HUD issued a Notice of Extensions for PHAs in Presidentially Declared Disaster Areas. Pursuant to the Notice, HUD is authorized, on a case-by-case basis, to grant public housing authorities located in Presidentially-declared disaster areas extensions to certain Rental Demonstration Assistance (RAD) Application submission deadlines. These extensions may be granted to PHAs that have: 1) submitted a letter of intent to reserve their position on the RAD waiting list and subsequently been notified by HUD that they are eligible for an award following submission of a completed RAD application, portfolio award proposal, or multiphase award application; or 2) received a portfolio award and been provided 365 days from issuance of the portfolio award to submit acceptable RAD Applications for the remaining projects including in the portfolio award. The Notice does not impose any time limitations with respect to qualifying disaster area designations. PHAs interested in applying for an extension may either contact their RAD transaction manager directly or email RADapplications@hud.gov.
As we head into the fourth quarter, HUD sent out an e-mail reminder Friday afternoon about flexibility when establishing Housing Assistance Payments (HAP) contract effective dates in Rental Assistance Demonstration (RAD) transactions. The January 2017 revision to the RAD Notice at Section 1.13(B)(5) gives Project Owners the ability to establish a HAP contract effective date of either 1) the first day of the month after closing, or 2) the first day of the second month following closing. For example, this flexibility allows RAD transactions that close in October to have a HAP effective date of either November 1 or December 1.
The fourth quarter has historically been the busiest time for closing RAD transactions, and HUD made this policy change to try to relive come pressure from the November closing schedule. In the reminder, HUD suggested that those with hard November closing deadlines should consider closing in October but maintaining a December HAP effective date. HUD strongly encouraged working toward an October closing if a December 1 HAP effective date is critical to the transaction.
The HUD reminder also reiterated the milestones established by HUD in March for yearend closings:
|Deadline to close by Nov. 30, 2017||Deadline to close by Dec. 31, 2017|
|Receive a RAD Conversion Commitment (RCC)||August 16||September 15|
|Submit complete closing package||September 1||October 1|
|All RAD documents approved and ready for HUD signatures||November 16||December 14|
HUD’s methodology for prioritizing yearend closings are based on several factors, including:
- Adherence to the deadlines set forth in the table above.
- Prioritization categories for CHAP processing listed in Section 1.11 of the RAD Notice.
- Critical deadlines beyond the control of the PHA and its development team (note that HUD will require documentation of these deadlines when considering this factor).
- Lower priority will be given to transactions when the original RCC expiration date has been extended past 90 days from issuance.
Ballard Spahr will continue to monitor any further guidance issued by HUD regarding yearend RAD closings and update our readers.
Our friends at NAHRO have alerted us that a new RAD notice will be issued tomorrow, August 23, 2017. The notice requires PHAs who already submitted a RAD letter of interest to preserve their spot on the wait list to submit a RAD application within 60 days if they want to continue in the RAD program. Guidance is also provided for setting rents for all RAD applications awarded outside of the previous 185,000 RAD cap, or for revocations or withdrawals after May 5, 2017 below that cap; rent levels for all such awards will be set at FY 2016 funding levels. Per the appropriations notice that extended the RAD cap, the outside deadline for final submission of multiphase award applications is extended to September 30, 2020.
On August 9, HUD issued to Congress its 16th report on worst case housing needs in the United States, based on 2015 data. Households with “worst case needs” are those that are very low income, do not receive government housing assistance and either pay more than 1/2 of their income for rent or live in severely inadequate conditions, or both. Findings include:
- Severe housing problems are increasing despite a decent economy.
- In 2015, 8.30 million households had worst case needs. This is an increase from 7.72 million in 2013. The record high for worst case needs is 8.48 million in 2011.
Worst case needs affect all types of households, whether examined by age and ethnicity, household structure, or locationwithin metropolitan areas or region.
The report identifies a shift from homeownership to renting as the biggest cause of the increase in worst case needs. For those of us who work with assisted housing or low-income families, its findings are unfortunately not a big surprise. However, it underscores the significant unmet needs of so many low-income families.
The Senate Committee on Appropriations unanimously voted on July 27, 2017 to approve its FY2018 Transportation, Housing and Urban Development (THUD) bill. The bill eliminates the cap in the Rental Assistance Demonstration (RAD) program, which has been supported by Secretary Carson, and also removes RAD’s sunset date. In addition to the advancements in RAD, some additional rental assistance highlights of the bill include:
- Increase in tenant-based Section 8 vouchers to $21.365 billion ($1.07 billion above the FY2017 enacted level);
- Increase in public housing funding to $6.45 billion ($103.5 million above the FY2017 enacted level);
- Increase in project-based Section 8 to $11.5 billion ($691 million above the FY2017 enacted level);
- Increase in Housing for the Elderly to $573 million ($70.6 million above the FY2017 enacted level); and
- Increase in Housing for Persons with Disabilities to $147 million for (nearly $1.0 million above the FY2017 enacted level).
