RAD Progress Report: More Than 35,000 Units Converted to Project-Based Section 8

Published by Teresa Garcia on Thursday, October 1, 2015
Journal thumb October 2015

Three years have passed since the U.S. Department of Housing and Urban Development (HUD) launched its Rental Assistance Demonstration (RAD), a program that allows public housing authorities (PHAs) to convert housing assistance to long-term, project-based Section 8 contracts. Since then, statistics indicate that the affordable housing preservation program is succeeding on many levels: More than 35,000 units have been converted through RAD, including about 18,000 units closed under the program’s first component and 17,000 under its second component. Additionally, Congress has shown support for the program by extending it through 2018 and more than tripling the cap for the program’s first component from 60,000 to 185,000 units.

RAD makes it possible for PHAs to leverage traditional capital, the low-income housing tax credit (LIHTC) and other financing tools previously unavailable to them. Tom Davis, director of HUD’s Office of Recapitalization, said RAD is providing PHAs with access to more stable funding that can be used to make much-needed repairs and improvements. “On the public housing side, RAD has ensured that over 18,000 units have the resources to cover their capital needs for the next 20 years,” said Davis. “It’s a huge accomplishment representing hundreds of millions of dollars.”

RAD proponents say the program is helping fill a void left by a grossly underfunded public housing system. “Conservative figures put the backlog of capital fund needs for public housing at $26 billion, while others in our industry suggest the backlog is much greater,” said Rob Fredericks, deputy executive director and chief administrative officer of the Housing Authority of the City of Santa Barbara (HACSB) in California. “In most regions, all one needs to do is look at the properties and it is evident that the funding has not been available to properly maintain or to renovate them and they have fallen into disrepair.”

HACSB is in the process of converting its entire portfolio of 316 units across 31 properties through RAD. “Our primary goal of pursuing the RAD conversions of our public housing was to ensure that these important community assets of affordable housing were rehabilitated and preserved as affordable housing for those most in need for generations to come,” said Fredericks.

The Housing Authority of the City of El Paso (HACEP) in Texas was one of the first housing authorities to attempt a portfolio-wide conversion through RAD, with more than 6,100 units being moved to Section 8 project-based rental assistance (PBRA). “We did a capital needs assessment on our properties and we found we needed about $250 million,” said Satish Bhaskar, HACEP’s chief financial officer. Bhaskar said that without RAD, it would have taken HACEP about 50 years to raise the funds needed. With the help of RAD, HACEP is renovating nearly all of its properties, except for six properties that were recently constructed. Planned rehabilitation work for the older properties include asbestos abatement, new wiring and new plumbing.

Implementation

Davis said that while HUD is essentially moving the same amount of funds from one subsidy stream to another, it can be a complex process. “It’s a program that touches multiple regulatory schemes and offices within HUD,” he said. “Making those connections and establishing the processes within the department to transition between regulatory schemes takes work.”

Others said that implementing a new program understandably entails a learning curve, both for HUD and participants. “It was challenging because the program was not just new to us, but it was new to HUD, too,” said Bhaskar. “There was a lot of learning happening on both sides.”

Another challenge has been the boom in volume for HUD staff after the recent unit cap increase. Davis said that fortunately, housing owners have a certain degree of flexibility when designing their transactions. “One of the beauties of the program is that it allows a lot of creativity in the field and proponents of the projects get to come up with solutions that best fit their situation,” said Davis. He said his goal is to provide clear and consistent parameters while offering as much flexibility as possible.

What’s Ahead?

In an ongoing effort to address questions and concerns, HUD staff members are updating RAD’s frequently asked questions (FAQ) document and are reviewing comments on the revised final implementation notice released in June. “The big things we’re focused on are improving the system and building on our accomplishments to date,” said Davis. “We’re working on a variety of projects and communicating with stakeholders as we go along.”

Another HUD goal takes into consideration the continued submission of new applications. HUD hopes for a long-term extension and a lift of the unit conversion cap under RAD’s first component. Davis said that HUD is also considering expanding RAD’s second component to other properties that could benefit from the program.