HUD Housing Notice § 2018-05

            U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                Office of Public and Indian Housing
                                          Office of Housing


 Special Attention of:                                                 Notice PIH-2018-11, H-2018-
 Public Housing Agencies                                               05
 Public Housing Hub Office Directors
 Public Housing Program Center Directors                               Issued: 7/2/2018
 Multifamily HUB Directors
 Multifamily Program Center Directors                                  Expires: This Notice remains
 Regional and Field Office Directors                                   in effect until amended,
 Regional Administrators                                               superseded, or rescinded.
 Performance Based Contract Administrators
                                                                       Amends: PIH 2012-32 (HA),
                                                                       H 2017-03 REV-3



SUBJECT: Rental Assistance Demonstration (RAD) – Supplemental Guidance

Purpose

   This Notice provides supplemental program instructions to and amends Notice PIH 2012-32
(HA), H-2017-03, REV-3, Rental Assistance Demonstration – Final Implementation, Revision 3,
(RAD Notice) published on January 12, 2017.

1. Rent Flexibilities – Expanded Rent-Bundling for Project-Based Vouchers (PBV). The
   following supplemental language is added to Section 1.6, Paragraph B.5.ii of the RAD
   Notice, prior to the phrase “For example, assume that…”:

    Further, PHAs are permitted to rent bundle from any non-RAD Project-Based Vouchers to
    the Project-Based Voucher assistance provided through RAD. The PHA must use its own
    voucher funding to supplement rents; no additional voucher funding will be provided through
    RAD. HUD will review the rents proposed for the non-RAD PBV contract to ensure that the
    PHA does not exceed the aggregate subsidy otherwise available for all of the rent-bundled
    projects. The execution of the HAP contract for the donor HAP contract must occur prior to
    or simultaneous with the conversion of the recipient HAP contract and the donor HAP
    contract must have a remaining contract term at least as long as the recipient HAP contract.
    The owner of the property with the non-RAD PBV contract must request an initial rent (or
    redetermined rent if the contract has already been executed) in accordance with 24 CFR §§
    983.301(b)(3) and 983.302 that reflects the amount approved by HUD. To ensure that


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    aggregate HAP costs do not exceed the costs incurred absent this provision, the owner of the
    property with the non-RAD PBV contract must agree not to request, in accordance with 24
    CFR § 983.301(b)(3), a redetermined rent that exceeds the OCAF-adjusted rent. This OCAF
    limitation is in addition to the existing PBV rent limitations in 24 CFR § 983.301(b) more
    generally.

    Please note that per Section 1.13.B.5, regardless of the initial contract rents for the RAD
    HAP contract, including as modified by this provision, in the year of conversion the Covered
    Project will only be assisted by the Operating and Capital Funds obligated to the PHA for
    that project.


2. PBV Tenant-Paid Utility Savings and Site-Specific Utility Allowances. The following is
   added to PBV Contract Terms found in the RAD Notice Section 1.6, Paragraph B.

    New items iv. and v. are added to Paragraph B.5. to read as follows:

    iv. PBV Site-Specific Utility Allowances. Except for Converting Projects that will include
    non-RAD PBV units, PHAs may elect to establish a site-specific Utility Allowance for any
    Covered Project. HUD is waiving 24 CFR 983.2(c)(6)(iii), which requires the PHA to apply
    the HCV Utility Allowance schedule for PBV properties, and HUD is establishing an
    alternative requirement. The Utility Allowance shall be calculated consistent with Housing
    Notice 2015-04 unless PIH promulgates guidance specific to the PBV program. 1 The Project
    Owner may carry out all of the responsibilities associated with Housing Notice 2015-04, but
    the PHA must ensure that the Utility Allowance is calculated correctly.

    For Converting Projects that include non-RAD PBV units, a PHA may request a waiver from
    HUD in order to establish a site-specific utility allowance schedule for both the RAD and
    non-RAD PBV units. 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


1 Housing Notice 2015-04 requires annual adjustments of property utility allowances based on a utility analysis,

requires notice to tenants for any utility allowance decrease and a phase-in of certain decreases, and provides
instruction for properties undergoing new construction or substantial rehabilitation to establish initial utility
allowances based on an energy consumption model to be subsequently updated once 12 months of consumption
data is available.



