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| ![](media/image1.wmf){w     | **U.S. Department of Housing and Urban |
| idth="0.9048611111111111in" | Development**                          |
| hei                         |                                        |
| ght="0.8777777777777778in"} | **Office of Housing**                  |
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**Special Attention of:**

> **Notice: H 2002-10**

All Regional Directors **Issued: May 17, 2002**

All Multifamily Hub Directors **Expires: May 31, 2003**

All Multifamily Program Center Directors
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

All Contract Administrators Cross References:

All Owners and Managements Agents of Section 8 Properties

**Subject:** Section 8 Project-Based Rent Adjustments Using the

Annual Adjustment Factor (AAF)

**[PURPOSE:]{.underline}**

This Notice describes updated procedures for annual adjustment of
pre-renewal contract rent for Section 8 projects where rent is adjusted
using the HUD-published Annual Adjustment Factor. This Notice also
describes the procedures for applying statutory comparability
requirements in AAF adjustments for Section 8 new construction and
substantial rehabilitation projects, including updated guidance
concerning Rent Comparability Studies (RCS). The procedures implement
statutory requirements and they will **[not be waived]{.underline}**.

**[NOTICE APPLICABILITY]{.underline}**:

What units are covered under this Notice?

This Notice applies to AAF adjustments of contract rent for a Section 8
project-based HAP contract that is assisted under the Section 8 new
construction, substantial rehabilitation, loan management and property
disposition programs.

This Notice does **NOT** apply to HAP contracts that renewed under the
Multifamily Assisted Housing Reform and Affordability Act of 1997
(MAHRA), after expiration or termination of the original HAP contract
term.

This Notice does **NOT** apply to budget-based adjustments of contract
rent.

This Notice does **NOT** apply to the Section 8 Voucher Program, the
Moderate Rehabilitation program (including the Moderate Rehabilitation
Single Room Occupancy (SRO) Program), or to Section 8 Project-Based
assistance under the Project-Based Certificate or Project-Based Voucher
Programs.

**[When is this Notice effective?]{.underline}**

The procedures in this Notice apply to rent adjustments for HAP contract
anniversaries that fall on or after the publication date of this Notice.

**[BACKGROUND:]{.underline}**

This notice specifies procedures for contract rent adjustments using the
HUD-published AAF in accordance with 42 U.S.C. 1437f (§ 8(c)(2)(A) of
the United States Housing Act of 1937).

For Section 8 new construction and substantial rehabilitation units, the
AAF-based rent adjustment is subject to rent comparability if the
pre-adjustment gross rent (contract rent plus any allowance for
tenant-paid utilities) is above the HUD-published fair market rent (FMR)
for the area in which the project is located. The owner must submit a
RCS to support any increase in the contract rent by application of the
AAF.

Each year, HUD publishes two separate AAF tables in the Federal Register
(24 CFR Part 888, Schedule C, Tables I and II). As required by law, each
Table II AAF is 0.01 less than the corresponding Table I AAF for the
same area and bedroom size. In general, Table I AAFs are used to adjust
contract rent for units occupied by a new family since the last contract
anniversary (turnover units), and Table II AAFs are used to adjust
contract rent for non-turnover units. The FY 2002 AAFs were published in
the Federal Register on Monday November 26, 2001.

**Part I** of this Notice describes the procedures for adjusting
contract rent of Section 8 new construction and substantial
rehabilitation units for which the pre-adjustment contract rent exceeds
the FMR.

**Part II** of this Notice describes the procedures for adjusting
contract rent of:

-   All other Section 8 new construction and substantial rehabilitation
    units (i.e., units not covered by Part I);

-   All Section 8 loan management (LM) and property disposition (PD)
    units where rents are adjusted by application of the AAF (but not
    for units for which HUD elects a budget-based adjustment of the
    contract rent).

