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Questions on Capital Needs Assessment

Applicability of Public Housing GPNA Requirement to RAD Transactions

All public housing agencies are required to conduct a Green Physical Needs Assessment using the HUD GPNA Tool. The final rule is projected to be published in March. Agencies with a December 31 fiscal year must submit the GPNA to HUD on September 1, 2013. My question is if a project is converting all units to RAD, does the project need to complete the GPNA? And, if a project is only converting some of the units to RAD and the remaining will stay in public housing, will the RAD units need to be part of the GPNA?

The public housing GPNA requirement will not become effective until the publication of its final rule. PHAs that have entered RAD and whose converted units are no longer recorded as ACC units in PIC as of their GPNA submission due date (and are reflected in the PIC data set provided by HUD for import into the GPNA tool) are not required to make the PNA submission from the GPNA tool for that portion of their inventory that has left public housing for RAD. PHAs that have been awarded a Commitment to Enter into a HAP (CHAP) under RAD as of the due date of their public housing GPNA will be required to make the PNA submission from the GPNA tool accounting for the entire inventory of units remaining in public housing (and remaining reflected in the PIC data set provided by HUD for import into the GPNA tool) but recording “0” needs for that portion under the CHAP. If the entire inventory of any AMP is under a CHAP as of the GPNA due date, no submission will be required as it will be considered likely that the entire AMP will be leaving public housing. Should public housing inventory under a CHAP not ultimately convert to RAD and remain in public housing, a GPNA submission will become required. Any subsequently required submission must be made from the automated reporting feature of the GPNA tool. Information from a RAD PCA may be used for the submission but it must be migrated to the GPNA tool.

How long is the RPCA good?

Is there any restriction on how early the RPCA can be done? We have a project where we would like go ahead and order the RPCA before we submit the application. The project will be funded entirely with Housing Authority funds, so there is no issue with having the RPCA provider approved by a lender. Is this acceptable?

Obviously the more current the RPCA, the better it is for the Owner, HUD, and all funding partners to understand the property and what repair and replacement needs have to be addressed. Typically HUD uses an RPCA for 12 months after which time, it will have to be updated if the RAD transaction has not closed. It is also important to document significant replacements that are made and changes made to the property after the RPCA has been completed and while HUD is reviewing the RAD transaction. However, if the transaction is using FHA insurance, the RPCA can be no more than 6 months old at the time of Firm Commitment issuance, otherwise it will need to be updated. Please keep your HUD Transaction Manager apprised of these significant changes. [Updated 2.14.14]

Additional Roles for RPCA Contractor

Are there any restrictions on what functions an RPCA contracting firm can perform in addition to completing the RPCA? Can they perform the work and serve as a GC?

The RAD Notice does not impose any requirements.

RPCA Utility Baseline Occupancy Adjustment

Could you further explain the Occupancy adjustment factor and how it’s calculated?

The utility usage should be adjusted when there are vacancies that impacted utility usage so that the consumption represents 100% occupancy. For example, if your property was 90% occupied during the year, and vacant units consume half as much electricity as occupied units, then the actual consumption represents about 95% of the amount of electricity that the property would have consumed if all units had been occupied for the full year. HUD does not dictate how the occupancy adjustment is made but does ask that you explain how you made your calculation in the narrative portion of the utility baseline.

Environmental Requirements for RAD

What is the required format of a Phase I Site Assessment to meet RAD Environmental requirements?

If you are using FHA financing, the Phase I will be ordered by your FHA lender, and the format will be in accordance with Chapter 9 of the MAP Guide. Otherwise, check with the agency that will be issuing the Environmental Review approval; the Phase I will need to be acceptable to the approving agency. It is a good idea to procure the Phase I from a firm that has experience preparing reports that have been found acceptable by the specific agency that will be issuing the Environmental Review approval. If you are not using FHA insurance, you should check with the entity performing the assessment to determine if a full Phase I will be required.

Responsible Entity Will Not Complete Environmental Review

We are a PHA and have been unable to get the Responsible Entity to complete the Environmental Review to ensure the property meets requirements for 24 CFR Part 50 or Part 58, as applicable. Is the Environmental Review still required in this instance?

In cases where the Responsible Entity chooses not to complete the assessment, HUD will complete the assessment under Part 50. Please contact your Transaction Manager for further instruction.

SHPO Consultation for RAD Conversions

Is SHPO or Section 106 review required on a RAD conversion project that is more than 40 years old? ?Does it matter whether it's minor rehab, gut rehab or demolition?

RAD requires Environmental Review approval (see Notice PIH-2012-32 REV-1 pages 84-85).? The required Environmental Review includes consultation with SHPO.

RPCA Requirement

When is the RPCA required?

The RPCA is required in all instances, except the following: 1) New Construction; 2) Gut Rehab (essentially, down to the stud); 3) Recently modernized or constructed buildings (based on the recommendation of your RAD Transaction Manager and approval by the RAD Team Lead); or 4) Any FHA 221(d)(4) transaction.

