Part One. What s New with RAD? 9/19/2017. HUD Increases Unit Cap. HUD Increases the Public Housing Unit Cap

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1 What s New with RAD? LIZ BRAMLET CONSULTING, LLC CONSULTING FOR TODAY S AFFORDABLE HOUSING Part One HUD Increases the Public Housing Unit Cap HUD Increases Unit Cap On Wednesday, August 23, 2017, HUD issued a Notice in the Federal Register on the RAD program HUD increased the unit cap from 185,000 units to 225,000 units for public housing units able to convert to long-term Section 8 assistance HUD must select properties through a competitive process using the existing waiting list and established selection criteria 3 1

2 HUD Increases Unit Cap cont d The RAD waiting list as of August 14, 2017 can be downloaded at WAITING LIST HUD can make RAD awards to projects where PHAs have submitted letters of interest to reserve their place on the waiting list and have submitted a completed RAD Application within 60 days of August 23, HUD Increases Unit Cap cont d For CHAPs issued beyond the 185,000 unit cap, and for any replacement awards made as a result of revocations or withdrawals that occur after May 5, 2017, HUD will set Section 8 rent levels based on FY 2016 funding levels The Section 8 rents based on 2016 funding levels may be downloaded at 2016 RENTS 5 HUD Increases Unit Cap cont d HUD has begun to issue CHAPs for the next 40,000 units on the waiting list where HUD has already received a completed application HUD is sending individual messages to PHAs that have submitted Letters of Interest and who have been selected from the waiting list 6 2

3 HUD Increases Unit Cap cont d After selecting the 40,000 units from the waiting list, a new waiting list of 48,708 has formed PHAs who have not yet applied and are interested in RAD may submit Letters of Interest, in lieu of a RAD Application, to reserve their position on the waiting list 7 HUD Increases Unit Cap cont d HUD has published a sample Resident Information Notice (RIN), which PHAs can use to provide basic information to residents about their proposed conversion PHAs must provide a RIN to all residents of a Converting Project prior to the first of the two meetings that a PHA must have with residents before submitting a RAD Application 8 HUD Increases Unit Cap cont d HUD has published revised RAD Resident Fact Sheets, which were designed to inform residents about important aspects of the RAD conversion process HUD recommends that PHAs provide these fact sheets to residents, regardless of what stage the PHA is in the conversion process 9 3

4 Part Two Updated RAD Notice Revision 3 of the RAD Notice HUD issued its third revision of the RAD notice, PIH Notice , Rev 3 on January 12, 2017 It remains in effect until it is amended, superseded or rescinded HUD states that the changes from previous notices result from lessons learned while implementing the RAD program 11 Revision 3 of the RAD Notice cont d Section One of the Notice covers conversions of public housing units to long-term Section 8 assistance under RAD s First Component The changes included in Section One are effective for all conversions not yet closed with HUD making some exceptions for projects near their closing date Any changes to Eligibility and Selection Criteria were effective on February 21 st 12 4

5 Section 8 Mod Rehab Conversions In the early years of the RAD program, owners of Section 8 Moderate Rehab projects could elect to convert under either RAD s First or Second Component Mod Rehab conversions are now only allowed under RAD s Second Component HUD addresses Mod Rehab conversions in Section 2 of the Notice 13 General Program Description General Program Description In Section 1.2 E, HUD addresses civil rights requirements and provide a list of activities for which owners must receive HUD s written approval before implementation as part of a RAD Conversion HUD must approve a conversion where the project will serve a different population; e.g. the project will change from housing families with children to housing the elderly or disabled 15 5

6 RAD Civil Rights Checklist The RAD Fair Housing, Civil Rights and Relocation Checklist requires submission of information regarding: Conversions of assistance in where the relocation will last at least 12 months; and Conversions of assistance involving new construction or substantial alteration, as those terms are defined in Section 504 of the Rehabilitation Act of Eligibility Hope VI Projects In Section 1.3 H, HUD addresses the eligibility of Hope VI projects Projects with a Date of Funding Availability (DOFA) of greater than 10 years prior to the RAD application Where a HOPE VI project was developed in phases on a contiguous site, each of the phases may have distinct DOFA dates, but for purposes of the RAD application, the earliest DOFA shall apply to all contiguous phases submitted for conversion 18 6

