JUST YET ANOTHER UNTOLD HUD STORY

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
FISCAL YEAR 2012 PROGRAM AND BUDGET INITIATIVES
RENTAL ASSISTANCE DEMONSTRATION
1
In Fiscal Year 2012, HUD is requesting $200 million to cover the incremental cost of converting public housing,
Section 8 Moderate Rehabilitation, Rent Supplement, and Rental Assistance programs to long-term project-based
Section 8 contracts under a demonstration of HUD’s proposed Transforming Rental Assistance (TRA)
initiative.
Over the last 75 years, the Federal Government has invested billions in the development and maintenance of public
and multifamily housing.  To protect the considerable Federal investment and respond to the growing demand for
affordable rental housing, we must continue to make standard life-cycle improvements to this inventory,
modernize or replace obsolete units, and stem the loss of stock from private sector partners choosing to opt-out of
affordable housing programs.
Particularly for public housing, this trend shows no sign of slowing, as the stock decreases by between .5 percent
and 1.0 percent each year.  Additionally, HUD estimates that the public housing inventory faces a capital needs
backlog ranging from $20 to $30 billion.  Given this large backlog and
fiscal constraints, the Department must find alternative means, other than
direct capital grants, to meet these needs.  At the same time, the structure
of the affordability covenants associated with the public housing program
impedes private investment in the stock.  This $200 million is estimated to
allow for the conversion of approximately 255,000 public housing units,
in addition to the Rent Supplement,  Rental Assistance Program and
Moderate Rehabilitation units.  The portion of these funds used for Public
Housing conversions alone will enable PHAs to leverage over $6 billion in
private debt and equity capital, creating more than 60,000 direct jobs.   HUD estimates that full conversion of
the entire public housing stock (with additional funding in future years), would allow PHAs to raise nearly $28
billion in capital in order to address the large existing backlog of capital needs and create an estimated
270,000 direct jobs.  Beyond the public housing stock, the Section 8 Moderate Rehabilitation (25,000 units), Rent
Supplement (9,500 units), and Rental Assistance programs (11,300 units) either offer no option to renew and
risk being lost from the affordable housing stock or cannot renew on terms that attract sufficient capital to
preserve long-term affordability
CONVERSION OF PROPERTIES
HUD is committed to utilizing its operating and capital funds in the most effective ways possible.  At the same time
though, the Department continues to face challenges in maintaining an aging public housing stock, of which half the
units were constructed prior to 1970.  These older units require continued investment to remain viable, with an
increasing backlog of modernization needs estimated at $20-30 billion, and an estimated 15.5 percent of units not
meeting HUD’s physical standards.  It is incumbent upon the Department to find alternative, sustainable means,
other than direct capital grants, to meet these needs  – particularly because public housing serves tremendously
vulnerable families who have few options in the event that their housing is lost.  Because of these realities, $200
million for the Transforming Rental Assistance (TRA) initiative demonstration is designed to preserve
public and assisted housing by increasing access to private capital and management techniques.
Specifically, this TRA funding request will be used for the incremental cost of converting public housing, Section 8
Moderate Rehabilitation, Rent Supplement, and Rental Assistance programs to an improved form of long-term,
project-based Section 8 contracts. These funds are estimated to allow for the  conversion of approximately