RAD: An Important Tool for Preserving Public Housing, not a Temporary Patch

Introduction

On Feb. 5, the House Financial Services Subcommittee on Housing, Community Development, and Insurance held a hearing entitled “A Future Without Public Housing? Examining the Trump Administration’s Efforts to Eliminate Public Housing.” The hearing was held to discuss Chairwoman Maxine Waters’, D-Calif. Housing is Infrastructure bill (among other bills) that, among other things, proposes to fund the Public Housing Operating Fund Backlog. Trump administration cuts to funding for public housing have led to some members of Congress doubting the administration’s support for public housing. Additionally, the Trump administration has proposed to eliminate the entirety of the public housing capital fund in the past three budget requests (FY2019-FY2021). Affordable housing advocates are expected to push for Public Housing Capital funding to be included in the COVID-19 response stimulus package, but how Congress will respond is unknown.

The Rental Assistance Demonstration (RAD) is the lead program being used to address the public housing capital needs backlog. It is considered by many as the lead public housing preservation initiative. As such, it is not surprising that RAD was heavily discussed during the hearing. Several witnesses at the hearing expressed support for RAD, including Ann Gass of the Housing Authority of Austin, Bobby Collins of the Housing Authority of Shreveport, Susan Popkin of the Urban Institute, Katherine Walz of the Shriver Center on Poverty Law, and Eugene Jones Jr. of the Atlanta Housing Authority. Some members of Congress also expressed support for RAD, but others did not. Those members who were critical of RAD highlighted many of the current misconceptions about the program. Their critiques are similar to criticisms held about past programs geared toward rehabilitating public housing, with concerns about tenant displacement at the forefront. However, a recent RAD evaluation, combined with testimony from expert witnesses supporting RAD, show that these critiques are not entirely accurate.

The History and Context of RAD

Enacted by Congress in 2011 under the Obama administration, RAD was created to preserve public housing properties that were in serious disrepair and other legacy federal rental assistance programs. RAD can be seen as the “next generation” of rental housing programs, and was created to address the huge capital backlog (in fall 2019 it was estimated by the National Low-Income Housing Coalition that  $70 billion is needed for public housing maintenance and repairs) that exists for public housing. This is vastly larger than HUD's dated estimation from 2011 of $26 billion.  

The program was originally designed to consolidate the many different HUD rental housing programs and provides two conversion platforms for public housing and other legacy rental assistance properties to choose from: Project Based Rental Assistance (PBRA) or Project Based Vouchers (PBV). It enables PHAs and owners of legacy properties can obtain private financing, such as private debt and low-income housing tax credit (LIHTC) equity, to recapitalize and preserve such properties. By accessing this additional capital, more money can be put into public housing properties to not only improve, but sometimes expand, the supply of affordable homes. RAD authorizing legislation provides tenant protections to allow original tenants to move back into their renovated homes (if they have to relocate at all) once the conversion and rehabilitation is finished, and the recent RAD Evaluation report backed up the importance and effectiveness of these protections.

Why Funds are Needed

Capital is needed to maintain any type of housing and because of the huge public housing capital needs backlog, much of the public housing stock in the United States is in extremely poor condition. Factors that led to this poor condition include the age of the stock, the lack of maintenance and adequate capital improvement funding, and the effects of climate change. The Urban Institute has found that almost half of public housing properties finished their last construction before 1975. Only 17 percent of public housing homes have undergone recapitalization since 1997. Beyond addressing concerns of quality of life for tenants through improved maintenance, RAD is also used to preserve the supply of affordable homes because operating costs of older homes are higher, meaning these homes are at risk of being demolished if the PHAs can no longer afford to operate them. Public housing is also under the threat of climate change - about 100,000 public housing units are in 100- or 500-year floodplains, meaning they are susceptible to severe weather events that could damage the homes even more. RAD can be used to address all these concerns by providing the means to repair the public housing stock and improve their climate resilience

Some of the nation’s most vulnerable populations live in public housing – seniors, persons with disabilities, and the lowest income residents. More than half of the households living in public housing are led by someone who is 62 or older and/or has one or more disabilities. In 2016, the average household living in public housing had an income of only $14,444 per year, and 91 percent of the households were very low-income (households with incomes at or below 50 percent of area median income). This is why the RAD statute contains numerous tenant protections, ensuring these vulnerable populations are able to continue to receive rental assistance throughout the RAD process, and a robust right to return to post-renovated homes. Some of these protections include the resident participation rights, the inability of the PHA to “re-screen” tenants, the maintenance of HUD’s guidelines for affordable rent, and only allowing evictions for “good cause.”

How has RAD been used? Is it effective?

RAD has been effective in achieving its goal of improving the nation’s public housing stock, according to a thorough evaluation of RAD completed by the Urban Institute on behalf of HUD in late 2019. The evaluation researched many aspects of the procedures undertaken during RAD conversions, such as the management process, the treatment of tenants, the end product of the conversion, and more. The evaluation concluded that RAD is very efficient at reaping large amounts of capital. Between 2012 and October 2018, 956 public housing property conversions were completed in the RAD program. These conversions helped leverage $12.6 billion dollars for 102,268 affordable homes, averaging $121,747 per home. The tenants reported being satisfied as well – 76 percent were very or somewhat satisfied with the management of the RAD process.

