1. Compliance Challenges in the RAD Portfolio June 22, 2017
Presented by:
Carol Howard
Vice President & Director of Housing Compliance
Boston Capital Corporation
Oke Johnson
Managing Director, Compliance Services
LEDIC Realty Company LLC
Compliance Challenges in the RAD Portfolio June 22, 2017
Boston Capital Corporation LEDIC Realty Company LLC
One Boston Place Colorado Blvd #
Boston, MA Thornton, CO 80602
Research information taken from the following sources:
HUD “Rental Assistance Demonstration (RAD) Quick reference Guide to Multifamily Housing Requirements” – October 2015
Crenshaw, Ware & Martin 2014 Legal Seminar –” RAD Conversion & Rehabilitation using LIHTC: Key Considerations for PHAs”
HUD “Rental Assistance Demonstration Conversion Guide for Public Housing Agencies” (portal.hud.gov)

2. Rental Assistance Demonstration (RAD)
Program in which properties “convert” their rental assistance to long-term, project based Section 8 contracts
“The RAD program was created to provide public housing authorities (PHAs) with new choices for preserving public housing. Its primary feature is the conversion of public housing properties to HUD’s project-based Section 8 assisted housing stage.
Section 8 allows for more funding flexibility, including the use of other funding sources like tax credits and public funds to maintain as well as improve existing public housing buildings.
Participation in RAD is voluntary for PHAs. Properties that convert are subject to long-term Section 8 rental assistance contracts and use restrictions.
RAD contracts also require properties to be owned or controlled by public or nonprofit entities, EXCEPT when low-income housing tax credits are used.”
Material taken from “Evaluation of HUD’s Rental Assistance Demonstration (RAD): Interim Report” September 2016

3. RAD Conversion
The intent is to permit PHAs to finance the renovation or revitalization of an existing housing.
Adding Low Income Housing Tax Credits (LIHTC) is an important module especially if substantial rehab is required.
“Marrying” these two programs (RAD & LIHTC) can sometimes be difficult for those that do not have any experience in either program.
Program confusion lays around tenant relocation & unit transfers, timely certifications, tax credit set asides, income & rent limits and student status.
Highly recommend communication regarding lease up with management team as soon as the deal is acquired/closes so the in place tenants can be properly tax credit qualified (LIHTC requirement).
Material taken from “Evaluation of HUD’s Rental Assistance Demonstration (RAD): Interim Report” September 2016

4. Add LIHTC to RAD IRS Rules vs HUD Rules
The Tax Credit program was created to foster private investment in affordable housing. Unlike RAD which falls under HUD, the LIHTC program is administered by the State Financing Agencies and governed by the IRS.
IRS Rules vs HUD Rules

5. Department of Housing and Urban Renewal Public Housing Authority
RAD Players in LIHTC / RAD Transactions
Department of Housing and Urban Renewal
(HUD)
Public Housing Authority
(PHA)
PHA potential roles:
Ownership of the land – Ground lease to LP
Can serve as developer
Can serve as the onsite management
Management

6. Limited Partnership General Partner Limited Partner PHA
Tax Credit Players in LIHTC / RAD Transactions
Limited Partnership
General Partner
0.01% ownership
Limited Partner
Tax Credit Investor
99.99% ownership
PHA
PHAs can be a member of the GP entity and/or can be the management team overseeing operations of the project
Management Agent

7. RAD Conversion – Parties Involved
Developer
Finance Lender
Tax Credit Syndicator/Investor
State Allocating Agency
In Place Tenants

8. Syndicator/Investor Concerns
Credit Delivery
Construction Completion & Lease Up
Guarantees
Program Conflicts
Syndicator/Investor need certainty, early communication to detect
concerns and to put an action plan in place!

9. Management Companies need to know the deal structure to plan accordingly
Date of Closing/Acquisition
Timing of construction/rehab
Projected credit delivery schedule
Minimum set aside, unit mix and # of buildings
Determine how BIN numbers (Tax Credit) have been established
Identify the tenants that are residing in the units at closing/acquisition
Know the number of vacant units at acquisition - closing
Determine a plan of relocation of tenants
Uniform Relocation Act
Determine if the tenants will be returning to their original units or not

10. Program requirement confusion - RAD/LIHTC
How does HUD and Tax Credits handle the following?
tenant relocation
unit transfers
timely certifications
tax credit set asides
income limits
rent limits
student status

11. Tenant Relocation Offsite Relocation Onsite Temporary Relocation
Rehab on the property may be completed without the tenant leaving their unit. However, there are some situations where the tenants must be relocated. There are a couple of possible scenarios:
Offsite Relocation
Onsite Temporary Relocation
Onsite Permanent Relocation
Onsite Temporary Relocation: If a tenant will temporarily move out of their unit to another unit in the same project while their unit is being rehabbed, a new certification is not required for Tax Credit purposes. Interim certifications are not required.
Onsite Permanent Relocation: If a tenant permanently relocates to a different unit in the same project a new income certification is not required; however the tenant might sign a new lease or an addendum to the lease reflecting the new unit. Under RAD, new leases for existing tenants must be signed prior to the effective date of the HAP contract.

12. CERTIFICATION PERIOD – TAX Credits
120 days of the acquisition/closing date
The tenant certification is important as we are required to document that the existing tenants were income eligible no earlier than 120 days prior to the date of acquisition/closing using the current income limits or no later than 120 days after the date of acquisition/closing using the current income limits.
IRS 120 Day Acquisition Rule: was created to allow developers/owners to income qualify in place tenants with the income limits in place at the time of acquisition.
If an in place tenant is not certified within this period, the effective date of certification then becomes the actual date the household is income certified and all documentation is completed.
To add to this, you need to determine when credit delivery was projected at underwriting to determine the latest possible period that certifications can occur.

13. Minimum Set Asides Income & Rent Limits Limits HUD limits
Hold Harmless limits
MTSP limits (Tax Credits)
40/60
20/50
The requirement for Tax Credits must be met no later than the close of the first year of the credit period and must remain in effect throughout the compliance period.
Minimum Set Asides

14. Student Status Know the difference in the Student Rules:
HUD Student Rules
LIHTC Full Time Student Rule