*PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL*
WORKING DRAFT
Last Modified 8/6/2014 7:32 PM Eastern Standard Time
Printed 5/19/2014 5:19 PM Eastern Standard Time
Multifamily for Tomorrow
Rental Assistance
Demonstration (RAD)
Document Type
Date
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL1
MULTIFAMILY FOR TOMORROW
Why RAD? (Component 1)
Public Housing inventory
▪ ~1.15 million units across 3,100+ PHAs
▪ Capital repair needs in excess of $25.6B across portfolio
($23,365/unit)
▪ Section 9 funding platform unreliable (pro-rations, appropriation
cuts), limited access to debt/equity capital (declaration of trust)
▪ Losing 10,000-15,000 hard units/year
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL2
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Why RAD? (Component 2)
Affordable multifamily housing in legacy programs “at risk”
▪ Mod Rehab (23,000 units) – cannot renew contracts on terms
needed to secure financing
▪ Rent Supp and RAP (22,500 units) – no option to renew when
contracts expire
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL3
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RAD key goals
RAD allows selected Public Housing and at-risk assisted Multifamily
“legacy” programs to convert their form of assistance to long-term
Section 8 Housing Assistance Payment (HAP) contracts
Key RAD goals
▪ Build on the proven Section 8 platform
▪ Leverage private capital to make needed repairs and preserve
affordable housing units
▪ Offer residents greater choice and mobility
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL4
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PHA objectives
▪ Modernize aging properties
▪ Substantially rehabilitate deteriorated properties
▪ Demolish and replace severely distressed/obsolete properties
▪ Thin densities via PBVs and transfer authority
▪ Portfolio streamlining
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL5
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RAD opportunities
▪ Gives PHAs tools to be market-driven affordable housing
developers
▪ Offers streamlined access to FHA financing with historic low rates
▪ Maximizes leverage of 4% & 9% LIHTCs by providing a stable
Section 8 contract
▪ Streamlines legacy programs onto existing platforms
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL6
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Public Housing Mod Rehab Rent Supp & RAP
1st Component:
Competitive, “Current Funding”
185,000 Unit Cap (*New*)
PBRA PBV
2nd Component:
Non-Competitive, No Cap (subject
to availability of TPVs)
PBV
RAD conversion eligibility
PBRA (*New*)
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL7
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Tenant
$318
Tenant
$318
HAP
$474
Capital
$144
Oper-
ating
$330
RAD Section 8 current funding
rent levels
$792$792
Post-Conversion
Section 8
Pre-Conversion
ACC
Tenant Rent
Housing Assistance Payment
Capital Fund
Operating Fund
Sample Public Housing Conversion
Per Unit Monthly (PUM)
▪ Tenants continue
to pay 30% of
their income
towards rent
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL8
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Contracts and rents
▪ Choice of Section 8 PBV or PBRA
▪ Annual operating cost adjustment factor (OCAF)
▪ RAD HAP funding begins at construction closing
▪ No limitation on use of project cash flow
▪ Automatic Section 8 HAP contract renewals
▪ Use Agreement co-terminus with HAP contract
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL9
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PBV
▪ Component of PHA’s Housing Choice Voucher
Program. Voucher funding administered by PHA
(w/ admin fee)
▪ 15 year contract (up to 20 with approval of
voucher agency)
▪ Choice mobility option provided to families, if
requested, after one-year of residency
▪ Contract rent caps: Lower of current funding;
reasonable rent; 110% FMR minus utilities
▪ Housing Quality Standards (HQS)
▪ If PBV>50%, social services mandatory in family
projects (elderly, disabled, scattered sites
exempted)
PBRA
▪ Provided to owners by HUD’s Office of
Multifamily Housing via a HAP. Projects
monitored by HUD Office of MF/PBCAs
▪ 20 year contract
▪ Subject to annual appropriations, but strong
history of full appropriations
▪ Choice mobility option can be limited to 15% of
the RAD project units and/or 33% of the PHA’s
annual HCV turn-over
▪ Contract rent caps: Lower of current funding and
120% FMR minus utilities (higher with RCS)
▪ REAC Inspection standard
PBV vs. PBRA
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL10
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RAD program requirements include
▪ Resident rights protected
– Residents have a right to return post-rehab
– Right to establish resident organization
▪ Davis-Bacon
– Applicable to all initial construction and repairs
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL11
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RAD application
statistics
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL12
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Project location
81%
Urban
19%
Rural
Urban
Rural
Urban v. rural
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL13
