In September 2019, the Department of Housing and Urban Development announced a program to transition properties operating under Section 202 PRACs into RAD (rental assistance demonstration) assets. 

Such a conversion can provide greater long-term stability to a community and its residents through enabling critical rehabilitation and the creation of reserves to cover future improvements and repairs. Additionally, conversion may enable annual rent increases to cover increases in costs.

In order to convert a property, the owner must go through a series of steps, briefly outlined below:

• Evaluate goals and define a basic strategy for the community.

• Provide a preliminary conversion plan to HUD via the RAD Resource Desk.

• Get a MAP-compliant capital needs assessment performed.

• Develop a comprehensive financing strategy.

• Submit the full conversion plan for HUD to review and approve.

• Upon closing, the new Section 8 HAP contract will take effect, replacing the PRAC.

For more information on each step, HUD has a 17-minute video to provide more granular detail.

Eligibility Criteria

In order to qualify for RAD for PRAC conversion, properties must typically meet several criteria. In addition to maintaining compliance with fair housing standards, assets must have:

• An active PRAC agreement

• Operating reserves of at least $250 per unit (this requirement can be met via funding from a lender or equity investor)

• A physical inspection score from HUD of at least 60 prior to applying

• Evidence that supportive services are accessible to residents

Another requirement for the process is the involvement and engagement of a property’s residents. A property owner is required to hold, at minimum, two meetings with residents to discuss any rehabilitation plans, relocations (if applicable), any policy changes, etc.

One of these meetings must happen more than 30 days prior to submitting a final conversion plan, while another must occur after the plan is submitted to HUD but before conversion begins. During the approval process, additional meetings are also required if the conversion plan is revised in any significant, material way.