HUD Issues Revised Instructions for Rental Assistance Demonstration

by Ballard Spahr LLP
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The U.S. Department of Housing and Urban Development (HUD) has released revised instructions for the Rental Assistance Demonstration (RAD) program. A copy of the Federal Register notice is available here, and a copy of the HUD PIH Notice is available at HUD’s RAD website.

Participation in the RAD program enables eligible public housing properties and other HUD-subsidized properties to convert voluntarily from their current subsidy to a long-term, project-based Section 8 contract. Property owners must apply to HUD for the authority to convert. HUD published a final notice implementing the program on July 26, 2012, and this revised notice changes some eligibility and selection criteria, among other revisions.

Major changes to the July 2012 Notice applicable to current RAD awardees and future applicants include the following:

  • Public housing projects and Section 8 Moderate Rehabilitation (Mod Rehab) projects may be eligible for RAD awards for multiphase projects.
  • Public housing projects and Mod Rehab projects may be eligible for an award of RAD conversion authority for a portfolio of properties. The application should include a list of all projects proposed to be included in the portfolio, and full applications for at least 50 percent of the portfolio projects.
  • Housing authorities with more than one RAD project may bundle the projects and adjust subsidy flow under the RAD authority among the bundled projects. The total funding that is used flexibly among the projects cannot exceed the aggregate amount of subsidy for the bundled projects.
  • Moving to Work (MTW) public housing agencies may use their MTW block grant flexibility to set and supplement initial contract rents under RAD, if the agency undertakes two or more RAD projects. This concept builds on the local blended subsidy programs on which Ballard Spahr has worked with a number of MTW agencies to develop. Use of MTW block grant funds to set initial contract rents will be subject to subsidy layering review and MTW continued service requirements, as calculated using the MTW baseline methodology described in PIH Notice 2013-02. Additionally, these projects may be included in the agency's MTW program.
  • Future Replacement Housing Factor (RHF) grant funds generated by other public housing units outside the RAD conversion may be repurposed to supplement RAD contract rents.
  • Initial contract rents for all applications received before December 31, 2013, including applications for portfolio or multiphase awards of RAD conversion authority to occur in 2014 or later, will be calculated based upon fiscal year 2012 funding as adjusted by the Operating Cost Adjustment Factor (OCAF). The RAD fiscal year 2012 funding calculation restores HUD offsets made to public housing agency reserves under HUD's "Operating Subsidy Allocation Adjustment."
  • The cap on available RAD conversion authority for mixed-finance units is eliminated.
  • The cap on available RAD conversion authority for Mod Rehab units is eliminated.
  • Projects selected for RAD are exempt from the Public Housing Assessment System (PHAS) upon issuance of a Commitment to enter into a Housing Assistance Payments Contract (CHAP).
  • A housing authority may include an application for RAD conversion authority in its application for Choice Neighborhoods Initiative funding.
  • Additional flexibility to use RAD for some HOPE VI or other mixed-finance properties is included in the notice.
  • Rents for public housing conversion units will not be reduced below the initial rent to owner for dwelling units under the initial Housing Assistance Payments (HAP) contract, subject to specific caveats described in the Notice.

HUD is seeking public comment on certain sections of the Notice. Comments are due by August 1, 2013, and may be submitted to RAD@hud.gov. HUD will issue an additional revision to the Notice if it decides to make changes based upon the comments, but is continuing to accept applications in the interim.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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