Notice PIH 2018 04 HA Subject Demolition andor

Notice PIH 2018 -04 (HA) Subject: Demolition and/or disposition of public housing property, eligibility for tenant-protection vouchers and associated requirements. D 3 G Webinar, June 19, 2018 Robert E. Hazelton, President and CEO

Background • March 22, 2018 HUD updates Demo-Dispo PIH 2012 -07 (HA) • Cross-references PIH Notices: a. b. c. d. e. f. g. 2012 -07 Demolition/disposition of Public Housing and Application Processing 2016 -13 Guidance on Property and Casualty Insurance Issues 2016 -20 Disposition Instructions for PHA Retention of Certain Public Housing RE 2016 -22 Environmental Review Requirements for Public Housing Agencies 2016 -23 Requirements for PHAs removing public housing units & ACC termination 2017 -10 Implementation of FFY 2017 Funding Provisions for the HCV Program 2017 -22 Guidance on Eligibility for Asset-Repositioning Fee (ARF) for Demo-dispo Purpose: The notice better explains application requirements to request HUD approval to demolish and/or dispose of public housing property under Section 18 of the United States Housing Act of 1937 and related Tenant Protection Voucher (TPV) eligibility for such actions. 2

Disposition Justification Criteria o UNITS: Surrounding Area – Not in the “best interest” of the residents or the PHA o o o Health and Safety Environmental Special Laws and Authorities Natural Features Infeasible Operations (lack of demand, changing demographics, etc. ) Burden of Proof: Environmental Assessment and/or Market Analysis o UNITS: Improved Efficiency/Effectiveness with off-site Low-income Housing o Efficiency of operations is better as PBV or PBRA units (not HCV) o Burden of Proof: PHA must demonstrate why the replacement housing is preferable o UNITS: Best Interests and Consistency – In the “best interest” of residents to dispose o o o Unit Obsolescence Very Small PHAs Comprehensive Rehabilitation or Replacement through RAD Improved Efficiency/Effectiveness through Low-income housing Scattered site units o Land COCC: Vacant Land Non-Dwelling Building Disposition o Unused land o Abandoned non-residential buildings o Central Office Cost Center buildings 3

Focus: Best Interests and Consistency o Best Interests and Consistency – 4 scenarios benefit small and large PHA alike! o Unit Obsolescence – Cost Obsolescence or Functional Obsolescence o Traditional Section 18 Demolition/Disposition process with new flexibility and interpretation o Very Small PHAs o PHAs 50 units or less can transfer assistance to Section 8 o Comprehensive Rehabilitation or Replacement through RAD o Combined use of the RAD and SAC programs for significant rehabilitation o Scattered Site Units o Distance and lack of uniformity create larger than normal expense ratios and difficulties to manage effectively o Burden of Proof in PHA Application o Technical cost obsolescence reporting o Detailed unit/property matrix o Written report of the plan (remember to “paint the picture”) o Geographic mapping of assets to demonstrate configuration o Small PHAs and Scattered Site: Must have voucher authority or prove administration arrangements 4

Example Scattered Site Mapping and Discussion of “contiguous” Contiguous Buildings? NO 5

Example Scattered Site Mapping and Discussion of “contiguous” Contiguous Buildings? YES 6

Example Scattered Site Mapping and Discussion of “contiguous” Contiguous Buildings? NO, but “Sites” YES. Policy Interpretation? 7

What to do with Excess Land & Scattered Sites? o Leverage and Manage o Scattered Site Bond Programs (S&P and GSEs) o Local financing o Mix, Match, Sell, Manage - monetize portfolio assets to achieve desired preservation results! o Sell some Assets to Generate “Sources” o Sell to a Non-Profit at below FMV, ensuring long term affordable housing o Maximize opportunities to Residents! Consider home-ownership for residents over-qualified in RAD LIHTC projects. Consider partnering with FHLB first time home buyer program. o Land disposition to a for-profit entity is allowed, but must provide FMV transaction o Develop for Highest and Best Use o o Work with local non-profit or for-profit developers under Land Lease provisions Increase additional non-ACC affordable housing Resident and community capacity building (think amenities, social services, increase access to goods, etc. ) Pursue self development opportunities? o Burden of Proof in PHA Application o o Important to detail the Commensurate Public Benefit if asset is disposed at less than FMV Describe economic opportunity benefits Land Use Restriction Potentially an appraisal to prove FMV 8

