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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 website. This resource includes descriptions of alternatives available to owners of Section 8 HAP-assisted residential or commercial properties who want to restore their HAP contracts. The information provided here is not thorough and rather is meant to assist owners navigate the choices readily available to them. For complete directions and requirements for renewal of a HAP contract, please refer to the Section 8 Renewal Policy Guide.

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

Option 1: Increase to Market

Eligibility: This alternative is readily available to owners whose contract rents are below comparable market leas as figured out by a lease comparability research study. An owner may request that their qualified current HAP agreement be ended and renewed under this alternative.

Term: Between 5 and 20 years.

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

Eligibility: This option is offered to owners whose contract leas are below or equivalent to comparable market rents. An owner might decrease their leas to market levels to participate under Option 2.

Renewal Rent Increase: At HAP renewal, leas are set at a level required to support a HUD-approved job spending plan. These rents may not go beyond market equivalent levels, as demonstrated by a rent comparability research study.

Comparability Adjustment: At each fifth year anniversary of the HAP contract renewal, the contract leas are changed to current market levels. The owner must send a rent comparability study which is utilized to set the rents on the 5th, 10th, and 15th anniversaries of the HAP contract.

Forms and documents for Option 2:

Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9

Option 3: Mark-to-Market

Eligibility: This choice is offered to specific tasks whose rents surpass market comparable levels as figured out by a rent comparability study. Typically, this uses to projects whose mortgages are guaranteed by the Federal Housing Administration. Congress approved HUD the authority to reorganize an owner's mortgage so that debt 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 equivalent level as shown by a rent comparability study.

Mortgage Restructuring: The owner might ask for that their qualified mortgage be restructured into a main mortgage and secondary debt. The brand-new primary mortgage will be sized so that market comparable rents suffice to support the financial obligation service on that mortgage. Use restrictions will remain in place at the residential or commercial property so long as the subordinate financial obligation balance stays. If the job can stay financially practical despite 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 site. All inquiries regarding a HAP renewal under Option 3 should be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This choice is readily available to jobs which are exempt from restructuring under MAHRA. This usually indicates that the job is exempt to an FHA-insured mortgage, however rather has a traditional mortgage or is tax-credit funded.

Term: Between 1 and twenty years.

Rent Increase: At HAP renewal, leas are either changed by the Operating Cost Adjustment Factor or by a HUD-approved spending plan (capped by market rents as figured out by a Lease Comparability Study), whichever is lesser.

Annual Rent Adjustment: The agreement leas will be adjusted upward each year by the Operating expense Adjustment Factor released 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 indications and is planned to capture the impacts of inflation and other market factors 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-lasting HUD usage agreement are required to restore under this Option. This usually includes jobs 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 on each project's specific HAP agreement, Use Agreement and, if relevant, Plan of Action. Please review those files and contact your HUD Account Executive with concerns regarding alternatives for your residential or commercial property.

Annual Rent Adjustment: Which lease adjustment mechanisms are offered to your project differ depending upon the HAP agreement, Use Agreement, and Plan of Action. Please evaluate those documents and call your HUD Account Executive with questions regarding alternatives for your residential or commercial property. Many Preservation jobs may request a budget-based rent boost to assist with unpredicted situations at a residential or commercial property or to attend to physical conditions requires.

Forms and documents for Option 5:

- The project's Use Agreement should be examined to determine 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 renew their HAP contract upon expiration. This does not apply to owners subject to a contractual commitment to renew the HAP contract resulting from an Use Agreement that is attached to the residential or commercial property.

An owner must offer HUD and occupants notification of the opt-out one year prior to expiration of the HAP contract. Upon expiration, qualified renters will be issued improved coupons 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 found at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and regional laws might impact an owner's capability to opt-out of restoring their HAP agreement. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not recommend an owner of their obligations under these laws.

If you are planning to choose out of HAP contract renewal, please review the 8( bb) Preservation Tool. This program permits HUD to ensure that budget friendly housing remains offered in your community even if you do not wish 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 qualified to renew their HAP contract 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 offers incentives for the assignment of a HAP contract to a nonprofit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs supply a variety of benefits to owners who wish to make sure long-lasting conservation of the housing support at their residential or commercial property.