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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 contains descriptions of options readily available to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP contracts. The information offered here is not thorough and instead is meant to assist owners navigate the options offered to them. For full directions and requirements for renewal of a HAP contract, please refer to the Section 8 Renewal Policy Guide.

For particular question 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 choice is readily available to owners whose agreement leas are listed below similar market rents as determined by a lease comparability research study. An owner might ask for that their qualified existing HAP contract be ended and restored under this alternative.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, leas are set at market similar levels, as determined by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner meets particular criteria to certify under the discretionary requirements described 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 available to owners whose contract rents are below or equivalent to leas. An owner might reduce their leas to market levels to get involved under Option 2.

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

Comparability Adjustment: At each fifth year anniversary of the HAP agreement renewal, the contract leas are changed to current market levels. The owner needs to submit a lease comparability research study which is used to set the leas on the 5th, 10th, and 15th anniversaries of the HAP agreement.

Forms and documents for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This option is offered to particular jobs whose rents surpass market equivalent levels as identified by a rent comparability research study. Typically, this applies to projects whose mortgages are insured by the Federal Housing Administration. Congress granted HUD the authority to reorganize an owner's mortgage so that debt service is reduced to a level that can be supported by market equivalent levels. If jobs can

Term: twenty years.

Annual Rent Increase: At HAP renewal, rents are reduced to a market similar level as shown by a rent comparability study.

Mortgage Restructuring: The owner might ask for that their qualified mortgage be reorganized into a primary mortgage and secondary financial obligation. The new primary mortgage will be sized so that market similar rents suffice to support the debt service on that mortgage. Use constraints 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 viable 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 questions concerning a HAP renewal under Option 3 ought to be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This choice is offered to jobs which are exempt from reorganizing under MAHRA. This usually means that the project is not subject to an FHA-insured mortgage, however instead has a standard mortgage or is tax-credit funded.

Term: Between 1 and 20 years.

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

Annual Rent Adjustment: The agreement rents will be changed up each year by the Operating expense Adjustment Factor released for the region. This multiplicative lease change is published by HUD in October of each year and is efficient in February of the list below year. The OCAF is based upon a range of market signs and is planned to catch the impacts of inflation and other market factors on the expense of operating rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain jobs based on a long-lasting HUD use agreement are needed 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 upon HAP contract requirements.

Rent Increase at HAP Renewal: The rents upon HAP renewal depend on each job's specific HAP contract, Use Agreement and, if appropriate, Strategy. Please examine those documents and call your HUD Account Executive with questions relating to options for your residential or commercial property.

Annual Rent Adjustment: Which rent adjustment systems are readily available to your job differ depending upon the HAP agreement, Use Agreement, and Plan of Action. Please evaluate those documents and contact your HUD Account Executive with concerns regarding options for your residential or commercial property. Many Preservation jobs might request a budget-based lease boost to help with unexpected scenarios at a residential or commercial property or to resolve physical conditions needs.

Forms and files for Option 5:

- The task's Use Agreement should 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

Eligibility: An owner might choose to not renew their HAP agreement upon expiration. This does not apply to owners based on a legal obligation to restore the HAP contract resulting from an Use Agreement that is connected to the residential or commercial property.

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

Full HUD requirements for an owner who wants to pull out of renewing their HAP agreement can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and local laws may 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 recommend an owner of their commitments under these laws.

If you are preparing to pull out of HAP contract renewal, please examine the 8( bb) Preservation Tool. This program allows HUD to guarantee that affordable housing stays readily available in your community even if you do not want to restore 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 agreement under Option 1 or 2 might likewise take part in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program provides incentives for the project of a HAP agreement to a not-for-profit, mission-oriented owner. The Capital Repairs program makes sure that the HAP renewal These programs provide a variety of benefits to owners who want to guarantee long-term conservation of the housing support at their residential or commercial property.