Press Release

FOR IMMEDIATE RELEASE: September 21, 2016
CONTACT: Charles McNally | (212) 542-7647

HUD PUBLISHES EVALUATION OF RENTAL ASSISTANCE DEMONSTRATION

Interim Report Finds Program Has Scale to Impact NYCHA Portfolio

NEW YORK––In 2012, Congress authorized the Rental Assistance Demonstration (RAD) to test a new way of meeting the large and growing capital improvement needs of the nation’s aging public housing stock. New research released today by the U.S. Department of Housing and Urban Development (HUD) examines how RAD is performing and provides evidence that the program is on track to accomplish its primary goal of attracting substantial new capital to stabilize the physical and financial conditions of public housing properties significantly improving housing conditions for low-income residents.

HUD’s Rental Assistance Demonstration Interim Reportfinds that by October of 2015, public housing authorities choosing to participate in the program successfully generated $2.5 billion in new investment to preserve and improve their public housing stock. HUD’s evaluation discovered that early adopters of RAD leveraged $9 in capital for every $1 of public housing funds, proving the program capable of stimulating critically needed capital infusion to modernize and transform the nation’s public housing stock for low-income families, elderly, and people with disabilities. PHAs have continued to have significant success leveraging funds for modernization and, to-date, have attracted over $60,000 per unit on average to replace outdated kitchens and baths, install energy and water efficient appliances, and make other critical improvements to preserve and, where needed, transform this affordable housing stock.

“The Rental Assistance Demonstration is attracting substantial investment in a budget environment where public dollars simply can’t keep pace with the growing backlog of capital needs facing our public housing authorities,” said HUD Secretary Julián Castro. “The early returns are in and RAD is proving itself to be an exciting new tool that creates significantly more bang for the buck so that we can ensure safe, quality housing for low-income Americans. As we continue to evaluate this demonstration, it’s already clear that RAD is helping to preserve an important piece of our nation’s affordable housing stock.”

The report comes at a time when the New York City Housing Authority (NYCHA) is implementing NextGeneration (NextGen) NYCHA, the Authority’s 10 year strategic plan to preserve public housing as a vital asset that promotes diversity and opportunity in New York City. Facing $17 billion in capital needs and declining federal capital funding, RAD is an important NextGen strategy to help the Authority leverage external dollars to rehabilitate public housing units and ensure that residents have safe, healthy homes. NYCHA is currently moving forward with upgrades to 1,400 units at Ocean Bay (Bayside) in Queens under the RAD program and has an additional 5,200 units on HUD’s wait list pending approval.

Fundamental to the design of RAD, current and future residents are guaranteed robust rights and protections akin to those of public housing, including the right to return to the property if temporary relocation is required during repairs. Further, HUD requires that a public or non-profit entity must always maintain a controlling interest in the property, even in the rare and unanticipated event of foreclosure, thus ensuring the long-term public stewardship of the properties. NYCHA’s version of RAD is called Permanent Affordability Commitment Together (PACT), which includes a set of principles identified by a number of resident leaders and advocacy groups in partnership with the Authority to guide RAD implementation in New York City.

“This study reinforces that the Rental Assistance Demonstration program can leverage private investment at a scale that will have a meaningful impact on NYCHA's housing portfolio," said Holly Leicht, HUD Regional Administrator for New York and New Jersey. “The major capital improvements and upgrades RAD makes possible will ensure that the next generation of New Yorkers have access to quality affordable housing and the opportunities that housing affords.”

“This report underscores the value of RAD as an effective, flexible tool for larger public housing authorities, like NYCHA, to rehab our aging housing stock and improve the quality of life for thousands of families,” said Shola Olatoye, the Chair and CEO of the New York City Housing Authority. “As a key strategy in NextGeneration NYCHA—the Authority’s 10 year strategic plan—RAD enables NYCHA to not only modernize apartments that have deteriorated from decades of government disinvestment, but also ensure their long-term affordability while protecting the rights of tenants.”

Just as private owners of single- and multi-family housing routinely rely upon debt financing as a means of undertaking physical improvements to their properties, RAD allows public housing authorities to safely leverage other sources of private capital, typically debt and equity, in order to finance rehabilitation or in some cases completely replace distressed public housing. To ensure that the housing remains permanently affordable, owners must agree to long-term rental assistance contracts and use restrictions that automatically renew as they expire. Combined with the physical improvements, these requirements ensure that the housing remains affordable and in good condition for decades to come.

In Fiscal Year 2017, HUD is requesting that Congress eliminate the current 185,000 unit-cap on public housing units that can convert without additional HUD subsidy. PHAs have already applied and received initial awards up to this cap and a waiting list has now formed. Eliminating the cap will allow every PHA that wishes to participate the opportunity to leverage capital, as this report has demonstrated is possible. The report also highlighted that some public housing properties with more serious capital needs will not be able to be sufficiently improved without additional subsidy, which is why HUD is also proposing to provide $50 million to help local public housing agencies finance the deeper recapitalization of tens of thousands of units of public housing.

Phase II of HUD’s evaluation will focus on how successful RAD is at improving the physical and financial conditions of federally assisted properties and how tenants have been impacted. The report will also update findings from the interim report as more data becomes available.

###

HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. More information about HUD and its programs is available on the Internet at www.hud.gov and http://espanol.hud.gov.

You can also connect with HUD on social media and follow Secretary Castro on
Twitter and Facebook or sign up for news alerts on HUD's Email List.