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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 contains descriptions of alternatives available to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP agreements. The information offered here is not detailed and instead is meant to assist owners navigate the options offered to them. For complete instructions and requirements for renewal of a HAP agreement, please refer to the Section 8 Renewal Policy Guide.

For specific concern about a job's eligibility to restore a HAP contract, please contact your regional HUD Multifamily Account Executive.

Option 1: Increase to Market

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

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, leas are set at market comparable levels, as identified by an owner's RCS. Rents are capped at 150% of Fair Market Rents unless the owner satisfies particular requirements to qualify 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 files

Option 2: Mark up to Budget

Eligibility: This option is offered to owners whose agreement rents are listed below or equivalent to similar market leas. An owner might reduce their rents to market levels to get involved 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 rents might not go beyond market comparable levels, as demonstrated by a lease comparability study.

Comparability Adjustment: At each 5th year anniversary of the HAP agreement renewal, the contract rents are adjusted to present market levels. The owner must send a rent comparability 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 option is available to specific tasks whose rents go beyond market similar levels as figured out by a lease comparability study. Typically, this applies to tasks whose mortgages are guaranteed by the Federal Housing Administration. Congress gave HUD the authority to reorganize an owner's mortgage so that debt service is reduced to a level that can be supported by market equivalent levels. If projects can

Term: 20 years.

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

Mortgage Restructuring: The owner might ask for that their eligible mortgage be restructured into a primary mortgage and secondary debt. The brand-new primary mortgage will be sized so that market comparable rents suffice to support the debt service on that mortgage. Use restrictions will stay in place at the residential or commercial property so long as the secondary financial obligation balance remains. If the job can stay economically feasible regardless of a rent reduction to market levels, then no mortgage restructuring may be required.

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

Option 4: Exception Projects

Eligibility: This option is offered to tasks which are exempt from restructuring under MAHRA. This generally indicates that the project is exempt to an FHA-insured mortgage, however rather has a traditional mortgage or is tax-credit funded.

Term: Between 1 and 20 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 rents as figured out by a Rent Comparability Study), whichever is lesser.

Annual Rent Adjustment: The agreement leas will be adjusted up each year by the Operating Cost Adjustment Factor published for the region. 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 signs and is intended to record the results of inflation and other market factors on the cost of running rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain tasks subject to a long-term HUD usage contract are needed to restore under this Option. This normally includes projects 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 specific HAP agreement, Use Agreement and, if appropriate, Strategy. Please evaluate those documents and call your HUD Account Executive with concerns concerning options for your residential or commercial property.

Annual Rent Adjustment: Which rent change systems are available to your task vary depending on the HAP agreement, Use Agreement, and Strategy. Please evaluate those documents and call your HUD Account Executive with questions regarding alternatives for your residential or commercial property. Many Preservation projects might request a budget-based rent increase to help with unanticipated scenarios at a residential or commercial property or to attend to physical conditions requires.

Forms and documents for Option 5:

- The job's Use Agreement should be reviewed to identify HAP renewal options.

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 restore their HAP agreement upon expiration. This does not use to owners subject to a contractual commitment to renew the HAP agreement resulting from an Usage Agreement that is attached to the residential or commercial property.

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

Full HUD requirements for an owner who wishes to pull out of restoring their HAP agreement can be discovered 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 contract. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not encourage an owner of their obligations under these laws.

If you are planning to pull out of HAP contract renewal, please review the 8( bb) Preservation Tool. This program permits HUD to make sure that inexpensive housing remains 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 renew their HAP agreement under Option 1 or 2 may also participate 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 project of a HAP agreement to a nonprofit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs offer a range of benefits to owners who wish to ensure long-term conservation of the housing help at their residential or commercial property.