202 Properties May Be Able To Utilize HUD's Rental Demonstration Assistance (RAD) Program
The HUD 202 program, which provides eligible non-profits financing to create or acquire affordable properties for senior citizens, might be getting yet another boost. Until a HUD announcement this April, the program had been defunded since 2010, the last year in which it offered loans to non-profits. This year, $50 million was allotted towards the 202 program, which was granted in amounts ranging from $50,000 to $5 million. However, that’s not the only positive update; HUD has also proposed reforms that will allow current owners of certain 202 properties to unlock additional financing options.
HUD has proposed reforms to the Section 202 Project Rental Assistance Contract (PRAC) program, which currently consists of about 2,900 properties, which themselves comprise 125,000 units. Some of these properties received their initial round of funding in 1990, and many of them are in urgent need of rehabilitation. However, in most cases, owners lack the funding to make the required repairs.
Specifically, Congress has permitted Section 202 PRAC properties to take part in the Rental Assistance Demonstration (RAD) program, which has allowed properties participating in various HUD legacy programs to convert their properties to new, long-term Section 8 contracts. This allows the government to pay property rents and also permits properties to raise rents. All of this would provide the funds that properties need to conduct necessary repairs and rehabilitation efforts.
The reforms would also permit owners to utilize Low Income Housing Tax Credits (LIHTC) deals for additional funding. Borrowers would be able to use 4% or 9% LIHTC deals, as well potentially combine them with other debt and tax-exempt bonds. While 9% credits are allocated by individual states and are highly competitive, 4% LIHTC funds come from the federal government. While these reforms could make a significant difference for Section 202 properties, no final statement has been made by HUD.