RAD Notice Revision 4 (H 2019-09 PIH 2019-23) (Published September 5, 2019)

RAD Notice Revision 3 as amended Vs RAD Notice Revision 4 (Published September 5, 2019)

RAD Supplemental (Notice H-2020-09 Notice PIH-2020-26) | RAD Supplemental COVID-19 Guidance

RAD Supplemental Notice | RAD Federal Register Supplemental Guidance on Final Notice (Published July 2, 2018)

RAD Notice Revision 3

Rental Assistance Demonstration (RAD) – Supplemental Guidance 3.B (Published 12/11/2018)

RAD Federal Register Notice Implementing Certain FY 18 Appropriations Act Provisions (Published July 2, 2018)

RAD Notice of Increase in Cap and Rent Setting (Published August 23, 2017)

RAD Notice Revision 3 (Published January 12, 2017)

RAD Notice Blacklined Version of Revision 2 vs Revision 3 (Published January 12, 2017)

Purpose
This revised notice (Notice) provides program instructions for the Rental Assistance Demonstration (RAD or Demonstration), including eligibility and selection criteria.

Background
RAD is authorized by the Consolidated and Further Continuing Appropriations Act of 2012 (Pub. L. No. 112-55, approved November 18, 2011), as amended by the Consolidated Appropriations Act, 2014 (Pub. L. No. 113-76, approved January 17, 2014), the Consolidated and Further Continuing Appropriations Act, 2015 (Pub. L. No. 113-235, approved December 16, 2014), the Consolidated Appropriations Act, 2016 (Pub. L. No. 114-113, approved December 18, 2015), the Consolidated Appropriations Act, 2017 (Pub. L. No 115-31, approved May 5, 2017), and section 237 of Title II, Division L, Transportation, Housing and Urban Development, and Related Agencies, of the Consolidated Appropriations Act, 2018 (Pub. L. 115-141, approved March 23, 2018) collectively, the “RAD Statute.” RAD has two separate components:

• First Component. The First Component allows projects funded under the public housing program to convert their assistance to long-term, project-based Section 8 rental assistance contracts. Under this component of RAD, public housing agencies (PHAs) may choose H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 2 between two forms of Section 8 Housing Assistance Payment (HAP) Contracts: project-based vouchers (PBVs) or project-based rental assistance (PBRA). No incremental funds are authorized for this component. PHAs will convert their assistance at current subsidy levels. The FY 2018 Appropriations Act authorizes up to 455,000 units to convert assistance under this component. Section I of this Notice provides instructions for PHAs that apply for conversion under the First Component.

  While the RAD Statute, as amended, contains language authorizing HUD to convert Section 8 Moderate Rehabilitation (Mod Rehab) projects (including Mod Rehab McKinney Vento SROs)1 under the First Component, HUD is exercising its discretion to prioritize public housing conversions under the competitive requirements of this component. The demand for public housing conversions is extremely high and significantly exceeded the initial limitation on the number of units that could be converted under the First Component. In addition, unlike Mod Rehab conversions, there is no Second Component option available for public housing projects. Consequently, Mod Rehab conversions are processed exclusively under the Second Component of RAD, which is non-competitive.

• Second Component. The Second Component allows owners of projects funded under the Rent Supplement (Rent Supp), Rental Assistance Payment (RAP), and Mod Rehab programs to convert to PBV or PBRA contracts upon contract expiration or termination occurring after October 1, 2006. The Second Component further allows owners of projects funded pursuant to Project Rental Assistance Contracts under the Section 202 Supportive Housing for the Elderly program (202 PRAC) to convert to PBV or PBRA contracts. Section II of this Notice provides instructions for owners of Mod Rehab projects. Section III of this Notice provides instructions for owners of Rent Supp and RAP projects. Section IV of this Notice provides instruction for owners of 202 PRAC projects. Collectively, pre-conversion projects whose assistance is converting from one form of rental assistance to another are referred in this Notice as “Converting Projects.” Post-conversion projects with assistance converted from one form of rental assistance to another are referred in this Notice as “Covered Projects.”

“Converting Projects.” Post-conversion projects with assistance converted from one form of rental assistance to another are referred in this Notice as “Covered Projects.”

Previous versions of this Notice were published as follows:

• PIH 2012-18 (March 8, 2012, superseded by PIH Notice 2012-32)
• PIH Notice 2012-32 (July 26, 2012)
• PIH Notice 2012-32 REV-1 (July 2, 2013)
• PIH Notice 2012-32 REV-1 Technical Correction (February 6, 2014)
• PIH 2012-32 Rev 2 (June 15, 2015).
• Notice PIH 2012-32 (HA) H 2017-03, REV 3 (January 12, 2017)
• Notice PIH 2018-11 H 2018-05 (July 2, 2018)
• Notice PIH 2018-22 H 2018 11 (December 11, 2018)

The terms of the Notice in effect at the time of closing generally govern all projects converting assistance under either component of RAD, notwithstanding execution of a conditional approval or commitment for conversion. For all conversion types, HUD reserves the right, in its sole discretion and upon request from the applicant, to apply provisions from previous versions of this Notice to program participants that are near conversion.  

Major Revisions in Revision 4

This revised Notice includes a change in eligibility and selection criteria as well as clarifications of existing instructions. Major revisions are summarized below. Where indicated, the provisions will be subject to a 30-day Notice and Comment period.

First Component (Public Housing Conversions)

1. Extends all resident rights to households that will reside in non-RAD Project Based Voucher (PBV) units placed in a converted public housing project so as to facilitate the standard protection of residents (see Section 1.6);
2. Increases resident notice requirements to improve communication with residents throughout the conversion process (see Section 1.8);

3. Establishes a mechanism for public housing agencies (PHAs) to enter into partnerships in order to pool resources or capacity with each other so as to effectively convert properties through RAD (see Section 1.5.L.);

4. Allows limited rent increases for public housing conversions to Project Based Rental Assistance (PBRA) contracts in certain scenarios, including in designated Opportunity Zones (see Section 1.7.A.5);

5. Modifies the requirements for portfolio awards so as to provide PHAs greater flexibility in staging the conversion of their properties (see Section 1.9.C.);

6. Streamlines Capital Needs Assessment (CNA) requirements to eliminate the submission of the CNA Tool when certain conditions have been met (see Section 1.5.A.);

7. Introduces a “Concept Call” so that PHAs can receive confirmation that project plans are sufficiently advanced to submit a Financing Plan (see Section 1.12.C.);

8. Prohibits PHAs from entering debt into the Earned Income Verification “Debts Owed” module purely as a result of the 50058 End of Participations that is required to be submitted into Public and Indian Housing Information Center (PIC) as part of the conversion (see Section 1.13.B);

9. Broadens the use of “tiered” environmental reviews so that streamlined submissions are needed for certain 24 CFR Part 50 reviews; requires the use of the HUD Environmental Review Online System (HEROS) for Part 50 reviews; and requires radon testing for PBRA and PBV conversions (see Attachment 1A);

10. Establishes policy that RAD rents will be updated every two years and the updated rents will be applied to new awards issued after those established dates (see Attachment 1C);

11. Establishes a priority for “Section 3” employment and other economic opportunities for residents of public housing or Section 8 assisted housing (see Section 1.4.A.18.).

The following additional changes are subject to Notice and Comment because they impact eligibility and selection criteria (see below):

1. Removing restrictions on certain HOPE VI properties that are under 10 years old; and

2. Eliminating the selection of applications based on previously established “Priority Categories” so that HUD reviews applications on a first-come, first serve basis. In the event that a waiting list forms, establishes the priority selection of applications for properties located in designated Opportunity Zones.

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

1. Implements the provision of the 2018 Appropriations Act authorizing the conversion of Section 202 PRAC projects to Section 8 PBRA or PBV contracts

2. Streamlines Capital Needs Assessment (CNA) requirements for Mod Rehab conversion to eliminate the submission of the CNA Tool when certain conditions have been met;

3. Broadens the use of “tiered” environmental reviews so that streamlined submissions are needed for certain Part 50 reviews; requires the use of the HUD Environmental Review Online System (HEROS) for Part 50 reviews; and requires radon testing for PBRA and PBV conversions

4. Streamlines the Conversion Plan (Financing Plan) requirements for Mod Rehab Conversion when certain criteria has been met

5. Creates an ability for Mod Rehab and SRO properties converting to PBRA to utilize contract rents based on the condition of the property following rehabilitation H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 5

6. Provides an ability for owners of converting SRO properties serving the homeless to establish a leasing or occupancy preference that facilitates permanent supportive housing;

7. Fully establishes resident right of return and the prohibition against re-screening for existing residents; and

8. Establishes a final date that any remaining RAP properties may make a submission of conversion under RAD.

Notice and Comment for Changes in Eligibility and Selection Criteria

This Notice is effective immediately except with respect to changes in the project eligibility and selection criteria, which are subject to a 30-day comment period commencing on the effective date for the remainder of the Notice. Unless HUD receives comment that would lead to the reconsideration of any of the indicated changes in eligibility and selection criteria, these changes will become effective seven calendar days following expiration of the 30-day comment period. If HUD receives adverse comment that leads to reconsideration, HUD will notify the public in a new revision immediately upon the expiration of the comment period. Please submit all comments to RAD@hud.gov.

PHAs and Project Owners applying to RAD during the 30-day public comment period will be subject to the new eligibility and selection criteria of this Notice. In the event that HUD reconsiders any changes to the eligibility and selection criteria after the 30-day comment period that materially impact an application submitted during the comment period, a PHA or Project Owner may amend an application previously submitted. However, CHAPs and Portfolio Awards for projects satisfying eligibility and selection criteria that are subject to notice and comment will only be issued upon expiration of the comment period.

Notice Organization
The main body of this Notice (Program Instructions) is divided into four sections:

• Section I: Provides instructions to PHAs and their development partners, who can convert the assistance of public housing projects under the First Component of the Demonstration.
• Section II: Provides instructions to owners of Mod Rehab projects, including SROs, who can convert the assistance of these projects under the Second Component of the Demonstration.
• Section III: Provides instructions to owners of Rent Supp and RAP projects, who can convert the assistance of these projects under the Second Component of the Demonstration.
• Section IV: Provides instructions to owners of 202 PRAC projects, who can convert the assistance of these projects under the Second Component of the Demonstration.

Please refer to the appropriate section for relevant instructions. A table of contents is provided on pages 6-8 of this Notice for reference.

Demonstration Goals
RAD provides the opportunity to test the conversion of public housing and other HUD-assisted properties to long-term, project-based Section 8 rental assistance to achieve certain goals, including the preservation and improvement of these properties through enabling access by PHAs and owners to private and public debt and equity to address immediate and long-term capital needs. RAD is also designed to test the extent to which residents have increased housing choices after the conversion, and the overall impact on the subject properties.

Evaluation
Each component of RAD will be evaluated separately:

• For conversions under the First Component, HUD is required under the RAD Statute to assess and publish findings regarding the impact of the conversion on: the preservation and improvement of the former public housing units, the amount of private capital leveraged as a result of such conversion, and the effect of such conversion on residents. (The 2012 Appropriations Act does not require an evaluation of the conversion of Mod Rehab under the First Component.) On September 30, 2014 HUD published “A Progress Report on the Rental Assistance Demonstration (RAD) Evaluation,” which provides a summary of early program results and outlines the evaluation underway.2 In addition, in September, 2016 HUD published the “Interim Report: Evaluation of HUD’s Rental Assistance Demonstration (RAD).
• For conversions under the Second Component, the legislation requires that the Comptroller General of the United States conduct a study of the long-term impact of the fiscal year 2012 and 2013 conversion of TPVs to PBVs on the ratio of tenant-protection vouchers to project-based vouchers. The study, which was completed and published on April 24, 2014, is available at http://www.gao.gov/products/GAO-14-402.

Further Information
Please check www.hud.gov/rad for the latest information on RAD or to join the RAD listserv. Materials referenced in this Notice may be obtained from this RAD website. Email questions to RAD@hud.gov.  Additionally, HUD will develop informational materials to address various program elements that HUD will post on the RAD website.

Paperwork Reduction Act
The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0612, 2529-0013, and 2506-0087. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

Pending
The information collection requirements contained in this document are pending approval by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-0118. In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB control number.

The Act. The United States Housing Act of 1937.

Administering PHA. A PHA that administers rental assistance under the Act, which may include the HCV, Mod Rehab, or PBV programs.

Affordable Housing Purposes. Activity that supports the pre-development, development or rehabilitation of other RAD conversions, public housing, housing assisted under Section 8 of the Act, properties subject to Low-Income Housing Tax Credits (LIHTC) use restrictions, or other federal or local housing programs serving households with incomes at or below 80% of area median income, or that provide services or amenities that will be used primarily by low-income households as defined by the Act.

Anniversary of the HAP Contract. The annual recurrence of the date of the first day of the term of the HAP Contract.

Annual Contributions Contract (ACC). The written grant agreement between HUD and a PHA under which HUD agrees to provide funding for a program (e.g., public housing or HCV) under the Act, and the PHA agrees to comply with HUD requirements for the program.

Capital Needs Assessment (CNA). A detailed physical inspection of a property to determine critical repair needs, short- and long-term rehabilitation needs, market comparable improvements, energy efficiency, unmet physical accessibility requirements, and environmental concerns, including lead-based paint. In accordance with Chapter 5 of the MAP Guide, the CNA identifies “Critical repairs,” which include 1) “Life Safety” repairs that, in HUD’s determination, are needed to address hazards to life and health and must be completed before residents can occupy or continue to occupy the affected units and 2) “Accessibility” repairs that are needed to correct accessibility deficiencies. The correction of accessibility deficiencies must take the minimum time reasonably possible given the physical characteristics of the repairs and construction process and given the reasonably anticipated impact of the deficiencies and the repairs on the tenants, including disruption or displacement of their occupancy and their safe and full enjoyment of the property.

Choice-Mobility. For residents of Covered Projects, the option to obtain an HCV from a PHA after a defined period of residency. (See Section 1.7.C.5 of this Notice for PBRA conversions, and 24 CFR § 983.261 and Section 1.6.D.8. for PBV conversions, for further details on the Choice-Mobility component.)

Closing. The event during which the applicable transaction documents are entered into. “Conversion” does not occur prior to Closing. (See Section 1.13 for further details on closing.)

Combined Agency. A PHA that either directly, or through an affiliate, administers both an HCV program and public housing.

Commitment to enter into a Housing Assistance Payments Contract (CHAP). Conditional commitment provided to the PHA for units that have been selected under the First Component of the Demonstration that describes the terms under which HUD would enter into a HAP Contract with the Project Owner once the project complies with all requirements in the CHAP, this Notice, and other statutory and regulatory requirements applicable to the project.

Contract Administrator. HUD or a PHA under ACC with HUD that either executes a HAP Contract with a Project Owner or, in PBRA, to which HUD may assign the HAP Contract and which upon assignment, the assignee becomes responsible for administering the HAP Contract.

Contract Rent. The total amount of rent specified in the HAP Contract as payable to the Project Owner for a unit occupied by an eligible family. In PBV, the contract rent is referred to as “Rent to Owner.”

Converting Project. The pre-conversion property whose assistance is converting from one form of rental assistance to another under the Demonstration.

Covered Project.  The post-conversion property with assistance converted from one form of rental assistance to another under the Demonstration.

Current Funding. Applicable to public housing conversions, the combination of Federal subsidy and tenant rents for which a project is eligible under the public housing program in the fiscal year of conversion. (See Sections 1.6.B.5. and 1.7.A.5., and Attachment 1C for further details on current funding.)

Date of Full Availability (DOFA). Per 24 CFR § 905.108, the last day of the month in which substantially all (95 percent or more) of the units in a public housing project are available for occupancy.

Declaration of Restrictive Covenants (DORC). The restrictive covenants covering a public housing mixed-finance project that obligate the Project Owner to operate a project in accordance with the Act, HUD regulations, the ACC, the Mixed Finance ACC Amendment, the HOPE VI Grant Agreement (if applicable), and the Choice Neighborhoods Implementation Grant Agreement (if applicable).

Declaration of Trust (DOT). The restrictive covenant on projects assisted through a public housing ACC that obligates PHAs to operate public housing projects in accordance with the ACC, the Act, and HUD regulations and requirements. In some cases, a Declaration of Restrictive Covenants is used in lieu of a Declaration of Trust, which Declaration of Restrictive Covenants obligates the owner of the property to operate certain units as public housing in accordance with the ACC, the Act and HUD regulations and requirements. For purposes of this Notice, the defined term Declaration of Trust (DOT) shall refer to a Declaration of Trust and/or a Declaration of Restrictive Covenants, as applicable to the specific site.

Distributions. Any withdrawal or taking of Surplus Cash by the Project Owner (see definition for “Surplus Cash”, below). Surplus Cash, once determined pursuant to applicable HUD requirements, is not subject to further federal restrictions.

Enhanced Vouchers (EVs). A type of tenant protection voucher provided pursuant to an eligibility event under Section 8(t) of the Act. EVs differ from regular vouchers in three significant ways: (1) the payment standard used to calculate the voucher housing assistance payment for EVs may exceed a PHA’s ordinary payment standard; (2) an EV provides residents with a right to remain in the project as long as the units are used for rental housing and are otherwise eligible for voucher assistance; and (3) the household must pay for rent no less than the rent the household was paying on the date of the eligibility event (minimum rent). If the household elects to move, the voucher is administered as a regular voucher. HUD provides EVs and funding to a voucher agency that has jurisdiction over the area in which the property that the eligibility event occurred is located.

Fair Market Rent (FMR). The cost in a particular housing market area of privately owned, decent, safe and sanitary rental housing. HUD establishes and publishes in the Federal Register FMRs for dwelling units of varying sizes for each metropolitan area. FMRs are gross rent estimates, i.e., they include the cost of tenant-paid utilities. See 24 CFR part 888 subpart A. The use of the term “FMR” on its own refers to the metropolitan area-wide FMR.

Faircloth-to-RAD. The process by which PHAs develop additional public housing units pursuant to the Faircloth Limit using the public housing development process at 24 CFR Part 905, Subpart F with conditional pre-completion approval to convert these units to a long-term Section 8 contract through RAD following completion of construction, rehabilitation, or acquisition under the public housing development process.

Faircloth Limit. The limitation on the number of new public housing units a PHA may develop as described in Section 9(g)(3) of the Act.

Family Self-Sufficiency (FSS). FSS is a program authorized under section 23 of the Act and designed to promote self-sufficiency of assisted families through the coordination of services. Residents enter into a five-year contract of participation which outlines goals related to seeking, obtaining, and maintaining employment. During the period of participation, residents may earn an escrow credit, based on increased earned income. FSS Coordinator funding may be available to PHAs to pay for the salary and benefits of a program coordinator who links residents with training opportunities, job placement organizations, and local employers.

Financing Plan. Documentation submitted to HUD for review to demonstrate that the Covered Project can be sustained physically and financially for the term of the HAP Contract at the rent Definitions H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 14 levels permitted under the Demonstration. The Plan must show how the project’s immediate and long-term capital needs will be addressed.

Good-Cause Exemption. An allowance made by HUD exempting a PBRA Covered Project from the Choice-Mobility component. (See Sections 1.7.C.5 and 2.6.I for further details on good-cause exemptions.)

Green Building. An approach to building, rehabilitation, repairs, maintenance, and property operations that is more sustainable than traditional approaches to such activities and results in a project that is more energy efficient, costs less to operate, has better indoor air quality, and reduces its overall impact on the environment. (See Section 1.4.A.2 for further details on green building.)

Gross Rent. The Gross Rent shall equal the contract rent plus any utility allowance for the unit.

HOTMA Implementation Notice. Federal Register Notice Housing Opportunities Through Modernization Act of 2016: Implementation of Various Section 8 Voucher Provision, published January 18, 2017 at 82 FR 5458.

Housing Assistance Payment (HAP). The payment made by the Contract Administrator to the Project Owner of an assisted unit as provided in the HAP Contract. Where the unit is leased to an eligible household, the payment is the difference between the contract rent for a particular assisted unit and the tenant rent payable by the family.

Housing Quality Standards (HQS). Standards set forth in 24 CFR § 982.401 that must be met by all units in the HCV program before assistance can be paid on behalf of a household. The HQS in 24 CFR § 982.401 apply to PBV, in accordance with 24 CFR § 983.101. Generally, Voucher Agencies must conduct HQS inspections of PBV projects not less than biennially during the term of the HAP Contract.

HAP Contract. The contract entered into by the Project Owner and the Contract Administrator that sets forth the rights and duties of the parties with respect to the Covered Project and the payments under the contract.

Identity of Interest (IOI). A relationship where two parties have closely related business operations or other activities. An identity of interest must be disclosed and may be prohibited. Examples of Identity of Interest relationships include, but are not limited to, a financial or family relationship between the PHA or owner (which includes but is not limited to an officer, director, or partner of the PHA or owner) and general contractor, subcontractor, seller of the land or property, any consultants, or other parties to the transaction.

MAP Guide. Housing Guidebook 4430.G “Multifamily Accelerating Processing (MAP) Guide”

Mixed-Finance Project. A public housing project developed in accordance with 24 CFR part 905 subpart F using public housing, nonpublic housing, or a combination of public housing and non-public housing funds, where the public housing units are owned in whole or in part by an entity other than the PHA, pursuant to 905.604(a). A mixed-finance project may include 100 percent public housing (if there is an Owner Entity other than the PHA) or a mixture of public housing and non-public housing units.

Notice of Anticipated RAD Rents (NARR). Conditional commitment provided to the PHA for units the PHA proposes to develop under Faircloth-to-RAD that describes the terms under which HUD will issue a CHAP to the PHA once the units are developed and accepted into the public housing program.

Operating Cost Adjustment Factor (OCAF). An operating cost adjustment factor established by HUD that is applied to the current contract rent, less the portion of the rent paid for debt service.

Ownership or Control. The RAD Statute provides requirements for the ownership or control of Covered Projects under the First Component. See Section 1.4.A.11 for a description of how to satisfy those requirements for PBV and PBRA conversions.

Prepayment. The satisfaction (i.e., payment in full) of the underlying mortgage prior to its maturity date. Prepayment is one of the eligibility triggering events for RAD conversion under Section III of this Notice.

Project. For purposes of determining a RAD transaction, a “project” is a structure or group of structures that in HUD’s determination are appropriately managed as a single financial asset. In most cases, this corresponds to a grouping of residential units that are managed and marketed as a single entity and are geographically proximate. In determining whether multiple structures constitute a project, HUD will take into account types of buildings, occupancy, location, market influences, management organization, financing structure or other factors as appropriate. For a RAD PBV conversion, the definition of “project” in 24 CFR 983.3 continues to apply for all references to the term in 24 CFR 983.4

Project-Based Voucher (PBV). A component of a PHA’s HCV program, where the PHA attaches voucher assistance to specific housing units through a PBV HAP Contract with an owner, pursuant to 24 CFR 983. Unlike a tenant-based voucher, the PBV assistance remains attached to the unit when the family moves, and assists the next eligible family to move into the PBV unit. The PBV program is administered by HUD’s Office of Public and Indian Housing.

Project-Based Rental Assistance (PBRA). Rental assistance under Section 8(C) of the Act provided by HUD to owners according to the terms of a HAP Contract for the provision of housing to eligible tenants. The PBRA program is administered by HUD’s Office of Housing.

Project Owner. The term Project Owner refers to the owner of the Covered Project, including but not limited to any owner pursuant to a HAP Contract. For purposes of HAP Contracts, an Owner is a private person, partnership, or entity (including a cooperative), a non-profit entity, a PHA, or other public entity, having the legal right to lease or sublease the dwelling units subject to the HAP Contract.  

Public Housing Agency (PHA). A Public Housing Agency that administers programs under the Act, which could include public housing, Mod Rehab and HCVs. In addition to this general definition, the term PHA, as used in this Notice, refers to the owner of a First Component Converting Project (even if the project is a mixed finance project and the PHA does not own the ACC units).

Public Housing Assessment System (PHAS). The current system used to measure the performance of PHAs administering the public housing program, per 24 CFR part 902, or any successor system.

Public Housing Project. Per 24 CFR § 905.108 the term ‘‘public housing’’ means low-income housing, and all necessary appurtenances thereto, assisted under the Act, other than assistance under 42 U.S.C. § 1437f of the Act (section 8). The term ‘‘public housing’’ includes dwelling units in a mixed finance project that are assisted by a PHA with public housing Capital Fund assistance or Operating Fund assistance. The term “public housing project” means housing developed, acquired, or assisted by a PHA under the Act, and the improvement of any such housing. Each public housing project has a project identification number in the Public and Indian Housing Information Center (PIC), though a PHA may propose to convert individual sites within the public housing project.

RAD Conversion Commitment (RCC). For the First Component, the contract executed by HUD, the PHA and, as applicable, the pre-conversion owner (if not the PHA), and the post-conversion Project Owner. The RCC follows completion of HUD’s review of the Financing Plan and describes the terms and conditions under which HUD will approve the proposed conversion and execute closing documents. (See Section 1.12 and Attachment 1A for further details on the RCC.)

RAD Fair Housing, Civil Rights and Relocation Checklist or Checklist.  The Accessibility and Relocation Checklist or its successor, the RAD Fair Housing, Civil Rights, and Relocation Checklist (when available) used in First Component transactions.

RAD Use Agreement. Applicable to the First Component, the document specifying the affordability and use restrictions on the Covered Project, which will be coterminous with the HAP Contract and must be recorded in a superior position to any new or existing financing or other encumbrances on the Covered Project. (See Sections 1.6.B.4 and 1.7.A.4 for further details on the RAD Use Agreement.)

REAC. HUD’s Real Estate Assessment Center.

Resident Opportunity and Self-Sufficiency Service Coordinators (ROSS-SC). Funding under this program is made available for Service Coordinators to assess the needs of residents of public housing and coordinate community resources to meet those needs. These services should enable participating families to make progress toward achieving economic independence and housing self-sufficiency, or, in the case of elderly or disabled residents, improve living conditions and enable residents to age-in-place.

Section Eight Management Assessment Program (SEMAP). The current system used to measure the performance of PHAs administering the Section 8 HCV program, per 24 CFR part 985, or any successor system.

Small Area FMR. The FMR established on a zip-code basis per 81 FR 80678, as published annually in the Federal Register.

Surplus Cash. For both PBV and PBRA, following completion of the Work, the amount determined to be available at the end of an annual fiscal year period after payment, or after funds have been set aside for payment, of (i) operating expenses, (ii) mortgage payments, and (iii) all amounts required to be deposited in the replacement reserve or other restricted accounts essential to the Covered Project’s operations.

Tenant Protection Vouchers (TPVs). Vouchers issued to eligible tenants of certain properties when an event at the property would otherwise expose tenants to a loss of rental assistance, resulting in an increase in their housing costs. Such events include when a Rent Supp or RAP contract terminates due to expiration, prepayment of the underlying mortgage, or an enforcement action; the termination or expiration of a Mod Rehab or SRO contract; or HUD approval of public housing unit demolitions, dispositions, and conversions under Section 18, Section 22, or Section 33 of the Act. HUD provides TPVs and funding to a voucher agency that has jurisdiction 5 https://www.hud.gov/sites/documents/16-17HSGN_16-17PIHN.PDF. Definitions H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 18 over the area in which the property is located. TPVs may be regular HCVs, which are administered in accordance with all HCV program requirements, or EVs, as described above.

Tenant Rent. The amount payable monthly by the household as rent to the unit owner as defined in 24 CFR Part 5.634 (public housing and PBRA) and 983.353 (PBV).

TTP. The total tenant payment as calculated pursuant to 24 CFR Part 5.

Uniform Physical Condition Standards. Protocols used for HUD Real Estate Assessment Center (REAC) physical inspections in accordance with 24 CFR part 5, subpart G.

Uniform Relocation Act (URA). The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 as amended (42 U.S.C. 4601 et seq.) and its implementing regulations (49 CFR part 24).

Utility Allowance. As defined in 24 CFR Part 5, the amount that a PHA or Project Owner determines is reasonable for tenant-paid utility costs. In the case where the utility allowance exceeds the Total Tenant Payment (as defined at 24 CFR § 5.613), the tenant is reimbursed in the amount of such excess.

Voucher Agency. A PHA that administers a HCV program.

Work or Scope of Work. The improvements required by HUD to be performed within a defined period following the conversion and specified in the RCC or other RAD conversion documents.

This revised notice (Notice) provides program instructions for the Rental Assistance Demonstration (RAD or Demonstration), including eligibility and selection criteria.

Under the First Component of RAD, PHAs may choose between two forms of Section 8 Housing Assistance Payment (HAP) Contracts: project-based vouchers (PBVs) or project-based rental assistance (PBRA). No incremental funds are authorized for this component. As such, initial contract rents are established based on public housing funding levels, and are subject to applicable program rent caps. Applications may be submitted for a specific project (using the RAD Application) or a PHA-defined portfolio of projects (which may include a multi-phase conversion of a pre-existing public housing site). If a PHA applies for a portfolio award, HUD will reserve RAD conversion authority for the number of units covered by the award, and the PHA will be required to submit a RAD Application for each individual project. Following review and selection of a RAD Application, HUD will provide the PHA with a Commitment to enter into a Housing Assistance Payment (CHAP), after which the PHA will have to present a Financing Plan for HUD to approve. After HUD approval of the Financing Plan, issuance of an RCC and successful closing of the conversion, a project will receive a long-term Section 8 HAP Contract. Upon conversion, units whose assistance has been converted pursuant to RAD will be removed from the public housing program. Converting Projects will be released from the public housing Declaration of Trust (DOT) and the Declaration of Restrictive Covenants (DORCs), if applicable, and a RAD Use Agreement will be placed on the Covered Project.

