One of the main purposes of RAD is to demonstrate how the conversion of current public housing assistance to long-term, project-based Section 8 rental assistance contracts can generate access to private and public debt and equity to address immediate and long-term capital needs through rehabilitation or new construction. HUD therefore expects that the majority of projects undergoing conversion of assistance through RAD will do at least some rehabilitation or reconstruction. The following include requirements related to conversion plans more broadly, including those involving rehabilitation and construction:

HUD recognizes that in order to secure and administer debt and equity sources, and oversee the successful completion of significant rehabilitation, the PHA or Project Owner will have to either dedicate experienced staff, if such experience currently exists on staff, or hire or contract for the expertise necessary to successfully complete rehabilitation on schedule and on budget. The Development Budget included in the Financing Plan may include a developer fee to address these costs according to the following requirements:

This Section explains the alternative processing requirements that certain very small PHAs may voluntarily adopt.

1. Conversion Planning Requirements.
   1. Capital Needs Assessment (CNA).⁶ Except as noted below, each project selected for award will be required to perform a detailed physical inspection to determine both short-term rehabilitation needs to be included as a Scope of Work that will be completed as part of the RAD conversion and long-term capital needs to be addressed through a Reserve for Replacement Account. A CNA must be submitted with the Financing Plan and must have been completed no earlier than 180 days prior to submission of the Financing Plan, except with HUD approval.
      • CNA eTool. The CNA eTool is required as part of any RAD Financing Plan (or application for FHA Firm Commitment), except as described below. The CNA eTool contains two major components - the narrative (the description of each component and its condition and may include an energy audit) and the financial model (the 20-year schedule and associated determination of the Initial Deposit to Replacement Reserve, or IDRR, and the Annual Deposit to Replacement Resreve, or ADRR).⁷
      • Contractor Qualifications. The CNA must be completed by a qualified, independent third-party professional as required by the MAP Guide.
      • Exemptions. HUD may exempt the transaction types set forth below from CNA requirements, provided that the proposed exemption is confirmed with HUD prior to submission of the Financing Plan and eligibility for the exampltion confirmed in HUD's review of the Financing Plan. Exemptions may apply to some or all ortions of the CNA, including the assessment of immediate needs and the portions of the CNA eTool necessary to produce the 20 Year Reserve Schedule:
        1. For non-FHA transactions, neither component of the CNA will be required as long as the Annual Deposit to the Replacement Reserve is no less than $450 per unit (or a lower amount if justified by an alternative form of CNA acceptable to HUD, typically one performed for an investor or lender), and the Project:
           1. Has been newly constructed or financed with 9% LIHTC within the last five years, as calculated from the date the final certificate of occupancy was isued, or
           2. Qualifies as new construction or will be financed with 9% LIHTC;
        2. For non-FHA transactions, the narrative will not be required where the transaction will be financed with 4% LIHTC;
        3. For non-FHA transactions, neither component of the CNA will be required wher the total assisted units (e.g., RAD units and other PBV units) at the project will constitute less than 20% of the total units at the project (or a higher percentage at HUD's discretion, taking into consideration the absolute number of RAD units at the project).
        4. For FHA transactions, PHAs should follow applicable requirements in the MAP Guide governing exemptions.
      • Utility Consumption Baseline.No utility consumption baseline analysis is necessary as part of the CNA conducted for the RAD conversion.

1. Conversion is a Significant Action under a PHA's Annual/Five Year Plan. Conversion of assistance under the Demonstration is considered a significant action by the PHA. If not fully discussed in a PHA’s Five-Year Plan, Annual Plan or MTW Plan, the conversion of assistance must be presented in an amendment to the PHA’s Five-Year Plan for qualified and non-qualified PHAs, a significant amendment to the Annual Plan for non-qualified PHAs, and an amendment to the MTW Plan for MTW PHAs with Standard MTW Agreements.³⁸ MTW PHAs subject to the MTW Operations Notice for the Expansion of the Moving to Work Demonstration Program, 83 Fed. Reg. 51474, ("Operations Notice") will include the conversion of assistance as a significant amendment to their Annnual Plan or Five-Year plan, consistent with requirements applicable to non-MTW PHAs, Qualified and non- qualified PHAs, as well as MTW PHAs, are subject to the Consolidated Plan requirements and the public notice and Resident Advisory Board consultation requirements outlined in 24 CFR part 903. MTW PHAs with Standard MTW Agreements must follow the MTW Plan Amendment and public process requirements outlined in the Standard MTW Agreement in lieu of the requirements in 24 CFR part 903. If the conversion will require changes to the PHA’s Admissions and Continued Occupancy Policy (ACOP) and/or Section 8 Administrative Plan, these changes must also be addressed in the PHA Five- Year Plan, Annual Plan, or MTW Plan, or submitted with the significant amendment to the PHA Plan or amendment to the MTW Plan. In addition to the information already required by 24 CFR part 903 for PHA Plan amendments, all PHAs must provide the information listed in Attachment 1D. A PHA may fulfill this requirement by including the RAD-related provisions in its Five-Year Plan, Annual Plan, MTW Plan, or Significant Amendment (as applicable), or provide the information in any successor forms produced by HUD.

