Housing authorities will be getting a new tool to leverage private sector resources now that Congress has authorized the Rental Assistance Demonstration (RAD) program in the FY 2012 appropriations bill for Transportation, Housing and Urban Development.
Under RAD, up to 60,000 public housing or moderate rehabilitation program units may be converted to either (i) assistance under a project-based housing choice voucher contract under Section 8(o)(13) of the U.S. Housing Act of 1937, or (ii) a project-based subsidy contract eligible for renewal under Section 524 of the Multifamily Assisted Housing Reform and Affordability Act of 1997.
However, Congress offered no new funding for RAD. Instead, funds necessary to subsidize a project converted under the new regime will be transferred from public housing operating and capital funds or from the moderate rehabilitation funds, as applicable, to the new Section 8 contract. Converted projects can expect to receive assistance in an amount equal to the operating and capital fund subsidies that would have been available under the old regime.
RAD may prove to be a powerful tool for some housing authorities to preserve and repair distressed affordable housing. However, given the absence of new funding, it may not be a financially viable tool for others. In high-cost markets, the public housing operating and capital fund subsidies, transferred to the new Section 8 contract, may not be sufficient to leverage enough funding to recapitalize projects and meet on-going operating costs. To be successful, some projects will require additional capital subsidies. Other projects may be more viable due to favorable local market conditions and available subsidy.
The appropriations bill suggests that annual rent adjustments may be limited to an operating cost adjustment factor to be published by HUD, and subject to the availability of appropriations. HUD has also suggested that annual adjustments will be made in accordance with HUD’s multifamily project-based rental assistance program.
RAD gives HUD flexibility to create alternative requirements or to waive any program requirements (other than fair housing, nondiscrimination, labor, and environmental requirements) to facilitate successful conversions. Notice of such waivers or alternative requirements must be published in the Federal Register. HUD has expressed an interest in ongoing dialogue as the scope and elements of the RAD program are further developed.
HUD will seek applications, through September 30, 2015, using a competitive process designed to demonstrate RAD’s feasibility:
- in different markets and geographic areas,
- with housing authorities of different sizes, and
- by leveraging other sources of funding to recapitalize properties
Tenants of converted public housing units will maintain the same tenant protections and rights given to public housing tenants under Section 9 of the U.S. Housing Act. RAD also bars the use of conversion under RAD as a basis for re-screening or terminating the assistance of any tenant family. Such families will not be considered a new admission for purposes of compliance with income targeting requirements. Such standards may affect whether certain public housing sites with resident incomes higher than 60 percent of area median income are viable candidates for Section 42 Low Income Housing Tax Credits.
Ballard Spahr attorneys continue to monitor and report on developments regarding RAD and are available to answer any questions or to facilitate discussions with HUD officials regarding RAD program parameters.
For more information, please contact Amy M. McClain at firstname.lastname@example.org or 410.528.5592, or any member of Ballard Spahr’s Housing Group. About Ballard Spahr’s Housing Group
Ballard Spahr’s Housing Group is nationally recognized for its leadership in the development and financing of housing, community development, energy, public/private partnerships, and transportation projects. The firm represents state and local housing finance agencies, public housing authorities, developers, mortgage and investment bankers, commercial lenders, and investors in tax credit programs in housing and community development transactions. The firm also advises clients on the programs and requirements of federal agencies related to housing, energy, and transportation, including HUD, DOT, DOE, FHA, Fannie Mae, Freddie Mac, and GNMA.