**[This Notice includes the following appendices:]{.underline}**

1\. Part One Adjustment Worksheet

2\. Part Two Adjustment Worksheet

3\. Sample Owner's Certification Form

4\. Sample Format for Reporting Unit Turnover

5\. Owner Certification for RCS Adjustment

6\. HUD 92273-S8 Rent Comparability Study Form (RCS)

**[WHEN AND HOW AN OWNER REQUESTS AN AAF RENT ADJUSTMENT:]{.underline}**

**Owner's request for AAF Adjustment:**

The contract rent shall not be increased unless the owner has timely
submitted a written request for an AAF rent adjustment to the Contract
Administrator (HUD/CA or Public Housing Agency). The owner's request
must include all of the required submissions to support the adjustment.
The request must be in the form and manner required by HUD, as described
in this Notice. If the owner is required to submit an RCS to support the
rent adjustment, the owner's submission must include the required
comparability analysis.

# **When the Rent Adjustment is Effective:**

An AAF contract rent increase is effective for contract months
commencing on the later of:

\(1\) The annual contract anniversary date for which the adjustment is
requested, or

\(2\) The first contract month beginning at least two months after the
owner has submitted all required materials to the CA (but no later than
two months before the next annual contract anniversary date).

**The following principles apply:**

-   [When the Owner's request with all required materials is submitted
    within the two-month deadline]{.underline}:

If the owner's request for the annual rent adjustment (with all required
materials) is submitted at least [two months before the annual contract
anniversary date]{.underline} for which the adjustment is requested
("two-month deadline"), any increase is effective for the contract
months beginning on the annual contract anniversary date. ***Note: The
increased rent is the base for any special adjustment, and for the next
annual adjustment.***

-   [When the Owner's request is submitted late ("extended
    deadline")]{.underline}:

If the owner's request for the annual rent adjustment is submitted
[after the two-month deadline, but not after the end of the twelve-month
period commencing on the two-month deadline date]{.underline} ("extended
deadline"), any increase is effective only for contract months beginning
at least two months after submission of the owner's request. The
contract rent for prior contract months will not be increased, however,
the increased rent is the base for any special rent adjustment and for
the next annual adjustment.

-   [When the Owner's request is not submitted by the extended
    deadline]{.underline}:

If the owner's request for the annual rent adjustment is submitted after
the extended deadline, the owner's request is not accepted, and the
contract rent is not increased.

***Note: A special rent adjustment is never approved to make up any loss
of contract rent where rent is not increased at the annual anniversary
date because the owner failed to submit their request by the two-month
deadline.***

**PART 1: NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION**

**CONTRACTS WHERE PRE-ADJUSTMENT GROSS RENTS ARE ABOVE**

**THE PUBLISHED FMR**

**When comparability applies:**

Comparability only applies if the [pre-adjustment gross
rents]{.underline} for new construction or substantial rehabilitation
contract units are above the published FMR for the unit size in the area
where the project is located. Comparability ***does not*** apply to the
determination of the annual adjustment for project-based units assisted
under the loan management or property disposition programs.

"Gross rent" is the sum of the contract rent for each unit size, plus
any applicable allowance for tenant-paid utilities. The calculation of
gross rent is based on the [pre-adjustment]{.underline} gross rent for
the contract month [before]{.underline} the annual contract anniversary,
including any special adjustment included in the pre-anniversary
contract rent, but not including any additional adjustment by
application of the AAF at the annual anniversary.

# **When an Owner Must Submit a RCS:**

If comparability applies, the owner must submit a RCS to the CA. The RCS
must be submitted with the owner's request for an AAF rent increase. The
contract rent will not be increased unless the owner has submitted the
RCS in the form and manner required by HUD.

### **How to Determine Comparability:**

On January 19, 2001, HUD issued the Section 8 Renewal Policy Guide.
Chapter Nine of the Guide contains detailed instructions for conducting
and reporting results of the RCS. The RCS instructions contained in the
Section 8 User Guide must be used in preparing the RCS for AAF rent
adjustments. The Section 8 User Guide is available at
[**www.hudclips.org**](http://www.hudclips.org/)

The RCS must include the comparability analysis for all unit sizes
assisted under the HAP contract (0 bedroom (BR), 1 BR, 2 BR, etc;) and
must be submitted on form HUD‑92273-S8 (7/00), Estimates of Market Rent
by Comparison (Appendix 6 of this Notice).

**Adjusting the RCS:**

Some owners of projects that have not yet renewed under MAHRA and who
utilize the AAF as the method of rent adjustment have requested that HUD
permit the five-year RCS that is used for MAHRA contracts to be used for
AAF properties. Unfortunately, the Department is unable to approve such
a request.

