Notice Section 1.5.B Special Applicatios Center (SAC) Applications and RAD
Notice Section 1.4.A.9 Demolition
*Internal HUD Use Only
*Internal HUD Use Only
Demolished Project Eligibility under RAD
A PHA is considering applying for RAD for a project that has already been demolished. Is this project still eligible for RAD?No. Only projects with units under ACC and in PIC are eligible for RAD.
Demolition and Reconstruction
Does RAD allow for the complete demolition and reconstruction of a project?Yes. If the reconstruction is on the current site, your conversion plan would need to cover temporary relocation costs for residents during the demolition and reconstruction. Alternatively, the reconstruction might be on a separate site (using the ‘transfer of assistance’ feature of RAD), in which case you might be able to complete the new construction prior to relocating residents from the existing project.
RAD Conversion of Demolished ACC Units
Can a housing authority that has demolished units counted in their ACC rebuild and covert to RAD for the new building with the same unit count?RAD is a "current funding" program. Therefore if you have units that have been demolished but are still in PIC and being funded by operating and capital funds, you can convert those units to RAD. The RAD rents will be set by the amounts currently funded in the operating and capital funds. Thus, if there has been a phase down of funding, the RAD rents will be set at the lower (current) levels. If the demolished units are not still in PIC, they are not eligible for RAD conversion. For the most part, units that are being built back under "Faircloth" must first be brought into the public housing program under either the traditional development method or the mixed-finance method, and then they would be eligible for RAD. Some PHAs have inquired as to whether there could be a "joint" or "simultaneous" closing. The Department is looking into that possibility.
Demo/Dispo, Transfer of Assistance and RPCA Requirement
If a HA is proposing to do a RAD conversion of Public Housing that involves demolishing an existing project and rebuilding an equal or greater number of units on the same site, is this treated in essentially the same way as for a RAD conversion with rehab? Is it unnecessary to do a transfer of assistance as long as the units are being rebuilt on the same site? Where and how does the RAD PCA fit into this scenario?In the situation you describe, a transfer of assistance would not be needed, because the RAD project would be located on the same site as the current public housing. In demolition-and-reconstruction projects, a RAD PCA is not required. See Notice PIH-2012-32, page 26, footnote 6; and Attachment 1A.1 paragraph B. [Updated 7.29.13]
Benefits of RAD v. SAC
I'm considering a RAD transaction, versus pursuing demolition-disposition through the SAC. It appears that, under RAD, approval of new financing is simpler. However, one advantage that the SAC provides (or used to provide) was the possibility of Tenant Protection Vouchers,that had the effect of increasing a PHAs voucher pool and providing the means for vouchers to be deployed via PBV using a true FMR-based payment standard. However, I understand that RAD brings with it no corresponding bonus of "extra" vouchers (please confirm).You are correct that, under RAD, a PHA does not receive TPVs. See Notice PIH-2012-07 for procedures for authorizing TPVs under demolition / disposition. Note that the RAD-HAP contract does begin to fund at construction closing and funds throughout construction. Some PHAs intend to use that rental income to assist with temporary relocation costs for residents. Those PHAs must ensure that their relocation plan complies with all requirements of the Uniform Relocation Act.
FHEO Review for Unit Reduction
If I am using both the de minimus reduction and the 75%/25% RAD/Section 18 blend provisions on a RAD transaction, do I need to submit the FHEO Change in Unit Configuration review? All reduced units will be replaced by other PBV units and Tenant Protection Vouchers (TPV), so the number of low-income dwelling units is the same.If all of the reduced units are being replaced with project-based assistance, an FHEO Change in Unit Configuration review is not needed.
Initial Funding for RAD/Section 18 Blends
If a PHA closes on a RAD/Section 18 Blend transaction on December 15, 2020, I am pretty sure that its 2021 Capital Fund grant will include funds for the 75% of the units that went RAD. Will the PHA’s 2021 Capital Fund grant include funds for the 25% of the units that went PBV via Section 18? In the same scenario, will HUD fund the Section 8 payments in 2021 for the 25% of the units that went PBV, or will HUD not fund the Section 8 payments for the 25% units until January 2022?The RAD units will follow regular RAD funding procedures. As such, a property with a 1/1/21 HAP effective date will receive Public Housing Operating and Capital funds in 2021 and use those funds to pay rental assistance to the property in CY 2021. With respect to the section 18 units: 1) The PHA will receive Capital Funds for those units in the FY 21 grant if the units were in public housing as of 6/30/20. The PHA will subsequently receive DDTF for these units for five years. None of these funds may be used on the converted property 2) The PHA will receive Tenant Protection Voucher (TPV) funding, which it will use to make payments under the non-RAD PBV HAP contract once it is effective. RAD funding procedures, including the use of Rehab Assistance Payments (RAP), would not apply to these units.
Scope of Work for Construction Blends
What can be included in the RAD scope of work to measure against Housing Construction Costs for the Construction Blend?For purposes of calculating aggregate construction costs vis-à-vis various HCC thresholds, HUD will consider the combined per unit construction costs of the overall project budget as identified by the PHA in the RAD Financing Plan. The project may include a mixture of new construction and substantial rehabilitation and may include other units besides the converting units (e.g., through the development of new units). However, if the project includes units that have already been approved and will be removed from public housing inventory under the Section 18 physical obsolescence criteria (Section 4.A.1 of PIH Notice 2021-07 HA), HUD will exclude the costs equal to the amounts necessary to equal the Section 18 obsolescence threshold when calculating eligibility for the blend. HUD has also developed an Excel tool available on the RAD Resource Desk (https://www.radresource.net/output.cfm?id=0613WB) that PHAs can use to assess whether the scope of work meets any of the thresholds for the Construction Blends and whether the site is in a high-cost area.
