What are the Section 8 HAP contract renewal options?

The six options

• •Option 1A — Mark-Up-to-Market: mark HAP rent up to RCS market rent (capped at 150% of prior rent). Highest-revenue path; choose when the market-rent delta exceeds ~5%.
• •Option 1B — Mark-Up-to-Market with Restrictions: same as 1A but locks in 20-30 year affordability covenants. Typical for LIHTC-compatible capital partners.
• •Option 2 — OCAF adjustment: new rent = current rent × (1 + OCAF), the annually published operating-cost factor. The default when the property is at or above market.
• •Option 3 — Budget-based: rent set to documented operating costs plus a HUD-approved return. Heavier process; use when actual costs outrun the OCAF trajectory.
• •Option 4 — Termination: let the contract expire and convert to market-rate. Rarely chosen — tenant protections make conversion expensive.
• •Option 5 — RAD conversion: replace the HAP with a RAD PBV/PBRA contract. Mandatory rehab (~$25-40K/unit) but 20-year renewable terms and mixed-finance access.
• •Option 6 — Rent reset to comparable rent via RCS, without the 1A/1B mark-up restrictions.

Sponsor decision framework

• •RCS market rent exceeds current HAP rent by >5% → evaluate Option 1A or 1B based on capital-partner requirements
• •At-market with stable operating costs → Option 2 (OCAF)
• •Operating costs have risen materially → Option 3 (budget-based)
• •Property needs major capital investment → Option 5 (RAD conversion)
• •Mixed/unclear → order an updated RCS and re-evaluate