RAD Workshop
WCAH
July 25, 2013
Presented by:
C. Ray Baker & Associates
WHY RAD?
•
Most of America’s 1.2 million Public Housing units were built
as temporary housing beginning in 1937.
•
These units are old, outdated and in desperate need of major
capital repairs.
•
RAD will allow PHAs and their developer partners to convert
Public Housing units to Section 8 PBV units.
•
During this transformation a combination of LIHTCs and debt
will provide the funding necessary to modernize these units.
•
Only a small fraction of the nations 3,200 Housing Authorities
have the expertise necessary to implement RAD.
2
CURRENT CHALLENGES
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
Section 8 Moderate Rehabilitation (Mod Rehab)
• Cannot renew on terms needed to secure financing
Rent Supplement (Rent Supp) & Rental Assistance Payment
(RAP)
• No option to renew when contracts expire
3
1ST COMPONENT
• 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
• Extensive waiver authority to facilitate conversion
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2ND COMPONENT
• Mod Rehab, Rent Supp & RAP
• Upon contract termination/expiration, convert Tenant
Protection Vouchers (TPVs) to PBVs
• No cap, but subject to availability of TPVs
• Choice-Mobility requirement per PBV program rules
• Limited waiver authority to facilitate conversion
• Prospective conversion authority through 9/30/2013
• Retroactive conversion authority back to 10/1/2006
(convert by 9/30/2013)
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RAD VS. HOPE VI
•
In nine months there are more Public Housing Authorities
engaged in RAD than there were in the first two years of the
HOPE VI program.
•
There are more Public Housing units in the RAD program
than there were in the first two years of the HOPE VI
program.
•
The RAD program has not required any additional funding
from Congress.
2/2/2012
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RAD BASICS
What?
• Allows 60,000 public housing units to convert to long-term Section
8 rental assistance contracts
Why?
• Access private debt and equity to finance capital needs
• Program simplification/streamlining
• Better platform for long-term preservation
Conversion Options
• Project-Based Rental Assistance (PBRA)
• Project-Based Vouchers (PBV)
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RAD WORKSHOP
•
What is RAD? HUD demonstration program that combines public housing
operating and capital subsidy into a Section 8 HAP contract
•
What kinds of developments are being done with RAD? Minor rehab; major
rehab; new construction; mixed income; off-site replacement housing
•
How do I determine if I have a project/portfolio that would be a good candidate
for RAD conversion? Use the RAD Inventory Assessment Tool in the Resources
section of www.hud.gov/rad
•
How would RAD affect:
• Residents: No change; 30% of income for rent
• PHA Functions: Dependent on cash flow, fees, strong management; puts them
on the more secure Section 8 funding platform; Gives them the affordable
housing tools of other nonprofit developers
•
Resources: www.hud.gov/rad; www.radcapitalmarketplace.com;
www.radresource.net
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RAD BASICS (CONT.)
•
Ownership – Public or non-profit, except to facilitate tax credits
•
Contract Rents
Operating Fund (with Operating Fund Allocation Adjustment)
+ Capital Fund
+ Tenant Rents
= RAD Contract Rent
Notes:
• HUD will honor the FY 2012 RAD contract rents for all applications
received before end of CY 2013 (applies to individual applications,
portfolio awards, and multi-phase awards)
• PHA may adjust Contract Rents across multiple projects as long as
aggregate subsidy does not exceed current funding (“rent bundling”)
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PUBLIC HOUSING CONVERSION RENT LEVELS
Sample Public Housing Conversion
Per Unit Monthly (PUM)
$900
$800
$700
$600
Operating
Fund $330
Housing
Assistance
Payment
$474
$500
$400
Capital Fund
$144
$792
$300
$200
Tenant
Payment $318
Tenant
Payment $318
Pre-Conversion
Post-Conversion
$100
$-
ACC
Section 8
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NONPROFIT DEVELOPER OBJECTIVES
•
•
Partner with PHAs to:
• Modernize aging family & elderly properties
• Substantial rehab of deteriorated properties
• Demolish/replace severely distressed/obsolete
properties
• Thin densities/mix incomes via RAD HAPs and
transfer authority
Place RAD HAP contracts in off-site units in high
amenity locations
• Increase QAP scoring by serving more VLI families
• New 20 year HAP contract funding
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RAD FINANCING
Debt
• Conventional
• Soft secondary
• Credit enhancement
FHA Insurance
• FHA Mortgagee Letter for RAD transactions
• LIHTC Pilot
LIHTCs
• 4% availability & considerations
• 9% availability & considerations
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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
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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
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FEDERAL HOME LOAN BANK AHP
Affordable Housing Program (AHP)
•
This program is funded with 10% of the Federal Home Loan
Banks' net income each year.
