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Opt-Outs - Owner Nonrenewal of Expiring Project-Based Section 8 Contracts Description: An owner must give a one year notice in order to "opt-out" of the project-based Section 8 contract. Owners who fail to give proper notice upon contract expiration may either renew the contract for up to one year, or permit tenants to remain at the same tenant share of rent until one year after proper notice is served. Where project-based assistance is not renewed, most tenants will receive enhanced vouchers, which may not be sufficient to enable them to remain in their homes. For more information see HUD Housing Programs: Tenants’ Rights and 1998 Supplement, Sec. 15.4.3. Statutes 42 U.S.C. 1437f(c)(8) (as amended Oct. 20, 1999) (requires one year advance notice to tenants and HUD for termination of project-based Section 8 contract, and prescribes form of notice). Multifamily Assisted Housing Reform and Affordability Act of 1997, Pub. L. No. 105-65, Title V, 111 Stat. 1343, 1384 (Oct. 27, 1997), codified at 42 U.S.C.A. § 1437f (Historical and Statutory Notes, "Multifamily Housing Assistance"), as amended by Pub. L. No. 106-74, §531 (Oct. 20, 1999), (MAHRAA) (Sec. 524 covers Section 8 contract renewals, statute outlines Mark to Market restructuring). MAHRAA is not codified in typical fashion, but is included as a "note" to 42 U.S.C. § 1437f, so legal reporting services have not compiled an amended version of the legislation. The document linked above is NHLP’s compilation of the statute with amendments. Pub. L. No. 106-74, §531, 113 Stat. 1113 (Oct. 20, 1999) (MAHRAA §524(d), as amended, requiring enhanced vouchers for all Section 8 contracts that are not renewed).
Older and other statutes for opt-outs: Pub. L. No. 104-120, § 2(b), 110 Stat. 834 (1996) (renewal of Section 8 contracts). Pub. L. No. 104-134, § 101(e), Title II, paragraph entitled "Annual Contributions for Assisted Housing," 110 Stat. 1321, 1321-265 (Apr. 26, 1996) (providing for enhanced vouchers and setting their rent levels). Pub. L. No. 104-204, 110 Stat. 2874, 2883 (Sept. 26, 1996) (appropriation for renewing Section 8 contracts). Pub. L. No. 105-276, §549, 112 Stat. 2461 (Oct. 21, 1998) (restoring the requirement that owners provide one-year’s notice of expiration or termination commencing Oct. 21, 1998). Pub. L. No. 106-74, §535, 113 Stat. 1121 (Oct. 20, 1999) (removing requirement that notice state reasons for notices served after effective date). Pub. L. No. 106-377, 114 Stat. 1441, 1441A-11 (Oct. 27, 2000) (appropriations for renewing Section 8 contracts and enhanced vouchers). Regulations 24 C.F.R. Part 401 (2001) (Multifamily Housing Mortgage and Housing Assistance Restructuring Program (Mark-to-Market). 24 C.F.R. Part 402 (2001) (Project-based Section 8 Contract Renewal Without Restructuring (Under Section 524(a) of MAHRAA)). Notices and Other Administrative Issuances: HUD, Section 8 Renewal Policy Guide (Jan. 19, 2001) [Link to document posted in Prepayment outline]. The document posted here is a version of the Guide as amended through November 2001. Check HUD's web site for any revisions. This guide explicitly supercedes notices H 99-36 and H 98-34, below, which are now relevant for past opt-outs. Chapter 8 of the Guide covers opt-outs and Chapter 11 covers "Resident Issues" including notice requirements. Appendices 11-1 and 11-2 prescribe the required form the notice, which includes a certification that the owner will accept enhanced vouchers. HUD Notice H 99-36, "Project-Based Section 8 Contracts Expiring in Fiscal Year 2000" (Dec. 29, 1999) HUD Notice H 98-34, "Project-Based Section 8 Contracts Expiring in Fiscal Year 1999" (Oct. 16, 1998). * HUD Notices may also be accessed through www.hudclips.org/sub_nonhud/cgi/hudclips.cgi. Data Data on Section 8 Opt-Outs and Terminations to date can be found on the National Housing Trust’s Web-site at www.nhtinc.org . HUD data on Section 8 projects (except Mod Rehabs) compiled from its various information systems is available on-line at: www.hud.gov/offices/hsg/mfh/exp/mfhdiscl.cfm.
