On July 26, 2012, HUD published a Final Notice in the Federal Register implementing the Rental Assistance Demonstration (RAD) Program. The program offers new opportunities to public housing agencies and some private owners of affordable housing projects.
The program is designed to test new methods to put public housing projects and certain HUD-assisted multifamily properties on a sound economic footing , as well as make it easier to obtain private debt and equity for renovations.
The program has two components – “competitive,” and “non-competitive.” Under the competitive program, PHAs may apply to HUD to convert public housing projects to either project-based Section 8 or project-based vouchers, with contracts of up to 20-years. This same choice is available to owners of Section 8 Moderate Rehabilitation.
The non-competitive component is open to owners of the HUD “orphan” subsidy programs – mod rehab, Rent Supplement, and the Section 236 Rental Assistance (RAP) program. In this program, owners may apply to HUD to convert tenant protection vouchers to project-based vouchers, with terms of 15-20 years.
Owners who are selected for participation in the RAD program will be obtaining a more reliable, long-term source of rent subsidies, giving the properties a better chance to obtain long-term debt and equity.
It is likely that many RAD deals will utilize the LIHTC as the source of equity. Obtaining the long-term rental assistance is likely to make tax credit investors more comfortable about participating in some of these deals, which to date, have attracted very little interest from the LIHTC investment industry.