Notice Section 1.5.B Special Applicatios Center (SAC) Applications and RAD
Notice Section 1.4.A.2 Healthy Housing and Energy Efficiency
Notice Section 1.4.A.8 Additional Design Considerations
Notice Section 1.4.A.9 Demolition
*Internal HUD Use Only
Section 18 Blend Processing
How does a PHA sequence its RAD and Section 18 applications in order to use this provision? How will HUD process the application materials to ensure that the release of the Declaration of Trust, RAD conversion, and execution of the non-RAD PBV AHAP or HAP contract occur jointly?Initial processing instructions are as follows: Step 1: The PHA submits a RAD application at www.radresource.net for the entire “Converting project” that will encompass the transaction. Step 2: The PHA satisfies PHA Plan requirements for both RAD and Section 18. Step 3:The PHA identifies that it intends to utilize a RAD/Section 18 Blend in the Concept Call held with HUD prior to submitting the Financing Plan. If the PHA is using the Small PHA Blend, the PHA submits its repositioning plan prior to submission of the Financing Plan in order to confirm eligibility. Step 4: The PHA determines its plan for how it will attach PBV assistance to the Section 18 units (i.e., through the Existing Housing PBV requirements or through AHAP). The plan must comply with all applicable PBV requirements (see program regulations at 24 CFR Part 983 and applicable guidance including, but not limited to: the HOTMA Federal Register Implementation Notice at 82 Fed. Reg. 5458 (January 18, 2017) and PIH Notice 2017-21) and be feasible based on the timing of the RAD closing. PHAs are encouraged to begin required steps to project-base Section 18 units as early as possible. See questions 8, 9, and 21. Step 5: The PHA submits a Financing Plan and other supporting information for the Section 18 units that complies with the following. The PHA’s Financing Plan will cover the entire transaction/converting project covered under the Blend. The Financing Plan includes documentation that HUD can use for both RAD and Section 18 processing as well as supplementary documentation needed to complete the Section 18 approval. The PHA is not required to submit a separate Section 18 application through IMS/PIC. Instead, HUD’s Special Applications Center (SAC) reviews the additional material noted below and uploads it into IMS/PIC in the form of a DDA Section 18 application. In addition to standard Financing Plan requirements, the PHA submits a Financing Plan that includes: a. A detailed transaction summary in the Conversion Overview, which must describe the use of this provision and confirm that the units that will be removed through Section 18 will be sold or otherwise transferred (i.e., ground lease) to a third-party entity that is recognized as a separate independent entity under State law (which may include a non-profit affiliate controlled by the PHA). b. A cash flow pro forma that reflects the income and expenses of the total project, i.e., for the RAD and non-RAD units. a. Capital Funds sources that, on a pro-rata basis, do not exceed the development budget, e.g., in a transaction seeking a 60/40 RAD/Section 18 construction blend, any Capital Fund contributions cannot exceed 60% of the development budget in a transaction with 60% of the units in RAD and 40% of the units as Section 18. This does not apply in the case of a PHA that will no longer have ACC units as a result of the RAD/Section 18 Blend or that will have less than 50 units remaining and have initiated procedures to dispose of their final ACC units.3 b. A Capital Needs Assessment covering the whole property. The hard construction costs in the Uses will be used to determine whether the project qualifies for the Construction Blend. c. A Sources and Uses covering the whole property. d. Any applicable front-end civil rights reviews completed for the entire property. e. An Environmental Review for the whole project. f. A RAD Initial Year Funding Tool that is correctly sized to include only the RAD units. g. Utility allowance schedule reflecting the projected utility allowances following the completion of rehab or construction, which will be used to prepare the CHAP amendment. Supplemental Section 18 materials. The PHA also submits certain materials needed for a complete Section 18 application that are not already required by RAD. Specifically, the PHA submits the following material to the RAD Resource Desk no later than its submission of the Financing Plan : a. List of units (by address, unit type, and PIC number) that designate which units will be removed through Section 18 and which units will be removed by RAD. Spreadsheet format preferred. b. Evidence that the PHA described the Section 18 disposition in its PHA Annual Plan and the Field Office approved that PHA Annual Plan. For Qualified PHAs, a certification that they have discussed the Section 18 disposition at a public hearing. See question 24. c. A local government support letter. The PHA must consult local government on its proposal to apply for Section 18 for some units under a RAD/Section 18 Blend and secure a letter of support from the chief executive officer (i.e., mayor) of the local government. d. Evidence of consultation with any resident organization for the residents living in the Converting Projects and the Resident Advisory Board (RAB)4; and any written comments received from impacted residents, resident organizations, or the RAB, along with the PHA’s responses to those comments. e. A Board resolution that approves the PHA’s proposal to apply for Section 18 for some units under a RAD/Section 18 Blend. The resolution must be signed and dated after all resident and local government consultation has been completed. PHAs are not required to submit the following items described in 24 CFR 970.7(b) since they will have been addressed through the RAD requirements: (i) evidence of environmental review – the environmental review for the entire project will be completed through the RAD processing requirements; (ii) (timetable for the disposition – the disposition will occur simultaneously with the RAD closing; (iii) a statement justifying the disposition – the disposition is justified based on the project qualifying for the RAD/Section 18 Blend; (iv) a description of the method of disposition (i.e., ground lease, sale); (v) estimates of the gross and net proceeds – the property’s sale will be occur under RAD requirements and any proceeds from sale will be subject to requirements imposed through RAD; and (vi) evidence the PHA offered the property to sale to the eligible resident organizations (See also 24 CFR 970.9(b)(3)(ii)— (the PHA would be eligible to an exception to the offer of sale because it has a firm plan, as proposed in the Financing Plan, to replace the public housing units with low-income housing units (PBV units)). PHAs can satisfy the Section 18 requirements for consulting with the impacted residents as part of the RAD consultation requirements. PHAs can also satisfy the Section 18 relocation plan requirements as part of the RAD Relocation Plan requirements, since the relocation benefits to all families must be the same. Please note that the PHA may not provide different relocation rights and benefits to residents of the project on the basis of whether they reside in a RAD unit or a Section 18 unit. Step 6: Upon receipt of the Financing Plan requesting the use of the RAD/Section 18 Blend, HUD revises the CHAP, amends the RAD PIC removal application, and creates the Section 18 removal application. HUD uses the materials already submitted by the PHA to the RAD Resource Desk to populate the Section 18 application. The SAC alerts the PHA if there are any missing items necessary for the Section 18 application. HUD will not approve the Financing Plan until the PHA has satisfied all Section 18 submission requirements. The Office of Recapitalization subsequently issues the RAD Conversion Commitment (RCC), which will reference the transaction’s use of the RAD/Section 18 blend and include a special condition that the non-RAD PBV HAP contract or AHAP will be executed concurrent with the conversion. The SAC then also issues the Section 18 approval letter, which will identify the maximum number of units eligible for Tenant Protection Voucher (TPV) funding based on PIH’s Annual HCV Funding notice, which currently allows the PHA to request TPVs for units that were occupied by assis
RAD / Section 18 Blend PHA Plan Requirements
RAD and Section 18 have different PHA Plan requirements. How do I satisfy the PHA Plan requirements for a RAD/Section 18 blend?The PHA Plan informs HUD, residents, and the public of the PHA’s plans and mission for serving the needs of participant families and the strategies for addressing those needs. HUD considers both RAD and Section 18 significant actions that PHAs must address in their PHA Plans. For RAD/Section 18 Blends, PHAs must meet the PHA Plan requirements for both RAD and Section 18. A PHA can indicate in its PHA Plan that it is considering submitting applications for RAD, Section 18, and a RAD/Section 18 Blend and can indicate the exact unit mix is not yet determined. A PHA can also specify whether or not any changes to the mix of units would be a significant amendment to the PHA Plan, which would require adoption and approval per 24 CFR § 903.21 if it were to change. The PHA may, for example, conclude that if the specific of mix of units between RAD and Section 18 is not yet known (because, for example, the PHA does not know which Construction Blend it will qualify for), but the outcome for the project will be the same (preservation through rehab) and all residents will have the same rights, such a change can be considered not to meet the criteria for significant amendment. The PHA should be as specific as possible in its PHA plan but should also be clear in its written materials and public hearing about the different options under consideration. RAD and Section 18 have different requirements for PHA Plans: 1. The RAD notice (Attachment 1D) details what must be included in the PHA Plan. PHA must include Attachment 1D in an Annual Plan, 5-year Plan, or significant amendment. Major items include: unit descriptions to be converted, changes in the number of units post conversion, changes in policies that govern eligibility or admission post conversion, any transfers of assistance, and a statement on the impact of conversion on a PHA’s Capital Fund budget. 2. See 24 CFR 970.3(b)(h) for the PHA Plan requirements for Section 18. PHAs describe proposed dispositions in their PHA Annual Plan or significant amendment. The PHA Annual Plan should indicate that the PHA has applied or will apply for disposition for a portion of the Converting Project. To satisfy the Section 18 requirements, the description of the project in the PHA Annual Plan (at a minimum the IMS/PIC project names and numbers) must be the same as the IMS/PIC project names and numbers that will be proposed for Section 18 as part of the RAD/Section 18 Blend. Qualified PHAs that are not required to submit PHA Annual Plans must certify they discussed the disposition at a public hearing. The PHA should also be aware of PBV requirements for the PHA Plan and Administrative Plan and may find it useful to address those requirements at the same time as the RAD and Section 18 requirements. For instance, if a PHA intends to use the PBV program, it must provide in the PHA Plan the projected number of PBV units, their general locations, the work it plans to do on the property or site, how many units of PBV it is planning on adding to the site, and how project- basing is consistent with its PHA Plan. Guidance on PBV requirements for the PHA Plan and Administrative Plan is in Appendix II of PIH Notice 2017-21.
