HUD Housing Notice § 2019-09
Rental Assistance Demonstration-Final Implementaion Rev. 4 (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 § 2019-09
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Housing
Office of Public and Indian Housing
Special Attention of: Notice H-2019-09 PIH-2019-
Public Housing Agencies 23 (HA)
Public Housing Hub Office Directors
Public Housing Program Center Directors Issued: 09/05/2019
Multifamily Regional Center Directors
Multifamily Regional Satellite Office Directors Supersedes: Notice PIH-2012-
Regional and Field Office Directors 32 (HA) H-2017-03, REV-3
Regional Administrators and Notice PIH 2018-11 (HA)
Performance Based Contract Administrators H 2018-05 and Notice PIH
2018-22 H 2018-11
Expires: This Notice remains
in effect until amended,
superseded, or rescinded.
SUBJECT: Rental Assistance Demonstration – Final Implementation, Revision 4
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 16,
2014), the Consolidated Appropriations Act, 2016 (Pub. L. No. 114-113, approved December 18,
2015), the Consolidated Appropriations Act, 2017 (Pub. L. No 115-31, approved May 5, 2017),
and section 237 of Title II, Division L, Transportation, Housing and Urban Development, and
Related Agencies, of the Consolidated Appropriations Act, 2018 (Pub. L. 115-141, approved
March 23, 2018) 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
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 1
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 FY 2018 Appropriations Act authorizes up to 455,000 units to convert
assistance under this component. Section I of this Notice provides instructions for PHAs
that apply for conversion under the First Component.
While the RAD Statute, as amended, contains language authorizing HUD to convert
Section 8 Moderate Rehabilitation (Mod Rehab) projects (including Mod Rehab
McKinney Vento 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.
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 to PBV or PBRA contracts upon contract expiration or termination
occurring after October 1, 2006. The Second Component further allows owners of
projects funded pursuant to Project Rental Assistance Contracts under the Section 202
Supportive Housing for the Elderly program (202 PRAC) to convert to PBV or PBRA
contracts. 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. Section IV of this Notice provides instruction for owners of 202 PRAC
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:
Notice PIH 2012-18 (March 8, 2012, superseded by Notice PIH 2012-32)
Notice PIH 2012-32 (July 26, 2012)
Notice PIH 2012-32 REV-1 (July 2, 2013)
1
All references in this Notice to Mod Rehab include Mod Rehab SRO unless otherwise stated.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 2
Notice PIH 2012-32 REV-1 Technical Correction (February 6, 2014)
Notice PIH 2012-32 REV 2 (June 15, 2015)
Notice PIH 2012-32 (HA) H 2017-03, REV 3 (January 12, 2017)
Notice PIH 2018-11 H 2018-05 (July 2, 2018)
Notice PIH 2018-22 H 2018 11 (December 11, 2018)
The terms of the Notice in effect at the time of closing generally govern all projects converting
assistance under either component of RAD, notwithstanding execution of a conditional approval
or commitment for conversion. For all conversion types, HUD reserves the right, in its sole
discretion and upon request from the applicant, to apply provisions from previous versions of
this Notice to program participants that are near conversion.
Major Revisions in Revision 4
This revised Notice includes a change in eligibility and selection criteria as well as clarifications
of existing instructions. Major revisions are summarized below. Where indicated, the provisions
will be subject to a 30-day Notice and Comment period.
First Component (Public Housing Conversions
1. Extends all resident rights to households that will reside in non-RAD Project Based
Voucher (PBV) units placed in a converted public housing project so as to facilitate the
standard protection of residents (see Section 1.6);
2. Increases resident notice requirements to improve communication with residents
throughout the conversion process (see Section 1.8);
3. Establishes a mechanism for public housing agencies (PHAs) to enter into partnerships in
order to pool resources or capacity with each other so as to effectively convert properties
through RAD (see Section 1.5.L.);
4. Allows limited rent increases for public housing conversions to Project Based Rental
Assistance (PBRA) contracts in certain scenarios, including in designated Opportunity
Zones (see Section 1.7.A.5);
5. Modifies the requirements for portfolio awards so as to provide PHAs greater flexibility
in staging the conversion of their properties (see Section 1.9.C.);
6. Streamlines Capital Needs Assessment (CNA) requirements to eliminate the submission
of the CNA Tool when certain conditions have been met (see Section 1.5.A.);
7. Introduces a “Concept Call” so that PHAs can receive confirmation that project plans are
sufficiently advanced to submit a Financing Plan (see Section 1.12.C.);
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8. Prohibits PHAs from entering debt into the Earned Income Verification “Debts Owed”
module purely as a result of the 50058 End of Participations that is required to be
submitted into Public and Indian Housing Information Center (PIC) as part of the
conversion (see Section 1.13.B);
9. Broadens the use of “tiered” environmental reviews so that streamlined submissions are
needed for certain 24 CFR Part 50 reviews; requires the use of the HUD Environmental
Review Online System (HEROS) for Part 50 reviews; and requires radon testing for
PBRA and PBV conversions (see Attachment 1A);
10. Establishes policy that RAD rents will be updated every two years and the updated rents
will be applied to new awards issued after those established dates (see Attachment 1C);
11. Establishes a priority for “Section 3” employment and other economic opportunities for
residents of public housing or Section 8 assisted housing (see Section 1.4.A.18.).
The following additional changes are subject to Notice and Comment because they impact
eligibility and selection criteria (see below):
1. Removing restrictions on certain HOPE VI properties that are under 10 years old; and
2. Eliminating the selection of applications based on previously established “Priority
Categories” so that HUD reviews applications on a first-come, first serve basis. In the
event that a waiting list forms, establishes the priority selection of applications for
properties located in designated Opportunity Zones.
Second Component (Section 202 PRAC, Mod Rehab, Mod Rehab SRO, Rent Supp, RAP
Conversions)
1. Implements the provision of the 2018 Appropriations Act authorizing the conversion of
Section 202 PRAC projects to Section 8 PBRA or PBV contracts
2. Streamlines Capital Needs Assessment (CNA) requirements for Mod Rehab conversion
to eliminate the submission of the CNA Tool when certain conditions have been met;
3. Broadens the use of “tiered” environmental reviews so that streamlined submissions are
needed for certain Part 50 reviews; requires the use of the HUD Environmental Review
Online System (HEROS) for Part 50 reviews; and requires radon testing for PBRA and
PBV conversions
4. Streamlines the Conversion Plan (Financing Plan) requirements for Mod Rehab
Conversion when certain criteria has been met
5. Creates an ability for Mod Rehab and SRO properties converting to PBRA to utilize
contract rents based on the condition of the property following rehabilitation
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6. Provides an ability for owners of converting SRO properties serving the homeless to
establish a leasing or occupancy preference that facilitates permanent supportive housing;
7. Fully establishes resident right of return and the prohibition against re-screening for
existing residents; and
8. Establishes a final date that any remaining RAP properties may make a submission of
conversion under RAD.
Notice and Comment for Changes in Eligibility and Selection Criteria
This Notice is effective immediately except with respect to changes in the project eligibility and
selection criteria, which are subject to a 30-day comment period commencing on the effective
date for the remainder of the Notice. 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 effective seven calendar days following 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 four 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.
Section IV: Provides instructions to owners of 202 PRAC projects, who can convert the
assistance of these projects under the Second Component of the Demonstration.
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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 and public 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 conversions under the First Component, 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.) On September 30, 2014 HUD published “A Progress
Report on the Rental Assistance Demonstration (RAD) Evaluation,” which provides a
summary of early program results and outlines the evaluation underway.2 In addition, in
September, 2016 HUD published the “Interim Report: Evaluation of HUD’s Rental
Assistance Demonstration (RAD).”3
For conversions under the Second Component, 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.
Paperwork Reduction Act
Approved
2
http://www.huduser.org/portal/RAD_Evaluation.html
3
http://portal.hud.gov/hudportal/documents/huddoc?id=RAD_InterimRpt_Final.pdf
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 6
The information collection requirements contained in this document have been approved by the
Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44
U.S.C. 3501-3520) and assigned OMB control number 2502-0612, 2529-0013, and 2506-0087.
In accordance with the Paperwork Reduction Act, 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.
Pending
The information collection requirements contained in this document are pending approval by the
Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44
U.S.C. 3501-3520) and assigned OMB control number 2502-0118. In accordance with the
Paperwork Reduction Act, 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.
R. Hunter Kurtz, Brian D. Montgomery,
Principal Deputy Assistant Secretary Assistant Secretary for Housing –
for Public and Indian Housing Federal Housing Commissioner
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 7
Table of Contents
TABLE OF CONTENTS
PURPOSE ...................................................................................................................................... 1
TABLE OF CONTENTS ............................................................................................................. 8
DEFINITIONS ............................................................................................................................ 11
SECTION I: PUBLIC HOUSING PROJECTS ....................................................................... 19
PURPOSE............................................................................................................................... 19
GENERAL PROGRAM DESCRIPTION .................................................................................... 19
ELIGIBILITY ......................................................................................................................... 22
PROJECT CONVERSION REQUIREMENTS AND FINANCING CONSIDERATIONS ................... 23
WAIVERS, ALTERNATIVES, AND OTHER PUBLIC HOUSING REQUIREMENTS .................... 42
SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS .............................................. 51
SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBRA ............................................. 74
RESIDENT NOTIFICATION .................................................................................................... 92
APPLICATION REQUIREMENTS............................................................................................ 95
SUBMISSION OF APPLICATIONS ......................................................................................... 98
SELECTION CRITERIA ........................................................................................................ 99
CHAP AWARD AND FINANCING PLAN SUBMISSION ...................................................... 101
CLOSING ........................................................................................................................... 103
DEVELOPER FEE .............................................................................................................. 107
STREAMLINED RAD CONVERSION FOR SMALL PUBLIC HOUSING AGENCIES. ............. 109
ADDITIONAL INFORMATION ............................................................................................ 114
ATTACHMENT 1A – FINANCING PLAN REQUIREMENTS AND FEASIBILITY BENCHMARKS FOR
PUBLIC HOUSING CONVERSIONS ............................................................................................... 115
ATTACHMENT 1B – RESIDENT PROVISIONS IN CONVERSIONS OF ASSISTANCE FROM PUBLIC
HOUSING TO PBRA AND PBV ................................................................................................... 130
ATTACHMENT 1C – CALCULATION OF HAP CONTRACT RENTS FOR CONVERSIONS OF
ASSISTANCE FROM PUBLIC HOUSING TO PBRA OR PBV ........................................................ 136
ATTACHMENT 1D – REQUIREMENTS FOR RAD-SPECIFIC PHA PLAN AND/OR SIGNIFICANT
AMENDMENT TO THE PHA PLAN SUBMISSIONS........................................................................ 144
ATTACHMENT 1E - HOUSE RULES: ADDENDUM A – RESIDENT PROCEDURAL RIGHTS .......... 152
SECTION II: MODERATE REHABILITATION PROJECTS .......................................... 154
2.1 PURPOSE ............................................................................................................................... 154
2.2 GENERAL PROGRAM DESCRIPTION ..................................................................................... 154
2.3 ELIGIBILITY ....................................................................................................................... 156
2.3.1 ELIGIBLE OWNERS ............................................................................................................ 156
2.3.2 ELIGIBLE PROPERTIES AND UNITS ................................................................................... 157
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Table of Contents
2.4 CONVERSION PLANNING REQUIREMENTS ........................................................................ 158
2.5 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS ............................................ 165
2.6 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBRA ........................................... 167
2.7 SPECIAL PROVISIONS AFFECTING CONVERSION OF SROS .............................................. 171
2.8 CONVERSION REQUIREMENTS .......................................................................................... 178
2.8.1 INITIAL SUBMISSION OF INTEREST TO HUD ................................................................. 178
2.8.2 PHA ADMINISTRATION OF THE PBV CONTRACT ......................................................... 179
2.8.3 RESIDENT NOTIFICATION AND CONSULTATION ............................................................ 180
2.8.4 CONVERSION PLAN, RAD APPROVAL, AND CLOSING ................................................... 183
2.9 ADDITIONAL INFORMATION .............................................................................................. 184
ATTACHMENT 2A: CONVERSION PLAN REQUIREMENTS AND FEASIBILITY BENCHMARKS FOR
MOD REHAB CONVERSIONS ....................................................................................................... 185
SECTION III: RENT SUPPLEMENT AND RENTAL ASSISTANCE PAYMENT
PROJECTS................................................................................................................................ 197
3.1 PURPOSE............................................................................................................................. 197
3.2 LAST DATE OF SUBMISSION ............................................................................................... 197
3.3 GENERAL PROGRAM DESCRIPTION .................................................................................. 197
3.4 ELIGIBILITY ....................................................................................................................... 201
3.4.1 ELIGIBLE OWNERS ......................................................................................................... 201
3.4.2 ELIGIBLE PROPERTIES AND UNITS................................................................................. 203
3.5 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS ............................................ 207
3.6 SPECIAL PROVISIONS AFFECTING CONVERSION TO PBRA ............................................. 211
3.7 PROCESSING REQUIREMENTS FOR PROSPECTIVE CONVERSIONS ................................... 216
3.7.1 OWNER SUBMISSIONS FOR PROSPECTIVE CONVERSIONS ............................................. 218
3.7.2 PBV: HUD REVIEW OF PROSPECTIVE CONVERSION REQUEST, SELECTION OF PHA,
AND FUNDING AND EXECUTION OF HAP CONTRACT ............................................................... 227
3.7.3 PBRA: HUD REVIEW OF PBRA REQUEST AND EXECUTION OF CONTRACT .............. 229
3.8 PROCESSING REQUIREMENTS FOR RETROACTIVE CONVERSIONS .................................. 230
3.8.1 SUBMISSION OF REQUESTS FOR RETROACTIVE CONVERSIONS ....................................... 231
3.8.2 REVIEW AND CONSENT OF PHA AND EXECUTION OF PBV HAP CONTRACT ............. 233
3.9 ADDITIONAL INFORMATION .............................................................................................. 234
SECTION IV: SECTION 202 PROJECT RENTAL ASSISTANCE CONTRACT (PRAC)
PROJECTS................................................................................................................................ 234
4.1 PURPOSE ............................................................................................................................... 234
4.2 GENERAL PROGRAM DESCRIPTION ..................................................................................... 235
4.3 ELIGIBILITY .......................................................................................................................... 236
4.5 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBVS ............................................ 249
4.6 SPECIAL PROVISIONS AFFECTING CONVERSIONS TO PBRA ........................................... 253
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 9
Table of Contents
4.7 CONVERSION AND PROCESSING REQUIREMENTS ............................................................. 257
4.7.1 INITIAL SUBMISSION OF INTEREST TO HUD ................................................................. 257
4.7.2 PHA ADMINISTRATION OF THE PBV CONTRACT ......................................................... 258
4.7.3 RESIDENT NOTIFICATION AND CONSULTATION ............................................................ 258
4.7.4 CONVERSION PLAN SUBMISSION, RAD APPROVAL, AND CLOSING .............................. 260
4.8 ADDITIONAL INFORMATION .............................................................................................. 261
ATTACHMENT 4A: CONVERSION PLAN REQUIREMENTS AND FEASIBILITY BENCHMARKS FOR
PRAC CONVERSIONS ................................................................................................................. 262
APPENDIX I – 24 CFR PART 880 REGULATION, STRICKEN FOR PBRA
CONVERSIONS ....................................................................................................................... 274
APPENDIX II –THE U.S. HOUSING ACT OF 1937, WAIVED FOR PBRA
CONVERSIONS ....................................................................................................................... 306
APPENDIX III – PBRA SITE AND NEIGHBORHOOD STANDARDS ........................... 307
APPENDIX IV– NEW CODES FOR SPECIAL PROGRAMS REPORTED ON THE
FAMILY REPORT (FORM HUD-50058) FOR THE RENTAL ASSISTANCE
DEMONSTRATION PROGRAM. ......................................................................................... 310
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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, housing assisted under Section 8 of the
Act, properties subject to Low-Income Housing Tax Credits (LIHTC) use restrictions, 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 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. In accordance with Chapter 5 of the MAP Guide, the CNA
identifies “Critical repairs,” which include 1) “Life Safety” repairs that, in HUD’s determination,
are needed to address hazards to life and health and must be completed before residents can
occupy or continue to occupy the affected units and 2) “Accessibility” repairs that are needed to
correct accessibility deficiencies. The correction of accessibility deficiencies must take the
minimum time reasonably possible given the physical characteristics of the repairs and
construction process and given the reasonably anticipated impact of the deficiencies and the
repairs on the tenants, including disruption or displacement of their occupancy and their safe and
full enjoyment of the property.
Choice-Mobility. For residents of Covered Projects, the option to obtain an HCV from a PHA
after a defined period of residency. (See Section 1.7.C.5 of this Notice for PBRA conversions,
and 24 CFR § 983.261 and Section 1.6.D.8. 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.)
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Definitions
Combined Agency. A PHA that either directly, or through an affiliate, administers both an 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
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, the assignee becomes 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 a project in accordance
with the Act, HUD regulations, the ACC, the Mixed Finance ACC Amendment, the HOPE VI
Grant Agreement (if applicable), and the Choice Neighborhoods Implementation Grant
Agreement (if applicable).
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Definitions
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. In some cases, a Declaration of
Restrictive Covenants is used in lieu of a Declaration of Trust, which Declaration of Restrictive
Covenants obligates the owner of the property to operate certain units as public housing in
accordance with the ACC, the Act and HUD regulations and requirements. For purposes of this
Notice, the defined term Declaration of Trust (DOT) shall refer to a Declaration of Trust and/or a
Declaration of Restrictive Covenants, as applicable to the specific site.
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.
Enhanced Vouchers (EVs). A type of tenant protection voucher 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. The
use of the term “FMR” on its own refers to the metropolitan area-wide FMR.
Family Self-Sufficiency (FSS). FSS is a program authorized under section 23 of the Act and
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 salary and benefits 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
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Definitions
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.I 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.)
HOTMA Implementation Notice. Federal Register Notice Housing Opportunities Through
Modernization Act of 2016: Implementation of Various Section 8 Voucher Provision, published
January 18, 2017 at 82 FR 5458.
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
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.
Identity of Interest (IOI). A relationship where two parties have closely related business
operations or other activities. An identity of interest must be disclosed and may be prohibited.
Examples of Identity of Interest relationships include, but are not limited to, a financial or family
relationship between the PHA or owner (which includes but is not limited to an officer, director,
or partner of the PHA or owner) and general contractor, subcontractor, seller of the land or
property, any consultants, or other parties to the transaction.
MAP Guide. Housing Guidebook 4430.G “Multifamily Accelerating Processing (MAP) Guide”
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 14
Definitions
Mixed-Finance Project. A public housing project developed in accordance with 24 CFR part 905
subpart F using public housing, nonpublic housing, or a combination of public housing and
nonpublic housing funds, where the public housing units are owned in whole or in part by an
entity other than the PHA, pursuant to 905.604(a). A mixed-finance project may include 100
percent public housing (if there is an Owner Entity other than the PHA) or a mixture of public
housing and non-public housing units.
Operating Cost Adjustment Factor (OCAF). An operating cost adjustment factor established by
HUD that is applied to the 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 financial asset. In
most cases, this corresponds to a grouping of residential units that are managed and marketed as
a single entity and are geographically proximate. In determining whether multiple 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 983.4
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,
pursuant to 24 CFR 983. 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
4
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.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 15
Definitions
housing to eligible tenants. The PBRA program is administered by HUD’s Office of Housing.
Project Owner. 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, Mod Rehab 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 the
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. The term “public housing 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 pre-conversion owner (if not the PHA), and the post-conversion
Project Owner. The RCC follows completion of HUD’s review of the Financing Plan and
describes the terms and conditions under which HUD will approve the proposed conversion and
execute closing documents. (See Section 1.12 and Attachment 1A for further details on the
RCC.)
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 Fair Housing, Civil Rights, and Relocation Notice. The “Rental Assistance Demonstration
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 16
Definitions
(RAD) Notice Regarding Fair Housing and Civil Rights Requirements and Relocation
Requirements Applicable to RAD First Component – Public Housing Conversions,” Notice H
2016-17; PIH 2016-17 (HA), as may be amended from time to time.5
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.)
REAC. HUD’s Real Estate Assessment Center.
Resident Opportunity and Self-Sufficiency Service Coordinators (ROSS-SC). Funding under this
program is made available for Service Coordinators to 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.
Small Area FMR. The FMR established on a zip-code basis per 81 FR 80678, as published
annually in the Federal Register.
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; the termination or expiration of a Mod Rehab or SRO contract; or HUD approval of
public housing unit demolitions, dispositions, and conversions under Section 18, Section 22, or
Section 33 of the Act. HUD provides TPVs and funding to a voucher agency that has jurisdiction
5
https://www.hud.gov/sites/documents/16-17HSGN_16-17PIHN.PDF.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 17
Definitions
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 5.634 (public housing and PBRA) and 983.353 (PBV),
TTP. The total tenant payment as calculated pursuant to 24 CFR Part 5.
Uniform Physical Condition Standards (UPCS). Protocols used for HUD Real Estate Assessment
Center (REAC) physical inspections in accordance with 24 CFR part 5, subpart G.
Uniform Relocation Act (URA). The Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 as amended (42 U.S.C. 4601 et seq.) and its implementing
regulations (49 CFR part 24).
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 an HCV program.
Work or Scope of Work. The improvements required by HUD to be performed within a defined
period following the conversion and specified in the RCC or other RAD conversion documents.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 18
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) or a PHA-defined portfolio of projects (which may include a multi-phase
conversion of a pre-existing public housing site). If a PHA applies for a portfolio award, HUD
will reserve RAD conversion authority for the number of units covered by the award, and the
PHA will be required to submit a RAD Application for each individual project. 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, issuance of an
RCC 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 published 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 or prior to the expiration of the
initial contract and each renewal contract thereafter, the Voucher Agency shall offer, and the
Project Owner shall accept, a renewal contract for the prescribed number and mix of units,
either on the site of the project subject to the expiring contract or, upon request of the Project
Owner and subject to PHA and HUD approval, at another site through a future transfer of
assistance. Each project with a PBV HAP Contract will also be subject to a RAD Use
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 19
Section I: Public Housing Projects
Agreement that will renew with the HAP Contract on the property assisted by the HAP
Contract. Further, the administering 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.8. 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
published 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. 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 for the prescribed number and mix of units,
either on the site of the project subject to the expiring contract or, upon request of the Project
Owner and subject to HUD approval, at another site through a future transfer of assistance.
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 on the property assisted by 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 of 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 that best meets its needs. It will also enable HUD and
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 20
Section I: Public Housing Projects
Congress to assess how effective each form of assistance proves to be in meeting such varied
circumstances and needs.
D. Resident Rights and Relocation. Equally important for the success of RAD are meaningful
resident participation, procedural and relocation rights, and mobility, which are addressed in
detail in various sections of the Notice and the RAD Fair Housing, Civil Rights, and
Relocation 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. These authorities prohibit
discrimination and impose affirmative obligations on HUD program participants. See HUD’s
general regulations at 24 CFR § 5.105. For example, the Fair Housing Act prohibits
discrimination in housing (see 42 U.S.C. §§ 3601, et seq., and 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)). All Federally assisted programs and 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 24 CFR part 8), as well as Titles II and III of the Americans with Disabilities Act
(12 U.S.C. §§ 12101, et seq., and 42 CFR parts 35). Executive Order 11063 (24 CFR part
107) was issued to prevent discrimination based on race, color, religion, sex, or national
origin in Federally assisted housing property or facilities and to require program participants
to provide information on race, color, religion, sex, or national original of applicants for and
participants in Federally assisted housing.
HUD has issued a separate notice, the RAD Fair Housing, Civil Rights, and Relocation
Notice, to provide more detailed guidance regarding certain civil rights requirements of RAD
transactions. This Notice has been updated to remove civil rights guidance and requirements
that are duplicative of the provisions of the RAD Fair Housing, Civil Rights, and Relocation
Notice. The removal of this language does not modify any of the requirements contained in
the RAD Fair Housing, Civil Rights, and Relocation Notice. PHAs should consult the RAD
Fair Housing, Civil Rights, and Relocation Notice early in the planning process so that they
are aware of RAD’s civil rights related requirements for project construction and operation,
site selection, submission of information to HUD, and HUD approval.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 21
Section I: Public Housing Projects
RAD conversions that include one or more of the circumstances described in the RAD Fair
Housing, Civil Rights, and Relocation Notice must undergo a Front-End Civil Rights
Review. The purpose of the review is early identification of the risk that elements of
proposed RAD projects will be out of compliance with certain fair housing and civil rights
requirements. When such circumstances are present, the PHA must obtain written approval
from HUD.6
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
1.9 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:
1. Have public housing units under an ACC;
2. Be classified as a Standard or High Performer under the Public Housing Assessment
System (PHAS). If classified as “troubled” (Troubled) the PHA may still be eligible if the
PHA is making substantial progress under its Recovery Agreement, Action Plan,
Corrective Action Plan (CAP) or Memorandum of Agreement (MOA) or proposes a
revision to such agreement or plan that incorporates conversion under RAD and that is
acceptable to HUD. 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.
3. 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;
6
Properties being redeveloped with funding under a Choice Neighborhoods Implementation (CNI) grant are not
subject to the RAD Fair Housing, Civil Rights, and Relocation Notice, including the RAD front-end and civil rights
transaction reviews.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 22
Section I: Public Housing Projects
4. Be 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;
5. Not have a debarment, suspension, or Limited Denial of Participation (LDP) in Federal
programs lodged against the applicant, PHA Executive Director, Board members, or
affiliates, unless HUD has determined that the RAD conversion is likely to place the
property under the control of a more capable entity;
6. Submit a completed application that complies with all RAD Application instructions.
7. Resolve to HUD’s satisfaction any outstanding civil rights matters prior to conversion.
All pending legal processes must have been satisfied to meet this standard. If eligibility
would be denied on this basis, HUD will notify the applicant of its determination and any
actions necessary to permit a finding of eligibility.
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).
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 and public 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). 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 to be included as a Scope of Work that will be
completed as part of the RAD conversion and long-term capital needs to be addressed
through a Reserve for Replacement Account. A CNA must be submitted with the
Financing Plan and must have been completed no earlier than 180 days prior to
submission of the Financing Plan, except with HUD approval.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 23
Section I: Public Housing Projects
CNA eTool. The CNA eTool is required as part of any RAD Financing Plan (or
application for FHA Firm Commitment), except as described below. The CNA
eTool contains two major components – the narrative (the description of each
component and its condition and may include an energy audit) and the financial
model (the 20-year schedule and associated determination of the Initial Deposit to
Replacement Reserve, or IDRR, and the Annual Deposit to Replacement Reserve,
or ADRR).
Contractor Qualifications. The CNA must be completed by a qualified,
independent third-party professional as required by the MAP Guide.
Exemptions. HUD may exempt the transaction types set forth below from CNA
requirements, provided that the proposed exemption is confirmed with HUD prior
to submission of the Financing Plan and eligibility for the exemption confirmed in
HUD’s review of the Financing Plan. Exemptions may apply to some or all
portions of the CNA, including the assessment of immediate needs and the
portions of the CNA eTool necessary to produce the 20 Year Reserve Schedule.
a. For non-FHA transactions, neither component of the CNA will be required
as long as the Annual Deposit to the Replacement Reserve is no less than
$450 per unit (or a lower amount if justified by an alternate form of CNA
acceptable to HUD, typically one performed for an investor or lender), and
the Project:
i. Has been newly constructed or financed with 9% LIHTC within
the last five years, as calculated from the date the final certificate
of occupancy was issued,7 or
ii. Qualifies as new construction or will be financed with 9% LIHTC;
b. For non-FHA transactions, the narrative will not be required where the
transaction will be financed with 4% LIHTC;
c. For non-FHA transactions, neither component of the CNA will be required
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, taking into consideration the
absolute number of RAD units at the project).
d. For FHA transactions, PHAs should follow applicable requirements in the
MAP Guide governing exemptions.
Utility Consumption Baseline. No utility consumption baseline analysis is
necessary as part of the CNA conducted for the RAD conversion.
7
Prior to confirming an exemption from the CNA HUD will require a disclosure of any construction defects and a
PHA certification that it conducted a site review/inspection of the project with respect to accessibility for persons
with disabilities and that the property complies with federal accessibility requirements
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 24
Section I: Public Housing Projects
2. Healthy Housing 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, 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. The use of Energy Star®, WaterSense®
or Federal Energy Management Program (FEMP)-designated products and appliances
replacements, if any such designation is available for the applicable system or
appliance, is presumed to be the minimum threshold for meeting such requirement.8
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) for single family or low-rise multifamily
properties (three stories or less) or the ASHRAE 90.1-2007 standard for mid- or high-
rise multifamily projects, or any successor codes that are 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.
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 no
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/.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 25
Section I: Public Housing Projects
later than 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. Once an awardee has submitted an application for a specific project, they may not
make any choice limiting actions before the completion of the environmental
review.10
4. Substantial Conversion of Assistance. Conversions may not result in a reduction of
the number of assisted units, except by a de minimis amount. A de minimis reduction
of units may include any of the following:
a. The greater of five units or the number of units (rounded to the nearest
whole number) corresponding to five percent of the number of ACC units
in the Project (or RAD-converted portfolio, if both the portfolio and de
minimis units are counted in the aggregate) immediately prior to
conversion;
b. Any unit that has been vacant for more than 24 months at the time of RAD
Application; and
c. Units that, if removed from assistance, 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), subject to HUD approval.
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).
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 complete the review in
conjunction with the Financing Plan review and therefore the PHA should submit full environmental review
documentation no later than the Financing Plan submission. HUD may require earlier submission in order to
ascertain whether a conversion has sufficiently advanced (see Section 1.12 for discussion of the Concept Call).
10
A choice limiting action means an action that may have an adverse impact on the environment or limit the choice
of reasonable alternatives. A choice limiting action may include, but is not limited to, real property acquisition,
demolition, disposition, rehabilitation, repair, new construction, site preparation or clearance, ground disturbance,
and leasing. For more information see the Environmental Review Requirements for RAD Conversions Quick
Reference Guide: https://www.hudexchange.info/resource/4216/environmental-review-requirements-for-rad-
transactions/
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Section I: Public Housing Projects
In all cases, the PHA shall submit within its 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. HUD may approve any reduction of units by project or
portfolio. Any de minimis reduction request must be included in the approved
Financing Plan prior to closing of the associated transaction.
The de minimis allowance may be calculated across portfolio conversions, but the
number of de minimis units allowed must be calculated based on 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.
a. RAD Fair Housing, Civil Rights, and Relocation Notice. Relocation
requirements related to public housing conversions under RAD are
described in the RAD Fair Housing, Civil Rights, and Relocation Notice.11
The RAD Fair Housing, Civil Rights, and Relocation Notice provides
PHAs and their development partners with information and resources on
RAD program requirements, Uniform Relocation Act (URA)
requirements, and other requirements which may be applicable such as
Section 104(d) of the Housing and Community Development Act of 1974,
as amended (Section 104(d)) when planning for or implementing resident
11
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 requirements regarding relocation included
in the applicable CNI NOFA and applicable CNI Grant Agreement.
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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.
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. The primary
source for First Component relocation requirements and guidance is 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.
b. 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.
c. 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.12
6. Accessibility Requirements. Federal accessibility requirements apply to all
conversions, whether they entail new construction, alterations, or existing facilities.
12
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
See the RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17
PIH 2016-17 (HA)) for a full description of the applicability of accessibility
requirements in RAD and the situations under which HUD will perform an up-front
review.
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. See the RAD
Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17 PIH 2016-17
(HA)) for a full description of Site and Neighborhood Standards requirements in
RAD and the situations under which HUD will perform an up-front review.
8. Additional Design Considerations. Applicants are also strongly encouraged to
demonstrate contemporary best practices in rehabilitation and construction, utilizing a
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, broadband infrastructure, senior fall prevention and aging in place
design, occupant health and welfare, basic environmental stewardship, and climate
change resilience.13
13
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.
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Section I: Public Housing Projects
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,14 a PHA may not demolish and/or dispose of units until after the
closing of construction financing for the Covered Project.15 Both the demolition
action and new construction or rehabilitation (either on-site or off-site) are considered
as part of a single Environmental Review. PHAs should be aware that the CDBG and
HOME programs have additional requirements regarding demolition if those sources
of funds are used.16
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 not in all
cases, result in discrimination against families with children. See the RAD Fair
Housing, Civil Rights, and Relocation Notice (Notice H 2016-17 PIH 2016-17 (HA))
for a full description of the situations under which HUD will perform an up-front
review when a PHA proposes to change the unit configuration of a project.
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.
HUD may also 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 determines that the PHA or a non-profit entity preserves an
interest in the property.
14
Demolition prior to replacement is common in transactions utilizing Choice Neighborhood Implementation grants.
Whenever approval is granted, a PHA cannot begin demolition before entering into a Converting Awaiting Transfer
(CAT) agreement, which converts the public housing assistance and reserves the PHA’s ability to place it under a
HAP contract at a future date.
15
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. In rare cases, 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.
16
The most relevant requirements are contained in Section 104(d) of the Housing and Community Development
Act of 1974, as amended.
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Section I: Public Housing Projects
Public or non-profit ownership or control, or preservation of an interest by a PHA or
non-profit in a property owned by a tax-credit entity controlled by a for-profit entity,
may be satisfied if the PHA, public entity or non-profit entity (or entities), directly or
through a wholly owned affiliate: (1) holds 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) demonstrates other ownership and control arrangements approved by
HUD.
Control rights referenced in the examples above include 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, and
consent rights over certain acts of the Project Owner (including, for example,
disposition of the Covered Project, changing the number of affordable units or the
affordability targeting, setting utility allowances or any unregulated tenant fees for the
affordable units, selecting the management agent, setting the operating budget and
making withdrawals from the reserves). Control may be established through the terms
of the Project Owner’s governing documents or through a Control Agreement,
provided that in either case amendment of the terms of control requires consent from
HUD. Ownership and control structures are subject to HUD review to ensure
compliance with statutory requirements.
If HUD, in its sole discretion, determines intervention is necessary in situations
involving foreclosure, bankruptcy, or termination and transfer of assistance for
material violations of, or default under, the HAP Contract, HUD will first seek to
require ownership or control of assisted units by a capable public or non-profit entity
before considering another capable entity, as determined by the Secretary.
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 Voluntary Compliance Agreement
(VCA), conciliation agreement, consent order or consent decree, or final judicial
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Section I: Public Housing Projects
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 to ensure continued
applicability of appropriate provisions of the VCA and related agreements to the
property and its operations. 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 applicable 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,unless specifically stated
otherwise, 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 considering the condition and needs of the Converting Project,
the nature of the proposed Covered Project, and the impact on the Converting
Project’s residents. The transfer shall not place housing in neighborhoods with highly
concentrated poverty based on the criteria formulated for transfers under Section
8(bb) of the Act.17 The transfer shall comply with all applicable fair housing and civil
rights requirements and all requirements detailed in this Notice, including
environmental review (see Section 1.4.A.3 and Attachment 1A), Site and
17
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.
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Section I: Public Housing Projects
Neighborhood Standards (see Section 1.4.A.7), Changes in Unit configuration (see
Section 1.4.A.10), and Accessibility requirements (see Section 1.4.A.6). See the RAD
Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17 PIH 2016-17
(HA)) for a full description of the an up-front civil rights review HUD will perform
when a PHA proposes a transfer of assistance. 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. PHAs should be aware that acquisition of
the transfer of assistance site for a Federally-funded project is generally subject to the
URA and the commercial or residential occupant of such site may be eligible for
relocation payments and assistance.
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, this information must be included in the PHA’s
Five Year, Annual, or MTW Plan, or as an amendment to the Five Year or MTW
Plan or significant amendment to the Annual Plan and must be consistent with the
Consolidated Plan. In a 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 PHA and Project
Owner must submit a request with their Financing Plan to either a) enter into the
HAP contract at the close of construction financing at the Covered Project and, if
residents will continue to occupy the former public housing units until
construction is complete, execute a Master Lease between the Project Owner
(Lessee) and PHA (Lessor) for the units with lease payments made from Rehab
Assistance Payments or other available funds or b) with HUD approval, enter into
a contractual agreement regarding delayed conversion (“Delayed Conversion
Agreement”), pursuant to which the Converting Project will remain as public
housing while occupied by public housing residents during construction of the
new site and the entire HAP Contract will be executed and effective as
construction is completed and units are ready for occupancy. Please note that a
Delayed Conversion cannot accommodate “staged” effective dates for distinct
clusters of units.18 HUD will approve such requests in its sole discretion, based on
sufficient demonstration that it is necessary to facilitate conversion.
