Eligible Programs Under Rental Housing Demonstration

Specifically, the RAD program allows property owners/investors in 4 different legacy programs the ability to convert into Section 8 contracts. These programs are:

• Rental Supplement (Rent Supp)

• Rental Assistance Payment (RAP)

• Section 8 Moderate Rehabilitation (Mod Rehab)

• Section 202 properties with Project Rental Assistance Contracts (PRACs)

Specifically, residents in RAD properties will continue pay 30% of their income towards housing. By law, these Section 8 contracts must be renewed, so they provide a large degree of stability for both residents and landlords.

Rental Assistance Demonstration and the HUD 221(d)(4) Program

For many borrowers who wish to upgrade a property currently participating in one of the HUD legacy programs mentioned above, combining a RAD conversion with HUD 221(d)(4) financing is an ideal fit.

Borrowers can use this funding to finance substantial rehabilitations to their property. In general, properties with 90% or more low-income units (such as RAD conversions) are allowed LTVs up to 90%.

In addition, rental assistance properties are permitted DSCRs as low as 1.11x. Finally, borrowers for Section 8 properties are eligible for a low 0.45% mortgage insurance premium (MIP), which is significantly lower than MIP for market-rate or affordable properties. Plus, the HUD 221(d)(4) loan has a 40-year, fixed-rate term, which makes it one of the longest term self-amortizing loans in the entire industry.

In addition, HUD 223(f) financing may also be a good option for certain RAD owners, especially if their property is currently being funded with another type of loan with a higher interest rate and they would like to refinance. HUD 223(f) loans also permit LTVs up to 90% and DSCRs as low as 1.11x for subsidized properties.

HUD 223(f) loans can also be used if a borrower would like to acquire a property participating in a HUD legacy program, such as the ones mentioned above, and then have it converted to Section 8 housing under the RAD program.

Other Financing Options for RAD Multifamily Properties

While products like the HUD 221(d)(4) loan are excellent, borrowers who wish to purchase or upgrade a RAD or RAD-eligible property shouldn’t feel limited to FHA-insured financing, as there are a variety of other multifamily loan options on the market. This includes non-HUD financing specifically geared towards affordable properties.

For instance, Fannie Mae Multifamily Affordable Housing Loans offer LTVs up to 90%, with an allowable DSCR of just 1.15x. Other Fannie Mae options include Fannie Mae Affordable Housing Preservation Loans, as well as Fannie Mae Moderate Rehabilitation Supplemental Loans for Affordable Properties and Fannie Mae Reduced Occupancy Affordable Rehab (ROAR) Loans, both of which are specifically designed to finance the rehabilitation of affordable properties.

Freddie Mac® also has a variety of multifamily financing options specifically geared towards affordable properties, including Freddie Mac HUD Section 8 Financing, which offers LTVs up to 80% (up to 90% for LIHTC properties) as well as Freddie Mac Cash Loans for Affordable Housing Preservation.

Rental Assistance Demonstration and Low-Income Housing Tax Credits (LIHTC)

The LIHTC program, which permits investors in affordable properties to take a 10-year income tax credit, may also be combined with RAD, as well as with the HUD 223(f) or HUD 221(d)(4) loans mentioned above, to maximize financial benefits for investors.

The U.S. government offers a specific amount of credits to each state, based on population, so the competition for LIHTCs can be fierce. However, being part of the RAD program can certainly give a property a leg up during the application process.

Related Questions

What is the Rental Assistance Demonstration (RAD) program?

The Rental Assistance Demonstration (RAD) Program is a federal housing program administered by HUD, which was enacted in 2012 as a part of the Consolidated and Further Continuing Appropriations Act. The RAD program allows properties using HUD legacy programs to convert their properties to HUD Section 8 housing, which is much better understood, and more easily permits the use of private capital to fund rehabilitation work.

Rental Assistance Demonstration, or RAD, is a Department of Housing and Urban Development (HUD) program which seeks to help investors preserve affordable housing across the U.S. To do this, the RAD program allows investors using four HUD legacy programs the ability to convert their housing into long-term Section 8 contracts. This helps investors by giving them more flexibility in terms of acquiring the financing to repair their properties, including making it easier to apply for the Low-Income Housing Tax Credit Program.

What are the benefits of the RAD program for landlords?

The RAD program provides landlords with a large degree of stability for their properties. By converting their housing into long-term Section 8 contracts, landlords are able to acquire financing more easily, including applying for the Low-Income Housing Tax Credit Program. Additionally, the Section 8 contracts must be renewed by law, so landlords can be sure that their properties will remain occupied and that their tenants will continue to pay 30% of their income towards housing.

What are the eligibility requirements for the RAD program?

In order to qualify for RAD for PRAC conversion, properties must typically meet several criteria. In addition to maintaining compliance with fair housing standards, assets must have:

• An active PRAC agreement
• Operating reserves of at least $250 per unit (this requirement can be met via funding from a lender or equity investor)
• A physical inspection score from HUD of at least 60 prior to applying
• Evidence that supportive services are accessible to residents

Another requirement for the process is the involvement and engagement of a property’s residents. A property owner is required to hold, at minimum, two meetings with residents to discuss any rehabilitation plans, relocations (if applicable), any policy changes, etc.

One of these meetings must happen more than 30 days prior to submitting a final conversion plan, while another must occur after the plan is submitted to HUD but before conversion begins. During the approval process, additional meetings are also required if the conversion plan is revised in any significant, material way.

Specifically, the RAD program allows property owners/investors in 4 different legacy programs the ability to convert into Section 8 contracts. These programs are:

• Rental Supplement (Rent Supp)
• Rental Assistance Payment (RAP)
• Section 8 Moderate Rehabilitation (Mod Rehab)
• Section 202 properties with Project Rental Assistance Contracts (PRACs)

Specifically, residents in RAD properties will continue pay 30% of their income towards housing. By law, these Section 8 contracts must be renewed, so they provide a large degree of stability for both residents and landlords.

How can landlords apply for the RAD program?

Landlords can apply for the RAD program by submitting an application to the Department of Housing and Urban Development (HUD). The application process is outlined in the RAD Application Guide. The guide provides detailed instructions on how to apply, including the required documents and forms that must be submitted. Additionally, landlords should contact their local HUD office for more information on the RAD program and to get assistance with the application process.

What are the timelines for the RAD program?

The timelines for the RAD program vary depending on the type of program being converted. For example, Section 8 Moderate Rehabilitation (Mod Rehab) conversions typically take between 12-18 months, while Section 202 PRAC conversions can take up to 24 months. For more information, you can visit the HUD website.

What are the risks associated with the RAD program?

The Rental Assistance Demonstration (RAD) program is a great way for investors to preserve affordable housing across the U.S. However, there are some risks associated with the program. These include:

• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.
• The RAD program is subject to the availability of funding from HUD, so there is no guarantee that the program will continue in the future.

In this article:

1. What Affordable Housing Investors Should Know About the Rental Assistance Demonstration (RAD) Program
2. Eligible Programs Under Rental Housing Demonstration
3. Rental Assistance Demonstration and the HUD 221(d)(4) Program
4. Other Financing Options for RAD Multifamily Properties
5. Rental Assistance Demonstration and Low-Income Housing Tax Credits (LIHTC)
6. Related Questions
7. Get Financing