PHA Options in Repositioning Public Housing

On November 13, 2018, HUD’s Office of Public and Indian Housing (PIH) notified Public Housing Agencies (PHAs) of the options available relative to the repositioning of public housing projects. PHAs have three options relative to how they will ultimately deal with their public housing stock.

1. Rental Assistance Demonstration (“RAD”) Program: This is by far the most popular and well known option. Up to 455,000 public housing units are being converted under the RAD program to either Project-Based Vouchers (PBVs) or Project-Based Rental Assistance (PBRA).
2. Voluntary Conversion: This is the process of converting public housing to vouchers, also known as a “Section 22” conversion. Public housing tenants are given either tenant-based or project-based vouchers. This is called “vouchering out” of public housing.
   1. This conversion requires that a PHA submit a “conversion assessment” to HUD as part of the annual PHA plan process. The conversion assessment contains five elements:
      1. An analysis of the cost of continuing to operate as public housing, compared to the cost of providing vouchers;
      2. An analysis of the market value of the project before and after rehab;
      3. An analysis of the ability of public housing residents to use a voucher, given housing market conditions;
      4. An impact analysis on the surrounding community, including the effect of conversion on the availability of affordable housing as well as the concentration of poverty in the neighborhood; and
      5. A description of the PHAs planned use of the property. The conversion must meet three requirements:
         1. The conversion cannot be more expensive than continuing to operate as public housing;
         2. The conversion must principally benefit the residents of the development, the PHA itself, and the community.
            1. With regard to resident benefit, the PHA must analyze the availability of landlords willing to accept vouchers, as well as access to schools, employment, and transportation; and
         3. The conversion may not adversely impact the availability of affordable housing in the neighborhood. Due to these complex (and difficult to meet) requirements, voluntary conversion is a rarely used option.
3. Section 18 Demolition: PHAs may decide to demolish or dispose of an entire development, or a portion of a development, for a variety of reasons, including the project being obsolete in terms of physical condition, location, or other factors making it unsuitable for housing purposes. Disposition may also occur for reasons such as a change in the neighborhood, the location of the project no longer being conducive to residential use, or the land on which the development was built is sufficiently valuable that the PHA can replace the existing development with a better development at no cost to HUD.

Some PHAs have granted HUD a formal interest in a public housing property through a Declaration of Trust (DOT). In such cases, the PHA was required to inform the public of the granting of this interest and provide public notice that the property must be operated in accordance with public housing requirements. If a PHA has given HUD a formal interest in the public housing project, the property may not be sold or otherwise encumbered without HUD approval. This approval must be granted before any of the three methods of repositioning may be used.

HUD is encouraging all PHAs to reposition public housing projects to address the overwhelming capital needs of public housing. HUD’s goal is to “reposition” 105,000 public housing units by September 2019. HUD will be contacting all PHAs that own public housing in the coming months to review the various options.

This effort to reposition public housing may present opportunities for private developers, and developers in cities with public housing should initiate discussions with local PHAs about opportunities for participation in the repositioning.