RAD Outlook Five Years In - PDF Free Download

RAD Outlook Five Years In MODERATOR Eric Novak Praxis Consulting PANELISTS Jeff Weiss Hunt Capital Partners Monica Sussman Nixon Peabody LLP Rachel Denton Novogradac & Company LLP Amparo Gamazo Southern Nevada Regional Housing Authority

Rental Assistance Demonstration (RAD) Update

RAD Public Housing Conversions Status* Data provided by Thomas R. Davis, Office of Recapitalization, HUD 78,946 Public Housing Units converted from Public Housing to Section 8. $4.58 Billion (roughly $60K per unit) in construction investment** in RAD Component 1 properties. It would have taken participating PHAs 46 years to accumulate enough public housing Capital Funds to complete a similar amount of construction. 25,268 Public Housing Units in the final stages of the RAD Component 1 conversion pipeline with RCCs issued or with Financing Plans submitted 69,548 Public Housing Units on the RAD Component 1 waiting list * Data through November 6, 2017. ** This figure doesn t include items such as acquisition, soft costs, reserves & developer fee. 4

PH Conversions Financing* 42% of transactions involve significant work from $25K to new construction 39% of transactions involve either 4% LIHTC or 9% LIHTC A major driver of the deeper-investment transactions, particularly those using 4% LIHTC, is accessing the value of the existing real estate (most significantly, by tapping into acquisition credits). * Data through October 2, 2017. 5

PH Conversions Where it works Note: This data reflects the inventory of RAD public housing applications ( projects ) received compared to the inventory of public housing projects existing in each region prior to any RAD conversions. 6

Legacy Program Conversions Status Conversions & Outstanding Pipeline Rent Supp/RAP Transactions: 27 properties remaining in portfolio 18 active transactions in the RAD 2 Pipeline 11 properties have contracts that expire in 2017 We hope to wind down the Rent Supp & RAP programs in the next few years Mod Rehab Transactions: 11 active transactions in the RAD 2 Pipeline Substantial opportunities for Mod Rehab properties NOTE: Data derived from RAD 2 closed transactions only through November 1, 2017. 7

Current Big-Picture Initiatives Statutory changes under consideration in FY2018 Appropriations Administration and Senate have proposed to eliminate the cap on public housing conversions Administration, Senate and House have proposed RAD for Section 202 PRACs Expanding the impact of RAD Eliminating the cap on public housing conversions would allow streamlining of the process, which currently has deadlines and requirements designed to manage a scarce resource HUD is exploring modifications to make conversion easier, especially for lesser-capacity PHAs and owners Small/rural PHAs Mod Rehab owners Considering ways to make RAD work for more properties, particularly where the numbers don t currently pencil out Outreach, especially to the Mod Rehab community 8

PBV and HOTMA Provisions Impacting RAD Change in Definition of PHA-Owned Units Limits significantly the kind of interests that HUD regulations defined as ownership, including a ground lease, mortgage interest, or non-controlling interest in the owner entity Continues to prohibit PHAs from unit inspections and rent reasonableness determinations Easier for RAD conversions if PHA leases land not an owner so they can administer the contract, make rent determination, and inspect, but can be complications for tax abatements. 9

Percentage Limitations of Number of Vouchers Under PBV Contract Generally, cannot exceed 20% of the authorized units Exceptions - up to additional 10% for - a. homeless b. veterans c. for elderly families and families with disabilities d. areas where vouchers are difficult to use poverty rate is 20% or less 10

Contract Term initial term can be 20 years Housing under Construction or Recently Constructed can enter into HAP contract for such housing, even if there was not AHAP, so long as owner demonstrates compliance with applicable requirements (Davis- Bacon ) prior to execution of the HAP contract (Not yet implemented) Rent Adjustments HAP contract after date of HOTMA shall provide for annual adjustments By agreement of the parties, by an OCAF, and may require an additional adjustment up the reasonable rent (Not yet implemented) Subject to initial rent setting requirements generally 110% of FMR, exception for non-qualified census tract May provide that initial rent is floor rent 11

Changes in Income Mixing Requirement General Rule no more than the greater of 25 units or 25% of units in any project may be assisted with PBVs Exceptions elderly households eligible for supportive services that are made available to the assisted resident of the project, according to standards provided by the Secretary For RAD 50% 12

The PBV unit percentage limitation doesn t apply to: HOME Converted from PBRA to PBV under RAD RAD Component 1 conversions to PBV LIHTC projects Additional categories determined by the Secretary 13

RAD Bleedover Effect of Site and Neighborhood Standards to new construction on regular PBV program 14

Thank You. For more information and case studies visit www.hud.gov/rad 15

Questions? Monica Hilton Sussman, Esq. msussman@nixonpeabody.com (202) 585-8833

Addressing its Aging Public Housing Portfolio

About SNRHA Consolidation of (3) Public Housing Authorities in 2010 (Las Vegas, Clark County and North Las Vegas); creating the 6th Largest PHA in HUD Region 9 Approx. 3,000 Public Housing Units in 26 developments; 800 Assisted Housing Units in 8 developments, including 229 Mobile Home Pads Approx.11,000 Rental Vouchers Extremely Valuable Portfolio (NV ranks Lowest in the Nation in Units Affordable and Available for Extremely Low Income Households)