   The Financing Plan must include a letter from HUD's Office of Public and Indian Housing approving the Five-Year Plan, Annual Plan, MTW Plan or Significant Amendment.

   In addition, any substantial change to the conversion plan is required to undergo the significant amendment process or other HUD review if the substantial change involves a transfer of assistance, a change in the number of assisted units, or a change in eligibility or preferences for new applicants.

1. Financing Plan. The PHA must submit a Financing Plan within 60 days of the invitation to submit the Financing Plan unless otherwise approved by HUD. The PHA must request a new Concept Call if it does not submit the Financing Plan timely. See Attachment 1A for Financing Plan Requirements. A Financing Plan must be substantially complete in order for HUD to consider the submission.⁸⁸

   HUD’s decisions regarding the acceptance of the Financing Plan will be made in HUD’s sole discretion. If HUD determines that a Financing Plan is not feasible and/or that the requirements of the Financing Plan as set forth in Attachment 1A have not been met, HUD will notify the PHA of the deficiencies and request a modified or new submission. If a PHA is unable to submit a complete and viable Financing Plan HUD will revoke the CHAP award.

   A PHA will be notified of HUD’s acceptance of the Financing Plan by the issuance of an RCC, conditioned upon firm commitment of financing from the lender on substantially the same terms as those presented with the Financing Plan.65 The RCC will outline the key components of the planned RAD conversion and the conditions that need to be satisfied in order to close the conversion. The RCC will be a template document not subject to negotiation.

   The PHA will have 30 calendar days from the date of issuance of the RCC to execute the RCC and return it to HUD. If the RCC is not returned in this time period, it will expire.

   Once the RCC is executed, HUD expects that the RAD conversion will close in a timely manner. The RCC will allow 90 calendar days (from the date the RCC is issued to the PHA) in which to close.

   The RCC sets out the requirements of the transaction that will ultimately be concluded at Closing. These requirements include such items as: the number of affordable housing units being converted, the HAP Contract rents, the choice of PBRA or PBV HAP Contract, financing terms and Sources and Uses, key features of the Covered Project, and special conditions that must be cleared before closing. The terms of the RCC survive Closing.

1. For non-LIHTC transactions, the developer fee may be up to 10 percent of the total development budget (all hard costs and reasonable soft costs), less developer fee and reserves and less any acquisition costs in non-arms-length acquisitions, e.g., transfers of property title to related or wholly-owned entities for the purpose of meeting single asset entity ownership requirements. The release of the developer fee will be made on the schedule proposed by the PHA and accepted by HUD in the Financing Plan.

   Development cost overruns that exceed funded contingencies may be drawn from any unearned and unreleased portion of the developer fee, and may therefore reduce the ultimate fee paid.

1. In LIHTC transactions (with or without private debt), the developer fee will be subject to the LIHTC allocating agency’s limitations on developer fees and the following HUD-imposed limitation: The undeferred portion of such developer fee (as documented in the LIHTC cost certification) may not, without HUD approval, exceed the greater of:
   1. 15 percent of the total development costs less acquisition payments made to the PHA, developer fee and all reserves; or
   2. The lesser of $1,000,000 or 15 percent of the total development costs without offset for acquisition payments made to the PHA, developer fee and all reserves.

   The limits on developer fee in effect prior to the issuance of this Notice shall apply to all transactions with an RCC issued prior to sixty (60) days after the date of this Notice which also close prior to the later of sixty (60) days after the date of this Notice or sixty (60) days after the date of the RCC.

1. Where the Contract Administrator agrees to adopt an admissions preference for a) homeless applicants referred to the property by the local Continuum of Care (CoC) and/or b) applicants exiting permanent supportive housing, which preference shall apply to at least 25% of the property’s units, HUD will permit a 25% increase in the allowable development fee limits described above. The fee will remain subject to the LIHTC allocating agency’s limitations, as applicable. The PHA or Project Owner must provide evidence of an agreement to participate in coordinated entry operated by the local CoC and must produce a letter from the CoC affirming, based on current data and local need, that there is expected to be need for affordable housing for these populations for the term of the HAP Contract. In such cases, HUD will require a special provision in the HAP Contract governing the continued existence of this preference through the term of the HAP Contract.

   A preference for homeless to applicants must that fall within the definition of Homeless established by section 103 of the McKinney-Vento Homeless Assistance Act and implemented in the Continuum of Care Program Rule at 24 CFR § 578.3, unless the local CoC provides a letter of support to cover a homeless population not included in that definition.

