Challenges and Prospects Ahead
So far, RAD seems to be measuring up to Congress’s main charge—generating additional funding for public housing to help take down its capital backlog and preserve stock without additional public funding—all while not allowing any further diminishment of the inventory or displacement of residents in the process. These are no small feats, particularly when compared with the HOPE VI program, which poured billions of additional public funds into public housing yet regrettably resulted in too many residents being displaced and an unacceptable reduction in the public housing inventory.
Yet RAD is by no means a magic bullet or a perfect program. It requires additional or better-aligned HUD subsidies to address higher-cost projects and make its choice-mobility option truly viable for residents. Temporary construction-related relocation will inconvenience residents beyond what is reasonable. There have been and will continue to be start-up and processing bottlenecks and delays along the way. Housing authorities must retrain staff to new budgets, systems, and reporting processes under RAD.
A few policy and program steps can be taken to even out inevitable bumps and make RAD an even more promising demonstration. Some helpful additional actions would include:
· Eliminate the RAD cap. The initial 60,000-unit cap on public housing conversions under RAD, the subsequent buildup of 125,000 units on a waiting list with an uncertain fate, the increase of the cap to 185,000 units to accommodate only those on the initial waiting list, and a subsequent buildup of another queue with an equally unclear fate are not the ways to run a true demonstration. It forces housing authorities to execute RAD within arbitrarily constricted and unrealistic development timeframes rather than allowing them to prudently plan and sequence improvements to their inventories over a reasonable time horizon. It unnecessarily bunches up and then sputters the demand for LIHTCs and other affordable housing capital funds that are typically rationed out in annual funding cycles—along with having to quickly ratchet up, then unpredictably and inefficiently wind down needed internal capacity and that of transactional partners, which may soon be required to be ratcheted up again. It also needlessly raises the hopes of residents waiting for their apartments to be repaired or replaced, then either dashes them again like other promised HUD programs or requires them to accommodate hurried construction-related relocation schedules.
All of this is beginning to affect an uncertainty fatigue among housing authorities and their partners. It is understandably discouraging agencies from submitting applications into a queue that could be prolonged once again, or lead to nothing. In response, current HUD secretary Julian Castro has called for eliminating the RAD cap and its circumscribed timelines so that housing authorities and their partners can appropriately plan and pursue RAD conversions according to a reasonably sequenced development schedule. Secretary Castro’s call should be heeded, rather than calls by some to see how RAD fares longer term before eliminating the cap. Without RAD, we have more than enough long-term proof that desperately needed affordable housing will continue to be lost and residents with few other housing options will be hurt.
· Allow the demonstration to demonstrate. Despite having dedicated HUD’s new Recapitalization Office within Multifamily Housing to process RAD conversions of assistance to project-based Sec. 8 contracts and systems—and having built up considerable and able capacity within it for the job—many housing authorities, their partners, and counsel report moving approved RAD applications through to final approval and closing to be a time-consuming labyrinth of multi-office reviews, questionable paper work, and check-offs. HUD’s public housing office reportedly now subjects RAD transactions to 20-point public housing risk analysis before completing its role in RAD-subsidy conversions. Different HUD offices have important inter-office support roles to play in helping establish mechanisms to convert one subsidy system to another under RAD. But the demonstration’s potential cannot be fully realized if multiple HUD offices continue to review RAD transactions through long-established intra-office lenses and processes devised for non-RAD purposes.
Congress prescribed fairly detailed basic requirements for RAD but then clearly charged HUD with making it a flexible demonstration. It allowed HUD considerable waiver authority to cut through bureaucratic rules and regulations in charting a new path for public housing. RAD is guided by a thorough implementing notice that has been revised to make needed changes along the way, which required official clearance by major HUD offices and the Office of Management and Budget each time it was revised. Moreover, an underlying principal of RAD was to allow individual transactions to be subjected to the rigorous scrutiny and underwriting of investors and public and private lenders participating—and assuming a fair measure of risk—in a RAD project, much in the way that they do in other affordable housing transactions.