7 Hope VI Projects cont d Owners of Hope VI projects that would be the final public housing units in their portfolio may also apply for a RAD conversion 19 Conversion to the CNA etool HUD is developing a standardized CNA etool that will be required for RAD conversions It must be part of any RAD Financing Plan submitted six months after HUD publishes the etool Any CNA submitted prior to this date must use either the CNA etool, if available, or follow the guidance under Revision 1 of this Notice 20 CNA etool Exemptions HUD may exempt the following transaction types from CNA requirements, with the exception of preparing the 20 Year Reserve Schedule and the Utility Consumption Baseline (UCB) Projects that will be financed with LIHTC; or Projects where the total assisted units (e.g., RAD units and other PBV units) at the project will constitute less than 20% of the total units at the project (or a higher amount at HUD s discretion). 21 7

8 CNA etool Exemptions cont d No utility consumption baseline analysis is necessary for buildings being demolished or being removed from the assisted inventory Utility consumption baseline requirements for new construction will apply in accordance with PBRA and PBV requirements All proposed exemptions must be confirmed and approved by the Transaction Manager 22 Green Building & Energy Efficiency In Section 1.4.A.2, HUD addresses the green building standards must meet for both new construction and rehabilitation HUD provides much detail about the standards a project must meet referencing several different building codes Anyone developing a construction plan for a RAD conversion must be familiar with these standards 23 Environmental Reviews All RAD applications must include a completed environmental review under either Part 50 or Part 58 as required based on the project s financing HUD will not approve any financing plan or an RCC for any owner that has not submitted an environmental review that meets the requirements spelled out in Attachment 1A 24 8

9 Substantial Conversion of Assistance In Section 1.4.A.4, HUD states that a PHA may not reduce the number of ACC units at a project without Section 18 Demolition or Disposition approval from the Special Applications Center (SAC) A PHA must submit within their PIC removal application a narrative explaining the proposed reduction, including a description of the units to be removed 25 Substantial Conversion of Assistance cont d The PHA must explain why the project meets the criteria to be excluded from the requirement that they not reduce the number of units through the RAD conversion The Transaction Manager will approve any reduction of units by project or portfolio Any property/proceeds received from the sale of any property under the de minimis exception must be used for Affordable Housing purposes 26 Relocation Requirements In Section 1.4.A.5, HUD addresses fair housing, civil rights and resident relocation issues In Notice PIH , HUD issued updated guidance for owners going through a RAD conversion The attachments to that Notice provide guidance on what should be included in a relocation plan with recommended resident notices 27 9

10 Relocation Requirements cont d The Notice states that all residents being temporarily relocated must be allowed to return to the Covered Project, but not say it must be same unit or one of the same size Owners should be careful in all communication with the residents not to guarantee them a return to the same unit if that will not happen HUD encourages owners to right-size their units as part of their relocation plan 28 Relocation Requirements cont d There is no such thing as involuntary permanent relocation of a resident of a project going through a RAD conversion Relocation Planners must read Notice PIH to understand how must deal with residents who will be relocated for more than 1 year or who the owner would like to permanently relocate Residents going through a RAD conversion are not eligible for tenant protection vouchers 29 Accessibility Requirements In Section 1.4.A.6, HUD addresses accessibility requirements Most covered projects are governed by more than 1 law addressing accessibility HUD reminds owners they must comply with all relevant laws including the Civil Rights Act, the ADA and Section

11 Site Selection & Neighborhood Standards In Section 1.4.A.7, HUD addresses site selection and neighborhood standards The PHA must certify with the submission of its Annual Plan, Significant Amendment to its Annual Plan, or MTW Plan that it complies with the applicable site selection requirements HUD will conduct a front-end civil rights review of the PHA s proposed site in some cases 31 Demolition In Section 1.4.A.9, HUD addresses demolition Unless approved in writing by HUD, a PHA may not demolish and/or dispose of units until after the closing of construction financing for the Covered Project Both the demolition action and new construction or rehabilitation (either on-site or off-site) are considered as part of a single Environmental Review 32 Demolition cont d Section 18 does not apply to RAD Conversions and is not required when conversions include demolition Demolition approval pursuant to Section 18 is not sufficient to permit demolition of units under RAD and may cause the Converting Project to be ineligible 33 11