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    consumption rates; and a proposed alternative methodology for calculating utility
    allowances on an ongoing basis.


    v. 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.

    Further, the paragraph in Attachment 1C of the RAD Notice entitled “Tenant-Paid Utility
    Savings for PBRA Conversions” is amended to add “and PBV” after any reference to PBRA.

    Further, the following paragraph in Attachment 1C is deleted:

    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.



3. Use of Developer Fee to Incentivize Preferences for Households Exiting Homelessness
   or Permanent Supportive Housing. The following is added as a new Paragraph C. at the
   end of Section 1.14 of the RAD Notice. All existing requirements set forth in Section 1.14
   remain in effect.

    Where the Contract Administrator agrees to adopt an admissions preference for a) homeless
    applicants referred to the property by the local Continuum of Care (CoC) and/or b)
    applicants exiting permanent supportive housing, which preference shall apply to at least



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    25% of the property’s units, HUD will permit a 25% increase in the allowable development
    fee limits described above.2 The fee will remain subject to the LIHTC allocating agency’s
    limitations, as applicable. The PHA or Project Owner must provide evidence of an
    agreement to participate in coordinated entry operated by the local Continuum of Care
    (CoC) and must produce a letter from the CoC affirming, based on current data and local
    need, that there is expected to be need for affordable housing for these populations for the
    term of the HAP contract. In such cases, HUD will require a special provision in the HAP
    contract governing the continued existence of this preference through the term of the HAP
    contract.

    The preference must apply to applicants that fall within the definition of Homeless
    established by section 103 of the McKinney-Vento Homeless Assistance Act and implemented
    in the Continuum of Care Program Rule at 24 CFR § 578.3, unless the local CoC provides a
    letter of support to cover a homeless population not included in that definition.3

4. Section 18 Applications and RAD. The following is added as two new paragraphs at the
   end of Section 1.5.B

    If at a converting project a PHA is using 24 CFR 970.17(b) or 970.17(c) to dispose of other
    units at the project justified on the grounds that disposition allows more efficient or effective
    on-site or off-site development (see PIH Notice 2018-04 for more details), HUD may
    disapprove the conversion if HUD determines that the PHA’s use of both RAD Notice REV-3
    requirements (or subsequent notices) and disposition under sections 970.17(b) or 970.17(c)
    undermines the unit replacement requirements of the RAD program.

    If a PHA is pursuing Section 18 approval under 24 CFR 970.17(c) for disposing of 25% of
    the units at the project justified on the grounds that it allows for comprehensive
    rehabilitation or replacement through RAD so that all units can be operated under project-
    based assistance (see PIH Notice 2018-04 for more details), the RAD relocation
    requirements described in PIH/Housing Notice 2016-17 shall apply to residents of the
    Section 18 units, in lieu of the relocation requirements under 24 CFR part 970. All of the
    RAD relocation requirements shall apply to residents of the Section 18 units, including, but
    not limited to, the resident notice and meeting requirements, the right to return, and
    relocation assistance and payments. The PHA may not provide different relocation rights


2 For guidance on establishing a homeless preference for PBRA, please see H 2013-21. For guidance on

establishing a homeless preference for PBV, please see PIH 2013-15.
3
 The definition of homeless implemented in the Continuum of Care Program can be found at:
https://www.hudexchange.info/resources/documents/CoCProgramInterimRule_FormattedVersion.pdf



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    and benefits to residents of the project on the basis of whether they reside in a RAD unit or a
    Section 18 unit.

5. Streamlined RAD Conversion for Small Public Housing Agencies (PHAs). The following
   is added as a new Section 1.15 of the RAD Notice and the existing Section 1.15 is
   renumbered as Section 1.16.

    1.15 Streamlined RAD Conversion for Small Public Housing Agencies. This Section
    explains the alternative processing requirements that certain very small PHAs may
    voluntarily adopt.

