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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 choices offered to owners of Section 8 HAP-assisted residential or commercial properties who want to restore their HAP contracts. The info offered here is not detailed and rather is intended to assist owners navigate the alternatives readily available to them. For complete directions and requirements for renewal of a HAP agreement, please describe the Section 8 Renewal Policy Guide.

For particular concern about a project's eligibility to renew a HAP contract, 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 comparable market rents as identified by a lease comparability study. An owner might ask for that their qualified present HAP agreement be terminated and renewed under this choice.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, leas are set at market equivalent levels, as figured out by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner satisfies certain criteria to certify under the discretionary criteria 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 submits

Option 2: Mark up to Budget

Eligibility: This alternative is offered to owners whose contract leas are below or equal to equivalent market leas. An owner may 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 job budget. These leas might not surpass market similar levels, as demonstrated by a lease comparability research study.

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

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 specific jobs whose rents exceed market similar levels as figured out by a lease comparability study. Typically, this uses to tasks whose mortgages are insured by the Federal Housing Administration. Congress granted HUD the authority to restructure an owner's mortgage so that debt service is lowered to a level that can be supported by market equivalent levels. If tasks can

Term: 20 years.

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

Mortgage Restructuring: The owner might request that their eligible mortgage be restructured into a main mortgage and subordinate debt. The brand-new primary mortgage will be sized so that market similar leas suffice to support the financial obligation service on that mortgage. Use constraints will stay in place at the residential or commercial property so long as the secondary debt balance stays. If the task can stay economically feasible regardless of a rent reduction to market levels, then no mortgage restructuring may be needed.

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

Option 4: Exception Projects

Eligibility: This choice is readily available to jobs which are exempt from reorganizing under MAHRA. This typically means that the job is not subject to an FHA-insured mortgage, but rather has a conventional mortgage or is tax-credit funded.

Term: Between 1 and twenty years.

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

Annual Rent Adjustment: The agreement leas will be adjusted up each year by the Operating Cost Adjustment Factor published for the locality. This multiplicative rent modification is released 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 meant to record the impacts of inflation and other market elements on the expense of running rental housing.

Forms and files for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain jobs subject to a long-term HUD use contract are required to renew under this Option. This usually includes tasks 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 on each job's particular HAP agreement, Use Agreement and, if appropriate, Plan of Action. Please examine those documents and contact your HUD Account Executive with concerns concerning choices for your residential or commercial property.

Annual Rent Adjustment: Which lease change mechanisms are offered to your project differ depending upon the HAP contract, Use Agreement, and Strategy. Please examine those files and contact your HUD Account Executive with questions regarding options for your residential or commercial property. Many Preservation projects may request a budget-based rent increase to help with unpredicted situations at a residential or commercial property or to deal with physical conditions needs.

Forms and documents for Option 5:

- The project's Use Agreement need to be examined to figure out 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 choose to not renew their HAP agreement upon expiration. This does not use to owners based on a contractual obligation to renew the HAP contract arising from an Use Agreement that is connected to the residential or commercial property.

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

Full HUD requirements for an owner who wishes to decide out of renewing their HAP contract 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 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 advise an owner of their responsibilities under these laws.

If you are planning to pull out of HAP agreement renewal, please review the 8( bb) Preservation Tool. This program permits HUD to make sure that economical housing stays offered in your neighborhood even if you do not want to restore 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 might also take part 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 variety of advantages to owners who want to ensure long-term conservation of the housing help at their residential or commercial property.