The developer fee shall be payable on the schedule allowed by the allocating agency and/or equity investor. Earned developer fees are not subject to any federal restrictions. Development cost overruns that exceed funded contingencies may be drawn from any unearned and unreleased portion of the developer fee, and may therefore reduce the ultimate fee paid.

1. Eligibility for Streamlined Project Conversion. In addition to the eligibility requirements outlined in Section 1.3, a PHA must meet the following criteria to participate in a streamlined RAD conversion as verified by HUD in its existing systems and records. Unless otherwise approved by HUD, a PHA must:
   1. Have 50 or fewer units remaining in its public housing inventory and demonstrate that through RAD or other means (e.g., Section 18 Demolition or Disposition) it will remove all of the public housing units under its ACC and close out its public housing program in accordance with Notice PIH 2019-13;
   2. Have an overall PHAS (Public Housing Assessment System) score of 75 or higher; have a PASS (Physical Assessment Sub-System) score of 30 or higher; and not have a PHAS substandard designation or a PHAS Capital Fund troubled designation;
   3. Not propose as part of the conversion to perform any construction or rehabilitation on the property, to undertake relocation, or to transfer the assistance.
   4. For PBV conversions, select a Contract Administrator that has at least 100 units under its HCV ACC.

1. Streamlined Project Conversion Requirements. The following describes the requirements of the RAD Notice that are modified or do not apply to streamlined RAD conversion.
   1. Application Requirements. Requirements set forth in Section 1.9 of the RAD Notice are modified for Streamlined RAD conversions (and other classes of conversions as HUD determines) eliminating the need for information on financing, a financing letter of interest, and, for public housing-only PHAs, identification of a partnering voucher agency. To ensure appropriate processing, the subject line of the email submission to RADapplications@hud.gov should include “Small PHA”.
   2. Capital Needs Assessment (CNA). Requirements set forth in the RAD Notice, Section 1.4.A.1 shall not apply. In lieu of a CNA, see below the required certification that must be included with the “Financing Plan.” The requirements set forth in the RAD Fair Housing, Civil Rights and Relocation Notice (Notice H 2016-17, PIH 2016-17 (HA)) continue to apply. Notwithstanding this exemption from the requirement to conduct a CNA, the PHA should have certified in its PHA Plan, Significant Amendment to the PHA Plan, or MTW Plan that it conducted a site review/inspection of the project with respect to accessibility for persons with disabilities and that the site is consistent with applicable accessibility standards under the Fair Housing Act, Section 504 of the Rehabilitation Act, and the Americans with Disabilities Act, as required by Section 5.2 of the RAD Fair Housing, Civil Rights and Relocation Notice (Notice H 2016-17, PIH 2016-17 (HA)).
   3. Environmental Review. For Environmental Reviews conducted under 24 CFR Part 50 for Streamlined RAD conversions without any rehabilitation, construction, or demolition,⁹⁸ HUD conducted a tiered review of program-wide and site-specific compliance, HUD made program-wide compliance determinations for most of the applicable environmental laws and authorities, and will complete a site-specific compliance review of the following:
      1. Coastal protection pursuant to the Coastal Barrier Resources Act, as amended by the Coastal Barrier Improvement Act of1990 (16 U.S.C. 3501);
      2. Flood insurance and flood plain management pursuant to the Flood Disaster Protection Act of 1973, the National Flood Insurance Reform Act of 1994 (42 U.S.C. 4001-4128 and 42 U.S.C. 5154a), Executive Order 11988, particularly section 2(a), and 24 C.F.R. Part 55;
      3. Contamination pursuant to 24 C.F.R. 50.3(i) (HUD Standard).

      Additionally, while Historic Preservation (National Historic Preservation Act of 1966, particularly sections 106 & 110; 36 CFR Part 800) is not included in the tiered review, for conversions that entail no physical activities or only activities that are limited to maintenance as defined in HUD Notice CPD-16-02. HUD has no further obligations under Section 106, HUD is not required to contact SHPO, THPO, and/or other interested parties or the public.⁹⁹

      PHAs will be required to submit documentation to facilitate HUD's site-specific review, as defined in Attachment 1A of the RAD Notice. For Environmental Reviews under 24 CFR part 58, PHA/Owners should reach out to the repsonsible entity. HUD encourages responsible entities to consider a tiered approach.

   4. Financing Plan Requirements for Streamlined RAD Conversion. The following table describes the applicability of the Financing Plan submission requirements set forth in Attachment 1A of the RAD Notice for Streamlined Conversion for small PHAs. 71

1. Healthy Housing and Energy Efficiency. For all projects retrofitted under a RAD conversion, if systems and appliances are being replaced as part of the Work identified in the approved Financing Plan and RCC, PHAs shall utilize the most energy- and water-efficient options that are financially feasible and that are found to be cost-effective by the CNA described above. The CNA will provide detailed analyses of energy-saving alternatives and other green building components, including payback and cost/saving analyses. The use of Energy Star WaterSense or Federal Energy Management Program (FEMP)-designated products and appliances replacements, if any such designation is available for the applicable system or appliance, is presumed to be the minimum threshold for meeting such requirement. PHAs are strongly encouraged, for all RAD conversion projects, to scope rehabilitation and ongoing replacements that utilize the components that the CNA indicates make financial sense, and other components that the CNA indicates will improve indoor air quality and/or reduce overall environmental impact where those components have little or no cost premium, consistent with the principles and best practices of the green building industry.

