“...close to 5 million Americans who
depend on subsidized public housing may soon have to figure out where and how they are going to live.”
The New York Times
September 19, 2008

Frequently Asked Questions

Buyer FAQ   |   Seller FAQ   |   General FAQ

Buyer FAQ

How can the Oregon Housing Preservation Project help me?
Our website hosts a database of all the affordable housing projects in the state and identifies at-risk properties. We market our program to current owners, and connect interested sellers with mission-based, non-profit buyers in their community. We also help buyers work through the complex rules and regulations that come with federal subsidies by offering technical support when working with HUD, Oregon Housing and Community Services and other agencies.

Through the Oregon Housing Acquisition Fund, we offer 3-5 year acquisition loans, underwritten by Network for Oregon Affordable Housing (NOAH), at below market rates. Preservation Loans allow purchasers to acquire a property quickly providing the new owner the time necessary to assemble financing for the permanent preservation of the property.

Will a loan cover the full acquisition cost?
Our Presevation loan will not generally cover the full cost of the transaction because loans are constrained by the lower of a 1.15 debt cover or 95% loan to value (LTV) for non-profits borrowers. (For-profit borrowers are capped at 75% LTV.) We use the lower of market or restricted rent value to determine LTV. We are actively seeking grant sources to help fill that gap, but in the meantime sponsors must come up with a portion of the acquisition cost from other sources. Oregon Housing and Community Services has some funds earmarked for preservation, and local jurisdictions are sometimes able to provide grant or soft debt financing.

If I use the Fund for an acquisition loan, do I have to use NOAH as my permanent lender?

Who is eligible to access the Oregon Housing Acquisition Fund?
Any qualified buyer can access the fund, although because some of our funding comes from private foundations, we are able to offer more advantageous terms to non-profit borrowers.

Who do I contact for more information?
Rob Prasch, Preservation Director, can be reached at 503.501.5688 or at

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Seller FAQ

How can the Oregon Housing Preservation Project help me?
We can help match sellers of Preservation properties with qualified buyers who are interested in acquiring and maintaining federally subsidized properties. Our staff works closely with representatives of HUD, Oregon Housing and Community Services and other agencies. These relationships enable us to help streamline the processes for sellers working with these government agencies. This results in making complex sale transaction easier for all. We are not brokers and we never charge a commission or realtor fee, which can save a seller thousands of dollars.

Who are the buyers who utilize your program?
The buyers we work with are experienced developers who already own and operate affordable housing properties in Oregon. They are sophisticated professionals who understand the complexities of HUD funding, and are capable of both managing the properties and satisfying myriad requirements of federal financing.

Can I sell my property using your program for as much as I could on the open market?
Sale prices are negotiated between the buyer and seller the same way they would in any other real estate transaction. Typically sales prices are based on appraised value. If the rent restrictions are set to expire on a property, the appraisal would reflect the post rent restricted value. Many interested buyers are non-profit organizations. Some sellers have chosen to sell their properties at a below market rate then use the difference as a charitable donation.

How long can I expect a sale to take?
Each sale is unique and includes many factors that determines the escrow period. The Oregon Housing Acquisition Fund was established specifically to allow buyers access to immediate capital. As a seller, you get the advantage of an immediate sale without waiting for long term financing to be secured.

What happens to the tenants in my building?
All buyers using our funds intend to continue the current rent subsidy programs, so tenants should see no meaningful change to their tenancy or rent structure after the property has sold. Buyers of Preservation properties use the transfer and permanent refinancing as an opportunity to recapitalize the project, so tenants will see significant improvements to their unit or complex after the sale.

Who do I contact for more information?
Rob Prasch, Preservation Director, can be reached at 503.501.5688 or at

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General FAQ

What makes a project “Preservation”?
A Preservation project is one that has expiring federal rent subsidies. Many of them have long term Project Based Section 8 contracts that are nearing (or have reached) the end of their original contract term. Other eligible projects include those originally built with funding from the US Department of Agriculture Rural Development, US Department of Housing and Urban Development, and those with expiring Low Income Housing Tax Credit restrictions. In order to be eligible, a project must be at risk of losing its subsidy.

Is it better to buy a project before or after its original Section 8 subsidy contract expires?
It is always better to purchase a property before its original Section 8 contract expires. Section 8 contracts and other federal subsidies can be assigned to a HUD approved new owner at any time, but once the original Section 8 contract expires HUD will not recognize additional debt service in the project contract rents This often results in significantly reduced mortgage amounts. Therefore, if you intend to take on new debt in order to purchase a Preservation property, it is important to contact HUD well before the original housing subsidy contract expires.

What is MAHRA and how does it effect Preservation?
MAHRA is an acronym for the Multifamily Assisted Housing Reform and Affordability Act. All projects that reach the end of their Project Based Section 8 contracts must go through the contract renewal process prescribed by MAHRA. There are a number of options an owner can chose when it’s time to renew their Section 8 contract. The option an owner selects determines what methodology will be used to set rents. Rents can be based on project costs, but at this point (after the original contract has expired) the only debt cost that will be considered in evaluating a project’s need for rental income will be the original debt payment. If an owner refinances after a project has been renewed under MAHRA, HUD will not recognize a higher loan payment amount, even if the resulting rents are below market.