However, in an effort to reduce the costs associated with conducting
comprehensive annual RCS's, the Department has determined that owners of
AAF properties may submit an "updated RCS" rather than a new RCS. The
updated RCS may be used for a period of four years (the original
submission plus four (4) updates). A certified appraiser must prepare
the updated RCS. HUD anticipates that the costs associated with an
updated RCS should be considerably less than a new study (see Appendix
5).

In addition to annual rent adjustments, owners are permitted to request
HUD approval of justified "special rent adjustments" during the contract
year. Eligible expenses for special adjustments are defined in HUD
Handbook 4350.1, Chapter 34. Special rent adjustments must **NOT**
result in contract rents that exceed the comparable market rent.

**[HOW TO CALCULATE THE PART I ANNUAL ADJUSTMENT:]{.underline}**

The CA will apply the published AAF in Table I and will ask the
following question for each unit type: "**Will the resulting rent still
be equal to or lower than the comparable rent?\" (NOTE:** Throughout
Part I of this Notice, when applying the published AAF, the factor of
1.000 must be used in all cases where the published factor is below
1.000.)

A. **If yes,** then the published AAF in Table I is applied to adjust
contract rent for units in which turnover occurred since the last HAP
anniversary date (see Appendix 4). The published AAF in Table II is used
to adjust contract rents for units in which turnover has **not**
occurred.

B. **If no (the pre-adjustment contract rent multiplied by the Table I
AAF exceeds the comparable market rent),** then the CA must:

1.  Determine the adjusted comparable rent (sum of the comparable rent
    plus any "initial difference" (see below);

2.  Multiply the pre-adjustment contract rent times the Table I AAF;

3.  If the amount calculated in Step 2 above is equal to or less than
    the adjusted comparable rent, then calculate the adjusted contract
    rent in accordance with paragraph A above.

4.  If the adjusted comparable rent is less than the amount calculated
    in Step 2 above, then calculate the adjusted contract rent in
    accordance with paragraph C below.

C. If the adjusted comparable rent is less than the amount calculated in
Step 2 (pre-adjustment contract rent times the Table I AAF), then the
adjusted comparable rent is the new contract rent, and by statute, will
be applied to all units regardless of turnover.

When the adjusted contract rent is determined, the owner must be
notified of the new contract rent. The Field Office Worksheet
(Appendices 1 and 2) is used to determine the new contract rent level
and should be attached to all correspondence informing the owner of the
new rent level.

**How to determine adjusted comparable rent:**

The "adjusted comparable rent" is the sum of the comparable rent (as
documented by the rent comparability study), plus the initial
difference. The initial difference is the dollar amount by which the
initial Section 8 contract rent exceeded the original comparable rent
(or the FMR if originally used instead of a comparable).

The owner must submit adequate evidence of the initial difference. If
the owner does not submit adequate evidence of the amount of the initial
difference to the contract administrator and if the initial difference
is not documented in the project file (generally maintained by the local
HUD Office), then the CA must use 10% of the initial Section 8 contract
rent for that unit, as a substitute for the initial difference.

For Financial Adjustment Factor (FAF) properties, the initial difference
should also include the original dollar figure of the FAF, if the FAF
has not been removed as a part of a refinancing transaction.

Once the initial difference is determined for each unit type, the
initial difference is added to the comparable rent for each unit type to
determine the ***Adjusted Comparable Rent***.

**How to determine adjusted rent if an owner does not request a rent
increase:**

If an owner does not request an increase or fails to submit a request
based on the procedures in this Notice, then the adjusted contract rents
are the same as the pre-adjustment contract rents. Rent decreases in
Section 8 new construction and substantial rehabilitation projects, are
specifically prohibited by law, unless the project has been refinanced
and the refinancing reduces owner\'s periodic payments.

