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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 options offered to owners of Section 8 HAP-assisted residential or commercial properties who want to renew their HAP contracts. The details supplied here is not extensive and rather is meant to help owners browse the alternatives offered to them. For complete guidelines and requirements for renewal of a HAP contract, please describe the Section 8 Renewal Policy Guide.

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

Option 1: Mark up to Market

Eligibility: This choice is readily available to owners whose contract rents are below equivalent market rents as identified by a rent comparability study. An owner may request that their qualified current HAP contract be ended and restored under this choice.

Term: Between 5 and 20 years.

Renewal Rent Increase: At HAP renewal, rents are set at market equivalent levels, as identified 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 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 alternative is available to owners whose contract leas are below or equal to comparable market leas. An owner might decrease their rents to market levels to participate under Option 2.

Renewal Rent Increase: At HAP renewal, leas are set at a level needed to support a HUD-approved project budget. These rents might not go beyond market equivalent levels, as shown by a rent comparability study.

Comparability Adjustment: At each fifth year anniversary of the HAP agreement renewal, the contract rents are adapted to existing market levels. The owner must send 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 choice is available to particular projects whose leas exceed market equivalent levels as identified by a lease comparability research study. Typically, this uses to jobs whose mortgages are insured by the Federal Housing Administration. Congress gave HUD the authority to reorganize an owner's mortgage so that debt service is lowered to a level that can be supported by market similar levels. If tasks can

Term: twenty years.

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

Mortgage Restructuring: The owner might ask for that their eligible mortgage be reorganized into a primary mortgage and secondary debt. The 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 location at the residential or commercial property so long as the subordinate debt balance stays. If the task can stay financially practical regardless of a rent decrease to market levels, then no mortgage restructuring may be needed.

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 offered to tasks which are exempt from reorganizing under MAHRA. This usually suggests that the project is exempt to an FHA-insured mortgage, however instead has a traditional mortgage or is tax-credit financed.

Term: Between 1 and twenty years.

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

Annual Rent Adjustment: The contract rents will be changed up each year by the Operating expense Adjustment Factor published for the region. This multiplicative rent 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 range of market signs and is meant to catch the effects of inflation and other market aspects 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 jobs subject to a long-lasting HUD usage arrangement are needed to restore under this Option. This normally 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 on each task's particular HAP contract, Use Agreement and, if applicable, Strategy. Please review those documents and call your HUD Account Executive with questions relating to options for your residential or commercial property.

Annual Rent Adjustment: Which rent modification mechanisms are readily available to your project vary depending upon the HAP contract, Use Agreement, and Strategy. Please evaluate those documents and contact your HUD Account Executive with questions regarding choices for your residential or commercial property. Many Preservation projects may ask for a budget-based rent increase to help with unpredicted circumstances at a residential or commercial property or to deal with physical conditions requires.

Forms and documents for Option 5:

- The job's Use Agreement should be examined 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 might choose to not restore their HAP contract upon expiration. This does not apply to owners subject to a legal responsibility to renew the HAP agreement arising from an Usage Agreement that is attached to the residential or commercial property.

An owner needs to supply HUD and renters notification of the opt-out one year prior to expiration of the HAP agreement. Upon expiration, eligible tenants will be released enhanced 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 discovered at Chapter 8 of the Section 8 Renewal Policy Guide. Please keep in mind that state and local laws might affect 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 an owner of their obligations under these laws.

If you are planning to pull out of HAP agreement renewal, please review the 8( bb) Preservation Tool. This program allows HUD to ensure that cost effective housing remains available in your community 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 eligible to renew their HAP contract under Option 1 or 2 might also get involved 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 project of a HAP agreement to a nonprofit, mission-oriented owner. The Capital Repairs program guarantees that the HAP renewal These programs supply a variety of benefits to owners who want to guarantee long-lasting preservation of the housing help at their residential or commercial property.