To stem the loss of critically needed public and other forms of subsidized housing as a result of the severe backlog of capital needs, the U.S. Department of Housing & Urban Development (HUD) officially launched its Rental Assistance Demonstration (RAD), the Obama Administration’s strategy to preserve tens of thousands of public and HUD-assisted housing units. In the near term, RAD is expected to preserve and enhance more than 13,000 units of affordable housing and generate more than $650 million in private capital to address the estimated $26 billion backlog in capital needs faced by public housing authorities in the U.S. This additional capital will also stimulate employment in the construction trades across the country.
“This innovative and cost-effective approach greatly enhances our ability to confront the decline of our public housing and older assisted housing stock,” said HUD Secretary Shaun Donovan. “With the initial implementation of RAD, the Obama Administration has begun to demonstrate that public-private partnership can help preserve our nation’s affordable housing and create jobs in the process.”
HUD awarded 112 initial commitments to 68 public housing authorities (PHAs), allowing these local housing agencies to seek private financing to rehabilitate units that are otherwise at risk of being lost from the affordable housing inventory. In addition, HUD approved 11 requests from private owners of assisted housing projects to convert and extend rental assistance contracts for 1,100 units (see attached list of private developments). Combined, the commitments announced today are projected to preserve more than 13,000 public and other HUD-assisted housing units for the next 20 years.
RAD allows public housing agencies and private owners of certain at-risk, federally assisted properties to convert their current assistance to long-term Section 8 contracts. Such contracts will allow owners to leverage millions of dollars in debt and equity to better address immediate capital needs and preserve these affordable housing units. In addition, participating agencies are freed from antiquated public housing rules and restrictions that hindered their ability to best preserve and manage their housing similar to other affordable housing owners and managers.
In 2011, HUD released "Capital Needs in the Public Housing Program," a study that found the nation’s 1.2 million public housing units need $26 billion to keep these homes in safe and decent condition for families, a figure well in excess of the roughly $2 billion Congress appropriates for capital repairs annually. Beyond the potential loss of this public housing stock, the Moderate Rehabilitation, Rent Supplement, and older Rental Assistance Payment (RAP) programs are also at risk of being lost from the affordable housing stock.
RAD is part of the Obama Administration's comprehensive strategy to preserve public and HUD-assisted housing. In November 2011, Congress authorized HUD to implement RAD as a budget-neutral demonstration program with two components, allowing for the conversion of assistance for both public housing and HUD-assisted properties that have expiring subsidies.