**[EXAMPLES OF PART I IMPLEMENTATTON:]{.underline}**

A New Construction Project with 100% Section 8 adjusted by the AAF. The
property has 100 units, 20 have turned over since the last anniversary
date, and 10 have remained vacant since the last anniversary date. The
rents at this property for 1 BR units are \$400 and \$500 for 2 BR
units. The initial Section 8 contract rents on this property in 1979
were \$210 for 1 BR units and \$260 for 2 BR Units. Published FMRs for
this area are \$375 for a 1 BR and \$475 for a 2 BR. The published AAF
in Table I (AAF for Turnover Units) is 1.054 and the published AAF in
Table II (AAF for non-turnover Units) is 1.044.

***Scenario 1: Project is eligible to receive the AAF based on the
comparable rents.***

The owner submits a form HUD-92273-S8 for the 1 BR rents and a form
HUD-92273-S8 for 2 BR rents, both completed in accordance with
instructions contained in Chapter Nine of the Section 8 User Guide. The
Estimated Market Rents on these forms are \$410 for a 1 BR and \$510 for
a 2 BR. HUD receives these forms 60 days prior to the contract
anniversary date and begins processing for a thirty-day turnaround.

Applying the Table I AAF to the current rents of \$400 and \$500 would
result in new rent levels of \$422 and \$527, both above the rent levels
that the comparable produced. The owner did not submit evidence of the
initial difference, so the PM/CA would use 10% of the initial Section 8
contract rent as a substitute for the initial difference. For 1 BR
units, this figure would be \$21 (10% of \$210) and for 2 BR units, this
figure would be \$26 (10% of \$260). These figures added to comparable
rents of \$410 and \$510 would produce adjusted comparable rent levels
of \$431 for 1 BR units and \$536 for 2 BR units.

Since these rent levels are both above the rent levels produced by the
Table I AAF of \$422 and \$527, respectively, then the maximum rent
levels that would be permitted are the rents produced by application of
the appropriate AAF published in the Federal Register.

Since adjustment by the AAF is permitted based on the comparable rents
plus the initial difference, then the 1 BR rent levels would be \$422
for the units in which turnover occurred and \$418 for the units in
which turnover has not occurred (including any units which were vacant
at the time of the last annual adjustment). In deriving the new GRP for
this unit type, \$422 would be multiplied by 20 (turnover units) and
\$418 would be multiplied by 80 (non-turnover units) to produce a
monthly GRP of \$8,440 (for turnover units) plus \$33,440 (for
non-turnover units) which equals \$41,880, divided by 100 units would
yield a rent of \$419 for all one bedroom units. The same calculation
would then be performed for the 2 BR units.

***Scenario 2: The Project is only eligible for the comparable rents.***

The owner submits a form HUD-92273-S8 for the 1 BR rents and a form
HUD-92273-S8 for 2 BR rents, both completed in accordance with
instructions contained in Chapter Nine of the Section 8 User Guide. The
Estimated Market Rent on these forms are \$400 for a 1 BR and \$500 for
a 2 BR. HUD receives these forms 60 days prior to the anniversary date
and begins processing for a thirty-day turnaround.

Applying the Table I AAF to the current rents of \$400 and \$500 would
result in new rent levels of \$422 and \$527, both above the rent levels
that the comparable produced. The owner did not submit evidence of the
initial difference, so the PM/CA would use 10% of the initial Section 8
contract rent as a substitute for the initial difference. For 1 BR units
this figure would be \$21 (10% of \$210) and for 2 BR units, this figure
would be \$26 (10% of \$260). These figures added to comparable rents
would produce adjusted comparable rent levels of \$421 for 1 BR units
and \$526 for 2 BR units. Since these rent levels are both below the
rent levels produced by the AAF in Table I of \$422 and \$527,
respectively, then the comparable rent plus the initial difference would
be the maximum permissible rents HUD could approve.

**PART 2: NEW CONSTRUCTION AND SUBSTANTIAL REHABILITATION**

CONTRACTS WHERE THE PRE-ADJUSTMENT GROSS RENT FOR THE SPECIFIC UNIT TYPE
DOES NOT EXCEED THE CURRENT PUBLISHED APPLICABLE EXISTING FMR; AND ALL
SECTION 8 LMSA AND PD CONTRACTS IN WHICH THE METHOD OF RENT ADJUSTMENT
IS THE ANNUAL ADJUSTMENT FACTOR.

