HUD issues updated guidance for RAD conversions

February 18, 2014

Affordable Housing Alert

Author(s): Deborah VanAmerongen

Last week, HUD issued a revised final implementation of the RAD program guidance, based on the re-authorization of Component 2 RAD conversions in the 2014 Omnibus appropriations bill.  Component 2 RAD conversions are divided into two main categories: Mod Rehab conversions and RAP/Rent Supplement conversions.

For Rent Supp and RAP contracts, contract expirations must be between 60 days from issuance of the notice (short-term extensions allowed) and December 31, 2014. Expiration of RAP and Rent Supp contracts for purposes of eligibility includes natural expiration as well as early termination due to prepayment of an underlying mortgage. For Component 2 Mod Rehab conversions, the expiration deadline of the Mod Rehab contract is 120 days from issuance of the updated notice and December 31, 2014. For Component 2 PBV contracts, whether Mod Rehab, RAP or Rent Supp, HUD is allowing a PHA to set initial rents as the rent floor, which was the practice already but now is memorialized.

With regards to the Letter of Interest Queue established last year, HUD stated the following in an e-mail to the RAD list serve: “Please note, if you previously submitted a Letter of Interest to participate in RAD, that letter will not count as an official submission request. The Letter of Interest queue was set up in the event that HUD could accommodate additional conversion requests in FY 13. Given the extended authority in CY14, the Letter of Interest queue is no longer active.”

There are many changes in the Mod Rehab category pertaining to the opening up of Component 1.  Certain provisions are subject to notice and comment within the first 30 days, though applications can be submitted during this period. Component 1 for Mod Rehab is opened on a rolling basis and the unit cap is removed. Portfolio applications and multi-phase developments are allowed under Component 1. Certain PBV contract provisions for Component 1 are waived to allow longer terms (if PHA agrees), instituting OCAF adjustments generally and setting a rent floor to initial rents (subject to some limitations).

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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