   Where a PHA is planning to use a RAD conversion in conjunction with new construction, projects shall at a minimum meet or exceed the 2009 International Energy Conservation Code (IECC) for single family or low-rise multifamily properties (three stories or less) or the ASHRAE 90.1-2007 standard for mid- or high-rise multifamily projects, or any successor codes that are adopted by HUD under the requirements of the Energy Independence and Security Act of 2007. All new construction projects are encouraged to meet or exceed the requirements for Energy Star for New Homes or Energy Star for Multifamily High Rise buildings. Further, in new construction and applicable retrofit projects, HUD strongly encourages the use of industry-recognized, green building certifications, such as the US Green Building Council’s LEED Rating System, Enterprise Green Communities Criteria, the National Green Building Standard, Green Globes, GreenPoint Rating, EarthCraft, Earth Advantage, Passive House, or Living Buildings.

1. Environmental Review. Under Federal environmental review requirements, proposed RAD projects are subject to environmental review under either Part 50 or Part 58, as applicable, and environmental documents are required to be submitted no later than the applicant’s Financing Plan. HUD will not issue an RCC if the project plan does not meet the environmental review requirements described in Attachment 1A. Once an awardee has submitted an applicatoin for a specific project, they may not make any choice limiting actions before the completion of the environmnetal review.

1. Substantial Conversion of Assistance. Conversions may not result in a reduction of the number of assisted units, except by a de minimis amount. A de minimis reduction of units may include any of the following:
   1. The greater of five units or the number of units (rounded to the nearest whole number) corresponding to five percent of the number of ACC units in the Project (or RAD-converted portfolio, if both the portfolio and de minimis units are counted in the aggregate) immediately prior to conversion;
   2. Any unit that has been vacant for more than 24 months at the time of RAD Application; and
   3. Units that, if removed from assistance, will allow the PHA to more effectively or efficiently serve assisted households through: 1) reconfiguring apartments (e.g., converting efficiency units to one-bedroom units); or 2) facilitating social service delivery (e.g., converting a basement unit into community space), subject to HUD approval.

   Otherwise, a PHA may not reduce the number of ACC units at a project without Section 18 Demolition or Disposition approval from the Special Applications Center (SAC).

   In all cases, the PHA shall submit within its PIC removal application (See Section 1.12) a narrative explanation of the proposed reduction, including a description of the units to be removed, an explanation of why the project meets the exclusion criteria, and any supporting evidence. HUD may approve any reduction of units by project or portfolio. Any de minimis reduction request must be included in the approved Financing Plan prior to closing of th associated transaction.

   The de minimis allowance may be calculated across portfolio conversions, but the number of de minimis units allowed must be calculated based on the RAD conversions closed prior to or simultaneous with the execution of the de minimis reduction. For example, a PHA that is converting 200 units across three properties is permitted to replace 190 RAD-assisted units (i.e. 95% of 200) across its portfolio and apply the unit reductions to a single property. However, the property that would have 10 fewer units assisted under a RAD HAP Contract must convert simultaneous with or after the first two properties, not before.

   A PHA must demonstrate that any reduction in units better serves residents, the Covered Project, or the operating viability of the PHA’s RAD or public housing portfolio, will not result in the involuntary permanent displacement of any tenant family, and will not result in discrimination based on race, color, religion, national origin, sex, disability, or familial status.

   Any property or the proceeds received from the sale of any property that is released from the DOT under the de minimis exception must be used for Affordable Housing Purposes.

1. Relocation Requirements.
   1. RAD Fair Housing, Civil Rights, and Relocation Notice. Relocation requirements related to public housing conversions under RAD are described in the “RAD Fair Housing, Civil Rights, and Relocation Notice”.¹⁵ The RAD Fair Housing, Civil Rights, and Relocation Notice provides PHAs and their development partners with information and resources on RAD program requirements, Uniform Relocation Act (URA) requirements, and other requirements which may be applicable such as Section 104(d) of the Housing and Community Development Act of 1974, as amended (Section 104(d)) when planning for or implementing resident moves in connection with a RAD conversion under the First Component of RAD. Specifically, the RAD Fair Housing, Civil Rights, and Relocation Notice provides guidance on relocation planning, resident right to return, relocation assistance, resident notification, initiation of relocation, and the fair housing and civil rights requirements applicable to these activities.