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PHA size
45%
Medium
40%
Small
15%
Large
Medium PHA (250-1,250)
Small PHA (<250)
Large PHA (>1,250)
PHA size
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL14
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Project type
28%
Elderly
72%
Family
Family
Elderly
Elderly v. family
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL15
MULTIFAMILY FOR TOMORROW
Section 8 conversion type (by project)
49%
PBV51%
PBRA
PBRA
PBV
PBRA v. PBV
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL16
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Project financing – debt options
40%
Conventional
40%
FHA
20%
No debt
Conventional
FHA
No debt
Debt type
▪ 40% of RAD
applications
propose FHA
financing
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL17
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LIHTC – 4% and 9%
28%
9% credits
72%
4% credits
9% LIHTC
4% LIHTC
4% v. 9% LIHTC
▪ 50% of RAD
applications
propose LIHTCs
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL18
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Debt type when no LIHTC
26%
Conventional
74%
FHA
FHA - no LIHTC
Conventional - no LIHTC
FHA v. conventional
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL19
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Debt type when LIHTC
58%
Conventional
42%
FHA
ConventionalFHA
FHA v. conventional
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL20
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RAD program update
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RAD applications, awards, and closings (as of 1/31/15)
Source: RAD Newsletter, February 2015 | Issue 6
Top 10 RAD applicants by PHA
▪ Chicago, IL 10,935 units
▪ El Paso, TX 6,100
▪ Nashville, TN 5,384
▪ Birmingham, AL 5,015
▪ Baltimore, MD 4,583
▪ San Francisco, CA 4,575
▪ Charlotte, NC 3,424
▪ Mobile, AL 3,410
▪ Tampa, FL 3,065
▪ Greensboro, NC 2,195
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL22
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Percentage of current PH units by HUD region that
have applied for RAD
6%7%
16%
22%
15%
21%
3%7%
18%
21%
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL23
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FHA financing options
Multifamily for tomorrow
PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL24
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RAD + FHA financing
Approximately 40% of PHAs are currently utilizing FHA
financing for their RAD conversions
▪ 70% Section 223(f)
▪ 30% Section 221(d)(4)
FHA offers high-leverage, long-term, fixed rate, fully-amortizing,
non-recourse debt at historic low interest rates
HUD has streamlined and centralized RAD/FHA processing
▪ Contract support for 223(f) underwriting
▪ Specialized processing centers for 221(d)(4) underwriting in
Chicago, Atlanta, Ft. Worth, and Seattle
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL25
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FHA Multifamily Mortgage Insurance Programs
Section 223(f) – refinance or acquisition
▪ Minor/moderate repairs (up to $6,500/unit* x high cost factor)
▪ Permanent loan with 12-month repair escrow
▪ Term: up to 35 years or 75% of REL
▪ Up to 87% LTV (1.15x DSC) for 90%+ rental assistance
Section 221(d)(4) – new construction or substantial rehabilitation
▪ Sub rehab (>$6,500/unit* x HCF or 2 major building systems)
▪ Construction + permanent loan
▪ Term: up to 40 years or 75% of REL
▪ Up to 90% LTC (1.11x DSC) for 90%+ rental assistance
* The 2015 Revised MAP Guide will increase this limit to $15,000/unit when it becomes effective – currently in draft form for public comment
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FHA financing + LIHTC
Financing affordable and LIHTC housing is a top priority for
Multifamily Housing at HUD
▪ Launched the FHA LIHTC Pilot Program in 2011-2012
▪ Continue to refine and improve programs/processes to facilitate
use of FHA mortgage insurance with LIHTCs to increase FHA’s
affordable housing production and preservation
▪ FHA LIHTC production doubled from 2013-2014
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL27
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FHA LIHTC Pilot Program
RAD conversions with 90%+ rental assistance and LIHTCs are
eligible for the FHA LIHTC Pilot Program
▪ Goal: close within 90-120 days from application (current average
is 100 days)
▪ Utilizes existing Section 223(f) program but allows for increased
repairs/moderate rehab (up to $40,000/unit)
▪ Will be expanded to Section 221(d)(4) soon – currently being
tested in California
▪ Program features:
– Streamlined applications
– Distinct application platform and separate processing track
– Designated Pilot processing centers with LIHTC experience
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PRE-DECISIONAL, PROPRIETARY AND CONFIDENTIAL28
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Resources
RAD application materials and additional resources can be found at
www.hud.gov/rad
Email questions to [email protected]
For more information regarding FHA financing, contact a MAP-
approved Lender or your local HUD Multifamily Production office.
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