HUD Housing Notice § 2017-03
Rental Assistance Demonstration – Final Implementation, Revision 3 (HUD Housing Notices)
HUD guidance — not codified law
In Force
Verified 10/6/2026 · Next check 10/13/2026
effective 10/6/2026FederalAffordable Housing ProgramsOperative Text
HUD Housing Notice § 2017-03
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Public and Indian Housing
Office of Housing
Special Attention of: Notice H-2017-03, REV-3,
Public Housing Agencies PIH-2012-32 (HA)
Public Housing Hub Office Directors
Public Housing Program Center Directors Issued: January 12, 2017
Multifamily HUB Directors
Multifamily Program Center Directors
Regional and Field Office Directors Expires: This Notice remains
Regional Administrators in effect until amended,
Performance Based Contract Administrators superseded, or rescinded.
SUBJECT: Rental Assistance Demonstration – Final Implementation, Revision 3
Purpose
This revised notice (Notice) provides program instructions for the Rental Assistance
Demonstration (RAD or Demonstration), including eligibility and selection criteria.
Background
RAD is authorized by the Consolidated and Further Continuing Appropriations Act of 2012
(Pub. L. No. 112-55, approved November 18, 2011), as amended by the Consolidated
Appropriations Act, 2014 (Pub. L. No. 113-76, approved January 17, 2014), the Consolidated
and Further Continuing Appropriations Act, 2015 (Pub. L. No. 113-235, approved December 6,
2014), and Division L, Title II, Section 237 of the Consolidated Appropriations Act (Pub. L. No.
114-113, enacted December 18, 2015), collectively, the “RAD Statute.” RAD has two separate
components:
First Component. The First Component allows projects funded under the public housing
program to convert their assistance to long-term, project-based Section 8 rental assistance
contracts. Under this component of RAD, public housing agencies (PHAs) may choose
between two forms of Section 8 Housing Assistance Payment (HAP) Contracts: project-
based vouchers (PBVs) or project-based rental assistance (PBRA). No incremental funds
are authorized for this component. PHAs will convert their assistance at current subsidy
levels. The 2015 Appropriations Act authorizes up to 185,000 units to convert assistance
under this component. Section I of this Notice provides instructions for PHAs that apply
for conversion under the First Component.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 1
While the RAD Statute, as amended, contains language authorizing HUD to convert
Section 8 Moderate Rehabilitation (Mod Rehab) projects (including Mod Rehab SROs)1
under the First Component, HUD is exercising its discretion to prioritize public housing
conversions under the competitive requirements of this component. The demand for
public housing conversions is extremely high and significantly exceeded the initial
limitation on the number of units that could be converted under the First Component. In
addition, unlike Mod Rehab conversions, there is no Second Component option available
for public housing projects. Consequently, Mod Rehab conversions are processed
exclusively under the Second Component of RAD, which is non-competitive. Any Mod
Rehab projects which initiated processing under the First Component either may be
grandfathered under the provisions of Revision 1 of this Notice or have the option to
switch to a conversion under the Second Component.
Second Component. The Second Component allows owners of projects funded under the
Rent Supplement (Rent Supp), Rental Assistance Payment (RAP), and Mod Rehab
programs to convert tenant protection vouchers (TPVs) to PBVs or PBRA upon contract
expiration or termination occurring after October 1, 2006. While there is no cap on the
number of units that can convert assistance under this component of RAD, and no
requirement for competitive selection, PBV conversions under this component are subject
to the availability of TPVs. Section II of this Notice provides instructions for owners of
Mod Rehab projects. Section III of this Notice provides instructions for owners of Rent
Supp and RAP projects.
Collectively, pre-conversion projects whose assistance is converting from one form of rental
assistance to another are referred in this Notice as “Converting Projects.” Post-conversion
projects with assistance converted from one form of rental assistance to another are referred in
this Notice as “Covered Projects.”
Previous versions of this Notice were published as follows:
PIH 2012-18 (March 8, 2012, superseded by PIH Notice 2012-32)
PIH Notice 2012-32 (July 26, 2012)
PIH Notice 2012-32 REV-1 (July 2, 2013)
PIH Notice 2012-32 REV-1 Technical Correction (February 6, 2014)
PIH 2012-32 Rev 2 (June 15, 2015).2
1
Because the RAD Statute now includes Mod Rehab SRO, all references in this Notice to Mod Rehab include Mod
Rehab SRO unless otherwise stated.
2
See http://portal.hud.gov/hudportal/documents/huddoc?id=pih2012-32rev1.pdf.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 2
Generally, public housing projects converting assistance under RAD will be bound by the terms
of the Notice in effect at the time of closing. Therefore, the terms of this Notice will apply to all
projects currently seeking conversion of assistance, even if a CHAP has already been issued,
with the exception of the provisions of Section 1.9 regarding Letters of Interest, which shall go
into effect as specified in such Section 1.9, and the provisions of Section 1.11, which shall go
into effect as specified in Section 1.11.C. All conversions under the Second Component will be
bound by the notice in effect at the time of the conversion request. However, projects that have
not yet closed may request HUD approval to convert under the terms of this revised Notice.
Finally, as described above, Mod Rehab projects which initiated processing under the First
Component have the option to be grandfathered under provisions of Revision 1 of this Notice.
For all conversion types, HUD reserves the right, in its sole discretion, to apply provisions from
previous versions of this Notice to program participants that are near conversion.
Notice and Comment for Changes in Eligibility and Selection Criteria
Unless HUD receives comment that would lead to the reconsideration of any of the indicated
changes in eligibility and selection criteria, these changes will become immediately effective
upon the expiration of the 30-day comment period. If HUD receives adverse comment that leads
to reconsideration, HUD will notify the public in a new revision immediately upon the expiration
of the comment period. Please submit all comments to RAD@hud.gov.
PHAs and Project Owners applying to RAD during the 30-day public comment period will be
subject to the new eligibility and selection criteria of this Notice. In the event that HUD
reconsiders any changes to the eligibility and selection criteria after the 30-day comment period
that materially impact an application submitted during the comment period, a PHA or Project
Owner may amend an application previously submitted. However, CHAPs and Portfolio Awards
for projects satisfying eligibility and selection criteria that are subject to notice and comment will
only be issued upon expiration of the comment period.
Notice Organization
The main body of this Notice (Program Instructions) is divided into three sections:
Section I: Provides instructions to PHAs and their development partners, who can
convert the assistance of public housing projects under the First Component of the
Demonstration.
Section II: Provides instructions to owners of Mod Rehab projects, including SROs, who
can convert the assistance of these projects under the Second Component of the
Demonstration.
Section III: Provides instructions to owners of Rent Supp and RAP projects, who can
convert the assistance of these projects under the Second Component of the
Demonstration.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 3
Please refer to the appropriate section for relevant instructions. A table of contents is provided on
pages 6-8 of this Notice for reference.
Demonstration Goals
RAD provides the opportunity to test the conversion of public housing and other HUD-assisted
properties to long-term, project-based Section 8 rental assistance to achieve certain goals,
including the preservation and improvement of these properties through enabling access by
PHAs and owners to private debt and equity to address immediate and long-term capital needs.
RAD is also designed to test the extent to which residents have increased housing choices after
the conversion, and the overall impact on the subject properties.
Evaluation
Each component of RAD will be evaluated separately:
For the conversion of public housing assistance to long-term, project-based Section 8
with no incremental funding, HUD is required under the RAD Statute to assess and
publish findings regarding the impact of the conversion on: the preservation and
improvement of the former public housing units, the amount of private capital leveraged
as a result of such conversion, and the effect of such conversion on residents. (The 2012
Appropriations Act does not require an evaluation of the conversion of Mod Rehab under
the First Component.) HUD has published “A Progress Report on the Rental Assistance
Demonstration (RAD) Evaluation,” which provides a summary of early program results
and outlines the evaluation underway.3 In addition, in September, 2016, HUD published
the “Interim Report: Evaluation of HUD’s Rental Assistance Demonstration (RAD).”4
For the conversion of TPVs to PBVs, the legislation requires that the Comptroller
General of the United States conduct a study of the long-term impact of the fiscal year
2012 and 2013 conversion of TPVs to PBVs on the ratio of tenant-protection vouchers to
project-based vouchers. The study, which was completed and published on April 24,
2014, is available at http://www.gao.gov/products/GAO-14-402.
Further Information
Please check www.hud.gov/rad for the latest information on RAD or to join the RAD listserv.
Materials referenced in this Notice may be obtained from this RAD website. Email questions to
RAD@hud.gov. Additionally, HUD will develop informational materials to address various
program elements that HUD will post on the RAD website.
3
http://www.huduser.org/portal/RAD_Evaluation.html
4
http://portal.hud.gov/hudportal/documents/huddoc?id=RAD_InterimRpt_Final.pdf
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 4
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act (PRA), HUD may not conduct or sponsor, and
a person is not required to respond to, a collection of information unless the collection displays a
currently valid OMB control number. OMB approved application and information collection
forms will be posted on the RAD website and the Federal Register.
Lourdes Castro Ramírez, Principal Deputy Ed Golding, Principal Deputy Assistant
Assistant Secretary for Public and Indian Secretary for Housing
Housing
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 5
Table of Contents
PROGRAM INSTRUCTIONS
TABLE OF CONTENTS
1
PURPOSE 1
TABLE OF CONTENTS 6
DEFINITIONS 9
SECTION I: PUBLIC HOUSING PROJECTS 16
PURPOSE 16
GENERAL PROGRAM DESCRIPTION 16
ELIGIBILITY 19
PROJECT CONVERSION REQUIREMENTS AND FINANCING CONSIDERATIONS 22
WAIVERS, ALTERNATIVES, AND OTHER PUBLIC HOUSING REQUIREMENTS 40
SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS 47
SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBRA 65
RESIDENT NOTIFICATION 82
APPLICATION REQUIREMENTS 85
SUBMISSION OF APPLICATIONS 90
SELECTION CRITERIA 91
CHAP AWARD AND FINANCING PLAN SUBMISSION 94
CLOSING 97
DEVELOPER FEE 101
ADDITIONAL INFORMATION 102
ATTACHMENT 1A – FINANCING PLAN REQUIREMENTS AND FEASIBILITY BENCHMARKS 103
ATTACHMENT 1B – RESIDENT PROVISIONS IN CONVERSIONS OF ASSISTANCE FROM PUBLIC
HOUSING TO PBRA AND PBV 115
1B.1 SUMMARY OF RESIDENT PROVISIONS 115
1B.2 RESIDENT PARTICIPATION AND FUNDING 117
ATTACHMENT 1C – CALCULATION OF HAP CONTRACT RENTS FOR CONVERSIONS OF ASSISTANCE
FROM PUBLIC HOUSING TO PBRA OR PBV 121
ATTACHMENT 1D – REQUIREMENTS FOR RAD-SPECIFIC PHA PLAN AND/OR SIGNIFICANT
AMENDMENT TO THE PHA PLAN SUBMISSIONS 128
ATTACHMENT 1E - HOUSE RULES: ADDENDUM A – RESIDENT PROCEDURAL RIGHTS 136
SECTION II: MODERATE REHABILITATION PROJECTS 138
2.1 PURPOSE 138
2.2 GENERAL PROGRAM DESCRIPTION 138
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 6
Table of Contents
2.3 ELIGIBILITY 140
2.3.1 ELIGIBLE OWNERS 140
2.3.2 ELIGIBLE PROPERTIES AND UNITS 141
2.4 CONVERSION PLANNING REQUIREMENTS 143
2.5 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS 147
2.6 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBRA 149
2.7 SPECIAL PROVISIONS AFFECTNG CONVERSION OF SROS 153
2.8 CONVERSION REQUIREMENTS 155
2.8.1 INITIAL SUBMISSION OF INTEREST TO HUD 155
2.8.2 PHA ADMINISTRATION OF THE PBV CONTRACT 156
2.8.3 RESIDENT NOTIFICATION AND CONSULTATION 157
2.8.4 FINANCING PLAN, RAD APPROVAL, AND CLOSING 160
2.9 ADDITIONAL INFORMATION 161
ATTACHMENT 2A: FINANCING PLAN REQUIREMENTS AND FEASIBILITY BENCHMARKS 162
SECTION III: RENT SUPPLEMENT AND RENTAL ASSISTANCE PAYMENT
PROJECTS 171
3.1 PURPOSE 171
3.2 NOTE ON EFFECTIVE DATE 171
3.3 GENERAL PROGRAM DESCRIPTION 171
3.4 ELIGIBILITY 174
3.4.1 ELIGIBLE PROPERTIES AND UNITS 176
3.5 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS 181
3.6 SPECIAL PROVISIONS AFFECTING CONVERSION TO PBRA 184
3.7 PROCESSING REQUIREMENTS FOR PROSPECTIVE CONVERSIONS 187
3.7.1 OWNER SUBMISSIONS FOR PROSPECTIVE CONVERSIONS 190
3.7.2 PBV: HUD REVIEW OF PROSPECTIVE CONVERSION REQUEST, SELECTION OF PHA,
AND FUNDING AND EXECUTION OF HAP CONTRACT 196
3.7.3 PBRA: HUD REVIEW OF PBRA REQUEST AND EXECUTION OF CONTRACT 198
3.8 PROCESSING REQUIREMENTS FOR RETROACTIVE CONVERSIONS 199
3.8.1 SUBMISSION OF REQUESTS FOR RETROACTIVE CONVERSIONS 201
3.8.2 REVIEW AND CONSENT OF PHA AND EXECUTION OF PBV HAP CONTRACT 203
3.9 ADDITIONAL INFORMATION 203
APPENDIX I – 24 CFR PART 880 REGULATION, STRICKEN FOR PBRA
CONVERSIONS 204
APPENDIX II –THE U.S. HOUSING ACT OF 1937, WAIVED FOR PBRA
CONVERSIONS 236
APPENDIX III – PBRA SITE AND NEIGHBORHOOD STANDARDS 237
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Table of Contents
APPENDIX IV– NEW CODES FOR SPECIAL PROGRAMS REPORTED ON THE
FAMILY REPORT (FORM HUD-50058) FOR THE RENTAL ASSISTANCE
DEMONSTRATION PROGRAM. 240
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 8
Definitions
DEFINITIONS
The Act. The United States Housing Act of 1937.
Administering PHA. A PHA that administers rental assistance under the Act, which may include
the HCV, Mod Rehab, or PBV programs.
Affordable Housing Purposes. Activity that supports the pre-development, development or
rehabilitation of other RAD conversions, public housing, section 8 of the Act, Low-Income
Housing Tax Credits (LIHTC), or other federal or local housing programs serving households
with incomes at or below 80% of area median income, or that provide services or amenities that
will be used primarily by low-income households as defined by the Act.
Anniversary of the HAP Contract. The annual recurrence of the date of the first day of the term
of the HAP Contract.
Annual Contributions Contract (ACC). The written grant agreement between HUD and a PHA
under which HUD agrees to provide funding for a program (e.g., public housing or Housing
Choice Vouchers (HCV)) under the Act, and the PHA agrees to comply with HUD requirements
for the program.
Capital Needs Assessment (CNA). A detailed physical inspection of a property to determine
critical repair needs, short- and long-term rehabilitation needs, market comparable
improvements, energy efficiency, unmet physical accessibility requirements, and environmental
concerns, including lead-based paint. Criticial repairs are work that, in HUD’s determination,
address imminent health and safety threats to residents and must be completed before residents
can occupy or continue to occupy the affected units.
Choice-Mobility. For residents of Covered Projects, the option to obtain a HCV from a PHA
after a defined period of residency. (See Section 1.7.C.5 of this Notice for PBRA conversions,
and Section 1.6.D.9 for PBV conversions, for further details on the Choice-Mobility component.)
Closing. The event during which the applicable transaction documents are entered into.
“Conversion” does not occur prior to Closing. (See Section 1.13 for further details on closing.)
Combined Agency. A PHA that either directly, or through an affiliate, administers both a HCV
program and public housing.
Commitment to enter into a Housing Assistance Payments Contract (CHAP). Conditional
commitment provided to the PHA for units that have been selected under the First Component of
the Demonstration that describes the terms under which HUD would enter into a HAP Contract
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 9
Definitions
with the Project Owner once the project complies with all requirements in the CHAP, this
Notice, and other statutory and regulatory requirements applicable to the project.
Contract Administrator. HUD or a PHA under ACC with HUD that either executes a HAP
Contract with a Project Owner or, in PBRA, to which HUD may assign the HAP Contract and
which upon assignment is responsible for administering the HAP Contract.
Contract Rent. The total amount of rent specified in the HAP Contract as payable to the Project
Owner for a unit occupied by an eligible family. In PBV, the contract rent is referred to as “Rent
to Owner.”
Converting Project. The pre-conversion property whose assistance is converting from one form
of rental assistance to another under the Demonstration.
Covered Project. The post-conversion property with assistance converted from one form of
rental assistance to another under the Demonstration.
Current Funding. Applicable to public housing conversions, the combination of Federal subsidy
and tenant rents for which a project is eligible under the public housing program in the fiscal
year of conversion. (See Sections 1.6.B.5 and 1.7.A.5, and Attachment 1C for further details on
current funding.)
Date of Full Availability (DOFA). Per 24 CFR § 905.108, the last day of the month in which
substantially all (95 percent or more) of the units in a public housing project are available for
occupancy.
Declaration of Restrictive Covenants (DORC). The restrictive covenants covering a public
housing mixed-finance project that obligate the Project Owner to operate project in accordance
with the Act, HUD regulations, the ACC, the Mixed Finance ACC Amendment, and the HOPE
VI Grant Agreement (if applicable).
Declaration of Trust (DOT). The restrictive covenant on projects assisted through a public
housing ACC that obligates PHAs to operate public housing projects in accordance with the
ACC, the Act, and HUD regulations and requirements.
Distributions. Any withdrawal or taking of surplus cash by the Project Owner (see definition for
“Surplus Cash”, below). Surplus cash, once determined pursuant to applicable HUD
requirements, is not subject to further federal restrictions.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 10
Definitions
Enhanced Vouchers (EVs). Tenant protection vouchers provided pursuant to an eligibility event
under section 8(t) of the Act. EVs differ from regular vouchers in three significant ways: (1) the
payment standard used to calculate the voucher housing assistance payment for EVs may exceed
a PHA’s ordinary payment standard; (2) an EV provides residents with a right to remain in the
project as long as the units are used for rental housing and are otherwise eligible for voucher
assistance; and (3) the household must pay for rent no less than the rent the household was
paying on the date of the eligibility event (minimum rent). If the household elects to move, the
voucher is administered as a regular voucher. HUD provides EVs and funding to a voucher
agency that has jurisdiction over the area in which the property that the eligibility event occurred
is located.
Fair Market Rent (FMR). The cost in a particular housing market area of privately owned,
decent, safe and sanitary rental housing. HUD establishes and publishes in the Federal Register
FMRs for dwelling units of varying sizes for each metropolitan area. FMRs are gross rent
estimates, i.e., they include the cost of tenant-paid utilities. See 24 CFR part 888 subpart A.
Family Self-Sufficiency (FSS). FSS is a program designed to promote self-sufficiency of assisted
families through the coordination of services. Residents enter into a five-year contract of
participation which outlines goals related to seeking, obtaining, and maintaining employment.
During the period of participation, residents may earn an escrow credit, based on increased
earned income. FSS Coordinator funding may be available to PHAs to pay for the costs of a
program coordinator who links residents with training opportunities, job placement
organizations, and local employers.
Financing Plan. Documentation submitted to HUD for review to demonstrate that the Covered
Project can be sustained physically and financially for the term of the HAP Contract at the rent
levels permitted under the Demonstration. The Plan must show how the project’s immediate and
long-term capital needs will be addressed.
Good-Cause Exemption. An allowance made by HUD exempting a PBRA Covered Project from
the Choice-Mobility component. (See Sections 1.7.C.5 and 2.6.J for further details on good-
cause exemptions.)
Green Building. An approach to building, rehabilitation, repairs, maintenance, and property
operations that is more sustainable than traditional approaches to such activities and results in a
project that is more energy efficient, costs less to operate, has better indoor air quality, and
reduces its overall impact on the environment. (See Section 1.4.A.2 for further details on green
building.)
Housing Assistance Payment (HAP). The payment made by the Contract Administrator to the
Project Owner of an assisted unit as provided in the HAP Contract. Where the unit is leased to an
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 11
Definitions
eligible household, the payment is the difference between the contract rent for a particular
assisted unit and the tenant rent payable by the family.
Housing Quality Standards (HQS). Standards set forth in 24 CFR § 982.401 that must be met by
all units in the HCV program before assistance can be paid on behalf of a household. The HQS
in 24 CFR § 982.401 apply to PBV, in accordance with 24 CFR § 983.101. Generally, Voucher
Agencies must conduct HQS inspections of PBV projects not less than biennially during the term
of the HAP Contract.
HAP Contract. The contract entered into by the Project Owner and the contract administrator
that sets forth the rights and duties of the parties with respect to the Covered Project and the
payments under the contract.
Mixed-Finance Project. A public housing project developed with a combination of private
financing and public housing development funds in accordance with 24 CFR part 905 subpart F.
Operating Cost Adjustment Factor (OCAF). An operating cost adjustment factor established by
HUD that is applied to current contract rent, less the portion of the rent paid for debt service.
Ownership or Control. The RAD Statute provides requirements for the ownership or control of
Covered Projects under the First Component. See Section 1.4.A.11 for a description of how to
satisfy those requirements for PBV and PBRA conversions.
Prepayment. The satisfaction (i.e., payment in full) of the underlying mortgage prior to its
maturity date. Prepayment is one of the eligibility triggering events for RAD conversion under
Section III of this Notice.
Project. For purposes of determining a RAD transaction, a “project” is a structure or group of
structures that in HUD’s determination are appropriately managed as a single asset. In
determining whether a combination of structures constitute a project, HUD will take into account
types of buildings, occupancy, location, market influences, management organization, financing
structure or other factors as appropriate. For a RAD PBV conversion, the definition of “project”
in 24 CFR § 983.3 continues to apply for all references to the term in 24 CFR § 983.5
5 For instance, 24 CFR § 983.202 provides, in part, “With the exception of single family scattered site projects,
a HAP contract shall cover a single project. If multiple projects exist, each project shall be covered by a
separate HAP contract.” The definition of “project” in 24 CFR § 983.3 is used to determined how many PBV
HAP Contracts must be entered into.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 12
Definitions
Project-Based Voucher (PBV). A component of a PHA’s HCV program, where the PHA attaches
voucher assistance to specific housing units through a PBV HAP Contract with an owner. Unlike
a tenant-based voucher, the PBV assistance remains attached to the unit when the family moves,
and assists the next eligible family to move into the PBV unit. The PBV program is administered
by HUD’s Office of Public and Indian Housing.
Project-Based Rental Assistance (PBRA). Rental assistance under Section 8(C) of the Act
provided by HUD to owners according to the terms of a HAP Contract for the provision of
housing to eligible tenants. The PBRA program is administered by HUD’s Office of Housing.
Project Owner. For purposes of Section I, II, and III of this Notice, the term Project Owner refers
to the owner of the Covered Project, including but not limited to any owner pursuant to a HAP
Contract. For purposes of HAP Contracts, an Owner is a private person, partnership, or entity
(including a cooperative), a non-profit entity, a PHA or other public entity, having the legal right
to lease or sublease the dwelling units subject to the HAP Contract.
Public Housing Agency (PHA). A Public Housing Agency that administers programs under the
Act, which could include public housing and HCVs. In addition to this general definition, the
term PHA, as used in this Notice, refers to the owner of a First Component Converting Project
(even if the project is a mixed finance project and the PHA does not own ACC units).
Public Housing Assessment System (PHAS). The current system used to measure the
performance of PHAs administering the public housing program, per 24 CFR part 902, or any
successor system.
Public Housing Project. Per 24 CFR § 905.108 the term ‘‘public housing’’ means low-income
housing, and all necessary appurtenances thereto, assisted under the Act, other than assistance
under 42 U.S.C. § 1437f of the Act (section 8). The term ‘‘public housing’’ includes dwelling
units in a mixed finance project that are assisted by a PHA with public housing Capital Fund
assistance or Operating Fund assistance. When used in reference to public housing, the term
‘‘project’’ means housing developed, acquired, or assisted by a PHA under the Act, and the
improvement of any such housing. Each public housing project has a project identification
number in the Public and Indian Housing Information Center (PIC), though a PHA may propose
to convert individual sites within the public housing project..
RAD Conversion Commitment (RCC). For the First Component, the contract executed by HUD,
the PHA and, as applicable, the post-conversion Project Owner. The RCC follows HUD approval
of the Financing Plan and describes the terms and conditions of the conversion. (See Section
1.12 and Attachment 1A for further details on the RCC.)
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Definitions
RAD Fair Housing, Civil Rights and Relocation Checklist or Checklist. The Accessibility and
Relocation Checklist or its successor, the RAD Fair Housing, Civil Rights and Relocation
Checklist (when available) used in First Component transactions.
RAD Use Agreement. Applicable to the First Component, the document specifying the
affordability and use restrictions on the Covered Project, which will be coterminous with the
HAP Contract and must be recorded in a superior position to any new or existing financing or
other encumbrances on the Covered Project. (See Sections 1.6.B.4 and 1.7.A.4 for further details
on the RAD Use Agreement.)
Resident Opportunity and Self-Sufficiency Service Coordinators (ROSS-SC). Funding under this
program is made available for Service Coordinators. Service Coordinators assess the needs of
residents of public housing and coordinate community resources to meet those needs. These
services should enable participating families to make progress toward achieving economic
independence and housing self-sufficiency, or, in the case of elderly or disabled residents,
improve living conditions and enable residents to age-in-place.
Section Eight Management Assessment Program (SEMAP). The current system used to measure
the performance of PHAs administering the Section 8 HCV program, per 24 CFR part 985, or
any successor system.
Surplus Cash. For both PBV and PBRA, following completion of the Work, the amount
determined to be available at the end of an annual fiscal year period after payment, or after funds
have been set aside for payment, of (i) operating expenses, (ii) mortgage payments, and (iii) all
amounts required to be deposited in the replacement reserve or other restricted accounts essential
to the Covered Project’s operations.
Tenant Protection Vouchers (TPVs). Vouchers issued to eligible tenants of certain properties
when an event at the property would otherwise expose tenants to a loss of rental assistance,
resulting in an increase in their housing costs. Such events include when a Rent Supp or RAP
contract terminates due to expiration, prepayment of the underlying mortgage, or an enforcement
action. HUD provides TPVs and funding to a voucher agency that has jurisdiction over the area
in which the property is located. TPVs may be regular HCVs, which are administered in
accordance with all HCV program requirements, or EVs, as described above.
Tenant Rent. The amount payable monthly by the household as rent to the unit owner as defined
in 24 CFR Part 5.
TTP. The total tenant payment as calculated pursuant to 24 CFR Part 5.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 14
Definitions
Uniform Physical Condition Standards. Protocols used for HUD Real Estate Assessment Center
(REAC) physical inspections in accordance with 24 CFR part 5, subpart G.
Utility Allowance. As defined in 24 CFR Part 5, the amount that a PHA or Project Owner
determines is reasonable for tenant-paid utility costs. In the case where the utility allowance
exceeds the Total Tenant Payment (as defined at 24 CFR § 5.613), the tenant is reimbursed in the
amount of such excess.
Voucher Agency. A PHA that administers a HCV program.
Work or Scope of Work. The scope of work required by HUD to be performed within a defined
period following the conversion and specified in the RCC or other RAD conversion documents.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 15
Section I: Public Housing Projects
SECTION I: PUBLIC HOUSING PROJECTS
Purpose
Section 1 of this Notice provides instructions to PHAs and their development partners seeking to
convert assistance of a public housing property.
General Program Description
Under the First Component of RAD, PHAs may choose between two forms of Section 8 Housing
Assistance Payment (HAP) Contracts: project-based vouchers (PBVs) or project-based rental
assistance (PBRA). No incremental funds are authorized for this component. As such, initial
contract rents are established based on public housing funding levels, and are subject to
applicable program rent caps. Applications may be submitted for a specific project (using the
RAD Application), a PHA-defined portfolio of projects, or a multi-phase project. If a PHA
applies for either a portfolio or multi-phase award, HUD will reserve RAD conversion authority
for the projects or phases covered by the award, and the PHA will be required to submit a RAD
Application for each individual project or phase. Following review and selection of a RAD
Application, HUD will provide the PHA with a Commitment to enter into a Housing Assistance
Payment (CHAP), after which the PHA will have to present a Financing Plan for HUD to
approve. After HUD approval of the Financing Plan and successful closing of the conversion, a
project will receive a long-term Section 8 HAP Contract. Upon conversion, units whose
assistance has been converted pursuant to RAD will be removed from the public housing
program. Converting Projects will be released from the public housing Declaration of Trust
(DOT) and the Declaration of Restrictive Covenants (DORCs), if applicable, and a RAD Use
Agreement will be placed on the Covered Project.
A. PBV Conversions. Where the PHA converts assistance of a public housing project to
Section 8 PBVs, the HAP Contract will be administered by the agency with which HUD has
entered into the applicable Voucher ACC (which in many cases will be the same agency that
is converting assistance). Contract rents will be established according to the terms described
in this Notice and will be adjusted annually by HUD’s OCAF on each anniversary of the
HAP Contract, subject to the availability of appropriations for each year of the contract (see
Section 1.6.B.5 and Attachment 1C) and the rent reasonableness requirement discussed later
in this Notice. The initial contract will be for a period of at least 15 years (up to 20 years
upon approval of the administering Voucher Agency). At expiration of the initial contract
and each renewal contract, the Voucher Agency shall offer, and the Project Owner shall
accept, a renewal contract. Each project with a PBV HAP Contract will also be subject to a
RAD Use Agreement that will renew with the HAP Contract. Further, the administering
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Section I: Public Housing Projects
Voucher Agency (i.e., the Contract Administrator) will provide a Choice-Mobility option to
residents of Covered Projects in accordance with section 1.6.D.9. With the exception of
provisions identified in this Notice (as well as retained flexibilities of Moving to Work
(MTW) agencies), all regulatory and statutory requirements of the PBV program in 24 CFR
part 983, and applicable standing and subsequent Office of Public and Indian Housing
guidance, including related handbooks, shall apply.
B. PBRA Conversions. Where the PHA converts assistance of a public housing project to
Section 8 PBRA, the HAP Contract will generally be administered by HUD’s Office of
Housing, unless later assigned to a PHA that is under ACC with HUD for the purpose of
administering project-based Section 8 HAP Contracts. Contract rents will be established
according to the terms described in this Notice and will be adjusted annually by HUD’s
OCAF at each anniversary of the HAP Contract, subject to the availability of appropriations
for each year of the contract (see section 1.7.A.5 and Attachment 1C). The initial contract
will be for a period of 20 years and will be subject to annual appropriations. At expiration of
the initial contract and each renewal contract, HUD shall offer, and the Project Owner shall
accept, a renewal contract. The initial contract shall be eligible for renewal under the
Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRAA). Each
Covered Project with a PBRA HAP Contract will be subject to a 20-year RAD Use
Agreement that will renew with the HAP Contract. Further, Project Owners must offer a
Choice-Mobility option to residents of Covered Projects, as specified in Section 1.7.C.5 of
this Notice, unless exempted from this requirement. With the exception of provisions
identified in this Notice, all regulatory and statutory requirements of the PBRA program in
24 CFR part 880, and applicable standing and subsequent Office of Housing guidance,
including related handbooks, shall apply (as modified and published in Appendix I of this
Notice).
C. Waivers. A major goal of the First Component of RAD is to test the conversion of the public
housing assistance to long-term, project-based Section 8 assistance available to Project
Owners of assisted multifamily housing in order to generate additional sources of private
financing. Consequently, HUD is applying its waiver authority and ability to establish limited
alternative requirements for the effective conversion assistance on a limited basis to facilitate
the major goals of the Demonstration and maintain existing distinctions between the PBV
and PBRA forms of contract assistance. Such distinctions will enable a PHA or Project
Owner to choose the form of assistance to best meet its needs. It will also enable HUD and
Congress to assess how effective each form of assistance proves to be in meeting such varied
circumstances and needs.
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D. Tenant Rights. Equally important for the success of RAD are meaningful resident
participation, procedural rights, and mobility, which are addressed in detail in various
sections of the Notice and summarized in Attachment 1B.
E. Fair Housing Requirements. RAD transactions are governed by the same civil rights
authorities that govern HUD-assisted activities generally. See 24 CFR § 5.105. The Fair
Housing Act prohibits discrimination in housing (see 42 U.S.C. §§ 3601, et seq., and HUD
regulations in 24 CFR part 100) and requires all federal executive departments and agencies
to “administer their programs and activities relating to housing and urban development . . . in
a manner affirmatively to further” fair housing (42 U.S.C. § 3608(d) and (e)). In addition, all
federally assisted activities are subject to Title VI of the Civil Rights Act of 1964 forbidding
discrimination on the basis of race, color and national origin (see 42 U.S.C. §§ 4000d, et.
seq., and HUD regulations in 24 CFR part 1) and Section 504 of the Rehabilitation Act of
1973, which forbids discrimination on the basis of disability and requires that federally
assisted programs make each activity “when viewed in its entirety” readily accessible to
persons with disabilities and make reasonable accommodation to the needs of persons with
disabilities (see 29 U.S.C. §§ 701, et seq., and HUD regulations in 24 CFR part 8), as well as
Titles II and III of the Americans with Disabilities Act and Executive Order 11063 and HUD
regulations at 24 CFR part 107. Thus, as with the administration of all HUD programs and all
HUD-assisted activities, fair housing and civil rights issues must be considered in the
administration of RAD transactions. This includes actions and policies that may have a
discriminatory effect on the basis of race, color, sex, national origin, religion, disability, or
familial status (see 24 CFR part 1 and part 100 subpart G) or that may impede, obstruct,
prevent, or undermine efforts to affirmatively further fair housing.
Elements of RAD transactions that have civil rights implications include, but are not limited
to, transfers of assistance, temporary and permanent relocation, demolition, site selection and
new construction, occupancy policies, changes in unit configuration, increase or reduction in
units, waiting list administration policies, policies regarding return of temporarily relocated
tenants, substantial rehabilitation or alteration program accessibility, tenant selection policies
and priority transfers, providing information to persons with Limited English Proficiency
(LEP) and persons with disabilities, reasonable accommodation policies, and Affirmative
Fair Housing Marketing Plans. All PHAs must consider civil rights when structuring these
and other elements of their RAD transaction. Further, all RAD conversions that include one
or more of the activities listed below must undergo a front-end review for compliance with
certain civil rights and fair housing requirements. A RAD conversion may not include one of
the activities below without prior written approval from HUD. All Financing Plans submitted
after August 15, 2015, must include evidence that the PHA has secured written approval
from HUD for any of the following activities that are included in its RAD conversion:
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o Conversions of assistance involving new construction, whether on a new site or on a
current site, in an area of minority concentration.
o Transfers of assistance where all or a portion of the Converting Project’s assistance is
transferred to a new site(s) as part of the subject transaction.
o Conversions of assistance where the total number of units in the Covered Project is
less than the original number of units in the Converting Project (this includes de
minimis reductions);
o Conversions of assistance where the Covered Project’s unit configuration is different
from the unit configuration of the converting project;
o Conversions where the Covered Project serves a different population from the one
served by the Converting Project (e.g., when a Converting Project serves families but
the Covered Project is subject to an elderly preference);
The RAD Fair Housing, Civil Rights and Relocation Checklist will require submission of
information regarding the foregoing and the following activities:
o Conversions of assistance in which the construction schedule indicates that relocation
is likely to exceed 12 months;
o Conversions of assistance involving new construction or substantial alteration, as
those terms are defined in Section 504 of the Rehabilitation Act of 1973.
Furthermore, as part of its review of these elements, HUD may request that PHAs that are
doing portfolio or multi-phased conversions provide information on their conversion plans
for other projects or subsequent phases to ensure that the overall plans for RAD conversion
are consistent with civil rights and fair housing. HUD may also require a front-end civil
rights review of a RAD conversion where it has learned of potential fair housing and civil
rights concerns or a history of such concerns.
Eligibility
Only PHAs may apply under this section of the Notice. However, PHAs may consider enlisting
partners to facilitate recapitalization and development of its projects. Additionally, while public
housing mixed-finance projects are eligible for conversion under the Demonstration (see Section
1.11.B of this Notice), the application for conversion of assistance must be submitted by the
PHA on whose ACC the units are included. This requirement also applies to directly-funded
Resident Management Corporations (RMCs).
A RAD Application may be rejected, or a CHAP or RCC revoked, if HUD determines an
applicant or PHA to be ineligible.
To be eligible for the Demonstration, a PHA must:
A. Have public housing units under an ACC;
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Section I: Public Housing Projects
B. Be classified as a Standard or High Performer under the Public Housing Assessment System
(PHAS), or, if classified as “troubled” (Troubled), the PHA must be making substantial
progress under its Recovery Agreement, Action Plan, Corrective Action Plan (CAP) or
Memorandum of Agreement (MOA) and HUD must have determined that the factors
resulting in the PHA’s Troubled status will not affect its capacity to carry out a successful
conversion under this Demonstration;
C. Be classified as a Standard or High Performer under the Section Eight Management
Assessment Program (SEMAP) if the PHA will be administering the PBV contract under
RAD. If classified as Troubled, the PHA must be making substantial progress under the
CAP and HUD must have determined that the factors resulting in the PHA’s Troubled status
will not affect its capacity to carry out a successful conversion under this Demonstration;
D. Be otherwise in substantial compliance with HUD reporting and programmatic requirements
and/or satisfactorily in compliance with any CAP or MOA related to any 1) program finding
or 2) failure to carry out, to the satisfaction of the Department, management decisions
relating to an audit by the Office of Inspector General;
E. Not have a debarment, suspension, or Limited Denial of Participation in Federal programs
lodged against the applicant, PHA Executive Director, Board members, or affiliates;
F. Submit a completed application that complies with all RAD Application instructions.
G. Not have a charge, cause determination, lawsuit, or letter of findings referenced in sub-
paragraphs (1)-(5) below against a PHA, its transferees, proposed development partners, or
sub-recipients that has not been resolved to HUD’s satisfaction:
1. A charge from HUD concerning a systemic violation of the Fair Housing Act or a
cause determination from a substantially equivalent state or local fair housing agency
concerning a systemic violation of a substantially equivalent state or local fair
housing law proscribing discrimination because of race, color, religion, sex, national
origin, disability or familial status;
2. A Fair Housing Act lawsuit filed by the Department of Justice (DOJ) alleging a
pattern or practice of discrimination or denial of rights to a group of persons raising
an issue of general public interest pursuant to 42 U.S.C. § 3614(a);
3. A letter of findings or lawsuit filed by DOJ identifying systemic noncompliance
under Title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act
of 1973, or section 109 of the Housing and Community Development Act of 1974;
4. A cause determination from a substantially equivalent state or local fair housing
agency concerning a systemic violation of provisions of a state or local law
proscribing discrimination in housing based on sexual orientation or gender identity;
or
5. A cause determination from a substantially equivalent state or local fair
housing agency concerning a systemic violation of a state or local law
proscribing discrimination in housing based on lawful source of income.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 20
Section I: Public Housing Projects
Applicants may still be eligible for the Demonstration if the charge, cause determination,
lawsuit, or letter of findings referenced in subparagraphs 1, 2, 3, 4, or 5 above has been
resolved to HUD’s satisfaction. However, if the matter has not been resolved to HUD’s
satisfaction, then the applicant is ineligible to participate in the Demonstration.
HUD will determine if actions to resolve the items listed above are sufficient to resolve the
matter. Examples of actions that could resolve the matter include, but are not limited to,
current compliance with a:
Voluntary compliance agreement (VCA) signed by all the parties;
HUD-approved conciliation agreement signed by all the parties;
Conciliation agreement signed by all the parties and approved by the state
governmental or local administrative agency with jurisdiction over the matter;
Consent order or consent decree; or
Final judicial ruling or administrative ruling or decision.
Additionally, a PHA may be required to demonstrate that its proposed activities under RAD
are consistent with and will not hinder or delay satisfaction of any applicable fair housing or
civil rights VCA, conciliation agreement, consent order or consent decree, final judicial
ruling, or administrative ruling or decision. HUD may terminate a CHAP or RCC if it
determines that the terms of the conversion would be inconsistent with fair housing or civil
rights laws or is inconsistent with, would hinder, or would delay satisfaction of a fair housing
or civil rights court order, settlement agreement, or VCA (see section 1.12 of this Notice).
H. HOPE VI Projects. PHAs may submit applications for the following HOPE VI projects:
1. Projects with a Date of Funding Availability (DOFA) of greater than 10 years prior to
the date of RAD application. Where a HOPE VI project was developed in phases on a
contiguous site, each of the phases may have distinct DOFA dates. For purposes of
this subsection, the earliest DOFA shall apply to all contiguous phases submitted for
conversion under RAD.
2. Projects with a DOFA of less than 10 years, if the Converting Project evidences a
recent multi-year pattern of financial distress, indicated by:
At least two of the three most recent audited financial statements for the
development partnership showing that the PHA’s assignment of funding for the
public housing-restricted units has been below 90% of the operating cost of such
units; and
Evidence that withdrawals have been made from the project’s operating deficit
reserve, transformation reserve or similar reserve account(s) set up to address
public housing funding shortfalls to such an extent that only 75% of such a
reserve(s) remain available, or evidence that, in at least two of the past three
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Section I: Public Housing Projects
years, the PHA or owner has made an annual contribution to meet the operating
deficit created by the public housing-restricted units.
To be eligible for this exception from the DOFA requirement, RAD applications for
HOPE VI projects must include with the application the required audited financial
statements and financial information documenting the pattern of distress.
3. Project(s) that, unless converted under RAD, would be the only remaining project(s)
with public housing units in the PHA’s inventory.
Project Conversion Requirements and Financing Considerations
One of the main purposes of RAD is to demonstrate how the conversion of current public
housing assistance to long-term, project-based Section 8 rental assistance contracts can generate
access to private debt and equity to address immediate and long-term capital needs through
rehabilitation or new construction. HUD therefore expects that the majority of projects
undergoing conversion of assistance through RAD will do at least some rehabilitation or
reconstruction. The following include requirements related to conversion plans more broadly,
including those involving rehabilitation and construction:
A. Conversion Planning Requirements.
1. Capital Needs Assessment (CNA).6 Except as noted below, each project selected for
award will be required to perform a detailed physical inspection to determine both
short-term rehabilitation needs and long-term capital needs to be addressed through a
Reserve for Replacement Account. A CNA must be submitted with the Financing
Plan.
Transition to CNA eTool. HUD is in the process of developing a standardized
CNA eTool for multifamily housing that will also be required of all RAD
transactions. This new CNA eTool will be required as part of any RAD Financing
Plan (or application for FHA Firm Commitment) submitted six months after
publication of the CNA eTool. Any CNA submitted prior to this date must use
either the CNA eTool, if available, or follow the guidance under Revision 1 of
this Notice.7
6
PIH Notice 2012-32 REV-1 used the terminology “Physical Condition Assessment,” or PCA. This terminology has
been changed with this revised Notice to “Capital Needs Assessment,” or CNA.
7
The PCA tool and Statement of Work described in Revision 1 can be accessed at www.hud.gov/rad.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 22
Section I: Public Housing Projects
Contractor Qualifications. The CNA must be completed by a qualified,
independent third-party professional as required in the appropriate HUD guidance
(the RAD PCA or the CNA eTool).
Exemptions. HUD may exempt the following transaction types from CNA
requirements, with the exception of preparing the 20 Year Reserve Schedule and
the Utility Consumption Baseline (UCB):
a. For non-FHA transactions,
i. Projects built within the last 5 years;
ii. Projects that qualify as new construction or “substantial
rehabilitation” (generally defined as meeting Level 3 Alterations
per the 2012 International Building Code for Existing Buildings);
iii. Projects that will be financed with Low Income Housing Tax
Credits (“tax credits”); or
iv. Projects where the total assisted units (e.g., RAD units and other
PBV units) at the project will constitute less than 20% of the total
units at the project (or a higher amount at HUD’s discretion).
b. For FHA transactions, PHAs should follow applicable requirements in the
MAP Guide governing exemptions.
HUD may exempt projects under a.iv above (projects where less than 20% of the
units are assisted) from the portions of the Excel Tool (existing RAD PCA or the
CNA eTool) necessary for the appropriate Tool to produce the 20 Year Reserve
Schedule.
HUD may exempt projects (e.g., projects where less than 21 units are assisted)
from completing the appropriate utility consumption tool (either the existing RAD
PCA or the CNA eTool) if it is determined that the project is exempt from utility
consumption benchmarking under PBRA or PBV.
No utility consumption baseline analysis is necessary for buildings being
demolished or being removed from the assisted inventory. Utility consumption
baseline requirements for new construction will apply in accordance with PBRA
and PBV requirements.
Any proposed exemptions must be confirmed with the Transaction Manager
assigned to the RAD conversion.
Utility Consumption Baseline. For any CNA submitted six months after
publication of the CNA eTool, the PHA must submit the Statement of Energy
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Section I: Public Housing Projects
Performance or the Statement of Energy Design and Intent (SEDI), as applicable
for New Construction or Gut Rehabilitation, or Statement of Energy Performance
(SEP) for other levels of rehabilitation, provided by the Environmental Protection
Agency’s Portfolio Manager system for UCB compliance. Both must be prepared
to the standards cited in the MAP Guide, regardless of source of financing. Any
CNA submitted prior to this date may either submit UCB data into EPA’s
Portfolio Manager or as part of the PCA described in Revision 1 of this Notice.
2. Green Building and Energy Efficiency. For all projects retrofitted under a RAD
conversion, if systems and appliances are being replaced as part of the Work
identified in the approved Financing Plan and RCC, at a minimum PHAs
shall complete replacements with Energy Star®, WaterSense® or Federal Energy
Management Program (FEMP)-designated products and appliances, if any such
designation is available for the applicable system or appliance.8 Additionally, PHAs
shall utilize the most energy- and water-efficient options that are financially feasible
and that are found to be cost-effective by the CNA described above. The CNA will
provide detailed analyses of energy-saving alternatives and other green building
components, including payback and cost/saving analyses. PHAs are strongly
encouraged, for all RAD conversion projects, to scope rehabilitation and ongoing
replacements that utilize the components that the CNA indicates make financial
sense, and other components that the CNA indicates will improve indoor air quality
and/or reduce overall environmental impact where those components have little or no
cost premium, consistent with the principles and best practices of the green building
industry.
Where a PHA is planning to use a RAD conversion in conjunction with new
construction, projects shall at a minimum meet or exceed the 2009 International
Energy Conservation Code (IECC) or the ASHRAE 90.1-2007 standard or any
successor code that is adopted by HUD under the requirements of the Energy
Independence and Security Act of 2007. All new construction projects are encouraged
to meet or exceed the requirements for Energy Star for New Homes or Energy Star
for Multifamily High Rise buildings. Further, in new construction and applicable
retrofit projects, HUD strongly encourages the use of industry-recognized, green
building certifications, such as the US Green Building Council’s LEED Rating
System, Enterprise Green Communities Criteria, the National Green Building
Standard, Green Globes, GreenPoint Rating, EarthCraft, Earth Advantage, Passive
House, or Living Buildings.
8
For Energy Star®, see http://www.energystar.gov/. For WaterSense®, see http://www.epa.gov/watersense/. For
FEMP, see http://www1.eere.energy.gov/femp/.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 24
Section I: Public Housing Projects
3. Environmental Review. Under Federal environmental review requirements,
proposed RAD projects are subject to environmental review under either Part 50 or
Part 58, as applicable, and environmental documents are required to be submitted as
part of the applicant’s Financing Plan.9 HUD will not issue an RCC if the project plan
does not meet the environmental review requirements described in Attachment 1A.
4. Substantial Conversion of Assistance. Conversions may not result in a reduction of
the number of assisted units, except by a de minimis amount, defined as no more than
the greater of five percent of the number of project or portfolio units under ACC
immediately prior to conversion or five units. However, a unit is excluded from this
de minimis threshold if any of the following apply:
i. The unit has been vacant for more than 24 months at the time of RAD
Application; or
ii. Reducing the total unit number will allow the PHA to more effectively or
efficiently serve assisted households through: 1) reconfiguring apartments
(e.g., converting efficiency units to one-bedroom units); or 2) facilitating
social service delivery (e.g., converting a basement unit into community
space).
Otherwise, a PHA may not reduce the number of ACC units at a project without
Section 18 Demolition or Disposition approval from the Special Applications Center
(SAC).
In all cases, the PHA shall submit within their PIC removal application (See Section
1.12) a narrative explanation of the proposed reduction, including a description of the
units to be removed, an explanation of why the project meets the exclusion criteria,
and any supporting evidence. The assigned Transaction Manager will approve any
reduction of units by project or portfolio.
9 Under Part 58 Review, the PHA submits a Request for Release of Funds (HUD-7015.15) or the local
responsible entity’s finding of exempt activity to the HUD Field Office. When the PHA submits a Request for
Release of Funds, the HUD Field Office provides environmental clearance, using Form HUD-7015.16, if no
valid objections are made and HUD has no knowledge of deficiencies cited in 24 CFR § 58.72(b). PHAs submit
only the Form HUD-7015.16 with the Financing Plan, not the full environmental review record. Under Part
50, HUD staff conduct the review in conjunction with the Financing Plan review and therefore the PHA should
submit full environmental review documentation as part of the Financing Plan submission. HUD may consider
early submission and review on a case-by-case basis.
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Section I: Public Housing Projects
De Minimis exceptions are allowed across multi-phase or portfolio conversions, but
the number of de minimis units must be authorized by the RAD conversions closed
prior to or simultaneous with the execution of the de minimis reduction. For example,
a PHA that is converting 200 units across three properties is permitted to replace 190
RAD-assisted units (i.e. 95% of 200) across its portfolio and apply the unit reductions
to a single property. However, the property that would have 10 fewer units assisted
under a RAD HAP Contract must convert simultaneous with or after the first two
properties, not before.
A PHA must demonstrate that any reduction in units better serves residents, the
Covered Project, or the operating viability of the PHA’s RAD or public housing
portfolio, will not result in the involuntary permanent displacement of any tenant
family, and will not result in discrimination based on race, color, religion, national
origin, sex, disability, or familial status.
Any property or the proceeds received from the sale of any property that is released
from the DOT under the de minimis exception must be used for Affordable Housing
purposes.
5. Relocation Requirements.
i. RAD Fair Housing, Civil Rights, and Relocation Notice. Relocation
requirements related to public housing conversions under RAD are described in
Notice H 2016-17; PIH 2016-17, as may be amended from time to time (“RAD
Fair Housing, Civil Rights, and Relocation Notice”).10 The RAD Fair Housing,
Civil Rights, and Relocation Notice provides PHAs and their development
partners with information and resources on RAD program requirements and
Uniform Relocation Assistance and Real Property Acquisition Policies Act
(URA) requirements when planning for or implementing resident moves in
connection with a RAD conversion under the First Component of RAD.
Specifically, the RAD Fair Housing, Civil Rights, and Relocation Notice
provides guidance on relocation planning, resident right to return, relocation
assistance, resident notification, initiation of relocation, and the fair housing and
civil rights requirements applicable to these activities.
10
“Rental Assistance Demonstration (RAD) Notice Regarding Fair Housing and Civil Rights Requirements and
Relocation Requirements Applicable to RAD First Component – Public Housing Conversions”
http://portal.hud.gov/hudportal/documents/huddoc?id=RAD_Notice2.pdf. For properties being redeveloped with
funding under a Choice Neighborhoods Implementation (CNI) grant, the RAD Fair Housing, Civil Rights, and
Relocation Notice is superseded by guidance regarding relocation included in the CNI NOFA.
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Section I: Public Housing Projects
The appendices to the RAD Fair Housing, Civil Rights, and Relocation Notice
include recommended relocation plan contents. Sample relocation notices for
issuance to residents depending on RAD project characteristics are available on
the RAD website at www.hud.gov/rad. Questions regarding relocation will
generally be addressed in the RAD Fair Housing, Civil Rights, and Relocation
Notice and not this Notice. In the event of a conflict between this Notice and the
RAD Fair Housing, Civil Rights, and Relocation Notice, with regard to
relocation requirements, the RAD Fair Housing, Civil Rights, and Relocation
Notice controls.
ii. Right to Return. Any resident that may need to be temporarily relocated to
facilitate rehabilitation or construction has a right to return to an assisted unit at
the Covered Project once rehabilitation or construction is completed. Permanent
involuntary displacement of residents may not occur as a result of a project’s
conversion of assistance, including, but not limited to, as a result of a change in
bedroom distribution, a de minimis reduction of units, the reconfiguration of
efficiency apartments, or the repurposing of dwelling units in order to facilitate
social service delivery. Where the transfer of assistance to a new site is
warranted and approved (see Section 1.4.A.12), residents of the Converting
Project will have the right to reside in an assisted unit at the new site once
rehabilitation or construction is complete. For more information on how to
implement these provisions see the RAD Fair Housing, Civil Rights, and
Relocation Notice.
iii. Ineligibility of Tenant Protection Vouchers. Conversion of assistance is not
an event that triggers the issuance of Tenant Protection Vouchers to residents of
public housing projects going through a RAD conversion.11
6. Accessibility Requirements. Federal accessibility requirements apply to all
conversions – whether they entail new construction, alterations, or existing facilities.
The laws that most typically apply include Section 504 of the Rehabilitation Act of
1973 (Section 504), the Fair Housing Act (FHAct) and the Americans with
Disabilities Act (ADA). Although the requirements of each of these laws are
somewhat different, PHAs must comply with each law that applies. All three laws
typically apply to new construction. Section 504 and the ADA also apply to
substantial alterations and other alterations as defined in 24 CFR § 8.23 and to
existing, unaltered facilities (24 CFR § 8.24). See also 28 CFR § 35.151(b) and 28
CFR part 36.
11
This provision does not preclude a PHA from receiving tenant protection vouchers for a property that has also
received a Choice Neighborhoods Implementation grant.
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Section I: Public Housing Projects
When a project’s rehabilitation meets the definition of a “substantial alteration” under
24 CFR § 8.23, a PHA must comply with all applicable accessibility requirements
under Section 504. For some projects, “other alterations,” as defined in Section 504,
are made over time. If other alterations, considered together, amount to an alteration
of an entire dwelling unit, the entire dwelling unit shall be made accessible.
Where a PHA is planning to use RAD conversion in conjunction with new
construction, the project must comply with all applicable accessibility requirements
for new construction. The specific requirements are set out in regulations at 24 CFR
part 8, 28 CFR part 35 and 36, and 24 CFR part 100, subpart D. Information on the
design and construction requirements of the Fair Housing Act that are applicable to
new construction is found at www.fairhousingfirst.org.
PHAs are encouraged to use universal design principles, visitability principles, and
active design guidelines in planning retrofit and new construction work, wherever
feasible. However, adherence to universal design principles does not replace
compliance with the accessibility requirements of Section 504, the ADA, and the Fair
Housing Act.
7. Site Selection and Neighborhood Standards. Where a PHA is planning to convert
assistance under RAD, the PHA must comply with all applicable site selection
requirements as set forth in this Notice and in accordance with any additional
applicable guidance provided by HUD. Site selection requirements set forth at 24
CFR § 983.57 shall apply to RAD conversions to PBV assistance and site selection
requirements set forth at Appendix III shall apply to RAD conversions to PBRA
assistance. Site selection must be consistent with the requirements of the Fair
Housing Act, Title VI of the Civil Rights Act of 1964 including implementing
regulations at 24 CFR § 1.4(b)(3), Section 504 of the Rehabilitation Act of 1973
including implementing regulations at 24 CFR § 8.4(b)(5), and the Americans with
Disabilities Act. Choice Neighborhoods Implementation projects are subject to the
site and neighborhood standards published in the applicable NOFA.
It is the PHA’s responsibility to ensure that the site selection complies with the
requirements of this Notice; the PHA must certify with the submission of its Annual
Plan, Significant Amendment to its Annual Plan, or MTW Plan that it complies with
the applicable site selection requirements. HUD will conduct a front-end civil rights
review of the PHA’s proposed site in certain circumstances. For conversions of
assistance that involve new construction that is located in an area of minority
concentration (whether on the existing public housing site or on a new site), HUD
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 28
Section I: Public Housing Projects
will conduct a front-end civil rights review of the site to determine whether it meets
one of the exceptions that would allow for new construction in an area of minority
concentration.
Under its Site and Neighborhood Standards, HUD may approve new construction in
an area of minority concentration, consistent with the regulatory requirements cited
above, provided that:
i. the new construction is located in a neighborhood experiencing significant
private investment that is demonstrably improving the economic character of
the area (a revitalizing area); or
ii. there are sufficient comparable housing opportunities in areas outside of
minority concentration.
In determining if the project meets the requirements above, HUD may consider such
factors as: whether the locality has a demonstrated commitment to revitalization that
includes or is in addition to the RAD conversion; whether the neighborhood shows
signs of revitalizing, through indicators such as declining census tract poverty rates,
low or declining violent crime rates or evidence of increased educational opportunity;
or whether there is high private and public investment in retail, commercial or
housing development that is already occurring or will imminently occur in the area.
A PHA must receive prior written approval from HUD following the review that
HUD has accepted the PHA's certification and supporting documentation prior to
entering into binding commitments for new construction. A determination that a site
fails to meet these requirements will be grounds for disapproval of a Financing Plan.
HUD acceptance of a site that the PHA has determined to meet the site and
neighborhood standards is not a determination of compliance with the duty to
affirmatively further fair housing or other fair housing and civil rights requirements.
HUD approval of the sites for one or more RAD conversions does not indicate
approval of the PHA’s or locality’s overall housing strategy. A PHA that does not
promote fair housing choice outside areas of minority concentration and continues to
site affordable housing in minority concentrated areas may be in noncompliance with
the duty to affirmatively further fair housing and other fair housing and civil rights
obligations. The PHA is responsible for ensuring that its RAD conversion, including
any associated new construction, is consistent with its certification to affirmatively
further fair housing and complies with civil rights laws.
8. Additional Design Considerations. Applicants are also strongly encouraged to
demonstrate contemporary best practices in rehabilitation and construction, utilizing a
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Section I: Public Housing Projects
long-term and holistic view of costs and benefits and a decision-making process
which includes current and future stakeholders. Planning and design should include
building lifecycle costs, energy and water-efficiency, social inclusion and
connectivity, occupant health and welfare, basic environmental stewardship, and
climate change resilience.12
9. Demolition. Conversion plans may include the partial or complete demolition of the
Covered Project and replacement of assistance on-site or off-site. Unless approved in
writing by HUD, a PHA may not demolish and/or dispose of units until after the
closing of construction financing for the Covered Project. 13 Both the demolition
action and new construction or rehabilitation (either on-site or off-site) are considered
as part of a single Environmental Review.
10. Change in Unit Configuration. Where a PHA is proposing to change the unit
configuration as part of the conversion, the PHA must demonstrate that the change in
bedroom distribution will not result in the involuntary permanent displacement of any
resident and will not result in discrimination based on race, color, national origin,
religion, sex, disability, or familial status. For example, if three and four-bedroom
units are replaced with one and two-bedroom units, the conversion may, but in not all
cases, result in discrimination against families with children.
11. Ownership and Control. Except where permitted to facilitate the use of tax credits,
during both the initial term and all renewal terms of the HAP Contract, HUD will
require ownership or control of the Covered Project by a public or non-profit entity.
Subject to HUD review to ensure compliance with statutory requirements, public or
non-profit entity ownership or control requirements may be satisfied if a public or
non-profit entity (or entities), directly or through a wholly owned affiliate:14 (1) holds
12
PHAs may wish to reference additional product certifications and standards in their building specifications and
can find additional guidance via the US Green Building Council’s Leadership in Energy and Environmental Design
(LEED) Rating System. Most of these programs build on the Energy Star certification and the IECC / ASHRAE
standards for ease of coordination.
13
Section 18 of the Act does not apply to RAD Conversions and is not needed for conversion plans involving
demolition. Demolition approval pursuant to Section 18 is not sufficient to permit demolition of units under RAD
and may cause the Converting Project to be ineligible for conversion under RAD. Section 18 approval (including an
approval letter from the Special Application Center) is required for elements of certain transactions which cannot be
implemented under RAD authority. See Section 1.5.B.
14 An affiliate includes a PHA affiliate as defined in 24 CFR § 905.604, but does not include a PHA
instrumentality as defined at 24 CFR § 905.604. The public or non-profit status of a PHA instrumentality
must be determined independently, not on the basis of its affiliation with the PHA.
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a fee simple interest in the real property of the Covered Project; (2) is the lessor under
a ground lease with the Project Owner; (3) has the direct or indirect legal authority
(via contract, partnership share or agreement of an equity partnership, voting rights,
or otherwise) to direct the financial and legal interests of the Project Owner with
respect to the RAD units; (4) owns 51 percent or more of the general partner interests
in a limited partnership or 51 percent or more of the managing member interests in a
limited liability company with all powers of a general partner or managing member,
as applicable; (5) owns a lesser percentage of the general partner or managing
member interests and holds certain control rights as approved by HUD; (6) owns 51
percent or more of all ownership interests in a limited partnership or limited liability
company and holds certain control rights as approved by HUD; or (7) other
ownership and control arrangements approved by HUD.
If HUD, in its sole discretion, determines necessary pursuant to foreclosure,
bankruptcy, or termination and transfer of assistance for material violations of, or
default under, the HAP Contract, HUD will require ownership or control of assisted
units in the following priority: (1) a capable public entity; and (2) a capable non-
public entity (e.g., a private entity), as determined by the Secretary.
HUD may allow ownership of the project to be transferred to a tax credit entity
controlled by a for-profit entity to facilitate the use of tax credits for the Covered
Project, but only if HUD determined that the PHA preserves its interest in the
property.15 Preservation of the PHA’s sufficient interest in a project using tax credits
could include, but not be limited to, the following, if properly structured subject to
HUD’s review:
PHA, or an affiliate under its sole control, is the general partner or managing
member;
PHA retains fee ownership and leases the real estate to the tax credit entity
pursuant to a long-term ground lease;
PHA retains control over the leasing of the Covered Project, such as exclusively
maintaining and administering the waiting list for the Covered Project, including
performing eligibility determinations complying with the PHA Plan;
PHA enters into a Control Agreement by which the PHA retains consent rights
over certain acts of the Project Owner (including, for example, disposition of the
Covered Project, leasing, selecting the management agent, setting the operating
15 Transfer of ownership is not a transfer of assistance under RAD. Transfer of assistance refers to a change in
the geographic site of the assistance.
