Congress authorized the Rental Assistance Demonstration (RAD) program to address the daunting backlog of capital repairs in the nation’s public housing stock and to stem the loss of affordable units. Historically, public housing authorities (PHAs) have not had sufficient funds to keep their units habitable or to make necessary repairs. PHAs can now use RAD Component I to access private debt and equity to fund repairs and stabilize properties. In March, Congress expanded eligibility requirements under the RAD program and raised the unit cap. For more information regarding the RAD program and other affordable housing news, click here.
As a PHA, you can use the program to convert your current funding into a PBRA contract (Section 8 project-based rental assistance) or a PBV contract (Section 8 vouchers). Converting your funding to these long-term Section 8 contracts using the RAD program allows you to repair and rehabilitate units while keeping rents affordable for tenants.
RAD is a complex program and can last anywhere from 6-18 months; therefore, it is imperative to select a knowledgeable lender who will walk you through the conversion process from start to finish. To give you a better idea of the steps involved in the conversion process, here is a simple breakdown of the RAD process:
FILE RAD APPLICATION
To begin the process, you need to file a RAD application with HUD.
HUD will review your application and issue their initial approval, also called the Commitment to Enter into a Housing Assistance Payment (CHAP).
SECURE DEBT FINANCING
If you are using debt financing, in conjunction with your RAD conversion, you should start the loan application sometime after you receive the CHAP. FHA has tailored its financing programs to allow for favorable terms for RAD transactions, providing for high loan-to-value and debt service loan restrictions.
UPDATE PHA PLAN
You will need to document the RAD conversion in your PHA’s annual plan.
PROVIDE FINANCING PLAN
You must give HUD a copy of your financing plan in order for it to approve the conversion of your property. In the plan you must be able to show that all of the improvements will be maintained after conversion
HUD will issue the RAD Conversion Commitment (RCC) after reviewing your financing plan, which means that HUD has officially approved your financing plan. Around the same time, HUD will issue a Firm Commitment for the debt.
The RAD closing and the debt closing will occur simultaneously. After closing, the long-term Section 8 contract and the RAD Use Agreement will both become effective. At the same time, your loan closing will provide the necessary funds to complete renovations and preserve your affordable housing units
Love Funding is proud to have a large team of RAD experts. We understand the complexities of these deals and will work with you to ensure that you select the right financing to accomplish your goals. Learn more about our skilled affordable housing finance experts here.