HUD Clarifies David-Bacon Act Wage Requirements on RAD Developments

On Dec. 23, HUD issued a notice clarifying whether developments in the Rental Assistance Development program’s second component need to pay prevailing-wage rates to laborers.

The prevailing-wage issue began on June 25, 2014, when HUD published a rule that amended the regulations governing the Section 8 Project-Based Voucher (PBV) program, largely due to changes made to the PBV program by the Housing and Economic Recovery Act of 2008 (HERA). One of the changes stipulated that prevailing-wage rates determined by the Davis-Bacon Act are applicable to RAD I developments with nine or more units. The prevailing-wage requirement applies if a public housing agency or HUD entered into agreements with the builder for Section 8 use before construction or rehabilitation started. However, the original RAD announcement didn’t address whether the prevailing-wage requirements apply to the RAD program’s second component.

For many RAD second component sites, budgets have been established on the assumption that Davis-Bacon wage requirements won’t be imposed. This allows for slightly lower building costs. According to the notice, HUD won’t enforce the prevailing-wage requirements for RAD second component sites that were either submitted and approved to proceed by HUD before June 25, 2014, or submitted and approved to proceed by HUD before Dec. 31, 2014, and involve the receipt of low-income housing tax credits (LIHTCs) that need to be used before Dec. 31, 2014. The notice also states that HUD will enforce the prevailing-wage requirements for RAD II properties that qualify as existing housing and are submitted and approved to proceed by HUD after Dec. 31, 2014, and HUD will continue to enforce prevailing-wage requirements for RAD first component sites.