This option allows you to mark up your Section 8 contract rents to the current market rents as determined by an analysis of the market in which the property is located. Option 1 is divided into two options.
General Eligibility Criteria for Option One-A and One-B
- Aggregate current rent levels under the expiring or terminating contract must be less than comparable market rents.
- Management's most recent Management and Occupancy Review (MOR) rating is "Satisfactory" or above.
- A REAC physical inspection score of 60 or above with no uncorrected Exigent Health and Safety (EH&S) violations.
- If applicable, all Financial Assistance Subsystem (FASS) findings need to be closed or under HUD-approved corrective action plan.
Option One-A: Entitlement Mark-Up-To-Market Eligibility
To be eligible under Option One-A the property must meet the following criteria:
- Market Rents: The Rent Comparability Study (RCS) must demonstrate that the comparable market rents are at or above 100% of the HUD published Fair Market Rent (FMR) potential. Use the FMR figures calculated for the fiscal year in which the contract is expiring to demonstrate eligibility.
- Use Restrictions: The project does not have a low-and moderate-income use restriction that cannot be eliminated by unilateral action by the Owner. Examples of use restrictions would be the existence of a Rent Supplement Contract, prior or present Flexible Subsidy assistance, or Low-Income Housing Tax Credits.
- The project is not subject to a contract for moderate rehabilitation assistance under section 8(e)(2) of the United States Housing Act of 1937, as in effect before October 1, 1991.
- The project is not one for which a public housing agency provided voucher assistance to one or more tenants after the Owner has provided notice of termination of the contract covering the tenant's unit.
- Ownership: The property owner must be one of the following:
- A profit-motivated entity (including a limited distribution entity)
- A housing authority occupying the status of a "public body corporate and politic" under the state legislation under which it was created
- A limited partnership with one or more nonprofit general partners or a sole general partner that is wholly owned and controlled by one of more nonprofit entities
- A limited liability company with one or more nonprofit managers or nonprofit managing members or a sole manager or managing member that is wholly owned or controlled by one or more nonprofit entities.
Option One-B: Discretionary Authority Eligibility
If a property is not eligible to renew under Option One-A then the owner may request a waiver under option One-B.
For Owners who request participation in Option One-B, and for Owners of projects that request an increase in rents above the cap on comparable rents of 150% of FMR, HUD will consider these requests if the project meets at least one of the following three characteristics:
- Vulnerable Populations: The tenants of the property are a particularly vulnerable population, demonstrated by a high percentage (at least 50%) of the units rented to elderly families, disabled families, or large families (large family is defined as a family of five or more persons)
- Vacancy Rates: The property is located in a low-vacancy market area (or in a rural area with no comparable rental housing) where there is a lack of affordable housing and where Housing Choice vouchers would be difficult to use.
- Community Support: The project is a high priority for the local community as demonstrated by a contribution of State and/or local funds to the project. Evidence of community support may be in the form of tax credits, tax abatements, capital improvement funds, etc. that have been provided to the project within the last five years.
For complete guidance and information regarding Option One please read Chapter 3 of the Section 8 Renewal Policy guidebook.
· Contract Renewal Request Form (Instructions)
· Worksheet for Mark Up To Market – Option One
· Rent Comparability Study (RCS)
· RCS Cover Letter (Word): Michigan - Hawaii - Pennsylvania
· Owner's Checklist for RCS Submission
· One Year Tenant Notification Letters
· Utility Allowance Analysis (if applicable)