Preserve Existing Affordable Units

Updated July 10, 2025
Navigation: Preserve Public Housing | Increase Public Housing Repositioning Options | Maximize Existing Housing Preservation Efforts | Raise Contract Rents for Early RAD Adopters | Protect PBRA Properties and the PBCAs that Ensure Their Compliance | Streamline USDA Rural Housing Service

Preserve Public Housing

The Public Housing Capital Fund provides annual funding for the development, financing, and modernization of public housing developments. This includes modernizing older buildings, addressing vacancies and relocating residents when needed, improving safety and security, paying for self-sufficiency programs, and paying off debt service.  

A significant amount of public housing was built in the 1950s and 1970s, and these developments have suffered from chronic underfunding for years. In 2010, the national Public Housing Capital Needs Assessment showed that the total backlog for public housing capital funding was $26 billion, and that Congress would need to appropriate $3.4 billion (in 2010 dollars) per year to meet all public housing capital needs. The report noted that each year the cost of the backlog compounds at a rate of 8.7% due to inflation and the increased cost of addressing deferred maintenance.  As a result, even when accounting for other federal capital programs that have helped modernize and improve public housing, such as the Rental Assistance Demonstration (RAD) and Choice Neighborhood Grants, NAHRO estimates the Capital Fund backlog has grown to approximately $90 billion in 2024.  Although funding for the Capital Fund has increased in recent years, and was funded at all-time highs in 2022, 2023, and 2024, Congress has not once provided an annual appropriation of $3.4 billion to the Capital Fund. There is still a considerable backlog that must be addressed to ensure that residents in aging public housing have access to decent, safe, and secure units. Public housing funding must keep pace with capital needs or risk harming the health of entire communities and the well-being of low-income Americans. 

Recommendation: Preserve the nation’s public housing by fully funding the Public Housing Capital Fund backlog.  

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Increase Public Housing Repositioning Options  

The Rental Assistance Demonstration (RAD) program was created by Congress in 2012 to address the chronic underfunding of the Public Housing Capital Fund. RAD does this by converting public housing units to the Section 8 funding stream – either through Project-based Voucher (PBV) units in the Housing Choice Voucher (HCV) program or to Project-based Rental Assistance (PBRA). 

By switching from the Public Housing Capital Fund and Operating Fund to a Section 8 funding stream, RAD-converted properties have a stable long-term funding source. Agencies can use this funding to leverage outside financing that the public housing program cannot access, including conventional debt, the Housing Credit, historic tax credits, demolition and disposition transition funding, FHA-insured debt, and other financing. These leveraged sources of capital can pay for the rehabilitation costs of units. RAD helps PHAs maintain the public stewardship of the converted property through clear rules on ongoing ownership and use so units remain affordable. 

As a demonstration program, only a certain number of units can be converted through RAD. At the program’s creation in 2012, the demonstration was capped at 60,000 units. Congress has acted three times to raise the unit cap: to 185,000 units in 2015, to 225,000 units in 2017, and to 455,000 units in 2018. In fiscal year 2024, Congress also extended the sunset date for the demonstration to 2029. 

Recommendation: HUD should request to make RAD available to any agency looking to convert at any time by removing the cap and the sunset date for the demonstration. 

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Maximize Existing Housing Preservation Efforts 

Section 18 of the Housing Act of 1937 allows for the demolition or disposition of public housing units. Although different from RAD, PHAs can blend a RAD conversion with Section 18 disposition funding. Section 18 allows for the disposition of public housing units when either the retention of the property is not suitable to the residents of the development, or the conditions adversely affect the health and/or safety of residents. PHAs are also allowed to use Section 18 disposition to provide more efficient or effective low-income housing if disposition is in the best interests of residents and in line with the PHA plan and when non-public housing property can be disposed of without impacting the operation of a public housing project. 

HUD guidance allows PHAs to pair RAD transactions with Section 18 disposition. PHAs that convert at least 75% of the public housing units within a project under RAD can replace up to 25% of the units within the projects through disposition and replace those units with tenant-protection vouchers (TPVs). Section 18/ RAD blends can help agencies make RAD deals pencil out. 

Recommendation: Fund TPVs at levels that ensure there is enough funding for PHAs to use them for Section 18/RAD blends.  

The public housing capital backlog signifies an unacceptable inadequacy of residents’ basic living conditions.  PHAs have made progress addressing the backlog with various funds and initiatives–public housing, the Rental Assistance Demonstration (RAD), disposition and replacement with Section 8 project-based vouchers (PBVs) funded by tenant protection vouchers (TPV) under Section 18 of the U.S. Housing Act of 1937 (Section 18; the Act), low-income housing tax credits (LIHTC), and other funding. RAD conversions to Section 8 authorized by Congress only at public housing funding levels and better-funded RAD/Section 18 Blends, supplemented by other resources, have produced approximately $19.5 billion of construction investments since RAD’s inception. Section 18 dispositions with full replacement TPVs and PBVs and the public housing Capital Fund Financing Program each produced several billion dollars more over approximately the past fifteen years. 

The measures needed to address this situation must be multi-faceted, and include a very substantial increase in capital funding and expanded ability to access 4% LIHTC, as well as substantial funding related to climate change, broadband and other goals. 

