Budget Based Rent Adjustment
Budget Based Rent Adjustments allow projects to adjust their Section 8 rents based on the project’s actual operating cost.
If a project is submitting a budget based rent adjustment as part of their annual adjustment associated with a contract renewed under the Section 8 Renewal Policy guidelines, the submission is due 120 days before the anniversary of the contract expiration date. For example, a contract with an expiration date of December 31, 2020, would have an anniversary date of December 31st, therefore their submission would be due September 2nd.
For project that have not yet renewed under the Section 8 Renewal Policy guidelines, they may submit their requests at any time.
For complete guidance and information regarding budget based rent adjustments please consult HUD Handbook 4350.1, Chapter 7.
Additional information regarding budget based rent adjustments can be found in the following:
Replacement Reserve Account Information
The initial submission to request a rent increase should include the materials listed below, plus any additional documents being used to support the request as required by HUD Handbook 4350.1, Chapter 7.
1. A cover letter that briefly summarizes the reasons why a rent increase is needed and the date the increase will be effective. Describe the project's physical condition and any improvements that have been budgeted for. The letter may refer to the reasons stated in the Notice or elaborate on those reasons. (The main reasons stated in the letter must be the same as the main reasons stated in the Notice to Tenants, if the project was subject to the tenant comment procedures.) It should also identify any proposed change in services, equipment or charges and the reasons for the change.
2. A Budget Worksheet providing income and expenses for the 12 months following the anticipated effective date of the proposed rent increase.
3. A brief statement explaining the basis for any increase in the expense line items on the budget work sheet. Generally, if an increase amounts to 5 percent or more over the most recent audit, it must be documented. If the income or expense was estimated at the prior annual period's actual, or the increase is less than $500, no explanation is required.
4. Where applicable, a copy of the Notice to Tenants annotated to show where and how the Notice was distributed (e.g., posted, mailed, hand carried).
5. An executed copy of the Owner's Certification Regarding Purchasing Practices and Reasonableness of Expenses.
6. A status report on the project's implementation of its current Energy Conservation Plan. This may be: (1) a narrative report coded to facilitate references to the plan; or (2) copy of the plan annotated to show the current status of all items that were scheduled to be completed within 60 days after the rent increase is proposed to be effective. This applies only to section 236 and BMIR projects, projects that receive rent supplement assistance, and projects that converted from supplement to Section 8. This requirement is to assure compliance with Section 329(c) of the Housing and Community Development Amendments of 1981.
7. A signed request for an increase in the Reserve for Replacement if such an increase is contemplated as part of the rent increase request.
8. For Protects with Utility Allowances, a recommendation to what utility allowance is appropriate for each unit type and a summary of how the owner/agent arrived at that amount with appropriate documentation as prescribed by paragraph 7-24 of this section.
ADDITIONAL SUBMISSION REQUIREMENTS
Rent Comparability Study (RCS)
RCS Cover Letter (if applicable): Michigan - Hawaii - Pennsylvania
Owner's Checklist for RCS Submission
Attachment 5 Projects Preparing a Budget-Based Rent Adjustment for the first time should submit this form from the Section 8 Renewal Policy