Under the First Component of RAD, PHAs may choose between two forms of Section 8 Housing Assistance Payment (HAP) Contracts: project-based vouchers (PBVs) or project-based rental assistance (PBRA). No incremental funds are authorized for this component. As such, initial contract rents are established based on public housing funding levels, and are subject to applicable program rent caps. Applications may be submitted for a specific project (using the RAD Application), a PHA-defined portfolio of projects, or a multi-phase project. If a PHA applies for either a portfolio or multi-phase award, HUD will reserve RAD conversion authority for the projects or phases covered by the award, and the PHA will be required to submit a RAD Application for each individual project or phase. Following review and selection of a RAD Application, HUD will provide the PHA with a Commitment to enter into a Housing Assistance Payment (CHAP), after which the PHA will have to present a Financing Plan for HUD to approve. After HUD approval of the Financing Plan and successful closing of the conversion, a project will receive a long-term Section 8 HAP Contract. Upon conversion, units whose assistance has been converted pursuant to RAD will be removed from the public housing program. Converting Projects will be released from the public housing Declaration of Trust (DOT) and the Declaration of Restrictive Covenants (DORCs), if applicable, and a RAD Use Agreement will be placed on the Covered Project.
Under the Demonstration, applicants may apply to convert a single project, a PHA-defined portfolio of projects, a multi-phase project, or a set of projects that incorporate rent flexibilities such as rent bundling or MTW fungibility. The requirements for each type of application are listed below:
- General Requirements. All applicants must complete the Microsoft Excel-based RAD Application, which HUD will make available on the RAD website (www.hud.gov/rad), along with all other required submittals. The RAD Application will include certain pre-populated project data and will require the applicant to input proposed data related to the long-term physical and financial feasibility of the project and other conversion-related items. For an application to be complete, user inputs must meet any applicable thresholds embedded and described in the RAD Application.
Applications will be accepted on a project-by-project basis, except where otherwise noted in this Section. If a PHA desires to convert only a portion of a project (e.g., only the high-rise portion of a project that is currently combined with scattered sites) and maintain the remaining portion as public housing, the PHA should indicate as such in its application (i.e., the PHA will not need to request a change in configuration for the project in order to submit the application).
It is important for the applicant to keep environmental impacts in mind, and to begin assembling environmental reports, during the application submission process. Following application review and approval, the proposed construction plans and site selection will be evaluated during environmental review and will require modification if they do not meet environmental review requirements.56 Questions regarding environmental review requirements should be directed to the local Responsible Entity contact for conversions to PBV, or to the local HUD Field Environmental Officer57 for any project involving FHA financing and/or PBRA conversions.
Upon completion of required entries on the application, the PHA will be able to generate a number of key exhibits, including a financing pro-forma for the project. The purpose of the pro-forma is to ensure that the PHA has sufficiently considered the long-term preservation needs of the property and the means by which those needs will be financed. In completing the financing pro-forma, the PHA must identify likely sources of debt and/or equity financing.
The RAD Application contains a template of each of the followings documents, which must be submitted where applicable:
- A RAD Board Approval Form, which will include the proposed pro-forma and other key certifications, must be approved by the PHA’s Board and signed by the authorized representative of the PHA. This form will be required for all submitted applications.
- A Financing Letter of Interest/Intent from each lender or equity investor, indicating, among other conditions, that the proposed pro-forma is reasonable. This letter is required where third-party financing is indicated in the application pro-forma. (A Financing Letter of Interest/Intent is not required where the pro-forma indicates that no financing is required, e.g., where immediate and long-term project capital needs can be met through a Reserve for Replacements account, or where the PHA is providing the financing.) The Financing Letter of Interest/Intent does not promise or imply a commitment to make a loan or equity investment but does signify that the lender or investor has reviewed the pro-forma for the subject project and considers it reasonable to proceed with further analysis and due diligence.
