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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 alternatives readily available to owners of Section 8 HAP-assisted residential or commercial properties who wish to renew their HAP contracts. The details provided here is not detailed and rather is intended to assist owners navigate the options available to them. For complete directions and requirements for renewal of a HAP agreement, please refer to the Section 8 Renewal Policy Guide.

For specific question about a task'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 offered to owners whose contract leas are listed below similar market rents as determined by a lease comparability research study. An owner might ask for that their eligible present HAP agreement be ended and restored under this option.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, rents are set at market equivalent levels, as determined by an owner's RCS. Rents are capped at 150% of Fair Market Rents unless the owner satisfies specific 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 alternative is available to owners whose agreement leas are listed below or equal to similar market leas. An owner may minimize their rents to market levels to take part under Option 2.

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

Comparability Adjustment: At each 5th year anniversary of the HAP contract renewal, the agreement rents are adjusted to present market levels. The owner should send 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 files for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This option is readily available to certain projects whose rents go beyond market equivalent levels as figured out by a lease comparability research study. Typically, this applies to jobs whose mortgages are guaranteed 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 similar levels. If jobs can

Term: 20 years.

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

Mortgage Restructuring: The owner may ask for that their qualified mortgage be reorganized into a primary mortgage and subordinate debt. The brand-new primary mortgage will be sized so that market equivalent rents are sufficient 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 project can stay financially feasible in spite of a rent 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 questions 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 restructuring under MAHRA. This typically means that the task is exempt to an FHA-insured mortgage, however rather has a conventional mortgage or is tax-credit financed.

Term: Between 1 and 20 years.

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

Annual Rent Adjustment: The agreement rents will be adjusted up each year by the Operating expense Adjustment Factor published for the region. This multiplicative lease change is released by HUD in October of each year and works in February of the list below year. The OCAF is based upon a variety of market indicators and is intended to capture 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 restore under this Option. This usually consists of projects with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending on HAP agreement requirements.

Rent Increase at HAP Renewal: The leas upon HAP renewal depend upon each job's particular HAP agreement, Use Agreement and, if appropriate, Plan of Action. Please review those files and call your HUD Account Executive with questions relating to choices for your residential or commercial property.

Annual Rent Adjustment: Which lease modification systems are readily available to your project differ depending on the HAP contract, Use Agreement, and Plan of Action. Please examine those documents and call your HUD Account Executive with concerns regarding alternatives for your residential or commercial property. Many Preservation tasks might ask for a budget-based rent boost to help with unanticipated scenarios at a residential or commercial property or to attend to physical conditions needs.

Forms and documents for Option 5:

- The job's Use Agreement must 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 choose to not renew their HAP contract upon expiration. This does not apply to owners subject to a contractual responsibility to renew the HAP agreement arising from an Usage Agreement that is connected to the residential or commercial property.

An owner should offer HUD and occupants notification of the opt-out one year prior to expiration of the HAP agreement. 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 contract can be discovered at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and local laws may impact an owner's ability to opt-out of restoring their HAP contract. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not encourage an owner of their responsibilities under these laws.

If you are preparing to choose out of HAP agreement renewal, please evaluate the 8( bb) Preservation Tool. This program allows HUD to make sure that budget friendly housing stays readily available in your neighborhood even if you do not wish 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 qualified to renew their HAP contract under Option 1 or 2 might also take part in the Section 8 Preservation Efforts programs described 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 wish to guarantee long-term preservation of the housing assistance at their residential or commercial property.