Websites: National Housing Trust - www.nhtinc.org National Low-Income Housing Coalition Website - www.nlihc.org HUD’s Office of Multifamily Housing Assistance Restructuring (OMHAR) - www.hud.gov/omhar - has some data on project filings, rules and guidelines, PAEs, and other helpful information HUDClips - www.hudclips.org/sub_nonhud/cgi/hudclips.cgi . Website has the applicable statutes, regs, Notices, and guidelines Other Resources Also posted to this web site is a Guide to Challenging Conversions of Federally Assisted Housing in California, much of which is applicable to housing conversions anywhere in the country. Includes a Check List for advocates’ use when evaluating adequacy of an owner’s notice. State and Local Initiatives The following state statutes and local codes include provisions providing protections in opt-out situations. Cal. Gov't. Code § 65863.10 and § 65863.11 (notice and right of first refusal for opt-out or prepayment) Cal. Gov't. Code § 65580-65589.8 (land use planning law containing some features that encourage preservation) 20 Ill. Comp. Stat. § 3805/8.1 (prepayment of certain state-financed loans) Minn. Stat. § 504B.255 (notice required for opt-out or prepayment) Wash. Rev. Code Ch. 59.28 (notice required for contract termination or prepayment) Denver Mun. Code §12-106, et seq. (opt-out or sale of HUD-subsidized property, Section 8 contracts) D.C. Code §§ 42-2851.01 et seq., 47-864 et seq. (2002) (termination of HUD-subsidized housing, right of first refusal, tax incentive for renewal) (Title II of the attached document). Portland City Code § 30.01.030, et seq. (opt-out or sale of HUD-subsidized property, Section 8 contracts) San Francisco Admin. Code § 60.4, et seq. (intended sale or disposition of properties with Section 8 contracts) Further information on these and other laws can be found at the State and Local Initiatives portion of this outline. Cases 1372 Kenyon St. Tenants' Ass'n v. Kenyon LP, D.C. Sup. Ct. No. 05ca001236 (filed Feb. 18, 2005)Challenge to various actions of manager of project-based Section 8 property to assume ownership and opt-out of Section 8 contract, in violation of rights of tenant association under partnership agreement, other contracts and duties. Court issued order finding tenant association had valid option to purchase.
File includes:
Challenge to opt-out based on the one year notice requirement in 42 USC § 1437f(c)(8) (1998) and fair housing grounds including violation of the fair housing act, and HUD's duty to affirmatively further fair housing pursuant to 42 U.S.C. Sec. 3608. 215 Alliance v. Cuomo 61 F.Supp. 2d 879, No. 98-64 DWF/AJB (D. Minn. Aug. 30, 1999). Successful challenge to HUD's approval of opt-out using HUD form notice due to lack of clarity regarding owners intent and failure to state reasons (the latter required by the version of 42 USC §1437f(c)(9) then in effect, since repealed); HUD's enhanced voucher policy of not subsidizing subsequent rent increases contrary to authorizing law; favorable dicta on Fair Housing claims 42 U.S.C. §§ 3604 and 3608, failure to consider the effects on racial minorities, disabled individuals, and failure to affirmatively further fair housing. Baker v. Property Investors of Connecticut Ci.v No. 302CV1839 AHN (D. Conn.. TRO Oct. 21, 2002) (New Era Court) Tenants filed suit in federal court to prevent evictions and termination of voucher assistance, following rent and security deposit disputes associated with issuance of enhanced vouchers. The vouchers were issued just two weeks before the termination of the project-based contract, resulting in a chaotic transition which included a gap in assistance where neither the project-based assistance nor vouchers were effective, allegedly improper rent determinations, and an inability of tenants to pay the increased security deposit. The resulting disputes have also cause the public housing authority to threaten to terminate tenants’ voucher assistance. Tenants obtained restraining orders against eviction and suspension of voucher assistance, and plaintiffs remain in settlement on the remainder of the claims. Court granted HUD's motion to dismiss for lack of standing. Brighton Village v. Martinez C.A. NO. 00-CV-12311-GAO, sub nom. Brighton VIllage Nominee Trust v. Malyshev, 2004 WL 594974 (D.Mass. Mar. 23, 2004)Elderly and disabled project which prepaid its HUD-held mortgage in 1986 and opted-out of Section 8 in 1995, when regular vouchers were issued. Owner sued tenants in state court for nonpayment of rent when their vouchers did not cover the rents charged. Tenants filed third party complaint aginst HUD, which then removed case to federal court, challenging the prepayment as contrary to Section 250 of the National Housing Act, and the opt-out as illegal under then-applicable 42 U.S.C. Sec. 1437f(c)(9). Plaintiffs sought monetary relief for affected tenants who had to pay more with regular replacement vouchers until enhanced vouchers were issued in 2000 after the statute was changed to make them eligible. Tenants also opposed owner's motion to remand to state