If I purchase a property before the contract ends, will I know what the rent amount will be after the property goes through MAHRA?
Not exactly. Many of the factors that go into determining rents are time sensitive, so projecting rents in future years is difficult. HUD, OHCS, and OHAP staff can all help you determine which renewal option makes the most sense for your project and can provide the methodology for determining rent amounts, but no one can give you a specific guaranteed number in advance of contract renewal under MAHRA.

I’ve heard people talk about Old Reg and New Reg projects — what do these terms mean?
Old Regulation projects refer to HUD 883 contracts entered into before 1981; New Regulation projects were signed after that date. HUD 833 contracts are Section 8 housing subsidy contracts provided to state housing agency bond-financed projects. The main difference between the two contracts is how each treats surplus cash. In most (but not all) cases, Old Reg projects allow the owner to retain all surplus cash. Many New Reg projects limit cash distributions, with any excess cash going into a residual receipts account controlled by either OHCS or HUD. Some prepayment options are also effected by Old/New Reg status. For any specific transaction, it is necessary to carefully review the loan documents, contracts and regulatory agreements to determine what applies to that project.

Can I expect to receive cash flow from these projects once I own one?
Yes, but the amount depends on the type of project you purchase and that specific project’s contracts and agreements. Some preservation projects allow all surplus cash to be distributed semi-annually or annually.

Other projects limit the amount of cash that can be released to the owner each year. Whatever rules are in place when a project is purchased generally remain in place after a sale or after the renewal of the Section 8 contract. As the new owner, you will receive whatever the previous owner was eligible to receive each year as a cash distribution. On limited Distribution projects, the amount of the allowed annual distribution is generally based on a percentage of the original owner’s equity amount at closing of the original financing. This formula does not change regardless of the amount of equity the new owner brings to the table. Any excess cash beyond the allowable distribution will usually be deposited into a Residual Receipts account and used solely for approved project expenses. Unused funds in the Residual Receipts account are returned to HUD at Section 8 contract expiration.

I know HUD requires notification to tenants, but as a buyer which notices do I need to worry about?
All notices are the responsibility of the current owner. That said, failure to give timely notice could affect you as the future owner. No tenant notices are required for ownership change or assignment of Section 8 contracts, but notices must be given in advance of an owner’s intent to opt-out of their Section 8 contract. Notices of an owner’s intent are required to be submitted to the Contract Administrator and residents at 12 months and 120 days from the date the contract expires. As a prospective buyer, it is worth while to track that these notices are provided. OHCS staff can inform you of the status of tenant notifications.

Does HUD require payments to replacement reserves?
HUD requires replacement reserve deposits if they hold or insure the mortgage. OHCS bond financed projects also have a replacement reserve requirement as do many other lenders. If a lender requires a reserve account, HUD requires that those funds be held by a third party (generally the lender), and that use and release policies for those funds conform to HUD’s reserve policies and practices. HUD will allow the expense of funding lender-required reserves to be included in budget based rent calculations.

What are the Section 8 Contract Renewal Options?
The Renewal Options determine the project’s contract rent for the new contract and the method for determining any annual rent adjustments. There are three options that apply to most Section 8 owners in Oregon who are looking to preserve their project’s affordability. While each has complex rules and exceptions, the main distinctions are:

Option 1: This option is only available to projects when the market rent is higher than both the project’s current contract rents and the area’s Fair Market Rent (FMR). In this case, rent would be set at the market rent (as determined by a third party Rent Comparability Study (RCS)). Ongoing annual adjustments are then based on HUD’s published Operating Cost Adjustment Factor (OCAF). A new RCS is completed every five years. No budget submission is required.

Option 2: This option is best for projects that have below market rents and generous cash flow. Initial rents at contract renewal are set based on the greater of current contract rents plus OCAF or a budget based rent, but never more than market rent as determined by a RCS. Annual increases can be based on OCAF or budget, at owner’s request. A new RCS is completed every five years. No budget submission is required unless owner requests rent increase based on budget.

Option 3: This option is best for properties with rents above market levels. Initial rents are set based on the lesser of current contract rents plus OCAF or a budget based rent. No rent survey is required. Annual increases can be based on OCAF or budgets. Budgets must be submitted annually to determine any increase.

Owners can always switch to a different renewal option at subsequent contract renewals.

The above summaries greatly simplify a complex process. Owners are encouraged to refer to the current version of the Section 8 Renewal Policy Guide Book from the HUD clips website.

Will HUD allow a sale price that is different than the appraisal?
Yes. HUD always allows a lower than appraised value sale. If the sale price is higher than the appraisal, buyer must show that the Section 8 rents are not supporting the higher cost (i.e., there must be other equity sources in the deal).

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