These are properties whose owners probably want to renew the Section 8 contract. Occasionally, Section 8 rents may possibly slightly exceed true market but they are close enough that the owner can show comparables sufficient to avoid the effort of a formal restructuring. The presence of another cloud on value, like a Flexible Subsidy Use Agreement or a local zoning variance or rent control, may keep properties in this category for a while. Renewal at current Section 8 rents is a relatively good deal for these exempt and ineligible properties, when compared to the risks and benefits of a market conversion or the effort and expense of restructuring. Properties owned by nonprofits will also invariably renew, even if the market rents substantially exceed Section 8 rents, because of their affordable housing mission.
Conversion remains an annual option, since there is no long-term use restriction.
Now or in the future, they may lack the revenue or capital for deferred maintenance and rehabilitation, and conditions may begin to deteriorate. Congress has provided no real additional resources in this program for meeting these needs. For the near future, oversight and monitoring of these properties will apparently remain with a downsized HUD that has diminished capacity for this function, so local vigilance may become increasingly important. These are properties with profit-motivated owners, usually with Section 8 contract rents significantly below true market. Since the new Section 8 program generally establishes the maximum rent at the lesser of current Section 8 rents or true market rents, conversion will most often threaten those properties where true market rents exceed current Section 8 rents by enough to outweigh the transaction costs and risks inherent in a market conversion.