Today at the ABA Affordable Housing Forum conference in DC, HUD Deputy Assistant Secretary for Multifamily Housing Priya Jayachandran expressed her enthusiasm for the possibility of 202 PRACs becoming eligible for RAD.
Last week, by an 89-8 vote, the Senate approved Fiscal Year 2017 Funding for HUD that includes a bonus for owners of HUD Section 202 properties with PRAC contracts. The FY2017 Transportation, Housing and Urban Development, and Related Agencies (THUD) Appropriations Act expands the universe of Rental Assistance Demonstration Program-eligible properties to the world of project rental assistance contracts under Section 202. Should the bill become law, these short-term PRACs would be able to convert to long-term project-based subsidy contracts with a term of 15 or 20 years. According to HUD data, there are over 120,000 units of housing covered by PRACs.
PRACs are common in post-1990 HUD Section 202 properties and are limited by the low rental subsidy available to this asset class. PRAC rent increases are budget-based without allowance for debt service payments. This potential addition to RAD would allow 202 owners to leverage private debt and equity in a way not possible under current program constraints. Your Nixon Peabody team continues to monitor this exciting development in the world of HUD senior housing.