- A Mixed-Finance Affidavit is required where the PHA is requesting to convert the public housing assistance in a mixed-finance project. This affidavit must be signed by both the PHA administering the public housing ACC and the Owner Entity of the project. Since only PHAs can apply under the Demonstration (see Section 1.3 of this Notice), the purpose of this affidavit is to ensure that both parties (the Owner Entity and the PHA) agree in principle to the conversion. Please note, however, that the HAP Contract for a mixed-finance conversion will be executed between the Contract Administrator and the mixed-finance Owner Entity, not the PHA administering the public housing ACC. (The PHA may be part of the ownership structure, however.)
- A Choice-Mobility Commitment Letter signed by: (a) the voucher agency that has committed to provide Choice-Mobility vouchers to the covered PBRA project of another PHA for the term of the initial HAP Contract; and (b) the agency that obtains a commitment from a voucher agency to support Choice-Mobility for a specified PBRA project. PHAs that are able to meet the Choice-Mobility requirement through turnover from their own voucher programs do not need to complete this letter.
If a PHA chooses to convert assistance to PBVs, the PHA must identify in the RAD Application the voucher agency that will administer the PBV HAP Contract. If another PHA is proposed as the contract administrator and the project is selected, the PHA will need to submit a signed letter from the voucher agency evidencing the agency’s willingness to administer the PBVs. The PHA may contact the local HUD Office of Public Housing to identify a list of voucher agencies that have appropriate legal jurisdiction to perform this role. If there is no voucher agency with overlapping legal jurisdiction that is willing to administer the PBV contract, the PHA may want to consider converting the project to PBRA. However, in so doing, the PHA would still be required to meet the Choice-Mobility requirement described above.
The RAD application shall also include supporting evidence if claiming priority status under Section 1.11.C.1(i).
Finally, the RAD application must include responses to comments received in connection with the required resident meetings on the proposed conversion.
- Applications Proposing to Use 9% LIHTCs. Applicants are encouraged to consider both 4% and 9% LIHTCs in their project financing. However, 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) in place at the time of application that demonstrates that the project would have been eligible and competitive for credits in the most recent round.
- Applications for Multi-phase Development. PHAs may submit applications involving the multi-phase redevelopment of projects. For purposes of the multi-phase award application, 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. A PHA must submit a RAD Application that reflects the first phase as well an explanation of future phases, including a narrative summary of the proposed phasing, the proposed date of submission of each phase’s financing plan, the proposed date of each phase’s LIHTC application (if applicable), and the proposed date of any demolition or disposition associated with each phase (if applicable).58 Upon acceptance of the PHA’s application, HUD will issue a CHAP for the initial phase and a Multi-phase Award Letter covering all phases of the project. A Multi-phase Award allows a PHA to reserve conversion authority for a project with multiple distinct development phases and locks in the applicable contract rent for the entire project at the time of initial application.
For awards made pursuant to the original 60,000 unit cap, the PHA had until July 1, 2015 to submit an application for the final phase of the project covered by the Multi-phase Award, unless HUD provided, in its sole discretion, an extension. For all Multi-phase awards made pursuant to the increase in the cap to 185,000 units, the Application for the last phase of a Multi-phase awards will be due no later than July 1, 2018. Subsequent to authority to convert additional units, HUD will establish Multi-phase awards in its sole discretion. Recipients of Multi-phase Awards shall still be required to fulfill all CHAP milestones for each of the CHAPs awarded by HUD. If the PHA is unable to complete a phase of the conversion, HUD reserves the right to revoke the CHAPs covering that phase and all subsequent phases of the conversion.
HUD recognizes that in certain situations multi-phase development warrants the demolition of a greater number of units than may be replaced in a single phase. HUD will consider individual requests for demolition prior to the construction closing of a phase based on a site plan, the timing and sources & uses for each proposed phase, the capacity of the development team, the impact on residents, and the overall likelihood that units will be successfully redeveloped.
Applicants should keep in mind that the environmental documents submitted with the Financing Plan during the first phase (see Attachment 1A) must be submitted for the entire site, i.e., all of the phases of the multi-phase development, and that the environmental review conducted during the first phase will cover the entire site.
