2-2. OWNER OPTIONS

At the time of renewal, an owner must choose among any of six renewal options for which the project is eligible.

• A. Six Owner Options.

  1. Option One is Mark-Up-To-Market(MUTM)

  2. Option Two is the renewal of contracts with existing rents adjusted by an operating cost adjustment factor (OCAF) or based on a budget:

     • a. When rents under the expiring contract are at or below market; or

     • b. Where the owner of a project has a contract that contains language that allows a discretionary comparability adjustment within the 5-year term and the project is exempt from Recap restructuring with above market rents requests to have the project’s rents reduced to market.

  3. Option Three is referral to Recap for processing because the contract rents are greater than market rents and the project has a HUD-insured or HUD-held mortgage.

Note: FHA-insured projects that have a Section 8 moderate rehabilitation contract other than a moderate rehabilitation contract under Section 441 of the Stewart B. McKinney Homeless Assistance Act are eligible for referral to Recap.

4. Option Four is renewal of contracts for “exception” projects under Section 524(b)(1) of MAHRA. These projects are exempt from debt-restructuring pursuant to Section 514(h) of MAHRA or are not an “eligible multifamily housing project,” as defined in Section 512(2) of MAHRA;

5. Option Five is the renewal of contracts for:

   • a. Portfolio Reengineering Demonstration projects with a:

     • 1. Mortgage Restructuring Demo Program Use Agreement; or

Chapter Two – Published March 2023

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     - 2) Budget-Based Without Mortgage Restructuring Demo Program Use Agreement. 

  - b. Preservation projects under either: 

     - 1) Title II, Emergency Low Income Housing Preservation Act of 1987 (ELIHPA); or 

     - 2) Title VI, Low-Income Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA). 

6. Option Six is to opt-out of the Section 8 contract.

• B. Determining Option.

When determining which option to select, owners should be aware that the contract renewal options are determined by the project’s eligibility at the expiration date of the existing Section 8 HAP contract. If the HAP contract is being terminated by mutual agreement of the parties, the project eligibility is determined at the time of termination of the HAP contract by mutual agreement.