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budget and making withdrawals from the reserves) and retains certain rights over
the Covered Project, such as administering the waiting list; or
Other means that HUD finds acceptable, in its sole discretion
All current and future ownership entities are subject to the eligibility requirements of
Section 1.3 of this Notice, including the civil rights threshold requirements.
Furthermore, if a PHA or project is subject to a VCA, conciliation agreement, consent
order or consent decree, or final judicial ruling or administrative ruling or decision
(hereafter referred to as “VCA and related agreements”), it must ensure that the
ownership agreement or other appropriate document makes the new owner subject to
the remedial provisions contained in such documents to the extent required by
Federal, state, and local law. It is the PHA’s obligation to disclose such VCA and
related agreements, to the prospective owner. The extent of the new owner’s
responsibilities, including whether the responsibilities are appropriately limited to the
development, maintenance, or operation of the particular RAD project, must be
appropriately documented. The PHA will follow any requirements for the
modification of such VCA or related agreements. If HUD is a party to the VCA and
related agreements, the RAD project will not close without HUD’s express approval
of the transfer of obligations to the new owner.
12. Transfer of Assistance. In order to facilitate the financing, development, and
preservation of decent, safe, and affordable housing, there are three scenarios under
which assistance converted pursuant to RAD may be transferred off of the existing
parcel of land (for the purposes of this sub-section, transfer of assistance does not
include transfers to an adjacent site): (1) where the PHA requests assistance to be
transferred as part of the conversion from Converting Project to Covered Project; (2)
post-conversion where a Project Owner requests a partial or full transfer of assistance,
or (3) where, as a result of a default of the Use Agreement or HAP Contract, HUD
terminates the HAP Contract. In all cases, the transfers of assistance will be subject to
the ownership and control provisions described in this Notice.
Approvals of a PHA or owner’s request to transfer assistance will be determined in
HUD’s sole discretion. HUD will assess that the transfer does not place housing in
neighborhoods with highly concentrated poverty based on the criteria formulated for
transfers under 8(bb) of the Act.16 Additionally, HUD will consider whether
16
The analysis can be found in Section VIII B.1 of H-2015-03 “Transferring Budget Authority of Project-Based
Section 8 Housing Assistance Payments Contract under Section 8(bb)(1) of the United States Housing Act.” A copy
of the criteria is available at www.hud.gov/rad. At a minimum, projects that are located in neighborhoods that meet
these criteria will meet the requirement under this Notice that transfers not occur to neighborhoods of concentrated
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Section I: Public Housing Projects
conversion on-site is economically non-viable; whether the Converting Project is
physically obsolete or severely distressed; how the transfer would affect the
Converting Project’s residents; and all applicable fair housing and civil rights
requirements. Any transfers of assistance must comply with all requirements detailed
in this Notice, including environmental review (see Section 1.4.A.3 and Attachment
1A), Site and Neighborhood Standards (see Section 1.4.A.7), Changes in Unit
configuration (see Section 1.4.A.10), and Accessibility requirements (see 1.4.A.6).
Further, unless otherwise approved by HUD a PHA may transfer units from a public
housing project to an existing low-income housing tax credit project within its 15-
year tax credit compliance period only if the transfer is necessary to help with the de-
concentration of poverty and/or the de-densification of a public housing project.
The project to which assistance is transferred will be subject to all of the contract
terms as described in the HAP Contract, RCC, and RAD Use Agreement.
a. Transfer at Conversion. Where a PHA proposes assistance to be transferred
to a new site as part of the conversion, a PHA must request approval for a
transfer of assistance within three months of CHAP award (see Section 1.12).
This information must also be included in the PHA’s Annual Plan or in a
Significant Amendment to the PHA’s Annual Plan or MTW Plan, and must be
consistent with the Consolidated Plan. In any conversion where residents will
remain in the Converting Project (i.e., the current public housing site) until the
rehabilitation or construction of the Covered Project (i.e., the receiving site) is
complete, the HAP Contract will typically be effective on the Covered Project
at closing of financing. However, the PHA and Project Owner may submit a
request for the Converting Project to remain as public housing during
construction and for the HAP Contract to be executed once the Covered
Project is ready for occupancy, pursuant to a contractual agreement regarding
new construction approved by HUD. HUD will approve such requests in its
sole discretion, based on sufficient demonstration that it is necessary to
facilitate conversion.
When the assistance will be transferred at closing (including to an adjacent
site), the DOT will be released at closing or upon execution of the HAP once
the Covered Project is ready for occupancy if:
1) as a condition of the RCC, the PHA will sell or lease the property at
Fair Market Value to a third party and use the proceeds to finance a
RAD transaction;
poverty. HUD may modify these criteria as appropriate to fit the purposes of RAD and will post the applicable
criteria at www.hud.gov/rad.
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Section I: Public Housing Projects
2) as part of the Financing Plan, the PHA provides plans to sell or lease
the land within one year of the execution of the HAP Contract
(whether at closing or when the Covered Project is ready for
occupancy) so that it can be used for Affordable Housing Purposes, in
which case the property will be placed under a restrictive covenant that
restricts its use to Affordable Housing Purposes; or
3) as part of the Financing Plan, the PHA provides plans to sell or lease
the land within one year of the execution of the HAP Contract at Fair
Market Value to a third party and use the proceeds for Affordable
Housing Purposes.
Upon any sale the PHA must escrow the proceeds in a bank account covered
by a General Depository Agreement (HUD 51999) 17 until they are needed to
be disbursed for a RAD transaction or for other Affordable Housing Purposes.
Further, when removing the DOT as a result of a prospective FMV sale, HUD
may require that an alternative restrictive covenant be placed on the property
until the sale is effectuated.
If in the Financing Plan the PHA does not provide a plan for selling the
property within one year of the RAD closing or does not identify a specified
use for the land, the DOT will remain in force until such time as the PHA
secures approval from the SAC for any proposed activity.
b. Transfer After Conversion. Except with HUD approval, a Project Owner
may only request a transfer of assistance after 10 years from the effective date
of the initial HAP Contract (unless a transfer is needed sooner as a result of
events such as eminent domain proceedings, natural disasters or unforeseen
events or unless HUD provides approval of a future transfer prior to
conversion). HUD may consider a partial or complete transfer of assistance to
a new location if the new location complies with applicable site selection
standards. If applicable, any lender and/or investor of the Covered Project
must approve the transfer of the assistance. In the event of such transfer, the
Project Owner may request, subject to HUD consent, that the original RAD
Use Agreement on the Covered Project be modified or released to reflect such
transfer of assistance. A RAD Use Agreement will be recorded against the
new location to which assistance is transferred.
c. Transfers as a Result of Default. In the event of default of a Covered
Project’s Use Agreement or HAP Contract, HUD may terminate the HAP
17
A copy of HUD’s GDA is available here http://portal.hud.gov/hudportal/documents/huddoc?id=51999.pdf
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 34
Section I: Public Housing Projects
Contract and transfer the assistance to another location. HUD will determine
the appropriate location and owner entity for such transferred assistance
consistent with the statutory goals and requirements of the Demonstration.
13. Davis-Bacon prevailing wages. The Davis-Bacon prevailing wage requirements
(prevailing wages, the Contract Work Hours and Safety Standards Act, and other
related regulations, rules, and requirements) apply to all Work, including any new
construction, that is identified in the Financing Plan and RCC to the extent that such
Work qualifies as development. ‘‘Development,’’ as applied to work subject to
Davis-Bacon requirements on Section 8 projects, encompasses work that constitutes
remodeling that alters the nature or type of housing units in a PBV or PBRA project,
reconstruction, or a substantial improvement in the quality or kind of original
equipment and materials, and is initiated within 18 months of the HAP Contract.
Development activity does not include replacement of equipment and materials
rendered unsatisfactory because of normal wear and tear by items of substantially the
same kind. Davis-Bacon requirements apply only to projects with nine or more
assisted units.
14. Section 3 of the Housing and Urban Development Act of 1968 (Section 3). Section
3 (24 CFR part 135) applies to all Work, including any new construction, that is
identified in the Financing Plan and RCC to the extent that such repairs qualify as
construction or rehabilitation. In addition, Section 3 may apply to the project after
conversion based on the receipt of the use of federal financial assistance for
rehabilitation activities.
15. Lead Based Paint Hazards. A property constructed before 1978 may contain lead-
based paint and lead-based paint hazards unless abatement was previously completed,
or a lead-based paint inspection determined that it was lead-based paint free.
Pursuant to 24 CFR part 35 subpart L, a PHA is required to conduct a lead-based
paint inspection and a lead risk assessment on a pre-1978 public housing property,
and, subsequently, conduct ongoing lead-based paint maintenance and periodic re-
evaluation for lead-based paint hazards. The PHA shall provide any documentation
available to the PHA regarding lead-based paint and lead-based paint hazards to the
firm preparing the CNA and to the Project Owner. The Project Owner must evaluate
and control lead-based paint hazards in the Covered Project pursuant to 24 CFR Part
35 subpart H, including, among other things, completing a risk assessment if the
multifamily property will receive more than $5,000 per unit in rental assistance
subsidy. If the PHA has provided the report of a current risk assessment (less than 12
months old), or an older risk assessment and reports of all subsequent periodic re-
evaluations, that documentation shall satisfy the Project Owner’s requirement to have
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 35
Section I: Public Housing Projects
completed a risk assessment under subpart H. The CNA must incorporate the work
necessary to meet the Project Owner’s requirements to treat lead-based paint hazards
under subpart H. (See subpart H if the multifamily property will receive $5,000 per
unit or less in rental assistance subsidy.)
16. Current PHA Employees. HUD encourages PHAs and their partners to grant current
workers whose employment positions are eliminated during conversion the right of
first refusal for new employment openings for which they are qualified.
B. Financing Requirements and Considerations.
To the extent that a PHA lacks recent experience in accessing various forms of debt and/or
equity capital, it may wish to consider engaging technical assistance offered by local or national
development intermediaries, professional financing advisors, consultants, and/or development
partners to augment its capacities. In reviewing the Financing Plan for final approval, HUD
assesses the capacity of the development team.
1. Debt Financing. Covered Projects are eligible for financing from private and public
lending sources. All loans made that are secured by Covered Projects must be
subordinate to a RAD Use Agreement. Unless otherwise approved by HUD,
permanent debt financing on Covered Projects must:
a. Be at a fixed rate of interest, for a fixed term, fully amortized over no more
than 40 years;
b. Not have a balloon payment until after the earlier to occur of a) expiration of
the term of the HAP Contract or b) 17 years from the date of the permanent
debt financing; and
c. Not have a debt service coverage less than the higher of 1.11 or lender
requirements.
The conditions in this paragraph are applicable to first mortgages and not applicable
to soft, subordinate financing. All subordinate (or secondary) financing must be
disclosed and then approved by the first-mortgage lender as well as HUD.18
RAD does not prohibit excess loan proceeds from being used to support other
purposes consistent with the PHA’s mission, e.g., renovations to other properties,
though other financing sources may impose such restrictions.
18 For transactions involving FHA-insured financing, the approval shall be in accordance with Chapter 8 of the
Mortgage Credit and Underwriting and Processing Requirements of the Multifamily Accelerated Processing (MAP)
Guide and any subsequent revisions or updates to the MAP Guide.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 36
Section I: Public Housing Projects
Sources of private and public debt financing to consider include any and all sources
that are commonly used in other low-income, use-restricted developments. In addition
to commercial lenders, applicants should consider facilities—both construction and
permanent—offered by Community Development Financial Institutions (CDFIs),
Government Sponsored Enterprises (GSEs), including the network of Federal Home
Loan Banks, and applicable private foundation financing. Public financing that may
be available includes state and locally provided facilities employing federal
Community Development Block Grants (CDBG), the Housing Trust Fund (HTF), and
state housing agency–provided financing. Many municipalities offer infrastructure
and other forms of development financing through tax-increment financing (TIF)
initiatives or other comparable public finance programs. In some cases, transit-
oriented development programs may prove accessible. Additionally, HOME funds
can be used to assist RAD projects after any public housing restrictions have been
removed from the property. The participating jurisdiction providing the HOME funds
is responsible for ensuring that both the RAD project and the specific use of the
HOME funds meet the requirements of 24 CFR Part 92. Eligible costs that may be
paid with HOME funds are established at 24 CFR § 92.206. However, PHAs and
participating jurisdictions should be aware of the statutory prohibition on using
HOME funds for public housing and must ensure that HOME funds are not expended
for any cost that may be associated with public housing.19
2. Public Housing Capital and Operating Program Funds. PHAs are permitted under
the Demonstration to use available public housing funding, including Operating
Reserves (as defined in PIH Notice 2011-55) and unobligated Capital Funds, as a
source of capital to support conversion (see Section 1.5 of this Notice for more
details). With written HUD approval, PHAs may also use Section 18 disposition
proceeds upon confirmation that the proposed use meets the Section 18 requirements.
MTW agencies may use their block grant as an additional source of capital to support
conversion. These funds, either as a source of debt or equity (grant), must be
identified in the Financing Plan. Financing proceeds in excess of transaction costs
will not be allowed when public housing Capital, Operating, or MTW block grant
funds are contributed to the project conversion. However, in the case of a PHA that is
19
Examples of costs associated with the public housing include soft costs associated with conversion of the housing
which are incurred prior to the conversion or any cost associated with the public housing site when the RAD project
will be located on a different site. Further information on HOME Program cost allocation procedures can be found
in CPD Notice 16-15: Allocating Eligible Costs and Identifying HOME-Assisted Units in Multi-Unit HOME Rental
and Homeownership Development Projects (https://www.hudexchange.info/resource/5137/notice-cpd-16-15-
allocating-eligible-costs-and-identifying-home-assisted-units-in-multiunit-home-rental-and-homeownership-
development-projects/)
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 37
Section I: Public Housing Projects
converting all of its ACC units, there is no restriction on the amount of public housing
funds that may be contributed to the Covered Project(s) at Closing; the PHA may
convey all program funds to the Covered Project(s).
3. Existing PHA Indebtedness and Contractual Obligations. A PHA must disclose in
its application and address in its Financing Plan the amount of project debt associated
with the Converting Project prior to conversion, including energy performance
contracts, Capital Fund Financing (CFFP), Operating Fund Financing, Public
Housing Mortgage Program, program debt (including ongoing repayment agreements
related to audits or compliance reviews), or other debt. The PHA may refinance
existing debt obligations as part of conversion. Conversion alone does not relieve the
PHA of these or other obligations. RAD does not constitute a waiver of any CFFP
requirements and is not treated as a CFFP ACC Amendment, including any
provisions restricting the removal of units from the inventory that would affect the
debt service coverage ratio through diminished Capital Funding or requiring
defeasance or prepayment, arising from program regulations or contractual
relationship with the secured party. PHAs should be aware that any new first
mortgage lender, to the extent permissible within the existing financing documents,
may require that existing indebtedness be paid off or subordinated in connection with
the refinancing and conversion of the Covered Project.
4. Federal Housing Administration (FHA) Insured Financing. FHA mortgage
insurance provides high leverage and long-term, fully amortizing fixed-rate financing
at competitive interest rates. For more information, PHAs should contact an approved
FHA Multifamily Lender:
http://portal.hud.gov/hudportal/documents/huddoc?id=aprvlend.pdf.
Some properties converting under RAD may qualify for financing under section
223(f) of the National Housing Act, which provides mortgage insurance for a
permanent financing and may include project repairs. If the scope of required
property repairs indicates “substantial rehabilitation,” as defined by the FHA
Multifamily Mortgage Insurance Program in the Multifamily Accelerated Processing
(MAP) Guide, the appropriate FHA-insured financing may instead be section
221(d)(4) of the National Housing Act. FHA has released separate guidance detailing
how HUD has modified the policy and processing of FHA insurance programs to
accommodate RAD conversions and minimize duplicative requirements (See Notice
H 2012-20, “Underwriting Instructions for Projects Converting Assistance as part of
the Rental Assistance Demonstration (RAD) Program”).
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Section I: Public Housing Projects
Risk sharing programs offered by state housing financing agencies, Freddie Mac,
and/or Fannie Mae should be considered. Secondary financing, tax credits, and other
public sources can be used in conjunction with FHA-insured financing and risk-
sharing programs. All of the above financing options may be used to credit-enhance
tax-exempt bonds.
5. Low-Income Housing Tax Credits (LIHTCs). Applicants are encouraged to use
LIHTCs and, if eligible, historic preservation tax credits, to support recapitalization.
Covered Projects may be eligible for HUD’s Multifamily Low Income Housing Tax
Credit Pilot Program (Notice H 2012-1), which offers a distinct application platform
and a separate processing track under the FHA Section 223(f) program described
above.20 RAD does not prohibit excess equity proceeds from being used to support
other Affordable Housing Purposes.
Many states face excessive demand on an annual basis for allocations of 9% LIHTCs
and routinely do not fully allocate their supply of 4% as-of-right credits coupled with
tax-exempt bond financing allowed under their annual Private Activity Bond Volume
Cap. Applicants are encouraged to assess local demand and supply considerations if
proposing to utilize LIHTCs and to discuss their interest in applying for LIHTCs as
soon as possible with state or local tax credit issuing agencies to obtain guidance on
how to compete for awards most effectively.
While the applicant must indicate in its application if it intends to use tax credits,
there is no requirement to have secured these credits prior to submitting an
application. Note that, for 9% credits, there are special application requirements that
are described in Section 1.9 of this Notice.
6. Grant Funding. In addition to equity from investors in LIHTC transactions, there are
numerous additional sources of equity or grant funding, including local, state, and
federal grants.21 State and local CDBG and HOME funds may be utilized as “gap”
grants for affordable housing developments.22 Numerous state and local governments
offer other grant funds that can be used as an equity contribution in financing plans,
20
Notice H 2012-1 can be found at http://portal.hud.gov/hudportal/documents/huddoc?id=12-01hsgn.pdf.
21 PHAs and the source of the grant funds shall determine, based on local conditions, whether funds are
structured as grants or as loans pursuant to the terms of Section 1.4(B)(1). The same source, such as CDBG
funds, could be structured in either manner.
22 See the RAD Fair Housing, Civil Rights, and Relocation Notice, and the applicable CDBG and HOME program
regulations, for relocation requirements specific to CDBG- and HOME-funded activities.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 39
Section I: Public Housing Projects
particularly if a scope of work includes “green retrofitting” or weatherization
components. In many localities, utility companies and appliance manufacturers offer
grants related to energy-saving retrofit components (http://www.dsireusa.org/ is one
source of information on incentives and policies state by state). Several private
foundations and corporate social investment funds offer grant funding in support of
affordable housing development. Finally, the Federal Home Loan Bank’s “Affordable
Housing Program” has been a significant source of grants for gap funding in
affordable housing projects, including many public housing mixed-finance and HOPE
VI developments, and may prove a generally-available source of gap funding for
properties converting under RAD. Note that in LIHTC transactions, these grants are
often restructured as debt.
7. Acquisition Proceeds. For transactions involving the transfer of ownership to a new
entity, a PHA is permitted to receive cash acquisition proceeds in excess of any seller
take-back financing. Such proceeds must be used for Affordable Housing Purposes.
The PHA must escrow the acquisition proceeds received at closing or during any
construction period associated with the RAD conversion (i.e., prior to cost
certification) in a bank account covered by a General Depository Agreement (HUD
51999)23 until they are disbursed for Affordable Housing Purposes.
Waivers, Alternatives, and Other Public Housing Requirements
Under the Demonstration, HUD has the authority to waive or specify alternative public housing
requirements, or to establish requirements for converted assistance under the demonstration.
Additionally, the RAD Statute imposes certain unique requirements. To facilitate the conversion
of assistance, HUD is waiving or imposing the following alternative and other public housing
program requirements for public housing projects converting assistance (Sections 1.6 and 1.7 list
the waivers and alternative and other requirements of programs into which assistance is being
converted):
A. Use of Public Housing Program Funds to Support Conversion. PHAs are permitted under
the Demonstration to use available public housing funding, including Operating Reserves,
Capital Funds, and Replacement Housing Factor (RHF) funds, and Demolition and
Disposition Transitional Funding (DDTF), as a source of capital in the development budget
to support conversion, whether for rehabilitation or new construction, as well as to increase
initial contract rents. Eligible conversion-related uses for these funds include pre-
development, development, or rehabilitation costs of the Covered Project, establishment of a
capital replacement reserve or operating reserve, payment of Capital Fund Financing
23
A copy of HUD’s GDA is available here http://portal.hud.gov/hudportal/documents/huddoc?id=51999.pdf
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 40
Section I: Public Housing Projects
Program (CFFP), Operating Fund Financing Program (OFFP), or Energy Performance
Contract (EPC) debt, and increase of the initial contract rent pursuant to Sections 1.6.B.5.iii
and 1.7.A.5.iv. In order to use such funds on a Covered Project, these funds must be
identified in the Financing Plan and RCC. See also 1.4.B.2.
If the PHA requests, in accordance with section 9(j)(2)(A)(ii) of the Act and the relevant
HUD Appropriation Acts, HUD will extend the PHA’s obligation end date for Capital Funds
used in the conversion for up to five years from the point when Capital Funds became
available to the PHA for obligation. By extending the obligation end dates, the expenditure
end dates will be correspondingly extended. Any such extensions must remain within the
boundaries of the account closing law, including preserving sufficient time for administrative
close-outs. Such extensions will prevent PHAs from otherwise losing their unobligated
Capital Funds prior to conversion.
Prior to the approval of a Financing Plan, a PHA may expend up to $100,000 in public
housing program funds on pre-development conversion costs per CHAP without HUD
approval. Predevelopment assistance may be used to pay for materials and services related to
proposed rehabilitation or development and may also be used for preliminary development
work. Public housing program funds spent prior to the RAD conversion or construction or
rehabilitation closing relating to a Covered Project as contemplated in the RCC are subject to
public housing procurement rules.
Issuance of the RCC constitutes approval to use public housing funds as referenced in the
Sources and Uses upon the RAD conversion or construction or rehabilitation closing relating
to a Covered Project.
In the case of a PHA that is converting all of its ACC units, there is no restriction on the
amount of public housing funds that may be contributed to the Covered Project(s); the PHA
may convey all program funds to the Covered Project(s). In order to cover the cost of
administrative activities required to terminate the ACC, once it no longer has units under
ACC and has no plans to develop additional public housing, the PHA may:
a) designate that a reserve associated with the Covered Project be available to fund any
public housing closeout costs (such as an operating deficit reserve or a specific PHA
close-out reserve). Any funds not needed for public housing closeout costs would
remain in such reserve or may be transferred to another reserve associated with the
Covered Project (such as the replacement reserve). Thereafter, these funds may be used
at the Covered Project pursuant to the authorized use of the applicable reserve, or
b) retain funds under the public housing program for this purpose. However, HUD will
recapture any public housing funds that a PHA does not expend for closeout costs.
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In the case where the PHA will continue to maintain other units in its inventory under public
housing ACC, a contribution of Operating Funds to the Covered Project that exceeds the
average amount the project has held in Operating Reserves over the past three years will
trigger a subsidy layering review under 24 CFR § 4.13. Similarly, any contribution of Capital
Funds, including RHF or DDTF, will trigger a subsidy layering review. Notwithstanding the
subsidy layering review, PHAs should be mindful of how the Capital Funds or Operating
Reserves used in the financing of its RAD properties may impact the physical and financial
health of properties that will remain in its public housing inventory.
In addition, following execution of the HAP Contract, PHAs are authorized to use Operating
and Capital Funds to make HAP payments for the remainder of the first calendar year in
which the HAP Contract is effective (See Section 1.13). Otherwise, a PHA may not
contribute public housing program funds to the Covered Project unless such funding has been
identified in the approved Financing Plan and included in the approved Sources and Uses
attached to the RCC.
B. Section 18 Applications24 and RAD. In connection with RAD conversions, Section 18
applies only in the following situations:
1. The disposition of excess land, as detailed in Paragraph N of Attachment 1A;
2. If a PHA proposed to reduce the number of assisted units by more than a de minimis
amount, as defined in Section 1.4.A.3; or
3. In certain scenarios where assistance is transferred from the Converting Project and
HUD has not approved the future use of the Converting Project site or sales proceeds
as part of the RAD conversion.
Otherwise, a PHA cannot have both a CHAP and an approval of a Section 18 Application for
the same public housing units. While a PHA may submit applications for both a RAD
conversion and a Section 18 action covering the same units and may receive initial approval
for both programs, it must make a decision as to which program to pursue for each unit
within ninety (90) business days of receipt of the second approval. The PHA must inform its
local HUD Office of Public Housing, SACTA@hud.gov, and its RAD Transaction Manager
of its decision in writing that it will surrender its CHAP (provided it is eligible to pursue
RAD in accordance with the following section) or request that HUD suspend its Section 18
approval. The CHAP shall be considered issued as of the date of this decision. In addition:
24
Although only Section 18 applications are specifically addressed in this section, HUD will also treat applications
submitted for the removal of public housing units under Section 22 of the Act (voluntary conversion), Section 33 of
the Act (required conversion), and Section 32 of the Act (homeownership) in accordance with this section. For
required conversion, also see section J of this notice.
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a. Units for which a PHA has received a Section 18 approval are ineligible for RAD if it
has taken any of the following actions to implement the Section 18 approval:
i. executed a demolition contract;
ii. completed a disposition (i.e., transferring title and/or executing a ground
lease);
iii. received TPVs from HUD as a result of a Section 18 approval;25 or
iv. Taken any steps to implement relocation under the Section 18 approval (i.e.,
issuing the 90-day notice to residents).
If a PHA has already submitted a RAD application or has a CHAP and has taken one
of these actions, it must submit a request to withdraw the RAD application or
surrender the CHAP. Otherwise, HUD will disapprove the RAD application or revoke
the CHAP.
b. If a PHA has received a CHAP for units for which it has also submitted a Section 18
application but not yet received a determination on that Section 18 application, it
must (i) submit a request to the SAC to withdrawal its Section 18 application; or (ii)
submit a request to its local HUD Office of Public Housing to “hold” its CHAP while
HUD completes its review of the Section 18 application. If a PHA decides to pursue
RAD for eligible units that have been approved under a Section 18 application, SAC
will conditionally rescind its Section 18 approval contingent on the successful
completion of the RAD transaction and will modify IMS/PIC accordingly.
C. Ineligibility for Asset Repositioning Fee (ARF), Replacement Housing Factor (RHF), or
Demolition Disposition Transition Funding (DDTF). PHAs will be ineligible to receive
ARF, Capital Fund RHF or DDTF grants (see 24 CFR § 990.190(h) and 24 CFR § 905.10(i)
and (j), respectively) for Covered Projects. RAD does not affect ARF, RHF, or DDTF for
other public housing projects either previously receiving those funds or which would
otherwise be eligible to receive such funding in the year in which the HAP Contract becomes
effective. RAD does not affect the PHA’s continued receipt of ARF, RHF, or DDTF for
projects that were previously receiving these funds.
D. Effect of Conversion on PHA’s Faircloth Limit. Section 9(g)(3) of the Act limits the
construction of new public housing units, referred to as the “Faircloth Limit.” Under the
Faircloth Limit, a PHA may not use funds allocated under the Capital or Operating Funds for
the purpose of constructing any new public housing units if the construction of those units
25
This does not apply to any dispositions approved or any TPVs received in conjunction with a Choice
Neighborhood award.
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Section I: Public Housing Projects
would result in a net increase in the number of units the PHA owned, assisted, or operated as
of October 1, 1999.
Conversions under the Demonstration will reduce a PHA’s Faircloth Limit. For example, a
PHA with a pre-RAD Faircloth Limit of 1,000 public housing units would have its Faircloth
Limit reduced to 900 units if it converted a 100-unit project. Units not converted under the de
minimis provision and which are removed from PIC would not affect the count under the
PHA’s Faircloth cap. In the example above, if 5 of the 100 units are de minimis and not
converted, the PHA Faircloth Limit would be reduced to 905.
E. Conversion is a Significant Amendment to Annual/Five Year Plan. Conversion of
assistance under the Demonstration is considered a significant action by the PHA. If not
fully discussed in a PHA’s Five-Year Plan, Annual Plan or MTW Plan, the conversion of
assistance must be presented in an amendment to the PHA’s Five-Year Plan for qualified and
non-qualified PHAs, a significant amendment to the Annual Plan for non-qualified PHAs,
and an amendment to the MTW Plan for MTW PHAs. As such, qualified and non-qualified
PHAs, as well as MTW PHAs, are subject to the Consolidated Plan requirements and the
public notice and Resident Advisory Board consultation requirements outlined in 24 CFR
part 903. MTW PHAs are also subject to the Consolidated Plan requirements; however, they
must follow the MTW Plan Amendment and public process requirements outlined in the
Standard MTW Agreement in lieu of the requirements in 24 CFR part 903. If the conversion
will require changes to the PHA’s Admissions and Continued Occupancy Policy (ACOP)
and/or Section 8 Administrative Plan, these changes must also be addressed in the PHA Five-
Year Plan, Annual Plan, or MTW Plan, or submitted with the significant amendment to the
PHA Plan or amendment to the MTW Plan. In addition to the information already required
by 24 CFR part 903 for PHA Plan amendments, all PHAs must provide the information listed
in Attachment 1D. A PHA may fulfill this requirement by including the RAD-related
provisions in their Five-Year Plan, Annual Plan, MTW Plan, or Significant Amendment (as
applicable), or provide the information in any successor forms produced by HUD.
The Financing Plan must include a letter from HUD approving the Five-Year Plan, Annual
Plan, MTW Plan or Significant Amendment.
In addition, any substantial change to the conversion plan is required to undergo the
significant amendment process or other HUD review if the substantial changes involve a
transfer of assistance, a change in the number of assisted units, or a change in eligibility or
preferences for new applicants.
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F. Moving To Work (MTW) Agencies. If an MTW agency chooses to convert assistance to
PBRA under this Demonstration, the Covered Project(s) will no longer be included as part of
the PHA’s MTW program.
If an MTW agency chooses to convert assistance to PBV, the Covered Project(s) will
continue to be included in the PHA’s MTW program. (See Section 1.6 for a discussion on
provisions a MTW agency may not alter).
Further, prior to conversion, MTW agencies will be required to amend Attachment A of their
MTW Agreement to the extent HUD determines is necessary to meet the statutory
requirements of RAD. The PHA must request the amended Attachment A language from
their MTW coordinator and follow provided instructions to return an executed Attachment A
amendment to HUD no later than the Financing Plan submission.
G. Outstanding Debt Incurred Under Section 4 of the Act. For any outstanding principal
balance and interest due on loans held by HUD that were issued to finance original
development or modernization of the Converting Project under Section 4 of the Act, HUD
will exercise its waiver authority under Section 4 of the Act to forgive the loan upon
conversion.
H. Resident Opportunities and Self Sufficiency Service Coordinators (ROSS-SC) and
Family Self-Sufficiency (FSS). In order to allow public housing residents currently
participating in ROSS-SC or FSS to continue to do so following conversion, HUD is waiving
provisions in section 34 of the Act that limit ROSS-SC to Public Housing, provisions in
section 34 of the Act (for funding prior to FY 13) that limit Public Housing FSS to residents
for public housing, and Section 23 of the Act (for funding FY14 and forward) that limits FSS
to residents of public housing and the housing choice voucher program.
I. Public Housing Assessment System (PHAS). After issuance of a CHAP, the Converting
Project shall not be issued PHAS scores beginning with the fiscal year in which the CHAP
was issued and continuing through subsequent fiscal years until conversion to Section 8. For
a project with a CHAP to be excluded from PHAS indicator scores, immediately after the
issuance of the CHAP the PHA must submit an application in the PIC Inventory Removals
Module, as either “RAD Conversion PBV” or “RAD Conversion PBRA,” for all units
covered by the CHAP (see Section 1.12.B). In order to be excluded from PHAS scoring, the
PHA must submit the application in PIC by the fiscal year end for the project.
After issuance of the CHAP and submission of the application in PIC, but prior to
conversion, all projects with a CHAP remain subject to the four PHAS assessments but will
not be issued scores for the assessments. “Subject to the four PHAS assessments” means that
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Section I: Public Housing Projects
the PHA must timely submit the required financial data schedule for each project with a
CHAP and that the project will be subject to a physical inspection, a management assessment
based on the financial submission, and a Capital Fund Program assessment. However, these
scores will not be issued. If a PHA has at least one project without a CHAP or has any
project with a CHAP for which the application has not been submitted in PIC by the fiscal
year end, the PHA will receive a PHAS score and designation for that fiscal year. If HUD
revokes the CHAP, HUD reserves the right to issue the PHAS scores (or reassess and rescore
all PHAS indicators, in its sole discretion) and issue the PHAS designation for all fiscal years
for the projects under the CHAP.
HUD is waiving 24 CFR part 902, Subpart A, to effectuate this treatment. After conversion,
all converted units will be subject to the applicable Section 8 program requirements.
J. Section 33 Required Conversion Review.26 While Section 33 of the Act would require that
a PHA annually review its inventory to identify projects that should undergo the Required
Conversion process, PHAs will not be required to assess projects that have been issued a
CHAP or are covered by a Portfolio or Multi-phase Award because HUD considers the RAD
conversion process to fulfill the requirements of Section 33 of the Act. Accordingly, HUD is
waiving 24 CFR part 972, subpart A for projects covered by a CHAP, a Portfolio Award, or a
Multi-phase Award.
K. Energy Performance Contract (EPC).27 A PHA may convert all units or a subset of units
within an EPC. If a PHA plans to convert a subset of units within an EPC the remaining EPC
must be financially viable and permitted under the current financing documents. The EPC
must generate sufficient savings to cover debt service and other EPC project costs without
counting the savings from the converting units. In order to demonstrate this, the PHA must
submit updated EPC documentation to HUD’s Energy Center to reflect the costs and
performance of the remaining units, including:
1. Updated HUD Cost Summary Sheet.
2. Updated HUD Cash Flow.
3. Other documents as requested by the Energy Center staff.
The Energy Center will review these documents and provide a draft amended EPC approval
letter specifying the impact of the RAD conversion and the minimum amount of debt that
will need to be addressed in the conversion. As a result, HUD recommends that PHAs submit
26
Section 33 of the Act requires PHAs to identify projects that must be removed from the stock of public housing.
27
HUD will issue further guidance on the intersection of RAD and EPCs that will be available at www.hud.gov/rad
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 46
Section I: Public Housing Projects
the updated EPC documentation as early as possible. The PHA’s Financing Plan must
demonstrate how the PHA will address the debt identified in the draft amended EPC approval
letter. Following the project’s closing, HUD will issue an amended EPC approval letter to the
PHA.
L. Capital Fund Education and Training Community Facilities (CFCF) Program. CFCF
provides capital funding to PHAs for the construction, rehabilitation, or purchase of facilities
to provide early childhood education, adult education, and job training programs for public
housing residents based on an identified need. Where a community facility has been
developed under CFCF in connection with or serving the residents of a Converting Project,
residents will continue to qualify as “PHA residents” for the purposes of CFCF program
compliance. The community facility must continue to be available to public housing
residents including “PHA residents.”
M. Lease Termination at Conversion is Not an Adverse Action. 24 CFR § 966.4(e)(8)(i)
classifies lease terminations as an adverse actions for which a tenant can seek a hearing under
the PHA’s grievance procedure. Public housing lease terminations that occur as part of a
RAD conversion do not qualify as an adverse action, provided that the tenants are provided
with a notice of termination in accordance with 24 CFR § 966.4(l)(3) as well as information
on when and how they will receive their new Section 8 lease, which must be effective the
same date the HAP Contract becomes effective. Grievance procedure requirements do not
apply to these lease terminations.
Special Provisions Affecting Conversions to PBVs
Under the Demonstration, HUD has the authority to waive statutory and regulatory provisions
governing the PBV program, or to establish alternative requirements for the effective conversion
of assistance. Additionally, the RAD Statute imposes certain unique requirements and authorizes
HUD to establish requirements for converted assistance under the Demonstration.
Listed below are the “special” requirements applicable to public housing projects converting
assistance to long-term PBV assistance under the First Component of the Demonstration, with
reference to the affected statute and/or regulation, where applicable. Special requirements are
grouped into four categories: Project Selection, Contract Terms, Resident Rights and
Participation, and Other Miscellaneous Provisions. All other regulatory and statutory
requirements of the PBV program in 24 CFR part 983 and section 8(o)(13) of the Act apply,
including environmental review, lead-based paint requirements, Davis-Bacon, and fair housing
requirements.
MTW agencies will be able to apply activities impacting the PBV program that are approved in
its MTW Plan to these properties as long as they do not conflict with RAD requirements. RAD
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Section I: Public Housing Projects
requirements include RAD statutory requirements, provisions of the PBV program specifically
addressed in this Notice (including provisions explicitly listed in Section 1.6 of this Notice as
provisions of the PBV program that MTW agencies may not alter under RAD), other conditions
and requirements of this Notice, or RAD contract forms or riders. With respect to any existing
PBV regulations that are waived or modified in this Section 1.6 pursuant to RAD authority,
except where explicitly noted below, MTW agencies may modify these or other requirements of
the PBV program if the activity is approved in its MTW Plan. All other RAD Requirements
listed below or elsewhere in this Notice shall apply to MTW agencies.
A. PBV Project Selection.
1. PBV Percentage Limitation. Covered Projects do not count against the percentage
limitation applicable to the PBV program. To implement this provision, HUD is
waiving section 8(o)(13)(B) of the Act as well as 24 CFR § 983.6 with respect to
Covered Projects. As a result, a PHA that is administering RAD PBV assistance does
not take the RAD PBV into consideration when calculating the percent limitation for
any non-RAD PBV actions that are subject to the percent limitation. In other words,
RAD PBV is excluded from both the numerator and the denominator when
calculating the percent that may be project-based for non-RAD PBV.
2. Cap on the Number of PBV Units in Each Project. There is no cap on the number
of units that may receive PBV assistance in each project. To implement these
provisions, HUD is waiving section 8(o)(13)(D) of the Act, as well as related
provisions of 24 CFR §§ 983.56, 983.257(b), 983.262(a) and (d).
3. Owner Proposal Selection Procedures. HUD is waiving 24 CFR § 983.51. With
respect to site selection standards, HUD requires compliance with the site selection
standards as set forth in this Notice.
4. Site selection – Compliance with PBV Goals, section 8(o)(13)(C)(ii) of the Act
and 24 CFR § 983.57(b)(1) and (c)(2). HUD waives these provisions having to do
with deconcentration of poverty and expanding housing and economic opportunity,
for the existing site.
B. PBV Contract Terms.
1. Length of Contract. Covered Projects shall have an initial HAP Contract term of at
least 15 years (up to 20 years upon request of the Project Owner and with approval by
the administering Voucher Agency). To implement this provision, HUD is specifying
alternative requirements for section 8(o)(13)(F) of the Act (which establishes a
maximum term of 15 years) as well as 24 CFR § 983.205(a) (which governs contract
term). Project Owners are required to make available for occupancy by eligible
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Section I: Public Housing Projects
tenants the number of assisted units under the terms of the contract and may not
reduce the number of assisted units without HUD approval. Any HUD approval of a
PHA’s request post-conversion to reduce the number of assisted units under the
contract is subject to conditions that HUD may impose and is reviewed by HUD in
the regular course of administration of the PBV program. MTW agencies may not
alter this requirement.
2. Mandatory Contract Renewal. In accordance with the RAD Statute, upon
expiration of the initial contract and each renewal contract, the administering Voucher
Agency must offer, and the Project Owner must accept, renewal of the contract
subject to the terms and conditions applicable at the time of renewal and the
availability of appropriations each year for such renewal. Consequently, section
8(o)(13)(G) of the Act, as well as 24 CFR § 983.205(b), governing the PHA
discretion to renew the contract, will not apply to the extent that these provisions
make renewal or extension decisions purely discretionary. However, Contract
Administrators and Project Owners may choose to extend the initial HAP Contract
term consistent with these provisions. The ability to extend the HAP Contract term
consistent with these provisions does not negate, in any way, the mandatory renewal
provision detailed in the first sentence of this paragraph. MTW agencies may not alter
this requirement.
3. Ownership or Control. This section has been moved to Section 1.4.A.11
4. RAD Use Agreement. Pursuant to the RAD Statute, a Covered Project shall have an
initial RAD Use Agreement that will:
i. Be recorded in a superior position to all liens on the property. The Use
Agreement shall be recorded prior to the Security Instrument or any other
mortgage or security instrument relating to an FHA-insured loan or a Risk-
share loan;
ii. Run until the conclusion of the initial term of the HAP Contract, automatically
renew upon extension or renewal of the HAP Contract for a term that
coincides with the renewal term of the HAP Contract, and remain in effect
even in the case of abatement or termination of the HAP Contract (for the
term the HAP Contract would have run, absent the abatement or termination),
unless the Secretary approves termination of the RAD Use Agreement in the
case of a transfer of assistance;
iii. Provide that in the event that the HAP Contract is removed due to breach,
non-compliance or insufficiency of Appropriations, for all units previously
covered under the HAP Contract new tenants must have incomes at or below
eighty percent (80%) of the area median income (AMI) at the time of
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Section I: Public Housing Projects
admission and rents may not exceed thirty percent (30%) of eighty percent
(80%) of AMI for an appropriate-size unit for the remainder of the term of the
RAD Use Agreement; and
iv. Require compliance with all applicable fair housing and civil rights
requirements, including the obligation to affirmatively further fair housing
5. Initial Contract Rent Setting. HUD has calculated initial contract rents for every
public housing project based on each project’s subsidy under the public housing
program. (See Attachment 1C for a full description of the methodology.) All RAD
applications, including applications for Portfolio or Multi-Phase awards, will have
initial contract rents based on their “RAD rent base year:”
All properties awarded under the original 60,000 unit cap have initial contract
rents based on FY 2012 funding levels (“FY 12 RAD rent base year”). These
rents will be adjusted each year by HUD’s published OCAF starting in CY 14
and established in the HAP Contracts at the time of conversion. Thus, for a
project in this category that closes in 2015, the initial contract rents will be
based on 2012 funding, with an OCAF adjustment for both 2014 and 2015.
All properties awarded above HUD’s original 60,000 unit cap but subject to
the increased 185,000 cap in effect as of the date of this Notice will have
initial contract rents based on FY 2014 funding levels (“FY 14 RAD rent base
year”). These rents will be adjusted each year by HUD’s published OCAF
starting in CY 15 and established in the HAP Contracts at the time of
conversion. Thus, for a project in this category that closes in 2015, the initial
contract rents will be based on 2014 funding, with an OCAF adjustment for
2015.
Subsequent to authority to convert additional units, properties will have initial
contract rents based on a future RAD rent base year in HUD’s sole discretion.
PHAs have additional discretion in establishing initial contract rents using the
following flexibilities:
i. MTW Fungibility. MTW agencies may use their MTW block grant funds to
set their initial contract rents, subject to applicable program caps. The agency
must use existing voucher funding to supplement rents; no additional voucher
funding will be provided. Any use of MTW block grant funds in setting initial
contract rents shall be subject to subsidy layering review and MTW continued
service requirements, as calculated using the MTW Baseline Methodology
described in PIH Notice 2013-02, or successor notice.
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Section I: Public Housing Projects
ii. Rent Bundling. PHAs may adjust subsidy (and initial contract rents) across
multiple projects as long as the PHA does not exceed the aggregate subsidy
for all of the projects the PHA has submitted for conversion under RAD. This
use, which HUD refers to as “bundled” rents, is permissible when a PHA
submits applications for two or more projects. There is no limit to the number
of projects that a PHA may bundle. The conversion of the donor property
must close prior to or simultaneous with the conversion of the recipient
property.
For example, assume that a PHA is considering bundling two identical
projects, both consisting of 100 units. In Project A, the contract rent is $500;
and in Project B, the contract rent is $600. The PHA could bundle the two
projects such that the initial contract rents for both projects will be $550.
See Section 1.9 for instructions on submitting applications with bundled rents.
iii. Future Replacement Housing Factor (RHF) or Demolition Disposition
Transition Funding (DDTF).28 PHAs that are scheduled to receive ongoing
RHF or DDTF funding (funds that have not been awarded and, with HUD
permission, funds that have been awarded but not yet disbursed) may choose
to forgo any ongoing RHF or DDTF grants for the purpose of offsetting an
increase to the RAD rent. See Attachment 1C for the calculation of how RHF
or DDTF funding may offset increased RAD rent.
Notwithstanding HUD’s calculation or the above-mentioned flexibilities, initial PBV
contract rents are subject to the statutory and regulatory PBV requirements governing
contract rents (see 24 CFR § 983.301), (except where alternative rent caps have been
approved in a MTW Plan). To this effect, initial contract rents cannot exceed the
lower of: (a) the reasonable rent (as defined under 24 CFR § 983.303); (b) an amount
determined by the PHA, not to exceed 110 percent of the applicable FMR (or
applicable exception payment standard, or rent cap approved in an MTW Plan),
minus any utility allowance; or (c) the rent requested by the owner.
28 RHF and DDTF are provided to PHAs following the demolition or disposition of public housing projects
pursuant to Section 18 of the Act. PHAs will not receive RHF or DDTF as a result of and following the
conversion of projects converting under RAD.
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6. Method of Adjusting Contract Rents. Contract rents will be adjusted only by
HUD’s OCAF at each anniversary of the HAP Contract, subject to the availability of
appropriations for each year of the contract term.29 As such, section 8(o)(13)(I) of the
Act and 24 CFR §§ 983.301 and 983.302, concerning rent determinations, shall not
apply when adjusting rents. The rent to owner may at no time exceed the reasonable
rent charged for comparable unassisted units in the private market, as determined by
the Contract Administrator in accordance with 24 CFR § 983.303.30 However, the
rent to owner shall not be reduced below the initial rent to owner for dwelling units
under the initial HAP Contract.31 MTW agencies may not alter this requirement.
7. Transfer of Assistance. This section has been moved to Section 1.4.A.12.
8. Agreement Waiver and RAD Rehab Assistance Payments. For public housing
conversions to PBV there will be no Agreement to Enter into a Housing Assistance
Payments (AHAP) contract. Therefore, all regulatory references to the AHAP,
including regulations under 24 CFR part 983 subpart D are waived. Instead, the PHA
and Project Owner typically will enter into a HAP Contract before construction
begins. Until the work is complete, standard HAP Contract funding procedures will
be used for occupied units. Units that are not occupied at any point during the period
of work identified in the approved Financing Plan and RAD Conversion Commitment
may be eligible, subject to the conditions below, for Rehab Assistance Payments
equal to the Public Housing Operating Fund and the Capital Fund amounts that
formed the basis for the calculation of initial contract rents (see Attachment 1C).
During the period of rehabilitation or construction as identified in the RCC and the
HAP Contract, the maximum number of units for which a Project Owner can receive
RAD Rehab Assistance Payments is limited to the number of units eligible for
Operating Fund or Capital Fund subsidy prior to conversion. As a result, some units
in the Covered Project may not be eligible for Rehab Assistance Payments.
29
OCAFs are calculated and published each year by HUD in the Federal Register and are applied to the portion of a
contract rent that is not committed to debt service payment in order to calculate the contract rent for the project in
the following fiscal year. For the most recent guidance on OCAF, please see: http://www.gpo.gov/fdsys/pkg/FR-
2011-10-26/pdf/2011-27816.pdf.
30
If the Covered Project is deemed to be PHA-owned pursuant to HUD guidance, an independent entity will need to
perform the rent-setting and inspection functions set out in 24 CFR § 983.59.
31
The rent to owner may fall below the initial contract rent: 1) to correct errors in calculations in accordance with
HUD requirements; 2) if additional housing assistance has been combined with PBV assistance after the execution
of the initial HAP Contract and a rent decrease is required pursuant to § 983.55 (Prohibition of excess public
assistance); or 3) if a decrease in rent to owner is required based on changes in the allocation of responsibility for
utilities between the owner and the tenant.
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Following the earlier of the end of the construction period identified in the HUD-
approved Financing Plan or actual construction, the PHA will no longer be eligible to
receive RAD Rehab Assistance Payments, and all units under contract will be eligible
for payment only for occupied units or for vacancy payments, as applicable. MTW
agencies may not alter this requirement.
9. HQS Inspections. Under current regulations at 24 CFR § 983.103(b) a unit covered
under a HAP Contract must be inspected and must meet HQS before assistance can
be paid on behalf of a household. In addition, section 8(o)(8)(A) of the Act provides
that HAP Contract units must be inspected to ensure compliance with HQS prior to
payment of any assistance on behalf of a family. When Work is occuring under RAD,
HUD requires that all units meet HQS no later than the date of completion of the
Work as indicated in the RCC. Consequently, HUD is waiving and establishing an
alternative requirement to 24 CFR § 983.103(b) and section 8(o)(8)(A) of the Act in
such cases.
10. Floating Units. For mixed-income Converting Projects where PHAs are currently
exercising their discretion to allow subsidized units to float within a project
redeveloped with funding under a Choice Neighborhoods Implementation or HOPE
VI grant, or as part of a Mixed-Finance project, upon the request of the Voucher
Agency that will administer the Covered Project, HUD will permit PBV assistance to
float among units within the project having the same bedroom size. A unit to which
assistance is floated must be comparable in condition to the unit it is replacing (i.e.,
the unit must be of the same quality and amenities as the unit it is replacing).
Assistance may float from a Section 504 accessible unit only to another Section 504
accessible unit that has the same bedroom size and accessibility features. Units that
float are not specifically designated under the HAP Contract. Therefore, the
requirements in 24 CFR § 983.203(c) that the HAP Contract provide “the location of
each contract unit” and “the area of each contract unit” are waived. Instead, the HAP
Contract must specify the number and type of units in the property that are designated
as RAD units, including any excepted units. From the time of the initial execution of
the PBV RAD HAP Contract, the property must maintain the same number and type
of RAD units, including the same number and type of Section 504 accessible units.
Floating units are subject to all of the requirements in this Notice and the PBV
regulations, including physical inspections, rent adjustments, and income-mixing
requirements. The alternative requirements with respect to floating units do not apply
to non-RAD PBV units.
C. PBV Resident Rights and Participation.
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1. No Rescreening of Tenants upon Conversion. Pursuant to the RAD Statute, at
conversion, current households cannot be excluded from occupancy at the Covered
Project based on any rescreening, income eligibility, or income targeting. With
respect to occupancy in the Covered Project, current households in the Converting
Project will be grandfathered for application of any eligibility criteria to conditions
that occurred prior to conversion but will be subject to any ongoing eligibility
requirements for actions that occur after conversion.32 Post-conversion, the tenure of
all residents of the Covered Project is protected pursuant to PBV requirements
regarding continued occupancy unless explicitly modified in this Notice (e.g., rent
phase-in provisions). For example, a unit with a household that was over-income at
time of conversion would continue to be treated as an assisted unit. Thus, 24 CFR §
982.201, concerning eligibility and targeting of tenants for initial occupancy, will not
apply for current households. Once the grandfathered household moves out, the unit
must be leased to an eligible family. MTW agencies may not alter this requirement.
Further, so as to facilitate the right to return to the assisted property, this provision
shall apply to current public housing residents of the Converting Project that will
reside in non-RAD PBV units or non-RAD PBRA units placed in a project that
contain RAD PBV units or RAD PBRA units. Such families and such contract units
will otherwise be subject to all requirements of the applicable program, specifically
24 CFR § 983 for non-RAD PBV units and the PBRA requirements governing the
applicable contract for non-RAD PBRA units.33
2. Right to Return. See section 1.4.A.5(ii) and the RAD Fair Housing, Civil Rights,
and Relocation Notice regarding a resident’s right to return.
3. Renewal of Lease. Since publication of the PIH Notice 2012-32 Rev 1, the
regulations under 24 CFR part 983 have been amended requiring Project Owners to
renew all leases upon lease expiration, unless cause exists. MTW agencies may not
alter this requirement.
4. Phase-in of Tenant Rent Increases. If a tenant’s monthly rent increases by more
than the greater of 10 percent or $25 purely as a result of conversion, the rent increase
will be phased in over 3 or 5 years. To implement this provision, HUD is specifying
32 These protections (as well as all protections in this Notice for current households) also apply when a household is
relocated to facilitate new construction or repairs following conversion and subsequently returns to the Covered
Project.
33 For non-RAD PBV households, applicable program requirements includes the requirement that any admission
to the project must be initially eligible for a HAP payment at admission to the program, which means their TTP may
not exceed the gross rent for the unit at that time.
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alternative requirements for section 3(a)(1) of the Act, as well as 24 CFR § 983.3
(definition of “total tenant payment” (TTP)) to the extent necessary to allow for the
phase-in of tenant rent increases. A PHA must create a policy setting the length of the
phase-in period at three years, five years or a combination depending on
circumstances. For example, a PHA may create a policy that uses a three year phase-
in for smaller increases in rent and a five year phase-in for larger increases in rent.
This policy must be in place at conversion and may not be modified after conversion.
The method described below explains the set percentage-based phase-in a Project
Owner must follow according to the phase-in period established. For purposes of this
section “Calculated PBV TTP” refers to the TTP calculated in accordance with
regulations at 24 CFR §5.628 and the “most recently paid TTP” refers to the TTP
recorded on line 9j of the family’s most recent HUD Form 50058. If a family in a
project converting from Public Housing to PBV was paying a flat rent immediately
prior to conversion, the PHA should use the flat rent amount to calculate the phase-in
amount for Year 1, as illustrated below.
Three Year Phase-in:
Year 1: Any recertification (interim or annual) performed prior to the second
annual recertification after conversion – 33% of difference between most
recently paid TTP or flat rent and the Calculated PBV TTP
Year 2: Year 2 Annual Recertification (AR) and any Interim Recertification
(IR) prior to Year 3 AR – 50% of difference between most recently paid TTP
and the Calculated PBV TTP
Year 3: Year 3 AR and all subsequent recertifications – Full Calculated PBV
TTP 34
Five Year Phase in:
Year 1: Any recertification (interim or annual) performed prior to the second
annual recertification after conversion – 20% of difference between most
recently paid TTP or flat rent and the Calculated PBV TTP
Year 2: Year 2 AR and any IR prior to Year 3 AR – 25% of difference
between most recently paid TTP and the Calculated PBV TTP
34 For example, where a resident’s most recently paid TTP is $100, but the Calculated PBV TTP is $200 and
remains $200 for the period of the resident’s occupancy, (i.e. no changes in income) the resident would
continue to pay the same rent and utilities for which it was responsible prior to conversion. At the first
recertification following conversion, the resident’s contribution would increase by 33% of $100 to $133. At
the second AR, the resdient’s contribution would increase by 50% of the $66 differential to the standard TPP,
increasing to $166. At the third AR, the resident’s contribution would increase to $200 and the resident would
continue to pay the Calculated PBV TTP for the duration of their tenancy.
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Year 3: Year 3 AR and any IR prior to Year 4 AR – 33% of difference
between most recently paid TTP and the Calculated PBV TTP
Year 4: Year 4 AR and any IR prior to Year 5 AR – 50% of difference
between most recently paid TTP and the Calculated PBV TTP
Year 5 AR and all subsequent recertifications – Full Calculated PBV TTP
Please Note: In either the three year phase-in or the five-year phase-in, once the
Calculated PBV TTP is equal to or less than the previous TTP, the phase-in ends and
tenants will pay full TTP from that point forward. MTW agencies must also
implement a three or five-year phase-in for impacted residents, but may alter the
terms above as long as it establishes a written policy setting forth the alternative
terms.
5. Family Self Sufficiency (FSS) and Resident Opportunities and Self Sufficiency
Service Coordinator (ROSS-SC) programs. Public Housing residents that are
currently FSS participants will continue to be eligible for FSS once their housing is
converted under RAD. The PHA may continue to use any FSS funds already awarded
to serve those FSS participants who live in units converted by RAD. At the
completion of the FSS grant, PHAs should follow the normal closeout procedures
outlined in the grant agreement. If the PHA continues to run an FSS program that
serves PH and/or HCV participants, the PHA will continue to be eligible (subject to
NOFA requirements) to apply for FSS funding and may use that funding to serve PH,
HCV and/or PBRA participants in its FSS program. Due to the program merger
between PH FSS and HCV FSS that took place pursuant to the FY14 Appropriations
Act (and was continued in the subsequent Appropriation Acts), no special provisions
are required to continue serving FSS participants that live in public housing units
converting to PBV under RAD.
However, PHAs should note that there are certain FSS requirements (e.g., escrow
calculation and escrow forfeitures) that apply differently depending on whether the
FSS participant is a participant under the HCV program or a public housing resident,
and PHAs must follow such requirements accordingly. All PHAs will be required to
administer the FSS program in accordance with FSS regulations at 24 CFR part 984,
the participants’ contracts of participation, and the alternative requirements
established in the “Waivers and Alternative Requirements for the FSS Program”
Federal Register notice, published on December 29, 2014, at 79 FR 78100.35 Further,
35
The funding streams for the PH FSS Program and the HCV FSS Program were first merged pursuant to the FY
2014 appropriations act. As a result, PHAs can serve both PH residents and HCV participants, including PBV
participants, with FSS funding awarded under the FY 2014 FSS Notice of Funding Availability (FSS NOFA) and
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upon conversion to PBV, already escrowed funds for FSS participants shall be
transferred into the HCV escrow account and be considered TBRA funds, thus
reverting to the HAP account if forfeited by the FSS participant.
For information on FSS PIC reporting requirements for RAD conversions, see Notice
PIH 2016-08 at http://portal.hud.gov/hudportal/documents/huddoc?id=pih2016-
08.pdf.
Current ROSS-SC grantees will be able to finish out their current ROSS-SC grants
once their housing is converted under RAD. However, once the property is converted,
it will no longer be eligible to be counted towards the unit count for future ROSS-SC
grants, nor will its residents be eligible to be served by future ROSS-SC grants,
which, by statute, can only serve public housing residents. At the completion of the
ROSS-SC grant, PHAs should follow the normal closeout procedures outlined in the
grant agreement. Please note that ROSS-SC grantees may be a non-profit or local
Resident Association and this consequence of a RAD conversion may impact those
entities.
6. Resident Participation and Funding. In accordance with Attachment 1B, residents
of Covered Projects with assistance converted to PBV will have the right to establish
and operate a resident organization for the purpose of addressing issues related to
their living environment and be eligible for resident participation funding.
7. Resident Procedural Rights. The following items must be incorporated into both the
Section 8 Administrative Plan and the Project Owner’s lease, which includes the
required tenancy addendum, as appropriate. Evidence of such incorporation may be
requested by HUD for purposes of monitoring the program.
i. Termination Notification. HUD is incorporating additional termination
notification requirements to comply with section 6 of the Act for public housing
projects that convert assistance under RAD. In addition to the regulations at 24
CFR § 983.257 related to Project Owner termination of tenancy and eviction
(which MTW agencies may not alter) the termination procedure for RAD
conversions to PBV will require that PHAs provide adequate written notice of
termination of the lease which shall be :
a. A reasonable period of time, but not to exceed 30 days:
any other NOFA under which the combination of funds remains in the applicable appropriations act. For PHAs that
had managed both programs separately and now have a merged program, a conversion to PBV should not impact
their FSS participants.
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ii. If the health or safety of other tenants, Project Owner employees,
or persons residing in the immediate vicinity of the premises is
threatened; or
iii. In the event of any drug-related or violent criminal activity or any
felony conviction;
b. Not less than 14 days in the case of nonpayment of rent; and
c. Not less than 30 days in any other case, except that if a State or local law
provides for a shorter period of time, such shorter period shall apply.
ii. Grievance Process. Pursuant to requirements in the RAD Statute, HUD is
establishing additional resident procedural rights to comply with section 6 of the
Act.
For issues related to tenancy and termination of assistance, PBV program rules
require the Project Owner to provide an opportunity for an informal hearing, as
outlined in 24 CFR § 982.555. RAD will specify alternative requirements for 24
CFR § 982.555(b) in part, which outlines when informal hearings are not
required, to require that:
a. In addition to reasons that require an opportunity for an informal hearing
given in 24 CFR § 982.555(a)(1)(i)-(vi),36 an opportunity for an informal
hearing must be given to residents for any dispute that a resident may have
with respect to a Project Owner action in accordance with the individual’s
lease or the contract administrator in accordance with RAD PBV
requirements that adversely affect the resident’s rights, obligations,
welfare, or status.
i. For any hearing required under 24 CFR § 982.555(a)(1)(i)-(vi), the
contract administrator will perform the hearing, as is the current
standard in the program. The hearing officer must be selected in
accordance with 24 CFR § 982.555(e)(4)(i).
ii. For any additional hearings required under RAD, the Project
Owner will perform the hearing.
b. There is no right to an informal hearing for class grievances or to disputes
between residents not involving the Project Owner or contract
administrator.
c. The Project Owner gives residents notice of their ability to request an
informal hearing as outlined in 24 CFR § 982.555(c)(1) for informal
hearings that will address circumstances that fall outside of the scope of 24
CFR § 982.555(a)(1)(i)-(vi).
36
§ 982.555(a)(1)(iv) is not relevant to RAD as the tenant-based certificate program has been repealed.
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d. The Project Owner provides opportunity for an informal hearing before an
eviction.
Current PBV program rules require that hearing procedures must be outlined in
the PHA’s Section 8 Administrative Plan.
8. Earned Income Disregard (EID). Tenants who are employed and are currently
receiving the EID exclusion at the time of conversion will continue to receive the EID
after conversion, in accordance with regulations at 24 CFR § 5.617. Upon the
expiration of the EID for such families, the rent adjustment shall not be subject to rent
phase-in, as described in Section 1.6.C.4; instead, the rent will automatically rise to
the appropriate rent level based upon tenant income at that time.
Under the Housing Choice Voucher program, the EID exclusion is limited only to
persons with disabilities (24 CFR § 5.617(b)). In order to allow all tenants (including
non-disabled persons) who are employed and currently receiving the EID at the time
of conversion to continue to benefit from this exclusion in the PBV project, the
provision in 24 CFR § 5.617(b) limiting EID to disabled persons is waived. The
waiver, and resulting alternative requirement, apply only to tenants receiving the EID
at the time of conversion. No other tenant (e.g., tenants that move into the property
following conversion or tenants who at one time received the EID but are not
receiving the EID exclusion at the time of conversion due to loss of employment) is
covered by this waiver.
9. Jobs Plus. Jobs Plus grantees awarded FY14 and future funds that convert the Jobs
Plus target projects(s) under RAD will be able to finish out their Jobs Plus period of
performance at that site unless significant relocation and/or change in building
occupancy is planned. If either is planned at the Jobs Plus target project(s), HUD may
allow for a modification of the Jobs Plus work plan or may, at the Secretary’s
discretion, choose to end the Jobs Plus program at that project.
