Option 2 – Budget

Contract Renewals for Other Projects with Current Rents at or Below Comparable Market Rents

Subject to HUD approval, owners may request to adjust their rents by a budget-based rent adjustment, limited by the market. In this instance, a budget is processed in lieu of the OCAF.

Both for-profit and Non-profit owners can submit a request for Option 2.

To request rental adjustments based on the Operating Cost Adjustment Factor see the ‘Option 2 OCAF Only’ tab above. To proceed with a budget-based Option 2 renewal continue to the steps below.

To qualify for Option 2

Owners must have:

  • Aggregate current rent levels under the expiring contract must be at or less than the comparable market rents (this is determined with a Rent Comparability Study), or
  • The property’s aggregate current rents exceed the comparable market rents, but the property is exempt from Mark-to-Market (Option 3) restructuring and the Owner is willing to reduce their rents to the comparable market rents.

Renewal requests of over 5 years require HUD approval. For properties with a contract term that exceeds 5 years, the property will need to obtain a new Rent Comparability Study at the end of the 5th year and the rents will be adjusted to the comparable market rents.

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 2 Budget Checklist here for a detailed list of submission requirements, or download it along with our Option 2 Budget Resource Bundle below.

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