Where the rent level for a specific unit type falls under one of the
conditions stated above, the contract administrator applies the
appropriate AAF to the pre-adjustment contract rent for the unit type.

For units in which turnover has occurred since the last HAP anniversary
date, the AAF in Table I will be applied. For units in which turnover
did **NOT** occur since the last HAP anniversary date, the AAF in Table
II will be applied.

The owner must submit a statement specifying the number of contract
units in which turnover occurred since the last HAP contract anniversary
date.

**[Special Rent Adjustments and Rent Comparability
Studies]{.underline}**:

HUD Handbook 4350.1, Chapter 34, Section 3, provides instructions for
approving and calculating special rent adjustments for AAF units. At its
discretion, HUD may approve special rent adjustments to cover a
substantial and general increase in real property taxes, assessments,
utility rates and hazard insurance increases, where the increased cost
is not sufficiently covered by the annual AAF adjustment.

HUD may approve a special rent adjustment that increases contract rents
up to the comparable market rent, but in no case can the special rent
adjustment increase rents above the comparable rent for unassisted units
in the local housing market. Since special rent adjustments are provided
at HUD's discretion, owners must always submit a RCS when requesting a
special rent adjustment.

**[Prohibition of rent reduction for NC & SR projects:]{.underline}**

If an owner does not request an increase or fails to submit a request
for adjustment (for new construction or substantial rehabilitation
projects) in accordance with this Notice, then the contract rents will
remain the same as the pre-adjustment contract rents (not including any
prior special adjustment).

Rent reductions in Section 8 new construction and substantial
rehabilitation are specifically prohibited by law, unless the project
has been refinanced and the refinancing reduces the owner\'s periodic
payments. The annual adjustment for new construction or substantial
rehabilitation units shall not result in a decrease of the
pre-adjustment contract rent (not including prior special adjustments).

**[Field Office Worksheets:]{.underline}**

**THE FIELD OFFICE WORKSHEETS** found at Appendices 1 and 2 of this
Notice must be used for both Part 1 and Part II rent adjustments. The
worksheets must be used to calculate the rents, as they are based in
statute. A worksheet should be completed for each unit type.

**[OWNER SUBMISSION REQUIREMENTS FOR PART I]{.underline}:**

Where rent levels for a specific unit type, in a substantial
rehabilitation or new construction contract, exceed the existing FMR for
that specific unit type, then the owner must submit the following items
in order to be eligible to receive a rent increase for that unit type:

-   Form HUD-92273-S8 (7/00), Estimates of Market Rent by Comparison,
    completed in accordance with the instructions outlined in Chapter
    Nine of the Section 8 User Guide. (See Appendix 6)

-   A copy of the owner certification (Appendix 3) (Only one
    certification per project is necessary regardless of the number of
    unit types for which a rent increase is requested).

-   The number of units in which turnover occurred since the last HAP
    contract anniversary, FOR EACH UNIT TYPE (a sample format for
    reporting can be found at Appendix 4).

NOTE: Appendices 3 and 4 provide sample formats in which information may
be reported or certification language is presented. These formats may be
modified so long as the certification language contained in Appendix 3
is presented exactly as printed and the information required by Appendix
4 is contained in the modified format.

**Optional Information:**

-   Evidence of the Initial Difference which existed between the
    original contract rents and underwriting comparable, or the FMRs at
    the time of initial underwriting, including any FAF which was a part
    of the original rents. (If this figure, and the documentation to
    support this figure, is not submitted, then HUD will use 10% of the
    initial Section 8 contract rent as a substitute for the initial
    difference)

-   Adjusted RCS.

**[OWNER SUBMISSION REQUIREMENTS FOR PART II]{.underline}:**

Where the rent levels for a specific unit type, in a substantial
rehabilitation or new construction contract, **DOES NOT** exceed the
existing FMR for that specific unit type, and for all LMSA and PD
Section 8 contracts where rents are adjusted by the AAF, the owner must
submit the following items in order to be eligible to receive a rent
increase for that unit type:

-   The number of units in which turnover occurred since the last HAP
    contract anniversary, FOR EACH UNIT TYPE (a sample format for
    reporting is attached in Appendix 4).

