HUD Issues RAD Conversions Update

HUD recently released an update on the progress of its Rental Assistance Demonstration (RAD) program. This program allows public housing agencies (PHAs) and owners of assisted sites to convert units to project-based Section 8 programs, providing an opportunity to invest billions into properties at risk of being lost from the nation’s affordable housing inventory.

The first component of RAD allows public housing and Section 8 moderate rehabilitation sites to convert to long-term Section 8 rental assistance contracts. Units that fall under this component are subject to a unit cap and are limited to current funding. RAD second component transactions cover Rent Supplement (Rent Supp), Rental Assistance Payments (RAP), and Section 8 Moderate Rehabilitation projects. Unlike first component transactions, second component transactions are not subject to the cap, but are constrained by the availability of tenant protection vouchers (TPVs). Both components allow housing programs to convert their assistance to long-term, project-based Section 8 contracts, providing a more stable source of funding.

The 1.2 million units in the Public Housing program have a documented capital needs backlog of nearly $26 billion. As a result, the public housing inventory has been losing an average of 10,000 units annually through demolitions and dispositions. Meanwhile, the 38,000 units assisted under HUD’s legacy programs are ineligible to renew their contracts on terms that favor modernization and long-term preservation. The current conditions of many of these properties inhibit investment and recapitalization efforts in the communities with the most need. By drawing on an established industry of lenders, owners, and stakeholders, RAD allows PHAs and owners of assisted sites to preserve and improve affordable housing units that could be subject to vouchers and demolition. RAD creates greater funding certainty while allowing increased operational flexibility to empower PHAs and owners to serve their communities.

RAD expansion. In the 2015 Appropriations Act, Congress expanded RAD by lifting the cap on the number of units of public housing that could convert under RAD. Previously, HUD was limited to 60,000 units that could convert through this demonstration. However, with the new legislation, HUD will be able to convert 185,000 units through the first component of RAD.

In addition, Congress extended authority to continue conversions for Rent Supplement, Rental Assistance Payment, and Mod Rehab properties under the second component of RAD. The legislation also authorized Section 8 Mod Rehab Single Room Occupancy (SRO) sites to now be eligible for RAD. HUD said that it’s currently updating its RAD notice, or PIH Notice 2012-32, to reflect this expansion and provide other clarifications.

Current progress. According to HUD’s recent newsletter, as of the end of November, the RAD program passed a milestone for the first component of the demonstration by closing its first 10,000 units. Collectively, these units are undertaking $400 million in construction activity, or about $40,000 per unit. Cumulatively, RAD has awarded 58,200 units under its first component and 8,618 units under its second component.