1. PBV Conversions. Where the PHA converts assistance of a public housing project to Section 8 PBVs, the HAP Contract will be administered by the agency with which HUD has entered into the applicable Voucher ACC (which in many cases will be the same agency that is converting assistance). Contract rents will be established according to the terms described in this Notice and will be adjusted annually by HUD’s published OCAF on each anniversary of the HAP Contract, subject to the availability of appropriations for each year of the contract (see Section 1.6.B.5 and Attachment 1C) and the rent reasonableness requirement discussed later in this Notice. The initial contract will be for a period of at least 15 years (up to 20 years upon approval of the administering Voucher Agency). At or prior to the expiration of the initial contract and each renewal contract thereafter, the Voucher Agency shall offer, and the Project Owner shall accept, a renewal contract for the prescribed number and mix of units, either on the site of the project subject to the expiring contract or, upon request of the Project Owner and subject to PHA and HUD approval, at another site through a future transfer of assistance. Each project with a PBV HAP Contract will also be subject to a RAD Use Agreement that will renew with the HAP Contract o the property assisted by the HAP Contract. Further, the administering Voucher Agency (i.e., the Contract Administrator) will provide a Choice-Mobility option to residents of Covered Projects in accordance with section 1.6.D.8. With the exception of provisions identified in this Notice (as well as retained flexibilities of Moving to Work (MTW) agencies), all regulatory and statutory requirements of the PBV program in 24 CFR part 983, and applicable standing and subsequent Office of Public and Indian Housing guidance, including related handbooks, shall apply.
2. PBRA Conversions. Where the PHA converts assistance of a public housing project to Section 8 PBRA, the HAP Contract will generally be administered by HUD’s Office of Housing, unless later assigned to a PHA that is under ACC with HUD for the purpose of administering project-based Section 8 HAP Contracts. Contract rents will be established according to the terms described in this Notice and will be adjusted annually by HUD’s published OCAF at each anniversary of the HAP Contract, subject to the availability of appropriations for each year of the contract (see section 1.7.A. and Attachment 1C). The initial contract will be for a period of 20 years and will be subject to annual appropriations. At expiration of the initial contract and each renewal contract, HUD shall offer, and the Project Owner shall accept, a renewal contract for the prescribed number and mix of units, either on the site of the project subject to the expiring contract or, upon request of the Project Owner and subject to HUD approval, at another site through a future transfer of assistance. The initial contract shall be eligible for renewal under the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRAA). Each Covered Project with a PBRA HAP Contract will be subject to a 20-year RAD Use Agreement that will renew with the HAP Contract on the property assisted by the HAP Contract. Further, Project Owners must offer a Choice-Mobility option to residents of Covered Projects, as specified in Section 1.7.C.5 of this Notice, unless exempted from this requirement. With the exception of provisions identified in this Notice, all regulatory and statutory requirements of the PBRA program in 24 CFR part 880, and applicable standing and subsequent Office of Housing guidance, including related handbooks, shall apply (as modified and published in Appendix I of this Notice).
3. Waivers. A major goal of the First Component of RAD is to test the conversion of the public housing assistance to long-term, project-based Section 8 assistance available to Project Owners of assisted multifamily housing in order to generate additional sources of private financing. Consequently, HUD is applying its waiver authority and ability to establish limited alternative requirements for the effective conversion of assistance on a limited basis to facilitate the major goals of the Demonstration and maintain existing distinctions between the PBV and PBRA forms of contract assistance. Such distinctions will enable a PHA or Project Owner to choose the form of assistance that best meets its needs. It will also enable HUD and Congress to assess how effective each form of assistance proves to be in meeting such varied circumstances and needs.
4. Resident Rights and Relocation. Equally important for the success of RAD are meaningful resident participation, procedural and relocation rights, and mobility, which are addressed in detail in various sections of the Notice and the RAD Fair Housing, Civil Rights, and Relocation Notice and summarized in Attachment 1B.
5. Fair Housing Requirements. RAD transactions are governed by the same civil rights authorities that govern HUD-assisted activities generally. These authorities prohibit discrimination and iimpose affirmative obligations on HUD program participants. See HUD's general regulations at 24 CFR § 5.105. For example, the Fair Housing Act prohibits discrimination in housing (see 42 U.S.C. §§ 3601, et seq., and 24 CFR part 100) and requires all Federal executive departments and agencies to “administer their programs and activities relating to housing and urban development . . . in a manner affirmatively to further” fair housing (42 U.S.C. § 3608(d) and (e)). All federally assisted programs and activities are subject to Title VI of the Civil Rights Act of 1964 forbidding discrimination on the basis of race, color and national origin (see 42 U.S.C. §§ 4000d, et. seq., and HUD regulations in 24 CFR part 1) and Section 504 of the Rehabilitation Act of 1973, which forbids discrimination on the basis of disability and requires that federally assisted programs make each activity “when viewed in its entirety” readily accessible to persons with disabilities and make reasonable accommodation to the needs of persons with disabilities (see 29 U.S.C. §§ 701, et seq., and 24 CFR part 8), as well as Titles II and III of the Americans with Disabilities Act (12 U.S.C. §§ 12101, et seq., and 42 CFR parts 35). Executive Order 11063 (24 CFR part 107 was issued to prevent discrimination based on race, color, religion, sex, or national origin in Federally assisted housing property or facilities and to require program participants to provide informatoin on race, color, religion, sex, or national original of applicants for and participants in Federally assisted housing.

   HUD has issued a separate notice, the RAD Fair Housing, Civil Rights, and Relocation Notice, to provide more detailed guidance regarding certain civil rights requirements of RAD transactions. This Notice has been updated to remove civil rights guidance and requirements that are duplicative ofthe provisions of the RAD Fair Housing, Civil Rights, and Relocation Notice. The removal of this language does not modify any of the requirements contained in the RAD Fair Housing, Civil Rights, and Relocation Notice. PHAs should consult the RAD Fair Housing, Civil Rights and Relocation Notice early in the planning process so that they are aware of RAD's ciivil rights related requirements for poject construction and operation, site selection, submission of information to HUD, and HUD approval.

   RAD conversions that include one or more of the circumstances described in the RAD Fair Housing, Civil Rights, and Relocation notice must undergo a Front-End Civil Rights Review. The purpose of the review is early identification of the risk that elements of proposed RAD projects will be out of compliance with certain fair housing and cvil rights requirements. When such circumstances are present, the PHA must obtain written approval from HUD.

Only PHAs may apply under this section of the Notice. However, PHAs may consider enlisting partners to facilitate recapitalization and development of its projects. Additionally, while public housing mixed-finance projects are eligible for conversion under the Demonstration (see Section 1.9 of this Notice), the application for conversion of assistance must be submitted by the PHA on whose ACC the units are included. This requirement also applies to directly-funded Resident Management Corporations (RMCs).

A RAD Application may be rejected, or a CHAP or RCC revoked, if HUD determines an applicant or PHA to be ineligible.

To be eligible for the Demonstration, a PHA must:

1. Have public housing units under an ACC or have available authority to develop units pursuant to the Faircloth Limit;
2. Be classified as a Standard or High Performance under the Public Housing Assessment System (PHAS). If classified as “troubled” (Troubled), the PHA may still be eligible if the PHA is making substantial progress under its Recovery Agreement, Action Plan, Corrective Action Plan (CAP) or Memorandum of Agreement (MOA) or proposes a revision to such agreement or plan that incorporates conversion under RAD and that is acceptable to HUD, HUD must have determined that the factors resulting in the PHA’s Troubled status will not affect its capacity to carry out a successful conversion under this Demonstration;
3. Be classified as a Standard or High Performer under the Section Eight Management Assessment Program (SEMAP) if the PHA will be administering the PBV contract under RAD. If classified as Troubled, the PHA must be making substantial progress under the CAP and HUD must have determined that the factors resulting in the PHA’s Troubled status will not affect its capacity to carry out a successful conversion under this Demonstration;
4. Be in substantial compliance with HUD reporting and programmatic requirements and/or satisfactorily in compliance with any CAP or MOA related to any 1) program finding or 2) failure to carry out, to the satisfaction of the Department, management decisions, relating to an audit by the Office of Inspector General;
5. Not have a debarment, suspension, or Limited Denial of Participation (LDP) in Federal programs lodged against the applicant, PHA Executive Director, Board members, or affiliates, unless HUD has determined that the RAD conversion is likely to place the property under the control of a more capable entity;
6. Submit a completed application that complies with all RAD Application instructions. Resolve to HUD's satisfaction any outstanding civil rights matters prior to conversion. All pending legal processes must have been satisfied to meet this standard. If eligibility would be denied on this basis, HUD will notify the applicant of its determination and any actions to permit a finding of eligibility.

Additionally, a PHA may be required to demonstrate that its proposed activities under RAD are consistent with and will not hinder or delay satisfaction of any applicable fair housing or civil rights VCA, conciliation agreement, consent order or consent decree, final judicial ruling, or administrative ruling or decision. HUD may terminate a CHAP or RCC if it determines that the terms of the conversion would be inconsistent with fair housing or civil rights laws or is inconsistent with, would hinder, or would delay satisfaction of a fair housing or civil rights court order, settlement agreement, or VCA (see Section 1.12 of this Notice).

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:

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.
   2. Energy Efficiency and Climate Resilience. 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.8 Where the CNA indicates a component will improve indoor air quality and/or reduce overall environmental impact at little or no cost premium, the PHA shall use such component 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 2021 International Energy Conservation Code (IECC) for single family or low-rise multifamily properties (three stories or fewer) or the ASHRAE 90.1-2019 standard for mid to 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. Additionally, all new construction projects are encouraged to meet or exceed the requirements for Energy Star for New Homes or Energy Star for Multifamily New Construction. Further, in new construction and applicable retrofit projects, HUD strongly encourages the use of industry-recognized, green building certifications that support net-zero and net-zero ready construction, such as DOE Zero Energy Ready Homes - Multifamily, Enterprise Green Communities Plus, Passive House Core or Zero, International Living Future Institute Core Green Building Certification or Zero Energy and Zero Carbon, National Green Building Standard with net zero energy badge, and LEED Zero Energy or Zero Carbon.?
      
      As noted in Section 1.4.B.6, numerous state and local governments offer other funding programs which can be used as sources in financing plans, particularly if a scope of work includes “green retrofitting” or weatherization components. In many localities, utility companies and appliance manufacturers offer grants related to energy-saving retrofit components. (http://www.dsireusa.org/ is one source of information on incentives and policies state by state.)
      
      Renewable Energy. PHAs are also strongly encouraged to assess the viability and potential cost savings of renewable energy sources for the site and design roofs and other systems accordingly. For example, PHAs can use the National Renewable Energy Laboratory (NREL) REopt tool to evaluate the economic viability and cost savings of multiple renewable energy options.

      Climate Resilience. All PHAs must:

      1. Analyze likely hazard risk by entering property addresses into FEMA's National Risk Index (NRI) and identifying which hazards are "relatively high" or "very high" for their census tract. If a census tract hazard does not apply to their specific site (e.g., a site located on top of a hill may not face riverine flooding risk), the PHA should explain the non-applicability of the NRI rating. Applicants may also consider hazards identified in climate projection tools as applicable: Climate Explorer, Flood Factor, NOAA Sea Level Rise Viewer, Climate Central Coastal Risk Screening Tool (by year and/or water level), and Climate Mapping for Resilience and Adaptation (CMRA).
          
      2. Provide a narrative description detailing how the scope of work addresses or mitigates against the identified climate hazard risks. PHAs are strongly encouraged to consider strategies to reduce the risk of resident injury and property damage when hazards strike. Hazard-specific resilience strategies to consider include, but are not limited to:
         • Potable water storage (one gallon per person for five to seven days);
         • Back-up power (generators or battery back-up for critical loads) to last five to seven days;
         • Indoor air quality: sensors and purifiers;
         • Flood protection: flood vents, water-resistant materials, roof sealing/water barrier, flood gates, flood doors, sandbags and other deployable barriers;
         • Floodwater control: backwater valves, sump pumps, permeable pavement, green roof, bioswales, dry wells;
         • Heat control: multi-pane and/or low-e coated windows, window shading, cool roofing products, enhanced roof and wall insulation;
         • Fire protection: compliance with 2021 International Wildland-Urban Interface Code, class A roof, noncombustible or fire-resistant materials, fine mesh vent screens, enclosed decks and eaves, tempered glass for first-floor windows; and
         • Winter and Rain Storm protection: impact-rated windows, FORTIFIED Roof™, buried utility lines.
            
      3. Informed by the climate hazard risks, PHAs must also create a property-wide disaster plan including an evacuation plan that describes safe egress route(s), plans for evacuating residents with disabilities and special needs, and clear communication of the evacuation plan and safety resources for residents. For residents with disabilities and special needs, this must include a plan for emergency evacuation and relocation, including discussion of facilities of like capacity that are equipped to provide critical needs-related care and services at a level like the originating facility.
   3. 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.

   4. 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.

   5. 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
   6. 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.

   7. 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.

   8. 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

   9. 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

   10. 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.

   11. 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.

   12. 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.

   13. RAD Use Agreement. Pursuant to the RAD Statute, a Covered Project shall have a RAD Use Agreement that will bein such a form as prescribed by HUD including but not limited to the following:
       1. Be recorded in a superior position to all other liens on the property that could compromise the applicability or enforceability of the RAD Use Agreement.²⁷ The Use Agreement shall be recorded prior to the Security Instrument or any other mortgage or security instrument relating to an FHA-insured loan or a Risk-share loan;
       2. Run until the conclusion of the initial term of the HAP Contract, automatically renew upon extension or renewal of the HAP Contract for a term that coincides with the renewal term of the HAP Contract, and remain in effect even in the case of abatement or termination of the HAP Contract, unless the Secretary approves termination of the RAD Use Agreement in the case of a transfer of assistance;
       3. Provide that in the event that the HAP Contract is removed due to breach, non-compliance or insufficiency of Appropriations, for all units previously covered under the HAP Contract new tenants must have incomes at or below eighty percent (80%) of the area median income (AMI) at the time of admission and rents may not exceed thrity percent (30%) of eighty percent (80%) of AMI for an appropriate-size unit for the remainder of the term of the RAD Use Agreement; and
       4. Require compliance with all applicable fair housing and civil rights requirements, including the obligation to affirmatively further fair housing.
   14. 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.

   15. 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.

   16. 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.)

   17. Current PHA Employees. HUD encourages PHAs and their partners to grant current workers whose employment positions are eliminated during conversion the right of first refusal for new employment openings for which they are qualified.

2. Financing Requirements and Considerations.

   To the extent that a PHA lacks recent experience in accessing various forms of debt and/or equity capital, it may wish to consider engaging technical assistance offered by local or national development intermediaries, professional financing advisors, consultants, and/or development partners to augment its capacities. In reviewing the Financing Plan for final approval, HUD assesses the capacity of the development team.

   1. Debt Financing. Covered Projects are eligible for financing from private and public lending sources. All loans made that are secured by Covered Projects must be subordinate to a RAD Use Agreement. See Attachment 1A for full financing underwriting requirements. Except where public housing funds are used in the transaction (see paragraph 2 below), RAD does not prohibit excess loan proceeds from being used to support other purposes consistent with the PHA’s mission, e.g., renovations to other properties, though other financing sources may impose such restrictions.

      Sources of private and public debt financing to consider include any and all sources that are commonly used in other low-income, use-restricted developments. In addition to commercial lenders, applicants should consider facilities—both construction and permanent—offered by Community Development Financial Institutions (CDFIs), Government Sponsored Enterprises (GSEs), Federal Home Loan Banks, and applicable private foundation financing. Other funding sources that may be available include Community Development Block Grants (CDBG), the Housing Trust Fund (HTF), and state housing agency–provided financing. Many municipalities offer infrastructure and other forms of development financing through tax-increment financing (TIF) initiatives or other comparable public finance programs. In some cases, transit- oriented development programs may prove accessible. Additionally, HOME funds can be used to assist RAD projects. The participating jurisdiction providing the HOME funds is responsible for ensuring that both the RAD project and the specific use of the HOME funds meet the requirements of 24 CFR Part 92. Eligible costs that may be paid with HOME funds are established at 24 CFR § 92.206. However, PHAs and participating jurisdictions should be aware of the statutory prohibition on using HOME funds for public housing and must ensure that HOME funds are not expended for any cost of public housing (e.g., legal fees related to the release of the public housing declaration of trust or declaration of restrictive covenants).

   2. Public Housing Capital and Operating Program Funds. PHAs are permitted under the Demonstration to use available public housing funding, including Operating Reserves (as defined in Notice PIH 2011-55) and unobligated Capital Funds, as a source of capital to support conversion (see Section 1.5 of this Notice for more details). With written HUD approval, PHAs may also use Section 18 disposition proceeds upon confirmation that the proposed use meets the Section 18 requirements. MTW agencies may use certain public housing and voucher funds authorized under their funding flexibilities ("MTW funds") as an additional source of capital to support conversion. These funds, whether provided as a loan, a grant, or a capital contribution, must be identified in the Financing Plan. If funds are contributed as a loan, except in extraordinary circumstances, the loan must be structured as a "soft" second mortgage payable from project cash flow. Financing proceeds in excess of transaction costs will not be allowed when public housing Capital, Operating, or MTW funds are contributed to the project conversion.

   3. Existing PHA Indebtedness and Contractual Obligations. A PHA must address in its Financing Plan the amount of project debt associated with the Converting Project prior to conversion, including energy performance contracts, Capital Fund Financing (CFFP), Operating Fund Financing, Public Housing Mortgage Program, program debt (including ongoing repayment agreements related to audits or compliance reviews), or other debt. The PHA may refinance existing debt obligations as part of conversion. Conversion alone does not relieve the PHA of these or other obligations. RAD does not constitute a waiver of any CFFP requirements and is not treated as a CFFP ACC Amendment, including any provisions restricting the removal of units from the inventory that would affect the debt service coverage ratio through diminished Capital Funding or requiring defeasance or prepayment, arising from program regulations or contractual relationship with the secured party. PHAs should be aware that any new first mortgage lender, to the extent permissible within the existing financing documents, may require that existing indebtedness be paid off or subordinated in connection with the refinancing and conversion of the Covered Project.

   4. Federal Housing Administration (FHA) Insured Financing. FHA mortgage insurance provides high leverage and long-term, fully amortizing fixed-rate financing at competitive interest rates. For more information, PHAs should contact an approved FHA Multifamily Lender: http://portal.hud.gov/hudportal/documents/huddoc?id=aprvlend.pdf.

      Some properties converting under RAD may qualify for financing under section 223(f) of the National Housing Act, which provides mortgage insurance for a permanent financing and may include project repairs. If the scope of required property repairs indicates “substantial rehabilitation,” as defined by the FHA Multifamily Mortgage Insurance Program in the MAP Guide, the appropriate FHA-insured financing may instead be section 221(d)(4) of the National Housing Act. FHA has released separate guidance detailing how HUD has modified the policy and processing of FHA insurance programs to accommodate RAD conversions and minimize duplicative requirements (See Notice H 2012-20, “Underwriting Instructions for Projects Converting Assistance as part of the Rental Assistance Demonstration (RAD) Program”).

      Risk sharing programs offered by state housing financing agencies, Freddie Mac, and/or Fannie Mae should be considered. Secondary financing, tax credits, and other public sources can be used in conjunction with FHA-insured financing and risk- sharing programs. All of the above financing options may be used to credit-enhance tax-exempt bonds.

   5. Low-Income Housing Tax Credits (LIHTCs), historic Tax Credits (HTCs), and Opportunity Zones. Applicants are encouraged to use LIHTCs and, if eligible, historic preservation tax credits, opportunity zones and stat or local tax incentive structures, to support recapitalization. Covered Projects may be eligible for HUD’s Multifamily Low Income Housing Tax Credit Pilot Program (Notice H 2012-1), which offers a distinct application platform and a separate processing track under the FHA Section 223(f) program described above.³⁰ RAD does not prohibit excess equity proceeds from being used to support other Affordable Housing Purposes.

      Many states face excessive demand on an annual basis for allocations of 9% LIHTCs and routinely do not fully allocate their supply of 4% as-of-right credits coupled with tax-exempt bond financing allowed under their annual Private Activity Bond Volume Cap. Applicants are encouraged to assess local demand and supply considerations if proposing to utilize LIHTCs and to discuss their interest in applying for LIHTCs as soon as possible with state or local tax credit issuing agencies to obtain guidance on how to compete for awards most effectively.

      While the applicant must indicate in its application if it intends to use tax credits, there is no requirement to have secured these credits prior to submitting an application.

   6. Grant Funding or Cash Flow Financing. There are many sources of funding at the local, state, and federal level, which may be structured as grants or as debt with repayment only required from cash flow.³¹ State and local CDBG and HOME funds may be utilized as “gap” financing for affordable housing developments.³² Numerous state and local governments offer other funding programs which can be used as sources in financing plans, particularly if a scope of work includes “green retrofitting” or weatherization components. In many localities, utility companies and appliance manufacturers offer grants related to energy-saving retrofit components (http://www.dsireusa.org/ is one source of information on incentives and policies state by state). Several private foundations and corporate social investment funds offer funding in support of affordable housing development. Finally, the Federal Home Loan Bank’s “Affordable Housing Program” has been a significant source of gap funding in affordable housing projects, including many public housing mixed-finance and HOPE VI developments, and may prove a generally-available source of gap funding for properties converting under RAD. Note that in LIHTC transactions, these funds are often structured as debt or granted to a sponsor entity and loaned from the sponsor to the Project Owner.

   7. Acquisition Proceeds. For transactions involving the transfer of ownership from a PHA administering the public housing program to a new entity, a PHA is permitted to receive cash acquisition proceeds in excess of any seller take-back financing unless the PHA is using public housing Capital, Operating, or MTW funds as a source of funds for the transaction.³³ All such proceeds must be used for Affordable Housing Purposes. Until expended, the PHA must place the proceeds in an account subject to a HUD-51999, General Depository Agreement,³⁴ which specifies the insurance and security investment requirements.

Under the Demonstration, HUD has the authority to waive or specify alternative public housing requirements, or to establish requirements for converted assistance under the Demonstration upon a finding by the Secretary that any such waivers or alternative requirements are necessary for the effective conversion of assistance under the Demonstration. Additionally, the RAD Statute imposes certain unique requirements. To facilitate the conversion of assistance, HUD is waiving or imposing the following alternative and other public housing program requirements for public housing projects converting assistance (Sections 1.6 and 1.7 list the waivers and alternative and other requirements of programs into which assistance is being converted):

1. 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.

2. Special Applications Center (SAC) Applications and RAD.

   1. General.HUD encourages PHAs to consider RAD as well as other tools that may be available ot them to reposition and preserve their public housing inventories. Other available tools include application to the Special Applications Center (SAC) for Demolition or Disposition under Section 18 of the Act, Voluntary Conversion under Section 22 of the Act, including Streamlined Voluntary Conversion as described in Notice PIH 2019-05, Required Conversion under Section 33 of the Act, and Homeownership under Section 32 of the Act.
   2. Joint RAD and Section 18 applications. A PHA may be able to combine RAD and Section 18 activities towards the preservation of a project. In certain circumstances as determined by HUD (for additional details see PIH Notice 2021-07, or any successor Notice), HUD will offer the PHA a streamlined process for securing HUD approval for the units eligible for Section 18 applications.

      1. If a PHA is combining the use of RAD and Section 18 activities at a project, all RAD relocation requirements (such as the resident notice and meeting requirements, the right to return and relocation assistance and payments as described in 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 970.21. The PHA may not provide different relocation rights and benefits to residents of the project on the basis of whether they will reside in a RAD Section 8 PBV or PBRA unit or a Section 18 unit to be assisted under Section 8 PBV.
      2. If, at a converting project, a PHA is using 24 CFR 970.17(b) or 970.17(c) to dispose of other units at the project justified on the grounds that disposition allows more efficient or effective on-site or off-site development (970.17(b)) or to dispose for reasons and goals of the PHA in its PHA plan (970.17(c)) (see Notice PIH 2021-07, as may be amended or succeeded, for more details), HUD may disapprove the conversion if HUD determines that the PHA’s use of both RAD and disposition under sections 970.17(b) or 970.17(c) in a single project undermines the unit replacement requirements of the RAD program.
      3. Notice PIH 2021-07 provided that any PBV HAP contract created under a RAD/Section 18 Small PHA Blend must be administered by an HCV contract administrator with at least 250 HCV units under its HCV Consolidated ACC prior to the creation of such PBV contract. This Notice revises the 250-unit standard and instead provides that the proposed HCV contract administrator must have at least 250 units under its HCV Consolidated ACC prior to the creation of the PBV HAP contract unless the field office determines that the proposed contract administrator has sufficient capacity to administer the PBV contract. The field office will consider factors such as the proposed contract administrator’s prior SEMAP scores, recent HCV-related audit findings for the contract administrator, whether the contract administrator has updated its Section 8 Administrative Plan to administer project-based vouchers, and whether the proposed contract administrator will have sufficient voucher authority, (in addition to any existing RAD or NonRAD PBV HAP Contracts) to adequately serve the tenant-based waiting list and provide mobility options for the PBV residents.
      4. This Notice revises Section 3(A)(2)(e)(1)(a) of Notice PIH 2021-07, which defines high cost areas used for the purposes of defining the percentage of units that may be disposed of through Section 18 pursuant to a RAD/Section 18 Construction Blend, to state that if the hard construction costs are equal to or exceeds ninety percent (90%) of the Housing Construction Costs (HCC) as published by HUD for the given market area, at the PHA’s discretion, up to sixty percent (60%) of the units in the Converting Project may be disposed of under Section 18. For high-cost areas, defined as those where HCC exceeds one hundred and twenty percent (120%) of the national average HCC or where the amount of construction necessary to convert the units from their current condition to the condition proposed as a result of the Work would cost in excess of two hundred percent (200%) of the national average HCC, at the PHA’s discretion up to eighty percent (80%) of the units in the Converting Project may be disposed of under Section 18.

   3. Switching applications. In come cases, after initiating a RAD or SAC application, a PHA may determine to pursue an alternative tool.

   1. After submiting a RAD Application or receiving a CHAP, a PHA must request to suspend its CHAP before submitting a SAC Application for the same units. HUD may subsequently reinstate the CHAP without the resubmission of a complete application described in Section 1.10.
   2. If a PHA that has submitted a SAC applicaton decides to pursue RAD for eligible units, the PHA must first withdraw its SAC application, in writing with a Board Resolution to support the withdrawal.
   3. If a PHA that has been approved for a SAC application decides to pursue RAD for eligible units, the PHA must request that SAC rescind or conditionally rescind its approval of the application. If applicable, the SAC will conditionally rescind its SAC application approval contingent on the successful copletionof the RAD transaction and will modify IMS/PIC accordingly. Units for which a PHA has received a SAC approval are ineligible for RAD if the PHA has taken any of the following actions to implement the Section 18 approval:

      1. executed a demolition contract;
      2. completed a disposition (i.e., transferring title and/or executing a ground lease);
      3. received TPVs from HUD as a result of an approval;37 or
      4. Taken any steps to implement relocation under the approval (i.e., issuing the 90-day notice to residents).
3. Ineligibility for Asset Repositioning Fee (ARF), Replacement Housing Factor (RHF), or Demolition Disposition Transition Funding (DDTF). PHAs will be ineligible to receive ARF, Capital Fund RHF or DDTF grants (see 24 CFR § 990.190(h) and 24 CFR § 905.400(i) and (j), respectively) for Converting Projects that are removed from public housing ACC. RAD does not affect ARF, RHF, or DDTF for other public housing projects either previously receiving those funds or which would otherwise be eligible to receive such funding in the year in which the HAP Contract becomes effective. RAD does not affect the PHA’s continued receipt of ARF, RHF, or DDTF for projects that were previously receiving these funds.

4. Effect of Conversion on PHA’s Faircloth Limit. Section 9(g)(3) of the Act limits the construction of new public housing units, referred to as the “Faircloth Limit.” Under the Faircloth Limit, a PHA may not use funds allocated under the Capital or Operating Funds for the purpose of constructing any new public housing units if the construction of those units would result in a net increase in the number of units the PHA owned, assisted, or operated as of October 1, 1999.

   A PHA’s Faircloth Limit will be reduced by the number of public housing ACC units removed from the public housing inventory as part of a RAD conversion. For example, a PHA with a pre-RAD Faircloth Limit of 1,000 public housing units would have its Faircloth Limit reduced to 900 units if it processed 100 ACC units through RAD, resulting in 95 Section 8 units and 5 units removed from inventory under the de minimis authority.

   Please note that prior versions of the RAD Notice excluded any de minimis units from the Faircloth Limit reduction. The change made in this Notice to include all public housing ACC units from the Faircloth reduction is retroactive to include all completed RAD conversions. However, any PHA that wishes to retain those de minimis units under its Faircloth Limit must contact HUD (PIHOCI@hud.gov) within 90 days of publication of this Notice.

5. 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.

6. Moving To Work (MTW) Agencies. If an MTW agency chooses to convert assistance to PBRA under this Demonstration, the Covered Project(s) will no longer be included as part of the PHA’s MTW program.

   If an MTW agency chooses to convert assistance to PBV, the Covered Project(s) will continue to be included in the PHA’s MTW program. (See Section 1.6 for a discussion on provisions a MTW agency may not alter for properties converting under RAD).

