Overview of Major Rental Assistance Demonstration (RAD) Provisions

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1 Overview of Major Rental Assistance Demonstration (RAD) Provisions A March 8 Federal Register notice announced the availability of a PIH Notice providing detailed eligibility and selection criteria for applicants interested in participating in the Rental Assistance Demonstration (RAD). The FY12 Appropriations Act allows HUD to convert assistance provided for public housing and three smaller private HUD-assisted housing programs to long-term, renewable, project-based Section 8 rental assistance or to project-based vouchers. (see Memo 11/18/11). The three smaller programs are the Rent Supplement program (Rent Supp), the Rental Assistance Program (RAP), and the Moderate Rehabilitation program (Mod Rehab). Although the Notice seeks public comment on the entire notice, the notice s sections regarding conversion of Rent Supp and RAP will be effective immediately. After receipt and consideration of comments, which are due April 9, HUD will issue a Final Notice, which may include revisions to each of the program conversion types under RAD. The RAD demonstration has two objectives: 1. To test whether such conversions can help preserve and improve low income housing by enabling public housing agencies (PHAs) and owners of private, HUD-assisted housing to leverage Section 8 assistance contracts to raise private debt and equity for capital improvements. 2. To test the extent to which residents have greater housing choice after conversion. The Appropriations Act created two RAD components. The main component allows up to 60,000 units of public housing and Mod Rehab to compete for permission to convert their existing federal assistance to project based Housing Choice Vouchers (PBV) or to Project-based Section 8 rental assistance (PBRA). HUD proposes to limit the number of Mod Rehab units converted under the component to 25% of the Mod Rehab stock, approximately 1,250 units. The second component allows Rent Supp, RAP, and Mod Rehab projects to convert tenant protection vouchers to PBVs if a property s contract expired or terminated due to mortgage prepayment after October 1, 2006 or will expire or will terminate due to prepayment before September 30, There is no limit to the number of units that may be converted under this component, and there is no competitive selection process for it. Overview of the First Component Summary of Key Features: There is no new, incremental funding for the first component conversions. Only the amount currently available for the converting public housing or Mod Rehab units is available for the converted PBV or PBRA units. Initial PBV contracts will be for at least 15 years and PBRA contracts will be for 20 years. When initial PHA-converted PBV and PBRA contracts expire, HUD must offer and PHAs must accept a renewal contract. When Mod Rehab contracts that were converted to PBVs expire, the notice is contradictory: section (2.3.1) says owners have an option to renew, but section (2.3.5 C 3) states that owners must renew. When Mod Rehab contracts that were converted to PBRAs expire, owners may renew but are not required to.

2 Public housing projects converted will also have a concurrent renewable RAD Use Agreement that must require the owner to preserve unit affordability, maintain housing standards, observe fair housing requirements, and maintain the number of units converted. Ownership and control of converted public housing must be by public or nonprofit entities. However if there is a foreclosure or termination of assistance (due to severe violations), HUD will require ownership or control of converted units in the following priority order: by a capable public entity and a capable private entity. HUD may allow ownership to a for-profit entity to facilitate use of tax credits if the PHA preserves interest in the property. Annual rent adjustments will be based on the Operating Cost Adjustment Factor (OCAF). Normally, PHAs cannot project base more than 20% of their Housing Choice Voucher formula allocation. RAD conversions of public housing units or Mod Rehab units will not count against the 20% cap. Normally PHAs cannot project base more than 25% of the units in a development (with exceptions for elderly and disabled housing). RAD will allow up to 50% of the public housing or Mod Rehab units in a converted development to be assisted with PBVs. Choice-Mobility HUD seeks to provide all residents of public housing and component #1 Mod Rehab projects with the option to move. RAD requires PHAs to provide choice-mobility options. The statute does not require this feature, but it is important to residents, advocates, and HUD. For PBV conversions existing PBV rules apply. For PBRA conversions the notice specifies that: o Tenants are eligible to move with a tenant-based voucher at the later of: 24 months after their movein date; 24 months after the execution of a HAP contract; or the date initial repairs are completed. o In any year a PHA would not be required to provide more than one-third of its turnover vouchers to residents of covered projects. o In any year a PHA or owner may limit the number of choice-mobility moves to 20% of the assisted units in a project. Resident Rights The statute prohibits rescreening of existing residents. Over-income households at the time of conversion cannot lose their lease. Residents are grandfathered for conditions that occurred prior to conversion, such as criminal history. Any residents temporarily relocated during rehab have a right to return. If a public housing tenant s monthly income increases by more than the greater of 10% or $25 solely as a result of conversion, the rent increase will be phased in over three years, which a PHA may extend to five years. When PHAs convert to PBVs, they are required to recognize legitimate resident organizations, which the notice describes in a way that reflects Section 964 of the regulations. When PHAs convert to PBRA, PHAs are required to recognize legitimate tenant organizations in accordance with Section 245 of the regulations. When PHAs convert to either PBVs or PBRAs, they must provide $25 per occupied unit annually for resident participation, at least $15 of which must be provided to the legitimate resident organization for resident organizing, education, and training. When PHAs convert to PBVs or PBRAs, the statute requires owners to adhere to existing resident procedural rights (Sections 6 rights). The notice lists grievance procedures that require residents: o Be advised of the specific grounds for any adverse owner action. 2

