9/13/2019 ARE YOU READY TO RAD?! MN NAHRO - FALL CONFERENCE 2019 Dana Kitchen Division Director, Minneapolis Office of Public Housing 1 INTRODUCTION 2 2 1
9/13/2019 WHAT IS RAD? HUD’s Rental Assistance Demonstration program Assisted housing preservation strategy RAD allows selected PHAs to convert Public Housing to long-term Section 8 Housing Assistance Payment (HAP) contracts Combines public housing operating and capital subsidy into a Section 8 HAP contract RAD is a method to obtain outside capital investments RAD is voluntary Minor rehab, major rehab, new construction, mixed income, off-site replacement housing 3 3 WHY RAD? Much of the nation’s public housing stock has an enormous backlog of capital needs and repairs RAD maintains public ownership of assisted housing Simplifies administration of the program Gives PHAs affordable housing tools of other nonprofit developers RAD allows PHAs to access debt and equity through public and private capital investors to finance capital needs Low Income Housing Tax Credits (LIHTC) Bonds Loans/Mortgages Robust residents’ rights providing greater choice and mobility RAD can lead to development of newly designed and accessible units, rehabilitation of existing units, and demolition of obsolete units Converts PHA properties to a more secure Section 8 funding platform 4 4 2
9/13/2019 GENERAL RAD FACTS Predictable initial contract rent setting Rents based on public housing funding levels with certain flexibilities Annual operating cost adjustment factor (OCAF) Can use PH $$ in development budget to support conversion No limitation on use of project cash flow RAD HAP funding begins at construction closing Long-Term Use Agreement (RAD Use Agreement) HAP Contract Renews Resident Right to Return Preserve FSS Replacement Housing Requirement Not eligible for DDTF or ARF 5 5 SAMPLE RAD SECTION 8 RENTS At conversion, PHAs will convert funding to a Section 8 contract rent RAD Rents for every public housing property available at www.hud.gov/rad 6 6 3
9/13/2019 RAD CAN HELP YOU TO… Complete repairs ranging from moderate to substantial Substantial rehab of deteriorated properties Demolish and redevelop distressed/obsolete properties Modernize aging family & elderly properties Thin densities and mix-incomes Move project-based assistance to opportunity neighborhoods Streamline administration of HUD program Stabilize property revenue 7 7 A BEFORE AND AFTER... Before RAD After RAD PH properties are typically not funded at Properties are placed on the more stable 100% Section 8 funding platform PHAs cannot typically borrow money to PHAs can more easily borrow money and perform necessary repairs (except for perform rehab OFFP, CFP, EPC) Funding fails to keep up Living conditions can be improved Residents cannot choose to move Residents may receive a tenant-based without losing housing assistance voucher, or similar assistance, and move after 1 year in PBV or 2 years in PBRA 8 8 4
9/13/2019 WILL RAD WORK FOR YOUR PHA? 9 9 KEY QUESTIONS AND CONSIDERATIONS Defining your RAD project Which units, building, developments? Full developments or partial What are trying to do? Preserve? Rehab? Redevelop? Transfer assistance? How do you plan to finance this conversion? “No-debt”/PH funds only? Debt? Tax Credits? Combination? What form of Section 8 will you choose? Project Based Vouchers (PBV) or Project Based Rental Assistance (PBRA) Capacity and Organizational implications Community Need Will you self-develop and/or manage? Or transfer to a PHA affiliate? Transfer to other Non- Profit/Public Body? Transfer to a For-Profit (LIHTC)? Use a Ground lease? PHA control of partnership or LLC? Will you convert with RAD, Section 18, or some combination of the two? Other repositioning conversions? 10 10 5
9/13/2019 INTERNAL CONSIDERATIONS Each development stands on its own PHAs have the tools of other affordable housing developers Property Managers can be empowered to manage their own operating budgets with their own replacement reserves Significantly more private leverage Properly structured projects generate unrestricted cash from cash flow, developer fees and loan payments Funding is more predictable Site based waiting lists 11 11 GENERAL RAD ELIGIBILITY Must be a PHA under an ACC Must be Standard or High Performer under PHAS Must be Standard or High Performer under SEMAP Must be in compliance with HUD reporting and programmatic requirements Must not have a debarment, suspension, or Limited Denial of Participation (LDP) Must submit a completed application that complies with RAD requirements Must not have or resolve any outstanding civil rights matters 12 12 6
