HUD Issues Rental Assistance Demonstration Notice for Public Comment    

HUD has issued Notice PIH-2012-18, inviting public comment on its proposed rules for the Rental Assistance Demonstration (RAD) for up to 60,000 housing units.  RAD was enacted as part of the fiscal year 2012 HUD appropriations act (Public Law 112-55), and offers public housing agencies (PHAs) the opportunity to convert their subsidies to Section 8 assistance through either project-based vouchers (PBVs) or project-based rental assistance (PBRA).  Owners of projects in the Section 8 Moderate Rehabilitation, Rent Supplement and Rental Assistance Payment programs are also eligible to apply.

After considering the public comments, HUD will issue another notice with final program instructions and eligibility and selection criteria.  According to HUD's Implementation Timetable, public comments on Notice 2012-18 are due April 9, 2012 and the Final Program Notice will be published on June 1, 2012.  The Application Window opens August 1, 2012, with awards made by October 1, 2012.

HUD states that the goal of RAD conversions is the preservation and improvement of these properties through facilitating access to private debt and equity to address capital needs.  RAD also seeks to test whether residents have increased housing choices after RAD conversion.  For public housing conversions, the Notice also provides that:

• Debt financing must be at a fixed rate, fully amortize over no more than 40 years, and have a maturity no earlier than the initial HAP contract.
• Contract rents will be equal to the project's current public housing funding, subject to certain caps, and will be adjusted annually by HUD's Operating Cost Adjustment Factor (OCAF).  
• Initial HAP contracts will be 15-20 years for PBVs and 20 years for PBRA. At the end of the initial contract, HUD will offer and the PHA or owner must accept a contract renewal, which will be under MAHRA for PBRA contracts.
• Each RAD PBV and PBRA contract will have a concurrent RAD Use Agreement, which must be recorded in first position.
• A RAD project must be owned or controlled by a public or nonprofit entity, except as allowed by HUD under special circumstances such as foreclosure, or to permit the use of Low-Income Housing Tax Credits.
• RAD will be limited to 1,000 units per PHA (but 4,000 units for New York).
• HUD encourages applicants to use Low-Income Housing Tax Credits and other grant funding to support recapitalization of projects converted under RAD.
• HUD has authority under RAD to waive certain statutory and regulatory provisions, such as the current caps on the percentage of its vouchers a PHA may project-base, the number of PBVs in a project, and procedures for selection of owner proposals under the PBV program.

Reno & Cavanaugh (R&C) will be offering comments during the public comment period and will be offering other guidance and training opportunities.  Please check our website for updates.

This notice is provided by R&C's Housing Policy Group.  

Contact:  Stephen I. Holmquist, sholmquist@renocavanaugh.com, (202) 349-2462 

Issued March 9, 2012.  Reno & Cavanaugh represents developers, housing authorities, lenders and other industry participants in matters of housing development, financing and other areas.  This memorandum provides general information and should not be viewed as specific legal advice.  These materials may not be copied or redistributed for commercial purposes or for compensation of any kind without prior written permission from Reno & Cavanaugh. If you have questions about these terms or would like information about licensing materials from www.renocavanaugh.com, please contact R&C.