10. When Total Tenant Payment Exceeds Gross Rent. Under normal PBV rules, the
PHA may select an occupied unit to be included under the PBV HAP Contract only if
the unit’s occupants are eligible for housing assistance payments (24 CFR
§ 983.53(c)). Also, a PHA must remove a unit from the contract when no assistance
has been paid for 180 days because the family’s TTP has risen to a level that is equal
to or greater than the contract rent, plus any utility allowance, for the unit (i.e., the
Gross Rent)) (24 CFR § 983.258). Since the rent limitation under this Section of the
Notice may result in a family’s TTP equaling or exceeding the gross rent for the unit,
for residents living in the Converting Project prior to conversion and who will return
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to the Covered Project after conversion, HUD is waiving both of these provisions and
requiring that the unit for such families be placed on and/or remain under the HAP
Contract when TTP equals or exceeds the Gross Rent. Further, HUD is establishing
the alternative requirement that until such time that the family’s TTP falls below the
gross rent, the rent to the owner for the unit will equal the lesser of (a) the family’s
TTP, less the Utility Allowance, or (b) any applicable maximum rent under LIHTC
regulations. When the family’s TTP falls below the gross rent, normal PBV rules
shall apply. As necessary to implement this alternative provision, HUD is waiving the
provisions of Section 8(o)(13)(H) of the Act and the implementing regulations at 24
CFR § 983.301 as modified by Section 1.6.B.5 of this Notice.37 In such cases, the
resident is considered a participant under the program and all of the family
obligations and protections under RAD and PBV apply to the resident. Likewise, all
requirements with respect to the unit, such as compliance with the HQS requirements,
apply as long as the unit is under HAP Contract. The PHA is required to process these
individuals through the Form 50058 submodule in PIC.
Following conversion, 24 CFR § 983.53(d) applies, and any new families referred to
the RAD PBV project must be initially eligible for a HAP payment at admission to
the program, which means their TTP may not exceed the gross rent for the unit at that
time. Further, a PHA must remove a unit from the contract when no assistance has
been paid for 180 days. If units are removed from the HAP contract because a new
admission’s TTP comes to equal or exceed the gross rent for the unit and if the
project is fully assisted, HUD is imposing an alternative requirement that the PHA
must reinstate the unit after the family has vacated the property. If the project is
partially assisted, the PHA may substitute a different unit for the unit on the HAP
contract in accordance with 24 CFR §983.207 or, where “floating” units have been
permitted, Section 1.6.B.10 of this Notice.
11. Under-Occupied Unit. If a family is in an under-occupied unit under 24 CFR
§ 983.260 at the time of conversion, the family may remain in this unit until an
appropriate-sized unit becomes available in the Covered Project. When an appropriate
sized unit becomes available in the Covered Project, the family living in the under-
occupied unit must move to the appropriate-sized unit within a reasonable period of
time, as determined by the administering Voucher Agency. In order to allow the
family to remain in the under-occupied unit until an appropriate-sized unit becomes
37 For example, a public housing family residing in a property converting under RAD has a TTP of $600. The
property has an initial Contract Rent of $500, with a $50 Utility Allowance. Following conversion, the residents is
still responsible for paying $600 in tenant rent and utilities.
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available in the Covered Project, 24 CFR § 983.260 is waived. MTW agencies may
not modify this requirement.
D. PBV: Other Miscellaneous Provisions
1. Access to Records, Including Requests for Information Related to Evaluation of
Demonstration. PHAs and the Project Owner must cooperate with any reasonable
HUD request for data to support program evaluation, including but not limited to
project financial statements, operating data, Choice-Mobility utilization, and
rehabilitation work. Please see Appendix IV for reporting units in Form HUD-50058.
2. Additional Monitoring Requirement. The Owner must submit to the administering
PHA and the PHA’s Board must approve the operating budget for the Covered
Project annually in accordance with HUD requirements.38
3. Davis-Bacon Act and Section 3 of the Housing and Urban Development Act of
1968 (Section 3). This section has been moved to 1.4.A.13 and 1.4.A.14.
4. Establishment of Waiting List. 24 CFR § 983.251 sets out PBV program
requirements related to establishing and maintaining a voucher-wide, PBV program-
wide, or site-based waiting list from which residents for the Covered Project will be
admitted. These provisions will apply unless the project is covered by a remedial
order or agreement that specifies the type of waiting list and other waiting list
policies. The PHA shall consider the best means to transition applicants from the
current public housing waiting list, including:
i. Transferring an existing site-based waiting list to a new site-based waiting list.
ii. Transferring an existing site-based waiting list to a PBV program-wide or HCV
program-wide waiting list.
iii. Transferring an existing community-wide public housing waiting list to a PBV
program-wide or HCV program-wide waiting list, an option particularly
relevant for PHAs converting their entire portfolio under RAD.
iv. Informing applicants on a community-wide public housing waiting list how to
transfer their application to one or more newly created site-based waiting lists.
For any applicants on the public housing waiting list that are likely to be ineligible for
admission to a Covered Project converting to PBV because the household’s TTP is
38
For PBV conversions that are not FHA-insured, a future HUD notice will describe project financial data that may
be required to be submitted by a PBV owner for purposes of monitoring and evaluation, given that PBV projects do
not submit annual financial statements to HUD/REAC.
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likely to exceed the RAD gross rent, the PHA shall consider transferring such
household, consistent with program requirements for administration of waiting lists,
to the PHA’s remaining public housing waiting list(s) or to another voucher waiting
list, in addition to transferring such household to the waiting list for the Covered
Project.
To the extent any wait list relies on the date and time of application, the applicants
shall have priority on the wait list(s) to which their application was transferred in
accordance with the date and time of their application to the original waiting list.
If the PHA is transferring assistance to another neighborhood and, as a result of the
transfer of the waiting list, the applicant would only be eligible for a unit in a location
which is materially different from the location to which the applicant applied, the
PHA must notify applicants on the wait-list of the transfer of assistance, and on how
they can apply for residency at other sites.
If using a site-based waiting list, PHAs shall establish a waiting list in accordance
with 24 CFR § 903.7(b)(2)(ii)-(iv) to ensure that applicants on the PHA’s public
housing community-wide waiting list have been offered placement on the Covered
Project’s initial waiting list. In all cases, PHAs have the discretion to determine the
most appropriate means of informing applicants on the public housing community-
wide waiting list given the number of applicants, PHA resources, and admissions
requirements of the projects being converted under RAD. A PHA may consider
contacting every applicant on the public housing waiting list via direct mailing;
advertising the availability of housing to the population that is less likely to apply,
both minority and non-minority groups, through various forms of media (e.g., radio
stations, posters, newspapers) within the marketing area; informing local non-profit
entities and advocacy groups (e.g., disability rights groups); and conducting other
outreach as appropriate. Any activities to contact applicants on the public housing
waiting list must be conducted in accordance with the requirements for effective
communication with persons with disabilities at 24 CFR § 8.6 and with the obligation
to provide meaningful access for persons with limited English proficiency (LEP).39
A PHA must maintain any site-based waiting list in accordance with all applicable
civil rights and fair housing laws and regulations.
39
For more information on serving persons with LEP, please see HUD’s Final guidance to Federal Financial
Assistance Recipients Regarding Title VI Prohibition Against National Origin Discrimination Affecting Limited
English Proficient Persons (72 FR 2732), published on January 22, 2007.
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To implement this provision, HUD is specifying alternative requirements for 24 CFR
§ 983.251(c)(2). However, after the initial waiting list has been established, the PHA
shall administer its waiting list for the Covered Project in accordance with 24 CFR §
983.251(c).
5. Mandatory Insurance Coverage. The Covered Project shall maintain at all times
commercially available property and liability insurance to protect the project from
financial loss and, to the extent insurance proceeds permit, promptly restore,
reconstruct, and/or repair any damaged or destroyed project property.
6. Agreement Waiver. This section has been moved to 1.6.B.8.
7. Future Refinancing. Project Owners must receive HUD approval for any refinancing
or restructuring of secured debt during the HAP Contract term to ensure the financing
is consistent with long-term preservation of the Covered Project. With respect to any
financing contemplated at the time of conversion (including any permanent financing
which is a conversion or take-out of construction financing), such consent may be
evidenced through the RCC.
8. Administrative Fees for Public Housing Conversions During the Year of
Conversion. For the remainder of the Calendar Year in which the HAP Contract
becomes effective (i.e., the “year of conversion”), RAD PBV projects will be funded
with public housing funds. For example, if the project’s assistance converts effective
July 1, 2015, the public housing ACC between the PHA and HUD will be amended to
reflect the number of units under HAP Contract, but will be for zero dollars, and the
RAD PBV HAP Contract will be funded with public housing money for July through
December 2015. Since TBRA is not the source of funds, PHAs should not report
leasing and expenses into VMS during this period, and PHAs will not receive section
8 administrative fee funding for converted units during this time.
PHAs operating HCV program typically receive administrative fees for units under a
HAP Contract, consistent with recent appropriation act references to “section 8(q) of
the [United States Housing Act of 1937] and related appropriations act provisions in
effect immediately before the Quality Housing and Work Responsibility Act of 1998”
and 24 CFR § 982.152(b). During the year of conversion mentioned in the preceding
paragraph, these provisions are waived. PHAs will not receive Section 8
administrative fees for PBV RAD units during the year of conversion.
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After the year of conversion, the Section 8 ACC will be amended to include Section 8
funding that corresponds to the units covered by the Section 8 ACC. At that time, the
regular Section 8 administrative fee funding provisions will apply.
9. Choice-Mobility. One of the key features of the PBV program is the mobility
component, which provides that if the family has elected to terminate the assisted
lease at any time after the first year of occupancy in accordance with program
requirements, the PHA must offer the family the opportunity for continued tenant-
based rental assistance, in the form of either assistance under the voucher program or
other comparable tenant-based rental assistance.
If as a result of participation in RAD a significant percentage of the PHA’s HCV
program becomes PBV assistance, it is possible for most or all of a PHA’s turnover
vouchers to be used to assist those RAD PBV families who wish to exercise mobility.
While HUD is committed to ensuring mobility remains a cornerstone of RAD policy,
HUD recognizes that it remains important for the PHA to still be able to use tenant-
based vouchers to address the specific housing needs and priorities of the community.
Therefore, HUD is establishing an alternative requirement for PHAs where, as a
result of RAD, the total number of PBV units (including RAD PBV units) under HAP
Contract administered by the PHA exceeds 20 percent of the PHA’s authorized units
under its HCV ACC with HUD.
The alternative mobility policy provides that an eligible voucher agency would not be
required to provide more than three-quarters of its turnover vouchers in any single
year to the residents of Covered Projects. While a voucher agency is not required to
establish a voucher inventory turnover cap, if such a cap is implemented, the voucher
agency must create and maintain a waiting list in the order in which the requests from
eligible households were received. In order to adopt this provision, this alternative
mobility policy must be included in an eligible PHA’s administrative plan.
To effectuate this provision, HUD is providing an alternative requirement to Section
8(o)(13)(E) of the Act and 24 CFR § 983.261(c). Please note that this alternative
requirement does not apply to PBVs entered into outside of the context of RAD.
MTW agencies may not alter this requirement.
10. Reserve for Replacement. The Project Owner shall establish and maintain a
replacement reserve in an interest-bearing account to aid in funding extraordinary
maintenance and repair and replacement of capital items in accordance with
applicable regulations. The reserve must be built up to and maintained at a level
determined by HUD to be sufficient to meet projected requirements. For FHA
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transactions, Replacement Reserves shall be maintained in accordance with the FHA
Regulatory Agreement. For all other transactions, Replacement Reserves shall be
maintained in a bank account or similar instrument, as approved by HUD, where
funds will be held by the Project Owner or mortgagee and may be drawn from the
reserve account and used subject to HUD guidelines.
Special Provisions Affecting Conversions to PBRA
Under the Demonstration, HUD has the authority to waive statutory and regulatory provisions
governing the PBRA program, or to establish alternative requirements for the effective
conversion of assistance. Additionally, the RAD Statute imposes certain unique requirements
and authorizes HUD to establish requirements for converted assistance under the demonstration.
For public housing projects converting assistance to PBRA under the First Component of the
Demonstration, 24 CFR part 880, Section 8 Housing Assistance Payments Program for New
Construction and applicable standing and subsequent Office of Housing guidance40 will apply,
except for the provisions listed below. These “special” provisions are grouped into three
categories: Contract Terms, Resident Rights and Participation, and Other Miscellaneous
Provisions. Where applicable, reference is made to the affected statute and/or regulation. For
additional background purposes, HUD has provided Appendix I, which is a copy of the existing
24 CFR part 880 regulation with the provisions stricken that will not apply to Covered Projects.
Additionally, Appendix II includes the specific provisions of the Act that are inapplicable to
PBRA conversions. Finally, Appendix III includes the site and neighborhood standards that
apply to PBRA.
A. PBRA Contract Terms.
1. Length of Contract. Covered Projects shall have an initial HAP term of 20 years. To
implement this provision, HUD is specifying alternative requirements for section
8(d)(2)(A) of the Act, which establishes a maximum term of 15 years for “an existing
structure.” Additionally, 24 CFR § 880.502, which imposes maximum contract terms
for New Construction projects consistent with statutory authority that was repealed in
1983, does not apply.
2. Mandatory Contract Renewal. Section 524 of MAHRAA and 24 CFR part 402
currently govern renewals of expiring or terminating project-based section 8 HAP
Contracts and, in general, require HUD to renew such contracts “at the request of the
40
Examples of Office of Housing guidance include handbooks such as “Occupancy Requirements of Subsidized
Multifamily Housing Programs” (4350.3) and “Multifamily Asset Management and Project Servicing” (4350.1).
Future changes to part 880 would apply to RAD as long as the future changes are not provisions that have been
stricken in the final Notice.
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owner.” Pursuant to the RAD Statute, upon expiration of the initial contract and each
renewal contract, the Secretary or Contract Administrator must offer, and the Project
Owner must accept, renewal of the contract subject to the terms and conditions
applicable at the time of renewal and the availability of appropriations each year of
such renewal. Consequently, to the extent that section 524 of MAHRAA and 24 CFR
part 402 are in effect upon contract expiration, the various provisions stating or
requiring that any renewal of an expiring contract for project-based assistance under
Section 8 shall be “at the request of the owner” will not apply.
3. Ownership or Control. This section has been moved to Section 1.4.A.11.
4. RAD Use Agreement. Pursuant to the RAD Statute, Covered Projects shall have an
initial RAD Use Agreement that will:
i. Be recorded superior to other liens on the property. The Use Agreement shall
be recorded prior to the Security Instrument or any other mortgage or security
instrument relating to an FHA-insured loan or a Risk-share loan;
ii. Run until the conclusion of the initial term of the HAP Contract, automatically
renew upon extension or renewal of the HAP Contract for a term that coincides
with the renewal term of the HAP Contract, and remain in effect even in the
case of abatement or termination of the HAP Contract (for the term the HAP
Contract would have run, absent the abatement or termination), unless the
Secretary approves termination of the RAD Use Agreement in the case of a
transfer of assistance;
iii. Provide that in the event that the HAP Contract is removed due to breach, non-
compliance or insufficiency of Appropriations, for all units previously covered
under the HAP Contract new tenants must have incomes at or below eighty
percent (80%) of the area median income (AMI) at the time of admission and
rents may not exceed thirty percent (30%) of eighty percent (80%) of AMI for
an appropriate-size unit for the remainder of the term of the RAD Use
Agreement; and
iv. Require compliance with all applicable fair housing and civil rights
requirements, including the obligation to affirmatively further fair housing.
5. Initial Contract Rent Setting. No additional or incremental funding is associated
with this Demonstration. Consequently, HUD is specifying alternative requirements
for section 8(c)(1) of the Act, which governs rent setting for project-based Section 8
units, and for section 8(c)(5) of the Act or 24 CFR § 880.503(b), which govern the
“project account.” HUD has calculated initial contract rents for every public housing
project based on each project’s subsidy under the public housing program. (See
Attachment 1C for a full description of the methodology.) All RAD applications,
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including applications for Portfolio or Multi-Phase awards, will have initial contract
rents based on their “RAD rent base year:”
All properties awarded under the original 60,000 unit cap have initial contract
rents based on FY 2012 funding levels (“FY 12 RAD rent base year”). These
rents will be adjusted each year by HUD’s published OCAF starting in CY 14
and established in the HAP Contracts at the time of conversion. Thus, for a
project in this category that closes in 2015, the initial contract rents will be
based on 2012 funding, with an OCAF adjustment for both 2014 and 2015.
All properties awarded above HUD’s original 60,000 unit cap but subject to
the increased 185,000 cap in effect as of the date of this Notice will have
initial contract rents based on FY 2014 funding levels (“FY 14 RAD rent base
year”). These rents will be adjusted each year by HUD’s published OCAF
starting in CY 15 and established in the HAP Contracts at the time of
conversion. Thus, for a project in this category that closes in 2015, the initial
contract rents will be based on 2014 funding, with an OCAF adjustment for
2015.
Subsequent to authority to convert additional units, properties will have initial
contract rents based on a future RAD rent base year in HUD’s sole discretion.
PHAs have additional discretion in establishing initial contract rents using the
following flexibility:
i. MTW Fungibility. MTW agencies may use their MTW block grant funds to
set their initial contract rents. In addition to the rent cap described below,
contract rents cannot exceed comparable market rent, as determined by a Rent
Comparability Study. Any use of MTW block grant funds in setting initial
contract rents shall be subject to subsidy layering review and MTW continued
service requirements, as calculated using the MTW Baseline Methodology
described in PIH Notice 2013-02, or successor Notice. If an MTW agency
converts a project to PBRA and uses this flexibility to increase their initial
contract rents, HUD will reduce the agency’s public housing subsidy by the
additional amount (in addition to any funding modifications that would occur
as a result of the conversion absent the rent increase) required to fund the
PBRA HAP (see Attachment 1C). HUD will limit the number of projects a
MTW agency may convert to PBRA if the PHA does not have sufficient public
housing subsidy to convert into PBRA assistance.
ii. Rent Bundling. PHAs may adjust subsidy (and initial contract rents) across
multiple projects as long as the PHA does not exceed the aggregate subsidy for
all of the projects the PHA has submitted for conversion under RAD. This use,
which HUD refers to as “bundled” rents, is permissible when a PHA submits
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applications for two or more projects. There is no limit to the number of
projects that a PHA may bundle. The conversion of the donor property must
close prior to or simultaneous with the conversion of the recipient property.
For example, assume that a PHA is considering bundling two identical
projects, both consisting of 100 units. In Project A, the contract rent is $500;
and in Project B, the contract rent is $600. The PHA could bundle the two
projects such that the initial contract rent at both projects will be $550.
See Section 1.9 for instructions on submitting applications with bundled rents.
iii. Future Replacement Housing Factor (RHF) or Demolition Disposition
Transition Funding (DDTF).41 PHAs that are scheduled to receive ongoing
RHF or DDTF funding (funds that have not been awarded and, with HUD
permission, funds that have been awarded but not yet disbursed) may choose to
forgo any ongoing RHF or DDTF grants for the purpose of offsetting an
increase to the RAD rent. See Attachment 1C for the calculation of how RHF
or DDTF funding may offset increased RAD rent.
iv. Tenant Paid Utility Savings. When conversion will result in the reduction of
one or more utility components (e.g., gas, water & sewer, electric) used to
establish the Utility Allowance, HUD will permit the RAD contract rent to be
increased by a portion of the utility savings. See Attachment 1C for additional
detail. The Utility Allowance shall be recalculated based on actual
consumption within a reasonable period following completion of the work.
Notwithstanding HUD’s calculation or the above-mentioned flexibilities, initial
contract rents will be capped at 120 percent of the Section 8 FMR, adjusted by the
number of bedrooms, and after subtracting any applicable utility allowance. However,
when HUD’s calculation of contract rents exceeds 120 percent of the FMR but where
the PHA believes that such rents are below the comparable market rent, the PHA may
request an exception under which the project may receive rents in excess of 120
percent of the FMR but not in excess of the lower of comparable market rents or 150
percent of FMR. HUD will grant such a request only when HUD determines that a
Rent Comparability Study (RCS), which the PHA must procure and pay for,
41 RHF and DDTF are provided to PHAs following the demolition or disposition of public housing projects
pursuant to Section 18 of the Act. PHAs will not receive RHF or DDTF as a result of and following the
conversion of projects converting under RAD.
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establishes that rents are below comparable market rents.42 Any such determination
will be made by HUD in its sole and absolute discretion. Where initial contract rents
are at or below 120 percent of the FMR, no RCS is required.
6. Method of Adjusting Contract Rents. Contract rents will be adjusted only by
HUD’s OCAF at each Anniversary of the HAP Contract, subject to (a) the availability
of appropriations for each year of the contract term, and (b) the Maximum Rent, as
defined below.43
The Maximum Rent is the higher of 140% of FMR (less utility allowances) or the
market rents, as demonstrated by an RCS procured and paid for by the Project Owner.
Where an RCS has been used to establish initial rents or to justify an OCAF adjusted
rent that exceeds 140% of the FMR, the RCS will remain valid for five years, the
Maximum Rent will not apply for the next four annual rent adjustments, and rents
will be adjusted only by the OCAF during such period.
7. Distributions. Regardless of type of financing, Covered Projects will not be subject
to any limitation on distributions of surplus cash, contingent on the availability of
surplus cash as determined by year-end audited or certified financial statements. To
implement this provision, HUD will not apply 24 CFR § 880.205, which, among
other provisions, establishes certain limitations on distributions for profit-motivated
owners and authorizes HUD to require the owner to establish a residual receipts
account. Distributions are not considered program or project funds.
8. Transfer of Assistance. This section has been moved to Section 1.4.A.12.
9. RAD Rehab Assistance Payments. HUD and the Project Owner typically will enter
into a HAP Contract before construction begins. During the period of work identified
in the approved Financing Plan and RCC, standard HAP contract administration
procedures will be used for occupied units. Except where the Section 8 Pass-
42 The Rent Comparability Study must be prepared consistent with Chapter Nine of HUD’s Section 8 Renewal
Guide, including any changes to Chapter Nine that HUD publishes while the HAP Contract is in effect. See
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8.
43 OCAFs are calculated and published each year by HUD in the Federal Register and are applied to the portion of a
contract rent that is not committed to debt service payment in order to calculate the contract rent for the project in
the following fiscal year. For the most recent guidance on OCAF, please see: http://www.gpo.gov/fdsys/pkg/FR-
2011-10-26/pdf/2011-27816.pdf.
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Through44 is used, units that are not occupied at any point during the period of work
identified in the approved Financing Plan and RCC may be eligible, subject to the
conditions below, for Rehab Assistance Payments equal to the Public Housing
Operating Fund and the Capital Fund amounts that formed the basis for the
calculation of initial contract rents (see Attachment 1C). During the period of
rehabilitation or construction as identified in the HAP Contract, the maximum
number of units for which a Project Owner can receive RAD Rehab Assistance
Payments is limited to the number of units eligible for Operating Fund or Capital
Fund subsidy prior to conversion. As a result, some units in the Covered Project may
not be eligible for Rehab Assistance Payments. As necessary to implement this
provision, HUD is suspending the applicability of additional provisions in 24 CFR §
880.504(a) until all contract units are made available for occupancy and waiving the
applicability of section 8(c)(4) of the Act.
The PHA will no longer be eligible to receive RAD Rehab Assistance Payments upon
completion of the work or the period of work identified in the RAD Conversion
Commitment, whichever is earlier. After such date, all units under the HAP Contract
will be eligible for payment only for occupied units or for vacancy payments, as
applicable.
10. Future Statutory or Administrative Changes. Consistent with PBRA HAP
Contracts entered into under MAHRAA, any changes in HUD requirements, except
to the extent required by statute, that are inconsistent with the PBRA HAP Contract
entered into through RAD, shall not be applicable. Further, for any statutory change
during the term of the contract affecting contract rents that HUD determines will
threaten the physical viability of the property, the Owner may terminate the contract
upon notification to HUD. Notwithstanding such termination, the project shall remain
subject to the RAD Use Agreement encumbering the property on which the project is
located.45
11. Floating Units. Upon the request of the Project Owner of a Covered Project that is
partially-assisted (i.e., fewer than 100% of the units are covered by the HAP
44 As fully described in Handbook 4350.1, Chapter 38, Paragraph 38-32, under the Section 8 Pass Through Owners
with residents under a project-based Section 8 HAP Contract whose unit was rendered uninhabitable may
temporarily lease a unit in another building, which is habitable, under UPCS. The Owner can sign a temporary lease
on behalf of the displaced Section 8 resident (i.e., a master lease) and begin to voucher for the contract rent for that
temporary unit.
45
Until HUD revises the currently approved PBRA HAP Contract for RAD, PHAs may request amendments to the
HAP Contract in accordance with this provision.
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Section I: Public Housing Projects
Contract), HUD will permit the section 8 assistance to float between units within the
project that have the same bedroom size and the same contract rent. Assistance may
float from a Section 504 accessible unit only to another Section 504 accessible unit
that has the same bedroom size and accessibility features. Further, as a condition for
granting such request, HUD requires that the unassisted units be inspected with the
same frequency as the assisted units are required to be inspected under 24 CFR
part 200, subpart P. From the time of the initial execution of the HAP Contract, the
property must maintain the same number and type of RAD units.
12. UPCS (REAC) Inspections. Under current regulations at 24 CFR part 5, subpart G,
a unit covered under a PBRA HAP Contract must meet the UPCS before assistance
can be paid on behalf of a household. Under RAD, once all units under the HAP
Contract become occupied, HUD will order a REAC inspection of the property to
ensure conditions meet the UPCS. HUD is hereby waiving and establishing this
alternative requirement to 24 CFR part 5, subpart G.
B. PBRA Resident Rights and Participation.
1. No Rescreening of Tenants upon Conversion. Pursuant to the RAD Statute, at
conversion, current households cannot be excluded from occupancy at the Covered
Project based on any rescreening, income eligibility, or income targeting. With
respect to occupancy in the Covered Project, current households in the Converting
Project will be grandfathered for application of any eligibility criteria to conditions
that occurred prior to conversion but will be subject to any ongoing eligibility
requirements for actions that occur after conversion.46 Post-conversion, the tenure of
all residents of the Covered Project is protected pursuant to PBRA requirements
regarding continued occupancy unless explicitly modified in this Notice (e.g., rent
phase-in provisions). For example, a unit with a household that was over-income at
time of conversion would continue to be treated as an assisted unit. Thus, the first
clause of section 8(c)(4) of the Act and 24 CFR § 880.603(b), concerning
determination of eligibility and selection of tenants for initial occupancy, will not
apply for current households. Once the grandfathered household moves out, the unit
must be leased to an eligible family. Further, so as to facilitate the right to return to
the assisted property, this provision shall apply to current public housing residents of
the Converting Project that will reside in non-RAD PBV units or non-RAD PBRA
units placed in a project that contain RAD PBV units or RAD PBRA units. Such
46 These protections (as well as all protections in this Notice for current households) apply when a household is
relocated to facilitate repairs following conversion and subsequently returns to the Covered Project, even if they are
considered a “new admission” upon return.
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families and such contract units will otherwise be subject to all requirements of the
applicable program, specifically 24 CFR § 983 for non-RAD PBV units and the
PBRA requirements governing the applicable contract for non-RAD PBRA units.47
2. Right to Return. See section 1.4.A.5(ii) and the RAD Fair Housing, Civil Rights,
and Relocation Notice regarding a resident’s right to return.
3. Phase-in of Tenant Rent Increases. If a resident’s monthly rent increases by more
than the greater of 10 percent or $25 purely as a result of conversion, the rent increase
will be phased in over 3 years or 5 years. Eligibility for the phase-in is to be
determined at the Initial Certification which occurs at the time the household is
converted to PBRA. A phase-in must not be applied after the household’s Initial
Certification. To implement the phase-in, HUD is specifying alternative requirements
for section 3(a)(1) of the Act, as well as 24 CFR § 880.201 (definition of “total tenant
payment” (TTP)) to the extent necessary to allow for the phase-in of tenant rent
increases. A PHA must create a policy setting the length of the phase-in period at
three years, five years, or a combination depending on circumstances. For example, a
PHA may create a policy that uses a three year phase-in for smaller increases in rent
and a five year phase-in for larger increases in rent. This policy must be in place at
conversion and may not be modified after conversion.
The method described below explains the set percentage-based phase-in a Project
Owner must follow according to the phase-in period established. For purposes of this
section “Calculated Multifamily TTP” refers to the TTP calculated in accordance
with regulations at 24 CFR § 5.628 (not capped at Gross Rent) and the “most recently
paid TTP” refers to the TTP recorded on the family’s most recent HUD Form 50059.
If a family in a project converting from Public Housing to PBRA was paying a flat
rent immediately prior to conversion, the PHA should use the flat rent amount to
calculate the phase-in amount for Year 1, as illustrated below.
Three Year Phase-in:
Year 1: Any recertification (interim or annual) performed prior to the second
annual recertification after conversion – 33% of difference between most
recently paid TTP or flat rent and the Calculated Multifamily TTP
47 For non-RAD PBV households, applicable program requirements includes the requirement that any admission
to the project must be initially eligible for a HAP payment at admission to the program, which means their TTP may
not exceed the gross rent for the unit at that time.
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Year 2: Year 2 Annual Recertification (AR) and any Interim Recertification
(IR) in prior to Year 3 AR – 50% of difference between most recently paid
TTP and Calculated Multifamily TTP
Year 3: Year 3 AR and all subsequent recertifications – Year 3 AR and any IR
in Year 3: Full Calculated Multifamily TTP48
Five Year Phase-in
Year 1: Any recertification (interim or annual) performed prior to the second
annual recertification after conversion – 20% of difference between most
recently paid TTP or flat rent and the Calculated Multifamily TTP
Year 2: Year 2 AR and any IR prior to Year 3 AR – 25% of difference
between most recently paid TTP and Calculated Multifamily TTP
Year 3: Year 3 AR and any IR prior to Year 4 AR – 33% of difference
between most recently paid TTP and Calculated Multifamily TTP
Year 4: Year 4 AR and any IR prior to Year 5 AR – 50% of difference
between most recently paid TTP and Calculated Multifamily TTP
Year 5 AR and all subsequent recertifications – Full Calculated Multifamily
TTP
Please Note: In either the three year phase-in or the five-year phase-in, once
Calculated Multifamily TTP is equal to or less than the previous TTP, the phase-in
ends and tenants will pay full Calculated Multifamily TTP from that point forward
4. Family Self-Sufficiency (FSS) and Resident Opportunities and Self Sufficiency
Service Coordinator (ROSS-SC) programs. Public Housing residents that are
currently FSS participants will continue to be eligible for FSS once their housing is
converted under RAD. All Project Owners will be required to administer the FSS
program or partner with another agency to administer the FSS program in accordance
48 For example, where a resident’s most recently paid TTP is $100, but the Calculated PBV TTP is $200 and
remains $200 for the period of the resident’s occupancy, (i.e. no changes in income) the resident would
continue to pay the same rent and utilities for which it was responsible prior to conversion. At the first
recertification following conversion, the resident’s contribution would increase by 33% of $100 to $133. At
the second AR, the resdient’s contribution would increase by 50% of the $66 differential to the standard TPP,
increasing to $166. At the third AR, the resident’s contribution would increase to $200 and the resident would
continue to pay the Calculated PBV TTP for the duration of their tenancy.
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with the requirements of 24 CFR part 984, the participants’ contracts of participation,
and future guidance published by HUD. The PHA may continue to use any FSS funds
already awarded to serve FSS participants in Covered Projects. At the completion of
the FSS grant, grantees should follow the normal closeout procedures outlined in the
grant agreement. Through waiver in this Notice, FSS funds awarded in FY14 and
prior FSS funds may be used to continue to serve FSS participants living in units
converted under RAD to PBRA. Pursuant to the FY 2015 Appropriations Act, any
FSS funds awarded in FY 2015 (and thereafter if the provision is extended), may be
used to also serve any other PBRA resident (regardless of whether the resident is in a
Covered Project).
Project Owners will be allowed to use any funds already granted for FSS coordinator
salaries until such funds are expended. All Project Owners will be required to provide
both service coordinators and payments to escrow until the end of the Contract of
Participation for each resident. If the Project Owner is a PHA that continues to run an
FSS program that serves public housing and/or HCV FSS participants, the PHA will
continue to be eligible (subject to NOFA requirements) to apply for FSS funding and
may use that funding to serve public housing, HCV and/or PBRA FSS participants.
However, if the PHA no longer has a public housing or HCV program, the Project
Owner is not eligible to apply for FSS funding. The owner is not required to enroll
new participants, but may choose to do so in accordance with Housing Notice 2016-
08
Upon conversion, funds escrowed under the public housing program for FSS
participants shall be transferred into the PBRA escrow account and be considered
PBRA funds, thus reverting to PBRA if forfeited by the FSS participant.
To ensure that HAP payments are processed correctly, and until TRACS is modified,
the Project Owner must notify MF_FSS@hud.gov that there are current FSS
participants residing in the Covered Project. If a Project Owner of a Covered Project
refuses to continue a FSS program, the PHA and the Project Owner will enter into an
arrangement allowing the PHA to continue to operate the FSS program until all
converted PBRA FSS participants have completed their Contracts according to 24
CFR § 984.303.
Current ROSS-SC grantees will be able to finish out their current ROSS-SC grants
once their housing is converted under RAD. However, once the property is converted,
it will no longer be eligible to be counted towards the unit count for future ROSS-SC
grants nor will its residents be eligible to be served by future ROSS-SC grants, as
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ROSS-SC, by statute, can serve only public housing residents. At the completion of
the ROSS-SC grant, grantees should follow the normal closeout procedures outlined
in the grant agreement. Please note that ROSS-SC grantees may be a non-profits or
local Resident Association and this consequence of a RAD conversion may impact
those entities.
5. Resident Participation and Funding. Residents of Covered Projects with assistance
converted to PBRA will have the right to establish and operate a resident organization
in accordance with 24 CFR part 245 (Tenant Participation in Multifamily Housing
Projects). In addition, in accordance with Attachment 1B, residents will be eligible
for resident participation funding.
6. Resident Procedural Rights. The information provided below must be included as
part of the House Rules for the associated project and the House Rules must be
furnished to HUD as part of the Financing Plan submission. See Attachment 1E for a
sample Addendum to the House Rules.
i. Termination Notification. HUD is incorporating additional termination
notification requirements to comply with section 6 of the Act for public housing
projects converting assistance under RAD, that supplement notification
requirements in regulations at 24 CFR § 880.607 and the Multifamily HUD
Model Lease.
a. Termination of Tenancy and Assistance. The termination procedure for
RAD conversions to PBRA will additionally require that Project Owners
provide adequate written notice of termination of the lease which shall be:
i. A reasonable period of time, but not to exceed 30 days:
o If the health or safety of other tenants, Project Owner
employees, or persons residing in the immediate vicinity of the
premises is threatened; or
o In the event of any drug-related or violent criminal activity or
any felony conviction;
ii. Not less than 14 days in the case of nonpayment of rent; and
iii. Not less than 30 days in any other case, except that if a State or
local law provides for a shorter period of time, such shorter period
shall apply.
b. Termination of Assistance. In all other cases, the requirements at 24 CFR §
880.603, the Multifamily HUD Model Lease, and any other HUD
multifamily administrative guidance shall apply.
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ii. Grievance Process. Pursuant to requirements in the RAD Statute, HUD is
establishing additional resident procedural rights to comply with section 6 of the
Act. In addition to program rules that require that tenants are given notice of
covered actions under 24 CFR part 245 (including increases in rent, conversions
of a project from project-paid utilities to tenant-paid utilities, or a reduction in
tenant paid utility allowances), HUD requires that:
a. Residents be provided with notice of the specific grounds of the Project
Owner’s proposed adverse action, as well as their right to an informal
hearing with the Project Owner;
b. Residents have an opportunity for an informal hearing with an impartial
member of the Project Owner’s staff within a reasonable period of time;
c. Residents have the opportunity to be represented by another person of
their choice, to ask questions of witnesses, have others make statements at
the hearing, and to examine any regulations and any evidence relied upon
by the Project Owner as the basis for the adverse action. With reasonable
notice to the Project Owner, prior to hearing and at the residents’ own
cost, residents may copy any documents or records related to the proposed
adverse action; and
d. Project Owners provide the resident with a written decision within a
reasonable period of time stating the grounds for the adverse action and
the evidence the Project Owner relied on as the basis for the adverse
action.
The Project Owner will be bound by decisions from these hearings, except if
(x) the hearing concerns a matter that exceeds the authority of the impartial
party conducting the hearing, or (y) the decision is contrary to HUD
regulations or requirements, or otherwise contrary to federal, State, or local
law. If the Project Owner determines that it is not bound by a hearing decision,
the Project Owner must promptly notify the resident of this determination, and
of the reasons for the determination.
7. Earned Income Disregard (EID). Tenants who are employed and are currently
receiving the EID exclusion at the time of conversion will continue to receive the EID
exclusion after conversion, in accordance with regulations at 24 CFR § 960.255.
After conversion, no other tenants will be eligible to receive the EID. If a tenant
receiving the EID exclusion undergoes a break in employment, ceases to use the EID
exclusion, or the EID exclusion expires in accordance with 24 CFR § 960.255, the
tenant will no longer receive the EID exclusion and the Owner will no longer be
subject to the provisions of 24 CFR § 960.255. Furthermore, tenants whose EID
ceases or expires after conversion shall not be subject to the rent phase-in provision,
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 76
Section I: Public Housing Projects
as described in Section 1.7.B.3; instead, the rent will automatically be adjusted to the
appropriate rent level based upon tenant income at that time.
8. Jobs Plus. Jobs Plus grantees awarded FY14 and future funds that convert the Jobs
Plus target project(s) under RAD will be able to finish out their Jobs Plus grant at that
site unless significant relocation and/or change in building occupancy is planned. If
either is planned at the Jobs Plus target project(s), HUD may allow for a modification
of the Jobs Plus work plan or may, at the Secretary’s discretion, choose to end the
Jobs Plus program at that project. If the program is continued, the Project Owner must
agree to continue to implement the program according to HUD’s program
requirements.
9. When Total Tenant Payment Exceeds Gross Rent. Under the PBRA program,
assisted families typically pay 30% of adjusted gross income toward rent and utilities,
referred to as TTP. Under normal PBRA rules, a Project Owner must process a
termination of assistance pursuant to section 8-5 C. of Housing Handbook 4350.3,
REV-1 when the family’s TTP has risen to a level that is equal to or greater than the
contract rent, plus any utility allowance, for the unit (i.e., the Gross Rent)). In
addition, section 8-6 A.1 provides that, when terminating a tenant’s assistance, the
owner is to increase the tenant rent to the contract rent (assuming that the tenant does
not receive the benefit of any other type of subsidy).
For residents living in the Converting Project on the date of conversion and all new
admissions to the Covered Project thereafter, when TTP equals or exceeds the
contract rent plus any utility allowance, the Project Owner must charge a tenant rent
equal to the lesser of (a) TTP (which is not capped at gross rent), less the utility
allowance in the contract, or (b) any applicable maximum rent allowable under
LIHTC regulations.49 To this end, HUD is waiving sections 8-5 C. and 8-6 A. 1. of
Housing Handbook 4350.3, REV-1. In such cases, the tenant will still be considered a
Section 8 tenant and will still have the rights and be subject to the requirements of
Section 8 tenants. Tenants will retain all of the rights under the Model Lease,
including the right to occupy the unit, as well as those provided through this Notice,
and tenants will still be subject to the requirements for Section 8 tenants, including
the requirements concerning reexamination of family income and composition found
in 24 CFR §§ 5.657 and 880.603(c). When TTP equals or exceeds Gross Rent, the
excess rent collected by the owner is considered project funds and must be used for
49
For example, a public housing family residing in a property converting under RAD has a TTP of $600. The
property has an initial Contract Rent of $500, with a $50 Utility Allowance. Following conversion, the residents is
still responsible for paying $600 in tenant rent and utilities. Accordingly, the Project Owner must charge this
resident $550, i.e., $600 TTP, minus $50 Utility Allowance.
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Section I: Public Housing Projects
project purposes. Assistance may subsequently be reinstated if the Tenant becomes
eligible for assistance. In the event that the tenant moves out, the Project Owner must
select an applicant from the waiting list who meets the applicable income limits for
the project.
The Project Owner is not required to process these individuals through Multifamily
Housing’s Tenant Rental Assistance Certification System (TRACS) but may be
required to do so in the future when a future revision of the TRACS can accept such
certifications. All normal actions for the contract rent shall continue for these units,
including application of the OCAF adjustment to the contract rent indicated in the
HAP Contract—since the OCAF adjusted rent will still be in effect whenever the unit
is occupied by a family eligible for rental assistance.
10. Under-occupied Units. If at the time of conversion, an eligible family assisted under
the HAP Contract is occupying a unit that is larger than appropriate because of the
family’s composition, the family may remain in the unit until an appropriate-sized
unit becomes available in the Covered Project. When an appropriate sized unit
becomes available in the Covered Project, the family living in the under-occupied
unit must move to the appropriate-sized within a reasonable period of time. In order
to allow the family to remain in the under-occupied unit until an appropriate sized
unit becomes available in the Covered Project, HUD is waiving the portion of 24
CFR § 880.605 that assumes the unit has become under-occupied as the result of a
change in family size.
C. PBRA: Other Miscellaneous Provisions.
1. Access to Records, Including Requests for Information Related to Evaluation of
Demonstration. PHAs and the Project Owner must cooperate with any reasonable
HUD request for data to support program evaluation, including but not limited to
project financial statements, operating data, Choice-Mobility utilization, and
rehabilitation work.
2. Davis-Bacon prevailing wages and Section 3 of the Housing and Urban
Development Act of 1968 (Section 3). This section has been moved to 1.4.A.13 and
1.4.A.14.
3. Establishment of Waiting List. The Project Owner can utilize a project-specific or
community waiting list. The PHA shall consider the best means to transition
applicants from the current public housing waiting list, including:
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i. Transferring an existing site-based waiting list to a new site-based waiting list.
ii. Transferring an existing site-based waiting list to a PBRA program-wide or
HCV program-wide waiting list.
iii. Transferring an existing community-wide public housing waiting list to a PBRA
program-wide or HCV program-wide waiting list, an option particularly
relevant for PHAs converting their entire portfolio under RAD.
iv. Informing applicants on a community-wide public housing waiting list how to
transfer their application to one or more newly created site-based waiting lists.
To the extent the wait list relies on the date and time of application, the applicants
shall have priority on the wait list(s) to which their application was transferred in
accordance with the date and time of their application to the original waiting list.
If the PHA is transferring assistance to another neighborhood and, as a result of the
transfer of the waiting list, the applicant would only be eligible for a unit in a location
which is materially different from the location to which the applicant applied, the
PHA must notify applicants on the wait-list of the transfer of assistance, and on how
they can apply for residency at other sites.
If using a site-based waiting list, PHAs shall establish a waiting list in accordance
with 24 CFR § 903.7(b)(2)(ii)-(iv) to ensure that applicants on the PHA’s public
housing community-wide waiting list have been offered placement on the Covered
Project’s initial waiting list. In all cases, PHAs have the discretion to determine the
most appropriate means of informing applicants on the public housing community-
wide waiting list given the number of applicants, PHA resources, and admissions
requirements of the projects being converted under RAD. A PHA may consider
contacting every applicant on the public housing waiting list via direct mailing;
advertising the availability of housing to the population that is less likely to apply,
both minority and non-minority groups, through various forms of media (e.g., radio
stations, posters, newspapers) within the marketing area; informing local non-profit
entities and advocacy groups (e.g., disability rights groups); and conducting other
outreach as appropriate. Any activities to contact applicants on the public housing
waiting list must be conducted in accordance with the requirements for effective
communication with persons with disabilities at 24 CFR § 8.6 and with the obligation
to provide meaningful access for persons with limited English proficiency (LEP).50
50
For more information on serving persons with LEP, please see HUD’s Final guidance to Federal Financial
Assistance Recipients Regarding Title VI Prohibition Against National Origin Discrimination Affecting Limited
English Proficient Persons (72 FR 2732), published on January 22, 2007.
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A Project Owner must maintain any site-based waiting list in accordance with all
applicable civil rights and fair housing laws and regulations unless the project is
covered by a remedial order or agreement that specifies the type of waiting list and
other waiting list policies.
To implement this provision, HUD is specifying alternative requirements for 24 CFR
§ 880.603 regarding selection and admission of assisted tenants. However, after the
initial waiting list has been established, the Project Owner shall administer its waiting
list for the Covered Project in accordance with 24 CFR § 880.603.
4. Mandatory Insurance Coverage. The Covered Project shall maintain at all times
commercially available property and liability insurance to protect the project from
financial loss and, to the extent insurance proceeds permit, promptly restore,
reconstruct, and/or repair any damaged or destroyed property of a project.
5. Choice-Mobility. HUD seeks to provide all residents of Covered Projects with viable
Choice-Mobility options. PHAs that are applying to convert the assistance of a
project to PBRA are required to provide a Choice-Mobility option to residents of
Covered Projects in accordance with the following:51
i. Resident Eligibility. Residents have a right to move with tenant-based rental
assistance (e.g., Housing Choice Voucher (HCV)) the later of: (a) 24 months
from date of execution of the HAP or (b) 24 months after the move-in date.
ii. Voucher Inventory Turnover Cap. Recognizing the limitation on the
availability of turnover vouchers from year to year, a voucher agency would
not be required, in any year, to provide more than one-third of its turnover
vouchers to the residents of Covered Projects. While a voucher agency is not
required to establish a voucher inventory turnover cap, if such a cap is
implemented the voucher agency must create and maintain a waiting list in the
order in which the requests from eligible households were received.
iii. Project Turnover Cap. Also recognizing the limited availability of turnover
vouchers and the importance of managing turnover in the best interests of the
property, in any year, a PHA may limit the number of Choice-Mobility moves
exercised by eligible households to 15 percent of the assisted units in the
project. (For example, if the project has 100 assisted units, the PHA could
limit the number of families exercising Choice-Mobility to 15 in any year, but
not to less than 15.) While a voucher agency is not required to establish a
51
The Choice-Mobility requirements that apply to covered PBRA projects differ from the requirements that apply to
covered PBV projects.
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Section I: Public Housing Projects
project turnover cap, if such a cap is implemented the voucher agency must
create and maintain a waiting list in the order in which the requests from
eligible households were received.
HUD’s goal is to have all residents in the Demonstration offered a Choice-Mobility
option within a reasonable time after conversion. However, as HUD recognizes that
not all PHAs will have vouchers sufficient to support this effort, HUD will take the
following actions:
Provide voucher agencies that make such a commitment bonus
points provided under the Section Eight Management Assessment Program
(SEMAP) for deconcentration.52
Grant a good-cause exemption from the Choice-Mobility requirement for no
more than 10 percent of units in the Demonstration. HUD will consider
requests for good-cause exemptions only from the following types of PHAs:
o Public housing–only agencies, defined as agencies that own units under a
public housing ACC, but do not administer, directly or through an
affiliate, a Housing Choice Voucher program; or
o Combined agencies that currently have more than one-third of their
turnover vouchers set aside for veterans, as defined for the purpose of
HUD-VASH, or homeless populations, as defined in 24 CFR § 91.5.53 To
be eligible for this exemption, the PHA’s admission policies must have
been formally approved by the PHA’s board prior to the time of
application.
6. Future Refinancing. Project Owners must receive HUD approval for any refinancing
or restructuring of secured debt during the HAP Contract term to ensure the financing
is consistent with long-term preservation of the Covered Project. With respect to any
financing contemplated at the time of conversion (including any permanent financing
which is a conversion or take-out of construction financing), such consent may be
evidenced through the RCC.
52
The sponsoring agency must commit to the full term of the initial HAP Contract, must undergo a significant
amendment to its Annual Plan (no later than 60 days after execution of the project’s CHAP), and must comply with
section 8(o)(6)(A) relating to selection preferences. In order to implement this incentive, HUD is waiving
provisions under 24 CFR § 985.3(h) to provide donating agencies with bonus points under the SEMAP for
deconcentration.
53
A veteran is, for the purpose of HUD-VASH, a person who served in the active military, naval, or air service, and
who was discharged or released under conditions other than dishonorable and is eligible for Veterans
Administration health care.
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7. Submission of Year-End Financial Statements. Projects converting assistance to
PBRA must comply with 24 CFR part 5, subpart H, as amended, revised, or modified
by HUD.54
8. Classification of Converting Projects as Pre-1981 Act Projects under Section
16(c) of the United States Housing Act of 1937. For purposes of ensuring maximum
flexibility in converting to PBRA, all projects converting to PBRA shall be treated as
Pre-1981 Act Projects under Section 16(c) of the Act. Section 16(c)(1), which applies
to pre-1981 Act projects, restricts occupancy by families that are other than very low-
income to 25% of overall occupancy. Thus, Project Owners of projects converting to
PBRA may admit applicants with incomes up to the low-income limit. HUD
Headquarters tracks the 25% restriction on a nationwide basis. Project Owners of
projects converting to PBRA do not need to request an exception to admit low-
income families. In order to implement this provision, HUD is specifying alternative
requirements for section 16(c)(2) of the Act and 24 CFR § 5.653(d)(2) to require
Project Owners of projects converting to PBRA to adhere to the requirements of
section 16(c)(1) of the Act and 24 CFR § 5.653(d)(1).
9. Owner-Adopted Preferences. Project Owners may adopt a preference for elderly
single persons pursuant to 24 CFR § 5.655(c)(5) and Housing Handbook 4350.3,
Chapter 4, provided the adoption of such preference can be implemented consistent
with the residents’ right of return under this Notice. Project Owners who wish to
adopt a preference for populations that are not identified in 24 CFR § 5.655(c)(5)
(e.g., elderly families, near-elderly single persons, near-elderly families), may do so
pursuant to Housing Notice 2013-21 (July 25, 2013). A Project Owner may not adopt
a preference that would have the purpose or effect of substantially delaying or
denying the participation of other eligible families in the program on the basis of race,
color, national origin, religion, sex, disability, or familial status, or would create or
perpetuate segregation
Resident Notification
Prior to submitting an application to participate in the Demonstration, the PHA must:
1. Notify residents of projects proposed for conversion and notify legitimate resident
organizations of the PHA’s intent to pursue a conversion;
54
This provision is included to clarify existing requirements for PHAs that own PBRA-assisted projects through
Single Asset Entities. Such owners are considered reporting entities under 24 CFR § 5.801 (a)(3) and (a)(4).
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Section I: Public Housing Projects
2. Conduct at least two meetings with residents of projects proposed for conversion to
discuss conversion plans and provide opportunity for comment, which discussion must
include a description of the PHAs preliminary intentions with respect to: a) whether the
conversion will include a transfer of assistance, b) plans to partner with an entity other
than an affiliate or instrumentality of the PHA if such partner will have a general partner
or managing member ownership interest in the proposed Project Owner, c) change in the
number or configuration of assisted units or any other change that may impact a
household’s ability to re-occupy the property following repairs or construction, d) de
minimis reduction of units which had been vacant for more than 24 months at the time of
RAD Application, and e) the scope of work;55
3. Prior to the first of the two resident meetings referenced in the preceding paragraph, issue
a RAD Information Notice (RIN) to inform residents of projects proposed for conversion
of their rights in connection with a proposed conversion (whether or not any relocation is
anticipated). The PHA should also issue a General Information Notice (GIN) if it is
required. See the RAD Fair Housing, Civil Rights, and Relocation Notice for additional
detail regarding the timing, content and purpose of these resident notifications.
4. Prepare comprehensive written responses to comments received in connection with the
required resident meetings on the proposed conversion to be submitted with the RAD
Application; and
Once a PHA is selected to participate in the Demonstration, it must have at least one more
meeting with residents prior to submission of the Financing Plan. Thereafter, additional
meetings with residents are required to discuss any material change in the calculation of their
utility allowances and any substantial change to the conversion plans relative to what was
presented in the RAD Application or the previous resident meeting. A substantial change to the
conversion plans includes, but is not limited to:
Introduction or abandonment of a transfer of assistance or a material change in the
projected location to which the assistance would be transferred;
Plans to partner with an entity other than an affiliate or instrumentality of the PHA if such
partner will have a general partner or managing member ownership interest in the
proposed Project Owner;
Change in the number or configuration of assisted units or any other change that may
impact a household’s ability to re-occupy the property following repairs or construction;
De minimis reduction of units which had been vacant for more than 24 months at the time
of RAD Application; or
A substantial change in the scope of work.
55
It is understood that at the application stage, this information is very preliminary and may be presented as such.
However, as noted below, additional meeting(s) with the residents should be held as this information is developed.
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Section I: Public Housing Projects
The requirement for resident notification and meetings for the RAD program are separate from,
and complimentary to, the resident notification and consultation requirements under the
significant amendment process (24 CFR part 903) and applicable relocation requirements (see
Section 1.4.A.4). A PHA must comply with all applicable resident consultation and notification
requirements. Refer to the RAD Fair Housing, Civil Rights, and Relocation Notice for resident
consultation requirements regarding relocation.
Upon issuance of the RCC (see Section 1.12 of this Notice), the PHA must notify each affected
household that conversion of the project has been approved, and inform households of the
specific rehabilitation or construction plans and any impact the conversion may have on them.
Households in the affected project(s) who do not want to transition to a new program may be
offered, if available, the opportunity to move to other public housing owned by the PHA.
When providing resident notification and meetings, a PHA must use effective communication for
persons with hearing, visual, and other communication-related disabilities consistent with
Section 504 of the Rehabilitation Act of 1973 and, as applicable, the Americans with Disabilities
Act of 1990. Effective communication includes, but is not limited to, providing written materials
in appropriate alternative formats (e.g., Braille, large type), as needed, and providing sign
language interpreters and assistive listening devices at resident meetings, as needed (24 CFR
§ 8.6). Additionally, resident meetings must be held in facilities that are physically accessible to
persons with disabilities. Where physical accessibility is not achievable, a PHA must use
alternative methods to meet with qualified individuals with disabilities, such as holding meetings
at an alternate accessible site or offering in-home meetings. Such meetings must be provided in
the most integrated setting appropriate to the needs of qualified individuals with disabilities. The
most integrated setting appropriate to the needs of qualified individuals with disabilities is a
setting that enables individuals with disabilities to interact with nondisabled persons to the fullest
extent possible (28 CFR part 35, appendix B).
Additionally, a PHA must provide meaningful access to its programs and activities for persons
who have a limited ability to read, speak, or understand English. For projects undergoing RAD
conversion, a PHA must provide language assistance to residents of the project who are Limited
English Proficient (LEP) to ensure that they have meaningful access to RAD resident
notifications and meetings. Such language assistance may include, but is not limited to,
providing written translation of notices regarding the plans for the project and relocation and oral
interpretation at resident meetings. For guidance on providing language assistance to persons
with LEP, please see Final Guidance to Federal Financial Assistance Recipients Regarding Title
VI Prohibition Against National Origin Discrimination Affecting Limited English Proficient
Persons (72 FR 2732).
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Application Requirements
Under the Demonstration, applicants may apply to convert a single project, a PHA-defined
portfolio of projects, a multi-phase project, or a set of projects that incorporate rent flexibilities
such as rent bundling or MTW fungibility. The requirements for each type of application are
listed below:
General Requirements. All applicants must complete the Microsoft Excel-based RAD
Application, which HUD will make available on the RAD website (www.hud.gov/rad), along
with all other required submittals. The RAD Application will include certain pre-populated
project data and will require the applicant to input proposed data related to the long-term
physical and financial feasibility of the project and other conversion-related items. For an
application to be complete, user inputs must meet any applicable thresholds embedded and
described in the RAD Application.
Applications will be accepted on a project-by-project basis, except where otherwise noted in
this Section. If a PHA desires to convert only a portion of a project (e.g., only the high-rise
portion of a project that is currently combined with scattered sites) and maintain the
remaining portion as public housing, the PHA should indicate as such in its application (i.e.,
the PHA will not need to request a change in configuration for the project in order to submit
the application).
It is important for the applicant to keep environmental impacts in mind, and to begin
assembling environmental reports, during the application submission process. Following
application review and approval, the proposed construction plans and site selection will be
evaluated during environmental review and will require modification if they do not meet
environmental review requirements.56 Questions regarding environmental review
requirements should be directed to the local Responsible Entity contact for conversions to
PBV, or to the local HUD Field Environmental Officer57 for any project involving FHA
financing and/or PBRA conversions.
Upon completion of required entries on the application, the PHA will be able to generate a
number of key exhibits, including a financing pro-forma for the project. The purpose of the
pro-forma is to ensure that the PHA has sufficiently considered the long-term preservation
needs of the property and the means by which those needs will be financed. In completing
the financing pro-forma, the PHA must identify likely sources of debt and/or equity
financing.
56
See Attachment 1A for a discussion of environmental review requirements.
57
Field Environmental Officer contact information is available at, https://www.hudexchange.info/environmental-
review/hud-environmental-staff-contacts/.
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Section I: Public Housing Projects
The RAD Application contains a template of each of the followings documents, which must
be submitted where applicable:
1. A RAD Board Approval Form, which will include the proposed pro-forma and
other key certifications, must be approved by the PHA’s Board and signed by the
authorized representative of the PHA. This form will be required for all submitted
applications.
2. A Financing Letter of Interest/Intent from each lender or equity investor,
indicating, among other conditions, that the proposed pro-forma is reasonable. This
letter is required where third-party financing is indicated in the application pro-forma.
(A Financing Letter of Interest/Intent is not required where the pro-forma indicates
that no financing is required, e.g., where immediate and long-term project capital
needs can be met through a Reserve for Replacements account, or where the PHA is
providing the financing.) The Financing Letter of Interest/Intent does not promise or
imply a commitment to make a loan or equity investment but does signify that the
lender or investor has reviewed the pro-forma for the subject project and considers it
reasonable to proceed with further analysis and due diligence.
3. A Mixed-Finance Affidavit is required where the PHA is requesting to convert the
public housing assistance in a mixed-finance project. This affidavit must be signed by
both the PHA administering the public housing ACC and the Owner Entity of the
project. Since only PHAs can apply under the Demonstration (see Section 1.3 of this
Notice), the purpose of this affidavit is to ensure that both parties (the Owner Entity
and the PHA) agree in principle to the conversion. Please note, however, that the
HAP Contract for a mixed-finance conversion will be executed between the Contract
Administrator and the mixed-finance Owner Entity, not the PHA administering the
public housing ACC. (The PHA may be part of the ownership structure, however.)
4. A Choice-Mobility Commitment Letter signed by: (a) the voucher agency that has
committed to provide Choice-Mobility vouchers to the covered PBRA project of
another PHA for the term of the initial HAP Contract; and (b) the agency that obtains
a commitment from a voucher agency to support Choice-Mobility for a specified
PBRA project. PHAs that are able to meet the Choice-Mobility requirement through
turnover from their own voucher programs do not need to complete this letter.
If a PHA chooses to convert assistance to PBVs, the PHA must identify in the RAD
Application the voucher agency that will administer the PBV HAP Contract. If another PHA
is proposed as the contract administrator and the project is selected, the PHA will need to
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 86
Section I: Public Housing Projects
submit a signed letter from the voucher agency evidencing the agency’s willingness to
administer the PBVs. The PHA may contact the local HUD Office of Public Housing to
identify a list of voucher agencies that have appropriate legal jurisdiction to perform this role.
If there is no voucher agency with overlapping legal jurisdiction that is willing to administer
the PBV contract, the PHA may want to consider converting the project to PBRA. However,
in so doing, the PHA would still be required to meet the Choice-Mobility requirement
described above.
The RAD application shall also include supporting evidence if claiming priority status under
Section 1.11.C.1(i).
Finally, the RAD application must include responses to comments received in connection
with the required resident meetings on the proposed conversion.
Applications Proposing to Use 9% LIHTCs. Applicants are encouraged to consider both
4% and 9% LIHTCs in their project financing. However, as the demand for the allocation of
9% LIHTCs is typically excessive, applicants proposing to use 9% LIHTCs shall provide
either evidence that a reservation has already been secured or a self-scored LIHTC
application under the Qualified Allocation Plan (QAP) in place at the time of application that
demonstrates that the project would have been eligible and competitive for credits in the most
recent round.
Applications for Multi-phase Development. PHAs may submit applications involving the
multi-phase redevelopment of projects. For purposes of the multi-phase award application,
the project being converted can be either one contiguous site or a single AMP. PHAs may
note that, for a single AMP, use of the multi-phase authority provides more time for
completion of all phases than use of the portfolio authority. A PHA must submit a RAD
Application that reflects the first phase as well an explanation of future phases, including a
narrative summary of the proposed phasing, the proposed date of submission of each phase’s
financing plan, the proposed date of each phase’s LIHTC application (if applicable), and the
proposed date of any demolition or disposition associated with each phase (if applicable).58
Upon acceptance of the PHA’s application, HUD will issue a CHAP for the initial phase and
a Multi-phase Award Letter covering all phases of the project. A Multi-phase Award allows a
PHA to reserve conversion authority for a project with multiple distinct development phases
and locks in the applicable contract rent for the entire project at the time of initial application.
For awards made pursuant to the original 60,000 unit cap, the PHA had until July 1, 2015 to
submit an application for the final phase of the project covered by the Multi-phase Award,
58
A Multi-Phase Application template is available at www.hud.gov/rad
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Section I: Public Housing Projects
unless HUD provided, in its sole discretion, an extension. For all Multi-phase awards made
pursuant to the increase in the cap to 185,000 units, the Application for the last phase of a
Multi-phase awards will be due no later than July 1, 2018. Subsequent to authority to convert
additional units, HUD will establish Multi-phase awards in its sole discretion. Recipients of
Multi-phase Awards shall still be required to fulfill all CHAP milestones for each of the
CHAPs awarded by HUD. If the PHA is unable to complete a phase of the conversion, HUD
reserves the right to revoke the CHAPs covering that phase and all subsequent phases of the
conversion.
HUD recognizes that in certain situations multi-phase development warrants the demolition
of a greater number of units than may be replaced in a single phase. HUD will consider
individual requests for demolition prior to the construction closing of a phase based on a site
plan, the timing and sources & uses for each proposed phase, the capacity of the development
team, the impact on residents, and the overall likelihood that units will be successfully
redeveloped.
Applicants should keep in mind that the environmental documents submitted with the
Financing Plan during the first phase (see Attachment 1A) must be submitted for the entire
site, i.e., all of the phases of the multi-phase development, and that the environmental review
conducted during the first phase will cover the entire site.