18
Please see guidance available on www.RADresource.net “Master Lease vs. Delayed Conversion Agreement”
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Section I: Public Housing Projects
When the assistance will be transferred at execution of the HAP Contract
(including to an adjacent site), the PHA must submit as part of the Financing Plan
a brief narrative describing its plans for the Converting Property. Generally, a
PHA’s plans must propose for HUD’s review one of the following:
i. Release the Declaration of Trust and place the property under an alternative
restrictive covenant at closing that, generally, will:
a) Be recorded in a superior position to all other liens on the property that
could compromise the applicability or enforceability of the alternative
restrictive covenant;
b) Run for a period of twenty years after which it will extinguish by its
terms;
c) Require that either:
i) the use of the property be restricted to Affordable Housing
Purposes, which restriction shall apply to any successor owners of
the property, or
ii) where the property is not used for Affordable Housing Purposes,
any net income generated from the property, including through
lease agreements, be restricted to Affordable Housing Purposes,
which restriction shall apply to any successor owners of the
property;Require that for the duration of the use restriction, HUD
approve any changes in ownership to confirm ongoing compliance
with the use restriction;
d) Require that, for the duration of the 20-year use restriction period or
until the property is sold at Fair Market Value (whichever is shorter), the
PHA retain records of and annually report to its board regarding the use
of the property (including any use for Affordable Housing Purposes) and
any proposed sale of the property; and further require that until any
proceeds from the property are fully expended, the PHA retain records
of and annually report to its board the net income generated from the
property, the proceeds of any sale of the property, and the use of such
funds for Affordable Housing Purposes. HUD will require such records
whenever HUD approval is needed for sale or transfer of the property or
upon request; and
e) Permit a subsequent removal of the alternative restrictive covenant with
HUD approval under the following situations:
i) for sale of the property at Fair Market Value (or equivalent market
valuation, e.g., negotiated sale) as long the as proceeds are
restricted to Affordable Housing Purposes, or
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Section I: Public Housing Projects
ii) when replaced with an alternative restrictive covenant (e.g.,
LIHTC extended use agreement) that, in HUD’s determination,
satisfies the Affordable Housing Purposes requirement.
ii. Retain the Declaration of Trust and separately demolish and/or dispose of
the Converting Property under section 18 of the Act or dispose of (retain)
the Converting Property under 2 CFR part 200 (see Notice PIH 2016-20); or
iii. Release the Declaration of Trust at conversion in order to imminently sell
the original property at Fair Market Value (FMV) (or equivalent market
valuation) with a plan to use the proceeds from the sale for Affordable
Housing Purposes.
Until expended, the PHA must place any proceeds in an account subject to a
HUD-51999, General Depository Agreement which specifies the insurance and
security investment requirements.
b. Transfer After Conversion. In general, a Project Owner may only request a
transfer of assistance to HUD after 10 years from the effective date of the initial
HAP Contract. A Project Owner may submit a transfer request sooner if it is
needed as a result of eminent domain proceedings, natural disasters, unforeseen
events, or as otherwise approved by HUD (for example, if HUD provided
approval of a future transfer prior to conversion). HUD may consider, and
approve with such conditions as HUD determines appropriate, a partial or
complete transfer of assistance to a new location if the new location complies
with applicable site selection standards. Substantially all units covered by the
initial HAP Contract must remain or be replaced as a result of the transfer.
Residents of the original location at the time of the transfer request shall not
experience a loss of rental assistance. PBV-assisted families living at the property
upon termination of a PBV HAP Contract have a statutory right to receive a
tenant-based voucher and to certain tenancy protections.19 (A family may
voluntarily decline the tenant-based voucher and accept a PBV unit at the new
location but may not be required to do so.) Termination of a PBV contract is not
cause for issuance of additional tenant-based voucher assistance from HUD.
19
See the Housing Opportunity Through Modernization Act of 2016 (HOTMA) and HUD’s implementation notices
including the "January 18, 2017 HOTMA implementation notice, 82 Fed. Reg. 5458," and the "July 14, 2017
technical correction and clarification notice, 82 Fed. Reg. 32461." Also see Notice PIH 2017-21. Pursuant to
applicable Housing Choice Voucher program requirements, upon PBV HAP Contract termination the family must
be given the option to remain in their unit with HCV assistance if the unit remains rental housing, the rent is
reasonable, and the unit meets housing quality standards.
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PHAs and owners contemplating RAD PBV transfers after conversion must take
the PBV families’ right to tenant-based voucher assistance into consideration and
ensure that there will be sufficient resources available to the PHA to both
effectuate the transfer and meet the PHA’s obligation to provide tenant-based
vouchers to those families that wish to receive them. Subject to the availability of
appropriations, PBRA-assisted families living at the property upon termination of
a PBRA HAP Contract that meet the eligibility requirements for voucher
assistance may receive tenant-based tenant protection vouchers (TPVs) in the
event the termination of the original PBRA HAP Contract qualifies for issuance
of such vouchers. If applicable, any lender to and/or investor in the Covered
Project must approve the transfer of the assistance. In the event of a transfer of all
RAD units, a RAD Use Agreement will be recorded encumbering the new
location to which assistance is transferred and the original RAD Use Agreement
on the Covered Project will be released. In the event of a partial transfer, a RAD
Use Agreement will be recorded encumbering the new location to which
assistance is transferred and HUD shall consider appropriate modifications to the
original RAD Use Agreement.
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 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. As to the events of breach
of the RAD Use Agreement, HUD will avail itself of such legal actions as
described in the RAD Use Agreement.
13. RAD Use Agreement. Pursuant to the RAD Statute, a Covered Project shall have a
RAD Use Agreement that will be in such a form as prescribed by HUD including but
not limited to the following:
a. Be recorded in a superior position to all other liens on the property that could
compromise the applicability or enforceability of the RAD Use Agreement.20
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;
b. 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
20
For projects being developed under a Choice Neighborhoods Implementation grant, the Choice Neighborhoods
Declaration of Restrictive Covenants (DORC) may be recorded in a superior position to the RAD Use Agreement.
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Section I: Public Housing Projects
even in the case of abatement or termination of the HAP Contract, unless the
Secretary approves termination of the RAD Use Agreement in the case of a
transfer of assistance;
c. 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
d. Require compliance with all applicable fair housing and civil rights
requirements, including the obligation to affirmatively further fair housing.
14. Davis-Bacon prevailing wages. The Davis-Bacon prevailing wage requirements
(prevailing wages, the Contract Work Hours and Safety Standards Act, and
implementing 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 following the effective
date 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.
15. Section 3 of the Housing and Urban Development Act of 1968 (Section 3). Section
3 is codified at 12 U.S.C. 1701u and implemented by regulation at 24 CFR part 135
or successor part.
a. Pursuant to such requirements, all pre-development conversion costs funded
by public housing program funds pursuant to Section 1.5.A are subject to 12
U.S.C. 1701u(c)(1) and (d)(1), which sets forth Section 3 requirements
applicable to public housing activities.
b. While most RAD conversions do not utilize funding covered by Section 3,
HUD has established the alternative requirement that any Work required by
the conversion after the RAD Closing that involves housing rehabilitation or
housing construction is subject to the Section 3 requirements applicable to
housing and community development activities as set forth in 12 U.S.C.
1701u(c)(2) and (d)(2) and the regulations derived from such provisions,
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Section I: Public Housing Projects
except that, with the exception of transactions receiving HUD housing and
community development assistance, such as CDBG (24 CFR part 570) or
HOME (24 CFR part 92), first priority for employment and other economic
opportunities shall be given to residents of public housing or Section 8
assisted housing. Otherwise, the receipt of Section 8 rental assistance does
not, in itself, trigger the applicability of Section 3.
c. The Project Owner shall report Section 3 compliance through the post-closing
completion certification to HUD described in Section 1.13.B.7 of this Notice
upon completion of the Work. In addition, for any housing rehabilitation or
housing construction assisted with HUD housing and community development
assistance, such as CDBG (24 CFR part 570) or HOME (24 CFR part 92),
Section 3 compliance shall be reported consistent with such program
requirements.
16. 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, if applicable, 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 completed a risk assessment under subpart H. If applicable, 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.)
17. 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.
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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. See Attachment 1A for full financing
underwriting requirements. Except where public housing funds are used in the
transaction (see paragraph 2 below), 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.
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), Federal Home Loan Banks, and
applicable private foundation financing. Other funding sources that may be available
include 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. 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 of public housing (e.g., legal fees related
to the release of the public housing declaration of trust or declaration of restrictive
covenants).
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 Notice PIH 2011-55) and unobligated Capital Funds, as a
source of capital to support conversion (see Section 1.5 of this Notice for more
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Section I: Public Housing Projects
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 certain public housing and voucher funds authorized under
their funding flexibilities (“MTW funds”) as an additional source of capital to support
conversion. These funds, whether provided as a loan, a grant, or a capital
contribution, must be identified in the Financing Plan. If funds are contributed as a
loan, except in extraordinary circumstances, the loan must be structured as a “soft”
second mortgage payable from project cash flow. Financing proceeds in excess of
transaction costs will not be allowed when public housing Capital, Operating, or
MTW funds are contributed to the project conversion.
3. Existing PHA Indebtedness and Contractual Obligations. A PHA must 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 MAP Guide, the appropriate FHA-
insured financing may instead be section 221(d)(4) of the National Housing Act. FHA
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Section I: Public Housing Projects
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”).
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), Historic Tax Credits (HTCs), and
Opportunity Zones. Applicants are encouraged to use LIHTCs and, if eligible,
historic preservation tax credits, opportunity zones and state or local tax incentive
structures, 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.21 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.
6. Grant Funding or Cash Flow Financing. There are many sources of funding at the
local, state, and federal level, which may be structured as grants or as debt with
21
Notice H 2012-1 can be found at http://portal.hud.gov/hudportal/documents/huddoc?id=12-01hsgn.pdf.
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Section I: Public Housing Projects
repayment only required from cash flow.22 State and local CDBG and HOME funds
may be utilized as “gap” financing for affordable housing developments.23 Numerous
state and local governments offer other funding programs which can be used as
sources in financing plans, 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
funding in support of affordable housing development. Finally, the Federal Home
Loan Bank’s “Affordable Housing Program” has been a significant source of 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
funds are often structured as debt or granted to a sponsor entity and loaned from the
sponsor to the Project Owner.
7. Acquisition Proceeds. For transactions involving the transfer of ownership from a
PHA administering the public housing program to a new entity, a PHA is permitted to
receive cash acquisition proceeds in excess of any seller take-back financing unless
the PHA is using public housing Capital, Operating, or MTW funds as a source of
funds for the transaction.24 All such proceeds must be used for Affordable Housing
Purposes. Until expended, the PHA must place the proceeds in an account subject to a
HUD-51999, General Depository Agreement which specifies the insurance and
security investment requirements.
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
upon a finding by the Secretary that any such waivers or alternative requirements are necessary
for the effective conversion of assistance under the Demonstration. Additionally, the RAD
Statute imposes certain unique requirements. To facilitate the conversion of assistance, HUD is
22
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.
23
For relocation requirements specific to CDBG and HOME-funded activities, see the applicable CDBG and
HOME program regulations at 24 CFR part 570 and 24 CFR part 92. CDBG grantees, HTF grantees, and HOME
participating jurisdictions must ensure that their relocation requirements are followed regardless of whether the PHA
is fulfilling their requirements in accordance with the RAD Fair Housing, Civil Rights, and Relocation Notice.
24
Where a PHA is using public housing funds as a source for the transaction, a de minimis level of cash acquisition
proceeds in excess of any seller take-back financing is permitted with good cause.
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Section I: Public Housing Projects
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 (see 24 CFR 905.400(i)), and
Demolition and Disposition Transitional Funding (DDTF) (see 24 CFR 905.400(j)), 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 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 and 1.7.A.5. In order to use such funds on a Covered Project,
these funds must be identified in the Financing Plan and RCC. See also Section 1.4.B.2.
HUD may extend the PHA’s obligation end date for Capital Funds used in the conversion for
up to thirty-six months from the previous obligation end date. 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, with HUD approval, also be used for
preliminary development work, including critical repairs.25 Public housing program funds
spent prior to Closing as contemplated in the RCC are subject to public housing procurement
rules.
Execution of Closing documents consistent with the RCC (as it may be amended) constitutes
approval to use public housing funds in the conversion as referenced in the final approved
Sources and Uses.
25
Please note that certain predevelopment activity may be considered a choice limiting action and cannot be
completed before completion of an environmental review.
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In the case of a PHA that will no longer have ACC units as a result of the pending or
simultaneous closing, or have less than 50 units remaining and have initiated procedures to
dispose of their final ACC units, there is no restriction on the amount of public housing funds
that may be contributed to the Covered Project(s) through the conversion. However, the PHA
must estimate and plan for outstanding liabilities and costs and must follow Notice PIH
2016-23 or successor notice regarding the administrative activities required to terminate the
ACC if it has no plans to develop additional public housing. 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.
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 those funds have been identified in the RCC and
converted at Closing for Section 8 RAD purposes.
Where a PHA has used public housing funds to support the development budget and
structured the contribution as a loan, any repayment of the loan must be used for Affordable
Housing Purposes. However, any prepayment of principal on such a loan that occurs within
the first 10 years shall be considered program income and may only be used for public
housing or Section 8 purposes.
B. Special Applications Center (SAC) Applications and RAD.
1. General. HUD encourages PHAs to consider RAD as well as other tools that may be
available to them to reposition and preserve their public housing inventories. Other
available tools include application to the Special Applications Center (SAC) for
Demolition or Disposition under Section 18 of the Act, Voluntary Conversion under
Section 22 of the Act, including Streamlined Voluntary Conversion as described in
Notice PIH 2019-05, Required Conversion under Section 33 of the Act, and
Homeownership under Section 32 of the Act.
2. Joint RAD and Section 18 applications. In some instances, a PHA may be able to
combine RAD and Section 18 towards the preservation of a project. Where permitted,
a PHA submits a RAD application for all units in a project. Once HUD confirms that
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Section I: Public Housing Projects
the PHA is eligible to combine RAD with Section 18, HUD will offer the PHA a
streamlined process for getting HUD approval for the units eligible for Section 18.
a. If a PHA is combining the use of RAD and Section 18 at a project,
including through the use of 24 CFR 970.17(c) to dispose of 25% of the
units at the project on the grounds that it allows for comprehensive
rehabilitation or replacement through RAD so that all units can be
operated under project-based assistance (i.e., RAD/Section 18 Blend, see
Notice PIH 2018-04 for more details), the RAD relocation requirements
described in the RAD Fair Housing, Civil Rights, and Relocation Notice
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 and benefits to residents of the project on the
basis of whether they reside in a RAD unit or a Section 18 unit.
b. In conjunction and simultaneously with RAD, a PHA may pursue Section
18 approval under 24 CFR 970.17(c) to dispose of its last 50 or fewer
public housing units. For the RAD and Section 18 approval to be jointly
processed, the PHA must be converting sufficient units under RAD that
would result in the PHA having 50 or fewer units and the units being
converted through RAD must be in the same project (e.g., a high-rise or
group or properties that are managed as one project) as units being
removed through Section 18. The Section 18 approval will be conditioned
on the successful conversion of the RAD units.
c. 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 Notice PIH 2018-04 for more details), HUD may
disapprove the conversion if HUD determines that the PHA’s use of both
RAD and disposition under sections 970.17(b) or 970.17(c) in a single
project undermines the unit replacement requirements of the RAD
program.
3. Switching applications. In some cases, after initiating a RAD or SAC application, a
PHA may determine to pursue an alternative tool.
a. After submitting a RAD Application or receiving a CHAP, a PHA must
request to suspend its CHAP before submitting a SAC Application for the
same units. HUD may subsequently reinstate the CHAP without the
resubmission of a complete application described in Section 1.10.
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Section I: Public Housing Projects
b. If a PHA that has submitted a SAC application decides to pursue RAD for
eligible units, the PHA must first withdraw its SAC application, in writing
with a Board Resolution to support the withdrawal.
c. If a PHA that has been approved for a SAC application decides to pursue
RAD for eligible units, the PHA must request that SAC rescind or
conditionally rescind its approval of the application. If applicable, the
SAC will conditionally rescind its SAC application approval contingent on
the successful completion of the RAD transaction and will modify
IMS/PIC accordingly. Units for which a PHA has received a SAC
approval are ineligible for RAD if the PHA has taken any of the following
actions to implement the SAC 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 an approval;26 or
iv. Taken any steps to implement relocation under the approval (i.e.,
issuing the 90-day notice to residents).
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 § 905.400(i)
and (j), respectively) for Converting Projects that are removed from public housing ACC.
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
would result in a net increase in the number of units the PHA owned, assisted, or operated as
of October 1, 1999.
A PHA’s Faircloth Limit will be reduced by the number of public housing ACC units
removed from the public housing inventory as part of a RAD conversion. For example, a
26
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
PHA with a pre-RAD Faircloth Limit of 1,000 public housing units would have its Faircloth
Limit reduced to 900 units if it processed 100 ACC units through RAD, resulting in 95
Section 8 units and 5 units removed from inventory under the de minimis authority.
Please note that prior versions of the RAD Notice excluded any de minimis units from the
Faircloth Limit reduction. The change made in this Notice to include all public housing ACC
units from the Faircloth reduction is retroactive to include all completed RAD conversions.
However, any PHA that wishes to retain those de minimis units under its Faircloth Limit
must contact HUD (PIHOCI@hud.gov) within 90 days of publication of this Notice.
E. Conversion is a Significant Action under a PHA’s 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 with Standard MTW Agreements.27
MTW PHAs subject to the MTW Operations Notice for the Expansion of the Moving to
Work Demonstration Program, 83 Fed. Reg. 51474, (“Operations Notice”) will include the
conversion of assistance as a significant amendment to their Annual Plan or Five-Year plan,
consistent with requirements applicable to non-MTW PHAs. 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 with Standard MTW Agreements 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 its 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’s Office of Public and Indian Housing
approving the Five-Year Plan, Annual Plan, MTW Plan or Significant Amendment.
27
39 MTW PHAs are subject to the Standard MTW Agreement, which outlines their terms of participation in the
MTW Demonstration. For more information, see
https://www.hud.gov/program_offices/public_indian_housing/programs/ph/mtw/mtwsa
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Section I: Public Housing Projects
In addition, any substantial change to the conversion plan is required to undergo the
significant amendment process or other HUD review if the substantial change involves a
transfer of assistance, a change in the number of assisted units, or a change in eligibility or
preferences for new applicants.
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 for properties converting under RAD).
Further, prior to conversion, MTW agencies with Standard MTW Agreements 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 its MTW coordinator and follow provided instructions to return
an executed Attachment A amendment to HUD no later than the Financing Plan submission.
G. 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 and provisions in
Section 23 of the Act that limits FSS to residents of public housing and the housing choice
voucher program.
H. Public Housing Assessment System (PHAS). After the PHA submits an application in the
PIC Inventory Removals Module (or successor module), as either “RAD Conversion PBV”
or “RAD Conversion PBRA,” for all units covered by the CHAP (see Section 1.12), the
Converting Project shall not be issued PHAS scores beginning with the fiscal year in which
the PIC removal application was accepted and continuing through subsequent fiscal years
until conversion to Section 8. In order for the project to be excluded from PHAS scoring,
HUD must accept the application in PIC by the fiscal year end for the project.
After HUD’s acceptance of the application in PIC, but prior to conversion, all projects
remain subject to the four PHAS assessments but will not be issued scores for the
assessments. “Subject to the four PHAS assessments” means that the PHA must timely
submit the required financial data schedule for each project and that the project will be
subject to a physical inspection, a management assessment based on the financial submission,
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Section I: Public Housing Projects
and a Capital Fund Program assessment. However, these scores will not be issued. If a PHA
has at least one project without an accepted application 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 the projects under the
revoked CHAP for all fiscal years during which the application was pending in PIC.
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.
I. Energy Performance Contract (EPC).28 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. Unless otherwise approved by HUD, 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 with 45 days 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 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. HUD will issue an amended EPC approval letter to the PHA.
J. Capital Fund Education and Training Community Facilities (CFCF) Program. CFCF
provides Capital Funds 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 of the Covered Project will continue to qualify as “PHA residents” for the purposes
of CFCF program compliance and must have continued access to the facility. The community
facility must continue to be available to public housing residents including “PHA residents.”
28
HUD will issue further guidance on the intersection of RAD and EPCs that will be available at www.hud.gov/rad
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Section I: Public Housing Projects
K. Lease Termination at Conversion is Not an Adverse Action. 24 CFR § 966.4(e)(8)(i)
classifies lease terminations as an adverse action 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.
L. PHA Partnerships. Two or more PHAs may coordinate efforts and pool resources or
capacity with each other pursuant to a contractual agreement among the PHAs towards the
effective conversion of assistance of a public housing project. Section 1, below, describes
new authorities created under RAD and Section 2, below, describes existing tools available
to PHAs notwithstanding the use of RAD authorities.
1. Where the PHAs demonstrate to HUD mutual agreement under terms acceptable to
HUD, participating PHAs may:
a. Contribute Capital Funds, RHF, DDTF, and public housing Operating
Reserves towards the conversion of another PHA’s property consistent
and in accordance with Section 1.5;
b. Forego any anticipated RHF/DDTF funding (funds that have not been
awarded and/or funds that have been awarded but not yet disbursed) to
boost another PHA’s RAD rents consistent and in accordance with Section
1.6.B.5.c. and 1.7.A.5.c;
c. Rent bundle across the PHAs’ RAD projects consistent and in accordance
with Section 1.6.B.5.b. and 1.7.A.5.b. (PHA partnership rent bundles may
not include non-RAD PBV projects);
d. Transfer available land currently under DOT if the land is needed to
facilitate the conversion; and/or
e. Propose other partnership arrangements extending provisions permissible
in this Notice which HUD may approve on a case-by-case basis.
2. In structuring such arrangements, PHAs may consider other resources already at their
disposal, including the ability to:
a. For PBV conversions, select another PHA with operational jurisdiction to
receive the new increment of units under their HCV ACC and to serve as
the contract administrator, with the attendant administrative
responsibilities and fees, or enter into an agreement to share administrative
duties (e.g., Housing Quality Standards inspections vs Subsidy
Administration). Where the new increment will be added to the HCV ACC
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Section I: Public Housing Projects
of an MTW agency to administer the PBV contract, the MTW agency may
use the authority as detailed in Section 1.6.B.5.b. to augment rents of the
property under contract;
b. Transfer the RAD PBV or PBRA assistance for the converting project
outside of their jurisdiction to a project and owner (including another PHA
or its affiliate or instrumentality) that satisfies the ownership and control
requirements described in Section 1.4.A.11 and all other RAD transfer of
assistance requirements under 1.4.A.12;
c. Provide development guarantees using non-federal funds;
d. Serve as Developer;
e. Serve as Management Agent; and/or
f. Undertake a voluntary transfer or consolidation of HCV programs (i.e.
transferring budget authority and corresponding baseline units for the
HCV program in accordance with Notice PIH 2015-22).
As an example, PHA A could seek to convert Property A in partnership with PHA B. PHA B
could provide Capital Funds as a source of funds for the conversion and, in exchange, PHA
A could agree to have PHA B serve as the PBV administering voucher agency for the
Covered Project, even though PHA A might have a voucher program.
M. Section 33 Required Conversion Review.29 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 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 or a Portfolio Award.
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
29
Section 33 of the Act requires PHAs to identify projects that must be removed from the stock of public housing.
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Section I: Public Housing Projects
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
their MTW Plans or included in the MTW Supplement to an approved PHA plan to these
properties as long as they do not conflict with RAD requirements. RAD 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 for properties converting 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 or included in the
MTW Supplement to an approved PHA plan. All other RAD Requirements listed below or
elsewhere in this Notice shall apply to MTW agencies.
So as to facilitate the uniform treatment of residents and units at a Covered Project, any non-
RAD PBV units located in the Covered Project shall be subject to the same waivers and
alternative requirements where noted below.
Finally, the Housing Opportunity Through Modernization Act of 2016 (HOTMA) and HUD’s
implementation notices30 (“HOTMA Implementation Notice”) modified the PBV program in
ways that partially or completely obviate the need for certain prior waivers or alternative
requirements adopted in RAD. These are noted below.
A. PBV Project Selection.
1. PBV Percentage Limitation. Covered Projects do not count against the percentage
limitation applicable to the PBV program. The HOTMA Implementation Notice
excludes formerly assisted properties from the percentage limitation. For any Covered
Projects not otherwise covered under the HOTMA Implementation Notice, including
transfers of assistance to a new location, 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
30
See "January 18, 2017 HOTMA implementation notice, 82 Fed. Reg. 5458," and the "July 14, 2017 technical
correction and clarification notice, 82 Fed. Reg. 32461." Also see Notice PIH 2017-21.
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Section I: Public Housing Projects
both the numerator and the denominator when calculating the percent of vouchers 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 RAD PBV assistance in each project. Under the HOTMA
Implementation Notice, certain formerly assisted properties are excepted from the
project cap. For any Covered Projects not covered under the HOTMA
Implementation Notice, including transfers of assistance to a new location, 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). Accordingly, units under the contract may
not be “excepted” for a specified purpose.
3. Owner Proposal Selection Procedures. In addition to situations already covered
under the HOTMA Implementation Notice (e.g., attaching PBV assistance to PHA-
owned units that were formerly assisted under the public housing program), HUD is
waiving 24 CFR § 983.51 so that a RAD PBV HAP contract is never subject to
competitive selection requirements. 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. To facilitate the uniform treatment of residents and units at a
Covered Project, any non-RAD PBV units located in the same Covered Project shall
be subject to the terms of this provision.
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 permits a minimum
term of one year) as well as 24 CFR § 983.205(a) (which governs contract term).
Project Owners are required to make available for occupancy by eligible tenants the
number of assisted units under the terms of the contract and may not reduce the
number of assisted units without written 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. MTW agencies may not alter
this requirement.
2. Mandatory Contract Renewal. In accordance with the RAD Statute, at or prior to
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Section I: Public Housing Projects
the 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. The renewal contract(s)
shall be for the prescribed number and mix of units but may, upon request of the
Project Owner and subject to HUD and Contract Administrator approval, be on one or
more transfer of assistance sites in lieu of the project site subject to the expiring
contract. 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 and are encouraged to do
so a minimum of one year prior to the expiration of the contract so as to avoid
unnecessary notice to residents per 24 CFR 983.206. 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. This section has been moved to Section 1.4.A.13
5. Initial Contract Rent Setting. No additional or incremental funding is associated
with this Demonstration. HUD has calculated initial contract rents for every public
housing project based on each project’s subsidy under the public housing program.
All RAD applications, including applications for Portfolio Awards, will have initial
contract rents based on their “RAD rent base year” described in Attachment 1C.
PHAs have additional discretion in establishing initial contract rents using the
following flexibilities:
a. MTW Fungibility. MTW agencies may use their MTW funds to set the
initial contract rents higher than the normally applicable contract rent cap
that is based on the project’s public housing subsidy. However, the initial
contract rent set by the PHA is still subject to all other applicable program
caps. The agency must use existing MTW funds to supplement the initial
contract rents; HUD will only provide new incremental voucher funding
for the first full calendar year following conversion using per unit costs
(PUCs) based on normally applicable public housing subsidy initial rent
caps. Any use of MTW funds in setting higher initial contract rents shall
be subject to subsidy layering review and MTW continued service
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Section I: Public Housing Projects
requirements, as calculated using the MTW Baseline Methodology
described in Notice PIH 2013-02, or successor notice.
b. Rent Bundling. Subject to HUD approval, 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. 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. This use, which HUD refers to as
“bundled” rents, can occur under the following scenarios:
i. When a PHA is converting two or more properties within its
public housing portfolio. The execution and effective date of the
HAP Contract for the donor HAP Contract must occur prior to or
simultaneous with the effective date of the recipient HAP
Contract;
ii. When PHAs have formed a Partnership in accordance with
Section 1.5.M and are bundling rents between two or more
converting projects. The execution and effective date of the HAP
Contract for the donor HAP Contract must occur prior to or
simultaneous with the effective date of the recipient HAP
Contract; and
iii. When a PHA bundles rents between a converting project and
non-RAD Project-Based Vouchers. In such a case, the PHA must
use its own voucher funding to supplement the higher RAD rent
that is being offset by the lower PBV rent for the non-RAD PBV
project or projects; no additional voucher funding will be
provided through RAD. HUD will review the rents proposed for
the non-RAD PBV HAP Contract to ensure that the PHA does
not exceed the aggregate subsidy otherwise available for all of
the rent-bundled projects. Except as provided in section 1.6.B.d
below, the execution and effective date of the HAP Contract for
the donor project must occur prior to or simultaneous with the
effective date of the recipient HAP Contract.The owner of the
property with the non-RAD PBV HAP 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 aggregate HAP costs do not exceed the costs incurred absent
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Section I: Public Housing Projects
this provision, the owner of the property with the non-RAD PBV
HAP 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. The donor HAP Contract must have a remaining
contract term at least as long as the recipient HAP Contract.
iv. Where an Agreement to enter into a HAP Contract (AHAP) is
used on the non-RAD PBV HAP Contract and the RAD and non-
RAD PBV projects are subject to a single financing, the
execution and effective date of the AHAP for the donor HAP
Contract must occur prior to or simultaneous with the conversion
of the recipient HAP Contract. The recipient RAD PBV HAP
Contract will include rent schedules for both unadjusted rents
and the anticipated rent bundled rents. The unadjusted rents are
the initial effective rents for the RAD PBV recipient project. At
the completion of rehab/construction of the donor project, where
the terms of the AHAP have been satisfied and the PHA and
owner of the donor property are ready to execute a HAP contract,
the cost-neutral application of the bundled rents will occur. 1) the
HAP for the non-RAD PBV HAP Contract will be determined
based on the initial rent, which is the PBV rent the project would
have been eligible for under the PBV initial rent requirements at
24 CFR § 983.301 reduced by the amount that has been bundled
to the RAD HAP Contract. 2) Upon the effective date of the non-
RAD PBV donor HAP Contract, the HUD-approved rent
bundled rents at the RAD HAP Contract will become effective.
For example, assume two 100 unit properties that will be
redeveloped under a single financing transaction, one developed
under standard PBV through an AHAP and another through
RAD. The estimated rents for the standard PBV are $1,000 while
the standard RAD rents are $500. The PHA plans to rent bundle
to increase the RAD rents to $750. Construction will occur on
the same timeline and the RAD PBV HAP Contract will close at
the same time as the AHAP is executed. The RAD PBV HAP
Contract will include unadjusted, pre-construction rents ($500)
as well as adjusted, post-construction rents ($750). The AHAP
will include estimated PBV rents, adjusted downward by $250.
When construction is completed, the post-construction rents on
the RAD HAP Contract will take effect when the donor non-
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Section I: Public Housing Projects
RAD PBV HAP Contract becomes effective. The PHA will
determine the initial contract rents for the non-RAD PBV donor
project in accordance with PBV requirements and deduct $250
from that amount.
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.
c. Future Replacement Housing Factor (RHF) or Demolition Disposition
Transition Funding (DDTF).31 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.
d. PBV Site-Specific Utility Allowances. 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 Notice H 2015-04 unless PIH promulgates guidance
specific to the PBV program. The Project Owner may carry out all of the
responsibilities associated with Notice H 2015-04, but the PHA must
ensure that the Utility Allowance is calculated correctly. This waiver and
alternative requirement shall also apply to non-RAD PBV units located at
the Covered Project.
e. Tenant-Paid Utility Savings. Where a Covered Project will use a site-
specific utility allowance as described in sub-paragraph iv. and the
conversion will result in the reduction of one or more utility components
(e.g., gas, water & sewer, electric) used to establish the Utility Allowance
relative to the utility allowance of the Converting Project (i.e., the public
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Section I: Public Housing Projects
housing project), HUD will permit the RAD contract rent to be increased
by a portion of the utility savings. See Attachment 1C for additional detail.
Notwithstanding HUD’s calculation of the initial contract rent based on
the project’s subsidy under the public housing program and any
modifications to the initial contract rent permitted under this Notice, 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 or
included in an MTW Supplement to the PHA 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 or included in an
MTW Supplement to the PHA Plan), minus any utility allowance; or (c)
the rent requested by the owner.
6. Method of Adjusting Contract Rents. Contract rents will be adjusted only by
HUD’s OCAF (which is applied only to the portion of the rent not attributable to debt
service) at each anniversary of the HAP Contract, subject to the availability of
appropriations for each year of the contract term.32 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 § 983.303.33 However, the
rent to owner shall not be reduced below the initial rent to owner for dwelling units
under the initial HAP Contract.34 MTW agencies may not alter this requirement.
7. Role of Independent Entity. Where the Covered Project is PHA-owned in
accordance with section 8(o)(11) of the Act as amended by HOTMA (see Attachment
A in Notice PIH 2017-21 for guidance on PHA-owned units), in addition to the
standard roles described in 24 CFR 983.59(b) (i.e., determining reasonable rents and
32
OCAFs are calculated and published each year by HUD in the Federal Register in order to calculate the contract
rent for the project in the following fiscal year.
33
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.
34
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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Section I: Public Housing Projects
conducting HQS inspection) the independent entity must also determine the OCAF
adjustment.
8. Transfer of Assistance. This section has been moved to Section 1.4.A.12.
9. 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. During the period of Work identified in the RCC, standard HAP Contract
funding procedures will be used for occupied units. Units covered under the HAP
Contract that are not occupied at any point during the period of Work identified in the
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 RCC, 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.
The Project Owner will no longer be eligible to receive RAD Rehab Assistance
Payments upon the earlier of completion of the Work or expiration of the time period
identified in the RCC for completion of all Work, which date is specified in the HAP
contract. After such date, all units under the HAP Contract will be eligible for
payment only for occupied units or for vacancy payments, as applicable. MTW
agencies may not alter this requirement.
10. 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, unless the PHA is using HOTMA non-life
threatening and alternative inspection provisions.35 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
occurring 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.
35
See Notice PIH-2017-20 for guidance on HOTMA non-life threatening and alternative inspection provisions.
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Section I: Public Housing Projects
11. Floating Units. Upon the request of the owner to 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
required UFAS accessible unit only to another UFAS accessible unit that has the
same bedroom size and accessibility features. If assistance floats to a UFAS
accessible unit as a reasonable accommodation for a household that had not
previously been in a UFAS unit, the assistance may float back to a non-UFAS unit
when there is no longer need for the reasonable accommodation provided the required
number of UFAS units is maintained. 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 UFAS 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.
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.36 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, Section
8(o)(4) of the 1937 Act and 24 CFR § 982.201, concerning eligibility and targeting of
36
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.
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Section I: Public Housing Projects
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, HUD waives Section 8(o)(4) and 24 CFR § 982.201 to
the extent necessary for this provision to 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 Part 983 for non-RAD PBV units and the
PBRA requirements governing the applicable contract for non-RAD PBRA units.
2. Right to Return. See Section 1.4.A.5.b. and the RAD Fair Housing, Civil Rights,
and Relocation Notice regarding a resident’s right to return. To facilitate the uniform
treatment of residents and units at a Covered Project, any non-RAD PBV units
located in the same Covered Project shall be subject to the terms of this provision.
3. Phase-in of Tenant Rent Increases. If, purely as a result of conversion, the amount a
tenant would pay for rent and utilities under the PBV program (the tenant’s TTP)
would increase the tenant’s TTP by more than the greater of 10 percent or $25, the
rent increase will be phased in over 3 or 5 years. To implement this provision, HUD
is specifying 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 and must communicate such policy in writing to affected residents. 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 (the first recertification following conversion), as illustrated
below.
Three Year Phase-in:
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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 37
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
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. To facilitate the uniform treatment of residents and units at a Covered Project,
any non-RAD PBV units located in the same Covered Project shall be subject to the
terms of this provision.
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 participate in the PHA’s FSS program.
37
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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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. 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 until provisions of the Economic Growth,
Regulatory Relief, and Consumer Protection Act are implemented, 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 (current, or as amended), 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 78100.38 Further, upon conversion
to PBV, if the PHA no longer has a public housing program, funds already escrowed
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.39
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,
38
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
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.
39
Where the PHA maintains a public housing program, any forfeited funds that had been escrowed prior to
conversion would revert to the PHA’s Operating Reserves.
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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. To facilitate the uniform treatment of residents and units at a Covered
Project, any non-RAD PBV units located in the same Covered Project shall be subject
to the terms of this provision.
5. 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. To
facilitate the uniform treatment of residents and units at a Covered Project, any non-
RAD PBV units located in the same Covered Project shall be subject to the terms of
this provision.
