October 16, 2014

HUD Releases Initial Results of Rental Assistance Demonstration

The early results of HUD’s Rental Assistance Demonstration (RAD) are in, and they are even better than expected.

By allowing public housing authorities to convert the funding for their highest-risk public housing properties into project-based assistance, RAD has enabled them to leverage an overwhelming amount of private and public funds to make needed repairs. According to a new report, Status of HUD’s Rental Assistance Demonstration (RAD) Evaluation and Results to Date, the 323 public housing properties that have been authorized to convert under RAD so far are expected to leverage over $19 in outside funds for every $1 of HUD funds. That means that the $189 million of HUD funds going into these properties will bring in $3.7 billion in additional sources.

RAD was established in 2011 to help preserve our nation’s crumbling public housing stock. Public housing properties around the country are currently in need of at least $26 billion in repairs, and there simply are not sufficient resources in the program to keep up with the vast and growing capital backlog. As a result, we lose 10,000 to 15,000 public housing units from our nation’s stock each year. RAD gives public housing agencies access to the tools they need - like the Low-Income Housing Tax Credit and mortgage debt financing - that allow them to preserve their properties without waiting for a $26 billion outlay that will probably never come.

Of the 323 properties approved for RAD conversion, 57 deals have now closed, representing 5,052 public housing units. These projects were smaller than the average project approved for conversion by about 30 percent, so the leverage ratio was not expected to be as high as the overall leverage ratio. Nonetheless, these projects demonstrated a higher leverage ratio than initially expected (9.20:1 compared to the expected 8.83:1), raising $437 million in funding from only $43 million in HUD funds.

While the early results point to a highly successful program, no other properties will be able to convert under RAD unless Congress authorizes it. Over 180,000 units’ worth of public housing have applied to convert, but only 60,000 have been approved to date. Many of these properties on the waiting list may be lost entirely if the RAD cap is not lifted soon.

Recognizing this, the Senate Appropriations Committee approved an increase in the RAD cap to 185,000 units (up from the current 60,000) in June, but the bill has not gone to the floor. Enterprise is working with its partners in the Lift the RAD Cap Coalition to ensure that Congress includes a RAD increase in any spending bill that it passes over the coming months.

Building on the success evident in these early evaluation results, it is clear that the time to expand RAD is now.

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