Public Housing Repositioning Letters Sent to Executive Directors

On Nov. 13, HUD’s Office of Public and Indian Housing sent a letter to Executive Directors of public housing agencies notifying them of their options related to the repositioning of their public housing properties. In the letter, HUD discusses the Rental Assistance Demonstration (RAD) program, new flexibilities for Section 18 demolition and disposition, and forthcoming guidance on voluntary conversion and the retention of assets after a Declaration of Trust (DOT) release.

Rental Assistance Demonstration (RAD). One form of repositioning involves the use of the current RAD, which is in the process of converting up to 455,000 public housing units to one of the Section 8 programs, either Project-Based Vouchers (PBVs) or Project-Based Rental Assistance (PBRA).

Voluntary conversion. Another repositioning “flexibility” in the PIH letter is voluntarily converting public housing to vouchers. Section 22 of the United States Housing Act allows PHAs to voluntarily remove public housing units from a PHA’s inventory and provide residents with tenant-based or project-based vouchers instead. This is often referred to as “vouchering out” of public housing.

Under current regulations, a PHA seeking to voluntarily convert public housing to vouchers must submit a “conversion assessment” to HUD as part of its regular, annual PHA plan process. A conversion assessment must have five elements:

• An analysis of the cost of continuing to operate the development as public housing, compared to the cost of providing vouchers.
• An analysis of the market value of the development before and after rehabilitation.
• An analysis of the ability of residents to use a voucher, given housing market conditions.
• An impact analysis on the surrounding community, including the effect of conversion on the availability of affordable housing as well as on the concentration of poverty in the neighborhood.
• A description of a PHA’s planned use of the property.

The conversion assessment must satisfy three conditions:

• Conversion won’t be more expensive than continuing to operate the development as public housing.
• Conversion will principally benefit the development’s residents, the PHA itself, and the community. Related to potential benefit to residents, the PHA must consider the availability of landlords willing to accept vouchers, as well as access to schools, employment, and transportation.
• Conversion won’t adversely affect the availability of affordable housing in the neighborhood.

Section 18 demolition. HUD’s letter refers to “new flexibilities” for Section 18 demolition and disposition. PHAs may decide to demolish or dispose of an entire development, or a portion of a development, for a variety of reasons, including the development being obsolete in terms of physical condition, location, or other factors making it unsuitable for housing purposes. And disposition may occur for reasons such a change occurred in the neighborhood, the location of the development is no longer conducive to residential use, or the land on which the development was built is sufficiently valuable that the PHA can replace the existing development with an improved development at no cost to HUD.

Retention of assets after a DOT release. A DOT is a legal instrument that grants HUD a formal interest in public housing property. It provides public notice that the property must be operated in accordance with all federal public housing requirements, including the requirement not to convey or otherwise encumber the property unless expressly authorized by federal law and/or HUD. PHAs must ensure a current DOT is recorded against all property, including land that has been acquired, developed, maintained, or assisted with funds authorized by the U.S. Housing Act of 1937, including the public housing operating fund and capital fund. If a PHA wants to sell public housing property, it must get Section 18 approval from HUD’s Special Applications Center (SAC) and then ask HUD field office counsel to release the DOT on the property.

HUD notes that it’s currently encouraging agencies to reposition their public housing properties to help address the significant public housing capital backlog. HUD’s immediate goal is to “reposition” 105,000 public housing units by September 2019. HUD isn’t requiring agencies to reposition or reduce the number of homes in their public housing properties at this time.

HUD notes that Field Offices plan to reach out to PHAs in the coming months to help agencies “explore repositioning possibilities in [PHA] inventories.” HUD states that its goal in contacting agencies is to help ensure PHAs understand their options. HUD plans to make all repositioning resources available on the PIH One-Stop Tool for PHAs (POST).