This evaluation is significant, because it is the first in-depth evaluation of RAD that has been completed. Many PHAs have participated in RAD, and the program is supported by many public housing agency trade groups – such as the Council of Large Public Housing Authorities, the Public Housing Authorities Directors Association, and National Association of Housing and Redevelopment Officials. More than 100,000 public housing homes have gone through RAD conversions, which represents roughly a quarter of the current authorized cap of 455,000 homes. Given that there are a little over a million public housing homes in existence, the number of traditionally financed public housing homes could be cut in almost half.

Skepticism from Congress

Despite the success of RAD, some members of Congress voiced concern at last month’s hearing, particularly regarding whether the program is necessary and the potential displacement of tenants it could cause. These concerns are understandable, particularly coming from members of Congress who are familiar with the history of public housing renovation in the United States.

For example, the HOPE VI program was created with the intention to tear down public housing buildings that were in unlivable condition and replace them with mixed-income developments. The intended ratio for public housing was a one-for-one replacement. However, this ratio was not met, and many renters were instead given a voucher rather than a home in a renovated public housing building. In HOPE VI’s place came the Choice Neighborhoods Initiative, first implemented by the Obama administration; Choice Neighborhoods strove to build upon and learn from the HOPE VI program. The Choice Neighborhoods program provides competitive grants to revitalize distressed neighborhoods containing public housing and other federally assisted housing into mixed-income neighborhoods through the creation of new affordable housing and other income producing properties and activities. Because of the history of programs like HOPE VI, some members of Congress may worry that RAD may follow the same path, and end up hurting some tenants instead of benefitting them. These concerns may have held more weight during the initial stages of RAD, when the program was initially implemented, and data on its track record was not yet available.

However, the HUD evaluation discussed above found that 82 percent of tenants in RAD properties are able to remain in their homes during the conversion process. Out of those who did have to temporarily relocate, 75 percent were able to move back into their original home after the conversion, and 92 percent were able to return to the original property. The witnesses also spoke to the strengths of RAD, such as: the flexibility available in catering to the needs of the specific community; its strong ability to raise capital especially when partnered with LIHTC (which means even more affordable homes can be built); and, the overall improvement in quality of life it brings to public housing tenants. The strength of RAD in rural areas was also mentioned, as other tools (such as vouchers) can be difficult to implement in rural areas. One expert witness at the hearing, Kate Walz of the Shriver Center on Poverty Law, recalled her experience of working with families who would have to move as far as 50 miles to be able to use their voucher. RAD allowed for their units to be updated with private capital and remain standing – in this case, RAD prevented their potential displacement.

RAD According to Experts: Stable and Beneficial

During the hearing, some members of Congress seemed to suggest RAD should be a temporary program that should be eliminated as soon as the capital backlog is filled. However, based on historical trends, it is unlikely that Congress will provide enough appropriations for the public housing capital fund not only to address the capital backlog, but also meet the regularly incurring annual capital needs of public housing. Even if the capital is provided, RAD is still a useful program to maintain because of its ability to leverage private capital with public subsidies.

When asked by Representative Velazquez, D-N.Y., if she would still support RAD if the capital backlog was filled, Ann Gass, of the Housing Authority of the City of Austin, said she would because, with RAD, you can use other financing tools such as the LIHTC. This makes it possible for PHA’s to build even more affordable homes than the capital fund may provide. At a later point in the hearing, Bobby Collins, of the Housing Authority of the City of Shreveport, emphasized the severe lack of funding public housing suffers from. He expressed support for increased funding and maintenance of any financial tools, including RAD, LIHTC, the new markets tax credit, and the historic tax credit.  

Advocacy and Education Needed

Though the proposed fiscal year (FY) 2021 budget was recently released by the White House, the final FY 2021 HUD appropriations is likely to be finalized after the election and by the end of the calendar year 2020. That bill will cover HUD operations through September 2021. While the current RAD unit cap has not yet been reached, because of the popularity of the program, it is likely the cap will be reached by September 2021, if not before. Given that timeline, RAD and affordable housing advocates should push their Congressional representatives to raise the cap of RAD units as part of the FY 2021 HUD appropriations bill. Raising the cap will help ensure that there is no interruption in PHA efforts to preserve public housing under RAD, and it continues to be successful in improving the living conditions for many residents in public housing.

Congress is unlikely to close the tremendous capital needs of public housing purely through appropriations. RAD arguably gives the best of two worlds: affordable homes rehabilitated with private capital that will follow strict affordability requirements due to the enforcement of the federal government. If RAD is eliminated, potential private capital that could be used to preserve and maintain affordable homes is left on the sidelines. Advocates in the affordable housing realm should educate their members of Congress about the benefits of RAD and its ability to better the housing stock and quality of life for many residents. While RAD has a great record of accomplishment, RAD advocates cannot take for granted it will continue with continued support from Congress.  Last month’s hearing made it clear that some members of Congress still need to be convinced.