Research & Innovations

PHAs Can Now Apply for a Waiver to Adjust Rents, Following CLPHA’s Advocacy

HUD has published RAD Supplemental Notice 4C, which contains several major revisions. Most notably, properties that converted under RAD that have insufficiently low rents are now able to apply for a waiver of rent adjustments by OCAF; CLPHA advocated for this relief through its RAD Rents Working Group. The changes in the Notice are effective immediately and are subject to a 30-day comment period. Other major changes in the Notice include:

• Implementing the extended application date to September 30, 2029, including for both stand-alone applications and applications for Portfolio Awards;
• Changing to RAD-Section 18 Blends allowing for tenant protection voucher (TPV) assistance to convert to a RAD HAP Contract under either PBRA or PBV when a Section 18 event occurs at a property that is partially converting;
• Allowing PHAs to continue Jobs Plus, ROSS, and FSS programs at properties that undergo RAD conversion;
• Strengthening requirements for owners to submit annual financial statements;
• Extending the notification requirement to 30 days prior to termination for nonpayment of rent;
• Clarifying that each HAP Contract must be renewed/extended after its initial term of 15 or 20 years;
• Providing guidance on security deposits, pet occupancy, and the use of plain language in resident leases;
• Making clarifying changes to resident notification requirements for Restore-Rebuild developments (formerly called Faircloth-to-RAD) where the proposed project is occupied;
• Strengthens the Financing Plan Requirements and Feasibility Benchmarks for public housing properties undergoing a RAD conversion;
• Making changes to conform RAD to the HOTMA PBV rule.

RAD-Section 18 Blends:

The Notice implements statutory changes around RAD and Section 18 Blends that allow HUD to convert tenant protection voucher (TPV) assistance to a RAD HAP Contract, under either PBRA or PBV, when partially converting a Section 9 property under RAD and an event under Section 18 occurs that results in eligibility for TPVs. Public housing properties that have been developed pursuant to the mixed-finance development method are eligible for RAD/Section 18 Blends.

Owners of properties that previously entered into a RAD PBRA HAP Contract that also includes units assisted by a PBV HAP contract can now request to terminate the PBV HAP Contract and enter into one single RAD PBRA HAP Contract for all assisted units with a term at least as long as the remaining term of the original RAD PBRA HAP Contract. Any residents of PBV units will not be rescreened and will retain all choice-mobility rights.

MTW agencies can use their MTW funds to set the initial contract rents higher than the normally applicable contract rent cap. However, the initial contract rent set by the PHA is still subject to all other applicable program caps. The agency must use existing MTW funds to supplement the initial contract rent, and any use of MTW funds in setting higher initial contract rents is still subject to subsidy layering review and MTW continued service requirements, as calculated using the MTW Baseline Methodology (described in Notice PIH 2013-02).

HUD will produce a single, blended rent schedule for all units resulting from a RAD/Section 18 Blend. The rent schedule will be calculated as the unit-weighted average contract rent by bedroom of the Converting Public Housing Assistance using the RAD rents based on their “RAD rent base year” (described in Attachment 1C of the Notice), and the Converting TPV Assistance using the lower of 110% of the applicable FMR (or approved exception payment standard) minus any Utility Allowance or the Reasonable Rent.

Requesting Waivers of Rental Adjustments by OCAF

A project owner may request a waiver of the rental adjustment by OCAF and receive a rental adjustment by an alternative operating cost factor. To request a waiver of the rental adjustment by OCAF, project owners must submit a request along with documentation demonstrating the need for an alternative operating cost factor rental adjustment in order to preserve the project. The submission to the Office of Recapitalization must be consistent with instructions published on www.hud.gov/rad. If the Office of Recapitalization grants the waiver, they will determine the appropriate alternative operating cost factor and resulting rents. For PBV, the Contract Administrator must consent to the request and their consent must be evidenced in the Project Owner’s documentation.

Financing Plan Requirements and Feasibility Benchmarks

The Notice makes changes to financing plan requirements and feasibility benchmarks for any transaction that has not submitted a complete Financing Plan on or before April 16, 2025 (the 90th day after the Effective Date of this Notice). All other transactions will be subject to the previous provisions of the RAD Notice, Rev-4.

Under 24 CFR § 58.11(c), all conversions will be subject to an environmental review under Part 50. Environmental documents are required to be submitted no later than the applicant’s Financing Plan. Once an awardee has submitted an application for a specific project, they may not make any choice limiting actions before the completion of the environmental review. The Notice contains details about the environmental documents that must be submitted, the entity that performs the review for each transaction type, and more.

HOTMA conforming changes

The Notice makes technical changes to the RAD Notice to update regulatory references and language and certain non-technical changes to resolve conflicts between the RAD Notice and the HOTMA Voucher Final Rule. These include several modified definitions; the maximum number of PBV units (percentage limitation); the cap on the number of PBV Units in each project (Income-Mixing requirement); proposal and project selection procedures; applicability of PBV housing types, execution of RAD PBV HAP Contract, and RAD rehab assistance payments; and changes to the execution of RAD PBV HAP Contract and rehabilitation.

Any questions should be emailed to [email protected]. Additionally, HUD will develop informational materials to address various program elements that HUD will post on the RAD website.

