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Form of Assistance

Under the HAP Contract, an owner is entitled to a specified rent for assisted units. i.e., the contract rent. While the only type of assistance the owner may receive from HUD is rental assistance payments, these payments actually cover the costs of owning, operating, and maintaining a project and compensate the owner for eligible rehabilitation performed.

First, a monthly base rent is established to cover costs such as acquisition debt service, utilities paid by the owner, insurance, taxes, routine maintenance, and a reserve for replacement. Applicants must determine whether the base rent for assisted SRO units is reasonable in relation to the rents being charged for comparable unassisted units, taking into account the location, size, type, quality, amenities, maintenance of the units, and management as well as not in excess of rents currently being charged by the same owner for comparable unassisted units. The maximum base rent for the SRO program is derived by multiplying the 0 BR Section 8 Existing Housing FMR by .75 (the SRO FMR) and, if applicable, subtracting the allowance for tenant-paid utilities. FMRs are published each year by HUD in the Federal Register.

The maximum contract rent an owner may receive is 120% of the SRO FMR minus the allowance for tenant-paid utilities. Thus, the additional 20% of rent an owner may receive (the 20% is the difference between the Section 8 Existing Housing FMR and the Moderate Rehabilitation FMR) is used to reimburse the owner for rehabilitation costs—i.e., the creation of more decent, safe and sanitary SRO housing for the homeless—not other owner expenses.

To calculate the actual contract rent, an applicant adds the monthly debt service for eligible rehabilitation costs to the base rent.