ARE YOU READY TO RAD?! MN NAHRO - FALL CONFERENCE 2019 Dana Kitchen - - PDF document

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ARE YOU READY TO RAD?!

MN NAHRO - FALL CONFERENCE 2019 Dana Kitchen Division Director, Minneapolis Office of Public Housing

INTRODUCTION

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WHAT IS RAD?

HUD’s Rental Assistance Demonstration program Assisted housing preservation strategy RAD allows selected PHAs to convert Public Housing to long-term Section 8 Housing Assistance Payment (HAP) contracts Combines public housing operating and capital subsidy into a Section 8 HAP contract RAD is a method to obtain outside capital investments RAD is voluntary Minor rehab, major rehab, new construction, mixed income, off-site replacement housing

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WHY RAD?

Much of the nation’s public housing stock has an enormous backlog of capital needs and repairs RAD maintains public ownership of assisted housing Simplifies administration of the program Gives PHAs affordable housing tools of other nonprofit developers RAD allows PHAs to access debt and equity through public and private capital investors to finance capital needs

 Low Income Housing Tax Credits (LIHTC)  Bonds  Loans/Mortgages

Robust residents’ rights providing greater choice and mobility RAD can lead to development of newly designed and accessible units, rehabilitation of existing units, and demolition of obsolete units Converts PHA properties to a more secure Section 8 funding platform

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GENERAL RAD FACTS

Predictable initial contract rent setting

 Rents based on public housing funding levels with certain flexibilities

Annual operating cost adjustment factor (OCAF) Can use PH $$ in development budget to support conversion No limitation on use of project cash flow RAD HAP funding begins at construction closing Long-Term Use Agreement (RAD Use Agreement) HAP Contract Renews Resident Right to Return Preserve FSS Replacement Housing Requirement Not eligible for DDTF or ARF

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SAMPLE RAD SECTION 8 RENTS

At conversion, PHAs will convert funding to a Section 8 contract rent RAD Rents for every public housing property available at www.hud.gov/rad

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RAD CAN HELP YOU TO…

Complete repairs ranging from moderate to substantial Substantial rehab of deteriorated properties Demolish and redevelop distressed/obsolete properties Modernize aging family & elderly properties Thin densities and mix-incomes Move project-based assistance to opportunity neighborhoods Streamline administration of HUD program Stabilize property revenue

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Before RAD After RAD

PH properties are typically not funded at 100% Properties are placed on the more stable Section 8 funding platform PHAs cannot typically borrow money to perform necessary repairs (except for OFFP, CFP, EPC) PHAs can more easily borrow money and perform rehab Funding fails to keep up Living conditions can be improved Residents cannot choose to move without losing housing assistance Residents may receive a tenant-based voucher, or similar assistance, and move after 1 year in PBV or 2 years in PBRA

A BEFORE AND AFTER...

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WILL RAD WORK FOR YOUR PHA?

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KEY QUESTIONS AND CONSIDERATIONS

Defining your RAD project

 Which units, building, developments? Full developments or partial

What are trying to do? Preserve? Rehab? Redevelop? Transfer assistance? How do you plan to finance this conversion? “No-debt”/PH funds only? Debt? Tax Credits? Combination? What form of Section 8 will you choose?

 Project Based Vouchers (PBV) or Project Based Rental Assistance (PBRA)

Capacity and Organizational implications Community Need Will you self-develop and/or manage? Or transfer to a PHA affiliate? Transfer to other Non- Profit/Public Body? Transfer to a For-Profit (LIHTC)? Use a Ground lease? PHA control of partnership or LLC? Will you convert with RAD, Section 18, or some combination of the two? Other repositioning conversions?