**[OWNERS OF SUBSTANTIAL REHABILITATION AND NEW CONSTRUCTION PROPERTIES
WITH BOTH PART I AND PART II UNIT TYPES]{.underline}**

Unit types are treated individually. In some situations, new
construction and substantial rehabilitation properties may have some
unit types that meet the requirements of Part I and other unit types
that meet the requirements of Part II. When an owner encounters this
condition at a property, they are required to submit the information for
each unit type based on the section of this Notice that the rent
increase will be processed under.

For example, a new construction property where the 1 BR rents exceed the
current FMRs, but the 2 BR rents do not. In requesting a rent increase,
the owner should detail in the request to the CA that the 1 BR units
exceed the published FMR and thus the information submitted is that
required for a Part I request. However, the 2 BR units do not exceed the
published FMR and therefore the information submitted for the 2 BR units
is that required for a Part II request. The units that are above the FMR
must complete a RCS, while units below FMR do not need a RCS. This
policy is unit, not project specific.

If you have any further questions regarding this notice, please contact
Peter Giaquinto at (202) 708-2866, or your Section 8 Help Desk Officer.

#  John C. Weicher

> Assistant Secretary for Housing -

#  Federal Housing Commissioner

**APPENDIX 1**

**PART I ADJUSTMENTS WORKSHEET**

**CONTRACT ADMINISTRATOR WORKSHEET FOR**

**PROCESSING RENT INCREASES FOR AAF RENT ADJUSTMENTS FOR NEW
CONSTRUCTION**

**AND SUBSTANTIAL REHABILITATION UNIT TYPES IF THE PRE-ADJUSTMENT GROSS
RENT EXCEEDS THE**

**EXISTING HOUSING FAIR MARKET RENT**

**(NOT USED TO CALCULATE BUDGET BASED RENT INCREASES)**

Property Name: Unit Type:

**Step 1:** Is this contract a New Construction or Sub Rehab contract? ;
AND

> Is the current gross rent for this unit type (before application of
> the AAF) above the Existing Housing FMR?

If the answer to BOTH questions is **YES**, then go to Step 2.

> If the answer to EITHER question is **NO**, this worksheet does not
> apply. Contract rent for this unit type is adjusted under Part II of
> this Notice. Go to Part II Adjustments Worksheet at Appendix 2.

**Step 2:** Multiply the Table I AAF times the pre-adjustment contract
rent. (NOTE: Use a factor of 1.000 if the published Table I AAF is below
1.000.)

[\_\_\_\_\_\_]{.underline}

Pre-adjustment

Contract Rent x Table I Factor = Step 2 Amount

**Step 3:** Add the initial difference to the comparable rent.

\$ [\_\_\_\_\_]{.underline} + \$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ =
\$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Comparable Rent Initial Difference Adjusted

Comparable Rent

**STEP 4:** Determine if the amount calculated in Step 2 is more than
the adjusted comparable rent calculated in Step 3.

\$ \$

Amount calculated Adjusted Comparable

In Step 2 Rent (from Step 3)

b.  If the amount calculated in Step 2 is more than the adjusted
    comparable rent, go to Step 6a and enter the amount of the adjusted
    comparable rent (in this case, the adjusted contract rent equals the
    adjusted comparable rent).

> b\. If the amount calculated in Step 2 is equal to or less than the
> adjusted comparable rent, go to step 5.

**Step 5:** For units in which turnover occurred in the last year, use
AAF Table I to calculate the rents. For units in which no turnover
occurred in the last year use AAF Table II to calculate the rents.
(NOTE: Throughout this Worksheet, when applying the published AAF, the
factor of 1.000 must be used in all cases where the published factor is
below 1.000.)

# ***Turnover units***

**Step 5a:**

\$ x \_\_\_ = \$ [\_]{.underline}

Pre-Adjustment Table 1 Adjusted Contract

Contract Rent Factor Rent for Turnover

> Units (enter this
>
> amount in Step 6b)

# ***Units with no turnover***

**Step 5b:**

\$ [\_\_\_\_\_\_\_\_\_]{.underline} x = \$ [\_\_]{.underline}

Pre-Adjustment Table 2 Adjusted Contract

Contract Rent Factor Rent for Non-

Turnover Units

> (enter this amount in Step 6c)

**Step 6:** Enter the adjusted contract rent.

a\) From Step 4a \$ for all units; **OR**

b\) From Step 5a \$ for units with turnover

Number of Units with turnover: \_\_\_\_\_\_\_\_\_

c\) From Step 5b \$ for units with no turnover

Number of Units with no turnover: \_\_\_\_\_\_\_\_\_

**Step 7:** Repeat Steps 1 through 6 for each unit type.

**STEP 8:** If Step 5 resulted in different rent levels for the same
unit type, then a common rent level for this unit type must be derived.
Use the rent levels listed in Step 6 to derive a new monthly Contract
Rent Potential.

