6-3. RENT ADJUSTMENTS FOR MULTI-YEAR CONTRACTS

• A. Rents may be adjusted by either:

  1. An OCAF adjustment; or

  2. A budget-based rent adjustment. If requesting a budget-based rent adjustment, the rent level required to meet operating expenses based on the format required by HUD Handbook 4350.1, Chapter 7 and HUD-9635 , must be submitted with the request. Notwithstanding the instructions in the Handbook, owners must use current debt service if an owner requests a budget-based rent adjustment. If requesting a budget-based rent adjustment:

     • a. The owner must submit or have submitted within the preceding 5 years a RCS prepared following the instructions found in Chapter Nine of the Section 8 Renewal Guide. This requirement does not apply if the owner is seeking a “0” budget based rent adjustment.

     • b. Previously submitted RCS’s are valid for 5 years and will be adjusted annually by OCAF.

       • c. If the RCS demonstrates that the current rents are above comparable market rents, the request for a budget-based rent adjustment will be denied (except any request for a $0 budget-based rent adjustment) and owner will only receive an OCAF rent adjustment.

     • d. If the proposed rents as adjusted based on a budget, do not exceed comparable market rents as established by the RCS, the owner may, at HUD’s discretion, receive a budget-based rent increase, not to exceed comparable market rents.

Note: In the case of a 515 project, accept the RHS approved budget without review; however, the owner will be required to submit a RCS if the resulting rents exceed the rents the project would have received from an OCAF adjustment (see chapter 14)

Note: In the case of a 202 project with a written and signed “Debt Service Savings Agreement,” HUD will allow the dollar amount listed in the agreement to be included in the budget.

• B. There is no “lesser of” test required at the time of the annual rent adjustment for a multiyear HAP contract.

• C. See Section 2-17.B for processing instructions.