HUD has published Rev-4 of the RAD Notice
(“Rev-4”) on its website (now renumbered as Notice H-2019-09 / PIH-2019-23(HA)). This blog post summarizes the Rev-4 updates for Component 1 public housing conversions. (Rev-4 also updates guidance on the other RAD component transactions – Mod Rehab, Rent Supp and RAP – and provides new guidance on “RAD for PRAC,” implementing the authority to convert Section 202 PRAC projects through RAD to long-term Section 8 contracts. For more information, see Parts 2, 3 and 4 of this post.)
Highlights of the Component 1 public housing conversion guidance include:
1. PHA joint ventures. Two or more PHAs can join forces to share resources. By entering into a written agreement, they can contribute public housing funds to each other’s projects, rent bundle across each other’s portfolio, transfer land or make other arrangements to facilitate RAD conversions amongst their portfolios.
2. Increased resident protections. Projects mixing RAD and non-RAD PBVs can now apply RAD resident rights to all units, including the avoidance of rescreening and continuation of Earned Income Disregard exclusions, without seeking a special waiver. The guidance also expands requirements for tenant notifications and PHA communication with residents.
3. Rent boost for projects in Opportunity Zones. PBRA projects involving new construction or substantial rehabilitation in Opportunity Zones are eligible for rent increases of up to $100 per unit.
4. Streamlining! CNAs, environmental review and more. For all those struggling with the CNA e-tool, the guidance brings hope of relief! CNA requirements are streamlined – including the elimination of the utility consumption baseline. If you want to make annual replacement reserve deposits equal to $450 per unit, you can skip the CNA entirely. For environmental review, past streamlining efforts have been continued through expansion of categorical reviews of certain transaction elements which simplify submission requirements.
5. Portfolio awards. PHAs can now apply for portfolio awards by indicating the number of units they wish to convert without having to identify the specific units. In addition, multiphase awards are collapsed into portfolio awards.
Additional updates include:
- Davis-Bacon wages do not apply to work done prior to the execution of the HAP contract. The 18-month window is clarified to be following contract execution.
- PHAs will be able to use existing income certifications and will not need to re-certify tenants upon the date of conversion.
- Guidance clarifies requirements for post-closing requests for transfers of assistance.
- Guidance provides standards for PHAs seeking a waiver of the PBV $0 subsidy problem – which prohibits a PHA from renting to a new, otherwise income-qualified tenant if the tenant’s income exceeds the RAD rent.
- An alternative restrictive covenant can facilitate removal of the Declarations of Trust (DOTs) in transfer of assistance projects.
- Projects seeking 9% LIHTCs will not have their CHAPs revoked and can reapply for LIHTCs if they do not receive awards in their initial attempt.
- The 10-year exclusion on conversion of HOPE VI projects is eliminated.
- Applications no longer require financing letters of intent.
- PHAs and Project Owners must have a concept call before submitting a Financing Plan.
- The practice of re-setting rents every two years has been made official policy.
- Guidance implemented in PIH 2018-04 – allowing the 75% RAD – 25% Section 18 blend – and in Notice H-2018-05 / PIH-2018-11 is incorporated – expanded rent bundling, PBV tenant-paid utility savings, developer fee boosts for homeless assistance, and streamlined processing for PHAs with less than 50 units.