- Agreement Waiver and RAD Rehab Assistance Payments. For public housing conversions to PBV there will be no Agreement to Enter into a Housing Assistance Payments (AHAP) contract. Therefore, all regulatory references to the AHAP, including regulations under 24 CFR part 983 subpart D are waived. Instead, the PHA and Project Owner typically will enter into a HAP Contract before construction begins. Until the work is complete, standard HAP Contract funding procedures will be used for occupied units. Units that are not occupied at any point during the period of work identified in the approved Financing Plan and RAD Conversion Commitment may be eligible, subject to the conditions below, for Rehab Assistance Payments equal to the Public Housing Operating Fund and the Capital Fund amounts that formed the basis for the calculation of initial contract rents (see Attachment 1C). During the period of rehabilitation or construction as identified in the RCC and the HAP Contract, the maximum number of units for which a Project Owner can receive RAD Rehab Assistance Payments is limited to the number of units eligible for Operating Fund or Capital Fund subsidy prior to conversion. As a result, some units in the Covered Project may not be eligible for Rehab Assistance Payments.
Following the earlier of the end of the construction period identified in the HUD- approved Financing Plan or actual construction, the PHA will no longer be eligible to receive RAD Rehab Assistance Payments, and all units under contract will be eligible for payment only for occupied units or for vacancy payments, as applicable. MTW agencies may not alter this requirement.
- When Total Tenant Payment Exceeds Gross Rent. Under the PBRA program, assisted families typically pay 30% of adjusted gross income toward rent and utilities, referred to as TTP. Under normal PBRA rules, a Project Owner must process a termination of assistance pursuant to section 8-5 C. of Housing Handbook 4350.3, REV-1 when the family’s TTP has risen to a level that is equal to or greater than the contract rent, plus any utility allowance, for the unit (i.e., the Gross Rent)). In addition, section 8-6 A.1 provides that, when terminating a tenant’s assistance, the owner is to increase the tenant rent to the contract rent (assuming that the tenant does not receive the benefit of any other type of subsidy).
For residents living in the Converting Project on the date of conversion and all new admissions to the Covered Project thereafter, when TTP equals or exceeds the contract rent plus any utility allowance, the Project Owner must charge a tenant rent equal to the lesser of (a) TTP (which is not capped at gross rent), less the utility allowance in the contract, or (b) any applicable maximum rent allowable under LIHTC regulations.49 To this end, HUD is waiving sections 8-5 C. and 8-6 A. 1. of Housing Handbook 4350.3, REV-1. In such cases, the tenant will still be considered a Section 8 tenant and will still have the rights and be subject to the requirements of Section 8 tenants. Tenants will retain all of the rights under the Model Lease, including the right to occupy the unit, as well as those provided through this Notice, and tenants will still be subject to the requirements for Section 8 tenants, including the requirements concerning reexamination of family income and composition found in 24 CFR §§ 5.657 and 880.603(c). When TTP equals or exceeds Gross Rent, the excess rent collected by the owner is considered project funds and must be used for project purposes. Assistance may subsequently be reinstated if the Tenant becomes eligible for assistance. In the event that the tenant moves out, the Project Owner must select an applicant from the waiting list who meets the applicable income limits for the project.
The Project Owner is not required to process these individuals through Multifamily Housing’s Tenant Rental Assistance Certification System (TRACS) but may be required to do so in the future when a future revision of the TRACS can accept such certifications. All normal actions for the contract rent shall continue for these units, including application of the OCAF adjustment to the contract rent indicated in the HAP Contract—since the OCAF adjusted rent will still be in effect whenever the unit is occupied by a family eligible for rental assistance.
Timing of TRACS Payments after ClosingWhen should a property receive voucher payments through the TRACS system relative to the effective contract date?
Payments through TRACS would start with the first January following the RAD closing.
Effective Date of RAD ConversionOn what date does a RAD project cease being a public housing project?
The project ceases to be a public housing project at the effective date of the HAP contract, which is the first of the month following closing.
Surplus Cash under the HAP ContractThe template PBRA HAP Contract for former Mod Rehab properties that is on the RAD website includes a provision that surplus cash can only be distributed once a year. Can this requirement be waived or modified for projects that do not have FHA financing?
No. The RAD template legal documents must be used without alteration. The restriction on cash flow only after closing of financial statements is true regardless of financing source.
AFS Audit Requirement in HAP Contract for PBRA ConversionsIn the sample RAD PBRA HAP contract for former Mod Rehab properties, it appears an AFS Audit will be required. Is this correct?