   Further, prior to conversion, MTW agencies with Standard MTW Agreements will be required to amend Attachment A of their MTW Agreement to the extent HUD determines is necessary to meet the statutory requirements of RAD. The PHA must request the amended Attachment A language from its MTW coordinator and follow provided instructions to return an executed Attachment A amendment to HUD no later than the Financing Plan submission.

7. Resident Opportunities and Self Sufficiency Service Coordinators (ROSS-SC) and Family Self-Sufficiency (FSS). In order to allow public housing residents currently participating in ROSS-SC or FSS to continue to do so following conversion, HUD is waiving provisions in section 34 of the Act that limit ROSS-SC to Public Housing and provisions in 23 of the Act that limits FSS to residents of public housing and the housing choice voucher program.

8. Public Housing Assessment System (PHAS). After the PHA submits an application in the PIC Inventory Removals module (or successor module), as either "RAD Conversion PBV" or "RAD Conversion PBRA," for all units covered by the CHAP (see Section 1.12), the Converting Project shall not be issued PHAS scores beginning with the fiscal year in which the PIC removal application was accepted and continuing through subsequent fiscal years until conversion to Section 8. In order for the project to be excluded from PHAS scoring, HUD must accept the application in PIC by the fiscal year end for the project.

   After HUD's acceptance of the application in PIC, but prior to conversion, all projects remain subject to the four PHAS assessments but will not be issued scores for the assessments. “Subject to the four PHAS assessments” means that the PHA must timely submit the required financial data schedule for each project and that the project will be subject to a physical inspection, a management assessment based on the financial submission, and a Capital Fund Program assessment. However, these scores will not be issued. If a PHA has at least one project without an accepted application in PIC by the fiscal year end, the PHA will receive a PHAS score and designation for that fiscal year. If HUD revokes the CHAP, HUD reserves the right to issue the PHAS scores (or reassess and rescore all PHAS indicators, in its sole discretion) and issue the PHAS designation for the projects under the revoked CHAP for all fiscal years during which the application wa pending in PIC.

   HUD is waiving 24 CFR part 902, Subpart A, to effectuate this treatment. After conversion, all converted units will be subject to the applicable Section 8 program requirements.

9. Energy Performance Contract (EPC).²⁷ A PHA may convert all units or a subset of units within an EPC. If a PHA plans to convert a subset of units within an EPC the remaining EPC must be financially viable and permitted under the current financing documents. The EPC must generate sufficient savings to cover debt service and other EPC project costs without counting the savings from the converting units. Unless otherwise approved by HUD, in order to demonstrate this, the PHA must submit updated EPC documentation to HUD’s Energy Center to reflect the costs and performance of the remaining units, including:
   1. Updated HUD Cost Summary Sheet.
   2. Updated HUD Cash Flow.
   3. Other documents as requested by the Energy Center staff.

   The Energy Center will review these documents with 45 days and provide a draft amended EPC approval letter specifying the impact of the RAD conversion and the minimum amount of debt that will need to be addressed in the conversion. As a result, HUD recommends that PHAs submit the updated EPC documentation as early as possible. The PHA’s Financing Plan must demonstrate how the PHA will address the debt identified in the draft amended EPC approval letter. HUD will issue an amended EPC approval letter to the PHA.

10. Capital Fund Education and Training Community Facilities (CFCF) Program. CFCF provides Capital Funds to PHAs for the construction, rehabilitation, or purchase of facilities to provide early childhood education, adult education, and job training programs for public housing residents based on an identified need. Where a community facility has been developed under CFCF in connection with or serving the residents of a Converting Project, residents of the Covered Project will continue to qualify as “PHA residents” for the purposes of CFCF program compliance and must have continued access to the facility. The community facility must continue to be available to public housing residents including “PHA residents.”

11. Lease Termination at Conversion is Not an Adverse Action. 24 CFR § 966.4(e)(8)(i) classifies lease terminations as an adverse action for which a tenant can seek a hearing under the PHA’s grievance procedure. Public housing lease terminations that occur as part of a RAD conversion do not qualify as an adverse action, provided that the tenants are provided with a notice of termination in accordance with 24 CFR § 966.4(l)(3) as well as information on when and how they will receive their new Section 8 lease, which must be effective the same date the HAP Contract becomes effective. Grievance procedure requirements do not apply to these lease terminations.

12. PHA Partnerships.Two or more PHAs may coordinate efforts and pool resources orcapacity with each other pursuant to a contractual agreement among the PHAs towards the effective conversion of assistance of a public housing project. Section 1, below, describes new authorities created under RAD and Section 2, below, describes existing tools available to PHAs notwithstanding the use of RAD authorities.
    1. Where the PHAs demonstrate to HUD mutual agreement under terms acceptable to HUD, participating PHAs may:
       1. Contribute Capital Funds, RHF, DDTF, and public housing Operating Reserves towards the conversion of another PHA’s property consistent and in accordance with Section 1.5;
       2. Forego any anticipated RHF/DDTF funding (funds that have not been awarded and/or funds that have been awarded but not yet disbursed) to boost another PHA’s RAD rents consistent and in accordance withSection 1.6.B.5.c. and 1.7.A.5.c;
       3. Rent bundle across the PHAs’ RAD projects consistent and in accordance with Section 1.6.B.5.b. and 1.7.A.5.b. (PHA partnership rent bundles may not include non-RAD PBV projects);
       4. Transfer available land currently under DOT if the land is needed to facilitate the conversion; and/or
       5. Propose other partnership arrangements extending provisions permissible in this Notice which HUD may approve on a case-by-case basis.
    2. In structuring such arrangements, PHAs may consider other resources already at their disposal, including the ability to:
       1. For PBV conversions, select another PHA with operational jurisdiction to receive the new increment of units under their HCV ACC and to serve as the contract administrator, with the attendant administrative responsibilities and fees, or enter into an agreement to share administrative duties (e.g., Housing Quality Standards inspections vs Subsidy Administration). Where the new increment will be added to the HCV ACC Section I: Public Housing Projects H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation51of an MTW agency to administer the PBV contract, the MTW agency may use the authority as detailed in Section 1.6.B.5.b. to augment rents of the property under contract;
       2. Transfer the RAD PBV or PBRA assistance for the converting project outside of their jurisdiction to a project and owner (including another PHA or its affiliate or instrumentality) that satisfies the ownership and control requirements described in Section 1.4.A.11 and all other RAD transfer of assistance requirements under 1.4.A.12;
       3. Provide development guarantees using non-federal funds;
       4. Serve as Developer;
       5. Serve as Management Agent; and/or
       6. Undertake a voluntary transfer or consolidation of HCV programs (i.e. transferring budget authority and corresponding baseline units for the HCV program in accordance with Notice PIH 2015-22).

    As an example, PHA A could seek to convert Property A in partnership with PHA B. PHA B could provide Capital Funds as a source of funds for the conversion and, in exchange, PHA A could agree to have PHA B serve as the PBV administering voucher agency for the Covered Project, even though PHA A might have a voucher program.

13. Section 33 Required Conversion Review.⁴¹ While Section 33 of the Act would require that a PHA annually review its inventory to identify projects that should undergo the Required Conversion process, PHAs will not be required to assess projects that have been issued a CHAP or are covered by a Portfolio Award because HUD considers the RAD conversion process to fulfill the requirements of Section 33 of the Act. Accordingly, HUD is waiving 24 CFR part 972, subpart A for projects covered by a CHAP or a Portfolio Award.

Under the Demonstration, HUD has the authority to waive statutory and regulatory provisions governing the PBV program, or to establish alternative requirements for the effective conversion of assistance. Additionally, the RAD Statute imposes certain unique requirements and authorizes HUD to establish requirements for converted assistance under the Demonstration.

Listed below are the “special” requirements applicable to public housing projects converting assistance to long-term PBV assistance under the First Component of the Demonstration, with reference to the affected statute and/or regulation, where applicable. Special requirements are grouped into four categories: Project Selection, Contract Terms, Resident Rights and Participation, and Other Miscellaneous Provisions. All other regulatory and statutory requirements of the PBV program in 24 CFR part 983 and section 8(o)(13) of the Act apply, including environmental review, lead-based paint requirements, Davis-Bacon, and fair housing requirements.

MTW agencies will be able to apply activities impacting the PBV program that are approved in their MTW Plans or included in the MTW Supplement to an approved PHA plan to these properties as long as they do not conflict with RAD requirements. RAD requirements include RAD statutory requirements, provisions of the PBV program specifically addressed in this Notice (including provisions explicitly listed in Section 1.6 of this Notice as provisions of the PBV program that MTW agencies may not alter for properties converting under RAD), other conditions and requirements of this Notice, or RAD contract forms or riders. With respect to any existing PBV regulations that are waived or modified in this Section 1.6 pursuant to RAD authority, except where explicitly noted below, MTW agencies may modify these or other requirements of the PBV program if the activity is approved in its MTW Plan or included in the MTW Supplement to an approved PHA plan. All other RAD Requirements listed below or elsewhere in this Notice shall apply to MTW agencies.

So as to facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the Covered Project shall be subject to the same waivers and alternative requirements where noted below.

Finally, the Housing Opportunity Through Modernization Act of 2016 (HOTMA) and HUD’s implementation notices³⁰ (“HOTMA Implementation Notice”) modified the PBV program in ways that partially or completely obviate the need for certain prior waivers or alternative requirements adopted in RAD. These are noted below.

1. PBV Project Selection.
   1. PBV Percentage Limitation. RAD PBV units in Covered Projects do not count against the percentage limitation applicable to the PBV program. The HOTMA Implementation Notice excludes PBV units at formerly federally assisted properties from the percentage limitation, which means neither the RAD PBV units nor the nonPBV RAD units count against the PBV program cap when the Covered Project is located at the same site as the converting public housing project. Furthermore, HUD is waiving section 8(o)(13)(B) of the Act as well as 24 CFR § 983.6 with respect to RAD PBV units and non-RAD PBV units within a Covered Project when such units are replacing public housing units at the time of the conversion at a new location. However, in such a case any additional PBV units subsequently placed at the former public housing site would not be exempt from the percentage limitation applicable to the PBV program. In other words, the number of PBV units excluded from the PHA’s PBV program cap cannot exceed the number of former public housing units that those PBV units are replacing through the course of the RAD conversion. All PBV units in a Covered Project that replace former public housing units at the time of conversion are excluded from both the numerator and the denominator when calculating the percent of vouchers that may be project-based by a PHA.
   2. Cap on the Number of PBV Units in Each Project. There is no cap on the number of units that may receive RAD PBV assistance in each project. Under the HOTMA Implementation Notice, certain formerly assisted properties are excepted from the project cap. For any Covered Projects not covered under the HOTMA Implementation Notice, including transfers of assistance to a new location, HUD is waiving section 8(o)(13)(D) of the Act, as well as related provisions of 24 CFR §§ 983.56, 983.257(b), 983.262(a) and (d). Accordingly, units under the contract may not be "excepted" for a specified purpose.
   3. Owner Proposal Selection Procedures. In addition to situations already covered under the HOTMA Implementation Notice (e.g., cases where a PHA may attach PBV assistance to units in which the PHA has an ownership interest as part of an initiative to improve, develop, or replace public housing), HUD is waiving 24 CFR § 983.51 so that a RAD PBV HAP contract is never subject to competitive selection requirements. With respect to site selection standards, HUD requires compliance with the site selection standards as set forth in this Notice. To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units in the same Covered Project, shall be subject to the terms of this provision.
   4. Site selection – Compliance with PBV Goals, section 8(o)(13)©(ii) of the Act and 24 CFR § 983.57(b)(1) and ©(2). HUD waives these provisions having to do with deconcentration of poverty and expanding housing and economic opportunity, for the existing site. To facilitate the uniform treatment of residents and units at Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.
2. PBV Contract Terms.
1. Length of Contract. Covered Projects shall have an initial HAP Contract term of at least 15 years (up to 20 years upon request of the Project Owner and with approval by the administering Voucher Agency). To implement this provision, HUD is specifying alternative requirements for section 8(o)(13)(F) of the Act (which permits a minimum term of one year) as well as 24 CFR § 983.205(a) (which governs contract term). Project Owners are required to make available for occupancy by eligible tenants the number of assisted units under the terms of the contract and may not reduce the number of assisted units without written HUD approval. Any HUD approval of a PHA’s request post-conversion to reduce the number of assisted units under the contract is subject to conditions that HUD may impose. MTW agencies may not alter this requirement.

2. Mandatory Contract Renewal. In accordance with the RAD Statute, at or prior to the expiration of the initial contract and each renewal contract, the administering Voucher Agency must offer, and the Project Owner must accept, renewal of the contract subject to the terms and conditions applicable at the time of renewal and the availability of appropriations each year for such renewal. The renewal contract(s) shall be for the prescribed number and mix of units but may, upon request of the Project Owner and subject to HUD and Contract Administrator approval, be on one or more transfer of assistance sites in lieu of the project site subject to th expiring contract. Consequently, section 8(o)(13)(G) of the Act, as well as 24 CFR § 983.205(b), governing the PHA discretion to renew the contract, will not apply to the extent that these provisions make renewal or extension decisions purely discretionary. However, Contract Administrators and Project Owners may choose to extend the initial HAP Contract term consistent with these provisions and are encouraged to do so a minimum of one year prior to the expiration of the contract so as to avoid unnecessary notice to residents per 24 CFR 983.206. The ability to extend the HAP Contract term consistent with these provisions does not negate, in any way, the mandatory renewal provision detailed in the first sentence of this paragraph. MTW agencies may not alter this requirement.

3. Ownership or Control. This section has been moved to Section 1.4.A.11

4. RAD Use Agreement. This section has been moved to Section 1.4.A.13.

5. Initial Contract Rent Setting. No additional or incremental funding is associated with tihs Demonstration. HUD has calculated initial contract rents for every public housing project based on each project’s subsidy under the public housing program. All RAD applications, including applications for Portfolio Awards, will have initial contract rents based on their “RAD rent base year” described in Attachment 1C. PHAs have additional discretion in establishing initial contract rents using the following flexibilities:
   1. MTW Fungibility. MTW agencies may use their MTW funds to set the initial contract rents higher than the normally applicable contract rent cap that is based on the project's public housing subsidy. However, the initial contract rent set by the PHA is still subject to all other applicable program caps. The agency must use existing MTW funds to supplement the initial contract rents; HUD will only provide new incremental voucher funding for the first full calendar year following conversion using per unit costs (PUCs) based on normally applicable public housing subsidy initial rent caps. Any use of MTW funds in setting higher initial contract rents shall be subject to subsidy layering review and MTW continued service requirements, as calculated using the MTW Baseline Methodology described in Notice PIH 2013-02, or successor notice.
   2. Rent Bundling. Subject to HUD approval, PHAs may adjust subsidy (and initial contract rents) across multiple projects as long as the PHA does not exceed the aggregate subsidy for all of the projects the PHA has submitted for conversion under RAD. For example, assume that a PHA is considering bundling two identical projects, both consisting of 100 units. In Project A, the contract rent is $500; and in Project B, the contract rent is $600. The PHA could bundle the two projects such that the initial contract rents for both projects will be $550. This use, which HUD refers to as "bundled" rents, can occur under the following scenarios:
      1. When a PHA is converting two or more properties within its public housing portfolio. The execution and effective date of the HAP Contract for the donor HAP Contract must occur prior to or simultaneous with the effective date of the recipient HAP Contract;
      2. When PHAs have formed a Partnership in accordance with Section 1.5.M and are bundling rents between two or more converting projects. The execution and effective date of the HAP Contract for the donor HAP Contract must occur prior to or simultaneous with the effective date of the recipient HAP Contract; and
      3. When a PHA bundles rents between a converting project and non-RAD Project-Based Vouchers. In such a case, the PHA must use its own voucher funding to supplement the higher RAD rent that is being offset by the lower PBV rent for the non-RAD PBV project or projects; no additional voucher funding will be provided through RAD. HUD will review the rents proposed for the non-RAD PBV HAP Contract to ensure that the PHA does not exceed the aggregate subsidy otherwise available for all ofthe rent-bundled projects. Except as provided in section 1.6.B.d below, the execution and effective date of the HAP Contract forthe donor project must occur prior to or simultaneous with the effective date of the recipient HAP Contract.The owner of the property with the non-RAD PBV HAP Contract must request an initial rent (or redetermined rent if the contract has already been executed) in accordance with 24 CFR §§ 983.301(b)(3) and 983.302 that reflects the amount approved by HUD. To ensure that aggregate HAP costs do not exceed the costs incurred absent Section I: Public Housing Projects H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation56this provision, the owner of the property with the non-RAD PBV HAP Contract must agree not to request, in accordance with 24 CFR § 983.301(b)(3), a redetermined rent that exceeds the OCAF-adjusted rent. This OCAF limitation is in addition to the existing PBV rent limitations in 24 CFR § 983.301(b) more generally. The donor HAP Contract must have a remaining contract term at least as long as the recipient HAP Contract.
      4. Where an Agreement to enter into a HAP Contract (AHAP) is used on the non-RAD PBV HAP Contract and the RAD and non-RAD PBV projects are subject to a single financing, the execution and effective date of the AHAP for the donor HAP Contract must occur prior to or simultaneous with the conversion of the recipient HAP Contract. The recipient RAD PBV HAP Contract will include rent schedules for both unadjusted rents and the anticipated rent bundled rents. The unadjusted rents are the initial effective rents for the RAD PBV recipient project. At the completion of rehab/construction of the donor project, where the terms of the AHAP have been satisfied and the PHA and owner of the donor property are ready to execute a HAP contract, the cost-neutral application of the bundled rents will occur. 1) the HAP for the non-RAD PBV HAP Contract will be determined based on the initial rent, which is the PBV rent the project would have been eligible for under the PBV initial rent requirements at 24 CFR § 983.301 reduced by the amount that has been bundled to the RAD HAP Contract. 2) Upon the effective date of the non-RAD PBV donor HAP Contract, the HUD-approved rent bundled rents at the RAD HAP Contract will become effective. For example, assume two 100 unit properties that will be redeveloped under a single financing transaction, one developedunder standard PBV through an AHAP and another through RAD. The estimated rents for the standard PBV are $1,000 while the standard RAD rents are $500. The PHA plans to rent bundle to increase the RAD rents to $750. Construction will occur on the same timeline and the RAD PBV HAP Contract will close at the same time as the AHAP is executed. The RAD PBV HAP Contract will include unadjusted, pre-construction rents ($500)as well as adjusted, post-construction rents ($750). The AHAP will include estimated PBV rents, adjusted downward by $250. When construction is completed, the post-construction rents on the RAD HAP Contract will take effect when the donor non-RAD PBV HAP Contract becomes effectve. The PHA will determine the initial contract rents for the non-RAD PBV donor project in accordance with PBV requirements and deduct $250 from that amount.

      Please note that per Section 1.13.B.5, regardless of the initial contract rents for the RAD HAP Contract, including as modified by this provision, in the year of conversion the COvered Project will only be assisted by the Operating and Capital Funds obligated to the PHA for that project.

   3. Future Replacement Housing Factor (RHF) or Demolition Disposition Transition Funding (DDTF).44 PHAs that are scheduled to receive ongoing RHF or DDTF funding (funds that have not been awarded and, with HUD permission, funds that have been awarded but not yet disbursed) may choose to forgo any ongoing RHF or DDTF grants for the purpose of offsetting an increase to the RAD rent. See Attachment 1C for the calculation of how RHF or DDTF funding may offset increased RAD rent.
   4. PBV Site-Specific Utility Allowances. PHAs may elect to establish a site-specific Utility Allowance for any Covered Project. HUD is waiving 24 CFR 983.2(c)(6)(iii), which requires the PHA to apply the HCV Utility Allowance schedule for PBV properties, and HUD is establishing an alternative requirement. The Utility Allowance shall be calculated consistent with Notice H 2015-04 unless PIH promulgates guidance specific to the PBV program. The Project Owner may carry out all of the responsibilities associated with Notice H 2015-04, but the PHA must ensure that the Utility Allowance is calculated correctly. This waiver and alternative requirement shall also apply to non-RAD PBV units located at the Covered Project.
   5. Tenant-Paid Utility Savings. Where a Covered Project will use a site-specific utility allowance as described in sub-paragraph iv. and the conversion will result in the reduction of one or more utility components (e.g., gas, water & sewer, electric) used to establish the Utility Allowance relative to the utility allowance of the Converting Project (i.e., the public housing project), HUD will permit the RAD contract rent to be increased by a portion of the utility savings. See Attachment 1C for additional detail.

      Notwithstanding HUD’s calculation of the initial contract rent based on the project’s subsidy under the public housing program and any modifications to the initial contract rent permitted under this Notice, initial PBV contract rents are subject to the statutory and regulatory PBV requirements governing contract rents (see 24 CFR §983.301), (except where alternative rent caps have been approved in a MTW Plan orincluded in an MTW Supplement to the PHA Plan). To this effect, initial contract rents cannot exceed the lower of: (a) the reasonable rent (as defined under 24 CFR §983.303); (b) an amount determined by the PHA, not to exceed 110 percent of the applicable FMR (or applicable exception payment standard, or rent cap approved in an MTW Plan or included in an MTW Supplement to the PHA Plan), minus any utility allowance; or (c) the rent requested by the owner.

   6. Faircloth-to-RAD Initial Contract Rents. The initial contract rents for the Faircloth-to-RAD units will be based on the project’s reasonably anticipated subsidy under the public housing program in accordance with a “RAD rent base year” described in Attachment 1C, as set forth in the NARR. In addition to applicable flexibilities as set forth in this Section 1.6.B.5, non-MTW PHAs may use existing HAP reserve funds to set the initial contract rents higher than the contract rent that is set forth in the NARR if the project meets both of the following conditions:
      i. The Faircloth-to-RAD units may not make up more than:
         a) The greater of 25 units or 25% of the units in the project; or
         b) The greater of 25 units or 40% of units in the project if it is in census tract where the poverty rate is no greater than 20%.
         c) The limitations in (a) and (b) above shall not apply to units that are made exclusively available to people who are elderly, eligible for supportive services, or youth receiving HCV Family Unification Program assistance.
      ii. The Faircloth-to-RAD project is in one of the following locations:
          a) A Metropolitan Statistical Area, Micropolitan Statistical Area, or ZIP code where the rental vacancy rate is less than 4 percent; or
          b) A ZIP code where 90 percent of the Small Area FMR is more than 110 percent of the metropolitan area FMR.
      
      When a non-MTW PHA uses existing HAP reserves to supplement the initial contract rents, HUD will only provide new incremental voucher funding for the first full calendar year following conversion using per unit costs (PUCs) based on normally applicable public housing subsidy levels. The initial contract rent is still subject to all other applicable program caps, and any use of the flexibilities referenced above in setting higher initial contract rents shall be subject to subsidy layering review.

   7. Initial PBV Rent Cap. Notwithstanding HUD’s calculation of the initial contract rent based on the project’s subsidy under the public housing program and any modifications to the initial contract rent permitted under this Notice, initial PBV contract rents are subject to the statutory and regulatory PBV requirements governing contract rents (see 24 CFR § 983.301), (except where alternative rent caps have been approved in a MTW Plan or included in an MTW Supplement to the PHA Plan). To this effect, initial contract rents cannot exceed the lower of: (a) the reasonable rent (as defined under 24 CFR § 983.303); (b) an amount determined by the PHA, not to exceed 110 percent of the applicable FMR (or applicable exception payment standard, or rent cap approved in an MTW Plan or included in an MTW Supplement to the PHA Plan), minus any utility allowance; or (c) the rent requested by the owner.

6. Method of Adjusting Contract Rents. Contract rents will be adjusted only by HUD’s OCAF (which is applied only to the portion of the rent not attributable to debt service) at each anniversary of the HAP Contract, subject to the availability of appropriations for each year of the contract term.³² As such, section 8(o)(13)(I) of the Act and 24 CFR §§ 983.301 and 983.302, concerning rent determinations, shall not apply when adjusting rents. The rent to owner may at no time exceed the reasonable rent charged for comparable unassisted units in the private market, as determined by the Contract Administrator in accordance with 24 CFR § 983.303.30 However, the rent to owner shall not be reduced below the initial rent to owner for dwelling units under the initial HAP Contract.³³ MTW agencies may not alter this requirement.

7. Role of Independent Entity. Where the Covered Project is PHA-owned in accordance with section 8(o)(11) of the Act as amended by HOTMA (see Attachment A in Notice PIH 2017-21 for guidance on PHA-owned units), in addition to the standard roles described in 24 CFR 983.59(b) (i.e., determining reasonable rents and conducting HQS inspection) the independent entity must also determine the OCAF adjustment.
8. Transfer of Assistance. This section has been moved to Section 1.4.A.12.

9. Agreement Waiver and RAD Rehab Assistance Payments. For public housing conversions to PBV there will be no Agreement to Enter into a Housing Assistance Payments (AHAP) contract. Therefore, all regulatory references to the AHAP, including regulations under 24 CFR part 983 subpart D are waived. Instead, the PHA and Project Owner typically will enter into a HAP Contract before construction begins. During the period of Work identified in the RCC, standard HAP Contract funding procedures will be used for occupied units. Units covered under the HAP Contract that are not occupied at any point during the period of Work identified in the RCC may be eligible, subject to the conditions below, for Rehab Assistance Payments equal to the Public Housing Operating Fund and the Capital Fund amounts that formed the basis for the calculation of initial contract rents (see Attachment 1C). During the period of rehabilitation or construction as identified in the RCC, 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 or Capital Fund subsidy prior to conversion. As a result, some units in the Covered Project may not be eligible for Rehab Assistance Payments.

   The Project Owner will no longer be eligible to receive RAD Rehab Assistance Payments upon the earlier of completion of the Work or expiration of the time period identified in the RCC for completiono f all Work, which date is specified in the HAP contract. After such date, all units under the HAP Contract will be eligible for payment only for occupied units or for vacancy payments, as applicable. MTW agencies may not alter this requirement.

10. HQS Inspections. Under current regulations at 24 CFR 983.103(b) a unit covered under a HAP Contract must be inspected for compliance with HQS before assistance can be paid on behalf of a household, unless the PHA is using HOTMA non-life threatening and alternative inspection provisions. In addition, section 8(o)(8)(A) of the Act provides that HAP Contract units must be inspected to ensure compliance with HQS prior to payment of any assistance on behalf of a family. When Work is occurring under RAD, HUD requires that all units undergo inspection for HQS no later than the date of completion of the Work as indicated in the RCC. To place the unit under HAP contract and commence making payments, the PHA may rely on the owner’s certification that the owner has no reasonable basis to have knowledge that life-threatening conditions exist in the unit or units to be added to the HAP Contract instead of conducting an initial inspection. During the period of the Work, HQS requirements apply. The PHA must enforce the Project Owner’s obligations under this paragraph and conduct inspections when needed, for example in response to tenant complaints or other information coming to its attention, and the owner must correct any deficiencies in accordance with HQS requirements (i.e. no more than 24 hours for a life-threatening deficiency, and within no more than 30 calendar days or any PHA-approved extension for other defects, but no later than the date of the completion of the Work as indicated in the RCC). To effectuate the revised initial inspection requirement for RAD PBV units and non-RAD PBV units within a Covered Project when such units are replacing public housing units at the time of conversion, HUD is waiving and establishing an alternative requirement to 24 CFR 983.103(b) and section 8(o)(8)(A) of the Act.

     

11. Floating Units. Upon the request of the owner to the Voucher Agency that will administer the Covered Project, HUD will permit PBV assistance to float among units within the project having the same bedroom size. A unit to which assistance is floated must be comparable in condition to the unit it is replacing (i.e., the unit must be of the same quality and amenities as the unit it is replacing). Assistance may float from a required UFAS accessible unit only to another UFAS accessible unit that has the same bedroom size and accessibility features. If assistance floats to a UFAS accessible unit as a reasonable accommodation for a household that had not previously been in a UFAS unit the assistance may float back to a non-UFAS unit when there is no longer a need for the reasonable accommodation provided the required number of UFAS units is maintained. Units that float are not specifically designated under the HAP Contract. Therefore, the requirements in 24 CFR § 983.203© that the HAP Contract provide “the location of each contract unit” and “the area of each contract unit” are waived. Instead, the HAP Contract must specify the number and type of units in the property that are designated as RAD units, including any excepted units. From the time of the initial execution of the PBV RAD HAP Contract, the property must maintain the same number and type of UFAS accessible units. Floating units are subject to all of the requirements in this Notice and the PBV regulations, including physical inspections, rent adjustments, and income-mixing requirements. The alternative requirements with respect to floating units do not apply to non-RAD PBV units.
3. PBV Resident Rights and Participation.

   1. No Rescreening of Tenants upon Conversion. Pursuant to the RAD Statute, at conversion, current households cannot be excluded from occupancy at the Covered Project based on any rescreening, income eligibility, or income targeting. With respect to occupancy in the Covered Project, current households in the Converting Project will be grandfathered for application of any eligibility criteria to conditions that occurred prior to conversion but will be subject to any ongoing eligibility requirements for actions that occur after conversion.32 Post-conversion, the tenure of all residents of the Covered Project is protected pursuant to PBV requirements regarding continued occupancy unless explicitly modified in this Notice (e.g., rent phase-in provisions). For example, a unit with a household that was over-income at time of conversion would continue to be treated as an assisted unit. Thus, Section 8(o)(4) of the 1937 Act and 24 CFR § 982.201, concerning eligibility and targeting of tenants for initial occupancy, will not apply for current households. Once the grandfathered household moves out, the unit must be leased to an eligible family. MTW agencies may not alter this requirement. Further, so as to facilitate the right to return to the assisted property, HUD waives Section 8(o)(4) and 24 CFR § 982.201 to the extent necessary for this provision to apply to current public housing residents of the Converting Project that will reside in non-RAD PBV units or non-RAD PBRA units placed in a project that contain RAD PBV units or RAD PBRA units. Such families and such contract units will otherwise be subject to all requirements of the applicable program, specifically 24 CFR Part 983 for non-RAD PBV units and the PBRA requirements governing the applicable contract for non-RAD PBRA units.33

   2. Right to Return. See section 1.4.A.5.b. and the RAD Fair Housing, Civil Rights, and Relocation Notice regarding a resident’s right to return. To facilitate the uniform treatment of residenets and units at a Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.

