COSCDA: RENTAL ASSISTANCE DEMONSTRATION weare · Jerry Anderson, Executive Vice President, Gill Group Shawna LaRue Moraille, Principal, ICF Bill Lord, Housing Program Manager, Tennessee

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COSCDA: RENTAL ASSISTANCE DEMONSTRATION(RAD) Conversions Using HOME, HTF, and CDBG

ICF proprietary and confidential. Do not copy, distribute, or disclose.

Session Speakers

ModeratorCarrie Kronberg, Housing Policy Director, State of Colorado Division of

HousingPanelists Jerry Anderson, Executive Vice President, Gill GroupShawna LaRue Moraille, Principal, ICFBill Lord, Housing Program Manager, Tennessee Housing Development

Agency (THDA)

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Agenda

Rental Assistance Demonstration (RAD) Overview HOME, HTF and CDBG in

RAD CommunitiesTennessee Housing

Development AgencyJoint Funded RAD Projects Resources

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RAD in Nashville, TN


Session Objectives

Inform participants about HUD’s Rental Assistance Demonstration (RAD) Identify potential opportunities to help save affordable housing in your

communities using HOME, HTF, and CDBG Funds Include some areas of focus where there are differences between RAD

and the CPD programs, including ownership and financing, property standards, cross-cutting requirements, and operational topics Learn about TN’s joint funded RAD projects and cover available

resources

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RAD Overview

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RAD Section AgendaWhat is RAD?RAD Authority Indicated RAD ObjectivesResident RequirementsRAD Conversion ProcessSpecial ProvisionsProperty Standards and Condition RentsCross-Cutting RequirementsOwnership Type Of Permanent Project Financing for RAD Financing Needs

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What is RAD?RAD was created in order to give public housing authorities (PHAs) a powerful

tool to preserve and improve public housing properties and address the $26 billion-dollar nationwide backlog of deferred maintenance. RAD (Rev 2+) also gives owners of three HUD "legacy" program (Rent

Supplement, Rental Assistance Payment, and Section 8 Moderate Rehabilitation) the opportunity to enter into long-term contracts that facilitate the financing of improvements.Allow properties to convert their portfolios in terms of ownership, type of

subsidy, and overall administrationAllows eligible properties to convert to a long-term Section 8 contract, either

Project Based Vouchers (PBV) or Project Based Rental Assistance (PBRA) under a Housing Assistance Payments (HAP) contract of an initial 20 years

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RAD Authority

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Authorized as part of the Consolidated Further Continuing Appropriations Act of 2012 (Public Law 112-55) RAD allows public housing agencies and multifamily owners to leverage

public and private debt and equity in order to reinvest in the public housing stock. This is critical given the backlog of public housing capital needs - estimated at over $35 billion. In RAD, units move to a Section 8 platform with a long-term contract that, by

law, must be renewed in perpetuity. A Use Agreement is also recorded under RAD further enforcing HUD’s long-term interest. This ensures that the units remain permanently affordable to low-income households RAD is highly cost-effective, relying on shifting existing levels of public

housing funds to project-based Section 8 as properties convert.

http://portal.hud.gov/hudportal/documents/huddoc?id=HR-2112-RAD-Language.pdf


RAD Authority (con’t)

Two components Competitive – initially had a cap of 60,000 units (public housing and Mod Rehab), currently, 455,000 units Non-competitive – no cap but subject to availability of tenant protection vouchers (Mod Rehab, Rent Supplement and Rental Assistance (RAP) program. ₋ Revision 3 included Continuum of Care Section 8 Mod Rehab SRO units₋ Revision 4 to RAD includes HUD 202 Project Rental Assistance Contract (PRAC)

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ICF proprietary and confidential. Do not copy, distribute, or disclose. 10

Indicated RAD Objectives

Preservation of Affordable HousingModernize aging family & elderly propertiesSub rehab of deteriorated propertiesThin densities/mix-incomes via project-based vouchers & transfer authorityDemolish/replace severely distressed/obsolete propertiesPortfolio streamlining


Resident RequirementsOwners must consult with residents prior to conversionTwo meetings are requiredScope of work and number of units affected covered, may need other meetings if additional changes are necessaryApplication and Financing plan must include resident comments Tenants not typically rescreened unless other programs require Lease termination post conversion requires 30 days notice, or less if health-

safety Tenants may request a tenant-based voucher after a period of tenancy in the

converted property (e.g., choice mobility)

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Resident Requirements (cont) Two key RAD requirements apply to residents:

1) Residents have a right to return (RTR) to the project after conversion.2) Involuntary permanent displacement of residents is prohibited. However, residents may voluntarily waive

their RTR and accept alternative housing options.

