HUD Revises Section 8(bb) FAQs

On March 14, HUD’s Office of Multifamily Housing revised the Frequently Asked Questions (FAQs) regarding the transfer of all or a portion of any remaining budget authority of a project-based Section 8 Housing Assistance Payment (HAP) contract from one property to one or more other properties using Section 8(bb) of the Housing Act of 1937. Section 8(bb) is a tool for preserving Section 8 budget authority. The revision supersedes the FAQs published on February 18, 2016 (see Memo, 2/29).

On October 9, 2014, HUD issued Notice H-2014-14 setting out policies and procedures for making such transfers (see Memo, 10/20/14 and 4/13/15). The Notice applies to situations in which the owner and contract administrator (generally HUD) mutually agree to terminate a HAP contract at Project A so that remaining budget authority can be transferred to another multifamily housing project, Project B. A contract at Project A can be subdivided so that one or more of the resulting subcontracts (Contracts A1, A2, etc.) can be terminated and their remaining budget authority transferred to a Section 8 HAP contract on one or more other multifamily housing projects, Projects B, C, D, etc.

The first FAQ from February 18 explained that 8(bb) transfers must be budget neutral, meaning that the annual gross rent potential (GRP) for Property B may not exceed the annual GRP for units terminating at Property A. The March 14 revision states that, in this context, GRP does not include utility allowances.

The February FAQ also stated that any decrease in units of more than 5% must be supported with additional documentation indicating a material improvement in location or a market-driven need to reconfigure unit types. The March revision deletes this 5% reference. A new FAQ quotes Notice H-2014-14, “the number of units supported by the budget authority of Project B should be substantially the same…as the number of units supported by the budget authority at Property A,” with a threshold of “within lesser of 5% or five units.” The March FAQ clarifies that means that no reduction can exceed five units.

New FAQ 10 states that the number and type of contract units at Property B must accommodate all Property A tenants who wish to relocate to Property B. Tenants can be “over-housed” at Property B to accommodate all tenants who decide to move until an appropriate unit type becomes available.

New FAQ 13 states that when an owner is considering opting out of their Section 8 HAP contract at the end of the year, the owner may be offered the opportunity to terminate the contract early in exchange for their participation in the 8(bb) transfer of subsidy process.

Former FAQ 15, revised as FAQ 17, concerns the need to demonstrate demand for additional affordable housing. The revision is more specific than the original FAQ, listing three factors that HUD Field Economists will review to determine demand: a market analysis showing that there are eligible households in the area, the number of current tenants and/or prospective eligible tenants on the waiting list at Property A who intend to move to Property B, and the number of prospective eligible tenants on the waiting list at Property B.

The revised FAQ adds eight technical answers regarding Real Estate Assessment Center (REAC) inspections. 

The March 14, 2016 revised FAQ is at: