Reno & Cavanaugh, CLPHA Submit Comments on the Rental Assistance Demonstration Program Implementing Notice to HUD  

Reno & Cavanaugh, PLLC (R&C) and the Council of Large Public Housing Authorities (CLPHA) submitted comprehensive comments to the United States Department of Housing and Urban Development (HUD) regarding the Rental Assistance Demonstration (RAD) Notice (PIH 2012-18).  The comments follow the following three overarching concerns, which are evident in many sections throughout the Notice.  These concerns are as follows:

• Equal treatment of Project-Based Vouchers (PBV) and Project-Based Rental Assistance (PBRA).  We feel strongly that the provisions in the Notice, including contract rent setting, the cap on the number of PBV units in a project, and 12-month choice-mobility constraint for PBV conversions, create unequal treatment of PBV and PBRA conversions, despite the fact that both are subject to the same OCAF limitations and financial risks inherent in the program.  In the final notice, HUD should restructure such provisions to provide equal treatment for PBV and PBRA conversions rather than providing greater incentives for PBRA conversions.  RAD is a demonstration program and, at this point, no one can be certain how deals will be structured, so HUD should be neutral and leave all options on the table.

• Increased flexibility in financing considerations and rehabilitation schedule.  Since there are so many unknown questions with regard to lender and investor reactions and, consequently, impending financing structures, HUD should be flexible within the proposed regulatory structure to allow for the Demonstration to fully take shape.  So many rigid financing requirements will create considerable challenges especially in the context of a no-cost RAD program.  Additionally, the overall rehabilitation schedule in the context of differing complexity levels with respect to financing, project size, and market challenges may be too stringent, and HUD should allow for flexibility in timing in order to ensure successful conversions.

• FHA-insured financing is crucial.  The rent setting constraints within the statute as well as initial conversations with lenders and investors indicate that FHA-insured financing will be critical in ensuring successful RAD conversions.  Given that there are numerous regulatory and financial barriers to participation in RAD by private lenders, HUD needs to work with FHA to make certain that whatever structures (be it existing or new products) are needed for RAD conversions are in place and available.

• Underutilized broad waiver authority to ensure a successful Demonstration.  The Congress gave HUD broad waiver authority as a critically important tool in order to ensure a successful demonstration program.  We believe that HUD should exercise its waiver authority to a greater extent than it proposes in this initial Notice, especially given the need for PHAs to be creative, in order to operate successfully under the no-cost RAD program.  In addition to the many waiver suggestions throughout the comments below, we have also included a few requested waivers at the end of our comments.

Contact: Stephen I. Holmquist, Member, Reno & Cavanaugh: (202) 349-2462 or sholmquist@renocavanaugh.com.  

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