Applications with Bundled Rents. When bundled rents are proposed, as described in
Section 1.6.B.5 and Section 1.7.A.5, the PHA must include in each project’s application a
reference to the other project(s) in the rent bundle and must also include with the application
a calculation demonstrating that the total subsidy for the bundled projects will not exceed the
aggregate funding for the Covered Projects.59 Upon CHAP award, failure of one project to
meet the requirements set forth in this Notice shall result in the termination of the second
project if that project is no longer feasible without the rent bundle. Further, the project that is
donating subsidy (and converting at lower rents) must close before or simultaneous with the
project(s) that are receiving subsidy (and converting at higher rents).
MTW Fungibility. An MTW agency may submit an application proposing to use its MTW
block grant authority to set initial contract rents pursuant to Section 1.6.B.5 and Section
1.7.A.5. The application must indicate the additional proposed subsidy dedicated to the
Converting Project(s).
59
HUD has prepared a sample Rent Bundling Worksheet that is available at www.hud.gov/rad
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Section I: Public Housing Projects
Portfolio Awards. A PHA may apply for a Portfolio Award, which allows a PHA to reserve
RAD conversion authority for a set of projects and locks in the applicable contract rent in the
year of application. In order to apply for a Portfolio Award, a PHA must submit:
1. A list of all projects proposed for a Portfolio Award, that includes, for each project,
the project’s name, PIC Development Number, units to be converted, total estimated
capital needs, and the major anticipated financing sources, where applicable; and
2. RAD Applications for at least 50% of the projects identified in the portfolio.
Upon approval of the application submission listed above, HUD will issue, in addition to the
provision of CHAPs for the applications submitted, a Portfolio Award Letter covering the
remaining projects within the portfolio proposed by the applicant. The Portfolio Award
Letter reserves RAD conversion authority for the remaining units in the portfolio and locks in
the applicable contract rent for the year of the application submission for the projects covered
by the Portfolio Award. The PHA will have 365 days from issuance of the Portfolio Award
Letter (or in the case of Portfolio Awards issued between January 1, 2015 and July 15, 2015,
365 days from July 15, 2015) to submit acceptable RAD Applications for the remaining
projects included in the Portfolio Award, which will result in the issuance of a CHAP for
each project.60 Recipients of Portfolio Awards shall still be required to fulfill all milestones
for each CHAP issued by HUD. If at any time HUD determines that a PHA has failed to
make sufficient progress towards the submitted conversion of the proposed portfolio, HUD
may revoke RAD conversion authority provided under the Portfolio Award for all projects
where a CHAP has yet to be issued. With HUD consent, PHAs may substitute projects in the
portfolio award, and switch projects between the active and pending portions of the portfolio,
provided that the newly substituted projects are subject to all of the requirements of this
Notice and will be subject to the same deadlines as the projects which they replaced within
the portfolio.
Further, PHAs that have received CHAPs for multiple projects, but that did not request a
Portfolio Award, may convert their awards into a Portfolio Award as long as no more than
half of the converting projects are covered under the Portfolio Award.
Joint Application under a Choice Neighborhoods Initiative (CNI) Implementation
Notice of Funding Availability (CNI NOFA). A CNI Implementation NOFA applicant
wishing to submit a joint RAD/CNI Implementation NOFA application must designate in the
Housing Strategy section of their CNI NOFA application that their application is a joint
60
For PHAs proposing a Portfolio conversion of over 3,000 public housing units, HUD may provide additional time
for the PHA to submit the remaining applications.
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RAD/CNI application, as well as provide a letter affirmatively requesting the housing
project(s) name and PIC Development Number and the number of standing public housing
units that the PHA wishes to convert under RAD. In such cases, the CNI NOFA Application
date shall be considered the date of application for RAD. Subject to a review of the criteria in
Section 1.3 of this Notice and collection of additional information as needed, Joint
applications will be issued a CHAP or, if RAD authority is unavailable, will be placed on the
waiting list, for each project identified in their joint application and will lock in the
applicable contract rents in the year of the application submission for projects covered by the
Application, whether or not they are awarded the CNI implementation grant. Recipients of
Joint RAD/CNI Awards shall still be required to fulfill all milestones for each CHAP, unless
HUD issues extensions for good cause. CNI applicants may submit a separate RAD
application for a project ahead of the CNI NOFA Application date, in order to secure a
CHAP under the RAD cap. If a RAD application is sent by a CNI applicant ahead of their
CNI application, pending the CNI award, milestones will be adjusted to match the CNI
timeline.
Submission of Letter of Interest When a Waiting List Has Formed. Commencing 30 days
following publication of this Notice and thereafter during any period when HUD is
maintaining a waiting list pursuant to Section 1.10, in lieu of a RAD Application, a PHA may
submit a letter of interest signed by the PHA’s Executive Director to
RADapplications@hud.gov that identifies all of the properties (PIC # and name) and
associated ACC units that the PHA is proposing for conversion. Such a submission would
reserve the PHA’s spot on the waiting list under the lowest priority category described in
Section 1.11 in the order in which the letter was received. In anticipation of HUD’s ability to
make additional awards, HUD will notify the PHA that it must submit a complete RAD
Application, Portfolio Award, or Multi-phase award, and comply with all the application
provisions of this Notice, within 60 days of such notification or forfeit its position on the
waiting list. PHAs may consider submitting complete RAD Applications separately for
properties in its conversion portfolio that would fall under a higher priority category so as to
achieve a higher position on the waiting list.
Submission of Applications
All required materials (including attachments and narrative summaries) must be submitted
electronically using the Microsoft Excel-based RAD Application, which is available at
www.hud.gov/rad. In addition to submitting the RAD application as an Excel file, the executed
attachments must be included as PDF files. No paper or fax submissions are permitted.
There is no HUD fee for the submission of an application or the withdrawal of an application or
award. There also is no cap on the number of project applications that a PHA may submit or
resubmit.
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Only complete applications will be considered. Rejected applicants will be notified and the PHA
may choose to re-submit. If resubmitted, the application will be reviewed in order of the date of
the resubmission.
Unless the application process is closed, which HUD would announce through the RAD website,
the last date that HUD will accept an application is the final date of the statutory authority, as
identified in the Federal Register. This announcement will specify the items related to selection
and eligibility that will be required.
Applications must be sent via email to RADapplications@hud.gov.
Selection Criteria
This section explains the criteria that HUD will use to select projects for participation under the
Demonstration.
A. Initial Application Period (CLOSED). As required under the RAD Statute, HUD first
conducted an initial competition period to ensure that awards were made to PHAs of various
sizes and across geographies. HUD created target pools for awards based on PHA size and in
four Census regions and made awards pursuant to those target pools. This initial application
period opened on September 24, 2012 (60 days after the initial version of this Notice was
issued) and closed on October 24, 2012 (30 days after the initial application period opened).
B. Second Application Period (CLOSED). The Second Application Period commenced on
October 25, 2012 and closed on July 27, 2015. All applications submitted during the Second
Application Period compete on a first-come, first-serve basis, where HUD issues a PHA an
award for any Application that meets all eligibility criteria and that was received while HUD
had available authority under the statutory cap.
C. Third Application Period. The Third Application Period commenced on July 28, 2015. For
all applications that meet all eligibility criteria during the Third Application Period, HUD
uses Priority Categories to issue CHAPs or to determine the Application’s placement on the
waiting list. The Priority Categories in effect at the time of the issuance of the CHAP apply
in each instance. The pre-existing six Priority Categories are being consolidated into two
Priority Categories and commencing 30 days following the publication of this Notice, for all
applications that meet all eligibility criteria, HUD will utilize the Priority Categories below.
HUD will review each Application in the order in which it is received and rank each
qualified application, first by the Priority Category in which it falls and then by the date the
Application was submitted. At the end of each calendar month, HUD will reserve units
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beginning with the highest ranked applications, up until the point at which issuing an
additional award would exceed the statutory cap. If in any given month a qualified
application cannot be awarded because HUD has reached its available authority under the
statutory cap, the application will be placed on the waiting list. Its position on the waiting list
will be determined first by the priority category in which it falls and then by the date the
Application was submitted. While a waiting list has formed, a PHA may submit a Letter of
Interest as described in Section 1.9 in lieu of an Application that would serve to reserve a
project or portfolio’s position on the waiting list subject to future submission of a RAD
Application.
In addition to completing all required fields in the RAD Application, PHAs must also clearly
indicate with their Application submission if the project meets any of the Priority Categories
and must provide supporting evidence if claiming priority under Section 1.11.C.1(i). For
applications that are placed on the waiting list, a PHA may contact HUD to amend its
application to modify the Priority Category in which a project would be classified.
1. Priority Categories. HUD is establishing the following priority categories for the
purpose of the Third Application Period.
i. High investment applications, specifically:
a. Applications or Multi-phase Applications that will redevelop physically or
functionally obsolete housing as evidenced by proposals involving:
i. Full or partial demolition of the existing project, with new construction
that includes tax credit only units and/or market rate units;
ii. Full or partial demolition of the existing project, with new construction;
iii. Choice Neighborhoods Implementation grant that HUD has awarded to
the subject property; or
iv. Projects where a majority of the units have been approved for demolition
or disposition under Section 18, which demolition or disposition approval
is proposed to be withdrawn upon award of RAD authority.
b. Applications that are part of a comprehensive neighborhood revitalization plan
such as:
i. Choice Neighborhoods Planning grant;
ii. Promise Zones; or
iii. Locally recognized neighborhood revitalization plan, as evidenced by a
letter of support from the City or County government describing the
commitment and backed by significant state or local financial investments
(existing or committed) in the community.
c. Applications that are, in HUD’s sole discretion, in imminent danger of losing
financing if they are not provided a CHAP (e.g. as evidenced by a 9% tax credit
award)
ii. All other applications, Portfolio Awards, and Multi-phase awards.
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HUD may, in its sole discretion, revoke a CHAP or reject a Financing Plan if the
conversion plans change in such a way that would have affected the project’s selection.
2. Replacement Awards. If a CHAP, Portfolio Award, or Multi-Phase Award that is
issued to a PHA is revoked or withdrawn (including revocations when the PHA fails to
comply with the requirements of this Notice), HUD will issue a replacement award from
the waiting list, if one has formed. In issuing such replacement awards, HUD will utilize
the foregoing provisions regarding prioritization of applications received during the Third
Application Period.
3. Online Summary. HUD will post a summary of applications selected for CHAP,
Portfolio, or Multi-phase Awards and waiting list status for all other applicants. The
summary will be updated monthly.
D. Exemptions from the Choice-Mobility Component. For PBRA conversions, HUD will
allow good-cause exemptions on a first-come, first-served basis up to the 10 percent limit.61
An Application that meets all requirements of the Notice, but that cannot be awarded a
CHAP because it has requested a good-cause exemption and HUD reached its 10% cap will
be placed on the waiting list. The Application will be passed over if all of the good-cause
exemptions as indicated above have been exhausted. An Application may be selected for a
good-cause exemption if a CHAP is terminated for a project that originally received a good-
cause exemption. At any point during the Second or Third Application Period, a PHA may
revise its application to certify that it will meet the Choice-Mobility component. If an
application is modified in this way, it will retain its place on the waiting list.
E. Application Denials. If HUD determines that a PHA does not meet the eligibility
requirements in Section 1.3, HUD will issue a letter denying a CHAP to the PHA citing the
specific grounds for the denial of its application. The PHA then has 14 days from the date of
the letter to appeal the denial in writing. The appeal must include the grounds for appealing
the denial and supporting documentation. The Department will review the appeal and will
notify the PHA of its decision within 60 days of the appeal. If applicable, the PHA's position
on the waiting list will not be adversely affected if a decision is made in favor of the PHA.
The appeal should be sent to RADapplications@hud.gov, with the name of the project and
the word “Appeal” included in the Subject Line, e.g., “Subject: Lincoln Townhomes,
Appeal.” If a PHA’s application or appeal is denied, the PHA may revise the application and
resubmit; such resubmittals will be reviewed in the order of date of resubmission.
61
As of the date of publication of this Notice, the good-cause exemptions have not been allotted up to the 10 percent
limit. As a result, HUD will allow good-cause exemptions during the Ongoing Application period on a first-come,
first served basis up to the 10 percent limit.
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CHAP Award and Financing Plan Submission
A. CHAP Award. PHAs will be notified of selection via issuance of a CHAP, or Commitment
to enter into a Housing Assistance Payment, which shall include the HUD-approved terms
and conditions for conversion of assistance. The CHAP will not be subject to negotiation.
If a PHA applies for either a Multi-phase or Portfolio Award, HUD will reserve RAD
conversion authority for the phases or projects covered by the award. A PHA must fulfill
applicable milestones for submission of the applications for the remaining phases or projects.
HUD’s issuance of a CHAP includes terms on which HUD will later issue the HAP. For this
reason, the CHAP should be useful in the PHA’s discussions with lenders, investors and
other providers of financing.
The CHAP may be revoked by HUD: (1) if, at any time, the PHA or project become
ineligible under the provisions of this notice; (2) upon HUD’s determination of financial
infeasibility; (3) for PHA failure to meet required deadlines; (4) for PHA non-cooperation;
(5) for violation of program rules and restrictions, including fraud, (6) if the PHA fails to
submit an approved significant amendment to HUD, and/or (7) if HUD determines that the
terms of the conversion would be inconsistent with fair housing and civil rights laws or a fair
housing or civil rights court order, settlement agreement, or voluntary compliance agreement.
Because units under the Demonstration are limited, it is critically important that recipients of
a CHAP diligently pursue the Financing Plan and complete conversion or withdraw, so that
HUD might award those units to a PHA that is able and willing to convert the assistance of
units.
B. Acceptance of CHAP. Within 30 days of CHAP issuance, a PHA must confirm its
acceptance of the CHAP by submitting an application (including required attachments) into
the Inventory Removals module in PIC identifying the units that will be removed from the
public housing Annual Contributions Contract (ACC) when the project completes
conversion.62 Failure to submit an application into PIC according to the instructions provided
by HUD will result in a suspension of the CHAP and a revocation if not corrected within 15
days of notification, unless HUD identifies just cause for an extension. If the CHAP is re-
62
Instructions for submitting a Removal Application into PIC are available here:
http://www.radresource.net/output.cfm?id=picremove. Please note that HUD uses the application in PIC in order to
implement the PHAS scoring exemption described in Section 1.5.I. When a CHAP is issued within the last 30 days
of the PHA’s fiscal year end date, PHAs may want to submit the application into PIC in less than 30 days.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 94
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instated, it will retain its original issuance date. Similarly, if the transaction changes and
HUD determines that the PIC application needs to be modified by the PHA, the PHA will
have 30 days to resubmit the Inventory Removal application and HUD will follow the above-
described procedure for failure to comply.
C. Activities Prior to Financing Plan Submission. The PHA is responsible for ensuring that
up front civil rights reviews and relocation activities are conducted as required in the RAD
Fair Housing, Civil Rights, and Relocation Notice.
D. Milestones and Financing Plan. For every project that receives a CHAP, the PHA must
submit a Financing Plan. See Attachment 1A for Financing Plan Requirements. For all
CHAP awards made prior to January 1, 2015, the Financing Plan is due according to the
existing agreement between the PHA and HUD as reflected in the RAD Resource Desk. For
CHAP awards issued after January 1, 2015, the Financing Plan is due according to the
instructions below and for purposes of Financing Plan Milestones, the term “CHAP issuance
date” refers to the later of the issuance of the CHAP or July 15, 2015. The Financing Plan
must be submitted prior to the following milestone deadlines (all days are expressed in
calendar days):
For non-LIHTC, FHA transactions, the Application for Firm Commitment, in lieu of the
Financing plan, is due 180 days following the CHAP issuance date.
In all other non-LIHTC transactions, the Financing Plan is due 180 days following the
CHAP issuance date.
For 4% LIHTC transactions the PHA must submit evidence that it has applied for LIHTC
and completed the required components of the CNA (see Section 1.4.A.1) no later than
180 days following CHAP issuance date. HUD may provide additional time for projects
in states without rolling 4% LIHTC awards. The Financing Plan (or FHA Application for
Firm Commitment) is then due within 90 days of the 4% award.
For 9% LIHTC transactions, the PHA must submit evidence that it has applied for 9%
LIHTC within 30 days following the application submission deadline for the first
available 9% LIHTC round in their state to occur after a 90 day grace period after the
CHAP issuance date.63 Following notification of its 9% LIHTC award, the Financing
Plan (or FHA Application for Firm Commitment) is then due within 180 days following
the 9% LIHTC award. If the PHA’s applications for 9% tax credits is unsuccessful, the
CHAP will be terminated unless, within 30 days of notification, the PHA:
Demonstrates that it diligently pursued 9% tax credits, as evidenced by the score
and ranking in the unsuccessful 9% application or by other means at HUD’s
discretion and
63
Application for a tax credit round prior to this date that is unsuccessful is not grounds for CHAP revocation.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 95
Section I: Public Housing Projects
Proposes a financing strategy that does not rely on 9% tax credits and that is
feasible in HUD’s sole discretion. HUD will re-establish a Financing Plan due date
based on the proposed financing.
For any transaction that involves a transfer of assistance, the PHA has 90 days to identify
the site to which assistance will be transferred and must submit to HUD documentation
demonstrating that the site meets the criteria for transfers of assistance set forth in this
Notice. The Financing Plan due date will be adjusted accordingly to permit time to
identify the site.
The above timeframes reflect the additional complexity and due diligence requirements
associated with tax credit transactions, which often also involve multiple financing sources.
At the same time, these timeframes recognize the fact of limited RAD authority and the
desire of the Department to demonstrate early results. Once the credits are awarded, the
design of the LIHTC program, and the motivation of the different development partners,
encourages the project to move expeditiously to closing.
The Financing Plan due date for each transaction will be established by HUD after CHAP
award and recorded in the RAD Resource Desk. Approval of extensions is at HUD’s sole
discretion. Extensions will not be approved if the delays resulted from factors that are within
the PHA’s control.
HUD will expedite the processing of all awards made pursuant to the first four Priority
Categories listed in Section 1.11.C.1.
A Financing Plan must be substantially complete in order for HUD to consider the
submission timely.64 A PHA that fails to submit a complete Financing Plan within the above
time-frames may have its CHAP revoked.
HUD’s decisions regarding the acceptance of the Financing Plan will be made in HUD’s sole
discretion. If HUD determines that a Financing Plan is not feasible and/or that the
requirements of the Financing Plan as set forth in Attachment 1A have not been met, the
PHA will have 30 days to make corrections that satisfactorily address HUD’s concerns. If a
Financing Plan is not accepted, HUD’s letter of disapproval will contain recommendations, if
any, that may result in an acceptable Financing Plan.
64
HUD will determine whether a Financing Plan is substantially complete in its sole discretion. Generally, a
substantially complete Financing Plan cannot lack any major components.
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A PHA will be notified of HUD’s acceptance of the Financing Plan by the issuance of an
RCC, conditioned upon firm commitment of financing from the lender on substantially the
same terms as those presented with the Financing Plan.65 The RCC will outline the key
components of the planned RAD conversion and the conditions that need to be satisfied in
order to close the conversion. The RCC will be a template document not subject to
negotiation.
The PHA will have 30 calendar days from the date of issuance of the RCC to execute the
RCC and return it to HUD. If the RCC is not returned in this time period, it will expire.
Once the RCC is executed, HUD expects that the RAD conversion will close in a timely
manner. The RCC will allow 90 calendar days (from the date the RCC is issued to the PHA)
in which to close.
The RCC sets out the requirements of the transaction that will ultimately be concluded at
Closing. These requirements include such items as: the number of affordable housing units
being converted, the HAP Contract rents, the choice of PBRA or PBV HAP Contract,
financing terms and Sources and Uses, and special conditions that must be cleared before
closing. The terms of the RCC survive Closing.
Closing
A. Closing Preparations. Conversion does not occur prior to the Closing.
The RCC sets out the requirements for Closing. Draft closing documents, including those
listed in the RCC and in any closing checklist provided by HUD, must be submitted to HUD
for review prior to closing. As indicated on the checklists, the closing package must contain
financing documentation for programmatic and underwriting review purposes and evidence
of title (and copies of title exception documents) and survey satisfactory to HUD. HUD
forms of the closing documents must be used. Closing may not occur until all policy and
legal issues are addressed to HUD’s satisfaction. After closing, HUD must receive fully
executed versions of the closing documents, as directed by HUD. To facilitate closing, HUD
may send documents to an escrow agent to hold in trust until all of HUD’s closing
requirements, including the closing of any construction financing, have been met.
65
Loan proceeds and other financing sources remain sufficient to cover immediate capital needs and, in comparison
to the terms put forth in the original application, the debt service coverage ratio does not decrease by more than
0.05%, the amortization and term (maturity) of financing remain the same, and the interest rates are competitive
with the market.
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In the event that construction or bridge financing will be used as part of the transaction
financing, HUD will require evidence before closing of firm commitment for take-out or
permanent financing conditional only to the completion of construction or term of the bridge
financing. For transactions utilizing outside financing, HUD will require evidence that
financing sources have closed and will be providing the contemplated funding. If the project
is being financed with an FHA-insured loan, the closing requirements listed under the MAP
Guide will apply.
The PHA must submit a draft closing package, including but not limited to the applicable
documents listed in the closing checklist.
B. Preparations for leaving the public housing program.66
1. 50058 End of Participation (EOP). In order for properties to be removed from
IMS/PIC and for families to formally transition off of the public housing program,
PHAs must submit a Form-50058 EOP for every resident at the Converting Project on
or before the day before the effective date of the HAP Contract. The EOP may be
created by a PHA’s software or using Family Reporting Software (FRS) and uploaded
to IMS/PIC, or the PHA may submit an on-line EOP.67 Failure to do so may result in
delays in HAP payments to the Covered Project.
2. Leases. PHAs must provide residents with notification of public housing lease
termination in accordance with 24 CFR § 966.4(l)(3) and in accordance with local
law, and shall enter into new Section 8 leases effective as of the effective date of the
HAP Contract.
3. Use of Capital Funds or Operating Reserves in the Development Budget. All
Capital Funds, including RHF and DDTF, or Operating Reserves that have been
approved in the Financing Plan must be drawn down at closing and placed in an
escrow account. If there is new debt being placed on the Covered Project, these funds
can be held by the lender. If no new debt will be utilized, the PHA must place the
funds in a separate bank account.
66
HUD intends to publish a Public Housing Closeout Quick Reference Guide to standardize the procedures PHAs
will use to closeout a public housing operation.
67
For instructions on submitting an on-line EOP see
http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/systems/pic/faq/58view#6
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4. Preparations for Entering PBV or PBRA. PHAs should be aware that many tasks
must be undertaken well in advance of closing (e.g., preparation of new leases). 68
5. Funding Upon Closing. The HAP Contract becomes effective on the first day of
either of the two months following closing, at the Project Owner’s discretion. For the
remainder of the first Calendar Year in which a HAP Contract is effective (the “year
of conversion”), Operating Funds and Capital Funds will be obligated to the PHA for
the Covered Project at the level of public housing subsidy which that project is
eligible to receive regardless of the initial contract rent amount or OCAF.69
i. Operating Fund.
a. PHAs must submit Operating Subsidy tools and follow the normal
Operating Subsidy process (including revisions where corrections are
needed) for the project for the year in which the project converts.
b. The amount of Operating Funds that can be used for HAP payments
during the year of conversion is capped at HUD’s obligations of Operating
Subsidy to the project for the remainder of the year after conversion, pro-
rated by the portion of units in the PIC Development that are converting
and will be removed from PIC. HUD will periodically publish the cap
amount for converted units.
c. Projects that complete conversion are not eligible for Operating Subsidy in
the subsequent year. For conversions that result in the removal of all
public housing units from a PIC Development, the PIC Development will
not be eligible for any subsidy in the subsequent funding year.70 For
partially converted projects, PHAs must remove eligible unit months
(EUMs) for units that converted to RAD from the Operating Subsidy
Tools and must adjust the rolling base to reflect only the units that remain
assisted under public housing. Please see the instructions to the Form
HUD-52722 for details on adjusting the rolling base.
68
HUD has developed quick reference guides to assist PHAs in preparing to operate and administer properties
assisted under the PBV and PBRA programs, which are available at www.hud.gov/rad
69
For example, a closing on December 10 will result in a HAP Contract that is effective on January 1 or February 1,
as selected by the Project Owner. For the remainder of the Calendar Year which includes the January 1 or February
1 date, subsidy is paid from public housing funds obligated to the PHA regardless of the RAD HAP Contract rent
amount or OCAF. Following conversion, the public housing units that are included in the RAD conversion will be
removed from the Public Housing Information Center (PIC). This action will not impact public housing subsidy for
the Covered Project for the balance of the Calendar Year.
70 If the project is funded in the year after the HAP effective date, the PHA should not draw down funds and should
notify the Field Office that the project should not be funded.
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d. The funding guidance provided in this notice supersedes the guidance in
Section 9 of the Notice PIH 2016-10.
ii. Capital Fund. The amount of Capital Funds that can be used for HAP
payments during the year of conversion is based on the PHA’s Capital Fund
Formula Grant attributable to the project (“Project Amount”) in the year of
conversion, pro-rated by the number of units in the PIC Development that are
converting and then by the months remaining in the year in which the HAP
Contract became effective. For the purposes of RAD, the Project Amount is
spread over the Calendar Year, rather than the Fiscal Year. Where HUD has not
yet obligated the full FY’s Capital Funds to the PHA, HUD shall obligate the
remaining funds as soon as available. Capital Fund amounts will be moved into
specific RAD Budget Line Items (BLIs) in LOCCS.
Prior to conversion, HUD will provide PHAs with worksheets to assist with the
above-mentioned calculations.
Commencing on the effective date of the HAP Contract, the PHA may use no more
than the amounts described above to make HAP payments in the “year of
conversion”. During this period – the months between the effective date of the HAP
Contract and the end of the calendar year – HUD will not provide additional subsidy
to the project if the amount provided through the public housing Operating Fund and
Capital Fund is insufficient to cover the rents listed in the HAP Contract. HUD
requires PHAs to estimate any potential deficit and encourages PHAs to establish an
Operating Deficit Reserve in their Financing Plan (using Operating Reserves,
available Capital Funds, financing proceeds, or any other eligible source), but is
under no HUD-imposed obligation to do so.
In the first full year following conversion, Covered Projects will be funded from the
PBRA account or the TBRA account, relative to the form of Section 8 assistance for
the Covered Project(s), according to the amount indicated in the HAP Contract,
including any applicable OCAF, subject to all terms and conditions of the HAP
Contract.
6. Post-Closing Completion Certification. For all repairs included in the Scope of
Work in the RCC, Project Owners must submit to HUD a completion certification,
including a cost certification and other information about compliance with the
requirements of the RCC. Project Owners can fulfill the cost certification element of
this requirement by submitting a cost certification required by a lender or investor or,
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if one is not required by a financing source (or not applicable), another form as
prescribed by HUD.
7. Management fees. Any management fees earned following conversion are not
subject to any federal restrictions.
8. Additional requirements for PHAs removing all public housing units. Notice
PIH 2016-23 provides information and guidance regarding program activities that
PHAs must complete regarding removal of the last of their public housing dwelling
units from their public housing inventory. Such notice also contains notification
requirements for both PHAs seeking to develop new public housing units in the future
(after removing all existing public housing dwelling units from their inventory) and
for PHAs seeking to close out their public housing program.
Developer Fee
HUD recognizes that in order to secure and administer debt and equity sources, and oversee the
successful completion of significant rehabilitation, the PHA or Project Owner will have to either
dedicate experienced staff, if such experience currently exists on staff, or hire or contract for the
expertise necessary to successfully complete rehabilitation on schedule and on budget. The
Development Budget included in the Financing Plan may include a developer fee to address
these costs according to the following requirements:
A. For non-LIHTC transactions, the developer fee may be up to 10 percent of the total
development budget (all hard costs and reasonable soft costs), less developer fee and
reserves and less any acquisition costs in non-arms-length acquisitions, e.g., transfers of
property title to related or wholly-owned entities for the purpose of meeting single asset
entity ownership requirements. The release of the developer fee will be made on the
schedule proposed by the PHA and accepted by HUD in the Financing Plan.
Development cost overruns that exceed funded contingencies may be drawn from any
unearned and unreleased portion of the developer fee, and may therefore reduce the
ultimate fee paid.
B. In LIHTC transactions (with or without private debt), the developer fee will be subject to
the LIHTC allocating agency’s limitations on developer fees. The undeferred portion of
such developer fee (as documented in the LIHTC cost certification) may not, without
HUD approval, exceed the greater of:
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 101
Section I: Public Housing Projects
1. 15 percent of the total development costs less acquisition payments made to the
PHA, developer fee and reserves.
2. The lesser of $1,000,000 or 15 percent of the total development costs without offset
for acquisition payments made to the PHA, developer fee and reserves.
The limits on developer fee in effect prior to the issuance of this Notice shall apply to
all transactions with an RCC issued prior to sixty (60) days after the date of this Notice
which also close prior to the later of sixty (60) days after the date of this Notice or sixty
(60) days after the date of the RCC.
The developer fee shall be payable on the schedule allowed by the allocating agency
and/or equity investor. Earned developer fees are not subject to any federal restrictions.
Development cost overruns that exceed funded contingencies may be drawn from any
unearned and unreleased portion of the developer fee, and may therefore reduce the
ultimate fee paid.
Additional Information
For additional information on this section of the Notice, please check www.hud.gov/rad or email
questions to RAD@hud.gov.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 102
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks for Public
Housing Conversions
A Financing Plan will not be reviewed until all required documentation is submitted. HUD will
complete an initial review for document completeness within five business days of submission.
Once HUD has determined that all required documents have been received, HUD will review the
documents submitted.
HUD’s purpose in reviewing Financing Plans is to ensure the long-term physical and financial
viability of the Covered Project. If a Financing Plan fails one or more feasibility benchmarks, the
HUD reviewer may still accept the Financing Plan if HUD determines that, taken as a whole, the
Financing Plan is consistent with the long-term physical and financial viability of the property
and/or the PHA can adequately support, through historical data or other means, the presented
figures. HUD reserves the right to reject any Financing Plan if the information provided is not
complete, accurate, or in compliance with the submission requirements listed below. HUD will
not accept the Financing Plan if the project does not meet environmental review requirements, as
described below.
Below are all the required components of a complete Financing Plan and the requirements of
each component. Please note that for RAD conversions that will utilize FHA mortgage
insurance, the submission requirements and feasibility benchmarks are primarily found in the
FHA Multifamily Accelerating (MAP) Guide as revised by Mortgagee Letter 2012-20. The end
of this Attachment lists the submissions that must be made separate and apart from the FHA-
insured loan application and uploaded to the RAD Resource Desk.
HUD reserves the right to streamline any or all of these requirements for classes of project, e.g.,
no debt-transactions or small projects.
A. Type of conversion. Identify whether the Covered Project will convert to PBV or PBRA
assistance.
i. For PBV conversions, identify the PHA that will administer the PBV HAP Contract.
ii. For PBRA conversions, where the PHA does not administer a voucher program and did
not receive a good cause exemption for Choice-Mobility, upload a fully executed Choice
Mobility Letter of Agreement signed by the PHA converting units and the PHA that has
agreed to administer the vouchers in order to comply with the Choice Mobility
requirement.
B. Capital Needs Assessment (CNA). See section 1.4(A)(1).
C. Scope of Work for Rehabilitation or New Construction. The scope of work must:
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 103
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1. Identify and address all repairs required in the CNA (including all items identified in
the CNA as not functioning at the time of the site visit) or provide a written
justification why those items are not included. Briefly discuss any differences
between the conclusions / recommendations of the CNA provider; the levels of
immediate rehabilitation needs; and the PHA’s choices for replacement components.
2. Include quantities and costs. Rehabilitation or new construction estimates must be
based upon reasonable market estimates of actual costs, confirmed either by cost
estimating completed by the architect/engineer, or through actual competitive bids for
major rehabilitation or construction items, in compliance with HUD requirements.
3. Include a summary of environmental issues known at that time, and a discussion of
any planned environmental remediation (including post-closing Operations &
Maintenance plans), and a summary of accessibility features that are required
pursuant to the Fair Housing Act and implementing regulations at 24 CFR Part 100,
Section 504 of the Rehabilitation Act of 1973 and implementing regulations at 24
CFR Part 8, and Titles II and III of the Americans with Disabilities Act and
implementing regulations at 28 CFR Parts 35 and 36, respectively. Please see the
revised Scope of Work for the CNA for a complete list of accessibility requirements
and resources. If the property was constructed before 1978, identify the need for
interim controls of lead-based paint hazards based on a risk assessment or re-evaluation
and discuss planned lead hazard control activities. Include a description of how all
utility consuming components that are past estimated useful life at the time of the
RAD application (or that are not functioning at the time of the CNA inspection) will
be replaced with the most financially efficient alternative (taking into account initial
cost and utility savings), as documented in the CNA.
4. Include a construction contingency of 10%. Note that HUD may require a higher
contingency on a case-by-case basis.
5. Include a reasonable timeline for completion of all rehabilitation items acceptable to
HUD, depending on the scope of rehabilitation funded.
D. Environmental Review. HUD cannot approve an applicant’s Financing Plan submission
unless and until the required environmental review has been completed for the applicant’s
proposed conversion project and found to meet environmental review requirements. The
following describes the submission and approval steps for securing a completed
environmental review.
RAD transactions will either be reviewed under 24 CFR Part 50 or 24 CFR Part 58, i.e., “Part
50 Reviews” or “Part 58 Reviews.”71 All PBRA and FHA transactions require Part 50
71
Please see the Environmental Review for RAD Transactions guidance document, available at
https://www.hudexchange.info/resource/4216/environmental-review-requirements-for-rad-transactions/.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 104
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
Reviews, which are conducted by HUD staff. Non-FHA PBV transactions require Part 58
Reviews, which are conducted by a Responsible Entity (RE), except in accordance with 24
CFR § 58.11, when HUD may determine to conduct the review under Part 50.
Transaction Type Required Environmental Review
Non-FHA with PBRA Part 50
FHA insured Part 50
Non-FHA with PBV Part 58
For multi-phase developments, the environmental documents submitted with the Financing
Plan during the first phase must be submitted for the entire site, i.e. all of the phases of the
multi-phase development, and the environmental review conducted during the first phase will
cover the entire site. Further, requests to transfer assistance from the Converting Project to a
new location are subject to environmental review.
For all Part 50 reviews, the applicant must submit reports and documentation to HUD
in accordance with 24 CFR Part 50, as discussed in Chapter 9 of the MAP guide, except
as follows:72, 73
1. For PBRA conversions, (or where HUD has determined to conduct the PBV
conversion review under Part 50) PHAs are not required to follow the radon testing
requirements of HN 2013-03. However, HUD strongly recommends testing for all
projects and mitigation of any structures with elevated radon (4 pCi/L or above).
2. For PBRA conversions (or where HUD has determined to conduct the PBV
conversion review under Part 50) that do not include substantial rehabilitation or new
construction activities, PHAs shall provide HUD with one of the following:74,75
A transaction screen in accordance with ASTM E 1528-14 (or the most recent
edition). A transaction screen will identify potential environmental concerns
based on questionnaires, owner/occupant inquiry, site visit, government
records inquiry and historical sources inquiry. The transaction screen must be
prepared by a qualified professional, in accordance with 24 CFR § 50.3(i)(4).
As the definition of preparer in ASTM E 1528-14 does not meet this
requirement, the professional must have either (a) a science degree and at least
72
Additional guidance on environmental review requirements is available on the HUD Environmental Review
website, at https://www.hudexchange.info/environmental-review/.
73
The MAP Guide is available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
74
Substantial rehabilitation is any rehabilitation that does not meet the conditions in 24 CFR § 50.20(a)(2) for
exclusion from review under the National Environmental Policy Act.
75
Applications to RAD for conversion assistance involving substantial rehabilitation or new construction will
always require a Phase I ESA in accordance with ASTM E 1527-13.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 105
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
one year of practical environmental assessment experience in the field, or (b)
three years of practical environmental assessment experience in the field
performing site assessments for site contamination. If any potential
environmental concerns are identified, an ASTM Phase I Environmental Site
Assessment (ESA) in accordance with ASTM E 1527-13 (or the most recent
edition) must be provided; OR
A Phase I ESA in accordance with ASTM E 1527-13 (or the most recent
edition).
HUD staff will carefully review the submissions and may require additional information in
order to complete their review. When HUD conducts the environmental review under Part
50, it documents the review using the HUD Environmental Review Online System (HEROS).
HUD’s review will result in a determination, which may stipulate the rejection of the site for
this demonstration or may require the completion of mitigation measures. The RCC will
include any conditions required to carry out any and all mitigation measures as may result
from the environmental review. Any conditions that cannot be satisfied before Closing will
survive Closing.
When a Responsible Entity (RE) completes an environmental review under Part 58, the
Financing Plan must include either Form 7015.16 or a letter with the Responsible
Entity’s (RE’s) finding of exempt activity in order to consider the environmental review
to be complete. The RE should use HUD recommended formats to document the
environmental review record.76 The PHA should submit an environmental report to the RE,
in such form as prescribed by the RE, to enable the RE to complete their analysis. Once the
review is completed, the PHA must submit either:
Form HUD-7015.15, Request for Release of Funds, to their local PIH field staff.77
After the PIH Field Director approves the RROF, the Director sends a completed
HUD Form 7015.16 to the PHA, approving the release of funds. The PHA must
submit the completed Form 7015.16 to HUD; or
If form HUD-7015.15 is not required because the project converts to Exempt under
24 CFR § 58.34, the PHA must submit the RE’s finding of exempt activity with their
RAD Financing Plan. A finding of exempt activity is a statement of the result of the
RE’s environmental review, and is required even when form HUD-7015.15 is not
required. A letter from the RE indicating that the project converts to Exempt under 24
CFR § 58.34 is sufficient.
76
HUD recommended formats are available at https://www.hudexchange.info/resource/3139/part-58-environmental-
review-cest-format/ and https://www.hudexchange.info/resource/3140/part-58-environmental-assessment-form/.
77
Form HUD-7015.15 is available at https://www.hudexchange.info/resource/2338/hud-form-701515-request-
release-funds-certification/.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 106
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
E. RAD Fair Housing, Accessibility and Relocation Checklist. Prior to submission of the
Financing Plan, all PHAs shall have completed and submitted the RAD Fair Housing, Civil
Rights and Relocation Checklist provided by HUD. The Checklist shall include a
certification that the relocation plan complies with all applicable HUD requirements,
including the Uniform Relocation Assistance and Real Property Acquisition Policies Act of
1970 (URA) and its implementing regulations (49 CFR Part 24) as well as Section 504 of the
Rehabilitation Act of 1973 and its implementing regulations (24 CFR §8.23).78 The cost of
the relocation must be fully funded in the Development Budget. The Financing Plan
submission shall include a copy of HUD’s approval of the Checklist or a statement that
approval is still outstanding. In the event of any changes in the plans described in the
Checklist, the PHA shall submit an update to the Checklist.
F. Development Budget (Sources and Uses of Funds). The Development Budget must:
a. Include a reasonable, balanced and comprehensive presentation of sources and uses of
funds, entered into the Transaction Log on the RAD Resource Desk, and which is in
accordance with all applicable HUD requirements.
b. Demonstrate that existing loans or debt will be paid off at the closing or supported
through NOI. For projects covered under an EPC, the PHA must provide a draft
amended EPC approval letter from the PIH Energy Center specifying the minimum
amount of debt that will need to be addressed in the conversion.
c. Demonstrate that any Identity of Interest (IOI) loans or advances will be converted to
unsecured Surplus Cash Notes (IOI loans may not be paid off from the proceeds of
new financing), unless otherwise approved by HUD.
d. Include narrative that discusses any aspects of the planned rehabilitation that may
result in an initial operating deficit during the rehabilitation and how that deficit will
be funded, including any operating deficit escrow or similar fund.
e. Include a Subsidy Layering Review (SLR) if one has been performed by another
agency. If no SLR has been performed, HUD will complete a SLR whenever multiple
federal sources are proposed, when public housing funds are used (see Section
1.5(A)), or when a MTW agency is using MTW block grant funds to set their initial
contract rents (see Section 1.6(B)5 and 1.7(A)5).
G. Development Team. Include the following information:
1. Identification of all participants, including the PHA, the general contractor, the legal
entity that will own the project, the proposed management agent, and all “principals”
of those entities.
78
For additional information see “Relocation Requirements under the Rental Assistance Demonstration (RAD)
Program, Public Housing in the First Component”
http://portal.hud.gov/hudportal/documents/huddoc?id=RAD_Notice2.pdf
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 107
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
2. Evidence of recent successful experience with similar rehabilitation or construction
projects. For properties requiring substantial rehabilitation or new construction, the
Project Owner is required to engage a general contractor, unless recent and
comparable experience managing rehabilitation can be demonstrated or if the
development team is using the FHA-insured Section 223(f) program or a repair
program approved by HUD. If multiple funding sources will be used for the Covered
Project, the development team must demonstrate that it has experience with at least
three transactions with multiple sources of financing.
3.
For PBRA conversions, evidence that all principals have Previous Participation
Certification in the Active Partners Performance System (APPS) (formerly the Form
2530) and are not be debarred, suspended, or subject to a Limited Denial of
Participation.79
H. Proposed Financing. For each proposed loan, equity contribution, or grant, the PHA must
include a:80
1. Recent lender, investor or grant engagement letter, dated no later than 60 days prior to
Financing Plan submission, with key terms identified (including amount, repayment
terms, interest rate, amortization, maturity, prepayment restrictions, pay-in schedule,
etc.) from all financing provider(s). Key terms for any permanent financing must
comply with the conditions under Section 1.4(B)(1) of this Notice (fixed rate of
interest, for a fixed term, and fully amortized over that term; balloon payments not
permitted before year 18; amortization term cannot exceed 40 years; etc.).
Additionally, all subordinate (or secondary) financing must be disclosed and then
approved by the first-mortgage lender as well as HUD in accordance with section 8.9
of the Mortgage Credit and Underwriting and Processing Requirements of the MAP
guide and any subsequent revisions or updates to the MAP guide.
2. Brief discussion of conditions / milestones to be satisfied prior to closing;
3. Documentation that the first mortgage lender has consented to the Use Agreement
and that the lien of the new first mortgage loan will be subordinate to the Use
Agreement;
79
The APPS/2530 applies to all FHA transactions and transactions in which 20% of the units in the Covered Project
will be covered under a PBRA contract (PBV transactions without FHA financing are exempt). The PHA and any
entities wholly owned by the PHA are not subject to 2530/APPS. For LLCs and LPs, non-PHA members and
partners, respectively, with 25% or more of the ownership interests are subject to approval provided that for LIHTC
transactions, limited partners or investment members are exempt. For non-profit entities, 2530s are required for
Board Officers but not Board Members. Management agents are subject to 2530 unless wholly-owned.
80 HUD has created templates that are available on the RAD Resource Desk that PHAs can use to provide all
required information on each loan, equity contribution, and grants.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 108
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
4. Estimation of projected closing date for all proposed financing. Discuss any known
impediments to closing within the timeframe required under the Notice. Include a
discussion of key milestones with estimated milestone completion dates. The terms
for all seller take-back financing must also be disclosed.
I. Operating Pro Forma. The Operating Pro-Forma must:
1. Be entered into the Transaction Log of the RAD Resource Desk (stabilized cash flow)
2. In a PHA provided template, project out for the term of the initial contract.
3. Include an attached discussion of the extent of energy and water savings that are
anticipated as a result of the rehabilitation or construction and the basis for those
estimates. The discussion must explain to what extent anticipated savings in utility
costs have been included in the pro forma operating expenses.
4. Include an attached Rent Comparability Study for projects converting to PBRA where
current funding81 is greater than 120 percent of the FMR and where the PHA believes
current funding is below the market rent. The Rent Comparability Study must be
prepared in accordance with Chapter 9 of HUD’s Section 8 Renewal Guide. See
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8
5. Be consistent with local standards for Federally-assisted housing and otherwise
comply with at least the following feasibility benchmarks:
a. Rents shall not exceed the amounts permitted under program rules
b. All other sources of income must be supported with a narrative or must not
exceed the average for the last three years (other income should not include
interest income on the replacement reserve account, which must remain in the
reserve and is not available for other purposes).
c. Vacancy loss shall be no less than the greater of the average over the past three
years or 3 percent.
d. Allowance for bad debt should be not less than the greater of the average over
the past three years or 2 percent.
e. Where the PHA indicates continuation of a Payment In Lieu of Taxes (PILOT),
provide a legal opinion based upon state and local law of continuation of
PILOT post conversion. If the PILOT will not be continued after conversion,
the PHA must provide documentation of real estate tax estimates.
f. Insurance costs must be documented, such as quotes from an insurance agent
based on actual recent premiums for similar projects.
g. All other operating expenses shall be no less than 85 percent of the average for
the last three years, unless justified.
h. The annual replacement reserve deposit should be equal to that amount which,
if deposited annually, will be sufficient to fund all capital needs, as identified
81
Current Funding, for purposes of this Attachment, is the funding determined using Attachment 1C of this Notice.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 109
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
in the CNA, arising during the first 20 years and otherwise not addressed
upfront in either the rehabilitation or an initial deposit to the replacement
reserve account. The PHA should use reasonable estimates in the inflation but
in doing so the rate for escalating the increase in repair costs should not exceed
the rate of interest on reserve deposits by more than 1%. HUD may consider
alternative arrangements with respect to the initial deposit to the replacement
reserve if risks to the Covered Project can be adequately mitigated.
i. For non-leveraged transactions (i.e. transactions that will not be taking on any
new hard debt as part of the conversion), the stabilized cash flow should not be
less than $12 per unit monthly. For leveraged transactions (i.e. transactions that
will be taking on new hard debt as part of the conversion), the debt-coverage
ratio should not be less than 1.11 over a ten year period using 2% growth in
revenue and 3% growth in expenses.
J. Market Study. A market study will only be required at HUD's request, e.g., in cases where
the project is currently experiencing a high vacancy rate, or when project plans include unit
reconfiguration or inclusion of market-rate units. For projects using an FHA insured
mortgage, please see the Multifamily Accelerated Processing (MAP) Guide for instruction on
when a market study is, and is not, required.
K. Approved Significant Amendment to the PHA Plan. Provide a letter from HUD approving
the Significant Amendment, Five-Year Plan, Annual Plan, or MTW Plan.
L. Pre-Approval of Specific Activities. For Financing Plans submitted after August 15, 2015,
evidence that the PHA has secured written approval from HUD for any of the following
activities that are included in its RAD conversion.
1. For conversions of assistance involving new construction, whether on a new site or on
a current site, in an area of minority concentration, confirmation that the project
locations meets Site and Neighborhood Standards (See Section 1.4.A.7).
2. For transfers of assistance where all or a portion of the Converting Project’s assistance
is transferred to a new site(s) as part of the subject transaction, confirmation from
HUD that the project meets the fair housing and civil rights requirements described
in:
i. Site and Neighborhood Standards (see Section 1.4.A.7),
ii. Changes in Unit configuration (see Section 1.4.A.10), and
iii. Accessibility requirements (see 1.4.A.6).
3. For conversions of assistance where the total number of units in the Covered Project
is less than the original number of units in the Converting Project (this includes de
minimis reductions), confirmation that the reduction will not result in discrimination
based on race, color, religion, national origin, sex, disability, or familial status.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 110
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
4. For Conversions of assistance where the Covered Project’s unit configuration is
different from the unit configuration of the converting project, confirmation that the
conversion will not result in discrimination based on race, color, national origin,
religion, sex, disability, or familial status.
5. Conversions where the Covered Project serves a different population from the one
served by the Converting Project (e.g. when a Converting Project serves families but
the Covered Project is subject to an elderly preference), confirmation that the
conversion will not result in discrimination based on race, color, national origin,
religion, sex, disability, or familial status.
M. Approval of Non-dwelling Real Property. The PHA provides information on the units,
non-dwelling property and land it wishes to remove from the Declaration of Trust (DOT) or
Declaration of Restrictive Covenants (DORC) and from the ACC in the RAD PIC Removal
Application. Information is provided both in the removal application form and by attaching
the CHAP, a site map, and a written explanation of units and property to the removal
application. Based on information the PHA provides in the RAD PIC Removal Application,
the PIH Field Office will review the removal application and approve any non-dwelling real
property that can be released from public housing use restrictions (DOT or DORC), under
RAD authority, as part of a RAD transaction, provided it is encumbered under a RAD Use
Agreement (including any addendum that may be required by HUD). The following non-
dwelling real property can be included:
1. Buildings that contain units to be converted under RAD, including:
units designated as “non-dwelling units” in IMS/PIC (laundry facilities,
storage, management offices);
community and common space;
units that are not public housing, but are part of a mixed-income community
amongst mixed-finance public housing units and are documented in IMS/PIC
as “non-ACC” units;82 and
underlying land at those buildings;
2. Necessary appurtenances for the RAD units (e.g., parking lots, playgrounds);
82
The DORC on a mixed-finance public housing project covers both land and improvements constituting that
project. Since public housing units may “float”, the property description and unit count in IMS/PIC covers both
public housing and non-public housing units. Therefore, when HUD approves public housing units to be released
from DORC and removed from IMS/PIC based on a RAD conversion, HUD automatically approves the release of
the other non-public housing units from DORC.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 111
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
3. Non-dwelling structures (e.g., sheds, community buildings) that at will be demolished
as part of the conversion, provided such demolition is included in the approved RAD
RCC;
4. Free standing non-dwelling buildings or other non-dwelling real property that will be
used primarily to “support” the RAD units (e.g., project-specific community centers,
maintenance building, management office building), provided such property is
contiguous, adjacent or in close proximity to the RAD dwelling units parcel, and the
PHA evidences the property will support the RAD units through either direct
supportive services for residents or direct administrative and/or management support
for RAD units. Such property may also serve other residents or projects of the PHA
provided the property primarily serves and supports the RAD units; and
5. Vacant land and other real property necessary to support the RAD units (e.g.,
landscaping, community gardens, or reasonable green-space that is required for
zoning).
HUD, in its sole discretion, will determine whether property proposed for release falls into
any of the categories above and can therefore be removed from the DOT or DORC at
closing.
In order for HUD to release the DOT or DORC from any public housing property83 not
referenced above, a PHA must submit a request in accordance with the applicable
requirements of other HUD programs and federal authorities, such as disposition under
Section 18 of the Act.
N. Approved Amendment to Attachment A of the MTW Agreement. For MTW agencies
that have not completed this step as part of a previously completed conversion, the PHA must
provide an executed amendment to Attachment A of their MTW Agreement with language
provided by the PHA’s MTW coordinator.
O. Affirmative Fair Housing Marketing Plan (AFHMP). For PBRA conversions, evidence
that a completed AFHMP (HUD 935.2A) has been submitted for approval to the local
Multifamily Regional Center. If a PHA is converting more than one project to PBRA, a
separate AFHMP must be submitted for each project. Typically, the management agent or
the entity responsible for marketing (if different) is responsible for completing and
Note that “public housing property” includes all real property that has been acquired, developed, modernized,
83
maintained or operated with assistance under Section 9 of the Act or other previous forms of public housing
assistance and may include property that is not recorded in IMS/PIC and/or is not encumbered by a valid DOT.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 112
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
submitting the AFHMP. If an Project Owner plans to adopt any local or residency
preferences, the Project Owner must submit its Tenant Selection Plan along with the AFHMP
(see HUD Handbook 4350.3, page 4-4). The purpose of affirmative marketing is to ensure
that individuals of similar income levels in the same housing market area have a like range of
housing choices available to them regardless of their race, color, national origin, religion,
sex, disability, or familial status. The Project Owner may not market or lease any unit not
occupied by a household exercising its right to remain in or return to the Covered Project
prior to approval of the AFHMP. Market or leasing includes the solicitation, distribution, or
acceptance of applications or development of a waiting list.
P. Estimate of public housing funds available for HAP subsidy. The PHA shall provide an
estimate of the public housing subsidy that will be used to support payments under the HAP
Contract in accordance with Section 1.13.B.5. HUD will provide tools for PHAs to make
such estimates.
Q. Transfer of Assistance. For all conversions involving a transfer of assistance to a new site,
the PHA must submit:
1. Evidence of HUD approval of the site and
2. A request from the PHA, based on the conditions established in Section 1.4.A.12 and
subject to HUD approval, for the DOT to be released at closing. Absent a request and
HUD approval, the DOT will remain on the current public housing site.
R. Resident Comments. Provide date(s) of the resident meeting (or meetings, where
applicable) held following the issuance of the CHAP and a record of the responses (written
or oral, or in subsequent actions) to resident comments on the proposed conversion that were
received in connection with such meetings.
S. Title Report. Submit a complete title report tracing title back to the vesting deed and
including information on whether the Converting Project is currently subject to a DOT or
DORC and any other liens, encroachments, easements or other encumbrances on the
property.
Financing Plan Requirements for Transactions Utilizing FHA-Insurance
For RAD conversions that will utilize FHA mortgage insurance, the submission requirements
and feasibility benchmarks are primarily found in the FHA Multifamily Accelerating (MAP)
Guide as revised by Mortgagee Letter 2012-20. In addition to submissions made in an FHA
insured loan Application for Firm Commitment, PHAs must also upload the following items to
the RAD Resource Desk. (Unless otherwise indicated, the PHA must submit all of the items
listed in the cited paragraph):
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 113
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
A. Type of Conversion
E. Fair Housing, Accessibility and Relocation Checklist or Update
F. Development Budget (Sources and Uses of Funds).
o Sources and Uses submitted with the FHA Application must be entered into the
Transaction Log on the RAD Resource Desk.
o For projects covered under an EPC, the PHA must provide a draft amended EPC
approval letter from the PIH Energy Center specifying the minimum amount of
debt that will need to be addressed in the conversion.
o Subparagraph 5. Subsidy Layering Review, if completed by an HFA (tax credits)
or by another agency. If no SLR is been performed, HUD will complete a SLR
whenever multiple federal sources are proposed, when public housing funds are
used (see Section 1.5(A)), or when a MTW agency is using MTW block grant
funds to set their initial contract rents (see Section 1.6(B)5 and 1.7(A)5).
H. Proposed Financing
I. Operating Pro Forma.
J. Market Study
K. Approved Significant Amendment to the PHA Plan.
L. Fair Housing and Civil Rights Pre-Approval of Specific Activities (if applicable)
M. Approval of Non-dwelling Real Property
N. Approved Amendment to Attachment A of the MTW Agreement (if applicable)
P. Estimate of public housing funds available for HAP subsidy
Q. Transfer of Assistance
R. Resident Comments
S. Title Report
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 114
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
Attachment 1B – Resident Provisions in Conversions of Assistance from Public Housing to
PBRA and PBV
This Attachment contains two sections, describing:
1B.1 Summary of Resident Provisions
1B.2 Resident Participation and Funding
1B.1 Summary of Resident Provisions
The following is a summary of special provisions and alternative requirements related to tenants
of public housing projects converting under RAD:
Conversion will be considered a significant amendment to a PHA Plan (see Section
1.5(E) of this Notice);
Notification of proposed conversion, meetings during the conversion process, written
response to residents comments on conversion, and notification of conversion approval
and impact (see Section 1.8 of this Notice);
No rescreening at conversion (see Section 1.6(C)(1) of this Notice for conversions to
PBV and Section 1.7(B)(1) for conversions to PBRA);
Right to return after temporary relocation to facilitate rehabilitation or construction (see
Section 1.4(A)(5) of this Notice and the RAD Fair Housing, Civil Rights, and Relocation
Notice);
Phase-in of tenant rent increases (see Section 1.6(C)(4) of this Notice for conversions to
PBV and Section 1.7(B)(3) for conversions to PBRA);
Continued participation in the ROSS-SC and FSS programs (see Section 1.6(C)(5) of this
Notice, for conversions to PBV and Section 1.7(B)(4) for conversions to PBRA);
Continued Earned Income Disregard (see Section 1.6(C)(8) of this Notice, for
conversions to PBV and Section 1.7.(B)(7) for conversions to PBRA);
Continued recognition of and funding for legitimate residents organizations (see Section
1.6(C)(6) of this Notice for conversions to PBV, Section 1.7(B)(5) of this Notice for
conversions to PBRA, and below in Attachment 1B.2 for additional requirements for both
programs);
Procedural rights consistent with section 6 of the Act (see Section 1.6(C)(7) of this
Notice for conversions to PBV and Section 1.7(B)(6) of this Notice for conversions to
PBRA); and
Choice-mobility option allowing a resident to move with a tenant-based voucher after
tenancy in the Covered Project (see 24 CFR § 983.260 for conversions to PBV and
Section 1.7(C)(5) of this Notice for conversions to PBRA).
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 115
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
For additional information, refer to Notice H 2016-17; PIH 2016-17 for additional
information on relocation requirements under RAD.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 116
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
1B.2 Resident Participation and Funding84
The following provisions contain the resident participation and funding requirements for public
housing conversions to PBRA and PBV, respectively.
A. PBRA: Resident Participation and Funding
Residents of Covered Projects converting assistance to PBRA will have the right to establish
and operate a resident organization in accordance with 24 CFR Part 245 (Tenant
Participation in Multifamily Housing Projects). In addition, a Project Owner must provide
$25 per occupied unit annually for resident participation, of which at least $15 per occupied
unit shall be provided to the legitimate tenant organization at the covered property. Resident
participation funding applies to all occupied units in the Covered Project as well as units
which would have been occupied if not for temporary relocation. These funds must be used
for resident education, organizing around tenancy issues, and training activities.
In the absence of a legitimate resident organization at a Covered Project:
1. HUD encourages the Project Owner and residents to work together to determine the most
appropriate ways to foster a constructive working relationship, including supporting the
formation of a legitimate residents organization. Residents are encouraged to contact the
Project Owner directly with questions or concerns regarding issues related to their
tenancy. Project Owners are also encouraged to actively engage residents in the absence
of a resident organization; and
2. Project Owners must make resident participation funds available to residents for
organizing activities in accordance with this Notice. Residents must make requests for
these funds in writing to the Project Owner. These requests will be subject to approval by
the Project Owner.
B. PBV: Resident Participation and Funding
To support resident participation following conversion of assistance, residents of Covered
Projects converting assistance to the PBV program will have the right to establish and
operate a resident organization for the purpose of addressing issues related to their living
environment, which includes the terms and conditions of their tenancy as well as activities
related to housing and community development.
1. Legitimate Resident Organization. A Project Owner must recognize legitimate resident
organizations and give reasonable consideration to concerns raised by legitimate resident
84
For the purposes of this Attachment, HUD uses the term “Project Owner” to refer to the owner of a converting or
Covered Project. In some instances the owner of a project could be a public, non-profit, or for-profit, e.g., mixed-
finance projects).
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 117
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
organizations. A resident organization is legitimate if it has been established by the
residents of a Covered Project, meets regularly, operates democratically, is representative
of all residents in the project, and is completely independent of the Project Owner,
management, and their representatives.
In the absence of a legitimate resident organization at a Covered Project, HUD
encourages the Project Owner and residents to work together to determine the most
appropriate ways to foster a constructive working relationship, including supporting the
formation of a legitimate residents organization. Residents are encouraged to contact the
Project Owner directly with questions or concerns regarding issues related to their
tenancy. Project Owners are also encouraged to actively engage residents in the absence
of a resident organization; and
2. Protected Activities. Project Owners must allow residents and resident organizers to
conduct the following activities related to the establishment or operation of a resident
organization:
a. Distributing leaflets in lobby areas;
b. Placing leaflets at or under residents' doors;
c. Distributing leaflets in common areas;
d. Initiating contact with residents;
e. Conducting door-to-door surveys of residents to ascertain interest in establishing a
resident organization and to offer information about resident organizations;
f. Posting information on bulletin boards;
g. Assisting resident to participate in resident organization activities;
h. Convening regularly scheduled resident organization meetings in a space on site
and accessible to residents, in a manner that is fully independent of management
representatives. In order to preserve the independence of resident organizations,
management representatives may not attend such meetings unless invited by the
resident organization to specific meetings to discuss a specific issue or issues; and
i. Formulating responses to Project Owner's requests for:
i. Rent increases;
ii. Partial payment of claims;
iii. The conversion from project-based paid utilities to resident-paid utilities;
iv. A reduction in resident utility allowances;
v. Converting residential units to non-residential use, cooperative housing, or
condominiums;
vi. Major capital additions; and
vii. Prepayment of loans.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 118
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
In addition to these activities, Project Owners must allow residents and resident
organizers to conduct other reasonable activities related to the establishment or operation
of a resident organization.
Project Owner s shall not require residents and resident organizers to obtain prior
permission before engaging in the activities permitted in this section.
3. Meeting Space. Project Owners must reasonably make available the use of any
community room or other available space appropriate for meetings that is part of the
multifamily housing project when requested by:
a. Residents or a resident organization and used for activities related to the operation of
the resident organization; or
b. Residents seeking to establish a resident organization or collectively address issues
related to their living environment.
Resident and resident organization meetings must be accessible to persons with
disabilities, unless this is impractical for reasons beyond the organization's control. If the
project has an accessible common area or areas, it will not be impractical to make
organizational meetings accessible to persons with disabilities.
Project Owners may charge a reasonable, customary and usual fee, approved by the
Secretary as may normally be imposed for the use of such facilities in accordance with
procedures prescribed by the Secretary, for the use of meeting space. A PHA may waive
this fee.
4. Resident Organizers. A resident organizer is a resident or non-resident who assists
residents in establishing and operating a resident organization, and who is not an
employee or representative of current or prospective Project Owners, managers, or their
agents.
Project Owners must allow resident organizers to assist residents in establishing and
operating resident organizations.
5. Canvassing. If a Covered Project has a consistently enforced, written policy against
canvassing, then a non-resident resident organizer must be accompanied by a resident
while on the property of the project.
If a project has a written policy favoring canvassing, any non-resident resident organizer
must be afforded the same privileges and rights of access as other uninvited outside
parties in the normal course of operations. If the project does not have a consistently
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 119
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
enforced, written policy against canvassing, the project shall be treated as if it has a
policy favoring canvassing.
A resident has the right not to be re-canvassed against his or her wishes regarding
participation in a resident organization.
6. Funding. Project Owners must provide $25 per occupied unit annually for resident
participation, of which at least $15 per occupied unit shall be provided to the legitimate
resident organization at the covered property.85 These funds must be used for resident
education, organizing around tenancy issues, and training activities.
In the absence of a legitimate resident organization at a Covered Project:
a. HUD encourages the Project Owner s and residents to work together to determine the
most appropriate ways to foster a constructive working relationship, including
supporting the formation of a legitimate residents organization. Residents are
encouraged to contact the Project Owner directly with questions or concerns
regarding issues related to their tenancy. Project Owner are also encouraged to
actively engage residents in the absence of a resident organization; and
b. Project Owner s must make resident participation funds available to residents for
organizing activities in accordance with this Notice. Residents must make requests for
these funds in writing to the Project Owner. These requests will be subject to
approval by the Project Owner.
