HUD’s Office of Public and Indian Housing (PIH) issued Notice PIH 2024-40 on December 26, modifying previous guidance (Notice PIH 2021-07) regarding how a public housing agency (PHA) can apply to demolish or dispose of public housing under Section 18 of the Housing Act of 1937. The Notice is to be used in conjunction with Section 18 regulations at 24 CFR Part 970. A number of changes urged by NLIHC and the National Housing Law Project are reflected in the revised Notice, including major improvements regarding resident consultation and resident relocation and consideration of the “commensurate public benefit” provision so that it better benefits genuinely low-income people. The new Notice also adds references to vacant land also subject to Section 18 disposition. Notice PIH 2024-40 increases the percentage of units that can be converted to Project-Based Vouchers (PBVs) in Rental Assistance Demonstration (RAD)/Section 18 Blend applications to 90% if the units are part of a property located in a very high-cost area.
A PHA that seeks to demolish or dispose of public housing and/or vacant land must obtain approval from PIH’s Special Applications Center (SAC). No “material changes” may be made once SAC approves an application. If a PHA wants to make any material changes, it must submit a new application to SAC. Material changes include:
- Modification of the method of disposition.
- A public bid sale for less than 80% of the appraised fair market value (FMV).
- Revised terms of “commensurate public benefit” for dispositions less than FMV.
Resident Consultation
As introduced in Notice PIH 2021-07, SAC will not approve any application that is clearly inconsistent with a PHA Plan or any information and data available to or requested by HUD, or if an application was not developed in consultation with residents, resident groups, and local government officials. A PHA must discuss the demolition or disposition at a public hearing as required by the PHA Plan regulations; the new Notice adds that a PHA must also comply with the resident consultation requirements of the PHA Plan, including discussing it with its Resident Advisory Board (RAB).
In addition to PHA Plan resident consultation provisions, the demolition/disposition regulations call for additional resident consultation specific to proposals to demolish or dispose of public housing (24 CFR 970.9). Notice PIH 2024-40 expands the previous Resident Consultation section (II.D. on pages 2 and 3), adding that residents affected by a demolition/disposition include public housing residents living in other units not proposed for removal at the same project as the property proposed for removal (units or vacant land) and/or residents living in any of a PHA’s other public housing units.
Along with a narrative of its resident consultation process, a PHA must attach to its application, evidence of consultation, such as sign-in sheets, dates, and meeting agendas. A PHA must allow residents and their representatives to submit written comments regarding the PHA’s proposed Section 18 Plan and the PHA must consider these comments. If a PHA proposes a demolition-only application, it must conduct a new consultation with residents if the PHA later submits a disposition-only application for the vacant land resulting from demolishing a development. Notice PIH 2024-40 adds as a “best practice,” conducting two meetings with residents before submitting an application, two meetings with residents after SAC accepts the demolition/disposition, and one meeting before finally removing the property.
Changes Regarding Disposition
When a PHA disposes of public housing property it must receive fair market value (FMV) in return. However, it is possible to dispose property at less than FMV if there is a “commensurate public benefit,” which generally means the disposed property is developed for “affordable housing” serving low-income households (those with income at or less than 80% of the area median income (AMI)). “Affordable housing” included housing developed with the Low-Income Housing Tax Credit (LIHTC). PIH 2024-40 makes a very beneficial improvement to the commensurate public benefit provisions (II.H. page 3) by explicitly calling for the disposed property to be used for or redeveloped as “low-income housing,” listing public housing and project-based Section 8 housing, including public housing converted through RAD. Only if it is not feasible to benefit low-income households with those programs can a PHA turn to “affordable housing” serving households with income at or less than 80% AMI, including LIHTC-assisted housing. The Notice encourages PHAs to give public housing residents priority for occupying “affordable housing.” The new Notice also requires a use restriction to ensure compliance with the commensurate benefit obligation and provides criteria that must be met by a use restriction.
The disposition regulations require a PHA to certify that disposition is in the best interests of residents and the PHA. There are three potential reasons a disposition might be considered in the best interest of residents and the PHA. One reason is that development of low-income housing off-site would be more efficient or effective. PIH 2024-40 (III.A.2, page 7) now requires a PHA to demonstrate that sufficient replacement low-income housing units are being provided in connection with disposition of a property. Before applying for Section 18 disposition, PIH encourages a PHA to first consider applying for a RAD or RAD/Section 18 Blend conversion. The new Notice deletes from Notice PIH 2021-07 the requirement for a PHA to demonstrate why replacement low-income housing units are preferrable (for example, by being more energy efficient, having better unit configuration, being in a better location, or effecting further minority or economic de-concentration).