      The appendices to the RAD Fair Housing, Civil Rights, and Relocation Notice include recommended relocation plan contents. Sample relocation notices for issuance to residents depending on RAD project characteristics are available on the RAD website at www.hud.gov/rad. The primary source for First Component relocation requirements and guidance is the RAD Fair Housing, Civil Rights, and Relocation Notice and not this Notice. In the event of a conflict between this Notice and the RAD Fair Housing, Civil Rights, and Relocation Notice, with regard to relocation requirements, the RAD Fair Housing, Civil Rights, and Relocation Notice controls.

   2. Right to Return. Any resident that may need to be temporarily relocated to facilitate rehabilitation or construction has a right to return to an assisted unit at the Covered Project once rehabilitation or construction is completed. Permanent involuntary displacement of residents may not occur as a result of a project’s conversion of assistance, including, but not limited to, as a result of a change in bedroom distribution, a de minimis reduction of units, the reconfiguration of efficiency apartments, or the repurposing of dwelling units in order to facilitate social service delivery. Where the transfer of assistance to a new site is warranted and approved (see Section 1.4.A.12), residents of the Converting Project will have the right to reside in an assisted unit at the new site once rehabilitation or construction is complete. For more information on how to implement these provisions see the RAD Fair Housing, Civil Rights, and Relocation Notice.
   3. Ineligibility of Tenant Protection Vouchers. Conversion of assistance is not an event that triggers the issuance of Tenant Protection Vouchers to residents of public housing projects going through a RAD conversion.¹⁶

1. Accessibility Requirements. Federal accessibility requirements apply to all conversions, whether they entail new construction, alterations, or existing facilities. See the RAD Fair Housing, Civil Rights, and relocation Notice (Notice H 2016-17 PIH 2016-17 (HA)) for a full description of the applicability of accessibility requirements in RAD and the situations under which HUD will perform an up-front review.

   PHAs are encouraged to use universal design principles, visitability principles, and active design guidelines in planning retrofit and new construction work, wherever feasible. However, adherence to universal design principles does not replace compliance with the accessibility requirements of Section 504, the ADA, and the Fair Housing Act.

1. Site Selection and Neighborhood Standards. Where a PHA is planning to convert assistance under RAD, the PHA must comply with all applicable site selection requirements as set forth in this Notice and in accordance with any additional applicable guidance provided by HUD. Site selection requirements set forth at 24 CFR § 983.57 shall apply to RAD conversions to PBV assistance and site selection requirements set forth at Appendix III shall apply to RAD conversions to PBRA assistance. Site selection must be consistent with the requirements of the Fair Housing Act, Title VI of the Civil Rights Act of 1964 including implementing regulations at 24 CFR § 1.4(b)(3), Section 504 of the Rehabilitation Act of 1973 including implementing regulations at 24 CFR § 8.4(b)(5), and the Americans with Disabilities Act. Choice Neighborhoods Implementation projects are subject to the site and neighborhood standards published in the applicable NOFA. See the RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17 PIH 2016-17 (HA)) for a full description of Site and Neighborhood Standards requirements in RAD and the situations under which HUD will perform an up-front review.

1. Additional Design Considerations. Applicants are also strongly encouraged to demonstrate contemporary best practices in rehabilitation and construction, utilizing a long-term and holistic view of costs and benefits and a decision-making process which includes current and future stakeholders. Planning and design should include building lifecycle costs, energy and water-efficiency, social inclusion and connectivity, broadband infrastructure, senior fall prevention and aging in place design, occupant health and welfare, basic environmental stewardship, and climate change resilience.¹⁷

1. Demolition. Conversion plans may include the partial or complete demolition of the Covered Project and replacement of assistance on-site or off-site. Unless approved in writing by HUD,18 a PHA may not demolish and/or dispose of units until after the closing of construction financing for the Covered Project.¹⁹ Both the demolition action and new construction or rehabilitation (either on-site or off-site) are considered as part of a single Environmental Review. PHAs should be aware that the CDBG and HOME programs have additional requirements regarding demolition if those sources of funds are used.²⁰

1. Change in Unit Configuration. Where a PHA is proposing to change the unit configuration as part of the conversion, the PHA must demonstrate that the change in bedroom distribution will not result in the involuntary permanent displacement of any resident and will not result in discrimination based on race, color, national origin, religion, sex, disability, or familial status. For example, if three and four-bedroom units are replaced with one and two-bedroom units, the conversion may, but not in all cases, result in discrimination against families with children. See the RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17 PIH 2016-17 (HA)) for a full description of the situations under which HUD will perform an up-front review when a PHA proposes to change the unit configuration of a project.

1. Ownership and Control. Except where permitted to facilitate the use of tax credits, during both the initial term and all renewal terms of the HAP Contract, HUD will require ownership or control of the Covered Project by a public or non-profit entity. HUD may also allow ownership of the project to be transferred to a tax credit entity controlled by a for-profit entity to facilitate the use of tax credits for the Covered Project, but only if HUD determines that the PHA or a non-profit entity preseves an interest in the property.