- Applications with Bundled Rents. When bundled rents are proposed, as described in Section 1.6.B.5 and Section 1.7.A.5, the PHA must include in each project’s application a reference to the other project(s) in the rent bundle and must also include with the application a calculation demonstrating that the total subsidy for the bundled projects will not exceed the aggregate funding for the Covered Projects.59 Upon CHAP award, failure of one project to meet the requirements set forth in this Notice shall result in the termination of the second project if that project is no longer feasible without the rent bundle. Further, the project that is donating subsidy (and converting at lower rents) must close before or simultaneous with the project(s) that are receiving subsidy (and converting at higher rents).
- MTW Fungibility. An MTW agency may submit an application proposing to use its MTW block grant authority to set initial contract rents pursuant to Section 1.6.B.5 and Section The application must indicate the additional proposed subsidy dedicated to the Converting Project(s).
- Portfolio Awards. A PHA may apply for a Portfolio Award, which allows a PHA to reserve RAD conversion authority for a set of projects and locks in the applicable contract rent in the year of application. In order to apply for a Portfolio Award, a PHA must submit:
- A list of all projects proposed for a Portfolio Award, that includes, for each project, the project’s name, PIC Development Number, units to be converted, total estimated capital needs, and the major anticipated financing sources, where applicable; and
- RAD Applications for at least 50% of the projects identified in the portfolio.
Upon approval of the application submission listed above, HUD will issue, in addition to the provision of CHAPs for the applications submitted, a Portfolio Award Letter covering the remaining projects within the portfolio proposed by the applicant. The Portfolio Award Letter reserves RAD conversion authority for the remaining units in the portfolio and locks in the applicable contract rent for the year of the application submission for the projects covered by the Portfolio Award. The PHA will have 365 days from issuance of the Portfolio Award Letter (or in the case of Portfolio Awards issued between January 1, 2015 and July 15, 2015, 365 days from July 15, 2015) to submit acceptable RAD Applications for the remaining projects included in the Portfolio Award, which will result in the issuance of a CHAP for each project.60 Recipients of Portfolio Awards shall still be required to fulfill all milestones for each CHAP issued by HUD. If at any time HUD determines that a PHA has failed to make sufficient progress towards the submitted conversion of the proposed portfolio, HUD may revoke RAD conversion authority provided under the Portfolio Award for all projects where a CHAP has yet to be issued. With HUD consent, PHAs may substitute projects in the portfolio award, and switch projects between the active and pending portions of the portfolio, provided that the newly substituted projects are subject to all of the requirements of this Notice and will be subject to the same deadlines as the projects which they replaced within the portfolio.
Further, PHAs that have received CHAPs for multiple projects, but that did not request a Portfolio Award, may convert their awards into a Portfolio Award as long as no more than half of the converting projects are covered under the Portfolio Award.
- Joint Application under a Choice Neighborhoods Initiative (CNI) Implementation Notice of Funding Availability (CNI NOFA). A CNI Implementation NOFA applicant wishing to submit a joint RAD/CNI Implementation NOFA application must designate in the Housing Strategy section of their CNI NOFA application that their application is a joint RAD/CNI application, as well as provide a letter affirmatively requesting the housing project(s) name and PIC Development Number and the number of standing public housing units that the PHA wishes to convert under RAD. In such cases, the CNI NOFA Application date shall be considered the date of application for RAD. Subject to a review of the criteria in Section 1.3 of this Notice and collection of additional information as needed, Joint applications will be issued a CHAP or, if RAD authority is unavailable, will be placed on the waiting list, for each project identified in their joint application and will lock in the applicable contract rents in the year of the application submission for projects covered by the Application, whether or not they are awarded the CNI implementation grant. Recipients of Joint RAD/CNI Awards shall still be required to fulfill all milestones for each CHAP, unless HUD issues extensions for good cause. CNI applicants may submit a separate RAD application for a project ahead of the CNI NOFA Application date, in order to secure a CHAP under the RAD cap. If a RAD application is sent by a CNI applicant ahead of their CNI application, pending the CNI award, milestones will be adjusted to match the CNI timeline.
