Rental Assistance Demonstration: Hitting full stride

The Rental Assistance Demonstration (RAD) program, created by the US Department of Housing and Urban Development (HUD) to address $25 billion of deferred maintenance across its public housing program, is picking up pace.  Program data recently released from HUD indicates that, as of late November, more than 90,000 units have applied to convert public housing under RAD.  Also, more than 24,000 units have been approved to participate in the RAD program as of the end of November.

Under Notice 2012-32, HUD has the authority to convert 60,000 units of public housing.  HUD is expected to get through the approval process of this limit by early 2014 and still have a large backlog forming. Given the overwhelming response to the program, congress is being asked to extend the limit to 150,000 units.  The program began taking applications in fall 2012, and by July 2013 approximately 20,000 applications had been received. Since July, activity has spiked to more than 90,000 units applied for.

As the nation is losing 10,000 units a year due to extreme deferred maintenance, the first component of RAD is an attempt to stabilize HUD’s public housing units.  The program allows public housing units to convert to long-term project-based Section 8 rental assistance contracts.

Some trends noted through October include:

  • 56 percent of RAD applications are located in the south/southeast
  • 47 percent of RAD applications are coming from medium-sized Public Housing Authorities  (250 – 1,250 units)
  • 71 percent are family projects
  • 45 percent have a financing plan including Low-Income Housing Tax Credits (LIHTC)
    • Of these LIHTC deals, 75 percent are 4% projects
  • 16 percent have a financing plan of debt only (no LIHTC)
    • Of these, 73 percent are considering using Federal Housing Administration (FHA) financing

Other trends noted in financing plans demonstrate the flexibility of the program. For example, 20 percent of the applications are contemplating demolition and new construction, mixed-income projects.  Many are also splitting new units into multiple sites. The flexibility of the program allows the housing authorities and communities to adapt to meet the unique needs of their residents rather than just fix the outdated public housing buildings.  The first RAD/LIHTC deals are closing now with approximately 20 total projects nationwide set to close over the next few months.

At recent events, HUD Secretary Shaun Donovan has called on affordable housing industry professionals to help build congressional support for raising the cap of allowable conversions to 150,000 as a method to help preserve affordable housing stock.