Skip to main content

Nixon Peabody LLP

  • People
  • Capabilities
  • Insights
  • About
Trending Topics
    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    Practices

    View All

    • Affordable Housing
    • Community Development Finance
    • Corporate & Finance
    • Cybersecurity & Privacy
    • Entertainment & Media
    • Environmental
    • Franchising & Distribution
    • Government Investigations & White Collar Defense
    • Healthcare
    • Intellectual Property
    • International Services
    • Labor, Employment, and Benefits
    • Litigation
    • Private Wealth & Advisory
    • Project Finance
    • Public Finance
    • Real Estate
    • Regulatory & Government Relations
    Industries

    View All

    • Aviation
    • Cannabis
    • Consumer
    • Energy
    • Financial Services
    • Healthcare
    • Higher Education
    • Infrastructure
    • Manufacturing
    • Nonprofit Organizations
    • Real Estate
    • Sports & Stadiums
    • Technology
    Value-Added Services

    View All

    • Alternative Fee Arrangements

      Developing innovative pricing structures and alternative fee agreement models that deliver additional value for our clients.

    • Continuing Education

      Advancing professional knowledge and offering credits for attorneys, staff and other professionals.

    • Crisis Advisory

      Helping clients respond correctly when a crisis occurs.

    • DEI Strategic Services

      Providing our clients with legal, strategic, and practical advice to make transformational changes in their organizations.

    • eDiscovery

      Leveraging law and technology to deliver sound solutions.

    • Environmental, Social, and Governance (ESG)

      We help clients create positive return on investments in people, products, and the planet.

    • Global Services

      Delivering seamless service through partnerships across the globe.

    • Innovation

      Leveraging leading-edge technology to guide change and create seamless, collaborative experiences for clients and attorneys.

    • IPED

      Industry-leading conferences focused on affordable housing, tax credits, and more.

    • Legal Project Management

      Providing actionable information to support strategic decision-making.

    • Legally Green

      Teaming with clients to advance sustainable projects, mitigate the effects of climate change, and protect our planet.

    • Nixon Peabody Trust Company

      Offering a range of investment management and fiduciary services.

    • NP Capital Connector

      Bringing together companies and investors for tomorrow’s new deals.

    • NP Second Opinion

      Offering fresh insights on cases that are delayed, over budget, or off-target from the desired resolution.

    • NP Trial

      Courtroom-ready lawyers who can resolve disputes early on clients’ terms or prevail at trial before a judge or jury.

    • Social Impact

      Creating positive impact in our communities through increasing equity, access, and opportunity.

    • Women in Dealmaking

      We provide strategic counsel on complex corporate transactions and unite dynamic women in the dealmaking arena.

    1. Home
    2. Insights
    3. Alerts
    4. HUD boosts RAD rents with changes to RAD/Section 18 blends

      Alerts

    Alert / Affordable Housing

    HUD boosts RAD rents with changes to RAD/Section 18 blends

    Jan 17, 2025

    LinkedInX (Twitter)EmailCopy URL

    By Kathie Soroka, Deborah VanAmerongen and David Hornstein

    New HUD guidance allows up to 90% of units to be projected based at 110% FMR in more cases. These changes help offset opportunities lost when HUD suspended its Streamlined Voluntary Conversion (SVC) program.

    What’s the impact?

    • More units in RAD transactions will be eligible for higher rents
    • More RAD transactions will pencil out and reach closing faster
    • The SVC program has been suspended

    DOWNLOAD

    PDF: HUD boosts RAD rents with changes to RAD/Section 18 blends

    HUD updated its public housing demolition and disposition (also known as “Section 18”) guidance in a notice published on December 26, 2024 (“Demo Dispo Notice,” HUD Notice PIH-2024-40 (HA)). In addition to general application and processing guidance, the notice updates the percentage of units eligible for Section 18 in Rental Assistance Demonstration (RAD) transactions. Under the new guidance, HUD increased the number of units that qualify for Section 18 and increased the number of factors that trigger the highest percentage of Section 18.

    HUD also published RAD Supplemental Notice 4C on January 16 and we will also be publishing an alert on Supplemental Notice 4C in the coming days.

    What’s included in HUD’s new Section 18 guidance?

    Under the updated guidance:

    • Projects whose construction costs exceed 90% of the HUD-determined Housing Construction Cost (HCC) can designate up to 90% of units as Section 18 units. Previously, only 60% of units qualified for Section 18 units at this threshold unless the project was located in certain high cost areas.
    • Projects that involve demolition and new construction or projects that transfer assistance to a new location can designate up to 90% of units as Section 18 units. Previously, neither new construction nor transfer of assistance were factors that, in and of themselves, qualified units for Section 18.
    • Projects whose construction costs exceed 60% of the HCC can designate up to 60% of units as Section 18. Previously, only 40% of units qualified for Section 18 at this threshold.
    • Projects whose construction costs exceed 30% of the HCC can designate up to 30% of units as Section 18. Previously, only 20% of units qualified for Section 18 at this threshold.
    • Small public housing authority (Small PHAs), those with 250 or fewer public housing units, can designate up to 90% of their units as Section 18 when they present a plan to convert their entire public housing portfolio. Previously, only 80% of units qualified for Section 18 in this scenario.

    Section 18 rents tend to be significantly higher in most jurisdictions. While RAD rent levels typically hover around 80% of the HUD-established Fair Market Rent (FMR), Section 18 units are eligible for Tenant Protection Vouchers (TPVs) which can be project-based at the contract administrator’s payment standard, typically 110% FMR.

    These changes to the RAD/Section 18 blends come in conjunction with HUD’s decision to suspend the Streamlined Voluntary Conversion (SVC) program in light of recent litigation.

     Triggering Factors Benefit Previous Guidance
    Construction costs > 90% of HCC Up to 90% Section 18 Up to 60% for Section 18
    Demolition and new construction Up to 90% Section 18 Not previously an independent trigger
    Transfer of Assistance Up to 90% Section 18 Not previously an independent trigger
    Construction costs > 60% of HCC Up to 60% Section 18 Up to 40% for Section 18
    Construction costs > 30% HCC Up to 30% Section 18 Up to 20% Section 18

    Section 18 opportunities

    The Demo Dispo Notice also updated other provisions relating to application and processing requirements for Section 18 demolition and disposition. Our Affordable Housing Team will continue to track the development and implementation of these changes. We are available to advise how our clients can access and apply these opportunities.

    For more information on the content of this alert, please contact your Nixon Peabody attorney or the authors of this alert. 

    Practices

    Affordable HousingReal Estate

    Industries

    Real Estate

    Insights And Happenings

    • Alert

      Revised FY 2025 fair market rents for New York City

      April 11, 2025
    • Alert

      New York Housing Agencies release Consolidated Guidance on Private Housing Finance Law Section 610

      Jan 27, 2025
    • Alert

      HUD makes changes to RAD public housing conversions with supplemental notice

      Jan 21, 2025
    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.

    Subscribe to stay informed of the latest legal news, alerts, and business trends.Subscribe

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    • Cookie Preferences
    • Privacy Policy
    • Terms of Use
    • Accessibility Statement
    • Statement of Client Rights
    • Purchase Order Terms & Conditions
    • Nixon Peabody International LLC
    • PAL
    © 2025 Nixon Peabody. All rights reserved