Over-Income Residents in RAD/Section 18 Blends
If a PHA is considering a RAD/Section 18 blend for a property, and that property has an over-income resident, would the over-income resident be moved back into a RAD unit or a Section 18 unit? What's the rent subsidy source for the original resident who is over-income? Do they still qualify for rental subsidy under RAD and/or Section 18 if they are over-income?According to the RAD Relocation Notice Section 6.2, “any public housing or Section 8 assisted resident that may need to be relocated temporarily to facilitate rehabilitation or construction has a right to return to an assisted unit at the Covered Project once rehabilitation or construction is complete. The right to return is not a right to any specific unit in the Covered Project.” The Covered Project refers to both the RAD and Section 18 units in a Blend, so a relocated resident could be moved back into a unit under the RAD or Section 18 HAP Contract. Regardless of their income, the resident has the right to return to a properly sized unit. An over-income tenant would not receive subsidy but would be placed on and/or remain under the applicable HAP Contract, as described in Section 1.6.C.9 of the RAD Notice. This provision applies to both the RAD and Section 18 units. If the tenant’s income drops and they are eligible for HAP subsidy, their subsidy source would depend on which unit they moved back to.
RAD/Section 18 Small PHA Blend
What eligibility criteria apply to the RAD/Section 18 Small PHA Blend?See PIH Notice 2021-07, 3.A.2.e.2. For any project that meets the following criteria HUD will approve up to 80% of units under Section 18 and 20% will convert under RAD. 1. The PHA must have 250 or fewer public housing units under its ACC. 2. The PHA is converting a portion of the public housing units within a Converting Project and is replacing the units proposed for disposition with project-based Section 8 assistance within the Covered Project, as the terms “Converting Project” and “Covered Project” are defined in the RAD Notice (H-2019-09 PIH-2019-23 (HA)). The aggregate number of “hard” replacement units (RAD and PBVs) in the Covered Project must meet the RAD “substantial conversion of assistance” requirements. The Converting Project may constitute the PHA’s entire public housing inventory (if the Covered Project will qualify as a single project defined in the RAD Notice) or may be one of multiple projects in the PHA’s inventory. 3. The PHA must submit to HUD a repositioning plan approved by the PHA’s board of commissioners and acceptable to HUD that removes all its public housing ACC units and will result in the closeout of the PHA’s Section 9 public housing program and termination of its Section 9 ACC. The repositioning plan must reflect that the PHA will not develop additional public housing units under otherwise available Faircloth authority. After removing all units as described in its repositioning plan, PHA must follow close-out procedures under PIH 2019-13. 4. Any PBV contract created under this blend must be administered by an HCV contract administrator with at least 250 HCV units under its HCV ACC prior to creation of such PBV contract. Note that as an alternative means of closing out under the requirements of PIH Notice 2019-13, PHAs may closeout their public housing programs through a Voluntary Transfer of their public housing program under PIH Notice 2014-24. After a PHA has removed all of its public housing units through Section 18, RAD, or another repositioning tool, the Divesting PHA would not have any public housing units to transfer to the Receiving PHA, but would transfer all remaining liabilities and assets (Faircloth authority, remaining Capital and Operating Funds, including Reserves).
High-Cost Area Determination
How does HUD determine what is a high-cost area?See Footnote 5 in PIH Notice 2021-07, 3.A.2.e.1(a) High-cost areas are defined as those where the HUD-published HCC exceeds 120% of the national average. For the purposes of this calculation – both the national average and the HCC for each jurisdiction – HUD uses the average of the 2-BR HCC for Elevator and Walk-up structures. The resulting list of high-cost areas is available here: https://www.radresource.net/output.cfm?id=Highcost.
Using Public Housing Funds for RAD/Section 18 Blends
Can a PHA contribute Public Housing funds (i.e., Capital Funds, Operating Funds, Program Income) into the RAD budget, even though the property will include non-RAD units?Yes. The RAD Notice (Section 1.5.A) permits public housing funds to be used as a source of capital in the development budget to support conversion. Consistent with HUD’s approach to subsidy layering reviews, in the case of a PHA that will no longer have ACC units as a result of the pending or simultaneous closing, or have less than 50 units remaining and have initiated procedures to dispose of their final ACC units, when the PHA is contributing public housing funds in a conversion, there is no restriction on the amount of public housing funds that may be contributed to the Covered Project(s) through the conversion. In all other cases, HUD will apply a proportionality test to make sure that the funds contributed relative to the total project budget are proportional to the RAD units relative to the total units. In addition, the PHA must estimate and plan for costs for operating and maintaining its remaining public housing units (if any) until such units are also removed from public housing, as well as the closeout costs (e.g., audits, legal fees) described in PIH Notice 2019-13 and 2014-24 (as applicable).
