Which rent do you underwrite the exit on, the payment standard or market

I'd underwrite the hold at the payment standard because that's the money that actually arrives, and the exit at market because that's what a stranger will pay for. If the deal only works when both numbers are the high one, the deal is telling you something.

arbor, the 160 dollar gap per door is doing a lot of work here. On three doors that's 5,760 a year of NOI that exists only because of the program. At a 7 cap that's around 82,000 of value that a market-rent buyer won't pay for. Worth seeing whether the deal survives losing it, because that's the honest downside case.

Half of my list is in a market where the payment standard sits under market rent, so I've got the opposite problem and I still think anchor has it right. Hold on what pays, exit on what a buyer believes.

The answer depends on one assumption, which is who the buyer pool is in your submarket at exit, not what the payment standard does.

Mechanically, payment standards are set by the local housing authority within a range tied to area rent estimates published federally, and they get revisited on a schedule the authority controls. Confirm the current schedule and the current standard for your bedroom count with that authority in writing, because the number you find posted online may be a cycle behind. The standard being above market in a submarket usually reflects a rent survey drawn over a wider geography than your comps, which is why the gap exists and also why it can compress without anything happening in your neighborhood.

On the exit, an appraiser working an income approach will use market rent unless the contract rents are supported and durable, and how much weight contract rents carry varies by appraiser and by lender instruction. The practical version is that a buyer who intends to keep the units on vouchers will pay closer to your in-place NOI, and a buyer who doesn't will haircut it toward market. In a submarket with a deep voucher landlord pool, that first buyer is real. In one where you'd be the only participating owner on the block, cairn's 82,000 is the number you're carrying uncompensated.

So underwrite the base case at market rent for the exit and treat the program premium as upside you might capture rather than value you're entitled to. If the deal only clears with the premium in both the hold and the exit, you're taking policy risk and buyer-pool risk on the same dollar.

In the rural markets I look at the standard is frequently above market, sometimes by 200 a door, and there is no voucher landlord pool to sell to. One or two owners in a whole county. So for me the exit is market rent every time and the premium is just cash flow while I hold.