Portfolio Assessment and Strategic Plan Conducted a Portfolio Analysis in 2014 and Updated in 2015 Methodology: Interviews, Data Analysis, Site Visits Examined: Operating Expenses Capital Needs Condition of Neighborhoods Demographics of Resident Population Located in a HUD Designated Qualified Census Tracts [QCT] or Difficult Development Area [DDA] Current Rental Assistance Demonstration [RAD] Program Rents

Portfolio Assessment and Strategic Plan Methodology: (cont d) Considered Available Financing Tools: Low-Income Housing Tax Credits (LIHTC) Public Housing Conventional Mod / Rehab Design / Bid / Build Public Housing Mixed Finance Rental Assistance Demonstration Program (RAD) Project-Based Section 8 Soft Gap Funding HOME, CDBG, Redevelopment Agency (RDA) Funds, Housing Trust Funds, FHLB AHP funds, Corporate and Philanthropic Grants,

Portfolio Assessment and Strategic Plan Strategy: Prioritize Projects Based upon Capital Need, Operating Efficiency, Condition of Neighborhood; Available Resources Look at: Short Term (0-5 Years); Medium Term (6-10 Years) and Long Term (10+ Years) Time Frames Look for Opportunities to Bundle Financings Go After 9% Tax Credits Each Year ($1 Million Cap Annually) Bond Projects in QCTs and DDAs Attend Nevada Qualified Allocation Plan (QAP) Hearings for the 9% LIHTC to Aggressively Push for Preservation Go after all Available Soft Subordinate Debt Decide upon Implementation Strategy(Self Develop or Procure Development Partner) for Each Financing Explore Use of Vacant Land and Vouchers to Implement Other Non-Public Housing Development in Non-Impacted Areas Plan for Transformations Within Agency as RAD Projects Come On Line

Accomplishments: SOUTHERN NEVADA REGIONAL HOUSING AUTHORITY PORTFOLIO PRESERVATION EFFORTS 2012-2017 Development No. Units Status Landsman Gardens, Henderson (RAD) 100 Family Units Re-Opened 2014 Vera Johnson Manor B, Las Vegas (RAD) 112 Family Units Re-Opened 2016 Biegger Estates, Clark County (RAD) 119 Family Units Re-Opened 2017 Vera Johnson Manor A, Las Vegas (Mixed Finance) 76 Family Units In Construction Rose Gardens, North Las Vegas (RAD) 120 Senior Units Closed October 2017 Total 527 Units

Accomplishments: Landsman Gardens, Henderson 100 Unit Family Development Built in 1971 Full Reconstruction Self-Developed RAD; Bond/4% Tax Credits HOME/AHP Funds/SNRHA CFP Funds RAD Conversion Cost: $23.5MIL Hard Cost: $14.7MIL Re-Opened 2014 First FHA 221(d)(4) to Close Under RAD

Accomplishments: Landsman Gardens, Henderson

112 Unit Family Development Built in 1984 Substantial Rehab Development Partner Mixed-Finance; Converted to RAD 9% Tax Credits/HOME/SNRHA CFP Funds Mixed-Finance/RAD Conversion Cost:$13.9MIL Hard Cost: $9.8MIL Re-Opened 2016

Accomplishments: Vera Johnson B, Las Vegas

Accomplishments: Biegger Estates, Clark County 119 Unit Family Development Built in 1985 Substantial Rehab Self-Developed RAD; 9% Tax Credits SNRHA CFP Funds RAD Conversion Cost:$18.9MIL Hard Cost: $10.3MIL Construction Completed June 2017

Accomplishments: Biegger Estates, Clark County

Accomplishments: Vera Johnson A, Las Vegas 76 Unit Family Development Built in 1984 Substantial Rehab Self-Developed Mixed-Finance; 9% Tax Credits SNRHA CFP Funds Mixed-Finance Conversion Cost: $12.6MIL Hard Cost: $7.3MIL Under Construction Anticipated Construction Completion May 2018

Accomplishments: Rose Gardens, N. Las Vegas 120 Unit Senior Development Built in 1975 New Construction CNLV CNI Planning Area Development Partner RAD; Bond/4% Tax Credits HOME/AHP/NHD GAHP and SNRHA CFP/OPS Reserves Funds RAD Conversion Cost: $24.2MIL Hard Cost: $18.7MIL Finance Closed October 2017 Anticipated Construction Completion December 2018