These measures should allow HUD’s Recap Office to devise and manage a crisp internal review and decision-making process for RAD transactions—ideally one guided by a multi-point “demonstration” analysis. Unforeseen policy issues may require other offices to be re-engaged beyond this process when needed. But RAD transactions proceeding according to already-prescribed notice requirements and reviews should not.
· Smartly deploy other available resources. Building on what it was able to facilitate in San Francisco, Cambridge, and El Paso, HUD should continue to advance ways to combine RAD with other HUD resources to help housing authorities with older, more-troubled properties with deeper capital needs, particularly in higher-cost markets. Until Congress finds a way to offer such agencies incremental subsidy assistance to offset their higher costs, too many housing authorities are precluded from using RAD as a good if not completely sufficient resource. One relatively doable step within reach—i.e., statutory authority exists and a governing notice is under active review—would be to better align the public housing Sec. 18 “Demo/Dispo” program to help recapitalize deeper-needs properties for housing authorities seeking to convert larger portfolios.
Sec. 18 enables agencies to demolish or dispose obsolete public housing properties, use disposition proceeds to develop other forms of affordable housing, and receive operating subsidies aligned to local market costs to help displaced tenants. Housing authorities can fuse such subsidies into current resources to support long-term Sec. 8 PBV contracts, which are similar to RAD-generated Sec. 8 PBV contracts, except that agencies can set rents relative to local market conditions, which are typically higher than allowed RAD rents. Currently, HUD makes the Sec. 18 program available mostly to housing authorities with properties that meet a somewhat opaque mathematical formula designed to measure physical obsolescence independent of other market factors—a policy and formula that many criticize. Too often, Sec. 18 is used to reduce the public housing inventory instead of helping to preserve it where and when it makes good sense to do so.
Although the Sec. 18 program works reasonably well with three or four HUD Choice Neighborhoods transactions each year, it could be better aligned in support of dozens of larger RAD portfolio transactions. Revised Sec. 18 criteria could prioritize deeper capital needs properties in large portfolios where it’s critical to replace troubled properties or take on higher cost rehab—similar to what was done in San Francisco—but also likely helpful in Seattle, Portland, Los Angeles, New York City, Boston, and some other higher-cost markets—where other properties in the portfolio are economically feasible to preserve using RAD. Or another Sec. 18 priority could be targeted to help redevelop larger, individual public housing developments that are troubled and not economically feasible under RAD. Applying Sec. 18 demolition or disposition actions to such properties would enable them to be replaced in neighborhoods of opportunity or local revitalization areas, while RAD could be used where feasible on other area properties under a concerted strategy.
· Support residents in using RAD’s mobility provisions. RAD’s transfer of assistance and new “choice-mobility” provisions afford public housing residents new housing choices, particularly as housing authorities try to deconcentrate overly dense developments or multiple projects in a defined area. These provisions can be used to help residents move to “neighborhoods of opportunity” or access employment or educational opportunities of their own making for their families in other communities. Here is a perfect chance for national and local philanthropy to assure continued or offer new funding to organizations that offer mobility counseling, relocation assistance, and other supports to families and individuals opting to take advantage of these new policies. Mobility studies show that low-income residents transitioning to new communities—and schools, churches, and service agencies—fare much better with well-planned and responsive mobility supports.
Building on a solid start three years in, with an additional policy push or two by Congress in the year ahead, and a continued record of responsive implementation, RAD promises to go well beyond its original statutory charge of generating additional capital to preserve and improve a modest amount of public housing. It could well become a true demonstration of what can result when HUD—or any federal agency for that matter—leads with vision, minds what works, and is given the freedom to bend what hasn’t to a better standard. That standard may well become the accepted practice.
Patrick Costigan was formerly a senior adviser to HUD secretary Shaun Donovan charged with getting RAD launched. He is a principal in CF Housing Group and serves as a strategic adviser to the RAD Collaborative.