12 Ownership and Control In Section 1.4.A.11, HUD addresses ownership Except where permitted to facilitate the use of tax credits, during both the initial term and all renewal terms of the HAP Contract, HUD will require ownership or control of the Covered Project by a public or non-profit entity HUD provides detailed guidance on how the ownership must be structured to meet this requirement 34 Transfer of Assistance In Section 1.4.A.12, HUD addresses transfer of assistance HUD will assess that the transfer does not place housing in neighborhoods with highly concentrated poverty based on the criteria formulated for transfers A copy of the criteria is available at 35 Transfer of Assistance cont d At a minimum, projects that are located in neighborhoods that meet these criteria will meet the requirement under this Notice that transfers not occur to neighborhoods of concentrated poverty HUD may modify these criteria as appropriate to fit the RAD program and will post the changes at

13 Transfer of Assistance cont d Unless otherwise approved by HUD, a PHA may transfer units from a public housing project to an existing LIHTC project within its 15-year compliance period only if the transfer is necessary to help with de-concentration of poverty and/or the de-densification of PH units HUD provides very detailed guidance for owners transferring assistance at conversion and for those who will apply to transfer at a later date 37 Transfer of Assistance cont d Owners planning to transfer assistance must read this section of the notice to ensure compliance Due to limited time, we are not addressing the details today We will be happy to discuss transfer issues with anyone after this webinar 38 Section 3 In Section 1.4.A.14, HUD addresses compliance with Section 3 of the HUD Act of 1968 Applies to all Work, including any new construction, that is identified in the Financing Plan and RCC Section 3 may apply to the project after conversion based on the federal financial assistance supporting the project 39 13

14 Lead-Based Paint In Section 1.4.A.15, HUD addresses lead-based paint issues A PHA is required to conduct a lead-based paint inspection and a lead risk assessment on a pre public housing property, and conduct ongoing lead-based paint maintenance and periodic re-evaluation for lead-based paint hazards 40 Lead-Based Paint cont d The PHA must provide any documentation available regarding lead-based paint and leadbased paint hazards to the firm preparing the CNA and to the Project Owner The Owner must evaluate and control lead-based paint hazards pursuant to 24 CFR Part 35 subpart H, including completing a risk assessment if the property will receive more than $5,000 per unit in rental assistance subsidy 41 Lead-Based Paint cont d The CNA must incorporate the work necessary to meet the Project Owner s requirements to treat lead-based paint hazards under subpart H. (See subpart H if the multifamily property will receive $5,000 per unit or less in rental assistance subsidy.) 42 14

15 Project Conversion Requirements and Financing Considerations Financial Considerations In Section 1.4.B addresses financial considerations HUD encourages PHAs who are inexperienced with current financing trends to hire a knowledgeable consultant to help them determine the best way to finance their project as part of the conversion 44 Financial Considerations cont d In Section 1.4.B.1 addresses debt financing All loans secured by the Covered Project must be subordinate to the RAD Use Agreement A fixed interest rate and amortize over 40 years Not have a balloon payment until after the earlier of the expiration of the HAP Contract or 17 years from the date of the permanent debt financing; and Not have a debt service coverage less than the higher of 1.11 or lender requirements 45 15

16 Financial Considerations cont d These conditions are applicable to first mortgages and not to soft, subordinate financing All subordinate (or secondary) financing must be disclosed and approved by the first-mortgage lender as well as HUD An owner may obtain soft debt through many programs including CDBG, HOME, the Housing Trust Fund and the Federal Home Loan Bank Board s Affordable Housing Program 46 Financial Considerations In Section 1.4.B.2 addresses PH funds With HUD approval, PHAs may also use Section 18 disposition proceeds if use complies with Section 18 MTW agencies may use their block grant as an additional source of capital to support conversion as either debt or equity Financing proceeds in excess of transaction costs will not be allowed when public housing Capital, Operating, or MTW block grant funds are contributed t 47 Financial Considerations cont d When a PHA is converting all of its ACC units, there is no restriction on the amount of public housing funds that may be contributed to the Covered Project(s) at Closing The PHA may convey all program funds to the Covered Project(s) 48 16

