Navigating Your Section 8 Renewal
This guide is designed for property owners and management agents with Section 8 Housing Assistance Payment (HAP) contracts approaching expiration. We’ll outline the six renewal options available under HUD’s Section 8 Renewal Policy Guide, helping you understand your choices and prepare for a smooth transition.
All Section 8 renewals follow procedures detailed in HUD’s comprehensive Section 8 Renewal Policy Guide. In March 2023, HUD released significant updates to Chapter 9, effective May 1, 2023. These revisions streamline the Rent Comparability Study (RCS) process, simplify submission requirements, and introduce new provisions for valuing non-shelter services, including internet and broadband access.
What are the Steps Involved in the Renewal Process?
The Section 8 contract renewal process typically includes:
- Deciding whether to renew your HAP contract based on your property’s financial situation and long-term plans
- Submitting a renewal request to HUD using Form HUD-9624, typically 12-18 months before contract expiration
- Completing a Rent Comparability Study (RCS) to establish market-rate rents for most renewal options
- Negotiating renewal terms including contract length and rent adjustments with HUD
- For opt-outs: Providing one-year advance notice to both HUD and all tenants, who will receive enhanced vouchers
Understanding Your 6 Contract Renewal Options
When your HAP contract expires, HUD offers six distinct renewal paths. Each option has specific eligibility criteria, contract terms, and rent adjustment mechanisms tailored to different property circumstances.
Here’s a comparison table for all 6 Section 8 renewal options:
Renewal Option | Eligibility | Contract Term | Rent Adjustments |
|---|---|---|---|
1. Mark-Up-to-Market | Current contract rents must be below market rates as determined by a HUD-approved RCS | 5 to 20 years (flexible) | At Renewal: Rents adjust to market levels based on RCS, capped at 150% of FMR |
2. Mark-Up-to-Budget | Current contract rents are at or below comparable market rents as verified by an RCS | 1 to 20 years (flexible) | At Renewal: Rents set according to HUD-approved project budget but cannot exceed market-comparable levels per RCS |
3. Mark-to-Market | • Rents exceeding comparable market rates | 20 years (fixed) | At Renewal: Rents reduce to market-comparable levels per RCS |
4. Exception Projects | • Properties not subject to FHA-insured mortgages | 1 to 20 years (flexible) | At Renewal: Rents adjust by lesser of OCAF or budget-based increase, with market rents as upper limit |
5. Preservation Projects | • Properties with approved Plans of Action under ELIHPA or LIHPRHA | Varies by project’s specific HAP contract, Use Agreement, and approved Plan of Action | Varies significantly based on each project’s governing documents; owners must review specific requirements |
6. Opt-Out | • Cannot be used if contractual obligations/Use Agreements mandate renewal | Contract terminates (exits Section 8 program) | N/A – Owner exits program; eligible tenants receive enhanced vouchers |
1. Mark-Up-to-Market
Mark-Up-to-Market allows owners with below-market rents to increase rents to competitive levels based on comparable market properties.
Eligibility
Current contract rents must be below market rates as determined by a HUD-approved Rent Comparability Study (RCS).
Contract Term
Contracts renew for flexible terms ranging from 5 to 20 years, with the specific length typically negotiated between the owner and HUD. Longer contract terms can provide greater rent stability and planning certainty, while shorter terms may offer more flexibility to respond to changing market conditions.
Rent Adjustments
- At Renewal: Rents adjust to market levels based on the RCS, capped at 150% of Fair Market Rents (FMR) unless specific discretionary criteria apply.
- Annual Adjustment: Rents adjust annually using the Operating Cost Adjustment Factor (OCAF), which reflects changes in operating expenses.
- Comparability Adjustment: Every five years, a new RCS adjusts rents to current market levels.
Required Forms & Documents
- Mark-Up-to-Market Worksheets
- HAP Renewal Request Form (HUD-9624)
- OCAF Adjustment Worksheet (HUD-9625)
- Section 8 Renewal Policy Guide: Chapters 3 & 9
2. Mark-Up-to-Budget
Mark-Up-to-Budget sets rents based on a HUD-approved operating budget, ideal for properties requiring specific funding levels to maintain operations.