        A. Eligibility for Streamlined Project Conversion. In addition to the eligibility
             requirements outlined in Section 1.3, of the RAD Notice, a PHA must meet the
             following criteria to participate in a streamlined RAD conversion as verified by HUD
             in its existing systems and records. Unless otherwise approved by HUD, a PHA must:
          i.      Have 50 or fewer units remaining in its public housing inventory and demonstrate
                  that through RAD or other means (e.g., Section 18 Demolition or Disposition) it
                  will remove all of the public housing units under its ACC;
          ii.   Have an overall PHAS (Public Housing Assessment System) score of 75 or
                higher; have a PASS (Physical Assessment Sub-System) score of 30 or higher;
                and not have a PHAS substandard designation or a PHAS Capital Fund troubled
                designation;
         iii.   Not propose as part of the conversion to perform any construction or
                rehabilitation on the property, to undertake relocation, or to transfer the
                assistance.
         iv.    For PBV conversions, select a Contract Administrator that has at least 100 units
                under its HCV ACC.

        B. Streamlined Project Conversion Requirements. The following describes the
           requirements of the RAD Notice that are modified or do not apply to streamlined
           RAD conversion.

           i.   Application Requirements. Requirements set forth in Section 1.9 of the RAD
                Notice are modified for Streamlined RAD conversions (and other classes of
                conversions as HUD determines) eliminating the need for information on
                financing, a financing letter of interest, and, for public housing-only PHAs,
                identification of a partnering voucher agency. To ensure appropriate processing,
                the subject line of the email submission to RADapplications@hud.gov should
                include “Small PHA”.



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          ii.    Capital Needs Assessment (CNA). Requirements set forth in the RAD Notice,
                 Section 1.4.A.1 shall not apply. In lieu of a CNA, see below the required
                 certification that must be included with the “Financing Plan.” The requirements
                 set forth in Notice H 2016-17, PIH 2016-17 (HA), Rental Assistance
                 Demonstration (RAD) Notice Regarding Fair Housing and Civil Rights
                 Requirements and Relocation Requirements Applicable to RAD First Component
                 – Public continue to apply. Notwithstanding this exemption from the requirement
                 to conduct a CNA, the PHA should have certified in its PHA Plan, Significant
                 Amendment to the PHA Plan, or MTW Plan that it conducted a site
                 review/inspection of the project with respect to accessibility for persons with
                 disabilities and that the site is consistent with applicable accessibility standards
                 under the Fair Housing Act, Section 504 of the Rehabilitation Act, and the
                 Americans with Disabilities Act, as required by Section 5.2 of Notice H 2016-17,
                 PIH 2016-17 (HA), Rental Assistance Demonstration (RAD) Notice Regarding
                 Fair Housing and Civil Rights Requirements and Relocation Requirements
                 Applicable to RAD First Component.
          iii.   Environmental Review. For Environmental Reviews conducted under 24 CFR
                 Part 50 for Streamlined RAD conversions without any repair, rehabilitation,
                 construction, or demolition, HUD will conduct a tiered review, in which HUD
                 will make program-wide compliance determinations for most of the applicable
                 environmental laws and authorities and complete only a site-specific compliance
                 review of the remaining laws and authorities for the streamlined conversion.
                 PHAs will be required to submit documentation to facilitate HUD’s site-specific
                 review. Forthcoming guidance on the tiered environmental review will be
                 provided by HUD. For Environmental Reviews under 24 CFR Part 58,
                 PHA/Owners should reach out to the responsible entity. HUD encourages
                 responsible entities to consider a tiered approach.
          iv.    Financing Plan Requirements for Streamlined RAD Conversion. The following
                 table describes the applicability of the Financing Plan submission requirements
                 set forth in Attachment 1A of the RAD Notice for Streamlined Conversion for
                 small PHAs. 4


Financing Plan Requirements for Streamlined RAD                                              Does Not
                                                                                  Applies Apply         Modified
Conversion for Small PHAs


4 Please note that while some Financing Plan requirements are not modified under Streamlined Conversion, HUD

anticipates that they will very rarely, if ever, be applicable due to the eligibility criteria for Streamlined
Conversion. This includes: E. RAD Fair Housing, Accessibility & Relocation Checklist; L. Pre-Approval of Specific
Activities; N. Approved Amendment to Attachment A of the MTW Agreement; and Q. Transfer of Assistance.


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     A. Type of Conversion. The PHA must identify whether the
        project will covert to PBV or PBRA as described in
        Attachment 1A of the RAD Notice.

