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www.quadel.com Rental Assistance Demonstration Overview Training MAHMA Regional Affordable Housing Conference May 4, 2016
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Rental Assistance Demonstration Overview Training
MAHMA Regional Affordable Housing Conference
May 4, 2016
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Introduction
• RAD is a voluntary HUD demonstration program
• RAD allows PHAs and owners to mortgage land and buildings to private capital investors
• Private investment may come from: • Low Income Housing Tax Credits (LIHTC)
• Bonds
• Loans/mortgages
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RAD Goals
• HUD’s rental housing preservation strategy
• Leverage debt and private equity to preserve and improve properties
• Development of newly designed and accessible units
• Sustainable and modern features
• Rehabilitation of existing units
• Demolition of obsolete units/buildings
• New affordable units
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Public Housing Conversions
• Only PHAs may apply for RAD under the First Component
• PHAs may engage partners and investors to facilitate investing funds for recapitalization and development of their projects.
• PHAs must also decide whether to convert their assistance to either a Project Based Voucher (PBV) contract or a Project-Based Rental Assistance (PBRA) Contract
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Why RAD
• Nearly 1.2 million units of public housing that have a capital needs repair backlog
• Approximately 38,000 privately owned units with a capital needs repair backlog
• At least $26 billion dollars needed to meet the repair backlog
• Approximately 10,000 public housing units are demolished and/or disposed of annually
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Five Things To Know About RAD Public Housing Conversions
1. RAD aids in the preservation of assisted housing programs
2. The impact on the resident is minimal
3. RAD forces PHA’s to compete in the housing market
4. RAD maintains the PHA public stewardship
5. RAD is a method to obtain outside capital
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Estimated Decline of Public Housing Stock
1,390,000
1,085,000
880,000
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1990 2010 2020
PUBLIC HOUSING UNITS
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Public Housing
PBRA PBV PBV
Component #1 Competitive Application Process Up to 185,000 Units
MOD Rehab (excluding McKinney)
PBRA
Rent Supp & RAP
Component #2 Non-Competitive December 2014
Contract Expiration
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Pre-RAD Statistics and Post-RAD Benefits
Before RAD After RAD Properties are typically not funded at
100% in Public Housing.
Properties are placed on a more stable
Section 8 funding program.
In Public Housing, PHAs cannot borrow money to
perform necessary repairs.
PHAs and owners can more easily borrow money
and perform rehabilitation work.
The funding fails to keep up with the deteriorating
living conditions of residents.
The living conditions of residents are improved.
Residents cannot choose to move without losing
housing assistance.
Residents may receive a tenant-based voucher, or
similar assistance, and move after 1 year in PBV
and 2 years in PBRA.
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RAD Conversion Process
PHA Determines RAD Eligibility and
Feasibility
PHA Submits Excel-Based RAD
Application to HUD HQ
HUD HQ Reviews RAD Application and
Requests Field Office Input on
Eligibility
Commitment to Enter Into Housing
Assistance Payments Contract (CHAP)
PHA Enters PIC Removal Request
(30 days from CHAP issued award)
Monthly Check-In Calls with HUD
Readiness Check; HUD Transaction
Manager (TM) Assigned
PHA Submits Financial Plan to HUD for Review
HUD Issues RAD Conversion
Commitment (RCC)
Closing/Project Converts
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RAD Stats As Of 3/1/2016
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RAD Update As Of 4/21/2016
• The Senate Appropriations Committee on April 21 unanimously approved its Fiscal Year (FY) 2017 Transportation, Housing and Urban Development (THUD) funding bill.
• The bill increases the number of public housing units that can convert under the Rental Assistance Demonstration (RAD) program from 185,000 to 250,000 and eliminates the program's sunset date.
• It also includes authority for Section 202 Project Rental Assistance Contract (PRAC) properties to convert under RAD and provides $4 million in assistance to those properties for that purpose.