85
Resident participation funding applies to all occupied units in the Covered Project as well as units which would
have been occupied if not for temporary relocation.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 120
Attachment 1C: Calculation of HAP Contract Rents
Attachment 1C – Calculation of HAP Contract Rents for Conversions of Assistance from
Public Housing to PBRA or PBV
This attachment explains the method by which HUD calculated the contract rents for each
project and provides additional detail on contract rent setting, including a demonstration of the
application of applicable rent caps for PBRA and PBV conversions. These instructions apply
only to public housing conversions under Section 1 of the Notice.
Actual initial contract rents may vary from the calculation described above as a result of actual
rent caps in effect at the time of conversion (e.g. the most recently published Fair Market Rents),
OCAF rent increases, and rent flexibilities described in Sections1.6(B)(5) and 1.7(A)(5).
1. Step One – Determine Current Funding86
Current funding will be determined based on the sum of the following for each project:
Per unit monthly (PUM) subsidy eligibility at full occupancy under the Operating Fund
program, based on the current year’s Operating Fund appropriation (incorporating any
pro-ration and excluding Asset Repositioning Fee).87
The amount of the PHA’s Capital Fund Formula Grant attributable to the project, divided
by the units recognized under the Capital Fund formula, i.e., “standing units”, divided by
twelve, and
PUM adjusted formula income under the Operating Fund program, i.e. tenant rent.88
86
HUD reserves the right to update or correct calculated contract rents based on technical corrections and to modify
the methodology for properties for which this information is unavailable at the time rents were initially calculated.
87
Operating Subsidy was derived from Form-52723 from 2012 or 2014 (depending on a projects applicable RAD
Rent Base Year), taking the following steps:
Step 1: Combine 1) PEL [Section 3 Part A, Line 03 (PUM inflated PEL)] + 2) UEL [Section 3 Part A, Line 05
(PUM inflated UEL)] + 3) Add-Ons [Section 3 Part A, Line 07-15] (excluding Asset Repositioning Fee [Line14]
and Resident Participation Funding [Line 11], divided by Total Unit Months + 4) Resident Participation Funding
[$25, divided by 12] + 5) Transition Funding [Section 3 Part C Line 02] + Other [Section 3, Part C, Line 03],
divided by Total Unit Months. The result is a PUM amount.
Step 2: Subtract Adjusted Formula Income [Section 3 Part B, Line 03 (PUM adjusted Formula Income)]
Step 3: Multiply the result by the current year's pro-ration
The Result is the derived PUM Operating Subsidy under RAD. Note that in this calculation the Operating Subsidy
Allocation Adjustment is added back in for properties converting based on FY 2012 funding..
88
Section 3, Part B, Line 03 of HUD Form-52723.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 121
Attachment 1C: Calculation of HAP Contract Rents
Thus, if the operating subsidy eligibility for a project is $340 PUM (adjusted for proration),
the Capital Fund formula grant attributable to the project is $135 PUM, and adjusted formula
income is $308 PUM, then current funding totals $783 PUM.89
2. Step Two – Apply Bedroom Adjustment Factor
The weighted average current funding amount will then be adjusted by a bedroom adjustment
factor to arrive at bedroom-specific rent schedule, which would apply to the bedroom
configuration of the Covered Project. HUD will use the same bedroom adjustment factors as
reflected in the metropolitan FMR schedules for the area in which the project is located. The
following is an illustration:
Current Funding: Bedroom Adjusted Based on FMR
Bedroom Size 0BR 1BR 2BR 3BR 4BR 5BR 6BR TOTAL
PIC Units 0 20 50 30 0 0 0 100
Metropolitan FMRs $550 $650 $775 $900 $1,000 $1,150 $1,300
FMR Bedroom
0.710 0.839 1.000 1.161 1.290 1.484 1.677
Adjustments
Bedroom Adjusted
$646 $770 $894 $783
Rent
3. Step Three – Apply Rent Caps
Finally, HUD would compare the Current Funding Rents calculated in Step Two with the
applicable rent caps to determine the HAP Contract Rent for conversions to either PBRA or
PBV (see Sections 1.6(B)(5) and 1.7(A)(5) of this Notice for a discussion of rent caps), as
illustrated in the continuing example below.
Conversion to PBRA
Bedroom Size 1BR 2BR 3BR
Current Funding Rents (Step Two) $646 $770 $894
120% of FMR $780 $930 $1,080
- Utility Allowance $50 $60 $70
FMR Rent Cap $730 $870 $1,010
89
The calculation of contract rents for MTW agencies with an alternative subsidy calculation under the public
housing program differs from the approach illustrated above because their Operating subsidy is not currently
allocated at a project level. For these agencies, HUD used data provided in the Form HUD-50058 MTW to derive
tenant rents. For Operating Fund subsidy, the project’s Operating subsidy is determined based on a pro rata share of
the agency’s Operating Fund grant.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 122
Attachment 1C: Calculation of HAP Contract Rents
Market Rent $640 $740 $830
-- Lower of Current Funding Rent and FMR rent cap --
PBRA Contract Rent $646 $770 $894
When converting to PBRA, the contract rent is the lower of 120 percent of FMR or current
funding. In this case, the Current Funding rents are below 120 percent of FMR (minus the
Utility Allowance) and so the contract rent is unchanged from the current funding rent
calculated in Step Two. (The market rent does not have any impact since current funding
does not exceed 120 percent of the FMR)
Conversion to PBV
Bedroom Size 1BR 2BR 3BR
Current Funding Rents (Step Two) $646 $770 $894
Reasonable Rent $640 $740 $830
110% of FMR $715 $853 $990
- Utility Allowance $50 $60 $70
FMR Rent Cap $665 $793 $920
-- Lower of Current Funding Rent, Reasonable Rent, or FMR rent cap--
PBV Contract Rent $640 $740 $830
When converting to PBV, the contract rent is the lower of the Reasonable Rent or 110
percent of the FMR (minus the Utility Allowance). In this case, the Current Funding rents
exceed the Reasonable Rents. As a result, the contract rents for this project would be capped
at the Reasonable Rent.
Utility Allowances The contract rents defined above are net of any utility allowances. Except for
cases described below, the utility allowances used in the HAP Contract at closing must be the
actual utility allowances that are in effect for each public housing unit type prior to conversion.
The CHAP, which includes the rent schedule, must be updated prior to conversion to reflect
current utility allowances.
Tenant-Paid Utility Savings for PBRA Conversions. Where conversion plans will result in
energy and water efficiency improvements, PHAs can submit UA projections performed by a
professional engineer, based on the project’s plans and specifications that, at a minimum, take
into account specific factors including, but not limited to, unit size, building orientation, design
and materials, mechanical systems, appliances, and characteristics of the building location. The
projections must be submitted in the RAD UA Projections Template. If approved by HUD, these
UAs will be used to modify the initial PBRA contract rents (for new construction) or post-rehab
rents (for rehab) in the HAP Contract. The rents will be adjusted in the following way:
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 123
Attachment 1C: Calculation of HAP Contract Rents
a. Where post-construction the property will have the same provisions and configuration
of utilities as the original property, HUD will increase the contract rents by 75% of
the approved reduction in Utility Allowance.
Example 1: Configuration of Utilities remains the same; Tenant-paid utility savings
CHAP Rent Schedule
BR Contract Rent Utility Allowance Gross Rent
1-BR $500 $130 $630
RAD Utility Allowance Projections Template
Current: Tenant pays Future: Tenant pays Impact on Contract
gas, electric; and water gas, electric and water Rent
Gas $50 $40 +$10 x 75%= + $7.5
Electric $40 $30 +$10 x 75%= + $7.5
Water $40 $20 +$20 x 75% = + $15
UA $130 $90 Total = +$30
Revised CHAP Rent
BR Contract Rent Utility Allowance Gross Rent
1-BR $530 $90 $620
b. Where post-construction the new property will have a provision and configuration of
utilities different from the original property, HUD will assess each utility. For
utilities that will shift from project-paid to tenant-paid or vice versa, an increase or
decrease in the utility allowance as a result of a new configuration will cause an
equal and opposite change to the contract rent. For utilities that will remain tenant-
paid, HUD will increase the contract rents by 75% of the approved reduction in
Utility Allowance.
Example 2: Configuration of Utilities changes; Tenant-paid utility savings
CHAP Rent Schedule
BR Contract Rent Utility Allowance Gross Rent
1-BR $500 $50 $550
RAD Utility Allowance Projections Template
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 124
Attachment 1C: Calculation of HAP Contract Rents
Current: PHA pays Future: Tenant pays Impact on Contract
Gas and electric; gas, electric and water Rent
tenant pays water
Gas $0 $30 -$30
Electric $0 $30 -$30
Water $50 $30 +$20 x 75% = + $15
UA $50 $90 -$45
Revised CHAP Rent
BR Contract Rent Utility Allowance Gross Rent
1-BR $455 $90 $545
At conversion the HAP Contract will include a pre-construction and post-construction
rent schedule.
To be eligible for this provision, a PHA must submit Utility Consumption Baseline data
into EPA’s Portfolio Manager
Tenant-Paid Utilities and PBV Conversions. Unless a waiver is requested and approved as
described below, the PHA must maintain a utility allowance schedule for all tenant-paid utilities
in accordance with 24 CFR § 983.301(f)(2)(ii) and 24 CFR § 982.517. The utility allowances
would become effective for each family at recertification.
A PHA may request a waiver from HUD in order to establish a site-specific utility allowance
schedule and to apply the same adjustments to contract rents based on Tenant-Paid Utility
Savings as described above for PBRA conversions.90 To be approved, a PHA must demonstrate
good cause that the utility allowance schedule used in its voucher program would either create an
undue cost on families because the utility allowance provided under the voucher program is too
low, or discourage conservation and efficient use of HAP funds because the utility allowance
provided under the voucher program would be excessive if applied to the Covered Project. For
HUD to consider such a waiver, the PHA must submit an analysis of utility rates for the
community and consumption data of project residents in comparison to community consumption
rates; and a proposed alternative methodology for calculating utility allowances on an ongoing
basis.
90 MTW agencies would secure approval for site-specific utility allowances via their MTW Plan. If approved,
an MTW agency may also apply the same adjustments to contract rents based on Tenant-Paid Utility Savings.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 125
Attachment 1C: Calculation of HAP Contract Rents
Such waiver requests should be submitted to the PIH Field Office. The PHA should notify the
RAD Transaction Manager of the request.
Notes
1. For MTW agencies converting to PBV that are utilizing MTW Fungibility, as described in
Section 1.6, the agency will use existing voucher funding to supplement rents (no
incremental voucher funding will be provided). For MTW agencies converting to PBRA that
are utilizing MTW Fungibility, as described in Section 1.7, HUD will permanently reduce the
agency’s public housing funds (in addition to any funding modifications that would occur as
a result of the conversion absent the rent increase) by the additional amount established for
the HAP Contract.
For example, assume that an MTW agency that is closing effective July 1, 2014 is
considering using fungibility for a project of 100 units whose contract rent is $500 PUM and
whose subsidy is $200 PUM. In order to make the deal feasible, the MTW must make the
contract rent $550 PUM and receive a subsidy of $250 PUM. In order to do this, the MTW
agency must agree to an additional permanent reduction in its Operating and Capital Fund
subsidy (in addition to any funding modifications that would occur as a result of the
conversion absent the rent increase) by a combined $60,000 a year ($50 PUM for 100 units
for 12 months) starting in CY 2015. During the remainder of CY 2014, the PHA can use its
available public housing or other funds to make up any gap in rental subsidy as a result of
Operating and Capital Fund allocations to a RAD project that are lower than the HAP
subsidy. In the year following, the HAP Contract rent provided will be $550 PUM.
2. For applications where the PHA proposes a de minimis reduction of units, projects will not
be permitted to retain the subsidy of any units that are not included in the conversion
application. An exception is made when the PHA is proposing a de minimis reduction in
dwelling units, but certain units will be designated for special purpose uses or units are being
reconfigured through rehab to improve marketability (e.g. combining efficiencies). The
project will retain the subsidy attributable to those units and the contract rents for the
dwelling units will increase by a share of the foregone subsidy (i.e., the Operating Fund and
Capital Fund portion of the weighted Contract Rent).
3. When a project’s funding is reduced as a result of a program cap on contract rents, a PHA
may request that HUD transfer the excess subsidy to the PHA’s voucher program in order to
facilitate Choice-Mobility.
4. PHAs that are scheduled to receive ongoing Replacement Housing Factor or Demolition
Disposition Transition Funding (including funds that have not been awarded as well as funds
that have been awarded but not yet disbursed) may choose to forego any ongoing
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 126
Attachment 1C: Calculation of HAP Contract Rents
RHF/DDTF grants for the purpose of offsetting an increase to the initial RAD rent. At a
PHA’s request HUD will provide a forecast of total Anticipated RHF/DDTF grants. The
RAD rent may then be increased by the following amount:
[Total Anticipated RHF/DDTF Grants + Undisbursed RHF/DDTF] ÷ 20 ÷ Number of Units
converting under RAD ÷12 = PUM RAD Rent Increase
The PUM RAD Rent Increase would be reflected in the initial rents established in the HAP
Contracts. The contract rents will still be subject to applicable rent caps. PHAs electing to
utilize this flexibility must acknowledge through a certification that HUD will cancel all
affected obligations of Replacement Housing Factor (RHF) funds or Demolition and
Disposition Transition Funding (DDTF).
5. Resident Paid Utilities. For projects with an existing EPC using the Resident Paid Utility
(RPU) Incentive, HUD will allow an amendment to the posted RAD rent to add the Per Unit
Month (PUM) EPC Resident Paid Utility Incentive. Further, if a converting project currently
has surcharges for excess consumption of PHA-supplied utilities (in accordance with 24 CFR
§ 965.506), HUD will allow an amendment to the posted RAD rent by the amount in Row 19
of the HUD-52722 (Calculation of Utility Expense Level) divided by Total Unit Months
(Section 2 Column A Line 15) of the HUD-52723 used in the Fiscal Year in which the RAD
contract rents were calculated.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 127
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
Attachment 1D – Requirements for RAD-Specific PHA Plan and/or Significant
Amendment to the PHA Plan Submissions
Until such time as the required elements may be provided in a HUD-provided form, the
following items must be covered in a request for a RAD-Specific PHA Plan Submission,
Significant Amendment to the PHA Plan, MTW Plan, or MTW’s revision to the MTW plan:
1. A description of the units to be converted. The description should include the following:
a. The number of units;
b. The bedroom distribution of units, and
c. The type of units (e.g., family, elderly/disabled, or elderly-only);
2. Any change in the number of units that is proposed as part of the conversion, including:
a. De minimis unit reductions and
b. Unit reductions that are exempt from the de minimis cap;
c. Any change in the bedroom distribution of units that is proposed as part of the
conversion;
3. Changes in the policies that govern eligibility, admission, selection, and occupancy of units
at the project after it has been converted.
a. If Converting to PBV: This includes any waiting list preferences that will be adopted for
the Covered Project as well as the Resident Rights and Participation, Tenant Protections
for residents stated in Section 1.6, Attachment 1B of this Notice and the Joint
Housing/PIH Notice H-2014-09/ PIH-2014-17. (See Table 1 below for more specific
guidance).
b. If Converting to PBRA: This includes any waiting list preferences that will be adopted
for the Covered Project as well as the Resident Rights and Participation, Tenant
Protections for residents stated in Section 1.7 and Attachment 1B of this Notice and the
Joint Housing PIH Notice H-2014-09/ PIH-2014-17. (see Table 1 below for more
specific guidance).
4. If there will be a transfer of assistance at the time of conversion, the significant amendment
must include:
a. The number of units to be transferred;
b. The bedroom distribution of the units in the new building(s), and
c. The type of units, if changed (e.g., family, elderly/disabled, or elderly-only); and
d. Any reduction or change in the number of units and what reduction category they fall
under (i.e. de minimis)
e. How the waiting list will be transferred and how households will be selected for the
transfer, where applicable (please see Table 2 below for more specific guidance).
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 128
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
5. An indication of whether the PHA is currently under a voluntary compliance agreement,
consent order or consent decree or final judicial ruling or administrative ruling or decision
and an assurance that compliance will not be negatively impacted by conversion activities.
6. A statement certifying that the RAD conversion complies with all applicable site selection
and neighborhood reviews standards and that all appropriate procedures have been followed.
7. All other required information and certifications necessary to submit a Significant
Amendment to the PHA Plan, including Resident Advisory Board comments and responses,
challenged elements, and all required certifications.
8. For MTWs utilizing MTW Fungibility as defined in Section 1.9.E and Section 1.6 or 1.7, as
applicable, a statement explaining how the MTW will be able to maintain continued service
level requirements.
Additionally, in accordance with 24 CFR Part 903, a PHA must perform the following actions in
regards to their Capital Funds:
1. During the PHA Plan submission and/or significant amendment stage, a PHA shall notify the
public that the current and future Capital Fund Program Grants Budgets, will be reduced as a
result of any projects converting to RAD,.
a. The PHA should provide an estimate of the amount of the current Capital Fund grant that
is associated with the proposed project(s) and the impact on the PHA’s current Five-Year
PHA Plan and Five-Year Capital Fund Action Plan.
b. If the RAD conversion will impact an existing CFFP or EPC, or it proposes to utilize
RHF funds to facilitate conversion, the PHA should also indicate the estimated impact of
those activities.
Finally, to avoid the need for a possible subsequent significant amendment, the PHA should
examine its definition of “Substantial Deviation”. The PHA may want to redefine its definition
of Substantial Deviation in Section 10 of the PHA Plan to exclude the following items:
1. The decision to convert to either Project Based Rental Assistance or Project Based Voucher
Assistance;
a. Changes to the Capital Fund Budget produced as a result of each approved RAD
Conversion, regardless of whether the proposed conversion will include use of additional
Capital Funds;
b. Changes to the construction and rehabilitation plan for each approved RAD conversion;
and
c. Changes to the financing structure for each approved RAD conversion.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 129
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
2. Please Note: Approval of a PHA’s Financing Plan may be delayed if a PHA has made a
substantial change to its plans, as defined locally, and the PHA has not completed a new
PHA Plan or Significant Amendment to its PHA Plan submission. In addition, if HUD
determines that there has been a significant change to the Significant Amendment involving
transfers of assistance, changes in the number of assisted units, or a change in eligibility or
preferences, HUD may require that a PHA resubmit their Significant Amendment.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 130
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
Table 1: List of RAD Program Elements Affecting Resident Rights and Participation,
Waiting List and Grievance Procedures for PBV and PBRA
Below, please find a table listing out each of the provisions affecting residents’ rights and
participation, waiting list and grievance procedures that must be included in a PHA’s Significant
Amendment. The table lists out the provisions applicable to the type of conversion (PBV or
PBRA) that the PHA is proposing. This list is not a substitute for providing a copy of the
relevant tenant protections listed below. PHAs should either provide reference to these tenant
protections or place the tenant protections cited in this table directly into their Plan submission.
Project Based Voucher Requirements Project Based Rental Assistance
(Section 1.6 of PIH Notice 2012-32, REV-3 Requirements (Section 1.7 of PIH Notice
and Notice H 2016-17; PIH 2016-17) 2012-32, REV-3 and Notice H 2016-17; PIH
2016-17))
Tenant Protections Under Notice H 2016-17; PIH 2016-17
1. Right to Return and Relocation 1. Right to return and Relocation
Assistance Assistance
Tenant Protections Under Section 1.6.C (PBV) or Section 1.7.B (PBRA)
1. No rescreening of tenants upon 1. No rescreening of tenants upon
conversion conversion;
2. Under-Occupied Unit 2. Under-Occupied Unit (See Section 1.7)
3. Renewal of Lease N/A
4. Phase-in of tenant rent increase: 3. Phase-in of tenant rent increase:
5. FSS and ROSS-SC programs; 5. FSS and ROSS-SC programs;
6. Resident Participation and Funding. 6. Resident Participation and Funding.
7. Termination notification 7. Termination notification
8. Grievance process 8. Grievance process
9. Earned Income Disregard. 9. Earned Income Disregard.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 131
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
11. Jobs Plus 10. Jobs Plus
10. When Total Tenant Payment Exceeds 11. When Total Tenant Payment Exceeds
Gross Rent. Gross Rent.
Tenant Protections Under Section 1.6.D (PBV) or Section 1.7.C (PBRA)
1. Establishment of Waiting List 1. Establishment of Waiting List
2. Choice Mobility 2. Choice Mobility
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 132
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
Sample PHA Plan Amendment
Below, is a sample PHA Plan Amendment. It is intended as an attachment to the PHA
Plan that would cover all the required elements for RAD. Please note: The PHA Plan must be
submitted with all appropriate forms and certifications to be acceptable to HUD, this includes the
HUD Form 50075; HUD Form 50077 (or HUD Form 50077-CR as applicable); HUD Form
50077-SL; and any form that may be required to perform PHA Plan activities in the future.
Attachment R – Rental Assistance Demonstration (RAD)
The (insert PHA name here) is amending its (annual and/or 5-year) PHA Plan because it
was a successful applicant in the Rental Assistance Demonstration (RAD). As a result, the (insert
PHA name here) will be converting to (Project Based Vouchers or Project Based Rental
Assistance) under the guidelines of PIH Notice 2012-32, REV-1 and any successor Notices.
Upon conversion to (Project Based Vouchers or Project Based Rental Assistance) the Authority
will adopt the resident rights, participation, waiting list and grievance procedures listed in (For
conversions to PBV: Section 1.6 of PIH Notice 2012-32, REV-2; and Joint Housing PIH Notice
H-2014-09/PIH-2014-17; For conversions to PBRA: Section 1.7 of PIH Notice 2012-32, REV-2;
and Joint Housing PIH Notice H-2014-09/PIH-2014-17). These resident rights, participation,
waiting list and grievance procedures are appended to this Attachment. Additionally, the (insert
PHA name here) certifies that it is currently compliant with all fair housing and civil rights
requirements, [insert only if applicable] including those imposed by any remedial orders or
agreements, namely [specify the name and date of the consent decree, order, voluntary
compliance agreement, or other remedial order or agreement].
RAD was designed by HUD to assist in addressing the capital needs of public housing by
providing (insert PHA name here) with access to private sources of capital to repair and preserve
its affordable housing assets. Please be aware that upon conversion, the Authority’s Capital Fund
Budget will be reduced by the pro rata share of Public Housing Developments converted as part
of the Demonstration, and that (insert PHA name here) may also borrow funds to address their
capital needs. [Insert only if applicable: The (insert PHA name here) will also be contributing
Operating Reserves in the amount of $XXX, Capital Funds in the amount of $XXX towards the
conversion, and/or Replacement Housing Factor (RHF) Funds in the amount of $XXX towards
the conversion.] [Insert only if applicable: The (insert PHA name here) currently has debt under
the Capital Fund Financing Program and will be working with (insert lender or bond trustee
name) to address outstanding debt issues, which may result in additional reductions of Capital
Funds.] [Insert only if applicable: The (insert PHA name here) currently has debt under an
Energy Performance Contract and will be working with (insert EPC provider’s name) to address
outstanding debt issues, which may result in additional reductions of Capital or Operating
Funds.] [For MTWs only, insert the following: Regardless of any funding changes that may
occur as a result of conversion under RAD, (insert MTW name here) certifies that it will
maintain its continued service level at (insert continued service level).]
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 133
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
Below, please find specific information related to the Public Housing Development(s)
selected for RAD:
Development #1
Name of Public PIC Development ID: Conversion type (i.e., Transfer of
Housing Project: PBV or PBRA): Assistance:
(if yes, please put
the location if
known, and # of
units transferring)
Total Units: Pre- RAD Unit Type Post-RAD Unit Type Capital Fund
(i.e., Family, Senior, if different (i.e., allocation of
etc.): Family, Senior, etc.) Development:
(Annual Capital
Fund Grant
attributable to the
Project, if known)
OR,
(Total Annual
Capital Fund
allocation divided
by total number of
public housing
units in PHA,
multiplied by total
number of units in
project)
Bedroom Type Number of Units Number of Units Change in
Pre-Conversion Post-Conversion Number of Units
per Bedroom
Type and Why
(De Minimis
Reduction,
Transfer of
Assistance, Unit
Reconfigurations,
etc.)
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 134
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
Studio/Efficiency
One Bedroom
Two Bedroom
Three Bedroom
Four Bedroom
Five Bedroom
Six Bedroom
(If performing a (Explain any changes in in the policies that govern eligibility,
Transfer of admission, selection, and occupancy of units at the project after it
Assistance): has been converted)
Resident Rights, Participation, Waiting List and Grievance Procedures
If converting to PBV: (Insert PIH Notice 2012-32, REV-3 Section 1.6.C & Section 1.6.D, and
Joint Housing/PIH Notice H-2014-09/ PIH-2014-17, as a whole, into this Attachment to your
PHA Plan)
If converting to PBRA: (Insert PIH Notice 2012-32, REV-3 Section 1.7.B & Section 1.7.C, and
Joint Housing/PIH Notice H-2014-09/ PIH-2014-17, as a whole, into this Attachment to your
PHA Plan)
Significant Amendment Definition
If your PHA is changing its definition for substantial deviation to the PHA Plan, below find
a suggested version:
As part of the Rental Assistance Demonstration (RAD), (insert PHA name here) is redefining the
definition of a substantial deviation from the PHA Plan to exclude the following RAD-specific
items:
a. The decision to convert to either Project Based Rental Assistance or Project Based
Voucher Assistance;
b. Changes to the Capital Fund Budget produced as a result of each approved RAD
Conversion, regardless of whether the proposed conversion will include use of
additional Capital Funds;
c. Changes to the construction and rehabilitation plan for each approved RAD
conversion; and
d. Changes to the financing structure for each approved RAD conversion.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 135
Attachment 1E: House Rules Addendum for PBRA Conversions
Attachment 1E - House Rules: Addendum A – Resident Procedural Rights
The information provided below must be included as part of the House Rules for the associated
project and evidence of such incorporation may be requested by HUD for purposes of monitoring
the program.
a. Termination Notification. HUD is incorporating additional termination notification
requirements to comply with section 6 of the Act for public housing projects converting
assistance under RAD, that supplement notification requirements in regulations at 24
CFR § 880.607 and the Multifamily HUD Model Lease.
i. Termination of Tenancy and Assistance. The termination procedure for RAD
conversions to PBRA will additionally require that Project Owners provide
adequate written notice of termination of the lease which shall not be less than:
1. A reasonable period of time, but not to exceed 30 days:
a. If the health or safety of other tenants, Project Owner employees,
or persons residing in the immediate vicinity of the premises is
threatened; or
b. In the event of any drug-related or violent criminal activity or any
felony conviction; or
2. Not less than 14 days in the case of nonpayment of rent; and
3. Not less than 30 days in any other case, except that if a State or local law
provides for a shorter period of time, such shorter period shall apply.
ii. Termination of Assistance. In all other cases, the requirements at 24 CFR §
880.603, the Multifamily HUD Model Lease, and any other HUD multifamily
administrative guidance shall apply.
b. Grievance Process. In addition to program rules that require that tenants are given notice
of covered actions under 24 CFR Part 245 (including increases in rent, conversions of a
project from project-paid utilities to tenant-paid utilities, or a reduction in tenant paid
utility allowances), HUD is incorporating resident procedural rights to comply with the
requirements of section 6 of the Act. RAD will require that:
i. Residents be provided with notice of the specific grounds of the Project Owner’s
proposed adverse action, as well as their right to an informal hearing with the
Project Owner;
ii. Residents will have an opportunity for an informal hearing with an impartial
member of the Project Owner’s staff within a reasonable period of time;
iii. Residents will have the opportunity to be represented by another person of their
choice, to ask questions of witnesses, have others make statements at the hearing,
and to examine any regulations and any evidence relied upon by the Project
Owner as the basis for the adverse action. With reasonable notice to the Project
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 136
Attachment 1E: House Rules Addendum for PBRA Conversions
Owner, prior to hearing and at the residents’ own cost, resident may copy any
documents or records related to the proposed adverse action; and
iv. Project Owners provide the resident with a written decision within a reasonable
period of time stating the grounds for the adverse action, and the evidence the
Project Owner relied on as the basis for the adverse action.
The Project Owner will be bound by decisions from these hearings, except if the:
i. Hearing concerns a matter that exceeds the authority of the impartial party
conducting the hearing.
ii. Decision is contrary to HUD regulations or requirements, or otherwise contrary to
federal, State, or local law.
If the Project Owner determines that it is not bound by a hearing decision, the PHA must
promptly notify the resident of this determination, and of the reasons for the
determination.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 137
Section II: Mod Rehab Projects
SECTION II: MODERATE REHABILITATION PROJECTS
2.1 Purpose
This Section provides RAD program instructions to owners of Section 8 Moderate Rehabilitation
projects, including Single Room Occupancy (SRO) dwellings as authorized by title IV of the
McKinney-Vento Homeless Assistance Act. Collectively, these projects will be referred to as
“Mod Rehab” projects unless otherwise noted.
HUD has consolidated the process and requirements for all Mod Rehab conversions under the
Second Component. Those projects that are currently being processed under the First Component
of this Notice will be allowed to switch and be processed under the Second Component of this
Notice. This consolidation allows owners to participate in RAD non-competitively and provides
for a simpler presentation of conversion options. In addition, while the Second Component does
not have the broad statutory waiver authority that the First Component does, the Second
Component does provide that participation is subject to the “requirements established by the
Secretary.” HUD has used this authority to develop alternative requirements, and the ability to
waive purely regulatory provisions in order to fulfill the purposes of the Demonstration.
2.2 General Program Description
Owners may choose between two forms of long-term Section 8 Housing Assistance Payment
(HAP) Contracts: project-based vouchers (PBVs) or project-based rental assistance (PBRA).
Conversions may be prospective (when an owner still has an active Mod Rehab contract at the
project) or retroactive (when the Mod Rehab contract has already expired at the project). Owners
pursuing a prospective conversion may choose from either a PBV contract or a PBRA contract.
Owners who are pursuing a retroactive conversion will be limited to PBV conversions only.
A. PBV Conversions. An owner may request to enter into a Section 8 PBV HAP Contract with
an eligible PHA to administer the contract. With the exception of provisions identified in this
Notice (as well as retained flexibilities of Moving to Work (MTW) agencies, all regulatory
and statutory requirements of the PBV program in 24 CFR Part 983, and applicable standing
and subsequent Office of Public and Indian Housing guidance, including related handbooks,
shall apply.
1. Prospective Conversions. Projects are eligible for prospective conversions if the
Mod Rehab contract has not yet expired or been terminated. In a prospective
conversion, the project will receive PBV assistance in lieu of the TPV assistance that
would have been otherwise provided to project residents. Prospective conversions
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 138
Section II: Mod Rehab Projects
may be suspended in a particular fiscal year if HUD does not have sufficient TPV
appropriations to fund all of the demands on the TPV account due to conversions.
Owners must comply with the resident consultation procedures described in this
Notice and must submit a request to HUD to confirm that the PHA that currently
administers the Mod Rehab contract is willing to administer the PBV contract. If that
PHA declines to consent, HUD will make a reasonable effort to find a PHA with
operational jurisdiction willing to enter into a PBV contract with the owner.
Following resident consultation and submission and approval of a Financing Plan, the
project will close when any new financing closes, the Mod Rehab contract is
terminated (or expires), and the new HAP Contract is executed. The PHA that has
agreed to administer the PBV HAP Contract will have the vouchers added to its
Annual Contributions Contract (ACC).
2. Retroactive Conversions. Where contract expiration has occurred and TPVs or EVs
have already been issued to project residents or where TPVs or EVs have been
requested and processed for project residents (i.e., the PHA’s ACC has been amended
reflecting the new increment of TPVs or EVs), projects may be eligible for a
retroactive conversion to PBV assistance. The contract expiration and issuance of
EVs or TPVs must have occurred on or after October 1, 2006.
Only the units occupied by eligible low-income residents that received TPV or EV
assistance at the time of contract expiration or termination, who continue to reside in
the project, and who consent to the conversion may be assisted under the PBV HAP
Contract. For retroactive conversions, as required under the RAD Statute, the
“Administering PHA” must approve a request for a retroactive conversion to a PBV
HAP Contract. If the actively Administering PHA does not consent to long-term
conversion of the contract to PBV assistance, the project is not eligible for retroactive
conversion.
B. PBRA Conversions. An owner may request to enter into a 20-year Section 8 PBRA HAP
Contract (subject to annual appropriations); the HAP Contract will be executed by HUD’s
Office of Housing. Initial contract rents will be determined by an RCS and be limited to
110% of FMR (unless a higher limitation not exceeding any applicable statutory maximum is
approved by HUD pursuant to Section 2.6.C) and will be adjusted only by an OCAF at each
anniversary of the HAP Contract, subject to the availability of appropriations for each year of
the contract term and the requirements of section 2.6.D. At expiration of the initial contract,
the owner is eligible to renew the contract under section 524 of MAHRAA, subject to the
terms and conditions applicable at the time of renewal and to the availability of
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 139
Section II: Mod Rehab Projects
appropriations for each year of such renewal. Regulatory requirements of the PBRA program
in 24 CFR Part 880, with the exception of provisions identified in this Notice, and applicable
standing and subsequent Office of Housing guidance, including handbooks, shall apply.
2.3 Eligibility
Owners of Mod Rehab projects that meet all eligibility requirements described below may
submit a Financing Plan to convert assistance under the Second Component of RAD.
2.3.1 Eligible Owners
A. Compliance with HUD and the PHA. Owners must be in good standing with HUD and the
PHA. The owner must have a history of compliance with program and contractual
requirements, including maintaining units in a decent, safe, and sanitary manner. If a
proposed conversion is in the context of an acquisition, the Administering PHA must consent
to the assignment of the contract in accordance with the provisions of the Mod Rehab HAP
Contract. The purchaser must provide evidence of successful experience owning and
operating HUD or other affordable multifamily housing properties.
B. Fair Housing and Civil Rights Compliance for PBV and PBRA Conversions. An owner
must be in compliance with all fair housing and civil rights requirements at 24 CFR
§5.105(a). An owner will not be eligible to participate in RAD if it has any of the charges,
cause determinations, lawsuits, or letters of findings referenced in sub-paragraphs (1)-(5)
below against the owner, its transferees, proposed development partners, or sub- recipients,
unless they have been resolved to HUD’s satisfaction.:
1. A charge from HUD concerning a systemic violation of the Fair Housing Act or a
cause determination from a substantially equivalent state or local fair housing agency
concerning a systemic violation of a substantially equivalent state or local fair
housing law proscribing discrimination because of race, color, religion, sex, national
origin, disability or familial status;
2. A Fair Housing Act lawsuit filed by the Department of Justice (DOJ) alleging a
pattern or practice of discrimination or denial of rights to a group of persons raising
an issue of general public interest pursuant to 42 U.S.C. § 3614(a);
3. A letter of findings or lawsuit filed by DOJ identifying systemic noncompliance
under Title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act
of 1973, or section 109 of the Housing and Community Development Act of 1974;
4. A cause determination from a substantially equivalent state or local fair housing
agency concerning a systemic violation of provisions of a state or local law
proscribing discrimination in housing based on sexual orientation or gender identity;
or
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 140
Section II: Mod Rehab Projects
5. A cause determination from a substantially equivalent state or local fair housing
agency concerning a systemic violation of a state or local law proscribing
discrimination in housing based on lawful source of income.
Applicants may still be eligible for conversion under RAD if such a charge, cause
determination, lawsuit, or letter of findings referenced in subparagraphs 1, 2, 3, 4, or 5 above
has been resolved to HUD’s satisfaction. However, if the matter has not been so resolved,
then the applicant is ineligible to participate in RAD.
HUD will determine if actions to resolve the charge, cause determination, lawsuit, or letter of
findings are sufficient to resolve the matter. Examples of actions that would normally be
considered sufficient to resolve the matter include, but are not limited to current compliance
with a:
Voluntary compliance agreement (VCA) signed by all the parties;
HUD-approved conciliation agreement signed by all the parties;
Conciliation agreement signed by all the parties and approved by the state
governmental or local administrative agency with jurisdiction over the matter;
Consent order or consent decree; or
Final judicial ruling or administrative ruling or decision.
Additionally, an owner may be required to demonstrate that its proposed activities under
RAD are consistent with any applicable VCA, conciliation agreement, consent order or
consent decree, final judicial ruling, or administrative ruling or decision. HUD may terminate
an approval if it determines that the terms of the conversion would be inconsistent with fair
housing or civil rights laws or a fair housing or civil rights court order, settlement agreement,
or VCA. Furthermore, if a project is subject to a VCA, conciliation agreement, consent order
or consent decree, or final judicial ruling or administrative ruling or decision, it must ensure
that the ownership agreement or other appropriate document makes the new owner subject to
the remedial provisions contained in such documents. It is the owner’s obligation to disclose
such VCAs, etc., to the prospective owner. The extent of the owner’s responsibilities,
including whether the responsibilities are appropriately limited to the development,
maintenance, or operation of the particular RAD project, must be appropriately documented.
The owner will follow any requirements for the modification of such VCAs, etc. If HUD is a
party to the VCA, etc., the RAD project will not close without HUD’s express approval of
the transfer of obligations to the new owner.
2.3.2 Eligible Properties and Units
A. Eligible Properties. A project is eligible for a prospective conversion if the project is
currently receiving assistance through a Mod Rehab contract that is either in its initial or
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 141
Section II: Mod Rehab Projects
renewal term. For retroactive conversions, a project is eligible to convert if the project
previously had a Mod Rehab contract that expired or terminated on or after October 1, 2006.
Properties that were previously assisted under a Mod Rehab contract where the HAP
Contract has been terminated by the Administering PHA due to non-compliance are
ineligible to participate under this Notice.
HUD will permit PHAs and owners to mutually agree to terminate the Mod Rehab contract
as necessary to enter into the new PBV or PBRA contract. However, so as not to create
accelerated pressure on the TPV account, HUD will only approve the early termination of
Mod Rehab contracts that are still under their original 10 year term if the project is
converting to PBRA.
B. Physical Condition. The owner must provide evidence that the project meets the minimum
threshold requirements of “decent, safe, and sanitary” housing. An owner must submit the
project’s most recent HQS or REAC score as evidence that the project meets this minimum
threshold requirement.
For PBV conversions, unless provided explicit approval by HUD, the converting units must
qualify as existing housing in order to be selected for conversion under the Second
Component of RAD. The PHA must ensure that the units substantially meet HQS, as defined
in the PHA’s Section 8 administrative plan, prior to project selection. Prior to entering into a
PBV HAP Contract, the Administering PHA will inspect the units proposed for conversion to
ensure that the units fully comply with HQS. The HAP Contract will not be executed until
and unless the converting units fully meet HQS.
C. Eligible Units. For prospective conversions, all units on the original Mod Rehab contract are
eligible for conversion under RAD. For PBV conversions, this includes only units that are
occupied at the time of the expiration or termination of the Mod Rehab Contract. For
retroactive conversions, eligible Mod Rehab contract units are those that are occupied at the
time of the RAD conversion by households who received TPV assistance as the result of the
expiration or termination of the contract.
Please note that for PBV conversions, the PHA makes the final determination of eligibility to
be included on the PBV HAP Contract; this includes a determination that the household is
income eligible for the PBV program and that the tenant’s total payment (TTP) of rent does
not exceed the contract rent at the project.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 142
Section II: Mod Rehab Projects
2.4 Conversion Planning Requirements
A. Capital Needs Assessment (CNA).91 Except as noted below, each project selected for
award will be required to perform a detailed physical inspection to determine both short-
term rehabilitation needs and long-term capital needs to be addressed through a Reserve
for Replacement Account. A CNA must be submitted with the Financing Plan.
Transition to CNA eTool. HUD is in the process of developing a standardized
CNA eTool for multifamily housing that will also be required of all RAD
transactions. This new CNA eTool will be required as part of any RAD Financing
Plan (or application for FHA Firm Commitment) submitted six months after
publication of the CNA eTool. Any CNA submitted prior to this date must follow
the guidance in the PCA tool described under Revision 1 of this Notice.92
Contractor Qualifications. The CNA must be completed by a qualified,
independent third-party professional as required in the appropriate HUD guidance
(the RAD PCA or the CNA eTool).
Exemptions. HUD will exempt the following transaction types from CNA
requirements, with the exception of preparing the 20 Year Reserve Schedule and
the Utility Consumption Baseline (UCB):
a. For non-FHA transactions,
i. Projects built within the last 5 years;
ii. Projects that qualify as new construction or “substantial
rehabilitation” (generally defined as meeting Level 3 Alterations
per the 2012 International Building Code for Existing Buildings);
iii. Projects that will be financed with Low Income Housing Tax
Credits (“tax credits”); or
iv. Projects where the total assisted units (e.g., RAD units and other
PBV units) at the project will constitute less than 20% of the total
units at the project (or a higher amount at HUD’s discretion).
b. For FHA transactions, Owners should follow applicable requirements in
the MAP Guide governing exemptions.
HUD may exempt projects under a.iv above (projects where less than 20% of the
units are assisted) from the portions of the Excel Tool (existing RAD PCA or the
CNA eTool) necessary for the appropriate Tool to produce the 20 Year Reserve
Schedule.
91
PIH Notice 2012-32 REV-1 used the terminology “Physical Condition Assessment,” or PCA. This terminology
has been changed with this revised Notice to “Capital Needs Assessment,” or CNA.
92
The PCA tool and Statement of Work described in Revision 1 can be accessed at www.hud.gov/rad.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 143
Section II: Mod Rehab Projects
HUD may exempt projects (e.g., projects where less than 21 units are assisted)
from completing the appropriate utility consumption tool (either the existing RAD
PCA or the CNA eTool) if it is determined that the project is exempt from utility
consumption benchmarking under PBRA or PBV.
No utility consumption baseline analysis is necessary for buildings being
demolished or being removed from the assisted inventory. Utility consumption
baseline requirements for new construction will apply in accordance with PBRA
and PBV requirements.
Any proposed exemptions must be confirmed with the Transaction Manager
assigned to the RAD conversion.
Utility Consumption Baseline. For any CNA submitted six months after
publication of the CNA eTool, the Owner must submit the Statement of Energy
Performance or the Statement of Energy Design and Intent (SEDI), as applicable
for New Construction or Gut Rehabilitation, or Statement of Energy Performance
(SEP) for other levels of rehabilitation, provided by the Environmental Protection
Agency’s Portfolio Manager system for Utility Consumption Baseline
compliance. Both must be prepared to the standards cited in the MAP Guide,
regardless of source of financing. Any CNA submitted prior to this date may
either submit Utility Consumption Baseline data into EPA’s Portfolio Manager or
as part of the PCA described in Revision 1 of this Notice.
B. Green Building and Energy Efficiency. For all projects retrofitted under a RAD
conversion, if systems and appliances are being replaced as part of the Work identified in the
approved Financing Plan, at a minimum Owners shall complete replacements with Energy
Star®, WaterSense® or Federal Energy Management Program (FEMP)-designated products
and appliances.93 Additionally, Owners shall utilize the most energy- and water-efficient
options that are financially feasible and that are found to be cost-effective by the CNA
described above. The CNA will provide detailed analyses of energy-saving alternatives and
other green building components, including payback and cost/saving analyses. Owners are
strongly encouraged, for all RAD conversion projects, to scope rehabilitation and ongoing
replacements and operations that utilize the components that the CNA indicates make
financial sense, and other components that the CNA indicates will improve indoor air quality
and/or reduce overall environmental impact where those components have little or no cost
premium, consistent with the principles and best practices of the green building industry.
93
For Energy Star®, see http://www.energystar.gov/. For WaterSense®, see http://www.epa.gov/watersense/. For
FEMP, see http://www1.eere.energy.gov/femp.
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C. Financing. An owner’s Financing Plan (as described in Section 2.8.4 below) must
demonstrate the availability of resources adequate to address all current and ongoing capital
needs identified in the CNA.
D. Environmental Reviews. Under Federal environmental review requirements, proposed RAD
projects are subject to environmental review. Environmental documents are required to be
submitted as part of the applicant’s overall Financing Plan. A Financing Plan cannot be
approved by HUD if the project plan does not meet environmental review requirements.
Please see Attachment 2A for a discussion of the environmental review requirements
applicable to RAD transactions.
E. Relocation and Right to Return. The right to remain or return applies to both PBV and
PBRA. Under RAD, any resident residing in the property prior to conversion has a right to
remain in, or in the event that rehabilitation will result in the relocation of residents, return to
an assisted unit at the Covered Project. Any relocation as a result of acquisition, demolition,
or rehabilitation is subject to requirements of the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970 (URA). Permanent involuntary displacement of
residents may not occur as a result of a project’s conversion of assistance. If proposed plans
for a project would preclude a resident from returning to the Covered Project, the resident
must be given an opportunity to comment and/or object to such plans. If the resident objects
to such plans, the Owner must alter the project plans to accommodate the resident in the
Covered Project. If a resident agrees to such plans, the Owner must secure informed, written
consent from the resident to receive permanent relocation assistance and payments consistent
with URA and acknowledgement that acceptance of such assistance terminates the resident’s
right to return to the Covered Project. In obtaining this consent, Owners must inform
residents of their right to return, potential relocation, and temporary and permanent housing
options at least 30 days before residents must make a decision. The Owner cannot employ
any tactics to pressure residents into relinquishing their right to return or accepting
permanent relocation assistance and payments.
F. Accessibility Requirements. Federal accessibility requirements apply to all conversions.
The laws that most typically apply to rehabilitation include Section 504 of the Rehabilitation
Act of 1973 (Section 504), and in some cases, the Americans with Disabilities Act (ADA).
Although the requirements of each of these laws are somewhat different, Owners must
comply with each law that applies. Section 504 and the ADA apply to substantial alterations
and other alterations as defined in 24 CFR § 8.23 and to existing, unaltered facilities (24 CFR
§ 8.24). See also 28 CFR § 35.151(b) and 28 CFR § 36.
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When a project’s rehabilitation meets the definition of a “substantial alteration” under 24
CFR § 8.23, the PHA or Project Owner, as applicable, must comply with all applicable
accessibility requirements under Section 504. For some projects, “other alterations” are made
over time. If other alterations, considered together, amount to an alteration of an entire
dwelling unit, the entire dwelling unit shall be made accessible.
Owners are encouraged to use universal design principles, visitability principles, and active
design guidelines in planning any construction, wherever feasible. However, adherence to
universal design principles does not replace compliance with the accessibility requirements
of Section 504, the ADA, and the Fair Housing Act.
G. Site Selection and Neighborhood Standards. Where an owner is planning to convert
assistance under RAD, the owner must comply with all applicable site selection
requirements, including those of the PBV 24 CFR § 983.57 and Appendix III of this Notice
for PBRA, and of the Fair Housing Act and Title VI of the Civil Rights Act of 1964,
including implementing regulations at 24 CFR § 1.4(b)(3), and of Section 504 of the
Rehabilitation Act of 1973, including implementing regulations at 24 CFR § 8.4(b)(5).
H. Change in Unit Configuration. Owners may change the unit configuration following
conversion (e.g., combine SRO units into efficiencies or one-bedroom apartments, however
the Owner must ensure that the change in bedroom distribution will not result in the
involuntary permanent displacement of any resident (see Section 2.4.E on Relocation and
Right to Return) and will not result in discrimination based on race, color, national origin,
religion, sex, disability, or familial status. Where the change in unit configuration will result
in a reduction of assisted units, PHAs may request Tenant Protection Vouchers (TPVs) for
any eligible residents that elect not to return to the property upon completion of the change in
unit configuration (see Section 2.4(E) regarding Right to Return requirements). For SRO
projects that are converting, such changes will require a letter of support from the Continuum
of Care (CoC) in which the project participates. See Section 2.7(B) of this Notice.
I. Transfer of Assistance. In order to facilitate the financing, development, and preservation of
decent, safe, and affordable housing, there are three scenarios under which assistance
converted pursuant to RAD may be transferred off of the existing parcel of land (for the
purposes of this paragraph, transfer of assistance does not include transfers to an adjacent
site): (1) where the Owner requests assistance to be transferred as part of the conversion from
Converting Project to Covered Project; (2) post-conversion where a Project Owner requests a
partial or full transfer of assistance, or (3) where, as a result of a default of the HAP Contract,
HUD terminates the HAP Contract.
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HUD will assess that the transfer does not occur in neighborhoods with highly concentrated
poverty based on the criteria formulated for transfers under 8(bb) of the Act.94 Further, HUD
will consider whether conversion on-site is economically non-viable; whether the Converting
Project is physically obsolete or severely distressed; how the transfer would affect the
Converting Project’s residents; and all applicable fair housing and civil rights requirements.95
Owners are strongly encouraged to request HUD approval of the proposed site prior to
submission of the Financing Plan.
For transfers of assistance to a new site, the Mod Rehab contract will remain in effect at the
original site and will not be terminated until the units at the new site are ready for occupancy
and the new HAP Contract is executed.
After initial conversion, except with HUD approval, a Project Owner may only request a
transfer of assistance after 10 years from the effective date of the initial HAP Contract
(unless a transfer is needed sooner as a result of unforeseen events such as a natural disaster).
If applicable, any lender and/or investor of the Covered Project, or the PHA, must approve
the transfer of the assistance.
2.5 Special Provisions Affecting Conversions to PBVs
Certain PBV statutory provisions have been waived or altered consistent with the authority
Congress has provided for Second Component conversions. In these cases, HUD also notes the
corresponding regulatory provisions that are waived or altered. Additionally, HUD has waived
certain regulatory provisions (that are not statutorily based) and established alternative
requirements in order to prevent displacement of certain residents and otherwise serve the
purposes of this Demonstration. All other regulatory and statutory requirements of the PBV
program in 24 CFR Part 983 and section 8(o)(13) of the Act shall apply, including resident
choice, environmental review, and fair housing requirements.
The modified or alternative requirements that pertain solely to PBV conversions under the
Demonstration are described below.
94
The analysis can be found in Section VIII B.1 of H-2015-03 “Transferring Budget Authority of Project-Based
Section 8 Housing Assistance Payments Contract under Section 8(bb)(1) of the United States Housing Act.” A copy
of the criteria is available at www.hud.gov/rad. At a minimum, projects that are located in neighborhoods that meet
these criteria will meet the requirement under this Notice that transfers not occur to neighborhoods of concentrated
poverty. HUD may modify these criteria as appropriate to fit the purposes of RAD and will post the applicable
criteria at www.hud.gov/rad.
95
Any transfers of assistance must comply with requirements detailed in this Notice on Site and Neighborhood
Standards (see Section 2.4G), Changes in Unit configuration (see Section 2.4H), and Accessibility requirements (see
2.4F). For PBV conversions, PHAs will be responsible for this determination.
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A. Length of Contract. By choosing to participate in the RAD program, the PHA and owner
agree to a minimum 15-year initial term for the HAP Contract. A PHA may agree to enter an
extension of the initial HAP Contract term with the Owner at any time during the initial term.
The PBV HAP Contract during the initial and any extended term is subject to the
requirement for sufficient annual appropriated funding.
B. PBV Percentage Limitation. Covered projects do not count against the percentage
limitation applicable to the PBV program. To implement this provision, HUD is waiving
section 8(o)(13)(B) of the Act as well as 24 CFR § 983.6. As a result, a PHA that is
administering RAD PBV assistance does not take the RAD PBV into consideration when
calculating the percent limitation for any non-RAD PBV actions that are subject to the
percent limitation. In other words, RAD PBV is excluded from both the numerator and the
denominator when calculating the percent that may be project-based for non-RAD PBV.
C. Cap on the Number of PBV Units in Each Project. There is no cap on the number of units
that may receive PBV assistance in each project. To implement these provisions, HUD is
waiving section 8(o)(13)(D) of the Act, as well as related provisions of 24 CFR §§ 983.56,
983.257(b), and 983.262(a) and (d).
D. Site selection –Compliance with PBV Goals, section 8(o)(13)(C)(ii) of the Act and 24
CFR § 983.57(b)(1) and (c)(2). HUD waives these provisions having to do with
deconcentration of poverty and expanding housing and economic opportunity, for the
existing site.
E. Owner Proposal Selection Procedures, 24 CFR § 983.51. Projects are selected in
accordance with program requirements detailed in this Notice. HUD is waiving 24 CFR §
983.51. With respect to site selection standards, HUD requires compliance with the site
selection standards as set forth in this Notice.
F. Limitation on Screening of Residents upon conversion. At conversion, current households
are new admissions into the PBV program. However, as a condition of participation in the
Demonstration, PHAs may only screen households for the mandatory screening requirements
established by statute and may not apply any other discretionary screening requirements.
PHAs must modify their Administrative Plan to implement this alternative requirement.
G. Initial Rents Initial rents for PBV contracts are determined by the PHA, in accordance with
24 CFR Part 983 Subpart G. Such rents generally cannot exceed the lowest of: (i) an amount
determined by the PHA, not to exceed 110 percent of the applicable fair market rent (or any
exception payment standard approved by the Secretary) for the unit bedroom size minus any
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utility allowance; (ii) the reasonable rent; or (iii) the rent requested by the owner. (See 24
CFR § 983.301 for program requirements on establishing initial rents). For RAD
conversions, HUD is waiving 24 CFR § 888.113(f)(2) and establishing the alternative
requirement that the applicable FMR used for SRO units for initial and re-determined rents
shall be the zero bedroom (efficiency) FMR.
H. Re-Determined Rents. The rent to owner will be redetermined in accordance with 24 CFR
§ 983.302.
I. Under-Occupied Units. Otherwise-eligible households of two or more individuals
occupying a unit determined by the PHA under HUD regulations to be under-occupied shall,
upon conversion to PBV, be allowed to remain in those units until such time as an
appropriate-size unit becomes available in the project. This protection also extends to single
elderly and disabled individuals regardless of the unit size. When an appropriate-size unit
becomes available, the family living in the oversized unit must move to the appropriate-size
unit within a reasonable time, as determined by the PHA . If the unit size required by the
family does not physically exist at the project, the family shall remain in its current unit
unless and until a more appropriate-size unit is available. If or when a smaller-size unit
becomes available, the family must move to the smaller-size unit. In order to effectuate this
provision, HUD is waiving 24 CFR §983.260(b)(1) & (2) and (c).
For households consisting of single individuals who are not elderly or disabled, the under-
occupied unit cannot be included in the PBV HAP Contract. The PHA shall provide an
enhanced voucher (at Mod Rehab projects) or a tenant protection voucher (at Mod Rehab
SRO projects) to such individuals, who will have the statutory right to remain in the project
(see PIH Notice 2001–41 for enhanced voucher requirements and PIH Notice 2008–12 for
guidance on enhanced voucher requirements for overhoused households). If the resident
moves with tenant-based voucher assistance, the unit is not eligible for conversion under
RAD, since the funding to support the converted unit is no longer available.
J. Davis-Bacon. For those projects with 9 or more assisted units where rehabilitation or
construction will occur, Davis-Bacon will apply. For more information addressing Davis-
Bacon and RAD Second Component transactions, please see PIH Notice entitled
‘Applicability of Davis-Bacon Labor Requirements to Projects Selected as Existing Housing
Under the Section 8 Project-Based Voucher Program – Guidance,’ 80 Fed. Reg. 12511,
March 9, 2015.
2.6 Special Provisions Affecting Conversions to PBRA
For Mod Rehab projects converting assistance to PBRA under the Demonstration, 24 CFR Part
880, Section 8 Housing Assistance Payments Program for New Construction (and applicable
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Section II: Mod Rehab Projects
standing and subsequent Office of Housing guidance96) will apply, except for the provisions
listed below. Where applicable, reference is made to the affected statute and/or regulation. For
additional background purposes, HUD has provided Appendix I, which is a copy of the existing
Part 880 regulation with the provisions stricken that will not apply to covered projects.
A. Length of Contract. Pursuant to the RAD Statute, covered projects shall have an initial HAP
term of 20 years. Additionally, 24 CFR § 880.502, which imposes maximum contract terms
for New Construction projects consistent with statutory authority that was repealed in 1983,
will not apply.
B. Contract Renewal. Pursuant to the RAD Statute, after the initial term of the HAP Contract,
the owner is eligible for renewal of the contract under section 524 of MAHRAA, subject to
the terms and conditions applicable at the time of renewal and the availability of
appropriations for each year of such renewal.
C. Initial Contract Rent Setting. No additional or incremental funding is associated with this
conversions to PBRA. Based on the requirements of section 8(c)(1) of the Act, the initial
contract rents will be established at the lesser of the following rent levels: (a) the comparable
market rent, as determined by a Rent Comparability Study (RCS), which must be prepared in
accordance with the requirements of Chapter Nine of the Section 8 Renewal Policy
Guidebook97 and submitted with the request for prospective conversion; and (b) 110 percent
of the applicable applicable fair market rent (FMR), less utility allowances or 120 percent of
the applicable FMR, less utility allowances, in the case of projects that (i) preserve project-
based rental assistance in communities with high percentages of rent-burdened households
and where it is particularly hard to utilize tenant-based assistance, (ii) serve to expand
housing opportunities in communities with poverty rates less than 30%, and/or (iii) support
revitalization activities that are resulting in material private investment in the surrounding
neighborhoods. For RAD conversions, HUD is waiving 24 CFR § 888.113(f)(2) and
establishing the alternative requirement that the applicable FMR used for SRO units at initial
contract rent setting and when adjusting contract rents shall be the zero bedroom (efficiency)
FMR. Further, with HUD approval, the Project Owner may use the Small Area FMR in place
of the FMR in the computation of rents. To implement this provision HUD is implementing
Examples of Office of Housing guidance include handbooks such as “Occupancy Requirements of Subsidized
96
Multifamily Housing Programs” (4350.3) and “Multifamily Asset Management and Project Servicing” (4350.1).
97 See http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8.
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Section II: Mod Rehab Projects
an alternative requirement to 24 CFR §888.113(h) so as to permit the use of a Small Area
FMR by project for initial contract rent setting and when adjusting contract rents.98
D. Method of Adjusting Contract Rents. Contract rents will be adjusted by HUD’s OCAF at
each Anniversary of the HAP Contract, subject to (a) the availability of appropriations for
each year of the initial term of the HAP Contract, and (b) the Maximum Rent, as defined
below.
The Maximum Rent is the higher of 120% of FMR (less utility allowances) or the market
rents, as demonstrated by an RCS procured and paid for by the Project Owner. Where an
RCS has been used to justify an OCAF adjusted rent that exceeds 120% of the FMR, the
RCS will remain valid for five years, the Maximum Rent will not apply for the next four
annual rent adjustments, and rents will be adjusted only by the OCAF. The applicable FMR
used for SRO units shall be the zero bedroom (efficiency) FMR. Further, where HUD has
approved the use of Small Area FMR by project, the Small Area FMR will continue to serve
as the applicable FMR when determining the rent cap.
E. Distributions. Covered Projects will not be subject to any limitation on distributions,
contingent on the availability of surplus cash as determined by year-end audited or certified
financial statements. To implement this provision, HUD will not apply 24 CFR § 880.205,
which, among other provisions, establishes certain limitations on distributions for profit-
motivated owners and authorizes HUD to require not-for-profit and certain for-profit owners
to establish a residual receipts account.
F. Limitation on Rescreening of Residents upon conversion. At conversion, current residents
are considered new admissions into the PBRA program. However, Project Owners may only
rescreen these households for the mandatory screening requirements established by statute
(see, e.g., 24 CFR §§ 5.854, 5.856, and 5.857) and may not apply any discretionary screening
requirements (see, e.g., 24 CFR §§ 5.852 and 5.855).
G. Davis Bacon. Davis-Bacon applies to Second Component PBRA conversions to the same
extent it would apply if the conversion were a PBV conversion. See PIH Notice entitled
“Applicability of Davis-Bacon Labor Requirements to Projects Selected as Existing Housing
Under the Section 8 Project-Based Voucher Program – Guidance,” in 80 Federal Register
12511, March 9, 2015.
98
This waiver and this provision shall not take effect until 81 FR 80567 (November 16, 2016) (“Establishing a More
Effective Fair Market Rent System; Using Small Area Fair Market Rents in the Housing Choice Voucher Program
Instead of the Current 50th Percentile FMRs”) becomes effective on January 17, 2017.
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H. Under-occupied Units Converting to PBRA. If at the time of conversion, an eligible family
assisted under the HAP Contract is occupying a unit that is larger than appropriate because of
the family’s composition, the family will be permitted to continue to occupy the unit until
such time as an appropriate-sized unit becomes available in accordance with 24 CFR §
880.605. When an appropriate-sized unit becomes available, the family living in the
oversized unit must move to the appropriate-sized unit within a reasonable amount of time.
This protection to single persons who are elderly or disabled, regardless of the unit size.
Residents of under-occupied units that are single individuals who are not elderly or disabled
cannot be included in the HAP Contract.
I. Physical Inspection for PBRA. Under current regulations at 24 CFR Part 5 Subpart G, a
unit covered under a PBRA HAP Contract must meet the Uniform Physical Condition
Standards (UPCS) before assistance can be paid on behalf of a household. Under RAD,
however, only after the PBRA HAP Contract is executed, HUD will order a REAC
inspection of the project to ensure conditions meet the UPCS. HUD is waiving and
establishing this alternative requirement to 24 CFR Part 5 Subpart G.
J. Choice Mobility. HUD seeks to provide all residents of covered projects with viable Choice-
Mobility options. Owners that are applying to convert the assistance of a project to PBRA are
required to provide a Choice-Mobility option to residents of covered projects (through a
voucher agency willing to provide vouchers to covered projects) in accordance with the
following:
1. Resident Eligibility. Residents have a right to move with tenant-based rental
assistance (e.g., Housing Choice Voucher (HCV)) the later of (a) 24 months from
date of execution of the HAP Contract or (b) 24 months after the move-in date.
2. Voucher Inventory Turnover Cap. Recognizing the limitation on the
availability of turnover vouchers from year to year, the voucher agency would not
be required, in any year, to provide more than one-third of its turnover vouchers
to the residents of Covered Projects. While a voucher agency is not required to
establish a voucher inventory turnover cap, if implemented the voucher agency
must create and maintain a waiting list in the order in which the request from
eligible households were received.
3. Project Turnover Cap. Also recognizing the limited availability of turnover
vouchers and the importance of managing turnover in the best interests of the
project, in any year, an owner may limit the number of Choice-Mobility moves
exercised by eligible residents to 15 percent of the assisted units in the project.
(For example, if the project has 100 assisted units, the owner could limit the
number of families exercising Choice-Mobility to 15 in any year but not less than
15). While a voucher agency is not required to establish a project turnover cap, if
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implemented the voucher agency must create and maintain a waiting list in the
order in which the requests from eligible households were received.