6. 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 (HUD Form 52530-c), as appropriate. 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 that convert assistance under RAD and to non-RAD PBV
units located at the Covered Project. 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 :
i. A reasonable period of time, but not to exceed 30 days:
1. If the health or safety of other tenants, Project Owner
employees, or persons residing in the immediate vicinity of
the premises is threatened; or
2. 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.
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b. 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 the termination of assistance and several other PHA determinations,
PBV program rules require the PHA 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:
i. In addition to reasons that require an opportunity for an informal
hearing given in 24 CFR § 982.555(a)(1)(i)-(v),40 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.
1. For any hearing required under 24 CFR §
982.555(a)(1)(i)-(v), 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).
2. For any additional hearings required under RAD, the
Project Owner will perform the hearing.
ii. There is no right to an informal hearing for class grievances or to
disputes between residents not involving the Project Owner or
Contract Administrator.
iii. 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).
iv. 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.
40
§ 982.555(a)(1)(iv) is not relevant to RAD as the tenant-based certificate program has been repealed.
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To facilitate the uniform treatment of residents and units at a Covered
Project, any non-RAD PBV units located in the same Covered Project
shall be subject to the terms of this provision.
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
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. To facilitate the uniform treatment of residents and units at
a Covered Project, any non-RAD PBV units located in the same Covered Project
shall be subject to the terms of this provision.
8. 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 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. Jobs Plus target public housing projects must enroll public
housing residents into the Jobs Plus rent incentive, JPEID, prior to conversion. Any
resident of the Covered Project that had not enrolled prior to conversion is not eligible
to enroll in JPEID but may utilize Jobs Plus services that predominantly benefit the
former public housing residents who resided at the target project at the time of RAD
conversion. To facilitate the uniform treatment of residents and units at a Covered
Project, any non-RAD PBV units located in the Covered Project may voluntarily
utilize Jobs Plus services that predominantly benefit the former public housing
residents who resided at the target project at the time of RAD conversion.
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9. 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
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. During any period 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.41 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. To
facilitate the uniform treatment of residents and units at a Covered Project, any non-
RAD PBV units located in the same Covered Project shall be subject to the terms of
this provision.
Unless a waiver is requested and approved as described below, any new admission to
the Covered Project must meet the eligibility requirements at 982.201 and require a
subsidy payment at admission to the program, which means their TTP may not equal
or 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
41 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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alternative requirement that the PHA must reinstate the unit after the family has left
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 the Notice.
A PHA may request a waiver from HUD for the Covered Project in order to admit
otherwise eligible families whose TTP exceeds gross rent and to allow the units those
families occupy to remain under the HAP contract even if the PHA has not made a
housing assistance payment for a family in 180 days.
For a Covered Project that consists of 100 percent RAD PBV units, the PHA must
demonstrate that a waiver is necessary in order to avoid an undue concentration of
poverty at the Covered Project. A PHA may evidence this by providing data showing,
for example:
how eligible income-certified applicants on the waiting list must be passed
over because their incomes result in zero HAP at admission causing a higher
concentration of poverty at the covered project; or
how the income of newly admitted families is causing a markedly higher
concentration of poverty than the PHA’s non-RAD PBV projects.
The resulting impact on the property must be compared with the concentration of
poverty at non-RAD PBV projects in the PHA’s jurisdiction. If there are no non-RAD
PBV projects in the PHA’s jurisdiction, the PHA may alternatively demonstrate that
the median income of families that could be admitted to the Covered Project is
significantly lower than the median income of new admissions from the waiting list to
the PHA’s HCV program since the time of the RAD conversion.
For any other Covered Project, the PHA must demonstrate that the property contains
specific units (e.g., units suitable for large families or accessible units) for which
there are insufficient alternative housing opportunities.
If the waiver is approved, the new admission[s] families covered under the waiver are
participants under the program and all of the family obligations and protections under
RAD and PBV apply to the family, and the unit is subject to all program
requirements. Such waiver requests should be submitted to the PIH Field Office in
accordance with Notice PIH 2018-16.
10. 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
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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
available in the Covered Project, 24 CFR § 983.260 is waived for current residents
remaining or returning to the Covered Project. MTW agencies may not modify this
requirement. To facilitate the uniform treatment of residents and units at a Covered
Project, any non-RAD PBV units located in the same Covered Project shall be subject
to the terms of this provision.
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. Ongoing PHA Board Review of Operating Budget. The Owner must submit to the
administering PHA’s Board the operating budget for the Covered Project annually.
The PHA’s Board must confirm that the Project Owner is making deposits into the
Reserve for Replacement account in accordance with the RCC as well as assess the
financial health of the Covered Project.42
3. Davis-Bacon Act and Section 3 of the Housing and Urban Development Act of
1968 (Section 3). These sections have 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 shall 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:
a. Transferring an existing site-based waiting list to a new site-based waiting
list.
42
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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b. Transferring an existing site-based waiting list to a PBV program-wide or
HCV program-wide waiting list.
c. 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.
d. 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
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 waiting 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
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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).43
When using a site-based waiting list, PHAs should consider waiting list and transfer
policies that expand opportunities for tenants seeking an emergency transfer under, or
consistent with, the PHA’s Emergency Transfer Plan. This includes allowing for
easier moves between assisted properties.
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). To facilitate the uniform treatment of residents and units at a Covered
Project, any non-RAD PBV units located in the same Covered Project shall be subject
to the terms of this provision.
A PHA must maintain any site-based waiting list in accordance with all applicable
civil rights and fair housing laws and regulations.
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. 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 but HUD review of liens must be performed prior to
execution.
7. 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
43
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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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 an 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.
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.
8. 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 the following 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
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Section I: Public Housing Projects
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.
9. 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
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.
10. Initial Certifications and Tenant Rent Calculations. The Contract Administrator
uses the family’s public housing tenant rent (reflected on line 10f of the family’s most
recent HUD Form 50058) at the date of the conversion to calculate the PBV HAP and
tenant rent until the effective date of the earlier of the family’s first regular or interim
recertification following the date of conversion. At the earlier of the family’s first
regular or interim recertification, the Contract Administrator will use the family’s
TTP based on the recertification and the HCV utility allowance (or the PBV site-
specific utility allowance, if applicable) to determine the PBV HAP and tenant rent.
This means that the family pays the same tenant rent as the family was paying under
the public housing program until the earlier of first regular or interim reexamination
following conversion, at which point the normally applicable PBV calculation for the
tenant rent becomes effective. (Under the PBV program, the monthly HAP is the rent
to owner minus the tenant rent, and the tenant rent is the family TTP minus the utility
allowance.) To facilitate the uniform treatment of residents and units at a Covered
Project, any non-RAD PBV units located in the same property as the Covered Project
shall be subject to the terms of this provision. To effectuate this provision, HUD is
waiving 24 CFR 5.601 and 983.3(c)(6)(iii).
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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 as modified for RAD and as set forth in Appendix I, and applicable existing and
subsequent Office of Housing guidance44 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 Contract 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
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. The renewal contract(s) shall be for the prescribed number and mix of
units but may, upon request of the Project Owner and subject to HUD approval, be on
44
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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one or more transfer of assistance sites in lieu of the project site subject to the
expiring contract. 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. This section has been moved to Section 1.4.A.13
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. All RAD
applications, including applications for Portfolio Awards, will have initial contract
rents based on their “RAD rent base year,” described in Attachment 1C. PHAs have
additional discretion in establishing initial contract rents using the following
flexibility:
a. MTW Fungibility. MTW agencies may use their MTW funds to set the
initial contract rents higher than the normally applicable contract rent cap
that is based on the project’s public housing subsidy. 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
funding flexibilities 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 Notice PIH
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 an MTW
agency may convert to PBRA if the PHA does not have sufficient public
housing subsidy to convert into PBRA assistance.
b. Rent Bundling. PHAs may adjust subsidy (and initial contract rents)
across multiple projects as long as the PHA does not exceed the aggregate
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subsidy for all of the projects the PHA has submitted for conversion under
RAD. 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. This use, which HUD refers to as “bundled” rents, can occur
under the following scenarios:
i. When a PHA is converting two or more properties within its
public housing portfolio. The execution and effective date of the
HAP Contract for the donor HAP Contract must occur prior to or
simultaneous with the effective date of the recipient HAP
Contract; and
ii. When PHAs have formed a Partnership in accordance with
Section 1.5.M and are bundling rents between two or more
converting projects. The execution and effective date of the HAP
Contract for the donor HAP Contract must occur prior to or
simultaneous with the effective date of the recipient HAP
Contract;
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.
c. Future Replacement Housing Factor (RHF) or Demolition Disposition
Transition Funding (DDTF).45 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.
d. 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
45
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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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.
e. New Construction or Substantial Rehab. For any transaction that is
proposed in its Financing Plan to undertake new construction or
substantial rehabilitation in a designated Opportunity Zone, HUD may
provide up to a $100 per unit per month (PUM) increase to the RAD rents,
subject to the availability of funds and such conditions as HUD may
impose. For purposes of this subparagraph, new construction or substantial
rehabilitation is defined as hard construction costs, including general
requirements, overhead and profit, and payment and performance bonds,
in excess of 60% of the Housing Construction Costs as published by HUD
for a given market area. Funds for this purpose shall be allocated on a
first-come, first served basis, subject to the availability of funds, based on
the time of the request (communicated through the submission of a
complete and acceptable Financing Plan), where the PHA demonstrates it
is necessary for the viability of the transaction.46
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,
establishes that rents are below comparable market rents.47 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.
46
HUD will aggregate for this purpose a limited amount of funds associated with units excluded from conversions
through a de minimis reduction pursuant to Section 1.4.A.4 (“Substantial Conversion of Assistance”).
47
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.
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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 (a) the availability
of appropriations for each year of the contract term, and (b) the Maximum Rent, as
defined below.48
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. 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 RCC, standard HAP Contract administration procedures will be used for
occupied units. Except where the Section 8 Pass-Through49 is used, units covered
under the HAP Contract that are not occupied at any point during the period of Work
identified in the 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 RCC, 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
48
OCAFs are calculated and published each year by HUD in the Federal Register and are applied to the contract rent
in order to calculate the contract rent for the project in the following fiscal year. For public housing conversions, the
OCAF excludes the portion of the contract rent that is committed to debt service payments .
49
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.
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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 Project Owner will no longer be eligible to receive RAD Rehab Assistance
Payments upon the earlier of completion of the Work or expiration of the time period
identified in the RCC for completion of all Work, which date is specified in the HAP
contract. After such date, all units under the HAP Contract will be eligible for
payment only for occupied units or for vacancy payments, as applicable.
9. 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.50
10. 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
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; from the time of
the initial execution of the HAP Contract, the property must maintain the same
number and type of RAD units. 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. Assistance may
float from a required UFAS unit only to another UFAS unit that has the same
bedroom size and accessibility features. If assistance floats to a UFAS unit as a
reasonable accommodation for a household that had not previously been in a UFAS
unit, the assistance may float back to a non-Section 504 unit when there is no longer
need for the reasonable accommodation provided the required number of UFAS units
is maintained.
50
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
11. 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.51 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
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.52
2. Right to Return. See section 1.4.A.5.b. and the RAD Fair Housing, Civil Rights, and
Relocation Notice regarding a resident’s right to return.
51
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.
52
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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3. Phase-in of Tenant Rent Increases. If, purely as a result of conversion, the amount a
tenant would pay for rent and utilities under the PBRA program (the tenant’s TTP)
would increase the tenant’s TTP by more than the greater of 10 percent or $25, the
rent increase will be phased in over 3 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 and must
communicate such policy in writing to affected residents. 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
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 TTP53
53
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 resident’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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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 participate in the PHA’s FSS program
once their housing is converted under RAD. Through waiver in this Notice, FSS grant
funds may be used to continue to serve such FSS participants. All Project Owners
will be required to administer the FSS program or partner with another agency to
administer the FSS program in accordance with the requirements of 24 CFR part 984,
the participants’ contracts of participation, and current and future guidance published
by HUD for all FSS participants enrolled in the FSS program prior to RAD
conversion. All Project Owners will be required to provide both service coordination
and payments to escrow until the end of the Contract of Participation for each
resident. 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 and adhere to the escrow and
reporting requirements in Notice H 2016-08. The Project Owner may enter into a
Cooperative Agreement with the PHA (the grantee), allowing the PHA to continue to
provide service coordination to RAD-affected PBRA participants until all have
completed their Contracts according to 24 CFR § 984.303. The Project Owner must
assume responsibility for the administrative duties associated with FSS such as
calculating and crediting escrow and reporting. Ultimately, the new Project Owner is
responsible for serving the RAD-affected FSS participants until the end of their CoPs.
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The owner is not required to enroll new participants, but may choose to run its own
voluntary FSS program in accordance with Notice H 2016-08.
At the completion of the FSS grant, grantees should follow the normal closeout
procedures outlined in the grant agreement. Future FSS NOFAs will identify eligible
FSS participants. Until HUD implements provisions of the Economic Growth,
Regulatory Relief, and Consumer Protection Act that expand eligibility for FSS to
PBRA properties, only a PHA that continues to run an FSS program that serves
public housing and/or HCV/PBV 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 RAD-affected PBRA FSS participants.
However, if the PHA no longer has a public housing or HCV program, the PHA is not
eligible to apply for FSS funding.
Upon conversion, if the PHA has closed out its public housing program in
accordance with Notice PIH 2019-13, 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.
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
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 non-profits or
local Resident Associations 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
submitted to HUD for review prior to Closing. See Attachment 1E for a sample
Addendum to the House Rules.
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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 be:
1. 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;
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. 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:
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 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 have the opportunity to be represented by another
person of their choice, to ask questions of witnesses, have
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Section I: Public Housing Projects
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
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 shall 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.
c. Family Right to Move. Pursuant to Section 1.7.C.5 and unless the
Covered Project received a specific good cause exemption to such
provision, families have a choice-mobility right which must be stated in
the House Rules as shown in sample in Attachment 1E.
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,
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 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
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Jobs Plus work plan or may, at the Secretary’s discretion, choose to end the Jobs Plus
program at that project. Jobs Plus target public housing projects must enroll public
housing residents into the Jobs Plus rent incentive, JPEID, prior to conversion. Any
resident of the Covered Project that had not enrolled prior to conversion is not eligible
to enroll in JPEID but may utilize Jobs Plus services offered at the target project that
predominantly benefit the former public housing residents who resided at the target
project at the time of RAD conversion. 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.54 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
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
54
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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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). These sections have 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:
a. Transferring an existing site-based waiting list to a new site-based waiting list.
b. Transferring an existing site-based waiting list to a PBRA program-wide
waiting list.
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c. Transferring an existing community-wide public housing waiting list to a PBRA
program-wide waiting list, an option particularly relevant for PHAs converting
their entire portfolio under RAD.
d. 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 waiting 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).55
When using a site-based waiting list, PHAs should consider waiting list and transfer
policies that expand opportunities for tenants seeking an emergency transfer under, or
consistent with, the PHA’s Emergency Transfer Plan. This allows for easier moves
55
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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between assisted properties. Any such preference must be approved by HUD in
accordance with Notice H 2013-21, prior to implementation.
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.
A Project Owner must maintain any site-based waiting list in accordance with all
applicable civil rights and fair housing laws and regulations.
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. Unless provided an exemption as described below, 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:56
a. 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 effective date of the HAP or (b) 24 months after
the move-in date.
b. 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.
c. 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 Project Owner and voucher agency
56
The Choice-Mobility requirements that apply to covered PBRA projects differ from the requirements that apply to
covered PBV projects.
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may agree to 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 Project Owner and
voucher agency could limit the number of families exercising Choice-
Mobility to 15 in any year, but not to less than 15.) While a Project Owner
and voucher agency are not required to establish a 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.
The voucher agency must maintain a written agreement with the owner describing
how the Choice-Mobility option will be administered in accordance with these
requirements and the process by which households may request a voucher. For
example, the written agreement must specify whether the owner will receive requests
from families or refer families to the PHA.
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 voucher agencies 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.57
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 with non special-purpose
vouchers; 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
57
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.
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HUD-VASH, or homeless populations, as defined in 24 CFR § 91.5.58 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, but HUD review of liens must be performed prior to
execution.
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.59
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. Covered Projects are not permitted to establish or,
where previously approved under public housing rules, maintain a designation (i.e., a
set-aside of units) for elderly families or for disabled families; unlike the statute
58
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.
59
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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governing public housing, the Section 8 statute does not authorize designations.
However, owners of Covered Projects may adopt a selection preference (e.g., for
elderly individuals and/or elderly families) which permits those applicants to be
selected from the waiting list and housed before other eligible families. 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), must obtain HUD approval from the prospective Multifamily Housing
Account Executive (field office) prior to execution of the HAP contract to do so in
accordance with Notice H 2013-21 (July 25, 2013). This approval must be secured
prior to conversion if the owner intends to implement the preference for new
admissions immediately following conversion.
10. Initial Certifications and Tenant Rent Calculations. Owners are to use the
resident’s pre-existing public housing 50058 data and maintain the tenant rent and
utility allowance until the resident’s next annual or interim certification. To effectuate
this provision, HUD is waiving 24 CFR 5.601.
Resident Notification
A. Before Application. Prior to submitting an application to participate in the Demonstration,
the PHA must:
1. Provide written notification to legitimate resident organizations of the PHA’s intent to
pursue a conversion;
2. Provide written notification in the form of a RAD Information Notice (RIN) to
residents of projects proposed for conversion to inform the residents of the PHA’s
intent to pursue a conversion and of their rights in connection with a proposed
conversion (whether or not any relocation is anticipated). A General Information
Notice (GIN) must also be issued if it is required by the URA. The URA regulations
at 49 CFR part 24 and relevant program regulations specify the time by which a GIN
must be issued, which may be different than the timing for issuance of the RIN. URA
and program regulations also specify the entity responsible for issuing GINs. See the
RAD Fair Housing, Civil Rights, and Relocation Notice for additional detail
regarding the timing, content and purpose of these resident notifications;
3. Following issuance of the RIN, 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 resident rights described
in Attachment 1B.1 and a description of the PHAs preliminary intentions, to the
extent formulated, with respect to: a) whether the conversion will include a transfer of
assistance and potential locations to which the assistance would be transferred, 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
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Section I: Public Housing Projects
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;60 and
4. Prepare comprehensive written responses to comments received in connection with
the required resident meeting on the proposed conversion to be submitted with the
RAD Application.
B. Before Concept Call. After a PHA is selected to participate in the Demonstration (i.e.,
receipt of CHAP) but prior to requesting a Concept Call, the PHA must have at least one
meeting with residents to discuss updated conversion plans covering, at a minimum, the
topics listed above, and to solicit feedback on proposed property improvements, if
appropriate. Additional resident meetings may be required if the PHA requests extension to
the submission of the Financing Plan as described in Section 1.12. The PHA shall prepare
comprehensive written responses to comments received in connection with the required
resident meetings.
C. Before Financing Plan. Following a successful Concept Call and invitation to submit a
Financing Plan, the PHA must have at least one more meeting with residents prior to
submission of the Financing Plan to discuss updated conversion plans covering, at a
minimum, the topics listed above, and the anticipated Financing Plan submission. The PHA
shall prepare comprehensive written responses to comments received in connection with the
required resident meetings.
D. Before Closing. Upon issuance of the RCC (see Section 1.12 of this Notice), the PHA must
also notify residents that conversion of the project has been approved, and address, as
appropriate, anticipated timing of the conversion, the anticipated duration of the Work, the
revised terms of the lease and house rules, any anticipated relocation, and opportunities and
procedures for the exercise of the choice-mobility option.
Households in the affected project(s) who do not want to transition to the Section 8 program
may, be offered, if available, the opportunity to move to other public housing owned by the
PHA.
E. Additional RAD Meetings. Additional meetings with residents are required to discuss any
substantial change to the conversion plans relative to what was presented in the previous
60
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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resident meetings. 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;
A substantial change in the proposed scope of the Work; or
A material change in utility allownaces.
F. Other Requirements. The requirements for resident notifications and meetings for the RAD
program are separate from, and complementary 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.
Meetings should be conducted in a place and time to foster participation of the residents.
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 may include, 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).
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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).
Application Requirements
Under the Demonstration, applicants may apply to convert a single project61, a phase of a multi-
phase rehabilitation or redevelopment, and/or a PHA-defined portfolio of projects (which could
include subsequent phases in a multi-phase effort and completely independent projects). The
requirements for each type of application are listed below:
A. General Requirements. All applicants must complete the 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 summary information regarding the PHA’s tentative plans.
PHAs apply by Project which may consist of an entire Asset Management Project (AMP), a
part of an AMP, or multiple AMPs. If a PHA desires to convert only a portion of a public
housing AMP (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). Similarly, a PHA may
indicate in its application if it is applying for multiple public housing AMPs as a single
Project.
The RAD Application must include, where applicable:
61
In limited cases and with compelling justification, HUD may permit more than one project to be combined as a
single transaction in order to facilitate financing as long as the PHA can ameliorate the risk of cross-default and
HUD determines that it could maintain individual oversight of each project.
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1. Certification of Board Approval which must be signed by the authorized
representative of the PHA. This certification will be required for all submitted
applications.
2. Responses to comments received in connection with the required resident meetings
on the proposed conversion.
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
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, or receive an exception to, the Choice-
Mobility requirement as described above.
B. Applications for Multi-phase Development. Prior versions of the Notice distinguished
Multi-Phase Awards from Portfolio Awards. With this notice, PHAs that wish to implement
a multi-phase rehabilitation or redevelopment of a public housing site may reserve authority
to do so under the Portfolio Award structure. As of the effective date of this Notice, existing
Multi-Phase Awards are converted to Portfolio Awards, subject to the time frames specified
for Portfolio Awards provided that HUD may, in its sole discretion, grant extensions to such
deadlines up to September 30, 2024.
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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.
C. Applications for Portfolio Awards. A PHA may apply for a Portfolio Award, which allows
a PHA to reserve RAD conversion authority for a set of projects (including for multiple
phases of a large scale redevelopment effort and for planned projects) and that locks in the
applicable contract rent in the year of application. In order to apply for a Portfolio Award, a
PHA must submit:
1. The total number of units to be converted; and
2. RAD Applications for the lesser of four projects or 25% of the units 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 units 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 units covered by the
Portfolio Award. In order to retain its Portfolio Award, except with HUD approval, a PHA
must close, on average starting one year after the issuance of the first CHAP, either two
projects per year or 25% of the units identified in the portfolio per year. For purposes of the
annual average, conversions which occur in the first year shall be deemed to have occurred in
the second year after issuance of the first CHAP. Units held in an existing portfolio award
will be held to this standard effective on the date of publication of this Notice. PHAs may
count existing CHAPs, in lieu of Applications, in presenting their Portfolio Award requests.
The PHA has until September 30, 2024, to submit an application for the final project covered
by the Portfolio Award. Recipients of Portfolio Awards shall be required to fulfill all RAD
requirements 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
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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.
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 they comply
with the requirements for a Portfolio Award.
D. Application for projects awarded under a Choice Neighborhoods Initiative (CNI)
Implementation Notice of Funding Availability (CNI NOFA). HUD will reserve authority
under the statutory cap on public housing conversions for properties covered under CNI
implementation grants that submit RAD Applications or Portfolio Award applications and
that meet eligibility requirements.
E. Submission of Letter of Interest When a Waiting List Has Formed. 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 or Portfolio Award application 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 pursuant to instructions available at www.hud.gov/rad. 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.
Only complete applications will be considered. Rejected applicants will be notified and the PHA
may choose to re-submit. If re-submitted, the application will be reviewed in order of the date of
the re-submission.
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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.
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 competed 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 (CLOSED). The Third Application Period commenced on July
28, 2015, and closes 30 days following the publication of this Notice. All applications
submitted during the Third Application Period competed on a first-come, first-serve basis
subject to the Priority Categories in effect at the time of the issuance of the CHAP in each
instance.
D. Fourth Application Period. The Fourth Application Period commences 30 days following
the publication of this Notice. Applications that meet all eligibility criteria, and any
associated Portfolio Award requests, will be awarded on a first-come, first-serve basis. HUD
will reserve units for the Application and any associated Portfolio Award up until the point at
which issuing an additional award would exceed the statutory cap. For all applications that
meet all eligibility criteria, HUD will rank each qualified application by the date and time the
Application was submitted. If the next ranked application cannot be awarded because HUD
has reached its available authority under the statutory cap, the application will be placed on
the waiting list by the date and time 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’s or a portfolio’s position on the waiting list
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subject to future submissions of a RAD Application. In administration of awards made off of
the waiting list, applications for properties located in designated Opportunity Zones, along
with their associated Portfolio Awards, shall be selected prior to all other properties.
E. Replacement Awards. If a CHAP or Portfolio Award 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 to an applicant from the waiting list, if one
has formed.
F. 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 periodically.
G. 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.62
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 has 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, 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.
H. 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 30 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.
62
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. For PBV conversions, the PHA is responsible for
ensuring that the rents included in the CHAP do not exceed the Reasonable Rent in
accordance with 24 CFR 983.301. The CHAP will not be subject to negotiation.
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.63
If a PHA applies for a 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) if the PHA cannot demonstrate to HUD’s satisfaction that it is making
adequate progress towards Closing; (4) for PHA non-cooperation; (5) for violation of
program rules and restrictions, including fraud, (6) if the PHA fails to discuss the conversion
plans as a significant action in the PHA’s Five-Year Plan, Annual Plan or MTW Plan or
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.
HUD will request periodic discussions with the PHA to assess whether the PHA is making
adequate progress towards the submission of a Financing Plan. In order to ensure PHAs are
making consistent progress towards conversions, within nine months (270 days) of the
CHAP award the PHA must submit a Financing Plan or receive an extension from HUD
setting forth a project-specific Financing Plan due date, which due date may be further
63
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.H. When a CHAP is issued near the PHA’s fiscal
year end, the PHAs are advised to submit the application into PIC before that date.
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extended by HUD upon reasonable justification. A PHA must hold another meeting to update
residents on conversion plans in order to secure an extension greater than six months.
PHAs may request amendments to the CHAP to split or combine CHAPs, modify the units
or utility allowances, utilize rent flexibilities in accordance with Section 1.6.B.5 or Section
1.7.C.5, or request a replacement CHAP in order to secure rents based on the applicable
RAD rent base year at the time of the request (see Attachment 1C).
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. 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.
C. Concept Call. Prior to submitting a Financing Plan a PHA must request a “Concept Call”
with HUD via the RAD Resource Desk during which the PHA will describe the conversion
plan and demonstrate that the plans are sufficiently advanced to warrant review by HUD. If
HUD determines, in its sole discretion, that conversion plans are sufficiently advanced and
do not present any program violations, HUD will invite the PHA to submit a Financing Plan
as long as it is consistent with the project plans.
D. Financing Plan. The PHA must submit a Financing Plan within 60 days of the invitation to
submit the Financing Plan unless otherwise approved by HUD. The PHA must request a new
Concept Call if it does not submit the Financing Plan timely. See Attachment 1A for
Financing Plan Requirements. A Financing Plan must be substantially complete in order for
HUD to consider the submission.64
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, HUD
will notify the PHA of the deficiencies and request a modified or new submission. If a PHA
is unable to submit a complete and viable Financing Plan HUD will revoke the CHAP award.
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, key features of the Covered Project, 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. Current
HUD forms of the closing documents must be used. Closing shall 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 conditioned only on the completion of construction or term of the
bridge financing and standard permanent loan financing conditions acceptable to HUD. 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
in parallel with specific RAD requirements.
The RAD HAP Contract generally becomes effective on the first day of either of the two
months following closing, at the Project Owner’s discretion.66
B. Preparations for leaving the public housing program.
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. Earned Income Verification. For any public housing residents with outstanding
debt, PHAs may not enter the debt into the Earned Income Verification “Debts
Owed” module as a result of the 50058 End of Participations that is required to be
submitted into PIC as part of the conversion. PHAs and Owners must otherwise
continue to use EIV in all applicable circumstances.
66
Where HUD has approved a delayed conversion (see Section 1.4.A.13), after Closing the Converting Project will
remain as public housing during the period of construction and the HAP Contract is executed once the Covered
Project is ready for occupancy.
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. 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 identified on the Sources and Uses and drawn
down at closing in accordance with HUD procedures which may include placement in
a segregated 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.
5. 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 and
implementation of new data systems).68
6. Funding Upon Closing. 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
a. Operating Fund.
i. 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.
ii. 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.
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.
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iii. 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.
iv. The funding guidance provided in this notice supersedes the
guidance in Section 9 of the Notice PIH 2016-10.
b. 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,
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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available Capital Funds, financing proceeds, or any other eligible source), but the
PHA 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.
7. Post-Closing Completion Certification. Project Owners must submit to HUD a
completion certification for all repairs included in the Scope of Work in the RCC 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, if one is not required by a
financing source (or not applicable), another form as prescribed by HUD.
8. Management fees. Any management fees earned following conversion are not
subject to any federal restrictions.
9. Additional requirements for PHAs removing all public housing units. Notice PIH
2019-13 or successor notice 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
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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 and the following HUD-imposed
limitation: The undeferred portion of such developer fee (as documented in the LIHTC cost
certification) may not, without HUD approval, exceed the greater of:
1. 15 percent of the total development costs less acquisition payments made to the PHA,
developer fee and all reserves; or
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 all 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.
C. 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 25% of the
property’s units, HUD will permit a 25% increase in the allowable development fee limits
described above.71 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 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.
A preference for homeless applicants must fall within the definition of Homeless established
by section 103 of the McKinney-Vento Homeless Assistance Act and implemented in the
71
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 Notice PIH 2013-15.
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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.72
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.
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, 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:
1. 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 and close out its public housing
program in accordance with Notice PIH 2019-13;
2. 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;
3. Not propose as part of the conversion to perform any construction or rehabilitation on
the property, to undertake relocation, or to transfer the assistance.
4. 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.
1. 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”.
72
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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2. 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 the
RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17, PIH
2016-17 (HA)) 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 the RAD Fair Housing, Civil Rights,
and Relocation Notice (Notice H 2016-17, PIH 2016-17 (HA)).
3. Environmental Review. For Environmental Reviews conducted under 24 CFR Part
50 for Streamlined RAD conversions without any rehabilitation, construction, or
demolition,73 HUD conducted a tiered review of program-wide and site-specific
compliance. HUD has made program-wide compliance determinations for most of the
applicable environmental laws and authorities, and will complete a site-specific
compliance review of the following:
a. Coastal protection pursuant to the Coastal Barrier Resources Act, as
amended by the Coastal Barrier Improvement Act of 1990 (16 U.S.C.
3501);
b. Flood insurance and floodplain management pursuant to the Flood
Disaster Protection Act of 1973, the National Flood Insurance Reform Act
of 1994 (42 U.S.C. 4001-4128 and 42 U.S.C. 5154a), Executive Order
11988, particularly section 2(a), and 24 C.F.R. Part 55;
c. Contamination pursuant to 24 C.F.R. 50.3(i) (HUD Standard).
Additionally, while Historic Preservation (National Historic Preservation Act of
1966, particularly sections 106 & 110; 36 CFR Part 800) is not included in the tiered
review, for conversions that entail no physical activities or only activities that are
limited to maintenance as defined in HUD Notice CPD-16-02, HUD has no further
obligations under Section 106. HUD is not required to contact SHPO, THPO, and/or
other interested parties or the public.74
73
This is further defined as those transactions that do not anticipate any reasonably foreseeable repairs or other
physical activities beyond maintenance, as defined in HUD Notice CPD 2016-02.
74
This Determination is detailed in the “Determination of ‘No Potential to Cause Effects’ under Section 106 of the
National Historic Preservation Act for Rental Assistance Demonstration (RAD) Projects Limited to Maintenance
Activities and Carried Out Under 24 CFR Part 50. See https://www.hudexchange.info/resource/3865/no-potential-
to-cause-effects-to-historic-properties-memos/.
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Section I: Public Housing Projects
PHAs will be required to submit documentation to facilitate HUD’s site-specific
review, as defined in Attachment 1A of the RAD Notice. 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.
4. 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. 75
Financing Plan Requirements for Streamlined RAD Does Not
Applies Modified
Conversion for Small PHAs Apply
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.76
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
75
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.
76
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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Section I: Public Housing Projects
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.3. 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.
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 Notice PIH 2019-13. 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 Notice PIH 2019-13 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.
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Section I: Public Housing Projects
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. (only applicable to MTW
Agencies subject to the Standard MTW
Agreement rather than the MTW Operations
Notice) 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.
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.
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Section I: Public Housing Projects
Additional Information
For additional information on this section of the Notice, please check www.hud.gov/rad or email
questions to RAD@hud.gov.
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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
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, small projects, or transactions using CNI grants.77
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 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).
77
See https://www.hud.gov/sites/documents/RAD-CHOICEPROTOCOL.PDF for RAD/CNI Protocols.
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Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
C. Scope of Work for Rehabilitation or New Construction. 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 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 (who is typically distinct from the
contractor that conducted the CNA), 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). 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 in accordance with LSHR 24 CFR 35.
O&M plans covering properties that continue to have lead painted surfaces, even if
enclosed or encapsulated, must include training and certifying property maintenance
personnel who disturb paint in accordance with the EPA’s Renovation, Repair and
Painting Rule (40 CFR 745, Subpart E), training and certifying property maintenance
personnel who abate the paint in accordance with the EPA’s Lead Abatement Rule
(40 CFR 745, Subpart L or Q), and training and certifying the employer of the
property maintenance personnel to become a certified lead renovation firm or
certified lead abatement firm, as applicable.
4. Include 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 instructions for the CNA e-Tool and
the RAD Fair Housing, Civil Rights, and Relocation Notice for a complete list of
accessibility requirements and resources.
5. 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.
6. Include a reasonable timeline for completion of all rehabilitation items acceptable to
HUD, depending on the scope of rehabilitation funded.
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Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
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.
A RAD transaction will either be reviewed under 24 CFR Part 50 (“Part 50 Reviews”) or 24
CFR Part 58 (“Part 58 Reviews”). Part 50 applies when HUD conducts the environmental
review, and Part 58 applies when a Responsible Entity (RE) conducts the environmental
review. The following table shows which review protocol a transaction will follow, along
with who will conduct the review:
Description Type of Environmental Review Reviewer
PBRA Non-FHA Part 50 RAD Transaction Manager
PBRA FHA Non-Risk Part 50 FHA Production
Share78
PBRA FHA Risk-Share Part 50 Transaction Manager
PBV FHA Non-Risk Share Part 50 FHA Production
PBV Non-FHA Part 58 Responsible Entity (RE)
PBV FHA Risk-Share Part 58 State Housing Finance
Agency or Responsible
Entity, as applicable79
Under limited circumstances, per 24 CFR 58.11(c), an Awardee with a non-FHA PBV
transaction may request HUD to undertake the environmental review under Part 50 if a
suitable RE cannot be found or if the local government was not a direct recipient of the funds
and refuses to accept responsibility or when HUD determines the local government does not
have capacity to act as an RE.80 This request must be made in writing and submitted to HUD
no later than at the time of the Financing Plan submission.
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
78
Section 542(c) of the Housing and Community Development Act of 1992 enables HUD and State and local
housing finance agencies (HFAs) to provide new risk-sharing arrangements to help those agencies provide more
insurance and credit for multifamily loans known as the FHA Risk Sharing Program.
79
Housing Finance Agencies can act as the Responsible Entity for Housing’s Risk Share Programs if the HFA is a
regular part of the state government or if the HFA is a state instrumentality that has been approved by the governor.
If the HFA does not meet either criteria, it must request another department of the state to act as Responsible Entity.
An instrumentality of a city or county government cannot act as a Responsible Entity for the Risk Share Program.
Please contact HUD if you have any questions about whether an HFA can act as the Responsible Entity.
80
These circumstances are considered on a case-by-case basis only. Please work with your Transaction Manager to
determine suitability.
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Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
multi-phase development) and the environmental review conducted during the first phase
will cover the entire site.
Requests to transfer assistance from the Converting Project to a new location are subject to
environmental review.
For transactions receiving funding from other HUD programs (i.e. HOME, CDBG, non-RAD
PBV), HUD encourages all parties to complete one review for all programs, even if these
programs’ environmental reviews are conducted under a different review protocol (Part 50,
Part 58). In cases where two Part 58 programs are combined, HUD encourages applicants to
work with the Responsible Entity to see if environmental reviews can be combined.