   3. Phase-in of Tenant Rent Increases. If, purely as a result of conversion, the amount a tenant would pay for rent and utilities under the PBV program (the tenant’s TTP) would increase the tenant's TTP by more than the greater of 10 percent or $25, the rent increase will be phased in over 3 or 5 years. To implement this provision, HUD is specifying alternative requirements for section 3(a)(1) of the Act, as well as 24 CFR § 983.3 (definition of “total tenant payment” (TTP)) to the extent necessary to allow for the phase-in of tenant rent increases. A PHA must create a policy setting the length of the phase-in period at three years, five years or a combination depending on circumstances and must communicate such policy in writing to affected residents. For example, a PHA may create a policy that uses a three year phase- in for smaller increases in rent and a five year phase-in for larger increases in rent. This policy must be in place at conversion and may not be modified after conversion.

      The method described below explains the set percentage-based phase-in a Project Owner must follow according to the phase-in period established. For purposes of this section “Calculated PBV TTP” refers to the TTP calculated in accordance with regulations at 24 CFR §5.628 and the “most recently paid TTP” refers to the TTP recorded on line 9j of the family’s most recent HUD Form 50058. If a family in a project converting from Public Housing to PBV was paying a flat rent immediately prior to conversion, the PHA should use the flat rent amount to calculate the phase-in amount for Year 1 (the first recertification following conversion), as illustrated below.

      Three Year Phase-in:

      • Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 33% of difference between most recently paid TTP or flat rent and the Calculated PBV TTP
      • Year 2: Year 2 Annual Recertification (AR) and any Interim Recertification (IR) prior to Year 3 AR – 50% of difference between most recently paid TTP and the Calculated PBV TTP
      • Year 3: Year 3 AR and all subsequent recertifications – Full Calculated PBV TTP⁵²

      Five Year Phase in:

      • Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 20% of difference between most recently paid TTP or flat rent and the Calculated PBV TTP
      • Year 2: Year 2 AR and any IR prior to Year 3 AR – 25% of difference between most recently paid TTP and the Calculated PBV TTP
      • Year 3: Year 3 AR and any IR prior to Year 4 AR – 33% of difference between most recently paid TTP and the Calculated PBV TTP
      • Year 4: Year 4 AR and any IR prior to Year 5 AR – 50% of difference between most recently paid TTP and the Calculated PBV TTP
      • Year 5 AR and all subsequent recertifications – Full Calculated PBV TTP

      Please Note: In either the three year phase-in or the five-year phase-in, once the Calculated PBV TTP is equal to or less than the previous TTP, the phase-in ends and tenants will pay full TTP from that point forward. MTW agencies must also implement a three or five-year phase-in for impacted residents, but may alter the terms above as long as it establishes a written policy setting forth the alternative terms. To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.

      • Family Self Sufficiency (FSS) and Resident Opportunities and Self Sufficiency Service Coordinator (ROSS-SC) programs. Public Housing residents that are currently FSS participants will continue to participate in the PHA's FSS program. The PHA may continue to use any FSS funds already awarded to serve those FSS participants who live in units converted by RAD. At the completion of the FSS grant, PHAs should follow the normal closeout procedures outlined in the grant agreement. If the PHA continues to run an FSS program that serves PH and/or HCV participants, the PHA will continue to be eligible (subject to NOFA requirements) to apply for FSS funding. 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 subsequent Appropriation Acts), 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 until provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act are implemented, 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 (current, or as amended), 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 78100.35 Further, upon conversion to PBV, if the PHA no longer has a public housing program, funds 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.⁵⁴

        For information on FSS PIC reporting requirements for RAD conversions, see Notice PIH 2016-08 at http://portal.hud.gov/hudportal/documents/huddoc?id=pih2016- 08.pdf.

        Current ROSS-SC grantees will be able to finish out their current ROSS-SC grants once their housing is converted under RAD. However, once the property is converted, it will no longer be eligible to be counted towards the unit count for future ROSS-SC grants, nor will its residents be eligible to be served by future ROSS-SC grants, which, by statute, can only serve public housing residents. At the completion of the ROSS-SC grant, PHAs should follow the normal closeout procedures outlined in the grant agreement. Please note that ROSS-SC grantees may be a non-profit or local Resident Association and this consequence of a RAD conversion may impact those entities. To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.

      • Resident Participation and Funding. In accordance with Attachment 1B, residents of Covered Projects with assistance converted to PBV will have the right to establish and operate a resident organization for the purpose of addressing issues related to their living environment and be eligible for resident participation funding. To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.

      • Resident Procedural Rights. The following items must be incorporated into both the Section 8 Administrative Plan and the Project Owner’s lease, which includes the required tenancy addendum (HUD Form 52530-c), as appropriate. Evidence of such incorporation may be requested by HUD for purposes of monitoring the program.
        1. Termination Notification. HUD is incorporating additional termination notification requirements to comply with section 6 of the Act for public housing projects that convert assistance under RAD and to non-RAD PBV units located at the Covered Project. In addition to the regulations at 24 CFR § 983.257 related to Project Owner termination of tenancy and eviction (which MTW agencies may not alter), the termination procedure for RAD conversions to PBV will require that PHAs provide adequate written notice of termination of the lease which shall be:
           1. A reasonable period of time, but not to exceed 30 days:
              1. If the health or safety of other tenants, Project Owner employees, or persons residing in the immediate vicinity of the premises is threatened; or
              2. In the event of any drug-related or violent criminal activity or any felony conviction;
           2. Not less than 14 days in the case of nonpayment of rent; and
           3. Not less than 30 days in any other case, except that if a State or local law provides for a shorter period of time, such shorter period shall apply.
        2. Grievance Process. Pursuant to requirements in the RAD Statute, HUD is establishing additional resident procedural rights to comply with section 6 of the Act.

           For the termination of assistance and several other PHA determinations, PBV program rules require the PHA to provide an opportunity for an informal hearing, as outlined in 24 CFR § 982.555. RAD will specify alternative requirements for 24 CFR § 982.555(b) in part, which outlines when informal hearings are not required, to require that:

           1. In addition to reasons that require an opportunity for an informal hearing given in 24 CFR § 982.555(a)(1)(i)-(vi),36 an opportunity for an informal hearing must be given to residents for any dispute that a resident may have with respect to a Project Owner action in accordance with the individual’s lease or the contract administrator in accordance with RAD PBV requirements that adversely affect the resident’s rights, obligations, welfare, or status.
              1. For any hearing required under 24 CFR § 982.555(a)(1)(i)-(v), the contract administrator will perform the hearing, as is the current standard in the program. The hearing officer must be selected in accordance with 24 CFR § 982.555€(4)(i).
              2. For any additional hearings required under RAD, the Project Owner will perform the hearing.
           2. There is no right to an informal hearing for class grievances or to disputes between residents not involving the Project Owner or Contract Administrator.
           3. The Project Owner gives residents notice of their ability to request an informal hearing as outlined in 24 CFR § 982.555©(1) for informal hearings that will address circumstances that fall outside of the scope of 24 CFR § 982.555(a)(1)(i)-(vi).
           4. The Project Owner provides opportunity for an informal hearing before an eviction.

           Current PBV program rules require that hearing procedures must be outlined in the PHA’s Section 8 Administrative Plan.

           To facilitate the uniform treatment of residents and units at Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.

      • Earned Income Disregard (EID). Tenants who are employed and are currently receiving the EID exclusion at the time of conversion will continue to receive the EID after conversion, in accordance with regulations at 24 CFR § 5.617. Upon the expiration of the EID for such families, the rent adjustment shall not be subject to rent phase-in, as described in Section 1.6.C.4; instead, the rent will automatically rise to the appropriate rent level based upon tenant income at that time.

        Under the Housing Choice Voucher program, the EID exclusion is limited only to persons with disabilities (24 CFR § 5.617(b)). In order to allow all tenants (including non-disabled persons) who are employed and currently receiving the EID at the time of conversion to continue to benefit from this exclusion in the PBV project, the provision in 24 CFR § 5.617(b) limiting EID to disabled persons is waived. The waiver, and resulting alternative requirement, apply only to tenants receiving the EID at the time of conversion. No other tenant (e.g., tenants that move into the property following conversion or tenants who at one time received the EID but are not receiving the EID exclusion at the time of conversion due to loss of employment) is covered by this waiver. To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.

      • Jobs Plus. Jobs Plus grantees awarded FY14 and future funds that convert the Jobs Plus target projects(s) under RAD will be able to finish out their Jobs Plus period of performance unless significant relocation and/or change in building occupancy is planned. If either is planned at the Jobs Plus target project(s), HUD may allow for a modification of the Jobs Plus work plan or may, at the Secretary’s discretion, choose to end the Jobs Plus program at that project. If the program is continued, the Project Owner must agree to continue to implement the program according to HUD’s program requirements. Jobs Plus target public housing projects must enroll public housing residents into the Jobs Plus rent incentive, JPEID, prior to conversion. Any resident of the Covered Project that had not enrolled prior to conversion is not eligible to enroll in JPEID but may utilize Jobs Plus services that predominantly benefit the former public housing residents who resided at the target project at the time of RAD conversion. To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the Covered Project may voluntarily utilize Jobs Plus services that predominantly benefit the former public housing residents who resided at the target project at the time of RAD conversion.

      • When Total Tenant Payment Exceeds Gross Rent. Under normal PBV rules, the PHA may select an occupied unit to be included under the PBV HAP Contract only if the unit’s occupants are eligible for housing assistance payments (24 CFR § 983.53(c)). Also, a PHA must remove a unit from the HAP Contract when no assistance has been paid for 180 days because the family’s TTP has risen to a level that is equal to or greater than the Gross Rent. (24 CFR § 983.258 and § 983.211).
        
        Pre-Conversion Residents. Since the rent limitation under this Section of the Notice may result in current residents having TTPs that exceed the Gross Rent, 24 CFR §983.53(c) does not apply in order to provide RAD PBV assistance to residents who were living in the Converting Project prior to conversion. As necessary to further implement the alternative requirements described below, HUD is waiving 24 CFR §983.258 and §983.211, as well as the provisions of Section 8(o)(13)(H) of the Act and the implementing regulations at 24 CFR § 983.301 as modified by Section 1.6.B.5 of this Notice.
        
        HUD is establishing an alternative requirement that the unit for a family with a TTP that equals or exceeds Gross Rent must be placed on the PBV HAP Contract and the family shall be admitted to the PBV program. In such cases the resident is considered a participant under the PBV program and all the family obligations and protections under RAD and PBV apply to the resident.
        
        During any period when the family’s TTP is equal to or above the Gross Rent, the zero-HAP family will pay an alternate rent to owner that is the lower of:
          a. the family’s TTP less the Utility Allowance, subject to any required phase-in pursuant to Section 1.6.C.3 of this Notice; or
          b. the Zero-HAP Rent Cap, which is the lower of either:
              i. 110% of the applicable FMR less the Utility Allowance; or
              ii. In the event the units are subject to more restrictive rent setting requirements under the LIHTC or HOME programs, or other programs approved by HUD on a project-specific basis, the rent to owner set to comply with such requirements.
        
        During any period that the family’s TTP falls below the Gross Rent, the normal PBV requirements apply and the family would pay 30% of adjusted income, less utility allowance.
        
        After a family has paid the Zero-HAP Rent Cap as set by this Section for a period of 180 days, the PHA shall remove the unit from the HAP Contract and the family’s participation in the PBV program ends.41 If the Covered Project is fully assisted and the family subsequently leaves the property, the PHA must reinstate the unit back onto the HAP Contract and admit an eligible family. If the Covered Project is partially assisted and the family subsequently leaves the property, the unit must be reinstated back onto the HAP Contract unless the PHA previously substituted a different unit on the HAP Contract in accordance with 24 CFR § 983.207 or, where “floating units” have been permitted, Section 1.6.B.10 of the Notice.
        
        Additionally, if the family continues to reside in the project after the family’s unit was removed from the HAP Contract, the family may request to return to the PBV program if the family’s income subsequently decreases to the extent that the family’s TTP is less than the Zero-HAP Rent Cap set by this section and the family is otherwise eligible for PBV assistance. The PHA shall, at the earliest opportunity4B-8 , reinstate the family’s unit back onto the HAP Contract to provide rental assistance to the family. All PBV requirements with respect to the unit, such as compliance with HQS, apply while the unit is under the HAP Contract or added back to the HAP Contract.
        
        New Admission Families. Unless a PHA requests and receives the waiver described below, any new admission to the Covered Project must meet the eligibility requirements at 24 CFR § 982.201 and require a subsidy payment at admission to the PBV program, which means the family’s TTP may not equal or exceed the Gross Rent for the unit at that time. Furthermore, a PHA must remove a new admission family’s unit from the PBV HAP Contract when no assistance has been paid for 180 days because a new admission family’s TTP subsequently increased to equal or exceed the Gross Rent. However, HUD is imposing an alternative requirement in such cases. If the project is fully assisted and the family subsequently leaves the property, the PHA must reinstate the unit on the HAP Contract and admit an eligible family. If the project is partially assisted, the PHA may substitute a different unit for the unit on the HAP Contract in accordance with 24 CFR § 983.207 or, where “floating units” have been permitted, Section 1.6.B.10 of the Notice.
        
        In circumstances where low RAD PBV rents may prohibit a significant number of otherwise eligible families on the waiting list from being admitted to the project because they do not require subsidy, and which could consequently create an undue concentration of poverty at the project compared to non-RAD PBV projects, a PHA may request a waiver of 24 CFR §§983.53(c), 983.259, 983.211, and 983.301 from HUD for the Covered Project. The waiver will apply the alternative requirements applicable to the pre-conversion residents in this Section to new admission families.
        
        The PHA may request the waiver during the RAD conversion process or may subsequently request the waiver any time after the effective date of the HAP Contract. In order for the waiver to be approved, the PHA must demonstrate that based on the RAD rent calculated in accordance with Attachment 1C, the monthly two-bedroom RAD Gross Rent is less than: 30% of the monthly income of a family of four at the midpoint between the Very Low Income (VLI) HUD Income Limit and Extremely Low Income (ELI) HUD Income Limit for the area in which the Covered Project is located.
        
        For waivers submitted during the conversion process, the Office of Recapitalization may grant the waiver after review of the Financing Plan and confirmation that the RAD rents meet the waiver rent threshold described above.4B-9 The Office of Recapitalization shall document the waiver by adding an additional provision to the RCC before closing. For waivers submitted after the effective date of the HAP Contract, the waiver is submitted through the normal waiver process outlined in Notice PIH 2018-16 (or any successor notice). In both cases, the approved waiver will be for the initial term of the PBV HAP Contract.
        
        If the waiver is approved, the new admission families covered under the waiver are participants under the PBV program, all the family obligations and protections under RAD and PBV apply to the family, the RAD PBV families shall be subject to the same alternative requirements applicable to the pre-conversion residents under this Section, and the unit is subject to all PBV program requirements, as modified by this Notice.
        
        Further, Covered Projects that receive the waiver shall be subject to an alternative income targeting requirement that at least 75% of new admissions to the PBV units (both RAD and non-RAD PBV units) in the Covered Project in any PHA fiscal year are ELI families.4B-10 If there are less than four new admissions to the Covered Project in a PHA fiscal year, the income targeting is determined by combining the new admissions for that fiscal year with the new admissions for the subsequent fiscal year (or years) until the combined total of new admissions equals or exceeds four for those consecutive fiscal years.
      • Under-Occupied Unit. If a family is in an under-occupied unit under 24 CFR § 983.260 at the time of conversion, the family may remain in this unit until an appropriate-sized unit becomes available in the Covered Project. When an appropriate sized unit becomes available in the Covered Project, the family living in the under- occupied unit must move to the appropriate-sized unit within a reasonable period of time, as determined by the administering Voucher Agency. In order to allow the family to remain in the under-occupied unit until an appropriate-sized unit becomes available in the Covered Project, 24 CFR § 983.260 is waived for current residents remaining or returning tot he Covered Project. MTW agencies may not modify this requirement. To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in thes ame Covered Project shall be sbuject to the terms of this provision.

4. PBV: Other Miscellaneous Provisions

   1. Access to Records, Including Requests for Information Related to Evaluation of Demonstration. PHAs and the Project Owner must cooperate with any reasonable HUD request for data to support program evaluation, including but not limited to project financial statements, operating data, Choice-Mobility utilization, and rehabilitation work. Please see Appendix IV for reporting units in Form HUD-50058.

   2. Ongoing PHA Board Review of Operating Budget. The Owner must submit to the administering PHA’s Board the operating budget for the Covered Project annually. The PHA's Board must confirm that the project Owner is making deposits into the Rserve for Replacement account in accordance with the RCC as well as assess the financial health of the Covered Project.⁵⁸

   3. Davis-Bacon Act and Section 3 of the Housing and Urban Development Act of 1968 (Section 3). These sections have been moved to 1.4.A.13 and 1.4.A.14.

   4. Establishment of Waiting List. 24 CFR § 983.251 sets out PBV program requirements related to establishing and maintaining a voucher-wide, PBV program- wide, or site-based waiting list from which residents for the Covered Project will be admitted. These provisions shall apply unless the project is covered by a remedial order or agreement that specifies the type of waiting list and other waiting list policies. The PHA shall consider the best means to transition applicants from the current public housing waiting list, including:
      1. Transferring an existing site-based waiting list to a new site-based waiting list.
      2. Transferring an existing site-based waiting list to a PBV program-wide or HCV program-wide waiting list.
      3. Transferring an existing community-wide public housing waiting list to a PBV program-wide or HCV program-wide waiting list, an option particularly relevant for PHAs converting their entire portfolio under RAD.
      4. Informing applicants on a community-wide public housing waiting list how to transfer their application to one or more newly created site-based waiting lists.

      For any applicants on the public housing waiting list that are likely to be ineligible for admission to a Covered Project converting to PBV because the household’s TTP is likely to exceed the RAD gross rent, the PHA shall consider transferring such household, consistent with program requirements for administration of waiting lists, to the PHA’s remaining public housing waiting list(s) or to another voucher waiting list, in addition to transferring such household to the waiting list for the Covered Project.

      To the extent any wait list relies on the date and time of application, the applicants shall have priority on the wait list(s) to which their application was transferred in accordance with the date and time of their application to the original waiting list.

      If the PHA is transferring assistance to another neighborhood and, as a result of the transfer of the waiting list, the applicant would only be eligible for a unit in a location which is materially different from the location to which the applicant applied, the PHA must notify applicants on the waiting of the transfer of assistance, and on how they can apply for residency at other sites.

      If using a site-based waiting list, PHAs shall establish a waiting list in accordance with 24 CFR § 903.7(b)(2)(ii)-(iv) to ensure that applicants on the PHA’s public housing community-wide waiting list have been offered placement on the Covered Project’s initial waiting list. In all cases, PHAs have the discretion to determine the most appropriate means of informing applicants on the public housing community-wide waiting list given the number of applicants, PHA resources, and admissions requirements of the projects being converted under RAD. A PHA may consider contacting every applicant on the public housing waiting list via direct mailing; advertising the availability of housing to the population that is less likely to apply, both minority and non-minority groups, through various forms of media (e.g., radio stations, posters, newspapers) within the marketing area; informing local non-profit entities and advocacy groups (e.g., disability rights groups); and conducting other outreach as appropriate. Any activities to contact applicants on the public housing waiting list must be conducted in accordance with the requirements for effective communication with persons with disabilities at 24 CFR § 8.6 and with the obligation to provide meaningful access for persons with limited English proficiency (LEP).⁵⁹

      To implement this provision, HUD is specifying alternative requirements for 24 CFR § 983.251(c)(2). However, after the initial waiting list has been established, the PHA shall administer its waiting list for the Covered Project in accordance with 24 CFR § 983.251(c). To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.

      A PHA must maintain any site-based waiting list in accordance with all applicable civil rights and fair housing laws and regulations.

   5. Mandatory Insurance Coverage. The Covered Project shall maintain at all times commercially available property and liability insurance to protect the project from financial loss and, to the extent insurance proceeds permit, promptly restore, reconstruct, and/or repair any damaged or destroyed project property.

   6. Future Refinancing. Project Owners must receive HUD approval for any refinancing or restructuring of secured debt during the HAP Contract term to ensure the financing is consistent with long-term preservation of the Covered Project. With respect to any financing contemplated at the time of conversion (including any permanent financing which is a conversion or take-out of construction financing), such consent may be evidenced through the RCC but HUD review of liens must be performed prior to execution.

   7. Administrative Fees for Public Housing Conversions During the Year of Conversion. For the remainder of the Calendar Year in which the HAP Contract becomes effective (i.e., the “year of conversion”), RAD PBV projects will be funded with public housing funds. For example, if the project’s assistance converts effective July 1, 2015, the public housing ACC between the PHA and HUD will be amended to reflect the number of units under HAP Contract, but will be for zero dollars, and the RAD PBV HAP Contract will be funded with public housing money for July through December 2015. Since TBRA is not the source of funds, PHAs should not report leasing and expenses into VMS during this period, and PHAs will not receive section 8 administrative fee funding for converted units during this time.

      PHAs operating an HCV program typically receive administrative fees for units under a HAP Contract, consistent with recent appropriation act references to “section 8(q) of the [United States Housing Act of 1937] and related appropriations act provisions in effect immediately before the Quality Housing and Work Responsibility Act of 1998” and 24 CFR § 982.152(b). During the year of conversion mentioned in the preceding paragraph, these provisions are waived. PHAs will not receive Section 8 administrative fees for PBV RAD units during the year of conversion.

      After the year of conversion, the Section 8 ACC will be amended to include Section 8 funding that corresponds to the units covered by the Section 8 ACC. At that time, the regular Section 8 administrative fee funding provisions will apply.

   8. Choice-Mobility. One of the key features of the PBV program is the mobility component, which provides that if the family has elected to terminate the assisted lease at any time after the first year of occupancy in accordance with program requirements, the PHA must offer the family the opportunity for continued tenant- based rental assistance, in the form of either assistance under the voucher program or other comparable tenant-based rental assistance.

      If as a result of participation in RAD a significant percentage of the PHA’s HCV program becomes PBV assistance, it is possible for most or all of a PHA’s turnover vouchers to be used to assist those RAD PBV families who wish to exercise mobility. While HUD is committed to ensuring mobility remains a cornerstone of RAD policy, HUD recognizes that it remains important for the PHA to still be able to use tenant- based vouchers to address the specific housing needs and priorities of the community. Therefore, HUD is establishing the following alternative requirement for PHAs where, as a result of RAD, the total number of PBV units (including RAD PBV units) under HAP Contract administered by the PHA exceeds 20 percent of the PHA’s authorized units under its HCV ACC with HUD.

      The alternative mobility policy provides that an eligible voucher agency would not be required to provide more than three-quarters of its turnover vouchers in any single year to the residents of Covered Projects. While a voucher agency is not required to establish a voucher inventory turnover cap, if such a cap is implemented, the voucher agency must create and maintain a waiting list in the order in which the requests from eligible households were received. In order to adopt this provision, this alternative mobility policy must be included in an eligible PHA’s administrative plan.

      To effectuate this provision, HUD is providing an alternative requirement to Section 8(o)(13)(E) of the Act and 24 CFR § 983.261(c). Please note that this alternative requirement does not apply to PBVs entered into outside of the context of RAD. MTW agencies may not alter this requirement.

   9. Reserve for Replacement. The Project Owner shall establish and maintain a replacement reserve in an interest-bearing account to aid in funding extraordinary maintenance and repair and replacement of capital items in accordance with applicable regulations. The reserve must be built up to and maintained at a level determined by HUD to be sufficient to meet projected requirements. For FHA transactions, Replacement Reserves shall be maintained in accordance with the FHA Regulatory Agreement. For all other transactions, Replacement Reserves shall be maintained in a bank account or similar instrument, as approved by HUD, where funds will be held by the Project Owner or mortgagee and may be drawn from the reserve account and used subject to HUD guidelines.

   10. Initial Certification and Tenant Rent Calculations. The Contract Administrator uses the family’s public housing tenant rent (reflected on line 10f of the family’s most recent HUD Form 50058) at the date of the conversion to calculate the PBV HAP and tenant rent until the effective date of the earlier of the family’s first regular or interim recertification following the date of conversion. At the earlier of the family’s first regular or interim recertification, the Contract Administrator will use the family’s TTP based on the recertification and the HCV utility allowance (or the PBV site-specific utility allowance, if applicable) to determine the PBV HAP and tenant rent. This means that the family pays the same tenant rent as the family was paying under the public housing program until the earlier of first regular or interim reexamination following conversion, at which point the normally applicable PBV calculation for the tenant rent becomes effective. (Under the PBV program, the monthly HAP is the rent to owner minus the tenant rent, and the tenant rent is the family TTP minus the utility allowance.) To facilitate the uniform treatment of residents and units at a Covered Project, any non-RAD PBV units located in the same property as the Covered Project shall be subject to the terms of this provision. To effectuate this provision, HUD is waiving 24 CFR 5.601 and 983.3(c)(6)(iii).

Under the Demonstration, HUD has the authority to waive statutory and regulatory provisions governing the PBRA program, or to establish alternative requirements for the effective conversion of assistance. Additionally, the RAD Statute imposes certain unique requirements and authorizes HUD to establish requirements for converted assistance under the Demonstration.

For public housing projects converting assistance to PBRA under the First Component of the Demonstration, 24 CFR part 880, Section 8 Housing Assistance Payments Program for New Construction as modified for RAD and as set forth in Appendix I, and applicable existing and subsequent Office of Housing guidance⁶⁰ will apply, except for the provisions listed below. These “special” provisions are grouped into three categories: Contract Terms, Resident Rights and Participation, and Other Miscellaneous Provisions. Where applicable, reference is made to the affected statute and/or regulation. For additional background purposes, HUD has provided Appendix I, which is a copy of the existing 24 CFR part 880 regulation with the provisions stricken that will not apply to Covered Projects. Additionally, Appendix II includes the specific provisions of the Act that are inapplicable to PBRA conversions. Finally, Appendix III includes the site and neighborhood standards that apply to PBRA.

1. PBRA Contract Terms.

   1. Length of Contract. Covered Projects shall have an initial HAP Contract term of 20 years. To implement this provision, HUD is specifying alternative requirements for section 8(d)(2)(A) of the Act, which establishes a maximum term of 15 years for “an existing structure.” Additionally, 24 CFR § 880.502, which imposes maximum contract terms for New Construction projects consistent with statutory authority that was repealed in 1983, does not apply.

   2. Mandatory Contract Renewal. Section 524 of MAHRAA and 24 CFR part 402 currently govern renewals of expiring or terminating project-based section 8 HAP Contracts and, in general, require HUD to renew such contracts “at the request of the owner.” Pursuant to the RAD Statute, upon expiration of the initial contract and each renewal contract, the Secretary or Contract Administrator must offer, and the Project Owner must accept, renewal of the contract subject to the terms and conditions applicable at the time of renewal and the availability of appropriations each year of such renewal. The renewal contract(s) shall be for the prescribed number and mix of units but may, upon request of the Project Owner and subject to HUD approval, be on one or more transfer of assistance sites in lieu of the project site subject to the expiring contract. Consequently, to the extent that section 524 of MAHRAA and 24 CFR part 402 are in effect upon contract expiration, the various provisions stating or requiring that any renewal of an expiring contract for project-based assistance under Section 8 shall be “at the request of the owner” will not apply.

   3. Ownership or Control. This section has been moved to Section 1.4.A.11.

   4. RAD Use Agreement. This section has been moved to Section 1.4.A.13
   5. Initial Contract Rent Setting. No additional or incremental funding is associated with this Demonstration. Consequently, HUD is specifying alternative requirements for section 8(c)(1) of the Act, which governs rent setting for project-based Section 8 units, and for section 8(c)(5) of the Act or 24 CFR § 880.503(b), which govern the “project account.” HUD has calculated initial contract rents for every public housing project based on each project’s subsidy under the public housing program. All RAD applications, including applications for Portfolio Awards, will have initial contract rents based on their “RAD rent base year” described in Attachment 1C. PHAs have additional discretion in establishing initial contract rents using the following flexibility:
      1. MTW Fungibility. MTW agencies may use their MTW funds to set the initial contract rents higher than the normally applicable contract rent cap that is based on the project’s public housing subsidy. In addition to the rent cap described below, contract rents cannot exceed comparable market rent, as determined by a Rent Comparability Study. Any use of MTW funding flexibilities in setting initial contract rents shall be subject to subsidy layering review and MTW continued service requirements, as calculated using the MTW Baseline Methodology described in Notice PIH 2013-02, or successor Notice. If an MTW agency converts a project to PBRA and uses this flexibility to increase their initial contract rents, HUD will reduce the agency’s public housing subsidy by the additional amount (in addition to any funding modifications that would occur as a result of the conversion absent the rent increase) required to fund the PBRA HAP (see Attachment 1C). HUD will limit the number of projects an MTW agency may convert to PBRA if the PHA does not have sufficient public housing subsidy to convert into PBRA assistance.
      2. Rent Bundling. PHAs may adjust subsidy (and initial contract rents) across multiple projects as long as the PHA does not exceed the aggregate Section I: Public Housing Projects H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation76subsidy for all of the projects the PHA has submitted for conversion under RAD. For example, assume that a PHA is considering bundling twoidentical projects, both consisting of 100 units. In Project A, the contract rent is $500; and in Project B, the contract rent is $600. The PHA could bundle the two projects such that the initial contract rents for both projects will be $550. This use, which HUD refers to as “bundled” rents, can occur under the following scenarios:

         Please note that per Section 1.13.B.5, regardless of the initial contract rents for the RAD HAP Contract, including as modified by this provision, in the year of conversion the Covered Project will only be assisted by the Operating and Capital Funds obligated to the PHA for that project.