17 PHA Indebtedness & Obligations In Section 1.4.B.3, HUE addresses PH debts and obligations A PHA must disclose in its application and address in its Financing Plan the amount of project debt associated with the Converting Project prior to conversion, including energy performance contracts, Capital Fund Financing (CFFP), Operating Fund Financing, Public Housing Mortgage Program, program debt (including ongoing repayment agreements related to audits or compliance reviews), or other debt 49 LIHTC In Section 1.4.B.5, HUD addresses LIHTC RAD does not prohibit excess equity proceeds from being used to support other Affordable Housing Purposes Many states face excessive demand on an annual basis for allocations of 9% LIHTCs and routinely do not fully allocate their supply of 4% as-of-right credits coupled with tax-exempt bond financing allowed under their annual Private Activity Bond Volume Cap 50 Grant Funding In Section 1.4.B.6, HUD addresses grants HUD reminds owners that there are numerous places to apply for grant funding or soft debt through federal, state and local programs such as CDBG, HOME, HTF, and the AHP Many states, counties and cities have created there own programs such as state housing trust programs, risk sharing programs, and creative financing efforts 51 17

18 Acquisition Proceeds In Section 1.4.B.7, HUD addresses acquisition proceeds For transactions involving the transfer of ownership to a new entity, a PHA is permitted to receive cash acquisition proceeds in excess of any seller take-back financing. The proceeds must be used for Affordable Housing Purposes and must be escrowed at closing or during any construction period associated with the RAD conversion 52 Waivers, Alternatives and Other Public Housing Requirements Use of Public Housing Funds In Section 1.5.A, HUD addresses using public housing programs to support the conversion PHAs are permitted to use available public housing funding, including Operating Reserves, Capital Funds, and Replacement Housing Factor (RHF) funds, and Demolition and Disposition Transitional Funding n the development budget to support conversion, for rehabilitation or new construction, and to increase initial contract rents 54 18

19 Use of Public Housing Funds cont d HUD provides new and detailed guidance on how an owner may utilize PH funds and towards what purpose Anyone planning to use PH funds in a RAD conversion should read this material in order to understand how to fit these funds into their budget and the Financial Plan them must submit to HUD 55 Section 18 Applications In Section 1.5.B, HUD addresses Section 18 applications Section 18 applies only in these situations: The disposition of excess land, If a PHA proposed to reduce the number of assisted units by more than a de minimis amount, where assistance is transferred from the Converting Project and HUD has not approved the future use of the Converting Project site or sales proceeds as part of the RAD conversion. 56 Section 18 Applications cont d Otherwise, a PHA cannot have both a CHAP and an approval of a Section 18 Application for the same public housing units A PHA may submit applications for both a RAD conversion and a Section 18 action for the same units and may receive initial approval for both, it must make a decision on which to pursue for each unit within ninety (90) business days of receipt 2 nd approval HUD provides new and detailed guidance on the use of Section 18 funds 57 19

20 Amendment to 5-Year Plan In Section 1.5.E, HUD addresses Amending a PHAs annual and 5-year plan A RAD conversion does constitute a significant amendment to both the annual and 5-year plan HUD provides new and detailed guidance on plan requirements and the consequences of not complying with this RAD provision 58 Moving to Work Agencies In Section 1.5.F, HUD addresses Moving to Work agencies If an MTW agency chooses to convert assistance to PBRA, the Covered Project(s) will no longer be included as part of the PHA s MTW program 59 PHAS In Section 1.5.I, HUD addresses removing projects from PHAS scoring For a project with a CHAP to be excluded from PHAS indicator scores, immediately after the issuance of the CHAP the PHA must submit an application in the PIC Inventory Removals Module, as either RAD Conversion PBV or RAD Conversion PBRA, for all units covered by the CHAP The PHA must submit the application in PIC by the fiscal year end for the project 60 20

21 Lease Conversions In Section 1.5.M, HUD addresses lease conversions Public housing lease terminations part of a RAD conversion do not qualify as an adverse action, provided that the tenants are provided with a notice of termination in accordance with HUD regs and information on when and how they will receive their new Section 8 lease, which must be effective the same date the HAP Contract becomes effective Grievance procedure requirements do not apply 61 Lease Conversions In Section 1.5.M, HUD addresses lease conversions Public housing lease terminations part of a RAD conversion do not qualify as an adverse action, provided that the tenants are provided with a notice of termination in accordance with HUD regs and information on when and how they will receive their new Section 8 lease, which must be effective the same date the HAP Contract becomes effective Grievance procedure requirements do not apply 62 Special Provisions Affecting PBV Conversions 21

