HUD’s Office of Public and Indian Housing (PIH) recently published the final implementation notice, Notice PIH 2012-32, for its Rental Assistance Demonstration (RAD) program. RAD was authorized in the 2012 HUD appropriations bill, H.R. 2112. Notice PIH 2012-32 follows HUD’s March 8 Notice PIH-2012-18 and includes a few key revisions based on comments from industry stakeholders that submitted comments on the program; NH&RA’s comments can be found here.

The intended goal of RAD is to test the conversion of public housing and other HUD-assisted properties to long-term, project-based Section 8 rental assistance. HUD’s intention is that these conversions will not only aid in the preservation and improvement of these properties but will also expand access to private debt and equity for public housing agencies (PHAs) and owners in order to address immediate and long-term capital needs. The RAD program will be administered jointly by PIH and the Office of Housing.

The Final Notice contains two conversion components; the first is competitive and applies to Public Housing and Section 8 Moderate Rehabilitation (Mod Rehab) contracts. The second component is non-competitive and applies to Mod Rehab, Rental Supplement (Rent Supp), and Rental Assistance Program (RAP) contracts. The Final Notice implements the competitive component and includes important updates to certain provisions from the original Notice.

First Component (Competitive)

Under the first competitive option, PHAs may apply to convert Public Housing projects to Section 8 project-based assistance, either Project-Based Vouchers (PBV), administered by PIH or Project-Based Rental Assistance (PBRA), administered by the Office of Housing. Mod Rehab project owners may also apply to convert Mod Rehab contracts to either a PBRA or PBV contract.

The Final RAD Notice includes number of significant changes specific to the competitive component of the RAD program, including:

  1. Project owners may choose to convert more than 50 percent of units to project-based assistance if the units qualify as elderly, disabled, scattered site, or receive supportive services;
  2. Prohibits involuntary displacement in properties converting to PBV assistance for income-mixing purposes;
  3. Several choice-mobility updates including incentives (such as bonus points to both donating and recipient PHAs) for voucher agencies to provide choice-mobility turnover vouchers to agencies without access to vouchers, a reduction to the annual turnover cap from 20 to 15 percent, and prioritization of the award of choice-mobility good cause exemptions based on PHA size;
  4. Modified Financing Plan benchmarks and processing requirements to allow for compatibility with a wider variety of funding sources such as FHA loans and LIHTCs;
  5. Expansion of the description of required resident notifications, protections, self-sufficiency services, and waiting list procedures;
  6. Eliminates the need to seek HUD approval of a change in project configuration prior to submission of a RAD application;
  7. Allows PHAs or Mod Rehab owners to request to transfer rental assistance from a project that is either economically non-viable, physically obsolete, severely distressed, or uninhabitable to a new project;
  8. Caps conversions of mixed-finance units at 1,200;
  9. Increase the amount of pre-development funds that can be spent on a conversion from $50,000 to $100,000;

Owners of Public Housing and Mod Rehab properties applying under the competitive component of RAD must submit applications between September 24, 2012 and October 24, 2012.

Second Component (Non-competitive)

The second, non-competitive option allows owners of Mod Rehab projects to apply to convert tenant protection vouchers (TPVs) to PBVs. TPVs are generally provided by HUD upon termination of Mod Rehab contracts. HUD states that successful applicants will articulate the mechanism by which the owner will leverage debt and equity in order to undertake capital improvements on the subject property.  In addition, owners receiving assistance under the RAP and Rent Supp programs may apply to receive PBVs in lieu of TPVs on Rent Supp or RAP contracts that have expired or been terminated, or will expire or terminate, between October 1, 2006, and September 30, 2013.

The Final RAD Notice includes number of significant changes specific to the non-competitive component of the RAD program, including:

  1. A provision to allow project owners to work with another agency to administer PBVs if the local agency is unwilling;
  2. Clarification that units occupied during the 24 months prior to contract termination may be included in the conversion;
  3. Stipulation that HUD can review deconcentration and income-mixing requirements in conversion proposals if the proposed conversion could result in a higher number of PBRA units than would be the case in a standard conversion project;
  4. Creates a process for allocating TPVs to Rent Supp or RAP projects with expiration dates after September 30, 2013 when an owner requests to prepay the mortgage;
  5. Establishes a centralized submission processing system.

Owners of Rent Supp, RAP, and Mod Rehab properties seeking to convert assistance under the non-competitive component are able to submit conversion requests immediately.

Click here to read the Final RAD Notice PIH 2012-32.

Other RAD Summaries

Goulston & Storrs: HUD Issues Final Notice for Rental Assistance Demonstration (RAD)
Ballard Spahr, LLP: HUD Issues Final Program Instructions for the Rental Assistance Demonstration
Nixon Peabody, LLP: HUD publishes final guidance on its Rental Assistance Demonstration