rental assistance demonstration (rad) filerad key goals rad allows selected public housing and...

*PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL*

WORKING DRAFT

Last Modified 8/6/2014 7:32 PM Eastern Standard Time

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Multifamily for Tomorrow

Rental Assistance

Demonstration (RAD)

Document Type

Date

Multifamily for tomorrow

PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL1

MULTIFAMILY FOR TOMORROW

Why RAD? (Component 1)

Public Housing inventory

▪ ~1.15 million units across 3,100+ PHAs

▪ Capital repair needs in excess of $25.6B across portfolio

($23,365/unit)

▪ Section 9 funding platform unreliable (pro-rations, appropriation

cuts), limited access to debt/equity capital (declaration of trust)

▪ Losing 10,000-15,000 hard units/year




Why RAD? (Component 2)

Affordable multifamily housing in legacy programs “at risk”

▪ Mod Rehab (23,000 units) – cannot renew contracts on terms

needed to secure financing

▪ Rent Supp and RAP (22,500 units) – no option to renew when

contracts expire




RAD key goals

RAD allows selected Public Housing and at-risk assisted Multifamily

“legacy” programs to convert their form of assistance to long-term

Section 8 Housing Assistance Payment (HAP) contracts

Key RAD goals

▪ Build on the proven Section 8 platform

▪ Leverage private capital to make needed repairs and preserve

affordable housing units

▪ Offer residents greater choice and mobility




PHA objectives

▪ Modernize aging properties

▪ Substantially rehabilitate deteriorated properties

▪ Demolish and replace severely distressed/obsolete properties

▪ Thin densities via PBVs and transfer authority

▪ Portfolio streamlining




RAD opportunities

▪ Gives PHAs tools to be market-driven affordable housing

developers

▪ Offers streamlined access to FHA financing with historic low rates

▪ Maximizes leverage of 4% & 9% LIHTCs by providing a stable

Section 8 contract

▪ Streamlines legacy programs onto existing platforms




Public Housing Mod Rehab Rent Supp & RAP

1st Component:

Competitive, “Current Funding”

185,000 Unit Cap (*New*)

PBRA PBV

2nd Component:

Non-Competitive, No Cap (subject

to availability of TPVs)

PBV

RAD conversion eligibility

PBRA (*New*)




Tenant

$318

Tenant

$318

HAP

$474

Capital

$144

Oper-

ating

$330

RAD Section 8 current funding

rent levels

$792$792

Post-Conversion

Section 8

Pre-Conversion

ACC

Tenant Rent

Housing Assistance Payment

Capital Fund

Operating Fund

Sample Public Housing Conversion

Per Unit Monthly (PUM)

▪ Tenants continue

to pay 30% of

their income

towards rent




Contracts and rents

▪ Choice of Section 8 PBV or PBRA

▪ Annual operating cost adjustment factor (OCAF)

▪ RAD HAP funding begins at construction closing

▪ No limitation on use of project cash flow

▪ Automatic Section 8 HAP contract renewals

▪ Use Agreement co-terminus with HAP contract




PBV

▪ Component of PHA’s Housing Choice Voucher

Program. Voucher funding administered by PHA

(w/ admin fee)

▪ 15 year contract (up to 20 with approval of

voucher agency)

▪ Choice mobility option provided to families, if

requested, after one-year of residency

▪ Contract rent caps: Lower of current funding;

reasonable rent; 110% FMR minus utilities

▪ Housing Quality Standards (HQS)

▪ If PBV>50%, social services mandatory in family

projects (elderly, disabled, scattered sites

exempted)

PBRA

▪ Provided to owners by HUD’s Office of

Multifamily Housing via a HAP. Projects

monitored by HUD Office of MF/PBCAs

▪ 20 year contract

▪ Subject to annual appropriations, but strong

history of full appropriations

▪ Choice mobility option can be limited to 15% of

the RAD project units and/or 33% of the PHA’s

annual HCV turn-over

▪ Contract rent caps: Lower of current funding and

120% FMR minus utilities (higher with RCS)

▪ REAC Inspection standard

PBV vs. PBRA




RAD program requirements include

▪ Resident rights protected

– Residents have a right to return post-rehab

– Right to establish resident organization

▪ Davis-Bacon

– Applicable to all initial construction and repairs




RAD application

statistics




Project location

81%

Urban

19%

Rural

Urban

Rural

Urban v. rural




PHA size

45%

Medium

40%

Small

15%

Large

Medium PHA (250-1,250)