\$ \_\_\_\_\_\_ for units with turnover X (units) = \$
[\_\_\_\_\_]{.underline}

\$ [\_\_\_]{.underline} for units with no turnover X (Units) = \$

Add the two numbers calculated above to derive total Contract Rent
Potential

\$ + \$ = \$

Turnover No Turnover Total

Divide Total Contract Rent Potential by the number of units for this
unit type to obtain the new rent level for all BR units.

\$ Total Contract Rent Potential divided by \_\_\_\_\_ units = \$ New
Rent Level

**STEP 9:** The new rent level for all BR units is

approved at \$ .

**APPENDIX 2**

**PART II ADJUSTMENTS WORKSHEET**

**FIELD OFFICE WORKSHEET FOR**

**PROCESSING RENT INCREASES FOR AAF RENTS FOR NEW CONSTRUCTION**

**AND SUBSTANTIAL REHABILITATION UNIT TYPES THAT DO NOT EXCEED**

**THE EXISTING HOUSING FAIR MARKET RENTS AND FOR ALL LMSA AND PD**

**SECTION 8 CONTRACT TYPES.**

**(NOT FOR USE ON BUDGET BASED RENT INCREASES)**

Property Name**:** Unit Type:

**Step 1:** **If this contract is a New Construction or a Substantial
Rehab contract, i**s the current gross rent for this unit type (before
application of the AAF) below the Existing Housing FMR? ;

**OR**

> **If this contract is an LMSA or PD contract,** is the method of
> adjustment for gross rent the application of the AAF (as opposed to
> budget‑based)?
>
> (NOTE: Budget‑based rents are NOT processed under this Notice. See
> Chapter 7, Handbook 4350.1)
>
> If the answer to the **applicable question is YES,** then proceed to
> Step 2.
>
> If the answer to the **applicable question is NO,** then this unit
> type should be adjusted under Part I of this Notice. This worksheet
> does not apply. Please find Part I Adjustments Worksheet at Appendix
> 1.
>
> If the second question is applicable and the answer is NO, then this
> Notice is not applicable and the rents should be adjusted under
> Chapter 7, Handbook 4350.1.

**Step 2:** For units in which turnover occurred in the last year, use
AAF Table I to calculate the rents. For units in which no turnover
occurred in the last year, use AAF Table II to calculate the rents.
(NOTE: Throughout this Worksheet, when applying the published AAF, the
factor of 1.000 should be used in all cases where the published factor
is below 1.000.)

Turnover units

\$ X = \$

Current Rent Table I Factor New Rent Level

Units with no Turnover

\$ [\_\_]{.underline} X = \$ [\_\_\_\_]{.underline}

Current Rent Table II New Rent Level

Factor

**Step 3:** The new rent level(s) for unit type is:

\$ for units with turnover (Number of Units )

\$ for units with no turnover (Number of Units )

**Step 4:** Since the calculation in Step 3 resulted in different rent
levels for the same unit type, then a common rent level for this unit
type must be derived. Use the rent levels listed in Step 3 above to
derive a new monthly Gross Rent Potential (GRP).

\$ for units with turnover X \_\_\_\_(Units) = \$

\$ for units with no turnover X
[(]{.underline}Units)=\$\_\_\_\_\_\_\_\_\_

> Add the two numbers calculated above to derive the total Contract Rent
> Potential
>
> \$ + \$ [\_\_\_]{.underline} = \$ [\_\_\_\_]{.underline}

Turnover No Turnover Total Contract Rent

Potential

Divide Total GRP by the number of units for this unit type to obtain the
new rent level for all BR units.

