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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 web page. This resource includes descriptions of choices offered to owners of Section 8 HAP-assisted residential or commercial properties who wish to restore their HAP agreements. The information offered here is not extensive and rather is intended to help owners browse the options offered to them. For full guidelines and requirements for renewal of a HAP agreement, please describe the Section 8 Renewal Policy Guide.

For particular concern 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 alternative is readily available to owners whose contract rents are listed below similar market leas as identified by a lease comparability study. An owner may request that their qualified current HAP contract be terminated and renewed under this option.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, leas are set at market comparable levels, as identified by an owner's RCS. Rents are topped at 150% of Fair Market Rents unless the owner satisfies certain criteria 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 submits

Option 2: Mark up to Budget

Eligibility: This choice is readily available to owners whose contract rents are below or equal to comparable market leas. An owner might decrease 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 job spending plan. These rents might not go beyond market equivalent levels, as shown by a rent comparability research study.

Comparability Adjustment: At each fifth year anniversary of the HAP agreement renewal, the agreement rents are adapted to present market levels. The owner should submit a lease comparability research 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 alternative is available to particular jobs whose leas surpass market equivalent levels as figured out by a lease comparability research study. Typically, this applies to projects whose mortgages are guaranteed by the Federal Housing Administration. Congress approved HUD the authority to restructure an owner's mortgage so that debt service is lowered to a level that can be supported by market equivalent levels. If projects can

Term: twenty years.

Annual Rent Increase: At HAP renewal, leas are minimized to a market similar level as shown by a rent comparability study.

Mortgage Restructuring: The owner may ask for that their qualified mortgage be reorganized into a primary mortgage and secondary financial obligation. The brand-new main mortgage will be sized so that market equivalent rents suffice 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 remains. If the project can remain economically feasible in spite 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 website. All inquiries regarding a HAP renewal under Option 3 ought to be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This alternative is readily available to projects which are exempt from reorganizing under MAHRA. This generally suggests that the project is exempt to an FHA-insured mortgage, but rather has a traditional 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 spending plan (topped by market leas as determined by a Lease Comparability Study), whichever is lower.

Annual Rent Adjustment: The agreement leas will be adjusted up each year by the Operating expense Adjustment Factor released for the region. This multiplicative lease change is released by HUD in October of each year and works in February of the following year. The OCAF is based upon a variety of market indicators and is intended to record the results of inflation and other market aspects on the cost of operating 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 required to restore under this Option. This generally consists of 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 leas upon HAP renewal depend upon each job's specific HAP contract, Use Agreement and, if applicable, Strategy. Please evaluate those documents and contact your HUD Account Executive with concerns regarding choices for your residential or commercial property.

Annual Rent Adjustment: Which lease adjustment systems are offered to your project differ depending upon the HAP contract, Use Agreement, and Strategy. Please examine those documents and call your HUD Account Executive with questions concerning choices for your residential or commercial property. Many Preservation projects may ask for a budget-based lease increase to help with unforeseen scenarios at a residential or commercial property or to address physical conditions requires.

Forms and documents for Option 5:

- The job's Use Agreement need to be examined to identify 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 may choose to not renew their HAP contract upon expiration. This does not apply to owners based on a contractual obligation to renew the HAP agreement resulting from an Use Agreement that is connected to the residential or commercial property.

An owner must offer HUD and tenants notice of the opt-out one year prior to expiration of the HAP contract. Upon expiration, eligible occupants will be provided improved coupons pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wishes to opt out of renewing their HAP contract can be found at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and regional laws may impact an owner's capability 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 examine 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 agreement.

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 qualified to renew their HAP agreement under Option 1 or 2 may also get involved in the Section 8 Preservation Efforts programs explained in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program offers rewards for the project of a HAP contract to a not-for-profit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs offer a range of advantages to owners who wish to guarantee long-lasting conservation of the housing assistance at their residential or commercial property.