1. TN Education Committee
Association of Housing and
Redevelopment Authorities
October 23, 2013
Presenters:
Judy Van Dyke
Holly Knight
Dan Johnson
Rob Hazleton

3. Core values

4. Core values

5. Core values

6. Core values

7. Our mission

8. Our people
Clockwise:
Founder & Managing Partner
Assistant Development
Coordinator
Development Partner
Partner & Development
Coordinator
Vice President of
Development

9. The Bennett Group Consulting, LLC

10. Our track record
Over a four-decade period, our partners have
 developed 81 residential communities
 created more than 4,000 units of market rate
and affordable housing
 developed 35 partnerships with non-profit
organizations
 generated $10 million in fees that were put back
into these organizations to further advance their
mission.

11. Grace Ridge Apartments
Auburn, Ala.
 56 Family Units
 New Construction
 Funding
 LIHTC
 Home
 Private Equity
 Earthcraft
 Alabama Council
on Human
Relations, CAP
Agency

12. Grady’s Walk
Dothan, Ala.







New Construction
56-unit seniors , 55 +
2 Bdr/2Bth
1,070sf
Organized Community
Action Partnerships,
CAP
Gazebo, Fitness
Center, Computer
Center, Clubhouse
Funding



LIHTC
Home
Private Equity

13. Jubilee
Pell City, Al




72 Unit Family
Homeownership
Organized Community
Action Partnerships,
CAP
Earthcraft


Funding





Solar site lighting
LIHTC
Private Equity
3 & 4 Bd
1,300 Avg sf
Splash Pad, Fitness
Center, Computer
Center, Clubhouse

14. Solstice
Opelika, Ala.



56-unit duplex, Senior
55+
Private, comfortable
neighborhood “feel”
Funding






LIHTC
Home
Private Equity
2 bd/2bth
1,072 Avg sf
Fitness
Center, Computer
Center, Clubhouse

15. Our industry partners
WILLIAM J. PEEK
Member of the
American Institute of Architects

16. Our industry partners
WILLIAM J. PEEK
Member of the
American Institute of Architects

17. Our industry partners

18. What is RAD

What is RAD? HUD demonstration program that combines public housing
operating and capital subsidy into payments under a Section 8 HAP contract

What kinds of developments are being done with RAD? Minor rehab; major
rehab; new construction; mixed income; off‐site replacement housing

How do I determine if I have a project/portfolio that would be a good
candidate for RAD conversion? Use the RAD Inventory Assessment Tool in
the Resources section of www.hud.gov/rad

How would RAD affect:
• Residents: No change; 30% of income for rent
• Boards and PHAs: Still maintain identity
• PHA Functions: Dependent on cash flow, fees, strong management; puts them on
the more secure Section 8 funding platform; Gives them the affordable housing tools
of other nonprofit developers

19. Who is involved?

20. RAD Basics
• Contract Rents:
Operating Fund (with Operating Fund Allocation Adjustment)
+ Capital Fund
+ Tenant Rents
= RAD Contract Rent
• Can convert Public Housing to:
• Project‐Based Rental Assistance (PBRA) or
• Project‐Based Vouchers (PBV)
• Can convert at 2012 funding levels
• Operating Fund 2012 higher than 2013 at 82% funding
• Capital Fund 2012 higher than 2013 at 95% funding
• WHY IS THE SECTION 8 FUNDING MODEL MORE SECURE FOR A PHA?
• Tenant Protections:
• Tenants have the absolute right to return
• Choice‐Mobility, with limited exemptions
• Extensive waiver authority available to facilitate conversion
RAD BASICS

21. RAD Details
• Ownership – Public or non-profit, except to facilitate tax credits
• The authority can lease the land to the LIHTC Partnership
• A Physical Condition Assessment (PCA) must be performed on RAD
sites to determine the improvements required
• The authority must comply with the Uniform Relocation Act
• An existing PILOT agreement must be renewed when ownership
Changes
• Davis-Bacon wages must be paid during rehabilitation

22. RAD Notice Changes
• Mixed Finance projects
• Removes unit cap for Mixed Finance projects
• Allows financially distressed HOPE VI projects to apply
• Exempts awarded projects from the Public Housing Assessment System
(PHAS)
• Extends Capital Fund obligation and expenditure deadlines
• Clarifies conditions for “rehab assistance payments”
• HUD will honor the FY 2012 RAD contract rents for all applications received before
end of CY 2013 (applies to individual applications, portfolio awards, and multi-phase
awards)
• PHA may adjust Contract Rents across multiple projects as long as aggregate
subsidy does not exceed current funding (“rent bundling”)