\$ Total GRP divided by units = \$

New Rent Level

**Step 5:** The new rent level for all BR units is approved at \$ .

**APPENDIX 3**

**SAMPLE FORMAT FOR**

**OWNER\'S CERTIFICATION OF COMPLIANCE WITH THE REQUIREMENTS OF**

**NOTICE:**

***Annual Adjustment Factor Rent Increase Requirements Pursuant to***

***42 U.S.C.* 1437f(c)(2)(A).**

Property Name:

FHA Number:

Section 8 Contract Number:

The attached represents a request for a rent increase for the
aforementioned property and the following unit type(s) (e.g. 1 BR,
2BR/2BA, 3 BR, etc.):

I certify as the owner of the property (or the agent empowered to act on
behalf of the owner) that all of the following items are true:

-   Preparations of all copies of form HUD-92273-S8 were completed IN
    ACCORDANCE WITH INSTRUCTIONS CONTAINED IN Chapter Nine of the
    Section 8 User Guide.

-   If project funds were used to pay for the completion of form(s)
    HUD-92273-S8, I certify that I am in compliance with the Contracting
    Guidelines set forth in Paragraph 6.50 of Handbook 4381.5, REV‑2.

-   If a figure is submitted for the initial difference this figure is
    the same dollar difference that existed between the original
    comparable used in underwriting (or the FMRs) and the contract rents
    at the time of initial occupancy. If no initial difference is
    submitted, then I authorize HUD to use 10% of the initial Section 8
    contract rent for each unit type as the initial difference.

-   The figures submitted with this request regarding the number of
    units in which turnover has occurred since the last HAP anniversary
    date are complete and accurate.

Under penalties and provisions of Title 18, United States Cost, Chapter
47, Section 1001, the statements contained in this request have been
examined by me and to the best of my knowledge and belief are true,
correct and complete.

**Owner/Agent**

**APPENDIX 4**

**OWNER**

**SAMPLE FORMAT FOR REPORTING UNIT TURNOVER**

This form or any other format may be used for reporting the number of
units in which turnover occurred **since the last HAP contract
anniversary date.** This information need only be submitted for the unit
types in which a rent increase is being requested under this Notice.

This information reflects the number of units in which turnover has
occurred since / [/]{.underline} (HAP Anniversary Date)

**Unit Type Total Number of Units**

**Units have incurred turnover**

**Units did not incur turnover**

**Unit Type Total Number of Units**

**Units have incurred turnover**

**Units did not incur turnover**

**Unit Type Total Number of Units**

**Units have incurred turnover**

**Units did not incur turnover**

**Unit Type Total Number of Units**

**Units have incurred turnover**

**Units did not incur turnover**

**Unit Type Total Number of Units**

**Units have incurred turnover**

**Units did not incur turnover**

**\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

**Owner/Agent**

**[Appendix 5]{.smallcaps}**

**[AAF RCS Adjustment Worksheet]{.smallcaps}**

**\_\_\_\_\_\_\_\_\_\_**

\_\_\_\_\_ My Rent Comparability Study (RCS) is less than five years

old.

-   The date of my original RCS is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

-   A updated RCS was completed on
    \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (Attach a list with
    the names and titles of persons contacted for each comparable
    property).

-   Based on the updated RCS, the *New Comparable Market Rent Potential*
    is\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

**I hereby certify that:**

**\_\_\_\_\_** The original RCS that was submitted on
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_,

has been updated and that the revised comparable market

rent is as stated above; AND

\_\_\_\_\_ neither I, nor any of my affiliates, are suspended or
debarred,

OR

\_\_\_\_\_ I, or my affiliates, are suspended or debarred and are
requesting a contract renewal subject to HUD approval; AND

\_\_\_\_\_ this information is true and complete**.**

Project Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

**Owner's Name
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

**Owner's
signature:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_Date:\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

***Warning: There are fines and imprisonment\--\$250,000/5 years---for
anyone who makes false, fictitious, or fradulent statements or entries
in any matter within the jurisdiction of the Federal government (18 USC
1001). In addition, any person who knowingly and materially violates any
required disclosure of information, including intentional
non-disclosure, is subject to civil money penalty not to exceed \$10,000
for each violation.***