Rental Assistance Demonstration (RAD) Update Presented by Tom Davis, Director Office of Recapitalization, HUD November 16, 2016

Public Housing Conversions – Status $3.2 Billion (>$60K per unit) in construction investment in RAD properties. This doesn’t include items such as acquisition, soft costs, reserves & developer fee 47,611 units converted. ≈15,000 units on the waiting list. Public Housing Conversions

PH Conversions – Program Growth NOTE: FY2017 data from RAD 1 closed transactions only through November 15, 2016. Public Housing Conversions

PD&R Interim Evaluation HUD’s Office of Policy Development & Research contracted Econometrica, Inc. to evaluate RAD. Interim Report, published September 21, 2016, finds: “Proof of concept” based on closings as of October, 2015. RAD transactions demonstrate a leverage ratio of $8.90 for every $1.00 of public housing funds invested 20-year projections comparing RAD scenario with counter-factual scenario absent the RAD conversion shows that all four case studies perform better under RAD Full evaluation, planned for December, 2018, will address additional issues including residents’ experiences and satisfaction. Interim report data did not include a sufficient number of completed transactions to adequately examine post-completion outcomes and impacts. Interim Evaluation

New Data Available

Fair Housing & Civil Rights Highlights No change in the underlying rules nor in the PHA’s responsibility for civil rights compliance Focus on clarity and transparency Explanation of requirements and factors that are considered Examples and illustrations Front-end review is a risk-based analysis More detail on how HUD approaches the risk analysis Presumptions New submission framework – the Checklist Realigned timing of some items – site submission, other front-end review items and AFHMP

Relocation Highlights Focus on resident protection and a smoother implementation Defines eligibility for protection more clearly Specifies what satisfies the right of return Requires written relocation plans for long-term relocation Adds RAD Information Notice and Notification of Return Allows earlier relocation (after RCC instead of after Closing) Identifies minimum resident relocation data to maintain Clarifies that PHAs may offer residents choice & alternative housing options with appropriate resident protections Permits use of public housing units for temporary relocation

Office of Recap Structure Director Tom Davis Deputy Director Jeff Little Affordable Housing Transaction Division Greg Byrne Closing & Post-Closing Division Bev Rudman Program Admin Office Jeff Little (Acting) Branch 2 (RAD 2, 236s, SPRAC) M. Monroe-Baldwin Branch 3 (RAD 1st Component) H. West Branch 1 G. Byrne (Acting) Branch 4 (Mark-to-Market, Post-M2M) P. Burke (Acting) Senior Advisors In Coordination With: Public and Indian Housing (PIH) Public Housing Housing Choice Voucher Fair Housing & Equal Opportunity (FHEO) Civil Rights and Fair Housing Community Planning and Development (CPD) Relocation Office of General Counsel (OGC) Legal Review

Supplemental Materials

Background on RAD The Problem The Solution Deferred public housing capital repair needs. 2010 estimate in excess of $25.6B across the portfolio (>$23k per unit) Public housing platform creates barriers to accessing private capital 10,000-15,000 public housing units lost each year Multifamily “legacy” program properties also at risk The Solution RAD created in FY2012, expanded in FY2015 Allows public housing and at-risk legacy properties to convert to long-term Section 8 Housing Assistance Payment (HAP) contracts Background

Public Housing Properties Convert at Cost-Neutral Rents Pre-Conversion (Public Housing) Post Conversion (Section 8 HAP Contract) Background

PH Conversions – Investment & Financing Closed Transactions by Level of Investment Closed Transactions by Financing Type NOTE: Percentages derived from RAD 1 closed transactions only through November 15, 2016. Public Housing Conversions

RAD Participation by PHA Size Public Housing Conversions

RAD Pipeline as a Percentage of Total Public Housing by Region 19% 19% 8%* *13% excluding NYC 24% Note: This data reflects the regional breakdown of RAD public housing applications (“projects”) received compared to the number of existing public housing projects in each region. Public Housing Conversions

PH Conversions – Preferred Platform PBRA vs PBV Trends Over Time (Percentage of Total Units) NOTE: Percentages derived from the entire RAD portfolio through November 15, 2016 (closed and “active” transactions to close in the future). Public Housing Conversions

Legacy Programs Status RAD 2nd Component Conversions # of projects and units Rent Supp/RAP Transactions: 40 active transactions in the RAD 2 Pipeline 49 properties in portfolio 22 properties (45%) expire in 2016 15 properties (31%) expire in 2017 12 properties (24%) expire after that Mod Rehab Transactions: 23 active transactions NOTE: Data derived from RAD 2 closed transactions only through November 12, 2016. Legacy Program Conversions

Legacy Programs – Pipeline Eligible Units in the Pipeline Quite few Rent Supp/RAP units Hope to sunset Rent Supp/RAP programs in the next few years Substantial opportunities for Mod Rehab units Legacy Program Conversions

RAD FY 17 Budget Requests Eliminate the cap on the public housing units that can convert at no cost Allow Section 202 Project Rental Assistance Contracts (PRACs) to convert under 2nd Component at no cost $50 million for incremental subsidy for public housing and Section 202 PRAC conversions; Authorize a tenant’s right to continued occupancy under the second component; and Align ownership and control requirements in the event of foreclosure, bankruptcy, or default with the baseline standard used up-front. FY2017 Budget Requests

Issues Surrounding the Cap There is demand – Units are on the waiting list and others are on the sidelines Transactions require significant lead time, typically 18-20 months, from allocation to closing High investment and transformative efforts require even more lead time – more than deadlines permit Program structures designed to allocate a scarce resource create extra hurdles (inconsistent with local development processes, procedural steps, capacity disconnects, etc.) FY2017 Budget Requests

Opportunity within the 202 PRAC Portfolio 120,000 units under year-to-year contracts Projects are at an age (20+ years old) where they are in need of recapitalization Limited ability to assemble new financing Like public housing units, 202 PRACs that switch to the Section 8 platform would be able to access resources RAD conversions would head-off a future crisis in this elderly housing portfolio and preserve services FY2017 Budget Requests

Need for Incremental Funding RAD has demonstrated tremendous results without any incremental funding – many properties will still convert on a cost-neutral basis Some public housing and 202 PRAC properties cannot be recapitalized and preserved without additional revenue Even a small appropriation for both public housing and 202 PRACs will allow HUD to begin developing and testing methods to fairly, and cost effectively, allocate any future incremental funding FY2017 Budget Requests

Thank You. For Evaluation materials, visit www. huduser Thank You. For Evaluation materials, visit www.huduser.gov/portal/RAD_Evaluation.html For more information and case studies visit www.hud.gov/rad