Option 2 – OCAF Only

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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

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.

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

Owners or Purchasers interested in the Capital Repairs and/or Transfer program as defined in Chapter 15 of the Section 8 Renewal Guide, may do so under Option 2.

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

Under Option 2 Chapter 15, the Owner/Purchaser must submit a request for budget-based rent increase, not to exceed comparable market rents for costs associated with the transaction including new debt service and debt service coverage.

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 over 5 years requires 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 5^th year and the rents will be adjusted to the comparable market rents.

In addition to the Option qualifications

Owner/Purchaser must agree to the following:
A Use Agreement – The Owner must agree to accept a 20-year recorded Use Agreement requiring the current or future owners to accept any Section 8 contract offered by HUD for the next 20 years. If the property already has a Use Agreement, the Owner must agree to extend the term an additional 20 years.

20-year Contract – The Owner/Purchaser must agree to accept a twenty-year Section 8 Contract, subject to annual appropriations. If the Owner/Purchaser is terminating a current contract, the Owner/Purchaser must agree that at the end of the 20-year contract, the contract will be renewed for the remaining term of the original contract.

Combine Multiple Contracts or Stages – Where applicable, and if possible, the Owner/Purchase must combine multiple contracts or stages.

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 Chapter 15 Checklist here for a detailed list of submission requirements or download it along with our Option 2 Chapter 15 Resource Bundle below.