1. Rental Assistance Demonstration (RAD) Update
Presented by Thomas R. Davis Office of Recapitalization, HUD June 22, 2017

2. RAD Public Housing Conversions – Status*
63,765 Units
converted from Public Housing to Section 8.
$4.07 Billion (>$74K per unit)
in construction investment** in RAD properties. It would have taken participating PHAs 46 years to accumulate enough public housing Capital Funds to complete a similar amount of construction.
39,000 Construction Trade Jobs generated and an additional 36,000 indirect jobs induced in the surrounding local economies.
25,047 Units
in the final stages of the conversion pipeline – with RCCs issued or with Financing Plans submitted
225,000 Units
authorized for conversion – an increase of 40,000 units from the previous 185,000 unit cap – but not enough to cover the ≈ 68,000 units that are on the waiting list.
* Data through June 16, 2017.
** This figure doesn’t include items such as acquisition, soft costs, reserves & developer fee.
PH RAD Status

3. PH Conversions – Financing*
44% of transactions involve significant work – from $25K to new construction
42% of transactions involve either 4% LIHTC or 9% LIHTC
A major driver of the deeper-investment transactions, particularly those using 4% LIHTC, is accessing the value of the existing real estate (most significantly, by tapping into acquisition credits).
* Data through June 16, 2017.
PH RAD Status

4. PH Conversions – Program Growth
Steady growth in conversions to Section 8 year to year
Interim evaluation by Econometrica, published September 21, 2016, found:
Proof of concept
9:1 leverage ratio
Econometrica leverage ratio was from 2015 data. Updated figure indicates $19 in other funds for every $1 in PH funds
Full evaluation in 2018 will address additional issues including residents’ experiences and satisfaction
NOTE: FY2017 data from RAD 1 closed transactions only through June 15, FYE is September 30.
Public Housing Conversions

5. PH Conversions – Where it works
Note: This data reflects the inventory of RAD public housing applications (“projects”) received compared to the inventory of public housing projects existing in each region prior to any RAD conversions.
Public Housing Conversions

6. Current Hot Topics in PH Conversions
RAD Fair Housing, Civil Rights & Relocation Notice
Front-end fair housing review is a risk-based analysis – not everything is reviewed by HUD
Site and Neighborhood Standards continues to be an area of concern, particularly for new construction replacement units
Relocation concerns seem to be somewhat eased, although the rules are complex
RAD Notice Revision 3
Conforms with HOTMA (removes cap on the percentage of PBV units on a site)
Eliminates need for a letter from the LIHTC Allocating Agency in the RAD application
Revises the developer fee cap in LIHTC transactions
Implementing the 40,000 Unit Increase in RAD Authority
HUD is working on a Federal Register Notice which will set the rent levels
Publication of the Federal Register Notice will start the 60-day clock to convert an LOI to a RAD application. Missing the 60-day deadline will mean losing one’s place on the waiting list
Closing Deadlines
Public Housing Conversions

7. 2017 Closing Priorities & Deadlines
Summary of Deadlines in RADBlast Issued March 15, HUD will prioritize transactions that met the applicable deadlines in managing workload
RCCs issued by March 15, are expected to close by June 30, 2017
To be eligible to close by Nov. 30, transaction must meet the following
To be eligible to close by Dec. 31, transaction must meet the following
Upload all required Financing Plan documents*
June 15
July 15
Receive a RAD Conversion Commitment (RCC)
August 15
Sept. 15
Submit complete closing package
Sept. 1
Oct. 1
All RAD documents approved and ready for HUD signatures
June 22
Nov. 16
Dec. 14
*Note: For FHA-insured financing, the FHA application should also be submitted on or before the date associated with the Financing Plan submission. Make plans with your FHA lender to keep your financing on track.

