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The Rev-4 of the RAD Notice - A few highlights

 

Since its release, the Rev-4 of the RAD Notice (now renumbered as Notice H-2019-09/PIH-2019-23 (HA)) has been a hot topic. The additional repositioning tools it provides housing authorities (HA) were heavily discussed at the recent RAD Collaborative Convening in Greensboro, NC and at other housing conferences I’ve been attending across the country. Here are some highlights from the revised notice with I find interesting: 

  • It allows HA’s to partner up, share resources, and do a bit of “horse trading” to benefit their portfolio repositioning.  They can now contribute public housing funds to each other’s projects, rent bundle across each other’s portfolio, transfer land or make other arrangements to facilitate RAD conversions amongst their portfolios.
  • HA’s can now apply for portfolio awards by entering 25% of units in RAD allowing them to lock in 2018 RAD rents as a future floor.
  •  Capital Needs Assessment requirements have been streamlined! This includes the elimination of all utility consumption baselines, and energy audits in some scenarios. 
  • A rent increase of $100 per unit is now possible if a RAD PBRA project involves new construction or substantial renovation in an Opportunity Zone (OZ). 
  •  Environmental clarifications include, broadening the use of tiered environmental reviews, required use of the new online HEROS platform, and increasing hazardous material requirements.
  •  Final guidance is provided on RAD for PRAC, allowing the conversion of Section 202 PRAC projects through RAD to long-term Section 8 contracts. (D3G can help whether you have a single PRAC or a complex portfolio. Read more here.)

D3G’s Housing Preservation Team brings superior knowledge and expertise to the complexity of RAD projects. We have 25 years of experience with HUD, FHA, RAD, Section 8 PBRA/PBVA, LIHTC and mixed income real estate repositioning services. Our experienced team can provide early planning and transactional guidance bringing projects from concept to reality. Read more about our RAD services here.

 

 

Celebrating 25 Years in Business!

Wow! Twenty-five years in business!

I’m not sure I was thinking that far ahead when I started the company back in 1994, by myself, in a windowless basement 340 square foot office.  Back then we were Dominion Environmental Group and definitely a “local” consultant, focused on hazardous materials testing and Phase 1 Environmental Site Assessments (ESA’s).  Boy have we evolved, grown and enhanced our array of professional service offerings over the years!  A few years after opening, we changed the name to our current Dominion Due Diligence Group and really started to focus on supporting the preservation of affordable housing, a cause I am deeply passionate about. We expanded our services to include Capital Needs Assessments, Architectural Review, Construction Cost Estimation, Sustainability/Energy Consulting, Green Building Certification, and Affordable Housing Repositioning Services. I am proud that D3G is the only affordable and workforce housing due diligence company that offers this depth and breadth of experience with experts that are all in-house – employees not contractors.

I’m also very proud of the accomplishments and acknowledgments we’ve received over the years, including the Ernst and Young Entrepreneur of the Year Award, a Best Places to Work award, and recognition of our support of Veterans Housing. I’m excited that for the past two decades D3G has been a willing guinea pig for HUD’s various pilot initiatives and housing preservation tools, such as the Rental Assistance Demonstration (RAD); Multifamily Accelerated Process (MAP); CNA e-Tool platform; 24 CFR 50/58 HEROS; LIHTC Pilot Initiative; Green MIP Reduction; and the Moving to Work (MTW) program.   

I’m thankful too, for the trust and support from our valued clients and vendors. Thank you for your belief in us and our abilities to help you achieve your project goals. Thank you for letting us share in your successes to transform communities and preserve workforce and affordable housing. D3G’s success can be attributed to the commitment to our core values, maintaining the highest level of customer service and having true Subject Matter Experts (SME’s) for employees. We will continue our mission of supporting workforce housing development and affordable housing preservation across the country by staying ahead of the latest financing programs and providing expert level consultative services to our clients. Here’s to 25! And celebrating the next successful chapter together.

 

 

Citi Showcases RAD Project that D3G Supported

Check out this cool video highlighting the successful transformation of a property devastated by super storm Sandy. The first RAD conversion for NYCHA Housing. https://youtu.be/kdGDtAC6Wrk 

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Bipartisan Bills to Improve LIHTC

Rob was on the Hill yesterday, hearing from and meeting with a few of the Representatives who helped to push this legislation!

 

After months of work by NAHB's Housing Credit Group members, legislation has been introduced in the House and Senate to improve the Low-Income Housing Tax Credit, as well as provide it with additional resources.