HUD recognizes that not all Mod Rehab Owners will have access to sufficient vouchers to
support this effort. HUD will provide voucher agencies that make a commitment to converting
properties bonus points under the Section Eight Management Assessment Program (SEMAP) for
deconcentration.
Project owners should include in their Financing Plan their intention to provide Choice Mobility
at the project and submit all required documentation. Additionally, HUD will grant a good-cause
exemption for no more than 10 percent of units in the Demonstration. All Mod Rehab owners are
eligible to request a good-cause exemption in their Financing Plan, unless the project owner
administers, directly or through an affiliate, a Housing Choice Voucher program.
2.7 Special Provisions Affecting Conversion of SROs
As the purpose of the conversion of SRO assistance to assistance under a PBV or PBRA contract
is to place the properties on a more sustainable footing while retaining and preserving the
original purpose of SRO properties to serve the homeless, the following requirements apply
specifically to SRO conversions:
A. Homeless preference. All properties converted shall follow procedures under the PBV and
PBRA programs to establish an admissions preference for converted properties for homeless
individuals or families. The preference for the homeless must apply to individuals or families
that fall within the definition for homeless established by the McKinney-Vento Homeless
Assistance Act as amended by the HEARTH Act and contained in the Continuum of Care
Interim Rule at 24 CFR § 578.3, unless the CoC provides a letter of support to cover a
homeless population not included in that definition.99 For PBV, the preference shall be
established by the PHA. For PBRA, the Owner shall establish the preference consistent with
24 CFR § 5.655(c)(5), Housing Handbook 4350.3 REV-1, Chapter 4; and Housing Notice
2013-21 (July 15, 2013). The preference shall not apply to current residents because these
residents will generally continue to be assisted after conversion, but will otherwise be an
absolute preference with higher priority than any other preference that the owner adopts (for
PBRA) or that the PHA establishes (for PBV). For PBV, the PHA must establish the
preference in their Administrative Plan, pursuant to 24 CFR § 982.54. For PBRA, the owner
must establish the preference through their Tenant Selection Plan as described in Housing
99
The definition of homeless established by the HEARTH Act can be found at:
https://www.hudexchange.info/resources/documents/CoCProgramInterimRule_FormattedVersion.pdf
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Notice 2013–-21. This requirement shall apply for the term of the contract and any renewal
contract.100
B. Consultation with Continuum of Care (CoC). Owners must meet with their CoC to explain
the conversion of assistance, project rehabilitation plans, the ongoing requirement for a
preference for homeless individuals or families, to discuss coordinated entry for new
homeless participants, and any plans to modify the means by which the project will provide
housing for homeless individuals or families (e.g., reconfiguring SRO units into efficiency or
1-bedroom units, or using a broader definition of homelessness than established by the
HEARTH Act). To the extent that project plans entail: 1. A reconfiguration of units or 2.
Serving a population not covered under the HEARTH Act, owners must secure a letter of
support from the CoC for these actions.
C. Screening Requirements. Prior to screening, to identify new homeless participants for
converted SRO properties, owners are encouraged to follow the CoC’s established
coordinated entry process.
In addition to the limitation on screening of residents upon conversion (see Section 2.5.F),
for any new families referred to the PBV project following conversion, a PHA administering
the PBV contract for a converted SRO project may establish distinct admission screening
requirements from those in place for its HCV program. Specifically, the PHA may choose
not to apply discretionary screening criteria (see in particular 24 CFR § 982.552 and 24 CFR
§ 982.553) to admission policies for converting SRO properties. If the PHA chooses to
exercise this discretion, it must have a consistent policy in its administrative plan with
respect to RAD SRO PBV projects. In administering its regular PBV program, PHAs
generally may not choose to apply different screening criteria within its HCV program. HUD
is authorizing this limited exception for SRO conversions under RAD. (Project Owners
under PBRA already have the discretion to apply distinct screening requirements for any
individual assisted project).
The Administering PHA or Project Owner must apply all mandatory screening criteria to
homeless individuals and families (e.g., sex offender screening under 24 CFR
§ 982.553(a)(2)(i) or 24 CFR § 5.856). All discretionary admission policies must be applied
to all applicants uniformly. Administering PHAs and Project Owners should be aware that
some discretionary criteria can have the effect of screening out homelessness individuals or
families, who may be more likely to have past convictions, past evictions, or previous debts.
HUD strongly encourages Administering PHAs and Project Owners to carefully consider
100
The intent of the preference is simply to ensure that the group that these conversions are designed to benefit
(namely homeless individuals and families) are the recipients of converted SRO assistance.
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Section II: Mod Rehab Projects
their discretionary admission policies and ensure that they are free of such barriers. Further,
as a condition of participation in RAD, Administering PHAs and Project Owners are
prohibited from adopting discretionary screening requirements that have the effect of
circumventing the homeless preference described above such that no homeless
individuals or families would be eligible for admission.
D. Reporting Requirements. In order to maintain data on the project’s ongoing housing of
formerly homeless persons, the project will continue to be required to report under the CoC’s
Homeless Management Information System (HMIS) and the annual Housing Inventory
Count (HIC). Collaboration with the CoC will be critical in meeting these requirements.
2.8 Conversion Requirements
Conversion of a Mod Rehab project will generally entail:
An initial submission of interest
Resident consultation
CoC consultation (for SROs only)
Selection of PHA (PBV conversions only)
Financing Plan submission and approval
Closing of financing and HAP Contract execution
2.8.1 Initial Submission of Interest to HUD
Prior to submitting a Financing Plan, an owner must make an initial submission to HUD
indicating the owner’s interest in conversion under this Notice. The submission must include:
Project name;
Project address;
Owner’s name;
Owner’s physical address;
Owner’s contact information;
The Mod Rehab HAP Contract number(s);
A copy of the current HAP Contract(s);
Total number of units covered under the Mod Rehab HAP Contract(s), by bedroom size;
If reconfiguring, the proposed post-conversion unit configuration;
Name of PHA currently administering the Mod Rehab contract(s);
A statement of known environmental conditions; and
Estimated submission date of Financing Plan.
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HUD has developed a template owners can use to make this initial submission.101 The initial
submission must be submitted electronically to the RAD Resource Desk at www.radresource.net.
HUD will provide the owner a confirmation of successful submission. HUD will use the initial
submission in order to:
1. Provide owners with access to the RAD Resource Desk, where owners will upload and
submit the required components of the Financing Plan (see Section 2.8.3); and
2. For PBV conversion, initiate the process to identify a PHA willing to administer the new
PBV contract.
3. For PBRA conversion, provide owners with a letter that includes the PBRA rents in
accordance with Section 2.6.C.
There is no fee associated with the initial submission, and there is no cap on the number of
projects for which an owner may submit. HUD will take no adverse action against an owner who
makes an initial submission, but does not later submit a Financing Plan.
2.8.2 PHA Administration of the PBV Contract
A. Selection of a PHA. For PBV conversions only, HUD will need to identify a PHA able and
willing to administer the PBV contract, and the PHA will need to accept the responsibility.
For prospective conversions, HUD will generally select the PHA that currently administers
the Mod Rehab contract, unless, based on documented capacity concerns, HUD finds the
PHA to be unfit for this role. In such cases, HUD will make a reasonable effort to find a
PHA, in consultation with the owner, with operational jurisdiction willing to enter into a
PBV contract with the owner for eligible units at the project. For retroactive conversions,
only the PHA whose ACC the vouchers are under may administer the PBV contract.
Within 30 days of the initial submission, HUD will identify an eligible PHA and request that
the PHA provide written consent to administer the PBV contract or to decline the request
within 30 days of HUD’s request. HUD will communicate the PHA’s response to the owner.
If no PHA consents to enter into the PBV contract, the project cannot convert to PBV, and
the owner may consider conversion to PBRA instead. Applicants must wait until a PBV HAP
Contract administrator has been identified before submitting their Financing Plan, as the
PHA who will act in this capacity must be identified in that plan.
B. Role of Administering PHA. The PHA that agrees to administer the PBV contract is
responsible for administrative duties described in 24 CFR Part 983 and this Notice. Prior to
conversion, the PHA’s key roles will include:
101
A sample Initial Submission template is available at www.hud.gov/RAD.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 156
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a. Pre-Selection Inspection. The PHA must ensure that the units substantially meet HQS,
as defined in the PHA’s Section 8 administrative plan.. The converting units must qualify
as existing housing in order to be eligible.
b. Initial rents. See Section 2.5.G.
c. Income eligibility. The PHA will determine which families are eligible for assistance
under a PBV contract.
d. HQS inspections. The project must substantially meet HQS prior to being selected for
the PBV program and must fully meet HQS prior to execution of the HAP Contract. .
2.8.3 Resident Notification and Consultation
A. Resident Notification – All conversions.
For all conversions, an owner is required to notify residents in writing of its intent to participate
in the Demonstration and to hold two meeting with residents.102 The Notification letter must
1. be delivered to all project residents, including each Mod Rehab–assisted household, as
well as posted in the project office or other common area, and at no fewer than three
prominent locations on the project site;
2. include the date and time of resident briefings;
3. include an estimated (for prospective) or actual (for retroactive) date of contract
expiration or termination and the units that would be covered under a new PBV or PBRA
HAP Contract;
4. state the owner’s plan for relocation, if applicable as a result of rehabilitation or
construction, including the expected length of the relocation, household’s right to return,
and the owner’s responsibility for covering relocation costs; and
5. supply information on the method to submit comments to the owner and provide for a 30-
day comment period.
The owner must conduct two resident meetings with all affected residents and provide the
residents with an opportunity to comment on the conversion. The purpose of the resident meeting
is to provide residents with greater detail related to the conversion, including rehabilitation plans
(if applicable), relocation (if applicable), and PBV or PBRA program rules that may differ from
Mod Rehab rules.
When providing resident notification and meetings, an Owner must use effective communication
for persons with hearing, visual, and other communication-related disabilities consistent with
Section 504 of the Rehabilitation Act of 1973 and, as applicable, the Americans with Disabilities
Act of 1990. Effective communication includes, but is not limited to, providing written materials
in appropriate alternative formats (e.g., Braille, large type), as needed, and providing sign
102
Sample resident notification letters are available at www.hud.gov/rad.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 157
Section II: Mod Rehab Projects
language interpreters and assistive listening devices at resident meetings, as needed (24 CFR Part
8.6). Additionally, resident meetings must be held in facilities that are physically accessible to
persons with disabilities. Where physical accessibility is not achievable, an Owner must use
alternative methods to meet with qualified individuals with disabilities, such as holding meetings
at an alternate accessible site or offering in-home meetings. Such meetings must be provided in
the most integrated setting appropriate to the needs of qualified individuals with disabilities in a
setting that enable individuals with disabilities to interact with nondisabled persons to the fullest
extent possible (28 CFR part 35, Appendix B).
Additionally, an Owner must provide meaningful access to its programs and activities for
persons who have a limited ability to read, speak, or understand English. For projects undergoing
RAD conversion, an Owner must provide language assistance to residents of the project who are
Limited English Proficient (LEP) to ensure that they have meaningful access to RAD resident
notifications and meetings. Such language assistance may include, but is not limited to,
providing written translation of notices regarding the plans for the project and relocation and oral
interpretation at resident meetings. For guidance on providing language assistance to persons
with LEP, please see Final Guidance to Federal Financial Assistance Recipients Regarding Title
VI Prohibition Against National Origin Discrimination Affecting Limited English Proficient
Persons (72 FR 2732).
The owner must submit a copy of all comments received with their Financing Plan, along with a
description of how the residents’ comments will be addressed in the conversion. HUD will
consider all resident comments and the owner’s plan to address the comments before approving
the Financing Plan. For prospective conversions, if more than 50 percent of written resident
comments disapprove of the conversion of assistance, HUD will contact the owner to discuss
options for proceeding with the conversion request or may decline the request.
Upon Financing Plan approval, the owner must notify each affected family that the project has
been approved.
B. Resident Notification — Additional Requirements Specific to Retroactive PBV
Conversions. For retroactive conversions, where families have EV or TPV assistance and
have decided to remain at the project, the additional purpose of the resident meeting is to
inform the households that only if they voluntarily relinquish their EV or TPV assistance can
the owner place their unit under the PBV contract. Units occupied by households that consent
to the conversion are eligible for PBV assistance, provided all other requirements are
satisfied. Whether to relinquish their assistance is solely the decision of the assisted
household. As such, the owner must explain and provide written documentation that
completely and accurately describes how the proposed conversion will affect resident rights,
rent payments, and mobility. Households must be made aware that if they elect to remain in
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 158
Section II: Mod Rehab Projects
the unit with EV or TPV assistance, the unit would be ineligible for the conversion. A
household currently assisted with an EV would retain the right to move from the project with
tenant-based voucher assistance. Further, if the household were to move prior to the
execution of the PBV HAP Contract, the unit would not receive PBV assistance.
The owner must provide each household that would be affected by a retroactive conversion
with a form that they can use to indicate their consent or non-consent to the conversion. The
owner must give families at least 30 calendar days from the date of the briefing to submit the
completed form. The form must be signed by the head of household and returned to the PHA.
Units occupied by households that affirmatively withhold consent are ineligible for
conversion and shall not be included in the PBV contract. If a household does not reply
within the timeframe outlined, the PHA must attempt to contact the household; if the PHA is
unsuccessful at obtaining the household’s consent, the unit shall not be included in the PBV
contract.
The owner may not employ any tactics to pressure a household during the notification
and comment period and may not terminate a household’s lease based on a household’s
comments or failure to submit a completed form.
C. Compliance with Applicable Notices Regarding Contract Expiration or Termination.
Section 8(c)(8)(A) of the Act requires that not less than one year before the termination or
expiration of any contract under which assistance payments are received under section 8,
which includes both Mod Rehab and SRO HAP Contracts, the owner must provide written
notice of the impending HAP Contract expiration to residents assisted under the Mod Rehab
or SRO HAP Contract. An owner requesting conversion under this Section of the Notice
must comply with this requirement. Section 8(c)(8)(a) also requires that the owner submit the
notice to HUD; however, since local PHAs administer the Mod Rehab program, the owner
shall submit the notice to the appropriate PHA instead of HUD. If the owner has not provided
residents with the one-year statutory notification at the time of the owner’s request to convert
assistance under this Notice, the owner must provide such notice prior to submitting its
application for conversion.
Conversion under this Notice may be processed during the one-year notification period, as
the conversion will adequately protect residents from displacement and from an increase in
the resident portion of the rent. However, if the owner decides not to pursue a RAD
conversion, they are still subject to compliance with 8(c)(8)(A).
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Section II: Mod Rehab Projects
2.8.4 Financing Plan, RAD Approval, and Closing
A. Financing Plan. The Owner must submit to HUD through the RAD Resource Desk a
complete Financing Plan that satisfies all HUD underwriting standards and program
requirements. (See Attachment 2.A for Financing Plan Requirements). HUD will have 60
calendar days from the date of submission of the Financing Plan to approve or reject the plan,
or request additional information. HUD’s decisions regarding the acceptance of the
Financing Plan will be made in HUD’s sole discretion. If HUD determines that a Financing
Plan is not feasible or that the requirements of the Financing Plan as set forth in Attachment
2A have not been met, then the owner may either make corrections that satisfactorily address
HUD’s concerns or appeal the decision to HUD within 30 days of notification. If a Financing
Plan is disapproved, HUD’s letter of disapproval will discuss changes, if any, that would
result in an acceptable Financing Plan.
B. Conversion Approval. An owner will be notified of HUD’s acceptance of the Financing
Plan via issuance of an approval letter, conditioned upon a firm commitment(s) of financing
on substantially the same terms as those presented with the Financing Plan.103 The approval
letter will outline the key components of the planned RAD conversion and will discuss the
conditions that need to be satisfied in order to close the conversion.
Once the approval letter is issued, HUD expects that the RAD conversion will close in a
timely manner. The approval letter will allow 90 calendar days (from the date the approval
letter is issued to the owner) in which to close the RAD conversion transaction. The owner
and financing partners will need to work diligently to achieve closing within the timeframe
required under this Notice in order to avoid rescission of the RAD approval.
C. Closing. Execution of the new PBV or PBRA HAP Contract occurs when the financing is
closed. In the event that construction or bridge financing will be used as part of the
transaction financing, HUD will require evidence at closing of firm commitment of take-out
or permanent financing conditional only to the completion of construction or term of the
bridge financing. In transactions with outside financing, a successful closing will also include
evidence that financing sources have closed and will be providing the contemplated funding.
If the project is being financed with an FHA-insured loan, the closing requirements listed
under the MAP guide will apply.
103
“Substantially the same terms” means that loan proceeds and other financing sources remain sufficient to cover
immediate capital needs and, in comparison to the terms put forth in the original application, the debt service
coverage ratio does not decrease by more than 0.05%, the amortization and term (maturity) of financing remain the
same, and the interest rates are competitive with the market.
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2.9 Additional Information
For additional information on this section of the Notice, please check www.hud.gov/rad or email
questions to RAD2@hud.gov.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 161
Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks for Mod
Rehab Conversions
A Financing Plan will not be reviewed until all required documentation is submitted. HUD will
complete an initial review for document completeness within five business days of submission.
Once HUD has determined that all required documents have been received, HUD will review the
documents submitted.
HUD’s purpose in reviewing Financing Plans is to ensure the long-term physical and financial
viability of the Covered Project. If a Financing Plan fails one or more feasibility benchmarks, the
HUD reviewer may still accept the Financing Plan if HUD determines that, taken as a whole, the
Financing Plan is consistent with the long-term physical and financial viability of the project
and/or the owner can adequately support, through historical data or other means, the presented
figures. HUD reserves the right to reject any Financing Plan if the information provided is not
complete, accurate, or in compliance with the submission requirements listed below. HUD will
not accept the Financing Plan if the project does not meet environmental review requirements, as
described below.
Below are all the required components of a complete Financing Plan and the requirements of
each component. Please note that for RAD conversions that will utilize FHA mortgage
insurance, the submission requirements and feasibility benchmarks are primarily found in the
FHA Multifamily Accelerating (MAP) Guide as revised by Mortgagee Letter 2012-20. The end
of this Attachment lists the submissions that must be made separate and apart from the FHA-
insured loan application.
HUD reserves the right to streamline any or all of these requirements for classes of project, e.g.,
no debt-transactions or small projects.
A. Type of conversion. Identify whether the Covered Project will convert to PBV or PBRA
assistance.
i. For PBV conversions, identify the PHA that will administer the PBV HAP Contract.
ii. For PBRA conversions, include
a fully executed Choice Mobility Letter of Agreement signed by the owner
converting units and the PHA that has agreed to administer the vouchers in order to
comply with the Choice Mobility requirement or
a request for a good-cause exemption for Choice-Mobility
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 162
Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
B. Resident Notification. The owner must provide a PDF attachment of all comments received
from residents as described in Section 2.8.3. Owners must provide a certification that they
have held the required meetings with residents and have provided residents with a reasonable
time period to submit comments on the conversion. The owner must also provide a
description of how the residents’ comments will be addressed in their plan for conversion.
C. A copy of the current Mod Rehab HAP Contract(s), including all exhibits;
D. Number of proposed units of each bedroom type. If a reconfiguration of units is proposed,
the owner must submit a narrative explanation of the proposal, including a description of the
units to be removed, an explanation of why the project can better serve assisted residents at
the reduced number and a letter of support from the COC if the project is a Mod Rehab SRO
project.
E. Capital Needs Assessment. A CNA must be submitted. See section 2.4(A).
F. Scope of Work. The scope of work must
1. Identify and address all repairs required in the CNA (including all items identified in
the CNA as not functioning at the time of the site visit) or provide a written
justification why those items are not included. Briefly discuss any differences between
the conclusions / recommendations of the CNA provider; the levels of immediate
rehabilitation needs; and the owner’s choices for replacement components.
2. Include quantities and costs. Rehabilitation estimates must be based upon reasonable
market estimates of actual costs, confirmed either by cost estimating completed by the
architect/engineer, or through actual competitive bids for major rehabilitation or
construction items, in compliance with HUD requirements.
3. Include a summary of environmental issues known at that time, including, if the
property was constructed before 1978, the need for lead-based paint abatement and
lead-based paint hazard abatement, and a discussion of any planned environmental
remediation (including post-closing Operations & Maintenance plans), and a summary
of accessibility features that are required pursuant to fair housing law and regulations
and the Americans with Disabilities Act and implementing regulations.
4. Include a description of how the owner will replace all utility consuming components
that are past estimated useful life at the time of the RAD application (or that are not
functioning at the time of the CNA inspection) with the most financially efficient
alternative (taking into account initial cost and utility savings), as documented in the
CNA.
5. Include a construction contingency of 10 percent (HUD may require a higher
contingency on a case-by-case basis).
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Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
6. Include a reasonable timeline for completion of all rehabilitation items acceptable to
HUD, generally 12 to 18 months from the date of closing the conversion and any
financing, depending on the scope of rehabilitation funded.
G. Environmental Review. HUD cannot approve an applicant’s Financing Plan submission
unless and until the required environmental review has been completed for the applicant’s
proposed conversion project and found to meet environmental review requirements. The
following describes the submission and approval steps for securing a completed
environmental review.
RAD transactions will either be reviewed under 24 CFR Part 50 or 24 CFR Part 58, i.e., “Part
50 Reviews” or “Part 58 Reviews.”104 All PBRA and FHA transactions require Part 50
Reviews, which are conducted by HUD staff. Non-FHA PBV transactions require Part 58
Reviews, which are conducted by a Responsible Entity (RE), except in accordance with 24
CFR § 58.11, when HUD may determine to conduct the review under Part 50.
Transaction Type Required Environmental Review
Non-FHA with PBRA Part 50
FHA insured Part 50
Non-FHA with PBV Part 58
For multi-phase developments, the environmental documents submitted with the Financing
Plan during the first phase must be submitted for the entire site, i.e. all of the phases of the
multi-phase development, and the environmental review conducted during the first phase will
cover the entire site. Further, requests to transfer assistance from the Converting Project to a
new location are subject to environmental review.
For all Part 50 reviews, the applicant must submit reports and documentation to HUD
in accordance with 24 CFR Part 50, as discussed in Chapter 9 of the MAP guide, except
as follows:105
1. For PBRA conversions, (or where HUD has determined to conduct the PBV
conversion review under Part 50) Owners are not required to follow the radon
testing requirements of HN 2013-03. However, HUD strongly recommends
104
Please see the Environmental Review for RAD Transactions guidance document, available at
https://www.hudexchange.info/resource/4216/environmental-review-requirements-for-rad-transactions/.
105
Additional guidance on environmental review requirements is available on the HUD Environmental Review
website, at https://www.hudexchange.info/environmental-review/. The MAP Guide is available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 164
Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
testing for all projects and mitigation of any structures with elevated radon (4
pCi/L or above).
2. For PBRA conversions (or where HUD has determined to conduct the PBV
conversion review under Part 50) that do not include substantial rehabilitation or
new construction activities, Owners shall provide HUD with one of the
following:106
A transaction screen in accordance with ASTM E 1528-14 (or the most recent
edition). A transaction screen will identify potential environmental concerns
based on questionnaires, owner/occupant inquiry, site visit, government
records inquiry and historical sources inquiry. The transaction screen must be
prepared by a qualified professional, in accordance with 24 CFR § 50.3(i)(4).
As the definition of preparer in ASTM E 1528-14 does not meet this
requirement, the professional must have either (a) a science degree and at least
one year of practical environmental assessment experience in the field, or (b)
three years of practical environmental assessment experience in the field
performing site assessments for site contamination. If any potential
environmental concerns are identified, an ASTM Phase I Environmental Site
Assessment (ESA) in accordance with ASTM E 1527-13 (or the most recent
edition) must be provided; OR
A Phase I ESA in accordance with ASTM E 1527-13 (or the most recent
edition).
HUD staff will carefully review the submissions and may require additional information in
order to complete their review. When HUD conducts the environmental review under Part
50, it documents the review using the HUD Environmental Review Online System (HEROS).
HUD’s review will result in a determination, which may stipulate the rejection of the site for
this demonstration or may require the completion of mitigation measures. The approval letter
will include any conditions required to carry out any and all mitigation measures as may
result from the environmental review. Any conditions that cannot be satisfied before the
execution of the HAP Contract will be captured in a Rider to the HAP Contract, and those
mitigation measure conditions must be completed in a timely manner.
When a Responsible Entity (RE) completes an environmental review under Part 58, the
Financing Plan must include either Form 7015.16 or a letter with the Responsible Entity’s
(RE’s) finding of exempt activity in order to consider the environmental review to be
106
Substantial rehabilitation is any rehabilitation that does not meet the conditions in 24 CFR § 50.20(a)(2) for
exclusion from review under the National Environmental Policy Act. Applications to RAD for conversion
assistance involving substantial rehabilitation or new construction will always require a Phase I ESA in accordance
with ASTM E 1527-13.
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Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
complete. The RE should use HUD recommended formats to document the environmental
review record.107 The PHA should submit an environmental report to the RE, in such form as
prescribed by the RE, to enable the RE to complete their analysis. Once the review is
completed, the PHA must submit either:
Form HUD-7015.15, Request for Release of Funds, to their local PIH field staff.108
After the PIH Field Director approves the RROF, the Director sends a completed
HUD Form 7015.16 to the PHA, approving the release of funds. The PHA must
submit the completed Form 7015.16 to HUD; or
If form HUD-7015.15 is not required because the project converts to Exempt under
24 CFR § 58.34, the PHA must submit the RE’s finding of exempt activity with their
RAD application. A finding of exempt activity is a statement of the result of the RE’s
environmental review, and is required even when form HUD-7015.15 is not required.
A letter from the RE indicating that the project converts to Exempt under 24 CFR
§ 58.34 is sufficient.
H. Accessibility and Relocation Plan Checklist. All owners shall complete and submit the
Accessibility and Relocation Plan Checklist provided by HUD. The checklist shall include a
certification that the relocation plan complies with all applicable HUD requirements,
including the Uniform Relocation Assistance and Real Property Acquisition Policies Act of
1970 (URA) and its implementing regulations (49 CFR Part 24) as well as Section 504 of the
Rehabilitation Act of 1973 and its implementing regulations (24 CFR §8.23). The cost of the
relocation must be fully funded in the Development Budget.
I. Development Budget (Sources and Uses of Funds). The Development Budget must:
i. Include a reasonable, balanced and comprehensive presentation of sources and uses of
funds, entered into the Transaction Log on the RAD Resource Desk, and which is in
accordance with all applicable HUD requirements.
ii. Demonstrate that existing loans or debt will be paid off at the closing or supported
through Net Operating Income.
iii. Demonstrate that any Identity of Interest (IOI) loans or advances will be converted to
unsecured Surplus Cash Notes (IOI loans may not be paid off from the proceeds of new
financing).
107
HUD recommended formats are available at https://www.hudexchange.info/resource/3139/part-58-
environmental-review-cest-format/ and https://www.hudexchange.info/resource/3140/part-58-environmental-
assessment-form/.
108
Form HUD-7015.15 is available at https://www.hudexchange.info/resource/2338/hud-form-701515-request-
release-funds-certification/.
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Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
iv. Include narrative that discusses any aspects of the planned rehabilitation that may result
in an initial operating deficit during the rehabilitation and how that deficit will be
funded, including any operating deficit escrow or similar fund.
v. Include a Subsidy Layering Review (SLR) if one has been performed by another
agency. If no SLR is provided, HUD will complete a SLR whenever multiple federal
sources are proposed.
J. Development Team. The owner must include the following information:
i. Identification of all participants, including the PHA, the general contractor, the legal
entity that will own the project, the proposed management agent, and all “principals” of
those entities.
ii. Evidence of recent successful experience with similar rehabilitation or construction
projects. For properties requiring substantial rehabilitation or new construction, the
Project Owner is required to engage a general contractor, unless recent and comparable
experience managing rehabilitation can be demonstrated or if the development team is
using the FHA-insured Section 223(f) program or a repair program approved by HUD.
If multiple funding sources will be used for the Covered Project, the development team
must demonstrate that it has experience with at least three transactions with multiple
sources of financing.
iii. For PBRA conversions, evidence that all principals have Previous Participation
Certification in the Active Partners Performance System (APPS) (formerly the Form
2530) and are not be debarred, suspended, or subject to a Limited Denial of
Participation.109
K. Proposed Financing. For each proposed loan, equity contribution, or grant, the PHA must
include a:110
i. Recent lender, investor or grant engagement letter, dated no later than 60 days prior to
Financing Plan submission, with key terms identified (including amount, repayment
terms, interest rate, amortization, maturity, prepayment restrictions, pay-in schedule,
etc.) from all financing provider(s). Key terms for any permanent financing must
109
The APPS/2530 applies to all FHA transactions and transactions in which 20% of the units in the Covered
Project will be covered under a PBRA contract (PBV transactions without FHA financing are exempt). The PHA
and any entities wholly owned by the PHA are not subject to 2530/APPS. For LLCs and LPs, non-PHA members
and partners, respectively, with 25% or more of the ownership interests are subject to approval provided that for
LIHTC transactions, limited partners or investment members are exempt. For non-profit entities, 2530s are required
for Board Officers but not Board Members. Management agents are subject to 2530 unless wholly-owned.
110
HUD has created templates that are available on the RAD Resource Desk that Project Owners can use to provide
all required information on each loan, equity contribution, and grants.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 167
Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
comply with the conditions under Section 1.4(B)(1) of this Notice (fixed rate of
interest, for a fixed term, and fully amortized over that term; balloon payments not
permitted before year 18; amortization term cannot exceed 40 years; etc.). Additionally,
all subordinate (or secondary) financing must be disclosed and then approved by the
first-mortgage lender as well as HUD in accordance with section 8.9 of the Mortgage
Credit and Underwriting and Processing Requirements of the MAP guide and any
subsequent revisions or updates to the MAP guide.
ii. Brief discussion of conditions / milestones to be satisfied prior to closing;
iii. Documentation that the first mortgage lender has consented to the Use Agreement and
that the lien of the new first mortgage loan will be subordinate to the Use Agreement;
iv. Estimation of projected closing date for all proposed financing. Discuss any known
impediments to closing within the timeframe required under the Notice. Include a
discussion of key milestones with estimated milestone completion dates. The terms for
all seller take-back financing must also be disclosed.
L. Operating Pro Forma. The Operating Pro-Forma must:
i. Be entered into the Transaction Log of the RAD Resource Desk (stabilized cash flow)
ii. In an owner provided template, project out for the term of the initial contract.
iii. Include an attached discussion of the extent of energy and water savings that are
anticipated as a result of the rehabilitation or construction and the basis for those
estimates. The discussion must explain to what extent anticipated savings in utility
costs have been included in the pro forma operating expenses.
iv. Comply with at least the following feasibility benchmarks:
a. Rents shall not exceed the amounts permitted under program rules;
b. All other sources of income must be supported with a narrative or must not exceed
the average for the last three years (other income should not include interest income
on the replacement reserve account, which must remain in the reserve and is not
available for other purposes);
c. Vacancy loss shall be no less than the greater of the average over the past three
years or 3 percent;
d. Allowance for bad debt should be not less than the greater of the average over the
past three years or 2 percent;
e. Real estate taxes for Mod Rehab shall be no less than the most recent tax bill
amount;
f. Insurance costs must be documented, such as quotes from an insurance agent based
on actual recent premiums for similar projects;
g. All other operating expenses shall be no less than 85 percent of the average for the
last three years;
h. The annual replacement reserve deposit should be equal to that amount which, if
deposited annually, will be sufficient to fund all capital needs, as identified in the
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Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
CNA, arising during the first 20 years and otherwise not addressed upfront in either
the rehabilitation or an initial deposit to the replacement reserve account, and
sufficient to maintain a minimum balance at the end of each year during that 20-
year period that is at least 5 percent of the total, aggregate projected capital needs
for that period.
i. For non-leveraged transactions, the stabilized cash flow should not be less than $12
per unit monthly. For leveraged transactions, the debt-coverage ratio should not be
less than 1.11 over a ten year period using 2% growth in revenue and 3% growth in
expenses.
M. Market Study. A market study will only be required at HUD's request, e.g., in cases where
the project is currently experiencing a high vacancy rate, or when project plans include unit
configuration or inclusion of market-rate units. For projects using an FHA insured mortgage,
please see the Multifamily Accelerated Processing (MAP) Guide for instruction on when a
market study is, and is not, required.
N. Certification of Compliance with Site and Neighborhood Standards. The owner (for
PBRA) or the voucher administering agency (for PBV) shall include a certification that the
site complies with applicable Site and Neighborhood Standards (see Section 2.4.G).
O. Affirmative Fair Housing Marketing Plan. For PBRA conversions, evidence that a
completed AFHMP (HUD 935.2A) has been submitted for approval to the local Multifamily
Regional Center. Typically, the management agent or the entity responsible for marketing (if
different) is responsible for completing and submitting the AFHMP. If a Project Owner plans
to adopt any local or residency preferences, the Project Owner must submit its Tenant
Selection Plan along with the AFHMP (see HUD Handbook 4350.3, page 4-4). Each
Covered Project must have a HUD-approved AFHMP prior to closing.
The purpose of affirmative marketing is to ensure that individuals of similar income levels in
the same housing market area have a like range of housing choices available to them
regardless of their race, color, national origin, religion, sex, disability, or familial status.
P. Coordination with Continuum of Care. SRO projects converting under RAD must submit
with their financing plan evidence that the local CoC has been consulted with regards to the
RAD conversion.
Financing Plan Requirements for Transactions Utilizing FHA-Insurance
For RAD conversions that will utilize FHA mortgage insurance, the submission requirements and
feasibility benchmarks are primarily found in the FHA Multifamily Accelerated Processing (MAP) Guide
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 169
Attachment 2A: Financing Plan Requirements and Feasibility Benchmarks
as revised by Mortgagee Letter 2012-20. Following submissions made in an FHA insured loan application
for Firm Commitment, Owners must also upload the following items to the RAD Resource Desk (Unless
otherwise indicated, the Owner must submit all of the items listed in the cited paragraph):
A. Type of Conversion
B. Resident Notification
C. Mod Rehab HAP Contract(s)
D. Proposed Units
G. Environmental Review (Part 50), as completed by HUD Multifamily Housing
Production
H. Accessibility and Relocation Plan Checklist
I. Development Budget (Sources and Uses of Funds).
o Sources and Uses submitted with the FHA Application must be entered into the
Transaction Log on the RAD Resource Desk.
K. Proposed Financing
L. Operating Pro Forma.
M. Market Study
N. Certification of Compliance with Site and Neighborhood Standards.
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Section III: Rent Supplement and Rental Assistance Payment Projects
SECTION III: RENT SUPPLEMENT AND RENTAL ASSISTANCE PAYMENT PROJECTS
3.1 Purpose
Section III of this Notice provides instructions to owners of Rent Supplement (Rent Supp) and
Rental Assistance Payment (RAP) projects seeking to convert assistance of a Rent Supp or RAP
project under RAD.
3.2 Note on Effective Date
PIH Notice 2012-32, Rev. 1 (technical correction) was published February 6, 2014 and PIH
Notice 2012-32, Rev. 2 was published June 15, 2015.
Any owners that submitted a complete request to the Office of Recapitalization that met all
requirements for conversions of Rent Supp or RAP assistance prior to the issuance of PIH Notice
2012-32, Rev. 2 are governed by the February 6, 2014 technical correction.
Any owners that submitted a complete request to the Office of Recapitalization that met all
requirements for conversions of Rent Supp or RAP assistance after June 15, 2015, and prior to
the issuance of this third revision of PIH Notice 2012-32, and have not yet closed the applicable
conversion, will be governed by PIH Notice 2012-32, Rev. 2. However, projects that have not
yet closed may request HUD approval to convert under the terms of this third revision. All
conversion requests under this Section (Section III) that are received after publication of this
third revision are subject to the instructions issued in this Notice.
3.3 General Program Description
Owners may choose between two forms of long-term Section 8 Housing Assistance Payment
(HAP) Contracts: project-based vouchers (PBVs) or project-based rental assistance (PBRA).
Conversions may be prospective (when an owner still has an active Rent Supp or RAP contract
at the project) or retroactive (when the Rent Supp or RAP contract has already expired at the
project). Owners pursuing a prospective conversion may choose from either a PBV contract or a
PBRA contract. Owners who are pursuing a retroactive conversion will be limited to PBV
conversions only.
A. PBV Conversions. An owner may request to enter into a Section 8 PBV HAP Contract with
an eligible PHA to administer the contract. With the exception of provisions identified in this
Notice (as well as retained flexibilities of Moving to Work (MTW) agencies, all regulatory
and statutory requirements of the PBV program in 24 CFR Part 983, and applicable standing
and subsequent Office of Public and Indian Housing guidance, including related handbooks,
shall apply.
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Section III: Rent Supplement and Rental Assistance Payment Projects
1. Prospective Conversions Projects are eligible for prospective conversions if the Rent
Supp or RAP contract expiration or termination has not yet occurred. To be
considered a prospective conversion, the expiration or termination date of the contract
must be at least 60 days after the owner’s conversion request to HUD (see Section
3.7.1). In a prospective conversion, the project will receive PBV assistance in lieu of
the TPV assistance that would be otherwise provided to project residents. Prospective
conversions to PBV may be suspended in a particular fiscal year if HUD does not
have sufficient TPV appropriations to fund all of the demands on the TPV account
due to conversions.
If the contract termination will occur within 60 days of the owner's initial submission
to HUD, an owner of an expiring Rent Supp or RAP contract may seek a short-term
extension of the contract at current funding levels, subject to the availability of
appropriations. This short-term extension may be used in conjunction with RAD to
provide adequate time for an owner to prepare and submit a request under RAD
before the contract reaches its expiration date. Short-term extension requests are made
directly to the Office of Recapitalization. The short-term extension contract may be
terminated early if the RAD conversion occurs prior to the short-term extension
contract expiration. If a Rent Supp or RAP contract extension is not provided, the
Rent Supp or RAP contract will expire, and the provision of TPVs will occur. The
owner may then proceed with a retroactive conversion.
In accordance with HUD policy and subject to the availability of appropriations,
special administrative fees will be provided to PHAs in connection with the
administration of TPVs for a Housing Conversion Action, (e.g., mortgage
prepayment, or expiration of a Rent Supp or RAP contract). In order to obtain such
fees, the PHA must submit the information requested in Notice PIH 2015-03 or any
successor notice regarding the implementation of funding provisions for the Housing
Choice Voucher program.
At the closing of the conversion of assistance: the Rent Supp or RAP contract will be
terminated (due to prepayment or expiration), the PHA that has agreed to administer
the PBV HAP Contract will have the vouchers added to its Annual Contribution
Contract (ACC), and the PBV HAP Contract will be executed.
2. Retroactive Conversions Where contract expiration has occurred and TPVs or EVs
have already been issued to project residents or where TPVs or EVs have been
requested and processed for project residents (i.e., the PHA’s ACC has been amended
reflecting the new increment of TPVs or EVs), projects may be eligible for a
retroactive conversion to PBV assistance. The contract expiration and issuance of
EVs or TPVs must have occurred on or after October 1, 2006.
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Section III: Rent Supplement and Rental Assistance Payment Projects
As described above, HUD will not process prospective conversions in projects where
the contract termination will occur in fewer than 60 days following the owner's initial
submission to HUD. If the contract termination will be fewer than 60 days from the
owner’s initial submission, or if TPV funding has been requested by the Office of
Public and Indian Housing on behalf of eligible project residents and processed, (i.e.,
the PHA’s ACC has been amended reflecting the new increment of TPVs) TPVs will
be issued to the eligible residents, and the conversion request will be processed as a
retroactive conversion to PBVs.
Only the units occupied by eligible low-income residents who either are receiving
TPV or EV assistance at the time of contract expiration or termination, who continue
to reside in the project, and who consent to the conversion, may be assisted under the
PBV HAP Contract. For retroactive conversions, as required under the RAD Statute,
the “Administering PHA” must approve a request for retroactive conversion to a PBV
HAP Contract. If the actively Administering PHA does not consent to long-term
conversion of the contract to PBV assistance, the project is not eligible for retroactive
conversion.
The table below summarizes key characteristics of prospective and retroactive
conversions.
Conversion Type Characteristics Determining Conversion Type
Prospective 1. Termination or expiration occurs at least 60 days after the
owner’s request; or
2. Termination or expiration occurs less than 60 days after the
owner’s request, but the owner receives a short-term
extension from the Office of Recapitalization and the new
expiration date is 60 days or more after the owner’s request.
Retroactive 1. Termination or expiration occurred on or after 10/1/2006
and TPVs were issued to eligible project residents;
2. Termination or expiration occurs within 60 days of the
owner’s request for conversion, and the owner does not
receive a short-term contract extension to pursue a
prospective conversion; or
3. Funding for TPVs has been requested on behalf of eligible
project residents and processed by the Office of Public and
Indian Housing.
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Section III: Rent Supplement and Rental Assistance Payment Projects
PBRA Conversions. An owner may request to enter into a 20-year Section 8 PBRA HAP
Contract (subject to annual appropriations); the HAP Contract will be executed by HUD’s
Office of Housing. Initial contract rents will be determined by an RCS and be limited to
110% of FMR (unless a higher limitation not exceeding any applicable statutory maximum
is approved by HUD pursuant to Section 3.6.C) and will be adjusted only by an OCAF at
each anniversary of the HAP Contract, subject to the availability of appropriations for each
year of the contract term and the requirements of section 3.6.D. At expiration of the initial
contract, the owner is eligible to renew the contract under section 524 of MAHRAA, subject
to the terms and conditions applicable at the time of renewal and to the availability of
appropriations for each year of such renewal. Regulatory and statutory requirements of the
PBRA program in 24 CFR Part 880, with the exception of provisions identified in this
Notice, and applicable standing and subsequent Office of Housing guidance, including
handbooks, shall apply.
Retroactive conversions are not permitted under PBRA.
B. Right to Remain or Return. The right to remain or return applies to both PBV and PBRA.
Under RAD, any resident residing in the project prior to conversion has a right to remain in,
or in the event that rehabilitation will result in the relocation of residents, return to an assisted
unit at the Covered Project. Any relocation as a result of acquisition, demolition, or
rehabilitation is subject to requirements of the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970 (URA). Permanent involuntary displacement of
residents may not occur as a result of a project’s conversion of assistance. If proposed plans
for a project would preclude a resident from returning to the Covered Project, the resident
must be given an opportunity to comment and/or object to such plans. If the resident objects
to such plans, the Owner must alter the project plans to accommodate the resident in the
Covered Project. If a resident agrees to such plans, the Owner must secure informed, written
consent from the resident to receive permanent relocation assistance and payments consistent
with URA and acknowledgement that acceptance of such assistance terminates the resident’s
right to return to the Covered Project. In obtaining this consent, Owners must inform
residents of their right to return, potential relocation, and temporary and permanent housing
options at least 30 days before residents must make a decision. The Owner cannot employ
any tactics to pressure residents into relinquishing their right to return or accepting
permanent relocation assistance and payments.
3.4 Eligibility
Owners of Rent Supp and RAP projects that meet all eligibility requirements described below
may submit a request to convert under the Second Component of RAD.
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Section III: Rent Supplement and Rental Assistance Payment Projects
3.4.1 Eligible Owners
A. Compliance with HUD and the PHA. For prospective conversions, the owner must either
demonstrate a rating of Satisfactory or higher on the most recent Management and
Occupancy Review or certify that the management company is being replaced by a
management agent with a record of successful operation of HUD-assisted multifamily
housing. The HUD Departmental Enforcement Center must have no active referrals
attributable to the owner. If a contract terminates due to an enforcement action, then the
project is ineligible, unless the request is in the context of an acquisition. If the request to
enter into a PBV or PBRA contract is in the context of an acquisition, the purchaser must
provide evidence of successful experience owning and operating HUD-assisted or other
affordable multifamily housing properties. Examples of the standard for this review may be
found in HUD Handbook 4350.1, Chapter 13 Transfer of Physical Assets.
For retroactive conversions, the owner must be in good standing with the PHA administering
the TPVs at the project and must receive the consent of the PHA and affected residents to
convert the TPV assistance to PBV.
B. Fair Housing Compliance for PBV and PBRA Conversions.
An owner must be in compliance with all fair housing and civil rights requirements at 24
CFR §5.105(a). An owner will not be eligible to participate in RAD if it has any of the
charges, cause determinations, lawsuits, or letters of findings referenced in sub-paragraphs
(1)-(5) below against the owner, its transferees, proposed development partners, or sub-
recipients, unless they have been resolved to HUD’s satisfaction.:
1. A charge from HUD concerning a systemic violation of the Fair Housing Act or a
cause determination from a substantially equivalent state or local fair housing agency
concerning a systemic violation of a substantially equivalent state or local fair
housing law proscribing discrimination because of race, color, religion, sex, national
origin, disability or familial status;
2. A Fair Housing Act lawsuit filed by the Department of Justice (DOJ) alleging a
pattern or practice of discrimination or denial of rights to a group of persons raising
an issue of general public interest pursuant to 42 U.S.C. § 3614(a);
3. A letter of findings or lawsuit filed by DOJ identifying systemic noncompliance
under Title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act
of 1973, or section 109 of the Housing and Community Development Act of 1974;
4. A cause determination from a substantially equivalent state or local fair housing
agency concerning a systemic violation of provisions of a state or local law
proscribing discrimination in housing based on sexual orientation or gender identity;
or
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Section III: Rent Supplement and Rental Assistance Payment Projects
5. A cause determination from a substantially equivalent state or local fair housing
agency concerning a systemic violation of a state or local law proscribing
discrimination in housing based on lawful source of income.
Applicants may still be eligible for conversion under RAD if such a charge, cause
determination, lawsuit, or letter of findings referenced in subparagraphs 1, 2, 3, 4, or 5 above
has been resolved to HUD’s satisfaction. However, if the matter has not been so resolved,
then the applicant is ineligible to participate in RAD.
HUD will determine if actions to resolve the charge, cause determination, lawsuit, or letter of
findings are sufficient to resolve the matter. Examples of actions that would normally be
considered sufficient to resolve the matter include, but are not limited to current compliance
with a:
Voluntary compliance agreement (VCA) signed by all the parties;
HUD-approved conciliation agreement signed by all the parties;
Conciliation agreement signed by all the parties and approved by the state
governmental or local administrative agency with jurisdiction over the matter;
Consent order or consent decree; or
Final judicial ruling or administrative ruling or decision.
Additionally, an owner may be required to demonstrate that its proposed activities under
RAD are consistent with any applicable VCA, conciliation agreement, consent order or
consent decree, final judicial ruling, or administrative ruling or decision. HUD may terminate
an approval if it determines that the terms of the conversion would be inconsistent with fair
housing or civil rights laws or a fair housing or civil rights court order, settlement agreement,
or VCA. Furthermore, if a project is subject to a VCA, conciliation agreement, consent order
or consent decree, or final judicial ruling or administrative ruling or decision, it must ensure
that the ownership agreement or other appropriate document makes the new owner subject to
the remedial provisions contained in such documents. It is the owner’s obligation to disclose
such VCAs, etc., to the prospective owner. The extent of the owner’s responsibilities,
including whether the responsibilities are appropriately limited to the development,
maintenance, or operation of the particular RAD project, must be appropriately documented.
The owner will follow any requirements for the modification of such VCAs, etc. If HUD is a
party to the VCA, etc., the RAD project will not close without HUD’s express approval of
the transfer of obligations to the new owner.
3.4.2 Eligible Properties and Units
A. Eligible Properties for PBV and PBRA Conversions. Eligible properties are those with an
active Rent Supp or RAP assistance contract at the project, or for retroactive conversions the
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Section III: Rent Supplement and Rental Assistance Payment Projects
project must have previously received Rent Supp or RAP assistance that expired or
terminated on or after October 1, 2006. In addition, the project must have experienced (on or
after October 1, 2006) an event that triggered the provision of TPVs, or anticipate a
triggering event that would provide TPVs to eligible residents at the project. Under RAD, a
triggering event is defined as the termination (or expiration) of a Rent Supp or RAP contract,
at which time regular Housing Choice Vouchers will be or have been provided, or in some
cases EVs will be or have been provided in the context of certain prepayments (discussed in
Section 3.4.2.D.2, below).
Typically, when the underlying mortgage on a Rent Supp or RAP project is prepaid, the
prepayment terminates the Rent Supp or RAP contract. In some cases, however, the
underlying mortgage may have been prepaid, but the contract may not have been terminated.
This happens, for example, when an owner intends to undertake an Interest Reduction
Payment (IRP) decoupling and requests a waiver from HUD to leave the Rent Supp or RAP
contract in place. Otherwise-eligible projects that have received such a waiver are eligible for
RAD, but only if HUD and the owner agree to terminate the existing Rent Supp or RAP
contract, thereby triggering issuance of TPVs.
B. Physical Conditions for PBV Conversions. The owner must provide evidence that the
project meets one of the following standards:
1. For prospective conversions, the most recent Real Estate Assessment Center
(REAC) score at the project must be 60 or above.
Unless provided explicit approval by HUD, the converting units must qualify as
existing housing in order be selected for conversion under Second Component of
RAD. The PHA must ensure that the units substantially meet HQS, as defined in the
PHA’s Section 8 administrative plan, prior to project selection. Prior to entering into
a PBV HAP Contract, the Administering PHA will inspect the units proposed for
conversion to ensure that the units fully comply with HQS. The HAP Contract will
not be executed until and unless the converting units fully meet HQS.
2. For retroactive conversions, units to be converted must meet HUD’s HQS as
determined by the PHA. The PBV contract will not be executed until and unless the
units meet HQS.
C. Physical Conditions for PBRA Conversions. The owner must provide evidence that the
project has received a score of 60 or above on the most recent Real Estate Assessment Center
(REAC) inspection at the project. Those properties that do not meet this minimum threshold
will not be eligible to convert under this notice.
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Section III: Rent Supplement and Rental Assistance Payment Projects
D. Eligible Units for PBV Conversion.111 Units eligible for conversion may include a
combination of units under a Rent Supp or RAP contract and other (i.e., unassisted) units at
the project. Eligibility of Rent Supp or RAP contract units and other units is discussed below.
All owners who wish to include other units at the project within their RAD conversion will
receive a determination from OGC to ensure that the prepayment at the project will trigger
the issuance of Enhanced Vouchers.
1. Rent Supp and RAP contract units. For prospective conversions, all units on the
original Rent Supp or RAP contract that are occupied at contract expiration or
termination are eligible for conversion to PBV under RAD. Note that the number of
units on the original contract may be higher than the number of units “actively
billing” at the project.112
For retroactive conversions, eligible Rent Supp or RAP contract units are those that
are occupied at the time of the RAD conversion by households who received TPV
assistance as the result of the expiration or termination of the contract.
2. Other Units at the Rent Supp or RAP project. In certain cases, the prepayment of a
mortgage on a project with a Rent Supp or RAP contract may trigger the provision of
EVs to assisted (in the case of HCV participants) and unassisted project residents.
Units occupied by such residents may qualify for conversion to PBV under RAD.
These units are eligible to include in the PBV conversion only if the prepayment
meets all conditions of PIH Notice 2001-41, Section 8 Tenant Based Assistance
(Enhanced and Regular Housing Choice Vouchers) for Housing Conversion Actions
– Policy and Processing Guidance, and if the following conditions are met:
a. The project falls within the definition of “eligible low-income housing” set
out in section 229 of the Low Income Housing Preservation and Resident
Homeownership Act (LIHPRHA), or is treated as such under Section 201(p)
of the Housing and Community Development Amendments of 1978 as
discussed below, which means that the prepayment or other transaction
111
Please note that for PBV conversions, the PHA makes the final determination of eligibility to be included on the
PBV HAP Contract; this includes a determination that the household is income eligible for the PBV program and
that the tenant’s total payment (TTP) of rent does not exceed the contract rent at the project.
112
In some cases, the amount of units that are actively billing on a Rent Supp or RAP contract has decreased over
time. For example, a Rent Supp or RAP contract may have been funded for 40 units originally, but over time the
amount of units that this funding can support has decreased. HUD will allow the conversion to cover all occupied
units indicated on the original Rent Supp or RAP contract.
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Section III: Rent Supplement and Rental Assistance Payment Projects
triggers provision of EVs to eligible families residing in the unassisted units at
the project. This includes units that are not assisted by a Section 8 HAP
contract, or a Rent Supp or RAP contract. To be included as eligible units in
the RAD conversion, the EVs must be provided or already have been provided
in the context of a qualifying preservation-eligible prepayment.
Qualifying preservation-eligible transactions in eligible low-income housing,
for the purposes of Rent Supp and RAP properties, include only the following
cases:
Prepayment of an underlying FHA-insured mortgage at a RAP
project;113
Prepayment of a mortgage held by a state agency as a result of a sale by
HUD without insurance, which immediately before the sale would have
been eligible for low-income housing under LIHPRHA; which mortgage
(1) for LIHPRHA projects is, or is within 2 years of being, eligible for
prepayment by contract or regulation in effect before February 5, 1988
without HUD’s prior approval; or (2) for Emergency Low Income
Housing Preservation Act (ELIHPA) projects is, or is within 1 year of
being, eligible for prepayment under regulation or contract in effect
before February 5, 1988;
Prepayment of a mortgage for a state-assisted project that is eligible for
preservation assistance under LIHPRHA or ELIHPA114; or
A project that has received a Flexible Subsidy Loan and is the subject of
a transaction under which the project is preserved as affordable housing
as determined by the Secretary under Section 201(p) of the Housing and
Community Development Amendments of 1978.
b. The families that would receive EVs must meet the income requirements for
the PBV program. The income eligibility requirements for EVs provided due
to the mortgage prepayment may be different from the income eligibility
requirements for the PBV program. Some moderate-income families may be
eligible for EVs (or in the case of a retroactive conversion, may have already
113
Please note: for properties with FHA-insured mortgages, this applies only to properties assisted with RAP
contract, not Rent Supp contracts. Prepayment of an FHA-insured mortgage on a Rent Supp property does not
trigger the provision of EVs and therefore no units beyond the Rent Supp units would be eligible for the RAD
conversion.
114
Rent Supp or RAP contracts must be expiring or in the process of being terminated in order for state-held
mortgages to be eligible under RAD.
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Section III: Rent Supplement and Rental Assistance Payment Projects
received EVs), but may be over-income with respect to PBV assistance. To be
eligible for the PBV program, project residents must be very low-income as
described in 24 CFR § 982.201, unless specified in the PHA’s Section 8
Administrative Plan. In the case of a prepayment of a mortgage on eligible
low income housing, only units occupied by families that meet the income
requirements (and all other voucher eligibility requirements) for PBV will
receive assistance under the PBV contract.115 Income eligibility will be
determined in accordance with voucher program requirements.
3. Timing concerning the issuance of EVs. In the case of a retroactive conversion, the
PBV contract may include those units occupied at the time of the RAD conversion by
families that received EV assistance as the result of a preservation eligible
prepayment in eligible low-income housing described in paragraph 2.i above. These
families must have accepted the EVs at the time of the mortgage prepayment, and the
families must be in residence at the project and receiving the EV assistance at the
time of the RAD conversion. However, the conversion may also include units
occupied by residents who have been offered and accepted vouchers, have not leased
up with such vouchers, and the PHA has not used the allocated funds to assist other
applicants on the PHA’s HCV waiting list.
4. Adding contract units. As described above, a resident may be eligible for an
enhanced voucher at the time of the RAD conversion, but not be eligible for an
assistance payment at the time that the PBV contract is executed. In such cases, the
unit the family is residing in may not be included onto the PBV contract. The tenant
continues to be eligible for enhanced voucher assistance for three years from the date
of the eligibility event and the PHA must ensure that such assistance remains
available for such tenants if during the three year period the family’s income
decreases or the rent for the unit increases thereby generating a housing assistance
payment (See PIH Notice 2001-41, Part II, Paragraph A(4)). If during the three year
period, the family would be eligible for an assistance payment and remains eligible
for the voucher program, the unit may be added to the PBV contract upon the PHA’s
and tenant’s consent. The retroactive conversion requirements for notice to tenant and
consent in accordance with Section 3.8 of this Notice must be followed. If the family
or the PHA withholds its consent, the family is either: 1) issued an enhanced voucher
and may lease up an unassisted unit at the property in which case the special
requirements for enhanced vouchers would apply as outlined in PIH Notice 2001-41,
or 2) the family may move with its voucher and the voucher would lose the enhanced
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Section III: Rent Supplement and Rental Assistance Payment Projects
features, in which case the regular requirements for HCV assistance would apply (see
24 CFR Section 982).
5. Housing Choice Voucher (HCV) program participant residing at the project. A
resident who is already receiving housing choice voucher assistance on the date of the
eligibility event may be included in the PBV contract, but only if the triggering event
for the RAD conversion provides the opportunity for the HCV assistance to become
enhanced (e.g. a prepayment) and if the resident consents to convert their assistance
to PBV assistance. In the case of a RAD conversion where a prepayment occurs, the
resident has several options. The resident may accept the enhanced voucher
protections (See Part II, Paragraph D of PIH Notice 2001-41); the resident may
choose to reject the enhanced voucher protections and retain its regular HCV
assistance, or the resident may agree to relinquish their voucher after being briefed by
the PHA and only if they provide written consent to convert their HCV assistance to
PBV assistance under RAD. Notice PIH 2001–41 addresses circumstances under
which an HCV program participant residing in a project undergoing a preservation
prepayment may remain in the project and receive enhanced voucher assistance.
E. Eligible Units for PBRA Conversion. All units that are currently covered by a Rent Supp or
RAP contract may be included in the PBRA conversion. Additionally, all units that would
receive TPVs in the form of EVs after a qualifying prepayment, as discussed in Section
3.4.2.D.2 above, may also be included in the PBRA conversion. HCV holders at the project
will be allowed to be included in the PBRA contract, but only if the triggering event for the
RAD conversion provides the opportunity for the HCV assistance to become enhanced (e.g. a
qualifying prepayment) and if the resident consents to convert their assistance to PBRA
assistance. Owners should follow the procedures discussed in Section 3.4.2.D.4 above in
order to include HCV assistance on their PBRA contract.
3.5 Special Provisions Affecting Conversions to PBVs
As discussed above in Section 3.3 of this Notice, certain PBV statutory provisions have been
waived or altered consistent with the authority Congress has provided for Second Component
conversions. In these cases, HUD also notes the corresponding regulatory provisions that are
waived or altered. Additionally, HUD has waived certain regulatory provisions (that are not
statutorily based) and established alternative requirements in order to prevent displacement of
certain residents and otherwise serve the purposes of this Demonstration. All other regulatory
and statutory requirements of the PBV program in 24 CFR Part 983 and section 8(o)(13) of the
Act shall apply, including resident choice, environmental review, Davis-Bacon and fair housing
requirements.
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The modified or alternative requirements that pertain solely to PBV conversions under the
Demonstration are described below.
A. Length of Contract. By choosing to participate in the RAD program, the PHA and owner
agree to a minimum 15-year initial term for the HAP. A PHA may agree to enter into an
extension of the initial HAP Contract term with the Owner at any time during the initial term.
The PBV HAP Contract during the initial and any extended term is subject to the
requirement for sufficient annual appropriated funding.
B. PBV Percentage Limitation. Covered projects do not count against the percentage
limitation applicable to the PBV program. To implement this provision, HUD is waiving
section 8(o)(13)(B) of the Act as well as 24 CFR § 983.6. As a result, a PHA that is
administering RAD PBV assistance does not take =the RAD PBV into consideration when
calculating the percent limitation for any non-RAD PBV actions. In other words, RAD PBV
is excluded from both the numerator and the denominator when calculating the percent that
may be project-based for non-RAD PBV.
C. Cap on the Number of PBV Units in Each Project. There is no cap on the number of units
that may receive PBV assistance in each project. To implement these provisions, HUD is
waiving section 8(o)(13)(D) of the Act, as well as related provisions of 24 CFR §§ 983.56,
983.257(b), 983.262(a) and (d).
D. Site selection –Compliance with PBV Goals, section 8(o)(13)(C)(ii) of the Act and 24
CFR § 983.57(b)(1) and (c)(2). HUD waives these provisions having to do with
deconcentration of poverty and expanding housing and economic opportunity, for the
existing site. However, HUD reserves the right to assess and consider as part of the RAD
request the impact of the proposed RAD conversion on deconcentration of poverty or
concentration of assistance in properties where the RAD conversion would result in an
increase in the number of units at the project receiving project-based rental assistance.
E. Owner Proposal Selection Procedures, 24 CFR § 983.51. Projects are selected in
accordance with program requirements detailed in this Notice. HUD is waiving 24 CFR §
983.51. With respect to site selection standards, HUD requires compliance with the site
selection standards as set forth in this Notice.
F. Adding contract units. 24 CFR § 983.207(b) does not apply. A PHA may only add units to
the converted project as described in Section 3.4D.
G. Limitation on Screening of Residents upon conversion. At conversion, current
households are new admissions into the PBV program. However, as a condition of
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Section III: Rent Supplement and Rental Assistance Payment Projects
participation in the Demonstration, PHAs may screen households only for the mandatory
screening requirements established by statute and may not apply any other discretionary
screening requirements. PHAs must amend their Administrative Plan to implement this
alternative requirement.
H. Initial Rents. Initial rents for PBV contracts are determined by the PHA, in accordance with
24 CFR Part 983 Subpart G. Such rents generally cannot exceed the lowest of: (i) an amount
determined by the PHA, not to exceed 110 percent of the applicable fair market rent (or any
exception payment standard approved by the Secretary) for the unit bedroom size minus any
utility allowance; (ii) the reasonable rent; or (iii) the rent requested by the owner. (See 24
CFR § 983.301 for program requirements on establishing initial rents).
I. Re-Determined Rents. The rent to owner will be redetermined in accordance with 24 CFR
§ 983.302.
J. Decoupled Projects and PBV Rents. Many owners who pursue a RAD Second Component
conversion also prepay and decouple their underlying 236 mortgage in conjunction with their
RAD Second Component conversion. To facilitate a prepayment of their 236 mortgage,
owners obtain new financing to pay off their 236 mortgage and to rehabilitate the project.
The increased debt service often necessitates an increase in the 236 rents at the project, which
are determined by a budget-based calculation. Section 219(b) of the 1999 Appropriations Act
(the Wellstone Amendment) prohibits rent increases on a prepaid 236 mortgage for 60 days
following prepayment.
24 CFR § 983.304(c) prohibits the PBV contract rent from exceeding the 236 basic rent at
the project in decoupled projects. This causes an inherent conflict when owners convert to a
PBV contract in a RAD Second Component conversion. Owners are expected to execute
their PBV HAP at the time of the triggering event, but at the time of the triggering event
basic rents cannot yet be increased.