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RAD Definitions Appendix A-1
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RAD
•Rental Assistance Demonstration Program
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Choice-Mobility
• The option for residents living in covered projects to obtain a tenant based housing choice voucher after a defined period of residency
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CHAP
• Commitment to Enter into a HAP Contract (CHAP)
• A document provided to the PHA or owner for projects that have been selected during the RAD competition under the first component of the demonstration
• Describes the terms under which HUD will enter into a HAP contract with the project owner
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Closing
• The transaction during which any converting units are released from legacy contract; and
• The new PBV or PBRA contracts are executed; and
• Any debt and/or equity financing agreement is entered into; and
• The terms and conditions of the RAD Conversion Commitment are recorded
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Current Funding
• Applicable to public housing conversions
• The combination of Federal subsidy and tenant rents for which a project is eligible under the public housing program in the fiscal year of conversion
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Deed of Trust
• The restrictive covenant on projects assisted through a public housing ACC that obligates the PHA to operate developments in accordance with the ACC, the Act and HUD regulations and requirements
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Covered Project
• A project that converts from one form of rental assistance to another under the Demonstration
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Distributions
• Any withdrawal or taking of surplus cash by the owner/PHA
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Financing Plan
• Documentation submitted to HUD for review that is intended to demonstrate that the covered project will be sustained physically and financially for the term of the HAP contract at the rent levels permitted under the Demonstration, including the means by which the project’s immediate and long-term capital needs will be addressed.
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Good Cause Exemption
• An allowance made by HUD exempting a covered PBRA project from the Choice-Mobility component
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Green Building
• An approach to building, rehabilitation, repairs, maintenance, and project operations that is more sustainable than traditional approaches to the activities and results in a project that is more energy efficient, costs less to operate, has better indoor air quality, and reduces its overall impact on the environment.
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Housing Assistance Payments Contract
• The payment made by the Contract Administrator to the owner of an assisted unit as provided in the HAP contract
• When the unit is leased to an eligible household, the payment is the difference between the contract rent for a particular assisted unit and the HUD-required rental contribution from eligible residents
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Mixed Finance Project
• A public housing project that has been developed with a combination of private financing and public housing development funds in accordance with 24 CFR Part 941
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Operating Cost Adjustment Factor (OCAF)
• An operating cost adjustment factor established by HUD that is applied to the existing contract rent, less the portion of the rent paid for debt service
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Ownership
• When a public or non-profit entity has legal title to the real property
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Control
• When a public or non-profit entity has the direct or indirect legal authority (via contract, partnership share or agreement of an equity partnership, voting rights, or otherwise) to direct the financial, legal, beneficial or other interests of the owner of a project or has 51% or more interest of the general partner share in a limited partnership
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Physical Condition Assessment (PCA)
• A detailed physical inspection of a project to determine critical repair needs, short- and long-term rehabilitation needs, market comparable improvements, and environmental concerns
• Owners of public housing and Mod Rehab properties converting assistance under RAD will use HUD’s PCA for the Mark-to-Market program, as may be modified to specifically meet the requirements of RAD, or a substantial equivalent standard as approved in writing by HUD, which contains a Green Building component.
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Project Based Voucher (PBV)
• A component of a PHA’s HCV program, wherein a PHA can attach voucher assistance to specific housing units through a HAP contract with an owner
• The PBV program is administered by HUD’s Office of Public and Indian Housing
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Project Based Rental Assistance (PBRA)
• Rental assistance provided by HUD to owners according to the terms of a HAP contract for the provision of housing to eligible tenants.
• The PBRA program is administered by HUD’s Office of Housing
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RAD Conversion Commitment (RCC)
• Contract executed by HUD and the PHA or owner, following HUD approval of the submitted Financing Plan, that describes the terms and conditions of the conversion
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RAD Use Agreement
• Document specifying the affordability and use restrictions on the covered project, which will be coterminous with the HAP contract and will be recorded prior to the lien of the first mortgage
• The RAD Use Agreement is used only in connection with public housing conversions under the demonstration
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Surplus Cash
• Following completion of initial repairs, any amounts remaining at the end of an annual fiscal year period after payment, or after funds have been set aside for payment of: • Operating expenses
• Mortgage payments, and
• All amounts required to be deposited in the replacement reserve or other restricted accounts essential to the project’s operations
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Important Definitions
Converting project – these are pre-conversion projects whose assistance is converting from one form of rental assistance (i.e., public housing operating subsidy) to another form of rental assistance (PBV or PBRA).
Covered project - these are post-conversion projects that are now covered by the new form of rental assistance, either PBV or PBRA.
