Send Notice to Preserve Options at HAP Contract Expiration

A housing assistance payments (HAP) contract is a contract between HUD and an owner to provide rental assistance for low-income residents. The rental assistance supplements what the resident pays for rent, which is usually 30 percent of the resident’s income.

Most owners aren’t required to renew their HAP contract at the end of its term. An owner’s decision to renew or “opt out” of the HAP contract can depend on a number of factors, including the site’s rent levels and degree of administrative burdens. If your HAP contract is set to expire within the next year or two and you’re inclined to opt out or not renew the rental assistance contract, you may need to take steps to protect your interests when the contract expires.

If an owner has satisfied the relevant requirements and ultimately chooses to opt out of the Section 8 contract, it may request to opt out of the Section 8 program by providing the Contract Renewal Request Form (Form HUD-9624) and elect Option Six (Opt-Out). Owners should be aware of their obligation to honor the right of tenants to remain and all notification requirements. In fact, HUD requires that you give advance notice to assisted households of the HUD contract expiration. If you don’t follow HUD rules on giving the notice in the proper manner, you can’t seek increased rents from households when the contract expires.

HUD will renew the contract up until the day the contract expires, should the owner change its mind on opting out. But it’s important to note that HUD has no authority to enter into a new contract after the owner has opted out of the Section 8 contract.

To help you, we’ll explain the notice requirements and give you a Model Notice: Inform Households of HAP Contract Expiration, as an example of how to notify households that your site’s HAP contract is expiring.

Owner Requirements for Tenant Notification

To opt out of the HAP contract, an owner must satisfy all notification requirements, including giving notice of the proposed HAP contract termination to the residents and the contract administrator at least one year before termination, and submitting the request and certification to the local HUD Office/contract administrator not less than 120 days before the expiration of the contract.

To opt out smoothly, you must give all assisted households at your site one year’s advance notice of your HAP contract’s expiration. If you don’t send this notice, you can’t require assisted households to pay higher rents when the HAP contract expires. HUD says that you may not raise rents until the one-year notice period is up. For example, if you send the notice eight months before the contract expires, you can’t demand larger rent payments from assisted households until four months after the contract expires, at which time residents will have gotten the full year’s notice. Although failing to give notice won’t be a problem if you end up signing a renewal contract, you don’t want to risk a big financial loss if that doesn’t happen.

The notice must follow the requirements stated in the HUD Section 8 Renewal Policy Guide:

• The letter must state the owner’s intentions (to renew or not renew) at the time of the contract’s expiration;
• Owners must state that they will honor the tenants’ right to remain and will continually renew leases if the site is offered as rental housing, the local housing authority continues to find the rent reasonable, and there’s no cause for eviction under federal, state, or local law;
• The notification letter must be on the owner’s or duly authorized representative’s letterhead and signed;
• The notice must be served by delivery to each unit at the site or mailed to each head of household of a unit (taping the notice to the outside of each unit isn’t acceptable);
• If the majority of a site speaks a language other than English, owners must provide the notification letters in the appropriate language(s); the cost of the translation of the letter is an eligible project expense; and
• While owners aren’t required to specify the reasons for opting out, owners are encouraged to provide as much information as possible to the tenants and HUD.

All tenant notification letters must be reviewed by the contract administrator either before the letters are sent to the tenants or at the time the letters are sent to the tenants to confirm the letters meet the requirements. In cases where HUD isn’t the contract administrator, the owner must send a copy of the notification letter to HUD. Although HUD doesn’t require owners to submit the notification letter for review before issuing it, to avoid situations where a faulty notice must be corrected after it has been given to the residents, owners are encouraged to submit letters for review 30 days in advance of the one-year period.

If an owner sends “does not intend to renew” notification letters, the contract administrator must review the letter within 30 days of receipt from the owner. No HUD approval is required before the one-year clock starts, but if the contract administrator determines that the letter doesn’t comply with HUD requirements, the owner will be notified that a corrected notice must be issued. In these cases, the one-year clock doesn’t begin until the proper notice is provided to HUD, the contract administrator, and the residents. If the contract administrator review determines that the letter is acceptable, no action by the contract administrator is necessary. But if the contract administrator review determines that the letter is unacceptable, the contract administrator will notify the owner that it has failed to provide proper notification.

Enhanced Vouchers for Residents

When an owner elects not to renew a HAP contract but instead chooses to opt out of a project-based Section 8 contract, eligible tenants living in the Section 8 project-based assisted units are given enhanced vouchers. Enhanced vouchers are Housing Choice Vouchers with additional tenant protections.

Residents who receive an enhanced voucher have the right to remain in their units if the units are offered as rental housing. The resident must have been issued an enhanced voucher sufficient to pay the rent charged for the unit, if the rent is reasonable. And owners may not terminate the tenancy of a resident who exercises this right to remain except for cause under federal, state, or local law.

Unlike a regular voucher, the subsidy is “enhanced” to cover the difference between the normally applicable payment standard and the possibly higher proposed rent of the unit. The payment standard for enhanced vouchers is the gross rent of the unit, provided the local housing authority determines the gross rent is reasonable in comparison to similar unassisted units in the market area.

These enhanced vouchers have a special minimum rent requirement. The family must continue to contribute towards rent at least the same amount they were paying for rent, unless the family suffers a decrease in gross family income of at least 15 percent from gross family income on the contract expiration date.

If the resident moves, the enhanced voucher becomes a regular Housing Choice Voucher. The enhanced feature of a voucher is tied to the owner’s site.