What is Rental Assistance Demonstration?
Rental Assistance Demonstration and the HUD 223(f) Loan Program Rental assistance demonstration is a program which offers PHAs (public housing authorities) the power to “preserve and improve public housing properties” by addressing nationwide deferred maintenance backlogs. Certain HUD ‘legacy’
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Rental assistance demonstration is a program which offers PHAs (public housing authorities) the power to “preserve and improve public housing properties” by addressing nationwide deferred maintenance backlogs. Certain HUD ‘legacy’ programs can enter into long-term contracts for financing improvements, including Rent Supplement, Rental Assistance Payment, and Section 8 Moderate Rehabilitation.
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Related Questions
What is the purpose of the Rental Assistance Demonstration (RAD) program?
The purpose of the Rental Assistance Demonstration (RAD) program is to help investors preserve affordable housing across the U.S. by allowing properties using HUD legacy programs to convert their properties to HUD Section 8 housing. This conversion allows investors to use private capital to fund rehabilitation work and gives them more flexibility in terms of acquiring the financing to repair their properties, including making it easier to apply for the Low-Income Housing Tax Credit Program (LIHTC).
Specifically, the RAD program allows property owners/investors in 4 different legacy programs the ability to convert into Section 8 contracts. These programs are:
- Rental Supplement (Rent Supp)
- Rental Assistance Payment (RAP)
- Section 8 Moderate Rehabilitation (Mod Rehab)
- Section 202 properties with Project Rental Assistance Contracts (PRACs)
Residents in RAD properties will continue pay 30% of their income towards housing. By law, these Section 8 contracts must be renewed, so they provide a large degree of stability for both residents and landlords.
How does the RAD program help preserve affordable housing?
The RAD program helps preserve affordable housing by allowing investors using four HUD legacy programs the ability to convert their housing into long-term Section 8 contracts. This helps investors by giving them more flexibility in terms of acquiring the financing to repair their properties, including making it easier to apply for the Low-Income Housing Tax Credit Program (LIHTC). Specifically, residents in RAD properties will continue pay 30% of their income towards housing. By law, these Section 8 contracts must be renewed, so they provide a large degree of stability for both residents and landlords. Source and Source
What are the eligibility requirements for the RAD program?
In order to qualify for RAD for PRAC conversion, properties must typically meet several criteria. In addition to maintaining compliance with fair housing standards, assets must have:
- An active PRAC agreement
- Operating reserves of at least $250 per unit (this requirement can be met via funding from a lender or equity investor)
- A physical inspection score from HUD of at least 60 prior to applying
- Evidence that supportive services are accessible to residents
Another requirement for the process is the involvement and engagement of a property’s residents. A property owner is required to hold, at minimum, two meetings with residents to discuss any rehabilitation plans, relocations (if applicable), any policy changes, etc.
One of these meetings must happen more than 30 days prior to submitting a final conversion plan, while another must occur after the plan is submitted to HUD but before conversion begins. During the approval process, additional meetings are also required if the conversion plan is revised in any significant, material way.
What are the benefits of participating in the RAD program?
The Rental Assistance Demonstration (RAD) Program provides investors with more flexibility in terms of acquiring the financing to repair their properties, including making it easier to apply for the Low-Income Housing Tax Credit Program (LIHTC). Additionally, RAD allows properties using HUD legacy programs to convert their properties to HUD Section 8 housing, which is much better understood, and more easily permits the use of private capital to fund rehabilitation work. Residents in RAD properties will continue pay 30% of their income towards housing, and by law, these Section 8 contracts must be renewed, so they provide a large degree of stability for both residents and landlords.
How can I apply for the RAD program?
The RAD program is administered by the Department of Housing and Urban Development (HUD). To apply for the program, you must first be an owner/investor in one of the four legacy programs eligible for conversion to Section 8 contracts: Rental Supplement (Rent Supp), Rental Assistance Payment (RAP), Section 8 Moderate Rehabilitation (Mod Rehab), and Section 202 properties with Project Rental Assistance Contracts (PRACs).
Once you have determined that you are eligible for the RAD program, you can apply by submitting an application to HUD. The application process includes submitting a RAD Conversion Request, which includes a description of the project, a financial pro forma, and other required documents. Once the application is approved, HUD will enter into a contract with the owner/investor to convert the property to a Section 8 contract.
For more information on the RAD program, please visit the HUD website.