The Senate Committee on Appropriations released an overall summary of the bill that can be found here. Unlike the drastic cuts seen in the House’s THUD bill, the Senate’s bill delivers increased overall funding of $60.058 billion ($3.5 billion higher than the House). This funding level represents an increase of $2.407 billion over current levels. While many speculate neither the Senate nor the House will move their respective THUD bill to the floor, the Senate’s funding levels represent a step in the right direction for those that rely on many HUD programs.
At the National Housing Conference 2017 Annual Policy Symposium on June 9, 2017, HUD Secretary Ben Carson delivered the keynote address and participated in a Q&A session with Chris Estes, President and CEO of NHC. While much of the keynote address focused on homeownership issues, remarks made during the Q&A included such topics as the Rental Assistance Demonstration (RAD) program, Housing First, veterans housing, rural housing, fair housing, and the Federal Housing Administration.
With respect to RAD, the Secretary called it the “perfect example” to leverage funds to provide more affordable units through public private partnerships. He called for the lifting of the RAD cap on units (currently 225,000 units), as he described the program as a “win win situation” in the context of spreading funds further in light of fiscal constraints. In emphasizing “enhancing public private partnerships,” the Secretary specifically mentioned the use of low-income housing tax credits.
A recording of the Secretary’s remarks can be found here. Remarks relating to RAD can be found beginning at time stamp 12:42 and also at 21:47.
Earlier in May, HUD received approval from the Office of Management and Budget of the final, revised form RAD documents. HUD had previously solicited two rounds of public comment as part of the Paperwork Reduction Act process. Ballard’s comments to HUD’s first solicitation of comments can be found here and our comments to the second round here. The final, revised form documents reflect HUD’s incorporation of many of the submitted comments – including comments received as part of the second round of public comment in October 2016.
The May 11th RADBlast! indicates that the revised forms must be utilized for any closing package submitted to HUD on or after June 1, 2017. Many of the revised RAD documents are available in Word format on HUD’s RAD website and both the old and new forms are available on the RAD Resource Desk. For the convenience of our readers, we’ve uploaded copies of the final, revised forms for public housing RAD conversions (RAD First Component) compared to the prior form documents – and you’ll immediately notice the riders to RAD Use Agreement and the HAP Contracts have been incorporated into the body of the respected documents:
- RAD Conversion Commitment (HUD Form 52624)
- RAD Use Agreement (HUD Form 52625)
- PBRA HAP Part I (HUD Form 52620)
- PBRA HAP Part II (HUD Form 52618)
- PBV Rider to HAP (HUD Form 52621)
If you’ve been following the progression of the revised RAD documents and would like to see the changes made to the documents since they were published for comment in October 2016, please contact me (firstname.lastname@example.org or 410.528.5337) and I will be happy to send you comparison copies of these interim revisions.
Overall, HUD was receptive to stakeholder comments and the revised documents reflect the collective knowledge gleaned over the last five years. We look forward to continuing to advance the RAD program.
In an interview with U.S. News and World Reports on “The Future of Affordable Housing in the Trump Era,” Amy McClain, who leads Ballard Spahr’s government-assisted housing practice (and is a frequent Housing Plus blogger), cautions that while she doesn’t expect budget cuts to be as severe as those proposed, funding for affordable housing is under threat. Amy notes that the proposed cuts to public housing funds could undermine the Rental Assistance Demonstration (RAD), which allows a public housing project to convert its subsidy to long-term Section 8 assistance and leverage debt and equity in order to finance the project’s rehabilitation or replacement. The post-conversion rents for RAD projects are based on the amount of public housing operating and capital funds allocated to the project pre-conversion. As Amy notes in the article, “If the public housing operating subsidy and the public housing capital fund get diminished [in the budget], then the rents are no longer viable to convert to the Section 8 platform.” Amy also emphasizes the role that affordable housing proponents can play in the budget debate. “It’s going to come down to what the advocacy groups do and the level of education for members of Congress to make sure everyone is aware of the benefit of programs and the impact that the cuts would have,” she says.
Read more about the proposed cuts to HUD’s budget here.
Last week, Ballard Spahr in conjunction with CSG Advisors hosted its 7th Annual Western Housing Conference in Phoenix, Arizona. The Conference brought together a wide range of public and private housing professionals facilitating a dynamic conversation on current developments in government-assisted housing.
The Conference opened with a “Washington Update” – a discussion on housing policy under the Trump Administration. Panelists Emily Cadik, Director of Public Policy at Enterprise Community Partners, and Peter Lawrence, Director of Public Policy and Government Relations at Novogradac & Company LLP, brought extensive insight into the political priorities driving forthcoming changes to government-assisted housing programs.