         1. When a PHA is converting two or more properties within its public housing portfolio. The execution and effective date of the HAP Contract for the donor HAP Contract must occur prior to or simultaneous with the effective date of the recipient HAP Contract; and
         2. When PHAs have formed a Partnership in accordance with Section 1.5.M and are bundling rents between two or more converting projects. The execution and effective date of the HAP Contract for the donor HAP Contract must occur prior to or simultaneous with the effective date of the recipient HAP Contract;
      3. Future Replacement Housing Factor (RHF) or Demolition Disposition Transition Funding (DDTF).61 PHAs that are scheduled to receive ongoing RHF or DDTF funding (funds that have not been awarded and, with HUD permission, funds that have been awarded but not yet disbursed) may choose to forgo any ongoing RHF or DDTF grants for the purpose of offsetting an increase to the RAD rent.

         See Attachment 1C for the calculation of how RHF or DDTF funding may offset increased RAD rent.

      4. TenantPaid Utility Savings. When conversion will result in the reduction of one or more utility components (e.g., gas, water & sewer, electric) used to establish the Utility Allowance, HUD will permit the RAD contract rent to be increased by a portion of the utility savings. See Attachment 1C for additional detail. The Utility Allowance shall be recalculated based on actual consumption within a reasonable period following completion of the work.
      5. New Construction or Substantial Rehab. For any transaction that is proposed in its Financing Plan to undertake new construction orsubstantial rehabilitation in a designated Opportunity Zone, HUD may provide up to a $100 per unit per month (PUM) increase to the RAD rents, subject to the availability of funds and such conditions as HUD may impose. For purposes of this subparagraph, new construction or substantial rehabilitation is defined 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. Funds for this purpose shall be allocated on a first-come, first served basis, subject to the availability of funds, based on the time of the request (communicated through the submission of a complete and acceptable Financing Plan), where the PHA demonstrates it is necessary for the viability of the transaction.63
      6. Faircloth-to-RAD Initial Contract Rents. The initial contract rents for the Faircloth-to-RAD units will be based on the project’s reasonably anticipated subsidy under the public housing program in accordance with a “RAD rent base year” described in Attachment 1C, as set forth in the NARR. Additionally, PHAs may use any other applicable flexibility as set forth in this Section 1.7.A.5 to set the initial contract rents higher than the contract rent that is set forth in the NARR.

   Notwithstanding HUD’s calculation or the above-mentioned flexibilities, initial contract rents will be capped at 120 percent of the Section 8 FMR, adjusted by the number of bedrooms, and after subtracting any applicable utility allowance. However, when HUD’s calculation of contract rents exceeds 120 percent of the FMR but where the PHA believes that such rents are below the comparable market rent, the PHA may request an exception under which the project may receive rents in excess of 120 percent of the FMR but not in excess of the lower of comparable market rents or 150 percent of FMR. HUD will grant such a request only when HUD determines that a Rent Comparability Study (RCS), which the PHA must procure and pay for, establishes that rents are below comparable market rents.64 Any such determination will be made by HUD in its sole and absolute discretion. Where initial contract rents are at or below 120 percent of the FMR, no RCS is required.

   6. Method of Adjusting Contract Rents. Contract rents will be adjusted only by HUD’s OCAF at each Anniversary of the HAP Contract, subject to (a) the availability of appropriations for each year of the contract term, and (b) the Maximum Rent, as defined below.⁶⁵

      The Maximum Rent is the higher of 140% of FMR (less utility allowances) or the market rents, as demonstrated by an RCS procured and paid for by the Project Owner. Where an RCS has been used to establish initial rents or to justify an OCAF adjusted rent that exceeds 140% of the FMR, the RCS will remain valid for five years, the Maximum Rent will not apply for the next four annual rent adjustments, and rents will be adjusted only by the OCAF during such period.

   7. Distributions. Regardless of type of financing, Covered Projects will not be subject to any limitation on distributions of Surplus Cash, contingent on the availability of Surplus Cash as determined by year-end audited or certified financial statements. To implement this provision, HUD will not apply 24 CFR § 880.205, which, among other provisions, establishes certain limitations on distributions for profit-motivated owners and authorizes HUD to require the owner to establish a residual receipts account. Distributions are not considered program or project funds.

   8. RAD Rehab Assistance Payments. HUD and the Project Owner typically will enter into a HAP Contract before construction begins. During the period of Work identified in the RCC, standard HAP Contract administration procedures will be used for occupied units. Except where the Section 8 Pass- Through⁶⁶ is used, units covered under the HAP Contract that are not occupied at any point during the period of Work identified in the RCC may be eligible, subject to the conditions below, for Rehab Assistance Payments equal to the Public Housing Operating Fund and the Capital Fund amounts that formed the basis for the calculation of initial contract rents (see Attachment 1C). During the period of rehabilitation or construction as identified in the RCC, 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 or Capital Fund subsidy prior to conversion. As a result, some units in the Covered Project may not be eligible for Rehab Assistance Payments. As necessary to implement this provision, HUD is suspending the applicability of additional provisions in 24 CFR § 880.504(a) until all contract units are made available for occupancy and waiving the applicability of section 8(c)(4) of the Act.

      The Project Owner will no longer be eligible to receive RAD Rehab Assistance Payments upon the earlier of completion of the Work or expiration of the time period identified in the RCC for completion of all Work, which date is specified in the HAP contract. After such date, all units under the HAP Contract will be eligible for payment only for occupied units or for vacancy payments, as applicable.

   9. Future Statutory or Administrative Changes. Consistent with PBRA HAP Contracts entered into under MAHRAA, any changes in HUD requirements, except to the extent required by statute, that are inconsistent with the PBRA HAP Contract entered into through RAD, shall not be applicable. Further, for any statutory change during the term of the contract affecting contract rents that HUD determines will threaten the physical viability of the property, the Owner may terminate the contract upon notification to HUD. Notwithstanding such termination, the project shall remain subject to the RAD Use Agreement encumbering the property on which the project is located.⁶⁷

   10. Floating Units. Upon the request of the Project Owner of a Covered Project that is partially-assisted (i.e., fewer than 100% of the units are covered by the HAP Contract), HUD will permit the Section 8 assistance to float between units within the project that have the same bedroom size and the same contract rent from the time of the initial execution of the HAP Contract, the property must maintain the same number and type of RAD units. As a condition for granting such request, HUD requires that the unassisted units be inspected with the same frequency as the assisted units are required to be inspected under 24 CFR part 200, subpart P. Assistance may float from a required UFAS unit only to another UFAS unit that has the same bedroom size and accessibility features. If assistance floats to a UFAS unit as a reaonsble accommodation for a household that had not previously been in a UFAS unit, the assistance may float back to a non-Section 504 unit when there is no longer need for the reaonsble accommodation provided the required number of UFAS units is maintained.

   11. UPCS (REAC) Inspections. Under current regulations at 24 CFR part 5, subpart G, a unit covered under a PBRA HAP Contract must meet the UPCS before assistance can be paid on behalf of a household. Under RAD, once all units under the HAP Contract become occupied, HUD will order a REAC inspection of the property to ensure conditions meet the UPCS. HUD is hereby waiving and establishing this alternative requirement to 24 CFR part 5, subpart G.

2. PBRA Resident Rights and Participation.

   1. No Rescreening of Tenants upon Conversion. Pursuant to the RAD Statute, at conversion, current households cannot be excluded from occupancy at the Covered Project based on any rescreening, income eligibility, or income targeting. With respect to occupancy in the Covered Project, current households in the Converting Project will be grandfathered for application of any eligibility criteria to conditions that occurred prior to conversion but will be subject to any ongoing eligibility requirements for actions that occur after conversion.46 Post-conversion, the tenure of all residents of the Covered Project is protected pursuant to PBRA requirements regarding continued occupancy unless explicitly modified in this Notice (e.g., rent phase-in provisions). For example, a unit with a household that was over-income at time of conversion would continue to be treated as an assisted unit. Thus, the first clause of section 8©(4) of the Act and 24 CFR § 880.603(b), concerning determination of eligibility and selection of tenants for initial occupancy, will not apply for current households. Once the grandfathered household moves out, the unit must be leased to an eligible family. Further, so as to facilitate the right to return to the assisted property, this provision shall apply to current public housing residents of the Converting Project that will reside in non-RAD PBV units or non-RAD PBRA units placed in a project that contain RAD PBV units or RAD PBRA units. Such families and such contract units will otherwise be subject to all requirements of the applicable program, specifically 24 CFR § 983 for non-RAD PBV units and the PBRA requirements governing the applicable contract for non-RAD PBRA units.47

   2. Right to Return. See section 1.4.A.5(ii) and the RAD Fair Housing, Civil Rights, and Relocation Notice regarding a resident’s right to return.

   3. Phase-in of Tenant Rent Increases. If, purely as a result of conversion, the amount a tenant would pay for rent and utilities under the PBRA program (the tenant's TTP) would increase the tenant's TTP by more than the greater of 10 percent or $25, the rent increase will be phased in over 3 or 5 years. Eligibility for the phase-in is to be determined at the Initial Certification which occurs at the time the household is converted to PBRA. A phase-in must not be applied after the household’s Initial Certification. To implement the phase-in, HUD is specifying alternative requirements for section 3(a)(1) of the Act, as well as 24 CFR § 880.201 (definition of “total tenant payment” (TTP)) to the extent necessary to allow for the phase-in of tenant rent increases. A PHA must create a policy setting the length of the phase-in period at three years, five years, or a combination depending on circumstances and must communicate such policy in writing to affected residents. For example, a PHA may create a policy that uses a three year phase-in for smaller increases in rent and a five year phase-in for larger increases in rent. This policy must be in place at conversion and may not be modified after conversion.

      The method described below explains the set percentage-based phase-in a Project Owner must follow according to the phase-in period established. For purposes of this section “Calculated Multifamily TTP” refers to the TTP calculated in accordance with regulations at 24 CFR § 5.628 (not capped at Gross Rent) and the “most recently paid TTP” refers to the TTP recorded on the family’s most recent HUD Form 50059. If a family in a project converting from Public Housing to PBRA was paying a flat rent immediately prior to conversion, the PHA should use the flat rent amount to calculate the phase-in amount for Year 1, as illustrated below.

      Three Year Phase-in:

      • Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 33% of difference between most recently paid TTP or flat rent and the Calculated Multifamily TTP
      • Year 2: Year 2 Annual Recertification (AR) and any Interim Recertification (IR) in prior to Year 3 AR – 50% of difference between most recently paid TTP and Calculated Multifamily TTP
      • Year 3: Year 3 AR and all subsequent recertifications – Year 3 AR and any IR in Year 3: Full Calculated Multifamily TTP48
      
      

      Five Year Phase-in

      • Year 1: Any recertification (interim or annual) performed prior to the second annual recertification after conversion – 20% of difference between most recently paid TTP or flat rent and the Calculated Multifamily TTP
      • Year 2: Year 2 AR and any IR prior to Year 3 AR – 25% of difference between most recently paid TTP and Calculated Multifamily TTP
      • Year 3: Year 3 AR and any IR prior to Year 4 AR – 33% of difference between most recently paid TTP and Calculated Multifamily TTP
      • Year 4: Year 4 AR and any IR prior to Year 5 AR – 50% of difference between most recently paid TTP and Calculated Multifamily TTP
      • Year 5 AR and all subsequent recertifications – Full Calculated Multifamily TTP
      
      

      Please Note: In either the three year phase-in or the five-year phase-in, once Calculated Multifamily TTP is equal to or less than the previous TTP, the phase-in ends and tenants will pay full Calculated Multifamily TTP from that point forward.

   4. Family Self-Sufficiency (FSS) and Resident Opportunities and Self Sufficiency Service Coordinator (ROSS-SC) programs. Public Housing residents that are currently FSS participants will continue to participate in the PHA's FSS program once their housing is converted under RAD. Through waiver in this Notice, FSS grant funds may be used to continue to serve such FSS participants. All Project Owners will be required to administer the FSS program or partner with another agency to administer the FSS program in accordance with the requirements of 24 CFR part 984, the participants’ contracts of participation, and current and future guidance published by HUD for all FSS participants enrolled in the FSS program prior to RAD conversion. All Project Owners will be required to provide both service coordination and payments to escrow until the end of the Contract of Participation for each resident.To ensure that HAP payments are processed correctly, and until TRACS is modified, the Project Owner must notify MF_FSS@hud.gov that there are current FSS participants residing in the Covered Project and adhere to the escrow and reporting requirements in Notice H 2016-08. The Project Owner may enter into a Cooperative Agreement with the PHA (the grantee), allowing the PHA to continue to provide servie coordination to RAD-affected PBRA participants until all have completed their Contracts according to 24 CFR § 984.303. The Project Owner must assume responsibility for the administrative duties associated with FSS such as calculating and crediting escrow and reporting. Ultimately, the new Project Owner is responsible for serving the RAD-affected FSS participants until the end of their CoPs. The owner is not required to enroll new participants, but may chose to run its own voluntary FSS program in accordance with Notice H 2016-08.

      At the completion of the FSS grant, grantees should follow the normal closeout procedures outlined in the grant agreement. Future FSS NOFAs will identify eligible FSS participants. Until HUD implements provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act that expand eligibility for FSS to PBRA properties, only a PHA that continues to run an FSS program that serves public housing and/or HCV/PBV FSS participants, the PHA will continue to be eligible (subject to NOFA requirements) to apply for FSS funding and may use that funding to serve public housing, HCV and/or RAD-affected PBRA FSS participants. However, if the PHA no longer has a public housing or HCV program, the PHA is not eligible to apply for FSS funding.

      Upon conversion, if the PHA has closed out its public housing program in accordance with Notice PIH 2019-13, funds escrowed under the public housing program for FSS participants shall be transferred into the PBRA escrow account and be considered PBRA funds, thus reverting to PBRA if forfeited by the FSS participant.

      Current ROSS-SC grantees will be able to finish out their current ROSS-SC grants once their housing is converted under RAD. However, once the property is converted, it will no longer be eligible to be counted towards the unit count for future ROSS-SC grants nor will its residents be eligible to be served by future ROSS-SC grants, as ROSS-SC, by statute, can serve only public housing residents. At the completion of the ROSS-SC grant, grantees should follow the normal closeout procedures outlined in the grant agreement. Please note that ROSS-SC grantees may be non-profits or local Resident Associations and this consequence of a RAD conversion may impact those entities.

   5. Resident Participation and Funding. Residents of Covered Projects with assistance converted to PBRA will have the right to establish and operate a resident organization in accordance with 24 CFR part 245 (Tenant Participation in Multifamily Housing Projects). In addition, in accordance with Attachment 1B, residents will be eligible for resident participation funding.

   6. Resident Procedural Rights. The information provided below must be included as part of the House Rules for the associated project and the House Rules must be submitted to HUD for review prior to Closing. See Attachment 1E for a sample Addendum to the House Rules.
      1. Termination Notification. HUD is incorporating additional termination notification requirements to comply with section 6 of the Act for public housing projects converting assistance under RAD, that supplement notification requirements in regulations at 24 CFR § 880.607 and the Multifamily HUD Model Lease.
         1. Termination of Tenancy and Assistance. The termination procedure for RAD conversions to PBRA will additionally require that Project Owners provide adequate written notice of termination of the lease which shall be:
            1. A reasonable period of time, but not to exceed 30 days:
               • If the health or safety of other tenants, Project Owner employees, or persons residing in the immediate vicinity of the premises is threatened; or
               • In the event of any drug-related or violent criminal activity or any felony conviction;
            2. Not less than 14 days in the case of nonpayment of rent; and
            3. Not less than 30 days in any other case, except that if a State or local law provides for a shorter period of time, such shorter period shall apply.
         2. Termination of Assistance. In all other cases, the requirements at 24 CFR § 880.603, the Multifamily HUD Model Lease, and any other HUD multifamily administrative guidance shall apply.
      2. Grievance Process. Pursuant to requirements in the RAD Statute, HUD is establishing additional resident procedural rights to comply with section 6 of the Act. In addition to program rules that require that tenants are given notice of covered actions under 24 CFR part 245 (including increases in rent, conversions of a project from project-paid utilities to tenant-paid utilities, or a reduction in tenant paid utility allowances), HUD requires that:
         1. Residents be provided with notice of the specific grounds of the Project Owner’s proposed adverse action, as well as their right to an informal hearing with the Project Owner;
         2. Residents have an opportunity for an informal hearing with an impartial member of the Project Owner’s staff within a reasonable period of time;
         3. Residents have the opportunity to be represented by another person of their choice, to ask questions of witnesses, have others make statements at the hearing, and to examine any regulations and any evidence relied upon by the Project Owner as the basis for the adverse action. With reasonable notice to the Project Owner, prior to hearing and at the residents’ own cost, residents may copy any documents or records related to the proposed adverse action; and
         4. Project Owners provide the resident with a written decision within a reasonable period of time stating the grounds for the adverse action and the evidence the Project Owner relied on as the basis for the adverse action.

         The Project Owner shall be bound by decisions from these hearings, except if (x) the hearing concerns a matter that exceeds the authority of the impartial party conducting the hearing, or (y) the decision is contrary to HUD regulations or requirements, or otherwise contrary to federal, State, or local law. If the Project Owner determines that it is not bound by a hearing decision, the Project Owner must promptly notify the resident of this determination, and of the reasons for the determination.

         c. Family Right to Move. Pursuant to Section 1.7.C.5 and unless the Covered Project received a specific good cause exemption to such provision, families have a choice-mobility right which must be stated in the House Rules as shown in sample in Attachment 1E.

   7. Earned Income Disregard (EID). Tenants who are employed and are currently receiving the EID exclusion at the time of conversion will continue to receive the EID exclusion after conversion, in accordance with regulations at 24 CFR § 960.255. After conversion, no other tenants will be eligible to receive the EID. If a tenant receiving the EID exclusion undergoes a break in employment, ceases to use the EID exclusion, or the EID exclusion expires in accordance with 24 CFR § 960.255, the tenant will no longer receive the EID exclusion and the Owner will no longer be subject to the provisions of 24 CFR § 960.255. Furthermore, 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.

   8. Jobs Plus. Jobs Plus grantees awarded FY14 and future funds that convert the Jobs Plus target project(s) under RAD will be able to finish out their Jobs Plus grant unless significant relocation and/or change in building occupancy is planned. If either is planned at the Jobs Plus target project(s), HUD may allow for a modification of the Jobs Plus work plan or may, at the Secretary’s discretion, choose to end the Jobs Plus program at that project. Jobs Plus target public housing projects must enroll public housing residents into the Jobs Plus rent incentive, JPEID, prior to conversion. Any resident of the Covered Project that had not enrolled prior to conversion is not eligible to enroll in JPEID but may utilize Jobs Plus services offered at the target project that predominantly benefit the former public housing residents who resided at the target project at the time of RAD conversion. If the program is continued, the Project Owner must agree to continue to implement the program according to HUD’s program requirements.

   9. When Total Tenant Payment Exceeds Gross Rent. Under normal PBRA rules, any new admission to the PBRA program must require a subsidy payment at admission to the program, which means their TTP may not equal or exceed the Gross Rent for the unit at that time (Section 3-6 F.4 of HUD Handbook 4350.3, REV-1). Further, a resident’s eligibility ends and a Project Owner must process a termination of assistance when the family’s TTP has risen to a level that is equal to or greater than the Gross Rent and increase the tenant rent to the contract rent (assuming that the tenant does not receive the benefit of any other type of subsidy) (24 CFR 880.603(c)(3) and Section 8-5 C and 8-6 A.1 of HUD Handbook 4350.3, REV-1).

      Since the rent limitation under this Section of the Notice may prevent the admission to a RAD PBRA Unit of existing residents or new admissions otherwise eligible for PBRA assistance, HUD is establishing an alternative requirement and requiring that families with a TTP that equals or exceeds Gross Rent who would otherwise qualify for assistance in the unit, shall be admitted and allowed to occupy the unit. HUD is also requiring that the units occupied by such families shall be placed on and/or remain under the HAP Contract when TTP equals or exceeds the Gross Rent.

      For residents living in the Converting Project prior to conversion and for all new admissions to the Covered Project during the initial term of the contract, HUD is establishing the alternative requirement that, during any period when the family’s TTP is equal to or above the Gross Rent, the zero-HAP family will pay an alternate rent to owner that is the lower of:
      
      a. the family’s TTP less the Utility Allowance, subject to any required phase-in pursuant to Section 1.6.C.3 of this Notice; or
      b. the Zero-HAP Rent Cap, which is the lower of either:
          i. The applicable FMR less the Utility Allowance; or
          ii. In the event the units are subject to more restrictive rent setting requirements under another federal, state, or local program (e.g. LIHTC or HOME), the rent to owner set to comply with such requirements.
      
      As necessary to implement this alternative requirement, HUD is waiving 24 CFR 880.603(c)(3) and sections 3-6 F.4, 8-5 C., and 8-6 A.1. of HUD Handbook 4350.3, REV-1. Tenants will retain all of the rights under the Model Lease, including the right to occupy the unit, as well as those provided through this Notice. Additionally, tenants will still be subject to the requirements for Section 8 tenants, including the requirements concerning reexamination of family income and composition found in 24 CFR part 5 in order to determine the Zero-HAP Rent Cap. When TTP equals or exceeds Gross Rent, the Zero-HAP Rent Cap collected by the Project Owner is considered project funds and must be used for project purposes. Subsidy may subsequently be reinstated if the tenant becomes eligible for subsidy.
      
      The Project Owner is not required to process these individuals through Multifamily Housing’s Tenant Rental Assistance Certification System (TRACS) but may be required to do so in the future when a future revision of the TRACS can accept such certifications. All normal actions for the contract rent in TRACS shall continue for these units, including application of the OCAF adjustment to the contract rent indicated in the HAP Contract, since the OCAF adjusted rent will still be in effect whenever the unit is occupied by a family eligible for rental subsidy.

   10. Under-occupied Units. If at the time of conversion, an eligible family assisted under the HAP Contract is occupying a unit that is larger than appropriate because of the family’s composition, the family may remain in the unit until an appropriate-sized unit becomes available in the Covered Project. When an appropriate sized unit becomes available in the Covered Project, the family living in the under-occupied unit must move to the appropriate-sized within a reasonable period of time. In order to allow the family to remain in the under-occupied unit until an appropriate sized unit becomes available in the Covered Project, HUD is waiving the portion of 24 CFR § 880.605 that assumes the unit has become under-occupied as the result of a change in family size.

3. PBRA: Other Miscellaneous Provisions.

   1. Access to Records, Including Requests for Information Related to Evaluation of Demonstration. PHAs and the Project Owner must cooperate with any reasonable HUD request for data to support program evaluation, including but not limited to project financial statements, operating data, Choice-Mobility utilization, and rehabilitation work.

   2. Davis-Bacon prevailing wages and Section 3 of the Housing and Urban Development Act of 1968 (Section 3). This section has been moved to 1.4.A.13 and 1.4.A.14.

   3. Establishment of Waiting List. The Project Owner can utilize a project-specific or community waiting list. The PHA shall consider the best means to transition applicants from the current public housing waiting list, including:
      1. Transferring an existing site-based waiting list to a new site-based waiting list.
      2. Transferring an existing site-based waiting list to a PBRA program-wide waiting list.
      3. Transferring an existing community-wide public housing waiting list to a PBRA program-wide waiting list, an option particularly relevant for PHAs converting their entire portfolio under RAD.
      4. Informing applicants on a community-wide public housing waiting list how to transfer their application to one or more newly created site-based waiting lists.

      To the extent the wait list relies on the date and time of application, the applicants shall have priority on the wait list(s) to which their application was transferred in accordance with the date and time of their application to the original waiting list.

      If the PHA is transferring assistance to another neighborhood and, as a result of the transfer of the waiting list, the applicant would only be eligible for a unit in a location which is materially different from the location to which the applicant applied, the PHA must notify applicants on the waiting list of the transfer of assistance, and on how they can apply for residency at other sites.

      If using a site-based waiting list, PHAs shall establish a waiting list in accordance with 24 CFR § 903.7(b)(2)(ii)-(iv) to ensure that applicants on the PHA’s public housing community-wide waiting list have been offered placement on the Covered Project’s initial waiting list. In all cases, PHAs have the discretion to determine the most appropriate means of informing applicants on the public housing community- wide waiting list given the number of applicants, PHA resources, and admissions requirements of the projects being converted under RAD. A PHA may consider contacting every applicant on the public housing waiting list via direct mailing; advertising the availability of housing to the population that is less likely to apply, both minority and non-minority groups, through various forms of media (e.g., radio stations, posters, newspapers) within the marketing area; informing local non-profit entities and advocacy groups (e.g., disability rights groups); and conducting other outreach as appropriate. Any activities to contact applicants on the public housing waiting list must be conducted in accordance with the requirements for effective communication with persons with disabilities at 24 CFR § 8.6 and with the obligation to provide meaningful access for persons with limited English proficiency (LEP).50

      When using a site-based waiting list, PHAs should consider waiting list and transfer policies that expand opportunities for tenants seeking an emergency transfer under, or consistent with, the PHA's Emergency Transfer Plan. This allows for easier moves between assisted properties. Any such preference must be approved by HUD in accordance with Notice H 2013-21, prior to implementation.

      To implement this provision, HUD is specifying alternative requirements for 24 CFR § 880.603 regarding selection and admission of assisted tenants. However, after the initial waiting list has been established, the Project Owner shall administer its waiting list for the Covered Project in accordance with 24 CFR § 880.603.

      A Project Owner must maintain any site-based waiting list in accordance with all applicable civil rights and fair housing laws and regulations.

   4. Mandatory Insurance Coverage. The Covered Project shall maintain at all times commercially available property and liability insurance to protect the project from financial loss and, to the extent insurance proceeds permit, promptly restore, reconstruct, and/or repair any damaged or destroyed property of a project.

   5. Choice-Mobility. HUD seeks to provide all residents of Covered Projects with viable Choice-Mobility options. Unless provided an exemption as described below, PHAs that are applying to convert the assistance of a project to PBRA are required to provide a Choice-Mobility option to residents of Covered Projects in accordance with the following:⁵¹
      1. Resident Eligibility. Residents have a right to move with tenant-based rental assistance (e.g., Housing Choice Voucher (HCV)) the later of: (a) 24 months from date of effective date of the HAP or (b) 24 months after the move-in date.
      2. Voucher Inventory Turnover Cap. Recognizing the limitation on the availability of turnover vouchers from year to year, a voucher agency would not be required, in any year, to provide more than one-third of its turnover vouchers to the residents of Covered Projects. While a voucher agency is not required to establish a voucher inventory turnover cap, if such a cap is implemented the voucher agency must create and maintain a waiting list in the order in which the requests from eligible households were received.
      3. Project Turnover Cap. Also recognizing the limited availability of turnover vouchers and the importance of managing turnover in the best interests of the property, in any year, a Project Owner and voucher agency may agree to limit the number of Choice-Mobility moves exercised by eligible households to 15 percent of the assisted units in the project. (For example, if the project has 100 assisted units, the Project Owner and voucher agency could limit the number of families exercising Choice-Mobility to 15 in any year, but not to less than 15.) While a Project Owner and voucher agency are not required to establish a project turnover cap, if such a cap is implemented the voucher agency must create and maintain a waiting list in the order in which the requests from eligible households were received.

      The voucher agency must maintain a written agreement with the owner describing how the Choice-Mobility option will be administered in accordance with these requirements and the process by which households may request a voucher. For example, the written agreement must specify whether the owner will receive rents from families or refer families to the PHA.

      HUD’s goal is to have all residents in the Demonstration offered a Choice-Mobility option within a reasonable time after conversion. However, as HUD recognizes that not all voucher agencies will have vouchers sufficient to support this effort, HUD will take the following actions:

      • Provide voucher agencies that make such a commitment bonus points provided under the Section Eight Management Assessment Program (SEMAP) for deconcentration.⁷⁴
      • Grant a good-cause exemption from the Choice-Mobility requirement for no more than 10 percent of units in the Demonstration. HUD will consider requests for good-cause exemptions only from the following types of PHAs:
      • Public housing–only agencies, defined as agencies that own units under a public housing ACC, but do not administer, directly or through an affiliate, a Housing Choice Voucher program with non special-purpose vouchers; or
      • Combined agencies that currently have more than one-third of their turnover vouchers set aside for veterans, as defined for the purpose of HUD-VASH, or homeless populations, as defined in 24 CFR § 91.5.⁷⁵ To be eligible for this exemption, the PHA’s admission policies must have been formally approved by the PHA’s board prior to the time of application.

