The Department of Housing and Urban Development (HUD) unveiled a set of revisions to the Rental Assistance Demonstration (RAD) program. These changes aim to expand the use of the program, especially to larger deals.
The changes were announced in a July 2 notice. Comments are being accepted for 30 days.
“We want it to be an effective tool for housing authorities, big and small,” says Patrick Costigan, senior adviser to HUD Secretary Shaun Donovan.
When RAD was launched, officials faced a number statutory requirements and timelines. As a result, the early focus fell on single projects.
The changes reflect HUD’s desire to broaden the program and be responsive to larger housing authorities and larger projects, Costigan says. For example, one revision calls for allowing multi-phase developments to take part.
RAD is the centerpiece of the agency’s strategy to preserve at-risk public and assisted housing. 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.
To learn more about RAD, visit this story.
About a year into the program, HUD has approved the conversion of approximately 20,000 public and assisted housing units in 180 projects.
Looking just at public housing, about 15,000 units in 132 projects taking part in RAD. These projects are estimated to generate $800 million in private debt and equity, says Costigan.
About 39 percent of those 15,000 units are projected to use 4 percent low-income housing tax credits (LIHTCs) and bonds. That’s significant because that subsidy is available and often goes unused, Costigan says.
About a quarter of the other deals are looking at using 9 percent LIHTCs, and about 37 percent of the 15,000 units are proposing to use debt only, with many using Federal Housing Administration programs.
The revisions include:
- Providing RAD awards for projects requiring multi-phased development to facilitate the assembly of financing;
- Allowing a public housing authority (PHA) to apply for a portfolio award for a set of projects, wherein HUD will reserve RAD conversion authority for all projects contained in the portfolio, provided the PHA submits individual completed RAD applications for at least 50 percent of the projects. The PHA then has 365 days to submit a completed application for each of the remaining projects;
- Providing contract rents at FY 2012 rent levels (as posted in the RAD Application) for all applications submitted prior to the end of CY 2013. This provision facilitates conversion of a public housing project, a multi-phase project, or a PHA-defined portfolio of projects by providing assurances to lenders and PHAs about contract rents to be established at the time of conversion;
- Allowing PHAs to adjust subsidy (and initial contract rents) across multiple projects to facilitate financing. The combined subsidy for these “bundled” projects may not exceed the aggregate funding for all of the projects the PHA is proposing to bundle;
- Allowing Moving to Work (MTW) agencies who are applying for two or more projects to use their MTW block grant flexibility to set initial contract rents, subject to RAD rent caps and continued service requirements;
- Expanding eligibility of HOPE VI projects;
- Eliminating the caps on awards to PHAs and to mixed-finance projects;
- Exempting awarded public housing projects from scoring under the Public Housing Assessment System to support redevelopment planning and need for temporary relocation during construction; and
- Allowing PHAs to use the Choice Neighborhoods Implementation (CNI) Notice of Funding Availability to apply for Joint RAD/CNI awards.
- Opening the Mod Rehab ongoing application period under the First Component and removing the cap on Mod Rehab projects applying under the First Component;
- Allowing a Mod Rehab owner to request a portfolio award for a grouping of projects, wherein HUD will reserve RAD conversion authority for all projects contained in the grouping, provided the owner submits a completed application for at least 50 percent of the projects. The owner then has 365 days to submit a completed application for the remaining projects; and
- Providing RAD awards for projects requiring multi-phased development to facilitate the assembly of financing.