The procedures described above create a special problem for projects subject to a Rent Supp
or RAP contract, which would terminate at the time of the prepayment of the 236 mortgage,
and owners of these projects would not be able to sign a PBV HAP with the appropriate rents
for the transaction. To address this situation, HUD is waiving 24 CFR § 236.725 for all
projects with Rent Supp or RAP that are pursuing a decoupling in conjunction with their
RAD Second Component conversion. This waiver will allow the Rent Supp or RAP contract
to remain in place after prepayment during the 60 days following prepayment. The PBV
HAP must be signed when the basic rent increase goes into effect, and the Rent Supp or RAP
contract will be terminated at the time of PBV HAP execution. Note: The PBV contract rents
will still be subject to the initial determination of rents as described above.
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Section III: Rent Supplement and Rental Assistance Payment Projects
K. Under-Occupied Units Converting to PBV. Otherwise-eligible households of two or more
individuals occupying a unit determined by the PHA under HUD regulations to be under-
occupied shall, upon conversion to PBV, be allowed to remain in those units until such time
as an appropriate-size unit becomes available in the project. This protection also extends to
single elderly and disabled individuals regardless of the unit size. When an appropriate-size
unit becomes available, the family living in the oversized unit must move to the appropriate-
size unit within a reasonable time, as determined by the PHA . If the unit size required by the
family does not physically exist at the project, the family shall remain in its current unit
unless and until a more appropriate-size unit is available. If or when a smaller-size unit
becomes available, the family must move to the smaller-size unit. In order to effectuate this
provision, HUD is waiving 24 CFR §983.260(b)(1) & (2) and (c).
For households consisting of single individuals who are not elderly or disabled, the under-
occupied unit cannot be included in the PBV HAP Contract. The PHA shall provide an
enhanced voucher (in the case of a preservation-eligible prepayment) or a tenant protection
voucher (in the case of a rent supplement or RAP expiration) to such individuals, who will
have the statutory right to remain in the project (see PIH Notice 2001–41 for enhanced
voucher requirements and PIH Notice 2008–12 for guidance on enhanced voucher
requirements for overhoused households). If the resident moves with tenant-based voucher
assistance, the unit is not eligible for conversion under RAD, since the funding to support the
converted unit is no longer available.
L. Davis-Bacon. For those projects with 9 or more assisted units where rehabilitation or
construction will occur, Davis-Bacon will apply. For more information addressing Davis-
Bacon and RAD Second Component transactions, please see PIH Notice entitled
‘Applicability of Davis-Bacon Labor Requirements to Projects Selected as Existing Housing
Under the Section 8 Project-Based Voucher Program – Guidance,’ 80 Fed. Reg. 12511,
March 9, 2015.
3.6 Special Provisions Affecting Conversion to PBRA
For Rent Supp and RAP projects converting assistance to PBRA under the Second Component of
RAD, 24 CFR Part 880, Section 8 Housing Assistance Payments Program for New Construction
(and applicable standing and subsequent Office of Housing guidance) will apply, except for the
provisions listed below.116,117 Where applicable, reference is made to the affected statute and/or
regulation. For additional background purposes, HUD has provided Appendix I, which is a copy
Examples of Office of Housing guidance include handbooks such as “Occupancy Requirements of Subsidized
116
Multifamily Housing Programs” (4350.3) and “Multifamily Asset Management and Project Servicing” (4350.1).
117
These include fair housing requirements related to planning, siting, admissions and occupancy, accessibility for
persons with disabilities, nondiscrimination and equal opportunity and affirmatively furthering fair housing.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 184
Section III: Rent Supplement and Rental Assistance Payment Projects
of the existing Part 880 regulation with the provisions stricken that will not apply to covered
projects.
A. Length of Contract. Pursuant to the RAD Statute, covered projects shall have an initial HAP
term of 20 years. Additionally, 24 CFR § 880.502, which imposes maximum contract terms
for New Construction projects consistent with statutory authority that was repealed in 1983,
will not apply.
B. Contract Renewal. Pursuant to the RAD Statute, after the initial term of the HAP Contract,
the owner is eligible for renewal of the contract under section 524 of MAHRAA, subject to
the terms and conditions applicable at the time of renewal and the availability of
appropriations each year of such renewal.
C. Initial contract rent setting. Initial rent levels for the PBRA contract are subject to section
8(c)(1) of the Act. For projects that will not undergo Work, the initial contract rents will be
established at the lesser of the following rent levels: (1) the comparable market rent, as
determined by a Rent Comparability Study (RCS), which must be prepared in accordance
with the requirements of Chapter Nine of the Section 8 Renewal Policy Guidebook118 and
submitted with the request for prospective conversion; and (2) 110 percent of the applicable
fair market rent (FMR), less utility allowances or 120 percent of the applicable FMR, less
utility allowances, in the case of projects that (i) preserve project-based rental assistance in
communities with high percentages of rent-burdened households and where it is particularly
hard to utilize tenant-based assistance, (ii) serve to expand housing opportunities in
communities with poverty rates less than 30%, and/or (iii) support revitalization activities
that are resulting in material private investment in the surrounding neighborhoods. With
HUD approval, the Project Owner may use the Small Area FMR in place of the FMR in the
computation of rents. To implement this provision HUD is implementing an alternative
requirement to 24 CFR §888.113(h) so as to permit the use of a Small Area FMR by project
for initial contract rent setting and when adjusting contract rents. 119
For projects with units that will be undergoing Work, the contract rents will be established at
the lesser of the following rent levels: (1) the “post-rehabilitation” rents, as determined by an
RCS; and (2) 110 percent of the applicable FMR, less utility allowances. For owners who
wish to establish rents using this method, the owner must submit the following: (1) An RCS
that includes both “as-is” rents at the project and “post-rehab” rents at the project and (2) A
proposed scope of work. The contract will include both an “as-is” rent schedule and a “post-
rehabilitation” rent schedule in one or more exhibits to the PBRA contract. The HAP
118
See http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8
119
This waiver and this provision shall not take effect until 81 FR 80567 (November 16, 2016) (“Establishing a
More Effective Fair Market Rent System; Using Small Area Fair Market Rents in the Housing Choice Voucher
Program Instead of the Current 50th Percentile FMRs”) becomes effective on January 17, 2017.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 185
Section III: Rent Supplement and Rental Assistance Payment Projects
Contract will reflect a date for the completion of the repairs. The owner will be required to
submit for HUD approval a cost-certification prepared for the third-party financing source
once the repairs have been completed.
If the repairs are not completed by the date reflected in the HAP Contract, unless HUD
agrees to extend the deadline for completion of repairs, on the first day of the month
following the date for the completion of repairs as reflected in the HAP Contract, HUD will
reduce the rents to those reflected in the “as-is” rent schedule starting on the first day of the
month when the repairs were to have been completed. Further, HUD will consider the
difference between the “as-is” and the “post-rehab” rents from the date of the effective date
of the HAP Contract until the date by which the repairs were to have been completed as an
overpayment and will offset future HAP payments until the overpayment has been repaid. 120
Effective on the date repairs are completed, HUD will resume providing the rents that are
reflected in the “post-rehab” rent schedule. For transactions where initial rents will be set at
the “post-rehab” rents, the PBRA HAP Contract will be effective on the first day of the
month following the closing on the construction financing. Owners will be required to submit
evidence that they have successfully closed on the construction financing to their transaction
manager.
D. Method of Adjusting Contract Rents. Contract rents will be adjusted by HUD’s OCAF at
each Anniversary of the HAP Contract, subject to (a) the availability of appropriations for
each year of the initial term of the HAP Contract and (b) the Maximum Rent, as defined
below.
The Maximum Rent is the higher of 110% of FMR (less utility allowances) or the market
rents, as demonstrated by an RCS procured and paid for by the Project Owner. Where an
RCS has been used to establish initial rents or to justify an OCAF adjusted rent that exceeds
110% of the FMR, the RCS will remain valid for five years, the Maximum Rent will not
apply for the next four annual rent adjustments, and rents will be adjusted only by the OCAF.
Where HUD has approved the use of Small Area FMR by project, the Small Area FMR will
continue to serve as the applicable FMR when determining the rent cap.
120
For example: a project has established a timeframe of completing construction within 12 months of the effective
date of the PBRA HAP Contract with $1,000 post-rehab rents and $800 as-is rents for 10 units. At the end of 12
months, construction is not completed, and HUD does not grant an extension. The contract rents will be reduced to
the rents reflected in the “as-is” rent schedule, and the owner will owe HUD $24,000, which will be repaid by
offsetting future HAP payments. Once the construction is completed in accordance with the scope of work and the
owner has submitted evidence of such completion that HUD determines is acceptable, HUD will resume providing
the rents as reflected in the “post-rehabilitation” rent schedule, subject to the required offsetting until the full
$24,000 is repaid to HUD.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 186
Section III: Rent Supplement and Rental Assistance Payment Projects
E. Distributions. Covered Projects will not be subject to any limitation on distributions of
surplus cash, contingent on the availability of surplus cash as determined by year-end audited
or certified financial statements. To implement this provision, HUD will not apply 24 CFR §
880.205, which, among other provisions, establishes certain limitations on distributions for
profit-motivated owners and authorizes HUD to require not-for-profit and certain for-profit
owners to establish a residual receipts account. Note: Although the PBRA contract will have
no limits on distributions, owners will still be subject to any limits on distributions that are
established in other governing documents at the project (e.g. a 236(e)(2) Use Agreement).
F. Limitation on Rescreening of Residents upon conversion. At conversion, current residents
are considered new admissions into the PBRA program. However, Project Owners may
screen current residents only for the mandatory screening requirements established by statute
(see, e.g., 24 CFR §§ 5.854, 5.856, and 5.857) and may not apply any discretionary screening
requirements (see, e.g., 24 CFR §§ 5.852 and 5.855).
G. Davis Bacon. Davis-Bacon applies to Second Component PBRA conversions to the same
extent it would apply if the conversion were a PBV conversion. See PIH Notice entitled
“Applicability of Davis-Bacon Labor Requirements to Projects Selected as Existing Housing
Under the Section 8 Project-Based Voucher Program – Guidance,” in 80 Federal Register
12511, March 9, 2015.
H. Under-occupied Units Converting to PBRA. If at the time of conversion, an eligible family
assisted under the HAP Contract is occupying a unit that is larger than appropriate because of
the family’s composition, the family will be permitted to continue to occupy the unit until
such time as an appropriate-sized unit becomes available in accordance with 24 CFR §
880.605. When an appropriate-sized unit becomes available, the family living in the
oversized unit must move to the appropriate-sized unit within a reasonable amount of time.
This protection to single persons who are elderly or disabled, regardless of the unit size.
Residents of under-occupied units that are single individuals who are not elderly or disabled
cannot be included in the HAP Contract.
3.7 Processing Requirements for Prospective Conversions
Prospective Conversions generally entail the following steps, described in further detail below
(see Section 3.8 for Retroactive Conversions):
Initial contact with HUD
Resident consultation and notification
Selection of PHA (PBV conversions only)
Conversion request submission and approval
Funding request and reservation
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Section III: Rent Supplement and Rental Assistance Payment Projects
Verification of expiration or termination of Rent Supp/RAP contract and HAP Contract
execution
A. Initial Contact with HUD. For conversions to PBRA and prospective conversions to PBV,
the first step is for the owner to contact HUD’s Office of Recapitalization to express interest
in a RAD conversion by registering an account on the RAD Resource Desk at
www.radresource.net, and submitting your initial interest. For PBV conversions, the owner is
not responsible for locating a PHA to administer the PBV contract. Upon initial contact with
HUD’s Office of Recapitalization, the transaction manager will work with the local Public
Housing field office to identify an appropriate PHA to administer the PBV assistance.
In the owner’s initial contact, the owner or owner’s representative will discuss the RAD
conversion with a member of HUD’s Office of Recapitalization’s staff and will develop a
strategy for a successful conversion at the project.
B. Resident Notification. After making contact with HUD’s Office of Recapitalization, the
owner must complete the following: resident briefing, resident notification and resident
comment activities prior to submission of the RAD conversion request. The owner is
required to notify all project households and legitimate resident organizations (as defined in
Section 1B.2 of this Notice) of the owner’s request to provide PBV or PBRA assistance in
lieu of TPV assistance. This notification must be done through a notification letter that meets
all of the following requirements121:
1. The notification letter must offer the residents a description of the anticipated contract
termination, the date of the termination, the units that are affected by the termination
of the Rent Supp or RAP contract, and the units that would receive PBV (or PBRA)
assistance in lieu of TPV assistance. The notification letter must also include a
description of the different rights under the affected programs (Rent Supp or RAP,
TPVs, and PBVs (or PBRA)) and how these programs impact resident rent payments
and resident mobility.
2. The notification letter must provide a 30-day comment period, during which time
residents and legitimate resident organizations will have the opportunity to comment.
The letter must contain instructions on how to submit written comments (by email, in
person etc.) and to whom to submit the comments. This 30-day comment period must
begin within 5 days following the resident briefing.
3. The notification letter must specify which units are proposed for conversion and must
be delivered to each unit in the project, with a copy to all legitimate resident
121
A sample notification letter for both PBV and PBRA conversions can be found at http://www.hud.gov/RAD
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 188
Section III: Rent Supplement and Rental Assistance Payment Projects
organizations; it must also be posted in the project office and at least three prominent
locations on the project site.
4. If relocation of households will be required due to rehabilitation, the notification
letter must state the owner’s plan for relocation, including the expected length of the
relocation, and it must specify that all relocation costs will be the responsibility of the
owner. All relocating households will have a right of first return.
5. The notification letter must indicate a date and time for the required residents’
briefing and provide a contact name and method of contact for questions and
comments.
The owner or owner’s representative is also required to schedule two residents’ briefings; the
first will involve HUD staff and the second can be held only by the owner. For PBV
conversions, the resident briefing will be held by Public Housing field office staff with
participation from HUD Multifamily field office staff. For PBRA conversions, the briefing
will be held by HUD Multifamily field office staff. The briefing is designed to fully inform
residents and legitimate resident organizations of the features of TPV and PBV (or PBRA)
assistance. The briefing will include information on the anticipated contract termination, the
date of the termination, the units that are affected by the termination of the Rent Supp or
RAP contract, and the units that would receive PBV (or PBRA) assistance in lieu of TPV
assistance. The owner or owner’s representative must attend the briefing and be available to
respond to residents’ questions and comments.
When providing resident notification and meetings, an Owner must use effective
communication for persons with hearing, visual, and other communication-related disabilities
consistent with Section 504 of the Rehabilitation Act of 1973 and, as applicable, the
Americans with Disabilities Act of 1990. Effective communication includes, but is not
limited to, providing written materials in appropriate alternative formats (e.g., Braille, large
type), as needed, and providing sign language interpreters and assistive listening devices at
resident meetings, as needed (24 CFR Part 8.6). Additionally, resident meetings must be held
in facilities that are physically accessible to persons with disabilities. Where physical
accessibility is not achievable, an Owner must use alternative methods to meet with qualified
individuals with disabilities, such as holding meetings at an alternate accessible site or
offering in-home meetings. Such meetings must be provided in the most integrated setting
appropriate to the needs of qualified individuals with disabilities. The most integrated setting
appropriate to the needs of qualified individuals with disabilities is a setting that enables
individuals with disabilities to interact with nondisabled persons to the fullest extent possible
(28 CFR part 35, Appendix B)..
Additionally, an Owner must provide meaningful access to its programs and activities for
persons who have a limited ability to read, speak, or understand English. For projects
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 189
Section III: Rent Supplement and Rental Assistance Payment Projects
undergoing RAD conversion, an Owner must provide language assistance to residents of the
project who are Limited English Proficient (LEP) to ensure that they have meaningful access
to RAD resident notifications and meetings. Such language assistance may include, but is not
limited to, providing written translation of notices regarding the plans for the project and
relocation and oral interpretation at resident meetings. For guidance on providing language
assistance to persons with LEP, please see Final Guidance to Federal Financial Assistance
Recipients Regarding Title VI Prohibition Against National Origin Discrimination Affecting
Limited English Proficient Persons (72 FR 2732).
3.7.1 Owner Submissions for Prospective Conversions
The owner must submit the items listed below to the RAD Resource Desk at
www.radresource.net at least 60 days, but no more than 12 months, prior to the anticipated
termination of the Rent Supp or RAP Contract. The owner is advised that early planning is
critical to ensure the PBV or PBRA contract is effective upon termination of the Rent Supp or
RAP Contract. If the Rent Supp or RAP contract is anticipated to expire or terminate fewer than
60 days following the date of application for the RAD conversion, the owner may request a
short-term extension of the contract.
HUD will carefully review the owner’s request to ensure it is eligible under the Notice and
complies with RAD requirements. The owner’s electronic application must include the following
information:
A. Statement Requesting PBV or PBRA Assistance in lieu of TPV Assistance. This
narrative statement must include:
1. Project Information. The Owner’s submission request must contain a general
project description (e.g. project name, project address, date project was built, total
number of units)
2. Transaction Description. The owner’s submission request must contain a
description of the overall transaction for the PBV or PBRA Conversion that includes
the information listed below:
i. Triggering Event. Description of the event that will trigger the termination of
the Rent Supp or RAP contract (contract expiration, contract termination, or
mortgage prepayment) including the Rent Supp or RAP contract number,
expiration date, number of units on the original contract, and the number of
actively billing units under the Rent Supp or RAP contract; as well as
mortgage information, such as whether the existing mortgage is FHA insured
or state-financed, and the mortgage maturity date.
ii. If the owner is prepaying the underlying mortgage, the statement must provide
detail on the anticipated prepayment, including proposed closing date of the
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Section III: Rent Supplement and Rental Assistance Payment Projects
transaction, whether the transaction is an acquisition or a refinance, a
summary of the proposed financing plan and must identify any external
financing deadlines, for example Low Income Housing Tax Credit (LIHTC)
bond closing or placed-in-service deadlines.
iii. HUD Approvals Needed. If the RAD conversion is part of a larger
preservation transaction – i.e. the prepayment of a Section 236 mortgage in
conjunction with a Decoupling, the 236 application must be submitted
electronically via www.hudmfpreservation.net, with an indication on their 236
application that the owner is pursuing RAD. The RAD application should also
indicate the nature of the preservation transaction and any anticipated
approvals from HUD’s Office of Recapitalization that will be needed in order
to trigger the termination of the Rent Supp or RAP contract at the project.
iv. LIHTC Award or Allocation Information - If the proposed conversion request
will involve LIHTC equity investment, the owner must submit with the RAD
conversion request scanned, PDF copies of all award or allocation letters from
the state LIHTC allocating agency evidencing the award/allocation, and
information on related LIHTC deadlines affecting the project.
v. Rehabilitation Information. If any Rehabilitation will occur in conjunction
with the site’s proposed RAD conversion request, the following information
must be provided: Per unit cost of rehabilitation, scope of work, relocation
plan, and a certification by the Owner that Davis Bacon wages will be paid.
3. Number of Units Proposed for the Conversion. The statement must identify the
number of units proposed for the RAD conversion. This includes project residents
that would be eligible for TPVs due to a termination of the Rent Supp or RAP
contract. To correctly identify the units eligible for conversion to PBV or PBRA
assistance, the owner should refer to the following points:
i. Number of Rent Supp or RAP contract units. The owner should review the
original Rent Supp or RAP contract to obtain the correct number of TPVs that
would be provided. This is the total number of Rent Supp or RAP units on the
original rental assistance contract that are currently occupied by income-
eligible (low-income) households. The final determination of income
eligibility will be performed by the PHA. If the Rent Supp or RAP contract
provides assistance to a project, it is likely that the number of actively billing
Rent Supp or RAP units is less than the total number of Rent Supp or RAP
units authorized in the original assistance contract. This is because, over time,
the amount of Rent Supp or RAP funding has stayed constant while costs have
increased, so the owner has reduced the number of units actively billing under
the Rent Supp or RAP program.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 191
Section III: Rent Supplement and Rental Assistance Payment Projects
ii. Number of non-Rent Supp/RAP units at the project. If the conversion
involves a qualifying prepayment in an eligible low-income housing project,
as defined above in Section 3.4(C), "Eligible Units," the RAD request may
include units occupied at the time of the RAD conversion by residents who
would otherwise receive EVs as a result of the mortgage prepayment. The
request must list the total number of units proposed for conversion with
residents that are eligible for EV assistance (subject to income eligibility as
determined by the PHA for PBV conversions).
iii. Number of Housing Choice Voucher (HCV) Units at the project. If the
conversion request involves units occupied by HCV holders, PBV assistance
may be attached to units in the project only when the triggering event is an
eligible prepayment and the conditions outlined in PIH Notice 2013-27:
Voluntary Relinquishment of Enhanced or Regular Voucher in Exchange for
PBV in Multifamily Conversion Actions are followed.
B. Resident Notification and Comment . The owner must provide evidence that resident
notification and comment procedures described in 3.7.B, above, have been met. The RAD
conversion request must include a copy of the notification letter, the date of the resident
briefing and the names and titles of participating HUD staff, copies of all comments
received, and a description of how the owner has considered the comments and addressed
them in the plan for the conversion of TPV assistance to PBV assistance. HUD will carefully
consider the comments from residents and legitimate resident organizations as part of the
review of the proposal, as discussed below.
C. Statement of Compliance. A statement of compliance with business practices detailed in
Section 3.4(A) of this Notice for owner eligibility, along with evidence of the most recent
REAC score and Management and Occupancy Review ratings that comply with Sections
3.4(E) and 3.4(A) of this Notice must be included in the materials as part of the conversion
request to HUD. If the project does not meet the required Management and Occupancy
Review standards, the statement should provide evidence that the transaction will put in place
a qualified owner and management entity to successfully operate the project as affordable
housing. If the project does not meet the required REAC score standards, the project will not
be eligible for conversion.
D. Project Agreements and Contracts. Scanned, PDF copies of all relevant and applicable
project legal agreements and documents, including: Rent Support RAP original contract
documents; mortgage note; Use and/or Regulatory Agreement; IRP Agreement; and, other
information necessary to evaluate the application that HUD may request at its discretion.
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Section III: Rent Supplement and Rental Assistance Payment Projects
E. Environmental Review. HUD cannot issue an approval to convert assistance until and
unless an environmental review has been completed and found to meet environmental review
requirements. The following describes the submission and approval steps for securing a
completed environmental review.
RAD transactions will either be reviewed under 24 CFR Part 50 or 24 CFR Part 58, i.e., “Part
50 Reviews” or “Part 58 Reviews.”122 All PBRA and FHA transactions require Part 50
Reviews, which are conducted by HUD staff. Non-FHA PBV transactions require Part 58
Reviews, which are conducted by a Responsible Entity (RE), except in accordance with 24
CFR § 58.11, when HUD may determine to conduct the review under Part 50.
Transaction Type Required Environmental Review
Non-FHA with PBRA Part 50
FHA insured Part 50
Non-FHA with PBV Part 58
For all Part 50 reviews, the applicant must submit reports and documentation to HUD in
accordance with 24 CFR Part 50, as discussed in Chapter 9 of the MAP guide, except as
follows:123
1. For PBRA conversions, (or where HUD has determined to conduct the PBV
conversion review under Part 50) PHAs are not required to follow the radon testing
requirements of HN 2013-03. However, HUD strongly recommends testing for all
projects and mitigation of any structures with elevated radon (4 pCi/L or higher).
2. For PBRA conversions (or where HUD has determined to conduct the PBV
conversion review under Part 50) that include substantial rehabilitation or new
construction activities, Owners shall provide HUD with a Phase I ESA in accordance
with ASTM E 1527-13.124
3. For PBRA conversions (or where HUD has determined to conduct the PBV
conversion review under Part 50) that do not include substantial rehabilitation or new
construction activities, Owners shall provide HUD with one of the following:
A transaction screen in accordance with ASTM E 1528-14 (or the most recent
edition). A transaction screen will identify potential environmental concerns
based on questionnaires, owner/occupant inquiry, site visit, government
122
Please see the Environmental Review for RAD Transactions guidance document, available at
https://www.hudexchange.info/resource/4216/environmental-review-requirements-for-rad-transactions/.
123
Additional guidance on environmental review requirements is available on the HUD Environmental Review
website, at https://www.hudexchange.info/environmental-review/. The MAP Guide is available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
124
For this purpose, substantial rehabilitation is any rehabilitation that does not meet the conditions in 24 CFR
§ 50.20(a)(2) for exclusion from review under the National Environmental Policy Act.
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Section III: Rent Supplement and Rental Assistance Payment Projects
records inquiry and historical sources inquiry. The transaction screen must be
prepared by a qualified professional, in accordance with 24 CFR § 50.3(i)(4).
As the definition of preparer in ASTM E 1528-14 does not meet this
requirement, the professional must have either: (a) a science degree and at
least one year of practical environmental assessment experience in the field, or
(b) three years of practical environmental assessment experience in the field
performing site assessments for site contamination. If any potential
environmental concerns are identified, an ASTM Phase I Environmental Site
Assessment (ESA) in accordance with ASTM E 1527-13 (or the most recent
edition) must be provided; OR
A Phase I ESA in accordance with ASTM E 1527-13 (or the most recent
edition).
HUD staff will carefully review the submissions and may require additional information in
order to complete their review. When HUD conducts the environmental review under Part
50, it documents the review using the HUD Environmental Review Online System (HEROS).
HUD’s review will result in a determination, which may stipulate the rejection of the site for
this demonstration or may require the completion of mitigation measures. The approval letter
will include any conditions required to carry out any and all mitigation measures that may
result from the environmental review. Any conditions that cannot be satisfied before the
execution of the HAP Contract will be captured in a Rider to the HAP Contract, and those
mitigation measure conditions must be completed in a timely manner.
When a Responsible Entity (RE) completes an environmental review under Part 58, they
should use HUD recommended formats to document the environmental review record.125 The
PHA should submit an environmental report to the RE, in such form as prescribed by the RE,
to enable the RE to complete their analysis. Once the review is completed, the PHA must
submit either:
Form HUD-7015.15, Request for Release of Funds, to their local PIH field staff.126
After the PIH Field Director approves the RROF, the Director sends a completed
HUD Form 7015.16 to the PHA, approving the release of funds. The PHA must
submit the completed Form 7015.16 to HUD; or
If form HUD-7015.15 is not required because the project converts to Exempt under
24 CFR § 58.34, the PHA must submit the RE’s finding of exempt activity with their
RAD application. A finding of exempt activity is a statement of the result of the RE’s
environmental review, and is required even when form HUD-7015.15 is not required.
125
HUD recommended formats are available at https://www.hudexchange.info/resource/3139/part-58-
environmental-review-cest-format/ and https://www.hudexchange.info/resource/3140/part-58-environmental-
assessment-form/.
126
Form HUD-7015.15 is available at https://www.hudexchange.info/resource/2338/hud-form-701515-request-
release-funds-certification/.
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Section III: Rent Supplement and Rental Assistance Payment Projects
A letter from the RE indicating that the project converts to Exempt under 24 CFR
§ 58.34 is sufficient.
The Owner submission must include either Form 7015.16 or a letter with the Responsible
Entity’s (RE’s) finding of exempt activity in order to consider the environmental review to be
complete.
Additionally, for PBRA conversions, owners will be required to submit the following:
F. Rent Comparability Study. In order to establish initial rents for a PBRA contract a Rent
Comparability Study will be required.
G. Capital Needs Assessment (CNA). Except as noted below, each project that is applying for
a PBRA conversion will be required to undergo a detailed physical inspection to determine
short-term rehabilitation needs and long-term capital needs to be addressed through a
Reserve for Replacement Account. A CNA must be submitted with the conversion request.
The assessment will be used to size ongoing reserve deposits and may inform the timeline for
any future refinancing.
1. Transition to CNA eTool. HUD is in the process of developing a standardized CNA
eTool for multifamily housing that will also be required of all PBRA RAD
conversions under this section. This new CNA eTool will be required as part of any
prospective conversion request that wishes to convert to PBRA that is submitted six
months after publication of the CNA eTool. Prior to the publication of the CNA
eTool, an owner may submit any alternative form of CNA completed by a qualified,
independent third-party professional.
2. Exemptions. HUD will exempt the following transaction types from completion of a
Capital Needs Assessment described in Paragraph 1:
i. For non-FHA transactions:
1. Projects that are undergoing rehabilitation and are providing a scope of
work and an RCS to establish PBRA contract rents. The Project Owner
must provide a copy of the CNA used to develop the Scope of Work,
which HUD will use to establish reserve for replacement requirements.
2. Projects that have had a PCA or CNA done in the last ten years will not
have to produce a new CNA. However, the existing CNA should be
included with their conversion request, which HUD will use to establish
reserve for replacement requirements;
3. Projects where the total assisted units (e.g., RAD units and other PBV
units) at the project will constitute less than 20% of the total units at the
project (or a higher percentage at HUD’s discretion).
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Section III: Rent Supplement and Rental Assistance Payment Projects
ii. For FHA transactions, owners should follow applicable requirements in the
MAP guide governing exemptions.
3. Expiring Rent Supplement or RAP contracts. For owners where the Rent Supp or
RAP contract is expiring within six months of the RAD conversion request, there is
no requirement to complete the CNA prior to conversion. However, HUD will require
a rider to the PBRA contract that indicates that the owner must procure and submit a
CNA within six months of the execution of the PBRA HAP Contract.
3.7.2 PBV: HUD Review of Prospective Conversion Request, Selection of
PHA, and Funding and Execution of HAP Contract
A. HUD Review. HUD will review the owner's request to verify that the conditions of this
Notice are met. Specifically, the review will verify the following:
1. The owner has correctly identified the number of eligible units proposed for
conversion and inclusion in the HAP Contract to be executed by the PHA and the
owner (the final number is subject to determination of unit eligibility, family program
eligibility and income verification by the PHA). This includes verifying that the
owner has correctly identified all units that are currently covered by a Rent Supp or
RAP contract, as well as any other units that may be eligible to convert their
assistance following the requirements of Section 3.4(C) “Eligible Units for PBV
Conversion;”
2. The owner has complied with the resident notice and briefing requirements in this
Notice, and satisfactorily addressed resident comments;
3. The project and owner meet all eligibility requirements listed in Section 3.4 of this
Notice;
4. If more than 50 percent of written comments from unique residents express
disapproval for the conversion of assistance, HUD must contact the owner to discuss
options for proceeding with the conversion request.
5. HUD reserves the right to deny the conversion request if the conditions of this Notice
are not met, or if the owner does not satisfactorily address concerns raised in
residents’ comments.
B. Selection of PHA. Once a transaction manager determines that the project meets all
requirements outlined in this notice and that the project is eligible for conversion, HUD will
forward the RAD project request to the HUD Public Housing Field Office Director. The field
office will determine the appropriate PHA to administer the PBVs in accordance with
established criteria for selection of PHA administration of TPVs, including, but not limited to,
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Section III: Rent Supplement and Rental Assistance Payment Projects
jurisdiction to administer the voucher program in the area where the project is located and
PHA administrative capacity (including any experience with operating a PBV program). The
PHA will have the opportunity to accept or reject the offer to enter into a PBV HAP Contract
for eligible units at the project. In the case that the initially-selected PHA does not wish to
enter into a PBV HAP Contract, the HUD Public Housing Field Office Director will make a
reasonable effort to find a PHA willing to enter into a PBV HAP Contract with the owner for
eligible units at the project. If no PHA consents to enter into the PBV HAP Contract, the
owner’s conversion request will not be approved. The selected PHA must inform the local
HUD Public Housing Field Office within 30 days of the date of its selection whether the PHA
consents or does not consent to enter into the PBV contract at the Rent Supp or RAP project.
Once a PHA has consented to administer the PBV contract, the local HUD Public Housing
Field Office will inform the transaction manager in HUD’s Office of Recapitalization that a
PHA has been identified.
C. Funding and Execution of the PBV HAP Contract. Once the transaction manager has
received confirmation that there is a PHA willing to administer the PBV HAP Contract at the
project, the transaction manager will begin the process of finalizing the PBV HAP Contract
at the project.
The transaction manager will also be responsible for identifying the anticipated number of
converting units at the project and preparing the Housing Conversion Action worksheet to
send to the Financial Management Division (FMD) to request funding for the conversion.
The transaction manager will use the anticipated date of the triggering event as the
anticipated effective date for the funding request. Once the funding request has been made,
the FMD will work closely with the transaction manager to ensure that the correct number of
vouchers has been requested before approving the funding request. Once the funding request
has been approved, HUD will then amend the PHA’s ACC, to provide tenant-protection
funding for the conversion.
The PHA will also determine which units will be included in the PBV contract. In some
cases, the number of actively billing Rent Supp or RAP units has reduced over time, so the
number of units on the contract exceeds the number of actively billing units. The original
contract specified the number of units to receive Rent Supp or RAP assistance, but did not
specify which units were covered by the contract. This can create confusion in determining
which families may receive assistance. For example, a 100-unit project may have a Rent
Supp contract that covers 50 units, but may have only 30 actively billing units. The 30
families that reside in the actively billing units will receive PBV assistance (provided they
are income-eligible), and an additional 20 households at the project would be eligible for
PBV assistance (provided there are 20 income- eligible families). Once the Owner’s
submission is accepted by HUD and a PHA is selected to administer the PBV HAP Contract,
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Section III: Rent Supplement and Rental Assistance Payment Projects
the PHA must determine which 20 families of the 70 families residing in units not actively
billing under the Rent Supp contract will receive voucher assistance. To determine which
households will receive assistance, the PHA will perform income verification on all
households that do not reside in the actively billing Rent Supp or RAP units, and will then
hold a lottery among the income-eligible residents to select the families who will receive the
vouchers. Subsequent to conversion, the PHA administering the contract shall enter data into
the Form HUD-50058, in accordance with PIH Notice 2011-065 and Appendix
For PBV conversions with environmental reviews conducted under 24 CFR Part 58, the
Transaction Manager will ensure that either Form 7015.16 or a letter with the Responsible
Entity’s finding of exempt activity has been submitted with the application for prospective
conversion. If the PBV conversion is FHA-financed or HUD has determined to conduct the
environmental review under 24 CFR Part 50, the Transaction Manager will conduct the
environmental review utilizing the environmental reports and analyses submitted as part of
the application for prospective conversion and ensure the environmental review meets the
standards of Part 50.127
Subsequent to the amendment of the PHA’s ACC, confirmation of the environmental review
being completed, and confirmation that the Rent Supp or RAP contract has been terminated
or has expired, the PHA and owner will enter into a PBV HAP Contract for projects that
qualify as existing housing under the PBV program.128 However, prior to the execution of the
HAP Contract, the units proposed for conversion must meet HQS, all income certifications
must have been made, and the triggering event must have occurred. If the units do not meet
HQS, the project will not be able to execute HAP until the units substantially comply with
HQS.
3.7.3 PBRA: HUD Review of PBRA Request and Execution of Contract
HUD will review the owner's request to verify that the conditions of this Notice are met.
Specifically, the review will verify the following:
The owner has correctly identified the number of units proposed for conversion and inclusion
in the PBRA HAP Contract to be executed by HUD and the owner. This includes verifying
that the owner has correctly identified all units that are currently covered by a Rent Supp or
RAP contract and all units that would receive TPVs in the form of EVs at a qualifying
Prepayment that may be converted to PBRA assistance following the requirements of Section
3.4(D), “Eligible Units for PBRA Conversion”.
127
See Section 3.7.1.E for more information on environmental review.
128
The HAP Contract and Rider can be found at www.hud.gov/rad
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Section III: Rent Supplement and Rental Assistance Payment Projects
The owner has complied with the resident notice and briefing requirements in this Notice,
and satisfactorily addressed resident comments;
The project and owner meet all eligibility requirements listed in Section 3.4 of this Notice;
and
If more than 50 percent of written comments from unique residents express disapproval for
the conversion of assistance, HUD must contact the owner to discuss options for proceeding
with the conversion request.
The RCS meets the standards set forth in Chapter 9 of the Section 8 Renewal Guide.
If “post-rehab” rents are being utilized, evidence that the Owner has secured sources to
finance the scope of work that would result in post-rehab rents.
The Transaction Manager will conduct the environmental review utilizing the environmental
reports and analyses submitted as part of the application for prospective conversion and
ensure the environmental review meets the standards of 24 CFR Part 50.129
Certification of Davis-Bacon wages if rehabilitation is being used.
HUD reserves the right to deny the conversion request if the conditions of this Notice are not
met, or if the owner does not satisfactorily address concerns raised in residents’ comments.
After reviewing the Owner’s submission, the Office of Recapitalization will send a letter to the
owner informing them of its initial approval to convert assistance under PBRA. Recap staff will
then begin the process of reserving funding for the PBRA contract. Conversion of assistance
under PBRA will be conditioned on expiration or termination of the Rent Supp or RAP contract
at the project. Once funds have reserved for the PBRA contract and the expiration or termination
of the Rent Supp or RAP contract has occurred, the PBRA contract will be executed by the
owner and the local HUD multifamily office.
3.8 Processing Requirements for Retroactive Conversions
Retroactive conversions are conversions of TPVs that have already been issued to project
residents as a result of a Rent Supp or RAP contract expiration or the termination of a Rent Supp
or RAP contract due to prepayment of a mortgage. Retroactive conversions will be limited to
PBV Conversions only. The contract expiration or termination must have occurred on or after
October 1, 2006. These TPVs may include EVs provided to eligible residents at the Rent Supp or
RAP-assisted project as the result of a mortgage prepayment, as detailed in Section 3.4(C). In
such cases, EVs provided to all project residents as part of the mortgage prepayment may be
129
See Section 3.7.1.E for more information on environmental review.
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Section III: Rent Supplement and Rental Assistance Payment Projects
converted to PBV assistance as part of the RAD proposal, provided that households that received
these EVs are still residing at the project and are eligible for PBV assistance. To be eligible for
the PBV program, project residents with EV assistance must be very low income (or low-income
if the PHA allows admission of low-income tenants in accordance with their administrative plan)
as described in 24 CFR § 982.201, and meet all program eligibility requirements of the PBV
program.
For retroactive conversions, the owner will submit a conversion request directly to the PHA that
administers the TPVs that were issued in response to the Rent Supp or RAP contract termination,
with a complete copy to HUD Headquarters through the RAD Resource Desk at
www.radresource.net. Only the TPVs originally provided to eligible residents at the time of
contract termination, expiration, or prepayment are eligible for conversion to PBV assistance,
and only the units occupied by households that received TPVs and are still residing at the project
are eligible to have their assistance converted to PBV assistance.
As described in Section 3.3 A.1 General Program Description-Prospective Conversions, an
owner may not submit a request for a prospective conversion if the Rent Supp or RAP contract is
anticipated to expire or terminate fewer than 60 days following the date of application for the
RAD conversion. If the Rent Supp or RAP contract is expected to expire or terminate within 60
days, the owner must pursue a retroactive conversion unless a short-term extension is approved.
In these instances, eligible residents will receive TPVs in accordance with current practice
described in PIH Notice 2001-41 or any subsequent guidance issued by the Office of Public and
Indian Housing governing Multifamily Housing Conversion Actions. After the TPVs are issued
to eligible residents, the owner may apply for a retroactive conversion of assistance.
Residents that were previously issued TPVs will be considered continuing participants and no re-
certification must be done at the time of conversion, provided that the PHA has completed an
income re-certification within the past 12 months from the date of conversion. However, if the
assistance was provided as EVs due to a preservation-eligible mortgage prepayment, the PHA
will perform income verification to determine whether the families that received EV assistance
meet the low-income requirements for the PBV program.
The owner is advised that the final number of units where assistance is converted is determined
after the receipt of resident consent and/ or non-consent, resident move out, or where voucher
holders have decided not to relinquish their vouchers. Any household that has consented must
relinquish its voucher at the time of conversion. However, residents retain the right to move from
the project with voucher assistance or remain with EV assistance, up until the time the PBV HAP
Contract is executed. If a household with a TPV moves from the project prior to the execution of
the PBV HAP Contract, the unit that was occupied by that household will not be included in the
PBV HAP Contract. Only income-eligible households that consent to the conversion and who
reside in the project at the time of PBV HAP Contract execution will receive assistance PBV
assistance.
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Section III: Rent Supplement and Rental Assistance Payment Projects
3.8.1 Submission of Requests for Retroactive Conversions
A Rent Supp or RAP project owner must submit their request to the PHA administering the
TPVs to convert such assistance to PBV assistance, and submit a complete copy to HUD
Headquarters through the RAD Resource Desk at www.radresource.net. Owners are strongly
encouraged to contact the PHA early in the process to determine if the PHA administering the
TPVs is interested in approving the PBV RAD request. The owner may request conversion of
TPVs that were issued to residents of the project following a contract termination that occurred
on or after October 1, 2006, or expires within 60 days of an owner’s RAD conversion request,
but did not receive an extension. The owner’s request must include the following information:
A. Statement Requesting Conversion of TPV Assistance to PBV Assistance. This narrative
statement must:
1. Identify the households for which a conversion of TPVs to PBV assistance is
requested. The owner must list the specific households, by name and unit number,
that received or will have received TPVs because of a contract termination due to
prepayment or contract expiration that occurred on or after October 1, 2006 and who
still reside at the project with HCV assistance. The PHA will verify the owner’s list
against the PHA’s records. Additionally, the owner must supply supporting
documentation that these households have consented to conversion of the TPV
assistance to PBV assistance, as described below.
2. A statement verifying that the date of the contract termination/expiration was no
earlier than October 1, 2006.
B. Documentation of Resident Consent. The owner is required to notify affected households
of its plans to request conversion of TPV assistance to PBV assistance.130 Additionally, the
activities below must be documented and submitted with the owner’s request:
1. The notification letter must be delivered to all project residents and legitimate
resident organizations, including each eligible unit occupied by an eligible household;
it must also be posted in the project office, the PHA office, and at least three
prominent locations on the project site.
2. The notification letter must include a list of the potentially-affected units and must
indicate that consent by each affected household must be obtained prior to any such
conversion. The notification letter must also indicate that the administering PHA will
130 Sample Resident Notification language can be found on the RAD website.
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Section III: Rent Supplement and Rental Assistance Payment Projects
schedule and hold resident briefings; the time and date of such briefings must be
stated in the letter.
3. The administering PHA must conduct a briefing for affected residents and legitimate
resident organizations, during which the PHA must explain and provide written
documentation that completely and accurately describes the different rights under the
affected programs, TPVs and PBV assistance, and the impact each type of assistance
may have on the tenant portion of the rent and resident mobility. Households must be
made aware that they may remain in the unit with the voucher assistance, and, if a
household does not consent to the conversion of their voucher assistance to PBV
assistance, they must not be made to move out of the unit. The owner cannot employ
any tactics to pressure the household into relinquishing its HCV and may not
terminate a household’s lease on such a basis.
4. If relocation of households will be required due to rehabilitation, the notification
letter and briefing must state the owner’s plan for relocation, including the expected
length of the relocation, and must specify that all relocation costs will be the
responsibility of the owner. All relocating households will have a right of first return.
5. During the briefing, each affected household must be provided with a form to
complete and return to the PHA to acknowledge their consent or non-consent; each
household must be provided at least 30 days from the date of the PHA briefing to
make the decision. The form must be signed by the head of household and returned to
the PHA, with a copy to the owner.
6. TPV assistance will be converted to PBV assistance only for units where the
household has signed a document consenting to the conversion of assistance.
Households that do not provide consent will continue to receive HCV assistance and
shall not be forced to relocate. Non-consent to the conversion is not grounds for lease
termination by the owner.
C. Statement of Compliance. A statement of compliance with business practices for owner
eligibility detailed in paragraph Section 3.4(A) of this Notice must be submitted, along with
evidence that the project meets HQS. Note: if TPVs have not been issued, HQS inspections
will be included in the TPV issuance process.
D. Environmental Review. See Section 3.7.1.E for the Environmental Review submission
requirements applicable to PBV.
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Section III: Rent Supplement and Rental Assistance Payment Projects
3.8.2 Review and Consent of PHA and Execution of PBV HAP Contract
The PHA will review the request of the owner and decide whether it is interested in participating
in RAD and a retroactive conversion. The PHA must inform HUD within 15 days of the date of
the owner’s request to the PHA if the agency does not consent to the conversion. The consent or
non-consent must be submitted to the RAD Resource Desk at www.radresource.net. If the PHA
determines it will participate, the PHA will review the request of the owner to verify whether or
not the owner has complied with all required resident notification and consent procedures, and to
ensure that the PBV contract will only cover those units where residents have consented to the
conversion.
Upon receipt of the PHA’s consent, HUD will review the owner’s submission as required under
section 3.7.1 to ensure that it meets all Notice requirements and will notify the owner and the
PHA within 15 calendar days whether the conversion request is approved. If the PHA does not
consent, the conversion of assistance will not be authorized, and a rejection will be sent. Per the
RAD Statute, the PHA that is actively administering the TPVs for the project must consent to the
conversion.
Following HUD approval, the PHA and owner will enter into a PBV HAP Contract if the units
meet the PBV regulatory requirements for existing housing. The term of the HAP Contract is 15
years; by choosing to participate in the RAD program, the PHA agrees to enter into 15-year HAP
Contract. The owner is advised that the PBV HAP Contract will only cover eligible units as
described in Section 3.4. A PBV HAP Contract will not be entered into unless the units
substantially meet HQS.
Subsequent to conversion, the PHA administering the contract shall enter data into the Form
HUD-50058, in accordance with PIH Notice 2011-65 and Appendix IV.
3.9 Additional Information
For additional information on this Section of the Notice, please check www.hud.gov/rad or email
questions to RAD2@hud.gov.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 203
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 APPENDIX I – 24 CFR PART 880 REGULATION, STRICKEN FOR
2 PBRA CONVERSIONS
3
4 Title 24: Housing and Urban Development
5 PART 880—SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW
6 CONSTRUCTION
7
8 Section Contents
9 Subpart A—Summary and Applicability
10
11 § 880.101 General.
12 § 880.104 Applicability of part 880.
13 § 880.105 Applicability to proposals and projects under 24 CFR part 811.
14 Subpart B—Definitions and Other Requirements
15
16 § 880.201 Definitions.
17 § 880.205 Limitation on distributions.
18 § 880.207 Property standards.
19 § 880.208 Financing.
20 § 880.211 Audit.
21 Subparts C–D [Reserved]
22
23 Subpart E—Housing Assistance Payments Contract
24
25 § 880.501 The contract.
26 § 880.502 Term of contract.
27
28 § 880.504 Leasing to eligible families.
29 § 880.505 Contract administration and conversions.
30 § 880.506 Default by owner (private-owner/HUD and PHA-owner/HUD projects).
31 § 880.507 Default by PHA and/or owner (private-owner/PHA projects).
32 § 880.508 Notice upon contract expiration.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 204
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 Subpart F—Management
2
3 § 880.601 Responsibilities of owner.
4 § 880.602 Replacement reserve.
5 § 880.603 Selection and admission of assisted tenants.
6 § 880.604 Tenant rent.
7 § 880.605 Overcrowded and underoccupied units.
8 § 880.606 Lease requirements.
9 § 880.607 Termination of tenancy and modification of lease.
10 § 880.608 Security deposits.
11 § 880.609 Adjustment of contract rents.
12 § 880.610 Adjustment of utility allowances.
13 § 880.611 Conditions for receipt of vacancy payments.
14 § 880.612 Reviews during management period.
15
16
17 Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 13611–13619.
18 Source: 44 FR 59410, Oct. 15, 1979, unless otherwise noted.
19 Subpart A—Summary and Applicability
20 § 880.101 General.
21 (a) The purpose of the Section 8 program is to provide low-income families with decent, safe
22 and sanitary rental housing through the use of a system of housing assistance payments. This part
23 contains the policies and procedures applicable to the Section 8 new construction program. The
24 assistance may be provided to public housing agency owners or to private owners either directly
25 from HUD or through public housing agencies.
26
27 [61 FR 13587, Mar. 27, 1996]
28 § 880.104 Applicability of part 880.
29 (a) Part 880, in effect as of November 5, 1979, applies to all proposals for which a notification
30 of selection was not issued before the November 5, 1979 effective date of part 880. (See 24 CFR
31 part 880, revised as of April 1, 1980.) Where a notification of selection was issued for a proposal
32 before the November 5, 1979 effective date, part 880, in effect as of November 5, 1979, applies
33 if the owner notified HUD within 60 calendar days that the owner wished the provisions of part
34 880, effective November 5, 1979, to apply and promptly brought the proposal into conformance.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 205
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 (b) Subparts E (Housing Assistance Payments Contract) and F (Management) of this part apply
2 to all projects for which an Agreement was not executed before the November 5, 1979, effective
3 date of part 880. Where an Agreement was so executed:
4 (1) The owner and HUD may agree to make the revised subpart E of this part applicable and to
5 execute appropriate amendments to the Agreement and/or Contract.
6 (2) The owner and HUD may agree to make the revised subpart F of this part applicable (with or
7 without the limitation on distributions) and to execute appropriate amendments to the Agreement
8 and/or Contract.
9 (c) Section 880.607 (Termination of tenancy and modification of leases) applies to all families.
10 (d) Notwithstanding the provisions of paragraph (b) of this section, the provisions of 24 CFR part
11 5 apply to all projects, regardless of when an Agreement was executed.
12 [61 FR 13587, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000]
13 § 880.105 Applicability to proposals and projects under 24 CFR part 811.
14 Where proposals and projects are financed with tax-exempt obligations under 24 CFR part 811,
15 the provisions of part 811 will be complied with in addition to all requirements of this part. In the
16 event of any conflict between this part and part 811, part 811 will control.
17 Subpart B—Definitions and Other Requirements
18 § 880.201 Definitions.
19 Annual Contributions Contract (ACC). As defined in part 5 of this title.
20 Agency. As defined in 24 CFR part 883.
21 Agreement. (Agreement to Enter into Housing Assistance Payments Contract) The Agreement
22 between the owner and the contract administrator which provides that, upon satisfactory
23 completion of the project in accordance with the HUD-approved final proposal, the administrator
24 will enter into the Contract with the owner.
25 Annual income. As defined in part 5 of this title.
26 Contract. (Housing Assistance Payments Contract) The Contract entered into by the owner and
27 the contract administrator upon satisfactory completion of the project, which sets forth the rights
28 and duties of the parties with respect to the project and the payments under the Contract.
29 Contract Administrator. The entity which enters into the Contract with the owner and is
30 responsible for monitoring performance by the owner. The contract administrator is a PHA in the
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1 case of private-owner/PHA projects, and HUD in private-owner/HUD and PHA-owner/HUD
2 projects.
3 Contract rent. The total amount of rent specified in the contract as payable to the owner for a
4 unit.
5 Decent, safe, and sanitary. Housing is decent, safe, and sanitary if it meets the physical condition
6 requirements in 24 CFR part 5, subpart G.
7 Drug-related criminal activity. The illegal manufacture, sale, distribution, use or possession with
8 the intent to manufacture, sell, distribute, or use, of a controlled substance as defined in section
9 102 of the Controlled Substances Act, 21 U.S.C. 802.
10 Elderly family. As defined in part 5 of this title.
11 Fair Market Rent (FMR). As defined in part 5 of this title.
12 Family. As defined in part 5 of this title.
13 Final proposal. The detailed description of a proposed project to be assisted under this part,
14 which an owner submits after selection of the preliminary proposal, except where a preliminary
15 proposal is not required under §880.303(c). (The final proposal becomes an exhibit to the
16 Agreement and is the standard by which HUD judges acceptable construction of the project.)
17 Housing assistance payment. The payment made by the contract administrator to the owner of an
18 assisted unit as provided in the contract. Where the unit is leased to an eligible family, the
19 payment is the difference between the contract rent and the tenant rent. An additional payment is
20 made to the family when the utility allowance is greater than the total tenant payment. A housing
21 assistance payment, known as a “vacancy payment” may be made to the owner when an assisted
22 unit is vacant, in accordance with the terms of the contract.
23 HUD. Department of Housing and Urban Development.
24 Independent Public Accountant. A Certified Public Accountant or a licensed or registered public
25 accountant, having no business relationship with the owner except for the performance of audit,
26 systems work and tax preparation. If not certified, the Independent Public Accountant must have
27 been licensed or registered by a regulatory authority of a State or other political subdivision of
28 the United States on or before December 31, 1970. In States that do not regulate the use of the
29 title “public accountant,” only Certified Public Accountants may be used.
30 Low income family. As defined in part 5 of this title.
31 NOFA. As defined in part 5 of this title.
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1 Owner. Any private person or entity (including a cooperative) or a public entity which qualifies
2 as a PHA, having the legal right to lease or sublease newly constructed dwelling units assisted
3 under this part. The term owner also includes the person or entity submitting a proposal under
4 this part.
5 Partially-assisted Project. A project for non-elderly families under this part which includes more
6 than 50 units of which 20 percent or fewer are assisted.
7 PHA-Owner/HUD Project. A project under this part which is owned by a PHA. For this type of
8 project, the Agreement and the Contract are entered into by the PHA, as owner, and HUD, as
9 contract administrator.
10 Private-Owner/HUD Project. A project under this part which is owned by a private owner. For
11 this type of project, the Agreement and Contract are entered into by the private owner, as owner,
12 and HUD, as contract administrator.
13 Private-Owner/PHA Project. A project under this part which is owned by a private owner. For
14 this type of project, the Agreement and Contract are entered into by the private owner, as owner,
15 and the PHA, as contract administrator, pursuant to an ACC between the PHA and HUD. The
16 term also covers the situation where the ACC is with one PHA and the owner is another
17 PHA.Project Account. A specifically identified and segregated account for each project which is
18 established in accordance with §880.503(b) out of the amounts by which the maximum annual
19 commitment exceeds the amount actually paid out under the Contract or ACC, as applicable,
20 each year.
21 Public Housing Agency (PHA). As defined in part 5 of this title.
22 Rent. In the case of an assisted unit in a cooperative project, rent means the carrying charges
23 payable to the cooperative with respect to occupancy of the unit.
24 Replacement cost. The estimated construction cost of the project when the proposed
25 improvements are completed. The replacement cost may include the land, the physical
26 improvements, utilities within the boundaries of the land, architect's fees, and miscellaneous
27 charges incident to construction as approved by the Assistant Secretary.
28 Secretary. The Secretary of Housing and Urban Development (or designee).
29 Small Project. A project for non-elderly families under this part which includes a total of 50 or
30 fewer (assisted and unassisted) units.
31 Tenant rent. As defined in part 5 of this title.
32 Total tenant payment. As defined in part 5 of this title.
33 Utility allowance. As defined in part 5 of this title.
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1 Utility reimbursement. As defined in part 5 of this title.
2 Vacancy payment. The housing assistance payment made to the owner by the contract
3 administrator for a vacant assisted unit if certain conditions are fulfilled as provided in the
4 Contract. The amount of the vacancy payment varies with the length of the vacancy period and is
5 less after the first 60 days of any vacancy.
6 Very low income family. As defined in part 5 of this title.
7 [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18923, Mar. 24, 1980; 48 FR 12703, Mar. 28,
8 1983; 49 FR 6714, Feb. 23, 1984; 49 FR 17449, Apr. 24, 1984; 49 FR 19943, May 10, 1984; 61
9 FR 5212, Feb. 9, 1996; 61 FR 13587, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 63 FR 46578,
10 Sept. 1, 1998; 65 FR 16722, Mar. 29, 2000]
11 § 880.205 Limitation on distributions.
12 (a) Non-profit owners are not entitled to distributions of project funds.
13 (b) For the life of the Contract, project funds may only be distributed to profit-motivated owners
14 at the end of each fiscal year of project operation following the effective date of the Contract
15 after all project expenses have been paid, or funds have been set aside for payment, and all
16 reserve requirements have been met. The first year's distribution may not be made until cost
17 certification, where applicable, is completed. Distributions may not exceed the following
18 maximum returns:
19 (1) For projects for elderly families, the first year's distribution will be limited to 6 percent on
20 equity. The Assistant Secretary may provide for increases in subsequent years' distributions on
21 an annual or other basis so that the permitted return reflects a 6 percent return on the value in
22 subsequent years, as determined by HUD, of the approved initial equity. Any such adjustment
23 will be made by Notice in theFederal Register.
24 (2) For projects for non-elderly families, the first year's distribution will be limited to 10 percent
25 on equity. The Assistant Secretary may provide for increases in subsequent years' distributions
26 on an annual or other basis so that the permitted return reflects a 10 percent return on the value in
27 subsequent years, as determined by HUD, of the approved initial equity. Any such adjustment
28 will be made by Notice in the Federal Register.
29 (c) For the purpose of determining the allowable distribution, an owner's equity investment in a
30 project is deemed to be 10 percent of the replacement cost of the part of the project attributable
31 to dwelling use accepted by HUD at cost certification (see §880.405) unless the owner justifies a
32 higher equity contribution by cost certification documentation in accordance with HUD
33 mortgage insurance procedures.
34 (d) Any short-fall in return may be made up from surplus project funds in future years.
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1 (e) If HUD determines at any time that project funds are more than the amount needed for
2 project operations, reserve requirements and permitted distribution, HUD may require the excess
3 to be placed in an account to be used to reduce housing assistance payments or for other project
4 purposes. Upon termination of the Contract, any excess funds must be remitted to HUD.
5 (f) Owners of small projects or partially-assisted projects are exempt from the limitation on
6 distributions contained in paragraphs (b) through (d) of this section.
7 (g) In the case of HUD-insured projects, the provisions of this section will apply instead of the
8 otherwise applicable mortgage insurance program provisions.
9 (h) HUD may permit increased distributions of surplus cash, in excess of the amounts otherwise
10 permitted, to profit-motivated owners who participate in a HUD-approved initiative or program
11 to preserve below-market housing stock. The increased distributions will be limited to a
12 maximum amount based on market rents and calculated according to HUD instructions. Funds
13 that the owner is authorized to retain under section 236(g)(2) of the National Housing Act are not
14 considered distributions to the owner.
15 (i) Any State or local law or regulation that restricts distributions to an amount lower than
16 permitted by this section or permitted by the Commissioner under this paragraph (i) is preempted
17 to the extent provided by section 524(f) of the Multifamily Assisted Housing Reform and
18 Affordability Act of 1997.
19 [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18923, Mar. 24, 1980; 49 FR 6714, Feb. 23,
20 1984; 61 FR 5212, Feb. 9, 1996; 65 FR 61074, Oct. 13, 2000]
21 § 880.207 Property standards.
22 Projects must comply with:
23 (a) [Reserved]
24 (b) In the case of manufactured homes, the Federal Manufactured Home Construction and Safety
25 Standards, pursuant to Title VI of the Housing and Community Development Act of 1974, and
26 24 CFR part 3280;
27 (c) In the case of congregate or single room occupant housing, the appropriate HUD guidelines
28 and standards;
29 (d) HUD requirements pursuant to section 209 of the Housing and Community Development
30 Act of 1974 for projects for the elderly or handicapped;
31 (e) HUD requirements pertaining to noise abatement and control; and
32 (f) Applicable State and local laws, codes, ordinances and regulations.
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1 (g) Smoke detectors —(1) Performance requirement. After October 30, 1992, each dwelling unit
2 must include at least one battery-operated or hard-wired smoke detector, in proper working
3 condition, on each level of the unit. If the unit is occupied by hearing-impaired persons, smoke
4 detectors must have an alarm system, designed for hearing-impaired persons, in each bedroom
5 occupied by a hearing-impaired person.
6 (2) Acceptability criteria. The smoke detector must be located, to the extent practicable, in a
7 hallway adjacent to a bedroom, unless the unit is occupied by a hearing-impaired person, in
8 which case each bedroom occupied by a hearing-impaired person must have an alarm system
9 connected to the smoke detector installed in the hallway.
10 [44 FR 59410, Oct. 15, 1979, as amended at 50 FR 9269, Mar. 7, 1985; 57 FR 33851, July 30,
11 1992; 63 FR 46578, Sept. 1, 1998]
12 § 880.208 Financing.
13 (a) Types of financing. Any type of construction financing and long-term financing may be used,
14 including:
15 (1) Conventional loans from commercial banks, savings banks, savings and loan associations,
16 pension funds, insurance companies or other financial institutions;
17 (2) Mortgage insurance programs under the National Housing Act;
18 (3) Mortgage and loan programs of the Farmers' Home Administration of the Department of
19 Agriculture compatible with the Section 8 program; and
20 (4) Financing by tax-exempt bonds or other obligations.
21 (b) HUD approval. HUD must approve the terms and conditions of the financing to determine
22 consistency with these regulations and to assure they do not purport to pledge or give greater
23 rights or funds to any party than are provided under the Agreement, Contract, and/or ACC.
24 Where the project is financed with tax-exempt obligations, the terms and conditions will be
25 approved in accordance with the following:
26 (1) An issuer of obligations that are tax-exempt under any provision of Federal law or regulation,
27 the proceeds of the sale of which are to be used to purchase GNMA mortgage-backed securities
28 issued by the mortgagee of the Section 8 project, will be subject to 24 CFR part 811, subpart B.
29 (2) Issuers of obligations that are tax-exempt under Section 11(b) of the U.S. Housing Act of
30 1937 will be subject to 24 CFR part 811, subpart A if paragraph (b)(1) of this section is not
31 applicable.
32 (3) Issuers of obligations that are tax-exempt under any provision of Federal law or regulation
33 other than section 11(b) of the U.S. Housing Act of 1937 will be subject to 24 CFR part 811,
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1 subpart A if paragraph (b)(1) of this section is not applicable, except that such issuers that are
2 State Agencies qualified under 24 CFR part 883 are not subject to 24 CFR part 811 subpart A
3 and are subject solely to the requirements of 24 CFR part 883 with regard to the approval of tax-
4 exempt financing.
5 (c) Pledge of Contracts. An owner may pledge, or offer as security for any loan or obligation, an
6 Agreement, a Contract or ACC entered into pursuant to this part: Provided, however, That such
7 financing is in connection with a project constructed pursuant to this part and approved by HUD.
8 Any pledge of the Agreement, Contract, or ACC, or payments thereunder, will be limited to the
9 amounts payable under the Contract or ACC in accordance with its terms. If the pledge or other
10 document provides that all payments will be paid directly to the mortgagee or the trustee for
11 bondholders, the mortgagee or trustee will make all payments or deposits required under the
12 mortgage or trust indenture or HUD regulations and remit any excess to the owner.
13 (d) Foreclosure and other transfers. In the event of foreclosure, assignment or sale approved by
14 HUD in lieu of foreclosure, or other assignment or sale approved by HUD:
15 (1) The Agreement, the Contract and the ACC, if applicable, will continue in effect, and
16 (2) Housing assistance payments will continue in accordance with the terms of the Contract.
