HUD Issues Interim Evaluation of Rental Assistance Demonstration
HUD recently released an Interim Report: Evaluation of HUD’s Rental Assistance Demonstration (RAD), which found that “RAD has been extremely successful in attracting capital to help stabilize affordable housing developments.” The research, performed by Econometrica Inc., provided evidence that the program is on track to accomplish its 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.
Recognizing that the federal resources needed to address a $26 billion backlog of capital needs are unlikely to be provided, the Obama administration proposed RAD as a way to give public housing authorities (PHAs) access to private capital to make these needed repairs, and it was authorized by Congress in 2012. Under RAD, PHAs convert at-risk public housing to a project-based Section 8 platform, giving them flexibility to use low-income housing tax credits, private mortgage debt, and other sources of capital to preserve these properties for the long term. Without RAD, it is estimated that roughly 10,000 public housing units would be permanently lost each year due to obsolescence and decay.
The results of the evaluation highlight a growing need for an expansion of the LIHTC. The LIHTC made up the largest share of the financing used to preserve the sites that have converted under RAD to date, representing 39.4 percent of the capital raised. As the LIHTC is increasingly relied upon to sustain HUD’s public housing, more allocation authority will be needed in order to preserve these sites while also financing the many other types of developments needed.
A second phase of the evaluation, expected in December 2018, will look at how RAD impacts the physical and financial condition of properties being converted, as well as how residents in sites undergoing conversion are affected.