It’s now a reality! Congress has passed, and the President has signed the Omnibus Budget Bill for 2018. For the first time, the long-awaited Bill authorizes HUD under the Rental Assistance Demonstration Program “RAD” to convert an unlimited number of Section 202 properties with Project Rental Assistance Contracts (PRAC) to long-term Project Based Section 8 Contracts.
What Does This Mean For You?
The bill provides overall funding of $678 million for the Housing for the Elderly (Section 202) program. This is a $176 million (35 percent) increase over FY 2017 levels. It also provides $105 million for new Capital Advances Funding for new PRAC projects, which is a tremendous achievement building on the $10 million provided in FY 2017. Before FY 2017, the last fiscal year with Capital Advance Funding was FY 2010.
Further, the Bill gives the HUD Secretary authority to re-direct some funding from accounts for “Housing for the Elderly” to support of PRAC conversions to Sec 8. This means some of those new funding dollars can be used to help support refinancing and rehabilitation of existing PRAC properties within your portfolio. And depending on the needs of the Project, HUD can subordinate its old PRAC grant, held by HUD as loans, which heretofore must be paid off as part of any refinancing plan.
More Money, More Opportunity
The Bill’s potential rent subsidy increase would enable billions of dollars of private mortgage loans for preservation and rehabilitation of your projects and the more than two thousand other Capital Grant projects across the country. This all breathes new life into the PRAC program and preserves this vital affordable housing stock for the long-term future.
With Capital Advances converted to new 20-year Project Based Sec 8 HAP contracts, long-term, low, fixed rate HUD insured loans to fund moderate or substantial rehabilitation can be created. The Section 8 Rents would be established through a Rent Comparability Study, or Budget-Based Funding. Beyond funding renovations, these new loans could also enable cash flow and potential distributions to non-profit owners for reinvestment into other affordable housing initiatives. Low Income Housing Tax Credits also could be used to boost dollars for rehab and provide cash incentives to non-profit owners who decide to participate.
This Could Mean Increased Efficiency and Reduced Costs
HUD recognizes that many Section 202/811 PRAC projects are aging and in need of substantial renovation. Estimates of deferred renovations range as high as $24 billion. With new HAP’s in place, many projects could be combined under single new mortgages further reducing costs and improving operating efficiency.
Berkadia is the leading affordable housing financing source in the country. We have assisted hundreds of non-profit owners in refinancing and rehabilitating many thousands of HUD subsidized elderly and handicapped properties over the years.
For More Information, Please Contact:
Rick Price, 301-202-3578; [email protected]
Nick Nicholson 301-202-3554; [email protected]
Gemma Geldmacher, 617-531-8911; [email protected]