17 (e) Financing of manufactured home parks. In the case of a newly constructed manufactured
18 home park, the principal amount of any mortgage attributable to the rental spaces in the park
19 may not exceed an amount per space determined in accordance with §207.33(b) of this title.
20 [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 62797, Sept. 22, 1980; 48 FR 12704, Mar.
21 28, 1983; 49 FR 17449, Apr. 24, 1984]
22 § 880.211 Audit.
23 (a) Where a State or local government is the eligible owner of a project or a contract
24 administrator under §880.505 receiving financial assistance under this part, the audit
25 requirements in 24 CFR part 44 shall apply.
26 (b) Where a non-profit organization is the eligible owner of a project, receiving financial
27 assistance under this part, the audit requirements in 24 CFR part 45 shall apply.
28 [50 FR 39091, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986; 57 FR 33256, July 27, 1992]
29 Subparts C–D [Reserved]
30 Subpart E—Housing Assistance Payments Contract
31 § 880.501 The contract.
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1 (a) Contract. The Housing Assistance Payments Contract sets forth rights and duties of the
2 owner and the contract administrator with respect to the project and the housing assistance
3 payments. The owner and contract administrator execute the Contract in the form prescribed by
4 HUD upon satisfactory completion of the project.
5 (b) [Reserved]
6 (c) Housing Assistance Payments to Owners under the Contract. The housing assistance
7 payments made under the Contract are:
8 (1) Payments to the owner to assist eligible families leasing assisted units, and
9 (2) Payments to the owner for vacant assisted units (“vacancy payments”) if the conditions
10 specified in §880.610 are satisfied.
11 The housing assistance payments are made monthly by the contract administrator upon proper
12 requisition by the owner, except payments for vacancies of more than 60 days, which are made
13 semi-annually by the contract administrator upon requisition by the owner.
14 (d) Amount of Housing Assistance Payments to Owner. (1) The amount of the housing assistance
15 payment made to the owner of a unit being leased by an eligible family is the difference between
16 the contract rent for the unit and the tenant rent payable by the family.
17 (2) A housing assistance payment will be made to the owner for a vacant assisted unit in an
18 amount equal to 80 percent of the contract rent for the first 60 days of vacancy, subject to the
19 conditions in §880.611. If the owner collects any tenant rent or other amount for this period
20 which, when added to this vacancy payment, exceeds the contract rent, the excess must be repaid
21 as HUD directs.
22 (3) For a vacancy that exceeds 60 days, a housing assistance payment for the vacant unit will be
23 made, subject to the conditions in §880.611, in an amount equal to the principal and interest
24 payments required to amortize that portion of the debt attributable to the vacant unit for up to 12
25 additional months.
26 (e) Payment of utility reimbursement. Where applicable, the owner will pay a utility
27 reimbursement in accordance with §5.632 of this title. HUD will provide funds for the utility
28 reimbursement to the owner in trust solely for the purpose of paying the utility reimbursement.
29 [44 FR 59410, Oct. 15, 1979, as amended at 49 FR 19943, May 10, 1984; 61 FR 13587, Mar. 27,
30 1996; 65 FR 16722, Mar. 29, 2000]
31 § 880.502 Term of contract.
32 (a) Term (except for Manufactured Home Parks). The term of the contract will be as follows:
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1 (1) For assisted units in a project financed with the aid of a loan insured or co-insured by the
2 Federal government or a loan made, guaranteed or intended for purchase by the Federal
3 government, the term will be 20 years.
4 (2) For assisted units in a project financed other than as described in paragraph (a)(1) of this
5 section, the term will be the lesser of (i) the term of the project's financing (but not less than 20
6 years), or (ii) 30 years, or 40 years if (A) the project is owned or financed by a loan or loan
7 guarantee from a state or local agency, (B) the project is intended for occupancy by non-elderly
8 families and (C) the project is located in an area designated by HUD as one requiring special
9 financing assistance.
10 (b) Term for Manufactured Home Parks. For manufactured home units or spaces in newly
11 constructed manufactured home parks, the term of the Contract will be 20 years.
12 (c) Staged Projects. If the project is completed in stages, the term of the Contract must relate
13 separately to the units in each stage. The total Contract term for the units in all stages, beginning
14 with the effective date of the Contract for the first stage, may not exceed the overall maximum
15 term allowable for any one unit under this section, plus two years.
16 [44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18924, Mar. 24, 1980; 48 FR 12705, Mar. 28,
17 1983; 49 FR 17449, Apr. 24, 1984]
18 (b) Project Account. (1) A project account will be established and maintained by HUD as a
19 specifically identified and segregated account for each project. The account will be established
20 out of the amounts by which the maximum annual commitment exceeds the amount actually paid
21 out under the Contract or ACC each year. Payments will be made from this account for housing
22 assistance payments (and fees for PHA administration, if appropriate) when needed to cover
23 increases in contract rents or decreases in tenant rents and for other cost specifically approved by
24 the Secretary.
25 (2) Whenever a HUD-approved estimate of required annual payments under the Contract or
26 ACC for a fiscal year exceeds the maximum annual commitment and would cause the amount in
27 the project account to be less than 40 percent of the maximum, HUD will, within a reasonable
28 period of time, take such additional steps authorized by Section 8(c)(6) of the U.S. Housing Act
29 of 1937, as may be necessary, to assure that payments under the Contract or ACC will be
30 adequate to cover increases in Contract rents and decreases in tenant rents.
31 § 880.504 Leasing to eligible families.
32 (a) Availability of units for occupancy by Eligible Families. During the term of the Contract, an
33 owner shall make available for occupancy by eligible families the total number of units for
34 which assistance is committed under the Contract. For purposes of this section, making units
35 available for occupancy by eligible families means that the owner: (1) Is conducting marketing in
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1 accordance with §880.601(a); (2) has leased or is making good faith efforts to lease the units to
2 eligible and otherwise acceptable families, including taking all feasible actions to fill vacancies
3 by renting to such families; and (3) has not rejected any such applicant family except for reasons
4 acceptable to the contract administrator. If the owner is temporarily unable to lease all units for
5 which assistance is committed under the Contract to eligible families, one or more units may be
6 leased to ineligible families with the prior approval of the contract administrator in accordance
7 with HUD guidelines. Failure on the part of the owner to comply with these requirements is a
8 violation of the Contract and grounds for all available legal remedies, including specific
9 performance of the Contract, suspension or debarment from HUD programs, and reduction of the
10 number of units under the Contract as set forth in paragraph (b) of this section.
11 (b) Reduction of number of units covered by Contract —(1) Part 880 and 24 CFR part 881
12 projects. HUD (or the PHA at the direction of HUD, as appropriate) may reduce the number of
13 units covered by the Contract to the number of units available for occupancy by eligible families
14 if:
15 (i) The owner fails to comply with the requirements of paragraph (a) of this section; or
16 (ii) Notwithstanding any prior approval by the contract administrator to lease such units to
17 ineligible families, HUD (or the PHA at the direction of HUD, as appropriate) determines that
18 the inability to lease units to eligible families is not a temporary problem.
19 .(c) Restoration. For this part 880, HUD will agree to an amendment of the ACC or the Contract,
20 as appropriate, to provide for subsequent restoration of any reduction made pursuant to
21 paragraph (b) of this section.
22 (d) Applicability. In accordance with section 555 of the Cranston-Gonzalez National Affordable
23 Housing Act of 1990, paragraphs (a) and (b) of this section apply to all Contracts. An owner who
24 had leased an assisted unit to an ineligible family consistent with the regulations in effect at the
25 time will continue to lease the unit to that family. However, the owner must make the unit
26 available for occupancy by an eligible family when the ineligible family vacates the unit.
27 (e) Termination of assistance for failure to submit evidence of citizenship or eligible immigration
28 status. If an owner who is subject to paragraphs (a) and (b) of this section is required to terminate
29 housing assistance payments for the family in accordance with 24 CFR part 5 because the owner
30 determines that the entire family does not have U.S. citizenship or eligible immigration status,
31 the owner may allow continued occupancy of the unit by the family without Section 8 assistance
32 following the termination of assistance, or if the family constitutes a mixed family, as defined in
33 24 CFR part 5, the owner shall comply with the provisions of 24 CFR part 5 concerning
34 assistance to mixed families, and deferral of termination of assistance.
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1 (f) Subpart L of 24 CFR part 5 applies to selection of tenants and occupancy requirements in
2 cases where there is involved or claimed to be involved incidents of, or criminal activity related
3 to, domestic violence, dating violence, or stalking.
4 [44 FR 59410, Oct. 15, 1979, as amended at 49 FR 31397, Aug. 7, 1984; 51 FR 11224, Apr. 1,
5 1986; 53 FR 846, Jan. 13, 1988; 53 FR 6601, Mar. 2, 1988; 59 FR 13652, Mar. 23, 1994; 60 FR
6 14841, Mar. 20, 1995; 61 FR 13587, Mar. 27, 1996; 73 FR 72342, Nov. 28, 2008; 75 FR 66260,
7 Oct. 27, 2010]
8 § 880.505 Contract administration and conversions.
9 (a) Contract administration. For private-owner/PHA projects, the PHA is primarily responsible
10 for administration of the Contract, subject to review and audit by HUD. For private-owner/HUD
11 and PHA-owner/HUD projects, HUD is responsible for administration of the Contract. The PHA
12 or HUD may contract with another entity for the performance of some or all of its contract
13 administration functions.
14 (b) PHA fee for Contract administration. A PHA will be entitled to a reasonable fee, determined
15 by HUD, for administering a Contract except under certain circumstances (see 24 CFR part 883)
16 where a state housing finance agency is the PHA and finances the project.
17 (c) Conversion of Projects from one Ownership/Contractual arrangement to another. Any
18 project may be converted from one ownership/contractual arrangement to another (for example,
19 from a private-owner/HUD to a private-owner/PHA project) if:
20 (1) The owner, the PHA and HUD agree,
21 (2) HUD determines that conversion would be in the best interest of the project, and
22 (3) In the case of conversion from a private-owner/HUD to a private-owner/PHA project,
23 contract authority is available to cover the PHA fee for administering the Contract.
24 § 880.506 Default by owner (private-owner/HUD and PHA-owner/HUD projects).
25 The Contract will provide:
26 (a) That if HUD determines that the owner is in default under the Contract, HUD will notify the
27 owner and the lender of the actions required to be taken to cure the default and of the remedies to
28 be applied by HUD including specific performance under the Contract, reduction or suspension
29 of housing assistance payments and recovery of overpayments, where appropriate; and
30 (b) That if the owner fails to cure the default, HUD has the right to terminate the Contract or to
31 take other corrective action.
32 § 880.507 Default by PHA and/or owner (private-owner/PHA projects).
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1 (a) Rights of Owner if PHA defaults under Agreement or Contract. The ACC, the Agreement
2 and the Contract will provide that, in the event of failure of the PHA to comply with the
3 Agreement or Contract with the owner, the owner will have the right, if he is not in default, to
4 demand that HUD investigate. HUD will first give the PHA a reasonable opportunity to take
5 corrective action. If HUD determines that a substantial default exists, HUD will assume the
6 PHA's rights and obligations under the Agreement or Contract and meet the obligations of the
7 PHA under the Agreement or Contract including the obligations to enter into the Contract.
8 (b) Rights of HUD if PHA defaults under ACC. The ACC will provide that, if the PHA fails to
9 comply with any of its obligations, HUD may determine that there is a substantial default and
10 require the PHA to assign to HUD all of its rights and interests under the Contract; however,
11 HUD will continue to pay annual contributions in accordance with the terms of the ACC and the
12 Contract. Before determining that a PHA is in substantial default, HUD will give the PHA a
13 reasonable opportunity to take corrective action.
14 (c) Rights of PHA and HUD if Owner defaults under Contract. (1) The Contract will provide that
15 if the PHA determines that the owner is in default under the Contract, the PHA will notify the
16 owner and lender, with a copy to HUD, (i) of the actions required to be taken to cure the default,
17 (ii) of the remedies to be applied by the PHA including specific performance under the Contract,
18 abatement of housing assistance payments and recovery of overpayments, where appropriate,
19 and (iii) that if he fails to cure the default, the PHA has the right to terminate the Contract or to
20 take other corrective action, in its discretion or as directed by HUD.
21 (2) If the PHA is the lender, the Contract will also provide that HUD has an independent right to
22 determine whether the owner is in default and to take corrective action and apply appropriate
23 remedies, except that HUD will not have the right to terminate the Contract without proceeding
24 in accordance with paragraph (b) of this section.
25 § 880.508 Notice upon contract expiration.
26 (a) The Contract will provide that the owner will notify each assisted family, at least 90 days
27 before the end of the Contract term, of any increase in the amount the family will be required to
28 pay as rent which may occur as a result of its expiration. If the Contract is to be renewed but with
29 a reduction in the number of units covered by it, this notice shall be given to each family who
30 will no longer be assisted under the Contract.
31 (b) The notice provided for in paragraph (a) of this section shall be accomplished by: (1) Sending
32 a letter by first class mail, properly stamped and addressed, to the family at its address at the
33 project, with a proper return address; and (2) serving a copy of the notice on any adult person
34 answering the door at the leased dwelling unit, or if no adult responds, by placing the notice
35 under or through the door, if possible, or else by affixing the notice to the door. Service shall not
36 considered to be effective until both required notices have been accomplished. The date on
37 which the notice shall be considered to be received by the family shall be the date on which the
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1 owner mails the first class letter provided for in this paragraph, or the date on which the notice
2 provided for in this paragraph is properly given, whichever is later.
3 (c) The notice shall advise each affected family that, after the expiration date of the Contract, the
4 family will be required to bear the entire cost of the rent and that the owner will be free (to the
5 extent the project is not otherwise regulated by HUD) to alter the rent without HUD approval,
6 but subject to any applicable requirements or restrictions under the lease or under State or local
7 law. The notice shall also state: (1) The actual (if known) or the estimated rent which will be
8 charged following the expiration of the Contract; (2) the difference between the rent and the
9 Total Tenant Payment toward rent under the Contract; and (3) the date the Contract will expire.
10 (d) The owner shall give HUD a certification that families have been notified in accordance with
11 this section with an example of the text of the notice attached.
12 (e) This section applies to all Contracts entered into pursuant to an Agreement executed on or
13 after October 1, 1981, or entered into pursuant to an Agreement executed before October 1,
14 1981, but renewed or amended on or after October 1, 1984.
15 [49 FR 31283, Aug. 6, 1984]
16 Subpart F—Management
17 § 880.601 Responsibilities of owner.
18 (a) Marketing. (1) The owner must commence diligent marketing activities in accordance with
19 the Agreement not later than 90 days prior to the anticipated date of availability for occupancy of
20 the first unit of the project.
21 (2) Marketing must be done in accordance with the HUD-approved Affirmative Fair Housing
22 Marketing Plan and all Fair Housing and Equal Opportunity requirements. The purpose of the
23 Plan and requirements is to assure that eligible families of similar income in the same housing
24 market area have an equal opportunity to apply and be selected for a unit in projects assisted
25 under this part regardless of their race, color, creed, religion, sex or national origin.
26 (3) With respect to non-elderly family units, the owner must undertake marketing activities in
27 advance of marketing to other prospective tenants in order to provide opportunities to reside in
28 the project to non-elderly families who are least likely to apply, as determined in the Affirmative
29 Fair Housing Marketing Plan, and to non-elderly families expected to reside in the community
30 by reason of current or planned employment.
31 (4) At the time of Contract execution, the owner must submit a list of leased and unleased units,
32 with justification for the unleased units, in order to qualify for vacancy payments for the
33 unleased units.
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1 (b) Management and maintenance. The owner is responsible for all management functions,
2 including determining eligibility of applicants, selection of tenants, reexamination and
3 verification of family income and composition, determination of family rent (total tenant
4 payment, tenant rent and utility reimbursement), collection of rent, termination of tenancy and
5 eviction, and performance of all repair and maintenance functions (including ordinary and
6 extraordinary maintenance), and replacement of capital items. (See part 5 of this title.) All
7 functions must be performed in accordance with applicable equal opportunity requirements.
8 (c) Contracting for services. (1) For this part 880 and 24 CFR part 881 projects, with HUD
9 approval, the owner may contract with a private or public entity (except the contract
10 administrator) for performance of the services or duties required in paragraphs (a) and (b) of this
11 section.
12 (2) For 24 CFR part 883 projects, with approval of the Agency, the owner may contract with a
13 private or public entity (but not with the Agency unless temporarily necessary for the Agency to
14 protect its financial interest and to uphold its program responsibilities where no alternative
15 management agent is immediately available) for performance of the services or duties required in
16 paragraphs (a) and (b) of this section.
17 (3) However, such an arrangement does not relieve the owner of responsibility for these services
18 and duties.
19 (d) Submission of financial and operating statements. After execution of the Contract, the owner
20 must submit to the contract administrator:
21 (1) Financial information in accordance with 24 CFR part 5, subpart H; and
22 (2) Other statements as to project operation, financial conditions and occupancy as HUD may
23 require pertinent to administration of the Contract and monitoring of project operations.
24 (e) Use of project funds. (1) Project funds must be used for the benefit of the project, to make
25 required deposits to the replacement reserve in accordance with §880.602 and to provide
26 distributions to the owner as provided in §880.205, §881.205 of this chapter, or §883.306 of this
27 chapter, as appropriate.
28 (2) For this part 880 and 24 CFR part 881 projects:
29 (i) Any remaining project funds must be deposited with the mortgagee or other HUD-approved
30 depository in an interest-bearing residual receipts account. Withdrawals from this account will be
31 made only for project purposes and with the approval of HUD.
32 (ii) Partially-assisted projects are exempt from the provisions of this section.
33 (iii) In the case of HUD-insured projects, the provisions of this paragraph (e) will apply instead
34 of the otherwise applicable mortgage insurance provisions.
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1 (3) For 24 CFR part 883 projects:
2 (i) Any remaining project funds must be deposited with the Agency, other mortgagee or other
3 Agency-approved depository in an interest-bearing account. Withdrawals from this account may
4 be made only for project purposes and with the approval of the Agency.
5 (ii) In the case of HUD-insured projects, the provisions of this paragraph will apply instead of
6 the otherwise applicable mortgage insurance provisions, except in the case of partially-assisted
7 projects which are subject to the applicable mortgage insurance provisions.
8 (Approved by the Office of Management and Budget under control number 2502–0204)
9 [44 FR 59410, Oct 15, 1979, as amended at 45 FR 18924, Mar. 24, 1980; 51 FR 11224, Apr. 1,
10 1986; 53 FR 846, Jan. 13, 1988; 53 FR 1145, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR
11 39702, Sept. 27, 1989; 56 FR 7536, Feb. 22, 1991; 60 FR 14841, Mar. 20, 1995; 61 FR 13588,
12 Mar. 27, 1996; 63 FR 46593, Sept. 1, 1998; 65 FR 16722, Mar. 29, 2000]
13 § 880.602 Replacement reserve.
14 (a) A replacement reserve must be established and maintained in an interest-bearing account to
15 aid in funding extraordinary maintenance and repair and replacement of capital items.
16 (1) Part 880 and 24 CFR part 881 projects. (i) For this part 880 and 24 CFR part 811 projects,
17 an amount equivalent to .006 of the cost of total structures, including main buildings, accessory
18 buildings, garages and other buildings, or any higher rate as required by HUD from time to time,
19 will be deposited in the replacement reserve annually. This amount will be adjusted each year by
20 the amount of the automatic annual adjustment factor.
21 (ii) The reserve must be built up to and maintained at a level determined by HUD to be sufficient
22 to meet projected requirements. Should the reserve achieve that level, the rate of deposit to the
23 reserve may be reduced with the approval of HUD.
24 (iii) All earnings including interest on the reserve must be added to the reserve.
25 (iv) Funds will be held by the mortgagee or trustee for bondholders, and may be drawn from the
26 reserve and used only in accordance with HUD guidelines and with the approval of, or as
27 directed by, HUD.
28 (v) Partially-assisted part 880 and 24 CFR part 881 projects are exempt from the provisions of
29 this section.
30 (2) Part 883 of this chapter projects. (i) For 24 CFR part 883 projects, an amount equivalent to
31 at least .006 of the cost of total structures, including main buildings, accessory buildings, garages
32 and other buildings, or any higher rate as required from time to time by:
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1 (A) The Agency, in the case of projects approved under 24 CFR part 883, subpart D; or
2 (B) HUD, in the case of all other projects, will be deposited in the replacement reserve annually.
3 For projects approved under 24 CFR part 883, subpart D, this amount may be adjusted each year
4 by up to the amount of the automatic annual adjustment factor. For all projects not approved
5 under 24 CFR part 883, subpart D, this amount must be adjusted each year by the amount of the
6 automatic annual adjustment factor.
7 (ii) The reserve must be built up to and maintained at a level determined to be sufficient by the
8 Agency to meet projected requirements. Should the reserve achieve that level, the rate of deposit
9 to the reserve may be reduced with the approval of the Agency.
10 (iii) All earnings, including interest on the reserve, must be added to the reserve.
11 (iv) Funds will be held by the Agency, other mortgagee or trustee for bondholders, as determined
12 by the Agency, and may be drawn from the reserve and used only in accordance with Agency
13 guidelines and with the approval of, or as directed by, the Agency.
14 (v) The Agency may exempt partially-assisted projects approved under 24 CFR part 883, subpart
15 D, from the provisions of this section. All partially-assisted projects not approved under the Fast
16 Track Procedures formerly in 24 CFR part 883, subpart D, are exempt from the provisions of this
17 section.
18 (b) In the case of HUD-insured projects, the provisions of this section will apply instead of the
19 otherwise applicable mortgage insurance provisions, except in the case of partially-assisted
20 insured projects which are subject to the applicable mortgage insurance provisions.
21 [61 FR 13588, Mar. 27, 1996]
22 § 880.603 Selection and admission of assisted tenants.
23 (a) Application. The owner must accept applications for admission to the project in the form
24 prescribed by HUD. Both the owner (or designee) and the applicant must complete and sign the
25 application. For this part 880 and 24 CFR part 881 projects, on request, the owner must furnish
26 copies of all applications to HUD and the PHA, if applicable. For 24 CFR part 883 projects, on
27 request, the owner must furnish to the Agency or HUD copies of all applications received.
28 (b) Determination of eligibility and selection of tenants. The owner is responsible for obtaining
29 and verifying information related to income eligibility in accordance with 24 CFR part 5, subpart
30 F, and evidence related to citizenship and eligible immigration status in accordance with 24 CFR
31 part 5, subpart E, to determine whether the applicant is eligible for assistance in accordance with
32 the requirements of 24 CFR part 5, and to select families for admission to the program, which
33 includes giving selection preferences in accordance with 24 CFR part 5, subpart D.
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1 (1) If the owner determines that the family is eligible and is otherwise acceptable and units are
2 available, the owner will assign the family a unit of the appropriate size in accordance with HUD
3 standards. If no suitable unit is available, the owner will place the family on a waiting list for the
4 project and notify the family of when a suitable unit may become available. If the waiting list is
5 so long that the applicant would not be likely to be admitted for the next 12 months, the owner
6 may advise the applicant that no additional applications are being accepted for that reason,
7 provided the owner complies with the procedures for informing applicants about admission
8 preferences as provided in 24 CFR part 5, subpart D.
9 (2) If the owner determines that an applicant is ineligible on the basis of income or family
10 composition, or because of failure to meet the disclosure and verification requirements for Social
11 Security Numbers (as provided by 24 CFR part 5), or because of failure by an applicant to sign
12 and submit consent forms for the obtaining of wage and claim information from State Wage
13 Information Collection Agencies (as provided by 24 CFR parts 5 and 813), or that the owner is
14 not selecting the applicant for other reasons, the owner will promptly notify the applicant in
15 writing of the determination and its reasons, and that the applicant has the right to meet with the
16 owner or managing agent in accordance with HUD requirements. Where the owner is a PHA, the
17 applicant may request an informal hearing. If the PHA determines that the applicant is not
18 eligible, the PHA will notify the applicant and inform the applicant that he or she has the right to
19 request HUD review of the PHA's determination. The applicant may also exercise other rights if
20 the applicant believes that he or she is being discriminated against on the basis of race, color,
21 creed, religion, sex, or national origin. See 24 CFR part 5 for the informal review provisions for
22 the denial of a Federal preference or the failure to establish citizenship or eligible immigration
23 status and for notice requirements where assistance is terminated, denied, suspended, or reduced
24 based on wage and claim information obtained by HUD from a State Wage Information
25 Collection Agency.
26 (3) Records on applicants and approved eligible families, which provide racial, ethnic, gender
27 and place of previous residency data required by HUD, must be maintained and retained for three
28 years.
29 (c) Reexamination of family income and composition —(1) Regular reexaminations. The owner
30 must reexamine the income and composition of all families at least every 12 months. After
31 consultation with the family and upon verification of the information, the owner must make
32 appropriate adjustments in the Total Tenant Payment in accordance with part 5 of this title and
33 determine whether the family's unit size is still appropriate. The owner must adjust Tenant Rent
34 and the Housing Assistance Payment to reflect any change in Total Tenant Payment and must
35 carry out any unit transfer required by HUD. At the time of the annual reexamination of family
36 income and composition, the owner must require the family to disclose the verify Social Security
37 Numbers, as provided by 24 CFR part 5. For requirements regarding the signing and submitting
38 of consent forms by families for the obtaining of wage and claim information from State Wage
39 Information Collection Agencies, see 24 CFR part 5. At the first regular reexamination after June
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1 19, 1995, the owner shall follow the requirements of 24 CFR part 5 concerning obtaining and
2 processing evidence of citizenship or eligible immigration status of all family members.
3 Thereafter, at each regular reexamination, the owner shall follow the requirements of 24 CFR
4 part 5 and verify the immigration status of any new family member.
5 (2) Interim reexaminations. The family must comply with provisions in its lease regarding
6 interim reporting of changes in income. If the owner receives information concerning a change in
7 the family's income or other circumstances between regularly scheduled reexaminations, the
8 owner must consult with the family and make any adjustments determined to be appropriate.
9 Any change in the family's income or other circumstances that results in an adjustment in the
10 Total Tenant Payment, Tenant Rent and Housing Assistance Payment must be verified. See 24
11 CFR part 5 for the requirements for the disclosure and verification of Social Security Numbers at
12 interim reexaminations involving new family members. For requirements regarding the signing
13 and submitting of consent forms for the obtaining of wage and claim information from State
14 Wage Information Collection Agencies, see 24 CFR part 5. At any interim reexamination after
15 June 19, 1995, when a new family member has been added, the owner shall follow the
16 requirements of 24 CFR part 5 concerning obtaining and processing evidence of the citizenship
17 or eligible immigration status of any new family member.
18 (3) Continuation of housing assistance payments. A family's eligibility for Housing Assistance
19 Payments continues until the Total Tenant Payment equals the contract rent plus any utility
20 allowance. The termination of eligibility at such point will not affect the family's other rights
21 under its lease, nor will such termination preclude the resumption of payments as a result of later
22 changes in income, rents, or other relevant circumstances during the term of the Contract.
23 However, eligibility also may be terminated in accordance with HUD requirements, for such
24 reasons as failure to submit requested verification information, including failure to meet the
25 disclosure and verification requirements for Social Security Numbers, as provided by 24 CFR
26 part 5, or failure to sign and submit consent forms for the obtaining wage and claim information
27 from State Wage Information Collection Agencies, as provided by 24 CFR part 5. See 24 CFR
28 part 5 for provisions requiring termination of assistance for failure to establish citizenship or
29 eligible immigration status and also for provisions concerning certain assistance for mixed
30 families (families whose members include those with eligible immigration status, and those
31 without eligible immigration status) in lieu of termination of assistance, and for provisions
32 concerning deferral of termination of assistance.
33 (Approved by the Office of Management and Budget under control number 2502–0204)
34 [61 FR 13589, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000; 70 FR 77744, Dec.
35 30, 2005]
36 § 880.604 Tenant rent.
37 The eligible Family pays the Tenant Rent directly to the Owner.
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1 [49 FR 19943, May 10, 1984]
2 § 880.605 Overcrowded and underoccupied units.
3 If the contract administrator determines that because of change in family size an assisted unit is
4 smaller than appropriate for the eligible family to which it is leased, or that the unit is larger than
5 appropriate, housing assistance payments with respect to the unit will not be reduced or
6 terminated until the eligible family has been relocated to an appropriate alternative unit. If
7 possible, the owner will, as promptly as possible, offer the family an appropriate unit. The owner
8 may receive vacancy payments for the vacated unit if he complies with the requirements of
9 §880.611.
10 § 880.606 Lease requirements.
11 (a) Term of Lease. The term of the lease will be for not less than one year. The lease may, or in
12 the case of a lease for a term of more than one year must, contain a provision permitting
13 termination on 30 days advance written notice by the family.
14 (b) Form —(1) Part 880 and 24 CFR part 881 projects. For this part 880 and 24 CFR part 881
15 projects, the form of lease must contain all required provisions, and none of the prohibited
16 provisions specified in the developer's packet, and must conform to the form of lease included in
17 the approved final proposal.
18 (2) 24 CFR part 883 projects. For 24 CFR part 883 projects, the form of lease must contain all
19 required provisions, and none of the prohibited provisions specified below.
20 (i) Required provisions (Addendum to lease).
21 Addendum to Lease
22 The following additional Lease provisions are incorporated in full in the Lease between
23 __________ (Landlord) and __________ (Tenant) for the following dwelling unit: _________.
24 In case of any conflict between these and any other provisions of the Lease, these provisions will
25 prevail.
26 a. The total rent will be $____ per month.
27 b. Of the total rent, $____ will be payable by the State Agency (Agency) as housing assistance
28 payments on behalf of the Tenant and $_____ will be payable by the Tenant. These amounts will
29 be subject to change by reason of changes in the Tenant's family income, family composition, or
30 extent of exceptional medical or other unusual expenses, in accordance with HUD-established
31 schedules and criteria; or by reason of adjustment by the Agency of any applicable Utility
32 Allowance; or by reasons of changes in program rules. Any such change will be effective as of
33 the date stated in a notification to the Tenant.
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1 c. The Landlord will not discriminate against the Tenant in the provision of services, or in any
2 other manner, on the grounds of race, color, creed, religion, sex, or national origin.
3 d. The Landlord will provide the following services and maintenance: ______
4 e. A violation of the Tenant's responsibilities under the Section 8 Program, as determined by the
5 Agency, is also a violation of the lease.
6 Landlord____________________
7 By____________________
8 Date____________________
9 Tenant____________________
10 Date____________________
11 [End of addendum]
12 (ii) Prohibited provisions. Lease clauses which fall within the classifications listed below must
13 not be included in any Lease.
14 Lease Clauses
15 a. Confession of Judgment. Consent by the tenant to be sued, to admit guilt, or to accept without
16 question any judgment favoring the landlord in a lawsuit brought in connection with the lease.
17 b. Seize or Hold Property for Rent or Other Charges. Authorization to the landlord to take
18 property of the tenant and/or hold it until the tenant meets any obligation which the landlord has
19 determined the tenant has failed to perform.
20 c. Exculpatory Clause. Prior agreement by the tenant not to hold the landlord or landlord's agents
21 legally responsible for acts done improperly or for failure to act when the landlord or landlord's
22 agent was required to do so.
23 d. Waiver of Legal Notice. Agreement by the tenant that the landlord need not give any notices in
24 connection with (1) a lawsuit against the tenant for eviction, money damages, or other purposes,
25 or (2) any other action affecting the tenant's rights under the lease.
26 e. Waiver of Legal Proceeding. Agreement by the tenant to allow eviction without a court
27 determination.
28 f. Waiver of Jury Trial. Authorization to the landlord's lawyer to give up the tenant's right to trial
29 by jury.
30 g. Waiver of Right to Appeal Court Decision. Authorization to the landlord's lawyer to give up
31 the tenant's right to appeal a decision on the ground of judicial error or to give up the tenant's
32 right to sue to prevent a judgment being put into effect.
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1 h. Tenant Chargeable with Cost of Legal Actions Regardless of Outcome of Lawsuit. Agreement
2 by the tenant to pay lawyer's fees or other legal costs whenever the landlord decides to sue the
3 tenant whether or not the tenant wins. (Omission of such a clause does not mean that the tenant,
4 as a party to a lawsuit, may not have to pay lawyer's fees or other costs if the court so orders.)
5 [End of clauses]
6 [44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13590, Mar. 27, 1996]
7 § 880.607 Termination of tenancy and modification of lease.
8 (a) Applicability. The provisions of this section apply to all decisions by an owner to terminate
9 the tenancy of a family residing in a unit under Contract during or at the end of the family's lease
10 term.
11 (b) Entitlement of Families to occupancy —(1) Grounds. The owner may not terminate any
12 tenancy except upon the following grounds:
13 (i) Material noncompliance with the lease;
14 (ii) Material failure to carry out obligations under any State landlord and tenant act;
15 (iii) Criminal activity by a covered person in accordance with sections 5.858 and 5.859, or
16 alcohol abuse by a covered person in accordance with section 5.860. If necessary, criminal
17 records can be obtained for lease enforcement purposes under section 5.903(d)(3).
18 (iv) Other good cause, which may include the refusal of a family to accept an approved modified
19 lease form (see paragraph (d) of this section). No termination by an owner will be valid to the
20 extent it is based upon a lease or a provisions of State law permitting termination of a tenancy
21 solely because of expiration of an initial or subsequent renewal term. All terminations must also
22 be in accordance with the provisions of any State and local landlord tenant law and paragraph (c)
23 of this section.
24 (2) Notice of good cause. The conduct of a tenant cannot be deemed “other good cause” under
25 paragraph (b)(1)(iv) of this section unless the owner has given the family prior notice that the
26 grounds constitute a basis for termination of tenancy. The notice must be served on the family in
27 the same manner as that provided for termination notices under paragraph (c) of this section and
28 State and local law.
29 (3) Material noncompliance. (i) Material noncompliance with the lease includes:
30 (A) One or more substantial violations of the lease; or
31 (B) Repeated minor violations of the lease that disrupt the livability of the building; adversely
32 affect the health or safety of any person or the right of any tenant to the quiet enjoyment of the
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1 leased premises and related facilities; interfere with the management of the building or have an
2 adverse financial effect on the building.
3 (ii) Failure of the family to timely submit all required information on family income and
4 composition, including failure to submit required evidence of citizenship or eligible immigration
5 status (as provided by 24 CFR part 5), failure to disclose and verify Social Security Numbers (as
6 provided by 24 CFR part 5), failure to sign and submit consent forms (as provided by 24 CFR
7 part 5), or knowingly providing incomplete or inaccurate information, shall constitute a
8 substantial violation of the lease.
9 (c) Termination notice. (1) The owner must give the family a written notice of any proposed
10 termination of tenancy, stating the grounds and that the tenancy is terminated on a specified date
11 and advising the family that it has an opportunity to respond to the owner.
12 (2) When a termination notice is issued for other good cause (paragraph (b)(1)(iv) of this
13 section), the notice will be effective, and it will so state, at the end of a term and in accordance
14 with the termination provisions of the lease, but in no case earlier than 30 days after receipt by
15 the family of the notice. Where the termination notice is based on material noncompliance with
16 the lease or material failure to carry out obligations under a State landlord and tenant act
17 pursuant to paragraph (b)(1)(i) or (b)(1)(ii) of this section, the time of service must be in accord
18 with the lease and State law.
19 (3) In any judicial action instituted to evict the family, the owner may not rely on any grounds
20 which are different from the reasons set forth in the notice.
21 (4) See 24 CFR part 5 for provisions related to termination of assistance because of failure to
22 establish citizenship or eligible immigration status, including informal hearing procedures and
23 also for provisions concerning certain assistance for mixed families (families whose members
24 include those with eligible immigration status, and those without eligible immigration status) in
25 lieu of termination of assistance, and for provisions concerning deferral of termination of
26 assistance.
27 (5) In actions or potential actions to terminate tenancy, the Owner shall follow 24 CFR part 5,
28 subpart L, in all cases where domestic violence, dating violence, stalking, or criminal activity
29 directly related to domestic violence, dating violence, or stalking is involved or claimed to be
30 involved.
31 (d) Modification of Lease form. The owner, with the prior approval of HUD or, for a 24 CFR part
32 883 project, the Agency, may modify the terms and conditions of the lease form effective at the
33 end of the initial term or a successive term, by serving an appropriate notice on the family,
34 together with the offer of a revised lease or an addendum revising the existing lease. This notice
35 and offer must be received by the family at least 30 days prior to the last date on which the
36 family has the right to terminate the tenancy without being bound by the modified terms and
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1 conditions. The family may accept the modified terms and conditions by executing the offered
2 revised lease or addendum, or may reject the modified terms and conditions by giving the owner
3 written notice in accordance with the lease that the family intends to terminate the tenancy. Any
4 increase in rent must in all cases be governed by §880.609 and other applicable HUD
5 regulations.
6 (Approved by the Office of Management and Budget under control number 2502–0204)
7 [44 FR 59410, Oct. 15, 1979, as amended at 51 FR 11225, Apr. 1, 1986; 53 FR 846, Jan. 13,
8 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39703, Sept. 27, 1989; 56 FR 7537, Feb. 22, 1991; 60
9 FR 14842, Mar. 20, 1995; 61 FR 13590, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 66 FR
10 28797, May 24, 2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66260, Oct. 27, 2010]
11 § 880.608 Security deposits.
12 (a) At the time of the initial execution of the lease, the owner will require each family to pay a
13 security deposit in an amount equal to one month's Total Tenant Payment or $50, whichever is
14 greater. The family is expected to pay the security deposit from its own resources and/or other
15 public sources. The owner may collect the security deposit on an installment basis.
16 (b) The owner must place the security deposits in a segregated, interest-bearing account. The
17 balance of this account must at all times be equal to the total amount collected from the families
18 then in occupancy, plus any accrued interest. The owner must comply with any applicable State
19 and local laws concerning interest payments on security deposits.
20 (c) In order to be considered for the return of the security deposit, a family which vacates its unit
21 will provide the owner with its forwarding address or arrange to pick up the refund.
22 (d) The owner, subject to State and local law and the requirements of this paragraph, may use the
23 security deposit, plus any accrued interest, as reimbursement for any unpaid family contribution
24 or other amount which the family owes under the lease. Within 30 days (or shorter time if
25 required by State, or local law) after receiving notification of the family's forwarding address, the
26 owner must:
27 (1) Refund to a family owing no rent or other amount under the lease the full amount of the
28 security deposit, plus accrued interest;
29 (2) Provide to a family owing rent or other amount under the lease a list itemizing any unpaid
30 rent, damages to the unit, and estimated costs for repair, along with a statement of the family's
31 rights under State and local law. If the amount which the owner claims is owed by the family is
32 less than the amount of the security deposit, plus accrued interest, the owner must refund the
33 unused balance to the family. If the owner fails to provide the list, the family will be entitled to
34 the refund of the full amount of the security deposit plus accrued interest.
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1 (e) In the event a disagreement arises concerning reimbursement of the security deposit, the
2 family will have the right to present objections to the owner in an informal meeting. The owner
3 must keep a record of any disagreements and meetings in a tenant file for inspection by the
4 contract administrator. The procedures of this paragraph do not preclude the family from
5 exercising its rights under State and local law.
6 (f) If the security deposit, including any accrued interest, is insufficient to reimburse the owner
7 for any unpaid tenant rent or other amount which the family owes under the lease, and the owner
8 has provided the family with the list required by paragraph (d)(2) of this section, the owner may
9 claim reimbursement from the contract administrator, as appropriate, for an amount not to
10 exceed the lesser of:
11 (1) The amount owed the owner, or
12 (2) One month's contract rent, minus the amount of the security deposit plus accrued interest.
13 Any reimbursement under this section will be applied first toward any unpaid tenant rent due
14 under the lease. No reimbursement may be claimed for unpaid rent for the period after
15 termination of the tenancy.
16 [44 FR 59410, Oct. 15, 1979, as amended at 49 FR 19943, May 10, 1984; 61 FR 13591, Mar. 27,
17 1996]
18 § 880.609 Adjustment of contract rents.
19 (a) Automatic annual adjustment of Contract Rents. Upon request from the owner to the contract
20 administrator, contract rents will be adjusted on the anniversary date of the contract in
21 accordance with 24 CFR part 888.
22 (b) Special additional adjustments. For all projects, special additional adjustments will be
23 granted, to the extent determined necessary by HUD (for 24 CFR part 883 projects, by the
24 Agency and HUD), to reflect increases in the actual and necessary expenses of owning and
25 maintaining the assisted units which have resulted from substantial general increases in real
26 property taxes, assessments, utility rates, and utilities not covered by regulated rates, and which
27 are not adequately compensated for by annual adjustments under paragraph (a) of this section.
28 The owner must submit to the contract administrator required supporting data, financial
29 statements and certifications.
30 (c) Overall limitation. Any adjustments of contract rents for a unit after Contract execution or
31 cost certification, where applicable, must not result in material differences between the rents
32 charged for assisted units and comparable unassisted units except to the extent that the
33 differences existed with respect to the contract rents set at Contract execution or cost
34 certification, where applicable.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 229
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 [44 FR 59410, Oct. 15, 1979, as amended at 59 FR 22755, May 3, 1994; 61 FR 13591, Mar. 27,
2 1996]
3 § 880.610 Adjustment of utility allowances.
4 In connection with annual and special adjustments of contract rents, the owner must submit an
5 analysis of the project's Utility Allowances. Such data as changes in utility rates and other facts
6 affecting utility consumption should be provided as part of this analysis to permit appropriate
7 adjustments in the Utility Allowances. In addition, when approval of a utility rate change would
8 result in a cumulative increase of 10 percent or more in the most recently approved Utility
9 Allowances, the project owner must advise the contract administrator and request approval of
10 new Utility Allowances. Whenever a Utility Allowance for a unit is adjusted, the owner will
11 promptly notify affected families and make a corresponding adjustment of the tenant rent and the
12 amount of the housing assistance payment for the unit.
13 (Approved by the Office of Management and Budget under control number 2502–0161)
14 [50 FR 39097, Sept. 27, 1985]
15 § 880.611 Conditions for receipt of vacancy payments.
16 (a) General. Vacancy payments under the Contract will not be made unless the conditions for
17 receipt of these housing assistance payments set forth in this section are fulfilled.
18 (b) Vacancies during Rent-up. For each assisted unit that is not leased as of the effective date of
19 the Contract, the owner is entitled to vacancy payments in the amount of 80 percent of the
20 contract rent for the first 60 days of vacancy if the owner:
21 (1) Conducted marketing in accordance with §880.601(a) and otherwise complied with
22 §880.601;
23 (2) Has taken and continues to take all feasible actions to fill the vacancy; and
24 (3) Has not rejected any eligible applicant except for good cause acceptable to the contract
25 administrator.
26 (c) Vacancies after Rent-Up. If an eligible family vacates a unit, the owner is entitled to vacancy
27 payments in the amount of 80 percent of the contract rent for the first 60 days of vacancy if the
28 owner:
29 (1) Certifies that he did not cause the vacancy by violating the lease, the Contract or any
30 applicable law;
31 (2) Notified the contract administrator of the vacancy or prospective vacancy and the reasons for
32 the vacancy immediately upon learning of the vacancy or prospective vacancy;
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 230
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 (3) Has fulfilled and continues to fulfill the requirements specified in §880.601(a) (2) and (3) and
2 paragraph (b) (2) and (3) of this section; and
3 (4) For any vacancy resulting from the owner's eviction of an eligible family, certifies that he has
4 complied with §880.607.
5 (d) Vacancies for longer than 60 days. If an assisted unit continues to be vacant after the 60-day
6 period specified in paragraph (b) or (c) of this section, the owner may apply to receive additional
7 vacancy payments in an amount equal to the principal and interest payments required to amortize
8 that portion of the debt service attributable to the vacant unit for up to 12 additional months for
9 the unit if:
10 (1) The unit was in decent, safe and sanitary condition during the vacancy period for which
11 payments are claimed;
12 (2) The owner has fulfilled and continues to fulfill the requirements specified in paragraph (b) or
13 (c) of this section, as appropriate; and
14 (3) The owner has (for 24 CFR part 883 projects, the owner and the Agency have) demonstrated
15 to the satisfaction of HUD that:
16 (i) For the period of vacancy, the project is not providing the owner with revenues at least equal
17 to project expenses (exclusive of depreciation), and the amount of payments requested is not
18 more than the portion of the deficiency attributable to the vacant unit, and
19 (ii) The project can achieve financial soundness within a reasonable time.
20 (e) Prohibition of double compensation for vacancies. The owner is not entitled to vacancy
21 payments for vacant units to the extent he can collect for the vacancy from other sources (such as
22 security deposits, payments under §880.608(f), and governmental payments under other
23 programs).
24 [44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13591, Mar. 27, 1996]
25 § 880.612 Reviews during management period.
26 (a) After the effective date of the Contract, the contract administrator will inspect the project and
27 review its operation at least annually to determine whether the owner is in compliance with the
28 Contract and the assisted units are in decent, safe and sanitary condition.
29 (b) In addition:
30 (1)(i) For this part 880 and 24 CFR part 881 private-owner/PHA projects, HUD will review the
31 PHA's administration of the Contract at least annually to determine whether the PHA is in
32 compliance with the ACC; and
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 231
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 (ii) For 24 CFR part 883 projects, HUD will periodically review the Agency's administration of
2 the Contract to determine whether it is in compliance with the Contract.
3 (2) HUD may independently inspect project operations and units at any time.
4 (c) Equal Opportunity reviews may be conducted by HUD at any time.
5 [44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13591, Mar. 27, 1996]
6 § 880.612a Preference for occupancy by elderly families.
7 (a) Election of preference for occupancy by elderly families —(1) Election by owners of eligible
8 projects. (i) An owner of a project assisted under this part (including a partially assisted project)
9 that was originally designed primarily for occupancy by elderly families (an “eligible project”)
10 may, at any time, elect to give preference to elderly families in selecting tenants for assisted,
11 vacant units in the project, subject to the requirements of this section.
12 (ii) For purposes of this section, a project eligible for the preference provided by this section, and
13 for which the owner makes an election to give preference in occupancy to elderly families is
14 referred to as an “elderly project.” “Elderly families” refers to families whose heads of
15 household, their spouses or sole members are 62 years or older.
16 (iii) An owner who elects to provide a preference to elderly families in accordance with this
17 section is required to notify families on the waiting list who are not elderly that the election has
18 been made and how the election may affect them if:
19 (A) The percentage of disabled families currently residing in the project who are neither elderly
20 nor near-elderly (hereafter, collectively referred to as “non-elderly disabled families”) is equal to
21 or exceeds the minimum required percentage of units established for the elderly project in
22 accordance with paragraph (c)(1) of this section, and therefore non-elderly families on the
23 waiting list (including non-elderly disabled families) may be passed over for covered section 8
24 units; or
25 (B) The project, after making the calculation set forth in paragraph (c)(1) of this section, will
26 have no units set aside for non-elderly disabled families.
27 (iv) An owner who elects to give a preference for elderly families in accordance with this section
28 shall not remove an applicant from the project's waiting list on the basis of having made the
29 election.
30 (2) HUD approval of election not required. (i) An owner is not required to solicit or obtain the
31 approval of HUD before exercising the election of preference for occupancy provided in
32 paragraph (a)(1) of this section. The owner, however, if challenged on the issue of eligibility of
33 the project for the election provided in paragraph (a)(1) of this section must be able to support
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 232
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 the project's eligibility through the production of all relevant documentation in the possession of
2 the owner that pertains to the original design of the project.
3 (ii) The Department reserves the right at any time to review and make determinations regarding
4 the accuracy of the identification of the project as an elderly project. The Department can make
5 such determinations as a result of ongoing monitoring activities, or the conduct of complaint
6 investigations under the Fair Housing Act (42 U.S.C. 3601 through 3619), or compliance
7 reviews and complaint investigations under section 504 of the Rehabilitation Act of 1973 (29
8 U.S.C. 794) and other applicable statutes.
9 (b) Determining projects eligible for preference for occupancy by elderly families —(1)
10 Evidence supporting project eligibility. Evidence that a project assisted under this part (or
11 portion of a project) was originally designed primarily for occupancy by elderly families, and is
12 therefore eligible for the election of occupancy preference provided by this section, shall consist
13 of at least one item from the sources (“primary” sources) listed in paragraph (b)(1)(i) of this
14 section, or at least two items from the sources (“secondary” sources) listed in paragraph (b)(1)(ii)
15 of this section:
16 (i) Primary sources. Identification of the project (or portion of a project) as serving elderly
17 (seniors) families in at least one primary source such as: The application in response to the notice
18 of funding availability; the terms of the notice of funding availability under which the application
19 was solicited; the regulatory agreement; the loan commitment; the bid invitation; the owner's
20 management plan, or any underwriting or financial document collected at or before loan closing;
21 or
22 (ii) Secondary sources. Two or more sources of evidence such as: lease records from the earliest
23 two years of occupancy for which records are available showing that occupancy has been
24 restricted primarily to households where the head, spouse or sole member is 62 years of age or
25 older; evidence that services for elderly persons have been provided, such as services funded by
26 the Older Americans Act, transportation to senior citizen centers, or programs coordinated with
27 the Area Agency on Aging; project unit mix with more than fifty percent of efficiency and one-
28 bedroom units [a secondary source particularly relevant to distinguishing elderly projects under
29 the previous section 3(b) definition (in which disabled families were included in the definition of
30 “elderly families”) from non-elderly projects and which in combination with other factors (such
31 as the number of accessible units) may be useful in distinguishing projects for seniors from those
32 serving the broader definition of “elderly families” which includes disabled families]; or any
33 other relevant type of historical data, unless clearly contradicted by other comparable evidence.
34 (2) Sources in conflict. If a primary source establishes a design contrary to that established by the
35 primary source upon which the owner would base support that the project is an eligible project
36 (as defined in this section), the owner cannot make the election of preferences for elderly
37 families as provided by this section based upon primary sources alone. In any case where
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 233
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 primary sources do not provide clear evidence of original design of the project for occupancy
2 primarily by elderly families, including those cases where primary sources conflict, secondary
3 sources may be used to establish the use for which the project was originally designed.
4 (c) Reservation of units in elderly projects for non-elderly disabled families. The owner of an
5 elderly project is required to reserve, at a minimum, the number of units specified in paragraph
6 (c)(1) of this section for occupancy by non-elderly disabled families.
7 (1) Minimum number of units to be reserved for non-elderly disabled families. The number of
8 units in an elderly project required to be reserved for occupancy by non-elderly disabled
9 families, shall be, at a minimum, the lesser of:
10 (i) The number of units equivalent to the higher of—
11 (A) The percentage of units assisted under this part in the elderly project that were occupied by
12 non-elderly disabled families on October 28, 1992; and
13 (B) The percentage of units assisted under this part in the elderly project that were occupied by
14 non-elderly disabled families upon January 1, 1992; or
15 (ii) 10 percent of the number of units assisted under this part in the eligible project.
16 (2) Option to reserve greater number of units for non-elderly disabled families. The owner, at the
17 owner's option, and at any time, may reserve a greater number of units for non-elderly disabled
18 families than that provided for in paragraph (c)(1) of this section. The option to provide a greater
19 number of units to non-elderly disabled families will not obligate the owner to always provide
20 that greater number to non-elderly disabled families. The number of units required to be
21 provided to non-elderly disabled families at any time in an elderly project is that number
22 determined under paragraph (c)(1) of this section.
23 (d) Secondary preferences. An owner of an elderly project also may elect to establish secondary
24 preferences in accordance with the provisions of paragraph (d) of this section.
25 (1) Preference for near-elderly disabled families in units reserved for elderly families. If the
26 owner of an elderly project determines, in accordance with paragraph (f) of this section, that
27 there are an insufficient number of elderly families who have applied for occupancy to fill all the
28 vacant units in the elderly project reserved for elderly families (that is, all units except those
29 reserved for the non-elderly disabled families as provided in paragraph (c) of this section), the
30 owner may give preference for occupancy of such units to disabled families who are near-elderly
31 families.
32 (2) Preference for near-elderly disabled families in units reserved for non-elderly disabled
33 families. If the owner of an elderly project determines, in accordance with paragraph (f) of this
34 section, that there are an insufficient number of non-elderly disabled families to fill all the vacant
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 234
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
1 units in the elderly project reserved for non-elderly disabled families as provided in paragraph (c)
2 of this section, the owner may give preference for occupancy of these units to disabled families
3 who are near-elderly families.
4 (e) Availability of units to families without regard to preference. An owner shall make vacant
5 units in an elderly project generally available to otherwise eligible families who apply for
6 housing, without regard to the preferences and reservation of units provided in this section if
7 either:
8 (1) The owner has adopted the secondary preferences and there are an insufficient number of
9 families for whom elderly preference, reserve preference, and secondary preference has been
10 given, to fill all the vacant units; or
11 (2) The owner has not adopted the secondary preferences and there are an insufficient number of
12 families for whom elderly preference, and reserve preference has been given to fill all the vacant
13 units.
14 (f) Determination of insufficient number of applicants qualifying for preference. To make a
15 determination that there are an insufficient number of applicants who qualify for the preferences,
16 including secondary preferences, provided by this section, the owner must:
17 (1) Conduct marketing in accordance with §880.601(a) to attract applicants qualifying for the
18 preferences and reservation of units set forth in this section; and
19 (2) Make a good faith effort to lease to applicants who qualify for the preferences provided in
20 this section, including taking all feasible actions to fill vacancies by renting to such families.
21 (g) Prohibition of evictions. An owner may not evict a tenant without good cause, or require that
22 a tenant vacate a unit, in whole or in part because of any reservation or preference provided in
23 this section, or because of any action taken by the Secretary pursuant to subtitle D (sections 651
24 through 661) of title VI of the Housing and Community Development Act of 1992 (42 U.S.C.
25 13611 through 13620).
26 [59 FR 65850, Dec. 21, 1994, as amended at 61 FR 9046, Mar. 6, 1996; 65 FR 16722, Mar. 29,
27 2000]
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 235
Appendix II –The U.S. Housing Act of 1937, Waived for PBRA Conversions
APPENDIX II –THE U.S. HOUSING ACT OF 1937, WAIVED FOR
PBRA CONVERSIONS
The following lists the sections of the Act that are waived for PBRA conversions under the first
component of the Demonstration:
Section 3(a)(1)
Section 8(b)(1)
Section 8(c)(1)
Section 8(c)(2)
Section 8(c)(4) (clause preceding the first comma)
Section 8(c)(5)
Section 8(d)(2)(A)
Section 16(c)(2)
Please note that in addition to this list there are provisions of section 8 that are not germane to
PBRA conversions under RAD and therefore do not apply.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 236
Appendix III – PBRA Site and Neighborhood Standards
APPENDIX III – PBRA SITE AND NEIGHBORHOOD STANDARDS
This Appendix III describes the site and neighborhood standards that apply to RAD projects
converting to PBRA. These requirements are meant to mirror those established in Housing
Notice 2014-14; any substantive conflicts between the requirements set forth herein and those set
forth in Housing Notice 2014-14 are accidental and in the event of such conflict, the
requirements set forth in Housing Notice 2014-14 shall control unless explicitly superseded by
HUD.
Site selection for all covered projects (whether existing housing / rehabilitation or new
construction) must meet the following requirements:
a. The site and neighborhood is suitable from the standpoint of facilitating and furthering
full compliance with the applicable provisions of Title VI of the Civil Rights Act of 1964,
Title VIII of the Civil Rights Act of 1968, Executive Order 11063, and HUD regulations
issued pursuant thereto.
b. The neighborhood must not be one that is seriously detrimental to family life or in which
substandard dwellings or other undesirable conditions predominate, unless there is
actively in progress a concerted program to remedy the undesirable conditions.
c. The housing must be accessible to social, recreational, educational, commercial, and
health facilities and services, and other municipal facilities and services that are at least
equivalent to those typically found in neighborhoods consisting largely of unassisted,
standard housing of similar market rents.
d. It must meet all applicable accessibility requirements, including, but not limited to, the
accessibility requirements of the Fair Housing Act, Section 504 of the Rehabilitation Act,
and the Americans with Disabilities Act.
To the extent the covered project involves new construction, the following site selection
requirements must also be met:
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 237
Appendix III – PBRA Site and Neighborhood Standards
e. The covered project may not be located in a racially mixed area if the project will cause a
significant increase in the proportion of minority to non-minority residents in the area and
may not be located in an area of minority concentration. If HUD determines that the
covered project will be located in an area of minority concentration, additional supporting
data (e.g., census data, evidence of local revitalization efforts, etc.) must be submitted in
order for HUD to determine that they meet one of the exceptions below:
1. Sufficient, comparable opportunities exist for housing for minority
households in the income range to be served by the proposed project, outside areas of
minority concentration. Sufficient does not require that in every locality there be an
equal number of assisted units within and outside of areas of minority concentration.
Rather, application of this standard should produce a reasonable distribution of assisted
units each year which over a period of several years will approach an appropriate balance
of housing opportunities within and outside areas of minority concentration. An
appropriate balance in any jurisdiction must be determined in light of local conditions
affecting the range of housing choices available for very low-income minority
households and in relation to the racial mix of the locality's population.
A. Units may be considered to be comparable opportunities if they
have the same household type and tenure type (owner/renter), require approximately the
same total tenant payment, serve the same income group, are located in the same housing
market, and are in standard condition.
B. Application of this sufficient, comparable opportunities standard
involves assessing the overall impact of HUD-assisted housing on the availability of
housing choices for very low-income minority households in and outside areas of
minority concentration, and must take into account the extent to which the following
factors are present, along with any other factor relevant to housing choice:
i. A significant number of assisted housing units are available outside areas of minority
concentration.
ii. There is significant integration of assisted housing projects constructed or
rehabilitated in the past ten years, relative to the racial mix of the eligible population.
iii. There are racially integrated neighborhoods in the locality.
iv. Programs are operated by the locality to assist minority households that wish to find
housing outside areas of minority concentration.
v. Minority households have benefitted from local activities (e.g., acquisition and write-
down of sites, tax relief programs for homeowners, acquisitions of units for use as
assisted housing units) undertaken to expand choice for minority households (or
families) outside of areas of minority concentration.
vi. A significant proportion of minority households have been successful in finding units
in nonminority areas under the Section 8 Certificate and Housing Voucher programs.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 238
Appendix III – PBRA Site and Neighborhood Standards
vii. Comparable housing opportunities have been made available outside areas of
minority concentration through other programs.
2. The project is necessary to meet overriding housing needs that cannot be
met in that housing market area. Application of the overriding housing needs criterion,
for example, permits approval of sites that are an integral part of an overall local strategy
for the preservation or restoration of the immediate neighborhood and of sites in a
neighborhood experiencing significant private investment that is demonstrably changing
the economic character of the area (a “revitalizing area”). An overriding housing need,
however, may not serve as the basis for determining that a site is acceptable if the only
reason the need cannot otherwise be feasibly met is that discrimination on the basis of
race, color, creed, sex, or national origin renders sites outside areas of minority
concentration unavailable, or if the use of this standard in recent years has had the effect
of circumventing the obligation to provide housing choice.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 239
Appendix IV– New Codes for Special Programs Reported on the Family Report (Form HUD-50058) for the Rental
Assistance Demonstration Program.
APPENDIX IV– NEW CODES FOR SPECIAL PROGRAMS
REPORTED ON THE FAMILY REPORT (FORM HUD-50058) FOR
THE RENTAL ASSISTANCE DEMONSTRATION PROGRAM.
In order to implement the Demonstration, four new codes to be used with data submitted
on Form HUD-50058 have been created to ensure proper monitoring and reporting. More
specifically, the four new codes will allow the Department to track the project-based
voucher (PBV) component of the Rental Assistance Demonstration (RAD) program. These
codes must be entered in line 2n of the Form HUD-50058 in accordance with PIH Notice
2011-065.
The following codes have been assigned to the four types of housing eligible for the RAD.
RADPH (Rental Assistance Demonstration/Public Housing)
RADMR (Rental Assistance Demonstration/Moderate Rehabilitation)
RADRS (Rental Assistance Demonstration/Rental Supplement)
RADRP (Rental Assistance Demonstration/Rental Assistance Program)
Upon publication of this notice, public housing agencies must enter the appropriate
program code on line 2n of the Family Report for families who are participating in the RAD
program.
PIH-2012-32 (HA), REV-3 Rental Assistance Demonstration – Final Implementation 240
Source: Legislative text reproduced verbatim
Plain English
Housing Notice H-2017-03 (PIH-2012-32, REV-3), issued January 12, 2017, establishes the rules for the Rental Assistance Demonstration (RAD), a federal program that allows public housing and certain other HUD-assisted properties to convert their existing rental assistance to long-term, project-based Section 8 contracts. The program has two components: the First Component covers public housing conversions to either Project-Based Vouchers (PBV) or Project-Based Rental Assistance (PBRA), while the Second Component covers Moderate Rehabilitation, Rent Supplement, and Rental Assistance Payment projects. Conversions preserve affordability through long-term HAP Contracts and RAD Use Agreements, while enabling access to private debt and equity for capital improvements.
Written by anthropic/claude-sonnet-4.6 · Reviewed on October 6, 2026
Plain English — not legal advice.
For Property Managers
Under Housing Notice H-2017-03, property owners and Public Housing Agencies pursuing RAD conversions are generally expected to complete Capital Needs Assessments, submit detailed Financing Plans, conduct required resident notification meetings, and comply with fair housing and civil rights requirements before closing. Compliant operators typically ensure that existing residents are not rescreened at conversion, that any rent increases are phased in over three or five years, and that a RAD Use Agreement is recorded in a superior lien position. Owners converting to PBRA must also provide a Choice-Mobility option and maintain mandatory insurance coverage throughout the HAP Contract term.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
For Tenants
Residents living in properties converting under Housing Notice H-2017-03 retain important protections, including the right not to be rescreened at conversion, the right to return after any temporary relocation for rehabilitation, and the right to a phased rent increase if their share rises by more than the greater of 10 percent or $25. Tenants also have access to grievance procedures and, after a defined period of residency, a Choice-Mobility option allowing a move with tenant-based voucher assistance. Residents who believe their rights under H-2017-03 are not being honored may raise concerns with their local HUD field office or consult a tenant-rights organization.
General guidance for tenants — not legal advice for your specific situation. Consult a tenant-rights organization or attorney for advice on your case.
Generated October 6, 2026 — auto-generated, not yet human-reviewed. See /transparency for methodology.
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Related Rules
§ 574.605
§ 574.605 Applicability of uniform administrative requirements, cost principles, and audit requirements for Federal awards.
§ 574.625
§ 574.625 Conflict of interest.
§ 574.645
§ 574.645 Coastal barriers.