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Notice Section 1.5 Waivers, Alternatives, and Other Public Housing Requirements

Notice Section 1.5.A User of Public Housing Program Funds to Support Conversion

Use of Public Housing Program Funds to Support Conversion. PHAs are permitted under the Demonstration to use available public housing funding, including Operating Reserves, Capital Funds, and Replacement Housing Factor (RHF) funds (see 24 CFR 905.400(i)), and Demolition and Disposition Transitional Funding (DDTF) (see 24 CFR 905.400(j)), as a source of capital in the development budget to support conversion, whether for rehabilitation or new construction, as well as to increase initial contract rents. Eligible conversion-related uses for these funds include pre- development, development, or rehabilitation costs of the Covered Project, establishment of a capital replacement reserve or operating reserve, payment of Capital Fund Financing Program (CFFP), Operating Fund Financing Program (OFFP), or Energy Performance Contract (EPC) debt, and increase of the initial contract rent pursuant to Sections 1.6.B.5 and 1.7.A.5. In order to use such funds on a Covered Project, these funds must be identified in the Financing Plan and RCC. See also Section 1.4.B.2.
HUD may extend the PHA’s obligation end date for Capital Funds used in the conversion for up to thirty-six months from the previous obligation end date. By extending the obligation end dates, the expenditure end dates will be correspondingly extended. Any such extensions must remain within the boundaries of the account closing law, including preserving sufficient time for administrative close-outs. Such extensions will prevent PHAs from otherwise losing their unobligated Capital Funds prior to conversion.
Prior to the approval of a Financing Plan, a PHA may expend up to $100,000 in public housing program funds on pre-development conversion costs per CHAP without HUD approval. Predevelopment assistance may be used to pay for materials and services related to proposed rehabilitation or development and may, with HUD approval, also be used for preliminary development work, including critical repairs.³⁵ Public housing program funds spent prior to Closing as contemplated in the RCC are subject to public housing procurement rules.
Execution of Closing documents consistent with the RCC (as it may be amended) constitutes approval to use public housing funds in the conversion as referenced in the final approved Sources and Uses.
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, there is no restriction on the amount of public housing funds that may be contributed to the Covered Project(s); the PHA may convey all program funds to the Covered Project(s) through the conversion. However, the PHA must estimate and plan for outstanding liabilities and costs and must follow Notice PIH 2016-23 or successor notice regarding the administrative activities required to terminate the ACC if it has no plans to develop additional public housing.
In the case where the PHA will continue to maintain other units in its inventory under public housing ACC, a contribution of Operating Funds to the Covered Project that exceeds the average amount the project has held in Operating Reserves over the past three years will trigger a subsidy layering review under 24 CFR § 4.13. Similarly, any contribution of Capital Funds, including RHF or DDTF, will trigger a subsidy layering review. Notwithstanding the subsidy layering review, PHAs should be mindful of how the Capital Funds or Operating Reserves used in the financing of its RAD properties may impact the physical and financial health of properties that will remain in its public housing inventory.
Following execution of the HAP Contract, PHAs are authorized to use Operating and Capital Funds to make HAP payments for the remainder of the first calendar year in which the HAP Contract is effective (See Section 1.13). Otherwise, a PHA may not contribute public housing program funds to the Covered Project unless those funds have been identified in the RCC and converted at Closing for Section 8 RAD purposes.
Where a PHA has used public housing funds to support the development budget and structured the conribution as a loan, any repayment of the loan must be used for Affordable Housing Purposes. However, any prepayment of principal on such a loan that occurs within the first 10 years shall be considered program income and may only be used for public housing or Section 8 purposes.

Notice Section 1.5.E Conversion is a Significant Action under a PHA's Annual/Five Year Plan

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.