Section 18 Blend Criteria
What eligibility criteria apply to the RAD/Section 18 Construction Blend?See PIH Notice 2021-07, 3.A.2.e.1. Any project that meets the following criteria will be approved under the Construction Blend: 1. The PHA is converting a portion of the public housing units within a Converting Project and is replacing the units proposed for disposition with project-based Section 8 assistance within the Covered Project, as the terms “Converting Project” and “Covered Project” are defined in the RAD Notice (H-2019-09 PIH-2019-23 (HA)). The aggregate number of “hard” replacement units (RAD and PBVs) in the Covered Project must meet the RAD “substantial conversion of assistance” requirements (see question 8 for more detail). 2. Units in the Covered Project must be either newly constructed or rehabilitated without the use of 9% Low Income Housing Tax Credits (LIHTCs). 3. Hard construction costs, including general requirements, overhead and profit, and payment and performance bonds, must meet one of the following construction thresholds described below. Construction thresholds are determined as a percent of the Housing Construction Costs (HCC) published by HUD for a given market area. The level of proposed rehab or construction in the RAD Financing Plan will determine whether the transaction qualifies for a blend and which tier it falls under. An 80% RAD / 20% Section 18 blend requires a HCC threshold of >30%. A 60% RAD / 40% Section 18 blend requires a HCC threshold of >60%. A 40% RAD / 60% Section 18 blend requires a HCC threshold of >90%. A 20% RAD / 80% Section 18 blend requires a HCC threshold of >90% plus a high-cost area. Each of the blends listed above reflect the maximum number of units in a converting project that may be approved under Section 18. The PHA may choose to use Section 18 for a lower percentage of units and a higher percentage through RAD. For example, if a PHA is proposing to complete $50,000 per unit in rehabilitation, equating to 46% of HUD’s published HCC for the respective market area, HUD will approve up to 20% of the units at the project under Section 18 Disposition, at the PHA’s discretion. HUD has created a Workbook to Test HCC Threshold: For RAD Section 18 Blends and Opportunity Zone Rent Increases (available here: https://www.radresource.net/output.cfm?id=0613WB) that PHAs can use to assess whether the proposed rehab/construction level in a transaction qualifies for a RAD/Section 18 Construction Blend.
Definition of Project for RAD/Section 18 Blends
How is “project” defined for the purposes of determining how many units are eligible for disposition under a blend?See PIH Notice 2021-07, 3.A.2.e. For purposes of calculating the number of eligible units that may be approved under Section 18, HUD considers the “Converting Project,” prior to consideration of the RAD/Section 18 blend, reflecting the public housing ACC units that would be removed from PIC through RAD and as defined in the RAD Notice (the Converting Project may be an AMP, multiple AMPs, or a portion of an AMP). For example, assume that a PHA has 100 ACC units in a garden-style apartment complex and a CHAP for 99 units with one unit in the converting project being a manager’s unit that will be excluded from the Housing Assistance Payment (HAP) Contract through RAD’s de minimis allowance. The proposed conversion includes hard costs in excess of 60% of HCC, qualifying the project for a RAD/Section 18 Construction blend with a mix of 60% RAD and 40% Section 18. The denominator would then be 100 units, allowing 40 units to qualify for Section 18 (40% of 100). Please note that since the blends provide for a maximum percent of units that can be approved under Section 18, when the percentage results in a non-whole number, HUD rounds down to the nearest whole number. However, if on an identical 100-unit property only 60 units are in the Converting Project because the PHA had separately secured Section 18 approval for 40 units (e.g., they met the obsolescence test) or if 40 of the units were not public housing ACC units (e.g., they are unassisted units in an existing public housing mixed-finance development), only 24 units would be eligible for Section 18 under the RAD/Section 18 blend (i.e., 40% of 60). Because of the many possible variations in project characteristics, HUD reserves the right to determine eligibility. Please check with the RAD Resource Desk. Within the project, the RAD and Section 18 units do not need to be in separate buildings. It will be up to the PHA to determine which units within the blend are removed through Section 18 and which units are converted through RAD. Please note that the selection of units to be removed through Section 18 may impact the PHA’s eligibility for Asset Repositioning Fee (see question 16 below). Further, the distribution of RAD and non-RAD PBV units may impact the number of HAP contracts that will be used in the conversion. All RAD units will be under a RAD PBV HAP contract and any Section 18 units will be under a regular PBV HAP contract, so placing RAD and non-RAD units in each building may result in more HAP contracts (see 24 CFR 983.3 and PIH Notice 2017-21 Appx. II for the definition of “Project” in the PBV program, which determines what units might be included under a single RAD or non-RAD PBV HAP contract).
PBRA and RAD/Section 18 Blends
In a blended transaction, must the RAD units all convert to PBV or can they convert to PBRA? And can the units that will be processed through Section 18 result in a PBRA contract?The units converting under RAD may convert either to PBV or PBRA (see Section 1.2 of the RAD Notice). Since the units processed under Section 18 will result in the issuance of new voucher funding to the PHA, currently there is only statutory authority for those units to result in a PBV contract. Although processed as one “transaction,” the RAD and non-RAD units will ultimately need to be under separate HAP contracts, even if both will be PBV: a RAD HAP for the RAD units (PBRA or PBV) with contract rents set per standard RAD rules and a separate regular PBV HAP or AHAP contract covering the units removed through Section 18 with contract rents set per standard PBV rules.