23. Show us the Money
• The RAD options:
• Modest rehab with no debt
• Modest rehab with no debt only
• Moderate rehab with debt and 4% LIHTCs
• Major rehab or replacement with debt and 9% LIHTCs
• These are funding sources that are not conveniently
available to small PHAs
• A conversion of all LIPH units eliminates the HUD
requirements for:
• Procurement
• Annual and Five‐ Year Plans
• PHAS
• REAC (if…PBV)
• You Get to Keep the Money – no offsets, developer fees, seller take back financing,
cash flow options

24. Per HUD as of August 2013

26. Tax Credits Leverage Funds

27. RAD Notice Changes
• Portfolio conversions
• PHA defines “portfolio” of projects, either the entire PHA inventory or some
subset
• PHA must submit applications for at least half of the projects in portfolio
• HUD will reserve award for remaining units in portfolio
• PHA must submit application for remaining projects in portfolio within 365 days
• Multi‐phase conversion
• Allows PHAs to reserve conversion authority for projects with multiple
development phases with applicable contract rent for all phases
• PHA has until July 1, 2015 to submit application for final phase
• PHA required to fulfill all CHAP milestones for each CHAP awarded
• Upon application acceptance, HUD will issue CHAP for initial phase and
multi‐phase
award letter covering all phases of project
• Joint RAD/CNI applicants

28. Backlog of Physical Needs
 $26 Billion in repair needs nationally
 Apt study says average of $24,000 in
need per PHA unit

30. RAD versus HOPE VI
 In one year there are more PHAs and more
Public Housing Units committed to RAD than
there were in the first four years of the HOPE VI
program.
 The RAD program has no additional funding
from Congress.
 Over 20 years Congress has spent $5.6 Billion
on HOPE VI.
 Opportunity for all PHAs to participate in
revitalization and leveraging private funds

31. RAD Authority
42,000 Units to date have been submitted

32. Sample Public Housing Conversion
Per Unit Monthly (PUM) – Same funding
$900
$800
$700
Operating Fund
$200
Operating Fund
$600
Housing Assistance
Payment
Housing
$300
Assistance
$330
Payment
$474
$500
$400
$300
$200
Capital Fund
Capital Fund
$144
$100
Tenant Payment
$150
Tenant Payment
$792
$450
Tenant Payment
$150
Tenant Payment
$318
$318
Pre-Conversion
Post-Conversion
$100
$-

33. Sample Public Housing Conversion
Per Unit Monthly (PUM) – Same funding
$900
$800
$700
Operating Fund
$200
Operating Fund
$600
$330
2013 Funding
$164
Payment
$474
$500
$-
Pre-Conversion
$409
$318
$100
$792
$450
Tenant Payment
$150
Tenant Payment
$318
Total
$200
Capital Fund
Capital Fund
$144
$100
Tenant Payment
$150
Tenant Payment
$259
$300
Funding
$95
2013 Cap and OP
2013
$400
Housing Assistance
Payment
Housing
$300
Assistance
Post-Conversion

34. How does the PHA Plan?
 Sequestration (Public Law 112-25 Budget
Control Act of 2011, August 2, 2011)
 Ten year implementation
 Know your Funding
 Financial and Physical Viability
 Diversify and Plan

35. Operating Subsidy Funding
$6,000,000,000.00
$5,000,000,000.00
$5,031,106,183
$4,921,341,060
$4,594,294,060
$4,611,918,201
$4,149,983,999
$4,000,000,000.00
Operating Fund CY
OFND Annual Amount (U.S.)
$3,000,000,000.00
Final Proration
$2,000,000,000.00
$1,000,000,000.00
2013
$0.00
82%
2012
94.968%
2011
100%
2010
103%
2009
88.42%

36. Capital Fund F Capital Funding Trends
2500000000
$2,341,258,000.00
$2,365,835,000.00
$1,910,035,000.00
$1,790,000,000.00
$1,696,372,000.00
2000000000
1500000000
1000000000
500000000
2009
2010
2011
2012
2013
0
1
2
3
4
5

