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Section 8 Contract Renew

Section 8 Contract Renewals

                       

Caution: After an O/A commissions a RCS, which cost thousands of dollars, and O/A compares RCS Market Rent Potential to currently approved Section 8 Contract Rent Potential it may be discovered the RCS Market Rate Rent Potential is less than current Potential.  In this case, a complete RCS would NOT qualify to be used for a request for increase in rents when renewing a Section 8 Contract.

What is the O/A alternative; DO NOT commission a complete RCS, but requests the Appraiser to provide LIMITED RCS GRIDS. After an O/A reviews RCS GRIDS with their Appraisers make a determination if a complete RCS is feasible.

Also, there is a HUD qualifying analyses of Owners’ RCS Grids Market Rents that may trigger a HUD commissioned Independent RCS. It is important O/A use the suggested LIMITED RCS GRIDS procedure. I suggest discussing this proactive pre-review with LIMITED RCS GRIDS with your Appraiser. When assisting preparation of renewal proposals for clients, I found that in some cases O/A did NOT do their due diligent ahead of time before accepting a complete RCS for submission of a request for renewal of their Section 8 Contracts which resulted in HUD reduced their current rents substantially.    

HUD revised Section 8 Contract Renewal Policy Guide (Guide) is a maze of instructions. While traversing the Guide one can become lost or confused when Owners/Agents are doing their “Due Diligence” in deciding which Option under the Guide to choose for renewals/annual rent adjustments of their Section 8 Contract.  

 

There are so many “what if” questions that should be answered before making an Option choice. Choosing the incorrect Guide Option could be costly that may not benefit the Owner, especially if you commission a Rent Comparability Study (RCS). You may not be aware there are alternative approaches to commissioning RCSs.

 

In my experience as a HUD Housing Consultant, HUD Budget-Based Rent Increase (BBRI) Worksheet submissions to HUD Contract Administrators/HUD whether with a Contract Renewal or just a BBRI request Owners/Agents miss the mark and do not include all Budget Expenses they are entitled to.

 

If your original Section 8 Contract was effective in the 1980s and 1990s and is approximately a 20year Contract; your Contract Renewal Proposal is due for submission to Contract Administrator 120 days prior to expiration of the Contract and must be renewed pursuant to guidelines in revised HUD Section 8 Renewal Policy Guide (Guide). The Guide reflects major changes to amendment to the Housing Act; Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA), Title V of the HUD Fiscal Year 1998 Appropriations Act, Pub. L. 105-65, enacted on October 27, 1997. MAHRA established new policies for the renewal of Section 8 project-based contracts based on market rents instead of the Fair Market Rent (FMR) standard.

 

A Rent Comparability Study (RCS) is required to be submitted with certain renewal Options. The Owner must submit the RCS to HUD (or the Section 8 Contract Administrator (CA) if there is one) no later than 120 days before the expiration of the Section 8 contract. Early submissions are allowed. Owners should not submit their requests no more than 180 days before the Section 8 Contract expires. Owners should submit the RCS along with the other information required in this GUIDE. If a RCS is submitted, HUD recommends the renewal request be submitted 180 days before the contract expires, because HUD will commission an Independent RCS when processing the request.

 

Keep in mind, if under the current unexpired Contract your annual rents maybe adjusted through application of HUD published Annual Adjustment Factors (AAF). Pursuant to the current revised Guide, request for Contract Renewals (and annual rent adjustments through the term of your renewed Contract) rents will be adjusted through Budget-based rent increase (BBRI) requests or application of HUD published Operating Cost Factors (OCAF).

 

 

In particular, Budget-Based Rent Increase (BBRI) requests must be prepared pursuant to Chapter 7 of HUD Servicing Handbook, and requests must be submitted on HUD approved Budget Worksheet, accompanied by required HUD forms. HUD BBRI formula consists of 2-components; a HUD Budget Worksheet and HUD Rent Computation Worksheet. To arrive at Owners’ BBRI Annual Gross Rent Potential, the HUD formula considers projected budget expense line items, other expense adjustments and Owners’ Annual Return on Initial Equity.

 

Further, if Tenants receive Utility Allowances (UA), HUD published new instructions requiring owners to request annual UA adjustments.

 

If you need my assistance in preparing a Proposal for Contract renewal, please contact me.

 

Alvin L. Sutherlin

Housing Consultant

Post Office Box 162

Mount Rainier, MD 20712-0162

 

Office Address: 4104-29th Street

Mount Rainier, MD 20712-1820 

 

301-277-3465

 

ALVINL.SUTHERLIN@VERIZON.NET

 

http://hud-consultant.com

 

References: http://hud-consultant.com/References.html

 

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Management Agents who manage several HUD projects with Housing Assistance Payments (HAP) Contracts, their Contracts either have been renewed under the new HUD Section 8 Renewal Policy Guide, Guidance for the Renewal of Project-Based Section 8 Contracts, or are due shortly for renewal or will expire within the next year or two.

During terms of HAP Contracts, each year O/A are required to request rent/budget authority adjustments through submission of Budget Worksheets or OCAF Worksheets for those HAP Contracts that were renewed under the new HUD Section 8 Renewal Policy Guide, Guidance for the Renewal of Project-Based Section 8 Contracts.

I am offering my services to O/A on negotiated terms that could reduce costs attributable to managing and preparing proposals for submission to HUD/Contract Administrators (HUD/CA). My services include, but not limited, to the following.

  • I will track expiration dates of HAP contracts, and notify O/A in a timely manner to prepare proposals for HAP Contract renewals,

     
  • I will track anniversary dates of HAP contracts, and notify O/A in a timely manner to prepare proposals for annual HAP Contract rent/budgetary adjustments,

     
  • Advise O/A of any published HUD Notices affecting programs that relate to HAP Contracts.

     
  • With assistance of O/A Accounting Departments and Contract Coordinators, I will prepare a Budget or OCAF approaches to determine which one will be to Owners’ advantage.

     
  • I will examine budget expense line items to determine if they include all expenses Owners are entitled to, pursuant to Data Definition for an Audited AFS in accordance with HUD requirements.

O/A are required to submit requests for HAP Contract renewals and annual rent/budgetary adjustments to HUD/CA 120-days prior to expiration dates or anniversary dates of HAP Contracts.

HUD Section 8 Renewal Policy Guide sets forth new guidelines that O/A must follow when requesting renewal of HAP Contracts and annual rent/budgetary adjustments to HAP Contracts. I can assist O/A in preparing requests for renewals or annual rent adjustments to HAP Contracts, using the required HUD Forms on O/A letterhead stationary. All O/A have to do is sign-off on collaborative proposals and mail them to HUD/CA.

Contact me and we can discuss your HUD Contract inventory and mutual arrangement that could be financially beneficial to you and me.

Contact me  by phone 301-277-3465, fax 925-380-4578
alvinl.sutherlin@verizon.net

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Date Updated: 12/09/2017 02:15:46 AM