Non-RAD HAP Contract Funding
Does a PHA receive new HAP funding to cover the cost of the non-RAD PBV HAP contract? Is the funding process the same for the RAD PBV HAP contract?Units converting through RAD are subject to the RAD processes for funding of the HAP contract described in Section 1.13 of the RAD Notice. For the balance of the year the RAD HAP contract becomes effective, the contract is funded from public housing funds. And in the first full year following conversion, the contract is funded through new Section 8 funds. Please see the RAD PBV Quick Reference Guide (here: http://www.radresource.net/sources/public/RAD%20PBV%20Conversion%20Guide%20-%201.9.15%20update.pdf) for details on how the new Section 8 funding is calculated. Units being approved under Section 18 that will be covered under a non-RAD PBV HAP contract are funded differently. Following the Section 18 approval, which occurs after the issuance of the RCC, in order for the PHA to receive new voucher funding with which to make payments under the non-RAD PBV HAP contract, the PHA must apply to HUD for new “Tenant Protection Voucher (TPV)” funding through their Field Office. PIH Notice 2021-07 § 5. This separate application is a necessary step in order to receive TPVs. The PHA may request a new increment of TPVs for occupied units and vacant units that were occupied by an assisted family within the 24 months prior to Section 18 approval. HUD generally issues TPVs on the average per unit cost (PUC) in the PHA’s HCV Program. However, if the PHA has concerns regarding the sufficiency of funding based on average PUC, the PHA can request higher TPV funding as part of its TPV application (HUD-52515) submission (or can make a subsequent request during the time of their initial funding increment). (See PIH Notice 2021-10 (here: https://www.hud.gov/sites/dfiles/PIH/documents/pih2021-10.pdf), or any successor notice, and the TPV FAQs (here: https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/tenant_protection_vouchers) for additional information about requesting TPVs). The PHA will generally use this funding to cover the HAP costs for the Section 18 units that are replaced under a PBV HAP contract, though may initially use the funding to relocate residents off-site with tenant-based assistance (and then back-fill the Section 18 units with its existing HCV resources after they have been redeveloped and when it is ready to put them under a HAP contract). Where the project has units that are vacant and have not been occupied within the last 24 months, the PHA would not be eligible for TPV funding for those units following a Section 18 approval per PIH Notice 2021-10 § 6(d) (here: https://www.hud.gov/sites/dfiles/PIH/documents/pih2021-10.pdf); the PHA should select those units for RAD since all public housing units converted through RAD are eligible for new funding as part of the conversion. If there are a significant number of long term vacancies that exceed the number of units converting through RAD, the PHA would still be required to replace the public housing units with project-based assistance consistent with RAD’s “substantial conversion of assistance” requirement. The PHA may consider using Section 18 for a smaller portion of the property than allowed under the blend.
Small PHA Blend Repositioning Plan Requirements
For a PHA pursuing a Small PHA Blend, what needs to be included in the Repositioning Plan? Is a PHA required to close out its public housing program through a Small PHA Blend?A PHA that chooses to use the Small PHA Blend is making a commitment to close-out its public housing program and must submit a Repositioning Plan per PIH Notice 2021-07, 3.A.2.e(2). However, a PHA may remove all of its remaining public housing units in the single transaction that uses the Small PHA Blend or may reposition all of its remaining public housing through separate transactions. If the transaction would remove all remaining units, the PHA must submit a HUD-5837 indicating it will closeout its public housing program and there is no need for a separate “Repositioning Plan.” If the transaction does not remove all remaining units, the PHA must demonstrate that it intends to pursue a reasonable and practical strategy to reposition all of its remaining public housing units Specifically, the PHA must develop a feasible repositioning plan that has been approved by its board of commissioners and reflects the specific repositioning tools (i.e. Section 18, RAD, a RAD/S18 blend), that the PHA plans to use to remove all remaining units; that it will not develop any additional public housing units under otherwise available Faircloth Authority; and that it will closeout its public housing program in accordance with PIH Notice 2019-13. The repositioning plan must be acceptable to HUD and must be submitted through the RAD Resource Desk prior to the submission of the RAD Financing Plan so that HUD can confirm the PHA’s eligibility for the Small PHA Blend.
Section 18 Blend Rents
How will the contract rents for the units approved under Section 18 that will be subject to the non-RAD PBV HAP Contract be determined?The non-RAD PBV units will be under a separate HAP contract and will have rents determined based on standard PBV requirements, rather than on RAD requirements. The PHA (or the independent entity, if the project qualifies as PHA-owned – see PIH Notice 2017-21 (here: https://www.hud.gov/sites/dfiles/PIH/documents/PIH-2017-21.pdf) Attachments A and B) will establish the “initial rent to owner” (i.e., contract rent) for units approved under Section 18 at the beginning of the Housing Assistance Payment (HAP) contract term, per 24 CFR 983.301(a)(2). The PHA may need information about proposed contract rents earlier than the beginning of the HAP contract term in order to complete RAD Financing Plan requirements (see RAD Notice Att. 1A). For example, the PHA may have estimated rents determined prior to submission of the RAD Financing Plan to support both HUD’s underwriting and to secure financing commitments from lenders/investors. Particularly where the project is not subject to competitive selection requirements (see PIH Notice 2017-21 Attachment L) the PHA may author a conditional letter to support underwriting that states that if HUD approves the RAD conversion and the Section 18 blend and the site satisfies all requirements for the placement of a PBV HAP contract or AHAP, the PHA commits to placing a PBV contract on an identified number of units and at the appropriate rent level.
RAD/Section 18 Blend Use Agreement Rider
PIH 2021-07 states that RAD/Section 18 blends will result in the “placement of a long-term use agreement at the Covered Project.” Has HUD made available the form of Use Agreement that will be used for the units approved under Section 18?Yes. A “RAD/Section 18 Blend Rider” to the RAD Use Agreement that will apply to the PBV units that are approved under Section 18 is available on the RAD Resource Desk. The rider extends all requirements of the RAD Use Agreement to the non-RAD PBV units, except for those items where HUD lacks the statutory authority to extend. Specifically, the rider states that the provision contemplating a future transfer of assistance in the event of a default is not applicable to the non-RAD PBV units since non-RAD PBV units are not subject so any of the transfer provisions under RAD. Further, the rider identifies that the requirement to renew the HAP contract while the Use Agreement is in place is not applicable because HUD does not have the authority to require the PHA and owner to perpetually renew the non-RAD PBV HAP contract. Nevertheless, the parties can have the rider reflect that it is the intention of the parties that the non-RAD PBV HAP contract shall be renewed concurrently with the RAD HAP contract upon the completion of the initial term and renewal term and therefore the use restrictions in the rider shall remain in effect until a release is recorded.
