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able debt service coverage will generallybecome the allowable distribution for rent-settingpurposes.If feasible, outstanding HUD loans are supposedto be repaid in conjunction with thedecoupling transaction. The HUD field officenow has authority to approve deferral ofFlexible Subsidy, Section 241, and other loans ifrepayment is inconsistent with preservationgoals.4. IRP POOLED GRANTS/LOANS(SECTION 236(s))The Section 236(s) program was authorized byMAHRA in 1997 but is not yet operational. Itpermits HUD to recapture and pool IRP subsidiesfrom Section 236 mortgage prepayments,foreclosures, and insurance terminations—andthen to recycle them as rehab grants and loansto eligible projects. Eligible properties arebroadly defined as any project—including butnot limited to Section 236 projects—that had aHUD-insured mortgage and a Section 8 projectbasedcontract on October 27, 1997. Funds maybe used for rehabilitation, replacement reservecontributions, and debt service payments onnon-federal rehabilitation loans. HUD will determineapplicable use restrictions. This is a significantpotential resource because no new appropriationsare required: the budget authorityalready exists through re-programming of existingIRP funds.Despite the program’s promise, its current statusis uncertain. HUD has recently proposedeliminating the loan mechanism. If implemented,the program will likely be limited to grants.Further, in the FY2002 HUD-VA SupplementalAppropriations Act, Congress rescinded virtuallythe entire IRP pool.5. ENHANCED VOUCHERSThis program provides tenant-based assistanceto eligible tenants when an owner prepays asubsidized mortgage, terminates the HUD mortgageinsurance, or opts out of a Section 8 subsidycontract. 23 The purpose is to enable tenantsto remain in the housing. EnhancedVouchers are also available to tenants inFlexible Subsidy projects in conjunction withapproved preservation transactions.The Enhanced Voucher payment standard is setat the market rent for the property, subject torent reasonableness as determined by the localpublic housing authority (PHA), which administersthe program for HUD. Rents are adjustedannually to reflect changes in the market. Theregular voucher payment standard is reinstatedwhen the tenant moves.Enhanced Voucher tenants have a right toremain in the property as long as it is availablefor rental use and the owner agrees to the PHAapprovedrent. If tenants exercise their right toremain, the owner may not terminate the tenancyexcept for cause under federal, state, or locallaw.The Enhanced Voucher program is described inChapter 11 of HUD's "Section 8 Renewal PolicyGuidebook." Detailed program rules are promulgatedby the Office of Public and IndianHousing. 24EligibilityTo qualify for Enhanced Vouchers in a Section 8opt-out, low-income tenants must have incomesat or below 80 percent of median, and theymust be covered by the Section 8 contract atthe opt-out date. In the case of subsidizedmortgage prepayments or insurance terminations,eligible tenants—including tenants coveredby a Section 8 contract—are low-incomehouseholds who reside in the housing on theprepayment or insurance termination date.Moderate-income tenants—those with incomesat or below 95 percent of median—may alsoqualify if they are elderly/disabled or if the projectis located in a low-vacancy area. Tenants inFlexible Subsidy projects are subject to thesame eligibility criteria.LimitationsWhile Enhanced Vouchers provide more tenantprotections now than in the past, they do nothold existing tenants entirely harmless. If the15chapter two: Federal Preservation Tools 15