   6. Future Refinancing. Project Owners must receive HUD approval for any refinancing or restructuring of secured debt during the HAP Contract term to ensure the financing is consistent with long-term preservation of the Covered Project. With respect to any financing contemplated at the time of conversion (including any permanent financing which is a conversion or take-out of construction financing), such consent may be evidenced through the RCC, but HUD review of liens must be performed prior to execution.

   7. Submission of Year-End Financial Statements. Projects converting assistance to PBRA must comply with 24 CFR part 5, subpart H, as amended, revised, or modified by HUD.54

   8. Classification of Converting Projects as Pre-1981 Act Projects under Section 16(c) of the United States Housing Act of 1937. For purposes of ensuring maximum flexibility in converting to PBRA, all projects converting to PBRA shall be treated as Pre-1981 Act Projects under Section 16(c) of the Act. Section 16(c)(1), which applies to pre-1981 Act projects, restricts occupancy by families that are other than very low- income to 25% of overall occupancy. Thus, Project Owners of projects converting to PBRA may admit applicants with incomes up to the low-income limit. HUD Headquarters tracks the 25% restriction on a nationwide basis. Project Owners of projects converting to PBRA do not need to request an exception to admit low- income families. In order to implement this provision, HUD is specifying alternative requirements for section 16(c)(2) of the Act and 24 CFR § 5.653(d)(2) to require Project Owners of projects converting to PBRA to adhere to the requirements of section 16(c)(1) of the Act and 24 CFR § 5.653(d)(1).

   9. Owner-Adopted Preferences. Covered Projects are not permitted to establish or, where previously approved under public housing rules, maintain a designation (i.e., a set-aside of units) for elderly families or for disabled families; unlike the statue governing public housing, the section 8 statute does not authorize designations. However, owners of Covered Projects may adopt a selection preference (e.g., for elderly individuals and/or elderly families) which permits those applicants to be selected from the waiting list and housed before other eligible families. Project Owners who wish to adopt a preference for populations that are not identified in 24 CFR § 5.655(c)(5) (e.g., elderly families, near-elderly single persons, near-elderly families), must obtain HUD approval from the prospective multifamily Housing Account Executive (field office) prior to execution of the HAP contract to do so in accordance with Notice H 2013-21 (July 25, 2013). This approval must be secured prior to conversion if the owner intends to implement the preference for new admissions immediately following conversion.

   10. Initial Certifications and Tenant Rent Calculation. Owners are to use the resident's pre-existing public housing 50058 data and maintain the tenant rent and utility allowance until the resident's next annual or interim certifiation. To effectuate this provision, HUD is waiving 24 CFR 5.601.

1. Before Application. Prior to submitting an application to participate in the Demonstration, the PHA must:
   1. Provide written notification of the PHA’s intent to pursue a conversion to duly elected resident organizations (in accordance with 24 CFR Part 964) representing the buildings or developments proposed for conversion. Additionally, HUD encourages PHAs to partner with resident leaders to help communicate information about the RAD conversion to the broader resident population through peer-to-peer engagement;
   2. Provide written notification in the form of a RAD Information Notice (RIN) to residents of projects proposed for conversion to inform the residents of the PHA’s intent to pursue a conversion, their rights in connection with a proposed conversion (whether or not any relocation is anticipated), the nature of current conversion plans, including at a minimum, a description of the plans that will be discussed at the resident meetings, and a means for contacting HUD.4B-4 RINs must be delivered directly to each unit or by U.S. mail to each head of household at the Converting Project, must be posted in a conspicuous place within the Converting Project, and must remain available at the management office during normal business hours for inspection and copying by tenants and by the public;
   3. In certain instances, such as when the PHA knows that a project will involve acquisition, rehabilitation or demolition, or if relocation is anticipated, another notice known as a General Information Notice (GIN) may also need to be issued simultaneously with the RIN. A GIN is a notice required by the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA) and its implementing regulations of 49 CFR part 24. The timing, content and delivery methods for GINs remain unchanged by this Notice. See the RAD Fair Housing, Civil Rights, and Relocation Notice for additional information.
   4. No less than one week following issuance of the RIN and within the six months prior to submission of the application, conduct at least two meetings with residents of projects proposed for conversion to discuss conversion plans and provide opportunities for comment. Discussion at both meetings must include a description of resident rights described in Attachment 1B.1 and a description of the PHA’s preliminary intentions, to the extent formulated, with respect to: a) whether the conversion will include a transfer of assistance and potential locations to which the assistance would be transferred, b) plans to partner with an entity other than an affiliate or instrumentality of the PHA if such partner will have a general partner or managing member ownership interest in the proposed Project Owner, c) change in the number or configuration of assisted units or any other change that may impact a household’s ability to re-occupy the property following repairs or construction, d) de minimis reduction of units which will have been vacant for more than 24 months at the time of RAD Application, e) the scope of work and potential relocation scenarios, f) an overview and projected timeline of the the conversion process, and g) primary differences for residents between public housing and the Section 8 platform (PBV or PBRA) of the conversion; 4B-5 and
   5. Submit the following information with the RAD Application:
      1. Certification that the RIN and notice of the tenant meetings have been provided to all residents in accordance with this Notice;
      2. A summary of meeting attendees and participation by residents, PHA staff, and other attendees, e.g. a sign-in sheet or list of registrants or participants for calls or online meetings;
      3. A description of the PHA’s efforts to promote tenant participation in meetings, including the dates and times of meetings to accommodate a variety of schedules, efforts to accommodate residents with disabilities or Limited English Proficiency in accordance with subparagraph H below, the format of meetings (in-person, electronic, or both), location of in-person meetings, efforts to overcome technology barriers for virtual meetings, and other relevant efforts as the PHA determines appropriate (e.g., offering childcare or refreshments);
      4. Meeting agenda(s) and copies of any handouts or presentation materials;
      5. A summary of questions and comments asked in the meeting or submitted by residents to the PHA and responses provided to the residents by the PHA to those questions and comments;
      6. Identification of how residents who were unable to attend meetings are able to access materials or submit questions or comments;
      7. Identification of materials that were shared with residents to communicate resident protections, which can include but are not limited to the following materials: HUD resident rights brochure; HUD resident fact sheets; HUD RAD video; or other resident education materials created by HUD or the PHA; and
      8. Where there is a duly elected resident organization, contact information for at least one elected leader of such organization.
2. Before Concept Call. After a PHA is selected to participate in RAD (i.e., after receipt of the CHAP) but prior to requesting a Concept Call, the PHA must have at least two additional meetings with residents to discuss updated conversion plans covering, at a minimum, the topics listed above, and to clearly describe and solicit feedback on proposed or needed property improvements, management changes, services, or other items as appropriate. Meetings should be spaced to provide meaningful updates to residents on the progress of the conversion, to offer opportunities for residents to provide input, and to permit residents to raise questions and concerns. PHAs are encouraged to meet with residents each calendar quarter and to provide access to written materials describing the conversion prior to each meeting. The PHA shall submit in the Financing Plan a summary of questions and comments received in connection with the required resident meetings and the responses provided to the residents by the PHA. Additional resident meetings may be required by HUD after the Concept Call if HUD determines that they are needed, for example, to provide residents with up-to-date information regarding the conversion.
3. Before Closing. After issuance of the RCC and prior to closing, the PHA must notify residents in writing that conversion of the project has been approved and hold an additional resident meeting following such notification. 4B-6 In the meeting and in the written notice, the PHA must address, as appropriate, the anticipated timing of the conversion, the anticipated duration of the Work, the revised terms of the lease and house rules, procedures for execution of the new lease, any anticipated relocation, and opportunities and procedures for the exercise of the choice-mobility option. PHAs must also provide access to or copies of the new lease form and any applicable house rules. HUD will require evidence of such notice and meeting(s) prior to closing. Households in the affected project(s) who do not want to transition to the Section 8 program may be offered, if available, the opportunity to move to other public housing owned by the PHA.
   
   Households in the affected project(s) who do not want to transition to the Section 8 program may, be offered, if available, the opportunity to move to other public housing owned by the PHA.

4. Additional RAD Meetings.The required meetings must discuss any substantial change to the conversion plans relative to what was presented in the previous resident meetings. Additional meetings with residents are required if one of the required meetings does not occur within a reasonable time (approximately three months) following a substantial change to the conversion plan. A substantial change to the conversion plans includes, but is not limited to:

   • Introduction or abandonment of a transfer of assistance or a material change in the projected location to which the assistance would be transferred;

   • Plans to partner with an entity other than an affiliate or instrumentality of the PHA if such partner will have a general partner or managing member ownership interest in the proposed Project Owner;

   • Change in the number or configuration of assisted units or any other change that may impact a household’s ability to re-occupy the property following repairs or construction; • De minimis reduction of units which had been vacant for more than 24 months at the time of RAD Application;

   • A substantial change in the proposed scope of the Work or relocation plans;

   • A material change in utility allowances; or

   • Other scenarios which HUD may prescribe

5. Significant Amendment Process. The requirements for resident notifications and meetings for the RAD program are separate from, and complementary to, the resident notification and consultation requirements under the significant amendment process (24 CFR part 903).
    
6. Other Requirements. A PHA must comply with all applicable relocation requirements (see Section 1.4.A.5) and all applicable resident consultation and notification requirements. Refer to the RAD Fair Housing, Civil Rights, and Relocation Notice for resident consultation requirements regarding relocation.

7. Meeting Participation. PHAs must provide adequate notice of meetings, should consider practices to reduce barriers to resident participation in meetings, and should conduct meetings in a place and time to foster participation. PHAs should consider the timing of resident meetings (e.g., times of day, days of the week including weekends) to encourage participation by residents with a variety of preferences and schedules. PHAs must make meeting notifications and meeting materials available in an accessible format (e.g., website, hard copies in the management office). Resident meetings can be offered in various formats including electronically (e.g., Zoom), in person, and/or in a hybrid meeting format. If a resident meeting is offered virtually, PHAs should consider residents’ computer and internet access and undertake reasonable measures to address technological barriers. Relevant parties from the PHA or the Project Owner should be available to respond to questions or comments from residents. Additionally, PHAs may not restrict attendance at the meetings unless necessary for the effective conduct of the meeting, for example, restricting attendance to accommodate size constraints of the venue of the meeting.

8. Accessibility Requirements. When providing resident notification and meetings, a PHA must use effective communication for persons with hearing, visual, and other communication-related disabilities consistent with Section 504 of the Rehabilitation Act of 1973 and, as applicable, the Americans with Disabilities Act of 1990. Effective communication may include, but is not limited to, providing written materials in appropriate alternative formats (e.g., Braille, large type, accessible email or websites), as needed, and providing sign language interpreters and assistive listening devices at resident meetings, as needed (24 CFR § 8.6). Additionally, resident meetings must be held in facilities that are physically accessible to persons with disabilities. Where physical accessibility is not achievable, a PHA must use alternative methods to meet with qualified individuals with disabilities, such as holding meetings at an alternate accessible site or offering in-home meetings. Such meetings must be provided in the most integrated setting appropriate to the needs of qualified individuals with disabilities. The most integrated setting appropriate to the needs of qualified individuals with disabilities is a setting that enables individuals with disabilities to interact with nondisabled persons to the fullest extent possible (28 CFR part 35, appendix B).
   
   Additionally, a PHA must provide meaningful access to its programs and activities for persons who have a limited ability to read, speak, or understand English. For projects undergoing RAD conversion, a PHA must provide language assistance to residents of the project who are Limited English Proficient (LEP) to ensure that they have meaningful access to RAD resident notifications and meetings. Such language assistance may include, but is not limited to, providing written translation of notices regarding the plans for the project and relocation and oral interpretation at resident meetings. For guidance on providing language assistance to persons with LEP, please see Final Guidance to Federal Financial Assistance Recipients Regarding Title VI Prohibition Against National Origin Discrimination Affecting Limited English Proficient Persons (72 FR 2732).
    
9. Resident Engagement Requirements in a Faircloth-to-RAD conversion. In addition to requirements for a PHA to include a Faircloth-to-RAD conversion in its Five-Year Plan, Annual Plan, or MTW Plan, HUD is requiring the following engagement with residents of an impacted property. When a PHA is developing new public housing units under Faircloth-toRAD, this Section 1.8.I shall apply in lieu of Sections 1.8.A through 1.8.D.
   1. If the property is occupied at the time the PHA requests a Notice of Anticipated RAD Rents, Sections 1.8.A through 1.8.D shall apply with the following modifications. The PHA must have complied with Section 1.8.A prior to submitting the request for a Notice of Anticipated RAD Rents. References to the Concept Call in Section 1.8.B shall be deemed to be references to the submission of the public housing acquisition, mixed finance development, or other development proposal pursuant to the applicable provisions of 24 CFR part 905. References to the RCC in Section 1.8.C shall be deemed to be references to HUD approval of such proposal and references to closing in Section 1.8.C shall be deemed to be the completion of such approved acquisition or development.
   2. If tenants are admitted to the property in accordance with admissions requirements after issuance of an RCC and prior to the Closing of the RAD conversion, the PHA shall, prior to the execution of the lease:
      1. Provide written notification in the form of a RAD Information Notice (RIN) to residents of projects proposed for conversion to inform the residents of the PHA’s intent to pursue a conversion and of their rights in connection with a proposed conversion/
      2. Provide a written explanation of the leasing and occupancy changes that will occur soon after move-in resulting from the RAD conversion to Section 8; and
      3. Meet with each resident household to discuss the conversion, explain the written materials referenced in subparagraph i and ii, above, and provide the residents an opportunity to ask questions. The resident meeting can be conducted on an individual household basis.
          
10. HUD Participation. At HUD’s request, the PHA must provide an opportunity for a representative from HUD to attend resident meetings either in-person or virtually.
     
11. Contacting HUD. Should residents and/or their advocates have concerns, require clarification on RAD program guidelines, including those focused on resident engagement and protections, or need additional support which cannot be met by the PHA, they may contact HUD at rad@hud.gov.

Under the Demonstration, applicants may apply to convert a single project78, a phase of a multi-phase rehabilitation or redevelopment, and/or a PHA-defined portfolio of projects (which could include subsequent phases in a multi-phase effort and completely independent projects. The requirements for each type of application are listed below:

1. General Requirements. All applicants must complete the RAD Application, which HUD will make available on the RAD website (www.hud.gov/rad), along with all other required submittals. The RAD Application will include certain pre-populated project data and will require the applicant to input summary information regarding the PHA’s tentative plans.

   PHAs apply by Project. A Project may consist of an entire Asset Management Project (AMP), a part of an AMP, multiple AMPs, or a project proposed for public housing development under 24 CFR Part 905. If a PHA desires to convert only a portion of a public housing AMP (e.g., only the high-rise portion of a project that is currently combined with scattered sites) and maintain the remaining portion as public housing, the PHA should indicate as such in its application (i.e., the PHA will not need to request a change in configuration for the project in order to submit the application). Similarly, a PHA may indicate in its application if it is applying for multiple public housing AMPs as a single Project. PHAs pursuing a Faircloth-to-RAD conversion must request a Notice of Anticipated RAD Rents (NARR) in lieu of the RAD Application.

   The RAD Application must include, where applicable:

   1. A Certification of Board Approval, which must be signed by the authorized representative of the PHA. This certification will be required for all submitted applications.
   2. A Response to comments received in connection with the required resident meetings on the proposed conversion.
   3. A Mixed-Finance Affidavit is required where the PHA is requesting to convert the public housing assistance in a mixed-finance project. This affidavit must be signed by both the PHA administering the public housing ACC and the Owner Entity of the project. Since only PHAs can apply under the Demonstration (see Section 1.3 of this Notice), the purpose of this affidavit is to ensure that both parties (the Owner Entity and the PHA) agree in principle to the conversion. Please note, however, that the HAP Contract for a mixed-finance conversion will be executed between the Contract Administrator and the mixed-finance Owner Entity, not the PHA administering the public housing ACC. (The PHA may be part of the ownership structure, however.)
   4. A Choice-Mobility Commitment Letter signed by: (a) the voucher agency that has committed to provide Choice-Mobility vouchers to the covered PBRA project of another PHA for the term of the initial HAP Contract; and (b) the agency that obtains a commitment from a voucher agency to support Choice-Mobility for a specified PBRA project. PHAs that are able to meet the Choice-Mobility requirement through turnover from their own voucher programs do not need to complete this letter.

    

   If a PHA chooses to convert assistance to PBVs, the PHA must identify in the RAD Application the voucher agency that will administer the PBV HAP Contract. If another PHA is proposed as the contract administrator and the project is selected, the PHA will need to submit a signed letter from the voucher agency evidencing the agency’s willingness to administer the PBVs. The PHA may contact the local HUD Office of Public Housing to identify a list of voucher agencies that have appropriate legal jurisdiction to perform this role. If there is no voucher agency with overlapping legal jurisdiction that is willing to administer the PBV contract, the PHA may want to consider converting the project to PBRA. However, in so doing, the PHA would still be required to meet, or receive an exception to, the Choice-Mobility requirement as described above.

2. Applications for Multi-phase Development. Prior versions of the Notice distinguished Multi-Phase Awards from Portfolio Awards. With this notice, PHAs that wish to implement a multi-phase rehabilitation or redevelopment of a public housing site may reserve authority to do so under the Portfolio Award structure. As of the effective date of this Notice, existing Multi-Phase Awards are converted to Portfolio Awards, subject to the time frames specified for Portfolio Awards provided that HUD may, in its sole discretion, grant extensions to such deadlines up to september 30, 2024.

   HUD recognizes that in certain situations multi-phase development warrants the demolition of a greater number of units than may be replaced in a single phase. HUD will consider individual requests for demolition prior to the construction closing of a phase based on a site plan, the timing and sources & uses for each proposed phase, the capacity of the development team, the impact on residents, and the overall likelihood that units will be successfully redeveloped.

   Applicants should keep in mind that the environmental documents submitted with the Financing Plan during the first phase (see Attachment 1A) must be submitted for the entire site, i.e., all of the phases of the multi-phase development, and that the environmental review conducted during the first phase will cover the entire site.

3. Applications for Portfolio Awards. A PHA may apply for a Portfolio Award, which allows a PHA to reserve RAD conversion authority for a set of projects (including for multiple phases of a large scale redevelopment effort and for planned projects) and that locks in the applicable contract rent in the year of application. In order to apply for a Portfolio Award, a PHA must submit:
   1. The total number of units to be converted; and
   2. RAD Applications for the lessor of four projects or 25% of the units identified in the portfolio.

   Upon approval of the application submission listed above, HUD will issue, in addition to the provision of CHAPs for the applications submitted, a Portfolio Award Letter covering the remaining units within the portfolio proposed by the applicant. The Portfolio Award Letter reserves RAD conversion authority for the remaining units in the portfolio and locks in the applicable contract rent for the year of the application submission for the units covered by the Portfolio Award. In order to retain its Portfolio Award, except with HUD approval, a PHA must close, on average starting one year after the issuance of the first CHAP, either two prjects per year or 25% of the units identified in the portfolio per year. For purposes of the annual average, conversions which occur in the first year shall be deemed to have occurred in the second year after issuance of the first CHAP. Units held in an existing portfolio award will be held to this standard effective on the date of publication of this Notice. PHAs may count existing CHAPs, in lieu of Applications, in presenting their Portfolio Award requests. The PHA has until September 30, 20204, submit an application for the final project covered by the Portfolio Award. Recipients of Portfolio Awards shall be required to fulfill all RAD Requirements for each CHAP issued by HUD. If at any time HUD determines that a PHA has failed to make sufficient progress towards the submitted conversion of the proposed portfolio, HUD may revoke RAD conversion authority provided under the Portfolio Award for all projects where a CHAP has yet to be issued. With HUD consent, PHAs may substitute projects in the portfolio award, and switch projects between the active and pending portions of the portfolio, provided that the newly substituted projects are subject to all of the requirements of this Notice.

   Further, PHAs that have received CHAPs for multiple projects, but that did not request a Portfolio Award, may convert their awards into a Portfolio Award as long as they comply with the requirements for a Portfolio Award.

4. Application for projects awarded under a Choice Neighborhoods Initiative (CNI) Implementation Notice of Funding Availability (CNI NOFA). HUD will reserve authority under the statutory cap on public housing conversions for properties covered under CNI implementation grants that submit RAD Applications or Portfolio Award applications and that meet eligibility requirements.
5. Submission of Letter of Interest When a Waiting List Has Formed. During any period when HUD is maintaining a waiting list pursuant to Section 1.10, in lieu of a RAD Application, a PHA may submit a letter of interest signed by the PHA’s Executive Director to RADapplications@hud.gov that identifies all of the properties (PIC # and name) and associated ACC units that the PHA is proposing for conversion. Such a submission would reserve the PHA’s spot on the waiting list under the lowest priority category described in Section 1.11 in the order in which the letter was received. In anticipation of HUD’s ability to make additional awards, HUD will notify the PHA that it must submit a complete RAD Application orPortfolio Award application, and comply with all the application provisions of this Notice, within 60 days of such notification or forfeit its position on the waiting list. PHAs may consider submitting complete RAD Applications separately for properties in its conversion portfolio that would fall under a higher priority category so as to achieve a higher position on the waiting list.

All required materials (including attachments and narrative summaries) must be submitted electronically pursuant to instructions available at www.hud.gov/rad. No paper or fax submissions are permitted.

There is no HUD fee for the submission of an application or the withdrawal of an application or award. There also is no cap on the number of project applications that a PHA may submit or resubmit.

Only complete applications will be considered. Rejected applicants will be notified and the PHA may choose to re-submit. If re-submitted, the application will be reviewed in order of the date of the re-submission.

Unless the application process is closed, which HUD would announce through the RAD website, the last date that HUD will accept an application is the final date of the statutory authority, as identified in the Federal Register. This announcement will specify the items related to selection and eligibility that will be required.

This section explains the criteria that HUD will use to select projects for participation under the Demonstration.

1. Initial Application Period (CLOSED). As required under the RAD Statute, HUD first conducted an initial competition period to ensure that awards were made to PHAs of various sizes and across geographies. HUD created target pools for awards based on PHA size and in four Census regions and made awards pursuant to those target pools. This initial application period opened on September 24, 2012 (60 days after the initial version of this Notice was issued) and closed on October 24, 2012 (30 days after the initial application period opened).
2. Second Application Period (CLOSED). The Second Application Period commenced on October 25, 2012 and closed on July 27, 2015. All applications submitted during the Second Application Period compete on a first-come, first-serve basis, where HUD issues a PHA an award for any Application that meets all eligibility criteria and that was received while HUD had available authority under the statutory cap.
3. Third Application Period (CLOSED). The Third Application Period commenced on July 28, 2015, and closes 30 days following the publication of this Notice. All applications submitted during the Third Application Period competed on a first-come, first-serve basis subject to the Priority Categories in effect at the time of the issuance of the CHAP in each instance.

4. Fourth Application Period.The Fourth Application Period commences 30 days following the publication of this Notice. Applications that meet all eligibility critera and any associated Portfolio Award requests, will be awarded on a first-come, first serve basis. HUD will reserve units for the Application and any associated Portfolio Award up until the point at which issuing an additional award would exceed the statutory cap. For all applications that meet all eligiblity criteria, HUD will rank each qualified application by the date and time the Application was submitted. If the next ranked application cannot be awarded because HUD has reached its available authoroity under the statutory cap, the application will be placed on the waiting list by the date and time the Applicaton was submitted. While a waiting list has formed, a PHA may submit a Letter of Interest as described in Section 1.9 in lieu of an Application that would serve to reserve a project's or a portfolio's position on the waiting list subject to future submission of a RAD Application. In administration of awards made off of the waiting list, applications for properties located in designated Opportunity Zones, along with their associated Portfolio Awards, shall be selected prior to all other properties.

5. Replacement Awards. If a CHAP or Portfolio Award issued to a PHA is revoked or withdrawn (including revocations when the PHA fails to comply with the requirements of this Notice), HUD will issue a replacement award to an applicant from the waiting list, if one has formed.
6. Online Summary. HUD will post a summary of applications selected for CHAP, Portfolio, or Multi-phase Awards and waiting list status for all other applicants. The summary will be updated periodically.
7. Exemptions from the Choice-Mobility Component. For PBRA conversions, HUD will allow good-cause exemptions on a first-come, first-served basis up to the 10 percent limit.61 An Application that meets all requirements of the Notice, but that cannot be awarded a CHAP because it has requested a good-cause exemption and HUD has reached its 10% cap will be placed on the waiting list. The Application will be passed over if all of the good-cause exemptions as indicated above have been exhausted. An Application may be selected for a good-cause exemption if a CHAP is terminated for a project that originally received a good- cause exemption. At any point, a PHA may revise its application to certify that it will meet the Choice-Mobility component. If an application is modified in this way, it will retain its place on the waiting list.
8. Application Denials. If HUD determines that a PHA does not meet the eligibility requirements in Section 1.3, HUD will issue a letter denying a CHAP to the PHA citing the specific grounds for the denial of its application. The PHA then has 30 days from the date of the letter to appeal the denial in writing. The appeal must include the grounds for appealing the denial and supporting documentation. The Department will review the appeal and will notify the PHA of its decision within 60 days of the appeal. If applicable, the PHA's position on the waiting list will not be adversely affected if a decision is made in favor of the PHA. The appeal should be sent to RADapplications@hud.gov, with the name of the project and the word “Appeal” included in the Subject Line, e.g., “Subject: Lincoln Townhomes, Appeal.” If a PHA’s application or appeal is denied, the PHA may revise the application and resubmit; such resubmittals will be reviewed in the order of date of resubmission.

1. CHAP Award. PHAs will be notified of selection via issuance of a CHAP, or Commitment to enter into a Housing Assistance Payment, which shall include the HUD-approved terms and conditions for conversion of assistance. For PBV conversions, the PHA is responsible for ensuring that the rents included in the CHAP do not exceed the Reasonable Rent in accordance with 24 CFR 983.301. The CHAP will not be subject to negotiation.

   PHA must confirm its acceptance of the CHAP by submitting an application (including required attachments) into the Inventory Removals module in PIC identifying the units that wil be removed from the public housing Annual Contributions Contract (ACC) when the projet completes conversion.⁸⁵

   If a PHA applies for a Portfolio Award, HUD will reserve RAD conversion authority for the phases or projects covered by the award. A PHA must fulfill applicable milestones for submission of the applications for the remaining phases or projects. HUD’s issuance of a CHAP includes terms on which HUD will later issue the HAP. For this reason, the CHAP should be useful in the PHA’s discussions with lenders, investors and other providers of financing.

   The CHAP may be revoked by HUD: (1) if, at any time, the PHA or project become ineligible under the provisions of this Notice; (2) upon HUD’s determination of financial infeasibility; (3) if the PHA cannot demonstrate to HUD’s satisfaction that it is making adequate progress towards Closing; (4) for PHA non-cooperation; (5) for violation of program rules and restrictions, including fraud, (6) if the PHA fails to discuss the conversion plans as a significant action in the PHA’s Five-Year Plan, Annual Plan or MTW Plan or submit an approved significant amendment to HUD, and/or (7) if HUD determines that the terms of the conversion would be inconsistent with fair housing and civil rights laws or a fair housing or civil rights court order, settlement agreement, or voluntary compliance agreement.

   HUD will request periodic discussions with the PHA to assess whether the PHA is making adequate progress towards the submission of a Financing Plan. In order to ensure PHAs are making consistent progress towards conversions, within nine months (270 days) of the CHAP award the PHA must submit a Financing Plan or receive an extension from HUD setting forth a project-specific Financing Plan due date, which due date may be further extended by HUD upon reasonable justification. A PHA must hold another meeting to update residents on conversion plans in order to secure an extension greater than six months.

   PHAs may request amendments to the CHAP to split or combine CHAPs, modify the units or utility allowances, utilize rent flexibilities in accordance with Section 1.6.B.5 or Section 1.7.C.5, or request a replacement CHAP in order to secure rents based on the applicable RAD rent base year at the time of the request (see Attachment 1C).

   Because units under the Demonstration are limited, it is critically important that recipients of a CHAP diligently pursue the Financing Plan and complete conversion or withdraw, so that HUD might award those units to a PHA that is able and willing to convert the assistance of units.

2. Activities Prior to Financing Plan Submission. The PHA is responsible for ensuring that up front civil rights reviews and relocation activities are conducted as required in the RAD Fair Housing, Civil Rights, and Relocation Notice.

3. Concept Call. Prior to submitting a Financing Plan a PHA must request a “Concept Call” with HUD via the RAD Resource Desk during which the PHA will describe the conversion plan and demonstrate that the plans are sufficiently advanced to warrant review by HUD. If HUD determines, in its sole discretion, that conversion plans are sufficiently advanced and do not present any program violations, HUD will invite the PHA to submit a Financing Plan as long as it is consistent with the project plans.

4. 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. Closing Preparations. Conversion does not occur prior to the Closing.

   The RCC sets out the requirements for Closing. Draft closing documents, including those listed in the RCC and in any closing checklist provided by HUD, must be submitted to HUD for review prior to closing. As indicated on the checklists, the closing package must contain financing documentation for programmatic and underwriting review purposes and evidence of title (and copies of title exception documents) and survey satisfactory to HUD. Current HUD forms of the closing documents must be used. Closing shall not occur until all policy and legal issues are addressed to HUD’s satisfaction. After closing, HUD must receive fully executed versions of the closing documents, as directed by HUD. To facilitate closing, HUD may send documents to an escrow agent to hold in trust until all of HUD’s closing requirements, including the closing of any construction financing, have been met.