In the Senate, the Affordable Housing Credit Improvement Act (S. 1703) has been introduced by Sens. Maria Cantwell (D-Wash.); Ron Wyden (D-Ore.), the ranking member of the Senate Finance Committee; Johnny Isakson (R-Ga.); and Todd Young (R-Ind.)

The House bill (H.R. 3077) was introduced by Reps. Suzan DelBene (D-Wash.), Kenny Marchant (R-Texas), Don Beyer (D-Va.) and Jackie Walorski (R-Ind.).

The Affordable Housing Credit Improvement Act includes key provisions NAHB strongly supports. The bill would:

  • Establish a permanent minimum 4% credit floor. Currently, this credit rate floats, and the current low interest rate environment results in 15 to 20% less equity available for development. Establishing a 4% minimum floor would provide more predictability and flexibility in financing projects, making more types of properties financially feasible and significantly increasing unit production.
  • Increase 9% credit allocations by 50%.
  • Prohibit local approval and contribution requirements, which can be misused to block affordable housing projects.
  • Rename the Low-Income Housing Tax Credit the Affordable Housing Tax Credit.

Sen. Cantwell's leadership on this issue has been critical to garner bipartisan support for this legislation.

The Affordable Housing Credit Improvement Act will help boost the production of sorely needed affordable rental apartment units. NAHB strongly supports this legislation and will push for its consideration by the Congress.

 

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Choice Neighborhoods Initiative Awarded to Norfolk and Newport News in Virginia

D3G is proud to have assisted both Newport News and Norfolk, both successful recipients of large Choice Neighborhoods Initiative (CNI). Congratulations to both localities on their hard work!

https://www.hud.gov/press/press_releases_media_advisories/HUD_No_19_060 

 

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FHA OFFERS INCENTIVES FOR PROPERTY OWNERS WHO INVEST IN OPPORTUNITY ZONES

HUD Multifamily issued additional Opportunity Zone incentives today. As a dedicated housing professional for 25 years, I think there is still a lot more HUD could do to encourage Affordable Housing in Opportunity Zones.

 

You can read the HUD release here - https://www.hud.gov/press/press_releases_media_advisories/HUD_No_19_058

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Updates To the Environmental Review Requirements for RAD Conversions - Quick Reference Guide

HUD has recently revised the Quick Reference Guide for Environmental Review Requirements for RAD Conversions. This version provides a more streamlined organization of information, incorporates frequently asked questions that have come up over the past few years, and introduces simplified environmental reviews for RAD conversions to PBRA that do not entail any work. This guide is applicable to both components of RAD (i.e., for public housing, Mod Rehab, Rent Supp & RAP, and soon 202 PRAC conversions). 

 

 

 

 

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HEROS Turns Five

On March 1st, HEROS celebrated five years in existence. From an idea floating around, to a document hundreds of pages long, to an almost mandatory system - it's come a long way!

 

Here are some HEROS stats:

Users

HUD staff:

  • CPD field: 477
  • CPD HQ: 35
  • OEE (CPD): 44
  • RAD: 55
  • Multifamily Housing and Healthcare: 371
  • Public Housing: 217
  • ONAP: 67
  • Other: 3

Non-HUD users:

  • CPD Entitlements: 3,235
  • CPD Consultants: 50
  • Public Housing Authorities: 51
  • ONAP Consultants & TDHEs: 22 (Pilot group only at this time)

 

Reviews in the system:

Part 50 – 4,850

Part 58 – 25,410

 

Here’s to many more years of HEROS!

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D3G Supported RAD Work in the News

D3G performed the RAD Due Diligence work on West Newton Apartments in Boston in 2017 and 2018. They just closed on the loan and the developer is getting ready to start the renovations. Not all RAD applications are accepted, but our clients have an upper leg when they use us to help them through the application process.

https://bostonrealestatetimes.com/inquilinos-boricuas-to-redevelop-and-preserve146-unit-west-newton-apartments/

 

We also provided the RAD Due Diligence work on Westside Courts in San Francisco in 2015 and 2016. Our Engineering, AEC and Green divisions all contributed to the massive improvements at this property.

https://www.globest.com/2019/02/26/mayors-office-unveils-public-housing-renovation/

 

What great success stories!

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LIHTC Pilot Notice

The long-awaited LIHTC Pilot notice was released late last week. Unfortunately, the notice language prohibits the pilot from being used for RAD transactions or New Construction using 4%. The industry will have to raise concern about these limitations because preservation of RAD and PRAC deserve reduced time and fees for transactions.

