The Department of Housing and Urban Development (HUD) Office of Multifamily Housing Programs published a Housing Notice on January 31, “Approval and Processing of Requests to Bifurcate Contracts.”

Bifurcation related to dividing a project-based Section 8 Housing Assistance Payments (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 useful asset management 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).

There are various scenarios where an owner may seek to bifurcate a HAP contract:

• Bifurcating a contract when a portion of a project becomes unsafe or uninhabitable because of a natural disaster.
• Dividing a project comprised of multiple properties that would be more appropriately managed as single assets.
• Subdividing a single, large project into multiple separate projects with distinct ownership entities that can each attract a Low Income Housing Tax Credit (LITHC) allocation.
• Transferring budget authority under Section 8 (bb) to relocate or deconcentrate the assisted housing footprint in a particular area.

Also included are standards and conditions a project owner must meet to obtain HUD approval for a HAP contract bifurcation, clarification on owner submission requirements, and description of processing approved bifurcation requests.

The notice applies to bifurcation requests submitted to HUD on or after February 1, 2024. LeadingAge supports HUD’s housing preservation and asset management flexibility efforts.