RAD/Section 18 Blend Substantial Conversion of Assistance Requirement
PIH Notice 2021-07 requires that “the aggregate number of replacement units (RAD and project-based Section 8) must meet the RAD “substantial conversion of assistance” requirements.” Can you provide examples?See PIH Notice 2021-07, 3.A.2.e HUD requires that the PHA will replace the units proposed for Section 18 disposition with PBV units. The totality of replacement units (RAD units + regular PBV HAP contract for the Section 18 units) must fall within the RAD de minimis allowance as defined in Section 1.4.A.4 of the RAD Notice. For example, for a 100-unit property, excluding the exceptions for long-term vacant units, reconfigured apartments, or social service units, the de minimis unit total could not exceed 5 units or 5%. As a result, a PHA could take a 100-unit ACC project with hard costs in excess of 60% of HCC (qualifying the project for a 60/40 RAD/Section 18 construction blend) and: 1. Replace 100 units, with 60 under RAD HAP contract and 40 under a regular PBV HAP contract. 2. Replace 95 units, with 55 under RAD HAP contract and 40 under a regular PBV contract (the 5 de minimis units are not replaced) 3. Replace 100 units, with 55 under RAD HAP contract and 45 under a regular PBV contract (including 5 de minimis units that are backfilled with regular PBVs funded from the PHA’s existing Housing Choice Voucher Budget Authority).
Resident Rights and RAD/Section 18 Blends
RAD and Section 18 normally have different requirements and rights for residents (consultation, relocation, right to return)? Which ones apply?The RAD relocation requirements described in PIH/Housing Notice 2016-17 (the RAD Fair Housing, Civil Rights, and Relocation Notice) shall apply to residents of the Section 18 units, in lieu of the relocation requirements under 24 CFR part 970, in accordance with 84 Fed. Reg. 54630 (Oct. 10, 2019) and the Section 1.5.B.2.a of the RAD Notice. All of the RAD relocation requirements shall apply to residents of the Section 18 units, including, but not limited to, the resident notice and meeting requirements, the right to return, and relocation assistance and payments. The PHA may not provide different relocation rights and benefits to residents of the project based on whether they reside in a RAD unit or a Section 18 unit. All residents of the Converting Project have a right to remain in or return to the project-based replacement units consistent with Section 6.1 of the RAD Relocation Notice (H/PIH 2016-17). The RAD Relocation Notice applies to non-RAD PBV units at the Covered Project, as further explained in the Section 1.5.B.2.a of the RAD Notice. Per Section 1.6.C.1 of the RAD Notice, “current households cannot be excluded from occupancy at the Covered Project based on any rescreening, income eligibility, or income targeting.” This also applies to current public housing residents of the Converting Project that will reside in non-RAD PBV units placed in a project that contains RAD PBV units or RAD PBRA units. All residents that return to the non-RAD PBV units will have the same resident rights as the residents in the RAD PBV units. A list of resident rights that apply to the non-RAD PBV units is fully described in the RAD Notice. A summary listing can be found in Table 1 of Att. 1D of the RAD Notice (p. 147-148), which lists the resident rights that must be included in the PHA Plan and the sections of the RAD Notice where you can locate detailed information about each resident protection. It states by way of summary that “tenant protections for RAD PBV residents apply to non-RAD PBV residents of the same Covered Project with the exception of Choice Mobility. Standard PBV Choice Mobility requirements apply to non-RAD PBV residents.” Both RAD (Section 1.8 of the RAD Notice) and Section 18 (24 CFR 970.9) require consultation with residents regarding the proposed actions. Under a RAD/Section 18 blend, these discussions should occur at the same time within the same meetings. PHAs can generally satisfy the Section 18 consultation requirements for impacted residents and with the resident organizations by complying with RAD consultation requirements (i.e., by providing notification letters and resident meetings required by the RAD notice). However, Section 18 also requires the PHA to consult with the Resident Advisory Board (RAB).
Waived PVB Requirements and RAD/Section 18 Blends
RAD has waived certain rules for project-basing vouchers. How do I determine which RAD waivers and alternative requirements apply to Blends?The units converted under RAD are subject to the waivers and alternative requirements for project-basing laid out in the RAD Notice. RAD waivers apply to non-RAD PBV units, including the Section 18 units in a Blend, that are part of a RAD Covered Project only if such waivers are explicitly provided in the RAD Notice. An explicitly provided waiver will contain a statement such as “any non-RAD PBV units located in the same Covered Project shall be subject to the terms of this provision.” Specifically, HUD has extended RAD waivers and alternative requirements related to resident rights as well as the waiver of the PBV requirements under section 8(o)(13)(C)(ii) of the Act and 24 CFR § 983.57(b)(1) and (c)(2) having to do with deconcentration of poverty and expanding housing and economic opportunity, for the existing site (see RAD Notice § 1.6.A.4). Many RAD waivers do not extend to the Section 18 units that will result in non-RAD PBV assistance through a blend. For instance, these units are subject to regular PBV rules during the pre-HAP contract phase relating to competitions, inspections, and use of an AHAP, and during the post-HAP contract phase relating to contract rent increases and choice mobility. Regular PBV rules may be found in 24 CFR Part 983 and the Housing Opportunity Through Modernization Act (HOTMA) Federal Register (FR) Implementation Notices at 82 FR 5458 (January 18, 2017), 82 FR 32461 (Jul. 14, 2017).
Small PHA Blend Contract Administrator
Is there any flexibility with regard to the Small PHA Blend requirement in PIH Notice 2021-07 which states: “Any PBV contract created under this subparagraph must be administered by an HCV contract administrator with at least 250 HCV units under its HCV ACC prior to creation of such PBV contract?”PHAs may request to waive this requirement by following the procedures in PIH Notice 2018-16 and presenting good cause justification. In considering such requests, HUD is likely to consider whether there is another PHA that administers more than 250 HCV ACC units with jurisdiction and, if so, whether that PHA is unwilling or unable to administer the additional PBV assistance.