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RAD Conversion Process

RAD Application – obtain board authority and meet with residentsCHAP Award – set forth contract rentsPre-Finance Plan Approvals – review for civil rights/transfer of assistance “Concept Call” to discuss Financing Plan prior to submission Financing Plan** – submit to and approve by HUD RAD Conversion Commitment (RCC) – set terms of closing and constructionClosing and Conversion – enter into RAD use agreement and HAP contractRehabilitation/Construction – work completed according to RCC

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**Gap identified for secondary financing


Special Provisions Long-term housing assistance payment (HAP) contracts (15-20 years), which,

at termination, must be renewed RAD Use Agreements that run with the term of the contract Upon foreclosure, the property must first be offered to a public entity and then

other entity No balloon payments less than 18 years Transfer of Assistance – change in geographic site is allowed, HUD will review

new area for minority concentration and concentration of poverty and that it’s economically viable

Applications for properties located in designated Opportunity Zones shall be selected prior to all other properties.

Allows limited rent increases for public housing conversions to Project Based Rental Assistance (PBRA) contracts in certain scenarios, including in designated Opportunity Zones

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Property Standards and Condition

Project must meet needs identified in CNA (Capital Needs Assessment) Address critical needs immediately Includes rehabilitation needs of the property Addresses 20-year schedule will include repairs over this timeframe Includes the initial deposit requirements to replacement reserves and

ongoing reserve deposit requirements Revision 3 dropped the threshold down to 50 units or less does not require a

full CNA

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Rents Initial Rents Not based on usual lender underwriting standards Set at the project’s current funding levels under the public housing/other

multifamily program₋ Tenant Payment₋ Project’s Share of the PHA’s Capital Fund₋ Project’s Operating Subsidy

Reasonable Test applicable to the initial rentsRent Adjustments Done annually based on Operating Cost Adjustment Factor (OCAF) The initial rents will be a floor rent, there may be a phase in if tenants aren’t

paying 30% of their adjusted gross income toward rent No special or other adjustments available due to project expense increases

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ICF proprietary and confidential. Do not copy, distribute, or disclose. 17

Tenant Payment $318

Tenant Payment $318

Capital Fund $144

Operating Fund $330

Housing Assistance

Payment (HAP)

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

Pre-Conversion Post-Conversion

Sample Public Housing Conversion Per Unit Monthly (PUM)

$792

Section 8Public Housing/MF

At conversion, the PHA will convert to

HAP contract, using a

Section 8 contract rent


Cross Cutting Requirements

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Relocation – subject to RAD Relocation notice RAD information notice required prior to conversion Relocation cannot occur until RAD Conversion Commitment (RCC)

executed GIN required if URA is triggered (e.g., acquisition, demolition, and

rehabilitation) If temporarily relocated, tenants have a “right to return” to the

property Tenants cannot be voluntarily displacedFederal Accessibility Requirements applyDavis-Bacon prevailing wages apply, rehabilitation only, any number of

units Rev 2 Mod Rehab does not trigger DBSection 3 hiring rules also apply


Cross Cutting Requirements (cont)Environmental Reviews Depending upon the type of conversion, one or more NEPA reviews are

conducted:₋ Part 50 – For PBRA or FHA insured mortgage conversions, HUD performs

the review₋ Part 58 – For PBV, the Responsible Entity performs (frequently the city or

county) Under PBRA conversions, a Phase 1 environmental is required Lead-based paint hazards and asbestos containing materials (ACMs) are

required to be addressed/included in workSite and Neighborhood standards For PBRA or PBV, public housing authority, will certify site and neighborhood

standards are met for all types of projects

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Ownership

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For LIHTC transactions owner may be for-profit limited partnershipThere must be some PHA control over the partnership (if public housing conversion), multi-family conversions ownership variesMay be through any or all of the following: 51% or more of the general partnership interest Ground lease of the land Declaration of Restrictive Covenants Subordinate Debt on the ProjectRevision 4 includes HUD 202 PRAC projects


Type Of Permanent Project Financing for RAD

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42%

58%

FHA Conventional

72%

28%

4% 9%

Low Income Housing Tax Credits (LIHTCs)

First Mortgage Debt


Financing Needs

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Financing plan must demonstrate Capital needs – immediate and long term Reserves planned for maintenance long term, including deposits Conventional Rehabilitation financing Gap financing for Tax Credit transactions and/or other secondary

financing New construction financing for Demolition/Disposition properties 40% of Projects seeking FHA financing, with half proposing to combine

FHA with LIHTCs. 50% of Projects proposing to use LIHTC financing – majority proposing

4% LIHTCs. 20% of Projects proposing no-debt strategies for minor repairs to place

well maintained projects on sound financial footing with stable rental income.