Notice Section 1.4.A.6 Accessibility Requirements

Documents on Public Housing Reviews

PIH Notice 2016-23 - Requirements & Guidance for PHAs Removing All Public Housing Units

FDS Reporting Requirements for RAD Conversions (Accounting Brief)

PBV Independent Entity Requirements

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Questions on Public Housing Reviews

Phase-In for EID Households

Can RAD households who are currently receiving an Earned Income Disregard (EID), receive a rent phase-in at conversion if the household’s monthly rent increases by more than the greater of 10% or $25 purely as a result of the conversion? Section 1.7.B.7 of the RAD Notice states “tenants whose EID ceases or expires after conversion shall not be subject to the rent phase-in provision, as described in Section 1.7.B.3; instead, the rent will automatically be adjusted to the appropriate rent level based upon tenant income at that time.

Yes, RAD households who are currently receiving an EID are eligible to receive a rent phase-in at conversion if the household’s monthly rent increases by more than the greater of 10% or $25 purely as a result of the conversion. Section 1.7.B.7 of the RAD Notice refers to the point in time when the EID ceases or expires. The result is the inclusion of income that was previously disregarded and an increased monthly rent. This increase in monthly rent, which occurs because of the inclusion of the previously disregarded income, is not subject to phase-in and any phase-in that was in effect ceases.

New Resident Eligibility for Family Self Sufficiency (FSS) Program After Conversion

Are new tenants who come under lease post-RAD conversion eligible for the Family Self Sufficiency (FSS) program?

For PBV conversions, new residents would be eligible for FSS as long as the PHA administers an FSS program. For PBRA conversions, FSS funds awarded in FY14 and prior FSS funds may be used only to continue to serve FSS participants living in units converted under RAD to PBRA. Pursuant to FY 2015 Appropriations Act, any FSS funds awarded in FY 2015 (and forward if the provision is extended), may be used to also serve any other PBRA resident, affected by RAD or not.

Eligibility for ROSS After CHAP Issuance

As it relates to the 2015 ROSS NOFA, are you eligible if you sign the final RAD contract before the awards for ROSS are made, or are you ineligible once the CHAP is received?

The RAD units are ineligible once the CHAP is received. See the ROSS NOFA Section IIIlA: "RAD Provision. Units that have been approved for RAD conversion or units that have already converted are not eligible to be served under the ROSS-SC NOFA. PHAs that are submitting RAD applications for some or all of their units, but that have not received approval during the ROSS application period, must withdraw their request for a ROSS grant as soon as they receive a RAD Commitment to enter into a Housing Assistance Payment (CHAP)."

Submission of Significant Amendment to 5 Year or Annual Plan for Non-MTW PHAs

I am a non-MTW PHA. What process do I follow for submitting and receiving approval of our Significant Amendment to the Five Year Plan or Annual Plan as required by the RAD Notice?

A RAD conversion, as noted in Section 1.5(E) of PIH Notice 2012-32, REV 2, requires a Significant Amendment to the PHA’s Five-Year Plan for qualified and non-qualified PHAs or a Significant Amendment to the Annual Plan for non-qualified PHAs. The Notice at Attachment 1 D also outlines elements that the PHA Plan Significant Amendment must address. PHAs will no longer submit Significant Amendments and PHA Plans to the RADPHAPlans@hud.gov mailbox. Non-MTW PHAs must submit Significant Amendments or PHA Plans via email to Field Office Public Housing Director or designated field office contact. The PHA must also upload a memo noting their submission and date to the RAD Resource Desk as part of their Financing Pla uploads. For non-MTW PHAs submitting a regularly scheduled PHA Plan, the Public Housing Field Office should follow their regular PHA Plan review and approval process. The Public Housing Field Office should send a letter confirming approval to the PHA, with a copy to the appropriate RAD Transaction Manager (TM), within 75 days of submission. The PHA will then upload the approval letter to the RAD Resource Desk.

Transfer of FSS Escrow Accounts for PBRA Conversions

How do FSS escrow accounts get transferred to deals that are converting to PBRA? We understand that they are transferred in PBV and that HUD continues to fund the rents at the initial HAP level, so that the FSS escrow accounts can funded by resident payments as their incomes rise. Will this also happen with PBRA?