Repositioning Before Small PHA Blend
Can a PHA with more than 250 units utilize the RAD/Section 18 Small PHA Blend if it first repositions other public housing assets resulting in having 250 or fewer public housing ACC units?Yes. A PHA may utilize any of HUD’s repositioning strategies to decrease the number of public housing units under ACC to 250 (or fewer) units. As soon as the PHA has 250 or fewer units under ACC, and otherwise meets the Small PHA Blend eligibility criteria, it would be eligible for the Small PHA Blend option.
Requirements for S18 Units in RAD/Section 18 Blends
In a RAD/Section 18 blend, are the units that will be disposed under Section 18 subject to RAD requirements for a Capital Needs Assessment, Environmental Review, Section 3, Davis-Bacon, and front-end civil rights reviews?The processing of the transaction and review of the Financing Plan will consider the entire Converting Project (the units that will be removed through both RAD and Section 18) and Covered Project (the post-conversion project with units that will be covered under the RAD HAP contract, non-RAD HAP contract(s), and any other units. Accordingly: 1. The entire Converting Project is subject to RAD’s requirement for a Capital Needs Assessment (see Section 1.4.A.1 of the RAD Notice) 2. The entire Converting Project will be subject to an environmental review, which will be confirmed as part of the RAD conversion (see Section 1.4.A.3 of the RAD Notice). PHAs do not need to complete a separate environmental review to satisfy the requirements of 24 CFR 970.13 for the units being disposed under Section 18 3. HUD will perform front-end civil rights reviews described in PIH/H 2016-17 for the entire Converting Project 4. Section 3 requirements for employing low-income individuals and contracting opportunities will apply to all of the Work on the Covered Project (rehab or construction) required by the RAD Conversion Commitment as part of the RAD conversion (see Section 1.4.A.15 of the RAD Notice) 5. Davis-Bacon will apply to all of the Work on the Covered Project (see Section 1.4.A.14 of the RAD Notice).
DDTF and ARF for RAD/Section 18 Blends
Is the PHA eligible to receive Demolition Disposition Transition Funding (DDTF) and Asset Repositioning Fee (ARF) for the units that will be removed through Section 18?PHAs are eligible to receive DDTF, but only for those units transitioning under Section 18, not the RAD units, and only in accordance with 24 CFR part 905. The PHA may use the DDTF for any eligible purposes, including for augmenting the RAD rents of a future RAD conversion (see RAD Notice Section 1.6.B.5 and 1.7.A.5). DDTF is an add-on of Capital Funds in the year following the removal of the Section 18 units. See also Public Housing Funds and Repositioning document and DDTF/ARF summary chart for more information, including eligible uses of DDTF (Capital Funds) once all units are removed from ACC. PHAs may be eligible to receive ARF.ARF is part of Operating Funds as described in 24 CFR 990.190(h). ARF eligibility shall be in accordance with 24 CFR part 990. PHAs are eligible for ARF for units with Section 18 approval for an entire building. If units do not meet this criterion (i.e., because the RAD and Section 18 units are in the same building), the PHA is not eligible for ARF for the units removed under Section 18. Within a “converting project”, the RAD and Section 18 units do not need to be in separate buildings. It will be up to the PHA to determine which units within a blend are removed through Section 18 and which units are converted through RAD. However, the selection of units to be removed through Section 18 may impact the PHA’s eligibility for ARF. ARF will be incorporated into the Operating Fund subsidy calculation for the PHA for the period described in 990.190(h). See also Public Housing Funds and Repositioning document and DDTF/ARF summary chart for more information, including eligible uses of ARF (Operating Funds) once all units are removed from ACC.
RAD/Section 18 Blend Use Agreement Rider
PIH 2021-07 states that RAD/Section 18 blends will result in the “placement of a long-term use agreement at the Covered Project.” Has HUD made available the form of Use Agreement that will be used for the units approved under Section 18?Yes. A “RAD/Section 18 Blend Rider” to the RAD Use Agreement that will apply to the PBV units that are approved under Section 18 is available on the RAD Resource Desk. The rider extends all requirements of the RAD Use Agreement to the non-RAD PBV units, except for those items where HUD lacks the statutory authority to extend. Specifically, the rider states that the provision contemplating a future transfer of assistance in the event of a default is not applicable to the non-RAD PBV units since non-RAD PBV units are not subject so any of the transfer provisions under RAD. Further, the rider identifies that the requirement to renew the HAP contract while the Use Agreement is in place is not applicable because HUD does not have the authority to require the PHA and owner to perpetually renew the non-RAD PBV HAP contract. Nevertheless, the parties can have the rider reflect that it is the intention of the parties that the non-RAD PBV HAP contract shall be renewed concurrently with the RAD HAP contract upon the completion of the initial term and renewal term and therefore the use restrictions in the rider shall remain in effect until a release is recorded.
Section 18 Blend Rents
How will the contract rents for the units approved under Section 18 that will be subject to the non-RAD PBV HAP Contract be determined?The non-RAD PBV units will be under a separate HAP contract and will have rents determined based on standard PBV requirements, rather than on RAD requirements. The PHA (or the independent entity, if the project qualifies as PHA-owned – see PIH Notice 2017-21 (here: https://www.hud.gov/sites/dfiles/PIH/documents/PIH-2017-21.pdf) Attachments A and B) will establish the “initial rent to owner” (i.e., contract rent) for units approved under Section 18 at the beginning of the Housing Assistance Payment (HAP) contract term, per 24 CFR 983.301(a)(2). The PHA may need information about proposed contract rents earlier than the beginning of the HAP contract term in order to complete RAD Financing Plan requirements (see RAD Notice Att. 1A). For example, the PHA may have estimated rents determined prior to submission of the RAD Financing Plan to support both HUD’s underwriting and to secure financing commitments from lenders/investors. Particularly where the project is not subject to competitive selection requirements (see PIH Notice 2017-21 Attachment L) the PHA may author a conditional letter to support underwriting that states that if HUD approves the RAD conversion and the Section 18 blend and the site satisfies all requirements for the placement of a PBV HAP contract or AHAP, the PHA commits to placing a PBV contract on an identified number of units and at the appropriate rent level.