22 PBV Conversions In Section 1.6, HUD addresses PBV conversions HUD has waived a limited number of regular PBV requirements to enable RAD conversions All other regulatory and statutory requirements of the PBV program in 24 CFR part 983 and section 8(o)(13) of the Act apply, including environmental review, leadbased paint requirements, Davis-Bacon, and fair housing requirements 64 PBV Conversions cont d Changed PBV regs for RAD conversions Covered Projects do not count against the percentage limitation applicable to the PBV program There is no cap on the number of units that may receive PBV assistance in each project Covered Projects shall have an initial HAP Contract term of at least 15 years (up to 20 years upon request of the Project Owner and with approval by the administering Voucher Agency) 65 PBV Conversions cont d Changed PBV regs for RAD conversions Any HUD approval of a PHA s request postconversion to reduce the number of assisted units is subject to conditions that HUD may impose and is reviewed by HUD in the regular course of administration of the PBV program. MTW agencies may not alter this requirement

23 PBV Conversions cont d Changed PBV regs for RAD conversions HUD approval of a PHA s request post-conversion to reduce the number of assisted units is subject to conditions HUD may impose and is reviewed by HUD in the regular course of administration Contract Administrators and Project Owners may choose to extend the initial HAP Contract term but this does not change the requirement that they both agree to automatically renew the contract and MTV Work Agencies may not change these regs 67 PBV Conversions cont d Changed PBV regs for RAD conversions Use Agreements must say that if the HAP is removed due to breach, non-compliance or insufficiency of Appropriations, for all units previously covered under the HAP new tenants must have incomes at or below 80% of the AMI aand rents may not exceed 30% of 80% of the AMI for an appropriate-size unit for the remainder of the term of the RAD Use Agreement Require compliance with all fair housing and civil rights requirements, including AFHM plans 68 Initial Contract Rent Setting Review Paragraph 1.6.B.i to learn how HUD establishes your initial contract rents based on when you received your conversion In the first section of the webinar, we discussed initial contract rents for projects being awarded conversions under the increase of 40,000 to the PHA unit cap 69 23

24 PBV Conversions cont d Any use of MTW block grant funds in setting initial contract rents shall be subject to subsidy layering review and MTW continued service requirements, as calculated using the MTW Baseline Methodology There is no limit to the number of projects that a PHA may bundle, but the donor project cannot convert later than the recipient one Initial contract rents cannot exceed the lower of: the reasonable rent, the payment standard, or the rent requested by the owner 70 PBV Conversions cont d Rents will be adjusted annually through the application of the OCAF announced for the area The rent to owner may not exceed the reasonable rent but will never be lower below the initial rent MTW agencies may not alter this requirement 71 PBV Conversions cont d 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 Units will not be required to meet HQS during construction 72 24

25 Floating Units The HAP Contract must specify the number and type of units in the property that are designated as RAD units, including any excepted units From the time of the initial execution of the PBV RAD HAP Contract, the property must maintain the same number and type of RAD units, including the same number and type of Section 504 accessible units. 73 PBV Conversions cont d 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 Units will not be required to meet HQS during construction 74 Residents Rights In Section 1.6.C, HUD begins a long discussion on residents rights as addressed below Current households cannot be excluded from occupancy at the Covered Project based on any rescreening, income eligibility, or income targeting Project Owners must renew all leases upon lease expiration, including MTW agencies A PHA must create a policy setting the length of the phase-in period for rent increases at three years, five years or a combination depending on circumstances 75 25

26 Residents Rights cont d In either the three year phase-in or the five-year phase-in, once the Calculated PBV TTP is equal to or less than the previous TTP, the phase-in ends and tenants will pay full TTP from that point forward MTW agencies must also implement a three or fiveyear phase-in for impacted residents, but may alter the terms above as long as it establishes a written policy setting forth the alternative terms 76 Residents Rights cont d Public Housing residents that are currently FSS participants will continue to be eligible for FSS The PHA may continue to use any FSS funds already awarded to serve those FSS participants who live in units converted by RAD At the completion of the FSS grant, PHAs should follow the normal closeout procedures outlined in the grant agreement The Notice reminds owners that FSS requirements differ under public housing versus the HCV program 77 Residents Rights cont d At the completion of the ROSS-SC grant, PHAs should follow the normal closeout procedures outlined in the grant agreement Note that ROSS-SC grantees may be a non-profit or local Resident Association and this consequence of a RAD conversion may impact those entities Residents may form a resident organization and receive funding as discussed in Attachment 1B 78 26