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INTERNAL CONSIDERATIONS

Each development stands on its own PHAs have the tools of other affordable housing developers Property Managers can be empowered to manage their own operating budgets with their own replacement reserves Significantly more private leverage Properly structured projects generate unrestricted cash from cash flow, developer fees and loan payments Funding is more predictable Site based waiting lists

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GENERAL RAD ELIGIBILITY

Must be a PHA under an ACC Must be Standard or High Performer under PHAS Must be Standard or High Performer under SEMAP Must be in compliance with HUD reporting and programmatic requirements Must not have a debarment, suspension, or Limited Denial of Participation (LDP) Must submit a completed application that complies with RAD requirements Must not have or resolve any outstanding civil rights matters

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STREAMLINED RAD ELIGIBILITY

Must have 50 or fewer units remaining in PH inventory Must demonstrate that through RAD or other means, the PHA will remove all PH units under ACC and close out its PH program Must have an overall PHAS score of 75 or higher, PASS score of 30 or higher, and not have a Substandard or Troubled designation Must not propose to perform any construction or rehab on the property, undertake any relocation, or transfer the assistance For PBV conversions, must select a Contract Administrator that has at least 100 HCV ACC units

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RAD RENTS

HUD publishes the calculated rents for every public housing property at www.hud.gov/rad

 Rents are posted by bedroom size.

The rents are derived from year-end public housing Operating Fund, Capital Fund, and Tenant Rent data Initial Contract Rents are also capped by applicable PBV or PBRA program rules

 PBV up to 110% of FMR, less utility allowance, and the Reasonable Rent  PBRA up to 120% of FRM, less utility allowance, unless Rent Comparability Study shows up to 150%

Prior to conversion, rents are adjusted each calendar year by HUD’s published Operating Cost Adjustment Factor (OCAF)

 See FR-6128-N-01 published 11/23/2018 for the 2019 OCAFs for each state

For example, for a project that applies today and closes in March of 2020, the initial contract rents will be based on FY 18 funding, with an OCAF adjustment for 2019 and 2020 PHAs do not need to request OCAF adjustments to their CHAPs as HUD makes these amendments automatically

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RAD INVENTORY ASSESSMENT TOOL

Try it for yourself! RAD Inventory Assessment Tool

 https://www.hud.gov/RAD/library/tools

Please contact our office with any questions and for more info!

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PLANNING, APPLYING, FINANCING, AND CLOSING

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RAD PLANNING

Educate the Board!! Know your Financial and Physical Picture Obtain Board Approval Amend PHA Plan Identify Scope of Needed Repairs (not for Streamlined) Identify site for new construction or for transfer of assistance (not for Streamlined) Obtain front-end civil rights review approval from HUD Identify and Assemble Development Team partners (not for Streamlined) Identify Financing (not for Streamlined) Develop Relocation Plan (not for Streamlined) Schedule Resident Meetings – OVER COMMUNICATE!!!

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RAD APPLICATION

Evidence of two resident meetings and responses to comments Certification of Board Approval Financing letters Choice Mobility Commitment Letter Identification and Commitment of partnering PHA/Contract Administrator, if applicable Application Structures

 Partial development  Many-to-One  Multi-phase  Portfolio

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STREAMLINED RAD APPLICATION

The following is eliminated for initial Streamlined RAD applications:

 Information on financing  Financing letter of interest  For PH-only PHAs, identification of a partnering voucher PHA

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CHAP AWARD

Reservation of authority by HUD Establishes rents

 Rents based on Operating Fund, Capital Fund, and Tenant rents

Rent flexibilities and CHAP Amendments (see guide) PIC removal application submitted once CHAP received Starts PHAS scoring exemption PIC Removal Request (30 days after CHAP)

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FINANCING SOURCES FREQUENTLY USED IN RAD

Debt

 Conventional  FHA Insurance

LIHTCs

 4% w/ tax-exempt bonds  9%  Historic Tax Credits

Public Housing Funds

 Operating Reserves  Capital Funds  Demo/Dispo Transition Funding (DDTF)  Sales Proceeds

Deferred Developer Fee Seller Take-Back Financing CDBG/HOME/Federal Home Loan Bank

