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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 consists of descriptions of options readily available to owners of Section 8 HAP-assisted residential or commercial properties who wish to renew their HAP contracts. The details offered here is not thorough and rather is planned to help owners navigate the options readily 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 call your regional HUD Multifamily Account Executive.

Option 1: Mark up to Market

Eligibility: This option is available to owners whose contract rents are listed below similar market rents as figured out by a rent comparability study. An owner may request that their eligible existing HAP agreement be terminated and restored under this option.

Term: Between 5 and 20 years.

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

Renewal Rent Increase: At HAP renewal, rents are set at a level needed to support a HUD-approved job budget plan. These leas might not go beyond market similar levels, as shown by a lease comparability study.

Comparability Adjustment: At each 5th year anniversary of the HAP contract renewal, the contract rents are gotten used to existing market levels. The owner must submit 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 documents 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 comparable levels as identified by a lease comparability study. Typically, this uses to tasks whose mortgages are insured by the Federal Housing Administration. Congress approved HUD the authority to restructure an owner's mortgage so that financial obligation service is lowered to a level that can be supported by market similar levels. If tasks can

Term: 20 years.

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

Mortgage Restructuring: The owner might ask for that their eligible mortgage be restructured into a main mortgage and subordinate financial obligation. The brand-new primary mortgage will be sized so that market comparable leas are enough to support the debt service on that mortgage. Use restrictions will stay in place at the residential or commercial property so long as the subordinate financial obligation balance stays. If the task can stay economically 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 website. All inquiries relating to a HAP renewal under Option 3 must be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This option is readily available to tasks which are exempt from restructuring under MAHRA. This normally indicates that the job is not subject to an FHA-insured mortgage, however rather has a conventional mortgage or is tax-credit financed.

Term: Between 1 and twenty years.

Rent Increase: At HAP renewal, rents are either changed by the Operating Cost Adjustment Factor or by a HUD-approved budget plan (capped by market leas as figured out by a Lease Comparability Study), whichever is lesser.
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Annual Rent Adjustment: The contract leas will be adjusted upward each year by the Operating expense Adjustment Factor published for the area. This multiplicative rent adjustment is released by HUD in October of each year and is efficient in February of the following year. The OCAF is based on a range of market signs and is planned to catch the results of inflation and other market elements on the expense of running rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Projects

Eligibility: Certain projects based on a long-term HUD use arrangement are required to restore under this Option. This usually includes jobs 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 particular HAP agreement, Use Agreement and, if applicable, Strategy. Please examine those files and call your HUD Account Executive with questions relating to choices for your residential or commercial property.

Annual Rent Adjustment: Which lease adjustment systems are offered to your project differ depending on the HAP contract, Use Agreement, and Plan of Action. Please examine those documents and contact your HUD Account Executive with concerns regarding choices for your residential or commercial property. Many Preservation projects may request a budget-based lease boost to help 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 need to be evaluated to identify 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 restore their HAP contract upon expiration. This does not use to owners based on a legal obligation to restore the HAP contract arising from an Use Agreement that is attached to the residential or commercial property.

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

Full HUD requirements for an owner who wishes to decide out of restoring their HAP agreement can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and local laws may 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 advise 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 enables HUD to make sure that budget-friendly housing remains readily available in your community even if you do not want to renew 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 restore 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 incentives for the assignment of a HAP contract to a not-for-profit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs provide a variety of advantages to owners who want to make sure long-lasting conservation of the housing assistance at their residential or commercial property.
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