Chapter 28 Bifurcating Section 8 Contracts

Subsequent Referral to RECAP

This option is for properties who have previously renewed under Option 3b RECAP Full and are submitting for subsequent renewal ahead of their Use Agreement expiration.

Option 3b RECAP Full

Full RECAP is used when debt re-structuring is required. Upon closing of full debt restructuring, a Housing Assistance Payment (HAP) Contract is typically issued for 20 years and must be continually renewed under Option 3b until the property’s Use Agreement expires. Budget-based rent adjustments under this option are not allowed. Rents are adjusted by the OCAF only. Properties are not allowed to terminate a Option 3b contract early to reissue under a different option.

Utility Allowance Analysis

A Full Baseline Utility Allowance with all supporting data collected from utility companies or tenants is required at minimum every 3 years but can be prepared and submitted annually.
Download the Baseline Utility Allowance Worksheet

For the two years following the most recent Baseline Utility Allowance, owners and agents have the option to again obtain data from utilities or tenants to determine utility allowances, or to perform a Factor-Based Utility Analysis, adjusting the allowance using a state-specific increase factor called the Utility Allowance Factor (UAF) provided by HUD.
Download the UAF Calculation Worksheet

What is required for your submission?

Access our Option 3b Subsequent Renewal Checklist here for a detailed list of submission requirements, or download it along with our Option 3b Subsequent Resource Bundle below.

Renewal of Projects Exempt from or Not Eligible for Debt Restructuring for Rural Housing Service 515 Projects

Known as the “Exception Rents” option, Option 4 Rural Housing is a good option for Owners when they have properties above market.

For-profit and Non-profit owners can submit a request for Option 4 Rural Housing.

To qualify for Option 4 Rural Housing, owners must:

• Have a property that is exempt from debt restructuring under Section 515(h) of MAHRA; or
• The property does not meet the definition of an “eligible multifamily housing project” under Section 512(2) of MAHRA

Owners of Section 515/8 projects who are requesting a contract renewal under Option 4 pursuant to 524(b)(1) of MAHRA must submit their project budget approved by RHS. HUD Account Executives and Performance Based Contract Administrators are not required to review and approve these budgets. If the budget has been approved by RHS, the budget-based rent will be accepted.

Properties can choose a term of 1 to 20 years for a contract renewal. Anything over 5 years requires HUD approval. In long term contracts, the property will be eligible for the Auto OCAF during rent adjustment years. If the property would like to adjust their rents with a budget during a rent adjustment year, a Rent Comparability Study would be required.

Utility Allowance Analysis

A Full Baseline Utility Allowance with all supporting data collected from utility companies or tenants is required at minimum every 3 years but can be prepared and submitted annually.
Download the Baseline Utility Allowance Worksheet

For the two years following the most recent Baseline Utility Allowance, owners and agents have the option to again obtain data from utilities or tenants to determine utility allowances, or to perform a Factor-Based Utility Analysis, adjusting the allowance using a state-specific increase factor called the Utility Allowance Factor (UAF) provided by HUD.
Download the UAF Calculation Worksheet

What is required for your submission?

Access our Option 4 Rural Housing Checklist here for a detailed list of submission requirements, or download it along with our Option 4 Resource Bundle below.

Renewal of Projects Exempt from or Not Eligible for Debt Restructuring

Known as the “Exception Rents” option, Option 4 is a good option for Owners when they have properties above market.

For-profit and Non-profit owners can submit a request for Option 4.

To qualify for Option 4, owners must:

• Have a property that is exempt from debt restructuring under Section 515(h) of MAHRA; or
• The property does not meet the definition of an “eligible multifamily housing project” under Section 512(2) of MAHRA

Under Option 4, at renewal, the property will process the “Lesser of Test”. What this means is the property will submit paperwork for an OCAF and a budget. Whichever process results in the lesser rents, is how the rents will be set.

For example, if the budget results in higher rents than the OCAF, the rents will be adjusted by the OCAF. OR, if the budget results in lower rents than the OCAF, the rents will be adjusted by the budget.

Properties can choose a term of 1 to 20 years for a contract renewal. Anything over 5 years requires HUD approval. In long term contracts, the property will be eligible for the Auto OCAF during rent adjustment years. If the property would like to adjust their rents with a budget during a rent adjustment year, a Rent Comparability Study would be required.

Please Note: Properties seeking an Option 4 renewal with an active Rural Development loan should see the ‘Option 4 Rural Housing’ tab below.

Utility Allowance Analysis

A Full Baseline Utility Allowance with all supporting data collected from utility companies or tenants is required at minimum every 3 years but can be prepared and submitted annually.
Download the Baseline Utility Allowance Worksheet

For the two years following the most recent Baseline Utility Allowance, owners and agents have the option to again obtain data from utilities or tenants to determine utility allowances, or to perform a Factor-Based Utility Analysis, adjusting the allowance using a state-specific increase factor called the Utility Allowance Factor (UAF) provided by HUD.
Download the UAF Calculation Worksheet

What is required for your submission?

Access our Option 4 Checklist here for a detailed list of submission requirements, or download it along with our Option 4 Resource Bundle below.