DDTF and ARF for RAD/Section 18 Blends
Is the PHA eligible to receive Demolition Disposition Transition Funding (DDTF) and Asset Repositioning Fee (ARF) for the units that will be removed through Section 18?PHAs are eligible to receive DDTF, but only for those units transitioning under Section 18, not the RAD units, and only in accordance with 24 CFR part 905. The PHA may use the DDTF for any eligible purposes, including for augmenting the RAD rents of a future RAD conversion (see RAD Notice Section 1.6.B.5 and 1.7.A.5). DDTF is an add-on of Capital Funds in the year following the removal of the Section 18 units. See also Public Housing Funds and Repositioning document and DDTF/ARF summary chart for more information, including eligible uses of DDTF (Capital Funds) once all units are removed from ACC. PHAs may be eligible to receive ARF.ARF is part of Operating Funds as described in 24 CFR 990.190(h). ARF eligibility shall be in accordance with 24 CFR part 990. PHAs are eligible for ARF for units with Section 18 approval for an entire building. If units do not meet this criterion (i.e., because the RAD and Section 18 units are in the same building), the PHA is not eligible for ARF for the units removed under Section 18. Within a “converting project”, the RAD and Section 18 units do not need to be in separate buildings. It will be up to the PHA to determine which units within a blend are removed through Section 18 and which units are converted through RAD. However, the selection of units to be removed through Section 18 may impact the PHA’s eligibility for ARF. ARF will be incorporated into the Operating Fund subsidy calculation for the PHA for the period described in 990.190(h). See also Public Housing Funds and Repositioning document and DDTF/ARF summary chart for more information, including eligible uses of ARF (Operating Funds) once all units are removed from ACC.
Requirements for S18 Units in RAD/Section 18 Blends
In a RAD/Section 18 blend, are the units that will be disposed under Section 18 subject to RAD requirements for a Capital Needs Assessment, Environmental Review, Section 3, Davis-Bacon, and front-end civil rights reviews?The processing of the transaction and review of the Financing Plan will consider the entire Converting Project (the units that will be removed through both RAD and Section 18) and Covered Project (the post-conversion project with units that will be covered under the RAD HAP contract, non-RAD HAP contract(s), and any other units. Accordingly: 1. The entire Converting Project is subject to RAD’s requirement for a Capital Needs Assessment (see Section 1.4.A.1 of the RAD Notice) 2. The entire Converting Project will be subject to an environmental review, which will be confirmed as part of the RAD conversion (see Section 1.4.A.3 of the RAD Notice). PHAs do not need to complete a separate environmental review to satisfy the requirements of 24 CFR 970.13 for the units being disposed under Section 18 3. HUD will perform front-end civil rights reviews described in PIH/H 2016-17 for the entire Converting Project 4. Section 3 requirements for employing low-income individuals and contracting opportunities will apply to all of the Work on the Covered Project (rehab or construction) required by the RAD Conversion Commitment as part of the RAD conversion (see Section 1.4.A.15 of the RAD Notice) 5. Davis-Bacon will apply to all of the Work on the Covered Project (see Section 1.4.A.14 of the RAD Notice).
Repositioning Before Small PHA Blend
Can a PHA with more than 250 units utilize the RAD/Section 18 Small PHA Blend if it first repositions other public housing assets resulting in having 250 or fewer public housing ACC units?Yes. A PHA may utilize any of HUD’s repositioning strategies to decrease the number of public housing units under ACC to 250 (or fewer) units. As soon as the PHA has 250 or fewer units under ACC, and otherwise meets the Small PHA Blend eligibility criteria, it would be eligible for the Small PHA Blend option.
Small PHA Blend Contract Administrator
Is there any flexibility with regard to the Small PHA Blend requirement in PIH Notice 2021-07 which states: “Any PBV contract created under this subparagraph must be administered by an HCV contract administrator with at least 250 HCV units under its HCV ACC prior to creation of such PBV contract?”PHAs may request to waive this requirement by following the procedures in PIH Notice 2018-16 and presenting good cause justification. In considering such requests, HUD is likely to consider whether there is another PHA that administers more than 250 HCV ACC units with jurisdiction and, if so, whether that PHA is unwilling or unable to administer the additional PBV assistance.
Waived PVB Requirements and RAD/Section 18 Blends
RAD has waived certain rules for project-basing vouchers. How do I determine which RAD waivers and alternative requirements apply to Blends?The units converted under RAD are subject to the waivers and alternative requirements for project-basing laid out in the RAD Notice. RAD waivers apply to non-RAD PBV units, including the Section 18 units in a Blend, that are part of a RAD Covered Project only if such waivers are explicitly provided in the RAD Notice. An explicitly provided waiver will contain a statement such as “any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.” Specifically, HUD has extended RAD waivers and alternative requirements related to resident rights as well as the waiver of the PBV requirements under section 8(o)(13)(C)(ii) of the Act and 24 CFR § 983.57(b)(1) and (c)(2) having to do with deconcentration of poverty and expanding housing and economic opportunity, for the existing site (see RAD Notice § 1.6.A.4). Many RAD waivers do not extend to the Section 18 units that will result in non-RAD PBV assistance through a blend. For instance, these units are subject to regular PBV rules during the pre-HAP contract phase relating to competitions, inspections, and use of an AHAP, and during the post-HAP contract phase relating to contract rent increases and choice mobility. Regular PBV rules may be found in 24 CFR Part 983 and the Housing Opportunity Through Modernization Act (HOTMA) Federal Register (FR) Implementation Notices at 82 FR 5458 (January 18, 2017), 82 FR 32461 (Jul. 14, 2017).
Resident Rights and RAD/Section 18 Blends
RAD and Section 18 normally have different requirements and rights for residents (consultation, relocation, right to return)? Which ones apply?The RAD relocation requirements described in PIH/Housing Notice 2016-17 (the RAD Fair Housing, Civil Rights, and Relocation Notice) shall apply to residents of the Section 18 units, in lieu of the relocation requirements under 24 CFR part 970, in accordance with 84 Fed. Reg. 54630 (Oct. 10, 2019) and the Section 1.5.B.2.a of the RAD Notice. All of the RAD relocation requirements shall apply to residents of the Section 18 units, including, but not limited to, the resident notice and meeting requirements, the right to return, and relocation assistance and payments. The PHA may not provide different relocation rights and benefits to residents of the project based on whether they reside in a RAD unit or a Section 18 unit. All residents of the Converting Project have a right to remain in or return to the project-based replacement units consistent with Section 6.1 of the RAD Relocation Notice (H/PIH 2016-17). The RAD Relocation Notice applies to non-RAD PBV units at the Covered Project, as further explained in the Section 1.5.B.2.a of the RAD Notice. Per Section 1.6.C.1 of the RAD Notice, “current households cannot be excluded from occupancy at the Covered Project based on any rescreening, income eligibility, or income targeting.” This also applies to current public housing residents of the Converting Project that will reside in non-RAD PBV units placed in a project that contains RAD PBV units or RAD PBRA units. All residents that return to the non-RAD PBV units will have the same resident rights as the residents in the RAD PBV units. A list of resident rights that apply to the non-RAD PBV units is fully described in the RAD Notice. A summary listing can be found in Table 1 of Att. 1D of the RAD Notice (p. 147-148), which lists the resident rights that must be included in the PHA Plan and the sections of the RAD Notice where you can locate detailed information about each resident protection. It states by way of summary that “tenant protections for RAD PBV residents apply to non-RAD PBV residents of the same Covered Project with the exception of Choice Mobility. Standard PBV Choice Mobility requirements apply to non-RAD PBV residents.” Both RAD (Section 1.8 of the RAD Notice) and Section 18 (24 CFR 970.9) require consultation with residents regarding the proposed actions. Under a RAD/Section 18 blend, these discussions should occur at the same time within the same meetings. PHAs can generally satisfy the Section 18 consultation requirements for impacted residents and with the resident organizations by complying with RAD consultation requirements (i.e., by providing notification letters and resident meetings required by the RAD notice). However, Section 18 also requires the PHA to consult with the Resident Advisory Board (RAB).
