Option 4: Renewal of Projects Exempt from or not Eligible for Debt-Restructuring


Option 4 is for owners whose properties are considered exception properties. Specifically, the following projects are identified by the statute as “exception properties”:

  1. 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.
  2. 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)
  3. Projects that have an expiring contract 1937 Act pursuant to section 441 or the Stewart B. McKinney Homeless Assistance Act (SRO Mod Rehab)
  4. Projects that do not qualify as projects pursuant to 512 of MAHRA. Such as:
    1. A project that is not subject to a HUD-held or insured mortgage
    2. 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.

The Lesser Of test means that the owner submits both an OCAF Adjustment request and a Budget-Based Adjustment request. SHCC will process both adjustments and approve the lesser of the two.

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.

Submission Requirements

HUD Guidance

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.