The Department of Housing and Urban Development (HUD) is implementing a new Fast Track component to its Rental Assistance Demonstration program (better known by its catchy acronym: RAD), which provides access to viable financing tools for at risk public and assisted housing. RAD Fast Track aims to address the overwhelming popularity of the RAD program by streamlining the process. HUD estimates that roughly 10,000 public housing units are lost to deterioration annually, while the need for affordable housing for low-income renters continues to skyrocket. The RAD programis a central part of HUD’s efforts to close this gap by preserving the country’s affordable rental housing, while at the same time adding value to it through privately-funded energy efficiency improvements.
On their website, HUD states that ”RAD is a central part of the Department’s rental housing preservation strategy, which works to preserve the nation’s stock of deeply affordable rental housing, promote efficiency within and among HUD programs, and build strong, stable communities.” Simply put, the RAD program makes it easier for public housing authorities to refinance and rehabilitate their aging facilities, by way of converting these properties to long-term Section 8 rental assistance contracts.
HUD was granted the authority to award only 60,000 units the ability to submit applications for conversion under the RAD program. As of December 31, 2013, HUD had received applications for over 176,000 units to be converted to long term Section 8 contracts. HUD is working with congress to lift the cap on the number of units that can be converted under this program. In light of the inherent popularity of the program, as evidenced by the number of applications received, HUD anticipates the cap to be lifted. In anticipation of the cap being lifted, HUD continues to review pending applications, and has begun revising procedures in order to streamline the conversion process. In the interim, HUD hopes to be able to quickly and efficiently process the pending applications once the cap is lifted.
Introducing: RAD Fast Track
As with any new program, there is bound to be a feeling-out stage, and growing pains and hiccups were to be expected. Now, in response to the overwhelming and growing demand for contracts under the RAD program, HUD is taking steps to streamline the process by implementing the new RAD Fast Track program. The implemented changes are clear evidence that HUD is serious about making this program attractive and owner/operator friendly, before the cap is lifted, and the influx of applications becomes too much to handle.
Here is a review of some of the revisions to the process:
- Condenses the 30, 60, 90 & 150 day milestone process into a streamlined 60 day process (commences after receipt of the CHAP/Award Letter)
- Codifies the existing documentation checklists, and eliminates some of the unnecessary/repetitive paperwork
- The first phase is for “Non-FHA Insured” Submittals only (both 4% & 9% LIHTC programs); however, there will be a Fast Track Program for FHA Insured projects coming soon
Due Diligence and RAD Fast Track
The RAD program requires a number of third party reports to be included with the submittal package prepared by the lender and borrower. With the implementation of the RAD Fast Track, execution of the due diligence scopes of work becomes even more vital to the process, and a quality provider can identify a lot of unforeseen conditions early in the process that come along with assessing aging properties. The related due diligence scopes of work include:
- A Part 50 review by HUD (which in essence would require supplying them with a Phase I) is required for all borrowers wishing to convert to a Section 8 Project Based Rental Assistance Program (PBRA)
- Borrowers wishing to convert to a Section 8 Project Based Voucher (PBV) requires a part 58 review by a local agency; however, if the local agency will not or cannot do the review, then a Phase I is recommended so that HUD can do the Part 50 review
- A RAD Physical Condition Assessment (PCA) is required for all RAD conversion submittals. The RAD PCA includes an Intrusive level HUD compliant Property Condition Assessment with a Reserve for Replacement Analysis/RAD Excel Tool, as well as an Energy Audit and Utility Analysis.
- Projects submitted under the RAD program are also encouraged to bolster their accessible dwelling unit inventory as part of the proposed substantial improvements. The relocation of tenants, and modification and adaptation of existing buildings/units to meet current accessibility standards requires design and consultation by a qualified third party
The above due diligence not only allows owners/operators to take advantage of much needed funding through the RAD program, should they decide to pursue HUD backed financing via long term Section 8 rental assistance, but they also provide valuable information about the condition of their property and viability of proposed improvements.
I discussed the RAD program in more detail in a previous Globe St blog. More information and links to RAD and Fast track related documents, including program information, planning tools, checklists and applications/closing materials, can be accessed via HUD’s Resource center website.