Completing Accessibility Repairs Identified in the RPCA

If a PHA has accessibility improvements identified in the PCA, can it perform that work post-closing as part of the scope of immediate repairs?

Critical repairs are repairs that must be done on an accelerated schedule, including health and safety issues (such as an improperly vented gas appliance). Note that identified accessibility modifications that pose imminent health and safety risks, may be considered critical repairs. All critical repairs must be completed prior to the RAD closing. If your property has a critical repair that you believe cannot be completed prior to RAD closing due to time constraints, please discuss this with your RAD Transaction Manager who may permit the repair to be moved into rehab as long as it can be demonstrated that doing so does not present an immediate health or safety hazard to residents. Rehab items also must be done, but the schedule is governed by the rehab provisions of the RAD Conversion Commitment. Year One items typically reflect systems or components that were functioning at the time of the inspection and are anticipated to require replacement in the first year. Whether and when these are done will be up to the property owner. A typical example would be a 20 year roof that is not leaking but that either has reached 20 years of age or will reach 20 years of age within the first year after the closing. The Reserve for Replacement would contain sufficient funds to pay for the roof replacement, and the timing of the roof replacement would be up to the owner.

Accessbility Requirements

My PHA previously met the standard for accessibility across the public housing portfolio. However, now that we are converting to RAD, there are individual projects that exceed the standard and some that do not meet the standard (but, again, overall we are in compliance). When we convert to RAD, will we be “grandfathered” in, or will we have to have all projects meet the accessibility standards on their own?

Each project covered under a HAP contract must meet the 5%/2% accessibility standards under Section 504 if the project is undergoing substantial alterations.

RPCA Requirement for New Construction or Substanital Renovation RAD Conversions (non-FHA Financing)

Is a RAD Property Condition Assessment (RPCA) required on a new construction or substantial renovation transaction?

A RPCA is required for all RAD transactions, except the following: 1) New Construction; 2) Gut Rehab (essentially, down to the stud); or 3) Recently modernized or constructed buildings (based on the recommendation of the HUD RAD Transaction Manager and approval by the RAD Team Lead). However, the RPCA Excel tool is still required to size the reserve for replacement deposit on all sub-rehab transactions, with the exception of “gut rehabs”. “Gut rehabilitation” is defined as “removal/replacement of all or substantially all interior finished surfaces”.

Units to Include in RPCA for Mod Rehab SRO

We are pursuing a RAD conversion under the second component. Our current Section 8 SRO Mod Rehab contract covers only a portion of the housing units in our building. Do we need to complete a PCA for the entire building, or just for the units included in our contract?

The requirement for the assessment of the physical condition of the property proposed for RAD conversion is contacted in Notice, PIH-2012-32 (HA), REV-2, Section 2.4.A., on page 136. The RAD conversion is intended to place the SRO units on a sound financial, physical, and managerial footing for the long-term HAP contract that will replace the Mod Rehab contract. If the ownership of the SRO units also owns the remaining units in the building, then the CNA (HUD’s name for the PCA) must cover the entire building. If the ownership of the SRO units is different than the entity owning the remaining units in the building, then the CNA must only cover the SRO units.

RPCA Requirement for Units Being Removed Under De Minimis Reduction

Is the RPCA required to include units that will not be converted to RAD because of the allowable de minimis reduction?

No. If the units are being reduced as part of the allowable de minimis reduction, they do not need to be included in the RPCA because they are not converting to RAD.

Fannie Mae End of Useful Life (EUL) Categories

If a component does not fall into a category for which the Fannie Mae Physical Needs Assessment Guidance to the Property Evaluator lists an EUL, can it be excluded from the RAD Report?

No, the component cannot be excluded. HUD relies on RPCA contractors to be aware of appropriate sources of information for EULs in this situation.

Revising RPCA Based on Current Unit Condition

In the time since the housing authority received the RPCA and now, a single family unit in the project had a fire resulting in extensive damage. The housing authority is working with the insurance company to get proceeds to rebuild the unit, but the timeline for dispersal of funds in not yet known. Should the housing authority revise the RPCA to include the fire repair or keep the repair work separate? They do not want to have to wait until a RAD closing to start the repair work, but they also do not want to wait until all of the repair work is finished before converting to RAD.

The PHA can start the fire restoration work whenever they are ready. If the PHA is ready to begin rior to the RAD closing date, the PHA will need to satisfy any applicable public housing requirements (the unit will still be public housing at that point). If the insurance proceeds are not expected to be sufficient to cover all of the repairs, the PHA will need additional funds in their RAD budget. Regarding the RPCA, the PHA should edit the RPCA to account for this. The Transaction Manager can show the PHA how to do this. The Scope of Work and list of repairs are Exhibits to the RAD Conversion Commitment so it is important that the information in the RPCA is correct.