Slide 1

Report
R E N O & C A V A N A U G H PLLC
Rental Assistance Demonstration (RAD)
Florida Association of Housing and Redevelopment Officials
Wednesday, August 6, 2013
RAD – 1st Component
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May Convert to Project-Based Rental Assistance
(PBRA) or Project-Based Vouchers (PBVs)
Contract Term:
∙ PBRA = 20 Years
∙ PBV = 15 or 20 Years
∙ Mandatory Renewals (HUD must offer, owner
must accept)
Use Agreement (only Public Housing
Conversions):
∙ 1st Priority
∙ Term Concurrent with HAP
∙ Automatic Renewal
∙ Not Foreclosable
RAD – 1st Component
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Ownership/Control by Public or Nonprofit Entity (only public housing
conversions)
∙ Ownership. Public or non-profit entity has legal title to property.
∙ Control. Public or non-profit entity 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, legal, beneficial or other interests of the owner of a
project or has 51 percent or more interest of the general partner
share in a limited partnership.
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Exceptions Allowing Private Ownership/Control
∙ LIHTC: But PHA Must Maintain Control via Ground Lease,
ROFR, PHA Subordinate Debt
∙ Foreclosure, Bankruptcy, Termination or Transfer of Assistance
− Priority for capable public entity
− If none, then capable private entity
RAD – 1st Component
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Contract Rents Capped at Current Funding per Statute (Public
Housing and Mod Rehab):
∙ PBRA = Lower of Current Funding or 120% FMR (But
exception rents available in some cases)
∙ PBV = Lower of Current Funding, 110% of FMR, or Reasonable
Rent
∙ Rent Adjustments = OCAF
RAD Rehab Assistance: Funding for Vacant Units Undergoing
Rehab or Construction
PBV Waivers on Competitive Selection, Inventory Cap (PBVs
don’t count against 20%), and Income Mixing (up to 50%, but
existing exceptions for seniors and services still available)
Other RAD Requirements for PHAs
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PHA Plan. RAD conversion requires a “significant amendment” to PHA
Plan.
Use of Public Housing Funds. PHA may use current public housing
funds, including reserves, for predevelopment costs and construction.
Effect on Public Housing Funding and Unit Cap. RAD units not eligible
for Asset Repositioning Fee (ARF) or Replacement Housing Factor (RHF)
funds. PHA’s “Faircloth cap” reduced by number of RAD units.
Davis-Bacon. Requirements apply to all initial repairs identified in
Financing Plan to the extent they would qualify as construction or
rehabilitation, regardless of whether the project qualifies as “existing
housing” under standard PBV rules.
Demo/Dispo. Section 18 does not apply unless number of assisted units
would be reduced by more than a de minimis amount. (1-for-1 replacement)
∙ Previously Demolished Units Eligible for RAD if Still Receiving Subsidy
∙ Allows Transfer of Subsidy for Off-Site Replacement without HUD
Demo/Dispo Review
Existing Debt – CFFP and EPC: Address reduced loan coverage with
current lender; can prepay in whole or in part with RAD proceeds.
RAD – Procurement
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May spend up to $100,000 in public housing
funds for predevelopment costs without HUD
approval
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However, must follow public housing procurement
rules (small purchase procedures)
Post-conversion, a PHA can only contribute
public housing funds pursuant to HUD-approved
financing plan
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HUD-approved post-conversion funding does not
trigger 24 CFR part 85
Still need to comply with state/local procurement
requirements
Resident Rights
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Consultation. Resident consultation before RAD application and
following award is important and required
Resident Right to Return. No permanent involuntary displacement may
result from RAD conversion, including as a result of changes in bedroom
distribution, reduction of units, or reconfiguration. Any resident
temporarily relocated has right to return
URA. Any temporary relocation must comply with Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970
Waiting List. If project-specific waiting list exists, it must be used after
conversion. Otherwise, one must be established consistent with public
housing rules which provide access from PHA’s community-wide list.
Thereafter, waiting list managed under Section 8 rules
No Rescreening. Current public housing residents are not subject to
rescreening, income eligibility, or income targeting provisions
PBV Lease Renewal. Unlike standard PBV program, a resident’s lease
must be renewed unless cause exists
Tenant Rent Increases. If tenant’s rent would increase more than
greater of 10% or $25, then increase phased in over 3-5 years
Procedural Rights. RAD statute requires certain rights of public housing
residents be retained for converted projects, including requirements for
adequate written notice of lease termination and access to grievance
process.