37. HCV Funding

38. Typical PHA Revenue versus Expenses
Total Revenue over Total Expenses
$3,000,000
$2,500,000
Dollars
$2,000,000
$1,500,000
Total Revenue
Total Expenses
$1,000,000
$500,000
$0
2009
2010
2011
2012
2013

39. Typical PHA Administrative Trends

40. Income/Expenses – Oops in 2012

41. Typical Expense Trends
Total Maintenance
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
Total Maintenance
FYE 2009
$594,383
FYE 2010
$692,426
FYE 2011
$711,099
FYE 2012
$803,869

42. Financial Planning
Short and Long Term
What discussions are you having?
What plans are being made to address financials?
 What are discretionary costs to be examined?




Administrative Expenses
Maintenance & Operations Expenses
Protective Services
Tenant Services
 Make tough decisions

43. Physical Needs
 What is your agency doing to address
physical needs?
 Are you fully UFAS compliant/ADA
compliant?
 Do your units physically meet or compare
to other affordable units in the market?

44. PNA
 A Physical Needs Assessment (PNA) is
systematic review all of the major physical
components of property to result in a projection
of future needs and costs to meet those needs.
 A PNA is a strategic planning tool. It is not a
budget but is an important reference document
for the development of annual budgets.
 A PNA can serve as documentation for a long
term grant or loan.
 It’s the beginning point for a number of other
tools

45. Energy Audit
 An Energy Audit (EA) is a systematic review of the
energy use and requirements for real estate that
seeks to identify opportunities for energy savings.
 While Energy Audits (EAs) and Physical Needs
Assessment (PNAs) often involve a review of the
same building systems, EAs have historically been
completed independently of PNAs.
 The broader real estate industry is moving
aggressively to integrate EAs and PNAs as has
HUD’s Mark to Market program.

46. Physical Needs Assessments
GPNA
RAD (RPCA)
PCNA
Why
Required by Rule
Public Housing converting to
Section 8
HUD Insured Loan
Requirement
Frequency
Every 5 years
Transaction Driven
At financing
Format
Access Database
Excel Sheets
Excel Sheets
Term
20 Year
20 Year
20 Year
Funding
Sources
HUD
PHA Funds
Multiple Funding Sources
HUD MAP lender

47. Backlog of Capital Needs
 Capital repair needs of $23,365 per unit
 Needs at your PHA







Roof - $8,000
3 Bedroom 504 Compliance $25-35,000
ADA Site compliance $10-15,000
HVAC replacement -$4,000
Water Heater - $350
Site Soil Erosion- $20,000
Appliances –Range $450 / Fridge $550

48. What is RAD/Why go RAD?
 Rental Assistance Demonstration Program is
an opportunity to convert your current form
of housing assistance to long-term Section 8
Housing Assistance Payments (HAP)
 Builds on a more stable funding platform
 Lock in 2012 funding
 Leverage private capital to address physical
needs and preserve your units
 Provides a great deal of regulatory and reporting
relief

49. Public Housing Policies – Too Many Rules!
Include but are not limited to:
• Capitalization
• Community Service and Self-Sufficiency
• Criminal Record Management
• Deconcentration of Poverty
• Dwelling Lease
• Drug Free Work Place
• EIV Security
• Financial Management
• Grievance Procedure
• Housekeeping
• Internal Control
• Investment
• Maintenance
• Non-Smoking
•
•
•
•
•
•
•
•
•
•
•
•
•
•
References: *24CFR 85.42, 902.79, 982.158, 990.325
Personnel
Pet – Residential and for Service
Animals
Procurement
Property Disposition
Reasonable Accommodations
Rent Collection
Records Retention and Disclosure
Risk Management
Section 3
Transfer Policy if not in ACOP
Travel
Vehicle Operation
Violence Against Women Act
HUD Reporting –multiple systems
49

50. What is best plan for residents?







Diversify
Borrow funds for improvements
New cutting edge programs
Partner
Reposition
RAD
Compliance is not going away even if there is
temporary relief
 Need to over come funding and sequestration

51. Why RAD
What Makes RAD So Special?
• One simple application, not four long
ones.(No SAC)
• Not competitive, just get it right.
• Rapid turnaround by HUD.
• Less procurement, fewer specialized
consultants.
• High probability of approval.
• RAD brings in new money.

