RAD: A New Source of
Rental Subsidy
September 29, 2013
RAD AUTHORITY
Authorized in Consolidated Further Continuing Appropriations
Act of 2012 (Public Law 112-55)
• Initial program rules outlined in PIH Notice 2012-18 (3/8/12)
• Final program rules outlined in PIH Notice 2012-32 (7/26/12)
• Revision 1 in PIH Notice 2012-32 REV 1 (7/2/13)
Allows public housing and certain at-risk multifamily legacy
programs to convert to long-term Section 8 rental assistance
• 1st Component, Competitive: Public Housing & Mod Rehab
• 2nd Component, Non-competitive: Mod Rehab, Rent Supp, & RAP
2
WHY RAD?
Public Housing
• Capital repair needs in excess of $25.6B across portfolio, or
$23,365/unit
• Section 9 funding platform unreliable (pro-rations, cuts),
inhibits access to private debt and equity capital (declaration
of trust)
• Losing 10,000-15,000 hard units/year
3
Billions
2000-12 FUNDING CURVES—SECTION 9
$6
$5
$4
PIH Capital Fund
$3
PIH Operating Fund
$2
Graph does not include
$4billion in 2009 to Cap
Fund through ARRA
$1
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
4
Billions
2000-12 FUNDING CURVES—SECTION 8
$18
$16
$14
$12
$10
PBRA OCAF ~4% per year
PBRA
TBRA
$8
$6
Graph does not include
$2billion in 2009 to PBRA
through ARRA
$4
$2
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
5
RAD PH RENTS—CONVERTING CURRENT FUNDING
$900
Sample Public Housing Conversion
Per Unit Monthly
$800
$700
$600
Operating Fund
$330
Housing
Assistance
Payment
$474
$500
$400
Capital Fund
$144
$792
$300
$200
$100
Tenant
Payment $318
Tenant
Payment $318
Pre-Conversion
Section 9 ACC
Post-Conversion
Section 8 HAP
At closing,
funding is
converted to a
Section 8
contract rent
$6
1ST COMPONENT—OVERVIEW
• Public Housing & Mod Rehab
• Can compete to convert assistance to:
– Project-Based Rental Assistance (PBRA) or
– Project-Based Vouchers (PBV)
• Cap of 60,000 units (applications must be received by
9/30/2015)
• Convert at current funding only
• Choice-Mobility, with limited exemptions
• Applications are first-come, first-served until cap reached
7
1ST COMPONENT—STATUS
1st Component—As of July 1
•
•
•
•
•
•
132 CHAP awards—14,781 units
51% converting to PBRA; 49% converting to PBV
Over 60% of projects planning to use LIHTCs
~ 45% of deals using FHA insurance [223(f) & 221(d)(4)]
Over 60 partnering lenders and investors
Leverage ~$815M in debt & equity investments
(conservative)
1st Component—Since July 1
• Additional 100+ applications—or +18,000 units
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RAD 1ST COMPONENT INITIAL AWARDS—GEOGRAPHY
Northeast Midwest South West
PHAs and Mod Rehab Units Awarded
949
1,279
Total
9,997 2,556 14,781
949
Units
1,279
Units
2,556
Units
9,997
Units
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PH INITIAL AWARDS—KEY CHARACTERISTICS
Capital Needs
• 22% New Construction
• 78% Rehab
― 24% proposed Greater than $50K in Rehab
― 23% proposed $30K – 50K in Rehab
― 21% proposed $10K – 30K in Rehab
― 32% proposed Less than $10K in Rehab
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PH INITIAL AWARDS—KEY CHARACTERISTICS
PHA Objectives
• Modernize aging family & elderly properties
• Sub rehab of deteriorated properties
• Thin densities/mix-incomes via PBVs & transfer
authority
• Demolish/replace severely distressed/obsolete
properties
• Portfolio streamlining
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KEY CHANGES IN THE RAD NOTICE
• Locking in 2012 contract rents for all
applications received by 12/31/13
• Allowing a PHA to “bundle” rents to
facilitate financing
• Allowing MTW agencies rent fungibility
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KEY CHANGES IN THE RAD NOTICE
• Mixed Finance projects
 Removing unit cap for Mixed Finance projects
 Allowing financially distressed HOPE VI projects to apply
• Exempting awarded projects from the Public
Housing Assessment System (PHAS)
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KEY CHANGES IN THE RAD NOTICE
• Eliminating unit caps on:
 Mod Rehab projects
 # of units a PHA can convert
• Creating new awards for:
 Portfolio conversions
 Multi-phase conversion
 Joint RAD/CNI applicants
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Aggregated Number of Unit Awards Issued
RAD PH AWARDS TREND CHART
160,000
140,000
120,000
Awards-to-Date
100,000
80,000
60,000
Awards Expected
Based on
Application
Trends
Awards Expected
Based on Current
Outreach
40,000
Anticipated
Future Awards
20,000
0
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DEVELOPMENT OPPORTUNITIES
•
For profit and non-profit Developer Opportunities
• First new HAP contracts in over 20 years
•
Responding to PHA RFP’s for development services
•
•
•
•
•
•
Larger PHAs: mixed income developments, etc.
