RAD/Section 18 Blends

On January 19, 2021, HUD issued PIH Notice 2021-07 on the Demolition and Disposition of Public Housing under Section 18 of the U.S. Housing Act of 1937. This Notice supersedes and replaces Notice PIH 2018-04.

 

LEARN ABOUT RAD/SECTION 18 BLENDS

Two kinds of RAD/Section 18 Blends:

• Construction Blend
• Small PHA Blend

These RAD/Section 18 Blends allow for:

• Higher contract rents support greater financing
• Robust resident rights
• RAD one-for-one replacement requirements apply (with de minimis)
• Public housing funds can be used in project conversion
• HUD underwriting of entire project to ensure project viability

PIH Notice 2021-07 describes examples of expanded eligibility for projects to "blend" project-based voucher ("PBV") assistance through a Rental Assistance Demonstration ("RAD") conversion with assistance from tenant protection vouchers ("TPVs") that are awarded through a Section 18 disposition approval, even if those units would not otherwise qualify for disposition. This Notice replaces the 75%/25% blend under PIH Notice 2018-04 to allow units in a project to qualify for Section 18 on a graduated scale based on the percentage of Housing Construction Costs ("HCC") that is met as part of the RAD conversion.

In addition, the aggregate number of replacement units (RAD and PBV) must meet the RAD "substantial conversion of assistance" requirements, the replacement units must be either new construction or substantially rehabilitated, and the project may not utilize 9% low-income housing tax credits. The new RAD/S18 blends will assist PHAs with preserving public housing assets, as all units removed under Section 18 must be used as Project-Based Voucher (PBV) housing.

CONSTRUCTION BLENDS

HUD approves a portion of units under Section 18, to be replaced with Project-Based Voucher, based on level of rehab/construction achieved. Percentage of units eligible for Sec 18 disposition within the Converting Project is based on the hard construction costs proposed for the new construction or rehabilitation of the Covered Project compared with HUD’s published Housing Construction Costs for the market

HUD has also developed an Excel tool available on the RAD Resource Desk that PHAs can use to assess whether the scope of work meets any of the thresholds for the Construction Blends and whether the site is in a high-cost area.

SMALL PHA BLENDS

For any PHA with 250 or fewer public housing units under its ACC, at the PHA’s discretion up to eighty percent (80%) of the units in a Converting Project may be disposed under Section 18.

• Blend is applied at the project level
• PHA must submit a repositioning plan to HUD showing how it will remove all of its public housing units
• Any PBV contract must be administered by a PHA operating at least 250 HCV units

APPLICATION SUBMISSION REQUIREMENTS

The Section 18 portion of the blended repositioning application must follow the approved RAD application and PHA Plan for both RAD and Section 18 as well as a Financing Plan.

The PHA is not required to submit a separate Section 18 application through IMS/PIC. Instead, HUD’s Special Applications Center (SAC) reviews the additional material provided in the RAD application and uploads it into IMS/PIC in the form of a DDA Section 18 application.

Required Submissions:

• RAD submission requirements (not through the SAC).
  • Step 1: RAD Application at www.RADresource.net.
  • Step 2: PHA Plan.
  • Step 3: Concept Call with HUD RECAP (prior to Financing Plan submission).
  • Step 4: Submit Plan for attached PBV assistance.
  • Step 5: Financing Plan.
  • Step 6: The SAC will alert the PHA if there are any missing items necessary for the Section 18 application.
  • Step 7: Apply for TPVs.
  • Step 8: Submit Draft PBV HAP contract (HUD 52530-B: PBV HAP Contract – Existing Housing) or AHAP (HUD 52531-A and HUD 52531-B) with the closing package.

Guidance:

• Check the “RAD Tools” for current RAD Rent Estimates
• Annual HCC Limits can be found on HUD’s webpages at 2023, 2022, 2021, 2020, 2019, 2018, 2017, 2016, and 2015.
• RAD and Section 18 Blend Process
• HUD 5900: Non-RAD PBV Rider to RAD Use Agreement (doc)
• Workbook to Test HCC Threshold for RAD Blends (xlsx)
• Section 18 application checklist >

FAQs for SAC Applications

How to and Training Videos