rental assistance emonstration (rad)...why rad –generally? 6.2 7.4 8.9 9.6 10.5 9.6 9.6 10.4 9.6...
TRANSCRIPT
RENTAL ASSISTANCE DEMONSTRATION(RAD)
New England Housing Network BriefingDecember 7, 2012
WHY RAD– GENERALLY?
6.27.4
8.99.6
10.59.6 9.6
10.49.6
10.9
6.55.7 5.6
6.2 6.1 5.8 6.1 6 6.15.4
0
2
4
6
8
10
12
1970 1978 1985 1991 1995 2001 2003 2005 2007 2009
# of Poor Rental Households & Available Affordable Units (in millions by year)
Poor renter households Affordable rental units
-0.3
1.7
3.3 3.4
4.43.8
3.5
4.4
3.5
5.5
-1
0
1
2
3
4
5
6
1970 1978 1985 1991 1995 2001 2003 2005 2007 2009
Gap Between Need & Availability of Affordable Units for Poor Renters (in millions by year)
Source: Institute for Children, Poverty, an d Homelessness, “A Home By Any Other Name,” September 2012
PUBLIC HOUSING – OPERATING FUND REALITY
3
80%
82%
84%
86%
88%
90%
92%
94%
96%
98%
100%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Pro
rati
on L
evel
s
PH Operating Fund Proration Levels 1997-2010
PUBLIC HOUSING – CAPITAL FUND REALITY
4
$1.90
$2.00
$2.10
$2.20
$2.30
$2.40
$2.50
$2.60
$2.70
$2.80
$2.90
$3.00
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bill
ions
PH Capital Fund Levels 1999-2010
PUBLIC HOUSING – FUNDING FUTURE?
5
$0
$1
$2
$3
$4
$5
$6
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bill
ions
Gaps in PH Operating Funding 1997-2010Amount made available Administration Request
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
WHY RAD—PUBLIC HOUSING?
HUD’s Legacy Programs (the Orphans)
• Section 8 Moderate Rehabilitation (Mod Rehab) ~ 23,000 units – Cannot renew on terms needed to secure financing
• Rent Supplement (Rent Supp) & Rental Assistance Payment (RAP) ~ 22,500 units– No option to renew when contracts expire
WHY RAD—MULTIFAMILY HOUSING?
Grants• HOPE VI • Choice Neighborhoods
Financing• Mixed Finance• Capital Fund Financing Program• Energy Performance Contracting
Other• Section 18 Demolition/Disposition • MtW Demonstration
HOW TO ADDRESS – PUBLIC HOUSING TOOLS NOW
8
• February 2010: FY11 Budget requests $350M for Transforming Rental Assistance (TRA) initiative
• May 2010: “Preservation, Enhancement, and Transformation of Rental Assistance Act of 2010” (PETRA) ‐ Administration’s bill
• December 2010: “Rental Housing Revitalization Act” (RHRA) introduced by Rep Ellison and co‐sponsors
• February 2011: FY12 Budget requests $200M for a “Rental Assistance Demonstration” (RAD)
• August 2011: RAD language provided as “Technical Drafting Service” to Reps Ellison, Bachus, and Senator Shelby
• November 2011: FY12 Appropriations minibus authorized RAD
LEGISLATIVE HISTORY
• 600+ Section 8 Contracts (PBRA & PBV)– Compared to Mixed‐Finance, offers Capital Fund allocation to support NOI
– Compared to CFFP, considerably less Capital Fund committed relative to debt/equity raise
– Maximizes leverage of 4% & 9% LIHTC deals by providing RAD rents & stable Section 8 contract
– Reduced appropriations, other funding reduction risk– No Declaration of Trust work around
• PHAs Function Same as Other Affordable Developers/Owners
• Historic Low Interest Rates– Streamlined access to FHA financing—3.45% for 40/yr amortization
• Streamlines Legacy Programs onto Existing platforms
RADOPPORTUNITIES
RADCONVERSION ELIGIBILITY
Public Housing Mod Rehab Rent Supp & RAP
1st Component: Competitive, 60,000 Units
PBRA PBV
2nd Component: Non‐Competitive, No‐Cap
(subject to availability of TPVs)
PBV
1st COMPONENT—PUBLICHOUSING&MODREHAB
Key Provisions• Public Housing & Mod Rehab• Convert at current funding only• PBRA or PBV• Cap of 60,000 units• Choice‐Mobility, with limited exemptions• Extensive waiver authority to facilitate conversion
• First come, first served after close of initial competitive window (10/25/2012)
• All applications must be received by 9/30/2015
12
1st COMPONENT—PUBLICHOUSING&MODREHAB
Contracts & Post-Conversion Terms• Option of PBRA or PBV contracts
• Long-term renewable use & affordability restrictions
• Secretary shall offer & the owner shall accept renewal of the contract
• Transfer of assistance to replacement units
• Public Housing Section 18 Demo/Dispo application not needed for conversion of substantially all units
• Requirements for assistance established through contracts, use agreements, regulations, etc
• Waiver authority for PBV, PBRA, Operating Fund, Capital Fund
• Evaluation
• Public or non-profit ownership or control, except after foreclosure, etc., or to facilitate tax credits
13
1st COMPONENT—PUBLICHOUSING
Resident Provisions
No Re‐Screening of Residents at ConversionOne‐for‐One Replacement• Must convert all or substantially all units in covered projectFamily Self Sufficiency• Current FSS participants continue in programResident Participation & Funding• PHA must recognize legitimate tenant organizations• PHA must provide $25 per occupied unit annually for resident
