Rental Assistance Demonstration (RAD) Program 2013 NJAHRA CONFERENCE Atlantic Club Hotel & Casino Atlantic City, NJ Presenters: William F. Snyder Louis Riccio
What is RAD? • It is the conversion from Section 9 Public Housing Assistance to Project Based Section 8 Assistance. • You will be released from your Public Housing Annual Contributions Contract and the Declaration of Trust. • You will have less administrative burden (HUD estimates about 15%). • You will be relieved from the burdens imposed by REAC (PASS, FASS, MASS). • RAD is the current administration’s attempt to recapitalize public housing through private debt & equity.
RAD-Should I or Should I not! • What is the future of public housing? • Will the PH program provide a stable funding source for operations & capital needs in the future? • Do my properties have significant capital needs? • Can my properties pass HUD’s physical condition assessment (PASS)?
HUD Funding for Public Housing What do we know about the stability and rate of funding for the Public Housing Program?
“Proration Factor” • The Annual Contributions Contract (ACC) stipulates that your subsidy is subject to annual appropriations from Congress. There is currently an $800,000,000.00 gap in PHA Operating Fund eligibility and Congressional appropriations. PHAs must estimate what percentage Congress will approve in preparing their budget.
Operating Fund • For 2012, the Congress accepted the Administration’s recommendation and funded the Public Housing Operating Fund at $3.982 billion, $1 billion below total subsidy eligibility. This funding level was paired with a $750 million offset against “excess” existing operating reserves held by Public Housing Authorities (PHAs). . • A year-long CR at the 2012 level will provide only 83 percent of PHAs’ operating costs for calendar year 2013. This would be the deepest proration in the program’s history.
Capital Fund Status • Estimated Need (Abt) $26 Billion • Annual Accrual Rate $3.6 Billion • 2013 Appropriation $1.78 Billion • 25% Cut in CFP from 2010-2012
Capital Fund Program From 2001 to 2013 the Capital Fund has been cut by nearly 50%! 25% from 2010 to 1013 alone!
Capital Fund Program • For 2012, the Public Housing Capital Fund was funded at $1.875 billion, the lowest funding level in the history of the program. Between 2010 and 2012, the Capital Fund experienced an unprecedented 25 percent reduction from what was already an inadequate funding level given the inventory’s annual accrual of capital needs. According to the Capital Needs Assessment recently completed by Abt Associates at HUD’s direction, the portfolio already has a modernization backlog in excess of $26 billion, with an annual accrual rate of approximately $3.4 billion.
Housing Choice Voucher Program • Need/Eligibility $18 Billion • Current HAP Funding 94% • Admin Fee 69%
Housing Choice Voucher Program • HUD’s FY 2013 budget proposed $1.575 billion for “administrative and other expenses of which up to $50 million “shall be available to…allocate to public housing agencies that need additional funds to administer their Section 8 programs” at pre-QHWRA rates, leaving at least $1.525 billion for ongoing administrative fees. Vouchers from incremental and special purpose programs such as HUD-Veterans Affairs Supportive Housing (HUD-VASH), Non-Elderly Disabled (NED), the Family Unification Program (FUP), tenant-protection vouchers, and opt-outs will be leased and therefore “roll into” the Section 8 tenant-based renewal account for FY 2013, HUD has previously estimated that the proposed funding level would provide an 81 percent pro-ration for 2013. • The FY 2012 act provided just $1.3 billion for ongoing administrative fees, $97 million less than the FY 2011 enacted level. This results in proration of 69 percent, this represents the lowest pro-ration in the 37-year history of Section 8 tenant-based voucher programs.
Community Development Program From 2004 to 2013 the CDBG program has been reduced by 1.54 billion.
HOME Program The HOME Program has been utilized as a source of gap funding in developing new affordable housing. Over the last 10 years, the HOME program has been slashed by 50%!
Washington to the Rescue? • Do you think that the current congress has an appetite form increasing HUD funding Public Housing? • Do you think that housing programs a congressional priority?
National Debt • Current Federal Budget $3.8 Trillion • Current National Debt $16.8 Trillion • Current annual budget deficit $973 Billion • Proposed Budget Savings over the next 10 years $1.5 Trillion
National Debt-over the next 10 years • Per year Savings (per sequestration) 150 Billion • Current Annual Deficit 973 Billion • Annual Difference 823 Billion • 10 years x10 • 10 Year deficit 8.23 Trillion • Current Deficit 16.8 Trillion • Total Projected Deficit at 2023 25.03 Trillion • Entire federal budget is 3.8 Trillion • The Deficit is going up-not down as a result of sequestration! • As a nation, we are overspending. • The United States just doesn’t not have the resources to continue to increase the federal budget. As such, it comes down to a matter of priorities (guns or butter). Currently, congress cannot agree on what priorities should be funded!
