HAP Contract: What It Means in a HUD Refinance

Answer first

In brief

A housing assistance payments (HAP) contract is the agreement between a property owner and HUD, or HUD's contract administrator, under which HUD pays project-based Section 8 rental assistance for specific units. The tenant pays a share of income, and the HAP contract pays the difference up to the contract rent. For a HUD refinance, the contract's coverage, rents and remaining term shape how the loan is sized, which premium applies and what affordability commitments come with it.

Written by Bravo Capital, a HUD-approved MAP and LEAN lender. Bravo’s 223(f) page covers how it finances these transactions.

Key points

Under the MAP Guide, a HAP contract covering 90 percent of units with at least 15 years remaining qualifies a property as affordable for HUD underwriting.
Properties with 90 percent or more rental assistance size to 90 percent of value and a 1.11 DSCR in 223(f) under the March 2021 MAP Guide.
Expiring contracts are renewed under Section 524 of MAHRA, generally at rents not exceeding comparable market rents.
Where contract rents exceed market, a renewal may require a Mark-to-Market restructuring.
A reliable HAP contract can support higher leverage, but underwriting uses rents HUD expects to be sustained.

What a HAP contract is

Project-based Section 8 attaches assistance to units rather than to tenants. Under the HAP contract, HUD pays the owner the difference between the approved contract rent and the tenant's portion, for eligible households in covered units. The contract has a stated term and is renewed under the rules in 24 CFR Part 402, which implements Section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). Rents are adjusted over time by an operating cost adjustment factor or by a budget-based process, depending on the renewal option.

For an owner, a HAP contract is both an income stream with low collection risk and a set of obligations: tenant income certification, physical inspection standards, and use commitments that run with the contract.

How a HAP contract shows up in HUD underwriting

The MAP Guide uses rental assistance in several places.

Affordable definition: a project qualifies as affordable based on project-based Section 8 if it has a HAP contract covering 90 percent of the units with a minimum remaining term of 15 years.
Sizing: 223(f) and 221(d)(4) properties with 90 percent or greater rental assistance size to 90 percent of value or replacement cost and 90 percent of NOI (1.11 DSCR) under the March 2021 MAP Guide.
223(a)(7): the NOI test rises to 95 percent for projects with more than 90 percent project-based assistance and a term extending more than 15 years after endorsement.
MIP: assistance no longer changes the premium. HUD's September 2025 notice eliminated the 2016 broadly affordable and affordable MIP categories and set 0.25 percent for all FHA multifamily programs.
Working capital: substantial rehabilitation projects with Section 8 on more than 90 percent of units may not need a working capital escrow if interim income covers those items.

Renewals and the market rent question

Under 24 CFR 402.4, HUD may renew an expiring project-based contract at initial rents that do not exceed comparable market rents. If the project is eligible for Mark-to-Market and the owner requests renewal, HUD or its participating administrative entity decides whether renewal without restructuring would keep adequate debt service coverage and replacement reserves; if not, a restructuring plan may be required. Other renewal options apply to projects eligible for exception rents. The practical point: a lender will look hard at whether today's contract rents can be sustained at the next renewal, because HUD loan terms run far longer than most HAP contract terms.

What owners should watch for in a refinance

Several issues come up repeatedly when a HAP property refinances into HUD debt or uses a bridge loan first.

Remaining term: a short remaining term can disqualify the property from HUD's affordable underwriting ratios, so a contract renewal or extension may need to come first.
Rent levels: if contract rents sit above comparable market rents, the lender will test sizing at market and consider the Mark-to-Market risk.
HUD approvals: changes in ownership of an assisted property involve HUD asset management, not just the lender.
Use agreements and residual receipts: existing restrictions and accounts may carry forward and limit how proceeds are used.

Where to go next

For refinancing Section 8 properties with a 223(f), see HUD 223(f) loans.

For streamlined refinances of insured HAP properties, see HUD 223(a)(7) loans.

For portfolio figures by state, metro and program, see the HUD multifamily data hub. Bravo Capital’s record: all 26 HUD firm commitments received since April 2022 have closed, totaling $526.0 million (HUD Closing Scorecard).

Primary sources

This page is based on public guidance from the U.S. Department of Housing and Urban Development. Program rules are transaction-specific and subject to change.

Common questions

Frequently asked questions

Does a HAP contract increase how much I can borrow?

It can. Under the March 2021 MAP Guide, properties with at least 90 percent rental assistance size to higher leverage and lower coverage than market rate properties. The rents must be ones HUD expects to be sustained.

What happens when my HAP contract expires?

The owner can request renewal under 24 CFR Part 402. HUD may renew at rents that do not exceed comparable market rents, and properties with above-market rents may be reviewed for Mark-to-Market restructuring.

Is a HAP contract the same as a housing choice voucher?

No. A HAP contract for project-based Section 8 attaches assistance to units at the property. Housing choice vouchers follow the tenant, although voucher programs also use HAP contracts with owners.

Can a property with a short remaining HAP term still get a HUD loan?

Yes, but it may not qualify for HUD's affordable underwriting, which under the MAP Guide relies on at least 15 years remaining on a contract covering 90 percent of units. Owners often renew or extend first.

Editorial review

Created by Bravo Capital, a HUD-approved MAP and LEAN lender, and expert-reviewed by the Bravo Capital HUD Underwriting Team. Last updated November 4, 2026. This page is educational and is not a credit decision or commitment to lend.