court. The trial court subsequently ruled that HUD violated both Section 250 and Section 1437f(c)(9), claims brought under the APA, and awarded financial restitution to the tenants under the APA's waiver of sovereign immunity. East Village Tenant’s Council v. U.S. Dep’t of HUD (Dist. Colo., unfiled)Section 8 opt-out, draft claims v. HUD and owner, including Fair Housing Act and failure to give notice including the reason for the nonrenewal to tenants and to HUD, pursuant to former 42 U.S.C. § 1437f(c)(8); City acquired property (pending negotiations) through condemnation and negotiated sale; fate of project-based Section 8 contract pending negotiations with City (PHA is new owner) and HUD. Hines v. Charleston Housing Authority No. 1:01CV00070CDP (E.D. Mo., filed April 26, 2001)Individual tenants and housing advocacy organization challenge prepayment of 515 FmHA financing and proposed termination of Section 8 contract and demolition. Claims include violation of Rural Rental Housing statutes, violation of Section 515 loan resolution, note and deed of trust, improper notice of Section 8 HAP contract termination, and fair housing discrimination and affirmatively furthering claims. While rejecting various statutory claims, court found that PHA's opt-out and demolition plan had a discriminatory impact in violation of the Fair Housing Act, and ultimately ordered the PHA to repair and rent the property. File includes:
2001 U.S. Dist. LEXIS 11470, No. Civ. S-01-832 LKK/JFM (E.D.Ca. order July 3, 2001) Court preliminarily enjoined a proposed prepayment of 236 BMIR mortgages and termination of Section 8 project-based contract. The decision was based primarily on violation of state law, Cal. Gov't Code Secs. 65863.10 and 65863.11. The court found no federal preemption of state statute, determined HUD has no duty to enforce state law, and dismissed HUD. Mother Zion Tenant Association v. Donovan No. 402239 (N.Y. Supreme Court decided Apr. 11, 2007) Current residents of File includes:
Challenge to prepayment of 221(d)(3) loan and proposed termination of Section 8 contract based on Washington State notice law and Fair Housing claims. Includes settlement agreement for partial extension of project-based Section 8 contract, and right of first refusal for city to purchase project. Park Hill Tenants Council v. HUD No. 00-N-1454 (D. Colo. filed Aug. 2000) Unsuccessful challenge to Section 8 opt-out, with claims brought against HUD, state agency, and owner, based on federal statutes, regulatory agreement and Fair Housing Act; case settled upon owner’s agreement to permit tenants to stay with enhanced vouchers. Park Village Apartment Tenants Ass’n v. Mortimer Howard Trust No. C 06-7389 (N.D. Cal. Feb. 14, 2007) (order granting preliminary injunction)Current residents of File includes:
People to End Homelessness v. Martinez (D. R.I., March 29, 2001) (Order on Motion to Dismiss), aff'd 339 F.3d 1 (1st Cir. 2003) (Develco) Plaintiffs challenge HUD's approval of Section 8 opt out and provision of enhanced vouchers under Administrative Procedures Act based on notices that do not comply with state and federal statutes, and failure to affirmatively further fair housing under 42 U.S.C. § 3608(e). The District Court dismissed all claims against HUD, and partially dismissed claims against the Owner. On plaintiffs appeal to the First Circuit, court upheld lower court's judgment, finding that HUD acted consistently with governing statutes in issuing enhanced vouchers despite deficient opt-out notices. Prince Hall Chambre Tenants Ass’n v. U.S. Dep’t of Hous. and Urban Dev. No. CA3-04CV-13251 (N.D. Tex. filed 2004). (Prince Hall Chambre, Dallas, TX) Tenants’ challenge to previous mortgage prepayment and planned termination of Section 8 contract by owner and HUD, and the owner’s refusal to provide Section 8 for income-eligible households and to permit replacement vouchers to be used at troubled property undergoing rehabilitation. Claims based upon federal statutes, regulations and contracts requiring full utilization of Section 8 subsidies (12 U.S.C. Sec. 1715z-1b(b) and 24 C.F.R. Sec. 886.129 and sec. 245.205), the enhanced voucher statute (42 U.S.C. Sec. 1437f(t), the HUD prepayment approval statute (12 U.S.C. sec. 1715z-15), fair housing laws, and the HAP contract and Use Agreement requiring habitable conditions. Owner and HUD entered into stipulation providing for use of vouchers in repaired units, and certification of all other tenants eligible for project-based Section 8, and settlement negotiations are continuing. File includes:
Plaintiff scattered-site tenants seek declaratory and injunctive relief to prevent the termination of project-based Section 8 contract and to enforce notice and right of first refusal requirements. File includes:
Young v. United States Dep’t of HUD, No. C-85-4642-EFL (N.D. Ca. Prelim. inj. denied Sept. 1985), injunction pending appeal denied, No. 85-2584 (9th Cir. 1985) (Clearinghouse No. 39,655) Unsuccessful challenge to Section 8 opt-out in 1985 as Fair Housing Act violation using disparate impact theory.
