	Background

The RAD program was authorized by Congress in November 2011 under  the Consolidated and Further Continuing Appropriations Act of 2012. The  RAD program provides HUD the opportunity to test the conversion of  units subsidized under HUD’s public housing and certain other programs  to long-term (typically 15 to 20 years), project-based voucher or rental  assistance contracts—two forms of rental assistance that tie the  assistance to the unit in order to provide subsidized housing to low- income residents. However, project-based vouchers  provide a mobility option for residents. Specifically, a large percentage of conversions have taken place in  New York, Massachusetts, Michigan, and New Jersey (see fig. HUD also took steps to communicate program requirements to property  owners, PHAs, and residents. HUD officials explained that these conference calls help to ensure  that applications are being processed similarly nationwide. RAD Conversions Have Had a Small Effect on the Percentage of Project- Based Vouchers

RAD conversions have had a small effect on the number and percentage  of total vouchers (project-based and tenant-based vouchers). The  remaining active contracts for the Rent Supp, RAP, and Mod Rehab  programs include about 38,000 units, which is relatively small compared  to the over 2 million vouchers currently assisting low-income residents. Even if all of these units were converted as of March 1, 2014,  the maximum change in the nationwide percentage of project-based  vouchers would be an increase from 3.45 percent to 5.48 percent. Stakeholders Utilized RAD Conversions to Preserve and Improve Affordable Housing Units

Property owners, PHAs, residents, housing organizations, and a housing  expert we spoke with generally viewed the RAD program as a useful tool  for preserving affordable housing. For example, representatives of a  property owner involved in a large number of conversions told us that  without RAD, they would not have preserved as many of the affordable  housing units as they have, and that those units would have most likely  been lost as affordable housing. PHA officials  and HUD field office staff who administer and oversee RAD conversions  to project-based vouchers consistently told us that, in their experience,  most property owners plan to recapitalize or have recapitalized their  properties, in order to rehabilitate the property. This recapitalization included refinancing with a long-term  mortgage. Appendix I: Objectives, Scope, and Methodology

This report examines aspects of the second component of HUD’s Rental  Assistance Demonstration (RAD) program, which allows the owners of  properties receiving rental assistance under the Department of Housing  and Urban Development’s (HUD) Rental Supplement (Rent Supp), Rental  Assistance Payment (RAP), and Moderate Rehabilitation (Mod Rehab)  programs—referred to as covered programs—to convert tenant-protection  vouchers to project-based vouchers upon contract expiration or  termination. Specifically, this report examines (1) how HUD has  implemented RAD conversions of tenant-protection vouchers to project- based vouchers under the covered programs; (2) how these conversions  are expected to affect the long-term percentage of project-based  vouchers and costs to the voucher program; and (3) how these  conversions have affected selected converted units and the housing  choices available to residents. The voucher data included the  total number of tenant-based and project-based vouchers and the number  of project-based vouchers created as a result of RAD conversions as of  March 1, 2014. We also obtained and analyzed documentation from HUD to  determine the impact of these conversions on the budget.
Why GAO Did This Study

Over the next several years, rental assistance contracts will expire for about 38,000 affordable housing units currently subsidized through three HUD rental programs. Owners of these units would no longer be required to maintain affordable rents or make their units available to low-income residents. Residents in these units are eligible to receive special tenant-based vouchers called tenant-protection vouchers to shield them from resulting rent increases. HUD's RAD program was created in 2011 to preserve affordable housing by, among other things, allowing owners to convert these tenant-protection vouchers to project-based vouchers for units in three designated HUD programs. Project-based vouchers result in a long-term contract between the property owners and PHAs, which administer the vouchers.
The Consolidated and Further Continuing Appropriations Act of 2012 mandated that GAO review these conversions under RAD. This report describes the results of these conversions.
GAO reviewed HUD program documentation and procedures; analyzed data on conversions as of March 1, 2014; and conducted interviews with HUD officials as well as nongeneralizable interviews with four PHAs and five property owners selected based on geography and other factors.
GAO is not making recommendations in this report.

What GAO Found

Conversions to project-based vouchers under the Department of Housing and Urban Development's (HUD) Rental Assistance Demonstration (RAD) program will have a small effect on the percentage of total vouchers (made up of project and tenant-based) that are project-based. Residents with tenant-based vouchers can receive their assistance in any eligible privately owned rental unit, which means if they leave the unit, their assistance goes with them. In contrast, residents with project-based vouchers can only benefit from the assistance if they remain in the specific unit. As of March 1, 2014, property owners had converted a total of 6,670 units to project-based vouchers in nine states. The percentage of vouchers that are project-based including RAD conversions was 3.81 percent, and without RAD, would have been 3.45 percent. Further, the impact of these conversions on the overall long-term percentage of project-based vouchers will be small because the conversions are limited to the remaining 38,000 units assisted through the three designated HUD programs, which is relatively small compared to the over 2 million total outstanding vouchers. As the figure shows, most conversions have taken place in New York, Massachusetts, Michigan, and New Jersey—four states with a large concentration of units that were originally subsidized under designated HUD programs.
Stakeholders GAO interviewed generally viewed the conversions to project-based vouchers as a useful tool in preserving affordable housing. Stakeholders explained that, absent RAD, property owners would have had few or no options for continuing some form of rental subsidy when their contracts expired. Further, RAD conversions provide a stable subsidy for their properties that allows them to better obtain financing. All five owners—representing nine properties GAO contacted—have recapitalized or plan to recapitalize their properties, including refinancing or restructuring their debt, in order to rehabilitate them. Housing organization officials and a housing expert also told GAO that RAD has helped to preserve the number of affordable housing units. PHA officials, property owners, and residents told GAO that these conversions have not adversely affected residents' housing choices.