“Sequestration” What is sequestration? Sequestration is an across-the-board reduction in Federal budgetary resources in all budget accounts that have not been exempted by statute. Under the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012, and other relevant legislation, across-the-board reductions of $85 billion in budgetary resources were required to be ordered by the President on March 1, 2013. Sequestration reduces each agency’s budgetary resources in non-exempt accounts for the remainder of the fiscal year (which runs through September 30, 2013). Automatic cuts come from domestic discretionary spending which make up about 30% of the federal budget. HUD spending is considered discretionary spending and is subject to sequestration.
“Sequestration” What will be the impact of sequestration on HUD? HUD will attempt to minimize the impact of sequestration to the extent permitted by law. However, HUD cannot choose which programs to exempt or what percentage cuts to apply. This will mean automatic and across-the-board budget cuts at HUD. The impact of sequestration on HUD programs will be dramatic. An approximate 5% across the board cut in HUD programs added to the already historic low proration factor!
“Sequester” • The sequester was originally passed as part of the Budget Control Act of 2011 (BCA), better known as the debt ceiling compromise. • It was intended to serve as incentive for the Joint Select Committee on Deficit Reduction (the “Supercommittee”) to come to a deal to cut $1.5 trillion over 10 years. If the committee had done so, and Congress had passed it by Dec. 23, 2011, then the sequester would have been averted. • No compromised deal has been achieved. • No compromise seems to be anywhere is sight!
U.S. Housing Authorities • Approximately 3,300 PHAs • 1.2 million public housing units • 60% of residents are elderly or disabled • 40% include families with children • Average residency for non-elderly is approximately 4 years
Federal Budget 101 Where Does the Money Go? • In fiscal year 2014, the federal government will spend around $3.8 trillion. These trillions of dollars make up a considerable chunk – around 22 percent – of the US. economy, as measured by Gross Domestic Product (GDP). That means that federal government spending makes up a sizable share of all money spent in the United States each year. So, where does all that money go?
Federal Budget 101 Mandatory and Discretionary Spending • The U.S. Treasury divides all spending into three groups: mandatory spending and discretionary spending and interest on debt. Interest on debt, which is much smaller than the other two categories, is the interest the government pays on its accumulated debt, minus interest income received by the government for assets it owns. • Mandatory items: Medicare, Medicaid, Social Security, unemployment, SNAP, SSI, TARP.
Federal Budget 101 • Total Federal Budget $3.8 Trillion • Annual HUD Budget $44.8 Billion • Percent of Total Budget <2% • Annual Federal Budget deficit $973 Billion • Accumulated federal deficit 16.8 Trillion
Do you think that things will get better anytime in the near future? • 2014 Operating Fund levels are being projected at the same levels as 2013 with sequestration. • Congress does not appear to be anywhere close to a compromise on spending priorities.
HUD Notice PIH 2012-32 • Issued 7/26/12 • Provide Instructions for the RAD program • Eligibility • Selection Criteria
RAD Goals • Build on the proven Section 8 platform • Leverage private capital to preserve assets • Offer residents greater choice and mobility
RAD Authority • Authorized in the Consolidated Further Continuing Appropriations Act of 2012 (Public Law 112-55) • Allows public housing & certain at-risk multifamily projects to convert to project based Section 8 • Two Components: • 1st-Competitive: Public Housing & Mod Rehab • 2nd-Non-competitive: Mod Rehab, Rent Supplement & RAP • On-going application period
1st Component-Competitive • Allow projects funded under public housing and Section 8 Moderate Rehabilitation to convert to project based Section 8 contracts. • PHAs may choose between project based voucher (PBA) or project based rental assistance (PBRA) • 60,000 units are authorized for conversion under the 2012 Appropriations Act.
2nd Component-Non Competitive • Rent Supplement, Rental Assistance Payment and Moderate Rehabilitation Programs may convert to Project Based Vouchers. • No cap on the number of units and no requirement for competitive selection • Subject to availability of vouchers
Public Housing Projects • Applications had to be submitted during the application period (9/24-10/24/12) • Approved projects will received a Commitment to enter into a Housing Assistance Payment (CHAP) • The PHA must submit a financing plan for HUD review and approval. • Approved projects will receive a long-term Section 8 HAP contract. • We are currently in the “On-going Application” period! You can still apply since the initial interest was not what had been forecast.
