Section 18 Update Offers New Section 18/RAD Blends & Other Flexibilities

On January 19, HUD published Notice PIH 2021-07 superseding and replacing its 2018 Section 18 notice regarding the demolition and/or disposition of public housing property, eligibility for tenant protection vouchers (TPV) and associated requirements.

Among other helpful flexibilities, the notice offers two new Section 18/Rental Assistance Demonstration (RAD) blend provisions, which will continue to be processed primarily through HUD’s Office of Recapitalization and require alignment with other RAD requirements:

• The current 75/25 RAD-Section 18 blend for projects not utilizing nine percent LIHTCs has been modified to offer a sliding scale of RAD and TPV mixes relative to HUD-determined Housing Construction Costs (HCC) in a defined jurisdiction:
  • When rehab costs are at least 60 percent of HCC, the Section 18-enabled TPV mix in a project can now be increased to 40 percent—for a new 60/40 blend;
  • When costs are equal or greater than 90 percent of HCC, TPVs can be increased to 60 percent of units (40/60 blend);
  • In “high-cost areas”—defined as where the local HCC exceeds 120 percent of the national average—TPVs can be increased to 80 percent of project units (High Cost 20/80 blend);
  • And what goes up can also come down: projects requiring lesser amounts of rehab but at least 30 percent of HCC can now be approved for TPVs for 20 percent of their units.
• A new “close-out” authority allows Public Housing Authorities (PHAs) with 250 remaining Public Housing units or fewer to seek Section 18 approval and TPVs for up to 80 percent of units in a RAD project when a PHA is closing out its Public Housing portfolio. This new provision effectively improves upon and streamlines HUD’s earlier Section 22 Streamlined Voluntary Conversion (SVC) initiative by allowing a PHA to more readily preserve units by converting awarded TPVs directly to project-based assistance.