Things You Should Know About RAD Public Housing Conversions
The Rental Assistance Demonstration (RAD) was created in order to give public housing authorities (PHAs) a powerful tool to preserve and improve public housing properties and address the $26 billion dollar nationwide backlog of deferred maintenance. RAD also gives owners of three HUD legacy programs (Rent Supplement, Rental Assistance Payment, and Section 8 Moderate Rehabilitation) the opportunity to enter into long-term contracts that facilitate the financing of improvements.
RAD allows public housing agencies to leverage public and private debt and equity in order to reinvest in the public housing stock.This is critical given the $25.6 billion backlog of public housing capital improvements.
In RAD, units move to a Section 8 platform with a long-term contract that, by law, must be renewed.This ensures that the units remain permanently affordable to low-income households.
Residents continue to pay 30% of their income towards the rent and they maintain the same basic rights as they possess in the public housing program.
RAD maintains the public stewardship of the converted properties through clear rules on ongoing ownership and use.
The RAD program is cost-neutral and does not increase HUD’s budget.The program shifts units from the public housing program to the Section 8 program so that providers may leverage the private capital markets to make capital improvements.
On September 21, 2016, HUD released a RAD evaluation interim report to determine how RAD is performing and determine if the program is on track to attract substantial new capital to stabilize the physical and financial conditions of public housing properties.
Findings of interest
PHAs often sought to use RAD as an opportunity to streamline their operations and remove their properties from the statutory and regulatory control of the public housing program.
PHAs are not necessarily proposing their neediest projects for RAD conversion and may be choosing the projects with the least amount of capital needs in order to more quickly convert the properties to RAD.
The most common sources of capital for RAD conversions are low-income housing tax credits.
PHAs chose to convert to RAD instead of other financing options because of RAD’s relative ease of use, technical capacity, perception of Section 8, access to capital, and potential for large-scale conversions.
PHAs found that RAD works better in areas where rents are high enough to finance capital needs.
Contact SVA if you have questions about RAD and how it might apply for your business.
Biz Tip Topic Expert: Sheri Springer
Sheri is a Senior Manager with SVA Certified Public Accountants. In her role, she oversees and performs audits for owners of affordable multifamily housing units receiving Section 42 Low-Income Housing Tax Credits.