   Public or non-profit ownership or control, or preservation of an interest by a PHA or non-profit in a property owned by a tax-credit entity controlled by a for-profit entity, may be satisfied if the PHA, public entity or non-profit entity (or entities), directly or through a wholly owned affiliate: (1) holds a fee simple interest in the real property of the Covered Project; (2) is the lessor under a ground lease with the project Owner; (3) 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 and legal interest of the Project Owner with respect to the RAD units; (4) owns 51 percent or more of the general partner interests in a limited liability company with all powers of a general partner or managing member, as applicable; (5) owns a lesser percentage of the general partner or managing member interest and holds certin control rights as approved by HUD; (6) owns 51 percent or more of all ownership interests in a limited partnership or limited liability company and holds certain control rights as approved by HUD; or (7) demonstrates other ownerhsip and control arrangements approved by HUD.

   Control rights referenced in the examples above include control over the leasing of the Covered Project, s+uch as exclusively maintaining and administering the waiting list for the Covered Project, including performing eligibility determinations, and consent rights over certain acts of the Project Owner (including, for example, disposition of the Covered Project, changing the number of affordable units or the affordability targeting, setting utility allowances or any unregulated tenant fees for the affordable units, selecting the management agent, setting the operating budget and making withdrawals from the reserves). Control may be established through the terms of the Project Owner's governing documents or through a Control Agreement, provided that in either case amendment of the terms of control requires consent from HUD. Ownership and control structures are subject to HUD review to ensure compliance with statutory requirements.

   If HUD, in its sole discretion, determines intervention is necessary in situations involving foreclosure, bankruptcy, or termination and transfer of assistance for material violations of, or default under, the HAP Contract, HUD will first seek to require ownership or control of assisted units by a capable public or non-profit entity before considering another capable entity, as determined by the Secreatary.

   All current and future ownership entities are subject to the eligibility requirements of Section 1.3 of this Notice, including the civil rights threshold requirements. Furthermore, if a PHA or project is subject to a Voluntary Compliance Agreement (VCA), conciliation agreement, consent order or consent decree, or final judicial ruling or administrative ruling or decision (hereafter referred to as “VCA and related agreements”), it must ensure that the ownership agreement or other appropriate document makes the new owner subject to the remedial provisions contained in such documents to the extent required by Federal, state, and local law to ensure continued applicability of appropriate provisions of the VCA and related agreements to the property and its operations. . It is the PHA’s obligation to disclose such VCA and related agreements, to the prospective owner. The extent of the new owner’s responsibilities, including whether the responsibilities are appropriately limited to the development, maintenance, or operation of the particular RAD project, must be appropriately documented. The PHA will follow any applicable requirements for the modification of such VCA or related agreements. If HUD is a party to the VCA and related agreements, the RAD project will not close without HUD’s express approval of the transfer of obligations to the new owner.

1. Transfer of Assistance. In order to facilitate the financing, development, and preservation of decent, safe, and affordable housing, there are three scenarios under which assistance converted pursuant to RAD may be transferred off of the existing parcel of land (for the purposes of this sub-section, unless specifically stated otherwise, transfer of assistance does not include transfers to an adjacent site): (1) where the PHA requests assistance to be transferred as part of the conversion from Converting Project to Covered Project; (2) post-conversion where a Project Owner requests a partial or full transfer of assistance, or (3) where, as a result of a default of the Use Agreement or HAP Contract, HUD terminates the HAP Contract. In all cases, the transfers of assistance will be subject to the ownership and control provisions described in this Notice.

   Approvals of a PHA or owner’s request to transfer assistance will be determined in HUD’s sole discretion, considering the condition and needs of the Converting Project, the nature of the proposed Covered Project, and the impact on the Converting Project's residents. The transfer shall not place housing in neighborhoods with highly concentrated poverty based on the criteria formulated for transfers under Section 8(bb) of the Act.²³ The transfer shall comply with all applicable fair housing and civil rights requirements and all requirements detailed in this Notice, including environmental review (see Section 1.4.A.3 and Attachment 1A), Site and Neighborhood Standards (see Section 1.4.A.7). Changes in Unit configuration (see Section 1.4.A.10), and Accessibility requirements (see 1.4.A.6). See the RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17 PIH 2016-17(HA)) for a full description of the up-front civil rights review HUD will perform when a PHA proposes a transfer of assistance. Further, unless otherwise approved by HUD a PHA may transfer units from a public housing project to an existing low-income housing tax credit project within its 15- year tax credit compliance period only if the transfer is necessary to help with the de- concentration of poverty and/or the de-densification of a public housing project. PHAs should be aware that acquisition of the transfer of assistance site for a Federally-funded project is generally subject to the URA and the commercial or residential occupant of such site may be eligible for relocation payments and assistance.

   The project to which assistance is transferred will be subject to all of the contract terms as described in the HAP Contract, RCC, and RAD Use Agreement.

