|HUD No. 16-039
March 31, 2016
RENTAL ASSISTANCE DEMONSTRATION (RAD) REACHES $2 BILLION MILESTONE
Initiative preserves declining public housing stock and transforms communities across the Nation
WASHINGTON - Three years after its launch, the U.S. Department of Housing and Urban Development's (HUD) Rental Assistance Demonstration (RAD) has generated $2 billion in private investment to make critically needed repairs and improvements to more than 30,000 units of former public housing. Under the RAD model, public housing authorities and owners of other HUD-supported properties can access private financing to rehabilitate and preserve existing affordable housing while expanding opportunity in communities across the nation.
RAD is helping to address the capital backlog in the public housing program through private sector leveraging without increasing costs to the taxpayer. Each year, roughly 10,000 units of public housing are lost due to disrepair - a supply-side crisis that's compounded by increasing demand for quality affordable housing. Today, more than a quarter of all renters are paying at least half of their income just to keep a roof over their families' heads. By stemming the tide of these lost units, RAD helps ensure more low-income residents are able to secure a quality affordable home.
"Our RAD initiative is an innovative option for housing authorities looking to keep pace with their capital needs in this challenging budget climate," said HUD Secretary Julián Castro. "Crossing the $2 billion mark represents the critical need to maintain and expand affordable housing stock to expand opportunity for more Americans seeking a quality and affordable place to live."
The process of converting deteriorating public housing to a project-based Section 8 model under RAD is proving to be a versatile tool for PHAs to preserve affordable housing, to serve more eligible households, and maximize the impact of scarce federal resources. While most conversions involve the modernization and stabilization of existing properties, in 17 percent of completed RAD conversions, PHAs have been able to demolish distressed properties and replace them with new, permanently affordable housing. In 30 conversions, PHAs converted and moved the assistance out of blighted or isolated locations and into neighborhoods of greater opportunity.
For example, in Lexington, Kentucky, Centre Meadows was of one of the first RAD transactions to close with a Federal Housing Administration (FHA) insured mortgage. The 206-unit apartment complex is currently undergoing substantial rehabilitation by the Lexington Housing Authority (LHA) involving 11 buildings. Centre Meadows was developed in the early 1970s in the southeastern portion of the city. The property had significant capital needs and LHA's Capital Funds were insufficient to meet those needs. This project was in such deteriorated shape that at the time of the RAD application, it was thought to be housing of last resort for people who had no other housing options. Without RAD, it was likely that the project would be demolished.
In North Carolina, the Lexington Housing Authority (LHA) converted all 268 units of its public housing units that faced persistent cutbacks in LHA's Capital Fund program and an extensive capital needs backlog, estimated at over $41,000 per unit in hard construction costs. RAD presented the LHA a way to raise private debt and equity necessary to finance these substantial repairs and allow the housing authority to leverage public and private sources of capital totaling more than $67,000 per unit which covered all construction costs needed to carry its affordable housing projects through the next 20 years.
Located in DeKalb County, Georgia, Tobie Grant Manor was built in the late 1960s and became functionally obsolete by 2013. Concrete walls, small rooms, and tiny closets made the buildings feel extremely outdated and expensive to maintain. RAD allowed the Housing Authority of DeKalb County to access outside capital to rehabilitate and rebuild their properties, providing long-term financial stability needed to maintain, preserve, and even add units. In addition to the equity brought in through Federal and state tax credits, this project was made feasible with conventional mortgages and federal HOME funds allocated by the state of Georgia. The conversion doubles the number of units at Tobie Grant, and financially positions HADC favorably for future redevelopments.
HUD has made awards to PHAs across the country for all of the 185,000 units currently authorized to participate in RAD and estimates over $6 billion in new, largely privately funded construction investments will be made in the public housing units currently authorized to participate in RAD. With a waiting list of new applicants forming, HUD has asked Congress to eliminate the current cap of 185,000 units so that any public housing property that can be preserved and improved through RAD is eligible.
HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. More information about HUD and its programs is available on the Internet at www.hud.gov and http://espanol.hud.gov.
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