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RAD Planning Tasks
• Obtain Board Approval
• Amend Plans
• Identify scope of needed repairs
• Identify site for new construction or for transfer of assistance
• Obtain front-end civil rights review approval from HUD
• Identify & Assemble Development Team partners & financing
• Develop Relocation Plan
• Schedule Resident Meetings
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Determining Feasibility and Initial Planning Considerations
• Conduct Feasibility Assessment
• RAD Inventory Assessment Tool (IAT)
• Staff preparation
• Resident Communication
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RAD Capital Needs Assessment (CNA) or Physical Condition Assessment (RPCA)
• For a full understanding of the CNA/RPCA requirements, see The Guide to RAD Physical Condition Assessment (RPCA), March 30, 2015 at:
• http://portal.hud.gov/hudportal/documents/huddoc?id=RAD_RPCA_Guide.pdf
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Unit Rehabilitation
• System Replacement
• Planning for Utility Efficiency
• Accessibility
• Competitiveness
• General Contractor
• Initial Operating Deficit Escrow
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Environmental Review
• All RAD projects are subject to environmental review
• See attachment 1A of Notice PIH-2012-32, REV 2 for a complete outline of environmental review requirements
• All PBRA or FHA transactions require 24 CFR Part 50 reviews, which are conducted by HUD
• Non-FHA transactions (usually PBV) are conducted by a Responsible Entity (RE) under 24 CFR Part 58, unless Part 58.11 applies then HUD will conduct the review
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Green Building Requirements
• The RPCA/CNA provides detailed analyses of energy saving alternatives and other green building components
• At a minimum, PHAs should complete replacement of all systems, components and appliances with Energy Star®, WaterSense® or Federal Energy Management Program (FEMP)-designated products and appliances
• All new construction projects converted under RAD must meet or exceed the requirements for Energy Star for New Homes or Energy Star for Multifamily High Rise buildings
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Design Considerations
• The design of the covered project should be based on best practices in rehabilitation and construction
• HUD recommends that current and future stakeholders should be involved in the process.
• Planning and design should include: building life cycle costs; energy and water efficiency; social inclusion and connectivity; occupant health and welfare; basic environmental stewardship; and climate change resilience.
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Operating Budget
• RAD Rent Levels & Project Income
• RAD Operating Expenses
• PHA Property Management Fees
• Asset Management Fees
• Replacement Reserve
• Net Operating Income
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Development Budget
• Construction Costs
• Acquisition Costs
• Professional Fees
• Loan Fees & Costs
• Replacement Reserves
• Developer Fee
• Relocation Costs
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Additional Funding Sources
• Operating Funds, Capital Funds, Replacement Housing Factor Fund
• Deferred Developer Fee
• HOME/CDBG
• Affordable Housing Program of the Federal Home Loan Bank (FHLB)
• Local or State Housing Trust Funds
• Green Energy Programs
• 4 % or 9% Low Income Housing Tax Credits
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Transfer of Assistance
There are 3 reasons why assistance may be transferred off site:
1. When PHA requests transfer as part of the conversion of a converting project to a covered project;
2. Post-conversion, when owner request full or partial transfer; or
3. As a result of default under a Use Agreement of a HAP Contract.
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Transfer at Conversion
• PHAs must request transfer within 3 months of CHAP award
• It must be included in the Significant Amendment to the PHA Plan, consistent with the Consolidated Plan
• The PHA or Owner may request that the converting project remain public housing during construction and the HAP contract will be executed once ready for occupancy. However, typically, the HAP will be executed at the closing of financing
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Demolition
• Plans may include partial or complete demolition of the Covered Project and replacement of assistance on-site or off-site.
