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RAD: A New Source of Rental Subsidy September 29, 2013

RAD: A New Source of Rental Subsidy September 29, 2013. RAD Authority. Authorized in Consolidated Further Continuing Appropriations Act of 2012 ( Public Law 112-55 ) Initial program rules outlined in PIH Notice 2012-18 (3/8/12) Final program rules outlined in PIH Notice 2012-32 (7/26/12)

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RAD: A New Source of Rental Subsidy September 29, 2013

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  1. RAD: A New Source of Rental Subsidy September 29, 2013

  2. RAD Authority Authorized in Consolidated Further Continuing Appropriations Act of 2012 (Public Law 112-55) • Initial program rules outlined in PIH Notice 2012-18 (3/8/12) • Final program rules outlined in PIH Notice 2012-32 (7/26/12) • Revision 1 in PIH Notice 2012-32 REV 1 (7/2/13) Allows public housing and certain at-risk multifamily legacy programs to convert to long-term Section 8 rental assistance • 1stComponent, Competitive: Public Housing & Mod Rehab • 2nd Component, Non-competitive: Mod Rehab, Rent Supp, & RAP

  3. Why RAD? Public Housing • Capital repair needs in excess of $25.6B across portfolio, or $23,365/unit • Section 9 funding platform unreliable (pro-rations, cuts), inhibits access to private debt and equity capital (declaration of trust) • Losing 10,000-15,000 hard units/year

  4. 2000-12 Funding Curves—Section 9 Graph does not include $4billion in 2009 to Cap Fund through ARRA

  5. 2000-12 Funding Curves—Section 8 PBRA OCAF ~4% per year Graph does not include $2billion in 2009 to PBRA through ARRA

  6. RAD PH Rents—Converting Current Funding At closing, funding is converted to a Section 8 contract rent Section 9 ACC Section 8 HAP

  7. 1st Component—Overview • Public Housing & Mod Rehab • Can compete to convert assistance to: • Project-Based Rental Assistance (PBRA) or • Project-Based Vouchers (PBV) • Cap of 60,000 units (applications must be received by 9/30/2015) • Convert at current funding only • Choice-Mobility, with limited exemptions • Applications are first-come, first-served until cap reached

  8. 1st Component—Status 1st Component—As of July 1 • 132 CHAP awards—14,781 units • 51% converting to PBRA; 49% converting to PBV • Over 60% of projects planning to use LIHTCs • ~ 45% of deals using FHA insurance [223(f) & 221(d)(4)] • Over 60 partnering lenders and investors • Leverage ~$815M in debt & equity investments (conservative) 1st Component—Since July 1 • Additional 100+applications—or +18,000units

  9. RAD 1st Component Initial Awards—Geography 949 Units 1,279 Units 2,556 Units 9,997 Units

  10. PH Initial Awards—Key Characteristics Capital Needs • 22% New Construction • 78% Rehab • 24% proposed Greater than $50K in Rehab • 23% proposed $30K – 50K in Rehab • 21% proposed $10K – 30K in Rehab • 32% proposed Less than $10K in Rehab

  11. PH Initial Awards—Key Characteristics PHA Objectives • Modernize aging family & elderly properties • Sub rehab of deteriorated properties • Thin densities/mix-incomes via PBVs & transfer authority • Demolish/replace severely distressed/obsolete properties • Portfolio streamlining

  12. Key Changes in the RAD Notice Locking in 2012 contract rents for all applications received by 12/31/13 Allowing a PHA to “bundle” rents to facilitate financing Allowing MTW agencies rent fungibility

  13. Key Changes in the RAD Notice • Mixed Finance projects • Removing unit cap for Mixed Finance projects • Allowing financially distressed HOPE VI projects to apply • Exempting awarded projects from the Public Housing Assessment System (PHAS)

  14. Key Changes in the RAD Notice • Eliminating unit caps on: • Mod Rehab projects • # of units a PHA can convert • Creating new awards for: • Portfolio conversions • Multi-phase conversion • Joint RAD/CNI applicants

  15. RAD PH Awards Trend Chart

  16. Development opportunities • For profit and non-profit Developer Opportunities • First new HAP contracts in over 20 years • Responding to PHA RFP’s for development services • Larger PHAs: mixed income developments, etc. • Mid-sized PHAs: 250 to 2500 units: Development opportunities not previously available. • Resource: HUD website: PHA profiles; PHA mortage amounts based on RAD; RAD Inventory Assessment Tool • Conversion of existing mixed finance developments • Combining other HUD programs, (Choice Neighborhoods, etc.) with RAD • Development of off-site “transfer of assistance” units

  17. Financing: FHA LIHTC Pilot Program 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

  18. Financing: FHA Multifamily Mortgage Insurance 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

  19. Financing: LIHTC • TE Bonds and 4% credits • Short bond structure • Higher rents • Lower borrowing rates • HFA support in QAPs for 4% deals: gap funds; scattered sites; pools; preservation set-asides; etc. • 9% credits • New construction • Points for HAP contracts for off-sites

  20. RAD Web Page RAD Notice, application materials, and additional resources can be found at www.hud.gov/rad Email questions to radresource.net Sign up at radcapitalmarketplace.com

  21. Current RAD Lenders & Investors

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