Rental Assistance Demonstration.

What RAD does

The Rental Assistance Demonstration (RAD) is a HUD program authorized by the Consolidated and Further Continuing Appropriations Act of 2012, and implemented primarily through the joint HUD Notice H-2019-09 / PIH-2019-23 (Rev. 4, September 5, 2019), as amended by Supplemental Notices 4B (July 2023) and 4C (H-2025-01 / PIH-2025-03, January 16, 2025). RAD converts legacy HUD subsidy programs — primarily traditional Public Housing — into long-term Section 8 contracts (either Project-Based Voucher or Project-Based Rental Assistance).

The strategic purpose: legacy public housing operates on annual appropriations and aging capital reserves that cannot support recapitalization. By converting to Section 8, properties gain access to the private capital markets — including LIHTC equity, tax-exempt bonds, conventional debt, and FHA insurance — for the substantial rehab those properties typically need.

Administered jointly by HUD's Office of Public and Indian Housing (PIH) and HUD's Office of Multifamily Housing, RAD is the largest public housing preservation initiative in HUD's history.

The two RAD components

RAD operates in two distinct components, both authorized under the Rental Assistance Demonstration heading in Title II, Division C of the Consolidated and Further Continuing Appropriations Act of 2012 (P.L. 112-55):

RAD First Component (RAD I)

Converts traditional Public Housing to long-term Section 8 contracts. Originally capped at 60,000 units in 2012, the cap was raised by Congress to 185,000 in 2015 (P.L. 113-235), then to 225,000 in 2017 (P.L. 115-31), then to 455,000 units in the FY2018 omnibus. The 455,000-unit cap remains in effect; as of late 2024 approximately 82% of the cap was consumed (converted or reserved). This component represents the bulk of RAD conversions.

RAD Second Component (RAD II)

Converts Section 8 Moderate Rehabilitation, Rent Supplement (Rent Supp), Rental Assistance Payment (RAP), and Section 202 PRAC properties — all legacy programs no longer being renewed — to either tenant-protection vouchers or project-based contracts. RAD II ensures continuity of subsidy for tenants when these legacy contracts expire. Mod Rehab conversions are processed exclusively under the Second Component, not the First.

How conversion works

The conversion is technical but follows a consistent pattern:

1. Application. The Public Housing Authority (PHA) or owner submits a RAD application to HUD describing the project, the proposed conversion type (PBV or PBRA), the rehab scope, and the financing structure.
2. CHAP issuance. HUD issues a Commitment to Enter into a Housing Assistance Payments Contract (CHAP), establishing the contract rents and terms.
3. Financing closing. The owner secures construction debt, equity, and any other capital. Larger conversions with significant rehab commonly use 4% LIHTC + tax-exempt bonds + FHA insurance; smaller PHAs or properties requiring minimal rehab convert without LIHTC.
4. Construction/rehab. Capital improvements occur, often with tenants in place (the "in-place rehab") subject to RAD's tenant protection provisions.
5. HAP contract execution. Upon completion, HUD signs a long-term HAP contract. PBRA contracts are 20-year initial term with mandatory renewal. PBV contracts are at least 15-year initial term (up to 20 years) with mandatory renewal. The legacy public housing subsidy is terminated; Section 8 takes over.
6. Compliance. Property operates under Section 8 rules going forward, with annual contract administration and tenant recertification.

Contract rents

RAD rents are set at the lower of (a) current "Public Housing operating cost plus capital fund subsidy" or (b) Section 8 reasonable rents. HUD will not increase the federal subsidy through conversion — RAD is intended to be budget-neutral on a per-unit basis. The economic gain comes from accessing capital, not from increased operating subsidy.

Tenant protections

RAD includes among the strongest tenant protections in federal housing programs:

• Right to return. All current tenants have a right to return to the property after rehab, regardless of changes in eligibility rules.
• No re-screening. Existing tenants are not re-screened for income, criminal background, or other eligibility criteria.
• Continued occupancy. No tenant may be involuntarily displaced by RAD conversion (subject to relocation during construction).
• Choice Mobility option. Available in both PBV and PBRA conversions, but with different waiting periods. PBV tenants may request a tenant-based voucher and move after one year of post-conversion occupancy (per RAD Notice § 1.6.D.8). PBRA tenants may exercise the same right after two years (per RAD Notice § 1.7.C.5). Both are subject to voucher availability.
• Family Self-Sufficiency. RAD properties may participate in FSS programs offering case management and asset-building.

