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Notice Listings on Changes in the Number of Units

Notice Section 1.4.A.4 Substantial Conversion of Assistance

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.

Notice Section 1.4.A.10 Change in Unit Configuration

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Questions on Changes in the Number of Units

De-minimis Reductions

Can a PHA apply the de-minimis standard for replacement across properties?

A PHA may apply the de-minimis standard for any group of properties that are undergoing conversion. For example, if the PHA has two CHAPs, each consisting of 100 units, and the PHA has six units at the first project that have rehab costs that would be exorbitant, the PHA could apply the de-minimis standard across both properties. Thus, because the PHA would, combined, be able to reduce 10 units (5%), the PHA would be permitted to reduce the 6 units at the first property (provided it does not reduce more than 4 units at the second property). However, the project utilizing the greatest reductions has to be the latest to convert (or converts simultaneously).

Elimination of Efficiences (and other unit reconfigurations) and Impact on RAD CHAP Rents

The property I wish to convert to RAD currently contains efficiencies which are hard to market. I'd like to convert them into 1 bedrooms. How will this impact my RAD contract rents?

Where a PHA wants to eliminate efficiencies (or otherwise reconfigure units) because the units are hard-to-market, and does so by combining two units into one, HUD will fund the reconfigured units according to the appropriate bedroom size. In addition, for the “lost” units, HUD will treat these as “special purpose”, meaning that the subsidy for the lost units will be distributed across the remaining units, subject to the RAD rent caps and in no event more than what the PHA would have received in subsidy prior to conversion. For example, a project has 100 efficiencies with RAD contract of $400 PUM, which was calculated based on combined Operating and Capital Fund subsidy of $200 and tenant rents of $200. The PHA wants to convert the 100 efficiencies into 50 one-bedroom units. As such, all 50 1-BR units could convert at a $600 PUM contract rent (subject to applicable 1-BR rent caps). [Updated 9/18/14]

Changes in Classification of Bedroom Size

How does a change in classification of bedroom size impact my RAD rents?

If a PHA can demonstrate that the current units are not competitive because of size or other factors, and therefore the PHA requests to re-classify the units to a smaller bedroom size, HUD will retain the current funding, subject to the applicable RAD rent caps. For example, assume that a PHA currently has 10 5-brm units with a RAD contract rent of $500. However, these units are extremely small by market standards and, as a result, the PHA has difficulty leasing these units to families otherwise eligible for a 5-brm unit. With supporting documentation, the PHA shows that these units would more appropriately be treated as 4-brm units. HUD will convert the units to 4-brm, but retain the funding at $500, subject only to the 4-brm rent cap.

Changes in Bedroom Distribution and Impact on RAD Contract Rents

If my RAD conversion involves a change in bedroom distributions (due to a transfer of assistance, demolition/new construction, or rehab), how will this affect the RAD contract rents?

Whether or not the actual number of units changes, the RAD team will assign to the project the contract rents associated with the bedroom sizes prior to the change in bedroom distribution. Thus, if the property had 40 2-brms with a RAD rent of $500 and 60 3-brms with a RAD rent of $600, but the PHA plans to change the distribution to 100 3-brm units, all those units will be funded at $600. Similarly, if the new project included all 2-brms, the rents for the 2-brms would be $500.

De Minimis Reduction Impact on Funding

In the event that a housing authority chooses to do a deminimis reduction, is the current funding simply redistributed across the units remaining or is that funding lost with the reduction?

Funding is lost in a de minimis reduction. You will see that when you enter the reduction in the Excel Application.

Reduction in Units vs Tenants Returning

What is the obligation of a project owner in the unlikely event that, due to an approved de minimis reduction in the number of units in a project, there are insufficient units available to accommodate all tenants who want to return to the converted project?

At the time of closing, all residents currently in converting units have a right to return to the project following rehabilitation. If a de minimis number of units are being removed from the site such that some families may be unable to move back in, the PHA must obtain consent from a household waive their right to return if the PHA is providing them with alternative accommodations. [Updated 7.29.13]