August 29, 2019

Implementing the Rental Assistance Demonstration Program with the Durham Housing Authority

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Aerial photo of Durham, North Carolina taken by a drone.

Enterprise Advisors of Enterprise Community Partners, supported by a team of subcontractors, has been working with the Durham Housing Authority (DHA) since 2016 to develop a Rental Assistance Demonstration (RAD) strategy to preserve the housing authority’s public housing portfolio.

A Rental Assistance Demonstration (RAD) works by converting public housing units from Section 9 to the Section 8 platform while giving housing authorities the opportunity to leverage public and private funding to better meet the capital needs of their units. The Section 8 platform ensures that the units permanently remain affordable to low-income households as residents continue to pay 30% of their income towards the rent as they would in the public housing program.

During a time when there is an estimated $35 billion capital backlog on public housing units nationwide, RAD can be a useful tool combined with conventional debt, FHA financing, and low income housing tax credits (LIHTC) to help housing authorities preserve public housing in their communities through completing repair work for any maintenance backlog, substantial rehabilitation and new construction.

Enterprise’s aim in this ongoing endeavor is to provide the DHA with the skillset to complete the RAD conversion of its entire housing portfolio ensuring that the city will continue to have good quality affordable housing available to the lowest income households in the community.

Site Visit 

On May 31, 2019, the Enterprise team conducted a site visit to the DHA. The team spent the first half of the day conducting a site tour of the public housing properties to assess the outside grounds, the condition of the building, and unit exteriors, and the public housing neighborhoods. 

This assessment helped determine: 

  • Where redevelopment efforts should be concentrated
  • The level of rehabilitation or demolition needed for the units
  • Where the housing authority should focus on preservation within their portfolio

Including in helping make recommendations for the usage of private debt, available city funds and LIHTC equity. 

By assessing the neighborhoods that the units are located, in addition to having the knowledge from partner contractors and developers’ experiences, the team was also able to assist in evaluating the usage of RAD transfer of assistance.  A RAD transfer allows PHAs to change the geographical location of housing subsidy. The conversion will contribute to future redeveloped public housing units located in areas of opportunity for residents.

The second half of the site visit, team members were able to finalize an optimum plan for how the housing authority should phase their properties through a RAD conversion. The current plan for the DHA includes three phases, which addresses a tax credit limit in the City that prohibits more than one 9% equity award within city limits in a one-year time period.

DHA RAD Conversion Plan

Phase 1:

Includes four developments totaling 425 units that are the highest priority projects. This is due to capital needs and City support, since some of the sites are located in the Downtown Planning project area.

Phase 2: 

Includes 181 units over three developments, that includes scattered sites. These developments will be self-developed by Development Ventures Incorporated, a subsidiary of the housing authority, using 4% LIHTC equity planned for January 2020. Four percent LIHTC supports construction projects without having additional federal subsidies based on a 10-year present value calculation of 30% of the qualified basis of each property.

This redevelopment, based on future architectural and engineering work, has the potential to increase density by increasing the number of public housing units in currently underdeveloped sites.

The DHA may utilize the RAD Section 18 Blend option, which permits certain properties converting under RAD to receive Section 18 approval and vouchers for a portion of units that are part of a strategy for replacement and redevelopment, to increase eligible revenue to the property from HUD.

Phase 3:

Includes 718 units covering three developments, including the largest family development within the DHA portfolio, which will later undergo redevelopment. The DHA is considering later redevelopment of these units based on expected lack of capacity, due to the work required for Phase 1 and 2 to complete the conversion process and the associated RAD Milestone deadlines.

RAD Milestones require transactions to have financing plans submitted within 180 days of their Commitment to enter into a Housing Assistance Payments (CHAP) award, or in the case of 9% LIHTC transactions financing plan submissions with 180 days of a successful 9% LIHTC award. Nine percent LIHTC finances construction or rehabilitation projects that use additional subsidies to complete a project based on a 10-year present value calculation of 70% of the qualified Area Median Income (AMI) of each property

As an early participant in the RAD program, the DHA has already closed on seven developments covering 477 units of their portfolio as of late 2017. The DHA could have its full portfolio converted by 2021, resulting in more stable property operations for the agency and newly redeveloped units for the families. 

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