Option Four – Renewal of Projects Exempted from OAHP
Certain project types are not eligible for OAHP, formally known as OMHAR, even though the contract rents may exceed market. Projects without FHA-insured loans are exempt, as are certain FHA-insured properties.
The “Lesser of” Test
Projects submitting a renewal under Option Four are subject to the “Lesser of” test. The “Lesser of” test will set the renewal rents at the lesser of the current rent potential adjusted by the current OCAF rate or a budget based* rent adjustment submitted in accordance with HUD Handbook 4350.1, Chapter 7
If the budget based rent adjustment results in a decrease in the Section 8 rents then the renewal rents will be set at the decreased rents.
The following projects are considered exception projects and are eligible for renewal under Option Four:
· State or Local Government financing: Projects for which the primary financing or mortgage insurance was provided by a unit of State government or a unit of general local government (or an agency or instrumentality of either) and is not insured under the National Housing Act.
· Section 202/8 and 515/8 Projects: Projects currently financed under Section 202 of the Housing Act of 1959 or Section 515 of the Housing Act of 1949. However, these projects can be eligible for restructuring if refinanced with FHA mortgage insurance. Section 202 and 811 Capital Advance projects are not eligible because they do not have Section 8 contracts.
· SRO Mod Rehab: Projects that have an expiring contract under Section 8 of the United States Housing Act of 1937 pursuant to Section 441 of the Stewart B. McKinney Homeless Assistance Act.
· Section 512 (2) of MAHRA: Projects that do not qualify as eligible multifamily housing projects pursuant to Section 512(2) of MAHRA include:
· A project that is not subject to a HUD-held or insured mortgage
· A project that has FHA mortgage insurance or is HUD-held with rents at or below comparable market rents. (For an Owner of an FHA-insured or HUD-held project to claim eligibility under this section, they must obtain a RCS.)
For complete guidance and information regarding Option Four please read Chapter 6 of the Section 8 Renewal Policy guidebook. Information on submitting a budget based rent adjustment can be found in HUD Handbook 4350.1, Chapter 7.
· Budget Based Rent Adjustment (if applicable)
· Utility Allowance Analysis (if applicable)
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