Rental Assistance
Demonstration (RAD)
Program
Housing Authority of the City of Passaic
Presenter
William F. Snyder-Consultant
Victor Cirilo, Executive Director
HUD Notice PIH 2012-32
Issued 7/26/12
Provide Instructions for the RAD
program
Eligibility
Selection Criteria
What is RAD
RAD converts the current public
housing program Annual
Contributions Contract (ACC) into a
Project Based Voucher (PBV) or
Project Based Rent Assistance
(PBRA).
Passaic Housing Authority
PHA previously applied for conversion for
all elderly units (130 units at 3 sites).
PHA one of 3 original Housing Authorities
to get HUD approval of its RAD application
PHA anticipates completing the transaction
by early 2014. I
Will be providing approximately
$5,900,000.00 in rehabilitation to the 3
projects ($45,000.00 per unit).
It will take 2 years, after conversion, to
complete the rehab work
PHA Current Consideration
Conversion of all housing under the
RAD program
Alfred Speer Village-384 units
Vreeland Village-116 units
Chestnut Gardens-70 units
Total additional units: 570
What will this mean for you?
There will be little effect on the
residents.
Rent will remain the same
You will not have to move out of your
unit during the rehabilitation work
What will this mean for your?
Rehabilitation approximately $25 million
dollars to make repairs at all locations.
Funding provides 75% of total capital need.
The balance can be funded over a 20 year
period via replacement reserve.
Current estimated need $33.7 million
It is an alternative to mixed finance (Choice
Neighborhood)
Current PHA need-Per PNA
$33,663,748-Total Capital Need
Speer Village-384 units
$21,969,000.00 Capital Need
$56,500 per unit
Vreeland Village-116 units
$6,909,523.00 Capital Need
$59,565 per unit
Chestnut Gardens-70 units
$4,785,225.00 Capital Need
$68,360 per unit
Where are we going with the
public housing program?
The trend does not seem to indicate
an increase in federal funding anytime
soon!
All of funding for our buildings comes
from HUD from 2 major sources:
Operating Fund
Capital Fund
“Proration Factor”
The Annual Contributions Contract
(ACC) stipulates that your subsidy is
subject to annual appropriations from
Congress. There is currently an
$800,000,000.00 gap in PHA
Operating Fund eligibility and
Congressional appropriations. PHAs
must estimate what percentage
Congress will approve in preparing
their budget.
The “Proration Factor”
Operating Fund
For 2012, the Congress accepted the
Administration’s recommendation and funded the
Public Housing Operating Fund at $3.982 billion,
$1 billion below total subsidy eligibility. This
funding level was paired with a $750 million offset
against “excess” existing operating reserves held
by Public Housing Authorities (PHAs). .
A year-long CR at the 2012 level will provide only
83 percent of PHAs’ operating costs for calendar
year 2013. This is the deepest proration in the
program’s history.
2014 is forecast at the same level.
Capital Fund Status
Estimated Need (Abt) $26 Billion
Annual Accrual Rate
$3.6 Billion
2013 Appropriation
$1.78 Billion
25% Cut in CFP from 2010-2012
Capital Fund Program
Capital Fund Program
For 2012, the Public Housing Capital Fund was
funded at $1.875 billion, the lowest funding level in
the history of the program. Between 2010 and
2012, the Capital Fund experienced an
unprecedented 25 percent reduction from what
was already an inadequate funding level given the
inventory’s annual accrual of capital needs.
According to the Capital Needs Assessment
recently completed by Abt Associates at HUD’s
direction, the portfolio already has a modernization
backlog in excess of $26 billion, with an annual
accrual rate of approximately $3.4 billion.
National Debt
Current Federal Budget $3.8 Trillion
Current National Debt
$16.8 Trillion
Current annual budget
deficit
$973 Billion
Proposed Budget Savings
over the next 10 years
$1.5 Trillion
“Sequestration”
What is sequestration?
Sequestration is an across-the-board reduction in Federal budgetary
resources in all budget accounts that have not been exempted by
statute. Under the Balanced Budget and Emergency Deficit Control Act
of 1985, as amended by the Budget Control Act of 2011, the American
Taxpayer Relief Act of 2012, and other relevant legislation, across-theboard reductions of $85 billion in budgetary resources were required to
be ordered by the President on March 1, 2013. Sequestration reduces
each agency’s budgetary resources in non-exempt accounts for the
remainder of the fiscal year (which runs through September 30, 2013).
