New Developments: Funding RAD, the Good and the Bad
By Thom Amdur
3 min read
If adopted, President Trump’s FY-2020 budget would make significant cuts to HUD’s budget—overall, a $9.6 billion decrease from FY-2019 appropriated levels—and would zero out many critical community development programs entirely. Writ large, it’s not a very encouraging set of presidential priorities for community development and affordable housing professionals. But the president’s budget is only a proposal and simply the beginning of the appropriations process.
I’m not going to dwell too much on the program-by-program specifics. You can find those details in our excellent budget update on Housingonline.com. What I want to focus on is the push-pull of the budget on the Rental Assistance Demonstration Program (RAD), which is the focus of this issue.
In many respects, RAD has been central to the Trump Administration’s affordable housing strategy, and an area where they have had the most demonstrable success. The program has really picked up steam these past two years and as of today more than 100,000 public housing homes have been preserved through RAD. In partnership with the 115th Congress, the Component 1 RAD cap has been increased significantly and after the success converting Rent Supp and RAP properties (nearly complete!), the Component 2 program has now been expanded to the 202 PRAC portfolio. As you will read in Kaitlyn Snyder’s piece later in this issue, the Office of Recapitalization has taken recent additional steps via its program regulations to expand the utility of RAD further and so we are very excited about its prospects in the year to come.
In one respect, the administration is doubling down on the RAD program’s success by recommending that Congress appropriate an additional $100 million dollars in the next fiscal year to support RAD properties that cannot convert under the current program rules. In a budget that makes many difficult decisions on resources, we are encouraged by this support of RAD and hope Congress will heed this recommendation.
That being said, there is a huge incongruity in the budget that must be resolved if RAD is to succeed, namely, the elimination of the Public Housing Capital Fund. RAD is largely successful by its ability to leverage private financing in the form of debt and tax credit equity to make much needed capital improvements in the public housing portfolio. Naturally, debt financing requires debt service and given the tenant base, rent collected from residents in public housing deals is understandably limited. Programmatic RAD rents are derived from the combination of public housing operating and capital fund dollars. If Congress were to eliminate the capital fund, RAD would essentially be neutralized and, of course, the underlying capital needs of the public housing portfolio would be increased at a geometric scale.
I do not believe the 116th Congress will eliminate the Public Housing Capital Fund, but we must continue to make the case that for tools like RAD to be successful, we need to maintain and indeed expand funding for public housing at this juncture. Every year that we delay recapitalization of the public housing portfolio the needs will grow and incremental additional dollars and resources will become necessary to alleviate the problem. Now is the time to expand federal resources to reposition this portfolio once and for all and take advantage of the RAD platform. If paired with a flat four percent Low Income Housing Tax Credit (our dearest legislative priority) and affirmative steps are taken by states to maximize the bond program (highlighted in NH&RA’s upcoming Multifamily Bond Policy Initiative), we have a real opportunity.