Public Housing Awards as of May 2013-60,000 available units There was a total of 130 projects that were issued CHAPs for 14,438 units
Initial RAD Rents • HUD establishes the initial contract Rents for every public housing project based upon: • 2012 Appropriated Operating Funds • 2012 Appropriated Capital Funds NOTE: For applications submitted prior to 12/31/13
Selection of PBA or PBRA • PBA • Project Based Rental Assistance will be administered by the agency on whose Annual Contribution Contract the voucher were assigned (most cases will be the agency doing the conversion) • Term-15 years (up to 20 with approval of administering voucher agency) • PBV rents will be equal to current finding subject to a cap and will be adjusted annually • PBA contract will also carry a concurrent renewable RAD User Agreement • Must provide Choice Mobility Option to residents • Maximum PBA assistance (20% of budget authority) will not count against the PHA’s maximum for covered projects
Cap on Number PBV Units in each project. • The 25% limitation on the number of PBV assistance in a project is increased to 50%. • 100% of the units may be PBV if the at least 50% of the units qualify as elderly, disabled or families receiving supportive services.
Selection of PBA or PBRA • PBRA • Project Based Rental Assistance-the project will be administered by HUD’s Office of Housing • PBRA Contract rents will be equal to the project’s current funding, subject to a cap and will be adjusted annually • Term-20 years • PBRA Contract will also carry a concurrent 20 year renewable RAD User Agreement • A Choice Mobility Option will be a condition of the conversion
Eligibility for Conversion to RAD • Must have public housing units under ACC • Be classified as a standard or high performer. If “troubled” must be able to demonstrate the capacity to carry out a successful conversion. • Be classified as standard or high performer under SEMAP if administering the PBV contract. If “troubled” must be able to demonstrate the capacity to carry out a successful conversion. • Be in substantial compliance with HUD reporting and programmatic requirements and/or be in compliance with an MOA. • Not have debarments, suspension or LDPs lodged against the Executive Director. Board members or affiliates. • Submit a completed application that complies with the RAD instructions • Be in compliance with all fair housing and civil rights requirements
Rehabilitation & Financing Consideration • HUD estimates that there is a need for approximately 25.6 billion in capital needs across the portfolio • One of the main purposes of the RAD program is demonstrate how the conversion to Project Based Assistance can generate access to private debt and equity to address immediate and long-term capital needs through rehabilitation. • Any and all viable forms of debt and equity financing will be considered to support the conversion.
Rehabilitation Needs • Applications will be scored on a per-unit capital cost value system • High Need Scoring: Family-$37,665 Elderly-$21,834
Green Physical Condition Assessment-PCA • The PCA is at the center of the conversion process. • It provides the 20 year capital needs for the property. • It is not the same as your Physical Needs Assessment-PNA. • It is very important to the overall project financing. • All PCA capital needs must be supported through the upfront financing and an annual deposit to a reserve for replacement (R&R) or a combination of both. • If this cannot be accomplished, the project is not feasible!
Rehabilitation ConsiderationPhysical Condition Assessment (PCA) • Projects selected for award will be required to perform a detailed physical inspection of the property to determine short-term rehabilitation needs and long term capital needs to be funded through a reserve for replacement. • The PCA Statement of Work must be in the format utilized in HUD’s Mark to Market program and may accessed at: • http://portal.hud.gov/hudportal/hud?src=/program_offices/housing/mfh/presrv/mhrpaes/training
Rehabilitation ConsiderationsGreen Building & Energy Efficiency • All projects retrofitted under the RAD conversion must replace appliances and systems with Energy Star, WaterSense or Federal Energy Management (FEMP) designated product and appliances.
Rehabilitation Consideration • Temporary Relocation-Any temporary relocation must comply with the Uniform Relocation Assistance and real Property Acquisition Act of 1970 (see 49 CFR Part 24)
Rehabilitation Consideration • Accessibility Requirements-When a project’s rehabilitation meets the definition of substantial rehabilitation under 24 CFR Part 8.23, the PHA must comply with all applicable accessibility features under 504 of the Rehabilitation Act of 1973.
Construction Considerations • Site Selection & Neighborhood Standards-where a PHA is planning to convert assistance under RAD in conjunction with new construction on an alternate site, the PHA must comply with all applicable site selection criteria per the Fair Housing Act and Title VI of the Civil Rights Act of 1964