participation ($15 per occupied unit > legitimate tenant organizationResident Procedural Rights• Consistent with Section 6 of the 1937 Housing Act
14
PUBLIC HOUSING—CURRENT FUNDING RENT LEVELS
ACC Section 8
At conversion, PHAs will convert
funding to a Section 8
contract rent
2ND COMPONENT—RENT SUPP,RAP&MOD REHAB
Key Provisions• Upon contract termination/expiration, convert Tenant
Protection Vouchers (TPVs) to PBVs
• No cap, but subject to availability of TPVs
• Choice‐Mobility requirement per PBV program rules
• Limited waiver authority to facilitate conversion
• Prospective conversion authority through 9/30/2013
• Retroactive conversion authority back to 10/1/2006 (convert by 9/30/2013)
16
GEOGRAPHIC DISTRIBUTION OF RENT SUPP/RAP
17
CA3%
CT1%
IL6%
MA15%
MD4%
MI12%
MN2%
NJ15%
NY29%
PA1%
VA3%
WA2%
Other7%
Rent Supp/RAP Highly Concentrated in a Few States
Debt• Conventional • Soft secondary• Credit enhancement
FHA Insurance• FHA Mortgagee Letter for RAD transactions• LIHTC Pilot
LIHTCs• 4% availability & considerations• 9% availability & considerations
RADFINANCING
18
Section 223(f) • Refinance or acquisition• Minor/moderate repairs ($6,500/unit*high cost factor)• Permanent debt with repair escrow ‐ up to 35 years
Section 221(d)(4)• Substantial rehab: 2 major building systems• Construction/permanent debt all in one ‐ initial/final closing• 40‐year financing
Mortgagee Letter for RAD Transactions issued 10/12• Eligibility, underwriting criteria, processing & materials
FHAMULTIFAMILY MORTGAGE INSURANCE
19
Streamlined‐Enhanced FHA 223(f) & LIHTCs
• Rehab expenditures of up to $40,000/unit
• Tax credit or Bond Cap allocation in hand
• Processed in Multifamily Hubs
• Using MAP lenders approved for the Pilot
• Goal of 3‐4 month turnaround on applications
20
FHALIHTCPILOT PROGRAM
RAD Sweet Spot—Debt Only
• Abt study—$24k/unit average capital need
• Opex at $4,500 pupy + $300 replacement reserves
• FHA debt at 3.45%; 1.2 DCR
• Feasible with RAD rents above ~$610/month
RAD&LIHTCS
21
RAD Sweet Spot—4% LIHTCs• Rehab needs above $24k/unit to ~$40k/unit
• Ease of meeting 50% test with RAD rents
• Available P‐A Volume Cap
• Non‐competitive
• QAPs favoring preservation, green
• Evolving, accessible short‐bond structure
• Historically low borrowing rates
RAD&LIHTCS
22
Short Bond Structure for 4% LIHTCs
• At Closing– TE bonds with 24 month term issued (1.25%)– FHA 221(d)(4) or 223(f) closes
• During Construction– Construction draws: Standard GNMA certificates– Bonds paid down & paid off at construction completion– Reduces negative arbitrage costs
• Long Term– Project benefits from 40‐year loan at FHA rate of 3.45%
RAD&LIHTCS
23
RAD Sweet Spot—9% LIHTCs• Targeted prospects for substantial rehab & replacement housing
• No Section 18 review• Income mixing• Split project (AMP) – 9% LIHTC used to help cover relo/demo/first phase– 4% LIHTC for balance of site
• RAD HAP contract(s) for off‐site replacement – Acquisition/rehab– New construction
RAD&LIHTCS
24
PHA’s Meeting Varied Objectives• Move out of public housing system• Preserve properties in good neighborhoods• Address problem properties– Further leverage for CNI/traditional mixed finance– Projects that didn’t get HOPE VI; may not qualify for CNI; don’t meet state’s 9% LIHTC QAP scoring criteria
Using a Range of Financing Structures• Debt only with FHA &/or CRA lenders• LIHTC 4% with FHA short bond structure• LIHTC 9% with debt added to reduce need for gap funds• Use of CDBG, HOME, AHP, local housing trust funds, etc
WHATWE’RE SEEING WITH RADSO FAR
25
• Initial competitive application round with ranking factors, designated geographic regions & PHA sizes to ensure equitable access closed October 24, 2012 – Awards anticipated by mid‐December
• 2nd non‐competitive application round allocated on first‐come, first‐served basis opened October 25, 2012– No ranking factors or point system– Remains open until September 30, 2014
RADSTATUS
FY13 Budget• Exempt Section 8 Mod Rehab from the 60,000 unit cap under the 1st component
AHSSIA• Authorize an appropriation of $150 million over 5 years for public housing and Section 8 Mod Rehab conversions
• Authorize owners of Rent Supp/RAP properties to choose to convert to PBRA or PBV assistance with $50 million appropriation over 5 years
FY14 Budget?
OTHER RAD‐RELATED PROPOSALS
PUBLIC HOUSING RESOURCES &TOOLS
28
RAD Conversion Guide for PHAs
PUBLIC HOUSING RESOURCES &TOOLS
29
RAD Inventory Assessment Tool for PHAs
RADCAPITAL MARKETPLACE
30
www.radcapitalmarketplace.com
RAD Notice, Application Materials and Additional Resources can be found at
www.hud.gov/rad
Email questions to [email protected]
RADWEB PAGE