Demolition Justification Criteria o Physical Obsolescence and Cost Ineffectiveness, allowed items: o Immediate and Short Term (3 year) Repairs o Building and Life Safety Code Requirements (IBC building code definition) o Underground Utilities (sewer, water, gas, electric) regardless of distance o Mitigation costs of asbestos, lbp, and other environmental (supported by reporting) o Increased Soft Cost Percentages (upto 30% potentially!) o Accessibility Improvements (UFAS, FHAAG, ADAAG, state/local) o Other Repairs, as supported by licensed professionals (e. g. seismic retrofits, mold remediation, radon gas mitigation, etc. ) o Other Factors: Physical land attributes to infeasible obsolescence (e. g. gurney elevator in elderly facility or adding a second bathroom to 5 bedroom units) o Technically “disallowed” items: o Energy upgrades (unless code related), new amenities, long-term repairs, landscaping beyond 5’ of buildings, work items associated with site improvements and appurtenances (e. g. parking lots, security cameras, playground, etc. ), and replacement of PHA personal property (removable items? ) 9

Demolition Justification Criteria (con’t) o Burden of Proof o PHA shall submit a list of specific and detailed work items that require rehabilitation, preferably prepared by an outside engineer or architect, in two components: Scope of Work & Cost Estimate o Capital Needs Assessment (aka Scope of Work) o Rehabilitation Cost Estimation - RSMeans* Segregation Method o Government Inspection Documents o Environmental Testing Reports o Prior PIH HA notice allowed only like-for-like replacement – however, the narrative scope of work is very important in your SAC application. Paint the picture, describe the condition, justify the need! * RSMeans: Notice specifically recommends R. S. Means Facilities Maintenance and Repair Cost Data, but also identifies Marshall and Swift cost index, other acceptable methods, and actual and competitive bids. 10

Comprehensive Rehabilitation or Replacement through Rental Assistance Demonstration (RAD) o Qualifications for the 75% / 25% RAD/SAC Split Program: The project-based Section 8 units (RAD and PBV) must be newly constructed or substantially rehabilitated (defined as 60% of calculated Hard Construction Costs (HCC) and not using the 9% Low Income Housing Tax Credits. The project primarily remains a RAD transaction, however, requesting SAC approval of 25% of the units. PBV or PBRA choice remains. All RAD program requirements (e. g. relocation, FHEO, env, etc. ) apply. o The totality of replacement units (RAD units + regular PBV contract for the Section 18 units) must fall within the RAD de minimis allowance. For example, for a 100 -unit property, the de minimis unit total could not exceed 5 units or 5%. As a result, a PHA could: o Replace 100 units, with 75 under RAD HAP contract and 25 under a regular PBV contract; or o Replace 95 units, with 70 under RAD HAP contract and 25 under a regular PBV contract, and 5 de minimis units; or o Replace 100 units, with 70 under RAD HAP contract and 30 under a regular PBV contract (including 5 de minimis units that are backfilled with regular PBVs). o Pros: o o Can make large (350 unit + sites more manageable) SAC phased approach allowed The 25%/75% is a wonderful tax-exempt bond enhancement Ultimately an incredible tool for deconcentrating poverty as the 25% replacement SAC units could be off-site 11

Current Property 360 units Future Property 270 units 12

Comprehensive Rehabilitation or Replacement through Rental Assistance Demonstration (RAD) (Con’t) o Burden of Proof – The RAD/SAC Split Financing Plan a. A detailed Conversion Overview transaction summary describing the use of this provision and confirm that the units that will be removed through Section 18 Disposition will be sold or otherwise transferred (i. e. ground lease) to a third-party entity that is recognized as a separate independent entity. This can be a combination of on-site and off-site construction. b. A cash flow pro forma that reflects the income and expenses of the total project. c. Capital Funds sources that, on a pro-rata basis, do not exceed 75% HUD’s published TDC. d. A Capital Needs Assessment (CNA) with e-Tool covering the whole property; including cost estimates for rehabilitation, and demonstration of acceptable TDC/HCC ratios. e. A completed front-end Civil Rights Review and Environmental Review (24 CFR Part 58). f. An updated post-closing engineered Utility Allowance (U/A) schedule. o The PHA would also submit certain materials needed for a complete Section 18 application that are not already required by RAD. Specifically, a. Site map(s) and spreadsheet designating which units, by address and unit type, will be removed through RAD and Section 18. The site map(s) should detail all land improvements therein and the spreadsheet should designate which units, by address, and unit type, will be removed through RAD and Section 18 b. An amended Annual Plan; Local government support letter; Full relocation plan; & Resolutions. 13

https: //www. hud. gov/sites/documents/TDCS_2017. PDF 14

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QUESTIONS AND DISCUSSIONS? 16