Yes, after the RAD closing the converted PBRA project would be subject to the REAC-FASS annual financial statement requirements. This is not applicable to PBV conversions.
Administrative Fees for PBV ConversionsWill PHA's converting to Project Based Vouchers receive an extra one time "special housing fee" of $200 per unit when they convert to PBVs? Does the answer depend on the type of RAD PBV conversion?
The answer depends on the type of PBV conversion. Generally, the special housing fee is allowable only if the PHA is not already administering rental assistance for the project: 1. The special housing fee is not applicable to conversions of public housing to PBVs. 2. The special housing fee is not applicable to conversions of Mod Rehab to PBV, whether the conversion occurs under the 1st or 2nd component of RAD. 3. The special housing fee is applicable to prospective conversions of RAP and Rent Supplement under the 2nd component of RAD. 4. The special housing fee is not applicable to retroactive conversions under the 2nd component of RAD.
PHA Administering PBV Contract and Section 8 Administrative PlanThis is for the 2nd component of RAD. If a PHA agreed to administer a PBV Contract, would the PHA be required to amend its Section 8 Administrative Plan even if the Section 8 Admin Plan includes verbiage on project-basing vouchers that complies with 24 CFR 983?
So long as the PHA's administrative plan already provides for project-basing vouchers and already includes the appropriate policies regarding project-based vouchers (e.g., appropriate policies for tenant selection), no further amendment to the administrative plan is required in order to administer PBVs under the 2nd component of RAD.
PBV Contract AdministrationIf a PHA agreed to administer a PBV Contract, would the PHA be required to amend its Annual Plan and go through the 45 day comment period before it could take any of the required actions for the conversion?
Yes, if the PHA administrative plan does not already include project-basing of vouchers and the required PBV policies. If the PHA administrative plan already includes those provisions, no further amendment is required.
Timing of RAD Unit ConversionWill the units converting to RAD be considered PBV units at the time of closing or after the rehabilitation is done?
The PBV HAP contract goes into effect at the RAD closing, so the units would become Section 8 PBVs at the beginning of the following month. For example, if the closing is on March 15, the effective date of the HAP contract would be April 1. Please note that, for most conversions, the HAP is executed prior to construction taking place.
ACC and Capital Fund Subsidy during RAD ConversionWill ACC and capital fund subsidy continue during the RAD conversion? If so, can those funds be used for temporary relocation costs and/or other development costs?
ACC subsidy will continue until the RAD closing. Following the RAD closing, the property will be under a Section 8 HAP contract. Under RAD, properties are eligible under their HAP contract for Rehab Assistance Payments, which provides subsidy payments during the period of rehab, approximately equal to the Operating and Capital subsidy amounts the project had received under public housing. Many PHAs plan to use this subsidy to support relocation costs.
Certifying Tenants Through PIH or Multi-FamilyIf we elected to covert our ACC assistance to PBV or PBRA, will we be certifying tenants and receiving funding through the PIH office or Multi-Family? Will we use 50058 or 50059? Will we be using the TRACS system?
RAD conversions to PBVs will use the 50058 which will be submitted into PIC, just like certifications for any other family assisted under the Housing Choice Voucher program. Subsidy will be administered by the housing authority with whom the PBV HAP contract is signed, rather than through PIH. RAD conversions to PBRA will use the 50059 which will be submitted into TRACS. Subsidy will be administered by the Office of Multifamily Housing at HUD.
Closing Out Projects in FASS-PHIf a public housing-only PHA converts its entire inventory to RAD, does it need to submit one last FASS-PH report (for that last partial or full year)?
Yes. Because it received Federal funds for a portion of that fiscal year, the PHA will need to submit a close-out FDS.
Converting Last Public Housing Project Early in Calendar Year (prior to Capital Fund grant award)If a conversion occurs early in the calendar year before HUD has made its Capital Fund grants, how can a PHA that is converting its last public housing project make sure to apply the entire Capital Fund grant to the converting project?
