7-8. PROJECT SPECIFIC RENTS (PSRS)

PSRs are first discussed in Housing Notice 94-42, Mid-Course Correction II - For Low Income Housing Preservation and Resident Homeownership (LIHPRHA) and Emergency Low Income Housing Preservation Act (ELIHPA) Programs and are used in Title II and Title VI preservation projects. PSRs are also discussed in Revisions to Notice 94-42, MCCII - For Low

Chapter Seven – Published March 2023

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Income Housing Preservation and Resident Homeownership (LIHPRHA) and Emergency Low Income Housing Preservation Act (ELIHPA) Programs.

• A. The PSRs are the rents unsubsidized tenants would reasonably expect to pay in preservation properties for their subject unit based on actual project and conditions. PSRs are derived from a market comparability analysis but adjusted to the actual project characteristics, including any repairs that are to be completed.

• B. Where applicable, PSRs will be maintained and updated annually during the annual rent increase process. Housing Notices 94-42 and 95-56 failed to identify a methodology for making the annual adjustment. Therefore, the AE will adjust the PSRs using the annual OCAF. The owner may periodically submit a new PSR analysis at any time during the life of the Use Agreement if the PSRs affect the total tenant payment. The PSR analysis must be supported by market comparables adjusted to the actual project characteristics and condition. In turn, the Multifamily Regional Office valuation staff will review the analysis to assure the proper adjustments have been made.

Note: Both Housing Notices are available on HUDCLIPS at http://www.hud.gov/offices/adm/hudclips/index.cfm

• 7-9. PRESERVATION UPDATES

• A. Shallow Rent Subsidy.

The 1995 Appropriations Act language establishing the Shallow Rent Subsidy was not made permanent. Therefore, the Shallow Rent Subsidy provision in approved Use Agreements is no longer applicable.

• B. Budget-Based Rent Increase.

  1. Instructions for processing a budget-based rent increase for LIHPRHA and ELIHPA projects is found in Chapter 11 of HUD Handbook 4350.6.

  2. Section 11-7. C.3. states: “if non-operating costs increase or decrease, e.g. a loan secured by the project is repaid, the budget will be adjusted for the change.” Therefore, HUD will recognize new debt in a budget-based rent increase request.

  3. If a budget based rent increase is deemed reasonable for the project, it will not be rolled back in a subsequent year.

• C. ELIHPA Use Agreement and Section 8 Contract.

When both the mortgage and ELIHPA Use Agreement end on the first of the month or at midnight of the last day of the month, both the Section 8 contract and the Use Agreement are considered coterminous. Therefore, the owner may select any renewal option for which the project is eligible except Option Five.

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Chapter Seven – Published March 2023