8. Legacy Program Conversions – Status
Conversions & Outstanding Pipeline
Rent Supp/RAP Transactions:
33 properties remaining in portfolio
21 active transactions in the RAD 2 Pipeline
17 properties have contracts that expire in 2017
We hope to wind down the Rent Supp & RAP programs in the next few years
Mod Rehab Transactions:
9 active transactions in the RAD 2 Pipeline
3 applications in process
Substantial opportunities for Mod Rehab properties
NOTE: Data derived from RAD 2 closed transactions only through June 15, 2017.
Legacy Program Conversions

9. Thank You. For more information and case studies visit www.hud.gov/rad

10. 5/24/17
Equity Market Status

11. Concerns for PHAs
Equity market returns to basics – CRA need, developer strength, deal complexity, and return
Limited federal resources & concerns regarding future availability
-PHAs are already barely getting by and were able to do more given high equity pricing and low interest rates– they don’t have other tools. The strain on equity pricing hits them harder, as there’s no general partner equity they’re sitting on. What they have is what they have.
-if we thought fed funding for PHAs was limited in , just wait until 2017
-I have the highest esteem for PHAs. Time and time again they do so much with so little. However, at the end of the day, they’re generally the ones working in rural counties, reliant on federal subsidy (not just to support this development, but to keep their own office lights on), and with limited capacity. As a result, in all honesty, PHAs are the most difficult to underwrite. They are most impacted by the tax code adjustments to price– especially 2016 and 2017 allocations.

12. Tools for PHAs Uptick in combination 4% and 9% transactions
Increase transaction size = increase interest
PHAs of all sizes using combo of public housing disposition and RAD in singular transaction
Know your strengths and weaknesses – fill knowledge gaps
-PHAs are already barely getting by and were able to do more given high equity pricing and low interest rates– they don’t have other tools. The strain on equity pricing hits them harder, as there’s no general partner equity they’re sitting on. What they have is what they have.
-if we thought fed funding for PHAs was limited in , just wait until 2017
-I have the highest esteem for PHAs. Time and time again they do so much with so little. However, at the end of the day, they’re generally the ones working in rural counties, reliant on federal subsidy (not just to support this development, but to keep their own office lights on), and with limited capacity. As a result, in all honesty, PHAs are the most difficult to underwrite. They are most impacted by the tax code adjustments to price– especially 2016 and 2017 allocations.

13. Lessons Learned
Worth repeating – estimate closing date and give yourself an additional month
Especially true if complex
Review HFA preferences/restrictions and compatibility with HUD requirements
Be realistic about pricing and plan accordingly
-PHAs are already barely getting by and were able to do more given high equity pricing and low interest rates– they don’t have other tools. The strain on equity pricing hits them harder, as there’s no general partner equity they’re sitting on. What they have is what they have.
-if we thought fed funding for PHAs was limited in , just wait until 2017
-I have the highest esteem for PHAs. Time and time again they do so much with so little. However, at the end of the day, they’re generally the ones working in rural counties, reliant on federal subsidy (not just to support this development, but to keep their own office lights on), and with limited capacity. As a result, in all honesty, PHAs are the most difficult to underwrite. They are most impacted by the tax code adjustments to price– especially 2016 and 2017 allocations.

14. Tips for Converting Existing Mixed-Finance Properties to RAD
20% or less of total units assisted: no RPCA needed
Can have negative R4R balance after Y10 if not exceeding 50% of 1st mortgage principal amortization
Capital Needs Inflation Rate can be modified to current local conditions; defaults to 2.5%
Consideration of future debt-only refinance to address IDRR
Educate investors, lenders, & HFAs early in process

15. Timing Considerations for LIHTC/RAD Transactions
9% LIHTC apps to be submitted in next available round following 90 days after CHAP issuance
4% LIHTC apps to be submitted 180 days after CHAP issuance
RAD Financing Plans due dates:
9% LIHTCs: 180 days after LIHTC allocation
4% LIHTCs: 90 days after LIHTC allocation
Projects expected to close within 90 days of RCC issuance

16. Tips for Successful LIHTC/RAD Transactions
Prepare a feasible “Plan B” if 9% LIHTCs not awarded, long before awards are announced
Start Part 58 Environmental Review process early
Submit FHEO requests early
Submit RAD Financing Plan soon after 4% LIHTC app submitted – don’t wait for LIHTC allocation
Prepare HUD closing docs prior to RCC issuance
Push for drafts of LPA and loan docs ASAP
Communicate with investor, lender, and HFA early re: Subordination to RAD Use Agreement

17. Richelle (Shelly) Patton Tapestry Development Group