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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 includes descriptions of options readily available to owners of Section 8 HAP-assisted residential or commercial properties who wish to renew their HAP agreements. The info supplied here is not detailed and instead is intended to help owners browse the choices available to them. For complete instructions and requirements for renewal of a HAP agreement, please describe the Section 8 Renewal Policy Guide.

For specific question about a project's eligibility to renew a HAP agreement, please contact your regional HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This alternative is available to owners whose agreement rents are below similar market rents as identified by a rent comparability research study. An owner may request that their eligible current HAP contract be terminated and renewed under this choice.

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 fulfills specific requirements to qualify under the discretionary requirements 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: Increase to Budget

Eligibility: This choice is readily available to owners whose contract leas are listed below or equivalent to comparable market leas. An owner might lower their leas to market levels to take part under Option 2.

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

Comparability Adjustment: At each fifth year anniversary of the HAP contract renewal, the contract leas are adapted to present market levels. The owner needs to submit a rent comparability study which is used to set the leas 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 choice is available to particular jobs whose rents exceed market equivalent levels as determined by a lease comparability research study. Typically, this applies to projects whose mortgages are insured by the Federal Housing Administration. Congress gave HUD the authority to restructure an owner's mortgage so that debt service is lowered to a level that can be supported by market similar levels. If jobs can

Term: 20 years.

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

Mortgage Restructuring: The owner might request that their qualified mortgage be restructured into a primary mortgage and secondary debt. The brand-new main mortgage will be sized so that market equivalent rents are enough 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 subordinate debt balance remains. If the job can stay economically feasible regardless of a rent reduction to market levels, then no mortgage restructuring might be needed.

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

Option 4: Exception Projects

Eligibility: This choice is available to jobs which are exempt from reorganizing under MAHRA. This normally suggests that the task is exempt to an FHA-insured mortgage, however rather has a conventional 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 (capped by market rents as figured out by a Rent Comparability Study), whichever is lower.

Annual Rent Adjustment: The agreement leas will be changed up each year by the Operating expense Adjustment Factor published for the locality. This multiplicative lease adjustment is published by HUD in October of each year and works in February of the following year. The OCAF is based on a variety of market indications and is meant to record the results of inflation and other market factors 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 projects subject to a long-lasting HUD use agreement are needed to renew under this Option. This typically includes projects 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 upon each job's particular HAP agreement, Use Agreement and, if relevant, Plan of Action. Please review those files and contact your HUD Account Executive with questions relating to alternatives for your residential or commercial property.

Annual Rent Adjustment: Which lease change mechanisms are readily available to your job vary depending on the HAP agreement, Use Agreement, and Plan of Action. Please evaluate those files and call your HUD Account Executive with concerns relating to alternatives for your residential or commercial property. Many Preservation jobs might ask for a budget-based lease increase to assist with unpredicted situations at a residential or commercial property or to attend to physical conditions needs.

Forms and files for Option 5:

- The job's Use Agreement should be reviewed to figure out 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 might elect to not renew their HAP agreement upon expiration. This does not apply to owners subject to a contractual obligation to renew the HAP agreement arising from an Usage Agreement that is attached 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, eligible renters will be released enhanced vouchers pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wants to opt out of renewing their HAP contract can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and regional laws might affect an owner's ability to opt-out of renewing their HAP agreement. 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 agreement renewal, please examine the 8( bb) Preservation Tool. This program permits HUD to guarantee that inexpensive housing remains available in your neighborhood even if you do not wish to restore your HAP contract.

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 eligible to renew their HAP contract under Option 1 or 2 might likewise get involved in the Section 8 Preservation Efforts programs explained in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program supplies incentives for the project of a HAP contract to a nonprofit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs supply a range of advantages to owners who want to ensure long-lasting preservation of the housing support at their residential or commercial property.