Option 3a or 3b – Initial Referrals
Initial Referral to RECAP
You may remember when this option was known as OAHP. OAHP expired in 2017 and is now known as the Office of Recapitalization, or RECAP.
Option 3 is split into two different options, Option 3a RECAP Lite, or Option 3b RECAP Full.
Typically, we see a Referral to RECAP when a property comes in to renew under Option 2, has an Active FHA loan with HUD, and the property’s current rents are above the Rent Comparability Study the property has procured.
RECAP will make the determination whether the property must have their rents reduced to market, or can still make debt payments on their FHA loan?
Option 3a RECAP Lite
RECAP Lite is used when there is no debt restructuring and the property rents get reduced to the Rent Comparability Study rents. During renewal years, an Option 3a can adjust their rents by the OCAF or with a budget, pending HUD approval.
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 3a or 3b Initial Renewals Checklist here for a detailed list of submission requirements, or download it along with our Option 3 Initial Resource Bundle below.
SKU CMS025 Category Uncategorized Tags 3a, 3b, Mark-to-Market, MTM, OAHP, Option 3, Recap, Recap Full, Recap Lite, Watchlist
Related products
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.
Download this document for free using the button below.
Mark-up-to Market (MU2M)
Back in 1999, Mark-up-to-Market (MU2M) was introduced as an emergency initiative to provide Owners of certain properties that had rents below market but were located in strong markets to be able to mark their rents up to market. This was an incentive to keep these properties in the Section 8 program and continue to provide affordable housing. Option 1 is broken into 2 different options. There is Option 1a, Entitlement, and Option 1b, Discretionary. With either option, the Owner must agree to renew their Housing Assistance Payment (HAP) contract for a minimum of 5 years.
Note: If filing for an Option 1 renewal with a Termination of Assistance under Chapter 15 please select the Option 1 Chapter 15 tab above.
To first qualify for Option 1a or 1b
The Owner must have:
- Aggregate current rent levels under the expiring contract must be less than the comparable market rents (this is determined with a Rent Comparability Study)
- The property must have received a “Satisfactory” score or higher on their most recent Management Occupancy Review
- A physical inspection score from the Real Estate Assessment Center (REAC) of 60 or above, with no Exigent Health & Safety (EH&S) violations
- All Financial Assistance Subsystem (FASS) findings need to be closed or under a HUD-approved corrective action plan, if applicable.
To further qualify for Option 1a, Entitlement
Property owner must be:
- A profit motivated entity, or
- A housing authority occupying the status of a “public body corporate and politic” under the stat legislation under which it was created, or
- A limited partnership with one or more nonprofit general partners or a sole general partner that is wholly owned and controlled by one or more nonprofit entities, or
- A limited liability company with one or more nonprofit managers or nonprofit managing members or a sole manager or managing member that is wholly owned or controlled by one or more nonprofit entities
Or, to further qualify for Option 1b, Discretionary
Property owner must meet one or more of the following characteristics:
Vulnerable populations – At least 50% of the population of the assisted units are rented to elderly families, disabled families, or large families (5 or more persons). The 50% can be met with an individual referenced population or inclusive of all categories
Vacancy Rates (Verified by HUD) – The project is in a low-vacancy market area (or in a rural area with no comparable rental housing) where there is a lack of affordable housing and where Housing Choice Vouchers (HCV) would be difficult to use
Community Support – The project is a high priority for the local community as demonstrated by a contribution of State and/or local funds to the project. Evidence of support may be in the form of tax credits, tax abatements, capital improvement funds, etc. that have been provided to the property within the last 5 years.
*Please read Chapter 3 of the Section 8 Renewal Guide for further specifics on requirements & qualifications
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 1 Checklist here for a detailed list of submission requirements or download it along with our Option 1 Resource Bundle below.
Download this document for free using the button below.
Click the button below to download the PDF of the most recent version.
Visit the HUD Data Sets website for the most current UAFs: https://www.huduser.gov/portal/datasets/muaf.html
Renewal of Portfolio Reengineering Demonstration or Preservation Projects
Option 5 is split into two different options, Option 5a Portfolio Reengineering Demonstration and Option 5b Preservation Projects.
Option 5a, Demonstration projects
This option covers any project that has completed the Demo program, as evidenced by a recorded Use Agreement. If the owner entered into the Demo program but did not execute and record a Demo Use Agreement, it is not eligible to renew under Option 5.
Option 5b, Preservation Projects
Preservation Project renewals consist of Section 236 and 221d3 BMIR properties whose owners entered into Long-term Use Agreements with HUD under either Title II Emergency Low Income Housing Preservation Act of 1987 (ELIPHA), or Title VI, Low-income Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA).
Properties can only renew under Option 5 if they are already in an Option 5 contract. No new properties may submit paperwork to renew under this option.
Option 5 Renewal Rent Adjustments Methods
The rent adjustment method available to you will be listed in the individual project’s Plan of Action (POA) and/or Use Agreement.
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 5 Checklist here for a detailed list of Option 5a or 5b submission requirements, or download it along with our Option 5 Resource Bundle below.
Download this document for free using the button below.