It results in an additional 5% across the board cut in all discretionary
spending programs
HUD is considered discretionary spending
“Sequestration”
What will be the impact of sequestration on
HUD?
HUD will attempt to minimize the impact of sequestration to the
extent permitted by law. However, HUD cannot choose which
programs to exempt or what percentage cuts to apply. This will
mean automatic and across-the-board budget cuts at HUD. The
impact of sequestration on HUD programs will be dramatic.
An approximate 5% across the board cut in HUD programs
added to the already historic low proration factor!
“Sequester”
The sequester was originally passed as part of the
Budget Control Act of 2011 (BCA), better known
as the debt ceiling compromise.
It was intended to serve as incentive for the Joint
Select Committee on Deficit Reduction (the
“Supercommittee”) to come to a deal to cut $1.5
trillion over 10 years. If the committee had done
so, and Congress had passed it by Dec. 23, 2011,
then the sequester would have been averted.
No compromised deal has been achieved.
RAD Goals
Build on the proven Section 8
platform
Leverage private capital to preserve
assets
Offer residents greater choice and
mobility
Selection of PBA or PBRA
PBA
Project Based Rental Assistance will be administered by
the agency on whose Annual Contribution Contract the
voucher were assigned (most cases will be the agency
doing the conversion)
Term-15 years (up to 20 with approval of administering
voucher agency)
PBV rents will be equal to current finding subject to a
cap and will be adjusted annually
PBA contract will also carry a concurrent renewable RAD
User Agreement
Must provide Choice Mobility Option to residents
Maximum PBA assistance (20% of budget authority) will
not count against the PHA’s maximum for covered
projects
Cap on Number PBV Units in each
project.
The 25% limitation on the number of
PBV assistance in a project is
increased to 50%.
100% of the units may be PBV if the
at least 50% of the units qualify as
elderly, disabled or families receiving
supportive services.
Selection of PBA or PBRA
PBRA
Project Based Rental Assistance-the project will
be administered by HUD’s Office of Housing
PBRA Contract rents will be equal to the
project’s current funding, subject to a cap and
will be adjusted annually
Term-20 years
PBRA Contract will also carry a concurrent 20
year renewable RAD User Agreement
A Choice Mobility Option will be a condition of
the conversion
Eligibility for Conversion to RAD
Must have public housing units under ACC
Be classified as a standard or high performer. If “troubled”
must be able to demonstrate the capacity to carry out a
successful conversion.
Be classified as standard or high performer under SEMAP if
administering the PBV contract. If “troubled” must be able to
demonstrate the capacity to carry out a successful conversion.
Be in substantial compliance with HUD reporting and
programmatic requirements and/or be in compliance with an
MOA.
Not have debarments, suspension or LDPs lodged against the
Executive Director. Board members or affiliates.
Submit a completed application that complies with the RAD
instructions
Be in compliance with all fair housing and civil rights
requirements
PHA QUALIFIES FOR CONVERSION!
Rehabilitation & Financing
Consideration
HUD estimates that there is a need for
approximately 25.6 billion in capital needs
across the portfolio
One of the main purposes of the RAD
program is demonstrate how the
conversion to Project Based Assistance
can generate access to private debt and
equity to address immediate and long-term
capital needs through rehabilitation.
Any and all viable forms of debt and equity
financing will be considered to support the
conversion.
Rehabilitation Needs
Applications will be scored on a perunit capital cost value system
High Need Scoring:
Family-$37,665
Elderly-$21,834
We are proposing in excess of $40,000
per unit
Rehabilitation Consideration
Physical Condition Assessment (PCA)
Projects selected for award will be required
to perform a detailed physical inspection of
the property to determine short-term
rehabilitation needs and long term capital
needs to be funded through a reserve for
replacement.
The PCA Statement of Work must be in the
format utilized in HUD’s Mark to Market
program and may accessed at:
http://portal.hud.gov/hudportal/hud?src=/program_offices/housing/mfh/presr
v/mhrpaes/training
Rehabilitation Consideration
Temporary Relocation-Any temporary
relocation must comply with the
Uniform Relocation Assistance and
real Property Acquisition Act of 1970
(see 49 CFR Part 24).
