Public housing agencies (PHAs) have struggled heroically to maintain the country’s 1.1 million public housing units, but the backlog of capital needs has grown to $26 billion, and there is little hope today that federal resources will rise to meet it. Congress authorized the Rental Assistance Demonstration (RAD) in 2012 to meet this funding challenge. RAD enables PHAs to convert public housing properties to project-based Section 8 contracts and, in so doing, permit an infusion of private capital to address the project’s repair and rehabilitation needs and to put the property on a path of financial stability over the long term. RAD makes it easier for PHAs to leverage additional funding sources, such as low-income housing tax credits and private mortgage debt.
This interim report provides insight into how RAD is being implemented across the country. The program is extremely popular. More than 400 PHAs have submitted more than 1,000 applications for project conversion. HUD has already reached the cap set by Congress of 185,000 units that may be converted, and other projects are waiting for the cap to be lifted. This report explores why participating PHAs are eager to implement RAD, why others have chosen not to pursue it, the kinds of properties that are making it more quickly to closing, and how rehabilitation and in some cases entirely new construction are being financed.
So far, RAD has been extremely successful in attracting capital to help stabilize affordable housing developments. As of October 2015, 185 public housing developments had completed the conversion process. They raised a total of $2.5 billion in funding, of which $2.25 billion came from sources external to the PHAs, for a leverage ratio of nearly 9:1. RAD appears to strengthen the long-term financial stability of converting properties, including those conducting nonfinancial deals that do not access external capital. Many important questions remain, however, regarding RAD’s potential to meet the long-term challenge to preserve, improve, and stabilize public housing. The second phase of this evaluation will examine precisely how RAD impacts the physical and financial condition of properties being converted and how project residents are affected. The final report is expected to be published by December 2018.