HUD Evaluation: RAD Improving Financial and Physical Conditions of Public Housing

The evidence for the Department of Housing and Urban Development (HUD) is clear that the federal Rental Assistance Demonstration (RAD) program is achieving its goal of preserving public housing. Findings from a recent evaluation of the federal program show that RAD is stimulating billions of dollars in capital investment and improving the conditions of distressed public housing.

“This evaluation validates our long-held belief that RAD is working,” said HUD secretary Ben Carson. “Our aging public housing stock is at extreme risk of being lost, and the capital needs of these properties are beyond what we can hope to get from Congress. RAD provides us the solution to preserve this critically needed housing so it remains permanently affordable for future generations.”

Enacted in 2012 by Congress, RAD was designed to improve and preserve at-risk public housing developments by allowing the properties to convert to long-term Section 8 rental assistance contracts. This is critical because it puts the housing authorities in better position to leverage additional financing to perform needed improvements. In 2010, a HUD study estimated the capital backlog at more than $25 billion. Today, HUD and third-party estimates range from $25 billion to over $70 billion.

Some of the key findings from the evaluation include:

Increased Financial Leveraging: Between November 2011, the program’s inception, through October 2018, 956 public housing projects with 103,268 units converted to project-based Section 8 or project-based vouchers. These developments raised $12.6 billion in capital through a variety of sources, or an average of $121,747 per unit.

Improved Physical Conditions: A sample of 17 RAD-converting public housing projects showed improved physical conditions and substantially lower critical needs, such as structural defects, lead-based paint, and asbestos. On average, the sample properties had short-term needs of $12,981 per unit before the conversion and $4,608 post-conversion, a 65% reduction.

Stronger Financial Conditions: The evaluation collected financial statements from 18 RAD projects, before and after conversion, and 46 non-RAD projects. Financial indicators show that liquidity and viability improved for the RAD projects after conversion but deteriorated for the non-RAD properties over the same period.

Long-Term Viability: In a sample of 18 RAD projects, the median replacement reserve account balance—for future capital needs—was $240,000, 3.63 times the average required annual deposit into replacement reserves. Operating consistent with real estate asset management best practices, the RAD projects will have adequate reserves to help address major capital needs in the future.

Resident Satisfaction: A survey of 298 residents at 18 RAD-converting properties showed general satisfaction in terms of improving the quality of their housing. More than 80% indicated they were “very satisfied” or “somewhat satisfied.” For property maintenance, 34% of residents reported it being “better than before,” 54% said “about the same,” and 9% said it was “worse than before.”