Accomplishments: 527 New or Substantially Modernized Units [includes Vera A and Rose] Over $60 Million in Hard Cost Improvements ($115K Per Unit) Over $68 MIL in Leveraged Financing $5.32 Leveraged for Every $1 in SNRHA Funds Over $6.3 MIL in Developer Fee to Reinvest in Future Projects Based On Success of RAD Program SNRHA Submitted RAD Portfolio Application in November 2015 for 17 Additional Properties (Approx. 1,600 Units); Phase I (Approx. 900 units); Phase II (Approx. 760 units). CHAP received for Phase I August 2017 SNRHA will have 12 months or/by August 2018 to submit RAD applications for Portfolio Application Phase II

Lessons Learned: Need to be Flexible in Implementation (Respond to Opportunities as They Arise) Rehab Scope Unpredictable Prevailing Wage Rates in LV Add Significantly to Cost Changing HUD Polices re: Relocation and Fair Housing Institutional Challenges for PHA Development Partners Increases Development Capacity and Spread Good Will Need to Continue to Promote Preservation Message

Upcoming Redevelopment Efforts: 2015 RAD Portfolio Phase I Development Relocation No Required # Units Otto Merida Desert Villas, Las Vegas 60 Family Units Lubertha Johnson Estates, Clark County 112 Senior Units Marion Bennett Plaza, Las Vegas 2015 RAD Portfolio Application - Phase I 119 Senior Units Financing Strategy N/A Status CHAP Issued August 2017 Anticipated Finance Closing 2018 Relocation Required Espinoza Terrace, Henderson 100 Senior Units 9% LIHTC Archie Grant, Las Vegas 125 Senior Units Ernie Cragin Terrace, Las Vegas 40 Family Units Hullum Homes, Clark County 59 Family Units Jones Gardens, Clark County 90 Family Units Bond/4% credits Sartini Plaza, Las Vegas 220 Senior Units Sartini Plaza Annex, Las Vegas 39 Senior Units CHAP Issued March 2017 CHAP Issued August 2017 6Months Extension Granted by HUD 2018 TBD Total 969 Units

2015 RAD Portfolio Application - Phase II - Due to HUD August 2018 Development # Units Financing Strategy Status Anticipated Finance Closing Relocation Required Schaffer Heights, Clark County 75 Senior Units 9% Tax Credits TBD TBD Hampton Court, Henderson 100 Family Units 9% Tax Credits TBD TBD Aida Brents, Las Vegas 24 Senior Units Harry Levy Gardens, Las Vegas 150 Senior Units James Down Towers, Las Vegas 200 Senior Units Simmons Manor, Clark County 61 Family Units Sherman Gardens Annex, Las Vegas 154 Family Units Bond/4% credits TBD TBD Total 764 Units

Next Redevelopment Effort: Espinoza Terrace 100 Unit Senior Development Built in 1973 Substantial Rehab Self-Developed RAD; 9% Tax Credits HOME/AHP/SNRHA CFP Funds Est. RAD Conversion Cost:$18.7MIL Est. Hard Cost: $11.3MIL Tax Credit Application submitted May 2017 Anticipated Finance Closing April 2018

Upcoming Redevelopment Efforts: Challenges Current Administration Proposed Budget Cuts: Corporate Tax Cuts - Reduces Tax Credit pricing 13% Cuts to the Department of Housing and Urban Development Availability of Soft Subordinate Debt (AHP, HOME, HTF, GAHP) Significant Financing Gap Recent SNRHA Board of Commissioners Composition changes Senate Bill SB187 effective July 1, 2017 Reduces and replaces 7 non-resident commissioners with 3 elected officials; erasing much of the institutional memory of the Board. President's Trump Proposed FY2018 Federal Budget Dept. of Housing & Urban Development 2017 budget 2018 proposal $46.9B $40.7B Decreased $6.2B (-13% change) From The Washington Post, March 16, 2017

Upcoming Redevelopment Efforts: Challenges Relocation Efforts RAD Portfolio Phase I: Approx. 150 units to be relocated from sites [60 Families plus 90 Seniors] Limited pool of public housing vacancies Holding units for relocation affects PHAS scores HUD limiting use of existing public housing units for relocation efforts under RAD and Mixed Finance.

RAD Conversion Impact PH Units Reduction as of May 2017: By 11% as of late 2019: By 14% - 26% as of late 2021: By 37% - 46% as of late 2027: By 48% - 71% Staff Reduction- Immediately after RAD conversions PH Asset Management Staff & Maintenance Staff Central Office Cost Center (COCC) Staff Increase: HCV /Admissions / Finance New Tax Credit Division: Property Management and Compliance

Before RAD & After RAD Before RAD After RAD Properties are typically not funded at 100% in Public Housing Properties are placed on a more stable Section 8 funding platform In Public Housing, PHAs cannot borrow money to perform necessary repairs PHAs and owners can more easily borrow money and perform rehabilitation work The funding fails to keep up with the deteriorating living conditions of residents The living conditions of residents are improved Residents cannot choose to move without losing housing assistance Residents may receive a tenantbased voucher, or similar assistance, and move after 1 year in PBV and 2 years in PBRA

2018 SNRHA PORTFOLIO PRESERVATION STRATEGY Conventional Mixed Finance RAD Conversion