3 o Have an opportunity to examine documents and have a hearing before an impartial party. o Be entitled to be represented by someone, ask questions of witnesses of their choice at any hearing, and receive a written notice of the decision by the owner. If a PHA converts to PBRA, current public housing residents participating in the Family Self-Sufficiency program remain eligible for FSS after conversion. Resident Participation Prior to a PHA submitting an application to convert to either PBVs or PBRAs, PHAs must conduct at least two meetings with residents and provide written responses to resident comments. If a PHA is selected for RAD, it must have at least one more meeting with residents before executing a contract with HUD. Once a contract is signed, PHAs must notify each affected household, inform them of specific rehab plans, and explain any impact on the household. Households that do not want to participate in the transition may be offered a unit in other public housing. Owners of Mod Rehab units converted under the first RAD component must notify residents of the intent to convert and conduct a resident meeting, providing them an opportunity to comment. Residents have 30 days to submit comments. The owner s RAD application must include all resident comments and must describe how residents comments will be addressed. Miscellaneous Provisions For PHAs, conversions constitute a significant amendment to the PHA Plan, triggering Resident Advisory Board and public hearing and comment obligations. In establishing a waiting list of a converted project, a PHA or private owner must honor any waiting list that existed at the time of the conversion. The Section 3 training and employment preferences apply to all initial repairs when a PHA converts to either PBV or PBRA. Converted projects of Moving To Work PHAs will no longer be included as part of the PHA s MTW demonstration. Selection Criteria The Appropriations Act requires the RAD demonstration to select projects of varying sizes that are geographically dispersed. The notice lists the number of units HUD will select in the four Census regions for both public housing and Mod Rehab owners. For public housing, the notice also indicates the number of units to be considered in each region by varying PHA sizes: fewer than 250 units, between 250 and 1,249 units, and greater than 1, 249 units. HUD will assess applications using four ranking factors. High immediate capital needs has up to 50 points. Up to 20 points will be available to a PHA that provides vouchers to the covered project of another PHA. Green building and energy efficiency features offer 10 points. PHAs designating only one priority project can earn up to 20 points. 3