 

http://d3g.com/images/other_media/RAD/Mortagee_Letter.pdf 

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RAD Collaborative - First Regional Convening (Feb 27th - Mar 1st)

We're headed to the first convening of the RAD Collaborative in Portland, Oregon and hope to see you there! 

http://d3g.com/images/other_media/RAD/RAD_Convening.pdf

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RAD Success in Nashville

The power of public-private partnerships and RAD can be highlighted by Nashville’s dedication, efforts, and outcomes in affordable housing. D3G is proud to have been a part of the MDHA RAD story. This is a truly transformative project for a formerly depressed part of the city. It's so exciting to see the continued success of RAD projects!

 

https://spark.adobe.com/page/gXnmNtGtALo6i/

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D3G’s Green MIP New Construction Project, Manseau Flats, Receives NGBS Bronze Certification

 

Manseau Flats is a six-story, 78-unit community with one- and two-bedroom floor plans. The property offers quick access to the local bike and walking paths along the Fox River and an adjacent marina. The building was constructed with highly-efficient Insulated Concrete Form (ICF) Walls and ENERGY STAR windows while the dwelling units water fixtures are low-flow, the appliances are all ENERGY STAR certified and the water heating and HVAC systems are high-efficiency. Building materials that were selected included low and no VOC paint to improve indoor air quality.

“HUD’s Green Mortgage Insurance Premium Reduction Program is a phenomenal program with a great return on investment for developers but there are a lot of steps and requirements,” said Stephen Evanko, D3G’s Managing Director of Energy and Sustainability. “D3G can support lenders and developers through the process – from the initial Environmental Site Assessments, to the Architectural Reviews, to the energy and green building consulting and verification as well as with the ongoing monitoring.”

 

Residents will benefit from a high-quality, energy-efficient apartment and will pay less in utility costs.

 

 

https://www.multihousingnews.com/post/walker-dunlop-arranges-15m-loan-for-manseau-flats/

https://www.manseauflats.com/ 

 

 

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RAD PBRA & PBV Funding During Shutdown?

Check out the latest news from the RAD Collaborative and be sure to save the date for Northwest Regional RAD+ Convening February 27th-March 1st. Hope to see you there!

 

http://d3g.com/images/other_media/white_papers/RAD_Collaborative_News.pdf 

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A change to the Rental Assistance Demonstration (RAD) regarding conversions to project-based rental assistance under RAD’s Second Component.

You can read more here but the good news is that they (HUD) clarified the understanding. 

https://www.federalregister.gov/documents/2018/12/11/2018-26709/rental-assistance-demonstration-amendment-to-final-notice 

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The Revitalization of Lynchburg, Virginia's Historic Krise Building

When you're in the business of Housing Preservation, it's certainly always cool when a project that you've supported helps to preserve and revitalize a 100+ year old building. Our work included everything from the ESA to SEDI to Radon testing and NGBS Green Verification Services. 

https://www.benzinga.com/pressreleases/18/09/r12413590/walker-dunlop-provides-4-million-construction-loan-for-the-revitalizat

 

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RAD Celebrates 100,000 Units Preserved

What an awesome milestone in housing preservation! D3G is proud to have been at the forefront of the RAD process and to see so many of our projects through to successful completion.

http://d3g.com/images/other_media/RAD/RAD_100000_Homes_2018.pdf

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Jenn Krieher Joins D3G as Housing Preservation Manager

D3G is excited to announce and welcome Jenn Krieher as Housing Preservation Manager. The Housing Preservation Services (HPS) department was recently created to support the widened scope of services that D3G provides. Jenn will be responsible for providing technical assistance for RAD and SAC Section 18 programs, as well as overseeing portfolio wide reviews for our PHA clients. She’ll manage the D3G relationship with PHA’s and their development teams, performing RAD transaction liaison and owner representative services for clients. 

“I’ve known Jenn for the past eight years and am thrilled to have her on board here at D3G. Her talent, and especially her HUD experience, will add to our unprecedented affordable housing knowledge,” said Rob Hazelton, President of D3G

Jenn joins D3G from HUD, where she was part of the innovative Office of Recapitalization, during the early days of HUD’s green programs. She brings with her a strong housing preservation background, existing relationships with key players in housing across the country and deep knowledge of RAD & SAC, having been a RAD Transaction Manager.