Small PHA (<250)

Large PHA (>1,250)

PHA size




Project type

28%

Elderly

72%

Family

Family

Elderly

Elderly v. family




Section 8 conversion type (by project)

49%

PBV51%

PBRA

PBRA

PBV

PBRA v. PBV




Project financing – debt options

40%

Conventional

40%

FHA

20%

No debt

Conventional

FHA

No debt

Debt type

▪ 40% of RAD

applications

propose FHA

financing




LIHTC – 4% and 9%

28%

9% credits

72%

4% credits

9% LIHTC

4% LIHTC

4% v. 9% LIHTC

▪ 50% of RAD

applications

propose LIHTCs




Debt type when no LIHTC

26%

Conventional

74%

FHA

FHA - no LIHTC

Conventional - no LIHTC

FHA v. conventional




Debt type when LIHTC

58%

Conventional

42%

FHA

ConventionalFHA

FHA v. conventional




RAD program update




RAD applications, awards, and closings (as of 1/31/15)

Source: RAD Newsletter, February 2015 | Issue 6

Top 10 RAD applicants by PHA

▪ Chicago, IL 10,935 units

▪ El Paso, TX 6,100

▪ Nashville, TN 5,384

▪ Birmingham, AL 5,015

▪ Baltimore, MD 4,583

▪ San Francisco, CA 4,575

▪ Charlotte, NC 3,424

▪ Mobile, AL 3,410

▪ Tampa, FL 3,065

▪ Greensboro, NC 2,195




Percentage of current PH units by HUD region that

have applied for RAD

6%7%

16%

22%

15%

21%

3%7%

18%

21%




FHA financing options




RAD + FHA financing

Approximately 40% of PHAs are currently utilizing FHA

financing for their RAD conversions

▪ 70% Section 223(f)

▪ 30% Section 221(d)(4)

FHA offers high-leverage, long-term, fixed rate, fully-amortizing,

non-recourse debt at historic low interest rates

HUD has streamlined and centralized RAD/FHA processing

▪ Contract support for 223(f) underwriting

▪ Specialized processing centers for 221(d)(4) underwriting in

Chicago, Atlanta, Ft. Worth, and Seattle




FHA Multifamily Mortgage Insurance Programs

Section 223(f) – refinance or acquisition

▪ Minor/moderate repairs (up to $6,500/unit* x high cost factor)

▪ Permanent loan with 12-month repair escrow

▪ Term: up to 35 years or 75% of REL

▪ Up to 87% LTV (1.15x DSC) for 90%+ rental assistance

Section 221(d)(4) – new construction or substantial rehabilitation

▪ Sub rehab (>$6,500/unit* x HCF or 2 major building systems)

▪ Construction + permanent loan

▪ Term: up to 40 years or 75% of REL

▪ Up to 90% LTC (1.11x DSC) for 90%+ rental assistance

* The 2015 Revised MAP Guide will increase this limit to $15,000/unit when it becomes effective – currently in draft form for public comment




FHA financing + LIHTC

Financing affordable and LIHTC housing is a top priority for

Multifamily Housing at HUD

▪ Launched the FHA LIHTC Pilot Program in 2011-2012

▪ Continue to refine and improve programs/processes to facilitate

use of FHA mortgage insurance with LIHTCs to increase FHA’s

affordable housing production and preservation

▪ FHA LIHTC production doubled from 2013-2014




FHA LIHTC Pilot Program

RAD conversions with 90%+ rental assistance and LIHTCs are

eligible for the FHA LIHTC Pilot Program

▪ Goal: close within 90-120 days from application (current average

is 100 days)

▪ Utilizes existing Section 223(f) program but allows for increased

repairs/moderate rehab (up to $40,000/unit)

▪ Will be expanded to Section 221(d)(4) soon – currently being

tested in California

▪ Program features:

– Streamlined applications

– Distinct application platform and separate processing track

– Designated Pilot processing centers with LIHTC experience




Resources

RAD application materials and additional resources can be found at

www.hud.gov/rad

Email questions to [email protected]

For more information regarding FHA financing, contact a MAP-

approved Lender or your local HUD Multifamily Production office.

rental assistance demonstration (rad) filerad key goals rad allows selected public housing and...

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