HOME, HTF and CDBG in RAD Communities

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HOME, HTF and CDBG Section AgendaHOME and HTF Select Rules Financing Ownership Income Targeting Rental Project Deadlines Affordability Period

CDBG Select Rules Financing Ownership Income Targeting

Areas of Focus for HOME, HTF, and CDBG Grantees Financing Ownership Property standards Cross-cutting Requirements Operational

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HOME and HTF Select Rules Financing HOME limit award to public housing, but RAD units lose public housing at “conversion” HTF - may be used on public housing units being constructed or rehabilitated in Choice Neighborhoods or mixed

finance/Low Income Housing Tax Credit projects Commitment must be with the ownership entity HOME - Minimum of $1000 per unit, Max subsidy, HUD 234 program limit; RAD has other limits HTF - Limits are set by grantee based on modest housing units with suitable amenities and local market Eligible costs, including:

– Acquisition– Hard and soft costs related to rehabilitation, demolition, reconstruction, new construction– Site preparation– Relocation– Initial operating deficit reserve (up to 18 months)– Operating cost assistance for rental housing (HTF only)

HOME has 25% match requirement, HTF does not; RAD deals will likely need to bring match

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HOME and HTF Select Rules (cont)Ownership CHDO must be sole owner, owner/developer, or for LIHTC, sponsor

Income TargetingRental Project Deadlines HOME has two specific deadlines that RAD doesn’t have:

– Four-year completion deadline– 18-month lease-up requirement, HOME units should be rented first

Affordability period New construction – 20 years

– RAD deals should be automatically 20 years, not 15 to match the HAP contract with HOME/HTF HOME assistance

– under $14,999 – 5 years– $15,000 - $40,000 – 10 years– $40.0001 + - 15 years

HTF – 30-year period of affordability, will not match RAD, but will need to make clear renewal

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CDBG Select Rules Financing Public housing units are eligible, pre-and post-conversion Eligible costs

– Infrastructure in support of affordable housing– Acquisition– Hard and soft costs related to rehabilitation, demolition, reconstruction and new construction– Site preparation– Relocation

Ineligible costs– New construction is not allowed unless CBDO is owner or housing of last resort under URA

Ownership – CBDO could be owner, aggregate housing if located in a state CRSA

Income Targeting Low/Mod National objective - 3 or more units triggers 51% or more of units as affordable Income limits are set by the program, at or below low/moderate income (e.g., 80%)

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Areas of Focus for HOME, HTF and CDBG Grantees Financing Financial plans are due to HUD for RAD, PJs and CDBG/HTF grantees may do conditional commitment

before an actual commitment of funds Project appraisals are different than other projects

Ownership PHA maintain ownership; multifamily ownership varies under RAD CHDO projects (HOME only)

– If fee simple interest, owner, or owner/developer– LIHTC sponsor sole ownership (e.g., 202 PRAC)

Property Standards - Standards different than under RAD – CDBG – no set standard, no CNA– HOME and HTF have written rehabilitation standards and others in place; UPCS required if no local

standard; CNA required for HOME/HTF for 26+ units– RAD

• PBV – HQS• PBRA - Uniform Physical Condition Standards (UPCS) – Real Estate Assessment Center (REAC)

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Areas of Focus (cont)Cross-Cutting Compliance Environmental Review – not done by PHA, must be by HUD or city/county for Part 58 review Davis-Bacon Labor standards, unit threshold with HOME/HTF and CDBG but not with RAD Lead Safe Housing Rule and Disclosure Rule

– Any number of units are triggered for HOME, HTF, and CDBG, work based upon scope of the project– Lead only addressed if identified during a CNA for PHA/owner

Affirmative marketing is required for HOME and HTF, including 504 accessible units Site and neighborhood standards are triggered with new construction only Accessible units under Section 504, by threshold

– 5 or more newly constructed units; 15 or more substantial rehabilitation– 5% UFAS and 2% sensory

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Areas of Focus (cont)URA HOME, HTF and CDBG program requirements and normal HUD policies for displacement, relocation and

acquisition apply to RAD conversions involving those funding sources, even though RAD has its own relocation requirements.

Its “business as usual” for RAD conversions involving HOME, HTF and CDBG program funding. URA requirements are unaltered by RAD and CPD program requirements also apply.

PJs and Grantees must ensure compliance with all applicable CPD program requirements and implementing policies.

Section 104(d) relocation and 1-for-1 replacement requirements may apply to RAD conversions involving HOME or CDBG funding. Section 104(d) does not apply to HTF.