RAD/Section 18 Blend Substantial Conversion of Assistance Requirement
PIH Notice 2021-07 requires that “the aggregate number of replacement units (RAD and project-based Section 8) must meet the RAD “substantial conversion of assistance” requirements.” Can you provide examples?See PIH Notice 2021-07, 3.A.2.e HUD requires that the PHA will replace the units proposed for Section 18 disposition with PBV units. The totality of replacement units (RAD units + regular PBV HAP contract for the Section 18 units) must fall within the RAD de minimis allowance as defined in Section 1.4.A.4 of the RAD Notice. For example, for a 100-unit property, excluding the exceptions for long-term vacant units, reconfigured apartments, or social service units, the de minimis unit total could not exceed 5 units or 5%. As a result, a PHA could take a 100-unit ACC project with hard costs in excess of 60% of HCC (qualifying the project for a 60/40 RAD/Section 18 construction blend) and: 1. Replace 100 units, with 60 under RAD HAP contract and 40 under a regular PBV HAP contract. 2. Replace 95 units, with 55 under RAD HAP contract and 40 under a regular PBV contract (the 5 de minimis units are not replaced) 3. Replace 100 units, with 55 under RAD HAP contract and 45 under a regular PBV contract (including 5 de minimis units that are backfilled with regular PBVs funded from the PHA’s existing Housing Choice Voucher Budget Authority).
PBRA and RAD/Section 18 Blends
In a blended transaction, must the RAD units all convert to PBV or can they convert to PBRA? And can the units that will be processed through Section 18 result in a PBRA contract?The units converting under RAD may convert either to PBV or PBRA (see Section 1.2 of the RAD Notice). Since the units processed under Section 18 will result in the issuance of new voucher funding to the PHA, currently there is only statutory authority for those units to result in a PBV contract. Although processed as one “transaction,” the RAD and non-RAD units will ultimately need to be under separate HAP contracts, even if both will be PBV: a RAD HAP for the RAD units (PBRA or PBV) with contract rents set per standard RAD rules and a separate regular PBV HAP or AHAP contract covering the units removed through Section 18 with contract rents set per standard PBV rules.
Definition of Project for RAD/Section 18 Blends
How is “project” defined for the purposes of determining how many units are eligible for disposition under a blend?See PIH Notice 2021-07, 3.A.2.e. For purposes of calculating the number of eligible units that may be approved under Section 18, HUD considers the “Converting Project,” prior to consideration of the RAD/Section 18 blend, reflecting the public housing ACC units that would be removed from PIC through RAD and as defined in the RAD Notice (the Converting Project may be an AMP, multiple AMPs, or a portion of an AMP). For example, assume that a PHA has 100 ACC units in a garden-style apartment complex and a CHAP for 99 units with one unit in the converting project being a manager’s unit that will be excluded from the Housing Assistance Payment (HAP) Contract through RAD’s de minimis allowance. The proposed conversion includes hard costs in excess of 60% of HCC, qualifying the project for a RAD/Section 18 Construction blend with a mix of 60% RAD and 40% Section 18. The denominator would then be 100 units, allowing 40 units to qualify for Section 18 (40% of 100). Please note that since the blends provide for a maximum percent of units that can be approved under Section 18, when the percentage results in a non-whole number, HUD rounds down to the nearest whole number. However, if on an identical 100-unit property only 60 units are in the Converting Project because the PHA had separately secured Section 18 approval for 40 units (e.g., they met the obsolescence test) or if 40 of the units were not public housing ACC units (e.g., they are unassisted units in an existing public housing mixed-finance development), only 24 units would be eligible for Section 18 under the RAD/Section 18 blend (i.e., 40% of 60). Because of the many possible variations in project characteristics, HUD reserves the right to determine eligibility. Please check with the RAD Resource Desk. Within the project, the RAD and Section 18 units do not need to be in separate buildings. It will be up to the PHA to determine which units within the blend are removed through Section 18 and which units are converted through RAD. Please note that the selection of units to be removed through Section 18 may impact the PHA’s eligibility for Asset Repositioning Fee (see question 16 below). Further, the distribution of RAD and non-RAD PBV units may impact the number of HAP contracts that will be used in the conversion. All RAD units will be under a RAD PBV HAP contract and any Section 18 units will be under a regular PBV HAP contract, so placing RAD and non-RAD units in each building may result in more HAP contracts (see 24 CFR 983.3 and PIH Notice 2017-21 Appx. II for the definition of “Project” in the PBV program, which determines what units might be included under a single RAD or non-RAD PBV HAP contract).
Scope of Work for Construction Blends
What can be included in the RAD scope of work to measure against Housing Construction Costs for the Construction Blend?For purposes of calculating aggregate construction costs vis-à-vis various HCC thresholds, HUD will consider the combined per unit construction costs of the overall project budget as identified by the PHA in the RAD Financing Plan. The project may include a mixture of new construction and substantial rehabilitation and may include other units besides the converting units (e.g., through the development of new units). However, if the project includes units that have already been approved and will be removed from public housing inventory under the Section 18 physical obsolescence criteria (Section 4.A.1 of PIH Notice 2021-07 HA), HUD will exclude the costs equal to the amounts necessary to equal the Section 18 obsolescence threshold when calculating eligibility for the blend. HUD has also developed an Excel tool available on the RAD Resource Desk (https://www.radresource.net/output.cfm?id=0613WB) that PHAs can use to assess whether the scope of work meets any of the thresholds for the Construction Blends and whether the site is in a high-cost area.
Section 18 Blend Criteria
What eligibility criteria apply to the RAD/Section 18 Construction Blend?See PIH Notice 2021-07, 3.A.2.e.1. Any project that meets the following criteria will be approved under the Construction Blend: 1. The PHA is converting a portion of the public housing units within a Converting Project and is replacing the units proposed for disposition with project-based Section 8 assistance within the Covered Project, as the terms “Converting Project” and “Covered Project” are defined in the RAD Notice (H-2019-09 PIH-2019-23 (HA)). The aggregate number of “hard” replacement units (RAD and PBVs) in the Covered Project must meet the RAD “substantial conversion of assistance” requirements (see question 8 for more detail). 2. Units in the Covered Project must be either newly constructed or rehabilitated without the use of 9% Low Income Housing Tax Credits (LIHTCs). 3. Hard construction costs, including general requirements, overhead and profit, and payment and performance bonds, must meet one of the following construction thresholds described below. Construction thresholds are determined as a percent of the Housing Construction Costs (HCC) published by HUD for a given market area. The level of proposed rehab or construction in the RAD Financing Plan will determine whether the transaction qualifies for a blend and which tier it falls under. An 80% RAD / 20% Section 18 blend requires a HCC threshold of >30%. A 60% RAD / 40% Section 18 blend requires a HCC threshold of >60%. A 40% RAD / 60% Section 18 blend requires a HCC threshold of >90%. A 20% RAD / 80% Section 18 blend requires a HCC threshold of >90% plus a high-cost area. Each of the blends listed above reflect the maximum number of units in a converting project that may be approved under Section 18. The PHA may choose to use Section 18 for a lower percentage of units and a higher percentage through RAD. For example, if a PHA is proposing to complete $50,000 per unit in rehabilitation, equating to 46% of HUD’s published HCC for the respective market area, HUD will approve up to 20% of the units at the project under Section 18 Disposition, at the PHA’s discretion. HUD has created a Workbook to Test HCC Threshold: For RAD Section 18 Blends and Opportunity Zone Rent Increases (available here: https://www.radresource.net/output.cfm?id=0613WB) that PHAs can use to assess whether the proposed rehab/construction level in a transaction qualifies for a RAD/Section 18 Construction Blend.
Using Public Housing Funds for RAD/Section 18 Blends
Can a PHA contribute Public Housing funds (i.e., Capital Funds, Operating Funds, Program Income) into the RAD budget, even though the property will include non-RAD units?Yes. The RAD Notice (Section 1.5.A) permits public housing funds to be used as a source of capital in the development budget to support conversion. Consistent with HUD’s approach to subsidy layering reviews, in the case of a PHA that will no longer have ACC units as a result of the pending or simultaneous closing, or have less than 50 units remaining and have initiated procedures to dispose of their final ACC units, when the PHA is contributing public housing funds in a conversion, there is no restriction on the amount of public housing funds that may be contributed to the Covered Project(s) through the conversion. In all other cases, HUD will apply a proportionality test to make sure that the funds contributed relative to the total project budget are proportional to the RAD units relative to the total units. In addition, the PHA must estimate and plan for costs for operating and maintaining its remaining public housing units (if any) until such units are also removed from public housing, as well as the closeout costs (e.g., audits, legal fees) described in PIH Notice 2019-13 and 2014-24 (as applicable).