• Demolition and/or disposition is only allowed following closing of construction financing, unless approved by HUD
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Davis Bacon Wage Requirements
• Both RAD Component One and Component Two are subject to Davis-Bacon wage requirements if initial repairs and new construction in the Financing Plan qualify as “development” activity
• Work qualifying as “development” activity
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Section 3
• Applies to all initial repairs and new construction in the Financing Plan if they qualify as new construction or rehabilitation
• May apply after conversion based on whether federal funds used for rehabilitation
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Public Housing Program Funds to Support Conversion • PHAs are permitted to use available public housing funding,
including Operating Reserves, Capital Funds, and Replacement Housing Factor (RHF) funds, as an additional source of capital in the development budget to support conversion, whether for rehabilitation or new construction
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Accessibility Requirements
• Federal accessibility requirements apply to all conversions whether they entail new construction, alterations, or existing facilities and PHAs must comply with all laws that apply
• New Construction
• Substantial Rehabilitation
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Comparison of PBV versus PBRA
Program Component
PBV
PBRA
Contract Term 15 years (but PHA can request up
to 20)
20 years
Mandatory Contract Renewal? Yes Yes
Administering Agency PHA/Voucher Administrator HUD/HUD PBCA Administrator
PHA gets admin fee? Yes No
Inspection Required HQS REAC
Maximum % of assisted units in a
project
50% (100% if elderly, disabled or
supportive services provided)
100%
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Program Component
PBV
PBRA
Tenant Right to Return? Yes Yes
No rescreening of Tenants at
conversion?
Yes Yes
Choice Mobility • After 1 year of occupancy,
tenant may receive HCV and
opt out
• PHA may set alternative policy
when over 20% of PBV units
are under HAP
• Tenants may receive HCV and
opt out after the later of 24
months form HAP or 24
months from move-in.
• Agency not required to
provide more than 1/3 of its
turnover vouchers to covered
project tenants
• PHA may limit moves to 15%
of units within project.
Comparison of PBV versus PBRA
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Program Component
PBV
PBRA
Owner-Adopted preferences Allowed under PH regulations Allowed pursuant to 24 CFR
5.655(c)(5), Notice 2013-21(July
25, 2013) and Housing Handbook
4350.3, Chapter 4. Preferences
may not discriminate or violate fair
housing and equal access
requirements.
Phase in of Rent increase over
greater of 10% or $25
Yes Yes
Floating units? Yes Yes
Comparison of PBV versus PBRA
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Project-Based Voucher (PBV) Requirements
Many of the rules for PBV under RAD differ
from the normal PBV regulations
• Project Selection
• Cap on the Number of PBV Units in Each Project
• PBV Administration
• Site and neighborhood Standards
• Deconcentration and Expanding Housing Opportunities
• Contract Terms
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Project-Based Voucher (PBV) Requirements (Cont.) • PBV Mandatory Contract Renewal
• RAD Use Agreement
• Initial contract rent setting
• Rent Bundling
• Future RHF or Demolition Dispositions Transition Funding (DDTF)
• RAD Rehab Assistance Waiver
• HQS Inspections
• Floating Units
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Project-Based Voucher (PBV) Requirements (Cont.) • Resident Rights and Participation
• Rent Phase in requirements
• Family Self-Sufficiency (FSS) and Resident Opportunities and Self Sufficiency Service Coordinator (ROSS-SC) Programs
• Resident Participation and Funding
• Resident Procedural Rights
• Grievance Process and Informal Hearings Policy
• Earned Income Disregard (EID)
• Jobs Plus
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Project-Based Voucher (PBV) Requirements (Cont.) • When Total Tenant Payment (TTP) Exceeds Gross Rent
• Under-Occupied Unit
• Choice-Mobility
• Access to Records, Including Requests for Information Related to the Evaluation of Demonstration
• Additional Monitoring Requirement
• Establishment of Waiting List
• Mandatory Insurance Coverage
• Future Refinancing
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Project-Based Voucher (PBV) Requirements (Cont.) • Administrative Fees for Public Housing Conversions during the
Transition Period
• Reserve for Replacement
• Agreement Waiver and RAD Rehab Assistance Payments (RAP)
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Project-Based Rental Assistance (PBRA) Requirements • PBRA Contract Terms
• PBRA Mandatory Contract Renewal
• RAD Use Agreement
• Initial Contract Rent Setting
• Rent Bundling
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Project-Based Rental Assistance (PBRA) Requirements • PBRA Tenant Paid Utility Savings
• PBRA Owner Distributions
• PBRA RAD Rehab Assistance Payments
• PBRA Future Statutory or Administrative Changes
• Floating Units
• PBRA Uniform Physical Condition Standards (REAC UPCS Inspections)
