HUD Issues Notice Implementing Priorities for Making Budget-Based Rent Adjustments for Certain Mark-to-Market Properties

HUD’s Office of Multifamily Housing Programs (MFH) issued Notice H 2024-05 on February 29, implementing MFH’s authority to make budget-based rent adjustments (BBRAs) for Section 8 Project-Based Rental Assistance housing assistance payment (HAP) contracts at properties subject to a Mark-to-Market (M2M) Use Agreement.

Due to limited funding, MFH is prioritizing BBRAs to properties that have the greatest needs. Only owners of properties in the Notice’s “1st Priority Group” are currently invited to apply for BBRA. These are properties that meet the eligibility requirements in Notice H 2024-05, and one of the six criteria listed for “Group A Properties” (page 6) – for example, a most recent REAC score less than 30 or REAC scores less than 60 for each of the last two inspections. A description of eligibility requirements (page 12) includes the following: requiring all units on the HAP contract to have rents less than comparable market rents as defined by a Rent Comparability Study (RCS); a Management and Occupancy Review (MOR) conducted within the last three years that meet one of several conditions; and resolution of all property-related issues identified in a Financial Assessment Subsystem (FASS).

The “Appropriations Act of 2023” amended the “Multifamily Assisted Housing Reform and Affordability Act of 1997” (MAHRA), giving HUD the authority to adjust rents or renew contracts at rent levels that are equal to the lesser of budget-based rents or comparable market rents in certain circumstances. HUD published a Final Rule in the Federal Register on February 28 revising 24 CFR part 401 to implement this new authority. Notice 2024-05 provides guidance on the eligibility requirements and conditions required by the statute and regulation, as well as other terms and conditions.


The passage of MAHRA created the Mark-to-Market (M2M) program to preserve the affordability of low-income multifamily rental properties with loans insured by the Federal Housing Administration (FHA). M2M allows MFH to adjust rents down to market rate on certain projects that have above-market Project-Based Section 8 contract rents. MFH may also restructure debt that is FHA-insured or HUD-held to ensure that an owner has a first mortgage loan that is supportable at the new, lower rents.

After restructuring, rent adjustments for M2M properties have historically been limited to an Operating Cost Adjustment Factor (OCAF) established annually for each state and territory. OCAFs are applied to the existing contract rent, less the portion of rent that is paid for debt service. However, many M2M properties now have rents that are below market-rate and inadequate to cover a properties’ operating expenses. Providing BBRAs ensures that project income can cover project operating expenses and can support debt service sufficient to perform necessary rehabilitation and recapitalization.

Read Notice 2024-05 at:

More information about Multifamily Project-Based Rental Assistance properties is on page 4-86 of NLIHC’s 2024 Advocates’ Guide.