How will contract rents be set for converting properties?
Rents will be market-based. Asking rents will be capped at the comparable market rent for similar unassisted properties in the area, up to 110 percent of the applicable area rental, unless HUD approves a market rent above this cap. A below-market rent would be permitted for a property that is physically and financially sustainable at such lower rent; HUD could use this authority if the competitive process for properties to be selected for conversion does not prevent “windfall” rents. Rents for units that are exempt from local rent control would have to be reasonable in comparison with other exempt units. For properties that are not sustainable at the comparable market rent and meet HUD-established criteria for preservation-worthiness, HUD could approve an exception rent. Exception rents would be strictly capped at the higher of 110 percent of the applicable area rental or 120 percent of the comparable market rent. Before approving an exception rent, HUD would have to consider whether a