- Submission of Letter of Interest When a Waiting List Has Formed. Commencing 30 days following publication of this Notice and thereafter during any period when HUD is maintaining a waiting list pursuant to Section 1.10, in lieu of a RAD Application, a PHA may submit a letter of interest signed by the PHA’s Executive Director to RADapplications@hud.gov that identifies all of the properties (PIC # and name) and associated ACC units that the PHA is proposing for conversion. Such a submission would reserve the PHA’s spot on the waiting list under the lowest priority category described in Section 1.11 in the order in which the letter was received. In anticipation of HUD’s ability to make additional awards, HUD will notify the PHA that it must submit a complete RAD Application, Portfolio Award, or Multi-phase award, and comply with all the application provisions of this Notice, within 60 days of such notification or forfeit its position on the waiting list. PHAs may consider submitting complete RAD Applications separately for properties in its conversion portfolio that would fall under a higher priority category so as to achieve a higher position on the waiting list.
- PBV Conversions. Where the PHA converts assistance of a public housing project to Section 8 PBVs, the HAP Contract will be administered by the agency with which HUD has entered into the applicable Voucher ACC (which in many cases will be the same agency that is converting assistance). Contract rents will be established according to the terms described in this Notice and will be adjusted annually by HUD’s OCAF on each anniversary of the HAP Contract, subject to the availability of appropriations for each year of the contract (see Section 1.6.B.5 and Attachment 1C) and the rent reasonableness requirement discussed later in this Notice. The initial contract will be for a period of at least 15 years (up to 20 years upon approval of the administering Voucher Agency). At expiration of the initial contract and each renewal contract, the Voucher Agency shall offer, and the Project Owner shall accept, a renewal contract. Each project with a PBV HAP Contract will also be subject to a RAD Use Agreement that will renew with the HAP Contract. Further, the administering Voucher Agency (i.e., the Contract Administrator) will provide a Choice-Mobility option to residents of Covered Projects in accordance with section 1.6.D.9. With the exception of provisions identified in this Notice (as well as retained flexibilities of Moving to Work (MTW) agencies), all regulatory and statutory requirements of the PBV program in 24 CFR part 983, and applicable standing and subsequent Office of Public and Indian Housing guidance, including related handbooks, shall apply.
- PBRA Conversions. Where the PHA converts assistance of a public housing project to Section 8 PBRA, the HAP Contract will generally be administered by HUD’s Office of Housing, unless later assigned to a PHA that is under ACC with HUD for the purpose of administering project-based Section 8 HAP Contracts. Contract rents will be established according to the terms described in this Notice and will be adjusted annually by HUD’s OCAF at each anniversary of the HAP Contract, subject to the availability of appropriations for each year of the contract (see section 1.7.A.5 and Attachment 1C). The initial contract will be for a period of 20 years and will be subject to annual appropriations. At expiration of the initial contract and each renewal contract, HUD shall offer, and the Project Owner shall accept, a renewal contract. The initial contract shall be eligible for renewal under the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRAA). Each Covered Project with a PBRA HAP Contract will be subject to a 20-year RAD Use Agreement that will renew with the HAP Contract. Further, Project Owners must offer a Choice-Mobility option to residents of Covered Projects, as specified in Section 1.7.C.5 of this Notice, unless exempted from this requirement. With the exception of provisions identified in this Notice, all regulatory and statutory requirements of the PBRA program in 24 CFR part 880, and applicable standing and subsequent Office of Housing guidance, including related handbooks, shall apply (as modified and published in Appendix I of this Notice).
- Waivers. A major goal of the First Component of RAD is to test the conversion of the public housing assistance to long-term, project-based Section 8 assistance available to Project Owners of assisted multifamily housing in order to generate additional sources of private financing. Consequently, HUD is applying its waiver authority and ability to establish limited alternative requirements for the effective conversion assistance on a limited basis to facilitate the major goals of the Demonstration and maintain existing distinctions between the PBV and PBRA forms of contract assistance. Such distinctions will enable a PHA or Project Owner to choose the form of assistance to best meet its needs. It will also enable HUD and Congress to assess how effective each form of assistance proves to be in meeting such varied circumstances and needs.