However, this is solely the Responsible Entity’s determination. In cases where a Part 50
program and a Part 58 program are combined, HUD may determine that it will perform one
Part 50 environmental review for both programs under 24 CFR 58.11 if performing an
additional Part 58 environmental review is not feasible in the time allotted. HUD must ensure
that the Part 50 review considers the full scope of all activities and funding associated with
all programs. When one review is used for both programs, the Approving Officials for both
programs must certify the 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:81
1. For PBRA conversions (or where HUD has determined to conduct the PBV
environmental review under Part 50) without FHA insurance and without any
rehabilitation, construction, or demolition,82 HUD conducted a tiered review of
program-wide and site-specific compliance. HUD has made program-wide
compliance determinations for most of the applicable environmental laws and
authorities, and will complete a site-specific compliance review of the following:
A. Coastal protection pursuant to the Coastal Barrier Resources Act, as amended
by the Coastal Barrier Improvement Act of 1990 (16 U.S.C. 3501);
B. Flood insurance and floodplain management pursuant to the Flood Disaster
Protection Act of 1973, the National Flood Insurance Reform Act of 1994 (42
81
The MAP Guide is available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
Additional guidance on environmental review requirements is available on the HUD Environmental Review
website, at https://www.hudexchange.info/environmental-review/.
82
This is further defined as those transactions that do not anticipate any reasonably foreseeable repairs or other
physical activities beyond maintenance, as defined in HUD Notice CPD 2016-02.
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Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
U.S.C. 4001-4128 and 42 U.S.C. 5154a), Executive Order 11988, particularly
section 2(a), and 24 C.F.R. Part 55;
C. Contamination pursuant to 24 C.F.R. 50.3(i) (HUD Standard).
Additionally, while Historic Preservation (National Historic Preservation Act of
1966, particularly sections 106 & 110; 36 CFR Part 800) is not included in the tiered
review, for conversions that entail no physical activities or only activities that are
limited to maintenance as defined in HUD Notice CPD-16-02, HUD has no further
obligations under Section 106. HUD is not required to contact SHPO, THPO, and/or
other interested parties or the public.83
PHAs will be required to submit documentation to facilitate HUD’s site-specific
review.
2. For all non-FHA PBRA conversions (or where HUD has determined to conduct the
PBV environmental review under Part 50) that do not meet the requirements under
paragraph 1 above, the awardee will follow the guidelines in Chapter 9 of the MAP
guide. Awardees will upload all applicable documentation directly into HEROS at the
time of Financing Plan submission. The following exceptions to the MAP Guide
apply:
In lieu of a Phase I Environmental Site Assessment (ESA) in accordance with
ASTM E 1527-13 (or the most recent edition) 84, except for conversions
involving substantial rehabilitation or new construction activities, Awardees
may submit a more limited report on potential sources of contamination.
Where a Phase I ESA is not required (i.e., projects without any associated
substantial rehabilitation85 or new construction), the Awardees can submit 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).
83
This Determination is detailed in the “Determination of ‘No Potential to Cause Effects’ under Section 106 of the
National Historic Preservation Act for Rental Assistance Demonstration (RAD) Projects Limited to Maintenance
Activities and Carried Out Under 24 CFR Part 50. See https://www.hudexchange.info/resource/3865/no-potential-
to-cause-effects-to-historic-properties-memos/.
84
The Transaction Screen does not meet the standard for “All Appropriate Inquiries” for CERCLA liability
protection, as noted in ASTM E 1528-14 Section 4.2.1.
85
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 1A – Financing Plan Requirements and Feasibility Benchmarks
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 ESA in accordance
with ASTM E 1527-13 (or the most recent edition) must be provided.
Awardees may submit a Phase I ESA that is up to 5 years old upon
submission; however, it must be updated by a Transaction Screen that is up to
1 year old upon submission.
When HUD conducts the environmental review under Part 50, PHAs (or their vendors) must
submit environmental reports and documentation86 for HUD review into the HUD
Environmental Review Online System (HEROS), where HUD will complete its review.
HUD staff will review the submissions and may require additional information in order to
complete their review. 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 or mitigation 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.87 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 (RROF), to their local PIH
field staff.88 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 proof of the completed Form 7015.16 (either a
86
PHAs and providers should take care to respond to all applicable laws and authorities and MAP-specific
requirements when providing documentation for environmental review. For all maps, please clearly indicate where
the project site is located. Information about HEROS and how to register can be found at
https://www.hudexchange.info/programs/environmental-review/housing/#heros.
87
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/.
88
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 1A – Financing Plan Requirements and Feasibility Benchmarks
copy of the paper form or a screenshot of the completed screen in HEROS) to
HUD; or
If form HUD-7015.15 is not required because the project converts to Exempt
under 24 CFR § 58.34(a)(12), 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(a)(12) is sufficient.
Additionally, except for properties without any rehabilitation, construction, or
demolition,89 the PHA must submit either a) a statement declaring that the RE examined
radon or b) where the RE had not examined radon as part of its review, either a Radon
Report consistent with the requirements of the Section 9.5.C of the MAP Guide (or
successor provision) for HUD to review or a statement that the property is exempt from
submission of a Radon Report per the MAP Guide.
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 URA as well as Section 504 of the Rehabilitation Act of 1973 and its
implementing regulations (24 CFR §8).90 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:
1. 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.
2. Include a construction contingency of 10% for rehabilitation or as otherwise allowed
by a LIHTC allocating agency for new construction. Note that HUD may require a
higher contingency on a case-by-case basis.
3. 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
89
This is further defined as those transactions that do not anticipate any reasonably foreseeable repairs or other
physical activities beyond maintenance, as defined in HUD Notice CPD 2016-02.
90
For additional information see the RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17;
PIH 2016-17).
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Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
amended EPC approval letter from the PIH Energy Center specifying the minimum
amount of debt that will need to be addressed in the conversion.
4. 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.
5. 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.
6. 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, in accordance
with section 102(d) of the HUD Reform Act, whenever multiple federal sources are
proposed, when public housing funds are used (see Section 1.5.A.), or when an MTW
agency is using MTW funds to set their initial contract rents (see Sections 1.6.B.5.
and 1.7.A.5.). A separate SLR will not be conducted by HUD if there is non-RAD
PBV or another HUD subsidy at the time of conversion; the SLR performed as part of
the RAD conversion will satisfy the requirements under section 102(d) of the HUD
Reform Act. The purpose of the subsidy layering review is to ensure that assistance
made available by HUD for a specific housing project will not be more than is
necessary to make the assisted activity feasible after taking into account assistance
from other government sources. The subsidy layering review performed for
conversions to either PBV or PBRA will ensure that costs are reasonable and cash
flow is not excessive. Given unique circumstances that occur in RAD conversion,
other guidance with respect to PBV or PBRA subsidy layering reviews do not apply
to financing of Covered Projects at the time of conversion.91
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. The submission must disclose any identity of interest between any of
the parties. Where fees normally determined by market negotiations (such as general
contractor overhead and profit) are being paid among identity of interest parties,
HUD may limit such fees to amounts comparable to the market, commonly seen in
RAD transactions, commonly permitted in other HUD programs, or permitted by the
applicable State’s low income housing tax credit qualified allocation plan.
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
91
Accordingly, Notice PIH 2013-11 or successor notice shall not apply.
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Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
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.92
H. Proposed Financing. For each proposed loan, equity contribution, or grant, the PHA must
include a:93
1. Recent lender, investor or grant engagement letter, dated no later than 60 days prior to
Financing Plan submission, with key terms identified (including for each amount,
repayment terms, interest rate, amortization, maturity, prepayment restrictions, and
pay-in schedule) from all financing provider(s). Permanent debt financing with
monthly payment amounts not conditioned on the availability of cash flow (i.e.,
“hard” debt) on Covered Projects must: 94
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.
All bridge loan or construction financing must be disclosed and approved by HUD.
All cash-flow (“soft” debt) and subordinate (or secondary) financing must be
disclosed and then approved by the first-mortgage lender as well as HUD in
92
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.
93
The RAD Resource Desk includes data entry fields that Project Owners and PHAs can use to provide all required
information on each loan, equity contribution, and grants.
94
A conversion may entail multiple hard-debt mortgages as long as, viewed together, they comply with these
conditions.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 123
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
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;
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 funding95 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
95
Current Funding, for purposes of this Attachment, is the funding determined using Attachment 1C of this Notice.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 124
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
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
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 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. Front-End Civil Rights Reviews. Any necessary approvals described in the RAD Fair
Housing, Civil Rights, and Relocation Notice must have been secured.
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,
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 125
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
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. 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;96 and
underlying land at those buildings;
2. Necessary appurtenances for the RAD units (e.g., parking lots, playgrounds);
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).
96
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.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 126
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
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 property97 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 or PHA retention of the property under 2 CFR Part 200.
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 submitting
the AFHMP. If a Project Owner plans to adopt any local or residency preference(s), 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.
97
Note that “public housing property” includes all real property that has been acquired, developed, modernized,
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.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 127
Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
Q. Transfer of Assistance. For all conversions involving a transfer of assistance to a new site,
the PHA must have secured HUD approval of the site (Covered Project). The PHA must also
identify proposed plans for the pre-conversion public housing site (Converting Project),
including how the PHA proposes to treat the DOT at the effective date of the HAP contract
in compliance with Section 1.4.A.12.
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 and scope
of work that were received in connection with such meetings.
S. Title Report. Submit a complete title report 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 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):
A. Type of Conversion
E. Fair Housing, Accessibility and Relocation Checklist or Update
F. Development Budget (Sources and Uses of Funds).
o Lender Narrative
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 an MTW agency is using MTW 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.
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Attachment 1A – Financing Plan Requirements and Feasibility Benchmarks
L. Front End Civil Rights Reviews (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
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 129
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 (including for those that will reside in non-
RAD PBV units in the Covered project):
Conversion will be considered a significant action requiring discussion in the PHA’s
Five-Year Plan, Annual Plan or MTW Plan or requiring 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);
A right to return, which covers the right to return to the rent-assisted property after
temporary relocation (when temporary relocation is necessary to facilitate rehabilitation
or construction), or the right to occupancy of the new unit if the rental assistance is
transferred to a new unit. (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.3. of this Notice for conversions to
PBV and Section 1.7.B.3. for conversions to PBRA);
Relocation protections, including procedural rights, assistance with moving, and
applicable relocation payments. (See Section 1.4.A.5 of this Notice and the RAD Fair
Housing, Civil Rights, and Relocation Notice.)
Continued participation in the ROSS-SC FSS and JobsPlus programs (see Sections
1.6.C.5 and 1.6.C.9 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);
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 130
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
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).
The foregoing is a summary of special provisions and alternative requirements relating to
residents of public housing projects converting to RAD and does not attempt to capture all
program requirements and details. For additional information, refer to the full text of this Notice
and to the RAD Fair Housing, Civil Rights, and Relocation Notice (Notice H 2016-17; PIH
2016-17).
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 131
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
1B.2 Resident Participation and Funding98
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, 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
resident 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.
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. Eligible uses of funds are the same as those permitted under “Guidance on the use of
Tenant Participation Funds,” Notice PIH 2013-21. The Department strongly encourages
residents and Project Owners to resolve questions concerning specific uses of resident
participation funds directly. If a dispute over funding arises the resident organization or
Project Owner may refer any disputes over funding to the HUD Field Office for intervention
only after documented efforts to at direct resolution have proven unsuccessful.
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
98
For the purposes of this Attachment, HUD uses the term “Project Owner” to refer to the owner of a Converting
Project or Covered Project, as applicable to the context.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 132
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
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
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 resident 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.
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. Major capital additions; and
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 133
Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
vi. Prepayment of loans.
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 Owners 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.
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Attachment 1B: Resident Provisions in Conversions of Assistance from Public Housing
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
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.99 These funds must be used for resident
education, organizing around tenancy issues, and training activities. 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.
Eligible use of funds are the same as those permitted under “Guidance on the use of
Tenant Participation Funds,” Notice PIH 2013-21. The Department strongly encourages
residents and Project Owners to resolve questions concerning specific uses of resident
participation funds directly. If a dispute over funding arises the resident organization or
Project Owner may refer any disputes over funding to the Contract Administrator for
intervention only after documented efforts to at direct resolution have proven
unsuccessful.
99
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.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 135
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.
RAD Rent Base Years. All RAD applications, including applications for Portfolio or Multi-
Phase awards, will have initial contract rents based on their “RAD rent base year.” Prior to
conversion, these rents will be adjusted by HUD’s published OCAF until they are established in
the HAP Contracts at the time of conversion.
For example, for CHAPs awarded based on the FY 14 RAD rent base year that closed in 2017,
the initial contract rents were based on 2014 funding, with an OCAF adjustment for 2015, 2016,
and 2017.
Every two years, beginning January 1, 2021, the RAD Rent Base Year shall be reset, based on
the funding levels of the immediately preceding fiscal year (for example FY 20 funding levels
for CHAPs issued in 2021 and 2022, FY 22 funding levels for CHAPs issued in 2023 and 2024).
These rents will be adjusted each year by HUD’s published OCAF starting in the calendar year
after the base year and established in the HAP Contracts at the time of conversion. This policy is
illustrated in Table 2: RAD Rent Base Years and OCAFs based on Award Date below, but is not
limited to the dates shown.
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Attachment 1C: Calculation of HAP Contract Rents
Table 2: RAD Rent Base Years and OCAFs based on Award Date
Year in which an
Awards made RAD Rent Base OCAF adjustment is
Applicable Universe between Year first applied
Properties awarded new RAD authority FY 12 2014
under the original 60,000 unit cap
Properties awarded new RAD authority FY 14 2015
above HUD’s original 60,000 unit cap but
subject to the increased 185,000 cap
Properties awarded new RAD authority FY 16 2017
above the 185,000 unit cap but subject to the
increased 225,000 cap
Properties awarded new RAD authority 7/2/18 – Modified 2019
above the 225,000 unit cap where the award 12/31/18 FY 16*
is made prior to January 1, 2019
Properties awarded new RAD authority 1/1/19 – FY 18 2019
January 1, 2019 through December 31, 2020 12/31/20
Properties awarded new RAD authority 1/1/21- FY 20 2021
January 1, 2021 through December 31, 2022 12/31/22
Properties awarded new RAD authority 1/1/23 – FY 22 2023
January 1, 2023 through December 31, 2024 12/31/24
*The Modified FY 16 RAD Rent Base Year utilizes the FY 16 RAD Rent base Year, but for the
Capital Fund component of the rent replaces FY 16 figures with FY 18 figures.
When a PHA returns RAD authority to HUD by submitting a voluntary withdrawal of a project
and subsequently requests new RAD authority for the same project within one month thereafter,
provided that HUD has authority to make awards under the statutory cap, HUD may approve
issuance of a replacement CHAP, via a CHAP amendment, without the requirement that the
PHA submit the application materials that would otherwise be required. The replacement CHAP
will include the original CHAP issuance date, but will have rents based on the applicable RAD
rent base year as described above. For example, a withdrawal of a CHAP and subsequent request
for new RAD authority that occurs in September of 2018 would have rents based on Modified
FY 16 rent levels.
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).
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 137
Attachment 1C: Calculation of HAP Contract Rents
Construction of Rents for the RAD Rent Base Year
1. Step One – Determine Current Funding100
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).101
The amount of the PHA’s Capital Fund Formula Grant attributable to the standing units
at the project (i.e., excluding DDTF), 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.102
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.103
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. The following is an illustration:
Current Funding: Bedroom Adjusted Based on FMR
100
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.
101
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..
102
Section 3, Part B, Line 03 of HUD Form-52723.
103
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.
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Attachment 1C: Calculation of HAP Contract Rents
Bedroom Size 0BR 1BR 2BR 3BR 4BR 5BR TOTAL
PIC Units 0 20 50 30 0 0 100
Metropolitan FMRs $550 $650 $775 $900 $1,000 $1,150
FMR Bedroom
0.710 0.839 1.000 1.161 1.290 1.484
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
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
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 139
Attachment 1C: Calculation of HAP Contract Rents
- 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. Where conversion plans will result in energy and water efficiency
improvements and, for PBV, where the Covered Project will utilize a site-specific utility
allowance (see Section 1.6.B.5.e.), 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 contract rents (for new construction) or post-rehab rents (for rehab)
in the HAP Contract. The rents will be adjusted in the following way:
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
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Attachment 1C: Calculation of HAP Contract Rents
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
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
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 141
Attachment 1C: Calculation of HAP Contract Rents
Notes
1. For MTW PHAs converting to PBV that are augmenting RAD rents using voucher reserves,
as described in Section 1.6, the agency will use MTW funds 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. Instead, HUD will reallocate the subsidy to other conversions in accordance with
Section 1.7.A.5.vi. 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 subsidy (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
RHF/DDTF grants for the purpose of offsetting an increase to the initial RAD rent. At a
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 142
Attachment 1C: Calculation of HAP Contract Rents
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 or 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.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 143
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 RAD Fair
Housing, Civil Rights, and Relocation Notice - Notice H 2016-17, PIH 2016-17 (HA) .
(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
RAD Fair Housing, Civil Rights, and Relocation Notice - Notice H 2016-17, PIH 2016-
17 (HA) . (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 location to where the assistance is being transferred
b. The number of units to be transferred;
c. The bedroom distribution of the units in the new building(s), and
d. The type of units, if changed (e.g., family, elderly/disabled, or elderly-only); and
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 144
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
e. Any reduction or change in the number of units and what reduction category they fall
under (i.e. de minimis)
f. 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).
g. What the PHA plans to do with the original site following the transfer of assistance,
consistent with allowable uses described in Section 1.4.A.12.
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 that meets the requirements of Section 5.2 of the RAD Fair Housing, Civil
Rights, and Relocation Notice (Notice H 2016-17/PIH 2016-17 (HA)) certifying that the
RAD conversion complies with all applicable site selection and neighborhood reviews 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 MTW PHAs augmenting the RAD rents using voucher reserves as described in Section
1.6 or 1.7, as applicable, a statement explaining how the PHA will be able to maintain
continued service level requirements.
Additionally, in accordance with 24 CFR Part 903, 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;
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 145
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
2. 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;
3. Changes to the construction and rehabilitation plan for each approved RAD conversion; and
4. Changes to the financing structure for each approved RAD conversion.
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.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 146
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 Notice H 2019-xx, PIH 2019- Requirements (Section 1.7 of Notice H 2019-
xx; and Notice H 2016-17, PIH 2016-17) xx, PIH 2019-xx; 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
3. Phase-in of tenant rent increase 3. Phase-in of tenant rent increase
4. FSS and ROSS-SC programs 4. FSS and ROSS-SC programs
5. Resident Participation and Funding 5. Resident Participation and Funding
6. Termination notification 6. Termination notification
7. Grievance process 7. Grievance process
8. Earned Income Disregard. 8. Earned Income Disregard
9. Jobs Plus 9. Jobs Plus
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 147
Attachment 1D - Requirements for RAD-Specific Significant Amendment Submissions
10. When Total Tenant Payment Exceeds 10. 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
By way of summary and not as a modification of the program requirements set forth in the
Notice provisions referenced, please note that the foregoing tenant protections for RAD PBV
residents apply to non-RAD PBV residents of the same Covered Project with the exception of
Choice Mobility. Standard PBV Choice Mobility requirements apply to non-RAD PBV
residents.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 148
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 H 2019-xx/PIH 2019-xx, REV-4 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 H 2019-xx/PIH 2019-xx, REV-4; and H-2016-17/PIH-2016-
17; For conversions to PBRA: Section 1.7 of H 2019-xx/PIH 2019-xx, REV-4; and H-2016-
17/PIH-2016-17). 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).]
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 149
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.)
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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 H 2019-xx/PIH 2019-xx, REV-4 Section 1.6.C & Section 1.6.D,
and H-2016-17/PIH-2016-17, as a whole, into this Attachment to your PHA Plan)
If converting to PBRA: (Insert H 2019-xx/PIH 2019-xx, REV-4 Section 1.7.B & Section 1.7.C,
and H-2016-17/PIH-2016-17, 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.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 151
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 written 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
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Attachment 1E: House Rules Addendum for PBRA Conversions
Owner as the basis for the adverse action. With reasonable notice to the Project
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 in writing of this determination, and of the reasons for the
determination.
c. Family Right to Move. [Do not include this provision if HUD provided to the
Covered Project a good-cause exemption from Choice Mobility as described in
Section 1.7.5.] Each family has the option to obtain tenant-based rental assistance
(commonly known as a Housing Choice Voucher) from [name of the PHA], subject to
certain program limitations, at any time after the second year of occupancy. Before
providing notice to terminate the lease, the family must first contact the PHA to request
tenant-based rental assistance if the family wishes to move with continued assistance. If
tenant-based rental assistance is not immediately available, the PHA shall give the family
priority to receive the next available opportunity for tenant-based rental assistance. After
the PHA offers the family the opportunity for tenant-based rental assistance in
accordance with HUD requirements and after the family has secured a lease with such
tenant-based rental assistance, the family must give the owner advance written notice of
intent to vacate (with a copy to the PHA) in accordance with the lease.
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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.
All Mod Rehab conversions are processed under the Second Component. 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 waive regulatory provisions and develop
alternative requirements to fulfill the purposes of the Demonstration as described in this Notice
and only to the extent described in this Notice.
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.
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
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, in which case the Mod
Rehab contract would be renewed until funds become available.
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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 Conversion 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,104 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 Administering PHA does not consent to long-term conversion of
the contract to PBV assistance, the project is not eligible for retroactive conversion.
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
appropriations for each year of such renewal. Regulatory requirements of the PBRA program
104
Where TPVs or EVs have been requested by the PHA and processed by HUD but none of the TPVs or EVs have
been issued to a project resident (i.e., the PHA’s ACC has been amended reflecting the new increment of TPVs or
EVs), HUD will amend the ACC a second time to remove the new increment of TPVs or EVs and the transaction
will be processed as a prospective conversion. The first issuance of a TPV or EV shall make a project ineligible for a
prospective conversion.
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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 Conversion Plan to convert assistance under the Second Component of RAD.
2.3.1 Eligible Owners
Compliance with HUD and PHA Requirements. Owners must be in good standing with
HUD and the PHA. The owner must not have a history of non-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 purchaser must provide
evidence of successful experience owning and operating HUD or other affordable
multifamily housing properties.105
Fair Housing and Civil Rights Compliance for PBV and PBRA Conversions. An owner
must resolve to HUD’s satisfaction any outstanding civil rights matters prior to conversion.
All pending legal processes must have been satisfied to meet this standard. If eligibility
would be denied on this basis, HUD will notify the applicant of its determination and any
actions necessary to permit a finding of eligibility.
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 documents 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 VCA, conciliation
agreement, consent order or consent decree, or final judicial ruling or administrative ruling or
105
If the acquisition occurs prior to the expiration or termination of the Mod Rehab Contract, the Administering
PHA must consent to the assignment of the contract in accordance with the provisions of the Mod Rehab Contract.
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decision. If HUD is a party to the such document, 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
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
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.
Physical Condition. For PBRA conversion, unless provided explicit approval by HUD, 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, 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,
unless the PHA is using HOTMA non-life threatening and alternative inspection
provisions.106
All PBRA and PBV conversions of properties constructed before 1978 must provide
evidence that the project meets the lead paint evaluation and remediation requirements in 24
CFR 35.
Eligible Units. For prospective PBRA conversions, all units on the original Mod Rehab
contract are eligible for conversion under RAD. Retroactive conversions to PBRA are not
authorized.
For prospective PBV conversions, all units on the Mod Rehab contract that are eligible for
TPVs at the expiration or termination of the Mod Rehab contract under PIH’s HCV funding
Appropriations Act notices (or successor PIH notices regarding TPV allocations) are eligible
106
See Notice PIH-2017-20
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for conversion under RAD. The PHA makes the final determination of unit eligibility to be
included in the PBV HAP Contract.
For retroactive PBV 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.
2.4 Conversion Planning Requirements
Capital Needs Assessment (CNA).107 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 Conversion Plan.
1. For FHA transactions, owners must use the CNA eTool and follow applicable
requirements in the MAP Guide governing exemptions. The CNA must be completed
by a qualified, independent third-party professional.
2. For all non-FHA transactions using equity sources of financing, the equity provider
will determine the scope of work and required Initial Deposits to the Reserve for
Replacement (IDRR) and Annual Deposits to the Reserve for Replacement (ADRR),
as long as the ADRR is not less than $450 per unit per year. Submission of a CNA to
HUD is not required unless the owner proposes an ADRR below this minimum
threshold.
3. For all other transactions (i.e., without any FHA-insured debt or equity financing
sources):
a. The Project Owner must provide a copy of a CNA completed within 12
months of RAD Conversion Plan submission by a qualified, independent
third-party professional.
b. A CNA will not be required to include an assessment of critical or
immediate needs if the project:
i. was built within the last 5 years; or
ii. qualifies as new construction or “substantial rehabilitation”
(generally defined as meeting Level 3108 Alterations per the
2012 International Building Code for Existing Buildings).
107
Notice PIH 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.
108
Level 1 is removal and replacement or covering of existing materials, elements, equipment, or fixtures using new
materials, elements, or equipment. that serve the same purpose. Level 2 includes reconfiguration of space, addition
or elimination of any door/window, reconfiguration or extension of any system, or installation of additional
equipment. Level 3 applies where the work area exceeds 50% of the aggregate area of the building. Level 3 must
also meet the provisions of level 1 and level 2 alterations.
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iii. HUD will use the component replacement and reserve schedule
from the submitted CNA to verify that the IDRR and ADRR
are in accordance with HUD requirements.
HUD may exempt projects from submitting a CNA where the project has 20 or fewer units or
where the total assisted units (e.g., RAD units and other units supported by PBV) at the
project will constitute less than 20% of the total units at the project (or a higher amount at
HUD’s discretion).
Any proposed exemptions must be confirmed with the Transaction Manager assigned to the
RAD conversion.
No utility consumption baseline analysis is necessary as part of the CNA conducted for the
RAD conversion.
HUD may, at its discretion, conduct a site visit to substantiate that site conditions established
in the CNA are as reported.
Healthy Housing 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 Conversion Plan, Owners shall utilize the most energy- and water-efficient options
that are financially feasible and that are found to be cost-effective. The use of Energy Star®,
WaterSense® or Federal Energy Management Program (FEMP)-designated products and
appliances replacements, if any such designation is available for the applicable system or
appliance, is presumed to be the minimum threshold for meeting such requirement.109
Owners are strongly encouraged, for all RAD conversion projects, to scope rehabilitation and
ongoing replacements that utilize components that 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.
Financing. An owner’s Conversion 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.
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 Conversion Plan. A Conversion Plan cannot be
approved by HUD if the project plan does not meet environmental review requirements.
109
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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Please see Attachment 2A for a discussion of the environmental review requirements
applicable to RAD transactions, including transactions that will not result in the alteration of
the physical condition of the property. Once an awardee has submitted an application for a
specific project, they may not make any choice limiting actions before the completion of the
environmental review.110
Lead Safety.
A CNA performed for a project built before 1978, and the scope of the
rehabilitation that follows, must address lead safety with respect to paint, dust,
soil (including compliance with 24 CFR 35, subparts B – R), and water (including
lead service line replacement).
For a project built before 1978 for which a CNA is not performed, the scope of
the rehabilitation must address lead safety with respect to paint, dust, soil
(including compliance with 24 CFR 35, subparts B – R), and water (including
lead service line replacement).
Relocation and Right to Return. Any person who is legally on the lease or otherwise in
lawful occupancy at the Converting Project at or after the time of submission of the
Conversion Plan has a right to remain in or, in the event that rehabilitation will result in the
relocation of residents, a right to return to an assisted unit at the Covered Project. Any
relocation as a direct result of acquisition, demolition, or rehabilitation is subject to
requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies
Act of 1970 (URA) which are found at 49 CFR part 24. Proper notices including the General
Information Notice (GIN), when applicable, must be sent in accordance with URA
regulations and other applicable relocation regulations. Additionally, relocation and one-for-
one replacement requirements under section 104(d) of the Housing and Community
Development Act of 1974 may apply when CDBG or HOME funds are used in connection
with a RAD conversion. Section 104(d) requirements are found at 24 CFR part 42, subpart C,
and program-specific relocation requirements for CDBG and HOME projects are found at 24
CFR 570.606 and 24 CFR 92.353, respectively. The applicability of URA or section 104(d)
requirements to a RAD conversion is fact-specific and must be determined in accordance
with the applicable URA and section 104(d) regulations. 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,
110
A choice limiting action means an action that may have an adverse impact on the environment or limit the choice
of reasonable alternatives. A choice limiting action may include, but is not limited to, real property acquisition,
demolition, disposition, rehabilitation, repair, new construction, site preparation or clearance, ground disturbance,
and leasing. For more information see the Environmental Review Requirements for RAD Conversions Quick
Reference Guide: https://www.hudexchange.info/resource/4216/environmental-review-requirements-for-rad-
transactions/.
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the resident must be given an opportunity to comment and/or object to such plans. If the
resident objects to such plans, the Project Owner must alter the Project plans in order to
house the resident in the Covered Project. If a resident agrees to the plans which would
preclude the resident’s return, the Project Owner must ensure that the resident’s decision is
fully informed, voluntary, and well documented. To be fully informed, at a minimum the
resident must be notified in writing of a) his or her right to return; b) his or her right to object
to plans which would preclude the resident from returning; c) the Project Owner’s obligation
to accommodate the resident’s right to return; and d) a description of the short and long-term
implications of both the right to return arrangements (e.g., temporary relocation) and the
resident’s options if the resident agrees to such plans. The resident must be provided
counseling regarding the resident’s rights and options. To be voluntary, a resident must be
informed of their right to return, potential for relocation, and temporary and permanent
housing options 30 days before making a decision. In addition, under the URA regulation,
residents must be provided notice of relocation at least 90 days before the relocation. The
Project Owner cannot employ any tactics to pressure the resident into relinquishing his or her
right to return or accepting permanent relocation assistance and payments. To be well
documented, evidence of a resident’s decision must be retained by the Project Owner. At a
minimum such evidence must include copies of notices informing the resident of their
options, records of any counseling or assistance provided, and the resident’s informed,
written consent, including an acknowledgement that acceptance of such assistance terminates
the resident’s right to return to the Covered Project. If the resident agrees to the Project
Owner’s plans, the permanent relocation is considered voluntary, but must include, at a
minimum, any relocation assistance and payments required under the URA and Section
104(d), as applicable. The Project Owner may not propose or request that residents waive
their rights or entitlements to relocation assistance under the URA or Section 104(d).
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.
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 and HUD’s implementing regulations. For
some projects undertaking repairs, “other alterations” described at 8.3 are made over time. If
other alterations, considered together (such as improvements to the kitchen and bathroom),
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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.
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 24 CFR § 983.57 for PBV conversions and of Appendix III
of this Notice for PBRA conversions, 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).
Change in Unit Configuration. Owners may change the unit configuration in conjunction
with 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.F. 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.F. regarding Right to Return requirements). For SRO
projects that are converting, such changes will require a letter of support from the CoC in
which the project participates. See Section 2.7.B. of this Notice.
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.
Absent compelling circumstances, HUD will assess that the transfer does not occur in
neighborhoods with highly concentrated poverty based on the criteria formulated for
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transfers under 8(bb) of the Act.111 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.112 Owners are strongly encouraged to
request HUD approval of the proposed site prior to submission of the Conversion Plan.
For PBV 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. For PBRA transfers of assistance, the new
HAP Contract can be executed at the close of construction financing and the Project Owner
can use the Section 8 Pass-Through.113
After initial conversion, in general, a Project Owner may only request a transfer of assistance
to HUD after 10 years from the effective date of the initial HAP Contract. A Project Owner
may submit a transfer request sooner if it is needed as a result of eminent domain
proceedings, natural disasters, unforeseen events, or as otherwise approved by HUD (for
example, if HUD provided approval of a future transfer prior to conversion). HUD may
consider, and approve with such conditions as HUD determines appropriate, 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 to and/or investor in the Covered Project
must also approve the transfer of the assistance. Substantially all units covered by the initial
HAP Contract must remain or be replaced as a result of the transfer. Residents of the original
location at the time of the transfer request shall not experience a loss of rental assistance.
PBV-assisted families living at the property upon termination of a PBV HAP Contract have a
statutory right to receive a tenant-based voucher and to certain tenancy protections.114 (A
111
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.
112
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.
113
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.
114
See the Housing Opportunity Through Modernization Act of 2016 (HOTMA) and HUD’s implementation
notices including the "January 18, 2017 HOTMA implementation notice, 82 Fed. Reg. 5458," and the "July 14, 2017
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Section II: Mod Rehab Projects
family may voluntarily decline the tenant-based voucher and accept a PBV unit at the new
location but may not be required to do so.) Termination of a PBV contract is not cause for
issuance of additional tenant-based voucher assistance from HUD. PHAs and owners
contemplating RAD PBV transfers after conversion must take the PBV families’ right to
tenant-based voucher assistance into consideration and ensure that there will be sufficient
resources available to the PHA to both effectuate the transfer and meet the PHA’s obligation
to provide tenant-based vouchers to those families that wish to receive them. Subject to the
availability of appropriations, PBRA-assisted families living at the property upon termination
of a PBRA HAP Contract that meet the eligibility requirements for voucher assistance may
receive tenant-based tenant protection vouchers (TPVs) in the event the termination of the
original PBRA HAP Contract qualifies for issuance of such vouchers.
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.115
Post-conversion, the tenure of all residents of the Covered Project is protected pursuant to
PBV or PBRA requirements regarding continued occupancy. Under PBV, a unit with a
household that was over-income at time of conversion would continue to be treated as an
assisted unit. Thus, Section 8(o)(4) of the Act and 24 CFR § 982.201, concerning income
eligibility and income targeting of tenants at initial occupancy, will not apply for current
households. Under PBRA, a household that would not be income eligible for initial
occupancy of a Section 8 unit at the time of conversion would still be placed on a Section 8
lease and eligible for assistance under the provisions governing continued occupancy. 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. Income eligibility requirements associated with new sources of financing,
such as Low-Income Housing Tax Credits, do not supersede this prohibition on rescreening,
and the Project Owner may be required to exclude Section 8 units occupied by ineligible
technical correction and clarification notice, 82 Fed. Reg. 32461." Also see Notice PIH 2017-21. Pursuant to
applicable Housing Choice Voucher program requirements, upon PBV HAP Contract termination the family must
be given the option to remain in their unit with HCV assistance if the unit remains rental housing, the rent is
reasonable, and the unit meets housing quality standards.
115
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.
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households from being covered by the new financing’s restrictions. Additionally, any owner-
adopted preference shall not apply to any current resident.
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.
Length of Contract. Section 8(o)(13)(F) of the Act provides, in part, that the HAP Contract
may have an initial term of up to 20 years. In addition, 24 CFR § 983.205(a) provides the
PHA with discretion to set the contract term, for a minimum period of one year and a
maximum period of twenty years. By choosing to participate in the RAD program, the PHA
and owner agree to an initial HAP Contract term of 20 years. A PHA may 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.
PBV Percentage Limitation. Per the RAD statute, Section 8(o)(13)(B) of the Act (and, by
extension, 24 CFR § 983.6) does not apply and covered projects do not count against the
percentage limitation applicable to the PBV program. 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 of the PHA’s voucher portfolio that may be
project-based for non-RAD PBV.
Cap on the Number of PBV Units in Each Project. There is no cap on the number of units
that may receive RAD PBV assistance in each project. Under the HOTMA Implementation
Notice, certain formerly assisted properties are excepted from the project cap. For any
Covered Projects not covered under the HOTMA Implementation Notice, HUD is waiving
section 8(o)(13)(D) of the Act, as well as related provisions of 24 CFR §§ 983.56,
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983.257(b), and 983.262(a) and (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.
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.
Initial Contract Rent Setting. 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).
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.
Re-Determined Rents. The rent to owner will be redetermined in accordance with 24 CFR
§ 983.302.
Under-Occupied Units. If a family is in an under-occupied unit under 24 CFR § 983.260 at
the time of conversion, the family may remain in the unit until an appropriately-sized unit
becomes available in the Covered Project.116 When an appropriately-sized unit becomes
available in the Covered Project, the family living in the under-occupied unit must move to
the appropriately-sized unit within a reasonable period of time, as determined by the PHA. In
order to allow the family to remain in the under-occupied unit until an appropriately-sized
unit becomes available in the Covered Project, 24 CFR § 983.260 is waived.117
116
A household is considered to be remaining in the unit during any period of temporary relocation to permit
rehabilitation of the Covered Project.
117
As the later enacted statute, the RAD Statute, as amended by the FY 2018 Appropriations Act to prohibit
conversion under the Second Component from being the basis for re-screening, termination of assistance, or eviction
of a family in the Converting Project, overrides the last sentence of section 3(b)(3)(A) of the Act. Absent this
override, the latter provision would prohibit occupancy of an assisted unit of two or more bedrooms by a single
person who is not elderly, disabled, a displaced person, or the remaining member of a tenant family, and any such
unit occupied by such a person could not be included in the HAP Contract. Accordingly, 24 CFR § 5.655(b)(5) shall
not apply.