4 Overview of the Second Component Owners of Mod Rehab properties have an alternative to the competitive process of the first component of RAD. They may seek HUD permission to convert to PBVs, the Enhanced Vouchers (EVs) that tenants are entitled to when a Mod Rehab contract expires. In addition, the second component enables owners of Rent Supp and RAP properties to chose to receive PBVs instead of tenant protection vouchers (TPVs) that would have been provided in response to a Rent Supp or RAP contract expiring or being terminated due to mortgage prepayment. As stated earlier, eligible properties are those with contracts that expired or terminated after October 1, 2006 or will expire or terminate before September 30, There is no limit to the number of units that may be converted under this component, and there is no competitive selection process for it. Summary of Key Features Initial PBV contracts will be for 15 years. Normally, PHAs cannot project base more than 20% of their Housing Choice Voucher formula allocation. RAD conversions of TPVs to PBVs at Mod Rehab, Rent Supp, or RAP properties will not count against the 20% cap. Normally PHAs cannot project base more than 25% of the units in a development (with exceptions for elderly and disabled housing). RAD will allow up to 50% of the Mod Rehab, Rent Supp, or RAP units in a converted development to be assisted with PBVs. Resident Notification and Comment Owners must notify residents of an intent to convert TPVs to PBVs. There must be a briefing to inform residents about the differences between EVs (for Mod Rehab), TPVs (for Rent Supp and RAP), and PBVs, including different rights, potential impact on rent payments, and mobility provisions. o For Mod Rehab and prospective Rent Supp and RAP properties. the PHA must schedule the briefing. o For retrospective Rent Supp and RAP properties, the owner must schedule the briefing in conjunction with HUD s Office of Public Housing and Office of Multifamily Housing. HUD staff will conduct the briefing and the owner must attend and respond to residents questions and comments. o Residents must have an opportunity to comment at the briefing, and PHAs and/or owners must consider resident comments. o Residents must be made aware that they may remain in their unit with an EV or TPV and cannot be forced to move for rejecting a PBV. o Households must be provided a form that indicates whether they consent to converting to PBVs and be given 30 days to make a decision. o The briefing should include accessible communications for persons with disabilities and language assistance for persons with limited English proficiency. Residents must receive a letter notifying them of the date and time of the briefing. In addition, notice must be posted at the project office or other common area and no fewer than three prominent locations at the project site. (For Mod Rehab, notice must also be at the PHA s office.) o The notification letter must describe the dates of contract expiration or termination and which units are affected. It must also explain the different rights, potential impact on rent payments, and mobility provisions between EVs (for Mod Rehab), TPVs (for Rent Supp and RAP), and PBVs, including. o The notification letter must provide a 30-day comment period along with instructions on how to submit comments. 4

5 For Mod Rehab and retrospective Rent Supp and RAP properties, the notice should state whether households will be relocated during rehabilitation. If so, the notice should describe the owner s relocation plan and the expected length of relocation. It should clearly state that the owner is responsible for all relocation costs and that all households have a right to return. Owners shall not use tactics to pressure a household into giving up an EV or TPV in exchange for a PBV, and may not terminate a lease on such basis. For prospective Mod Rehabs, Rent Supps, and RAPs, if more than 50% of the residents submit forms rejecting conversion, the owner must be contacted to discuss options. The PHA or HUD may deny the conversion request. The Federal Register notice invites public comment regarding the detailed eligibility and selection criteria proposed in Notice PIH In particular, HUD requests comments about 12 topics, including: Limiting the number of Mod Rehab units converted under the first component to 5% of the total 25,000- unit inventory. The reason for the limit is to ensure a significant test with public housing. Mod Rehab projects have unlimited ability to convert tenant protection vouchers to project-based vouchers under the second component. What contract rent setting policies might help PHAs and private owners obtain capital funds? Congress did not authorize additional funds for the first RAD component; therefore, PHAs and Mod Rehab owners will be required to convert assistance for projects at current subsidy levels. PBRA and PBV rent levels are capped by their statutes. Under both components, PHAs and owners are required to notify and consult with tenants about the intent to apply for conversion. Tenants must also have an opportunity to comment, and PHAs and owners must address resident comments. HUD seeks feedback regarding whether detailed resident notification and consultation provisions in Notice PIH provide for meaningful participation, and balance RAD s goals of preserving housing while maximizing residents housing choices. In both RAD components, residents have a right to remain in their converted homes or to move after a set with a regular Housing Choice Voucher. HUD requests feedback regarding ranking factors intended to encourage applicants to form partnerships to secure turnover vouchers to support the mobility. HUD will be holding a series of webcasts, accessible through RAD Notice Overview - March 12, pm EST RAD Section I Public Housing - March 15, pm EST RAD Section II Mod Rehab - March 16, pm EST RAD Section III Rent Supp and RAP - March 16, pm EST HUD invites RAD questions via , rad@hud.gov. PIH Notice is available on HUD s RAD page, as HUD Notice Rental Assistance Demonstration - Partial implementation and Request for Comments). Comments are due April 9, ed 5