RAD/Section 18 Blends
A new provision was added to the Rental Assistance Demonstration (RAD) in 2018 through Notice PIH 2018-04, introducing the RAD/Section 18 Blend option, which allowed up to 25% of the public housing units in a RAD project to be “disposed” under Section 18. Notice PIH 2021-07 allowed the percentage of units in a RAD/Section 18 Blend that could convert to PBVs to increase in three increments of 40%, 60%, and 80% depending on construction costs.
The purpose of RAD/Section 18 Blends is to allow a public housing property to undergo RAD conversion for one portion of the property’s units while the remaining units use the Section 18 disposition program’s Tenant Protection Vouchers (TPVs), which are converted to Project-Based Vouchers (PBVs). The primary reason for using the RAD/Section 18 Blend is to improve a project’s financing: PBVs generally provide greater rent revenue than RAD formula rent amounts. The PBV Housing Assistance Payment (HAP) contract at a RAD/Section 18 Blend project may be renewed as many times as necessary in order to keep the PBV units in the RAD project affordable, echoing the RAD program’s requirement that HAP contracts always be renewed.
PIH 2024-40 (III.B.1, page 8) increased the percentage of units in a RAD/Section 18 Blend project that can be Section 18 units from 80% to 90% (with only 10% of the units being straight RAD units) if the project entailed:
- Rehabilitation with hard construction costs exceeding 90% of the area’s Housing Construction Costs (HCC), as determined by PIH;
- Demolition and redevelopment; or
- The transfer of public assistance to a new site under RAD.
If rehabilitation with hard construction costs exceeded 60% of the area’s HHC, then 60% of the units can be Section 18 units (with 40% of the units being straight RAD units). And if rehabilitation with hard construction costs exceeded 30% of the area’s HHC, then 30% of the units can be Section 18 units (with 70% of the units being straight RAD units).
The RAD operations requirements in Notice H-2019-09 PIH-2019-23 (REV 4) states that a PHA may not provide different relocation rights and benefits to residents of a project on the basis of whether they live in a RAD unit or a RAD/Section 18 Blend unit. All RAD resident protection provisions must apply to residents of RAD/Section 18 Blend units. In a clarifying improvement, PIH 2024-40 (III.B, page 8) states that “All residents shall be treated uniformly and in accordance with RAD requirements, including the civil rights requirements and reviews described in the RAD Fair Housing, Civil Rights, and Relocation Notice PIH 2016-17.”
Relocation of Residents
PIH 2024-40 (VII.A, page 17) reminds PHAs of the Section 18 regulations (24 CFR 970.21), which require a PHA to offer each household displaced by demolition or disposition comparable housing that meets housing quality standards (HQS) and is located in an area that is generally not less desirable than the location of the displaced persons. The housing must be offered on a nondiscriminatory basis, without regard to race, color, religion, creed, national origin, disability, age, familial status, or gender, in compliance with applicable federal and state laws. For people with disabilities displaced from a unit with reasonable accommodations, comparable housing “should” include similar accommodations. A PHA is required to pay for the actual and reasonable relocation expenses of each resident to be displaced, including residents requiring reasonable accommodations because of disabilities.
The new Notice also adds (VII.C, page 18) that if a PHA intends to build or otherwise provide affordable replacement housing for the public housing units proposed for removal, PIH recommends that the PHA give the residents who are relocated from the public housing units the first right to occupy the new replacements units, and a PHA must provide any necessary counseling for residents who are displaced. When the PHA is relocating families with Housing Choice Voucher (HCV) assistance (including TPVs), PIH encourages the PHA to provide households with mobility counseling (VII.D, page 18).
Read Notice PIH 2024-40 at: https://tinyurl.com/5n8nz92m
More information about Section 18 and demolition/disposition is on page 4-67 of NLIHC’s 2024 Advocates’ Guide and on NLIHC’s public housing webpage.
More information about public housing is on page 4-36 of NLIHC’s 2024 Advocates’ Guide.
More information about the Rental Assistance Demonstration (RAD) is on page 4-50 of NLIHC’s 2024 Advocates’ Guide and on NLIHC’s public housing webpage.
More information about PHA Plans is on page 8-31 of NLIHC’s 2024 Advocates’ Guide.