Questions and Answers (Q&A) -
8 Contract Renewals
for renewal of a Section 8 Contract is an analysis of who will benefit
from the process, U.S. Departments of Housing & Urban Development (HUD)
or Owners and Management Agents on behalf of
Owners. Through years of assisting Owners and Management Agents (O/A) of
HUD Subsidized projects I have observed and concluded that if O/A does
not do their due diligence prior to committing to an Option under HUD
Section 8 Contract Renewal policy Guide (Guide)
there may be repercussions.
may result in many after affects.
Who benefits from HUD published Guide?
Do you really think HUD would publish the Guide for O/A benefits; I have
a bridge in Brooklyn I would like to sell you? The Departments has a
responsibility to the US Congress to develop policies and procedures to
justify its existence. This could be in the form of restricting funding
to O/A to a minimum.
monetary benefits Profit-Motivated and Limited Dividend can expect from
renewal of their Section 8 Contracts?
the Department’s original publication of the Guide over the years, it
has resulted in over 300 pages of outstanding instructions. Through the
years HUD reviewed the Guide and made efforts to close as many
loop-holds as possible so that Owners receive little or no monetary
What are some of the changes over the years to the Guide that indicates
the Department’s has made it difficult for Owners to receive a deserving
annual rent adjustment under a long-term Contract?
There are 5-Options under the Guide that may apply to Owners when they
choose to renew their Section 8 Contracts. Each Option has its own
requirements, which appear to stand on its own and others that require
Owners’ due diligence in deciding which Option to choose from.
instance, under Option Four – Renewal of Projects Exempt from or not
Eligible for Debt-Restructuring, originally when an Owner chose this
Option initial rents were set at the “lesser of” a Budget-based Rent
Increase (BBRI) potential or an Operating Cost Adjustment Factor (OCAF)
potential. During a long-term Contract, each year the owner had the
choice of requesting an increase in rents through a BBRI or OCAF rent
Currently, HUD eliminated original annual choices for rent adjustments
under this Option; HUD has restricted Owners to ONLY 1-choice under
Option Four; for year-2 forward under a long-term Contract Owners may
ONLY receive annual OCAF rent adjustments.
specific change to the Guide that may trigger HUD internal review of
Owners’ Rent Comparability Study (RCS) when they submit requests for
renewal of Section 8 Contracts?
HUD added to Chapter Nine of the Guide a mandatory Owners’ RCS market
rent threshold. Owners’ RCS must conclude that projects’ median rent for
assisted units, as derived from Owners’ RCS, do not exceed 140 percent
of “Median Gross Rent By Zip Code Tabulation Area” as published by the
U. S. Bureau of the Census or other comparable source as determined by
the Department. If 140% is exceeded an HUD
Independent RCS is triggered.
Normally, this has little or no affect on most Section 8 renewal
processes; however, I had a client whose rents were drastically cut as a
result of a HUD Independent RCS.
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
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
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.
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
How can Owners/Management Agents submission of HUD BBRI either benefit
projects’ cash flow or may cause future operating deficits?
From any other HUD outstanding instructions, the procedures for
preparing and submission of a HUD BBRI process are unique. You might say
the HUD process, in my opinion, has built-in HUD subjectivities.
former HUD Multifamily Asset Manager I can prepare several versions of
HUD BBRI that may or may not pass HUD muster; on the other hand if an
independent review was conducted by a HUD Multifamily Account Executive
my prepared BBRI may be subject to HUD Field Office internal policies;
all HUD Field Offices policies are not equal.
When the rubber
meets the road I know where all the bodies are buried and by using my
creative skills and knowledge of HUD instructions can assist my clients
in navigating HUD mine fields.
What approach should be used in selecting an Option under the Guide when
requesting renewal of a Section 8 Contract?
decision in selecting an Option under the Guide for renewal of a Section
8 Contract is not one dimensional but must be reviewed from several
you need my assistance in preparing a Proposal for Contract renewal,
please contact me.
Office Box 162
Rainier, MD 20712-0162
Address: 4104-29th Street
Rainier, MD 20712-1820