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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 web page. This resource contains descriptions of alternatives available to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP contracts. The information supplied here is not thorough and instead is meant to assist owners browse the alternatives offered to them. For complete guidelines and requirements for renewal of a HAP contract, please describe the Section 8 Renewal Policy Guide.

For particular concern about a task's eligibility to restore a HAP agreement, please contact your regional HUD Multifamily Account Executive.

Option 1: Increase to Market

Eligibility: This option is available to owners whose contract rents are listed below equivalent market leas as determined by a rent comparability research study. An owner might ask for that their eligible existing HAP agreement be ended and restored under this choice.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, rents are set at market comparable levels, as identified by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner satisfies specific criteria to qualify under the discretionary requirements 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: Mark up to Budget

Eligibility: This option is available to owners whose contract leas are listed below or equal to comparable market rents. An owner may minimize their leas to market levels to participate under Option 2.

Renewal Rent Increase: At HAP renewal, leas are set at a level needed to support a HUD-approved task budget. These rents may not exceed market equivalent levels, as demonstrated by a rent comparability research study.

Comparability Adjustment: At each fifth year anniversary of the HAP contract renewal, the contract leas are gotten used to present market levels. The owner needs to send a rent comparability study which is utilized to set the leas 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 alternative is readily available to certain tasks whose rents surpass market comparable levels as determined by a lease comparability research study. Typically, this uses to projects whose mortgages are insured 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 similar levels. If jobs can

Term: 20 years.

Annual Rent Increase: At HAP renewal, leas are decreased to a market similar level as demonstrated by a lease comparability research study.

Mortgage Restructuring: The owner might request that their qualified mortgage be restructured into a main mortgage and subordinate financial obligation. The new primary mortgage will be sized so that market comparable rents suffice to support the financial obligation service on that mortgage. Use limitations will remain in location at the residential or commercial property so long as the secondary financial obligation balance stays. If the project can stay economically feasible despite a rent reduction to market levels, then no mortgage restructuring may be required.

More Information for Option 3: Information about Option 3 can be found on the About Mark-to-Market site. All inquiries regarding a HAP renewal under Option 3 need to be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This option is offered to projects which are exempt from restructuring under MAHRA. This normally implies that the task is not subject to an FHA-insured mortgage, however instead 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 identified by a Rent Comparability Study), whichever is lesser.

Annual Rent Adjustment: The agreement rents will be changed upward each year by the Operating expense Adjustment Factor published for the area. 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 on a range of market signs and is intended to record the impacts 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 contract are to renew under this Option. This generally consists of projects 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 rents upon HAP renewal depend upon each task's specific HAP agreement, Use Agreement and, if relevant, Plan of Action. Please examine those files and call your HUD Account Executive with questions concerning alternatives for your residential or commercial property.

Annual Rent Adjustment: Which lease modification systems are readily available to your project differ depending upon the HAP agreement, Use Agreement, and Strategy. Please examine those documents and contact your HUD Account Executive with concerns concerning alternatives for your residential or commercial property. Many Preservation projects might request a budget-based rent increase to help with unexpected situations at a residential or commercial property or to attend to physical conditions requires.

Forms and documents for Option 5:

- The job's Use Agreement must be examined 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
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Eligibility: An owner may choose to not renew their HAP agreement upon expiration. This does not use to owners subject to a contractual commitment to restore the HAP agreement resulting from an Use Agreement that is attached to the residential or commercial property.

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

Full HUD requirements for an owner who wishes to opt 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 restoring their HAP contract. 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 pull out of HAP contract renewal, please review the 8( bb) Preservation Tool. This program enables HUD to make sure that budget friendly housing remains offered 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 restore their HAP contract under Option 1 or 2 might also take part in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program provides rewards for the project of a HAP contract to a not-for-profit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs supply a variety of benefits to owners who want to guarantee long-term conservation of the housing help at their residential or commercial property.