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FINANCING PLAN

Determination of PBV or PBRA Capital Needs Assessment Scope of Work Environmental Review Accessibility and Relocation Checklist

 Fair Housing, Civil Rights, and Relocation, Notice PIH 2016-17

Sources & Uses Development Team Operating Pro-Forma Market Study PHA Plan Amendment or MTW Plan Amendment Approval of activities and property Affirmative Fair Housing Marketing Plan (for PBRA only) Funds available Transfer of Assistance Resident Comments Site and Neighborhood Standards, if applicable Title Report

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STREAMLINED RAD FINANCING PLAN

The following is eliminated for the Streamlined RAD financing plan:

 Capital Needs Assessment (CNA)  Scope of Work  Development Team  Proposed Financing  Market Study  Approval of Non-Dwelling Real Property

The following is modified/simplified for the Streamlined RAD financing plan:

 No CNA required, but board certification about general property condition required  Sources & Uses  Operating Pro-Forma

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RAD CONVERSION COMMITMENT

Contract HUD uses to approve the Financing Plan Memorializes scope of work to be completed HUD issues RCC and PHA and new owner (if applicable) have 30 days to sign Relocation cannot begin until the later of the effective date of the RCC and applicable notice of relocation (30 or 90 day) has expired

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CLOSING

PHA submits draft closing package (checklist available) RAD Closing Coordinator and HUD field counsel review Release of Public Housing Declaration of Trust (DOT) Execution of Section 8 HAP Contract (PBV or PBRA) Recordation of RAD Use Agreement

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REHAB/CONSTRUCTION

Property covered under HAP contract at close of construction financing Davis-Bacon and Section 3 apply Rehab Assistance Payments paid for vacant units during rehab/construction Office of Recap responsible for overseeing rehab/construction required by RCC Owner submits construction completion certification to RAD Resource Desk

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RAD AGREEMENTS

RAD Use Agreement HAP Contract Mortgage Note, if applicable Regulatory Agreement LIHTC LURA Secondary Financing Notes

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RAD USE AGREEMENT

First Lien Position Survives HAP Termination 80% of AMI No Transfer without HUD Approval

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POST-RAD ORGANIZATIONAL CHANGES

HUD Systems Financial Reporting and Budgets Reserve for Replacement requirement Physical Inspections Post-Conversion Staffing

 PHA salary expense levels higher than in the private affordable market  May need to educate staff with new skills for HUD and/or investor occupancy compliance

Overall Operations

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THE RESIDENTS

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PUBLIC HOUSING RESIDENT PROTECTIONS

Residents have a right to return post-conversion No re-screening of residents at conversion One-for-One Replacement

 Must convert all or substantially all units is covered project

Family Self-Sufficiency

 Current FSS participants continue in program

Right to establish resident organization

 PHA must recognize legitimate tenant organizations

Resident participation funding

 PHA must provide $25 per occupied unit annually for resident participation ($15 per occupied unit > legitimate tenant organization

Resident Procedural Rights

 Consistent with Section 6 of the 1937 Housing Act (and detailed in the RAD Notice)

Resident Relocation

 All relocation is subject to the Uniform Relocation Act (URA) requirements

Choice-Mobility

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RESIDENT RIGHTS AND REQUIREMENTS: PRIOR TO APPLICATION

Resident meetings required prior to application and prior to CHAP award to discuss:

 Whether to transfer assistance to a new site  Whether to partner with a developer  Whether to change the number or configuration of assisted units  Whether any changes might impact a household’s ability to re-occupy the property following repairs or construction  Whether long-term vacant units will be replaced, and  The potential scope of construction work

Resident notices:

 RAD Resident Information Notice (RIN) prior to resident meetings  General Information Notices (GIN) - for URA

Notify any resident organization(s) Consider your Limited-English Proficiency (LEP) Plan RAD conversion is a Significant Amendment to the PHA Plan Assess resident needs and any temporary or permanent relocation