High-Cost Area Determination
How does HUD determine what is a high-cost area?See Footnote 5 in PIH Notice 2021-07, 3.A.2.e.1(a) High-cost areas are defined as those where the HUD-published HCC exceeds 120% of the national average. For the purposes of this calculation – both the national average and the HCC for each jurisdiction – HUD uses the average of the 2-BR HCC for Elevator and Walk-up structures. The resulting list of high-cost areas is available here: https://www.radresource.net/output.cfm?id=Highcost.
RAD/Section 18 Small PHA Blend
What eligibility criteria apply to the RAD/Section 18 Small PHA Blend?See PIH Notice 2021-07, 3.A.2.e.2. For any project that meets the following criteria HUD will approve up to 80% of units under Section 18 and 20% will convert under RAD. 1. The PHA must have 250 or fewer public housing units under its ACC. 2. The PHA is converting a portion of the public housing units within a Converting Project and is replacing the units proposed for disposition with project-based Section 8 assistance within the Covered Project, as the terms “Converting Project” and “Covered Project” are defined in the RAD Notice (H-2019-09 PIH-2019-23 (HA)). The aggregate number of “hard” replacement units (RAD and PBVs) in the Covered Project must meet the RAD “substantial conversion of assistance” requirements. The Converting Project may constitute the PHA’s entire public housing inventory (if the Covered Project will qualify as a single project defined in the RAD Notice) or may be one of multiple projects in the PHA’s inventory. 3. The PHA must submit to HUD a repositioning plan approved by the PHA’s board of commissioners and acceptable to HUD that removes all its public housing ACC units and will result in the closeout of the PHA’s Section 9 public housing program and termination of its Section 9 ACC. The repositioning plan must reflect that the PHA will not develop additional public housing units under otherwise available Faircloth authority. After removing all units as described in its repositioning plan, PHA must follow close-out procedures under PIH 2019-13. 4. Any PBV contract created under this blend must be administered by an HCV contract administrator with at least 250 HCV units under its HCV ACC prior to creation of such PBV contract. Note that as an alternative means of closing out under the requirements of PIH Notice 2019-13, PHAs may closeout their public housing programs through a Voluntary Transfer of their public housing program under PIH Notice 2014-24. After a PHA has removed all of its public housing units through Section 18, RAD, or another repositioning tool, the Divesting PHA would not have any public housing units to transfer to the Receiving PHA, but would transfer all remaining liabilities and assets (Faircloth authority, remaining Capital and Operating Funds, including Reserves).
Over-Income Residents in RAD/Section 18 Blends
If a PHA is considering a RAD/Section 18 blend for a property, and that property has an over-income resident, would the over-income resident be moved back into a RAD unit or a Section 18 unit? What's the rent subsidy source for the original resident who is over-income? Do they still qualify for rental subsidy under RAD and/or Section 18 if they are over-income?According to the RAD Relocation Notice Section 6.2, “any public housing or Section 8 assisted resident that may need to be relocated temporarily to facilitate rehabilitation or construction has a right to return to an assisted unit at the Covered Project once rehabilitation or construction is complete. The right to return is not a right to any specific unit in the Covered Project.” The Covered Project refers to both the RAD and Section 18 units in a Blend, so a relocated resident could be moved back into a unit under the RAD or Section 18 HAP Contract. Regardless of their income, the resident has the right to return to a properly sized unit. An over-income tenant would not receive subsidy but would be placed on and/or remain under the applicable HAP Contract, as described in Section 1.6.C.9 of the RAD Notice. This provision applies to both the RAD and Section 18 units. If the tenant’s income drops and they are eligible for HAP subsidy, their subsidy source would depend on which unit they moved back to.
Reporting Rehab Assistance Payments in VMS (PBV Conversion)
We converted to PBV and units were vacated due to rehab and thus we are eligible to receive Rehab Assistance Payments (RAP). How do we report the use of the RAP funds in VMS?The VMS Users Manual instructs PHAs to report Rehab Assistance Payments in the RAD 1 HAP Expense field in VMS. PHAs should not report the units as leased.
ESCo Guarantee
How is the ESCo guarantee impacted when an EPC is amended as a result of a conversion of a portion of units covered under an EPC?Any changes to an ESCo guarantee are to be determined between the PHA and their ESCo. ESCO guarantees are not required for an EPC so if changes to it do occur they do not affect the conversion process. HUD is committed to providing PHAs with ongoing assistance in understanding RAD’s intersection with green and energy efficiency objectives. As additional best practices, success stories, and helpful decision frameworks are identified, HUD will maintain those resources on the RAD web site for interested parties. HUD also strongly encourages PHAs and partners to discuss creative ideas around maximizing energy and water efficient improvements through RAD. We look forward to continued dialogue with partners around this and other related issues. For questions or additional feedback, please contact us at the RAD mailbox at RAD@hud.gov, or at the EPC Policy mailbox at PHI_EPC_Policy@hud.gov.
Paying a Project's EPC Debt
Where I am converting a project that is part of a larger EPC, and I am proposing to pay down the project’s EPC debt, how will I determine the proportionate amount that must be addressed as part of the conversion?HUD’s primary interest is to ensure that a converting property addresses, at a minimum, the debt proportionate with the amount of savings the project had been projected to achieve in the original EPC approval so that once the property is converted and removed from the public housing inventory, the PHA’s remaining EPC remains financially viable. Accordingly, the information that PHAs must submit must clearly show the savings that were projected for the converting project, especially when it is not adequately presented in the EPC approval letter. HUD reserves the right to require additional debt treatment in the event that the remaining EPC would fail to meet the EPC statutory and regulatory standards. Note that the EPC lender is likely to also evaluate the debt that should be addressed as part of the conversion and may require a different amount than HUD calculates. Notwithstanding the requirements of an EPC lender, PHAs must comply with HUD’s requirements.
Submission Requirements Under EPC
What do I need to submit to HUD if I am converting a property covered under an EPC?Where the PHA will pay-off or assume all of the EPC debt as part of the conversion, the PHA will need to notify of its intent. The PHA will draft a letter from the Executive Director to the Field Office (copying the Transaction Manager and Energy Center) formally requesting HUD to end the EPC incentives at the time of conversion and describing the PHA plan to address EPC debt (i.e. Pay off or assume). After conversion, the Field Office will finanlize the cessation of EPC incentives through a letter to the PHA Executive Director. However, where a portion of the EPC will remain following the conversion, HUD will need to amend the EPC approval letter. To do this, the PHA must propose the amount to be paid off or assumed so as to ensure that the project’s conversion does not increase the risk of default on the remaining EPC loan and, for partial AMP conversions, determine the appropriate updates to the project’s Operating Subsidy forms (HUD 52722, 52723). This information will be submitted to the Energy Center, in the format requested, along with the supporting documents delineated in Appendix A, the PHA is highly encouraged to engage their ESCo in developing this submission. The Energy Center will review the submission and if it determines the PHA proposal to be accurate, the Energy Center will create a draft approval letter, which PHAs must submit with their Financing Plan. After closing, HUD will finalize the amendment to the EPC approval letter.
