RAD-All the Latest News! Texas Housing Conference July 28-30, 2014 Hilton Hotel Austin, TX

Presenters Terri Anderson, Anderson Capital Jerry Anderson, Gill Group Elizabeth Arteaga, HUD Barry Palmer, Coats|Rose Deborah VanAmerogen, Nixon Peabody

Rental Assistance Demonstration Deborah VanAmerongen Strategic Policy Advisor

Application Volume 3

Apps, CHAPs & Closings 4 Note: This data reflects applications received as of 12/31/13 and CHAPs awarded through 1/6/14. CHAP Awardees includes CNI applicants as well as Portfolio and Multiphase awards made as of 1/6/14.

Type of LIHTCs by Project 5

Type of Permanent Project Financing Type of 1st Mortgage Financing (with Tax Credits) 6

Type of Permanent Project Financing Type of 1st Mortgage Financing (without Tax Credits) 7

Underwriting Rents on RAD Transactions 8

Rent Levels and Rent Adjustments Initial Rent Levels – Not based on usual lender underwriting standards – Set at the project’s current funding levels under the public housing program Tenant Payment Project’s Share of the PHA’s Capital Fund Project’s Operating Subsidy 9

Rent Levels and Rent Adjustments Based on 2012 Subsidy Levels For projects which submitted applications by 2013 Grandfathers in higher the higher funding levels of FY 2012 in setting initial rents Rent Reasonable Test applicable to the initial rents Rent Adjustments – Rent adjustments will be done by Operating Cost Adjustment Factor The initial rents will be a floor rent No special or other adjustments available due to project expense increases 10

RAD Section 8 Current Funding Rent Levels 11 ACCSection 8 At conversion, PHAs will convert funding to a Section 8 contract rent

Section 8 Conversion Choices By Project 12

PBRA Contract Project-based Rental Assistance Contract – Administered by the Office of Housing/PBCAs— generally familiar to HFAs – Initial term of the PBRA Contract is 20 years – Initial Rent Cap Initial rents based on current funding may not exceed 120% of the FMR, unless rents derived from current funding are below market, in which case limit is 150% of FMR – Rents will be adjusted for the 20-year term by OCAF— similar to MAHRA 13

PBRA Contract (cont’d) – Choice Mobility – allows tenant to move from project, but project retains the project based assistance If neither the PHA nor the HFA has a Section 8 tenant based assistance program – May need another PHA to provide Choice Mobility Letter – May seek a waiver from Choice Mobility requirements— but waivers are very limited – May limit turnover to 15% of the units in the project in any one year – May also limit to no more than 30% of the PHA’s annual voucher turnover 14

PBRA Contract (cont’d) – REAC Inspections/Annual Financial Statements/Management and Occupancy reviews Are required similar to the traditional Section 8 program – No limits in family projects on the number of units that may receive the benefits of the PBRA—100% of units may receive section 8 PBRA assistance 15

Project-based Voucher Contract Administered by HUD through PHAs Initial Term of 15 years—although PHA may agree to provide 20-year term; also PHA can agree to extend for 15 more years Initial Rent Cap – Initial rents based on the Project’s current funding limited to lesser of 110% of the FMRs or the market/reasonable rent for the units in the project Rents adjusted annually by OCAF—same as PBRA 16

Project-based Voucher Contract (cont’d) Choice Mobility – Tenant may request a Section 8 voucher after first year of occupancy – Project retains the PBV – PHA must give the PBV tenant requesting a voucher first priority on the PHA’s voucher waiting list 17

Project-based Voucher Contract (cont’d) PHA will earn a Section 8 administrative fee for the PBVs added to its inventory No REAC/Project Financial Statements/or Management and Occupancy Reviews—but will be subject to Housing Quality Standards Limits on number of PBVs that may be provided to a family project Use of existing PHA waiting list for admission of new tenants upon unit turnover 18

Project-based Voucher Contract (cont’d) If more than 50% of the units in a family project will be assisted by PBVs, owner must have a PHA approved supportive services program – If 100% of units to receive PBVS, then 50% of the units must have a family member participating in supportive services program – Existing tenants are not required to participate in the program – Upon turnover of units of existing tenants, owner must have plan to implement the supportive services requirements for 50% of the units No limits on number of PBV units in an elderly project or a project for persons with disabilities 19

Resident Rights—Relocation RAD does not allow for permanent displacement of existing residents Any permanent displacement or displacement for more than one year requires compliance with the Uniform Relocation Act – Need to be aware that certain notices may be required even when there is no permanent displacement – If URA is applicable—can trigger significant benefits to displaced tenants 20

Other Consideration for RAD Projects Davis-Bacon Applicability – Does not apply to projects meeting definition of existing housing Currently, projects that substantially meet HQS when project is selected Meets HQS compliance when the Section 8 HAP contract is executed – New Construction requires payment of Davis-Bacon wages – Substantial Rehabilitation will also require payment of Davis-Bacon wage rates 21

Other Consideration for RAD Projects (cont’d) Environmental Reviews – NEPA Review—not satisfied by Phase I or Phase II Environmental review – NEPA must be done by a Responsible Entity (frequently the city or county) or by HUD – If no substantial rehabilitation RE or HUD may find that the project is categorically excluded from NEPA review 22

Other Consideration for RAD Projects (cont’d) Ownership of Converted RAD Projects – For LIHTC transactions owner may be for-profit limited partnership – There must be some PHA control over the partnership May be through any or all of the following: – 51% or more of the general partnership interest – Ground lease of the land – Declaration of Restrictive Covenants – Subordinate Debt on the Project 23

Other Consideration for RAD Projects (cont’d) Procurement Requirements – Generally, HUD procurement requirements under 24 CFR part 85 not applicable – Must comply with applicable State and local procurement requirements 24

Process Originally there was a competitive process, but now applications being reviewed on rolling basis PHA must submit a RAD Financing Plan which must include the following: – Physical Condition Assessment performed by qualified third party – Scope of Work to be done based on the PCA – NEPA review—which may result in need for site remediation 25

THANK YOU Deborah VanAmerongen Strategic Policy Advisor Nixon Peabody LLP 437 Madison Avenue New York, NY (212)