Under the Demonstration, HUD has the authority to waive or specify alternative public housing requirements, or to establish requirements for converted assistance under the demonstration. Additionally, the RAD Statute imposes certain unique requirements. To facilitate the conversion of assistance, HUD is waiving or imposing the following alternative and other public housing program requirements for public housing projects converting assistance (Sections 1.6 and 1.7 list the waivers and alternative and other requirements of programs into which assistance is being converted):
- Use of Public Housing Program Funds to Support Conversion. PHAs are permitted under the Demonstration to use available public housing funding, including Operating Reserves, Capital Funds, and Replacement Housing Factor (RHF) funds, and Demolition and Disposition Transitional Funding (DDTF), as a source of capital in the development budget to support conversion, whether for rehabilitation or new construction, as well as to increase initial contract rents. Eligible conversion-related uses for these funds include pre- development, development, or rehabilitation costs of the Covered Project, establishment of a capital replacement reserve or operating reserve, payment of Capital Fund Financing Program (CFFP), Operating Fund Financing Program (OFFP), or Energy Performance Contract (EPC) debt, and increase of the initial contract rent pursuant to Sections 1.6.B.5.iii and 1.7.A.5.iv. In order to use such funds on a Covered Project, these funds must be identified in the Financing Plan and RCC. See also 1.4.B.2.
If the PHA requests, in accordance with section 9(j)(2)(A)(ii) of the Act and the relevant HUD Appropriation Acts, HUD will extend the PHA’s obligation end date for Capital Funds used in the conversion for up to five years from the point when Capital Funds became available to the PHA for obligation. By extending the obligation end dates, the expenditure end dates will be correspondingly extended. Any such extensions must remain within the boundaries of the account closing law, including preserving sufficient time for administrative close-outs. Such extensions will prevent PHAs from otherwise losing their unobligated Capital Funds prior to conversion.
Prior to the approval of a Financing Plan, a PHA may expend up to $100,000 in public housing program funds on pre-development conversion costs per CHAP without HUD approval. Predevelopment assistance may be used to pay for materials and services related to proposed rehabilitation or development and may also be used for preliminary development work. Public housing program funds spent prior to the RAD conversion or construction or rehabilitation closing relating to a Covered Project as contemplated in the RCC are subject to public housing procurement rules.
Issuance of the RCC constitutes approval to use public housing funds as referenced in the Sources and Uses upon the RAD conversion or construction or rehabilitation closing relating to a Covered Project.
In the case of a PHA that is converting all of its ACC units, there is no restriction on the amount of public housing funds that may be contributed to the Covered Project(s); the PHA may convey all program funds to the Covered Project(s). In order to cover the cost of administrative activities required to terminate the ACC, once it no longer has units under ACC and has no plans to develop additional public housing, the PHA may:
- designate that a reserve associated with the Covered Project be available to fund any public housing closeout costs (such as an operating deficit reserve or a specific PHA close-out reserve). Any funds not needed for public housing closeout costs would remain in such reserve or may be transferred to another reserve associated with the Covered Project (such as the replacement reserve). Thereafter, these funds may be used at the Covered Project pursuant to the authorized use of the applicable reserve, or
- retain funds under the public housing program for this purpose. However, HUD will recapture any public housing funds that a PHA does not expend for closeout costs.
In the case where the PHA will continue to maintain other units in its inventory under public housing ACC, a contribution of Operating Funds to the Covered Project that exceeds the average amount the project has held in Operating Reserves over the past three years will trigger a subsidy layering review under 24 CFR § 4.13. Similarly, any contribution of Capital Funds, including RHF or DDTF, will trigger a subsidy layering review. Notwithstanding the subsidy layering review, PHAs should be mindful of how the Capital Funds or Operating Reserves used in the financing of its RAD properties may impact the physical and financial health of properties that will remain in its public housing inventory.
In addition, following execution of the HAP Contract, PHAs are authorized to use Operating and Capital Funds to make HAP payments for the remainder of the first calendar year in which the HAP Contract is effective (See Section 1.13). Otherwise, a PHA may not contribute public housing program funds to the Covered Project unless such funding has been identified in the approved Financing Plan and included in the approved Sources and Uses attached to the RCC.
- Conversion is a Significant Amendment to Annual/Five Year Plan. Conversion of assistance under the Demonstration is considered a significant action by the PHA. If not fully discussed in a PHA’s Five-Year Plan, Annual Plan or MTW Plan, the conversion of assistance must be presented in an amendment to the PHA’s Five-Year Plan for qualified and non-qualified PHAs, a significant amendment to the Annual Plan for non-qualified PHAs, and an amendment to the MTW Plan for MTW PHAs. As such, qualified and non-qualified PHAs, as well as MTW PHAs, are subject to the Consolidated Plan requirements and the public notice and Resident Advisory Board consultation requirements outlined in 24 CFR part 903. MTW PHAs are also subject to the Consolidated Plan requirements; however, they must follow the MTW Plan Amendment and public process requirements outlined in the Standard MTW Agreement in lieu of the requirements in 24 CFR part 903. If the conversion will require changes to the PHA’s Admissions and Continued Occupancy Policy (ACOP) and/or Section 8 Administrative Plan, these changes must also be addressed in the PHA Five- Year Plan, Annual Plan, or MTW Plan, or submitted with the significant amendment to the PHA Plan or amendment to the MTW Plan. In addition to the information already required by 24 CFR part 903 for PHA Plan amendments, all PHAs must provide the information listed in Attachment 1D. A PHA may fulfill this requirement by including the RAD-related provisions in their Five-Year Plan, Annual Plan, MTW Plan, or Significant Amendment (as applicable), or provide the information in any successor forms produced by HUD.
The Financing Plan must include a letter from HUD approving the Five-Year Plan, Annual Plan, MTW Plan or Significant Amendment.
In addition, any substantial change to the conversion plan is required to undergo the significant amendment process or other HUD review if the substantial changes involve a transfer of assistance, a change in the number of assisted units, or a change in eligibility or preferences for new applicants.
- Accessibility Requirements. Federal accessibility requirements apply to all conversions – whether they entail new construction, alterations, or existing facilities. The laws that most typically apply include Section 504 of the Rehabilitation Act of 1973 (Section 504), the Fair Housing Act (FHAct) and the Americans with Disabilities Act (ADA). Although the requirements of each of these laws are somewhat different, PHAs must comply with each law that applies. All three laws typically apply to new construction. Section 504 and the ADA also apply to substantial alterations and other alterations as defined in 24 CFR § 8.23 and to existing, unaltered facilities (24 CFR § 8.24). See also 28 CFR § 35.151(b) and 28 CFR part 36.
When a project’s rehabilitation meets the definition of a “substantial alteration” under 24 CFR § 8.23, a PHA must comply with all applicable accessibility requirements under Section 504. For some projects, “other alterations,” as defined in Section 504, are made over time. If other alterations, considered together, amount to an alteration of an entire dwelling unit, the entire dwelling unit shall be made accessible.
Where a PHA is planning to use RAD conversion in conjunction with new construction, the project must comply with all applicable accessibility requirements for new construction. The specific requirements are set out in regulations at 24 CFR part 8, 28 CFR part 35 and 36, and 24 CFR part 100, subpart D. Information on the design and construction requirements of the Fair Housing Act that are applicable to new construction is found at www.fairhousingfirst.org.
PHAs are encouraged to use universal design principles, visitability principles, and active design guidelines in planning retrofit and new construction work, wherever feasible. However, adherence to universal design principles does not replace compliance with the accessibility requirements of Section 504, the ADA, and the Fair Housing Act.
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