HUD Issues Two RAD Notices Implementing FY18 Appropriations Act Provisions and Making Additional Changes

HUD published two Federal Register notices on July 3 that affect the Rental Assistance Demonstration (RAD) program. The first notice implements provisions of the FY18 Appropriations Act. The second notice formally announces five additional changes to the RAD program detailed in a new joint Notice PIH-2018-11/H-2018-5, which supplements the existing RAD Notice PIH 2012-32/H-2017-03 REV3.

The FY18 Appropriations Act increased the number of public housing units that could be converted to Project-Based Vouchers (PBVs) or Project-Based Rental Assistance (PBRA) by 225,000 units, up to a total of 455,000 units. The original FY12 demonstration limited RAD to 60,000 units. In addition, the FY18 Appropriations Act extended the deadline for public housing agencies (PHAs) to apply for RAD to September 30, 2024.

For “First Component” (public housing) RAD conversions, the first notice explains that any of the 125,000 units currently on the RAD waitlist that HUD approves for conversion before January 1, 2019, will have contract rents based on those units’ FY18 Capital Fund Formula Grant, the FY16 Operating Fund level, and tenant rents. RAD conversions that HUD approves after January 1, 2019, will have contract rent levels based on those units’ FY18 Capital Fund, FY18 Operating Fund, and tenant rent levels. PHAs on the waitlist that has submitted Letters of Intent have 60 days to submit a full RAD application.

In addition, PHAs that have RAD awards based on an earlier RAD rent base year (e.g., FY12, FY14, or FY16) may withdraw a project and reapply to obtain RAD rents based on the policy in place at that time. For example, if the withdrawal and reapplication take place after January 1, 2019, the project may secure FY18 RAD rents. Consistent with the FY18 Appropriations Act, the first notice allows multi-phase RAD awards made after March 22, 2018, to submit an application for the final phase by September 30, 2024.

For “Second Component” RAD conversions that apply to the Rent Supplement (Rent Supp), Rental Assistance Program (RAP), Moderate Rehabilitation (Mod Rehab), Single Room Occupancy (SRO), or Section 202 PRAC programs, the first notice clearly states that current households cannot be rescreened or evicted because they were over-income at the time of the conversion. In addition, Rent Supp and RAP properties converted under RAD to PBRA that are in HUD-defined high-cost areas will have initial rents set at comparable market rents.

The Federal Register second notice and Notice PIH-2018-11/H-2018-5 describe five changes to the current RAD implementation Notice PIH 2012-32/H-2017-03 REV3:

  1. PHAs may establish project-specific utility allowances for RAD projects. If conversion results in the reduction of utility costs, the RAD contract rent paid to the owner may be increased by a portion of the utility savings. The extent of the “portion” is not indicated.
  2. HUD will allow a 25% increase in the allowable development fee for owners who adopt a waitlist preference for households exiting homelessness or permanent supportive housing (PSH). The preference must apply to at least 25% of a property’s units. The homeless or PSH households must be referred by the Continuum of Care (CoC) and the PHA or owner must have an agreement in place with the CoC.
  3. HUD will not approve a proposed RAD conversion if a PHA intends to use Section 18 regulations to dispose of other units at the project that would have the effect of undermining RAD’s basic one-for-one unit replacement policy. Also, if a PHA is seeking Section 18 approval to dispose of 25% of the units at a project so that 100% of the units rehabilitated or replaced through RAD can be operated under project-based assistance, RAD relocation rules apply to residents of Section 18 units, including resident notice and meeting requirements, the right to return, and receipt of relocation assistance and payments.
  4. The RAD rent-setting flexibility applied to multiple projects referred to as “rent bundling” is expanded to allow PHAs to blend the subsidy between RAD PBVs and non-RAD PBVs. The rents of non-RAD PBVs are reduced by the equivalent increase of the RAD PBV rents.
  5. Very small PHAs with portfolios of 50 units or fewer will have a streamlined conversion process if certain requirements are met:
    1. The RAD conversion or Section 18 disposition or demolition will remove all its public housing units.
    2. The RAD conversion does not involve any rehabilitation, new construction, or relocation.
    3. The PHA has an overall Public Housing Assessment System (PHAS) score of at least 75, has a Physical Assessment Sub-System (PASS) score of at least 30, and does not have a PHAS “substandard” designation or a PHAS Capital Fund “troubled” designation.

More about RAD is on page 4-15 of NLIHC’s 2018 Advocates’ Guide.