HUD Proposes Contract Bifurcation Chapter to Kickstart Handbook Update Process

(Oct. 7, 2024) The U.S. Department of Housing and Urban Development (HUD) has announced the first set of comprehensive updates to the Multifamily Asset Management and Project Servicing Handbook since 1992. Additional chapters will be released on a rolling basis, and HUD intends to publish the complete, updated handbook in 2026.

The first posted chapter, Bifurcating Section 8 Contracts, explains the standards and conditions a property owner must meet to obtain approval from the Office of Multifamily Housing Programs to bifurcate a Section 8 Project-Based Rental Assistance (PBRA) Housing Assistance Payments (HAP) contract; the chapter also describes the processing of approved bifurcation requests. This chapter is intended to supersede Housing Notice 2024-03, "Approval and Processing of Requests to Bifurcate Contracts," issued by HUD in Jan. 2024.

Bifurcation relates to dividing a project-based Section 8 HAP contract into two or more contracts while retaining the same affordability, allowing a property’s affordable units to be geographically relocated or financially dispersed. Bifurcation is a useful asset management tool that helps affordable housing providers preserve the housing stock, including for properties that converted from a Section 202 PRAC platform to a project-based rental assistance (PBRA) contract through the Rental Assistance Demonstration (RAD). LeadingAge had joined the Preservation Working Group (PWG) in submitting coalition comments to HUD in 2023, when the agency first proposed contract bifurcation guidance. LeadingAge's comments called out flaws in HUD's originally proposed bifurcation guidance. The flaws included limiting contract renewal options for certain properties undergoing bifurcation. The agency responded to the comments by LeadingAge and the PWG by amending their guidance and ensuring all standard renewal options upon bifurcation. The fix is maintained in the proposed handbook chapter. 

HUD is accepting comments to the proposed handbook chapter by Nov. 18, 2024. 

Contact: Annalyse Komoroske Denio, akomoroskedenio@leadingageny.org, 518-867-8866