icon Blueprint for March

Posing Possibilities

3 min read

Public housing in the U.S. dates back to the Housing Act of 1937 when Congress created local housing authorities to build public housing for millions who were struggling after the Great Depression. Subsequently, public housing was constructed nationwide, but without sufficient investment, many fell and continue to fall into disrepair.

In the 1970s, President Nixon established a moratorium on construction and by the 1980s negative perceptions resulted in even more neglected public housing. Federal and local governments looked to the private market to address the issue – enter Section 8 and the HOPE VI program.

Then, in 1999, the eponymous Faircloth Amendment halted the construction of new public housing and capped units at existing levels. This legislation is still in effect today. 

This issue of Tax Credit Advisor is a nod to the Department of Housing and Urban Development’s Rental Assistance Demonstration (RAD) program, which is celebrating its 10th anniversary of the first public housing conversion, as well as its latest pathway to new deeply affordable housing, via the Faircloth-to-RAD process.

RAD was created as a powerful tool for Public Housing Authorities (PHAs) to use to preserve and improve public housing. Since its launch, the program has leveraged over $19.2 billion in construction investment to improve or construct over 174,000 public housing units and 53,000 Section 8 tax credit and market-rate apartments. (Leveraging Private Capital to Rehabilitate HUD Legacy and Public Housing Properties)

“HUD’s RAD program was a big idea: to raise money to rehabilitate crumbling old public housing properties by raising private equity and converting the buildings into project-based Section 8 developments. Now, a couple of modifications to RAD are increasing its reach.” Queen Manor, a RAD/Section 18 blend, is an existing property that will be combined under one ownership structure with an adjacent Low Income Housing Tax Credit project, Owens Manor, a Faircloth-to-RAD that is being re-syndicated after completing its 15-year compliance period. (Case Study: Owens and Queen Manor Apartments in Dover, DE)

As previously mentioned, the number of public housing units was capped at 1999 levels by the Faircloth Amendment. “Over the years, public housing units have fallen below the limits – there are an estimated 170,000 so-called ‘Faircloth units’ scattered across PHAs, and HUD has developed the Faircloth-to-RAD program to put the new units on the Section 8 platform.” (Industry Insights)

“Faircloth-to-RAD is a confluence of two federal regulatory guidelines that shape the way that PHAs operate…Though its structure is relatively complicated, Faircloth-to-RAD enables PHAs to use RAD’s financing structures to make units brought back under Faircloth authority more economically feasible with Section 8 project-based contracts.” (Three Years On)

Faircloth-to-RAD poses possibilities for PHAs to add to their stock by both creating and redeveloping public housing. With Faircloth-to-RAD, public housing has finally come full circle. (The Guru Is In)

Jessica Hoefer