Capital Funds are used for funding HAP payments in the initial year of closing and can also be used for development costs (in the Sources & Uses). First, the PHA will want to ensure that enough of the Capital Fund grant is set aside for HAP payments. In such a case, a portion, based on the number of months remaining in the calendar year of the PHA’s Capital Fund grant, can be used for rental assistance to support the Covered Project for the remainder of the calendar year of the conversion. Within 2 weeks of the Capital Fund grant award, the PHA should complete the updated Initial Year Funding Tool to calculate the amount of Capital Funds needed and then complete HUD form 50075.1 with that amount shown in BLI 1503. The executed 50075.1 and the Initial Year Funding Tool should be emailed to email@example.com, with a copy to Ivan Pour. Upon receipt, HUD will review and move the funds to BLI 1503 in LOCCS. The remaining balance of the Capital Fund grant can be contributed to the Covered Project as part of the development budget if in the Financing Plan and memorialized in the RCC (Sources & Uses Exhibit), the PHA identifies that this source will come into the project after conversion by, for example, including in the Sources “TBD- 2017 Capital Fund balance.” This would authorize the use of those funds for the Covered Project when the funds become available, even though that would occur after conversion. Given that the precise amount that will be available will be unknown at the time of Financing Plan submission and at closing, in its review of the Financing Plan, HUD will make sure that the transaction does not rely on those funds in order to meet RAD’s minimum underwriting standards. In other words, the transaction must be able to stand on its own without the funds. The funds could then be used to enhance replacement reserves or operating reserves. Within 2 weeks of the Capital Fund grant award, the PHA should complete the 50075.1 with BLI 1504 populated with the corresponding Capital Fund amount and then email the 50075.1 to firstname.lastname@example.org, with a copy to Ivan Pour. Upon receipt, HUD will review and move the funds to BLI 1504 in LOCCS.
BLIs on Capital Funds HUD Form 50075Please tell me what Budget Line Items (BLIs) are used for RAD activities on Capital Funds HUD Form 50075.1 along with a description of planned activities that should be reflected under each applicable account.
Use BLI 1504 for Capital Funds that are contributed into a RAD project's development budget. Use BLI 1503 for Capital Funds that are or will be used to make rental assistance payments.
Utilizing Op and Cap Funds to Pay for PBV Admin Fee in First Year of ConversionThis is for a public housing conversion to PBVs. During the conversion year under PBV, the voucher-administering agency earns no admin fee (Notice, REV-2, page 60). However, can the converting agency choose to reimburse the voucher-administering agency for its admin costs?
Yes, the PHA may do so long as (1) the amount paid is not more than the allowable HUD schedule of admin fees and (2) the PHA identifies these amounts in the Development Budget (Sources and Uses). This action is allowable even if the converting agency is also the voucher-administering agency.
Restrictions on Net Cash FlowWe have a RAD conversion entering into the final phases (post-construction) of closing out to the permanent loan from our lender. Is there is any RAD requirement to send excess cash to a residual receipts account?
No. Per page 66 of the RAD Notice REV-2, Distributions: "Regardless of type of financing, Converted Projects will not be subject to any limitation on distributions of surplus cash, contingent on the availability of surplus cash as determined by year-end audited or certified financial statements. To implement this provision, HUD will not apply 24 CFR § 880.205, which, among other provisions, establishes certain limitations on distributions for profit-motivated owners and authorizes HUD to require the owner to establish a residual receipts account. Distributions are not considered program or project funds." However, this refers only to limitations by HUD. The PHA may choose to accept limitations on distributions that may be imposed by non-FHA lenders or other funders.
Units Eligible for Rehab Assistance PaymentsHow can a PHA determine how many units under HAP contract are eligible for Rehab Assistance Payments?
During the period of rehabilitation or construction as identified in the HAP Contract, the maximum number of units for which a Project Owner can receive RAD Rehab Assistance Payments is limited to the number of units eligible for Operating Fund subsidy prior to conversion. The number of units eligible for Operating Fund subsidy prior to conversion is equal to the number of Total Eligible Unit Months (EUMs) on the project’s Form-52723 submission (Section 2, Column B, Row 15.) divided by twelve and rounded down to the nearest whole number. For conversions where only a portion of a PIC Development has converted, the number of EUMs associated with the converted portion can be derived from the Initial Year Funding Tool (See “2a. Operating Fund” worksheet, cell R28).
Requirement to Make Monthly Replacement Reserve Deposits Following ConversionSuppose that the PHA's operating expenses increase following conversion and the project doesn't have the cash to make the deposit into the R4R as required under RAD- what would be the likely consequences of a failure to make required replacement reserve deposits? Does it make a difference whether it's PBV or PBRA?
Failure to make required deposits to the replacement reserve is a violation of both the RAD Conversion Commitment (which survives the closing) and the PBRA or PBV HAP Contract and HUD may take enforcement action in such an event. If a property experiences an unexpected and substantial increase in operating expenses, the owner should contact HUD to determine options that will not result in HUD initiating an enforcement action.