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Davis-Bacon Prevailing Wages. Execution of a PBV contract through RAD that provides
rental assistance to previously-assisted units does not trigger Davis-Bacon prevailing wage
requirements (prevailing wages, the Contract Work Hours and Safety Standards Act, and
implementing regulations, rules, and requirements). However, to the extent that construction
or rehabilitation is performed on nine or more units that were not previously rent assisted or
rent restricted and will be newly assisted as a result of the conversion transaction (including,
without limitation, through transfer of assistance), such construction or rehabilitation is
subject to Davis-Bacon prevailing wage requirements.
Replacement Reserve. 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. The reserve must be built up to and maintained at a level
determined by HUD to be sufficient to meet projected needs. Replacement reserves shall be
maintained in a bank account or similar instrument, as approved by HUD, where funds will
be held by the mortgagee or, where there is no financing, by the Project Owner and may be
drawn from the reserve account and used subject to HUD guidelines.
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
standing and subsequent Office of Housing guidance118) 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. Appendix
III provides the site and neighborhood standards applicable to RAD conversions to PBRA.
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.
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
118
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).
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appropriations for each year of such renewal.
Initial Contract Rent Setting. 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 Guidebook119 and submitted with the request for prospective conversion; and (b) 110
percent of the applicable 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 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.
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 (or 120 percent of
the applicable FMR, less utility allowances, per the criteria described above). For owners
who wish to establish rents using this method, the owner must submit an RCS that includes
both “as-is” rents at the project and “post-rehab” rents at the project. 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 Contract will reflect a date for the completion of the
Work. The owner will be required to submit for HUD approval a cost-certification prepared
for the third-party financing source once the Work has been completed.
If the Work is not completed by the date reflected in the HAP Contract, unless HUD agrees
to extend the deadline for completion of the Work, on the first day of the month following
the date for the completion of the Work 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 Work was 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
119
See http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8.
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Contract until the date by which the Work was to have been completed as an overpayment
and will offset future HAP payments until the overpayment has been repaid. Effective on the
date the Work is completed and the cost-certification accepted by HUD, 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.
Method of Adjusting Contract Rents. Contract rents will be adjusted by the 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.120
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.
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.
Davis-Bacon Prevailing Wages. Execution of a PBRA contract through RAD that provides
rental assistance to previously-assisted units does not trigger Davis-Bacon prevailing wage
requirements (prevailing wages, the Contract Work Hours and Safety Standards Act, and
implementing regulations, rules, and requirements). However, to the extent that construction
or rehabilitation is performed on nine or more units that were not previously rent assisted or
rent restricted and will be newly assisted as a result of the conversion transaction (including,
without limitation, through transfer of assistance), such construction or rehabilitation is
subject to Davis-Bacon prevailing wage requirements. In such cases, Davis-Bacon applies to
120
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 in order to calculate the contract rent for the project in the
following fiscal year.
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a PBRA conversion to the same extent it would apply if the conversion were a PBV
conversion.
Under-Occupied Units. If at the time of conversion, an eligible family assisted under the
Mod Rehab 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 appropriately-sized unit
becomes available in the Covered Project.121 When an appropriately-sized unit becomes
available in the Covered Project, the family living in the under-occupied unit must move to
the appropriately-sized unit within a reasonable period of time. In order to allow the family to
remain in the under-occupied unit until an appropriately-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.122
Physical Inspection. 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, however, only after the PBRA HAP Contract is executed and the
Work completed, 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.
Choice-Mobility. HUD seeks to provide all residents of covered projects with viable Choice-
Mobility options. Unless provided an exemption as described below, 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
121
A household is considered to be remaining in the unit during any period of temporary relocation to permit
rehabilitation of the Covered Project.
122
As the later enacted statute, the RAD Statute, as amended by the FY 2018 Appropriations Act to prohibit
conversion under the Second Component from being the basis for re-screening, termination of assistance, or eviction
of a family in the Converting Project, overrides the last sentence of section 3(b)(3)(A) of the Act. Absent this
override, the latter provision would prohibit occupancy of an assisted unit of two or more bedrooms by a single
person who is not elderly, disabled, a displaced person, or the remaining member of a tenant family, and any such
unit occupied by such a person could not be included in the HAP Contract. Accordingly, 24 CFR § 5.655(b)(5) shall
not apply.
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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 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. 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 Conversion Plan, unless the project
owner administers, directly or through an affiliate, a Housing Choice Voucher program.
Unless exempt, project owners should include in their Conversion Plan their intention to
provide Choice-Mobility at the Project and include the following as part of the House Rules
for the associated project: “Family Right to Move. Each family has the option to obtain
tenant-based rental assistance (commonly known as a Housing Choice Voucher) from [name
of the PHA], subject to certain program limitations, at any time after the second year of
occupancy. Before providing notice to terminate the lease, the family must first contact the
PHA to request tenant-based rental assistance if the family wishes to move with continued
assistance. If tenant-based rental assistance is not immediately available, the PHA shall give
the family priority to receive the next available opportunity for tenant-based rental assistance.
After the PHA offers the family the opportunity for tenant-based rental assistance in
accordance with HUD requirements and after the family has secured a lease with such tenant-
based rental assistance, the family must give the owner advance written notice of intent to
vacate (with a copy to the PHA) in accordance with the lease.”
2.7 Special Provisions Affecting Conversion of SROs
As the purpose of the conversion of SRO assistance to assistance under a long-term PBV or
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PBRA HAP 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:
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 and contained in the Continuum of Care Interim Rule at 24 CFR § 578.3. 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 Notice H 2013-21 (July 15, 2013). The preference shall not apply to current
residents because these residents will 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 Notice H 2013–-21. This requirement shall apply for the term of the contract and
any renewal contract.123
Consultation with CoC. Owners must meet with their CoC to discuss the conversion of
assistance, project rehabilitation plans, the ongoing requirement for a preference for
homeless individuals or families, 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). To
the extent that project plans entails a reconfiguration of units, owners must secure a letter of
support from the CoC for these actions.
Admission of Homeless Participants. The Administering PHA or Project Owner is strongly
encouraged to follow the CoC’s established coordinated entry process to identify new
homeless participants for converted SRO properties prior to screening. The Administering
PHA or Project Owner must apply all mandatory screening criteria to homeless individuals
and families that are new admissions (e.g., sex offender screening under 24 CFR
§ 982.553(a)(2)(i) or 24 CFR § 5.856).
For PBV properties, the Administering PHA may establish screening requirements for new
admissions to the SRO project which are distinct from those in place for its HCV program,
123
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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provided that such screening requirements do not conflict with the prohibition on screening
of pre-conversion residents upon conversion (see Section 2.4.K.). 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 all SRO projects converting to PBV under RAD. In administering its regular PBV
program, PHAs generally may not choose to apply different screening criteria to different
properties 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).
All discretionary admission policies must be applied to all applicants to a converted SRO
property uniformly.
Administering PHAs and Project Owners should be aware that some discretionary criteria
can have the effect of screening out homeless 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 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.
Data Submission Requirements. In order to maintain data on the project’s ongoing housing
of formerly homeless persons, the project will continue to be required to participate in 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.
Tenant Selection in Permanent Supportive Housing.
1. In setting preferences for new admissions following accommodation of current
residents pursuant to Section 2.4.E, the Administering PHA or Project Owner may
not deny admission to or otherwise discriminate against or among any federally
protected classes, including among different groups of persons with disabilities.
Although an owner or PHA may adopt a preference for admission of families that
include a person with disabilities, the owner or PHA may not adopt a preference for
admission of persons with a specific disability.124 However, an owner or PHA may
124
24 C.F.R. § 5.655(c)(3); 24 C.F.R. §982.207(b)(3).
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provide a suite of supportive services, and a preference for admission to assisted units
for households containing individuals who would qualify for the supportive services
offered, such as, for example, by having Medicaid reimbursement authority for the
supportive services provided. Any preference for admission to assisted units may not
discriminate based on the type of disability and any individual who would qualify to
receive the services offered under the service’s nondiscriminatory eligibility
requirements may not be excluded from the preference.
2. For Mod Rehab projects converting SRO assistance to PBV under the Demonstration,
the Administering PHA may establish a selection preference for families who qualify
for voluntary services, including disability-specific services, offered in conjunction
with assisted units, provided that the preference is consistent with the PHA plan. The
voluntary services may be designed to be particularly beneficial for specific
subpopulations, pursuant to PBV program requirements. Voluntary services can
consist of a variety of activities, including for example, meal service adequate to meet
nutritional needs, housekeeping assistance, personal assistance, transportation
services, case management, child care, education services, employment assistance
and job training, counseling services, life skills training, and other services designed
to help the recipient live in the community as independently as possible. Voluntary
services can also include disability-specific services, such as mental health services,
assistance with activities of daily living, personal assistance services, outpatient
health services, and the provision of medication, which are provided to support a
person with a disability. Such services may also include, for example, services
provided by State Medicaid programs to promote community-based settings for
individuals with disabilities. To implement such a preference, such housing, aid,
services, benefits, and accommodations must be provided in the most integrated
setting appropriate to the needs and choices of qualified individuals with disabilities,
participation cannot be designed to deny participation in housing, programs, or
activities that are not separate or different, participation in such housing, aids,
benefits, or services cannot be required, and such preference must comply with and
be implemented in accordance with applicable anti-discrimination requirements. This
type of preference must be implemented in accordance with the requirements in
Federal Register Notice 82 FR 5458 “Housing Opportunities Through Modernization
Act of 2016: Implementation of Various Section 8 Voucher Provisions” and any
successor regulations, notices and guidance. As part of the PHA plan review process,
the Office of Fair Housing and Equal Opportunity, in consultation with the Office of
General Counsel, will review the proposed preference. However, HUD’s limited
review and authorization to implement a preference is not a determination by HUD of
compliance with such requirements.
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3. For Mod Rehab projects converting SRO assistance to PBRA under the
Demonstration, the following provisions shall apply.
a. The Project Owner may establish a preference for admission of
households including a person that qualifies for the services provided at
the site, including services, aids, benefits, and accommodations which are
designed to be particularly beneficial for specific subpopulations, if it is
determined that all of the following criteria are met:
i. The housing, aid, benefits, services, and accommodations will
serve the resident population in the most integrated setting
appropriate to the needs and choices of qualified individuals
with disabilities in accordance with Section 504 and Title II of
the ADA. For example, the housing’s design, location, and/or
operational policies and procedures must mitigate the effects of
segregation or concentration of individuals with a specific
disability or diagnosis.
ii) The preference is limited to the population of families that
include an individual where that individual’s need for services
significantly interfere with the family’s ability to obtain and
maintain housing.
iii) Such families will not be able to obtain or maintain themselves
in housing without the availability of such supportive services.
iv) Participation in such services is voluntary. Families are not
required to accept the housing, aids, benefits, accommodations,
or services offered at the project. The Project Owner may not
condition admission into the project on the basis of utilizing
services offered at the project. The Project Owner may not
deny the opportunity for continued occupancy at the project on
the basis that an individual chooses to no longer participate in a
service or that the individual no longer qualifies for a service.
v) The preference will not be used to exclude a family or
individual based on disability.
b. The determination required in Section 2.7.E.3(a), above, shall be made by
the Project Owner. The Project Owner shall consult with the state and
county Medicaid authorities, health services agencies, and other state
officials implementing Olmstead settlements, as applicable, regarding how
the project and the proposed preference fits with the state system of care
and expands individual choice.
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i. The Project Owner’s determination with respect to subsection
(a)(i), above, shall consider factors at a minimum including the
number of units and bedroom distribution of units eligible to be
filled pursuant to the proposed preference relative to the
number of units in the property (including whether the
preference applies to more than the greater of five units or 25%
of the total units at the project), whether any other units at the
project are subject to a preference for persons with disabilities,
the overall size of the property, whether the location of units
appropriate for persons admitted under the proposed preference
are dispersed throughout the property, the availability of
cooking facilities in the units, access and egress to the units,
the ability of residents with disabilities to interact with
residents who do not have disabilities, the property location,
access to public transportation, access to other neighborhood
amenities, the nature of the services provided, and the
qualifications of the provider. The Project Owner must also
consider standards for proposed integrated settings that are
specific to the state where the property is located (e.g.,
Olmstead settlements, Qualified Allocation Plans, state
transition plan under the Home and Community Based Services
settings rule,125 and state and local guidelines governing the
concentration of persons with disabilities within a property, for
various disability types). The Project Owner’s determination
may rely heavily on whether the proposed setting is consistent
with such state standards for integrated settings, but Project
Owners are cautioned to conduct appropriate due diligence
regarding whether the state standards are appropriate for such
reliance.
ii. In evaluating whether the factors in subsections (a)(ii) and
(a)(iii), above, are met in a particular case, the Project Owner
may look to whether payment for the services for the
individuals that qualify for the preference is provided through a
federal agency, state, or local program implementing home-
and community-based supportive services for people with
significant and long-term service needs, which program is
established to mitigate the risk of institutionalization or
125
42 C.F.R. § 441.301(c)(4).
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homelessness pursuant to authorities such as, but not limited to,
(i) Sections 1115, 1115a, 1915(i), 1915(k), and 1915(j)(3) of
the Social Security Act of 1935; (ii) a Home and Community
Based Services Waiver pursuant to Section 1915(c) of the
Social Security Act of 1935; (iii) the Money Follows the
Person Demonstration and (iv) a state or local plan for
implementing the “most integrated setting” mandate of
Olmstead v. L.C.126
c. The Project Owner may not implement a preference as described in this
Section 2.7.E.3 absent notice to and authorization from HUD. Compliance
with all applicable fair housing and civil rights requirements is the
responsibility of the Project Owner, and HUD’s limited review and
authorization to implement a preference is not a determination by HUD of
compliance with such requirements. Prior to or contemporaneous with the
RAD Conversion Plan submission, a request for review of a preference
must be submitted through the applicable Office of Multifamily Housing
Programs regional asset management office pursuant to Notice H 2013-21.
The request must include a certification from the Project Owner regarding
the determinations set forth in Section 2.7.E.3(a), above, and must include
the information and documentation to support the certification, a
description of how the Project Owner reached the determinations, and any
appropriate additional documentation. The request must be accompanied
by appropriate ancillary documents such as a description of the property
(including of the services offered and the provider), a tenant selection plan
(which must identify all tenant screening and selection preferences at the
property), and an affirmative fair housing marketing plan. The Office of
Multifamily Housing Programs will document authorization to implement
the preference following a finding by regional asset management staff and
by the Office of Fair Housing and Equal Opportunity staff, in consultation
with Office of General Counsel staff in the applicable HUD Region, that
the Project Owner’s determination documentation is adequate for purposes
of HUD’s limited review. HUD may request that the Project Owner
provide additional documentation necessary to review the adequacy of the
Project Owner’s determination.
126
See https://www.medicaid.gov/medicaid/ltss/money-follows-the-person/index.html and
https://www.ada.gov/olmstead/olmstead_about.htm.
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Section II: Mod Rehab Projects
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)
Conversion Plan submission and conditional approval
Closing of financing and HAP Contract execution consistent with conditional approval
2.8.1 Initial Submission of Interest to HUD
Prior to submitting a Conversion 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;
Project Owner’s name;
Project Owner’s contact information;
The Mod Rehab Contract number(s);
Mod Rehab Contract expiration date
Total number of units covered under the Mod Rehab Contract(s), by bedroom size;
Property Type (Mod Rehab or Mod Rehab SRO) and
Conversion Type (PBRA or PBV)
HUD has developed an electronic form submission for Project Owners to make the initial
submission. To access the electronic submission template, Project Owners must request access to
the RAD Resource Desk at www.radresource.net where users will be prompted to provide the
information listed above.
HUD will provide the Project Owner a confirmation of successful submission. HUD will use the
initial submission in order to:
1. Assign a Transaction Manager, who will make contact to discuss the conversion process
and the Project Owner’s goals for the Project; and
2. For PBV conversion, initiate the process to identify a PHA willing to administer the new
PBV contract (usually this is the current PHA administering the Mod Rehab contract).
There is no fee associated with the initial submission, and there is no cap on the number of Mod
Rehab Projects for which a Project Owner may make a submission. HUD will take no adverse
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Section II: Mod Rehab Projects
action against an owner who makes an initial submission, but does not later submit a Conversion
Plan.
2.8.2 PHA Administration of the PBV Contract
1. 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 HUD finds the PHA to be unfit
for this role, the PHA is uninterested in administering the contract, or there is a strong
business justification for selecting an alternative PHA. In such cases, HUD will make
a reasonable effort to find a PHA, in consultation with the Project Owner, with
operational jurisdiction willing to enter into a PBV contract with the Project 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 Conversion Plan 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
Project Owner. If no PHA consents to enter into the PBV contract, the Project cannot convert
to PBV, and the Project Owner may consider conversion to PBRA instead. Applicants must
wait until a PBV HAP Contract Administrator has been identified before submitting their
Conversion Plan, as the PHA who will act in this capacity must be identified in that plan.
2. 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 include:
1. Pre-Selection Inspection. The PHA must ensure that the units substantially meet
HQS, as defined in the PHA’s Section 8 administrative plan, prior to submission of
the Conversion Plan.
2. Initial contract rent setting. The PHA will determine the initial contract rents
pursuant to Section 2.5.G.
3. Number of Vouchers. The PHA will request vouchers based on the number of units
on the Mod Rehab contract that are eligible for TPVs at the expiration or termination
of the Mod Rehab contract under PIH’s HCV funding Appropriations Act notices (or
successor PIH notices regarding TPV allocations) .
4. HQS inspections. Prior to execution of the HAP Contract, the PHA must inspect the
Converting Project proposed for conversion to ensure that the units fully comply with
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Section II: Mod Rehab Projects
HQS, unless the PHA is using HOTMA non-life threatening and alternative
inspection provisions.127
2.8.3 Resident Notification and Consultation
Resident Notification – All conversions.
For all conversions, a Project Owner is required to notify residents in writing of its intent to
participate in the Demonstration.128 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. Include a description of any proposed rehabilitation or construction at the property;
5. State the Project 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
6. Supply information on the method to submit comments to the Project Owner and
provide for a 30-day comment period.
The Project 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 meetings 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. The Project Owner must hold an
additional meeting when there has been a material change that was not already discussed in a
previous meeting.
When providing resident notification and meetings, a Project 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
128
This notification letter does not replace or obviate any other applicable notification letters, such as those that may
be required under the URA. Sample resident notification letters are available at www.hud.gov/rad.
128
This notification letter does not replace or obviate any other applicable notification letters, such as those that may
be required under the URA. Sample resident notification letters are available at www.hud.gov/rad.
H-2019-09 PIH-2019-23 (HA), Rental Assistance Demonstration REV-4 – Final Implementation 180
Section II: Mod Rehab Projects
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 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, a Project 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, a Project 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 Project Owner must submit a copy of all comments received with their Conversion Plan,
along with a description of how the residents’ comments will be addressed in the conversion.
HUD will consider all resident comments and the Project Owner’s plan to address the
comments before approving the Conversion Plan. For prospective conversions, if more than
50 percent of written resident comments disapprove of the conversion of assistance, HUD
will contact the Project Owner to discuss options for proceeding with the conversion request
or may decline the request.
Upon conditional approval of the Conversion Plan, the Project Owner must notify each
affected family that the project has been approved for conversion.
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
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Section II: Mod Rehab Projects
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
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.
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 Mod Rehab Contracts (including SRO properties), the owner must provide
written notice of the impending Mod Rehab Contract expiration to residents assisted under
the Mod Rehab Contract. An owner requesting conversion under this Section of the Notice
must comply with this requirement. However, conversion under this Notice will adequately
protect residents from displacement and from an increase in the resident portion of the rent.
Consequently, conversion may be processed and completed during the one-year notification
period. 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. If the owner subsequently
decides not to pursue a RAD conversion, they are still subject to compliance with 8(c)(8)(A).
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.
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Section II: Mod Rehab Projects
2.8.4 Conversion Plan, RAD Approval, and Closing
Conversion Plan. The Owner must submit to HUD through the RAD Resource Desk a
complete Conversion Plan that satisfies all HUD underwriting standards and program
requirements. (See Attachment 2.A for Conversion Plan Requirements). HUD will have 60
calendar days from the date of submission of the Conversion Plan to conditionally approve or
reject the plan, or request additional information. HUD’s decisions regarding the acceptance
of the Conversion Plan will be made in HUD’s sole discretion. If HUD determines that a
Conversion Plan is not feasible or that the requirements of the Conversion 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 Conversion Plan is disapproved, HUD’s letter of disapproval will discuss
changes, if any, that would result in an acceptable Conversion Plan.
Conversion Approval. An owner will be notified of HUD’s acceptance of the Conversion
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 Conversion Plan.129 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 conditional approval letter is issued, HUD expects that the RAD conversion will
close in a timely manner. The conditional approval letter will allow 90 calendar days (from
the date the conditional approval letter is issued to the owner) in which to close the RAD
conversion transaction, unless extended by HUD. 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 conditional approval.
Closing. Conversion under RAD, and 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 and routine processing conditions acceptable to
HUD. In transactions with outside financing, a successful closing will also include evidence
that financing sources have closed and will provide the contemplated funding. If the project
129
“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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Section II: Mod Rehab Projects
is being financed with an FHA-insured loan, the closing requirements listed under the MAP
Guide will apply.
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.
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks for
Mod Rehab Conversions
A Conversion Plan will not be reviewed until all required documentation is submitted
electronically to the RAD Resource Desk at www.radresource.net. HUD will complete an initial
review for document completeness within five business days of submission and will notify the
Project Owner of deficiencies. Once HUD has determined that all required documents appear to
have been received, HUD will review the submission.
HUD’s purpose in reviewing Conversion Plan is to ensure the long-term physical and financial
viability of the Covered Project. If a Conversion 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 Conversion Plan if the information provided is not
complete, accurate, or in compliance with the submission requirements listed below. HUD will
not accept the Conversion Plan if the Covered Project does not meet environmental review
requirements, as described below.
Below are all the required components of a complete Conversion Plan and the requirements of
each component.130 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. Owners
must upload their Conversion Plan as outlined below, following submission of the FHA insured
loan application for Firm Commitment.
HUD reserves the right to streamline any or all of these requirements for classes of project, e.g.,
no debt-transactions or small projects.
Conversion Overview. A narrative summary of the Covered Project and the Project Owner’s
conversion goals. Include details such as a description of the physical Project, the number of
proposed units of each bedroom type, project history, identification of immediate capital
needs of the Project, identification of other properties to be held within the same ownership
entity, anticipated financing that will be obtained to meet the capital needs, anticipated
relocation, and circumstances such as new construction, Transfer of Assistance, scattered
site, and reconfiguration of units.
130
Additional guidance in preparing the Financing Plan is available in The Mod Rehab Processing Guide located at
http://www.radresource.net/2c_library.cfm.
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
HQS or REAC Inspections. Submit the project’s most recent Housing Quality Standards
(HQS) or Real Estate Assessment Center (REAC) score as evidence that the project meets
this minimum threshold requirement.
Mod Rehab Contract. Submit a copy of the fully executed original and current Mod Rehab
Contract(s), including all exhibits.
Statement of Compliance with Fair Housing and Civil Rights. The Project Owner must
submit a written statement certifying that it will comply with the requirements identified in
section 2.3.1.B of this Notice.
Type of conversion. Identify whether the Covered Project will convert to PBV or PBRA
assistance. For PBV conversions, identify the PHA that will administer the PBV HAP
Contract.
Choice- Mobility Letter of Agreement. 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.
Resident Notification. The Project Owner must provide proof of written notification
informing residents of the intent to participate in RAD. Include 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 Project
Owner must also provide a description of how the residents’ comments will be addressed in
their plan for conversion.
Capital Needs Assessment (CNA). A CNA is required in order to identify the short-term
and long-term capital needs of the property, which will factor into the Scope of Work and
both the Initial and Annual Deposits to the Replacement Reserve. See Paragraph 2.4.A. for
additional information on CNA requirements.
Initial Contract Rent Setting.
1. For PBV conversions, submit evidence that the Project Owner’s proposed rents are in
accordance with the PHA’s rent setting. See Section 2.5.F. for additional information
on Initial Contract Rent Setting for PBV.
2. For PBRA conversions, submit a Rent Comparability Study, including the Owner’s
RCS Cover Letter. The rents cannot exceed the limits set forth in Section 2.6.C.
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
Scope of Work. The Conversion Plan must include a Scope of Work that accompanies the
CNA. The Scope of Work must:
1. Identify and address all repairs identified in the CNA as critical or immediate,
(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 proposed Work and the conclusions and
recommendations of the CNA provider; additional scope items not identified in the
CNA; and the Project Owner’s choices for replacement components.
2. Identify replacement quantities and costs. Rehabilitation cost 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 and corresponding remediation activities
known at that time, and a summary of accessibility features that are required pursuant
to applicable accessibility standards and other accessibility requirements. Other
accessibility requirements include, but are not limited to, physical features that need
to be provided as reasonable accommodations for qualified persons with disabilities.
4. Include a reasonable timeline for completion of all rehabilitation items acceptable to
HUD, from the date of Conversion Closing and any financing, depending on the
scope of rehabilitation needed.
For Conversions using FHA financing or equity sources of financing. submit a copy of the
Scope of Work included with the FHA Application for Firm Commitment, or submitted to
the lender, equity provider (including LIHTC, historic tax credit or Opportunity Zone equity
providers), LIHTC allocating agency or comparable funding source.
Environmental Review. HUD cannot approve an applicant’s Conversion Plan 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.
A RAD transaction will either be reviewed under 24 CFR Part 50 (“Part 50 Reviews”) or 24
CFR Part 58 (“Part 58 Reviews”). Part 50 applies when HUD conducts the environmental
review, and Part 58 applies when an RE conducts the environmental review. The following
table shows which review protocol a transaction will follow, along with who will conduct the
review:
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
Description Type of Environmental Review Reviewer
PBRA Non-FHA Part 50 RAD Transaction Manager
PBRA FHA Non-Risk Part 50 FHA Production
Share131
PBRA FHA Risk-Share Part 50 Transaction Manager
PBV FHA Non-Risk Share Part 50 FHA Production
PBV Non-FHA Part 58 Responsible Entity
PBV FHA Risk-Share Part 58 State Housing Finance
Agency or Responsible
Entity, as applicable132
Under limited circumstances, per 24 CFR 58.11(c), an Awardee with a non-FHA PBV
transaction may request HUD to undertake the environmental review under Part 50 if a
suitable RE cannot be found or if the local government was not a direct recipient of the funds
and refuses to accept responsibility or when HUD determines the local government does not
have capacity to act as an RE.133 This request must be made in writing and submitted to
HUD no later than at the time of the Conversion Plan submission.
For multi-phase developments, the environmental documents submitted with the Conversion
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.
Requests to transfer assistance from the Converting Project to a new location are subject to
environmental review.
For transactions receiving funding from other HUD programs (i.e. HOME, CDBG, non-RAD
PBV), HUD encourages all parties to complete one review for all programs, even if these
programs’ environmental reviews are conducted under a different review protocol (Part 50,
Part 58). In cases where two Part 58 programs are combined, HUD encourages applicants to
work with the Responsible Entity to see if environmental reviews can be combined.
However, this is solely the Responsible Entity’s determination. In cases where a Part 50
131
Section 542(c) of the Housing and Community Development Act of 1992 enables HUD and State and local
housing finance agencies (HFAs) to provide new risk-sharing arrangements to help those agencies provide more
insurance and credit for multifamily loans known as the FHA Risk Sharing Program.
132
Housing Finance Agencies can act as the Responsible Entity for Housing’s Risk Share Programs if the HFA is a
regular part of the state government or if the HFA is a state instrumentality that has been approved by the governor.
If the HFA does not meet either criteria, it must request another department of the state to act as Responsible Entity.
An instrumentality of a city or county government cannot act as a Responsible Entity for the Risk Share Program.
Please contact HUD if you have any questions about whether an HFA can act as the Responsible Entity.
133
These circumstances are considered on a case-by-case basis only. Please work with your Transaction Manager to
determine suitability.
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
program and a Part 58 program are combined, HUD may determine that it will perform one
Part 50 environmental review for both programs under 24 CFR 58.11 if performing an
additional Part 58 environmental review is not feasible in the time allotted. HUD must ensure
that the Part 50 review considers the full scope of all activities and funding associated with
all programs. When one review is used for both programs, the Approving Officials for both
programs must certify the 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:134
1. For PBRA conversions (or where HUD has determined to conduct the PBV
environmental review under Part 50) without FHA insurance and without any
rehabilitation, construction, or demolition,135 HUD conducted a tiered review of
program-wide and site-specific compliance. HUD has made program-wide
compliance determinations for most of the applicable environmental laws and
authorities, and will complete a site-specific compliance review of the following:
A. Coastal protection pursuant to the Coastal Barrier Resources Act, as amended by
the Coastal Barrier Improvement Act of 1990 (16 U.S.C. 3501);
B. Flood insurance and floodplain management pursuant to the Flood Disaster
Protection Act of 1973, the National Flood Insurance Reform Act of 1994 (42
U.S.C. 4001-4128 and 42 U.S.C. 5154a), Executive Order 11988, particularly
section 2(a), and 24 C.F.R. Part 55;
C. Contamination pursuant to 24 C.F.R. 50.3(i) (HUD Standard).
Additionally, while Historic Preservation (National Historic Preservation Act of
1966, particularly sections 106 & 110; 36 CFR Part 800) is not included in the tiered
review, for conversions that entail no physical activities or only activities that are
limited to maintenance as defined in HUD Notice CPD-16-02, HUD has no further
obligations under Section 106. HUD is not required to contact SHPO, THPO, and/or
other interested parties or the public.136
134
The MAP Guide is available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
Additional guidance on environmental review requirements is available on the HUD Environmental Review
website, at https://www.hudexchange.info/environmental-review/.
135
This is further defined as those transactions that do not anticipate any reasonably foreseeable repairs or other
physical activities beyond maintenance, as defined in HUD Notice CPD 2016-02.
136
This Determination is detailed in the “Determination of ‘No Potential to Cause Effects’ under Section 106 of the
National Historic Preservation Act for Rental Assistance Demonstration (RAD) Projects Limited to Maintenance
Activities and Carried Out Under 24 CFR Part 50. https://www.hudexchange.info/resource/3865/no-potential-to-
cause-effects-to-historic-properties-memos/
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
Owners will be required to submit documentation to facilitate HUD’s site-specific
review.
For Environmental Reviews under 24 CFR Part 58, PHAs and/or proposed
Owners should reach out to the responsible entity.
2. For all non-FHA PBRA conversions (or where HUD has determined to conduct the
PBV environmental review under Part 50) that do not meet the requirements under
paragraph 1 above, the owner or vendor will follow the guidelines in Chapter 9 of the
MAP guide. Owners or vendors will upload all applicable documentation directly into
HEROS at the time of Conversion Plan submission. The following exceptions to the
MAP Guide apply:
In lieu of a Phase I Environmental Site Assessment (ESA) in accordance
with ASTM E 1527-13 (or the most recent edition) 137, except for
conversions involving substantial rehabilitation or new construction
activities, Awardees may submit a more limited report on potential
sources of contamination. Where a Phase I ESA is not required (i.e.,
projects without any associated substantial rehabilitation138 or new
construction), the Awardees can submit 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 ESA in accordance with ASTM E 1527-13 (or the most
recent edition) must be provided.
137
The Transaction Screen does not meet the standard for “All Appropriate Inquiries” for CERCLA liability
protection, as noted in ASTM E 1528-14 Section 4.2.1.
138
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: Conversion Plan Requirements and Feasibility Benchmarks
Awardees may submit a Phase I ESA that is up to 5 years old upon
submission; however, it must be updated by a Transaction Screen that is
up to 1 year old upon submission.
3. For all 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 radon testing for
all projects and mitigation of any structures with elevated levels of radon (4 pCi/L or
above).
When HUD conducts the environmental review under Part 50, PHAs (or their vendors) must
submit environmental reports and documentation139 for HUD review into the HUD
Environmental Review Online System (HEROS), where HUD will complete its review.
HUD staff will review the submissions and may require additional information in order to
complete their review. 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 RAD approval will include any conditions required to carry out any and all
mitigation measures as may result from the environmental review. Any conditions or
mitigation that cannot be satisfied before Closing will survive Closing.
When a Responsible Entity (RE) completes an environmental review under Part 58, the
Conversion 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.140 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 (RROF), to their local PIH field
staff.141 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
139
PHAs and providers should take care to respond to all applicable laws and authorities and MAP-specific
requirements when providing documentation for environmental review. For all maps, please clearly indicate where
the project site is located. Information about HEROS and how to register can be found at
https://www.hudexchange.info/programs/environmental-review/housing/#heros
140
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/.
141
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: Conversion Plan Requirements and Feasibility Benchmarks
must submit proof of the completed Form 7015.16 (either a copy of the paper form or
a screenshot of the completed screen in HEROS) to HUD; or
If form HUD-7015.15 is not required because the project converts to Exempt under
24 CFR § 58.34(a)(12), the PHA must submit the RE’s finding of exempt activity
with their RAD Conversion 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(a)(12) is sufficient.
Accessibility and Relocation Plan Checklist. All Project Owners shall complete and submit
the Accessibility and Relocation Plan Checklist provided by HUD on the RAD Resource
Desk. The checklist shall include a certification that anticipated relocation activities comply
with all applicable HUD requirements, including the URA as well as applicable accessibility
standards, including, but not limited to those under Section 504 of the Rehabilitation Act of
1973 and its implementing regulations (24 CFR §8). The cost of accessibility improvements
and relocation must be fully funded in the Development Budget. Project Owners are
encouraged to use HUD’s guidance on relocation planning for persons with disabilities in
HUD Handbook 1378.0, Exhibit 3-1 and the RAD Fair Housing, Civil Rights, and
Relocation Notice.
Proposed Financing
a. For all conversions using financing, the following must be addressed:
1. Provide a brief discussion of conditions/milestones to be satisfied prior to
closing including any known impediments to closing within the timeframe
required under the Notice;
2. Estimated closing date(s) for all proposed financing;
3. For each proposed loan, equity contribution, or grant, the Conversion Plan
must include a recent lender, investor or grant commitment letter, dated no
more than 60 days prior to Conversion Plan submission, with key terms
identified (including amount, repayment terms, interest rate, amortization,
maturity, prepayment restrictions, and pay-in schedule) from all financing
provider(s);
b. For conversions not using FHA financing or equity sources, the following
requirements must be addressed in addition to the requirements set forth in
Attachment 2A, Section M.a. 1-3 above:
1. Permanent debt financing with monthly payment amounts not conditioned
on the availability of cash flow (i.e., “hard” debt) on Covered Projects must:
8. Be at a fixed rate of interest, for a fixed term, fully amortized over no
more than 40 years;
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
9. 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
10. Not have a debt service coverage less than the higher of 1.11 or lender
requirements.
2. All subordinate (or secondary) financing must be disclosed and then
approved by the first-mortgage lender;
3. The terms for all seller take-back financing must also be disclosed;
4. If project revenue or existing reserves will be a source of funding, submit
evidence of the current account balances.
Development Budget (Sources and Uses of Funds). All owners must submit a
Development Budget.
c. For Conversions using FHA financing or equity sources of financing, submit a copy
of the Development Budget included with the FHA Application for Firm
Commitment, or submitted to the lender, equity provider (including LIHTC, historic
tax credit or Opportunity Zone equity providers), LIHTC allocating agency or
comparable funding source. The Project Owner must submit the FHA Application
for Firm Commitment review before the RAD conversion is submitted to the Office
of Recapitalization. Include a Subsidy Layering Review (SLR) if one has been
performed by another agency. If no SLR is provided, HUD will complete an SLR
whenever multiple federal sources are proposed.
d. For all other Conversions with new financing:
1. Include a reasonable, balanced, and comprehensive presentation of both
construction period and permanent sources and uses of funds.
2. Identify existing loans or debt that will be paid off at the closing, if applicable.
3. Include a construction contingency of 10 percent (HUD may require a higher
contingency on a case-by-case basis) if the Project Owner plans to obtain new
financing simultaneous with the Conversion.
4. Demonstrate that any Identity of Interest (IOI) loans or advances will be
converted to unsecured Surplus Cash Notes (Project’s cash remaining, after debt
service, project operational costs and other permitted payments) unless otherwise
approved by HUD.
5. If applicable, identify the initial operating deficit during the construction period
and how that deficit will be funded, such as an operating deficit escrow or similar
fund.
6. 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.