For questions contact your local HUD Regional Relocation Specialist. Contact info is available at: https://www.hudexchange.info/programs/relocation/

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https://www.hudexchange.info/programs/relocation/


Areas of Focus (cont)Operational Utility allowances

– PHA UA schedule can’t be used in HOME projects, unless it is done on a project-by-project basis Rents

– Max Low HOME rent limits must be met, compared to max rent proposed by the owner• More units may need to be designated as Low to be able to charge the max project-based Section 8 rent

Income Limits and Targeting– “Right to return” to the project –however, HOME/HTF has requirements on screening– Initial occupancy: Max very low-income HOME limits must be met or at or below 60% of area median

income if PJ needs for Program Rule, if 5 or more HOME-assisted units, 20% must be provided to very low income

– Ongoing occupancy: Max very low income and low-income HOME limits must be met, if 5 or more HOME-assisted units, 20% must be provided to very low income• Unit substitutions must be made according to the HOME requirements

– HTF serves extremely low at or below 30% of AMI (while the fund is below $1 billion) Monitoring

– Who does it (PHA with subsidy contract, grantee, etc.) and coordination

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Tennessee Housing Development Agency

Joint Funded RAD Projects


THDA - LITEC

RAD projects receive a basis boost in the Low-Income Housing Tax Credit application and also receive a priority among PHA developments that apply

Developments must have: Rental Assistance Demonstration (“RAD”) Commitment to Enter into a Housing Assistance

Payments Contract

Letter from PHA that says– the development proposed in the Initial Application is identified in the PHA’s RAD Commitment to Enter into a

Housing Assistance Payments Contract or CNI Implementation Grant– the housing units are an essential element of that Plan; and– the Tax Credits for the development proposed in the Initial Application are an essential component of the PHA’s

RAD Program.


THDA – Housing Trust Fund

Competitive Grant Competition PHA’s working under a RAD contract are eligible Gap Financing up to $900,000 based on eligible units, subsidy limits and project

need Funded units may be fixed or floating Points incentive for units with PBV or PBRA

To date THDA has made 12 Awards under the “HTF” 9 of the 12 awards have gone to PHA’s to support RAD conversions All 9 RAD projects have complex financing stacks that included 4% Bonds or 9%

LIHTC Total funding to PHA’s has been $6,544,617 Projects range from renovation to mixed income new construction


Franklin Housing Authority

Chickasaw Senior Community New Construction, 48 Total Units

– 22 RAD Units– 26 LIHTC Units– Includes 13 units dedicated to HTF Financing Stack

– LIHTC Proceeds $ 9,262,000.00 – Final Mortgage $ 1,132,145.15 – Owner Equity $ 580,555.66 – HTF $ 843,000.00 – Total Development Cost:

$11,967,700.81


Metropolitan Housing Development Agency Boscobel Phase 2; Mixed Income (4) phases replaces former Cayce Homes (781 Units)

New Construction, 101 Total Units– 45 RAD/LIHTC Units– 4 HTF Units– 15 Workforce housing units – 41 market rate units

Financing Stack– LIHTC Proceeds $10,558,944.00– PJ HOME Grant (Nashville)

$ 500,000.00– Final Mortgage

$ 7,400,000.00– Owner equity (Unrestricted PHA Reserves)

$14,648,610.00 – Owner equity

$ 646,818.00 – Total Development Cost:

$ 34,228,805.00


Resources

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HUD RAD Web Page

RAD Notice, application materials, and additional resources can be found at

www.hud.gov/rad

Sign up for their mailing listEmail questions to radresource.net

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http://www.hud.gov/rad


Other ResourcesHUD Exchange RAD Page https://www.hudexchange.info/programs/rad/

RAD ER Guidance – includes other HUD programs https://www.hudexchange.info/resource/4216/environmental-

review-requirements-for-rad-transactions/

RAD Differences PBV and PBRA https://files.hudexchange.info/resources/documents/Key-

Differences-PBV-PBRA-Mod-Rehab-SRO-Conversions-Chart.pdf

Photos and Project Samples https://www.hud.gov/RAD/news/photoessays

RAD Collaborative (CLPHA-sponsored) http://www.radcollaborative.org/rad-project-portfolio-strategies

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RAD in Portland, ME

https://www.hudexchange.info/programs/rad/

https://files.hudexchange.info/resources/documents/Key-Differences-PBV-PBRA-Mod-Rehab-SRO-Conversions-Chart.pdf

https://www.hud.gov/RAD/news/photoessays

COSCDA: RENTAL ASSISTANCE DEMONSTRATION weare · Jerry Anderson, Executive Vice President, Gill Group Shawna LaRue Moraille, Principal, ICF Bill Lord, Housing Program Manager, Tennessee

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