Financing Consideration
RAD projects are eligible for financing from
private and public lending sources (see
application proforma).
Loans are secured according to the RAD
User Agreement that will be filed in first
position.
Debt Service Coverage must be at least
1.11 or the lender's requirements
HOME funds can be use in RAD projects
Financing Considerations
Low-Income Housing Tax CreditsApplicants are encouraged to use
LIHTCs to support recapitalization of
the project (9% & 4%). Applicants
should indicate in their application
that they intend to use LIHTCs.
There is no requirement that the
credit be secured prior to submitting
an application. The 9% credit have
special application requirements.
Amendment to Annual & Five Year Plan
(Should be done immediately!)
Conversion to the RAD Program is considered a
significant amendment to the PHA’s Five Year
Plan for both qualified and non-qualified PHA.
RAD Conversion is subject to the Consolidated
Plan requirements and public notice and Resident
Advisory Board consultation requirement per 24
CFR Part 903.
Policy changes must be submitted to HUD within
60 days of CHAP delivery.
Public notice and at least one public hearing
Plan Amendments
Must include the following:
A description of the units to be converted, including type
of units (family, elderly, etc) and bedroom distribution.
Any change in the number of units, including the de
minimis unit reduction (5% or 5 units).
Any change in bedroom distribution
Any change in policy governing admission, eligibility,
selection and occupancy after conversion (including
waiting list preferences).
Transfer of assistance where the converted units will be
moved to another location
HUD will review all amendments for civil right,
executive order and regulatory compliance.
Resident Provisions
(Attachment 1B.2-Pages 75-78)
Residents must be notified and have
an ability to comment on the
conversion in writing. Resident
comments must be responded to.
Resident meetings must be held
during the conversion process.
Similar to Demo/Dispo process
Rent Calculation
Once you convert to RAD, the
Housing Authority will no longer
receive Operating or Capital Fund
subsidies.
The OF and CF are built into the
monthly rent and subsidized through
the Housing Choice Voucher Program
(S8)
RAD Application
Filed at: RADapplication@hud.gov
RAD Board Approval Form-includes the proposed pro-forma and other key
certifications and must be approved by the Board of Commissioners and
signed by the authorized representative.
Financing Letter of Interest/Intent-from each lender or equity investor
indicating that the proposed pro-forma is reasonable. This is not necessary
where the long-term capital needs are being met from a reserve for
replacement.
Mixed Finance Affidavit-is required where the PHA is requesting to convert
public housing to a mixed finance project.
Choice Mobility Letter-signed by the voucher agency that has committed to
provide Choice Mobility vouchers. This is not necessary where the PHA is
meeting this requirement through turnover in their own voucher program.
Designation of PBV Administering agency-the PHA must identify the agency
that will be administering the PBV contract (signed letter from the
administering agency)
Resident consultation-include responses to comments received in
connection with the resident meetings on the proposed conversion to RAD
All required materials (Including attachments) must be submitted
electronically using the Excel-based RAD application. Attachments must be
included as PDF files. NO PAPER OR FAX SUBMISSIONS AREV
PERMITTED.
There is no cap on the number of applications that a PHA can file.
Ranking Factors
Summary of Ranking Factors
Points
High Capital Need
0-50
Choice Mobility Factor
20
Green Building & Energy
Efficiency
10
PHA Priority
20
TOTAL
100
CHAP Milestones
(Commitment to Enter into a Housing Assistance Payment
Contract)
All PHAs will be notified of their selection via
issuance of an award letter, signed by HUD.
Attached to the award letter will be a Commitment
to Enter into a Housing Assistance Payment
(CHAP) which will indicate HUD-approved terms
and conditions for the conversion.
CHAPs are not subject to negotiation by the PHA
or a third party.
The PHA has 15 days in which to notify HUD that
they are refusing to terms of the CHAP.
Does it Make Sense for your to
consider RAD Conversion?
This is a decision that rest with each
individual PHA at each individual project.
Consideration should be given to what funding
will be in the future!
Consideration should be given to your
rehabilitation needs.
Do we do all projects or selected projects?
Is this a viable alternative to mixed finance?
Is HUD going to eventually required that all
PHA convert to the RAD system?
Question & Answers
Thank-you for participating!