As part of a multi-step update to its Multifamily Asset Management and Project Servicing Handbook, the Department of Housing and Urban Development (HUD) addresses Bifurcating Section 8 Contracts.

Additional chapters will be released on a rolling basis. Following comments for each of the chapters, HUD intends to publish the complete, updated handbook in 2026. This is the first comprehensive update to the handbook since 1992.

According to HUD’s press release, “the handbook will incorporate hundreds of policy documents in one location with enhanced digital features enabling quick access to information in a user-friendly format. The handbook will also provide property owners and management with the tools they need to serve individuals and families who rely on multifamily rental assistance programs.”

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 January, 2024.

Bifurcation relates 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).

In 2023, when the agency first proposed contract bifurcation guidance. LeadingAge, in comments submitted with the Preservation Working Group (PWG), a national coalition of housing owners, developers, advocates, tenant associations, state and local housing agencies dedicated to the preservation of multifamily housing for low-income families, called out flaws in HUD’s originally proposed bifurcation guidance. The flaws included limiting contract renewal options for certain properties undergoing bifurcation.

In response to those comments, HUD amended its guidance and ensured all standard renewal options upon bifurcation. The fix is maintained in the proposed handbook chapter.

HUD is accepting comments on the proposed handbook chapter by November 18, 2024.