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The deadline to submit applications to safeguard rental assistance for residents of properties with Rent Supplement and Rental Assistance Payment (RAP) assistance contracts has passed. The U.S. Department of HUD provides a report of progress to date, and expectations for the future of applications in the pipeline.
HUD reports having received Rental Assistance Demonstration (RAD) applications or letters of interest from two-thirds of all Rent Supplement and RAP properties, and have transactions completed or in progress to preserve more than 3,500 assisted units.
You can check out the full text of what HUD sent out via its RADBlast on April 22, 2013.
The “second component” of the Rental Assistance Demonstration (RAD) provides an opportunity for owners of properties with Rent Supplement, RAP, and Mod Rehab assistance to convert expiring rental assistance contracts to 15-year Project Based Voucher (PBV) contracts. The program allows owners to safeguard rental supports for vulnerable residents, and to harness financing to make repairs and improve projects.
We are pleased to provide an update on Rent Supplement and RAP conversions under RAD.
The second component of RAD, which is noncompetitive, launched last summer, with tremendous uptake. To date, we have received RAD applications or letters of interest from two-thirds of all Rent Supplement and RAP properties, and have transactions completed or in progress to preserve more than 3,500 assisted units.
We have received 39 applications for conversion of assistance. Of those, HUD has fully completed and closed on the conversion of eleven projects, preserving 1,207 units across six states, including a handful of retroactive conversions. Another 18 projects, representing some 1,862 units, have been approved for RAD conversion. For the remainder of this fiscal year, prior to September 30, 2013, HUD anticipates that another 18 projects will come through RAD for conversion.
Letters of Interest
The Second Component of RAD sunsets on September 30, 2013. Due to limited Tenant Protection Voucher (TPV) resources, prioritization of projects for the RAD conversions has been essential. HUD has been accepting applications on a rolling basis for properties that have contract expiration dates on or before September 30, 2013. Owners with Rent Supp or RAP contract expiration dates after September 30, 2013, interesting in participating in RAD, were to submit a signed letter of interest via email no later than April 1, 2013. Those that met the deadline were placed in a queue for consideration should funding become available.
In total, HUD received 152 letters of interest, representing some 11,000 contract units. This equates to approximately half of the universe of all Rent Supp and RAP properties in the inventory, demonstrating strong support of the RAD program. We are currently assessing the availability of funding for the letter of interest transactions and will be putting out information as soon as possible in the coming weeks on which projects we will be able to accommodate this year.
Community and Geographic Impact
Rent Supplement and RAP conversions are concentrated in several states which are home to these properties – New York, New Jersey, Michigan, and Massachusetts. Owners have worked closely with public housing agencies, HUD staff, tenant organizations, housing consultants and state and local housing agencies to complete successful RAD conversions. Many transactions are proposing to repair or rebuild rental homes in areas impacted by Hurricane Sandy. HUD is pleased to partner with these organizations to improve housing, communities, and resident opportunities.
Note: The above reflects data for all active applications under review.
A RAD Success Story
The Detroit Multifamily HUB closed its first RAD transaction on April 16, 2013. Foxfire Apartments is a 160-unit development located in Jackson, Michigan. The project was previously Section 236 uninsured with 32 units assisted with a RAP contract. The local office processed an Interest Reduction Payment (IRP) decoupling and as part of the RAD transaction and Section 236 prepayment, the project now benefits from 72 project based vouchers to be administered by MSHDA. The owner utilized HFA insured financing under the Section 223(f) program and will make an estimated $386,000 in repairs, in addition to the anticipated rehab to be performed in conjunction with low income housing tax credits. The lender is Pillar Capital Finance, LLC and the FHA insured loan amount is $5,044,000.
Margaret S. SalazarActing Associate Deputy Assistant Secretary for the Office of Affordable Housing Preservation
Send questions to email@example.com and visit the RAD website regularly for additional resources. To join the RAD email list, please go here.
Underwriting Instructions for Projects Converting Assistance as part of the Rental Assistance Demonstration (RAD) Program, issued Oct. 11 by the U.S. Department of Housing and Urban Development (HUD), provides 22-pages of detailed information on project eligibility based on timing and type as well as guidance for expedited underwriting transactions including:
According to the notice, properties that participate in Rental Assistance Demonstration (RAD) may:
PHAs and private owners of Rent Supp, RAP or Mod Rehab properties may then leverage the PBRA or PBV assistance contract to attract new financing FHA multifamily mortgage insurance is an important source of debt financing for projects participating in RAD.
The notice indicates that underwriting of public housing, Mod Rehab, Rent Supp and RAP properties with PBV or PBRA assistance under RAD will mirror the underwriting of other properties assisted with Section 8 PBV or PBRA assistance.
HUD endorses many transactions each year involving the acquisition, refinance and rehab of PBRA or PBV-assisted projects. However, HUD is making certain allowances for processing RAD transactions that utilize FHA insured debt to accommodate and expedite these transactions, as described below.
Of particular note to senior housing providers with an interest in housing plus services, the notice indicates (page 8) that, among eligible expenses, an owner/PHA may propose non-shelter services in RAD projects from an external funding source or using surplus cash, with the constraint that no more than 15% of the project’s effective gross income may be used for supportive services, so long as there services would not be commercial in nature or undermine the predominantly residential character of the property.
Applicability of the LIHTC Pilot to RAD Transactions is also addressed in detail.
As with many of the latest pieces on preservation and refinancing, the HUD contact is Margaret S. Salazar in the Office of Multifamily Housing at 202-402-2423.