January 8, 2018

Lessons From RAD

Photograph showing the façade of a low-rise, multi-story brick residential building.Loring House, a 104-unit affordable housing property located in Portland, Maine, was renovated through HUD’s Rental Assistance Demonstration program.

First authorized by Congress in 2012, HUD’s Rental Assistance Demonstration (RAD) program empowers public housing agencies (PHAs) to leverage private capital to address the backlog of deferred maintenance and capital improvement needs of the nation’s 1.2 million public housing units that was estimated to be $26 billion in 2010. RAD allows PHAs to convert public housing units to long-term, project-based rental assistance that provides greater financial certainty and stability to help attract private capital for modernization and preservation, and it allows PHAs to use that capital in ways that public housing is not allowed to do. At the National Housing Conference’s 2017 national housing policy convening, Solutions for Affordable Housing, Bank of America Merrill Lynch senior vice president Brian Tracey moderated a discussion by panelists who have experience with RAD from various perspectives. Tom Davis, director of HUD’s Office of Recapitalization; Steve PonTell, president and chief executive officer of National Community Renaissance; Stacy Spann, executive director of the Housing Opportunities Commission of Montgomery County, Maryland; and Jessica Cassella, attorney at the National Housing Law Project, shared lessons learned from their involvement with RAD conversions.

A “Powerful Tool”

Although the program is still evolving and many challenges to implementation remain, HUD sees RAD as a “powerful tool” for preserving and improving the public housing stock. To date, RAD has generated $4.5 billion in investment, a sum for which Davis estimates PHAs would have waited 46 years under traditional approaches for funding capital improvements, to convert roughly 81,000 units. By putting properties in a stable financial position for the long term, RAD enables PHAs to access all the standard economic tools for capital improvements in the form of rehabilitation or, sometimes, new construction. For all the program’s successes, however, some challenges remain. RAD is still a relatively new and complex program, which may make participation difficult for PHAs, especially those with small to medium capacity, says Davis. He would like to see more PHAs using RAD, perhaps through greater administrative flexibility, the pairing of RAD with other subsidies and funding, or the elimination of the statutory cap on the number of RAD units authorized. He noted a waiting list of more than 77,000 units that would be participating in RAD if not for the cap. Having closed 11 RAD transactions with the Housing Opportunities Commission, Spann agrees that RAD deals are not easy transactions, and completing a RAD conversion quickly enough to mesh with the other components of a financing deal, such as low-income housing tax credits (LIHTCs), can be especially difficult. With competitive tax credit markets in states such as California, syncing the timing of various funding streams is critical. PonTell points out that PHAs that enjoy extra flexibility in administering assistance programs as Moving to Work demonstration sites, as was the case with a conversion he worked on with the Housing Authority of the County of San Bernardino, may find it easier to manage the many parts of the RAD deal. Davis says that HUD strives to set consistent “guardrails” — the rules, requirements, and expectations governing the program — while at the same time allowing local variability and creativity.

PHAs can use RAD to address capital improvement needs while pursuing complementary goals. Spann notes that using RAD for new construction creates an opening for PHAs to deconcentrate poverty, replacing public housing units in higher-poverty areas with new units in areas of opportunity. In PonTell’s experience, achieving a mix of resident incomes, another goal that PHAs might pursue, has been challenging, and in some cases existing residents have exceeded the income limits of the completed RAD conversion.

Tenants’ Experiences With RAD

RAD conversions can have serious consequences for residents, says Cassella. Capital improvements, whether demolition and new construction or rehabilitation, can be disruptive, typically requiring residents to relocate. RAD rules provide residents safeguards as long as PHAs and developers comply, so enforcement is crucial. As a protection against permanent displacement, tenants have the right to stay in the converted property even if they exceed income limits, and they retain all the rights that they possessed as public housing residents before a RAD conversion, including the right to a grievance process. Cassella says that the best RAD conversions are those that go beyond the minimum requirements to put residents first, and she encourages PHAs to engage local tenant advocacy groups. PonTell reports that in his experience, residents tend to be happy with the improvements and new amenities that result from RAD construction and rehabilitation. For its part, HUD has a third-party evaluation currently underway to survey residents affected by RAD, and Davis says that many of the early problems related to unclear rules about residents’ rights have been reduced through clarification and revision.

RAD’s Future

Despite RAD’s significant progress in leveraging capital investment in the nation’s public housing stock, Davis notes that the capital needs backlog remains great. RAD can be refined as it continues to evolve, and it can remain an important and powerful tool for leveraging blended public and private funding streams to help PHAs address capital needs as well as other goals that improve residents’ quality of life and available opportunities. Stakeholders are applying the lessons they have learned to improve RAD processes and outcomes; as Spann says of the Housing Opportunities Commission, “I can guarantee you our 11th transaction is way better than our first was.”

 
 
Home Page Archives