52. RAD Highlights
 Applications for demonstration must be in by
December 31,2013 to lock in 2012 funding
 PHAs will remain PHAs and still run their housing
 Boards of commissioners still remain
 PHAs may need to obtain financing to address
physical backlog
 May submit partial portfolio or phased approach
 Under RAD a PHA chooses PBV (PHA) or PBRA
(Project Based Rental Assistance) HUD Multi
Family
 Gives PHA secure funding for 15 – 30 years plus
annual inflation factor increase

53. RAD process
 Open applications through 9/15
 Initial review/approvals in 30-45 days; RAD transaction
manager assigned upon initial approval
 Ability to review prospective deals with RAD Team prior to
application
 Submit full or partial AMP
 No SAC approval
 Subsidy layering review via RAD
 Simplified procurement
 Freed from PH Annual Plans, PHAS, Community
Service, EPIC reporting, Section 3, etc.

54. RAD financing
 Availability of FHA 223(f) & 221(d)(3) insurance, with priority
processing
 Access to FHA LIHTC Pilot processing
 Ability to tap 9% & 4% LIHTCs, including “short bond”
structures
 Ability to support transaction with public housing reserves
and capital funds, including Replacement Housing Factor
funds
 Access to HOME and CDBG for development budgets
 Available sales proceeds can support other affordable
housing purposes

55. RAD flexibility
 Transfer assistance from unworkable units prior to
conversion
 Market accommodations in meeting 1-for-1 preservation
(e.g., convert efficiencies to 1 bdrms; long-term vacant units)
 Combine RAD & agency PBVs or SAC TPVs>PBVs
 Flexibility to reduce densities, replace housing offsite, produce mixed income communities
 Allows PHA to undertake renovations immediately or after
conversion, as warranted
 Demolition/New Construction allowed
 Ability to “bundle” project applications for flexibility with initial
contract rents

56. Next Steps




Initial RAD assessment
Board Resolution to apply for RAD
Two resident meetings
Finalize application to be submitted
before December 31, 2013

57. What can RAD do now?
 15-20 year, renewable contracts with use agreement
 Predictable initial contract rent setting; annual operating cost
adjustments for inflation (OCAF)
 Established replacement and operating reserves; standard
industry underwriting requirements
 RAD HAP funding begins at construction closing
 No limitations on use of project cash flow
 PHA ownership/control similar to LIHTC practices
 Long-term affordability ensured

58. Operating Costs Adjustment Factor
(OCAF)
RAD versus no RAD in PH
$350 HAP Contract x 100 units=$35,000
$35,000 x 12 months=$420,000
$420,000x 2.0 OCAF= $428,400
$428,400x 2.0 OCAF=$436,968
$436,968x 2.0 OCAF=$445,707
$445,707x 2.0 OCAF=$454,621
$454,621x 2.0 OCAF=$463,713
Total HAP Funding 5 years=
$2,229,409
PH 2012
Op Sub $250
Cap Fund $100
TP
$150 TP =
Total=
$500
PH 2013
$220
$95
$150
$465
$315x100units=$31,500 x 12=$378,000
$378,000
$378,000
$378,000
$378,000
Total PH Cap and OP Funding to property 5 Years=
$1,890,000

59. Road to Application
• Simple, start with basic assessment tool and pro forma www.hud.gov/rad
• Application
• Two resident meetings
• Board meeting and approval
• Financing letters
• Lender
• Investor
• If 9% credit, letter from HFA or self‐scoring
• Choice Mobility: Letter for PBRA; ability to administer for
PBV (Waiver request as needed)
• If converting a project that is currently mixed‐finance, need
signatures of all parties
• Fix “Fatal Error” issues
• CHAP Award

60. PBV versus PBRA
RENTAL ASSISTANCE DEMONSTRATION (RAD)
Various Considerations in Choosing PBRA vs. PBV
Item
1. Baseline Funding Levels
2. Initial Contract Term
3. Contract Renewals
4. Rent Caps
PBRA
Based on 2012 levels, with
Operating Fund Offset restored
20 years
PBV
Same
15 years (up to 20 at option of
voucher agency); voucher agency
may also automatically extend for
another 15 years
At end of contract term, Secretary Same
must offer, and PHA must, accept
renewal
Current funding cannot exceed
Current funding cannot exceed
120% of the FMR, unless the
the lower of (1) reasonable rent
current funding is less than
or (2) 110% of FMR.
market, in which case the current
funding cannot exceed 150% of
FMR.