27 Residents Rights cont d PHAs must provide adequate written notice of termination of the lease which shall be : No longer than 30 days if the health and safety are not threatened 14 days for non-payment of rent 30 days for other causes 79 Earned-Income Disregard & Jobs Plus Tenants receiving the PH earned-income disregard at conversion will continue to receive it even if they are not disabled as required by the HCV disregard This provision applies only to residents receiving the earned-income disregard at conversion and to no new tenants or existing tenants not on it at conversion Jobs Plus grantees that convert the Jobs Plus target projects(s) under RAD will be able to finish their Jobs Plus period of performance unless significant relocation and/or change in building occupancy is planned 80 TTP Exceeds Gross Rent For residents living in a Converting Project prior to conversion who s rent exceeds the TTP, their units to remain under the HAP The rent to the owner for the unit will equal the lesser of the family s TTP, less the Utility Allowance, or maximum LIHTC rent When the family s TTP falls below the gross rent, normal PBV rules shall apply

28 TTP Exceeds Gross Rent cont d If units are removed from the HAP because a new resident s TTP comes to equal or exceed the gross rent and if the project is fully assisted, HUD requires that the PHA reinstate the unit after the family vacates If the project is partially assisted, the PHA may substitute a different unit for the unit on the HAP contract in accordance 82 Under-Occupied Unit If a family is in an under-occupied unit under at the time of conversion, they may remain in this unit until an appropriate-sized unit becomes available in the Covered Project When an appropriate sized unit becomes available, the family must move to the appropriate-sized unit 83 Establishing the Waiting List In Paragraph 1.6.D.4, HUD addresses how residents of the converting project can be placed on other PHA waiting lists They provide recommendations for how a PHA may place residents on other waiting lists, including site-based waiting lists Applicants must be placed on other waiting lists based on the date/time of their original applications 84 28

29 Future Refinancing Owners must receive HUD approval for any refinancing or restructuring of secured debt during the HAP Contract term With respect to any financing contemplated at the time of conversion (including any permanent financing which is a conversion or take-out of construction financing), such consent may be evidenced through the RCC 85 Choice Mobility HUD is establishing an alternative requirement for PHAs where, as a result of RAD, the total number of PBV units (including RAD PBV units) under HAP Contract exceeds 20% of the PHA s authorized units under its ACC The alternative mobility policy provides that a PHA would not be required to provide more than 3/4 of its turnover vouchers in any year to residents of RAD projects 86 Special Provisions Affecting PBRA Conversions 29

30 PBRA Conversions In Section 1.7, HUD addresses PBRA conversions HUD has waived a limited number of regular PBRA requirements to enable RAD conversions Otherwise all other provisions for the Section 8 New Construction Program found at 24 CFR Part 880, relevant handbooks, notices and other HUD guidance will apply 88 PBV Conversions cont d Changed PBV regs for RAD conversions Use Agreements must say that if the HAP is removed due to breach, non-compliance or insufficiency of Appropriations, for all units previously covered under the HAP new tenants must have incomes at or below 80% of the AMI aand rents may not exceed 30% of 80% of the AMI for an appropriate-size unit for the remainder of the term of the RAD Use Agreement Require compliance with all fair housing and civil rights requirements, including AFHM plans 89 Initial Contract Rent Setting Review Paragraph 1.A.5 to learn how HUD establishes your initial contract rents based on when you received your conversion In the first section of the webinar, we discussed initial contract rents for projects being awarded conversions under the increase of 40,000 to the PHA unit cap Initial contract rents will not exceed 120% of the FMR unless on is justified up to 150% of the FMR based on a PHA-procured RCS 90 30

31 Rent Bundling & Utility Savings There is no limit to the number of projects that a PHA may bundle, but the donor project cannot convert later than the recipient one When conversion will result in the reduction of one or more utility components used to establish the Utility Allowance, HUD will permit the RAD contract rent to be increased by a portion of the utility savings. 91 Annual Rent Adjustments The contract rent will be adjusted through the application of the OCAF The Maximum Rent is the higher of 140% of FMR or the market rents, as demonstrated by an RCS procured and paid for by the Project Owner Where an RCS has been used to establish initial rents or to justify an OCAF adjusted rent that exceeds 140% of the FMR, the RCS will remain valid for five years, the Maximum Rent will not apply for the next four annual rent adjustments, and rents will be adjusted only by the OCAF 92 Distributions & REAC Inspections Regardless of project financing, there will be limitations on distributions to owners other than what is available as surplus cash as determined by a HUDapproved audit Under RAD, once all units under the HAP Contract become occupied, HUD will order a REAC inspection of the property to ensure conditions meet the UPCS 93 31

