RAD PIH Notice 2012-32 (.pdf, 1 MB) - National Low Income ...

Section II: Moderate Rehabilitation Projects1. Length of Contract. Covered projects shall have an initial HAP term of 20 years. Toimplement this provision, HUD is waiving section 8(d)(2)(A) of the Act, whichestablishes a maximum term of 15 years for ―an existing structure.‖ as Additionally, 24CFR § 880.502, which imposes maximum contract terms for New Construction projectsconsistent with statutory authority that was repealed in 1983, will not apply. Owners ofcovered projects are required to make available for occupancy by eligible tenants thenumber of assisted units under the terms of the contract and may not reduce the numberof assisted units without HUD approval. Any HUD approval of an owner’s request toreduce the number of assisted units under the contract shall be subject to conditions thatHUD may impose.2. Contract Renewal. Pursuant to the RAD statute, after the initial term of the HAPcontract, the owner is eligible for renewal of the contract under section 524 ofMAHRAA, subject to the terms and conditions applicable at the time of renewal and theavailability of appropriations each year of such renewal.3. Initial Contract Rent Setting. No additional or incremental funding is associated withthis Demonstration. Consequently, section 8(c)(1) of the Act, which governs rent settingfor project-based Section 8 units, shall not apply. Nor shall section 8(c)(5) of the Act or24 CFR § 880.503(b), which govern the ―project account,‖ apply. At the time thatassistance will be converted, initial contract rents will be established based on currentcontract rent levels. Initial contract rents will be capped at the lesser of: (a) currentcontract rent or (b) 120 percent of the applicable Section 8 FMR minus any utilityallowance. However, when the current contract rent exceeds 120 percent of the FMR butwhere the owner believes that such rents are below the comparable market rent, theowner may request an exception in which the project may receive rents in excess of 120percent of the FMR. The exception rent, if approved, shall be set at the lesser ofcomparable market rents or 150 percent of FMR. Comparable market rents shall bedetermined by HUD in its sole and absolute discretion, based on a Rent ComparabilityStudy (RCS), procured and paid for by the owner. 78 Where contract rents are at or below120 percent of the FMR, no RCS is required.4. Method of Adjusting Contract Rents. Contract rents will be adjusted annually byHUD’s OCAF at each anniversary of the HAP contract, subject to the availability ofappropriations for each year of the contract term. Consequently, neither section 8(c)(2) ofthe Act nor 24 CFR § 880.609, which govern rent adjustments for project-based section 8units, shall apply. While the initial rent is capped, rent caps do not apply when calculatingrent adjustments by OCAF and no RCS is required.78 The Rent Comparability Study must be prepared in accordance with Chapter 9 of HUD’s Section 8 RenewalGuide. See http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8.PIH-2012-32 (HA) Rental Assistance Demonstration – Final Implementation 91