Lost in the rush at the end of the year was news that HUD’s Office of Public and Indian Housing released a notice on December 26th (PIH 2024-40) updating the governance of the demolition and disposition of public housing property under Section 18 of the Housing Act of 1937.
Public housing authorities (PHAs) interested in preserving and rehabbing their properties, particularly through the Rental Assistance Demonstration, should take note. Changes in the notice make it easier for some rehab projects that combine RAD with Section 18 to pencil, hopefully enabling further preservation deals to take place.
For those familiar with RAD and RAD & Section 18 blends (if you’re not, see the section below), HUD has increased the percentage of units in a project eligible to convert under Section 18 in the construction and the small PHA blends. The highest level of construction blend now permits PHAs to convert up to 90 percent of units in a project under Section 18 and at least 10 percent under RAD, an increase over the 80/20 split under prior guidance. The same change is made for the Small PHA blend available to PHAs with 250 or fewer remaining public housing units.
PIH 2024-40 Construction Blend | |
Eligibility | Unit Mix Percentage |
Proposed rehab where hard construction costs exceed 90% of the PIH Housing Construction Costs (HCC) for given market area; orDemolition and redevelopment of the project; orTransfer of assistance | Up to 90% Section 18 and at least 10% RAD |
Proposed rehab where hard construction costs exceed 60% of the HCC for given market area | Up to 40% Section 18 and at least 40% RAD |
Proposed rehab where hard construction costs exceed 30% of the HCC for given market area | Up to 30% Section 18 and at least 70% RAD |
HUD has also expanded the eligibility for the highest level of the construction blend to include any project that will include the demolition and redevelopment of the property OR a transfer of assistance. This significantly widens the number of projects that could qualify for the blend. This removes the burden of proving you meet the construction cost thresholds in a scenario where HUD has already deemed the property eligible for demolition. It should also encourage PHAs to consider transfers of assistance and could change the types of conversions we see. For example, under this new guidance a PHA could look at acquiring a property with minimal rehab needs, propose to transfer the assistance from the existing public housing property to the new site and still qualify for the most generous blend.
In addition to improving the highest construction blend threshold the notice also makes the lowest threshold more generous, permitting PHAs with hard construction costs exceeding 30 percent of the market HCC to convert 30 percent of units under Section 18, an increase over 20 percent under the old guidance.
Under a separate notice (PIH-2024-41) published on the same day, HUD withdrew the notice (PIH 2019-05) that governs the PHA’s option to pursue Streamlined Voluntary Conversion under Section 22 of the Housing Act of 1937. It appears HUD wants to limit small PHAs from using this option in favor of the Small PHA blend which brings with it the more robust RAD resident rights and tenant protections.
If none of that makes sense to you, allow me to explain. It may seem counterintuitive that a notice focused on “demolition and disposition” of public housing would be crucial to its preservation, but that is largely a reflection of the fact that the Rental Assistance Demonstration was conceived as a revenue neutral program. No additional funding is appropriated by Congress for converting properties, they simply move from getting their funding under public housing (Section 9 of the Housing Act of 1937) to receiving their funding as a 20-year project-based contract (Section 8).
This can make substantial rehabilitation under a RAD conversion difficult. Without additional funding, it is hard to leverage debt to conduct repairs, especially if the funding a property received under the public housing program was insufficient to begin with. One way PHAs can increase the cash flow of a property at conversion (and therefore pay for rehab) is by pursuing what is called a RAD & Section 18 blend.

Under a blend, some units convert under RAD and receive a prorated amount of their old public housing funding, often referred to as the “RAD rent.” The remainder of units convert under the authority of Section 18 of the Housing Act of 1937, which permits HUD to provide those units with Tenant Protection Vouchers (TPVs) that carry a subsidy amount of up to 110% of the area Fair Market Rent (FMR). These vouchers can be project-based and often (but not always) provide subsidies higher than what the property’s RAD rent would be.
The incentive for PHAs is therefore to maximize the number of units that convert under Section 18, because each Section 18 unit will provide you more revenue (note that residents will pay the same amount in both situations, the difference is just in how much subsidy is paid by HUD). See the example below for a 110-unit property owned by the Greenwich Housing Authority in Connecticut, Wilbur Peck Court.
Per Unit Subsidy | Percent of FMR | Estimated debt leverage* | |
RAD Rent | $1,254 | 45% | $6.8M |
Section 18 TPV | $3,144 | 110% | $16.1M |
The Section 18 unit funding amount is roughly 2.5 times the RAD funding amount. In a blend where 90% of the units receive the Section 18 TPV funding level and 10% of units receive the RAD amount, the property could take out a loan of roughly $16M for rehabilitation compared to just under $7M with the RAD rents alone. That is what makes the new notice from PIH so useful – they just made the blends slightly sweeter, enabling properties to convert a larger share of units under Section 18 while also making it easier to do so. Previously, to access that level of a blend, a PHA would need to meet specific per unit construction costs. Now they can achieve it if the property will be demolished and rebuilt or if the assistance at the public housing property is set to be transferred.
The changes to the blends have not yet been reflected in an updated RAD notice (or the RAD blend eligibility workbook), so expect to see an updated notice from the Office of Recapitalization in the near future that makes these changes, along with others the Department will want to expedite before the change in administrations.
There are a few other changes scattered throughout the notice, which replaces an older notice (PIH 2021-07):
- The notice provides greater detail and specificity on the required use restrictions HUD will impose when a property is disposed of below fair market value. (Section II.H)
- The notice provides guidance on ground leases for properties disposed of under fair market value (Section II.H.I)
- The notice provides additional detail on part 50 and part 58 environmental requirements
- The notice specifies that a new Special Applications Center (SAC) application will need to be submitted for any material changes post-approval. Previously, the PHA could just email the SAC to request an amendment.