Budget-Based Rent Increase
Rentals/Carrying Charge Increases (Cooperatives)
Notice H-2012-14, SUBJECT: Use of “New Regulation” Section 8 Housing
Assistance Payments (HAP) Contracts Residual Receipts to Offset
Project-Based Section 8 Housing Assistance Payments
Code of Federal Regulations (CFR) 245
Profit and Loss Statement
Chart of Accounts
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
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.
Owner Equity (DOES NOT APPLY TO NON-PROFITS)
Exception: From time-to-time Contract Administrators/HUD Multifamily Asset
Management Staff are asked to process special rent increases for projects that
have been sold at foreclosure sales to third parties or sold by HUD, as a
HUD-owned property. In either case, if a property was sold without
financing, there are special processing procedures that must
be followed. These procedures are intended to provide a mechanism to deal
with projects that were financed by the owner after acquisition on an all-cash
Note: To do a comprehensive analysis, based on HUD outstanding instructions,
my services would include a complete submission in collaboration with your
staff, which consist of completing all HUD required forms, completed proposal on
your company letterhead, with one original bound copy for mailing to
Contract Administrator/HUD and two bound office copies.
HUD Directives, provides
procedures for processing budgeted carrying charge and rent increases in certain
HUD projects. All project owners whose mortgages are insured under Section 231,
232, 202 projects (who do not use the Section 8 Annual Adjustment Factor (AAF)),
213, 236 (including cooperatives), Rent Supplement, 221(d)(3) Market Rate and
221(d)(3) Below Market Interest Rate (BMIR) rental and cooperative projects,
207's and 231's both regulated and controlled by alternative rent mechanism;
Section 220 and 221(d)(4)'s that are regulated; and all of the above that are
not automatically preempted by HUD and request exemption from local rent
control, are required to use the Budget Approach when requesting HUD to increase
the Maximum Allowable Rent Potential.
We have developed a computerized
version of the budgeted carrying charge/rent increase process. Our prepared
proposals have been accepted and approved by HUD Field Offices in several
states. If you provide us with the necessary information, we will prepare
complete budget proposals for rentals and cooperatives projects.
From HUD’s standpoint, the
expenses from the Profit & Loss of the owner’s annual financial audit for
the most recent fiscal year is their primary consideration. They consider the
demonstrated expenses for that period as a starting point for the new budget
period. Their thinking is that the demonstrated expenses for the audit period is
a measuring stick against the current annual gross rent income potential.
Theoretically, in order for the
project owner to break even, he must recoup any shortfall in income from the
previous fiscal year, due to any increase in expenses. When you think it
through, HUD’s Budget-based method for processing rent increases makes sense.
This process has served my
clients well and gotten them rent increases.
Proposals are prepared on your
letterhead, and packaged for submission to your local HUD Field Office at a
reasonable cost. You only have to sign it. We can offer guidance to walk
you through the steps, and prepare the formal request to HUD.
me by phone 301-277-3465 or
Testimonials from Clients
05/26/2016 04:56:17 PM