Significant takeaways from the discussion included:
- The concern over a predicted decrease in HUD’s budget by $6 million, as outlined by the Washington Post on March 8th. Since the panel occurred, the Trump administration’s budget blueprint for fiscal year 2018 budget was released. Housing Plus posted a blog providing an overview of the budget blueprint on March 16, 2017.
- The elimination of one or more of the tax credit programs, private activity bonds and/or the reduction of the corporate tax rate through tax reform will have significant impacts on the availability of equity financing needed to at least sustain affordable housing development at its current levels.
- An infrastructure bill that includes housing may be an opportunity to meet any deficits created by HUD budget cuts to the Public Housing Capital Fund and Community Development Block Grant programs.
- The spending caps under the existing Budget Control Act also pose a threat to government-assisted housing programs, especially in light of the proposed increases in defense spending and the resulting offsets that would be needed from non-defense discretionary spending.
- Stakeholders should continue to invite legislators and members of Congress to ribbon cuttings and site visits in their districts. These visits are critical in gaining Congressional support for government-assisted housing programs.
The second session of the Conference focused on lessons learned from implementing the Rental Assistance Demonstration (RAD) program. Nicole Ferreira, Vice President for Development at the New York City Housing Authority, and Jenny Scanlin, Director of Development at the Housing Authority of the City of Los Angeles, each provided a case study from which they described the benefits and limitations of the program and the financial structures making each deal work. Beverly Rudman, Director of the Closing/Post Closing Department in HUD’s Office of Recapitalization, provided an update on the program and described particular challenges facing her office, which oversees the RAD program. The panel highlighted the following as effective tools for successfully underwriting a RAD deal and securing community and tenant buy-in: (1) Tenant Protection Vouchers, (2) the demolition and disposition process under Section 18 of the U.S. Housing Act of 1937, (3) seller take back financing from the Housing Authority and (4) federal and local redevelopment grants.
Panelists Tom Capp, Chief Operating Officer of Gorman & Company, C.J. Eisenbarth Hager, Director of Healthy Community Polices at Vitalyst Health Foundation, and Keon Montgomery, Housing Manager for the City of Phoenix Housing Department, then provided a local perspective on how private/public partnerships can be used to create sustaining change in communities. The panel emphasized the use of health studies in the predevelopment process to generate academic research on the specific needs of the impacted community and solicit funding from public and private partners to address those needs.
The last panel focused on the changes in the affordable housing finance market. Monty Childs, Director of Loan Origination and Structuring at Freddie Mac, John Ducey, Manager of Multifamily Affordable Housing-Credit at Fannie Mae, Sarah Garland, Senior Vice President at PNC Bank, Catalina Velma, Vice President of Public Housing at the National Equity Fund, and Cody Wilson, Director at Stifel, Nicolaus & Company, each provided a unique perspective on the impact of recent and prospective economic changes (e.g. tax reform, HUD budget cuts and rises in interest rates) on the equity, bond and lending markets, as well as the increased challenge in financing small and rural projects. The panel also discussed financing tools like Tax-Exempt Loans (Freddie Mac), Reduced Occupancy Affordable Rehab (ROAR) Execution (Fannie Mae) and FHA 221(d)(4) Loans (HUD), which have been found to address some of the challenges faced in the market.
A copy of the conference materials can be found here.
If you have any questions regarding the information above, or want more information on how to register for next year’s conference, please contact Jennifer Boehm at email@example.com.
HUD’s Office of Recapitalization recently released a memo to all CHAP awardees setting forth closing deadlines for CY 2017 RAD transactions. Awardees should be especially mindful of these intermediate deadlines to ensure that their RAD projects can be promptly processed.
|Deadline to close by June 30, 2017||Deadline to close by Nov. 30, 2017||Deadline to close by Dec. 31, 2017|
|Upload all required Financing Plan documents||Completed||June 15||July 15|
|Receive a RAD Conversion Commitment (RCC)||Completed||August 15||September 15|
|Submit complete closing package||April 15||September 1||October 1|
|All RAD documents approved and ready for HUD signatures||June 22||November 16||December 14|
Other key takeaways from the memo include the following:
- Projects that wish to have RAD rents funded with Section 8 subsidy beginning in January 1, 2018 must close by November 30, 2017.
- In addition to the priority categories listed in Section 1.11 of the RAD Notice, HUD will prioritize projects adhering to the deadlines and those with demonstrable critical deadlines beyond the control of the housing authority and its development team.
- HUD may require an update to the Financing Plan and re-issuance of the RAD Conversion Commitment (RCC) if the RCC has aged over 6 months.