AAF Rent Increases
In 1994 Congress altered the rent increase regulations for Section 8 AAF contracts. Prior to 1994, these properties received an annual rent increase based upon an Annual Adjustment Factor. However, in 1994 Congress enacted legislation which stipulated that the Section 8 rents must be below the comparable unassisted market rents in order to be eligible for an AAF rent increase. For many years, many properties were unable to receive any rent increase. The inability to offset rising operating expenses with rent increases decreased Net Operating Income and put many of these properties at risk. During a review of a client’s portfolio, First Capital recommended applying for AAF rent increases for several properties whose rents appeared to below comparable market rents, which would again make them eligible for AAF rent increases. First Capital obtained and reviewed the Rent Comparability Studies to demonstrate that the current contract rents were below market. First Capital also prepared AAF Rent Increase Applications and closed each transaction. In some cases, properties still remain eligible for future AAF rent increases. First Capital’s strategic plans provided long-term financial stability for projects eligible for AAF rent increases.
