By Alexandra S. Jackiw, CPM®, CAPS, C3P
Earlier this summer HUD celebrated a significant milestone — the renovation of 100,000 public housing homes through the Rental Assistance Demonstration (RAD) Program. If you visit https://www.hud.gov/RAD/news/case-studies you can read about the many successes public housing agencies have experienced as a result of RAD implementation. The case studies tell the story of the importance of RAD.
So, what is RAD and why has it been so impactful? Let’s take a look at it from a historical perspective.
President Roosevelt signed the Wagner-Steagall Housing Act into law on September 1, 1937. The new law established the United States Housing Authority (USHA) that provided $500 million in loans for low-cost housing projects across the country. The Housing Act also provided for subsidies to be paid from the U.S. government to local public housing agencies (LHAs) to improve living conditions for low-income families.
While the Housing Act’s social mission to house low-income families was embraced by the country, it soon became clear that the need for affordable housing outpaced supply. In addition, the existing stock of public housing units began to age and there were insufficient funds available for necessary repairs and upgrades to these aging properties. As a result, over the years the public housing inventory has deteriorated and the total number of available housing units has declined. HUD estimates that approximately 10,000 public housing units are demolished and/or disposed of annually.
There are currently about 1.2 Million units in the Public Housing program nationally. According to a 2010 study, the capital spending backlog at that time was already $26 billion and expected to grow by $3.4 billion annually, bringing the projected backlog to $56.6 billion by 2019.
In 2012, Congress authorized the Rental Assistance Demonstration (RAD) program. The program was created to:
- Provide funding for capital needs
- Facilitate access to private capital
- Streamline HUD programs
- Create housing options for residents
Under RAD, public housing authorities can convert their Section 9 (public housing) funding to Section 8 (rental assistance) funding by leveraging public and private debt and equity to rehabilitate the housing stock and address the backlog of capital needs. The RAD program provides long-term funding commitments, private financing options, and increased operational flexibility to empower PHAs and owners who serve families in need of affordable housing. It allows PHAs access to funding sources, which provide the capital necessary to complete major repairs or reconstruction.
The initial allocation under RAD was for up to 60,000 units to covert. However, that ceiling has been lifted several times. In 2018 Congress expanded the ceiling to 455,000 units and extended the program through 2024.
The five things to know about RAD public housing conversions:
- RAD aids in the preservation of assisted housing programs.
- PHA residents retain their rights.
- RAD facilitates public/private investment.
- RAD maintains the PHA public stewardship.
- RAD is cost neutral and does not increase the HUD budget.
As HUD has stated: “The purpose of RAD is to preserve and improve affordable housing so that residents can live in stable, healthy, and safe environments.” The case studies on HUD’s website point to the following positive outcomes as a result of RAD conversions:
- Housing options for the homeless increased
- The needs of veterans with special needs addressed
- Health outcomes for residents improved
- Community and neighborhood pride increased
- Resident engagement revived
- Integrated resident services provided
The RAD program has been a “win-win” for PHAs throughout the United States. The key player in a RAD conversion is the PHA that owns and generally operates the property. The RAD program provides the PHA with tremendous flexibility in ownership and operation of the converted property. Hayes Gibson Property Services is proud to provide consulting services to several PHAs who are either contemplating or have recently completed RAD conversions. Contact us if you need help navigating through the process.