The Department of Housing and Urban Development released a new Section 8 Renewal Policy Guide containing comprehensive guidance for renewing expiring Section 8 Housing Assistance Payment (HAP) contracts. The guide includes some policy changes, which will be effective for all renewal or amend rent packages received by the Department after November 5, 2015.
The Guide incorporates procedures from previous Section 8 expiring contract Housing Notices, along with a number of changes. The body of the guidebook contains stars (*) to indicate where specific text has been revised. Chapters 2 and 16 have been completely revised and do not contain stars (*) to indicate specific changes in the text.
According to analysis from Reno & Cavanaugh, one of the major changes in the new guide is that HUD will now rely upon the owner’s rent comparability study for Mark up to Market renewal applications, as long as rents do not exceed 140% of Median Gross Rent by Zip Code tabulation area. Previously, HUD needed to contract with a third party appraiser.
The Contents of the Guide are as follows:
Chapter 1: Introduction
- Legislative history of the Multifamily Assisted Housing Reform and Affordability Act (MAHRA).
- Chronological list of HUD’s rulemaking and administrative policies for implementing statutory and regulatory requirements associated with Section 8 expiring contract renewals
Chapter 2: Section 8 Renewals
- Outlines various ways a contract can be renewed.
- Provides six options available to owners with expiring Section 8 HAP contracts.
- Discusses early contract termination, rent comparability studies and which contracts to use by chosen option.
- Provides instructions for processing either OCAF or budget based rent adjustment requests.
- Information on how to calculate waivers to various provisions in the Guide.
Chapter 3: Option One, Mark-Up-To-Market
- Provides instructions for renewing a contract under the Mark-Up-To-Market (MUTM) option.
- Identifies who is eligible for renewal under MUTM option and how to process the renewal request.
Chapter 4: Option Two, Contract Renewals For Other Projects with Current Rents At or Below Comparable Market Rents
- 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 MUTM option.
- Outlines projects eligible to renew under this option and documentation to be submitted by the owner to HUD/Contract Administrators for review.
Chapter 5, Option Three, Referral to Recap
- Discusses procedures by which a project with rents above comparable market rents is referred to the Office of Recapitalization (Recap) (formerly known as the Affordable Housing Preservation (OAHP)) for processing and renewal.
- Identifies items an owner must submit with its renewal request and it outlines what steps Recap will take if a restructuring agreement is not reached between the owner and Recap.
Chapter 6, Option Four, Renewal of Projects Exempt from or not Eligible for Debt Restructuring
- Identifies “exception” projects, which are exempted from or ineligible for Recap and as such, generally exempt from having to conduct rent comparability studies (RCS) and lower rents to comparable market rents.
- *However, owners of projects subject to certain HUD-held and FHA insured mortgages must obtain a RCS when renewing under this Option. In addition, annual budget-based rent adjustments will require a RCS.*
- Outlines the owner’s renewal submission requirements and provides instructions for initial and subsequent renewals.
Chapter 7, Option Five, Renewal of Portfolio Reengineering Demonstration or Preservation Projects
- Details how to renew a contract that has been through the Demonstration program.
- Provides instructions for renewal in cases where the project had its rents reduced and/or had its mortgage restructured.
- Provides guidance for renewing Preservation contracts according to the approved Plan of Action (POA).
Chapter 8, Option Six, Opt-Outs
- Provides instructions for processing owner opt-outs, which are expiring Section 8 project-based contracts whose owners elect not to renew the contract.
- Identifies the owner’s responsibilities to the tenants and provides processing instructions.
Chapter 9, Rent Comparability Studies
- Provides instructions for conducting and reviewing a rent comparability study (RCS).
Chapter 10, Residual Receipts
- *Presents an introduction to the treatment of Residual Receipts and refers users to the most current Notice regarding the subject.*
Chapter 11, Tenant Issues
- Outlines all of the steps that must be followed to assure that tenants are protected during the renewal process.
- Defines housing conversion actions and identifies tenant notification requirements an owner must meet in a housing conversion action.
- Describes the difference between a regular voucher and an enhanced voucher.
Chapter 12, Physical Condition of the Project
- Discusses how a project’s physical condition impacts the contract renewal process.
Chapter 13, HUD’s Refusal to Renew Section 8 Contracts
- Outlines the circumstances under which HUD may refuse to renew an expiring Section 8 contract.
- Provides owners with an appeal process to follow in cases where their request to renew is rejected.
Chapter 14, Rural Housing Service (RHS) Section 515/8
- Outlines how to renew a Section 8 contract for a Rural Housing Service (formally Farmers Home) Section 515 project.
Chapter 15, *Section 8 Preservation Efforts*
- Outlines the procedure for providing budget-based rent increases to owners who renew under the Capital Repairs Program or the Transfer Program.
- Identifies eligibility requirements for “marking up to budget” and provides instructions for future rent adjustments.
*Chapter 16, “Old Regulation” State Housing Finance Agency Projects – Owner Options upon Full Prepayment of Original, Permanent Financing
- *Provides guidance for owners of Section 8 projects that are subject to the “old regulation” state HFA form of HAP contract for New Construction or Substantial Rehabilitation projects, i.e., the November 1975 version of HUD-52645A (“1975 HAP Form”), for which the original, permanent financing provided by an HFA (“Financing”) was *or will be* prepaid in full.*
Please send any questions you may have on the new Guide to Section8RenewalGuide@hud.gov
