In order to preserve existing HUD-assisted housing, authority to approve waivers of five provisions in the Section 8 Renewal Policy Guide is being delegated to local Hub Directors. According to a memorandum dated August 28 from Benjamin Metcalf, Deputy Assistant Secretary for Multifamily Housing Programs, Hub Directors must determine that a requested waiver is appropriate by assessing documentation submitted by project owners.
Four of the Renewal Guide provisions that may be waived by the Hub Director are in Chapter 15, pertaining to nonprofit Section 8 project preservation. They are:
- The prohibition of a for-profit organization using the preservation features in Chapter 15 may be waived if a for-profit has a strong history of providing affordable housing and has the experience to own and maintain the property.
- If a project’s underwriting requires market rents in a Rent Comparability Study greater than rents at rent-restricted units (such as those assisted with Low Income Housing Tax Credits) in order to ensure long-term preservation, the Hub Director may waive the requirement to lower the comparable market rents in the Rent Comparability Study.
- For substantial rehabilitation projects that have a construction loan, the effective date of post-rehabilitation rent levels may be the date of closing, rather than the date rehabilitation is completed, if the lender requires full debt service payment at closing.
- A pre-MAHRAA contract may be terminated early in order to take advantage of preservation tools if the owner is willing to renew the contract for 20 years, renew the contract for the remaining balance on the contract being terminated, and sign the “Rider to Original Section 8 Housing Assistance Payments Contract.” (MAHRAA is the Multifamily Assisted Housing Reform and Affordability Act of 1997 that authorized the Mark-to-Market program and renewal of expiring Section 8 contracts.)
The fifth provision that may be waived is in Chapter 3. A Section 8 contract at a property that had a Real Estate Assessment Center (REAC) physical inspection score of 60 or less may be renewed under Mark-Up-to-Market if the property is transferred to a new owner and/or rehabilitation will correct the deficiencies identified in the REAC inspection. Mark-Up-to-Market allows rents to owners to increase to market-rate.
The Section 8 Renewal Policy Guide is at http://portal.hud.gov/hudportal/documents/huddoc?id=Sec_8_Renewal_Policy_Guide.pdf. Chapter 15 starts on page 197.
More information about the Project-based Section 8 program, Mark-to-Market, and Mark-Up-to-Market is on page 139 of NLIHC’s 2014 Advocates’ Guide, http://nlihc.org/sites/default/files/2014AG-139.pdf