32 Residents Rights In Section 1.7.B, HUD begins a long discussion on residents rights as addressed below Current households cannot be excluded from occupancy at the Covered Project based on any rescreening, income eligibility, or income targeting Project Owners must renew all leases upon lease expiration, including MTW agencies A PHA must create a policy setting the length of the phase-in period for rent increases at three years, five years or a combination depending on circumstances 94 Residents Rights cont d Public Housing residents that are currently FSS participants will continue to be eligible for FSS The PHA may continue to use any FSS funds already awarded to serve those FSS participants who live in units converted by RAD At the completion of the FSS grant, PHAs should follow the normal closeout procedures outlined in the grant agreement Review all detail in the Notice on FSS provisions as it is usually not part of an PBRA project 95 Residents Rights cont d At the completion of the ROSS-SC grant, PHAs should follow the normal closeout procedures outlined in the grant agreement Note that ROSS-SC grantees may be a non-profit or local Resident Association and this consequence of a RAD conversion may impact those entities Residents may form a resident organization and receive funding as discussed in Attachment 1B 96 32

33 Residents Rights cont d PHAs must provide adequate written notice of termination of the lease which shall be : No longer than 30 days if the health and safety are not threatened 14 days for non-payment of rent 30 days for other causes 97 Earned-Income Disregard Tenants receiving the PH earned-income disregard at conversion will continue to receive it This provision applies only to residents receiving the earned-income disregard at conversion and to no new tenants or existing tenants not on it at conversion Existing participants who go off EID for any reason after conversion are not allowed to receive EID again Rent increases based on ending the EID are not subject to the 3-5 year phase-in 98 TTP Exceeds Gross Rent For residents living in the Converting Project on the date of conversion and all new admissions to the Covered Project thereafter, when TTP equals or exceeds the contract rent plus any utility allowance, the Project Owner must charge a tenant rent equal to the lesser of TTP (which is not capped at gross rent), less the utility allowance in the contract, or the maximum LIHTC rent 99 33

34 Under-Occupied Unit If a family is in an under-occupied unit under at the time of conversion, they may remain in this unit until an appropriate-sized unit becomes available in the Covered Project When an appropriate sized unit becomes available, the family must move to the appropriate-sized unit 100 PBRA Miscellaneous Provisions HUD gives multiple recommendations about maintaining the waiting list and insuring the residents are placed on all relevant lists, including site-based waiting lists Owners must receive HUD approval for any refinancing or restructuring of secured debt during the Contract term With respect to any financing contemplated at the time of conversion such consent may be evidenced through the RCC 101 PBRA Miscellaneous Provisions cont d Owners must submit year-end financial statements as required by the Office of Housing Owners may adopt a preference for elderly single persons pursuant to Chapter 4 of the Housing Handbook Owners who wish to adopt a preference for populations that are not identified in 24 CFR 5.655(c)(5) (e.g., elderly families, near-elderly single persons, near-elderly families), may do so pursuant to Housing Notice (July 25, 2013)

35 Resident Notification In Paragraph 1.8, HUD has substantially expanded an owner s responsibility to communicate with their residents during the RAD application and conversion process Anyone involved in planning the management of a conversion must review these requirements and ensure their process incudes communicating with the residents as HUD now requires 103 Application Requirements Application Requirements In Paragraph 1.8, HUD addresses application requirements All applicants must complete the Microsoft Excel-based RAD Application on the RAD website ( along with all other required submittals Keep environmental impacts in mind, and begin assembling environmental reports, during the application submission process

36 Applications with LIHTC Applicants are encouraged to consider both 4% and 9% LIHTCs in their project financing. As the demand for the allocation of 9% LIHTCs is typically excessive, applicants proposing to use 9% LIHTCs shall provide either evidence that a reservation has already been secured or a self-scored LIHTC application under the Qualified Allocation Plan (QAP) 106 Applications for Multi-Phase Developments PHAs may submit applications involving the multiphase redevelopment of projects The project being converted can be either one contiguous site or a single AMP PHAs may note that, for a single AMP, use of the multi-phase authority provides more time for completion of all phases than use of the portfolio authority 107 Submitting Applications 36

37 Submitting Applications All required materials (including attachments and narrative summaries) must be submitted electronically using the Microsoft Excel-based RAD Application, which is available at In addition to submitting the RAD application as an Excel file, the executed attachments must be included as PDF files. No paper or fax submissions are permitted. 109 Submitting Applications Rejected applicants will be notified and the PHA may choose to re-submit If resubmitted, the application will be reviewed in order of the date of the resubmission 110 Selection Criteria 37