9/13/2019 STREAMLINED RAD ELIGIBILITY Must have 50 or fewer units remaining in PH inventory Must demonstrate that through RAD or other means, the PHA will remove all PH units under ACC and close out its PH program Must have an overall PHAS score of 75 or higher, PASS score of 30 or higher, and not have a Substandard or Troubled designation Must not propose to perform any construction or rehab on the property, undertake any relocation, or transfer the assistance For PBV conversions, must select a Contract Administrator that has at least 100 HCV ACC units 13 13 RAD RENTS HUD publishes the calculated rents for every public housing property at www.hud.gov/rad Rents are posted by bedroom size. The rents are derived from year-end public housing Operating Fund, Capital Fund, and Tenant Rent data Initial Contract Rents are also capped by applicable PBV or PBRA program rules PBV up to 110% of FMR, less utility allowance, and the Reasonable Rent PBRA up to 120% of FRM, less utility allowance, unless Rent Comparability Study shows up to 150% Prior to conversion, rents are adjusted each calendar year by HUD’s published Operating Cost Adjustment Factor (OCAF) See FR-6128-N-01 published 11/23/2018 for the 2019 OCAFs for each state For example, for a project that applies today and closes in March of 2020, the initial contract rents will be based on FY 18 funding, with an OCAF adjustment for 2019 and 2020 PHAs do not need to request OCAF adjustments to their CHAPs as HUD makes these amendments automatically 14 14 7
9/13/2019 RAD INVENTORY ASSESSMENT TOOL Try it for yourself! RAD Inventory Assessment Tool https://www.hud.gov/RAD/library/tools Please contact our office with any questions and for more info! 15 15 PLANNING, APPLYING, FINANCING, AND CLOSING 16 16 8
9/13/2019 RAD PLANNING Educate the Board!! Know your Financial and Physical Picture Obtain Board Approval Amend PHA Plan Identify Scope of Needed Repairs (not for Streamlined) Identify site for new construction or for transfer of assistance (not for Streamlined) Obtain front-end civil rights review approval from HUD Identify and Assemble Development Team partners (not for Streamlined) Identify Financing (not for Streamlined) Develop Relocation Plan (not for Streamlined) Schedule Resident Meetings – OVER COMMUNICATE!!! 17 17 RAD APPLICATION Evidence of two resident meetings and responses to comments Certification of Board Approval Financing letters Choice Mobility Commitment Letter Identification and Commitment of partnering PHA/Contract Administrator, if applicable Application Structures Partial development Many-to-One Multi-phase Portfolio 18 18 9
9/13/2019 STREAMLINED RAD APPLICATION The following is eliminated for initial Streamlined RAD applications: Information on financing Financing letter of interest For PH-only PHAs, identification of a partnering voucher PHA 19 19 CHAP AWARD Reservation of authority by HUD Establishes rents Rents based on Operating Fund, Capital Fund, and Tenant rents Rent flexibilities and CHAP Amendments (see guide) PIC removal application submitted once CHAP received Starts PHAS scoring exemption PIC Removal Request (30 days after CHAP) 20 20 10
9/13/2019 FINANCING SOURCES FREQUENTLY USED IN RAD Debt Conventional FHA Insurance LIHTCs 4% w/ tax-exempt bonds 9% Historic Tax Credits Public Housing Funds Operating Reserves Capital Funds Demo/Dispo Transition Funding (DDTF) Sales Proceeds Deferred Developer Fee Seller Take-Back Financing CDBG/HOME/Federal Home Loan Bank 21 21 FINANCING PLAN Determination of PBV or PBRA PHA Plan Amendment or MTW Plan Amendment Capital Needs Assessment Approval of activities and property Scope of Work Affirmative Fair Housing Marketing Plan (for Environmental Review PBRA only) Accessibility and Relocation Checklist Funds available Fair Housing, Civil Rights, and Relocation, Notice Transfer of Assistance PIH 2016-17 Resident Comments Sources & Uses Development Team Site and Neighborhood Standards, if applicable Operating Pro-Forma Title Report Market Study 22 22 11
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