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1 Section 8 Contract Renewal Options
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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 contains descriptions of alternatives readily available to owners of Section 8 HAP-assisted residential or commercial properties who wish to renew their HAP agreements. The details supplied here is not detailed and rather is meant to assist owners navigate the choices available to them. For full directions 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 restore a HAP contract, please call your local HUD Multifamily Account Executive.

Option 1: Increase to Market

Eligibility: This alternative is offered to owners whose agreement leas are listed below comparable market leas as figured out by a lease comparability research study. An owner might request that their eligible existing HAP agreement 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 meets certain criteria 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 option is offered to owners whose contract rents are listed below or equal to similar market rents. An owner might lower their rents to market levels to get involved under Option 2.

Renewal Rent Increase: At HAP renewal, leas are set at a level required to support a HUD-approved job budget. These rents may not surpass market comparable levels, as shown by a rent comparability research study.

Comparability Adjustment: At each 5th year anniversary of the HAP agreement renewal, the agreement rents are changed to present market levels. The owner should submit a lease comparability study which is utilized to set the rents on the 5th, 10th, and 15th anniversaries of the HAP contract.

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 certain projects whose rents exceed market similar levels as figured out by a lease comparability study. Typically, this applies to tasks whose mortgages are insured by the Federal Housing Administration. Congress granted HUD the authority to restructure an owner's mortgage so that debt service is decreased to a level that can be supported by market comparable levels. If projects can

Term: twenty years.

Annual Rent Increase: At HAP renewal, leas are reduced to a market similar level as demonstrated 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 debt. The brand-new primary mortgage will be sized so that market comparable leas suffice to support the financial obligation service on that mortgage. Use restrictions will stay in place at the residential or commercial property so long as the subordinate financial obligation balance remains. If the project can stay financially viable regardless of a lease reduction 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 ought to be directed to m2minfo@hud.gov.

Option 4: Exception Projects

Eligibility: This choice is available to tasks which are exempt from reorganizing under MAHRA. This typically implies that the project is exempt to an FHA-insured mortgage, but rather has a conventional mortgage or is tax-credit funded.

Term: Between 1 and 20 years.

Rent Increase: At HAP renewal, rents are either changed by the Operating Cost Adjustment Factor or by a HUD-approved budget plan (capped by market rents 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 expense Adjustment Factor published for the locality. This multiplicative lease modification is published by HUD in October of each year and is effective in February of the list below year. The OCAF is based upon a variety of market signs and is planned to record the results of inflation and other market factors on the cost of running rental housing.

Forms and files for Option 4:


Section 8 Renewal Policy Guidebook, Chapter 6


Option 5: Preservation Projects

Eligibility: Certain tasks based on a long-lasting HUD use contract are required to restore under this Option. This usually consists of projects with a Portfolio Reengineering Demonstration Use Agreement, an ELIHPA Use Agreement, or a LIHPRHA Use Agreement.

Term: Varies depending on HAP contract requirements.

Rent Increase at HAP Renewal: The leas upon HAP renewal depend on each project's specific HAP agreement, Use Agreement and, if applicable, Strategy. Please evaluate those documents and contact your HUD Account Executive with questions concerning options for your residential or commercial property.

Annual Rent Adjustment: Which rent modification systems are readily available to your project vary depending on the HAP contract, Use Agreement, and Plan of Action. Please examine those documents and contact your HUD Account Executive with concerns regarding alternatives for your residential or commercial property. Many Preservation jobs may request a budget-based lease increase to help with unexpected circumstances at a residential or commercial property or to attend to physical conditions requires.

Forms and documents for Option 5:

- The task's Use Agreement should be evaluated to figure out 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 choose to not restore their HAP agreement upon expiration. This does not use to owners based on a legal commitment to renew the HAP agreement arising from an Usage Agreement that is connected to the residential or commercial property.

An owner must offer HUD and renters notice of the opt-out one year prior to expiration of the HAP contract. Upon expiration, qualified renters will be released enhanced vouchers pursuant to 42 U.S.C. § 1437f( t).

Full HUD requirements for an owner who wants to decide out of restoring their HAP contract can be discovered at Chapter 8 of the Section 8 Renewal Policy Guide. Please note that state and regional laws might impact an owner's ability to opt-out of renewing their HAP agreement. These requirements would not appear in the Section 8 Renewal Policy Guide and HUD can not advise an owner of their responsibilities under these laws.

If you are planning to choose out of HAP agreement renewal, please review the 8( bb) Preservation Tool. This program enables HUD to ensure that cost effective housing remains readily available in your community even if you do not wish to restore 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
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Section 8 Preservation Efforts

Eligibility: An owner who is eligible to restore 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 offers incentives for the task of a HAP agreement to a nonprofit, mission-oriented owner. The Capital Repairs program ensures that the HAP renewal These programs supply a variety of advantages to owners who want to make sure long-term preservation of the housing support at their residential or commercial property.