Labor standards — Davis-Bacon

RAD conversions that include construction activity are generally subject to Davis-Bacon prevailing-wage requirements when the conversion involves federal financial assistance for development (including FHA insurance, HUD reserve transfers, or tax-exempt bond financing). The applicable thresholds and exact coverage depend on the conversion component (First vs Second), the conversion type (PBV vs PBRA), and the financing structure. Confirm Davis-Bacon applicability with HUD labor-standards staff and the financing sources at deal structuring — not at construction start. State or local prevailing-wage laws apply independently of federal Davis-Bacon and frequently have lower unit thresholds.

LIHTC pairing

4% LIHTC + tax-exempt bonds is a common — but not required — recapitalization structure for RAD conversions involving significant rehab. Many smaller PHAs and properties with limited rehab needs convert without LIHTC, relying on FHA-insured permanent debt, HUD reserve transfers, and seller financing from the PHA. When LIHTC is used, the deal carries both LIHTC compliance (15-year initial + 15-year extended use) and the long-term RAD HAP contract; whichever restriction is more stringent governs.

For the full capital-stack mechanics — credit pricing, basis boost interactions, PHA seller-note structures, and triple-stacking with HTC where historic public housing buildings qualify — see the dedicated guide: LIHTC Deal Structures Guide.

OBBBA's reduction of the PAB financed-by test to 25% (from 50%) has significantly increased the supply of bond cap available for RAD + 4% LIHTC deals starting January 1, 2026 — likely accelerating already-strong RAD conversion volume.

RAD-Section 18 hybrid conversions

Section 18 of the Housing Act of 1937 authorizes the demolition or disposition of public housing units that meet specific criteria (obsolete, economically nonviable, etc.). Section 18 provides Tenant Protection Vouchers (TPVs) for displaced residents, which can be project-based at a new or rehabilitated property.

HUD has developed RAD-Section 18 hybrid procedures allowing portfolios to combine the two paths — typically using RAD for the bulk of units and Section 18 for units that don't fit RAD's economic envelope. This hybrid is increasingly common for large redevelopment deals where the property's value exceeds RAD's rent-limit constraints.

How to apply

1. PHA initiative: RAD conversions are initiated by the PHA. Most large PHAs have RAD strategies covering their entire portfolio.
2. Pre-application: Internal feasibility — physical needs assessment (PNA), market study, preliminary financing plan
3. RAD application: Submit to HUD via the RAD Resource Desk. Application is detailed; pre-application technical assistance recommended.
4. CHAP issuance: 60-120 days typical from complete application to CHAP. Establishes contract rents and conversion terms.
5. Financing close: Working from CHAP, owner secures all capital sources. Most use the FHA 221(d)(4) New Construction or Substantial Rehab Mortgage Insurance Program or FHA 223(f) Acquisition/Refinance.
6. Closing and conversion: Simultaneous closing of capital and execution of HAP contract.

Pairing with other programs

• 4% LIHTC + tax-exempt bonds: Standard recapitalization combination
• FHA 221(d)(4) / 223(f) mortgage insurance: Most common debt structure
• HOME / HTF: Gap fill for deeper affordability components
• FHLB AHP: Additional gap subsidy for capital improvements
• Capital Magnet Fund: Particularly for CDFI-sponsored RAD deals
• State HFA soft loans: Many states have dedicated public housing preservation programs

Recent program developments

Tenant protection enhancements (2022-2025)

HUD has issued multiple PIH notices strengthening RAD's tenant protection provisions, particularly around relocation, right to return, and Choice Mobility implementation.

Faircloth-to-RAD

HUD has implemented procedures allowing PHAs to use unused "Faircloth Limit" public housing units (units PHAs are entitled to operate but never built) as the basis for new RAD-eligible Section 8 contracts. This expands RAD beyond strict 1-for-1 replacement of existing public housing.

OBBBA impact

OBBBA did not directly amend RAD. However, the OBBBA reduction of the bond financed-by test from 50% to 25% (effective January 1, 2026) substantially increases capacity for RAD + 4% LIHTC + bonds deals, which is the dominant structural pattern in RAD conversions.

Practitioner resources

• HUD RAD Resource Desk — the central application and guidance portal
• Notice H-2019-09 / PIH-2019-23 (Rev. 4, and subsequent revisions) — the implementing guidance
• HUD's RAD program homepage with model documents and templates
• Your PHA's RAD strategy and portfolio assessment
• Industry resources: CLPHA (Council of Large Public Housing Authorities), NAHRO, NCSHA, Novogradac RAD coverage