HUD PIH Posts Guidance on Using Proceeds from Disposition of Public Housing or Voluntary Conversion to Vouchers

HUD’s Office of Public and Indian Housing (PIH) posted Notice PIH 2020-23 providing guidance to public housing agencies (PHAs) about the requirements for obtaining approval to use proceeds from disposition of public housing or voluntary conversion to Housing Choice Vouchers (HCVs). Disposition generally involves selling public housing but can also include providing a ground lease of public housing property or transferring public housing. Residents and advocates should be aware of how the asset of public housing will be used after disposition or conversion to vouchers, given HUD’s emphasis on public housing repositioning (see Memo 11/19/18).

Section 18 of the “Housing Act” allows PHAs to apply to HUD for approval to dispose of public housing, as well as demolish it. The notice only applies to disposition. Section 22 of the “Housing Act” allows PHAs to voluntarily convert public housing to vouchers. Disposition, conversion to vouchers, demolition, and conversion under the Rental Assistance Demonstration (RAD) to project-based vouchers (PBVs) or project-based rental assistance (PBRA) are all possible ways to “reposition” public housing, which HUD is actively encouraging.

When a PHA obtains HUD approval to dispose of or convert public housing, it must use “net proceeds” that result to provide low-income housing or to benefit the PHA’s residents. Net proceeds may also be used as leverage to develop commercial enterprises on the public housing site to serve resident needs. Low-income housing includes public housing, PBV, and PBRA units.

To obtain HUD approval, a PHA must submit an application to the Special Applications Center (SAC). First, PHAs must actively consult with residents and resident groups, local government officials, and the public through the Annual PHA Plan process. Consultation must describe how the PHA proposes to use the net proceeds. PHAs must use means of communication effective for people with disabilities and limited English proficiency.

PHAs may use gross proceeds to pay for various resident relocation costs such as: counseling services, including mobility counseling; moving expenses, including housing search costs; application fees; security and/or utility deposits; and costs of any necessary reasonable accommodations under Section 504 of the Rehabilitation Act.

The notice lists six eligible uses of net proceeds:

  1. Modernization and development of public housing using the proceeds at Capital Funds.
  2. Building or rehabilitating housing as PBV housing or bringing existing housing under PBV. When building or rehabilitating housing for PBV, proceeds may be used for property acquisition, hard construction or rehabilitation costs, and funding reserve accounts, among other costs. When used for existing housing, proceeds may be used for property acquisition and minor repairs and upgrades.

If an application to SAC is for disposition, the application must give a brief description of the proposed use of the proceeds. If an application is for voluntary conversion to vouchers, the application must describe the future use of the property, including any planned disposition.

An application must indicate whether the proceeds will be used for newly constructed/rehabilitated housing or for existing housing, the amount of the proceeds it will use, and whether the proceeds will be in the form of cash or a loan. A PHA must show that it has plans to acquire and develop the housing and attach PBV to it. A PHA must also provide a brief description of the PBV project, including total number of units, number of PBV units, number of units designated accessible mobility units, designated accessible sensory units, and units with accessibility features. Other PBV-related requirements include: whether the PHA included the PBV units in its Annual PHA Plan, the name of the owner of the project and the ownership structure, and how long the property will be operated as a PBV project (whether the PHA plans to extend the PBV contract beyond the initial 20-year contract).

  1. PHAs may use proceeds for eligible uses of public housing Operating Funds.
  2. PHAs may use proceeds as a source of capital to support RAD conversions, including development costs, rehabilitation costs, or other related transactional costs.
  3. PHAs may use proceeds as leverage to develop commercial enterprises on the public housing site that serve resident needs.
  4. PHAs may use proceeds to increase the supply, availability, and use of low-income housing. For example, for HCV and PBV, PHAs may use proceeds to cover administrative expenses and other activities, such as: providing households with the cost of application fees and security and utility deposits; providing housing search assistance, including mobility counselling; identifying areas with low-poverty and without racial or ethnic population concentration; implementing Small Area Fair Market Rents (SAFMRs); and undertaking efforts to increase HCV effectiveness in serving people experiencing homelessness, people with disabilities, and other vulnerable populations.

Notice PIH 2020-23 is at:

More information about Section 18 disposition, Section 22 voluntary conversion to vouchers, and HUD’s repositioning effort is on page 4-50 of NLIHC’s 2020 Advocates’ Guide, and on NLIHC’s public housing webpage where there is also information about RAD, as well as on page 4-39 of NLIHC’s 2020 Advocates’ Guide.

More information about public housing is on page 4-30 of NLIHC’s 2020 Advocates’ Guide.

More information about the PHA Plan process is on page 7-61 of NLIHC’s 2020 Advocates’ Guide.