61. 5. Annual Inflation Adjustment
Based on Operating Cost Adjustment
Factor (OCAF), i.e., the method used
to adjust rents for Multifamily
projects renewed under the
Multifamily Assisted Housing Reform
and Affordability Act (MAHRAA).
Same
6. Choice Mobility
Resident may request next available
Resident may request next available
voucher after two years; however,
voucher after one year, with no
voucher agency may limit to not more limitations.
than 15% of project in any year and not
more than 33% of voucher turnover
due to RAD.
7. Voucher Admin Fee
N/A
PHA earns Section 8 voucher admin fee
for all units converted to PBV
Note: for agencies that do not
administer a voucher program, and
that convert to PBVs, the voucher
agency will be responsible for
administration of the waiting list,
eligibility, reexaminations, leading to
substantial deregulation for the
converting agency.
8. REAC/UPCS Inspections
Yes
No (unless project receives FHA
insurance)

62. 9. REAC/FASS-MF Annual Financial
Statements
10. Management and Occupancy
Reviews (MORs)
11. Cash Flow
12. Appropriations
13. Rehab Requirements
14. FHEO Site/Neighborhood
Standards
15. Income Mixing
Yes
No (unless project receives FHA
insurance)
Yes
No (unless project receives FHA
insurance)
Unrestricted
Same
Annual funding subject to
Annual funding subject to
appropriations; however, the
appropriations. Because of the RAD
Congress has never failed to renew a Use Agreement, if Congress provides
PBRA contract
less than full funding for the
Voucher program (i.e., proration),
the PHA administering the voucher
program may will likely need to
absorb the cuts from its non-RAD
voucher units.
There is no required level of rehab
Same
under RAD (or requirement to
leverage debt). The PHA must simply
ensure that whatever needs are
identified are addressed.
Standard FHEO requirements not
Same
waived under RAD.
N/A
Under normal PBV rules, not more
than 25% of units in a project can be
assisted, unless the units are elderly
or disable, scattered site, or
receiving supportive services. RAD
increased the threshold to 50%, with

63. LEEDS HOUSING AUTHORITY
PBV v PBRA
326
129
PBV
HCV
RAD
Other
Y1
326
129
160,392
63,468
223,860
Y2
326
106
160,392
52,275
Y3
326
85
160,392
Y4
326
64
Y5
326
Y6
326
Y7
326
Y8
Units
Admin Fee
No RAD
No RAD
144,156
162
79,704
212,667
136,948
154
75,719
41,642
202,034
130,101
146
71,933
160,392
31,540
191,932
123,596
139
68,336
45
160,392
21,943
182,335
117,416
132
64,919
26
160,392
12,827
173,219
111,545
125
61,673
8
160,392
4,166
164,558
105,968
119
58,590
326
160,392
0
160,392
104,732
113
55,660
Y9
326
160,392
0
160,392
107,515
107
52,877
Y10
326
160,392
0
160,392
110,159
102
50,233
Y11
326
160,392
0
160,392
112,670
97
47,722
Y12
326
160,392
0
160,392
115,056
92
45,336
Y13
326
160,392
0
160,392
117,323
88
43,069
Y14
326
160,392
0
160,392
119,477
83
40,915
Y15
326
160,392
0
160,392
121,522
79
38,870
Y16
326
160,392
0
160,392
123,466
75
36,926
Y17
326
160,392
0
160,392
125,312
71
35,080
Y18
326
160,392
0
160,392
127,066
68
33,326
Y19
326
160,392
0
160,392
128,732
64
31,660
3,047,448
227,860
PBV
NO PBV
PBV Admin Fees
3,275,308
992,548
Other Admin Fees
This is happening
anyway
DIFFERENCE
2,282,760
Total Admin Fees
Extra Admin Fee
2,282,760
ANNUAL AVG
ANNUAL AVG
992,548
NO PBV
PBV
52,239
172,385

64. Additional thoughts
•
•
•
•
FDS different for PBV and PBRA
Simplification of programs to learn
Pay for vendor software
Will more developers be supporting HCV
due to PBV
• What will HCV funding do? How likely
are severe cuts to zero out the program?
• HQS versus REAC
• Multi family reorganization

65. Change
 Take the first step in faith. You don’t have
to see the whole staircase, just take the
first step.
-Martin Luther King, Jr.