38 Selection Criteria The 3rd Application Period began on 7/28/15 For applications that meet all eligibility criteria during the 3rd Application Period, HUD uses Priority Categories to issue CHAPs or to determine their placement on the waiting list The Priority Categories in effect at the time of the issuance of the CHAP apply in each instance 112 Selection Criteria cont d While a waiting list has formed, a PHA can submit a letter of interest to reserve their place on the waiting list PHAs must clearly indicate with their Application submission if the project meets any of the Priority Categories and must provide supporting evidence supporting their claim The priority categories are spelled out on Page 92 of the Notice 113 Exemption from Choice Mobility For PBRA conversions, HUD will allow goodcause exemptions on a first-come, first-served basis up to the 10% At any point during the Second or Third Application Period, a PHA may revise its application to certify that it will meet the Choice-Mobility component and retain its place on the waiting list

39 CHAP Award and Financing Plan Submission CHAP Acceptance Within 30 days of CHAP issuance, a PHA must confirm its acceptance of the CHAP by submitting an application (including required attachments) into the Inventory Removals module in PIC identifying the units that will be removed from the public housing Annual Contributions Contract (ACC) when the project completes conversion 116 Prior to Financial Plan Submission The PHA is responsible for ensuring that up front civil rights reviews and relocation activities are conducted as required in the RAD Fair Housing, Civil Rights, and Relocation Notice

40 Milestones and Financing Plan HUD explains when an owner is responsible for submitting their financing plan based on when they received their CHAP award The dates vary based on the type of financing and if a project is to include LIHTC A PHA will be notified of HUD s acceptance of the Financing Plan by the issuance of an RCC, conditioned upon firm commitment of financing on substantially the same terms in the plan 118 The RCC The RCC sets the requirements of the transaction that will ultimately be concluded at Closing. The number of units being converted, the HAP Contract rents, the choice of PBRA or PBV, financing terms and Sources and Uses, and special conditions that must be cleared before closing The terms of the RCC survive the closing 119 The Closing 40

41 The Closing Draft closing documents, including those listed in the RCC and in any closing checklist provided by HUD, must be submitted to HUD for review prior to closing HUD forms of the closing documents must be used Closing may not occur until all policy and legal issues are addressed to HUD s satisfaction 121 Preparing to Leave PH Program Beginning on Page 98 of the Notice, HUD lists the steps an owner must take to leave the PH program and enter either the PBV or PBRA program HUD forms of the closing documents must be used Closing may not occur until all policy and legal issues are addressed to HUD s satisfaction 122 Funding Upon Closing The HAP contract on the first day of either of the 2 months following the closing at the owner s discretion For the remainder of the first Calendar Year in which a HAP Contract is effective (the year of conversion ), Operating Funds and Capital Funds will be obligated to the PHA at the level of public housing subsidy which that project is eligible to receive regardless of the initial rents

42 Funding Upon Closing cont d HUD lays out in expanded detail how an owner can use their operating and capital funds during the year of conversion For all repairs included in the Scope of Work in the RCC, Project Owners must submit to HUD a completion certification, including a cost certification and other information about compliance with the requirements of the RCC 124 Funding Upon Closing cont d Any management fees earned following conversion are not subject to any federal restrictions Notice PIH provides information and guidance regarding program activities that PHAs must complete regarding removal of the last of their public housing dwelling units from their public housing inventory 125 The Developer Fee The release of the developer fee will be made on the schedule proposed by the PHA and accepted by HUD in the Financing Plan In LIHTC transactions (with or without private debt), the developer fee will be subject to the LIHTC allocating agency s limitations on developer fees

43 The Developer Fee cont d The undeferred portion of the developer fee (as documented in the LIHTC cost certification) may not, without HUD approval, exceed the greater of: 15% of the TDC less acquisition payments made to the PHA, developer fee and reserves The lesser of $1,000,000 or 15% of the TDC without offset for acquisition payments made to the PHA, developer fee and reserves 127 Part Three Wrap Up with Questions Questions LIZ BRAMLET, PRESIDENT LIZ BRAMLET CONSULTING, LLC CONSULTING FOR TODAY S AFFORDABLEHOUSING (800) LIZ@LIZBRAMLETCONSULTING.COM