9-2. APPLICABILITY OF CHAPTER NINE

This Chapter provides guidance on HUD’s standards for preparing, submitting, and reviewing an RCS. More specifically:

• A. It provides guidance to Owners and RCS appraisers for preparing and submitting an RCS.

• B. It defines the limited circumstances under which an Owner may employ an alternative mechanism for setting contract rent levels instead of an RCS when requesting renewing under Option One or Two (see Section 9-4).

• C. It provides guidance to RCS reviewers, including HUD staff, Contract Administrators (CA), and the Office of Recapitalization (Recap). Recap has amended its Operating Guide and will apply the Rent Comparability Grid (Form HUD-92273-S8) and the guidelines in Sections 9-9 through 9-13 to Recap’s processes for reviewing an RCS.

• D. When Section 8 Project-Based Rent Adjustments Using the Annual Adjustment Factor (AAF) (Notice H 02-10) is applicable, and an Owner of a new construction/ substantial rehabilitation project is required to submit Estimates of Market Rent by Comparison (Form HUD-92273), the Owner must use one of the following two methods

1 However, under Option Three-B, rents may be set at a level above market if approved by the PAE. 2 Section 512(1) of MAHRA

3 HUD uses the term “comparable market rents” to describe these rents.

Chapter Nine – Published March 2023

1

instead of following the instructions in this Guide, determined by the project and transaction:

1. Submit the Rent Comparability Grid, RCS Submittal Cover Letter, an Initial Screening Checklist, a Detailed Screening Checklist, a Rent Grid Analysis Checklist, and a Certification of Substantive Reviewer. The Owner must require the RCS appraiser preparing the reports to do so in accordance with the guidance in Sections 9-8 through 9-13 and must follow the instructions provided in Fiscal Year 1997 Annual Adjustment Factor (AAF) Requirements (Notice H 97-14) to determine which units must be included in the RCS.

2. Submit the Request to Renew Using Non-Section 8 Units in the Section 8 Project as a Market Rent Ceiling (Form HUD-9629), deleting references to renewals and instead referring to rent comparisons required by Notice H 97-14. In order to use this method, the project must meet all the conditions in paragraph 9-6.B of this Chapter for all unit types for which Notice H 97-14 requires the use of Estimates of Market Rent by Comparison , substituting references to renewals with references to rent comparisons when reading Section 9-6.

Other provisions of Notice H 97-14 (e.g., adding initial difference to the rent resulting from the analysis in paragraph 1 or 2 above), still apply, and Notice H 97-14 determines which units the RCS must cover. “Initial difference” means the dollar amount by which the initial Section 8 contract rents exceeded the original comparable rents (or the Fair Market Rents, if they were originally used instead of comparables). The Owner must submit evidence of the initial difference.

• E. This Chapter does not apply to market rent analyses required in the processing of applications for FHA insurance.