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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 options available to owners of Section 8 HAP-assisted residential or commercial properties who wish to restore their HAP contracts. The details offered here is not extensive and instead is intended to assist owners navigate the options readily available to them. For complete instructions and requirements for renewal of a HAP contract, please refer to the Section 8 Renewal Policy Guide.

For specific concern about a job's eligibility to renew a HAP agreement, please contact your local HUD Multifamily Account Executive.

Option 1: Increase to Market

Eligibility: This option is offered to owners whose contract leas are listed below equivalent market leas as identified by a rent comparability study. An owner may ask for that their eligible existing HAP agreement be ended and renewed under this alternative.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, leas 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 criteria 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 files

Option 2: Mark up to Budget

Eligibility: This choice is available to owners whose contract rents are listed below or equivalent to equivalent market rents. An owner may decrease their rents 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 job spending plan. These leas 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 leas are gotten used to existing market levels. The owner must submit a lease comparability study which is used 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 alternative is offered to specific projects whose rents surpass market equivalent levels as determined by a rent comparability research study. Typically, this uses to tasks whose mortgages are guaranteed by the Federal Housing Administration. Congress approved HUD the authority to restructure an owner's mortgage so that financial obligation service is reduced to a level that can be supported by market comparable levels. If projects can

Term: 20 years.

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

Mortgage Restructuring: The owner may request that their qualified mortgage be restructured into a primary mortgage and secondary financial obligation. The new primary mortgage will be sized so that market comparable rents are enough to support the financial obligation service on that mortgage. Use restrictions will stay in location at the residential or commercial property so long as the subordinate financial obligation balance stays. If the project can remain financially feasible in spite of a rent decrease 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 questions regarding a HAP renewal under Option 3 ought to be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This choice is offered to projects which are exempt from reorganizing under MAHRA. This generally implies that the job is not subject to an FHA-insured mortgage, but rather has a standard mortgage or is tax-credit funded.

Term: Between 1 and twenty years.

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

Annual Rent Adjustment: The contract leas will be adjusted up each year by the Operating Cost Adjustment Factor published 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 variety of market indicators and is meant to catch the effects 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-term HUD usage contract are required to renew under this Option. This generally includes projects 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 rents upon HAP renewal depend upon each task's particular HAP contract, Use Agreement and, if relevant, Strategy. Please evaluate those files and call your HUD Account Executive with concerns regarding alternatives for your residential or commercial property.

Annual Rent Adjustment: Which rent change systems are readily available to your project vary depending upon the HAP contract, Use Agreement, and Plan of Action. Please evaluate those documents and contact your HUD Account Executive with concerns regarding alternatives for your residential or commercial property. Many Preservation projects might ask for a budget-based lease increase to help with unforeseen circumstances at a residential or commercial property or to deal with physical conditions requires.

Forms and documents for Option 5:

- The job's Use Agreement must be evaluated to determine 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 use to owners based on a legal responsibility to restore the HAP contract resulting from an Use Agreement that is connected to the residential or commercial property.

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

Full HUD requirements for an owner who wants to opt out of restoring their HAP agreement can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and regional laws may affect an owner's ability to opt-out of restoring 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 planning to opt out of HAP agreement renewal, please evaluate the 8( bb) Preservation Tool. This program allows HUD to ensure that budget-friendly housing remains available in your community even if you do not want to renew your HAP contract.

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 take part 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 assignment of a HAP contract to a nonprofit, mission-oriented owner. The Capital Repairs program makes sure that the HAP renewal These programs supply a variety of benefits to owners who wish to ensure long-term preservation of the housing assistance at their residential or commercial property.