   In the event that construction or bridge financing will be used as part of the transaction financing, HUD will require evidence before closing of firm commitment for take-out or permanent financing conditioned only on the completion of construction or term of the bridge financing and standard permanent loan financing conditions acceptable to HUD. For transactions utilizing outside financing, HUD will require evidence that financing sources have closed and will be providing the contemplated funding. If the project is being financed with an FHA-insured loan, the closing requirements listed under the MAP Guide will apply in parallel with specific RAD requirements.

   The RAD HAP Contract generally becomes effective on the first day of eitehr of the two months following clisng, at the Project Owner's discretion.⁹⁰

2. Preparations for leaving the public housing program.⁹¹
   1. 50058 End of Participation (EOP). In order for properties to be removed from IMS/PIC and for families to formally transition off of the public housing program, PHAs must submit a Form-50058 EOP for every resident at the Converting Project on or before the day before the effective date of the HAP Contract. The EOP may be created by a PHA’s software or using Family Reporting Software (FRS) and uploaded to IMS/PIC, or the PHA may submit an on-line EOP.67 Failure to do so may result in delays in HAP payments to the Covered Project.
   2. Leases. PHAs must provide residents with notification of public housing lease termination in accordance with 24 CFR § 966.4(l)(3) and in accordance with local law, and shall enter into new Section 8 leases effective as of the effective date of the HAP Contract.
   3. Earned Income Verification. For any public housing residents with outstanding debt, PHAs may not enter the debt into the Earned Income Verification “Debts Owed” module as a result of the 50058 End of Participations that is required to be submitted into PIC as part of the conversion. PHAs and Owners must otherwise continue to use EIV in all applicable circumstances.
   4. Use of Capital Funds or Operating Reserves in the Development Budget. All Capital Funds, including RHF and DDTF, or Operating Reserves that have been approved in the Financing Plan must be identified on the Sources and Uses and drawn down at closing in accordance with HUD procedures which may include placement i a segregated account. If there is new debt being placed on the Covered Project, these funds can be held by the lender. If no new debt will be utilized, the PHA must place the funds in a separate bank account.
   5. Preparations for Entering PBV or PBRA. PHAs should be aware that many tasks must be undertaken well in advance of closing (e.g., preparation of new leases and implementation of new data systems).⁹³
   6. Funding Upon Closing. For the remainder of the first Calendar Year in which a HAP Contract is effective (the “year of conversion”), Operating Funds and Capital Funds will be obligated to the PHA for the Covered Project at the level of public housing subsidy which that project is eligible to receive regardless of the initial contract rent amount or OCAF.69
      1. Operating Fund.
         1. PHAs must submit Operating Subsidy tools and follow the normal Operating Subsidy process (including revisions where corrections are needed) for the project for the year in which the project converts.
         2. The amount of Operating Funds that can be used for HAP payments during the year of conversion is capped at HUD’s obligations of Operating Subsidy to the project for the remainder of the year after conversion, pro- rated by the portion of units in the PIC Development that are converting and will be removed from PIC. HUD will periodically publish the cap amount for converted units.
         3. Projects that complete conversion are not eligible for Operating Subsidy in the subsequent year. For conversions that result in the removal of all public housing units from a PIC Development, the PIC Development will not be eligible for any subsidy in the subsequent funding year.⁹⁵ For partially converted projects, PHAs must remove eligible unit months (EUMs) for units that converted to RAD from the Operating Subsidy tools and must adjust the rolling base to reflect only the units that remain assisted under public housing. Please see the instructions to the Form HUD-52722 for details on adjusting the rolling base.
         4. The funding guidance provided in this notice supersedes the guidance in Section 9 of the Notice PIH 2016-10.
      2. Capital Fund. The amount of Capital Funds that can be used for HAP payments during the year of conversion is based on the PHA’s Capital Fund Formula Grant attributable to the project (“Project Amount”) in the year of conversion, pro-rated by the number of units in the PIC Development that are converting and then by the months remaining in the year in which the HAP Contract became effective. For the purposes of RAD, the Project Amount is spread over the Calendar Year, rather than the Fiscal Year. Where HUD has not yet obligated the full FY’s Capital Funds to the PHA, HUD shall obligate the remaining funds as soon as available. Capital Fund amounts will be moved into specific RAD Budget Line Items (BLIs) in LOCCS.

      Prior to conversion, HUD will provide PHAs with worksheets to assist with the above-mentioned calculations.

      Commencing on the effective date of the HAP Contract, the PHA may use no more than the amounts described above to make HAP payments in the “year of conversion”. During this period – the months between the effective date of the HAP Contract and the end of the calendar year – HUD will not provide additional subsidy to the project if the amount provided through the public housing Operating Fund and Capital Fund is insufficient to cover the rents listed in the HAP Contract. HUD requires PHAs to estimate any potential deficit and encourages PHAs to establish an Operating Deficit Reserve in their Financing Plan (using Operating Reserves, available Capital Funds, financing proceeds, or any other eligible source), but the PHA is under no HUD-imposed obligation to do so.

      In the first full year following conversion, Covered Projects will be funded from the PBRA account or the TBRA account, relative to the form of Section 8 assistance for the Covered Project(s), according to the amount indicated in the HAP Contract, including any applicable OCAF, subject to all terms and conditions of the HAP Contract.

   7. Post-Closing Completion Certification. Project Owners must submit to HUD a completion certification; for all repairs included in the Scope of Work in the RCC and other information about compliance with the requirements of the RCC. Project Owners can fulfill the cost certification element of this requirement by submitting a cost certification required by a lender or investor or, if one is not required by a financing source (or not applicable), another form as prescribed by HUD.
   8. Management fees. Any management fees earned following conversion are not subject to any federal restrictions.
   9. Additional requirements for PHAs removing all public housing units. Notice PIH 2019-13 or successor notice provides information and guidance regarding program activities that PHAs must complete regarding removal of the last of their public housing dwelling units from their public housing inventory. Such notice also contains notification requirements for both PHAs seeking to develop new public housing units in the future (after removing all existing public housing dwelling units from their inventory) and for PHAs seeking to close out their public housing program.

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:

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.

2. 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.

3. 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.

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

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.

2. 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

For additional information on this section of the Notice, please check www.hud.gov/rad or email questions to RAD@hud.gov.

A Financing Plan will not be reviewed until all required documentation is submitted. HUD will complete an initial review for document completeness within five business days of submission. Once HUD has determined that all required documents have been received, HUD will review the documents submitted.

HUD’s purpose in reviewing Financing Plans is to ensure the long-term physical and financial viability of the Covered Project. If a Financing Plan fails one or more feasibility benchmarks, the HUD reviewer may still accept the Financing Plan if HUD determines that, taken as a whole, the Financing Plan is consistent with the long-term physical and financial viability of the property and/or the PHA can adequately support, through historical data or other means, the presented figures. HUD reserves the right to reject any Financing Plan if the information provided is not complete, accurate, or in compliance with the submission requirements listed below. HUD will not accept the Financing Plan if the project does not meet environmental review requirements, as described below.

Below are all the required components of a complete Financing Plan and the requirements of each component. Please note that for RAD conversions that will utilize FHA mortgage insurance, the submission requirements and feasibility benchmarks are primarily found in the MAP Guide as revised by Mortgagee Letter 2012-20. The end of this Attachment lists the submissions that must be made separate and apart from the FHA-insured loan application and uploaded to the RAD Resource Desk.

HUD reserves the right to streamline any or all of these requirements for classes of project, e.g., no debt-transactions, small projects or transactions using CNI grants.¹⁰²

1. Type of conversion. Identify whether the Covered Project will convert to PBV or PBRA assistance.
   1. For PBV conversions, identify the PHA that will administer the PBV HAP Contract.
   2. For PBRA conversions, where the PHA did not receive a good cause exemption for Choice-Mobility, upload a fully executed Choice Mobility Letter of Agreement signed by the PHA converting units and the PHA that has agreed to administer the vouchers in order to comply with the Choice Mobility requirement.
2. Capital Needs Assessment (CNA). See section 1.4(A)(1).
3. Scope of Work for Rehabilitation or New Construction. The scope of work must:
   1. Identify and address all repairs required in the CAN (including all items identified in the CAN as not functioning at the time of the site visit) or provide a written justification why those items are not included. Briefly discuss any differences between the conclusions / recommendations of the CAN provider; the levels of immediate rehabilitation needs; and the PHA’s choices for replacement components.
   2. Include quantities and costs. Rehabilitation or new construction estimates must be based upon reasonable market estimates of actual costs, confirmed either by cost estimating completed by the architect/engineer (who is typically distinct from that contractor that conducted the CAN), or through actual competitive bids for major rehabilitation or construction items, in compliance with HUD requirements.
   3. Include a summary of environmental issues known at that time, and a discussion of any planned environmental remediation (including post-closing Operations & Maintenance plans). If the property was constructed before 1978, identify the need for interim controls of lead-based paint hazards based on a risk assessment of re-evaluation and discuss planned lead hazard control activities in accordance with LSHR 24 CFR 35. O&M plans covering properties that continue to have lead painted surfaces, even if enclosed or encapsulated, must include training and certifying property maintenance personnel who disturb paint in accordance with the EPA's Renovation, Repair and Painting Rule (40 CFR 745, Subpart E), training and certifying property maintenance personnel who abate the paint in accordance with the EPA's lead Abatement Rule (40 CFR 745, Subpart L or Q), and training and certifying the employer of the property maintenance personnel to become a certified lead renovation firm or certified lead abatement firm, as applicable.
   4. Include a summary of accessibility features that are required pursuant to the Fair Housing Act and implementing regulations at 24 CFR Part 100, Section 504 of the Rehabilitation Act of 1973 and implementing regulations at 24 CFR Part 8, and Titles II and III of the Americans with Disabilities Act and implementing regulations at 28 CFR Parts 35 and 36, respectively. Please see the instructions for the CAN e-Tool and the RAD Fair Housing, Civil Rights, and Relocation Notice for a complete list of accessibility requirements and resources.
   5. Include a description of how all utility consuming components that are past estimated useful life at the time of the RAD application (or that are not functioning at the time of the CAN inspection) will be replaced with the most financially efficient alternative (taking into account initial cost and utility savings), as documented in the CAN.
   6. Include a reasonable timeline for completion of all rehabilitation items acceptable to HUD, depending on the scope of rehabilitation funded.
   7. Identify which hazards are "relatively high" or "very high" for their county and census tract according to FEMA's National Risk Index (NRI) and provide a narrative description detailing how the scope of work addresses or mitigates against the climate hazard risks.
   8. Until such time as regulations promulgated pursuant to Executive Order 13690 become effective, for all buildings that will be newly constructed (including gut rehab, where physically and financially feasible) and will be located in the FEMA 500-year floodplain (or 100-year floodplain where FEMA has not mapped the 500- year floodplain), all relevant building mechanicals (HVAC, cogeneration, hot water heating, and other systems) and all residential units must be designed to be at a height no less than the greater of the 500-year floodplain or two feet above the 100-year floodplain based on FEMA Flood Insurance Rate Maps (FIRMs). Any interior nonresidential spaces – such as common areas, community centers, and lobbies – that are not elevated to this level, must at a minimum be floodproofed to at least two feet above the 100-year floodplain. For buildings outside of FEMA floodplains, PHAs are encouraged to consult other sources (e.g., historical flooding of neighboring sites, NOAA Sea Level Rise Viewer, Flood Factor) to consider future flood risk and design accordingly.
4. Environmental Review. HUD cannot approve an applicant’s Financing Plan submission unless and until the required environmental review has been completed for the applicant’s proposed conversion project and found to meet environmental review requirements. The following describes the submission and approval steps for securing a completed environmental review.

A RAD transactions will either be reviewed under 24 CFR Part 50 or 24 CFR Part 50 ("Part 50 Reviews") or 24 CFR Part 58 ("Part 58 Reviews"). Part 50 applies when HUD conducts the environmental review, and Part 58 applies when a Responsible Entity (RE) conducts the environmental review. The following table shows which review protocol a transaction will follow, along with who will conduct the review.

Description	Type of Environmental Review	Reviewer
PBRA Non-FHA	Part 50	RAD Transaction Manager
PBRA FHA Non-Risk Share104	Part 50	FHA Production
PBRA FHA Risk-Share	Part 50	Transaction Manager
PBV FHA Non-Risk Share	Part 50	FHA Production
PBV Non-FHA	Part 58	Responsible Entity (RE)
PBV FHA Risk-Share	Part 58	State Housing Finance Agency or Responsible Entity, as applicable

Under limited circumstances, per 24 CFR 58.11©, an Awardee with a non-FHA PBV transaction may request HUD to undertake the enviornmental review under Part 50 if a suitable RE cannot be found or if the local government was not a direct recipient of the funds and refuses to accept responsibility or when HUD determines the local government does not have capcatiy to act as an RE.106 This request must be made in writing and submitted to HUD no later than at the time of the Financing Plan submisison.

For multi-phase developments, the environmental documents submitted with the Financing Plan during the first phase must be submitted for the entire site, i.e. all of the phases of the multi-phase development, and the environmental review conducted during the first phase will cover the entire site.

Requests to transfer assistance from the Converting Project to a new location are subject to environmental review.

For transactions receiving funding from other HUD programs (i.e., HOME, CDBG, non-RAD PBV), HUD encouarages all parties to complete one review for all programs, even if these programs' environmental reviews are conducted under a different review portocol (Part 50, Part 58). In cases where two Part 58 programs are combined, HUD encourages applicants to work with the Responsible Entity to see if enviornmental reviews can be combined. However, this is soley th Responsible Entity's determination. In cases where a Part 50 program and a Part 58 program are combined, HUD may detemrine that it will perform one Part 50 environmental review for both programs under 24 CFR 58.11 if performing an additional Part 58 environmental reivew is not feasible in the time alloted. HUD must ensure that the Part 50 review considers the full scope of all activities and funding associated with all programs. When one review is used for both programs, the Approving Officials for both pprogams must certify the review.

For all Part 50 reviews, the applicant must submit reports and documentation to HUD in accordance with 24 CFR Part 50, as discussed in Chapter 9 of the MAP Guide, except as follows:

1. For PBRA conversions, (or where HUD has determined to conduct the PBV environmental review under Part 50) without FHA insurance and without any rehabilitation, construction, or demolition,⁸² HUD conducted a tiered review of program-wide and site-specific compliance. HUD has 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 of 1990 (16 U.S.C. 3501);
   2. Flood insurance and floodplain 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 interestd parties or the public.>sup>110

   PHAs will be required to submit documentation to facilitate HUD's site-specific review.

2. All non-FHA PBRA conversions (or where HUD has determined to conduct the PBV environmental review under Part 50) that do not meet the requirements under paragraph 1 above, the awardee will follow the guidelines in Chapter 9 of the MAP guide. Awardees will upload all applicable documentation directly into HEROS at the time of Financing Plan submission. The following exceptions to the MAP Gudie apply:
   • Awardees may submit a more limited report on potential sources of contamination. Where a Phase 1 ESA is not required (i.e., projects without any associated substantial rehabilitation114 or new construction), the Awawrdees can submit a "transaction screen" in accordance with ASTM E 1528-14 (or the most recent edition). A transaction screen will identify potential environmental concerns based on questionnaires, owner/occupant inquiry, site visit, government records inquiry and historical sources inquiry. The transaction screen must be prepared by a qualified professional, in accordance with 24 CFR § 50.3(i)(4). As the definition of preparer in ASTM E 1528-14 does not meet this requirement, the professional must have either (a) a science degree and at least one year of practical environmental assessment experience in the field, or (b) three years of practical environmental assessment experience in the field performing site assessments for site contamination. If any potential environmental concerns are identified, an ASTM Phase I ESA in acordance with ASTM E 1527-13 (or the most recent edition) must be provided. OR
   • Awardees may submit a Phase 1 ESA that is up to 5 years old upon submission; however, it must be updated by a Transaction Screen that is up to 1 year old upon submission.

 

When HUD conducts the environmental review under Part 50, PHAs (or their vendors) must submit environmental reports and documentation115 for HUD review into the HUD Environmental Review Online System (HEROS), where HUD will complete its review.

 

HUD staff will review the submissions and may require additional information in order to complete their review. HUD's review will result in a determination, which may stipulate the rejection of the site for this demonstration or may require the completion of mitigation measures. The RCC will include any conditions required to carry out any and all mitigation measures as may result from the environmental review. Any conditions or mitigation that cannot be satisfied before Closing will survive Closing.

When a Responsible Entity (RE) completes an environmental review under Part 58, the Financing Plan must include either Form 7015.16 or a letter with the Responsible Entity’s (RE’s) finding of exempt activity in order to consider the environmental review to be complete. The RE should use HUD recommended formats to document the environmental review record.  The PHA should submit an environmental report to the RE, in such form as prescribed by the RE, to enable the RE to complete their analysis. Once the review is completed, the PHA must submit either:

• Form HUD-7015.15, Request for Release of Funds (RROF), to their local PIH field staff. After the PIH Field Director approves the RROF, the Director sends a completed HUD Form 7015.16 to the PHA, approving the release of funds. The PHA must submit proof of the completed Form 7015.16 (either a copy of the paper form or a screenshot of the completed screen in HEROS)to HUD; or
• If form HUD-7015.15 is not required because the project converts to Exempt under 24 CFR § 58.34(a)(12), the PHA must submit the RE's finding of exempt activity with their RAD Financing Plan. A finding of exempt activity is a statement of the result of the RE’s environmental review, and is required even when form HUD-7015.15 is not required. A letter from the RE indicating that the project converts to Exempt under 24 CFR § 58.34(a)(12) is sufficient.  

Additionally, the PHA must submit a Radon Report consistent with the requirements of Section 9.6.3 of the MAP Guide (or successor provision) for HUD to review.

5. RAD Fair Housing, Accessibility and Relocation Checklist. Prior to submission of the Financing Plan, all PHAs shall have completed and submitted the RAD Fair Housing, Civil Rights and Relocation Checklist provided by HUD. The Checklist shall include a certification that the relocation plan complies with all applicable HUD requirements, including the URA as well as Section 504 of the Rehabilitation Act of 1973 and its implementing regulations (24 CFR §8).¹¹⁹ The cost of the relocation must be fully funded in the Development Budget. The Financing Plan submission shall include a copy of HUD’s approval of the Checklist or a statement that approval is still outstanding. In the event of any changes in the plans described in the Checklist, the PHA shall submit an update to the Checklist.
6. Development Budget (Sources and Uses of Funds). The Development Budget must:
1. Include a reasonable, balanced and comprehensive presentation of sources and uses of funds, entered into the Transaction Log on the RAD Resource Desk, and which is in accordance with all applicable HUD requirements.
2. Include a construction contingency of 10% for rehabilitation or as othterwise allowed by a LIHTC allocating agency for new construction. Note that HUD may require a higher contingency on a case-by-case basis.
3. Demonstrate that existing loans or debt will be paid off at the closing or supported through NOI. For projects covered under an EPC, the PHA must provide a draft amended EPC approval letter from the PIH Energy Center specifying the minimum amount of debt that will need to be addressed in the conversion.
4. Demonstrate that any Identity of Interest (IOI) loans or advances will be converted to unsecured Surplus Cash Notes (IOI loans may not be paid off from the proceeds of new financing), unless otherwise approved by HUD.
5. Include narrative that discusses any aspects of the planned rehabilitation that may result in an initial operating deficit during the rehabilitation and how that deficit will be funded, including any operating deficit escrow or similar fund.
6. Include a Subsidy Layering Review (SLR) if one has been performed by another agency. If no SLR has been performed, HUD will complete a SLR, in accordance with section 102(d) of the HUD Reform Act, whenever multiple federal sources are proposed, when public housing funds are used (see Section 1.5A), or when an MTW agency is using MTW funds to set their initial contract rents (see Sections 1.6B5 and 1.7A5). A separate SLR will not be conducted by HUD if there is non-RAD PBV or another HUD subsidy at the time of conversion; the SLR performed as part of the RAD conversion will satisfy the requirements under section 102(d) of the HUD Reform Act. The purpose of the subsidy layering review is to ensure that assistance made available by HUD for a specific housing project will not be more than is necessary to make the assisted activity feasible after taking into account assistance from other government sources. The subsidy layering review performed for conversions to either PBV or PBRA will ensure that costs are reasonable and cash flow is not excessive. Given unique circumstances that occur in RAD conversion, other guidance with respect to PBV or PBRA subsidy layering reviews do not apply to financing of Covered Projects at the time of conversion.¹²⁰
7. Development Team. Include the following information:
1. Identification of all participants, including the PHA, the general contractor, the legal entity that will own the project, the proposed management agent, and all “principals” of those entities. The submission must disclose any identity of interest between any of the parties. Where fees normally determined by market negotiations (such as general contractor overhead and profit) are being paid among identity of interest parties, HUD may limit such fees to amounts comparable to the market, commonly seen in RAD transactions, commonly permitted in other HUD programs, or permitted by the applicable State’s low income housing tax credit qualified allocation plan.
2. Evidence of recent successful experience with similar rehabilitation or construction projects. For properties requiring substantial rehabilitation or new construction, the Project Owner is required to engage a general contractor, unless recent and comparable experience managing rehabilitation can be demonstrated or if the development team is using the FHA-insured Section 223(f) program or a repair program approved by HUD. If multiple funding sources will be used for the Covered Project, the development team must demonstrate that it has experience with at least three transactions with multiple sources of financing.
3. For PBRA conversions, evidence that all principals have Previous Participation Certification in the Active Partners Performance System (APPS) (formerly the Form 2530) and are not be debarred, suspended, or subject to a Limited Denial of Participation.
8. Proposed Financing. For each proposed loan, equity contribution, or grant, the PHA must include a:¹²¹
1. Recent lender, investor or grant engagement letter, dated no later than 60 days prior to Financing Plan submission, with key terms identified (including for each amount, repayment terms, interest rate, amortization, maturity, prepayment restrictions, and pay-in schedule) from all financing provider(s). Permanent debt financing with monthly payment amounts not conditioned on the availability of cash flow (i.e., “hard&radquo; debt) on Covered Projects must:¹²⁵
   1. Be at a fixed rate of interest, for a fixed term, and fully amortized over not more than 40 years;
   2. Not have a baloon payment until after the earlier to occur of a) expiration of the term of the HAP Contract or b) 17 years from the date of the permanent debt financing; and
   3. Not have a debt service coverage less than the higher of 1.11 or lender requirements.
   
   

   All bridge loan or construction financing must be disclosed and approved by HUD. All cash-flow (“soft” debt) and subordinate (or secondary) financing must be disclosed and then approved by the first-mortgage lender as well as HUD in accordance with section 8.9 of the Mortgage Credit and Underwriting and Processing Requirements of the MAP Guide and any subsequent revisions or updates to the MAP Guide.

2. Brief discussion of conditions / milestones to be satisfied prior to closing;
3. Documentation that the first mortgage lender has consented to the Use Agreement and that the lien of the new first mortgage loan will be subordinate to the Use Agreement;
4. Estimation of projected closing date for all proposed financing. Discuss any known impediments to closing within the timeframe required under the Notice. Include a discussion of key milestones with estimated milestone completion dates. The terms for all seller take-back financing must also be disclosed.
9. Operating Pro Forma. The Operating Pro-Forma must:
1. Be entered into the Transaction Log of the RAD Resource Desk (stabilized cash flow)
2. In a PHA provided template, project out for the term of the initial contract.
3. Include an attached discussion of the extent of energy and water savings that are anticipated as a result of the rehabilitation or construction and the basis for those estimates. The discussion must explain to what extent anticipated savings in utility costs have been included in the pro forma operating expenses.
4. Include an attached Rent Comparability Study for projects converting to PBRA where current funding is greater than 120 percent of the FMR and where the PHA believes current funding is below the market rent. The Rent Comparability Study must be prepared in accordance with Chapter 9 of HUD’s Section 8 Renewal Guide. See http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8
5. Be consistent with local standards for Federally-assisted housing and otherwise comply with at least the following feasibility benchmarks:
1. Rents shall not exceed the amounts permitted under program rules
2. All other sources of income must be supported with a narrative or must not exceed the average for the last three years (other income should not include interest income on the replacement reserve account, which must remain in the reserve and is not available for other purposes).
3. Vacancy loss shall be no less than the greater of the average over the past three years or 3 percent.
4. Allowance for bad debt should be not less than the greater of the average over the past three years or 2 percent.
5. Where the PHA indicates continuation of a Payment In Lieu of Taxes (PILOT), provide a legal opinion based upon state and local law of continuation of PILOT post conversion. If the PILOT will not be continued after conversion, the PHA must provide documentation of real estate tax estimates.
6. Insurance costs must be documented, such as quotes from an insurance agent based on actual recent premiums for similar projects.
7. All other operating expenses shall be no less than 85 percent of the average for the last three years, unless justified.
8. The annual replacement reserve deposit should be equal to that amount which, if deposited annually, will be sufficient to fund all capital needs, as identified in the CAN, arising during the first 20 years and otherwise not addressed upfront in either the rehabilitation or an initial deposit to the replacement reserve account. The PHA should use reasonable estimates in the inflation but in doing so the rate for escalating the increase in repair costs should not exceed the rate of interest on reserve deposits by more than 1%.  HUD may consider alternative arrangements with respect to the initial deposit to the replacement reserve if risks to the Covered Project can be adequately mitigated.
9. For non-leveraged transactions (i.e. transactions that will not be taking on any new hard debt as part of the conversion), the stabilized cash flow should not be less than $12 per unit monthly. For leveraged transactions (i.e. transactions that will be taking on new hard debt as part of the conversion), the debt-coverage ratio should not be less than 1.11 over a ten year period using 2% growth in revenue and 3% growth in expenses.
10. Market Study. A market study will only be required at HUD's request, e.g., in cases where the project is currently experiencing a high vacancy rate, or when project plans include unit reconfiguration or inclusion of market-rate units. For projects using an FHA insured mortgage, please see the MAP Guide for instruction on when a market study is, and is not, required.
11. Approved Significant Amendment to the PHA Plan. Provide a letter from HUD approving the Significant Amendment, Five-Year Plan, Annual Plan, or MTW Plan.
12. Front-End Civil Rights Reviews. Any necessary approvals described in the RAD Fair Housing, Civil Rights, and Relocation Notice must have been secured.

13. Approval of Non-dwelling Real Property.  The PHA provides information on the units, non-dwelling property and land it wishes to remove from the Declaration of Trust (DOT) or Declaration of Restrictive Covenants (DORC) and from the ACC in the RAD PIC Removal Application.  Information is provided both in the removal application form and by attaching the CHAP, a site map, and a written explanation of units and property to the removal application.  Based on information the PHA provides in the RAD PIC Removal Application, the PIH Field Office will review the removal application and approve any non-dwelling real property that can be released from public housing use restrictions (DOT or DORC), under RAD authority, as part of a RAD transaction, provided it is encumbered under a RAD Use Agreement. The following non-dwelling real property can be included:

1. Buildings that contain units to be converted under RAD, including:
• units designated as “non-dwelling units” in IMS/PIC (laundry facilities, storage, management offices);
• community and common space;
• units that are not public housing, but are part of a mixed-income community amongst mixed-finance public housing units and are documented in IMS/PIC as “non-ACC” units;^{127 and}
• underlying land at those buildings;
2. Necessary appurtenances for the RAD units (e.g., parking lots, playgrounds);
3. Non-dwelling structures (e.g., sheds, community buildings) that at will be demolished as part of the conversion, provided such demolition is included in the approved RAD RCC;
4. Free standing non-dwelling buildings or other non-dwelling real property that will be used primarily to “support” the RAD units (e.g., project-specific community centers, maintenance building, management office building), provided such property is contiguous, adjacent or in close proximity to the RAD dwelling units parcel, and the PHA evidences the property will support the RAD units through either direct supportive services for residents or direct administrative and/or management support for RAD units. Such property may also serve other residents or projects of the PHA provided the property primarily serves and supports the RAD units; and
5. Vacant land and other real property necessary to support the RAD units (e.g., landscaping, community gardens, or reasonable green-space that is required for zoning).

HUD, in its sole discretion, will determine whether property proposed for release falls into any of the categories above and can therefore be removed from the DOT or DORC at closing.

In order for HUD to release the DOT or DORC from any public housing property not referenced above, a PHA must submit a request in accordance with the applicable requirements of other HUD programs and federal authorities, such as disposition under Section 18 of the Act or PHA retention of the property under 2 CFR Part 200.

