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RAD Updates Published in Rev-4 (Part 2:  Mod Rehab Conversions)
HUD has published Rev-4 of the RAD Notice (“Rev-4”) on its website (now renumbered as Notice H-2019-09 / PIH-2019-23(HA)).  This blog post summarizes the Rev-4 updates for Component 2 Mod Rehab conversions.  (Rev-4 also updates guidance on the other RAD conversion types – public housing, Rent Supp and RAP properties and provides new guidance on “RAD for PRAC,” implementing the authority to convert Section 202 PRAC projects through RAD to long-term Section 8 contracts.  For more information, see Parts 1, 3 and 4 of this post.) 
Highlights of the Component 2 Mod Rehab conversion guidance include:
1. Choose your own CNA.  Struggle not with e-CNA tool, Mod Rehab conversion-ees.  Rev-4 streamlines many of the CNA requirements.  Utility consumption baseline analysis is no longer required.  If you are not using FHA financing, you can provide a CNA in the form you prefer, so long as it’s conducted by a qualified, independent third party.  No CNA is required if the scope of work meets the threshold for substantial rehabilitation, if the project was built in the last 5 years, or if the annual deposit to replacement reserve is at least $450 per unit and the project has equity financing. 
2. Davis-Bacon limited.  Davis-Bacon wages only apply to work done on nine or more units that have not been previously assisted.  Davis-Bacon does not apply to rehab of the units currently under the Mod Rehab contract. 
3. Preference for recipients of supportive services.  Mod Rehab SRO conversions can now more easily establish an admission preference for people needing voluntary services or supportive services.  This previously required additional scrutiny. 
4. Environmental review streamlining.  The guidance clarifies and allows for some streamlining of environmental review requirements. 

Additional updates include:
  • So long as TPVs or EVs (Enhanced Vouchers) have not been issued to project residents, projects can convert as prospective conversions, even if TPVs or EVs have been requested and processed by HUD.
  • Retrospective conversions are not eligible for PBRA, only PBV.  In PBRA conversions, all of the units under the Mod Rehab contract are eligible for conversion.  PBV conversions are limited to those units that qualify for TPVs.
  • PBRA projects can receive up to 120% of FMR under certain circumstances, one of which now includes the receipt of post-rehab rents if the project undergoes rehab (limited to 120% FMR). 
  • Replacement reserves are required for PBV projects.
  • PBRA projects with transfers of assistance to new construction can enter into a HAP at closing and use a pass-through structure.  The guidance also provides standards for evaluating requests for post-closing transfers of assistance.
  • Open civil rights matters are not a bar to conversion eligibility if the project resolves the matters to HUD’s satisfaction prior to conversion. 

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