Satisfying EPC Obligations
If I have a RAD award and my project is covered under an existing EPC, what are the options available in terms of satisfying that EPC obligation?Essentially, there are two basic options: Option A: Pay off the EPC debt, either with proceeds from the RAD conversion (say, mortgage proceeds or tax credit equity) or through other eligible uses, e.g., existing Operating or Capital Fund accounts. Some EPC contracts require EPC lender approval to pay off (or pay down) any debt. Or Option B: Assume the debt and continue to make the EPC debt payments post-conversion with projects or other proceeds. If the converting project will assume the debt, the lender will have to agree to subordinate all interests to the RAD Use Agreement. Further, if, in addition to assuming the EPC debt, you plan on taking on new debt as part of the RAD conversion, the EPC lender and the non-EPC lender will need to negotiate over which position each will take, which often pushes the PHA towards paying off the EPC debt. Sometimes, a PHA will assume the obligation of the existing EPC debt but with non-program and non-project funds, depending on the existing EPC contractual provisions, Either of these options must be reflected in a PHA’s Financing Plan submission. Where the debt will be paid down or paid off, the debt would be included in the development budget. Where the debt will be assumed, HUD will underwrite the transaction to ensure there is adequate cash flow to continue debt service payments. HUD recommends a PHA consult with legal and financial advisors, the EPC lender and the new first mortgage lender (if applicable), to determine which approach will work best for the PHA and the project. HUD also encourages PHAs to work with ESCos ealy in the process to develop options and reach out to the OFO Energy Center at OFOEnergyCenter@hud.gov for comment.
Existing EPC Incentives Under New RAD Section 8 Rent
Are the existing EPC incentives maintained under the new RAD Section 8 rent?Yes. The RAD rents for each public housing project incorporate any existing Frozen Rolling Base (FRB), Add-On Subisdy (AOS), and Rate Reduction Incentive associated with an existing EPC that were in place at the time of each project’s “RAD rent base year” – FY 2012 for properties awarded under the original 60,000 unit cap or FY 2014 for properties awarded as a result of the increase of the cap to 185,000 units. The methodology for calculating RAD rents includes the Operating Subsidy Utility Expense Level (UEL) and Energy Add-on so that projects retain the value of existing EPC incentives when they convert through RAD. The PHA should consider the impact of essentially switching from the AOS to the Frozen Rolling Base incentive as part of its RAD conversion. However, due to incomplete administrative data, HUD did not incorporate the Resident Paid Utility Incentive (RPU) into the rent levels posted in the RAD Application and Tool. As a result, for projects proposed for RAD conversion with an existing EPC using the RPU, HUD will allow an amendment to the posted RAD rent to add the Per Unit Month (PUM) EPC Resident Paid Utility Incentive. If the PHA has the RPU incentive, they should notify their Transaction Manager who will work with PIH to determine an accurate incentive amount. For additional details on the specific line items utilized in calculating the posted RAD rents, see Attachment 1C in PIH Notice 2012-32 REV 2.
Definition of
What level of work is considered "new construction" for a RAD project when rehab is being done? For example, would a PHA be required to perform an FHEO review for "new construction" if it is gut-rehabbing all of the units?For the purposes of RAD, new construction refers to the construction of entirely new structures and/or significant extensions of existing structures. Substantial rehabilitation of an existing structure that may include the demolition of units and walls but that will re-use the existing foundation is not considered new construction.
Units Eligible for Rehab Assistance Payments
How can a PHA determine how many units under HAP contract are eligible for Rehab Assistance Payments?During the period of rehabilitation or construction as identified in the HAP Contract, the maximum number of units for which a Project Owner can receive RAD Rehab Assistance Payments is limited to the number of units eligible for Operating Fund subsidy prior to conversion. The number of units eligible for Operating Fund subsidy prior to conversion is equal to the number of Total Eligible Unit Months (EUMs) on the project’s Form-52723 submission (Section 2, Column B, Row 15.) divided by twelve and rounded down to the nearest whole number. For conversions where only a portion of a PIC Development has converted, the number of EUMs associated with the converted portion can be derived from the Initial Year Funding Tool (See “2a. Operating Fund” worksheet, cell R28).
Initial Funding for RAD/Section 18 Blends
If a PHA closes on a RAD/Section 18 Blend transaction on December 15, 2020, I am pretty sure that its 2021 Capital Fund grant will include funds for the 75% of the units that went RAD. Will the PHA’s 2021 Capital Fund grant include funds for the 25% of the units that went PBV via Section 18? In the same scenario, will HUD fund the Section 8 payments in 2021 for the 25% of the units that went PBV, or will HUD not fund the Section 8 payments for the 25% units until January 2022?The RAD units will follow regular RAD funding procedures. As such, a property with a 1/1/21 HAP effective date will receive Public Housing Operating and Capital funds in 2021 and use those funds to pay rental assistance to the property in CY 2021. With respect to the section 18 units: 1) The PHA will receive Capital Funds for those units in the FY 21 grant if the units were in public housing as of 6/30/20. The PHA will subsequently receive DDTF for these units for five years. None of these funds may be used on the converted property 2) The PHA will receive Tenant Protection Voucher (TPV) funding, which it will use to make payments under the non-RAD PBV HAP contract once it is effective. RAD funding procedures, including the use of Rehab Assistance Payments (RAP), would not apply to these units.
Determining "Substantial Rehabilitation"
The RAD Conversion Commitment requires that any transaction where the Work includes new construction or substantial rehabilitation, the PHA and/or Project Owner must engage a qualified general contractor who shall obtain either (i) a payment and performance bond from a properly licensed surety, which bond and surety shall be acceptable to HUD, or (ii) a letter of credit, acceptable to HUD. How does HUD define “substantial rehabilitation” for the purposes of determining when a payment and performance bond or letter of credit is required?For purposes of determining when a payment and performance bond or letter of credit is needed, HUD defines substantial rehabilitation as hard construction costs, including general requirements, overhead and profit, and payment and performance bonds, in excess of 60% of the Housing Construction Costs as published by HUD for a given market area.
Delays in Construction Due to COVID-19
How will HUD handle delays due to COVID-19 in the completion of construction required by the RAD Conversion Commitment (RCC), including increases in costs, modification of resident relocation? How will it approve periods for rehab assistance payments?HUD will approve extensions to the rehab period and rehab assistance payments. Such requests can be made through the RAD Resource Desk. Note that the RAD construction deadlines do not supersede other parties’ requirements, so development teams should also consult with their lenders, investors, and other stakeholders as applicable when modifying the construction schedule. Increases in costs should be reflected on the sources and uses log on the RAD Resource Desk. HUD encourages PHAs to maintain routine communication with residents whose length of relocation may be impacted and to alert HUD if relocation plans change such that resident relocation will exceed 12 months.
Construction Schedules and COVID-19
Public Housing Authorities (PHAs) and their development teams are currently implementing renovations and tenant moves to facilitate construction. How should property owners reconcile the construction schedule with COVID-19 concerns?PHAs and their Rental Assistance Demonstration (RAD) development partners should consider the health and well-being of the residents and the public as the first priority and use CDC guidance and guidance from state and local health officials. In doing so, RAD development teams should consider the impact of their renovation activities on the potential to exacerbate or mitigate exposure to the virus, particularly among vulnerable populations. Every construction project is different - in the vulnerability of the residents, the extent of tenant relocation, the extent of construction, the timing of construction and the deadlines created by natural conditions or financing sources. In all cases, development teams should follow the instructions of applicable governmental authorities (such as a government-issued shelter-in-place or similar order).
FHEO Review for Unit Reduction
If I am using both the de minimus reduction and the 75%/25% RAD/Section 18 blend provisions on a RAD transaction, do I need to submit the FHEO Change in Unit Configuration review? All reduced units will be replaced by other PBV units and Tenant Protection Vouchers (TPV), so the number of low-income dwelling units is the same.If all of the reduced units are being replaced with project-based assistance, an FHEO Change in Unit Configuration review is not needed.
Energy Savings for PBRA Conversion
The energy savings provision of the new HUD RAD notice (Attachment 1C, pages 116-118 of the Notice REV-2) allows PHAs to apply 75% of the energy savings back to the contract rent. (1) When can a PHA apply the energy savings?; 2) How does it get documented?; 3) Can the PHA take the energy savings in the first year of the new HAP?(1) The Notice provides that, for rehab projects, the energy savings will result in an increase to the post-rehab rents (at the RAD closing the PBRA HAP contract will specify both pre-rehab and post-rehab rents). Thus, you must complete the rehab before the energy savings can be applied. For new construction, the energy savings can be applied once construction is completed. (2) The Notice discusses documentation requirements at the bottom of page 116 and top of page 117. "PHAs can submit UA projections performed by a professional engineer, based on the project’s plans and specifications that, at a minimum, take into account specific factors including, but not limited to, unit size, building orientation, design. and materials, mechanical systems, appliances, and characteristics of the building location. The projections must be submitted in the RAD UA Projections Template." Note that approval is at HUD's discretion. (3) See item (1) regarding timing of the increase in RAD Contract Rent.
