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.
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RAD Contract Rents for Mixed-Finance ProjectsHUD will assign to a mixed-finance project, as with all RAD conversions, a RAD Contract Rent. Can the PHA negotiate with the owner of that project for such things as land lease payments, participation in cash flow, etc.?
Yes. HUD will underwrite each project to determine that all costs are reasonable and related to the project, and that the financing plan is feasible. Otherwise, the PHA and the mixed-finance owner are free to negotiate such matters.