 No relocation activities can occur until the execution of the RAD Conversion Commitment (RCC)  Residents may not be involuntarily displaced 32

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RESIDENT RIGHTS AND REQUIREMENTS: DURING CONVERSION

Substantial replacement of units Relocation assistance Ongoing meetings and information about plans as necessary Continued ability to form a resident organization At least one additional meeting before submitting the Financing Plan is required More meetings if there are any material changes from the pre-application discussion

 Material changes are likely as most PHA’s plans are rough when the application is first submitted

Consider fair housing compliance when planning all meetings and resident communication (meaningful access, language barriers, etc.)

 LEP Plan REQUIRED!!!!

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RESIDENT RIGHTS AND REQUIREMENTS: RELOCATION

RAD provides residents with relocation protections

 Uniform Relocation Act (URA) applies  RAD Fair Housing, Civil Rights, and Relocation Notice PIH 2016-17  Planning and communication requirements including notices provided  Residents have a right to return  No relocation activities can occur until the execution of the RAD Conversion Commitment  Permanent Displacement under URA (*Note: Permanent involuntary relocation is prohibited under RAD)

Cost of temporary relocation should be factored into the development budget Common Relocation Options

 On-site  Other public housing owned by the agency  Other affordable housing owned by the agency  Private housing  Using housing vouchers administered by the PHA

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RESIDENT RIGHTS AND REQUIREMENTS: CURRENT AND ONGOING

Right to Return

 No permanent involuntary relocation!  May be housed in an oversized unit initially, if necessary, to preserve the right to return

No new eligibility screening, including “over-income” households Phase-in of any tenant rent increase if residents were paying less than 30% of adjusted income prior to conversion Continued participation in ROSS and FSS Resident Procedural Rights

 Resident organizing rights  Resident participation funding ($25 per unit per year)

Choice Mobility

 After 1 year for PBV conversions  After 2 years for PBRA conversions

Termination notification requirements Grievance procedures

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RAD AND OTHER REPOSITIONING EFFORTS

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COMBINING RAD?

All RAD All Section 18, including:

 Obsolescence (physical or locational)  Health and Safety  More Efficient/Effective  Scattered sites  Very Small PHAs (50 units or less)

RAD/Section 18 Blends

 Can combine in a single development  75% of the units convert through RAD and 25% disposed through Section 18 w/ PBV replacement  Project will receive TPVs for 25% of all occupied units  Eligible properties include those whose rehab or construction costs are at least 60% of Hard Construction Cost (HCC) limits

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CHOOSING FORM OF SECTION 8

PBRA

Subsidy provided to owners by HUD’s Office of Multi-Family Housing via a HAP Contract with HUD 20-year contract No administrative fee to PHAs Subject to annual appropriations with a strong history of full appropriations Choice mobility option after two years and can be limited Contract rent caps up to 120% FMR (or higher with RCS) Uniform Physical Conditions Standards (UPCS) No Board required No HUD social services requirement

PBV

Administration and funding by PHA via a HAP Contract (would remain part of HUD’s Office of Public Housing) 15-20-year contract PHA can earn administrative fee Subject to annual appropriations with a history of appropriation reductions Choice mobility option provided to families after one year Contract rent caps at either reasonable rent or 110% of FMR Housing Quality Standards (HQS) Board requirements continue If PBV, >50% social services mandatory in family projects (elderly, disabled, scattered sites exempted)

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RESOURCES AND QUESTIONS

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RESOURCES

HUD’s RAD site: www.hud.gov/rad RAD Resource Desk: https://www.radresource.net/ RAD Implementation Notice, Revision, Notice PIH 2019-23 Fair Housing, Civil Rights and Relocation, Notice PIH 2016-17 RAD Inventory Assessment Tool: https://www.hud.gov/RAD/library/tools Email questions to: rad@hud.gov

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