HUD Issues Revised Final Implementation Notice for RAD Program

On September 5, 2019, HUD issued Notice H-2019-09, PIH-2019-23 (HA), Rental Assistance Demonstration – Final Implementation, Revision 4. This revised notice provides program instructions for the Rental Assistance Demonstration (RAD) Program, including eligibility and selection criteria.

Background

The RAD program was created by Congress in 2011 and provides the opportunity to test the conversion of public housing and other HUD-assisted properties to long-term, project-based Section 8 rental assistance to achieve certain goals, including the preservation and upgrading of these properties by enabling Public Housing Agencies (PHAs) to access private and public debt and equity to address immediate and long-term capital needs. RAD is also designed to test the extent to which residents have increased housing choices after the conversion, and the overall impact on the properties.

RAD has two components:

• First Component: The First Component allows projects funded under the public housing (Section 9) program to convert their assistance to long-term, project-based Section 8 rental assistance contracts. PHAs may choose between two forms of Section 8 Housing Assistance Payment (HAP) Contracts: project-based vouchers (PBVs) or project-based rental assistance (PBRA). PHAs will convert assistance at current subsidy levels and there will be no increase in funding. The law authorizes the conversion of up to 455,000 public housing units under this component. Section I of the Notice provides instructions for PHAs applying for conversion under the First Component.
  • While the RAD statute authorizes HUD to convert Section 8 Moderate Rehabilitation Projects (Mod Rehab) under the First Component, HUD is exercising its discretion to prioritize public housing conversions under the competitive requirements of the First Component. The demand for public housing conversions is extremely high and significantly exceeded the initial limitation on the number of units that could be converted under the First Component.  Consequently, Mod Rehab conversions will be processed exclusively under the Second Component of RAD, which is non-competitive.
• Second Component: The Second Component allows owners of projects funded under the Rent Supplement (Rent Supp), Rental Assistance Payment (RAP), and Mod Rehab programs to convert to PBV or PBRA contracts upon contract expiration or termination occurring after October 1, 2006. The Second Component further allows owners of projects funded under the Project Rental Assistance Contracts (PRAC) under the Section 202 program to convert to PBV or PBRA contracts.

Major Revisions in Revision 4

This revised Notice includes a change in eligibility and selection criteria as well as clarifications of existing instructions and is more than 300 pages long. Following is a summary of the major revisions:

First Component (Public Housing Conversions)

1. Extends all resident rights to households that will reside in non-RAD Project-Based Voucher (PBV) units placed in a converted public housing project so as to facilitate the standard protection of residents;
2. Increases resident notice requirements;
3. Establishes a mechanism for PHAs to enter into partnerships with other PHAs in order to pool resources or capacity;
4. Allows limited rent increases for public housing conversions to PBRA contracts in certain scenarios, including in designated Opportunity Zones (OZs);
5. Modifies the requirements for portfolio awards so as to provide PHAs greater flexibility in staging the conversion of their properties;
6. Streamlines Capital Needs Assessment (CAN) requirements to eliminate the submission of the CNA Tool when certain conditions have been met;
7. Introduces a “Concept Call” so that PHAs can receive confirmation that project plans are sufficiently advanced to submit a Financing Plan;
8. Prohibits PHAs from entering debt into the EIV “Debts Owed” module purely as a result of the 50058 End of Participations that is required to be submitted into Public and Indian Housing Information Center (PIC) as part of the conversion;
9. Broadens the use of “tiered” environmental reviews, requires the use of the HUD Environmental Review Online System, and requires radon testing for PBRA and PBV conversions;
10. Establishes policy that RAD rents will be updated every two years and the updated rents will be applied to new awards issued after those established dates; and
11. Establishes a priority for “Section 3” employment and other economic opportunities for residents of public housing or Section 8 assisted housing.

Two additional First Component Changes are subject to Notice and Comment because they impact eligibility and selection criteria:

1. Removing restrictions on certain HOPE VI projects that are under ten years old; and
2. Eliminating the selection of applications based on previously established “Priority Categories,” so that HUD may review and approve applications on a first-come, first serve basis. In the event that a waiting list forms, properties located in OZs will be given priority.

Second Component (Section 202 PRAC, Mod Rehab, Mod Rehab SRO, Rent Supp, RAP Conversions)

1. Implements the provision of the 2018 Appropriations Act authorizing the conversion of Section 202 PRAC projects to Section 8 PBRA or PBV contracts;
2. Streamlines  CNA requirements for Mod Rehab conversion to eliminate the submission of the CNA Tool in certain cases;
3. Broadens the use of “tiered” environmental reviews, requires the use of the HUD Environmental Review Online System, and requires radon testing for PBRA and PBV conversions;
4. Streamlines the Conversion Plan requirements for Mod Rehab Conversion when certain criteria are met;
5. Creates an ability for Mod Rehab and SRO projects converting to PBRA to use contract rents based on the condition of the property following rehab;
6. Provides an ability for owners or converting SRO projects serving the homeless to establish a leasing or occupancy preference that facilitates permanent supportive housing;
7. Fully establishes resident right of return and the prohibition against re-screening for existing residents; and
8. Establishes a final date that any remaining RAP properties may make a submission of conversion under RAD.

Notice and Comment for Changes in Eligibility and Selection Criteria

This Notice is effective immediately except with respect to changes in the project eligibility and selection criteria, which are subject to a 30-day comment period. Unless HUD receives comment that would lead to the reconsideration of any of the indicated changes in eligibility and selection criteria, these changes will become effective seven calendar days following expiration of the 30-day comment period.

PHAs and owners applying to RAD during the 30-day public comment period will be subject to the new eligibility and selection criteria of this Notice unless HUD makes a change based on the comments.

Notice Organization

The Notice is divided into four sections:

• Section I: Instructions to PHAs and others converting under the First Component;
• Section II: Instructions to owners of Mod Rehab projects converting under the Second Component;
• Section III: Instructions to owners of Rent Supp and RAP projects converting under the Second Component; and
• Section IV: Instructions to owners of 202 PRAC projects converting under the Second Component.

The Notice is long, technical, and complex. PHAs and owners who are intending to participate in a RAD conversion should obtain the Notice and become familiar with the requirements. Over the next few weeks I will prepare and publish on our website a series of articles on all four sections of the Notice.