Vacant Units Due to Preparation for Modernization as Part of RAD
Under what circumstances can units covered by a CHAP Award be considered "Units Undergoing Modernization"?Units in a project with CHAP approval, which the PHA plans to modernize, that are vacant because a PHA has not reoccupied them in preparation for modernization pursuant to a for RAD conversion, can be considered as “Units Undergoing Modernization,” provided they comply with 24 CFR 990.145 (excerpted below). To be eligible, such vacant units must need to be vacated for the modernization work to occur. Such vacant units may be categorized as undergoing modernization for a maximum of two years (24 months) prior to the RAD conversion (HAP Effective Date). The units must be approved by the Field Office, and the unit status correctly reflected in PIC. The RAD conversion and planned modernization must be in: 1) A HUD approved PHA Annual Plan for non-qualified PHAs (24 CFR 903); 2) A HUD approved 5-Year Plan for qualified PHAs (24 CFR Part 903) (if no Capital Funds are being used as part of the modernization, a narrative description of the work, including the projected start and completion date, should be included in the Capital Improvements section of the Plan); or 3) a HUD approved Capital Fund Plan (24 CFR 905.300) if Capital Funds are also being used for modernization Units converting to RAD that will not be modernized are not eligible to be categorized as Units Undergoing Modernization. § 990.145 Dwelling units with ap¬proved vacancies. (a) A PHA is eligible to receive oper¬ating subsidy for vacant public housing units for each unit month the units are under an ACC and meet one of the fol¬lowing HUD-approved vacancies: (1) Units undergoing modernization. Vacancies resulting from project mod-ernization or unit modernization (such as work necessary to reoccupy vacant units) provided that one of the fol¬lowing conditions is met: (i) The unit is undergoing moderniza¬tion (i.e., the modernization contract has been awarded or force account work has started) and must be vacant to perform the work, and the construc¬tion is on schedule according to a HUD-approved PHA Annual Plan; or (ii) The unit must be vacant to per¬form the work and the treatment of the vacant unit is included in a HUD-approved PHA Annual Plan, but the time period for placing the vacant unit under construction has not yet expired. The PHA shall place the vacant unit under construction within two federal fiscal years (FFYs) after the FFY in which the capital funds are approved.
Architecture and Engineering Fees
Does RAD have a standard for the reasonableness of Architectural and Engineering (A/E) fees?For projects subject to Subsidy Layering Reviews, the RAD SLR has a threshold of 5% of hard construction costs for architectural fees. Engineering fees, however, should be reported separately, as should construction management, permitting, and commissioning services. For any amount above 5%, the PHA would need to provide documentation that such amounts are consistent with local practices, including allowable amounts under the applicable State Qualified Allocation Plan (QAP).
RPCA Requirement for New Construction or Substanital Renovation RAD Conversions (non-FHA Financing)
Is a RAD Property Condition Assessment (RPCA) required on a new construction or substantial renovation transaction?A RPCA is required for all RAD transactions, except the following: 1) New Construction; 2) Gut Rehab (essentially, down to the stud); or 3) Recently modernized or constructed buildings (based on the recommendation of the HUD RAD Transaction Manager and approval by the RAD Team Lead). However, the RPCA Excel tool is still required to size the reserve for replacement deposit on all sub-rehab transactions, with the exception of “gut rehabs”. “Gut rehabilitation” is defined as “removal/replacement of all or substantially all interior finished surfaces”.
Accessbility Requirements
My PHA previously met the standard for accessibility across the public housing portfolio. However, now that we are converting to RAD, there are individual projects that exceed the standard and some that do not meet the standard (but, again, overall we are in compliance). When we convert to RAD, will we be “grandfathered” in, or will we have to have all projects meet the accessibility standards on their own?Each project covered under a HAP contract must meet the 5%/2% accessibility standards under Section 504 if the project is undergoing substantial alterations.
Completing Accessibility Repairs Identified in the RPCA
If a PHA has accessibility improvements identified in the PCA, can it perform that work post-closing as part of the scope of immediate repairs?Critical repairs are repairs that must be done on an accelerated schedule, including health and safety issues (such as an improperly vented gas appliance). Note that identified accessibility modifications that pose imminent health and safety risks, may be considered critical repairs. All critical repairs must be completed prior to the RAD closing. If your property has a critical repair that you believe cannot be completed prior to RAD closing due to time constraints, please discuss this with your RAD Transaction Manager who may permit the repair to be moved into rehab as long as it can be demonstrated that doing so does not present an immediate health or safety hazard to residents. Rehab items also must be done, but the schedule is governed by the rehab provisions of the RAD Conversion Commitment. Year One items typically reflect systems or components that were functioning at the time of the inspection and are anticipated to require replacement in the first year. Whether and when these are done will be up to the property owner. A typical example would be a 20 year roof that is not leaking but that either has reached 20 years of age or will reach 20 years of age within the first year after the closing. The Reserve for Replacement would contain sufficient funds to pay for the roof replacement, and the timing of the roof replacement would be up to the owner.
Applicability of Davis Bacon to 2nd Component RAD Conversions
I am pursing a 2nd component conversion. Under the wording of the new PBV Final Rule, I am unclear if the transaction will be subject to Davis Bacon wage rates. Can you please confirm?In the June 25, 2014 final rule, HUD clarified the reference to statutory labor standards provisions that are applicable to assistance under the PBV program. The Final Rule states that when the nature of the work planned to be performed prior to execution of a Housing Assistance Payments (HAP) contract, or after HAP contract execution within such post-execution period as may be specified by HUD, constitutes development of the project, statutory Davis-Bacon requirements may apply to existing housing (which is not subject to an agreement to enter into a housing assistance payments contract, or AHAP). The Department is preparing additional guidance to clarify when Davis Bacon requirements apply to existing PBV housing, including 2nd Component RAD transactions. In the meantime, we offer the following general rule of thumb: if the project will undergo rehabilitation in connection with the RAD conversion (either pre or post HAP contract execution), the development team should budget assuming Davis Bacon wage rates will apply.
Rehab Assistance Payments
How can I forecast the income my project is eligible to receive in Rehab Assistance Payments?Rehab Assistance Payments are provided under the HAP contract to provide subsidy payments to the property during the period of rehab. Units are only eligible for Rehab Assistance Payments if they were eligible for Operating Subsidy prior to conversion (i.e., included in “Eligible Unit Months” in the Form 52723 for the Calendar Year of conversion) and are uninhabitable during the period of rehab or construction. Rehab Assistance Payments are sized by HUD based on the Operating Fund and Capital Fund subsidy that formed the basis of a property’s RAD rent. For example, a property has a RAD rent of $500 PUM, which was based on Operating and Capital subsidy of $300 and tenant rents of $200. The HAP contract would include a Rehab Assistance Payment of $300 (adjusted by the OCAF, if the rents were due an OCAF adjustment). The PHA can find these amounts in the PUM Capital Fund, PUM Tenant Rents, and PUM Op Fund columns of the applicable RAD Rents spreadsheet, available on https://www.hud.gov/RAD/library/notices.
Treatment of Vacant Units Prior to RAD Conversion for Operating Subsidy Pu
A PHA receives a CHAP award and, because of the scope of repairs, chooses not to re-fill vacancies, waiting instead until conversion to make repairs. How would these units be treated under the Operating Fund Program for the period prior to conversion?Units vacant for RAD can be considered as “Under Vacant for Modernization” per the 990 regulation. For 2014, the RAD conversion would have to be in the PHA Plan. The months in 2013 during the reporting period when the unit was vacant for RAD purposes must be reflected in PIC as a unit status change. Additionally, if it is intended that the unit receive funding in 2014 as “Unit Vacant undergoing Modernization” but the current eligibility in the HUD-52723 indicates the unit as simply vacant then a revision will need to be submitted. The revision deadline for 2014 is June 27th. The PHA can also reference the Notice PIH 2011-7 Guidance IMS/PIC Development
Completing Repairs prior to RAD Closing
I am a PHA with a CHAP and would like to complete some repairs prior to the closing of the RAD conversion. Is this allowed?All repairs identified as "critical" in the RAD PCA must be completed prior to closing. If the PHA wishes to complete additional repairs to the property prior to closing, it is permitted to do so but must follow all applicable Public Housing rules. It is important to remember that until the RAD conversion has closed, the property is still considered Public Housing and is subject to Public Housing rules. The PHA must also make sure the Financing Plan and RAD PCA are updated to reflect the changes to the repair schedule and scope of work. Please note that RAD conversions pursuing FHA financing should discuss the completion of additional repairs with their Transaction Manager as additional approvals may be necessary.
