Nearly 24,000 units of public housing and 8,000 units of other multifamily housing have been approved to take part in the Rental Assistance Demonstration (RAD) program as of late November, according to Shaun Donovan, secretary of the Department of Housing and Urban Development (HUD).
The agency has received applications for more than 90,000 units to convert public housing under RAD and expects to hit the program’s 60,000-unit limit in the early months of 2014.
“That is why we need to increase the cap to 150,000 in our 2014 budget,” Donovan said at AHF Live in Chicago. “That’s going to be decided in the next month or so. We need your help to get that done.”
Sponsored by Affordable Housing Finance magazine, the conference drew more than 800 developers and others from the affordable housing industry. (Read an overview of Donovan’s speech here.)
RAD aims to address a $25 billion backlog in capital needs for public housing. The nation loses about 10,000 public housing units each year, and another 40,000 units are at risk of losing their subsidies and being removed from the public housing inventory.
The new program is the centerpiece of HUD’s strategy to preserve these at-risk public and assisted-housing developments. The first component allows public housing and moderate rehabilitation properties to convert, under a competition limited to 60,000 units, to long-term Sec. 8 rental assistance contracts. The second component allows Rent Supplement, Rental Assistance Payment, and Mod Rehab properties to convert tenant-based vouchers issued upon contract expiration or termination to project-based assistance.
So far, about 40 percent of the public housing authorities involved in RAD are using low-income housing tax credits in their deals. Of those utilizing housing credits, 75 percent are accessing 4 percent credits and tax-exempt bonds, according to Donovan.
That’s notable because many states have unused bond volume cap. As a result, a net new resource to affordable housing is being used in a large share of RAD deals, Donovan said.
“Given this, I have been aggressive, my whole team has, in promoting the use of this tool because we think it is a smart thing, a new way to bring new resources to affordable housing, particularly public housing,” Donovan said.
The comments also help address concerns that RAD deals will be one more group competing for precious 9 percent credits.
According to Donovan, 9 percent LIHTCs have been allocated to deals with the most intense needs and represent about 25 percent of all deals using housing credits so far. Overall, that means about 10 percent of all RAD deals are using 9 percent credits.
“We need to do everything we can to increase low-income housing tax credits in this country, but RAD is something we all ought to be supporting,” Donovan told developers. “We need your help to lift the cap.”