Welcome to the Section 8 Housing Assistance Payment Contract Renewal Options webpage. This resource contains descriptions of options available to owners of Section 8 HAP-assisted properties who wish to renew their HAP contracts. The information provided here is not comprehensive and instead is intended to help owners navigate the options available to them. For full instructions 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. To view the archived Section 8 Contract Renewals webpage, please click here.
Option 1: Mark up to Market
Eligibility: This option is available to owners whose contract rents are below comparable market rents as determined by a rent comparability study. An owner may request that their eligible current HAP contract be terminated and renewed under this option.
Term: Between 5 and 20 years.
Renewal Rent Increase: At HAP renewal, rents are set at market comparable levels, as determined 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.
Annual Rent Adjustment: The contract rents will be adjusted upward each year by the Operating Cost Adjustment Factor published for the locality. This multiplicative rent adjustment is published by HUD in October of each year and is effective in February of the following year. The OCAF is based on a variety of market indicators and is intended to capture the effects of inflation and other market factors on the cost of operating rental housing.
Comparability Adjustment: At each fifth year anniversary of the HAP contract renewal, the contract rents are adjusted to current market levels. The owner must submit a rent comparability study which is used to set the rents on the 5th, 10th, and 15th anniversaries of the HAP contract.
Forms and documents for Option 1:
Option 2: Mark up to Budget
Eligibility: This option is available to owners whose contract rents are below or equal to comparable market rents. An owner may reduce their rents to market levels to participate under Option 2.
Term: Between 1 and 20 years.
Renewal Rent Increase: At HAP renewal, rents are set at a level required to support a HUD-approved project budget. These rents may not exceed market comparable levels, as demonstrated by a rent comparability study.
Annual Rent Adjustment: The contract rents will be adjusted upward each year by the Operating Cost Adjustment Factor published for the locality. This multiplicative rent adjustment is published by HUD in October of each year and is effective in February of the following year. The OCAF is based on a variety of market indicators and is intended to capture the effects of inflation and other market factors on the cost of operating rental housing.
Comparability Adjustment: At each fifth year anniversary of the HAP contract renewal, the contract rents are adjusted to current market levels. The owner must submit a rent comparability study which is used to set the rents on the 5th, 10th, and 15th anniversaries of the HAP contract.
Forms and documents for Option 2:
- HAP Renewal Request Form (HUD-9624)
- HUD Handbook 4350.1 Chapter 7: Processing Budgeted Rent Increases
- Section 8 Renewal Policy Guidebook: Chapter 4, Chapter 9
- OCAF Adjustment Worksheet (HUD-9625)
Option 3: Mark-to-Market
Eligibility: This option is available to certain projects whose rents exceed market comparable levels as determined by a rent comparability study. Typically, this applies to projects 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 reduced to a level that can be supported by market comparable levels. If projects can
Term: 20 years.
Annual Rent Increase: At HAP renewal, rents are reduced to a market comparable level as demonstrated by a rent comparability study.
Mortgage Restructuring: The owner may request that their eligible mortgage be restructured into a primary mortgage and subordinate debt. The new primary mortgage will be sized so that market comparable rents are sufficient to support the debt service on that mortgage. Use restrictions will remain in place at the property so long as the subordinate debt balance remains. If the project can remain financially viable despite a rent reduction to market levels, then no mortgage restructuring may be required.
More Information for Option 3: Information about Option 3 can be found on the About Mark-to-Market website. All inquiries regarding a HAP renewal under Option 3 should be directed to [email protected].
Option 4: Exception Projects
Eligibility: This option is available to projects which are exempt from restructuring under MAHRA. This typically means that the project is not subject to an FHA-insured mortgage, but instead has a conventional mortgage or is tax-credit financed.
Term: Between 1 and 20 years.
Rent Increase: At HAP renewal, rents are either adjusted by the Operating Cost Adjustment Factor or by a HUD-approved budget (capped by market rents as determined by a Rent Comparability Study), whichever is lesser.
Annual Rent Adjustment: The contract rents will be adjusted upward each year by the Operating Cost Adjustment Factor published for the locality. This multiplicative rent adjustment is published by HUD in October of each year and is effective in February of the following year. The OCAF is based on a variety of market indicators and is intended to capture the effects of inflation and other market factors on the cost of operating rental housing.
Forms and documents for Option 4:
Option 5: Preservation Projects
Eligibility: Certain projects subject to a long-term HUD use agreement are required to renew under this Option. This typically includes 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 rents upon HAP renewal depend on each project’s specific HAP contract, Use Agreement and, if applicable, Plan of Action. Please review those documents and contact your HUD Account Executive with questions regarding options for your property.
Annual Rent Adjustment: Which rent adjustment mechanisms are available to your project vary depending on the HAP contract, Use Agreement, and Plan of Action. Please review those documents and contact your HUD Account Executive with questions regarding options for your property. Many Preservation projects may request a budget-based rent increase to assist with unforeseen circumstances at a property or to address physical conditions needs.
Forms and documents for Option 5:
- The project’s Use Agreement should be reviewed 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 may elect to not renew their HAP contract upon expiration. This does not apply to owners subject to a contractual obligation to renew the HAP contract resulting from a Use Agreement that is attached to the property.
An owner must provide HUD and tenants notice of the opt-out one year prior to expiration of the HAP contract. Upon expiration, eligible tenants will be issued enhanced vouchers 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 local laws may 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 cannot advise an owner of their obligations under these laws.
If you are planning to opt out of HAP contract renewal, please review the 8(bb) Preservation Tool. This program allows HUD to ensure that affordable housing remains available in your community even if you do not wish to renew your HAP contract.
Forms and documents for Option 6:
Section 8 Preservation Efforts
Eligibility: An owner who is eligible to renew their HAP contract under Option 1 or 2 may also participate in the Section 8 Preservation Efforts programs described in Chapter 15 of the Section 8 Renewal Policy Guide. The Transfer program provides 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 provide a variety of benefits to owners who wish to ensure long-term preservation of the housing assistance at their property. Some benefits include:
- A long-term HAP contract that can be used to qualify for Low-income Housing Tax Credits;
- Rents that are based on the as-renovated condition of the property prior to completion of construction; and
- The ability to raise rents in excess of those permitted by other affordable housing programs.
More Information for Section 8 Preservation Efforts: Please review Chapter 15 of the Section 8 Renewal Policy Guide for full details on the Transfer and Capital Repairs programs.
Forms and documents for for Section 8 Preservation Efforts: