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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 options readily available to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP agreements. The info provided here is not thorough and instead is intended to assist owners navigate the choices available to them. For complete instructions and requirements for renewal of a HAP contract, please describe the Section 8 Renewal Policy Guide.

For particular concern about a project's eligibility to renew a HAP agreement, please call your local HUD Multifamily Account Executive.
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Option 1: Increase to Market

Eligibility: This choice is readily available to owners whose contract leas are listed below equivalent market leas as figured out by a lease comparability research study. An owner might ask for that their eligible present HAP agreement be ended and renewed under this option.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, rents are set at market similar levels, as determined by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner fulfills certain requirements to qualify under the discretionary criteria 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: Mark up to Budget

Eligibility: This choice is available to owners whose contract rents are below or equivalent to similar market rents. An owner might minimize 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 budget plan. These leas may not go beyond market similar levels, as shown by a lease comparability study.

Comparability Adjustment: At each fifth year anniversary of the HAP agreement renewal, the agreement leas are adapted to existing market levels. The owner must submit a lease comparability study which is utilized to set the rents 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 readily available to specific projects whose rents exceed market similar levels as figured out by a lease comparability research study. Typically, this applies to tasks whose mortgages are insured by the Federal Housing Administration. Congress gave HUD the authority to restructure an owner's mortgage so that financial obligation service is minimized to a level that can be supported by market comparable levels. If projects can

Term: 20 years.

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

Mortgage Restructuring: The owner might ask for that their eligible mortgage be reorganized into a main mortgage and subordinate financial obligation. The new main mortgage will be sized so that market similar rents suffice to support the debt service on that mortgage. Use limitations will remain in location at the residential or commercial property so long as the subordinate debt balance stays. If the project can remain economically practical 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 regarding a HAP renewal under Option 3 must be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This choice is available to projects which are exempt from reorganizing under MAHRA. This usually suggests that the job is not subject to an FHA-insured mortgage, however rather has a standard mortgage or is tax-credit financed.

Term: Between 1 and 20 years.

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

Annual Rent Adjustment: The contract leas will be changed upward each year by the Operating Cost Adjustment Factor released for the area. This multiplicative lease modification is released by HUD in October of each year and is reliable in February of the list below year. The OCAF is based on a range of market indications and is meant to record the effects of inflation and other market factors on the expense of running rental housing.

Forms and documents for Option 4:

Section 8 Renewal Policy Guidebook, Chapter 6

Option 5: Preservation Projects

Eligibility: Certain jobs subject to a long-term HUD usage arrangement are required to restore under this Option. This typically consists of tasks with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending on HAP agreement requirements.
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Rent Increase at HAP Renewal: The leas upon HAP renewal depend upon each project's particular HAP agreement, Use Agreement and, if suitable, Plan of Action. Please evaluate those documents and contact your HUD Account Executive with questions regarding choices for your residential or commercial property.

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

Forms and files for Option 5:

- The job's Use Agreement ought to 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 might choose to not restore their HAP contract upon expiration. This does not apply to owners subject to a contractual responsibility to restore the HAP contract resulting from an Usage Agreement that is attached to the residential or commercial property.

An owner needs to provide HUD and occupants notification of the opt-out one year prior to expiration of the HAP contract. Upon expiration, eligible renters 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 agreement can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind 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 encourage an owner of their obligations under these laws.

If you are preparing to opt out of HAP contract renewal, please examine the 8( bb) Preservation Tool. This program enables HUD to guarantee that cost effective housing stays offered in your neighborhood even if you do not want to renew 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 also take part 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 assignment of a HAP contract to a not-for-profit, mission-oriented owner. The Capital Repairs program makes sure that the HAP renewal These programs provide a range of advantages to owners who wish to make sure long-term conservation of the housing support at their residential or commercial property.