Option 4 is for owners whose properties are considered exception properties. Specifically, the following projects are identified by the statute as “exception properties”:
- Project(s) with primary financing or mortgage insurance that were provided by a unit of state or local government and not insured under the National Housing Act.
- Projects financed under section 202 of the Housing Act of 1959 or section 515 of the housing act of 1949 (includes 202/8, 515/8: does not include 202 and 811 Capitol Advance projects, which do not have section 8 contracts)
- Projects that have an expiring contract 1937 Act pursuant to section 441 or the Stewart B. McKinney Homeless Assistance Act (SRO Mod Rehab)
- Projects that do not qualify as projects pursuant to 512 of MAHRA. Such as:
- A project that is not subject to a HUD-held or insured mortgage
- A project that has FHA mortgage insurance or is HUD-held with rents at or below comparable market rate.
The main benefit is that you do not have to submit a Rent Comparability Study (RCS) at contract renewal, as you do with Options 1 and 2. However, unlike Options 1 and 2, under Option 4 the property is subject to the Lesser Of Test.
Option 4 is a good option for an owner with a property that has Above Market Rents. Since an RCS is not required, the renewal can be done with the Lessor Of test.
Chapter Six of the Section 8 Renewal Policy has complete guidance regarding Option 4.
Rent Adjustments with Multi-year Contracts
Annual rent increases during the term of the contract can be either OCAF Rent Adjustments or Budget-Based, as determined by the owner. However, if you submit a budget-based adjustment, you must submit an RCS that demonstrates that your adjusted rents will not be above comparable rents, as determined by the RCS.