 

 

Opportunities for Developers and Stakeholders within HUD’s Rental Assistance Demonstration (RAD)

The HUD Rental Assistance Demonstration (RAD) began as a limited pilot program in 2012, focused on accessing capital to address the backlog of deferred physical needs within public housing.   According to a HUD 2010 study, the backlog of repairs was estimated at $26B within the public housing stock.   More recent estimates place the backlog repair cost at greater than $35B.  The underlying premise of RAD is to remove the restrictive covenants on the property, better known as a “Declaration of Trust” which previously hindered the ability for public housing entities to leverage and redevelop real estate assets. Unencumbered real estate, combined with the transfer of public assistance from the Section 9 platform to the Section 8 platform allows for public housing to receive long term Housing Assistance Payment contracts and operate more like conventional affordable housing.  A few current stats on the viability and success of the program:

a.       RAD is a no-cost program to the Government involving a transfer of Public Housing capital and operating funds to the stable Multifamily Section 8 platform.   All residents have the right to return post-transformation, and long-term affordability is protected by renewable 20-year Section 8 contracts. 

b.       RAD has overwhelming bipartisan support, as evidenced by the recent increase in statutory authority from the previous 185,000 units to 455,000 units of public housing.  Also worthy of noting is that the Senate requested elimination of the cap altogether, which would allow conversion authorization for all 1.2million units of public housing.

c.       The initial 85,000 units of RAD conversion has generated greater than $5.8B investment in public housing, with a private to public capital ratio of 9:1.  Based upon current HUD Section 9 subsidy levels, it would have taken 47 years of appropriations to invest the same amount of capital for repairs, renovations and replacement.

Recent Policy Improvements:

RAD, though still considered a demonstration program, has advanced far beyond the original 60,000 units of authority.   HUD’s Office of Recapitalization has demonstrated strong leadership and a willingness to both streamline the process, as well as encourage deeper rehabilitations and/or disposition/demolition of functionally obsolescent property.   Subsequently, at the beginning of Q2 2018 HUD released a housing guidance document (PIH 2018-04 (HA)) which provides greater flexibility, new opportunities and streamlined initiatives within RAD; including:

a.       Small PHAs under 50 units can transfer to the Section 8 platform under a simplified process.  These units would obtain project-based voucher (PBV) contracts and be transferred to a non-profit entity.

b.       Scattered site assets, defined as non-contiguous 4-unit or less buildings, can be “disposed” of by a public housing agency via: (i) Section 8 contract transfer; (ii) fair market value (FMV) sale; or (iii) transfer of ownership to public housing residents.

c.       PHAs with excess land and commercial buildings have a streamlined method for (i) FMV sale; (ii) transfer to a non-profit demonstrating commiserate public benefit; or (iii) leverage and housing construction using RAD. 

d.       PHAs intending to use 4% LIHTC bonds to address advanced capital needs may apply for a 25%-75% SAC/RAD rental assistance split, whereby 25% of the units can be granted HUD Section 18 Tenant Protection Vouchers (TPV).  This new financing structure provides greater rent levels and timing of rental assistance payments, substantially enhancing LIHTC 4% bond proceeds.

Opportunities:

The following HUD graphic details adoption rates of RAD by region in the United States.  The Southeast has been an early adopter of RAD and continues to show rapid acceptance of the program.

 

 

The following discussion points detail opportunities about the potential role of Developers and Stakeholders within RAD transactions:

1.       RAD works and works well, supported by the evidence and success of early adopters, and increasing interest by some of the largest affordable housing developers in the country.   They all cannot be that wrong!

2.       RAD is best when combined with other sources of capital, equity and grant funds; for this reason, affordable housing developers with affordable and mixed financing experience find themselves in a unique opportunity to assist with public housing transformation.

3.       PIH Notice 2018-04 provides a prescriptive process for determining functional and cost obsolescence on older properties.  New guidance encourages demolition of larger public housing projects and replacement with multiple smaller, regionally diverse, new construction projects.  Single large PIH projects will be encouraged to be divided into multiple transactions, deconcentrating demographics. 

4.       PIH Notice 2018-04 provides mechanisms for commercial property, vacant land, and low-density land to be repurposed, and either sold at FMV, transferred to a non-profit, or placed under a land-lease with a private developer. 

5.       PIH Notice 2018-04 provides a method for public housing transformation where residents may become home buyers.   It is estimated that more than 200,000 single family homes are within the public housing portfolio, and recent HUD guidance encourages transfer of ownership to residents.   

