable regardless of a lease reduction to market levels, then no mortgage restructuring might be needed.

More Information for Option 3: Information about Option 3 can be found on the About Mark-to-Market website. All queries relating to a HAP renewal under Option 3 need to be directed to [email protected].

Option 4: Exception Projects

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

Term: Between 1 and 20 years.

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

Annual Rent Adjustment: The contract rents will be adjusted upward each year by the Operating Cost Adjustment Factor released for the area. This multiplicative rent change 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 signs and is meant to record the effects of inflation and other market factors on the cost of running rental housing.

Forms and documents 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 needed 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 leas upon HAP renewal depend upon each job's specific HAP agreement, Use Agreement and, if applicable, Plan of Action. Please examine those files and contact your HUD Account Executive with questions regarding choices for your residential or commercial property.

Annual Rent Adjustment: Which rent modification mechanisms are readily available to your task vary depending on the HAP agreement, Use Agreement, and Plan of Action. Please evaluate those files and call your HUD Account Executive with concerns relating to alternatives for your residential or commercial property. Many Preservation projects might request a budget-based lease increase to assist with unexpected circumstances at a residential or commercial property or to address physical conditions requires.

Forms and documents for Option 5:

- The task's Use Agreement must be evaluated to determine 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 choose to not restore their HAP agreement upon expiration. This does not apply to owners based on a contractual obligation to renew the HAP contract arising from an Usage Agreement that is connected to the residential or commercial property.

An owner should provide HUD and tenants notification of the opt-out one year prior to expiration of the HAP agreement. Upon expiration, eligible occupants will be released boosted vouchers 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 keep in mind that state and local laws may 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 encourage an owner of their obligations under these laws.

If you are preparing to pull out of HAP agreement renewal, please review the 8( bb) Preservation Tool. This program enables HUD to guarantee that inexpensive housing stays 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 qualified to renew their HAP contract under Option 1 or 2 may also get involved in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program offers rewards for the project of a HAP contract to a nonprofit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs supply a range of benefits to owners who want to guarantee long-term preservation of the housing help at their residential or commercial property.