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
Proposed Development Team. The Project Owner must identify the proposed legal entity
that will own the Covered Project following conversion, the proposed management agent
following conversion, and the “principals” of both entities. In addition, the Project Owner
shall provide the following:
1. For all conversions with a proposed change in ownership entity, the new Project
Owner must provide evidence of successful experience owning and operating
HUD or other multifamily housing properties. New Project Owners may be
required to demonstrate that the criteria specified in HUD Handbook 4350.1,
Chapter 13, Change in Ownership: Transfer of Physical Assets have been met in
part or in whole.
2. For PBRA conversions with a proposed change in ownership entity or a material
proposed change in ownership of the existing ownership entity, the new Project
Owner must submit evidence that all new principals have a Previous Participation
Certification in the Active Partners Performance System (APPS) (formerly
referred to as Form HUD-2530) and are not be debarred, suspended, or subject to
a Limited Denial of Participation.
3. For all conversions with a proposed change in management agent the new agent
must provide evidence of successful experience managing and operating HUD or
other multifamily housing properties.
4. For all conversions in which Work is proposed, the Project Owner must submit the
identity of the general contractor or construction manager or a statement that the
Project Owner will be managing construction directly, together with evidence of
the general contractor’s, construction manager’s or Project Owner’s recent and
successful experience with similar rehabilitation or construction projects.
Operating Pro Forma. The Operating Pro-Forma must:
1. For all FHA transactions or Conversions using equity sources of financing:
a. Provide a copy of the Operating Pro Forma that was submitted with the FHA
Application for Firm Commitment or submitted to the lender, equity provider
(including LIHTC, historic tax credit, or Opportunity Zone equity providers),
LIHTC allocating agency, or comparable funding source.
2. For all other Conversions:
a. Provide a 20-year Operating Pro Forma in an owner-provided template.
b. Include columns capturing the average amount for the past three years for all
line items listed in the Pro Forma. Provide explanations and/or supporting
documentation for any major deviations of the historical average from the
year 1 data entered on the Pro Forma.
c. 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
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
for those estimates. The discussion must explain to what extent anticipated
savings in utility costs have been included in the pro forma operating
expenses.
d. Ensure the Pro Forma complies with at least the following feasibility
benchmarks unless otherwise approved by HUD:
Revenue:
i. Rents shall not exceed the amounts permitted under program rules;
ii. All other sources of income 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);
iii. Vacancy loss shall be no less than the greater of the average over
the past three years or 3 percent;
iv. Allowance for bad debt should be not less than the greater of the
average over the past three years or 2 percent;
Expenses:
i. All other operating expenses shall be no less than 85 percent of the
average for the last three years;
ii. The ADRR should be equal to that amount which, if deposited
annually, will be sufficient to fund all capital needs, as identified 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 Owner should use reasonable
estimates for 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 (IDRR) if risks to the Covered Project can be adequately
mitigated. The ADRR must be sufficient to maintain a minimum
balance at the end of each year during the initial 20-year HAP
Contract term in accordance with the HUD MAP Guide Appendix
5g Section VII.C.3D, Minimum Balances; and
iii. 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.
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Attachment 2A: Conversion Plan Requirements and Feasibility Benchmarks
Market Study. A market study or net demand analysis may be required if the project is
currently experiencing a high vacancy rate or if the Project Owner is requesting a
reconfiguration of units. The Project Owner should consult with the Transaction Manager to
determine if a market study is necessary before procuring one.
Certification of Compliance with Site and Neighborhood Standards. The Project Owner
(for PBRA) or the PHA (for PBV) shall evaluate and include a certification that the site
complies with applicable Site Selection and Neighborhood Standards (see Section 2.4.H).
Affirmative Fair Housing Marketing Plan and Tenant Selection Plan. For PBRA
conversions, evidence that a completed AFHMP (Form 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 preferences, the Project
Owner must submit its Tenant Selection Plan along with the AFHMP (see HUD Handbook
4350.3, page 4-4) for review. Please note that in accordance with Notice H 2013-21, if a
Project Owner plans to adopt any preferences that are not authorized in 24 CFR 5.655(c), it
must obtain HUD approval. The AFHMP and any owner-adopted preferences may not
conflict with any special condition arising from the RAD conversion or any provision in a
remedial order or agreement. 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.
Transfer of Assistance. For all conversions involving a transfer of assistance to a new site,
the PHA must have secured HUD approval of the site (Covered Project). See Section 2.4.J.
Coordination with CoC. SRO projects converting under RAD must provide a certification
with their Conversion Plan that the local CoC has been consulted with regards to the RAD
conversion and that it will participate in the CoC’s Homeless Management Information
System (HMIS) and the annual Housing Inventory Count (HIC). To the extent that project
plans entail a reconfiguration of units or include a transfer of assistance, owners must also
secure a support letter from the CoC.
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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 Last date of Submission
Except with HUD approval, any request under this Section must be submitted by September 30,
2019, and the conversion must be completed no later than November 30, 2019.
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.
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 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.
Short-term extensions have been 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
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Section III: Rent Supplement and Rental Assistance Payment Projects
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, subject
still to the final date of conversion in Section 3.2, 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.
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,
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Section III: Rent Supplement and Rental Assistance Payment Projects
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.
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, the site and neighborhood standards in Appendix III of this Notice, and applicable
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Section III: Rent Supplement and Rental Assistance Payment Projects
standing and subsequent Office of Housing guidance, including handbooks, shall apply.
Retroactive conversions are not permitted under PBRA.
Relocation and Right to Return. Any person who is legally on the lease or otherwise in
lawful occupancy at the Converting Project at or after the time of submission of the
Conversion Plan has a right to remain in or, in the event that rehabilitation will result in the
relocation of residents, a right to return to an assisted unit at the Covered Project. Any
relocation as a direct result of acquisition, demolition, or rehabilitation is subject to
requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies
Act of 1970 (URA) which are found at 49 CFR part 24. Proper notices including the General
Information Notice (GIN), when applicable, must be sent in accordance with URA
regulations and other applicable relocation regulations. Additionally, relocation and one-for-
one replacement requirements under section 104(d) of the Housing and Community
Development Act of 1974 may apply when CDBG or HOME funds are used in connection
with a RAD conversion. Section 104(d) requirements are found at 24 CFR part 42, subpart C,
and program-specific relocation requirements for CDBG and HOME projects are found at 24
CFR 570.606 and 24 CFR 92.353, respectively. The applicability of URA or section 104(d)
requirements to a RAD conversion is fact-specific and must be determined in accordance
with the applicable URA and section 104(d) regulations. 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 Project Owner must alter the project plans in order to
house the resident in the Covered Project. If a resident agrees to the plans which would
preclude the resident’s return, the Project Owner must ensure that the resident’s decision is
fully informed, voluntary, and well documented. To be fully informed, at a minimum the
resident must be notified in writing of a) his or her right to return; b) his or her right to object
to plans which would preclude the resident from returning; c) the Project Owner’s obligation
to accommodate the resident’s right to return; and d) a description of the short and long-term
implications of both the right to return arrangements (e.g., temporary relocation) and the
resident’s options if the resident agrees to such plans. The resident must be provided
counseling regarding the resident’s rights and options. To be voluntary, a resident must be
informed of their right to return, potential for relocation, and temporary and permanent
housing options 30 days before making a decision. In addition residents must be provided
notice of relocation at least 90 days before the relocation. The Project Owner cannot employ
any tactics to pressure the resident into relinquishing his or her right to return or accepting
permanent relocation assistance and payments. To be well documented, evidence of a
resident’s decision must be retained by the Project Owner. At a minimum such evidence
must include copies of notices informing the resident of their options, records of any
counseling or assistance provided, and the resident’s informed, written consent, including an
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Section III: Rent Supplement and Rental Assistance Payment Projects
acknowledgement that acceptance of such assistance terminates the resident’s right to return
to the Covered Project. If the resident agrees to the Project Owner’s plans, the permanent
relocation is considered voluntary, but must include, at a minimum, any relocation assistance
and payments required under the URA and Section 104(d), as applicable. The Project Owner
may not propose or request that residents waive their rights or entitlements to relocation
assistance under the URA or Section 104(d).
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.
3.4.1 Eligible Owners
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.
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;
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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.
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:
C. Voluntary compliance agreement (VCA) signed by all the parties;
D. HUD-approved conciliation agreement signed by all the parties;
E. Conciliation agreement signed by all the parties and approved by the state
governmental or local administrative agency with jurisdiction over the matter;
F. Consent order or consent decree; or
G. 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 documents., to the prospective owner. The extent of the owner’s responsibilities,
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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 VCA, conciliation
agreement, consent order or consent decree, or final judicial ruling or administrative ruling or
decision, etc. If HUD is a party to the such a document 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
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
project must have previously received Rent Supp or RAP assistance that expired or
terminated within two years of the request. 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.
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
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not be executed until and unless the converting units fully meet HQS, unless the PHA
is using HOTMA non-life threatening and alternative inspection provisions.142.
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.
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.
Eligible Units for PBV Conversion.143 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 that are eligible for TPVs at the expiration or
termination of the contract under PIH’s HCV funding Appropriations Act notices (or
successor PIH notices regarding TPV allocations) 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.144
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
142
See Notice PIH-2017-20
143
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.
144
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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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.
Conversions of assistance under the Second Component may not be the basis of re-
screening or termination of assistance or eviction of any tenant family in a property
participating in the demonstration and such a family shall not be considered a new
admission for any purpose, including compliance with income targeting. Other units
occupied by such residents 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 Notice PIH 2001-41, Section 8 Tenant Based Assistance (Enhanced and
Regular Housing Choice Vouchers) for Housing Conversion Actions – Policy and
Processing Guidance, and if 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 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;145
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;
145
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.
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Prepayment of a mortgage for a state-assisted project that is eligible for
preservation assistance under LIHPRHA or ELIHPA146; 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.
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. 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 Notice PIH 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.
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
146
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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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, and fair housing requirements.
The modified or alternative requirements that pertain solely to PBV conversions under the
Demonstration are described below.
Length of Contract. Section 8(o)(13)(F) of the Act provides, in part, that the HAP Contract
may have an initial term of up to 20 years. In addition, 24 CFR § 983.205(a) provides the
PHA with discretion to set the contract term, for a minimum period of one year and a
maximum period of twenty years. 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.
PBV Percentage Limitation. Per the RAD statute, Section 8(o)(13)(B) of the Act (and, by
extension, 24 CFR § 983.6) does not apply and covered projects do not count against the
percentage limitation applicable to the PBV program. 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.
Cap on the Number of PBV Units in Each Project. There is no cap on the number of units
that may receive RAD PBV assistance in each project. Under the HOTMA Implementation
Notice, certain formerly assisted properties are excepted from the project cap. For any
Covered Projects not covered under the HOTMA Implementation Notice, HUD is waiving
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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).
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.
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.
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.
No Screening of Residents 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.147
Post-conversion, the tenure of all residents of the Covered Project is protected pursuant to
PBV requirements regarding continued occupancy. 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 income eligibility and income targeting of tenants at initial occupancy,
will not apply for current households. Once the grandfathered household moves out, the unit
must be leased to an eligible family. Income eligibility requirements associated with new
sources of financing, such as Low-Income Housing Tax Credits, do not supersede this
prohibition on rescreening, and the Project Owner may be required to exclude Section 8 units
occupied by ineligible households from being covered by the new financing’s restrictions.
Additionally, any owner-adopted preference shall not apply to any current resident.
147
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.
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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).
Re-Determined Rents. The rent to owner will be redetermined in accordance with 24 CFR
§ 983.302.
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.
Under-Occupied Units Converting to PBV. If a family is in an under-occupied unit under
24 CFR § 983.260 at the time of conversion, the family may remain in the unit until an
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appropriate-sized unit becomes available in the Covered Project.148 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 PHA. In order to allow the family to remain in the under-occupied unit
until an appropriate-sized unit becomes available in the Covered Project, 24 CFR § 983.260
is waived.149
Davis-Bacon Prevailing Wages. Execution of a PBV contract through RAD that provides
rental assistance to previously-assisted units does not trigger Davis-Bacon prevailing wage
requirements (prevailing wages, the Contract Work Hours and Safety Standards Act, and
implementing regulations, rules, and requirements). However, to the extent that construction
or rehabilitation is performed on nine or more units that were not previously rent assisted or
rent restricted and will be newly assisted as a result of the conversion transaction (including,
without limitation, through transfer of assistance), such construction or rehabilitation is
subject to Davis-Bacon prevailing wage requirements.
Transfers after conversion. After initial conversion, in general, a Project Owner may only
request a transfer of assistance to HUD after 10 years from the effective date of the initial
HAP Contract. A Project Owner may submit a transfer request sooner if it is needed as a
result of eminent domain proceedings, natural disasters, unforeseen events, or as otherwise
approved by HUD (for example, if HUD provided approval of a future transfer prior to
conversion). Absent compelling circumstances, 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 and how the transfer would affect project residents. HUD
may consider, and approve with such conditions as HUD determines appropriate, 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 to and/or investor in the Covered Project
must also approve the transfer of the assistance. Substantially all units covered by the initial
HAP Contract must remain or be replaced as a result of the transfer. Residents of the original
location at the time of the transfer request shall not experience a loss of rental assistance.
148
A household is considered to be remaining in the unit during any period of temporary relocation to permit
rehabilitation of the Covered Project.
149
As the later enacted statute, the RAD Statute, as amended by the FY 2018 Appropriations Act to prohibit
conversion under the Second Component from being the basis for re-screening, termination of assistance, or eviction
of a family in the Converting Project, overrides the last sentence of section 3(b)(3)(A) of the Act. Absent this
override, the latter provision would prohibit occupancy of an assisted unit of two or more bedrooms by a single
person who is not elderly, disabled, a displaced person, or the remaining member of a tenant family, and any such
unit occupied by such a person could not be included in the HAP Contract. Accordingly, 24 CFR § 5.655(b)(5) shall
not apply.
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PBV-assisted families living at the property upon termination of a PBV HAP Contract have a
statutory right to receive a tenant-based voucher and to certain tenancy protections.150 (A
family may voluntarily decline the tenant-based voucher and accept a PBV unit at the new
location but may not be required to do so.) Termination of a PBV contract is not cause for
issuance of additional tenant-based voucher assistance from HUD. PHAs and owners
contemplating RAD PBV transfers after conversion must take the PBV families’ right to
tenant-based voucher assistance into consideration and ensure that there will be sufficient
resources available to the PHA to both effectuate the transfer and meet the PHA’s obligation
to provide tenant-based vouchers to those families that wish to receive them.
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.151,152 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. Appendix III provides the site and neighborhood standards applicable to RAD
conversions to PBRA.
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.
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
150
See the Housing Opportunity Through Modernization Act of 2016 (HOTMA) and HUD’s implementation
notices including the "January 18, 2017 HOTMA implementation notice, 82 Fed. Reg. 5458," and the "July 14, 2017
technical correction and clarification notice, 82 Fed. Reg. 32461." Also see Notice PIH 2017-21. Pursuant to
applicable Housing Choice Voucher program requirements, upon PBV HAP Contract termination the family must
be given the option to remain in their unit with HCV assistance if the unit remains rental housing, the rent is
reasonable, and the unit meets housing quality standards.
151
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).
152
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.
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appropriations each year of such renewal.
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 Guidebook153 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. Properties that are located in
High Cost Areas as identified in Notice H 2017–06 shall have initial rents set at comparable
market rents, without regard to any Fair Market Rent (FMR) cap.
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) unless located in a High Cost Area, 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 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
153
See http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhsec8
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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.154
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.
Method of Adjusting Contract Rents. For properties located in a High Cost Area, Over the
20-year term of the HAP contract, contract rents will be adjusted using the processes
described in the HUD Section 8 Renewal Policy Guidebook under Option 1A: Mark-Up-To-
Market.
Otherwise, 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 (or 120% if approved at initial rent-
setting), 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 (or 120% as applicable), 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.
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
154
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.
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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).
No Rescreening of Residents 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.155
Post-conversion, the tenure of all residents of the Covered Project is protected pursuant to
PBRA requirements regarding continued occupancy. A household that would not be income
eligible for initial occupancy of a Section 8 unit at the time of conversion would still be
placed on a Section 8 lease and eligible for assistance under the provisions governing
continued occupancy. 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. Income eligibility requirements associated
with new sources of financing, such as Low-Income Housing Tax Credits, do not supersede
this prohibition on rescreening, and the Project Owner may be required to exclude Section 8
units occupied by ineligible households from being covered by the new financing’s
restrictions. Additionally, any owner-adopted preference shall not apply to any current
resident.
Davis-Bacon Prevailing Wages. Execution of a PBRA contract through RAD that provides
rental assistance to previously-assisted units does not trigger Davis-Bacon prevailing wage
requirements (prevailing wages, the Contract Work Hours and Safety Standards Act, and
implementing regulations, rules, and requirements). However, to the extent that construction
or rehabilitation is performed on nine or more units that were not previously rent assisted or
rent restricted and will be newly assisted as a result of the conversion transaction (including,
without limitation, through transfer of assistance), such construction or rehabilitation is
subject to Davis-Bacon prevailing wage requirements. In such cases, Davis-Bacon applies to
a PBRA conversion to the same extent it would apply if the conversion were a PBV
conversion.
155
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.
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Under-occupied Units Converting to PBRA. If at the time of conversion, an eligible family
assisted under the Rent Supp or RAP (and if applicable Section 236) 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.156 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.157
Transfers after conversion. After initial conversion, in general, a Project Owner may only
request a transfer of assistance to HUD after 10 years from the effective date of the initial
HAP Contract. A Project Owner may submit a transfer request sooner if it is needed as a
result of eminent domain proceedings, natural disasters, unforeseen events, or as otherwise
approved by HUD (for example, if HUD provided approval of a future transfer prior to
conversion). Absent compelling circumstances, 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 and how the transfer would affect project residents. HUD
may consider, and approve with such conditions as HUD determines appropriate, 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 to and/or investor in the Covered Project
must also approve the transfer of the assistance. Substantially all units covered by the initial
HAP Contract must remain or be replaced as a result of the transfer. Residents of the original
location at the time of the transfer request shall not experience a loss of rental assistance.
Subject to the availability of appropriations, PBRA-assisted families living at the property
upon termination of a PBRA HAP Contract that meet the eligibility requirements for voucher
assistance may receive tenant-based TPVs in the event the termination of the original PBRA
HAP Contract qualifies for issuance of such vouchers.
156
A household is considered to be remaining in the unit during any period of temporary relocation to permit
rehabilitation of the Covered Project.
157
As the later enacted statute, the RAD Statute, as amended by the FY 2018 Appropriations Act to prohibit
conversion under the Second Component from being the basis for re-screening, termination of assistance, or eviction
of a family in the Converting Project, overrides the last sentence of section 3(b)(3)(A) of the Act. Absent this
override, the latter provision would prohibit occupancy of an assisted unit of two or more bedrooms by a single
person who is not elderly, disabled, a displaced person, or the remaining member of a tenant family, and any such
unit occupied by such a person could not be included in the HAP Contract. Accordingly, 24 CFR § 5.655(b)(5) shall
not apply.
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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
Verification of expiration or termination of Rent Supp/RAP contract and HAP Contract
execution
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.
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 requirements158:
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,
158
A sample notification letter for both PBV and PBRA conversions can be found at http://www.hud.gov/RAD
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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
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
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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
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:
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:
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Section III: Rent Supplement and Rental Assistance Payment Projects
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
transaction, whether the transaction is an acquisition or a refinance, a
summary of the proposed conversion 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, and a
relocation plan. If rehabilitation will occur on nine or more units that were
not previously rent assisted or rent restricted and will be newly assisted as a
result of the conversion transaction, the project description must include a
certification by the Owner that Davis-Bacon wages will be paid on
rehabilitation of such units.
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Section III: Rent Supplement and Rental Assistance Payment Projects
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.
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.
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 Notice PIH 2013-27:
Voluntary Relinquishment of Enhanced or Regular Voucher in Exchange for
PBV in Multifamily Conversion Actions are followed.
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.
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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.
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.
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.
A RAD transaction will either be reviewed under 24 CFR Part 50 (“Part 50 Reviews”) or 24
CFR Part 58 (“Part 58 Reviews”). Part 50 applies when HUD conducts the environmental
review, and Part 58 applies when an RE conducts the environmental review. The following
table shows which review protocol a transaction will follow, along with who will conduct the
review:
Description Type of Environmental Review Reviewer
PBRA Non-FHA Part 50 RAD Transaction Manager
PBRA FHA Non-Risk Part 50 FHA Production
Share159
PBRA FHA Risk-Share Part 50 Transaction Manager
PBV FHA Non-Risk Share Part 50 FHA Production
PBV Non-FHA Part 58 Responsible Entity
159
Section 542(c) of the Housing and Community Development Act of 1992 enables HUD and State and local
housing finance agencies (HFAs) to provide new risk-sharing arrangements to help those agencies provide more
insurance and credit for multifamily loans known as the FHA Risk Sharing Program.
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PBV FHA Risk-Share Part 58 State Housing Finance
Agency or Responsible
Entity, as applicable160
Under limited circumstances, per 24 CFR 58.11(c), an Awardee with a non-FHA PBV
transaction may request HUD to undertake the environmental review under Part 50 if a
suitable RE cannot be found or if the local government was not a direct recipient of the funds
and refuses to accept responsibility or when HUD determines the local government does not
have capacity to act as an RE.161 This request must be made in writing and submitted to
HUD no later than at the time of the conversion plan request.
For transactions receiving funding from other HUD programs (i.e. HOME, CDBG, non-RAD
PBV), HUD encourages all parties to complete one review for all programs, even if these
programs’ environmental reviews are conducted under a different review protocol (Part 50,
Part 58). In cases where two Part 58 programs are combined, HUD encourages applicants to
work with the Responsible Entity to see if environmental reviews can be combined.
However, this is solely the Responsible Entity’s determination. In cases where a Part 50
program and a Part 58 program are combined, HUD may determine that it will perform one
Part 50 environmental review for both programs under 24 CFR 58.11 if performing an
additional Part 58 environmental review is not feasible in the time allotted. HUD must ensure
that the Part 50 review considers the full scope of all activities and funding associated with
all programs. When one review is used for both programs, the Approving Officials for both
programs must certify the 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:162
160
Housing Finance Agencies can act as the Responsible Entity for Housing’s Risk Share Programs if the HFA is a
regular part of the state government or if the HFA is a state instrumentality that has been approved by the governor.
If the HFA does not meet either criteria, it must request another department of the state to act as Responsible Entity.
An instrumentality of a city or county government cannot act as a Responsible Entity for the Risk Share Program.
Please contact HUD if you have any questions about whether an HFA can act as the Responsible Entity.
161
These circumstances are considered on a case-by-case basis only. Please work with your Transaction Manager to
determine suitability.
162
The MAP Guide is available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
Additional guidance on environmental review requirements is available on the HUD Environmental Review
website, at https://www.hudexchange.info/environmental-review/.
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1. For PBRA conversions (or where HUD has determined to conduct the PBV
environmental review under Part 50) without FHA insurance and without any
rehabilitation, construction, or demolition,163 HUD conducted a tiered review of
program-wide and site-specific compliance. HUD has made program-wide
compliance determinations for most of the applicable environmental laws and
authorities, and will complete a site-specific compliance review of the following:
A. Coastal protection pursuant to the Coastal Barrier Resources Act, as amended by
the Coastal Barrier Improvement Act of 1990 (16 U.S.C. 3501);
B. Flood insurance and floodplain management pursuant to the Flood Disaster
Protection Act of 1973, the National Flood Insurance Reform Act of 1994 (42
U.S.C. 4001-4128 and 42 U.S.C. 5154a), Executive Order 11988, particularly
section 2(a), and 24 C.F.R. Part 55;
C. Contamination pursuant to 24 C.F.R. 50.3(i) (HUD Standard).
Additionally, while Historic Preservation (National Historic Preservation Act of
1966, particularly sections 106 & 110; 36 CFR Part 800) is not included in the tiered
review, for conversions that entail no physical activities or only activities that are
limited to maintenance as defined in HUD Notice CPD-16-02, HUD has no further
obligations under Section 106. HUD is not required to contact SHPO, THPO, and/or
other interested parties or the public.164
PHAs will be required to submit documentation to facilitate HUD’s site-specific
review.
For Environmental Reviews under 24 CFR Part 58, PHAs and/or proposed Owners
should reach out to the responsible entity.
163
This is further defined as those transactions that do not anticipate any reasonably foreseeable repairs or other
physical activities beyond maintenance, as defined in HUD Notice CPD 2016-02.
164
This Determination is detailed in the “Determination of ‘No Potential to Cause Effects’ under Section 106 of the
National Historic Preservation Act for Rental Assistance Demonstration (RAD) Projects Limited to Maintenance
Activities and Carried Out Under 24 CFR Part 50. https://www.hudexchange.info/resource/3865/no-potential-to-
cause-effects-to-historic-properties-memos/
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2. For all non-FHA PBRA conversions (or where HUD has determined to conduct the
PBV environmental review under Part 50) that do not meet the requirements under
paragraph 1 above, the awardee will follow the guidelines in Chapter 9 of the MAP
guide. Awardees will upload all applicable documentation directly into HEROS at the
time of conversion plan request. The following exceptions to the MAP Guide apply:
In lieu of a Phase I Environmental Site Assessment (ESA) in accordance
with ASTM E 1527-13 (or the most recent edition) 165, except for
conversions involving substantial rehabilitation or new construction
activities, Awardees may submit a more limited report on potential
sources of contamination. Where a Phase I ESA is not required (i.e.,
projects without any associated substantial rehabilitation166 or new
construction), the Awardees can submit 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 ESA in accordance with ASTM E 1527-13 (or the most
recent edition) must be provided.
Awardees may submit a Phase I ESA that is up to 5 years old upon
submission; however, it must be updated by a Transaction Screen that is
up to 1 year old upon submission.
3. For all 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 radon testing for
165
The Transaction Screen does not meet the standard for “All Appropriate Inquiries” for CERCLA liability
protection, as noted in ASTM E 1528-14 Section 4.2.1.
166
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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all projects and mitigation of any structures with elevated levels of radon (4 pCi/L or
above).
When HUD conducts the environmental review under Part 50, PHAs (or their vendors) must
submit environmental reports and documentation167 for HUD review into the HUD
Environmental Review Online System (HEROS), where HUD will complete its review.
HUD staff will review the submissions and may require additional information in order to
complete their review. 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 or mitigation that
cannot be satisfied before Closing will survive Closing.
When a Responsible Entity (RE) completes an environmental review under Part 58, the
Conversion 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.168 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 (RROF), to their local PIH field
staff.169 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 proof of the completed Form 7015.16 (either a copy of the paper form or
a screenshot of the completed screen in HEROS) to HUD; or
If form HUD-7015.15 is not required because the project converts to Exempt under
24 CFR § 58.34(a)(12), the PHA must submit the RE’s finding of exempt activity
with their RAD Conversion 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(a)(12) is sufficient.
167
PHAs and providers should take care to respond to all applicable laws and authorities and MAP-specific
requirements when providing documentation for environmental review. For all maps, please clearly indicate where
the project site is located. Information about HEROS and how to register can be found at
https://www.hudexchange.info/programs/environmental-review/housing/#heros
168
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/.
169
Form HUD-7015.15 is available at https://www.hudexchange.info/resource/2338/hud-form-701515-request-
release-funds-certification/.
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Rent Comparability Study. In order to establish initial rents for a PBRA contract a Rent
Comparability Study will be required.
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).
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.
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3.7.2 PBV: HUD Review of Prospective Conversion Request, Selection of
PHA, and Funding and Execution of HAP Contract
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 . 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.
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, 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
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Housing Field Office will inform the transaction manager in HUD’s Office of
Recapitalization that a PHA has been identified.
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,
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 Notice PIH 2011-065 and Appendix IV.
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
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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 50.170
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.171 However, prior to the execution of the
HAP Contract, the units proposed for conversion must meet HQS (unless the PHA is using
HOTMA non-life threatening and alternative inspection provisions172), 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 unassisted project units following the requirements of Section 3.4(D),
“Eligible Units for PBRA Conversion”.
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
170
See Section 3.7.1.E. for more information on environmental review.
171
The HAP Contract and Rider can be found at www.hud.gov/rad
172
See Notice PIH-2017-20 for guidance on HOTMA non-life threatening and alternative inspection provisions.
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Section III: Rent Supplement and Rental Assistance Payment Projects
reports and analyses submitted as part of the application for prospective conversion and
ensure the environmental review meets the standards of 24 CFR Part 50.173
Certification of Davis-Bacon wages if rehabilitation is being carried out on nine or more
units that were not previously rent assisted or rent restricted and will be newly assisted as a
result of the conversion transaction.
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
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,
173
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
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 Notice PIH 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.
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:
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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 30,2006 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.
Documentation of Resident Consent. The owner is required to notify affected households
of its plans to request conversion of TPV assistance to PBV assistance.174 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
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
174
Sample Resident Notification language can be found on the RAD website.
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Section III: Rent Supplement and Rental Assistance Payment Projects
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.
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.
Environmental Review. See Section 3.7.1.E. for the Environmental Review submission
requirements applicable to PBV.
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.
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Section III: Rent Supplement and Rental Assistance Payment Projects
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 Notice PIH 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.
SECTION IV: SECTION 202 PROJECT RENTAL ASSISTANCE CONTRACT (PRAC) PROJECTS
4.1 Purpose
Section 237 of the General Provisions – Department of Housing and Urban Development in the
Consolidated Appropriations Act, 2018 (Pub. L. No. 115-141) authorized RAD conversion of
Project Rental Assistance Contracts (PRACs) under Section 202(c)(2) of the Housing Act of
1959. This Section provides RAD program instructions to owners of these Section 202 Housing
for the Elderly Capital Advance properties with PRACs. These properties are referred to as “202
PRAC Projects” unless otherwise noted.
While the Second Component of RAD does not have the broad statutory waiver authority that
the First Component does, the Second Component does provide that participation is subject to
“requirements established by the Secretary.” HUD has used this authority and standard
regulatory waiver authority to develop alternative requirements, and to waive purely regulatory
provisions where necessary in order to fulfill the purposes of the Demonstration.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
4.2 General Program Description
Under the Second Component of RAD, a 202 PRAC Project Owner may convert an eligible
PRAC to one of two forms of long-term Section 8 Housing Assistance Payment (HAP)
Contracts: project-based vouchers (PBVs) or project-based rental assistance (PBRA). The
selection is the Project Owner’s choice. At the time of conversion, Converting Projects will be
released from any outstanding obligations under the Capital Advance Agreement, the Capital
Advance Mortgage Note, the Capital Advance Program Regulatory Agreement, the Capital
Advance Program Use Agreement, and related or collateral documents associated with the
PRAC and the foregoing documents and will enter into an Elderly Housing Use Agreement,
which will be recorded as a restrictive covenant in first position on the Covered Project. The
Elderly Housing Use Agreement, described in more detail in Section 4.4.J, will restate any
PRAC obligations that survive the conversion. The Elderly Housing Use Agreement will have a
term of 20 years plus the balance of the term left on the Capital Advance Program Use
Agreement at the time of conversion. Any PRAC documents still in effect at the time of
conversion will be terminated immediately prior to execution of a new PBV or PBRA HAP
Contract and the Elderly Housing Use Agreement.
A. PBV Conversions. If the Project Owner requests to enter into a Section 8 PBV HAP
Contract, HUD will make a reasonable effort to find an eligible PHA with a Housing Choice
Voucher Program and with operational jurisdiction, that is willing to enter into and
administer the PBV HAP Contract with the Project Owner. After HUD determines that the
requirements of this Notice have been satisfied, the PHA that has agreed to administer the
PBV HAP Contract will have the resulting vouchers and budget authority added to its Annual
Contributions Contract (ACC). Contract rents will be established and adjusted according to
the terms described in this Notice. Project Owner and the PHA will execute the HAP
Contract effective at the expiration of the PRAC. The initial contract must be for a term of 20
years (i.e., the maximum allowable initial term under section 8(o)(13)(F) of the Act).
Mandatory contract extensions of the initial term are governed by section 4.5.B. of this
Notice. Unless specifically identified in this Notice, 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 notices and handbooks, shall apply.
B. PBRA Conversions. If a Project Owner requests to enter into a Section 8 PBRA HAP
Contract (subject to annual appropriations), the HAP Contract will be executed by HUD’s
Office of Housing. After HUD determines that the requirements of this Notice have been
satisfied, the Project Owner and HUD will execute the HAP Contract to finalize the
conversion. Contract rents will be established and adjusted according to the terms described
in this Notice. The initial contract must be for a period of 20 years and will be subject to
annual appropriations. At expiration, the initial contract shall be eligible for renewal under
the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRAA).
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
Mandatory contract renewals are governed by section 4.6.C. of this Notice. The Covered
Project shall be governed by 24 CFR part 880, as modified and as published in Appendix I of
this Notice, the site and neighborhood standards in Appendix III of this Notice, as well as by
applicable standing and subsequent Office of Housing guidance, including notices and
handbooks.
4.3 Eligibility
Owners of 202 PRAC Projects that meet all eligibility requirements described below may request
to convert assistance under the Second Component of RAD. HUD may, at its discretion and
subject to the availability of staffing resources, prioritize processing and approval of conversions
for projects that have immediate capital needs; funding from a 3rd party source; and/or are PBRA
conversions.
4.3.1 Eligible Owners
A. Compliance with HUD Requirements. The Project Owner must be in good standing with
HUD. If the current Project Owner is anticipated to remain in the ownership structure, the
Project Owner must not have a history of non-compliance with program and contractual
requirements, including maintaining units in a decent, safe, and sanitary condition. If a
proposed conversion is in the context of an acquisition simultaneous with the conversion,
the purchaser must provide evidence of successful experience owning and operating HUD
or other multifamily housing properties. Any change in Ownership will require Form
HUD-2530 Previous Participation approval as described in Attachment 4A.
B. Fair Housing and Civil Rights Compliance. A Project Owner must certify it will comply
with all fair housing and civil rights requirements including but not limited to those at 24
CFR § 5.105(a). Any outstanding fair housing or civil rights matters arising prior to
conversion must be resolved to HUD’s satisfaction prior to conversion, provided that all
applicable legal processes have been satisfied. If HUD determines a conversion would fail to
meet this standard, HUD will notify the Project Owner of its determination and any
necessary actions. Fair housing or civil rights matters that arise after conversion will be
addressed in accordance with applicable authorities.
Additionally, a Project 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
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
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 Project Owner
subject to the remedial provisions contained in such documents. It is the Project Owner’s
obligation to disclose such documents, etc., to the prospective Project Owner. The extent of
the Project 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 Project Owner will follow any requirements for the
modification of such VCA, conciliation agreement, consent order or consent decree, or final
judicial ruling or administrative ruling or decision. If HUD is a party to such document, the
RAD project will not close without HUD’s express approval of the transfer of obligations to
the new Project Owner.
4.3.2 Eligible Properties and Units
A. Eligible Properties and Units. A property is eligible for conversion if the property is
currently receiving assistance through a PRAC that is in its renewal term. A property
assisted by a PRAC in its initial term is also eligible for conversion but, depending on the age
of the funds HUD has obligated to the contract, may have to time the conversion based on
when funding can be transferred to support a conversion to a Section 8 contract. For a
property assisted by a PRAC in its initial term, the Project Owner should confirm with HUD
the necessary timing of its conversion. Properties that were previously assisted under a
PRAC which has been terminated due to noncompliance are ineligible to participate under
this Notice. A Project Owner may include under the subsequent Section 8 HAP Contract no
more than the number of units covered under the PRAC.
B. Physical Condition. For PBRA conversions, unless project plans address (or obviate,
through transfer of assistance) all physical deficiencies identified in the most recent REAC
Inspection report, the project must have a REAC score of 60 or above.
For PBV conversions, the Converting Project must qualify as “existing housing” in order to be
eligible for conversion. This means that the PHA must ensure that the Converting Project’s
units substantially comply with HQS, as defined in the PHA’s Section 8 administrative plan,
prior to submission of the Conversion Plan (see Section 4.7.4 for more information on the
Conversion Plan). Prior to entering into a PBV HAP Contract, the PHA must inspect the
Converting Project proposed for conversion to ensure that the units fully comply with HQS,
unless the PHA is using HOTMA non-life threatening and alternative inspection provisions.175
175
See Notice PIH-2017-20
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
4.4 General Requirements
A. Applicability of PRAC Requirements. Until conversion and the effective date of a HAP
Contract, properties continue to be subject to the requirements of the PRAC. Owners of 202
PRAC Projects are required to submit a project budget and any accompanying request for a
Budget Based Rent Increase annually for renewal of the PRAC. HUD requires that Project
Owners analyze project operating and capital needs as well as the efficacy of resident
services at each renewal and request adjustments to the Operating Expense Amount
accordingly.