HQS Inspections
Prior to completing a RAD/Section 18 Blend and execution of HAP contracts, is it necessary for the PHA to conduct inspections of the units for compliance with Housing Quality Standards (HQS)?For the RAD units, Section 1.6.B.10 of the RAD Notice states: “When Work is occurring under RAD, HUD requires that all units meet HQS no later than the date of completion of the Work as indicated in the RCC. Consequently, HUD is waiving and establishing an alternative requirement to 24 CFR § 983.103(b) and section 8(o)(8)(A) of the Act in such cases.” Additionally, Section 1.6.B.9 of the RAD Notice states: “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.” Please see these sections of the RAD Notice for a complete description of these alternative requirements. These alternative requirements do not apply to the non-RAD PBV units. The units that the PHA intends to place under non-RAD PBV assistance must be inspected. First, prior to selecting the project for non-RAD PBVs, the PHA (or independent entity, if PHA-owned) must conduct a pre-selection inspection. 24 CFR § 983.103(a). Among other items reviewed at the pre-selection inspection, the PHA or independent entity will make a determination regarding whether the units substantially comply with HQS such that they may qualify as “existing housing” per 24 CFR § 983.3. If all the proposed non-RAD PBV units in the project substantially comply with HQS on the proposal selection date and the project will be able to meet all other PBV requirements relevant to the condition of the units before and during the HAP contract,2 the PHA may consider the project to be existing housing and place the units under a PBV HAP contract at closing; otherwise, the PHA and owner must treat the project as rehabilitated or newly constructed housing under PBV rules and complete work pursuant to an AHAP under 24 CFR part 983 subpart D prior to executing a PBV HAP contract. See the PBV FAQs (here: https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/project) for further information about existing housing and about the earliest time the non-RAD PBV units can be placed under an AHAP or HAP contract. Second, the PHA or independent entity must conduct a pre-HAP contract inspection per 24 CFR § 983.103(b) for the non-RAD PBV units. The PHA may not sign a non-RAD PBV HAP contract for a unit that does not fully comply with HQS (unless the PHA has adopted either (or both) of the HOTMA HQS flexibilities described in PIH Notice 2017-20). 24 CFR § 983.204(a)(2); 82 Fed. Reg. 5458 (January 18, 2017).
Small PHA Blend Repositioning Plan Requirements
For a PHA pursuing a Small PHA Blend, what needs to be included in the Repositioning Plan? Is a PHA required to close out its public housing program through a Small PHA Blend?A PHA that chooses to use the Small PHA Blend is making a commitment to close-out its public housing program and must submit a Repositioning Plan per PIH Notice 2021-07, 3.A.2.e(2). However, a PHA may remove all of its remaining public housing units in the single transaction that uses the Small PHA Blend or may reposition all of its remaining public housing through separate transactions. If the transaction would remove all remaining units, the PHA must submit a HUD-5837 indicating it will closeout its public housing program and there is no need for a separate “Repositioning Plan.” If the transaction does not remove all remaining units, the PHA must demonstrate that it intends to pursue a reasonable and practical strategy to reposition all of its remaining public housing units Specifically, the PHA must develop a feasible repositioning plan that has been approved by its board of commissioners and reflects the specific repositioning tools (i.e. Section 18, RAD, a RAD/S18 blend), that the PHA plans to use to remove all remaining units; that it will not develop any additional public housing units under otherwise available Faircloth Authority; and that it will closeout its public housing program in accordance with PIH Notice 2019-13. The repositioning plan must be acceptable to HUD and must be submitted through the RAD Resource Desk prior to the submission of the RAD Financing Plan so that HUD can confirm the PHA’s eligibility for the Small PHA Blend.