• Resident Rights and Participation
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Project-Based Rental Assistance (PBRA) Requirements • Termination Notification
• PBRA Grievance Process
• Earned Income Disregard (EID)
• Jobs Plus
• When Total Tenant Payment Exceeds Gross Rent for PBRA
• Under-Occupied Units
• Access to Records, Request for Information
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Project-Based Rental Assistance (PBRA) Requirements • Establishment of Waiting List
• PBRA Choice-Mobility
• Future Refinancing
• PBRA Submission of Year-End Financial Statements
• PBRA: Classification of Converting Projects as Pre-1981 Act Projects under
• Section 16(c) of the United States Housing Act of 1937
• PBRA Owner-Adopted Preferences
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Uniform Relocation Act (URA) Requirements • RAD projects are encouraged to have a written relocation plan
• URA applies to projects that include: • Acquisitions
• Relocations
• Demolition
• All RAD relocations must be consistent with fair housing and civil rights laws
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RAD Relocation Plan Contents
1. General description of and purpose for the project
2. General description of the project and the site, including acquisition, demolition, rehabilitation, and construction activities and funding sources
3. Specific steps to minimize adverse impacts of relocation, including when transferring the assistance to a new site
4. Information on occupancy
5. Information on relocation needs and costs
6. General moving assistance information
7. Temporary move assistance
8. Permanent move assistance
9. Appeals process
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Resident Return and Reoccupancy Policies
• Temporary Relocations
• Permanent Moves
• Resident Choice
• Utility Costs
• Referrals to Housing Not Located in Areas of Minority Concentration
• Replacement Housing Payment
• Accessible Housing for Persons with Disabilities
• Relocation Budget
• Appeal Process
• Certification
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Business Agreements •RAD Use Agreement
•HAP Contract
•Mortgage Note
•Regulatory Agreement
•LIHTC LURA
•Secondary Financing Notes
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RAD Use Agreement
•First Lien Position
•Survives HAP Termination
•80% AMI
•No Transfer without HUD Approval
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Task List Prior to or After Closing
• TRACS Registration - 888-297-8689
• EIV Access
• WASS ID - 888-245-4860
• FASS Registration and User Guide
• Form 50059 and 50059A
• HAP Contract Related Items
• Tenant Files
• Move In Documents
• Post Closing Cost Certification
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Occupancy Related Issues
• Wait List
• AFHMP
• Management Agent Certification
• Lease Requirements
• House Rules
• Grievance Process
• Pets
• Tenant Selection Plan
• Utility Allowances
• Resident Rights and Responsibilities
• Model Lease (HUD 90105-A)
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Occupancy Related Issues (continued)
• Model Lease Term
• Required Addenda and Attachments
• Security Deposits
• Charges in Addition to Rent
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Occupancy Related Issues (continued)
• Modifying the Model Lease – Not Permitted • Changes in Tenant Rent
• Regularly Scheduled Recertifications
• Reporting Changes Between Recertifications
• Removal of Subsidy
• Tenant Obligation to Repay
• Discrimination Prohibited
• Termination of Tenancy
• Penalties for Submitting False Information
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Monitoring
Management and Occupancy Reviews
REAC Physical Inspections
Annual Financial Statements
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AFS Requirements
Ownership Type Filing Type Filing Type
Non-Profit OMB A-133 Owner-Certified 60 days after
project’s fiscal year end; Audit nine
months after project’s fiscal year
end
For-Profit (Less than $500k in
Combined Federal Assistance)
Owner Certified 90 days after project’s fiscal year
end
For-Profit (Over $500k in Combined
Federal Assistance)
Audit 90 days after project’s fiscal year
end
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PBV and PBRA: Not subject to “rescreening” or income eligibility Phase in rent increases FSS continued participation Grievance Procedure Section 8 units can float in certain LIHTC properties
PBRA rent increases - OCAF at anniversary No limitations on distributions
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Resources
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Resources
• TRACS Registration - 888-297-8689
• WASS ID - 888-245-4860
• “Preparing for REAC Inspections”
http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_17204.pdf
• PBRA Quick Reference Guide http://portal.hud.gov/hudportal/documents/huddoc?id=radpbraquickref.pdf
• 24 CFR Part 245
• Notice PIH-2012-32 (HA), REV-1 and REV-2
• HUD Funding Specialist
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Questions?
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Thank You
Michael Adamson
Indiana Quadel Consulting
10 West Market Street, Suite 1750
Indianapolis, IN 46204
(317) 656-8801