- Tenant Rights. Equally important for the success of RAD are meaningful resident participation, procedural rights, and mobility, which are addressed in detail in various sections of the Notice and summarized in Attachment 1B.
- Fair Housing Requirements. RAD transactions are governed by the same civil rights authorities that govern HUD-assisted activities generally. See 24 CFR § 5.105. The Fair Housing Act prohibits discrimination in housing (see 42 U.S.C. §§ 3601, et seq., and HUD regulations in 24 CFR part 100) and requires all federal executive departments and agencies to “administer their programs and activities relating to housing and urban development . . . in a manner affirmatively to further” fair housing (42 U.S.C. § 3608(d) and (e)). In addition, all federally assisted activities are subject to Title VI of the Civil Rights Act of 1964 forbidding discrimination on the basis of race, color and national origin (see 42 U.S.C. §§ 4000d, et. seq., and HUD regulations in 24 CFR part 1) and Section 504 of the Rehabilitation Act of 1973, which forbids discrimination on the basis of disability and requires that federally assisted programs make each activity “when viewed in its entirety” readily accessible to persons with disabilities and make reasonable accommodation to the needs of persons with disabilities (see 29 U.S.C. §§ 701, et seq., and HUD regulations in 24 CFR part 8), as well as Titles II and III of the Americans with Disabilities Act and Executive Order 11063 and HUD regulations at 24 CFR part 107. Thus, as with the administration of all HUD programs and all HUD-assisted activities, fair housing and civil rights issues must be considered in the administration of RAD transactions. This includes actions and policies that may have a discriminatory effect on the basis of race, color, sex, national origin, religion, disability, or familial status (see 24 CFR part 1 and part 100 subpart G) or that may impede, obstruct, prevent, or undermine efforts to affirmatively further fair housing.
Elements of RAD transactions that have civil rights implications include, but are not limited to, transfers of assistance, temporary and permanent relocation, demolition, site selection and new construction, occupancy policies, changes in unit configuration, increase or reduction in units, waiting list administration policies, policies regarding return of temporarily relocated tenants, substantial rehabilitation or alteration program accessibility, tenant selection policies and priority transfers, providing information to persons with Limited English Proficiency (LEP) and persons with disabilities, reasonable accommodation policies, and Affirmative Fair Housing Marketing Plans. All PHAs must consider civil rights when structuring these and other elements of their RAD transaction. Further, all RAD conversions that include one or more of the activities listed below must undergo a front-end review for compliance with certain civil rights and fair housing requirements. A RAD conversion may not include one of the activities below without prior written approval from HUD. All Financing Plans submitted after August 15, 2015, must include evidence that the PHA has secured written approval from HUD for any of the following activities that are included in its RAD conversion:
- Conversions of assistance involving new construction, whether on a new site or on a current site, in an area of minority concentration.
- Transfers of assistance where all or a portion of the Converting Project’s assistance is transferred to a new site(s) as part of the subject transaction.
- Conversions of assistance where the total number of units in the Covered Project is less than the original number of units in the Converting Project (this includes de minimis reductions);
- Conversions of assistance where the Covered Project’s unit configuration is different from the unit configuration of the converting project;
- Conversions where the Covered Project serves a different population from the one served by the Converting Project (e.g., when a Converting Project serves families but the Covered Project is subject to an elderly preference);
The RAD Fair Housing, Civil Rights and Relocation Checklist will require submission of information regarding the foregoing and the following activities:
- Conversions of assistance in which the construction schedule indicates that relocation is likely to exceed 12 months;
- Conversions of assistance involving new construction or substantial alteration, as those terms are defined in Section 504 of the Rehabilitation Act of 1973.
Furthermore, as part of its review of these elements, HUD may request that PHAs that are doing portfolio or multi-phased conversions provide information on their conversion plans for other projects or subsequent phases to ensure that the overall plans for RAD conversion are consistent with civil rights and fair housing. HUD may also require a front-end civil rights review of a RAD conversion where it has learned of potential fair housing and civil rights concerns or a history of such concerns.
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