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D3G'S Stephen Evanko Recognized as Home Innovation NGBS Green Partner of Excellence

Midlothian, VA, February 25th –Stephen Evanko, Managing Director of Energy & Sustainability for Dominion Due Diligence Group (D3G) has been named a Home Innovation NGBS Green Partner of Excellence for 2017. NGBS Green, which is based on the National Green Building Standard™ (NGBS), has certified more homes than any other national green home certification program thanks in large part to its knowledgeable in-field verifiers. Being one of an elite group of Home Innovation’s green certification program partners to be recognized validates the commitment Stephen has made to providing customers with increased value, professionalism, and relevance in the marketplace through third-party verification to the NGBS.

“What a year!” said Home Innovation Vice President Innovation Services Michelle Foster. “NGBS Green celebrated its 100,000th NGBS Green Certified home in March 2017, and less than a year later we have certified an additional 28,000+ homes. In 2017 we also marked the first 2015 NGBS Green Certified home; started development of the 2018 NGBS, which will now cover mixed-use multifamily buildings; and Home Innovation was selected as ENERGY STAR MRO for high-rise multifamily buildings. We could not have attained all these milestones – while at the same time continuing to provide an affordable, rigorous certification program that provides value to the entire residential construction industry – without dedicated partners like Stephen.”

Stephen’s firm, Dominion Due Diligence Group, supports multifamily projects pursuing HUD financing.  In 2016, HUD launched the Green Mortgage Insurance Premium Reduction that offered Multifamily projects up to 40 basis point for pursuing energy-efficient design and green building certifications. 

As an accredited NGBS Green Verifier, Stephen and his team have provided NGBS green building consulting verification and energy modeling services for ~100 projects that have pursued this incentive.  NGBS Green Verifiers are trained, tested, and accredited by Home Innovation to ensure consistency and rigor across the country for NGBS Green Certifications across the country.

“HUD’s Green Mortgage Insurance Premium Reduction Program is a phenomenal program with a great return on investment for developers but there are a lot of steps and requirements. NGBS is a great solution and we enjoy helping developers through the process to secure the rate reduction and deliver a quality building, said Evanko.”

To earn certification to the National Green Building Standard, a home must meet rigorous criteria in six categories – Lot & Site Development; Resource Efficiency; Energy Efficiency; Water Efficiency; Indoor Environmental Quality; and Homeowner Education. There are mandatory practices in each category that every NGBS Green Certified home must meet, and there are a wide range of additional optional practices in each category that a builder can select based on the applicability to buyers or renters in their market. There are also mandatory point minimums in every category in order for a home to attain the next level of certification, which is a more stringent requirement than in any other national certification program.

Since January 2009, when the National Green Building Standard (NGBS) became the first residential green building rating system to be approved by the American National Standards Institute (ANSI), Home Innovation Research Labs has certified nearly 130,000 green single-family and apartment homes, and more than 1,650 lots within green residential land developments. (For more details on current certification numbers, visit www.homeinnovation.com/ngbsgreenstats.) For more information on NGBS Green Certified homes and Home Innovation’s NGBS Green Partner home builders and remodelers, visit www.NGBS.com.

 

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ABOUT D3G: Since 1994, Dominion Due Diligence Group (D3G) has been navigating the nation’s most complex housing and healthcare projects. D3G was the original third party due diligence consultant to concentrate on the HUD-FHA-MAP mortgage insurance industry and has since grown into a full-service Environmental and Engineering real estate due diligence company. Our third-party reporting is used for HUD-FHA, SFHA, Fannie Mae, Freddie Mac and conventional financial transactions. D3G has helped shape the affordable housing preservation industry by presenting environmental, property and sustainability solutions to our Lenders, Borrowers, General Contractors, Design Professionals and Equity Partners. D3G has a full energy and sustainability team offering an extensive suite of services including; energy benchmarking, energy audit, energy modeling and green building consulting and verification.

ABOUT HOME INNOVATION RESEARCH LABS: Home Innovation Research Labs, located in Upper Marlboro, Md., is a full-service research, testing, and consulting firm determined to improve the quality, durability, affordability, and environmental performance of single- and multifamily homes and home building products – in short, we aim to perfect the home. Founded in 1964 as a subsidiary of the National Association of Home Builders (NAHB), our team has been integral in solving many of our client’s most difficult product and technology issues, and helping to introduce some of the most groundbreaking innovations in residential construction. Through an interdisciplinary research approach – including market research, building science analysis, laboratory testing, and standards development – we help to find a home for innovation in the residential construction industry.

 

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