Rental Assistance Demonstration (RAD) Update Presented by Thomas R. Davis Office of Recapitalization, HUD April 11, 2017

Background on RAD The Problem Deferred public housing capital repair needs. 2010 estimate in excess of $25.6B across the portfolio (>$23k per unit) and rising 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 – Changing the Regulatory Platform RAD created in FY2012, expanded in FY2015 Allows public housing to convert on a budget-neutral basis to long-term Section 8 Housing Assistance Payment (HAP) contracts Also allows at-risk legacy assisted properties to convert to Section 8 HAP contracts Leverages private investment to address capital needs, improving conditions for residents, creating jobs and stabilizing the assisted portfolio Background

RAD Public Housing Conversions – Status 60,073 units converted. ≈ 32,000 units on the waiting list. $3.9 Billion (>$67K per unit) in construction investment in RAD properties. This doesn’t include items such as acquisition, soft costs, reserves & developer fee Public Housing Conversions

PH Conversions – Program Growth Steady growth in conversions year to year Major process changes improved cross-silo coordination and sped processing times Interim evaluation by Econometrica, published September 21, 2016, found: Proof of concept 9:1 leverage ratio Full evaluation in 2018 will address additional issues including residents’ experiences and satisfaction NOTE: FY2017 data from RAD 1 closed transactions only through March 17, 2017. Public Housing Conversions

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 March 17, 2017. Public Housing Conversions

Public Housing Universe PH Conversions – Relative Distribution RAD Pipeline as a Percentage of the Total Public Housing Inventory by Region 17% 16% Participating PHA Size in RAD Pipeline Compared to PHA Size in Total Public Housing Inventory 8%* *12% excluding NYC Public Housing Universe RAD 23% 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

Legacy Program Conversions – Status Conversions & Outstanding Pipeline Rent Supp/RAP Transactions: 40 properties remaining in portfolio 26 active transactions in the RAD 2 Pipeline 25 properties have contracts that expire in 2017 We hope to wind down the Rent Supp & RAP programs in the next few years Mod Rehab Transactions: 8 active transactions in the RAD 2 Pipeline 2 applications in process Substantial opportunities for Mod Rehab properties NOTE: Data derived from RAD 2 closed transactions only through March 17, 2017. Legacy Program Conversions

2016 Notice Revisions RAD Fair Housing, Civil Rights & Relocation Notice No change in underlying fair housing rules from those established in the June, 2015, Rev-2 of the RAD Notice; modest changes in timing of fair housing requirements Front-end fair housing review is a risk-based analysis Fair housing portions of the Notice provided clarity and transparency to FHEO review Substantial changes in the relocation requirements designed to facilitate relocation implementation, to provide greater clarity and to enhance resident protections RAD Notice Revision 3 – Public Housing Conversions Conform with HOTMA (remove cap on the percentage of PBV units on a site) Modest changes to underwriting requirements (use of proceeds, developer fee limitations, close-out expenses for full-portfolio conversions) Simplify eligibility and application procedures Clarify expectations around communication with residents, prohibition on rescreening for existing residents, rent phase-in and waiting list transfer arrangements RAD Notice Revision 3 – Legacy Program Conversions Revise rent setting provisions Public Housing Conversions

2016 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

Office of Recap Structure Director Tom Davis Affordable Housing Transaction Division Greg Byrne Closing & Post-Closing Division Bev Rudman Program Administration Office Will Lavy (Acting) Branch 2 (RAD 2, 236s, Mark-to-Market) Minnie Monroe-Baldwin Branch 3 (RAD 1st Component) Harry West Branch 1 Alan Kaufmann Branch 4 (RAD 1st Component, Post-Mark-to-Market) Kara Williams-Kief 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

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