Non-RAD HAP Contract Funding
Does a PHA receive new HAP funding to cover the cost of the non-RAD PBV HAP contract? Is the funding process the same for the RAD PBV HAP contract?Units converting through RAD are subject to the RAD processes for funding of the HAP contract described in Section 1.13 of the RAD Notice. For the balance of the year the RAD HAP contract becomes effective, the contract is funded from public housing funds. And in the first full year following conversion, the contract is funded through new Section 8 funds. Please see the RAD PBV Quick Reference Guide (here: http://www.radresource.net/sources/public/RAD%20PBV%20Conversion%20Guide%20-%201.9.15%20update.pdf) for details on how the new Section 8 funding is calculated. Units being approved under Section 18 that will be covered under a non-RAD PBV HAP contract are funded differently. Following the Section 18 approval, which occurs after the issuance of the RCC, in order for the PHA to receive new voucher funding with which to make payments under the non-RAD PBV HAP contract, the PHA must apply to HUD for new “Tenant Protection Voucher (TPV)” funding through their Field Office. PIH Notice 2021-07 § 5. This separate application is a necessary step in order to receive TPVs. The PHA may request a new increment of TPVs for occupied units and vacant units that were occupied by an assisted family within the 24 months prior to Section 18 approval. HUD generally issues TPVs on the average per unit cost (PUC) in the PHA’s HCV Program. However, if the PHA has concerns regarding the sufficiency of funding based on average PUC, the PHA can request higher TPV funding as part of its TPV application (HUD-52515) submission (or can make a subsequent request during the time of their initial funding increment). (See PIH Notice 2021-10 (here: https://www.hud.gov/sites/dfiles/PIH/documents/pih2021-10.pdf), or any successor notice, and the TPV FAQs (here: https://www.hud.gov/program_offices/public_indian_housing/programs/hcv/tenant_protection_vouchers) for additional information about requesting TPVs). The PHA will generally use this funding to cover the HAP costs for the Section 18 units that are replaced under a PBV HAP contract, though may initially use the funding to relocate residents off-site with tenant-based assistance (and then back-fill the Section 18 units with its existing HCV resources after they have been redeveloped and when it is ready to put them under a HAP contract). Where the project has units that are vacant and have not been occupied within the last 24 months, the PHA would not be eligible for TPV funding for those units following a Section 18 approval per PIH Notice 2021-10 § 6(d) (here: https://www.hud.gov/sites/dfiles/PIH/documents/pih2021-10.pdf); the PHA should select those units for RAD since all public housing units converted through RAD are eligible for new funding as part of the conversion. If there are a significant number of long term vacancies that exceed the number of units converting through RAD, the PHA would still be required to replace the public housing units with project-based assistance consistent with RAD’s “substantial conversion of assistance” requirement. The PHA may consider using Section 18 for a smaller portion of the property than allowed under the blend.
RAD / Section 18 Blend PHA Plan Requirements
RAD and Section 18 have different PHA Plan requirements. How do I satisfy the PHA Plan requirements for a RAD/Section 18 blend?The PHA Plan informs HUD, residents, and the public of the PHA’s plans and mission for serving the needs of participant families and the strategies for addressing those needs. HUD considers both RAD and Section 18 significant actions that PHAs must address in their PHA Plans. For RAD/Section 18 Blends, PHAs must meet the PHA Plan requirements for both RAD and Section 18. A PHA can indicate in its PHA Plan that it is considering submitting applications for RAD, Section 18, and a RAD/Section 18 Blend and can indicate the exact unit mix is not yet determined. A PHA can also specify whether or not any changes to the mix of units would be a significant amendment to the PHA Plan, which would require adoption and approval per 24 CFR § 903.21 if it were to change. The PHA may, for example, conclude that if the specific of mix of units between RAD and Section 18 is not yet known (because, for example, the PHA does not know which Construction Blend it will qualify for), but the outcome for the project will be the same (preservation through rehab) and all residents will have the same rights, such a change can be considered not to meet the criteria for significant amendment. The PHA should be as specific as possible in its PHA plan but should also be clear in its written materials and public hearing about the different options under consideration. RAD and Section 18 have different requirements for PHA Plans: 1. The RAD notice (Attachment 1D) details what must be included in the PHA Plan. PHA must include Attachment 1D in an Annual Plan, 5-year Plan, or significant amendment. Major items include: unit descriptions to be converted, changes in the number of units post conversion, changes in policies that govern eligibility or admission post conversion, any transfers of assistance, and a statement on the impact of conversion on a PHA’s Capital Fund budget. 2. See 24 CFR 970.3(b)(h) for the PHA Plan requirements for Section 18. PHAs describe proposed dispositions in their PHA Annual Plan or significant amendment. The PHA Annual Plan should indicate that the PHA has applied or will apply for disposition for a portion of the Converting Project. To satisfy the Section 18 requirements, the description of the project in the PHA Annual Plan (at a minimum the IMS/PIC project names and numbers) must be the same as the IMS/PIC project names and numbers that will be proposed for Section 18 as part of the RAD/Section 18 Blend. Qualified PHAs that are not required to submit PHA Annual Plans must certify they discussed the disposition at a public hearing. The PHA should also be aware of PBV requirements for the PHA Plan and Administrative Plan and may find it useful to address those requirements at the same time as the RAD and Section 18 requirements. For instance, if a PHA intends to use the PBV program, it must provide in the PHA Plan the projected number of PBV units, their general locations, the work it plans to do on the property or site, how many units of PBV it is planning on adding to the site, and how project- basing is consistent with its PHA Plan. Guidance on PBV requirements for the PHA Plan and Administrative Plan is in Appendix II of PIH Notice 2017-21.