RAD Supplemental Notice 4C

PHAs Can Now Apply for a Waiver to Adjust Rents, Following CLPHA’s Advocacy

HUD has published RAD Supplemental Notice 4C, which contains several major revisions. Most notably, properties that converted under RAD that have insufficiently low rents are now able to apply for a waiver of rent adjustments by OCAF; CLPHA advocated for this relief through its RAD Rents Working Group. The changes in the Notice are effective immediately and are subject to a 30-day comment period. Other major changes in the Notice include:

• Implementing the extended application date to September 30, 2029, including for both stand-alone applications and applications for Portfolio Awards;
• Changing to RAD-Section 18 Blends allowing for tenant protection voucher (TPV) assistance to convert to a RAD HAP Contract under either PBRA or PBV when a Section 18 event occurs at a property that is partially converting;
• Allowing PHAs to continue Jobs Plus, ROSS, and FSS programs at properties that undergo RAD conversion;
• Strengthening requirements for owners to submit annual financial statements;
• Extending the notification requirement to 30 days prior to termination for nonpayment of rent;
• Clarifying that each HAP Contract must be renewed/extended after its initial term of 15 or 20 years;
• Providing guidance on security deposits, pet occupancy, and the use of plain language in resident leases;
• Making clarifying changes to resident notification requirements for Restore-Rebuild developments (formerly called Faircloth-to-RAD) where the proposed project is occupied;
• Strengthens the Financing Plan Requirements and Feasibility Benchmarks for public housing properties undergoing a RAD conversion;
• Making changes to conform RAD to the HOTMA PBV rule.

RAD-Section 18 Blends:

The Notice implements statutory changes around RAD and Section 18 Blends that allow HUD to convert tenant protection voucher (TPV) assistance to a RAD HAP Contract, under either PBRA or PBV, when partially converting a Section 9 property under RAD and an event under Section 18 occurs that results in eligibility for TPVs. Public housing properties that have been developed pursuant to the mixed-finance development method are eligible for RAD/Section 18 Blends.

Owners of properties that previously entered into a RAD PBRA HAP Contract that also includes units assisted by a PBV HAP contract can now request to terminate the PBV HAP Contract and enter into one single RAD PBRA HAP Contract for all assisted units with a term at least as long as the remaining term of the original RAD PBRA HAP Contract. Any residents of PBV units will not be rescreened and will retain all choice-mobility rights.

MTW agencies can use their MTW funds to set the initial contract rents higher than the normally applicable contract rent cap. However, the initial contract rent set by the PHA is still subject to all other applicable program caps. The agency must use existing MTW funds to supplement the initial contract rent, and any use of MTW funds in setting higher initial contract rents is still subject to subsidy layering review and MTW continued service requirements, as calculated using the MTW Baseline Methodology (described in Notice PIH 2013-02).

HUD will produce a single, blended rent schedule for all units resulting from a RAD/Section 18 Blend. The rent schedule will be calculated as the unit-weighted average contract rent by bedroom of the Converting Public Housing Assistance using the RAD rents based on their “RAD rent base year” (described in Attachment 1C of the Notice), and the Converting TPV Assistance using the lower of 110% of the applicable FMR (or approved exception payment standard) minus any Utility Allowance or the Reasonable Rent.

Requesting Waivers of Rental Adjustments by OCAF

A project owner may request a waiver of the rental adjustment by OCAF and receive a rental adjustment by an alternative operating cost factor. To request a waiver of the rental adjustment by OCAF, project owners must submit a request along with documentation demonstrating the need for an alternative operating cost factor rental adjustment in order to preserve the project. The submission to the Office of Recapitalization must be consistent with instructions published on www.hud.gov/rad. If the Office of Recapitalization grants the waiver, they will determine the appropriate alternative operating cost factor and resulting rents. For PBV, the Contract Administrator must consent to the request and their consent must be evidenced in the Project Owner’s documentation.

Financing Plan Requirements and Feasibility Benchmarks

The Notice makes changes to financing plan requirements and feasibility benchmarks for any transaction that has not submitted a complete Financing Plan on or before April 16, 2025 (the 90th day after the Effective Date of this Notice). All other transactions will be subject to the previous provisions of the RAD Notice, Rev-4.

Under 24 CFR § 58.11(c), all conversions will be subject to an environmental review under Part 50. Environmental documents are required to be submitted no later than the applicant’s Financing Plan. Once an awardee has submitted an application for a specific project, they may not make any choice limiting actions before the completion of the environmental review. The Notice contains details about the environmental documents that must be submitted, the entity that performs the review for each transaction type, and more.

HOTMA conforming changes

The Notice makes technical changes to the RAD Notice to update regulatory references and language and certain non-technical changes to resolve conflicts between the RAD Notice and the HOTMA Voucher Final Rule. These include several modified definitions; the maximum number of PBV units (percentage limitation); the cap on the number of PBV Units in each project (Income-Mixing requirement); proposal and project selection procedures; applicability of PBV housing types, execution of RAD PBV HAP Contract, and RAD rehab assistance payments; and changes to the execution of RAD PBV HAP Contract and rehabilitation.

Any questions should be emailed to [email protected]. Additionally, HUD will develop informational materials to address various program elements that HUD will post on the RAD website.

RAD Supplemental Notice 4C