Keeping on Top of Section 8 Renewals

With a majority of the original 20-year Section 8 contracts maturing, many site owners are facing the future with a different rental income situation than they've been accustomed to. For years, Section 8 owners received automatic annual rent increases. These increases, in many cases, put rents at levels that were not on par with market rents.

Things changed with the passage of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA), which took effect in 1999. Essentially, Congress said that Section 8 rents must be comparable to unsubsidized rents in the areas where the site is located. In some cases, this had the effect of rents being adjusted upward. But in many cases, it meant rents at Section 8 sites had to be reduced. To establish an equitable rent, MAHRA requires that a rent comparability study (RCS) be completed for individual sites to see if the Section 8 subsidized rents are relative to market-rent levels.

HUD issued a guidebook to help owners with Section 8 renewals, The Section 8 Renewal Policy Guide, found online at www.hud.gov/offices/hsg/mfh/mfhsec8.cfm. The guidebook covers the various contract renewal options and required documentation. Most of the renewal options require an RCS as part of the initial request, and then every five years after that. (See “10 Tips for Compliant Rent Comparability Studies” in this issue.)

Follow Timeline for Contract Renewal

Colleen Bloom is associate director for Housing Operations for the American Association of Homes and Services for the Aging (AAHSA). She says the organization stresses timely handling of Section 8 contract renewals and annual rent adjustments with its member property owners so that rental assistance payments are appropriate and paid without interruption. AAHSA recommends the following timeline for contract renewal:

One year out. Send expiration notification letter to residents, with a copy to HUD or the contract administrator (CA).

Eight to nine months out. Select an appraiser, if a rent comparability study is required, and commission the study. (Note: The appraisal must be completed no more than 90 days before the submission to HUD/CA.)

Six to seven months out. Get the appraisal back from the appraiser, review for completeness, and correct any omissions.

The following steps apply annually for contracts already renewed at least once under MAHRA requirements and are necessary to assure appropriate annual rent adjustments:

Four to six months out. Absolutely no less than 120 days prior to expiration, submit Attachment 3A-2 (the Contract Renewal Request Form) and the OCAF worksheet to HUD or the CA. If requesting a budget-based adjustment on an anniversary (a multiyear contract anniversary as opposed to an actual “renewal”), a budget must also be submitted at this time. If requesting an Option 4 “renewal”—for contracts with an initial or subsequent renewal date after Aug. 19, 2007 (as opposed to a mid-term, multiyear contract anniversary)—both budget and OCAF worksheets must be submitted so the “lesser of” test can be applied.

Three months out. Check with your HUD project manager or CA renewal officer to assure that all documents have been received and that the contract renewal or rent adjustment is being processed in a timely fashion.

30-45 days out. If renewal/adjustment documents have not been received for execution by the owner/board, contact HUD/CA to request the status of the contract. Raise the issue to the next level of HUD/CA supervision if there is a problem.

Changes to Renewal Guide Proposed

HUD has issued a draft of proposed changes to the Section 8 Renewal Policy Guide and an informal request for comments on the Multifamily Web site at www.hud.gov/offices/hsg/mfh/exp/guide/sec8renguidedraftchgs.pdf.

According to HUD spokesman Lemar Wooley, HUD has not yet issued a formal notice. “We will soon be publishing a Notice in the Federal Register announcing the proposed changes and seeking comments from the public,” Wooley wrote in a late August email. “Included in the Federal Register Notice will be the date the comments are due.”

“Some of the proposed changes clarify practices that already are being employed informally with regard to Section 8 renewals,” Bloom notes. “Many of the proposed changes are things we advocated for.”

HUD still favors 20-year contracts for Section 8 housing. In a memo dated July 15, 2010, HUD's director of the Office of Housing Assistance and Grant Administration noted that some field offices have been denying owners’ requests to renew their contracts for 20 years. The position of HUD, the memorandum stated, is that “long-term, multiyear contracts assist in preserving affordable housing.” Owners should be encouraged to request “the longest possible term for the Section 8 contract renewal irrespective of the renewal option selected.”

Insider Source

Colleen Bloom: Assoc. Director for Housing Operations, American Association of Homes and Services for the Aging, 2519 Connecticut Ave., NW, Washington, DC 20008; (202) 508-9483; cbloom@aahsa.org.