Section 18 Blend Processing
How does a PHA sequence its RAD and Section 18 applications in order to use this provision? How will HUD process the application materials to ensure that the release of the Declaration of Trust, RAD conversion, and execution of the non-RAD PBV AHAP or HAP contract occur jointly?Initial processing instructions are as follows: Step 1: The PHA submits a RAD application at www.radresource.net for the entire “Converting project” that will encompass the transaction. Step 2: The PHA satisfies PHA Plan requirements for both RAD and Section 18. Step 3:The PHA identifies that it intends to utilize a RAD/Section 18 Blend in the Concept Call held with HUD prior to submitting the Financing Plan. If the PHA is using the Small PHA Blend, the PHA submits its repositioning plan prior to submission of the Financing Plan in order to confirm eligibility. Step 4: The PHA determines its plan for how it will attach PBV assistance to the Section 18 units (i.e., through the Existing Housing PBV requirements or through AHAP). The plan must comply with all applicable PBV requirements (see program regulations at 24 CFR Part 983 and applicable guidance including, but not limited to: the HOTMA Federal Register Implementation Notice at 82 Fed. Reg. 5458 (January 18, 2017) and PIH Notice 2017-21) and be feasible based on the timing of the RAD closing. PHAs are encouraged to begin required steps to project-base Section 18 units as early as possible. See questions 8, 9, and 21. Step 5: The PHA submits a Financing Plan and other supporting information for the Section 18 units that complies with the following. The PHA’s Financing Plan will cover the entire transaction/converting project covered under the Blend. The Financing Plan includes documentation that HUD can use for both RAD and Section 18 processing as well as supplementary documentation needed to complete the Section 18 approval. The PHA is not required to submit a separate Section 18 application through IMS/PIC. Instead, HUD’s Special Applications Center (SAC) reviews the additional material noted below and uploads it into IMS/PIC in the form of a DDA Section 18 application. In addition to standard Financing Plan requirements, the PHA submits a Financing Plan that includes: a. A detailed transaction summary in the Conversion Overview, which must describe the use of this provision and confirm that the units that will be removed through Section 18 will be sold or otherwise transferred (i.e., ground lease) to a third-party entity that is recognized as a separate independent entity under State law (which may include a non-profit affiliate controlled by the PHA). b. A cash flow pro forma that reflects the income and expenses of the total project, i.e., for the RAD and non-RAD units. a. Capital Funds sources that, on a pro-rata basis, do not exceed the development budget, e.g., in a transaction seeking a 60/40 RAD/Section 18 construction blend, any Capital Fund contributions cannot exceed 60% of the development budget in a transaction with 60% of the units in RAD and 40% of the units as Section 18. This does not apply in the case of a PHA that will no longer have ACC units as a result of the RAD/Section 18 Blend or that will have less than 50 units remaining and have initiated procedures to dispose of their final ACC units.3 b. A Capital Needs Assessment covering the whole property. The hard construction costs in the Uses will be used to determine whether the project qualifies for the Construction Blend. c. A Sources and Uses covering the whole property. d. Any applicable front-end civil rights reviews completed for the entire property. e. An Environmental Review for the whole project. f. A RAD Initial Year Funding Tool that is correctly sized to include only the RAD units. g. Utility allowance schedule reflecting the projected utility allowances following the completion of rehab or construction, which will be used to prepare the CHAP amendment. Supplemental Section 18 materials. The PHA also submits certain materials needed for a complete Section 18 application that are not already required by RAD. Specifically, the PHA submits the following material to the RAD Resource Desk no later than its submission of the Financing Plan : a. List of units (by address, unit type, and PIC number) that designate which units will be removed through Section 18 and which units will be removed by RAD. Spreadsheet format preferred. b. Evidence that the PHA described the Section 18 disposition in its PHA Annual Plan and the Field Office approved that PHA Annual Plan. For Qualified PHAs, a certification that they have discussed the Section 18 disposition at a public hearing. See question 24. c. A local government support letter. The PHA must consult local government on its proposal to apply for Section 18 for some units under a RAD/Section 18 Blend and secure a letter of support from the chief executive officer (i.e., mayor) of the local government. d. Evidence of consultation with any resident organization for the residents living in the Converting Projects and the Resident Advisory Board (RAB)4; and any written comments received from impacted residents, resident organizations, or the RAB, along with the PHA’s responses to those comments. e. A Board resolution that approves the PHA’s proposal to apply for Section 18 for some units under a RAD/Section 18 Blend. The resolution must be signed and dated after all resident and local government consultation has been completed. PHAs are not required to submit the following items described in 24 CFR 970.7(b) since they will have been addressed through the RAD requirements: (i) evidence of environmental review – the environmental review for the entire project will be completed through the RAD processing requirements; (ii) (timetable for the disposition – the disposition will occur simultaneously with the RAD closing; (iii) a statement justifying the disposition – the disposition is justified based on the project qualifying for the RAD/Section 18 Blend; (iv) a description of the method of disposition (i.e., ground lease, sale); (v) estimates of the gross and net proceeds – the property’s sale will be occur under RAD requirements and any proceeds from sale will be subject to requirements imposed through RAD; and (vi) evidence the PHA offered the property to sale to the eligible resident organizations (See also 24 CFR 970.9(b)(3)(ii)— (the PHA would be eligible to an exception to the offer of sale because it has a firm plan, as proposed in the Financing Plan, to replace the public housing units with low-income housing units (PBV units)). PHAs can satisfy the Section 18 requirements for consulting with the impacted residents as part of the RAD consultation requirements. PHAs can also satisfy the Section 18 relocation plan requirements as part of the RAD Relocation Plan requirements, since the relocation benefits to all families must be the same. Please note that the PHA may not provide different relocation rights and benefits to residents of the project on the basis of whether they reside in a RAD unit or a Section 18 unit. Step 6: Upon receipt of the Financing Plan requesting the use of the RAD/Section 18 Blend, HUD revises the CHAP, amends the RAD PIC removal application, and creates the Section 18 removal application. HUD uses the materials already submitted by the PHA to the RAD Resource Desk to populate the Section 18 application. The SAC alerts the PHA if there are any missing items necessary for the Section 18 application. HUD will not approve the Financing Plan until the PHA has satisfied all Section 18 submission requirements. The Office of Recapitalization subsequently issues the RAD Conversion Commitment (RCC), which will reference the transaction’s use of the RAD/Section 18 blend and include a special condition that the non-RAD PBV HAP contract or AHAP will be executed concurrent with the conversion. The SAC then also issues the Section 18 approval letter, which will identify the maximum number of units eligible for Tenant Protection Voucher (TPV) funding based on PIH’s Annual HCV Funding notice, which currently allows the PHA to request TPVs for units that were occupied by assis