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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 offered to owners of Section 8 HAP-assisted residential or commercial properties who want to restore their HAP contracts. The info provided here is not extensive and rather is meant to assist owners browse the alternatives offered to them. For complete guidelines and requirements for renewal of a HAP agreement, please describe the Section 8 Renewal Policy Guide.

For specific question about a task's eligibility to renew a HAP agreement, please contact your local HUD Multifamily Account Executive.

Option 1: Increase to Market

Eligibility: This choice is offered to owners whose agreement rents are below equivalent market rents as determined by a rent comparability research study. An owner might ask for that their qualified current HAP contract be ended and restored under this alternative.

Term: Between 5 and twenty years.

Renewal Rent Increase: At HAP renewal, rents are set at market comparable levels, as figured out by an owner's RCS. Rents are capped at 150% of Fair Market Rents unless the owner meets specific requirements to certify under the discretionary requirements described 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 choice is offered to owners whose contract rents are listed below or equivalent to comparable market rents. An owner may lower their rents to market levels to get involved under Option 2.

Renewal Rent Increase: At HAP renewal, rents are set at a level required to support a HUD-approved task budget plan. These leas might not exceed market equivalent 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 should submit a rent comparability research 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 choice is offered to particular tasks whose rents exceed market similar levels as determined by a rent comparability research study. Typically, this uses to jobs whose mortgages are guaranteed by the Federal Housing Administration. Congress gave HUD the authority to restructure an owner's mortgage so that debt service is minimized to a level that can be supported by market comparable levels. If jobs can

Term: twenty years.

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

Mortgage Restructuring: The owner might request that their qualified mortgage be restructured into a primary mortgage and secondary financial obligation. The brand-new primary mortgage will be sized so that market equivalent leas suffice to support the debt service on that mortgage. Use constraints will remain in place at the residential or commercial property so long as the subordinate financial obligation balance stays. If the project can stay financially viable regardless of a lease decrease to market levels, then no mortgage restructuring might be needed.

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

Option 4: Exception Projects

Eligibility: This alternative is readily available to jobs which are exempt from reorganizing under MAHRA. This normally indicates that the project is not subject to an FHA-insured mortgage, but rather has a conventional mortgage or is tax-credit funded.

Term: Between 1 and twenty years.

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

Annual Rent Adjustment: The agreement leas will be changed up each year by the Operating Cost Adjustment Factor released 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 upon a range of market signs and is intended to record the results of inflation and other market aspects 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 projects subject to a long-term HUD usage arrangement are needed 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 rents upon HAP renewal depend upon each job's specific HAP contract, Use Agreement and, if applicable, Plan of Action. Please review those documents and call your HUD Account Executive with questions relating to alternatives for your residential or commercial property.

Annual Rent Adjustment: Which rent adjustment mechanisms are available to your project differ depending on the HAP contract, Use Agreement, and Strategy. Please evaluate those documents and call your HUD Account Executive with questions concerning options for your residential or commercial property. Many Preservation projects might ask for a budget-based lease increase to help with unpredicted circumstances at a residential or commercial property or to address physical conditions needs.

Forms and files for Option 5:

- The job's Use Agreement ought to be evaluated to determine 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 renew their HAP contract upon expiration. This does not apply to owners based on a legal obligation to restore the HAP agreement resulting from an Use 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, eligible occupants will be issued boosted 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 keep in mind that state and regional laws might affect an owner's capability 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 obligations under these laws.

If you are preparing to choose out of HAP contract renewal, please review the 8( bb) Preservation Tool. This program allows HUD to guarantee that economical housing stays 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 restore their HAP agreement under Option 1 or 2 might likewise take part in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program provides rewards for the task of a HAP agreement to a nonprofit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs provide a variety of benefits to owners who wish to make sure long-term preservation of the housing assistance at their residential or commercial property.