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Section 8 Contract Renwal Policy Guide

Original Section 8 Contracts Effective Prior to 1997                       

This is my introduction as a Housing Consultant.  I retired in 1989 from the Department of Housing and Urban Development, as a Senior Asset Manager in the Washington , DC Multifamily Asset Management Branch.  Since my retirement, I have provided consulting services to owners and management agents of HUD multifamily subsidized communities throughout the United States .

 

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.

 

Pursuant to HUD Section 8 renewal Guide, you have 6 Options to choose from when you request a renewal of your Section 8 Contract.

 

Uner some Options, Owners 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; under the current unexpired Contract your annual rents are adjusted through application of HUD published Annual Adjustment Factors (AAF). However, under 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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The Section 8 Renewal Policy Guide provides Six Options available to Owners when choosing an Option to renew their Section 8 Contracts. The problem when assessing available Options, HUD does not provide Owners with an in-depth analysis and does not get down in the weeds when an Owner evaluates what Option to choose.

I can provide an analysis Option by Option, based on your project’s status, and by a process of elimination, provide you with best Options that would benefit the Owner.

If you provide me with requested data I can give you an assessment Option by Option for your evaluation. I will work with your staff in preparing a Proposal for renewal of your Section 8 Contract.

My 13-year as a HUD Project Manager, 23-years experience as a HUD Multifamily Consultant for HUD Multifamily Subsidized Projects, and participate as a Consultant in developing HUD Multifamily Preservation Training Modules, I have insight in available preservation tools available to Owners that is not integrated in the Section 8 Renewal Policy Guide.

Summary:
Describes the basic content of the essential “bible” to the contract renewal process, the Section 8 Renewal Policy, explains where and how a copy can be obtained and important tips as to its effective use by property owners in completing the renewal process.

The Section 8 Renewal Policy was revised in May 2012. This guidebook (Guide) summarizes a number of important housing policy laws and regulations and HUD Notices into a single resource from which owners can understand the complex procedure of renegotiating their HAP contract.

The contents of the guidebook (Guide) are as follows:

Chapter 1: Introduction
This Chapter provides the legislative history of the Multifamily Assisted Housing Reform and Affordability Act (MAHRA). It also provides a chronological listing of HUD’s rule making and administrative policies for implementing statutory requirements associated with Section 8 expiring contract renewals.

Chapter 2: Contract Renewals
This chapter outlines the various ways a contract can be renewed and provides six options available to owners with expiring Section 8 contracts. It defines initial and subsequent renewals and explains how rent adjustments are made during the term of a multi-year section 524 contract. This chapter also discusses contract terms, rent calculations for short-term renewals and instructions for combining contracts.

Chapter 3: Owner Option One, Mark-Up-To-Market
This Chapter provides instructions for renewing a contract under the Mark-Up-To-Market option. It identifies who is eligible for renewal under this option and how to process the renewal request. Owners must meet certain eligibility criteria that are outlined in the chapter. This chapter also provides information on how to calculate owner distributions and future rent adjustments.

Chapter 4: Owner Option Two, Other Contract Renewals with Current Rents at or Below Comparable Market Rents
This Chapter provides instructions for renewing a contract in cases where a contract’s current rents are at or below comparable market rents but the contract is not being renewed using the mark-up-to-market option. It outlines who is eligible to renew under this option and identifies documentation to be submitted by the owner to HUD/Contract Administrators for review. It also provides processing instructions and guidance for future rent adjustments.

Chapter 5, Owner Option Three, Referral to the Office of Affordable Housing Preservation (OAHP)
This Chapter discusses the procedures by which a project with rents above comparable market rents is referred to the Office of OAHP for processing and renewal. The chapter identifies items an Owner must submit with their renewal request and it outlines what steps will be taken by OAHP if a restructuring agreement is not reached between the owner and OMHAR.

Chapter 6, Owner Option Four, Renewal of Projects Exempted From OAHP
This Chapter identifies “exception” projects. Exception projects are ineligible for OAHP and as such, they are exempt from having to conduct rent comparability studies and lower rents to comparable market rents. This chapter outlines the Owners’ renewal submission requirements and provides instructions for initial and subsequent renewals.

Chapter 7, Option Five, Renewal of Portfolio Reengineering Demonstration or Preservation Projects
This chapter details how to renew a contract that has been through the Demonstration program. It provides instructions for renewal in cases where the project had its rents reduced and or had its mortgage restructured and it provides instructions for processing a renewal in instances where the project failed to have a rent reduction or debt restructuring. It also provides guidance for renewing Preservation contracts according to the approved Plan of Action (POA).

Chapter 8, Option Six, Opt-Outs
This Chapter provides instructions for processing Owner opt-outs. Opt-outs are expiring Section 8 project-based contracts whose owners elect not to renew the contract. This Chapter identifies owners’ responsibilities to the tenants and provides processing instructions.

Chapter 9, Rent Comparability Studies (RCS)
This Chapter provides instructions for conducting and reviewing rent comparability studies.

Chapter 10, Residual Receipts
This Chapter identifies the steps that must be taken, when appropriate, to assure that residual receipts are returned to HUD.

Chapter 11, Resident Issues
This Chapter outlines all of the steps that must be followed to ensure that tenants are protected during the renewal process. This chapter defines housing conversion actions and identifies notification requirements an owner must meet. It also describes the differences between a regular voucher and an enhanced voucher.

Chapter 12, Physical Condition of the Property
This Chapter discusses how a project’s physical condition impacts the contract renewal process.

Chapter 13, HUD’s Refusal to Renew/Section 8 Contract Owner’s Dispute and Appeal of Rejection
This Chapter outlines the circumstances under which HUD may refuse to renew an expiring Section 8 contract, and it provides owners with an appeal process to follow in cases where their request to renew is rejected.

Chapter 14, RHS/515 Projects
This Chapter outlines how to renew a Farmers Home 515 project.

Chapter 15, Nonprofit Rent Increases
This Chapter outlines the procedure for providing budget-based rent increases to nonprofit owners. The Chapter identifies eligibility requirements for “marking up to budget” and provides instructions for future rent adjustments.

Chapter 16, Other Issues
This Chapter discusses miscellaneous issues that have not been included in previous chapters of this guide. This Chapter includes rent increases for non-Section 8 rents, and REMS reporting requirements. It also addresses the effect of refinancing FHA insured properties on Mark-to-Market eligibility and how any new debt should be addressed in a projects operating budget.

Owners must read and understand the Section 8 Renewal Policy guidebook before attempting to renew an expiring HAP contract so as to insure that their actions represent the most appropriate and applicable choice for their property.

The Section 8 Renewal Policy contains complete explanations of the six possible renewal options as well as all of the required forms needed to complete a renewal. To order a copy of the guide: Click on this link


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Contact me by phone 301-277-3465, fax 925-380-4578 or by email at alvinl.sutherlin@verizon.net and I can discuss the status of your project.

If you need assistance in preparing a request for a TPA or assignment of a Section 8 Contract, contact me. References will be provided upon request.

Contact Information:

Alvin L. Sutherlin
Housing Consultant
Post Office Box 162
Mount Rainier, Maryland 20612-0162
Contact me by phone 301-277-3465 or Email:
alvinl.sutherlin@verizon.net

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Date Updated: 12/02/2017 04:34:53 AM