     B. Capital Needs Assessment (CNA). Section 1.4.A.1 of the
        RAD Notice is waived for Streamlined Conversions.
        However, the PHA must provide a certification from its
        Board that:
    i. The PHA has assessed the property for any exigent health
       and safety hazards and, if applicable, has completed any
       necessary repairs.
    ii. The property can be sustained for 20 years as decent, safe,
        and sanitary housing at the published RAD contract rents.5
    iii.If the PHA is transferring the property to a new owner
        (including an wholly controlled single asset entity) and the
        property has pre-1978 “target” housing, PHA has
        provided the Owner the records of lead disclosures, lead-
        based paint inspections, risk assessments, ongoing lead-
        based paint maintenance, periodic re-evaluations, and the
        Owner has agreed to evaluate and control lead-based paint
        hazards.

     C. Scope of Work. Does not apply.

     D. Environmental Review. Section 1.4.A.3. and Attachment
        1A of the RAD Notice are modified for Environmental
        Reviews required under 24 CFR Part 50 to allow for a
        tiered Environmental Review. See Section 1.15.B.iii.
        above.

     E. RAD Fair Housing, Accessibility & Relocation
        Checklist. As applicable to the proposed conversion
        plans, the PHA must complete and submit the checklist as
        described in Attachment 1A of the RAD Notice.




5 While the capital needs assessment is no longer required, HUD recommends that the Board complete due

diligence appropriate to the property prior to making this certification. Capital needs assessors, architects,
consultants, general contractors, building inspectors or, in some cases, PHA staff, may provide relevant analysis
using the HUD e-CNA tool as a template, using another CNA template, using the provider’s proprietary tool
and/or based on the provider’s professional judgment. Under this streamlined processing, HUD will rely on the
Board’s certification that it has satisfied itself regarding the sustainability of the property at the published RAD
contract rents.



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    F. Sources & Uses. Requirements set forth in Attachment 1A
       of the RAD Notice do not apply except that all of the
       PHA’s remaining public housing funds must be reflected
       in a Sources and Uses statement (e.g. used to cover any
       conversion-related cost or placed into an initial deposit to
       the replacement reserve), with the exception of any funds
       needed to address the public housing closeout in
       accordance with PIH 2016-23. Any public housing funds
       that are retained under public housing and not used to
       cover the cost of administrative activities required to
       terminate the ACC as described in PIH 2016-23 will be
       remitted to HUD.

    G. Development Team. Does not apply.

    H. Proposed Financing. Does not apply.

    I. Operating Pro-Forma. The PHA must submit an
       operating pro-forma that meets all existing requirements
       except that annual replacement reserve deposits must
       equal or exceed $500 per unit, unless otherwise approved
       by HUD and justified by a third-party assessment report.

    J. Market Study. Does not apply.

    K. Approval of Significant Amendment to PHA Plan. All
       Requirements for RAD Specific PHA Plan and/or
       Significant Amendment Submission set forth in
       Attachment 1D of the RAD Notice shall apply.

    L. Pre-Approval of Specific Activities. Requirements set
       forth in Attachment 1A of the RAD Notice shall apply.

    M. Approval of Non-Dwelling Real Property. Does not
       apply. In order to facilitate the complete conversion of the
       PHA, all non-dwelling property and land possessed by the
       PHA will be removed from the DOT or DORC and from
       the ACC and shall be encumbered by the RAD Use
       Agreement or released under 2 CFR 200.311(c).

    N. Approved Amendment to Attachment A of the MTW
       Agreement. See Footnote in Section 1.15.B.iv

    O. Affirmative Fair Housing Marketing Plan (AFHMP).
       Applies only for PBRA conversions, as set forth in
       Attachment 1A of the RAD Notice.



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    P. Estimated public housing funds available for HAP
       subsidy. Submission requirements set forth in Attachment
       1A of the RAD Notice shall apply.

    Q. Transfer of Assistance. See Footnote 2.

    R. Resident Comments. Submission requirements set forth in
       Attachment 1A of the RAD Notice shall apply.
       Furthermore, All Resident Participation and Funding
       requirements set forth in Attachment 1B of the RAD
       Notice shall apply.

    S. Title Report. Submission requirements set forth in
       Attachment 1A of the RAD Notice shall apply.




 Dominique G. Blom, General Deputy                    Brian D. Montgomery
 Assistant Secretary for Public and Indian            Assistant Secretary for Housing –
 Housing                                               Federal Housing Commissioner




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