Mid-sized PHAs: 250 to 2500 units: Development opportunities
not previously available.
Resource: HUD website: PHA profiles; PHA mortage amounts
based on RAD; RAD Inventory Assessment Tool
Conversion of existing mixed finance developments
Combining other HUD programs, (Choice Neighborhoods,
etc.) with RAD
Development of off-site “transfer of assistance” units
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FINANCING:
FHA LIHTC PILOT PROGRAM
Streamlined-Enhanced FHA 223(f) & LIHTCs
• Rehab expenditures of up to $40,000/unit
• Tax credit or Bond Cap allocation in hand
• Processed in Multifamily Hubs
• Using MAP lenders approved for the Pilot
• Goal of 3-4 month turnaround on applications
17
FINANCING:
FHA MULTIFAMILY MORTGAGE INSURANCE
Section 223(f)
• Refinance or acquisition
• Minor/moderate repairs ($6,500/unit*high cost factor)
• Permanent debt with repair escrow - up to 35 years
Section 221(d)(4)
• Substantial rehab: 2 major building systems
• Construction/permanent debt all in one - initial/final closing
• 40-year financing
Mortgagee Letter for RAD Transactions issued 10/12
• Eligibility, underwriting criteria, processing & materials
18
FINANCING: LIHTC
•
TE Bonds and 4% credits
• Short bond structure
• Higher rents
• Lower borrowing rates
• HFA support in QAPs for 4% deals: gap funds; scattered
sites; pools; preservation set-asides; etc.
•
9% credits
• New construction
• Points for HAP contracts for off-sites
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RAD WEB PAGE
RAD Notice, application materials, and
additional resources can be found at
www.hud.gov/rad
Email questions to radresource.net
Sign up at radcapitalmarketplace.com
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CURRENT RAD LENDERS & INVESTORS
Alliant Capital
Boston Capital
California Community Reinvestment
Corporation
Centerline Capital Group
Community Affordable Housing Equity
Corporation
Community House Partners Development
Corporation
Direct Tax Credits, Inc.
Enterprise Community Investment
Georgia Department of Community Affairs
Great Lakes Capital Fund
Hudson Housing Capital
Hunt Capital Parnters
National Equity Fund
Newport Partners LLC
Ohio Capital Corporation
Ohio Capital Housing Corporation
PNC Real Estate
Prestige Affordable Housing Equity Partners
Raymond James Tax Credit Funds Inc.
RBC Capital Markets
Bellwether Enterprise Real Estate Capital LLC Arbor Commercial Mortgage
Capital Fund Services Inc.
Beekman Securities
Crain Mortgage Group LLC
Centerline Mortgage Capital
Fifth Third Bank
Chase Bank
First Citizens Bank NA
Columbus Bank and Trust
Forest City Capital Corporation
Continental Mortgage Corporation
Great Lakes Capital Fund
Federal Home Loan Bank of Chicago
Highland Commercial Mortgage
Hunt Capital Partners
Lake Forest Bank & Trust Company
McCan Communities
Lancaster Pollard
New Mexico Bank & Trust
Love Funding
NW Financial Group LLC
M&T
Rabobank N.A.
PNC Real Estate
Red Stone Equity Partners
Prudential Huntoon Paige Associates LLC
SunTrust Bank
RBC Capital Markets Housing Finance Group TD Bank
US Bank
Red Mortgage Capital
Red
Stone Equity Partners
Rockport Mortgage
Richmon Group
St. James Capital LLC
Union Bank
US Bank Community Development
Corporation
Walker Dunlop
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