14. Approved Amendment to Attachment A of the MTW Agreement. For MTW agencies that have not completed this step as part of a previously completed conversion, the PHA must provide an executed amendment to Attachment A of their MTW Agreement with language provided by the PHA’s MTW coordinator.
15. Affirmative Fair Housing Marketing Plan (AFHMP). For PBRA conversions, evidence that a completed AFHMP (HUD 935.2A) has been submitted for approval to the local Multifamily Regional Center. If a PHA is converting more than one project to PBRA, a separate AFHMP must be submitted for each project. Typically, the management agent or the entity responsible for marketing (if different) is responsible for completing and submitting the AFHMP. If a Project Owner plans to adopt any local or residency preference(s), the Project Owner must submit its Tenant Selection Plan along with the AFHMP (see HUD Handbook 4350.3, page 4-4). The purpose of affirmative marketing is to ensure that individuals of similar income levels in the same housing market area have a like range of housing choices available to them regardless of their race, color, national origin, religion, sex, disability, or familial status. The Project Owner may not market or lease any unit not occupied by a household exercising its right to remain in or return to the Covered Project prior to approval of the AFHMP. Market or leasing includes the solicitation, distribution, or acceptance of applications or development of a waiting list.
16. Estimate of public housing funds available for HAP subsidy. The PHA shall provide an estimate of the public housing subsidy that will be used to support payments under the HAP Contract in accordance with Section 1.13.B.5. HUD will provide tools for PHAs to make such estimates.
17. Transfer of Assistance. For all conversions involving a transfer of assistance to a new site, the PHA must have secured HUD approval of the site (Covered Project). The PHA must also identify proposed plans for the pre-conversion public housing site (Converting Project), including how the PHA proposes to treat the DOT at the effective date of the HAP contract in compliance with Section 1.4.A.12.
18. Resident Participation and Comments. Provide:
    1. A summary of meeting attendees and participation by residents, PHA staff, and other attendees;
    2. A description of the PHA’s efforts to promote tenant participation in meetings, including the dates and times of meetings to accommodate a variety of schedules, efforts to accommodate residents with disabilities or Limited English Proficiency in accordance with Section 1.8.H, the format of meetings (in-person, electronic, or both), location of in-person meetings, efforts to overcome technology barriers for virtual meetings, and other relevant efforts as the PHA determines appropriate (e.g., offering childcare, refreshments);
    3. Meeting agenda(s) and copies of handouts or presentation materials;
    4. A summary of questions and comments asked in the meeting or submitted by residents to the PHA and responses provided by the PHA to those questions and comments;
    5. Identification of how residents who were unable to attend meetings are able to access materials or submit questions or comments and receive responses;
    6. Identification of materials that were shared with residents to communicate resident protections, which can include but are not limited to the following materials: HUD resident rights brochure; HUD resident fact sheets; HUD RAD video; or other resident education materials created by HUD or the PHA; and
    7. Where there is a duly elected resident organization, contact information for at least one elected leader of such organization
19. Title Report. Submit a complete title report including information on whether the Converting Project is currently subject to a DOT or DORC and any other liens, encroachments, easements or other encumbrances on the property.

Financing Plan Requirements for Transactions Utilizing FHA-Insurance
For RAD conversions that will utilize FHA mortgage insurance, the submission requirements and feasibility benchmarks are primarily found in the MAP Guide as revised by Mortgagee Letter 2012-20. In addition to submissions made in an FHA insured loan Application for Firm Commitment, PHAs must also upload the following items to the RAD Resource Desk. (Unless otherwise indicated, the PHA must submit all of the items listed in the cited paragraph):

• A. Type of Conversion
• E. Fair Housing, Accessibility and Relocation Checklist or Update
• F. Development Budget (Sources and Uses of Funds).
• Lender Narrative
• Sources and Uses submitted with the FHA Application must be entered into the Transaction Log on the RAD Resource Desk.
• For projects covered under an EPC, the PHA must provide a draft amended EPC approval letter from the PIH Energy Center specifying the minimum amount of debt that will need to be addressed in the conversion.
• Subparagraph 5. Subsidy Layering Review, if completed by an HFA (tax credits) or by another agency. If no SLR is been performed, HUD will complete a SLR whenever multiple federal sources are proposed, when public housing funds are used (see Section 1.5.A), or when an MTW agency is using MTW funds to set their initial contract rents (see Section 1.6.B.5 and 1.7.A.5).
• H. Proposed Financing
• I. Operating Pro Forma.
• J. Market Study
• K. Approved Significant Amendment to the PHA Plan.
• L. Front End Civil Rights Reviews (if applicable)
• M. Approval of Non-dwelling Real Property
• N. Approved Amendment to Attachment A of the MTW Agreement (if applicable)
• P. Estimate of public housing funds available for HAP subsidy
• Q. Transfer of Assistance
• R. Resident Comments
• S. Title Report

This Attachment contains two sections, describing:

1B.1 Summary of Resident Provisions
1B.2 Resident Participation and Funding

1B.1 - Summary of Resident Provisions

The following is a summary of special provisions and alternative requirements related to tenants of public housing projects converting under RAD (including for those that will reside in non-RAD PBV units in the Covered project):

• Conversion will be considered a significant action requiring discussion in the PHA’s Five-year Plan, Annual Plan or MTW Plan or requiring a significant amendment to a PHA Plan (see Section 1.5.E of this Notice);
• Notification of proposed conversion, meetings during the conversion process, written response to residents comments on conversion, and notification of conversion approval and impact (see Section 1.8 of this Notice);
• No rescreening at conversion (see Section 1.6CC.1 of this Notice for conversions to PBV and Section 1.7.B.1 for conversions to PBRA);
• A right to return, which covers the right to return tot he rent-assisted property after temporary relocation (when termporary relocation is necessary to facilitate rehabilitation or construction, or the right to occupancy of the new unit if the rental assistance is transferred toa new unit. (See Section 1.4.A.5. of this Notice and the RAD Fair Housing, Civil Rights, and Relocation Notice.);
• Phase-in of tenant rent increases (see Section 1.6.C.3 of this Notice for conversions to PBV and Section 1.7.B.3 or conversions to PBRA);
• Relocation protections, including procedural rights, assistance with moving, and applicble relocatoin payments. (See Section 1.4.A.5 of this Notice and the RAD Fair Housing, Civil Rights, and Relocation Notice.)
• Continued participation in the ROSS-SC,FSS and JobsPlus programs (see Sections 1.6.C.5 and 1.6.C.9 of this Notice, for conversions to PBV and Section 1.7.B.4 for conversions to PBRA);
• Continued Earned Income Disregard (see Section 1.6.C.8 of this Notice, for conversions to PBV and Section 1.7.B.7 for conversions to PBRA);
• Continued recognition of and funding for legitimate residents organizations (see Section 1.6.C.6 of this Notice for conversions to PBV, Section 1.7.B.5 of this Notice for conversions to PBRA, and below in Attachment 1B.2 for additional requirements for both programs);
• Procedural rights consistent with section 6 of the Act (see Section 1.6.C.7 of this Notice for conversions to PBV and Section 1.7.B.6 of this Notice for conversions to PBRA); and
• Choice-mobility option allowing a resident to move with a tenant-based voucher after tenancy in the Covered Project (see 24 CFR § 983.260 for conversions to PBV and Section 1.7.C.5 of this Notice for conversions to PBRA).

The foregoing is a summary of special provisions and alternative requirements relating to residents of public housing projects converting to RAD and does not attempt to capture all program requirements and etails. For additional informatoin, refer to the full text of this Notice and ot the RAD Fair Housing, Civil Rights, and Relocation Noitce (Notice H 2016-17; PIH 2016-17).

1B.2 - Resident Participation and Funding¹²⁹

The following provisions contain the resident participation and funding requirements for public housing conversions to PBRA and PBV, respectively.

Residents of Covered Projects converting assistance to PBRA will have the right to establish and operate a resident organization in accordance with 24 CFR Part 245 (Tenant Participation in Multifamily Housing Projects). In addition, a Project Owner must provide $25 per occupied unit annually for resident participation, of which at least $15 per occupied unit shall be provided to the legitimate tenant organization at the covered property. Resident participation funding applies to all occupied units in the Covered Project as well as units which would have been occupied if not for temporary relocation. These funds must be used for resident education, organizing around tenancy issues, and training activities.

In the absence of a legitimate resident organization at a Covered Project:

1. HUD encourages the Project Owner and residents to work together to determine the most appropriate ways to foster a constructive working relationship, including supporting the formation of a legitimate resident organization. Residents are encouraged to contact the Project Owner directly with questions or concerns regarding issues related to their tenancy. Project Owners are also encouraged to actively engage residents in the absence of a resident organization;
2. Project Owners must make resident participation funds available to residents for organizing activities in accordance with this Notice. Residents must make requests for these funds in writing to the Project Owner. These requests will be subject to approval by the Project Owner. Eligible uses of funds are the same as those permitted under “Guidance on the use of Tenant Participation Funds,” Notice PIH 2013-21. The Department strongly encourages residents and Project Owners to resolve questions concerning specific uses of resident participation fund directly. If a dispute over funding arises, the resident organization or Project Owner may refer any disputes over funding ato the HUD Field Office for intervention only after documented efforts to a direct resolution have proven unsucessful.

To support resident participation following conversion of assistance, residents of Covered Projects converting assistance to the PBV program will have the right to establish and operate a resident organization for the purpose of addressing issues related to their living environment, which includes the terms and conditions of their tenancy as well as activities related to housing and community development.

1. Legitimate Resident Organization. A Project Owner must recognize legitimate resident organizations and give reasonable consideration to concerns raised by legitimate resident organizations. A resident organization is legitimate if it has been established by the residents of a Covered Project, meets regularly, operates democratically, is representative of all residents in the project, and is completely independent of the Project Owner, management, and their representatives.

   In the absence of a legitimate resident organization at a Covered Project, HUD encourages the Project Owner and residents to work together to determine the most appropriate ways to foster a constructive working relationship, including supporting the formation of a legitimate resident organization. Residents are encouraged to contact the Project Owner directly with questions or concerns regarding issues related to their tenancy. Project Owners are also encouraged to actively engage residents in the absence of a resident organization;

2. Protected Activities. Project Owners must allow residents and resident organizers to conduct the following activities related to the establishment or operation of a resident organization:
1. Distributing leaflets in lobby areas;
2. Placing leaflets at or under residents' doors;
3. Distributing leaflets in common areas;
4. Initiating contact with residents;
5. Conducting door-to-door surveys of residents to ascertain interest in establishing a resident organization and to offer information about resident organizations;
6. Posting information on bulletin boards;
7. Assisting resident to participate in resident organization activities;
8. Convening regularly scheduled resident organization meetings in a space on site and accessible to residents, in a manner that is fully independent of management representatives. In order to preserve the independence of resident organizations, management representatives may not attend such meetings unless invited by the resident organization to specific meetings to discuss a specific issue or issues; and
9. Formulating responses to Project Owner's requests for:
1. Rent increases;
2. Partial payment of claims;
3. The conversion from project-based paid utilities to resident-paid utilities;
4. A reduction in resident utility allowances;
5. Major capital additions; and
6. Prepayment of loans.

In addition to these activities, Project Owners must allow residents and resident organizers to conduct other reasonable activities related to the establishment or operation of a resident organization.

Project Owners shall not require residents and resident organizers to obtain prior permission before engaging in the activities permitted in this section.

3. Meeting Space. Project Owners must reasonably make available the use of any community room or other available space appropriate for meetings that is part of the multifamily housing project when requested by:
1. Residents or a resident organization and used for activities related to the operation of the resident organization; or
2. Residents seeking to establish a resident organization or collectively address issues related to their living environment.

Resident and resident organization meetings must be accessible to persons with disabilities, unless this is impractical for reasons beyond the organization's control. If the project has an accessible common area or areas, it will not be impractical to make organizational meetings accessible to persons with disabilities.

Project Owners may charge a reasonable, customary and usual fee, approved by the Secretary as may normally be imposed for the use of such facilities in accordance with procedures prescribed by the Secretary, for the use of meeting space. A PHA may waive this fee.

4. Resident Organizers. A resident organizer is a resident or non-resident who assists residents in establishing and operating a resident organization, and who is not an employee or representative of current or prospective Project Owners, managers, or their agents.

Project Owners must allow resident organizers to assist residents in establishing and operating resident organizations.

5. Canvassing. If a Covered Project has a consistently enforced, written policy against canvassing, then a non-resident resident organizer must be accompanied by a resident while on the property of the project.

If a project has a written policy favoring canvassing, any non-resident resident organizer must be afforded the same privileges and rights of access as other uninvited outside parties in the normal course of operations. If the project does not have a consistently enforced, written policy against canvassing, the project shall be treated as if it has a policy favoring canvassing.

A resident has the right not to be re-canvassed against his or her wishes regarding participation in a resident organization.

6. Funding. Project Owners must provide $25 per occupied unit annually for resident participation, of which at least $15 per occupied unit shall be provided to the legitimate resident organization at the covered property.¹³⁰ These funds must be used for resident education, organizing around tenancy issues, and training activities. Project Owners must make resident participation funds available to residents for organizing activities in accordance with this Notice. Residents must make requests for these funds in writing to the Project Owner. These requests will be subject to approval by the Project Owner. Eligible use of funds are the same as those permitted under “Guidance on the use of Tenant Participation Funds,” Notice PIH 2013-21. The Department strongly encourages residents and Project Owners to resolve questions concerning specific uses of resident participation funds directly. If a dispute over funding arises, the resident organization or Project Owner may refer any disputes over funding to the Contract Administrator for intervention only after documented efforts to a direct resolution have proven unsuccessful.

This attachment explains the method by which HUD calculated the contract rents for each project and provides additional detail on contract rent setting, including a demonstration of the application of applicable rent caps for PBRA and PBV conversions. These instructions apply only to public housing conversions under Section 1 of the Notice.

RAD Rent Base Years. All RAD applications, including applications for Portfolio or Multi-Phase awards, will have initial contract rents based on their “RAD rent base year.” Prior to conversion, these rents will be adjusted by HUD’s published OCAF until they are established in the HAP Contracts at the time of conversion.

For example, for CHAPs awarded based on the FY 14 RAD rent base year that closed in 2017, the initial contract rents were based on 2014 funding, with an OCAF adjustment for 2015, 2016, and 2017.

Every two years, beginning January 1, 2021, the RAD Rent Base Year shall be reset, based on the funding levels of the immediately preceding fiscal year (for example FY 20 funding levels for CHAPs issued in 2021 and 2022, FY 22 funding levels for CHAPs issued in 2023 and 2024). These rents will be adjusted each year by HUD’s published OCAF starting in the calendar year after the base year and established in the HAP Contracts at the time of conversion. This policy is illustrated in Table 2: RAD Rent Base Years and OCAFs based on Award Date below, but is not limited to the dates shown.

*The Modified FY 16 RAD Rent Base Year utilizes the FY 16 RAD Rent base Year, but for the Capital Fund component of the rent replaces FY 16 figures with FY 18 figures.

When a PHA returns RAD authority to HUD by submitting a voluntary withdrawal of a project and subsequently requests new RAD authority for the same project within one month thereafter, provided that HUD has authority to make awards under the statutory cap, HUD may approve issuance of a replacement CHAP, via a CHAP amendment, without the requirement that the PHA submit the application materials that would otherwise be required. The replacement CHAP will include the original CHAP issuance date, but will have rents based on the applicable RAD rent base year as described above. For example, a withdrawal of a CHAP and subsequent request for new RAD autority that occurs in September of 2018 would have rents based on Modified FY 16 rent levels.

Actual initial contract rents may vary from the calculation described above as a result of actual rent caps in effect at the time of conversion (e.g. the most recently published Fair Market Rents), OCAF rent increases, and rent flexibilities described in Sections1.6(B)(5) and 1.7(A)(5).

Construction of Rents for the RAD Rent Base Year

1. Step One – Determine Current Funding¹³¹

Current funding will be determined based on the sum of the following for each project:

• Per unit monthly (PUM) subsidy eligibility at full occupancy under the Operating Fund program, based on the current year’s Operating Fund appropriation (incorporating any pro-ration and excluding Asset Repositioning Fee).¹³²
• The amount of the PHA’s Capital Fund Formula Grant attributable to the standing units at the project, (i.e, excluding DDTF), divided by the units recognized under the Capital Fund formula, i.e., “standing units”, divided by twelve, and
• PUM adjusted formula income under the Operating Fund program, i.e. tenant rent.¹³³

Thus, if the operating subsidy eligibility for a project is $340 PUM (adjusted for proration), the Capital Fund formula grant attributable to the project is $135 PUM, and adjusted formula income is $308 PUM, then current funding totals $783 PUM.¹³⁴

2. Step Two – Apply Bedroom Adjustment Factor

The weighted average current funding amount will then be adjusted by a bedroom adjustment factor to arrive at bedroom-specific rent schedule, which would apply to the bedroom configuration of the Covered Project. The following is an illustration:

Current Funding: Bedroom Adjusted Based on FMR
Bedroom Size	0BR	1BR	2BR	3BR	4BR	5BR		TOTAL
PIC Units	0	20	50	30	0	0		100
Metropolitan FMRs	$550	$650	$775	$900	$1,000	$1,150
FMR Bedroom Adjustments	0.710	0.839	1.000	1.161	1.290	1.484
Bedroom Adjusted Rent		$646	$770	$894				$783

3. Step Three – Apply Rent Caps

Finally, HUD would compare the Current Funding Rents calculated in Step Two with the applicable rent caps to determine the HAP Contract Rent for conversions to either PBRA or PBV (see Sections 1.6.B.5 and 1.7.A.5 of this Notice for a discussion of rent caps), as illustrated in the continuing example below.

Conversion to PBRA
Bedroom Size	1BR	2BR	3BR
Current Funding Rents (Step Two)	$646	$770	$894
120% of FMR	$780	$930	$1,080
- Utility Allowance	$50	$60	$70
FMR Rent Cap	$730	$870	$1,010
Market Rent	$640	$740	$830
-- Lower of Current Funding Rent and FMR rent cap --
PBRA Contract Rent	$646	$770	$894


When converting to PBRA, the contract rent is the lower of 120 percent of FMR or current funding. In this case, the Current Funding rents are below 120 percent of FMR (minus the Utility Allowance) and so the contract rent is unchanged from the current funding rent calculated in Step Two. (The market rent does not have any impact since current funding does not exceed 120 percent of the FMR)

Conversion to PBV
Bedroom Size	1BR	2BR	3BR
Current Funding Rents (Step Two)	$646	$770	$894
Reasonable Rent	$640	$740	$830
110% of FMR	$715	$853	$990
- Utility Allowance	$50	$60	$70
FMR Rent Cap	$665	$793	$920
-- Lower of Current Funding Rent, Reasonable Rent, or FMR rent cap--
PBV Contract Rent	$640	$740	$830

When converting to PBV, the contract rent is the lower of the Reasonable Rent or 110 percent of the FMR (minus the Utility Allowance). In this case, the Current Funding rents exceed the Reasonable Rents. As a result, the contract rents for this  project would be capped at the Reasonable Rent.

Utility Allowances The contract rents defined above are net of any utility allowances. Except for cases described below, the utility allowances used in the HAP Contract at closing must be the actual utility allowances that are in effect for each public housing unit type prior to conversion. The CHAP, which includes the rent schedule, must be updated prior to conversion to reflect current utility allowances.

Tenant-Paid Utility Savings. Where conversion plans will result in energy and water efficiency improvements, and, for PBV, where the Covered Project will utilize a site-specific utility allowance (see Section 1.6.B.5.e), 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. If approved by HUD, these UAs will be used to modify the initial contract rents (for new construction) or post-rehab rents (for rehab) in the HAP Contract. The rents will be adjusted in the following way:

• Where post-construction the property will have the same provisions and configuration of utilities as the original property, HUD will increase the contract rents by 75% of the approved reduction in Utility Allowance.

Example 1: Configuration of Utilities remains the same; Tenant-paid utility savings

CHAP Rent Schedule

BR	Contract Rent	Utility Allowance	Gross Rent
1-BR	$500	$130	$630

RAD Utility Allowance Projections Template

	Current: Tenant pays gas, electric; and water	Future: Tenant pays gas, electric and water	Impact on Contract Rent
Gas	$50	$40	+$10 x 75%= + $7.5
Electric	$40	$30	+$10 x 75%= + $7.5
Water	$40	$20	+$20 x 75% = + $15
UA	$130	$90	Total = +$30

Revised CHAP Rent

BR	Contract Rent	Utility Allowance	Gross Rent
1-BR	$530	$90	$620

• Where post-construction the new property will have a provision and configuration of utilities different from the original property, HUD will assess each utility. For utilities that will shift from project-paid to tenant-paid or vice versa, an increase or decrease in the utility allowance as a result of a new configuration will cause an equal and opposite change to the contract rent. For utilities that will remain tenant-paid, HUD will increase the contract rents by 75% of the approved reduction in Utility Allowance.

 

Example 2: Configuration of Utilities changes; Tenant-paid utility savings

CHAP Rent Schedule

BR	Contract Rent	Utility Allowance	Gross Rent
1-BR	$500	$50	$550

RAD Utility Allowance Projections Template

	Current: PHA pays Gas and electric; tenant pays water	Future: Tenant pays gas, electric and water	Impact on Contract Rent
Gas	$0	$30	-$30
Electric	$0	$30	-$30
Water	$50	$30	+$20 x 75% = + $15
UA	$50	$90	-$45

Revised CHAP Rent

BR	Contract Rent	Utility Allowance	Gross Rent
1-BR	$455	$90	$545

At conversion the HAP Contract will include a pre-construction and post-construction rent schedule.

To be eligible for this provision, a PHA must submit Utility Consumption Baseline data into EPA’s Portfolio Manager  

Tenant-Paid Utilities and PBV Conversions. Unless a waiver is requested and approved as described below, the PHA must maintain a utility allowance schedule for all tenant-paid utilities in accordance with 24 CFR § 983.301(f)(2)(ii) and 24 CFR § 982.517. The utility allowances would become effective for each family at recertification.

A PHA may request a waiver from HUD in order to establish a site-specific utility allowance schedule and to apply the same adjustments to contract rents based on Tenant-Paid Utility Savings as described above for PBRA conversions. To be approved, a PHA must demonstrate good cause that the utility allowance schedule used in its voucher program would either create an undue cost on families because the utility allowance provided under the voucher program is too low, or discourage conservation and efficient use of HAP funds because the utility allowance provided under the voucher program would be excessive if applied to the Covered Project. For HUD to consider such a waiver, the PHA must submit an analysis of utility rates for the community and consumption data of project residents in comparison to community consumption rates; and a proposed alternative methodology for calculating utility allowances on an ongoing basis.

Such waiver requests should be submitted to the PIH Field Office. The PHA should notify the RAD Transaction Manager of the request.

Notes

1. For MTW PHAs converting to PBV that are augmenting RAD rents using voucher reserves, as described in Section 1.6, the agency will use MTW funds to supplement rents (no incremental voucher funding will be provided). For MTW agencies converting to PBRA that are utilizing MTW Fungibility, as described in Section 1.7, HUD will permanently reduce the agency’s public housing funds (in addition to any funding modifications that would occur as a result of the conversion absent the rent increase) by the additional amount established for the HAP Contract.

   For example, assume that an MTW agency that is closing effective July 1, 2014 is considering using fungibility for a project of 100 units whose contract rent is $500 PUM and whose subsidy is $200 PUM. In order to make the deal feasible, the MTW must make the contract rent $550 PUM and receive a subsidy of $250 PUM. In order to do this, the MTW agency must agree to an additional permanent reduction in its Operating and Capital Fund subsidy (in addition to any funding modifications that would occur as a result of the conversion absent the rent increase) by a combined $60,000 a year ($50 PUM for 100 units for 12 months) starting in CY 2015. During the remainder of CY 2014, the PHA can use its available public housing or other funds to make up any gap in rental subsidy as a result of Operating and Capital Fund allocations to a RAD project that are lower than the HAP subsidy. In the year following, the HAP Contract rent provided will be $550 PUM.

2. For applications where the PHA proposes a de minimis reduction of units, projects will not be permitted to retain the subsidy of any units that are not included in the conversion application. Instead, HUD will reallocate the subsidy to other conversions in accordance with Sectin 1.7.A.5.vi. An exception is made when the PHA is proposing a de minimis reduction in dwelling units, but certain units will be designated for special purpose uses or units are being reconfigured through rehab to improve marketability (e.g. combining efficiencies). The project will retain the subsidy attributable to those units and the contract rents for the dwelling units will increase by a share of the foregone subsidy (i.e., the Operating Fund and Capital Fund portion of the weighted Contract Rent).
3. When a project’s funding is reduced as a result of a program cap on contract rents, a PHA may request that HUD transfer the excess subsidy to the PHA’s voucher program in order to facilitate Choice-Mobility.
4. PHAs that are scheduled to receive ongoing Replacement Housing Factor or Demolition Disposition Transition Funding subsidy (including funds that have not been awarded as well as funds that have been awarded but not yet disbursed) may choose to forego any ongoing RHF/DDTF grants for the purpose of offsetting an increase to the initial RAD rent. At a PHA’s request HUD will provide a forecast of total Anticipated RHF/DDTF grants. The RAD rent may then be increased by the following amount:

   [Total Anticipated RHF/DDTF Grants + Undisbursed RHF/DDTF]  20  Number of Units converting under RAD 12 = PUM RAD Rent Increase

   The PUM RAD Rent Increase would be reflected in the initial rents established in the HAP Contracts. The contract rents will still be subject to applicable rent caps. PHAs electing to utilize this flexibility must acknowledge through a certification that HUD will cancel all affected obligations of Replacement Housing Factor (RHF) funds or Demolition and Disposition Transition Funding (DDTF).

5. Resident Paid Utilities. For projects with an existing EPC using the Resident Paid Utility (RPU) Incentive, HUD will allow an amendment to the posted RAD rent to add the Per Unit Month (PUM) EPC Resident Paid Utility Incentive. Further, if a converting project currently has surcharges for excess consumption of PHA-supplied utilities (in accordance with 24 CFR § 965.506), HUD will allow an amendment to the posted RAD rent by the amount in Row 19 of the HUD-52722 (Calculation of Utility Expense Level) divided by Total Unit Months (Section 2 Column A Line 15) of the HUD-52723 used in the Fiscal Year in which the RAD contract rents were calculated.

Until such time as the required elements may be provided in a HUD-provided form, the following items must be covered in a request for a RAD-Specific PHA Plan Submission, Significant Amendment to the PHA Plan, MTW Plan, or MTW’s revision to the MTW plan:

1. A description of the units to be converted. The description should include the following:
1. The number of units;
2. The bedroom distribution of units, and
3. The type of units (e.g., family, elderly/disabled, or elderly-only);
2. Any change in the number of units that is proposed as part of the conversion, including:
1. De minimis unit reductions and
2. Unit reductions that are exempt from the de minimis cap;
3. Any change in the bedroom distribution of units that is proposed as part of the conversion;
3. Changes in the policies that govern eligibility, admission, selection, and occupancy of units at the project after it has been converted.
1. If Converting to PBV: This includes any waiting list preferences that will be adopted for the Covered Project as well as the Resident Rights and Participation, Tenant Protections for residents stated in Section 1.6, Attachment 1B of this Notice and the RAD Fair Housing, Civil Rights, and Relocation Notice - Notice H-2016-17/ PIH-2016-17 (HA). (See Table 1 below for more specific guidance).
2. If Converting to PBRA: This includes any waiting list preferences that will be adopted for the Covered Project as well as the Resident Rights and Participation, Tenant Protections for residents stated in Section 1.7 and Attachment 1B of this Notice and RAD Fair Housing, Civil Rights, and Relocation Notice - Notice H-2016-17, PIH-2016-17 (HA). (see Table 1 below for more specific guidance).
4. If there will be a transfer of assistance at the time of conversion, the significant amendment must include:
1. The location to where the assistance is being transferred;
2. The number of units to be transferred;
3. The bedroom distribution of the units in the new building(s), and
4. The type of units, if changed (e.g., family, elderly/disabled, or elderly-only); and
5. Any reduction or change in the number of units and what reduction category they fall under (i.e. de minimis)
6. How the waiting list will be transferred and how households will be selected for the transfer, where applicable (please see Table 2 below for more specific guidance).
7. What the PHA plans to do with the original site following the transfer of assistance, consistent with allowable uses described in Sectin 1.4.A.12.
5. An indication of whether the PHA is currently under a voluntary compliance agreement, consent order or consent decree or final judicial ruling or administrative ruling or decision and an assurance that compliance will not be negatively impacted by conversion activities.
6. A statement that meets the requirements of Section 5.2 of the RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17/PIH 2016-17 (HA)) certifying that the RAD conversion complies with all applicable site selection and neighborhood reviews and that all appropriate procedures have been followed.
7. All other required information and certifications necessary to submit a Significant Amendment to the PHA Plan, including Resident Advisory Board comments and responses, challenged elements, and all required certifications.
8. For MTW PHAs augmenting the RAD rents using voucher reserves as described in Section 1.6 or 1.7, as applicable, a statement explaining how the PHA will be able to maintain continued service level requirements.

Additionally, in accordance with 24 CFR Part 903, during the PHA Plan submission and/or significant amendment stage, a PHA shall notify the public that the current and future Capital Fund Program Grants Budgets, will be reduced as a result of any projects converting to RAD.

1. The PHA should provide an estimate of the amount of the current Capital Fund grant that is associated with the proposed project(s) and the impact on the PHA’s current Five-Year PHA Plan and Five-Year Capital Fund Action Plan.
2. If the RAD conversion will impact an existing CFFP or EPC, or it proposes to utilize RHF funds to facilitate conversion, the PHA should also indicate the estimated impact of those activities.

Finally, to avoid the need for a possible subsequent significant amendment, the PHA should examine its definition of “Substantial Deviation”. The PHA may want to redefine its definition of Substantial Deviation in Section 10 of the PHA Plan to exclude the following items:

1. The decision to convert to either Project Based Rental Assistance or Project Based Voucher Assistance;
2. Changes to the Capital Fund Budget produced as a result of each approved RAD Conversion, regardless of whether the proposed conversion will include use of additional Capital Funds;
3. Changes to the construction and rehabilitation plan for each approved RAD conversion; and
4. Changes to the financing structure for each approved RAD conversion.

Please Note: Approval of a PHA’s Financing Plan may be delayed if a PHA has made a substantial change to its plans, as defined locally, and the PHA has not completed a new PHA Plan or Significant Amendment to its PHA Plan submission. In addition, if HUD determines that there has been a significant change to the Significant Amendment involving transfers of assistance, changes in the number of assisted units, or a change in eligibility or preferences, HUD may require that a PHA resubmit their Significant Amendment.