Rental Assistance
Demonstration (RAD) Update
Presented by
Thomas R. Davis
Office of Recapitalization, HUD
June 22, 2017
RAD Public Housing Conversions – Status*
63,765 Units
converted from Public Housing to Section 8.
$4.07 Billion (>$74K per unit)
in construction investment** in RAD properties. It would have taken participating PHAs 46 years to accumulate
enough public housing Capital Funds to complete a similar amount of construction.
39,000 Construction Trade Jobs
generated and an additional 36,000 indirect jobs induced in the surrounding local economies.
25,047 Units
in the final stages of the conversion pipeline – with RCCs issued or with Financing Plans submitted
225,000 Units
authorized for conversion – an increase of 40,000 units from the previous 185,000 unit cap – but not enough to
cover the ≈ 68,000 units that are on the waiting list.
* Data through June 16, 2017.
** This figure doesn’t include items such as acquisition, soft costs, reserves & developer fee.
PH RAD Status
2
PH Conversions – Financing*
• 44% of transactions involve significant work – from $25K to new construction
• 42% of transactions involve either 4% LIHTC or 9% LIHTC
• A major driver of the deeper-investment transactions, particularly those
using 4% LIHTC, is accessing the value of the existing real estate (most
significantly, by tapping into acquisition credits).
* Data through June 16, 2017.
PH RAD Status
3
PH Conversions – Program Growth
• Steady growth in conversions to
Section 8 year to year
• Interim evaluation by
Econometrica, published
September 21, 2016, found:
– Proof of concept
– 9:1 leverage ratio
– Econometrica leverage ratio was from
2015 data. Updated figure indicates
$19 in other funds for every $1 in PH
funds
• Full evaluation in 2018 will
address additional issues including
residents’ experiences and
satisfaction
NOTE: FY2017 data from RAD 1 closed transactions only through June 15, 2017.
FYE is September 30.
Public Housing Conversions
4
PH Conversions – Where it works
Note: This data reflects the inventory of RAD public housing applications (“projects”) received compared to the inventory of public housing projects existing in each
region prior to any RAD conversions.
Public Housing Conversions
5
Current Hot Topics in PH Conversions
• RAD Fair Housing, Civil Rights & Relocation Notice
– Front-end fair housing review is a risk-based analysis – not everything is reviewed by HUD
– Site and Neighborhood Standards continues to be an area of concern, particularly for new
construction replacement units
– Relocation concerns seem to be somewhat eased, although the rules are complex
• RAD Notice Revision 3
– Conforms with HOTMA (removes cap on the percentage of PBV units on a site)
– Eliminates need for a letter from the LIHTC Allocating Agency in the RAD application
– Revises the developer fee cap in LIHTC transactions
• Implementing the 40,000 Unit Increase in RAD Authority
– HUD is working on a Federal Register Notice which will set the rent levels
– Publication of the Federal Register Notice will start the 60-day clock to convert an LOI to a
RAD application. Missing the 60-day deadline will mean losing one’s place on the waiting list
• Closing Deadlines
Public Housing Conversions
6
2017 Closing Priorities & Deadlines
Summary of Deadlines in RADBlast Issued March 15, 2017
HUD will prioritize transactions that met the applicable deadlines in managing workload
RCCs issued by
March 15, 2017
are expected to
close by
June 30, 2017
Upload all required Financing
Plan documents*
Receive a RAD Conversion
Commitment (RCC)
Submit complete closing package
All RAD documents approved and
ready for HUD signatures
June 22
To be eligible
To be eligible
to close by
to close by
Nov. 30, 2017 Dec. 31, 2017
transaction
transaction
must meet the must meet the
following
following
June 15
July 15
August 15
Sept. 15
Sept. 1
Nov. 16
Oct. 1
Dec. 14
*Note: For FHA-insured financing, the FHA application should also be submitted on or before the date associated with the Financing
Plan submission. Make plans with your FHA lender to keep your financing on track.
7
Legacy Program Conversions – Status
Conversions & Outstanding Pipeline
Rent Supp/RAP Transactions:
•
33 properties remaining in portfolio
•
21 active transactions in the
RAD 2 Pipeline
•
17 properties have contracts that
expire in 2017
•
We hope to wind down the Rent Supp
& RAP programs in the next few years
Mod Rehab Transactions:
•
9 active transactions in the
RAD 2 Pipeline
•
3 applications in process
•
Substantial opportunities for Mod
Rehab properties
NOTE: Data derived from RAD 2 closed transactions only through June 15, 2017.
Legacy Program Conversions
8
Thank You.
For more information and case studies visit
www.hud.gov/rad
9
5/24/17
Equity Market Status
ncsha.org
Concerns for PHAs
• Equity market returns to basics – CRA need,
developer strength, deal complexity, and return
• Limited federal resources & concerns regarding
future availability
ncsha.org
Tools for PHAs
• Uptick in combination 4% and 9% transactions
• Increase transaction size = increase interest
• PHAs of all sizes using combo of public housing
disposition and RAD in singular transaction
• Know your strengths and weaknesses – fill
knowledge gaps
ncsha.org
Lessons Learned
• Worth repeating – estimate closing date and give
yourself an additional month
• Especially true if complex
• Review HFA preferences/restrictions and
compatibility with HUD requirements
• Be realistic about pricing and plan accordingly
ncsha.org
Tips for Converting Existing Mixed-Finance
Properties to RAD
• 20% or less of total units assisted: no RPCA needed
• Can have negative R4R balance after Y10 if not
exceeding 50% of 1st mortgage principal
amortization
• Capital Needs Inflation Rate can be modified to
current local conditions; defaults to 2.5%
• Consideration of future debt-only refinance to
address IDRR
• Educate investors, lenders, & HFAs early in process
ncsha.org
Timing Considerations
for LIHTC/RAD Transactions
• 9% LIHTC apps to be submitted in next available
round following 90 days after CHAP issuance
• 4% LIHTC apps to be submitted 180 days after
CHAP issuance
• RAD Financing Plans due dates:
• 9% LIHTCs: 180 days after LIHTC allocation
• 4% LIHTCs: 90 days after LIHTC allocation
• Projects expected to close within 90 days of RCC
issuance
ncsha.org
Tips for Successful LIHTC/RAD Transactions
• Prepare a feasible “Plan B” if 9% LIHTCs not
awarded, long before awards are announced
• Start Part 58 Environmental Review process early
• Submit FHEO requests early
• Submit RAD Financing Plan soon after 4% LIHTC
app submitted – don’t wait for LIHTC allocation
• Prepare HUD closing docs prior to RCC issuance
• Push for drafts of LPA and loan docs ASAP
• Communicate with investor, lender, and HFA early
re: Subordination to RAD Use Agreement
ncsha.org
Richelle (Shelly) Patton
Tapestry Development Group
[email protected]
404.997.6786
ncsha.org