   1. Transfer at Conversion. Where a PHA proposes assistance to be transferred to a new site as part of the conversion, this information must be included in the PHA’s Five Year, Annual, or MTW Plan, or as an amendment to the FIve Year or MTW Plan or significant amendment to the Annual Plan and must be consistent with the Consolidated Plan. In a conversion where residents will remain in the Converting Project (i.e., the current public housing site) until the rehabilitation or construction of the Covered Project (i.e., the receiving site) is complete, the PHA and Project Owner must submit a request with their Financing Plan to either a) enter into the HAP contract at the close of construction financing at the Covered Project and, if residents will continue to occupy the former plublic housing units until construction is complete, execute a Master Lease beween the Project Onwer (Lessee) and PHA (Lessor) for the unit with lease payments made from Rehab Assistance Payments for other available funds or b) with HUD approval, enter into a contractual agreement regarding delayed conversion ("Delayed Conversion Agreement"), pursuant to which the Converting Project will remain as public housing while occupied by public housing residents during construction of the new site and the entire HAP Contract will be executed and effective as construction is completed and units are ready for occupancy. Please note that a Delayed Conversion cannot accommodate "staged" effective dates for distinct clusters of units.²⁴. HUD will approve such requests in its sole discretion, based on sufficient demonstration that it is necessary to facilitate conversion.

      When the assistance will be transferred at execution of the HAP Contract (including to an adjacent site), the PHA must submit as part of the Financing Plan, a brief narrative describing its plans for the Converting Property. Generally, a PHA's plans must propose for HUD's review one of the following:

      1. Release the Declaration of Trust and place the property under an alternative restrictive covenant at closing that, generally will;
         1. Be recorded in a superior position to all other liens on the property that could compromise the applicability or enforceability of the alternative restrictive covenant;
         2. Run for a period of twenty years after which it will extinguish by its terms;
         3. Requires that either:
            1. the use of the property be restricted to Affordable Housing Purposes, which restriction shall apply to any successor owners of the property, or
            2. where the property is not used for Affordable Housing Purposes, any net income generated from the property, including through lease agreements, be restricted to Affordable Housing Purposes, which restriction shall apply to any successor owners of the property; Require that for the duration of the use restriciton, HUD approve any changes in ownership to confirm ongoing compliance with the use restriction;
         4. Require that, for the duration of the 20 year use restriction period or until the property is sold at Fair Market Value (whichever is shorter), the PHA retain records of and annually report to its board regarding the use of the property (including any use for Affordable Housing Purposes) and any proposed sale of the property; and further require that until any proceeds from the property are fully expended, the PHA retain records of and annual report to its board the net income generated from the property, the proceeds of any sale of the property, and the use of such funds for Affordable Housing Purposes. HUD will require such records whenever HUD approval is needed for sale or transfer of the property or upon request; and
         5. Permit a subsequent removal of the alternative restrictive covenant with HUD approval under the following situations:
            1. for sale of the property at Fair Market Value (or equivalent market valuation, e.g., negotiated sale) as long as the proceeds are restricted to Affordable Housing Purposes, or
            2. when replaced with an alternative restrictive covenant (e.g., LIHTC extended use agreement) that, in HUD's determination satisfies the Affordable Housing Purposes requirement.
      2. Retain the Declaration of Trust and separately demolish and/or dispose of the Converting Property under section 18 of the Act or dispose of (retain) the Converting Property under 2 CFR part 200 (see Notice PIH 2016-20); or
      3. Release the Declaration of Trust at conversion in order to imminently sell the original property at Fair Market Value (FMV) (or equivalent market valuation) with a plan to use the proceeds from the sale for Affordable Housing Purposes.

      Until expended, the PHA must place any proceeds in an account subject to a HUD-51999, General Depository Agreement, which specifies the insurance and security investment requirements.

