2022 is shaping up to be a transformative year for Public Housing Authorities (PHAs). In the everchanging landscape of affordable housing there are always new challenges and new opportunities in terms of how PHA’s deploy capital to finance the rehabilitation and renovation of affordable housing properties while preserving affordability.
Though not new, the Rental Assistance Demonstration program (RAD) which generates funds focused on the preservation of affordable housing, is gaining increased popularity among PHA’s. RAD allows PHAs to access private capital – debt and equity – to finance capital improvements and convert their public housing developments to affordable housing, often utilizing LIHTC, complemented by Section 8 Rental Assistance. This enables PHAs to achieve their goal of preserving long-term affordability and improving the quality of their housing communities. According to Novogradac, since inception, over 165,000 public housing units have been converted to Section 8 through RAD.
RAD is a critical tool allowing PHAs to maintain their role in providing much needed affordable housing in their communities. As the program evolves, it is important to understand its benefits:
Opportunity for PHA Ownership: The structure of the RAD program allows PHA’s to become owners and administrators of their properties, which in turn will lead to greater stability of the portfolio and the generation of operating income. For deals that do not utilize the RAD program, PHA’s often serve solely as the managing PHA and receive the rental subsidy for the units, but never have ownership/administrator benefits.
Enhanced Curb Appeal & Living Conditions: New influx of capital allows for deferred maintenance and capital needs to be addressed at properties. The cash flow generated through RAD is used for operational and capital improvements. Residents benefit from improved living situations and stability, property owners, residents and neighbors benefit from increased curb appeal, and the community benefits from recapitalized housing that preserves affordability.
Better Understanding of the Program’s Nuances: After the program’s launch in 2012 there was a bit of a learning curve for PHA’s and their partners. RAD deals are complicated and require technical expertise and a deep understanding of the program to maximize the many benefits it has to offer. To date, Berkadia’s Tax Credit Syndication team has closed 19 RAD deals totaling more than 2,200 units and has 14 RAD deals in their pipeline.