Choice Mobility
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HUD Goal: Provide residents of all
covered projects with portable tenantbased vouchers after initial occupancy
∙ PBV: standard rules – voucher after 1 year
∙ PBRA: more flexibility – 2 years; turnover &
project caps; some good cause exemptions
∙ Vouchers from turnover or another PHA
− Implications for Voucher Waiting List
HUD Process
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Commitment to enter a Housing Assistance
Payment (“CHAP”) – effectively this is the
HUD RAD award letter
CHAP sets forth units to be converted, size,
and contract rents as well as “Milestones” that
must be met after issuance of the CHAP
For LIHTC deals, milestones begin at award of
LIHTC funding
RAD Milestones
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Within 30 days: a) lender engagement or commitment; and b)
statement of capacity of development team
Within 60 days: a) significant amendment to Annual/Five Year
plan; and b) election to convert to PBV or PBRA
Within 90 days: a certification from PHA that all lender due
diligence – including a physical condition assessment and
environmental reports – has been completed; and the PCA
must be submitted to HUD
Within 150 days: a certification from PHA that all applications
for firm commitments have been submitted (note: for FHAinsured deals, this is the Firm Commitment Application)
Within 180 days: the Financing Plan must be submitted to
HUD
Within 320 days: submit a firm commitments for all financing
Within 360 days: financial closing
Within 12-18 months: after issuance of HAP, completion of
work.
RAD Financing Plan
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Key elements of Financing Plan are:
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Identify type of conversion (PBV or PBRA)
Physical Condition Assessment
Scope of Work for rehab or new construction
Completed Environmental Review
Relocation Plan
Development Budget
Development Team (all principals must have Previous
Participation Certification in APPS – i.e. Form 2530
clearances)
Proposed Financing (including consent of first mortgage
lender to Use Agreement)
Title pro forma
Other items: Operating Pro Forma, Market Study, and How
Construction Management Will Be Done
RAD Conversion Commitment
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RCC will include key conditions to
conversion such as:
∙ Effective Date of HAP (Executed by HUD but held in
escrow)
∙ Scope of Work
∙ Timeline for Work
∙ Key terms of financing, replacement reserve funding,
and other special conditions
PHA Development Methods
Public Housing
Conventional
Mixed Finance
RAD
Conventional
Section 8/LIHTC
PHA owns project
subject to HUD
Declaration of Trust
Private owner (LIHTC
entity) owns project
(PHA may have GP
interest); subject to
HUD Declaration of
Restrictive Covenants
PHA owns project
directly (or through an
affiliated single purpose
entity), subject to RAD
Use Agreement
Private owner (LIHTC entity)
owns project (PHA may have GP
interest), subject to RAD Use
Agreement
All public housing funds
(possibly other soft
sources)
Multiple sources of
funding, including
LIHTC
Mortgage loan proceeds
(possibly other sources)
Multiple sources of funding,
including LIHTC
All public housing units
Often mixed-income
(pub. housing, LIHTC,
market)
All RAD Section 8 units
May be mixed income (Sec. 8,
tax credit, market) subject to RAD
one-for-one replacement
requirements
Property manager
typically PHA (but can
be private)
Property manager
typically private (but
may be PHA)
Property manager
probably PHA (but can
be private)
Property manager probably
private (but may be PHA)
PHA procures General
Contractor directly; Field
Office approves
proposal
Owner entity contracts
with General Contractor
and other parties; HUD
Headquarters review
PHA procures General
Contractor directly; HUD
RAD review
Owner entity contracts with
General Contractor and other
parties; HUD RAD review
Important Changes in
Notice PIH 2012-32-REV-1
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Providing RAD awards for multiphase projects.
Allowing PHAs to apply for a portfolio award for multiple projects. PHA must
submit complete RAD applications for 50% of the projects and complete RAD
applications for the remaining projects within 365 days. Applications for the last
phase of a multiphase project must be submitted before the authority for the
RAD program expires in 2015. HUD has said that closing dates for multiphase
projects will be set on an individual award basis and that HUD will issue a FAQ
to address this further.
For all RAD applications received prior to December 31, 2013, including
applications for Portfolio or Multi-phase Awards, providing RAD contract rents at
FY2012 rent levels.
Permitting the "bundling" projects for conversion and thereby potentially set
higher rent levels. Basically, PHAs can adjust subsidy across multiple projects
provided an aggregate subsidy cap is not exceeded. There is no limit to the
number of projects that may be bundled.
Important Changes in
Notice PIH 2012-32-REV-1
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Allowing Moving to Work (MTW) agencies who are applying for two or more
projects to use their MTW block grant flexibility in setting initial contract rents
subject to PBV or PBRA rent caps.
Eliminating certain caps/restrictions on RAD conversions of mixed-finance and
incorporating more flexible provisions for HOPE VI properties. There is no cap
on the number of units a PHA may be awarded and no cap on the number of
mixed-finance units that may be converted. HOPE VI properties with a DOFA
date of greater than 10 years are eligible and newer HOPE VI properties that
evidence multi-year financial distress are eligible.
Exempting awarded public housing projects from scoring under the Public
Housing Assessment System (PHAS).
Opening Mod Rehab Ongoing Application Period under First Component and
removing the cap on Mod Rehab projects applying under First Component.
Also permitting portfolio awards and multiphase Mod Rehab projects.
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R E N O & C A V A N A U G H PLLC
Megan Glasheen, Member
(202) 349 2457
[email protected]

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