   2. Transfer After Conversion. In general, a Project Owner may only request a transfer of assistance to HUD after 10 years from the effective date of the initial HAP Contract. A Project Ownr may submit a transfer request if it is needed as a result of eminent domain proceedings, natural disasters, unforeseen events or as otherwise approved by HUD (for example, if HUD provided approval of a future transfer prior to conversion). HUD may consider, and approve with such conditions as HUD determines appropriate, a partial or complete transfer of assistance to a new location if the new location complies with applicable site selection standards. Substantially all units covered by the initial HAP Contract must remain or be replaced as a result of the transfer Residents of the original location at the time of the transfer request shall not experience a loss of rental assistance. PBV-assisted families living at the property upon termination of a PBV HAP Contract have a statutory right to receive a tenant-based voucher and to certain tenancy protections.²⁶ (A family may voluntarily decline the tenant-based voucher and accept a PBV unit at the new location but may not be required to do so.) Termination of a PBV contract is not cause for issuance of additional tenant-based voucer assistance from HUD. PHAs and owners contemplating RAD PBV transfers after conversion must take the PBV families' right to tenant-based voucher assistance into consideration and ensure that there will be sufficient resources available to the PHA to both effectuate the transfer and meet the PHA's obligation to provide tenant-based vouchers to those families that wish to receive them. Subject to the availability of appropriations, PBRA-assisted families living at the property upon termination of a PBRA HAP Contract that met the eligibility requirements for voucher assistance may receive tenant-based tenant protcection vouchers (TPVs) in the event the termination of the original PBRA HAP Contract qualifies for issuance of such vouchers. If applicable, any lender to and/or investor in the Covered Project must approve the transfer of the assistance. In the event of transfer of all RAD units, a RAD Use Agreement will be recorded encumbering the new location to which assistance is transferred and HUD shall consider appropriate modifications to the original RAD use Agreement.
   3. Transfers as a Result of Default. In the event of default of a Covered Project’s Use Agreement or HAP Contract, HUD may terminate the HAP Contract and transfer the assistance to another location. HUD will determine the appropriate location and owner entity for such transferred assistance consistent with the statutory goals and requirements of the Demonstration. As to the events of breach of the RAD Use Agreement, HUD will avail itself of such legal actions as described in the RAD Use Agreement.

1. Davis-Bacon prevailing wages. The Davis-Bacon prevailing wage requirements (prevailing wages, the Contract Work Hours and Safety Standards Act, and implementing regulations, rules, and requirements) apply to all Work, including any new construction, that is identified in the Financing Plan and RCC to the extent that such Work qualifies as development. ‘‘Development,’’ as applied to work subject to Davis-Bacon requirements on Section 8 projects, encompasses work that constitutes remodeling that alters the nature or type of housing units in a PBV or PBRA project, reconstruction, or a substantial improvement in the quality or kind of original equipment and materials, and is initiated within 18 months following the effective date of the HAP Contract. Development activity does not include replacement of equipment and materials rendered unsatisfactory because of normal wear and tear by items of substantially the same kind. Davis-Bacon requirements apply only to projects with nine or more assisted units.

1. Section 3 of the Housing and Urban Development Act of 1968 (Section 3). Section 3 is codified at 12 U.S.C. 1701u and implemented by regulation at 24 CFR part 135 or successor part.
   1. Pursuant to such requirements, all pre-development conversion costs funded by public housing program funds pursuant to Section 1.5.A are subject to 12 U.S.C. 1701u(c)(1) and (d)(1), which sets forth Section 3 requirements applicable to pubic housing activities.
   2. While most RAD conversions do not utilize funding covered by Section 3, HUD has established the alternative requirement that any work required by the conversion after the RAD Closing that invovles housing rehabilitation or housing construction is subject to the Section 3 requirements applicable to housing and community development activies as set forth in 12 U.S.C. 1701u(c)(2) and (d)(2) and the regulations derived from such provisions, except that, with the exception of transactions receiving HUD housing and community development assistance, such as CDBG (24 CFR part 570) or HOME (24 CFR part 92), first priority for employment and other economic opportunities shall be given to residents of pubic housing or Section 8 assisted housing. Otherwise, the receipt of Section 8 rental assistance does not, in itself, trigger the applicability of Section 3.
   3. The Project Owner shall report Section 3 compliance through the post-closing completion certification to HUD described in Section 1.13.B.7 of this Notice upon completion of the Work. In addition, for any housing rehabilitation or housing construction assisted with HUD housing and community development assistance, such as CDBG (24 CFR part 570) or HOME (24 CFR part 92), Section 3 compliance shall be reported consistent with such program requirements.

1. Lead Based Paint Hazards. A property constructed before 1978 may contain lead- based paint and lead-based paint hazards unless abatement was previously completed, or a lead-based paint inspection determined that it was lead-based paint free. Pursuant to 24 CFR part 35 subpart L, a PHA is required to conduct a lead-based paint inspection and a lead risk assessment on a pre-1978 public housing property, and, subsequently, conduct ongoing lead-based paint maintenance and periodic re-evaluation for lead-based paint hazards. The PHA shall provide any documentation available to the PHA regarding lead-based paint and lead-based paint hazards to the firm preparing the CNA, if applicable, and to the Project Owner. The Project Owner must evaluate and control lead-based paint hazards in the Covered Project pursuant to 24 CFR Part 35 subpart H, including, among other things, completing a risk assessment if the multifamily property will receive more than $5,000 per unit in rental assistance subsidy. If the PHA has provided the report of a current risk assessment (less than 12 months old), or an older risk assessment and reports of all subsequent periodic re-evaluations, that documentation shall satisfy the Project Owner’s requirement to have completed a risk assessment under subpart H. If applicable, the CNA must incorporate the work necessary to meet the Project Owner’s requirements to treat lead-based paint hazards under subpart H. (See subpart H if the multifamily property will receive $5,000 per unit or less in rental assistance subsidy.)