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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 options available to owners of Section 8 HAP-assisted residential or commercial properties who want to restore their HAP contracts. The information offered here is not thorough and rather is meant to assist owners navigate the alternatives available to them. For complete instructions and requirements for renewal of a HAP contract, please refer to the Section 8 Renewal Policy Guide.

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

Option 1: Increase to Market

Eligibility: This alternative is offered to owners whose contract leas are listed below comparable market leas as figured out by a rent comparability study. An owner may request that their qualified current HAP agreement be ended and renewed under this alternative.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, rents 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 specific requirements 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: Increase to Budget

Eligibility: This choice is offered to owners whose agreement rents are listed below or equivalent to equivalent market leas. An owner might reduce their leas to market levels to participate under Option 2.

Renewal Rent Increase: At HAP renewal, leas are set at a level required to support a HUD-approved task budget. These leas may not go beyond market similar levels, as shown by a rent comparability study.

Comparability Adjustment: At each 5th year anniversary of the HAP agreement renewal, the contract rents are adapted to present market levels. The owner must send a lease comparability research 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 choice is available to certain tasks whose leas go beyond market similar levels as figured out by a lease comparability research study. Typically, this uses to jobs whose mortgages are guaranteed by the Federal Housing Administration. Congress gave HUD the authority to restructure an owner's mortgage so that financial obligation service is decreased to a level that can be supported by market similar levels. If jobs can

Term: twenty years.

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

Mortgage Restructuring: The owner may ask for that their qualified mortgage be restructured into a main mortgage and subordinate debt. The new primary mortgage will be sized so that market similar rents are adequate to support the debt service on that mortgage. Use constraints will stay in location at the residential or commercial property so long as the secondary debt balance stays. If the task can remain financially feasible despite a lease decrease 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 site. All queries concerning a HAP renewal under Option 3 must 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 job is exempt to an FHA-insured mortgage, however rather has a traditional mortgage or is tax-credit financed.

Term: Between 1 and twenty years.

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

Annual Rent Adjustment: The contract leas 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 is effective in February of the following year. The OCAF is based on a variety of market indications and is planned to capture the results of inflation and other market aspects 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-term HUD usage contract are needed to renew under this Option. This generally consists of tasks with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending upon HAP agreement requirements.

Rent Increase at HAP Renewal: The rents upon HAP renewal depend on each job's particular HAP contract, Use Agreement and, if relevant, Strategy. Please review those documents and call your HUD Account Executive with concerns relating to choices for your residential or .

Annual Rent Adjustment: Which lease change systems are readily available to your job differ depending upon the HAP agreement, Use Agreement, and Plan of Action. Please review those documents and contact your HUD Account Executive with concerns relating to choices for your residential or commercial property. Many Preservation projects may ask for a budget-based rent increase to assist with unforeseen situations at a residential or commercial property or to deal with physical conditions requires.

Forms and files for Option 5:

- The project's Use Agreement must be examined to determine HAP renewal choices.
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 elect to not renew their HAP contract upon expiration. This does not use to owners subject to a legal responsibility to renew the HAP contract arising from an Use Agreement that is connected to the residential or commercial property.

An owner must provide HUD and tenants notification of the opt-out one year prior to expiration of the HAP agreement. Upon expiration, eligible tenants will be provided improved vouchers pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wants to pull out of renewing their HAP contract can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and local laws might impact an owner's ability 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 obligations under these laws.

If you are preparing to decide out of HAP agreement renewal, please evaluate the 8( bb) Preservation Tool. This program allows HUD to make sure that budget friendly housing remains readily 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 eligible to renew their HAP agreement 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 provides incentives for the assignment of a HAP agreement to a nonprofit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs supply a variety of advantages to owners who want to ensure long-term conservation of the housing support at their residential or commercial property.