Articles "HUD Multifamily Inventory Awaits Decisions," 27 HOUSING LAW BULLETIN 139 (Sept. 1997). "The New Section 8 Renewal and Restructuring Program: An In-Depth Review," 27 HOUSING LAW BULLETIN 175 (Nov. 1997) (long summary). "Moving Forward on Project-Based Section 8 Expiring Contracts," 27 HOUSING LAW BULLETIN 195 (Dec. 1997) (next steps). "What Might Happen to Section 8 Properties Under the New Law?", 28 HOUSING LAW BULLETIN 17 (Feb. 1998) (how to begin categorizing properties). "Section 8 Renewal and Restructuring: Working At the State Level", 28 HOUSING LAW BULLETIN 35 (Mar. 1998) (commencing state and local activities). "Why Does the Section 8 Budget Estimate Keep Changing?", 28 HOUSING LAW BULLETIN 80 (May 1998). "IRS Issues Favorable "Mark to Market" Revenue Ruling", 28 HOUSING LAW BULLETIN 134 (Aug. 1998). "HUD Issues Regulations for Section 8 "Mark to Market" Program", 28 HOUSING LAW BULLETIN 143 (Sept. 1998). "Important New Laws for HUD Multifamily Housing", 28 HOUSING LAW BULLETIN 191(Oct./Nov. 1998) (reviews relevant provisions of FY ‘99 HUD Appropriations Act). "HUD’s Fair Housing Duties and the Loss of Public and Assisted Housing", 29 HOUSING LAW BULLETIN 1 (Jan. 1999). "Preservation Crisis Mounts: HUD and Congress Respond" 29 HOUSING LAW BULLETIN 67 (April 1999). "HUD Finally Announces "Mark-Up" Policy to Prevent Some Section 8 Opt-Outs", 29 HOUSING LAW BULLETIN 96 (May 1999). "HUD’s Final "Mark-Up" Notice Contains Important Changes", 29 HOUS. L. BULL. 138 (July/Aug. 1999) (reviewing the final HUD "Mark Up" policy Notice H 99-15). "Minnesota Section 8 Tenants Win Major Preservation Victory", 29 HOUS. L. BULL. 161 (Sept. 1999) (reviewing 215 Alliance v. Cuomo). "Preserving Federally Assisted Housing at the State and Local level: A Legislative Tool Kit," 29 HOUS. L. BULL. 183 (Oct. 1999) (survey of state and local preservation initiatives). "Final Mark to Market Regulations," 30 HOUS. L. BULL. 61 (May 2000). "New Studies Assessing Risk of Opt-outs Enable Advocates to Target Preservation Efforts," 30 HOUS. L. BULL. 82 (June 2000). "HUD Issues Final Rule on Tenant Organizing," 30 HOUS. L. BULL. 113 (Aug. 2000). "Congress Clarifies Tenants’ Right to Remain in HUD Multifamily Conversions," 30 HOUS. L. BULL. 138 (Sept. 2000). "HUD Issues New Section 8 Renewal Policy Guide," 31 HOUS. L. BULL. 61 (March 2001). "Second HUD Report on "Vouchered-Out" Assisted Properties," 31 HOUS. L. BULL. 68 (March 2001). "HUD Data on Section 8 Projects," 31 HOUS. L. BULL. 116 (May 2001). "Opt-out and Prepayment of Four Section 8 Properties Preliminarily Enjoined," 31 HOUS. L. BULL. 180 (July/Aug.2001). "HUD Revises Enhanced Voucher Guidance," 32 HOUS. L. BULL. 8 (Jan. 2002).
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