B. Capital Needs Assessment (CNA). Each Converting Project is required to have a CNA and
to demonstrate that both short-term and long-term capital needs can be addressed through the
replacement reserve account (see paragraph C) and/or through financing (see paragraph D) as
appropriate. The CNA contains two major components – the narrative (the description of
each component and its age and condition) and the financial model (the 20-year schedule and
associated determination of the Initial Deposit to Replacement Reserve, or IDRR, and the
Annual Deposit to Replacement Reserve, or ADRR). The CNA must be completed or
updated within 12 months of the submission of the Conversion Plan, except with HUD
approval. Further, the CNA must be performed by a qualified, independent third-party
professional as defined in Section 5.2.B.2 of the MAP Guide. The CNA must be prepared in
accordance with the instructions at Appendix 5G of the MAP Guide although the use of a
specific format is not required unless HUD requires a specific format for 202 PRAC budget-
based rent increase requests. The CNA submitted for RAD must be consistent with any CNA
submitted to a Multifamily Regional Center as part of the demonstration of project expenses
for the most recent annual rent adjustment under the 202 PRAC, although it may include
additional discretionary items. (As such, the CNA submitted for the purposes of
demonstrating project expenses must meet the aforementioned standards.) The CNA will
identify certain improvements for physical accessibility for persons with disabilities as well
as design considerations that promote housing stability for an aging population. In further
developing the scope of work, refer to Paragraphs E, F, and G regarding Accessibility
Requirements, Design Considerations for Elderly Housing, and Healthy Housing and Energy
Efficiency, respectively.
C. Replacement Reserve. 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. The reserve must be built up to and maintained at a level
determined by HUD to be sufficient to meet projected needs as identified in the CNA 20-year
replacement schedule. The Project Owner must commit to repairing and replacing
components generally in accordance with the schedule set forth in the CNA. HUD
encourages Project Owners to evaluate the 20-year replacement needs of the property at the
time of their annual PRAC renewal, prior to submitting a Conversion Plan.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
For PBRA, 24 CFR § 880.602 applies, as amended (see Appendix I).
For PBV, replacement reserves shall be maintained in a bank account or similar
instrument, as approved by HUD, where funds will be held by the mortgagee or,
where there is no financing, by the Project Owner and may be drawn from the reserve
account and used subject to HUD guidelines.
D. Financing and Repairs. If the CNA identifies repairs as critical, immediate or required
within the first two years following conversion and the total of such repairs exceeds an
average of $5,000 per unit, if HUD determines that immediate repairs are necessary based on
REAC scores of 59 or less or referrals to the Department Enforcement Center (DEC) related
to physical conditions, or if there is outstanding noncompliance with accessibility
requirements identified by the CNA, the Project Owner must demonstrate as a condition of
closing that it has secured financing sources to address such needs and must agree to address
such needs within a prescribed period following the conversion as part of the Work.
Following conversion and the completion of any immediate repairs, HUD requires all
Projects to either utilize available capital replacement reserves to address ongoing capital
repair and replacement needs generally consistent with the CNA, or to periodically
recapitalize as lifecycle improvements become necessary.
E. Accessibility Requirements. Federal accessibility requirements apply to all conversions.
The laws that most typically apply to HUD-assisted housing undergoing rehabilitation
include Section 504 of the Rehabilitation Act of 1973 (Section 504), the Fair Housing Act,
and, in some cases, the Americans with Disabilities Act (ADA). Although the requirements
of each of these laws are somewhat different, Project Owners must comply with each law
that applies. Section 504 and the ADA apply to new construction and additions as defined in
24 CFR § 8.22, substantial alterations and other alterations as defined in 24 CFR § 8.23 and
to existing, unaltered facilities (24 CFR § 8.24), as well as any combination thereof. See also
28 CFR § 35.151(b) and 28 CFR § 36.402. Section 504 and the ADA also require structural
modifications as reasonable accommodations. The Fair Housing Act applies to the design
and construction of multifamily dwellings built for first occupancy after March 13, 1991. It
also requires that Project Owners allow for structural alterations in housing generally as
reasonable modifications when necessary for an individual with a disability to use and enjoy
a dwelling, and under these authorities, Project Owners must ensure that reasonable
modifications remain available to the resident after construction or alteration (e.g.,
accommodations are preserved through the course of the construction work or, if the resident
is moved to a different unit as a result of construction, are installed in the new unit).
When a Project’s rehabilitation meets the definition of a “substantial alteration” under 24
CFR § 8.23, the Project Owner must comply with all applicable accessibility requirements
for new construction at 24 CFR § 8.22 under HUD’s Section 504 regulations as well as the
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
ADA. 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, until five percent of the dwelling units in a project are readily
accessible to and usable by individuals with mobility impairments (see 24 CFR § 8.23).
Project Owners are encouraged to use universal design principles, visitability principles, and
active design guidelines in planning any construction. However, adherence to any of these
principles or guidelines does not replace compliance with the accessibility requirements of
Section 504, the ADA, and the Fair Housing Act.
F. Design Considerations for Elderly Housing. Quality housing is a platform for health and
wellness. Health can be promoted through both supportive services (as described below) and
through a physical living environment suitable for the needs of the anticipated residents. In
the context of housing for the elderly, enhanced livability of the physical environment
promotes housing stability and may prevent premature institutionalization in assisted living
or nursing homes. A well-situated, well-designed physical space at the unit and building level
can help seniors maintain independence and age in place longer. In addition to any required
accessibility features under Section 504 of the Rehabilitation Act of 1973, the design and
construction requirements of the Fair Housing Act, or Title II of the Americans with
Disabilities Act, the Department strongly encourages Project Owners to incorporate design
standards that address fall prevention, visitability, universal design, and electronic
communication mechanisms when developing or rehabilitating housing and community
facilities. Project Owners are expected to consider access to transportation and walkability to
the surrounding community and neighborhood services when selecting sites for a transfer of
assistance. These design elements and siting decisions all serve to enhance the livability of
housing for older adults and promote housing stability.
G. Healthy Housing and Energy Efficiency. If systems and appliances are being replaced as
part of the Work identified in the approved Conversion Plan, the Project Owner shall utilize
the most energy- and water-efficient options that are financially feasible and that are found to
be cost-effective. The use of 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, is presumed to be the minimum threshold for meeting
such requirement.176 Project Owners are strongly encouraged, for all Converting Projects, to
scope rehabilitation and ongoing replacements that utilize the components that the CNA
indicates will improve indoor air quality, prepare the property for known or anticipated
natural hazards, generate utility cost savings for residents or common areas, and/or reduce
overall environmental impact, where those components are determined to be cost-effective
and consistent with healthy housing and energy efficiency principles and best practices.
176
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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H. Existing Residual Receipts Balance. Project Owners may apply any balance in the
Converting Project’s residual receipts as a source in the development budget to support
conversion. Eligible conversion-related uses for these funds include pre-development,
development, or rehabilitation costs of the Covered Project, or establishment of the
replacement reserve or operating reserve.
I. Operating Reserve. The Project Owner shall establish and maintain a Project operating
reserve account in an interest-bearing account to be used for project purposes, consistent with
this paragraph. Withdrawals from the operating reserve do not require HUD approval.
However, surplus cash distributions are prohibited during any period when the balance in the
operating reserve is less than $250 per unit. The Project operating reserve is separate and
apart from the replacement reserve. The operating reserve must be used for the benefit of the
project, including to provide working capital, to cover unexpected operating or capital
expenses, to bridge periods of financial instability, to cover budget deficiencies arising from
time to time as a result of delinquent receivables or other contingencies, or for other similar
purposes determined by the Project Owner as beneficial to preserve the financial or physical
stability of the Project. HUD will monitor the balance in the operating reserve when
reviewing the Project Owner’s annual financial statements. An operating reserve required by
a third-party source of financing (e.g., a lender or a LIHTC-motivated equity investor) that
meets or exceeds $250 per unit satisfies the requirements of this Section and the Project
Owner is not required to maintain a distinct operating reserve for this purpose.
J. Ownership and Control. Through the term of the Converting Project’s Capital Advance
Use Agreement, HUD will require ownership or control of the Covered Project by a non-
profit entity. A non-profit entity is an organization that has tax-exempt status under Section
501(c)(3) or Section 501(c)(4) of the Internal Revenue Code of 1986 or that is a non-profit
consumer cooperative and includes a non-profit entity that is affiliated with a public agency.
Subject to HUD review, non-profit entity ownership or control requirements may be satisfied
if a non-profit entity (or entities), directly or through an entity wholly owned by the non-
profit entity (or entities) meets one or more of the following: (1) holds 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,
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
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
ownership and control arrangements approved by HUD. Note however, that prior to
conversion, the Converting Project must continue to meet the ownership requirements set
forth in the Housing Act of 1959, as amended.
K. Elderly Housing Use Agreement. A Covered Project shall have an Elderly Housing Use
Agreement. The Elderly Housing Use Agreement will:
Restrict the units covered under the HAP Contract, but not govern any other units at
the Covered Project;
Be recorded in a superior position to all other liens on the property that HUD
determines could compromise the applicability or enforceability of the Elderly
Housing Use Agreement. The Elderly Housing Use Agreement shall be recorded
prior to any mortgage or security instrument, including an FHA-insured loan or a
Risk-Share loan;
Have a term equal to the remaining term of the Capital Advance Use Agreement plus
20 years but not to exceed 60 years from the commencement of the Capital Advance
Use Agreement;
Remain in effect even in the case of abatement or termination of the HAP Contract,
although the Secretary may approve a modification or termination of the Elderly
Housing Use Agreement to facilitate a transfer of assistance or if HUD determines it
is necessary in order to address a demonstrated financial burden caused by
insufficient Federal appropriations;
Provide that, if the HAP Contract is terminated due to breach or non-compliance by
the Project Owner, for all units previously covered under the HAP Contract, new
tenants must meet the definition of “elderly family” in 24 CFR 5.403; and
1. Through the period equal to the remaining term of the Capital Advance Use
Agreement, must have incomes at or below fifty percent (50%) of the area
median income (AMI) at the time of admission and rents may not exceed
thirty percent (30%) of fifty percent (50%) of AMI for an appropriate-size unit
for the remainder of the term of the Elderly Housing Use Agreement; and
2. Thereafter and through the remainder of the Elderly Housing Use Agreement,
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 Elderly Housing Use Agreement;
Require compliance with all applicable fair housing and civil rights requirements,
including the obligation to affirmatively further fair housing; and
Prescribe potential remedies in the event of default, which remedies may include,
without limitation, civil money penalties, injunctive relief, specific performance, the
right to take possession subject to non-disturbance of subordinate lienholders, the
right to appointment of a receiver, the right to require a transfer of the Covered
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
Project with consent of mortgage lienholders, the right to transfer the HAP Contract,
and any other remedy available at law or in equity.
L. Restriction on Net Proceeds from Refinance or Sale. The proceeds from any refinance or
sale of the Covered Project, net of funds described below, that occurs during the period equal
to the remaining term of the original Capital Advance Use Agreement will be restricted to
benefit the Covered Project or residents at the Covered Project (e.g., capital improvements,
service delivery, or any uses set forth in a HUD-approved sources and uses statement other
than acquisition) or to other Affordable Housing Purposes. For purposes of this paragraph,
proceeds of a refinancing include all commercial or subsidized loan proceeds, equity
investments and grants received by or invested in the Project Owner after deduction of funds
used for repayment of commercial first mortgage debt secured by the Covered Project. For
purposes of this paragraph, proceeds of a sale include all cash or other direct or indirect
consideration paid to or on behalf of the seller of a Covered Project after deduction of funds
used for repayment of commercial first mortgage debt secured by the Covered Project. In
addition, in the context of an arms-length sale to an unrelated third party, net proceeds of a
sale shall be determined after deduction of the following:
The seller’s payment of real estate or transfer taxes and fees, recording fees, real
estate brokerage fees, and reasonable third-party transaction costs associated with the
sale;
Any unrecovered (i.e., not previously drawn) seller equity in the Covered Project.
Seller equity shall be calculated as a pro-rata portion of the original Capital Advance
Note corresponding to the term of the Capital Advance Use Agreement that has
elapsed;177 and
Paydown of any Identity of Interest (IOI) loans or advances that were used to address
the needs of the project or residents of the project.
M. 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 Conversion Plan. A Conversion Plan cannot be
approved by HUD if the Project plan does not meet environmental review requirements.
Please see Attachment 4A for a discussion of the environmental review requirements
applicable to PRAC conversions, including conversion transactions that will not result in the
alteration of the physical condition of the Project.
177
For example, if a property with an original Capital Advance Note of $10 million is sold as part of the proposed
conversion 20 years into the original 40 year Capital Advance Use Agreement term, the Project Owner would have
accrued $5 million in seller equity (20 years ÷ 40 year × $10 million) that would be unrestricted at sale. If the
property were subsequently re-sold 10 years later the maximum seller equity potentially available at that time would
be $7.5 million. However, if $3 million in seller equity had been drawn at the original conversion, the maximum
unrecovered seller equity available at the subsequent sale would be $4.5 million.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
N. Relocation and Right to Return. Any person who is legally on the lease or otherwise in
lawful occupancy at the Converting Project at or after the time of submission of the
Conversion Plan has a right to remain in or, in the event that rehabilitation will result in the
relocation of residents, a right to return to an assisted unit at the Covered Project. Any
relocation as a direct result of acquisition, demolition, or rehabilitation is subject to
requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies
Act of 1970 (URA) which are found at 49 CFR part 24. Proper notices including the General
Information Notice (GIN), when applicable, must be sent in accordance with URA
regulations and other applicable relocation regulations. Additionally, relocation and one-for-
one replacement requirements under section 104(d) of the Housing and Community
Development Act of 1974 may apply when CDBG or HOME funds are used in connection
with a RAD conversion. Section 104(d) requirements are found at 24 CFR part 42, subpart C,
and program-specific relocation requirements for CDBG and HOME projects are found at 24
CFR 570.606 and 24 CFR 92.353, respectively. The applicability of URA or section 104(d)
requirements to a RAD conversion is fact-specific and must be determined in accordance
with the applicable URA and section 104(d) regulations. 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 Project Owner must alter the Project plans in order to
house the resident in the Covered Project. If a resident agrees to the plans which would
preclude the resident’s return, the Project Owner must ensure that the resident’s decision is
fully informed, voluntary, and well documented. To be fully informed, at a minimum the
resident must be notified in writing of a) his or her right to return; b) his or her right to object
to plans which would preclude the resident from returning; c) the Project Owner’s obligation
to accommodate the resident’s right to return; and d) a description of the short and long-term
implications of both the right to return arrangements (e.g., temporary relocation) and the
resident’s options if the resident agrees to such plans. The resident must be provided
counseling regarding the resident’s rights and options. To be voluntary, a resident must be
informed of their right to return, potential for relocation, and temporary and permanent
housing options 30 days before making a decision. In addition, under the URA regulation,
residents must be provided notice of relocation at least 90 days before the relocation. The
Project Owner cannot employ any tactics to pressure the resident into relinquishing his or her
right to return or accepting permanent relocation assistance and payments. To be well
documented, evidence of a resident’s decision must be retained by the Project Owner. At a
minimum such evidence must include copies of notices informing the resident of their
options, records of any counseling or assistance provided, and the resident’s informed,
written consent, including an acknowledgement that acceptance of such assistance terminates
the resident’s right to return to the Covered Project. If the resident agrees to the Project
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
Owner’s plans, the permanent relocation is considered voluntary, but must include, at a
minimum, any relocation assistance and payments required under the URA and Section
104(d), as applicable. The Project Owner may not propose or request that residents waive
their rights or entitlements to relocation assistance under the URA or Section 104(d).
O. Site Selection and Neighborhood Standards. Where a Project Owner is planning to convert
assistance under RAD, the Project Owner must comply with all applicable site selection
requirements, including those of 24 CFR § 983.57 for PBV (except as waived in Section
4.5.E) 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).
P. Change in Unit Configuration. Project Owners may change the unit configuration in
conjunction with conversion (e.g., converting efficiency units to one-bedroom units).
However, the Project Owner must ensure that the change in bedroom distribution will not
result in the involuntary permanent displacement of any resident (see Section 4.4.M on
Relocation and Right to Return), will not result in a reduction in accessible units below the
minimum percentage, and will not, except with HUD approval, result in a reduction in the
number of assisted units by the greater of 5% or five units. The Project Owner must also
ensure that a change in unit configuration does not result in discrimination based on race,
color, national origin, religion, sex, disability, or familial status.
Q. Transfer of Assistance (TOA). In order to facilitate the financing, development, and
preservation of decent, safe, and sanitary affordable housing, there are three scenarios under
which assistance converted pursuant to RAD may be transferred from the existing Project
(for the purposes of this paragraph, transfer of assistance does not include transfers to an
adjacent site): (1) the Project Owner requests assistance to be transferred as part of the
conversion from a Converting Project to another Project; (2) post-conversion, the Project
Owner requests a partial or full transfer of assistance to another Project; or (3) as a result of a
default of the HAP Contract, HUD terminates the HAP Contract but seeks to preserve the
assistance at another Project with another Project Owner.
HUD will ascertain that assistance does not transfer to neighborhoods with highly
concentrated poverty based on the criteria formulated for transfers under section 8(bb) of the
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
Act.178 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.179 Project Owners are strongly encouraged to request HUD approval of
the proposed site prior to submission of the Conversion Plan.
For PBV transfers of assistance to a new site, the PRAC 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 HAP Contract is executed. For PBRA transfers of assistance, the HAP Contract can
be executed at the closing of the construction financing and the Project Owner may use the
Section 8 Pass-Through to provide for the continued flow of subsidy during the construction
period.180
After initial conversion, in general, a Project Owner may only request a transfer of assistance
after 10 years from the effective date of the initial HAP Contract. A Project Owner may
submit a transfer request sooner if it is needed as a result of eminent domain proceedings,
natural disasters, unforeseen events, or as otherwise approved by HUD (for example, if HUD
provided approval of a future transfer prior to conversion). HUD may consider, and approve
with such conditions as HUD determines appropriate, 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 to and/or investor in the Covered Project must also
approve the transfer of the assistance. Substantially all units covered by the initial HAP
Contract must remain or be replaced as a result of the transfer. Residents of the original
location at the time of the transfer request shall not experience a loss of rental assistance.
PBV-assisted families living at the property upon termination of a PBV HAP Contract have a
statutory right to receive a tenant-based voucher and to certain tenancy protections.181 (A
178
The analysis can be found in Section VIII B.1 of Notice 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 the 8(bb) criteria satisfy 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.
179
For example, any transfers of assistance must comply with requirements detailed in this Notice on Site and
Neighborhood Standards (see Section 4.4.O), Changes in Unit Configuration (see Section 4.4.P), and Accessibility
Requirements (see Section 4.4.E). For PBV conversions, PHAs will be responsible for this determination.
180
As fully described in Handbook 4350.1, under Section 8 Pass Through, Project 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 Project 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.
181
See the Housing Opportunity Through Modernization Act of 2016 (HOTMA) and HUD’s implementation
notices including the "January 18, 2017 HOTMA implementation notice, 82 Fed. Reg. 5458," and the "July 14, 2017
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
family may voluntarily decline the tenant-based voucher and accept a PBV unit at the new
location but may not be required to do so.) Termination of a PBV contract is not cause for
issuance of additional tenant-based voucher assistance from HUD. PHAs and owners
contemplating RAD PBV transfers after conversion must take the PBV families’ right to
tenant-based voucher assistance into consideration and ensure that there will be sufficient
resources available to the PHA to both effectuate the transfer and meet the PHA’s obligation
to provide tenant-based vouchers to those families that wish to receive them. Subject to the
availability of appropriations, PBRA-assisted families living at the property upon termination
of a PBRA HAP Contract that meet the eligibility requirements for voucher assistance may
receive tenant-based tenant protection vouchers (TPVs) in the event the termination of the
original PBRA HAP Contract qualifies for issuance of such vouchers.
In the event that a transfer of assistance is approved, the underlying Elderly Housing Use
Agreement will be transferred to the new Project and HUD will release the Elderly Housing
Use Agreement on the original site corresponding to the units transferred.
R. Davis-Bacon prevailing wages. Execution of a HAP Contract through RAD that provides
rental assistance to previously-assisted units does not trigger Davis-Bacon prevailing wage
requirements (prevailing wages, the Contract Work Hours and Safety Standards Act, and
implementing regulations, rules, and requirements). However, to the extent that construction
or rehabilitation is performed on nine or more units that were not previously rent assisted or
rent restricted and will be newly assisted as a result of the conversion transaction (including,
without limitation, through transfer of assistance), such construction or rehabilitation is
subject to Davis-Bacon prevailing wage requirements. In such cases, Davis-Bacon applies to
a PBRA conversion to the same extent it would apply if the conversion were a PBV
conversion.
S. Supportive Services for the Elderly. A Service Coordinator and/or the availability of
Supportive Services for the elderly plays a critical role supporting the physical and mental
health and wellness of residents and the delivery of cost-effective long-term community-
based housing for this population. HUD encourages Project Owners to evaluate the service
provision at the time of their annual PRAC renewal, prior to submitting a Conversion Plan.
Each project will be required to demonstrate that the needs of residents are adequately met
either through a Service Coordinator (full-time or part-time) funded through the annual
project budget or through another service coordination/service provision arrangement.
Project Owners must describe how the proposed supportive services provided by the Project
technical correction and clarification notice, 82 Fed. Reg. 32461." Also see Notice PIH 2017-21. Pursuant to
applicable Housing Choice Voucher program requirements, upon PBV HAP Contract termination the family must
be given the option to remain in their unit with HCV assistance if the unit remains rental housing, the rent is
reasonable, and the unit meets housing quality standards.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
or otherwise available to residents will meet the identified needs of the anticipated residents
as they age. Project Owners must further describe how the identified supportive services will
be provided or otherwise made available on a consistent, long-term basis to support residents.
These commitments will be incorporated into terms of the Elderly Housing Use Agreement
and/or HAP Contract at closing.
T. Provision of Services. For properties that have submitted an Initial Submission of Interest to
HUD (i.e., prior to conversion), HUD may approve service costs to be paid from Section 202
project rental assistance up to $27 per unit per month if it is necessary to provide effective
supportive services for the elderly. This adjustment to the PRAC contract shall be subject to
the availability of funding in the Housing for the Elderly account.182 Accordingly, conditioned
on the project’s successful conversion, HUD is waiving and providing an alternative
requirement to 24 § CFR 891.225, which limits the eligible service costs that can be paid
from project rental assistance to $15 per unit per month. This rent adjustment would become
effective immediately prior to the conversion (following Conversion Plan Approval and
following release of all Closing documents from escrow to permit the Closing) and would be
rescinded if the conversion does not occur. Following conversion, the Project Owner is
required to maintain provision of services in accordance with this paragraph.
U. Lead Based Paint Hazards. For properties built before 1978 and in the infrequent case that
a child under age 6 resides in one or more units:
The Lead Disclosure Rule and the Lead Safe Housing Rule (specifically, 24 CFR part
35, subparts A, B, H, and R) apply to each such unit, any common areas servicing such
units, and exterior painted surfaces associated with such units or common areas.
(These covered areas must have a risk assessment conducted and any lead-based paint
hazards identified controlled and cleared, with affected tenants getting disclosure
and/or notification of these activities, as applicable; see also the MAP Guide section
9.5.A, Lead-Based Paint.)
If occupancy rule exceptions are made to allow children under age 6 to reside (such as
in accordance with the Living Equitably: Grandparents Aiding Children and Youth
Act of 2003, P.L. 108-186), the general exemption of the property from the lead safety
rules is not available and they apply to the entire property.
V. Completion Certification. HUD may require a certification or evidence of completion of
any requirements the Project Owner is required to complete following the conversion of
assistance.
182
PRAC renewals and rent adjustments are funded from the Housing for the Elderly account. Renewal of ongoing
PRAC contracts including inflationary adjustments to core operating expenses will be prioritized over mid-cycle
rent increases that enhance services and replacement reserves for converting properties.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
4.5 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 and applicable standing and
subsequent Office of Public and Indian Housing guidance, including related notices and
handbooks shall apply, including resident choice, environmental review, and non-discrimination
and equal opportunity requirements.
The modified or alternative requirements that pertain solely to 202 PRAC Projects converting
assistance to PBV under the Demonstration are described below.
Please note that while in this Notice HUD prescribes requirements for converting 202 PRAC
Projects to PBV, the conversion of project subsidy from its current PRAC account to a PBV
contract will result in added complexity to the closing of the transaction (as compared to PRAC
conversions to PBRA) and may cause unforeseen delays.
A. Initiation of Contract. The HAP may only be effective at the expiration of the PRAC.
Further in order to provide sufficient time for HUD to transfer funds across appropriated
accounts and then to subsequently obligate new funding to a PHA’s Housing Choice
Voucher ACC, all closing conditions must be satisfied, and all transaction documents
executed and held in escrow, 90 days before the PRAC expiration.183
B. Length of Contract. Section 8(o)(13)(F) of the Act provides, in part, that the HAP Contract
may have an initial term of up to 20 years. In addition, 24 CFR § 983.205(a) provides the
PHA with discretion to set the contract term, for a minimum period of one year and a
maximum period of twenty years. By choosing to participate in RAD, the PHA and the
Project Owner agree to an initial HAP Contract term of 20 years. A PHA may enter into an
extension of the initial HAP Contract term with the Project 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.
C. Mandatory Contract Extension. Section 8(o)(13)(G) of the Act provides, in part, that the
extension of any PBV HAP Contract is at the discretion of the PHA. The regulatory
183
In addition to statutory limitations, HUD must structure the conversion in this manner in order to ensure that
there are not delays between when the PHA has subsidy obligations under the HAP contract and when funds are
obligated to the PHA’s HCV program and to ensure that the funding provided is adequate.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
provisions governing PBV HAP Contract extensions are contained in 24 CFR § 983.205(b).
By choosing to participate in RAD, the PHA agrees to offer, and the Project Owner agrees to
accept, each extension of the initial HAP Contract term during the term of the Elderly
Housing Use Agreement so that the contract could expire no earlier than the expiration date
of the Elderly Housing Use Agreement.184 As indicated in Section 4.5.A, the PBV HAP
Contract during the initial and any extended term is subject to the requirement for sufficient
annual appropriated funding. The contract extension(s) shall be for the prescribed number
and mix of units but may, upon request of the Project Owner and subject to HUD approval,
be on one or more transfer of assistance sites in lieu of the project site subject to the expiring
contract.
D. PBV Percentage Limitation. Per the RAD statute, Section 8(o)(13)(B) of the Act (and, by
extension, 24 CFR § 983.6) does not apply and Covered Projects do not count against the
percentage limitation applicable to the PBV program. 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.
E. Cap on the Number of PBV Units in Each Project. There is no cap on the number of units
that may receive RAD PBV assistance in each project because under the HOTMA
Implementation Notice, units exclusively serving elderly families are excepted from the
project cap.
F. 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.
G. 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. For purposes of RAD, the date of PBV proposal selection shall be the date on which
the Project Owner submits a Conversion Plan. With respect to site selection standards, HUD
requires compliance with the site selection standards as set forth in this Notice.
184
For example, if the Elderly Housing Use Agreement required a minimum affordability period of 39 years, the
PHA and Project Owner would enter into an initial 20-year HAP contract and, because the Elderly Housing Use
Agreement would still be in effect at the end of the 20 year term, must subsequently agree to extend the contract for
at least 19 additional years.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
H. Initial Contract Rent Setting. Consistent with the requirements of section 8(o)(13)(H) of
the 1937 Act and 24 CFR part 983, Subpart G, the initial contract rents will be the lower of:
(a) the approved PRAC rents determined by HUD;185 (b) the reasonable rent (as defined
under 24 CFR § 983.303); (c) 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 (d) the rent requested by the Project Owner.
With HUD approval, Project Owners and the PHA administering the contract may adjust
subsidy amounts across multiple Projects proposed for conversion in order to modify initial
contract rents that would be established in the HAP Contracts, as long as the subsidy
adjustments do not exceed the aggregate subsidy for all of the Projects that the Project
Owners has submitted for conversion under RAD and as long as the rents do not exceed
applicable rent limits described in 24 CFR part 983 subpart G. This use, which HUD refers to
as “bundled” rents, is permissible when multiple Project Owners in mutual agreement submit
Conversion Plans for two or more Projects. There is no limit to the number of Projects that
Project Owners may bundle. The conversion of the donor Project must close prior to or
simultaneous with the conversion of the recipient Project. For example, assume that when
Project Owners are 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 Project
Owners could bundle the two projects such that the initial contract rents for both projects will
be $550.
I. Re-Determined Rents. The Project Owner may request an increase in rent at the anniversary
date of the HAP contract by written notice to the PHA in accordance with 24 CFR
§ 983.301(b)(2). Under the PBV regulations, a Project Owner may request an adjusted rent
level below the PBV rent caps. As a condition of converting to PBV under RAD, the Project
Owner agrees to never request a rent increase in excess of the OCAF-adjusted rent.186 This
OCAF limitation is in addition to the existing PBV rent limitations in 24 CFR § 983.301(b)
more generally. All other PBV provisions governing the redetermination of rent to the
Project Owner apply.
J. Distributions. As an alternative requirement, distribution of surplus cash is prohibited unless
the Project operating reserve is funded at no less than $250 per unit and the replacement
185
PRAC rents are the “Operating Expense Amounts” listed in Part I of the PRAC, Exhibit 1, as adjusted pursuant
to rent “bundling” described in this subsection G. If PRAC rents have been temporarily increased in accordance with
an approved plan with the Multifamily Regional Center, the PRAC rents used for the purposes of setting initial
contract rents at conversion will be adjusted downward.
186
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 in order to calculate the contract rent for the project in the
following fiscal year.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
reserve is funded at a level prescribed by any conversion agreements.
K. 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.187
Post-conversion, the tenure of all residents of the Covered Project is protected pursuant to
PBV requirements regarding continued occupancy. 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 income eligibility and income targeting of tenants at initial
occupancy, will not apply for current households. Once the grandfathered household moves
out, the unit must be leased to an eligible family. Income eligibility requirements associated
with new sources of financing, such as Low-Income Housing Tax Credits, do not supersede
this prohibition on rescreening, and the Project Owner may be required to exclude Section 8
units occupied by ineligible households from being covered by the new financing’s
restrictions.
L. Under-Occupied Units. If a family is in an under-occupied unit under 24 CFR § 983.260 at
the time of conversion, the family may remain in the unit until an appropriate-sized unit
becomes available in the Covered Project.188 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 PHA. In
order to allow the family to remain in the under-occupied unit until an appropriate-sized unit
becomes available in the Covered Project, 24 CFR § 983.260 is waived.189
M. Occupancy Requirements. In accordance with the RAD statute, as amended by the
Consolidated Appropriations Act, 2018 (Pub. L. No. 115-141), Section 202 PRAC projects
187
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.
188
A household is considered to be remaining in the unit during any period of temporary relocation to permit
rehabilitation of the Covered Project.
189
As the later enacted statute, the RAD Statute, as amended by the Consolidated Appropriations Act, 2018 (Pub. L.
No. 115-141) to prohibit conversion under the Second Component from being the basis for re-screening, termination
of assistance, or eviction of a family in the Converting Project, overrides the last sentence of section 3(b)(3)(A) of
the Act. Absent this override, the latter provision would prohibit occupancy of an assisted unit of two or more
bedrooms by a single person who is not elderly, disabled, a displaced person, or the remaining member of a tenant
family, and any such unit occupied by such a person could not be included in the HAP Contract. Accordingly, 24
CFR § 5.655(b)(5) shall not apply.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
converting assistance under RAD must continue to serve elderly persons. Accordingly, in
addition to income-eligibility and income targeting requirements in 24 CFR 982.201, new
admissions must meet the definition of “elderly family” in 24 CFR 5.403. See Section 4.5.K
regarding the treatment of current households.
4.6 Special Provisions Affecting Conversions to PBRA
For 202 PRAC Projects converting assistance to PBRA, 24 CFR part 880 (“Section 8 Housing
Assistance Payments Program for New Construction”), as modified and as published in
Appendix I of this Notice, the site and neighborhood standards in Appendix III of this Notice,
and applicable standing and subsequent Office of Housing guidance190 will apply, except for the
provisions listed below. Where applicable, reference is made to the affected statute and/or
regulation.
A. Initiation of Contract. The HAP effective date will typically be the first day of the month,
that begins at least 30 days after all closing conditions have been satisfied and documents
executed and recorded, as applicable. For example, for a closing that occurs on May 28th, a
HAP effective date will typically be July 1. This timing will enable a smooth transition from
vouchering for payments under the PRAC to vouchering under the new HAP.
B. Length of Contract. Pursuant to the RAD statute, Covered Projects shall have an initial
HAP Contract term of 20 years. Accordingly, section 8(d)(2)(A) of the Act, which
establishes a maximum term of 15 years for “an existing structure,” does not apply.
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.
C. Mandatory Contract Renewal. Pursuant to the RAD Statute, after the initial term of the
HAP Contract, the HAP Contract is eligible for renewal 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. By choosing to participate in RAD, the Project
Owner agrees to accept each offer to renew the HAP contract during the term of the Elderly
Housing Use Agreement so that any renewal of the HAP contract could expire no earlier than
the expiration of the Elderly Housing Use Agreement, but not to exceed a term of 20 years
for any given renewal.191 The renewal contract(s) shall be for the prescribed number and mix
190
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).
191
For example, if the Elderly Housing Use Agreement required a minimum affordability period of 39 years, the
HUD and Project Owner would enter into an initial 20 year HAP contract and, because the Elderly Housing Use
Agreement would still be in effect at the end of the 20 year term, at the end of the term, HUD would offer and a
Project Owner must request a contract renewal covering at least 19 additional years.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
of units but may, upon request of the Project Owner and subject to HUD approval, be on one
or more transfer of assistance sites in lieu of the project site associated with the expiring
contract.
D. Initial Contract Rent Setting. The initial contract rents will be the lower of (a) the approved
PRAC rents192 or (b) 120% of the applicable FMR (consistent with the requirements of
Section 8(c)(1) of the Act), less any utility allowances. A Project Owner may request that
HUD use the SAFMR in place of the FMR in the computation of the rent cap. 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.
With HUD approval, Project Owners may adjust subsidy across multiple Projects proposed
for conversion in order to modify the initial contract rents that would be established in the
HAP Contract, as long as the Project Owners do not exceed the aggregate subsidy for all of
the Projects the Project Owners have submitted for conversion under RAD and the rents do
not exceed 120% of FMR (or SAFMR, as applicable). This use, which HUD refers to as
“bundled” rents, is permissible when Project Owners in mutual agreement submit Conversion
Plans for two or more Projects. There is no limit to the number of Projects that Project
Owners may rent bundle together. The conversion of the “donor” Project must close prior to
or simultaneously with the conversion of the “recipient” Project. For example, assume that
two Project Owners are 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
Project Owners could bundle the two projects such that the initial contract rents for both
Projects will be $550.
HUD may, in limited circumstances, modify the PRAC Rents separate from the annual
contract renewal process and prior to conversion, given the project budget, and subject to the
availability of funding in the Housing for the Elderly account.193 For example, if a CNA was
not available at the time of the most recent PRAC renewal, a rent adjustment to appropriately
update reserve for replacement deposits could be requested in the middle of the contract year,
ahead of conversion.
192
PRAC rents are the “Operating Expense Amounts” listed in Part I of the PRAC, Exhibit 1, as adjusted pursuant
to rent “bundling” described in this subsection C. If PRAC rents have been temporarily increased in accordance with
an approved plan with the Multifamily Regional Center, the PRAC rents used for the purposes of setting initial
contract rents at conversion will be adjusted downward.
193
PRAC renewals and rent adjustments are funded from the Housing for the Elderly account. Renewal of ongoing
PRAC contracts including inflationary adjustments to core operating expenses will be prioritized over mid-cycle
rent increases that enhance services and replacement reserves for converting properties.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
E. Method of Adjusting Contract Rents. Contract rents will be adjusted by an 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.194
The Maximum Rent is the higher of 120% of FMR or SAFMR (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 SAFMR by project, the SAFMR will continue to serve as the applicable
FMR when determining the rent cap.