Completion of Capital Improvements
Once awarded, what is the time frame to complete capital improvements?The Financing Plan and RCC must include a reasonable timeline for completion of all rehabilitation items acceptable to HUD, generally 12 to 18 months from the date of closing the conversion and any financing, depending on the scope of rehabilitation funded. (Notice PIH-2012-32 REV-1 page 79).
Davis Bacon and Section 3 Applicability
What is the trigger for Davis-Bacon and Section 3 under a RAD conversion?Davis-Bacon and Section 3 are triggered by any any rehabilitation or new construction performed as part of the “Year One” repair schedule defined by the RPCA, Financing Plan and Rad Conversion Commitment. In addition, and substantial repairs undertaken prior to conversion (i.e., pre-conversion rehabilitation with Capital Funds).
Benefits of RAD v. SAC
I'm considering a RAD transaction, versus pursuing demolition-disposition through the SAC. It appears that, under RAD, approval of new financing is simpler. However, one advantage that the SAC provides (or used to provide) was the possibility of Tenant Protection Vouchers,that had the effect of increasing a PHAs voucher pool and providing the means for vouchers to be deployed via PBV using a true FMR-based payment standard. However, I understand that RAD brings with it no corresponding bonus of "extra" vouchers (please confirm).You are correct that, under RAD, a PHA does not receive TPVs. See Notice PIH-2012-07 for procedures for authorizing TPVs under demolition / disposition. Note that the RAD-HAP contract does begin to fund at construction closing and funds throughout construction. Some PHAs intend to use that rental income to assist with temporary relocation costs for residents. Those PHAs must ensure that their relocation plan complies with all requirements of the Uniform Relocation Act.
Completion of Critical Repairs
What is the process for clearing critical repairs that have been completed?The RAD Conversion Commitment contains an exhibit (Ex. G) for all critical repairs associated with the RAD conversion and states that they must be completed prior to closng. The Owner must provide a written certification that all critical repairs listed in Exhibit G of the RCC have been completed prior to closing. This certification can be made via the Consolidated Owner Certification template which is available on www.radresourc.net > Contracts & Closing Documents. [Updated 5.30.14]
TDC/HCC Cost Limits
Do the TDC/HCC cost limits established by HUD apply to the RAD program?No. During conversion the TDC/HCC cost limits do not apply. Post-conversion, a RAD project is not public housing, so public housing rules do not apply.
Demo/Dispo, Transfer of Assistance and RPCA Requirement
If a HA is proposing to do a RAD conversion of Public Housing that involves demolishing an existing project and rebuilding an equal or greater number of units on the same site, is this treated in essentially the same way as for a RAD conversion with rehab? Is it unnecessary to do a transfer of assistance as long as the units are being rebuilt on the same site? Where and how does the RAD PCA fit into this scenario?In the situation you describe, a transfer of assistance would not be needed, because the RAD project would be located on the same site as the current public housing. In demolition-and-reconstruction projects, a RAD PCA is not required. See Notice PIH-2012-32, page 26, footnote 6; and Attachment 1A.1 paragraph B. [Updated 7.29.13]
Energy Performance Contract after RAD Closing
Can a RAD project take on an Energy Performance Contract (EPC) after RAD closing?After the RAD closing, the project will no longer be public housing, and the public housing EPC program would not be applicable. However, many PHAs are finding that RAD allows them, essentially, to create their own EPC. By locking in the current funding under RAD, the PHA will benefit from utility savings.
RAD Conversion of Demolished ACC Units
Can a housing authority that has demolished units counted in their ACC rebuild and covert to RAD for the new building with the same unit count?RAD is a "current funding" program. Therefore if you have units that have been demolished but are still in PIC and being funded by operating and capital funds, you can convert those units to RAD. The RAD rents will be set by the amounts currently funded in the operating and capital funds. Thus, if there has been a phase down of funding, the RAD rents will be set at the lower (current) levels. If the demolished units are not still in PIC, they are not eligible for RAD conversion. For the most part, units that are being built back under "Faircloth" must first be brought into the public housing program under either the traditional development method or the mixed-finance method, and then they would be eligible for RAD. Some PHAs have inquired as to whether there could be a "joint" or "simultaneous" closing. The Department is looking into that possibility.
Timing of Section 8 Admin Fees in a RAD Section 18 Blend
In a RAD Section 18 blend transaction, when does the contract administrator begin receiving voucher adminitration fees?In a RAD Section 18 Blend, the RAD PBV HAP contract is funded by Public Housing funds for the remainder of the calendar year of conversion. In the first full calendar year after the RAD conversion, the project will receive Section 8 funds. HUD will disburse Administrative fees to PHAs each month based on actual leasing reported in VMS in prior months. For the Section 18 units, the execution of the PBV HAP contract will initiate the Section 8 funding process. The PHA will receive Administrative Fees monthly as it is obligated in advance and a reconciliation is performed at the end of the year.
Demolished Project Eligibility under RAD
A PHA is considering applying for RAD for a project that has already been demolished. Is this project still eligible for RAD?No. Only projects with units under ACC and in PIC are eligible for RAD.
Demolition and Reconstruction
Does RAD allow for the complete demolition and reconstruction of a project?Yes. If the reconstruction is on the current site, your conversion plan would need to cover temporary relocation costs for residents during the demolition and reconstruction. Alternatively, the reconstruction might be on a separate site (using the ‘transfer of assistance’ feature of RAD), in which case you might be able to complete the new construction prior to relocating residents from the existing project.
As part of a RAD conversion, can my PHA demolish the existing structure and undertake new construction?
As part of a RAD conversion, can my PHA demolish the existing structure and undertake new construction?The RAD program was designed to help address the large backlog of capital needs in public housing. A PHA may use RAD to rehabilitate an existing project or, where circumstances warrant, demolish a project and build new replacement housing, including atoff-site locations. However, this type of redevelopment will very likely require more than debt financing to be feasible. Additional funding possibilities include LIHTC equity, soft financing sources such as green funding products, CDBG, HOME, the Affordable Housing Program of the Federal Home Loan Banks, local housing trust funds or foundation funding and PHA sources such as Operating Funds, Capital Fund and, Replacement Housing Factor Funds. Other public housing development funds targeted to distressed housing may be available under the HUD’s Choice Neighborhoods Initiative. A separate Section 18 Demo/Dspo approval is not required under RAD. However, PHAs should keep in mind that they must follow the Uniform Relocation Act with respect to resident relocation and that current residents of the project being converted under RAD have the right to return to the site without re-screening. [See Final RAD Notice References: Paragraphs 1.5, B and 1A.1,C.]
Ability to develop Faircloth units if utilizing a repositioning tool that requires closing out of Public Housing
Certain repositioning tools (i.e., Streamlined Voluntary Conversion, Small PHA RAD Blends, Section 18 “under 50”) that are only available to small PHAs require the PHA to close out its public housing program. Can a PHA utilize one of these tools and still be able to develop their remaining available Faircloth authority through Faircloth-to-RAD prior to closing out their public housing program?Yes. PHAs that have repositioned all of their public housing units under one of the above-mentioned mandatory closeout tools may develop Faircloth to RAD units prior to closing out their public housing program. As an example, a 122-unit PHA with 44 units of additional Faircloth authority decides to pursue a Small PHA RAD & Section 18 Blend. The PHA may complete their RAD & Section 18 Blend transaction and unit removal and then delay their mandatory close out in order to first develop up to 44 units of Faircloth to RAD units. The PHA may not develop traditional PH units, and the PHA must complete close out activities following the closing of their Faircloth to RAD project.