Eligibility
Current contract rents are at or below comparable market rents as verified by an RCS.
Contract Term
Flexible terms ranging from 1 to 20 years.
Rent Adjustments
- At Renewal: Rents are set according to a HUD-approved project budget but cannot exceed market-comparable levels determined by the RCS.
- Annual Adjustment: Annual rent increases follow the OCAF.
- Comparability Adjustment: A new RCS every five years ensures rents remain aligned with market conditions.
Required Forms & Documents
- HAP Renewal Request Form (HUD-9624)
- HUD Handbook 4350.1, Chapter 7
- Section 8 Renewal Policy Guide: Chapters 4 & 9
3. Mark-to-Market (for Above-Market Rents)
The Mark-to-Market program restructures properties with rents exceeding market levels, typically involving FHA-insured mortgage adjustments to ensure long-term affordability.
Eligibility
- Properties with rents exceeding comparable market rates
- Must have an FHA-insured or HUD-held mortgage
- Classified as “eligible multifamily housing projects” under the Multifamily Assisted Housing Reform and Affordability Act (MAHRA)
Contract Term
20-year HAP contract renewal.
Rent & Mortgage Adjustments
- At Renewal: Rents reduce to market-comparable levels determined by an RCS.
- Mortgage Restructuring: HUD adjusts the mortgage to a level sustainable under the new, lower market rents, preserving affordability while maintaining financial viability.
4. Exception Projects
Exception Projects are properties exempt from Mark-to-Market restructuring, typically due to financing structure or statutory exemptions under MAHRA Section 514(h).
Eligibility
- Properties not subject to FHA-insured mortgages (e.g., conventionally financed or low-income housing tax credit properties)
- Projects exempt from mandatory Mark-to-Market restructuring
Contract Term
Flexible renewal periods from 1 to 20 years.
Rent Adjustments
- At renewal, rents adjust by the lesser of the OCAF or a budget-based increase, with market rents serving as the upper limit.
- Annual adjustments follow the OCAF.
Required Forms & Documents
- HAP Renewal Request Form (HUD-9624)
- OCAF Adjustment Worksheet (HUD-9625)
- Section 8 Renewal Policy Guide: Chapter 6
5. Preservation Projects
Preservation Projects operate under special long-term use agreements requiring specific renewal procedures to maintain affordability commitments.
Eligibility
- Properties with approved Plans of Action under the Emergency Low Income Housing Preservation Act (ELIHPA) or Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA)
- Projects subject to Portfolio Reengineering Demonstration Use Agreements
Contract Term & Rent Adjustments
- Terms and rent mechanisms vary significantly based on each project’s specific HAP contract, Use Agreement, and approved Plan of Action.
- Owners must carefully review their governing documents to understand applicable requirements.
Required Forms & Documents
- HAP Renewal Request Form (HUD-9624)
- OCAF Adjustment Worksheet (HUD-9625)
- Section 8 Renewal Policy Guide: Chapter 7
6. Opt-Out of HAP Contract Renewal
Owners may choose to exit the Section 8 program, though this option comes with strict notice requirements and tenant protections.
Eligibility & Requirements
- Cannot be used by owners with contractual obligations or Use Agreements mandating renewal
- Requires one-year written notice to both HUD and all tenants (delivered to each unit or mailed to heads of household)
- Notification must be provided in appropriate language(s) if tenants speak languages other than English
- Upon contract expiration, eligible tenants receive enhanced vouchers to help them remain in their homes
- Owners must comply with state and local laws that may restrict opt-out rights
Required Forms & Documents
Next Steps and Getting Help
The renewal process can be complex, with each property presenting unique circumstances. For specific questions about your project’s eligibility and the optimal renewal path, reach out to us. Learn more about Section 8 housing compliance with our COS and COSV courses.
Sources: