The U.S. Government Accountability Office (GAO) issued a report entitled, HUD Rental Assistance Demonstration: Information on Initial Conversions to Project-Based Vouchers, on April 24. The report includes the finding that converting tenant protection vouchers to project-based vouchers under the Rental Assistance Demonstration’s (RAD’s) Second Component “will have a small effect on the percentage of total vouchers (made up of project- and tenant-based) that are project-based.”
When a Rent Supplement (Rent Supp), Rental Assistance Payment (RAP), or Moderate Rehabilitation (Mod Rehab) property’s rental assistance contract expires or is terminated due to the owner prepaying an FHA-insured mortgage, owners are no longer required to maintain affordable rents or keep units available to low income residents. In order to prevent assisted residents from experiencing rent burdens in such instances, HUD provides tenant protection vouchers.
The RAD Second Component allows owners of Rent Supp, RAP, and Mod Rehab properties to convert tenant protection vouchers (TPVs) to project-based vouchers (PBVs). Because TPVs are tenant-based, once an assisted household moves, the apartment it previously occupied will no longer be affordable to other low income households. PBVs, however, stay with the property if a household later decides to move. PBVs entail a 15- or 20-year contract with a public housing agency (PHA). Owners can use the PBV stream of revenues over the contract period to leverage private debt and equity to address immediate capital needs and preserve the property as affordable housing for low income households.
The report states that although the Second Component of RAD has increased the number of PBVs nationally, the increase was not enough to substantially affect the overall percentage. As of March 1, 2014 there were 2,055,349 tenant-based vouchers plus 81,364 PBVs for a total of 2,136,713 vouchers. Of the 81,364 PBVs, only 8,014 were RAD Second Component conversion PBVs.
The report also concludes that the impact of RAD Second Component conversions on the long-term percentage of project-based vouchers is limited to the remaining 37,861contracts: 4,713 Rent Supp, 10,915 RAP, and 22,233 Mod Rehab. HUD estimates that contracts covering 15,628 Rent Supp and RAP units will be expiring in the coming years, nearly half of these expiring in FY16.
GAO also concludes that RAD Second Component conversions should not affect voucher program costs because HUD uses the same calculation for providing budget authority for the PBVs converted under RAD as it does for calculating budget authority for TPVs.
View HUD Rental Assistance Demonstration: Information on Initial Conversions to Project-Based Vouchers, GAO-14-402, April 2014 at: http://www.gao.gov/assets/670/662736.pdf