•
Most effective when paired with other programs and funding
sources, like Low-Income Housing Tax Credits.
•
More than 776,000 housing units have been built using AHP
funds, including 475,000 units for very low-income residents.
•
$4.6 billion in total AHP dollars since 1990. That’s 200 million
per year.
•
AHP loan funding often comes with an equal amount of grant
funding.
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RAD & LIHTCS
RAD Sweet Spot—Debt Only
• Abt study—$24k/unit average capital need
• Opex at $4,500 pupy + $300 replacement reserves
• FHA debt at 3.45%; 1.2 DCR
• Feasible with RAD rents above ~$610/month
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RAD & LIHTCS
RAD Sweet Spot—4% LIHTCs
• Rehab needs above $24k/unit to ~$40k/unit
• Ease of meeting 50% test with RAD rents
• Available P-A Volume Cap
• Non-competitive
• QAPs favoring preservation, green
• Evolving, accessible short-bond structure
• Historically low borrowing rates
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RAD & LIHTCS
Short Bond Structure for 4% LIHTCs
•
At Closing
– TE bonds with 24 month term issued (1.25%)
– FHA 221(d)(4) or 223(f) closes
•
During Construction
– Construction draws: Standard GNMA certificates
– Bonds paid down & paid off at construction completion
– Reduces negative arbitrage costs
•
Long Term
–
Project benefits from 40-year loan at FHA rate of 3.45%
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RAD & LIHTCS
RAD Sweet Spot—9% LIHTCs
• Targeted prospects for substantial rehab &
replacement housing
• No Section 18 review
• Income mixing
• Split project (AMP)
– 9% LIHTC used to help cover relo/demo/first phase
– 4% LIHTC for balance of site
• RAD HAP contract(s) for off-site replacement
– Acquisition/rehab
– New construction
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RAD ACROSS THE COUNTRY – 1ST COMPONENT
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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RAD ACROSS THE COUNTRY
1st Component
• 132 CHAP awards, representing 14,781 units
• 51% conversion to PBRA, 49% conversion to PBV
• Over 60% of proposals planning to use LIHTCs (the vast majority being
4% credits)
• Over 60 partnering lenders and investors
• Expected to raise $816M in debt and equity instruments
2nd Component
• Approved 5,000 units in 48 projects
• Expecting additional 2,000 unit approvals by end FY 2013
• Over 120 projects awaiting approval with additional authority
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KEY CHANGES IN THE RAD NOTICE
•
•
Eliminates caps on units that can convert for:
 Public housing
 Mode Rehab
Creates new awards for:
 Portfolio conversions

PHA defines “portfolio” of projects, either the entire PHA inventory or some subset
 PHA must submit applications for at least half of the projects in portfolio
 HUD will reserve award for remaining units in portfolio
 PHA must submit application for remaining projects in portfolio within 365 days
 Multi-phase conversion

Allows PHAs to reserve conversion authority for projects with multiple development phases with applicable contract
rent for all phases
 PHA has until July 1, 2015 to submit application for final phase
 PHA required to fulfill all CHAP milestones for each CHAP awarded
 Upon application acceptance, HUD will issue CHAP for initial phase and multi-phase award letter covering all
phases of project
 Joint RAD/CNI applicants
•
Opens the Ongoing Mod Rehab Application Period
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Aggregated Number of Unit Awards Issued
RAD 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
LENDERS AND TAX CREDIT 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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RAD WEB PAGE
RAD Notice, application materials, and
additional resources can be found at
www.hud.gov/rad
Email questions to radresource.net
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