Public Housing residents that are current FSS participants will continue to be eligible for FSS once their housing is converted under RAD, and PHAs will be allowed to use any remaining PH FSSfunds, to serve those FSS participants who live in units converted by RAD. Due to the program merger between PH FSS and HCV FSS that took place pursuant to the FY14 Appropriations Act (and was continued in the FY15 Appropriations Act), no special provisions are required to continue serving FSS participants that live in public housing units converting to PBV under RAD. However, PHAs should note that there are certain FSS requirements (e.g. escrow calculation and escrow forfeitures) that apply differently depending on whether the FSS participant is a participant under the HCV program or a public housing resident, and PHAs must follow such requirements accordingly. All PHAs will be required to administer the FSS program in accordance with FSS regulations at 24 CFR Part 984, the participants’ contracts of participation, and the alternative requirements established in the “Waivers and Alternative Requirements for the FSS Program” Federal Register notice, published on December 29, 2014, at 79 FR 78100. 25 Further, upon conversion to PBV, already escrowed funds for FSS participants shall be transferred into the HCV escrow account and be considered TBRA funds, thus reverting to the HAP account if forfeited by the FSS participant. An owner is permitted to obtain the escrow amount by creating monthly Owner/Agent Request (OARQ) adjustments on the property’s HAP voucher and then must deposit the money in the corresponding escrow account. In order for HUD to identify information relating to FSS, and until future updates can be made to TRACS, all FSS OARQ adjustments must indicate the Unit Number, Head of Household’s Last Name, and the words “FSS Participant” in the comments section. The owner shall deposit the FSS account funds of all participating families into a single depository account.

RPCA Requirement

When is the RPCA required?

The RPCA is required in all instances, except the following: 1) New Construction; 2) Gut Rehab (essentially, down to the stud); 3) Recently modernized or constructed buildings (based on the recommendation of your RAD Transaction Manager and approval by the RAD Team Lead); or 4) Any FHA 221(d)(4) transaction.

Closing Out Projects in FASS-PH

If a public housing-only PHA converts its entire inventory to RAD, does it need to submit one last FASS-PH report (for that last partial or full year)?

Yes. Because it received Federal funds for a portion of that fiscal year, the PHA will need to submit a close-out FDS.

Applicability of 5 Year Plan Submission if Converting all AMPs to RAD

If a Housing Authority converts all their amps to RAD and submitted an Amendment to their 5 year plan, do they need to submit a 5 year plan again? We believe the HA would not have to because they would no longer be considered public housing.

You are correct that the Housing Authority would not have to submit a 5 Year Plan if all AMPs are being converted to RAD. However, the AMPs will not "officially" leave public housing until the RAD closing so if a 5 Year Plan is due prior to the RAD closings of all of the Housing Authorities AMPs, the Housing Authority would still need to comply with the current public housing rules in place regarding a 5 Year Plan submission.

Inclusion of Excess Personal Property in RAD Conversion

If a PHA owns excess personal property (i.e., vehicles) not currently considered part of any one AMP, may it include the property in its RAD conversion?

Yes, provided that either: (A) the PHA is converting its entire public housing portfolio; or (B) there is a sufficient nexus between the property and the proposed conversion (i.e., the vehicle will serve the project).

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.

RAD PRAC

How does the switch to a RAD HAP Contract affect the PHA's Admissions and Continued Occupancy Policy?

A project that converts under RAD will no longer be under the public housing program. Therefore, the ACOP will not apply. The owner must establish admissions and occupancy policy consistent with the program to which the project is applying. For conversions to PBV, these policies can be found in CFR 24 Part 983. For conversions to PBRA, these policies can be found in Handbook 4350.3

ROSS Service Coordinator Grant

My PHA is the recipient of a ROSS Service Coordinator Grant and plans to submit a RAD Application. Will we be permitted to continue assisting families (who, because of the RAD conversion) will be residing in non-public housing units) after the conversion?

Yes. Section 1.5H of the Notice provides that residents who are currently participating in ROSS may continue to participate after the RAD conversion for the term of ROSS grant. Also, with the PBRA HAP, the converted properties will be eligible to apply for the Multifamily Housing Service Coordinator Grants which are available to subsidized properties. These competitive grants are offered through a Notification of Funding Availability to serve properties designated as elderly and/or disabled. [Revised 7.17.14]

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.