F. Distributions. Covered Projects will not be subject to any limitation on distributions,
contingent on satisfaction of program requirements and the availability of surplus cash as
determined by year-end audited or certified financial statements, and subject to the
provisions of this paragraph. 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. As an alternative requirement, in addition to
standard PBRA requirements that must be satisfied prior to calculating surplus cash,
distribution of surplus cash is prohibited unless HUD is able to verify on the annual financial
statement that the Project operating reserve is funded at no less than $250 per unit. HUD may
also impose restrictions on distributions of surplus cash on a given project as a potential
remedy if HUD determines the Project Owner is in violation of the HAP Contract or Elderly
Housing Use Agreement.
G. 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.195
Post-conversion, the tenure of all residents of the Covered Project is protected pursuant to
PBRA requirements regarding continued occupancy. For example, a household that would
194
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 in order to calculate the contract rent for the project in the
following fiscal year.
195
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.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
not be income eligible for initial occupancy of a Section 8 unit at the time of conversion
would still be placed on a Section 8 lease and eligible for assistance under the provisions
governing continued occupancy. 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. Income eligibility requirements associated
with new sources of financing, such as Low-Income Housing Tax Credits, do not supersede
this prohibition on rescreening, and the Project Owner may be required to exclude Section 8
units occupied by ineligible households from being covered by the new financing’s
restrictions.
H. Under-Occupied Units. If at the time of conversion, an eligible family assisted under the
PRAC 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.196 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 30 days. 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.197
I. Occupancy Requirements. In accordance with the RAD statute, as amended by the
Consolidated Appropriations Act, 2018 (Pub. L. No. 115-141), Section 202 PRAC projects
converting assistance under RAD must continue to serve elderly persons. Accordingly, in
addition to income-eligibility and income targeting requirements in 24 CFR 5.653, new
admissions must meet the definition of “elderly family” in 24 CFR 5.403. See Section 4.5.K
regarding the treatment of current households.
J. 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, only after the PBRA HAP Contract is executed and any
proposed Work is completed, HUD will order a REAC inspection of the Project to ensure
196
A household is considered to be remaining in the unit during any period of temporary relocation to permit
rehabilitation of the Covered Project.
197
As the later enacted statute, the RAD Statute, as amended by the Consolidated Appropriations Act, 2018 (Pub. L.
No. 115-141) to prohibit conversion under the Second Component from being the basis for re-screening, termination
of assistance, or eviction of a family in the Converting Project, overrides the last sentence of section 3(b)(3)(A) of
the Act. Absent this override, the latter provision would prohibit occupancy of an assisted unit of two or more
bedrooms by a single person who is not elderly, disabled, a displaced person, or the remaining member of a tenant
family, and any such unit occupied by such a person could not be included in the HAP Contract. Accordingly, 24
CFR § 5.655(b)(5) shall not apply.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
conditions meet the UPCS. HUD is waiving and establishing this alternative requirement to
24 CFR part 5 subpart G.
4.7 Conversion and Processing Requirements
As discussed in further detail below, the conversion of a PRAC Project will generally entail:
An Initial Submission of Interest to HUD
Resident Notification and Consultation
Selection of PHA (PBV conversions only)
Conversion Plan Submission, RAD Approval, and Closing
4.7.1 Initial Submission of Interest to HUD
Prior to submitting a Conversion Plan, a Project Owner must make an initial submission to HUD
indicating the Project Owner’s interest in conversion under this Notice. The submission must
include:
Project name;
Project address;
Project Owner’s name;
Project Owner’s contact information;
The PRAC Contract number(s);
PRAC Contract expiration date(s);
Total number of units covered under the PRAC Contract(s), by bedroom size; and
Conversion Type (PBV or PBRA).
HUD has developed an electronic form submission for Project Owners to make the initial
submission. To access the electronic submission template, Project Owners must request access to
the RAD Resource Desk at www.radresource.net where users will be prompted to provide the
information listed above.
HUD will provide the Project Owner a confirmation of successful submission. HUD will use the
initial submission in order to:
1. Assign a Transaction Manager, who will make contact to discuss the conversion process
and the Project Owner’s goals for the Project; and
2. For PBV conversion, initiate the process to identify a PHA willing to administer the new
PBV contract.
There is no fee associated with the initial submission. HUD will take no adverse action against a
Project Owner who makes an initial submission but does not later submit a Conversion Plan.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
4.7.2 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 would need to agree to accept the
responsibility. 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 decline
the request within 30 days of HUD’s request. HUD will communicate the PHA’s response to
the Project Owner. Applicants must wait until a PBV HAP Contract administrator has been
identified before submitting their Conversion Plan, as the PHA who will act in this capacity
must be identified in that plan. If no PHA consents to enter into the PBV contract, the Project
cannot convert to PBV, and the Project Owner may consider conversion to PBRA instead.
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 include:
1. Pre-Selection Inspection. The PHA must ensure that the units substantially comply
with HQS, as defined in the PHA’s Section 8 administrative plan, prior to submission
of the Conversion Plan.
2. Initial Contract Rent Setting. The PHA will determine that the initial contract rents
do not exceed the rent caps described in Section 4.5.G.
3. HQS Inspections. Prior to entering into a PBV HAP Contract, the PHA must inspect
the Converting Project proposed for conversion to ensure that the units fully comply
with HQS,198 unless the PHA is using HOTMA non-life threatening and alternative
inspection provisions. 199
4.7.3 Resident Notification and Consultation
198
Please note that under PBV, the standard HQS requirements related to lead-based paint under 24 CFR 982.401 do
not apply. Instead, if the property was constructed before 1978 and one or more units has a child under age 6
residing, the PHA must ensure that the HQS requirements for lead safety at 24 CFR 983.101(c)(2) are met in those
units, common areas servicing those units, and exterior painted surfaces associated with such units or common areas
(or the whole property if there are children under age 6 residing in numerous units).
199
See Notice PIH-2017-20 for guidance on HOTMA non-life threatening and alternative inspection provisions.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
Resident Notification. For all conversions, a Project Owner is required to notify residents in
writing of its intent to participate in RAD and is required to hold at least two meetings with
residents.200 The Project Owner must have at least one resident meeting within 30 days prior to
submission of the Conversion Plan and at least one resident meeting after submission of the
Conversion Plan but prior to conversion. The Notification letter must:
1. Be delivered to all Converting Project residents, including each PRAC–assisted
household, as well as posted in the Converting Project office or other common area, and
at no fewer than three prominent locations on the Converting Project site;
2. Include the date and time of the resident briefings;
3. Include an estimated date of conversion to either a PBV or PBRA HAP Contract;
4. Include a description of any proposed change in ownership, rehabilitation, construction,
or transfer of assistance associated with the conversion;
5. State the Project Owner’s plan for relocation, if applicable, as a result of rehabilitation or
construction, including the expected length of the relocation, the temporary nature of the
relocation, the household’s right to return, and the Project Owner’s responsibility for
covering relocation costs; and
6. Supply information on the method to submit comments to the Project Owner and provide
for a 30-day comment period.
The Project 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 PRAC rules. The Project Owner must hold an additional meeting when
there has been a material change that was not already discussed in a previous meeting.
When providing resident notifications and conducting resident meetings, the Project 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 § 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 Project 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
200
Sample resident notification letters are available at www.hud.gov/rad.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
qualified individuals with disabilities in a setting that enables individuals with disabilities to
interact with nondisabled persons to the fullest extent possible (28 CFR part 35, Appendix B).
Additionally, the Project 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, the Project 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 Project Owner must submit a copy of all comments received with their Conversion Plan,
along with a description of how the residents’ comments will be addressed in the conversion.
HUD will consider all resident comments and the Project Owner’s plan to address the comments
before approving the Conversion Plan. If more than 50 percent of written resident comments
disapprove of the conversion of assistance, HUD will contact the Project Owner to discuss
options for proceeding with the conversion request or may decline the request.
Upon Conversion Plan approval, the Project Owner must notify each affected family that the
Project has been approved.
4.7.4 Conversion Plan Submission, RAD Approval, and Closing
A. Conversion Plan Submission. The Project Owner must submit to HUD through the RAD
Resource Desk a complete Conversion Plan that satisfies all RAD program requirements.
(See Attachment 4.A for Conversion Plan Requirements.)
HUD will review the Conversion Plan and Notify the Project Owner of HUD’s determination
to approve or reject the plan or to request additional information. HUD’s decisions regarding
the acceptance of the Conversion Plan will be made in HUD’s sole discretion. If HUD
determines that a Conversion Plan is not feasible or that the requirements of the Conversion
Plan as set forth in Attachment 4A have not been met, then the Project Owner may either
make corrections that satisfactorily address HUD’s concerns or appeal the decision. If a
Conversion Plan is disapproved, HUD’s letter of disapproval will discuss changes, if any,
that would result in an acceptable Conversion Plan.
B. RAD Approval. If the Conversion Plan satisfies the requirements of this Notice, HUD will
issue an approval letter to the Project Owner. The approval letter will outline the key
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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 Project Owner) in which to
close the RAD conversion transaction, unless extended by HUD. The Project Owner 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. Upon conversion, units whose assistance has been converted pursuant to RAD will
be removed from the 202 PRAC program. Converting Projects will be released from any
outstanding obligations under the Capital Advance Agreement, the Capital Advance
Mortgage Note, the Capital Advance Program Regulatory Agreement, the Capital Advance
Program Use Agreement, and related or collateral documents associated with the PRAC and
the foregoing documents. The 202 PRAC will be terminated (or for PBV conversions, the
202 PRAC will expire without renewal), the Section 8 HAP Contract will be executed and
the Project Owner will enter into an Elderly Housing Use Agreement, which will be recorded
as a restrictive covenant in first position on the Covered Project. The effective date identified
in the HAP Contract is the date the Project will cease to operate as a 202 PRAC Project and
begins to operate under Section 8 requirements.
4.8 Additional Information
For additional information on this section of the Notice, please check www.hud.gov/rad or email
questions to RAD2@hud.gov.
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Attachment 4A: Conversion Plan Requirements and Feasibility Benchmarks for
PRAC Conversions
A Conversion Plan will not be reviewed until all required documentation is submitted
electronically to the RAD Resource Desk at www.radresource.net. HUD will complete an initial
review for document completeness within five business days of submission and will notify the
Project Owner of deficiencies. Once HUD has determined that all required documents appear to
have been received, HUD will review the submission.
HUD’s purpose in reviewing the Conversion Plan is to ensure the long-term physical and
financial viability of the Covered Project in providing quality, supportive housing to elderly
residents. HUD reserves the right to reject any Conversion Plan if the information provided is not
complete, accurate, or in compliance with the submission requirements listed below. If a
Conversion Plan fails one or more feasibility benchmarks, HUD may, in its sole discretion, still
accept the Conversion Plan if HUD determines that the Conversion Plan is consistent with the
long-term physical and financial viability of the Covered Project, and/or the Project Owner has
demonstrated through historical data or other means that the Project Owner can satisfactorily
maintain and manage the Covered Project as presented in the Conversion Plan. HUD will not
accept the Conversion Plan if the Covered Project does not meet environmental review
requirements, as described below.
Below are all the required components of a complete Conversion Plan and the requirements of
each component. Additional guidance in preparing the Conversion Plan is available in the PRAC
Processing Guide located at http://www.radresource.net/mf_library.cfm.
A. Conversion Overview. A narrative summary of the Covered Project and the Project Owner’s
conversion goals. Include details such as a description of the physical Project, Project history,
identification of immediate capital needs of the Project, identification of other properties to
be held within the same ownership entity, anticipated financing that will be obtained to meet
the capital needs, anticipated relocation, how the conversion of assistance will impact
residents, and circumstances such as new construction, Transfer of Assistance, scattered site,
and reconfiguration of units.
B. Proposed Units. The Project Owner must provide the number of units by bedroom size
proposed to be covered by the HAP Contract. If a reconfiguration of units is proposed, the
Project Owner must submit a narrative explanation of the proposal, including a description of
the units to be removed and an explanation of why the Project can better serve assisted
residents at the reduced number. Discussion of the proposed units can be included in the
Conversion Overview.
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C. PRAC Contract. Submit a copy of the fully executed current PRAC Contract including all
exhibits.
D. Statement of Compliance with Fair Housing and Civil Rights. The Project Owner must
submit a written statement certifying that it does not have any outstanding fair housing or
civil right matters and that the proposed RAD conversion is consistent with any applicable
remedial order or agreements, as described in section 4.3.1.B. of this Notice.
E. Resident Notification. The Project Owner must provide proof of written notification
informing residents of the intent to participate in RAD. Include a PDF attachment of all
comments received from residents as described in Section 4.7.3. Project 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
Project Owner must also provide a description of how the residents’ comments will be
addressed in their plan for conversion.
F. Capital Needs Assessment. A CNA is required in order to identify the short-term and long-
term capital needs of the property, which will factor into the Scope of Work and both the
Initial and Annual Deposits to the Replacement Reserve. See Paragraph 4.4.A. for additional
information on CNA requirements.
G. Initial Contract Rent Setting.
1. For PBV conversions, submit evidence that the Project Owner’s proposed rents are in
accordance with the PHA’s rent setting. See Section 4.5.G for additional information on
Initial Contract Rent Setting for PBV.
2. For PBRA conversions, the rents cannot exceed the limits set forth in Section 4.6.C
H. Scope of Work. The Conversion Plan must include a Scope of Work that accompanies the
CNA. The Scope of Work must:
1. Identify and address all repairs identified in the CNA as critical, immediate or required
within the first two years following conversion when the total of such repairs exceeds
$5,000 per unit (including all items identified in the CNA as not functioning at the time
of the CNA site visit). Briefly discuss any differences between the proposed Work and
the conclusions and recommendations of the CNA provider; any additional scope items
not identified in the CNA; and the Project Owner’s choices for replacement components.
2. If the most recent REAC Inspection score is below 60, or the property has been referred
to DEC due to physical deficiencies, the scope of work must address all physical
deficiencies identified.
3. Identify replacement quantities and costs. Rehabilitation estimates must be based on
reasonable market estimates of actual costs, confirmed either by cost estimating
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completed by the architect/engineer, or through actual competitive bids for major
rehabilitation or construction items, in compliance with HUD requirements.
4. Include a summary of environmental issues and corresponding remediation activities
known at that time, and a summary of accessibility features that are required pursuant to
applicable accessibility standards and other accessibility requirements. Other accessibility
requirements include, but are not limited to, physical features that need to be provided as
reasonable accommodations for qualified persons with disabilities. The scope of work
should also include design features necessary for elderly housing (see Section 4.4.F) and
a description of how those features will promote housing stability for an aging
population.
5. Include a construction contingency of 10 percent (HUD may require a higher contingency
on a case-by-case basis) if the Project Owner plans to obtain new financing simultaneous
with the Conversion.
6. Include a reasonable timeline for completion of all rehabilitation items acceptable to
HUD, from the date of Conversion Closing and any financing, depending on the scope of
rehabilitation needed.
For Conversions using FHA financing, conventional debt, or equity sources of financing,
submit a copy of the Scope of Work included with the FHA Application for Firm
Commitment, or submitted to the lender, equity provider (including LIHTC, historic tax
credit or Opportunity Zone equity providers), LIHTC allocating agency or comparable
funding source.
I. Environmental Review. HUD cannot approve an applicant’s Conversion 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.
A RAD transaction will either be reviewed under 24 CFR Part 50 (“Part 50 Reviews”) or 24
CFR Part 58 (“Part 58 Reviews”). Part 50 applies when HUD conducts the environmental
review, and Part 58 applies when a Responsible Entity (RE) conducts the environmental
review. The following table shows which review protocol a transaction will follow, along
with who will conduct the review:
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Description Type of Environmental Review Reviewer
PBRA Non-FHA Part 50 RAD Transaction Manager
PBRA FHA Non-Risk Part 50 FHA Production
Share201
PBRA FHA Risk-Share Part 50 Transaction Manager
PBV FHA Non-Risk Share Part 50 FHA Production
PBV Non-FHA Part 58 Responsible Entity
PBV FHA Risk-Share Part 58 State Housing Finance
Agency or Responsible
Entity, as applicable202
Under limited circumstances, per 24 CFR 58.11(c), an Awardee with a non-FHA PBV
transaction may request HUD to undertake the environmental review under Part 50 if a
suitable RE cannot be found or if the local government was not a direct recipient of the funds
and refuses to accept responsibility or when HUD determines the local government does not
have capacity to act as an RE.203 This request must be made in writing and submitted to
HUD no later than at the time of the Conversion Plan submission.
For multi-phase developments, the environmental documents submitted with the Conversion
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.
Requests to transfer assistance from the Converting Project to a new location are subject to
environmental review.
For transactions receiving funding from other HUD programs (i.e. HOME, CDBG, non-RAD
PBV), HUD encourages all parties to complete and adopt one review for all programs, even
if these programs’ environmental reviews are conducted under a different review protocol
(Part 50, Part 58). In cases where two Part 58 programs are combined, HUD encourages
applicants to work with the Responsible Entity or Entities to see if environmental reviews
can be combined. However, this is solely the Responsible Entities’ determination. In cases
201
Section 542(c) of the Housing and Community Development Act of 1992 enables HUD and State and local
housing finance agencies (HFAs) to provide new risk-sharing arrangements to help those agencies provide more
insurance and credit for multifamily loans known as the FHA Risk Sharing Program.
202
Housing Finance Agencies can act as the Responsible Entity for Housing’s Risk Share Programs if the HFA is a
regular part of the state government or if the HFA is a state instrumentality that has been approved by the governor.
If the HFA does not meet either criteria, it must request another department of the state to act as Responsible Entity.
An instrumentality of a city or county government cannot act as a Responsible Entity for the Risk Share Program.
Please contact HUD if you have any questions about whether an HFA can act as the Responsible Entity.
203
These circumstances are considered on a case-by-case basis only. Please work with your Transaction Manager to
determine suitability.
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where a Part 50 program and a Part 58 program are combined, HUD may determine that it
will perform one Part 50 environmental review for both programs under 24 CFR 58.11 if
performing an additional Part 58 environmental review is not feasible in the time allotted.
HUD must ensure that the Part 50 review considers the full scope of all activities and funding
associated with all programs. When one review is used for both programs, the Approving
Officials for both programs must certify the 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:204
1. For PBRA conversions (or where HUD has determined to conduct the PBV
environmental review under Part 50) without FHA insurance and without any
rehabilitation, construction, or demolition,205 HUD conducted a tiered review of
program-wide and site-specific compliance. HUD has made program-wide
compliance determinations for most of the applicable environmental laws and
authorities, and will complete a site-specific compliance review of the following:
A. Coastal protection pursuant to the Coastal Barrier Resources Act, as amended by
the Coastal Barrier Improvement Act of 1990 (16 U.S.C. 3501);
B. Flood insurance and floodplain management pursuant to the Flood Disaster
Protection Act of 1973, the National Flood Insurance Reform Act of 1994 (42
U.S.C. 4001-4128 and 42 U.S.C. 5154a), Executive Order 11988, particularly
section 2(a), and 24 C.F.R. Part 55;
C. Contamination pursuant to 24 C.F.R. 50.3(i) (HUD Standard).
Additionally, while Historic Preservation (National Historic Preservation Act of
1966, particularly sections 106 & 110; 36 CFR Part 800) is not included in the tiered
review, for conversions that entail no physical activities or only activities that are
limited to maintenance as defined in HUD Notice CPD-16-02, HUD has no further
obligations under Section 106. HUD is not required to contact SHPO, THPO, and/or
other interested parties or the public.206
204
The MAP Guide is available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
Additional guidance on environmental review requirements is available on the HUD Environmental Review
website, at https://www.hudexchange.info/environmental-review/.
205
This is further defined as those transactions that do not anticipate any reasonably foreseeable repairs or other
physical activities beyond maintenance, as defined in HUD Notice CPD 2016-02.
206
This Determination is detailed in the “Determination of ‘No Potential to Cause Effects’ under Section 106 of the
National Historic Preservation Act for Rental Assistance Demonstration (RAD) Projects Limited to Maintenance
Activities and Carried Out Under 24 CFR Part 50. https://www.hudexchange.info/resource/3865/no-potential-to-cause-effects-to-
historic-properties-memos/
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Project Owners will be required to submit documentation to facilitate HUD’s site-
specific review.
2. For all non-FHA PBRA conversions (or where HUD has determined to conduct the
PBV environmental review under Part 50) that do not meet the requirements under
paragraph 1 above, the Project Owner or vendor will follow the guidelines in Chapter
9 of the MAP guide. Project Owners or vendors will upload all applicable
documentation directly into HEROS at the time of Conversion Plan submission. The
following exceptions to the MAP Guide apply:
In lieu of a Phase I Environmental Site Assessment (ESA) in accordance
with ASTM E 1527-13 (or the most recent edition),207 except for
conversions involving substantial rehabilitation or new construction
activities. Awardees may submit a more limited report on potential
sources of contamination. Where a Phase I ESA is not required (i.e.,
projects without any associated substantial rehabilitation208 or new
construction), the Awardees can submit 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 ESA in accordance with ASTM E 1527-13 (or the most
recent edition) must be provided.
Awardees may submit a Phase I ESA that is up to 5 years old upon
submission; however, it must be updated by a Transaction Screen that is
up to 1 year old upon submission.
207
The Transaction Screen does not meet the standard for “All Appropriate Inquiries” for CERCLA liability
protection, as noted in ASTM E 1528-14 Section 4.2.1.
208
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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When HUD conducts the environmental review under Part 50, PHAs (or their vendors) must
submit environmental reports and documentation209 for HUD review into the HUD
Environmental Review Online System (HEROS), where HUD will complete its review.
HUD staff will review the submissions and may require additional information in order to
complete their review. 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 RAD approval will include any conditions required to carry out any and all
mitigation measures as may result from the environmental review. Any conditions or
mitigation that cannot be satisfied before Closing will survive Closing.
When a Responsible Entity (RE) completes an environmental review under Part 58, the
Conversion 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.210 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 (RROF), to their local PIH field
staff.211 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 proof of the completed Form 7015.16 (either a copy of the paper form or
a screenshot of the completed screen in HEROS) to HUD; or
If form HUD-7015.15 is not required because the project converts to Exempt under
24 CFR § 58.34(a)(12), the PHA must submit the RE’s finding of exempt activity
with their RAD Conversion 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(a)(12) is sufficient.
209
PHAs and providers should take care to respond to all applicable laws and authorities and MAP-specific
requirements when providing documentation for environmental review. For all maps, please clearly indicate where
the project site is located. Information about HEROS and how to register can be found at
https://www.hudexchange.info/programs/environmental-review/housing/#heros
210
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/.
211
Form HUD-7015.15 is available at https://www.hudexchange.info/resource/2338/hud-form-701515-request-
release-funds-certification/.
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Additionally, except for properties without any rehabilitation, construction, or
demolition,212 the PHA must submit either a) a statement declaring that the RE examined
radon or b) where the RE had not examined radon as part of its review, either a Radon
Report consistent with the requirements of the Section 9.5.C of the MAP Guide (or
successor provision) for HUD to review or a statement that the property is exempt from
submission of a Radon Report per the MAP Guide.
J. Accessibility and Relocation Plan Checklist. All Project Owners shall complete and submit
the Accessibility and Relocation Plan Checklist provided by HUD on the RAD Resource
Desk. The checklist shall include a certification that the relocation plan complies with all
applicable HUD requirements, including the URA as well as applicable accessibility
standards, including but not limited to those under Section 504 of the Rehabilitation Act of
1973 and its implementing regulations (24 CFR § 8.23). The cost of accessibility
improvements and relocation must be fully funded in the Development Budget. Project
Owners are encouraged to use HUD’s guidance on relocation planning for persons with
disabilities in HUD Handbook 1378.0, Exhibit 3-1 and the RAD Fair Housing and Civil
Rights Notice.
K. Proposed Financing
1. For all conversions using financing, the following must be addressed:
a. Provide a brief discussion of conditions/milestones to be satisfied prior to closing
including any known impediments to closing within the timeframe required under the
Notice;
b. Estimated closing date(s) for all proposed financing;
c. For each proposed loan, equity contribution, or grant, the Conversion Plan must
include a recent lender, investor or grant commitment letter, dated no more than 60
days prior to Conversion Plan submission, with key terms identified (including
amount, repayment terms, interest rate, amortization, maturity, prepayment
restrictions, and pay-in schedule) from all financing provider(s);
2. For conversions not using FHA financing or equity sources, the following requirements
must be addressed in addition to the requirements set forth in Attachment 4A, Section
K.1 above:
a. Permanent debt financing with monthly payment amounts not conditioned on the
availability of cash flow (i.e., “hard” debt) on Covered Projects must:
i. Be at a fixed rate of interest, for a fixed term, fully amortized over no more
than 40 years;
212
This is further defined as those transactions that do not anticipate any reasonably foreseeable repairs or other
physical activities beyond maintenance, as defined in HUD Notice CPD 2016-02.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
ii. 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
iii. Not have a debt service coverage less than the higher of 1.11 or lender
requirements.
b. All subordinate (or secondary) financing must be disclosed and then approved by the
first-mortgage lender;
c. The terms for all seller take-back financing must also be disclosed;
d. If project revenue or existing reserves will be a source of funding, submit evidence of
the current account balances.
L. Development Budget (Sources and Uses of Funds). All Project Owners must submit a
Development Budget.
1. For Conversions using FHA financing or equity sources of financing, submit a copy
of the Development Budget included with the FHA Application for Firm Commitment, or
submitted to the lender, equity provider (including LIHTC, historic tax credit or
Opportunity Zone equity providers), LIHTC allocating agency or comparable funding
source. The Project Owner must submit the FHA Application for Firm Commitment
review before the RAD conversion is submitted to the Office of Recapitalization. Include
a Subsidy Layering Review (SLR) if one has been performed by another agency. If no
SLR is provided, HUD will complete an SLR whenever multiple federal sources are
proposed.
2. For all other Conversions with new financing:
a. Include a reasonable, balanced, and comprehensive presentation of both construction
period and permanent sources and uses of funds, which development budget must be
consistent with the development budget submitted to the lender, equity provider
(including LIHTC, historic tac credit or Opportunity Zone equity providers), LIHTC
allocating agency or comparable funding source.
b. Identify existing loans or debt that will be paid off at the closing, if applicable.
c. Include a binding commitment letter with respect to any new source of financing or
sources of equity.
d. Include a construction contingency of 10 percent (HUD may require a higher
contingency on a case-by-case basis) if the Project Owner plans to obtain new
financing simultaneous with the Conversion.
e. Demonstrate that any Identity of Interest (IOI) loans or advances will be converted to
unsecured Surplus Cash Notes (Project’s cash remaining, after debt service, project
operational costs and other permitted payments) unless otherwise approved by HUD.
f. If applicable, identify the initial operating deficit during the construction period and
how that deficit will be funded, such as an operating deficit escrow or similar fund.
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
g. 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.
M. Proposed Development Team. The Project Owner must identify the proposed legal entity
that will own the Covered Project following conversion, the proposed management agent
following conversion, and the “principals” of both entities. In addition, the Project Owner
shall provide the following:
1. For all conversions with a proposed change in ownership entity, the new Project Owner
must provide evidence of successful experience owning and operating HUD or other
multifamily housing properties. New Project Owners may be required to demonstrate that
the criteria specified in HUD Handbook 4350.1, Chapter 13, Change in Ownership:
Transfer of Physical Assets have been met in part or in whole.
2. For PBRA conversions with a proposed change in ownership entity or a material
proposed change in ownership of the existing ownership entity, the new Project Owner
must submit evidence that all new principals have a Previous Participation Certification
in the Active Partners Performance System (APPS) (formerly referred to as Form HUD-
2530) and are not be debarred, suspended, or subject to a Limited Denial of Participation.
3. For all conversions with a proposed change in management agent the new agent must
provide evidence of successful experience managing and operating HUD or other
multifamily housing properties.
4. For all conversions in which Work is proposed, the Project Owner must submit the
identity of the general contractor or construction manager or a statement that the Project
Owner will be managing construction directly, together with evidence of the general
contractor’s, construction manager’s or Project Owner’s recent and successful experience
with similar rehabilitation or construction projects.
N. Operating Pro Forma. The Operating Pro-Forma must:
1. For all FHA transactions or Conversions using equity sources of financing:
a. Provide a copy of the Operating Pro Forma that was submitted with the FHA
Application for Firm Commitment or submitted to the lender, equity provider
(including LIHTC, historic tax credit or Opportunity Zone equity providers), LIHTC
allocating agency or comparable funding source.
2. For all other Conversions:
a. Provide a 20-year Operating Pro Forma in an owner-provided template,
b. 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.
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c. Include columns capturing the average amount for the past three years for all line
items listed in the Pro Forma. Provide explanations and/or supporting documentation
for any major deviations of the historical average from the year 1 data entered on the
Pro Forma.
d. Ensure the Pro Forma complies with at least the following feasibility benchmarks
unless otherwise approved by HUD:
Revenue:
i. Rents shall not exceed the amounts permitted under program rules;
ii. All other sources of income 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);
iii. Vacancy loss shall be no less than the greater of the average over the past
three years or 3 percent;
iv. Allowance for bad debt should be not less than the greater of the average
over the past three years or 2 percent;
Expenses:
i. All operating expenses shall be reasonable, with decreases justified and
generally no less than 85 percent of the average for the last three years;
ii. The ADRR should be equal to that amount which, if deposited annually,
will be sufficient to fund all capital needs, as identified 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 Project Owner should use reasonable estimates for 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 (IDRR) if risks to the Covered Project can be
adequately mitigated. The ADRR must be sufficient to maintain a
minimum balance at the end of each year during the initial 20-year HAP
Contract term in accordance with the HUD MAP Guide Appendix 5g,
Section VII.C.3D, Minimum Balances; and
iii. 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.
O. Supportive Services and Design. Applicants must describe how the proposed supportive
services meet the identified needs of the anticipated residents, both initially and as they age,
and how the identified supportive services will be provided on a consistent, long-term basis
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Section IV: Section 202 Project Rental Assistance Contract (PRAC) Projects
to support residents. The conversion plan also must discuss how current property design
features and/or modifications planned in conjunction with the conversion provide a physical
living environment suitable for meeting the needs of elderly residents and facilitating
prolonged independent living. Relevant building design features may include, but are not
limited to, those focused on fall prevention and visitability, universal design, and electronic
communication mechanisms.
P. Market Study. A market study or net demand analysis may be required if the project is
currently experiencing a high vacancy rate or if the Project Owner is requesting a
reconfiguration of units. The Project Owner should consult with the Transaction Manager to
determine if a market study is necessary before procuring one.
Q. Certification of Compliance with Site and Neighborhood Standards. The Project Owner
(for PBRA) or the PHA (for PBV) shall evaluate and include a certification that the site
complies with applicable Site and Neighborhood Standards (see Section 4.4.O.).
R. Affirmative Fair Housing Marketing Plan. For PBRA conversions, evidence that a
completed AFHMP (Form 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 tenant admission 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) for review. The AFHMP may not conflict with any special condition arising from
the RAD conversion or provision in a remedial order or agreement. 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.
S. Transfer of Assistance. For all conversions involving a transfer of assistance to a new site,
the Project Owner must have secured HUD approval of the site (Covered Project). See
Section 2.4.I.
T. Title Report. Submit a complete title report including information on whether the
Converting Project is currently subject to any other liens, encroachments, easements or other
encumbrances on the property.
273
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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.
274
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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.
275
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
276
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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.
277
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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.
278
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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.
279
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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.
280
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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,
281
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
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.
282
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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:
283
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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
284
Appendix I: 24 CFR Part 880 Regulation, Stricken for PBRA Conversions
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.
285
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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 5.655.
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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 5.655.
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
292
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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.
293
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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.
294
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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.
295
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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
296
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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 (Protection for Victims of Domestic Violence, Dating Violence, Sexual Assault, or
29 Stalking).
30 (d) Modification of Lease form. The owner, with the prior approval of HUD or, for a 24 CFR part
31 883 project, the Agency, may modify the terms and conditions of the lease form effective at the
32 end of the initial term or a successive term, by serving an appropriate notice on the family,
33 together with the offer of a revised lease or an addendum revising the existing lease. This notice
34 and offer must be received by the family at least 30 days prior to the last date on which the
35 family has the right to terminate the tenancy without being bound by the modified terms and
36 conditions. The family may accept the modified terms and conditions by executing the offered
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1 revised lease or addendum, or may reject the modified terms and conditions by giving the owner
2 written notice in accordance with the lease that the family intends to terminate the tenancy. Any
3 increase in rent must in all cases be governed by §880.609 and other applicable HUD
4 regulations.
5 (Approved by the Office of Management and Budget under control number 2502–0204)
6 [44 FR 59410, Oct. 15, 1979, as amended at 51 FR 11225, Apr. 1, 1986; 53 FR 846, Jan. 13,
7 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39703, Sept. 27, 1989; 56 FR 7537, Feb. 22, 1991; 60
8 FR 14842, Mar. 20, 1995; 61 FR 13590, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 66 FR
9 28797, May 24, 2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66260, Oct. 27, 2010]
10 § 880.608 Security deposits.
11 (a) At the time of the initial execution of the lease, the owner will require each family to pay a
12 security deposit in an amount equal to one month's Total Tenant Payment or $50, whichever is
13 greater. The family is expected to pay the security deposit from its own resources and/or other
14 public sources. The owner may collect the security deposit on an installment basis.
15 (b) The owner must place the security deposits in a segregated, interest-bearing account. The
16 balance of this account must at all times be equal to the total amount collected from the families
17 then in occupancy, plus any accrued interest. The owner must comply with any applicable State
18 and local laws concerning interest payments on security deposits.
19 (c) In order to be considered for the return of the security deposit, a family which vacates its unit
20 will provide the owner with its forwarding address or arrange to pick up the refund.
21 (d) The owner, subject to State and local law and the requirements of this paragraph, may use the
22 security deposit, plus any accrued interest, as reimbursement for any unpaid family contribution
23 or other amount which the family owes under the lease. Within 30 days (or shorter time if
24 required by State, or local law) after receiving notification of the family's forwarding address, the
25 owner must:
26 (1) Refund to a family owing no rent or other amount under the lease the full amount of the
27 security deposit, plus accrued interest;
28 (2) Provide to a family owing rent or other amount under the lease a list itemizing any unpaid
29 rent, damages to the unit, and estimated costs for repair, along with a statement of the family's
30 rights under State and local law. If the amount which the owner claims is owed by the family is
31 less than the amount of the security deposit, plus accrued interest, the owner must refund the
32 unused balance to the family. If the owner fails to provide the list, the family will be entitled to
33 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.
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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;
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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
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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
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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
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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
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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]
305
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.
306
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 Notice H
2014-14; any substantive conflicts between the requirements set forth herein and those set forth
in Notice H 2014-14 are accidental and in the event of such conflict, the requirements set forth in
Notice H 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 are 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:
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
307
Appendix III – PBRA Site and Neighborhood Standards
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.
308
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.
309
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 Notice PIH 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.
310
Source: Legislative text reproduced verbatim
Plain English
Housing Notice H-2019-09/PIH-2019-23 (HA), Revision 4 establishes the rules for HUD's Rental Assistance Demonstration (RAD), a program that allows public housing agencies and owners of certain HUD-assisted properties to convert their existing rental assistance into long-term Section 8 project-based contracts. The notice sets eligibility criteria, application procedures, resident rights protections, and financing requirements for converting projects under either the First Component (public housing) or Second Component (Mod Rehab, Rent Supp, RAP, and Section 202 PRAC properties). Converted projects remain subject to affordability restrictions, fair housing requirements, and ongoing HUD oversight for the duration of the HAP Contract.
Written by anthropic/claude-sonnet-4.6 · Reviewed on October 6, 2026
Plain English — not legal advice.
For Property Managers
Under Housing Notice H-2019-09/PIH-2019-23 (HA), compliant operators pursuing a RAD conversion submit a complete application or Conversion Plan, conduct required resident meetings before and during the process, and secure a Financing Plan demonstrating long-term physical and financial viability. Operators maintain replacement reserves, carry mandatory insurance, comply with Davis-Bacon wage requirements where applicable, and execute a RAD Use Agreement or Elderly Housing Use Agreement recorded in a superior lien position. Owners converting under the Second Component set initial contract rents through a Rent Comparability Study and accept mandatory contract renewal or extension obligations tied to the applicable use agreement term.
General guidance for property managers — not legal advice for your specific situation. Consult an attorney for advice on your case.
For Tenants
Housing Notice H-2019-09/PIH-2019-23 (HA) prohibits rescreening current residents at conversion and guarantees a right to return after any temporary relocation for rehabilitation. Residents are entitled to phased rent increases, grievance procedures, resident participation funding, and a Choice-Mobility option allowing a move with tenant-based assistance after qualifying occupancy. Tenants who believe these protections are not being honored may raise concerns with the administering PHA, contact HUD at RAD@hud.gov, 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.