Rental Assistance Demonstration (RAD) Update

Presented by Tom Davis, Director

Office of Recapitalization, HUDFebruary 22, 2016

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The Problem• Deferred public housing capital repair needs. 2010 estimate in excess of $25.6B

across the portfolio (>$23k per unit) and rising

• Public housing platform creates barriers to accessing private capital

• 10,000-­‐15,000 public housing units lost each year

• Multifamily “legacy” program properties also at risk

The Solution – Changing the Regulatory Platform• RAD created in FY2012, expanded in FY2015

• Allows public housing to convert on a budget-­‐neutral basis to long-­‐term Section 8 Housing Assistance Payment (HAP) contracts

• Also allows at-­‐risk legacy assisted properties to convert to Section 8 HAP contracts

• Leverages private investment to address capital needs, improving conditions for residents, creating jobs and stabilizing the assisted portfolio

Background on RAD

Background

RAD Program Status Report 2/16/2017

27,8

84

7,10

8

70,2

55

9,39

6

12,2

03

58,1

54

Status of units under RAD cap185,000 units

Reserved Authority for Multiphase orPortoflio Projects

CHAPAward

Pending

CHAPAwarded

FinancingPlan

Submitted

RAD Conversion

Committment (RCC) Issued

Closed

0 812

195

48

7,69

1

4,34

3

2,25

0

2,81

2

RAD Waiting List

Pre-7/28/15 T ier 2 T ier 3 T ier 4 T ier 5 Priority Undet

Total:18,151

Appl ications received prior to 7/28/15 will be awarded CHAPs on a first come first serve basis. All applications after that d ate are sorted into priority tiers in the categories defined in the RAD Notice, with Tier 1 as the highest priority (deepest investment). Applications that have not yet been sorted into a tier are l isted as

Tier 1

$3.90B

Construction Investment in Closed Transactions

No Priority

RAD Public Housing Conversions – Status

3

$3.9 Billion(>$67K per unit)

in construction investment in RAD properties. This

doesn’t include items such as acquisition, soft costs, reserves &

developer fee

58,154 units converted.

≈18,000 units on the waiting list.

Public Housing Conversions

PH Conversions – Program Growth

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NOTE: FY2017 data from RAD 1 closed transactions only through February 16, 2017.

Public Housing Conversions

• Steady growth in conversionsyear to year

• Major process changes improved cross-­‐silo coordination and sped processing times

• Interim evaluation by Econometrica, published September 21, 2016, found:– Proof of concept– 9:1 leverage ratio

• Full evaluation in 2018 will address additional issues including residents’ experiencesand satisfaction

PH Conversions – Investment & Financing

5

Closed Transactions byLevel of Investment

Closed Transactions by Financing Type

NOTE: Percentages derived from RAD 1 closed transactions only through January 5, 2017.

Public Housing Conversions

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Note: This data reflects the regional breakdown of RAD public housing applications (“projects”) received compared to the number of existing public housing projects in each region.

19%

19%

24%

8%**13% excluding NYC

Public Housing Conversions

Public Housing Universe

RAD

PH Conversions – Relative DistributionRAD Pipeline as a Percentage of the Total Public Housing Inventory by Region

Participating PHA Size in RAD Pipeline Compared to PHA Size in Total Public Housing Inventory

Legacy Program Conversions – Status

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Rent Supp/RAP Transactions:• 62 properties remaining in portfolio• 45 active transactions in the

RAD 2 Pipeline• 49 properties have contracts that

expire in 2017• We hope to sunset the Rent Supp &

RAP programs in the next few years

Mod Rehab Transactions:• 9 active transactions in the

RAD 2 Pipeline• 3 applications in process

• Substantial opportunities for Mod Rehab properties

NOTE: Data derived from RAD 2 closed transactions only through January 5, 2017.

Legacy Program Conversions

Conversions & Outstanding Pipeline

2016 Notice Revisions

8Public Housing Conversions

• RAD Fair Housing, Civil Rights & Relocation Notice– No change in underlying fair housing rules from those established in the June, 2015, Rev-­2 of the RAD Notice;; modest changes in timing of fair housing requirements

– Front-­end fair housing review is a risk-­based analysis– Fair housing portions of the Notice provided clarity and transparency to FHEO review– Substantial changes in the relocation requirements designed to facilitate relocation implementation, to provide greater clarity and to enhance resident protections

• RAD Notice Revision 3 – Public Housing Portion– Conform with HOTMA (remove cap on the percentage of PBV units on a site)– Modest changes to underwriting requirements (use of proceeds, developer fee limitations, close-­out expenses for full-­portfolio conversions)

– Simplify eligibility and application procedures – on hold due to Executive Order– Clarify expectations around communication with residents, prohibition on rescreening for

existing residents, rent phase-­‐in and waiting list transfer arrangements

• RAD Notice Revision 3 – Legacy Program Conversions– Revise rent setting provisions

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2016 PD&R Interim Evaluation• HUD’s Office of Policy Development & Research contracted Econometrica,

Inc. to evaluate RAD. Interim Report, published September 21, 2016, finds:

• “Proof of concept” based on closings as of October, 2015.

• RAD transactions demonstrate a leverage ratio of $8.90 for every $1.00 of public housing funds invested

• 20-­‐year projections comparing RAD scenario with counter-­‐factual scenario absent the RAD conversion shows that all four case studies perform better under RAD

• Full evaluation, planned for December, 2018, will address additional issues including residents’ experiences and satisfaction. Interim report data did not include a sufficient number of completed transactions to adequately examine post-­‐completion outcomes and impacts.

Interim Evaluation

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Office of Recap Structure

Director Tom Davis

Affordable Housing Transaction DivisionGreg Byrne

Closing & Post-­Closing DivisionBev Rudman

Program Administration OfficeWill Lavy (Acting)

Branch 2(RAD 2, 236s, Mark-­to-­Market)Minnie Monroe-­

Baldwin

Branch 3(RAD 1st

Component)Harry West

Branch 1(RAD 1st

Component)Alan Kaufmann

Branch 4(RAD 1st

Component, Post-­Mark-­to-­Market)Kara Williams-­Kief

Senior Advisors

Public and Indian Housing (PIH) • Public Housing • Housing Choice Voucher

Fair Housing & Equal Opportunity (FHEO)• Civil Rights and Fair

Housing

Community Planning and Development (CPD) • Relocation

In Coordination With:

Office of General Counsel (OGC) • Legal Review

Thank You.

For evaluation materials, visitwww.huduser.gov/portal/RAD_Evaluation.html

For more information and case studies visit www.hud.gov/rad

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