HUD’s RAD/Section 18 Blends are resulting in substantial additional progress, by authorizing a mix of units with statutorily constrained RAD rents and higher Section 8 PBV program-level rents constrained by Section 8 payment standards and rent reasonableness.  Significant potential is still unrealized as to Section 18 use for redevelopment, however, because of the remaining financial gap between RAD/Section 18 Blends and 100% TPVs at Section 8 rents that become available with Section 18 approvals.  RAD Blends offer a maximum of 60% TPV units and 40% RAD units to replace public housing, or 80% TPV units for units in HUD-designated high-cost areas or with new construction-level redevelopment costs in other areas.  If the remaining subsidy gap for otherwise desirable redevelopment of developments that are ineligible for Section 18 approvals conservatively equals on average $300 per unit per month and 50,000 units ultimately are affected, the extra annual subsidy would be $180 million.  The resulting additional capital that this amount could leverage, using a factor of 12:1 as an approximate leverage ratio, would be $2.16 billion.  The leveraging of LIHTC might add multiples of that amount to the additional capital.  This is a significant additional amount, although not enough in itself to cover most of the capital backlog. 

Recommendation: HUD should revise Notice PIH 2021-07, to allow disposition and replacement voucher approval for additional categories of priority public housing preservation and replacement, without showing obsolescence.  These categories could match the categories for which owners of project-based rental assistance projects (non-RAD PBRA) have a right in many circumstances to mark their properties up to market—the PBRA equivalent of awarding full TPVs. Those categories include projects with the majority of units occupied by elderly households, disabled households or large families, in low vacancy areas or with demonstrated community support.   

Recommendation: HUD could clarify that PHAs can expend public housing funds to support preservation and redevelopment efforts involving conversion to long-term Section 8 contracts. For example, HUD may need to revise 24 CFR 905.202(g), prohibiting Capital Fund use to benefit programs other than public housing such as Section 8; and 24 CFR 905.200(a)(9), which could be read to limit eligible demolition costs to those that benefit remaining public housing on the site. Alternatively, HUD could interpret these regulations not to apply to public housing recapitalization through use of Section 8. 

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Raise Contract Rents for Early RAD Adopters 

Although RAD has proven to be an incredibly important program for preserving affordable units, initial adopters of the conversion program have recently seen challenges with costs. Contract Rents for RAD properties are set at funding levels at the time of the property’s conversion, with Housing Assistance Payments (HAP) contracts that only allow for an annual operating adjustment factor increase. RAD properties have not been immune to the significant, unforeseen impacts from the COVID-19 pandemic, historic high inflation, and unprecedented supply chain labor shortages. Current Contract Rent levels for many RAD properties do not cover basic operating expenses, including insurance coverage, living wages for staff, supplies and appliances, and contractor costs. 

The actual increase in expenses for early RAD adopters has far surpassed the annual rent increases they have received, placing these properties at high risk for severe financial distress, as the Contract Rents cannot sustain the costs of debt service and operations. Due to extremely low Contract Rents, and the Section 8 Project-Based Rental Assistance (PBRA) program’s admission requirements, many RAD properties are having to turn away otherwise program-eligible families because they are not low enough income, resulting in further re-concentration of poverty. 

HUD has publicly stated that the goal of RAD is to provide safer and healthier housing, with a broader mix of incomes, and that as a Demonstration program this is an iterative process, with HUD soliciting feedback on improvements that are needed.  

Recommendation: Allow PHAs participating in the RAD program to have the option of setting RAD Contract Rents at the level of the applicable Fair Market Rent minus the utility allowance; the RAD rent set by HUD at the time of the conversion; a more recent RAD rent set by HUD; standard PBV rent setting; or another rent setting mechanism that ensures RAD agencies are able to meet the needs of their communities. 

Recommendation:  Allow PHAs participating in the RAD program additional options to increase contract rents to better reflect local rental prices including revising HUD’s Operating Cost Adjustment Factor (OCAF) methodology to allow for the inclusion of debt service coverage as part of the calculation for annual rent increases. 

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Protect PBRA Properties and the PBCAs that Ensure Their Compliance 

Performance-Based Contract Administrators (PBCAs) are vital partners to HUD, managing 17,700 multifamily property contracts and assisting over 1.3 million low-income households through the Section 8 PBRA program. PBCAs protect resident health and safety, ensure property maintenance, and provide timely rent payments to owners, bringing private-sector best practices to the program. They are essential to preserving affordable housing, preventing properties from converting to market-rate or falling into disrepair. A PBCA’s success is contingent on its Annual Contributions Contract (ACC) with HUD, which should remain intact to address local needs effectively amidst the housing crisis. 

Recommendation: HUD should support policies that preserve the ACC agreement between a PBCA and the Department and exempt it from CICA and FAR requirements, as proposed in Section 239 of the FY 2025 House Transportation-HUD Appropriations bill. 

PBCAs help ensure residents live in safe, affordable housing while preventing subsidy payment errors by HUD, ensuring federal funds are used efficiently. They work with property owners to verify rent accuracy, ensure correct voucher payments, and certify resident eligibility for federal assistance. The annual on-site Management and Occupancy Review (MOR) is crucial for reducing improper payments under the PBRA program by auditing financial management related to rent and income certifications. However, recent changes to MOR regulations, including a 3-year look-back period, have unintentionally complicated the process, making compliance efforts more time-consuming. 

Recommendation: HUD should refine the MOR rule to reduce the number of files reviewed during each MOR, extend the look-back period beyond one year, and permit remote or hybrid MORs to allow PBCAs to review documents before the on-site visit. 

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Streamline USDA Rural Housing Service 

Rural America is also grappling with a housing supply and affordability crisis. Addressing this requires providing these communities with the tools needed to increase housing availability, build and preserve units, and foster strong, vibrant economies.  

The Rural Housing Service Reform Act, a bipartisan bill supported by NAHRO, will help streamline USDA programs and preserve properties by enabling entities like PHAs to acquire them and continue rental subsidies after mortgages end. This is critical as the stock of Section 515 units has dramatically decreased over the past years from a peak of 550,000 units to just 390,000 units in 2024 due to maturing mortgages. 

Recommendation: Help pass the Rural Housing Service Reform Act to improve preservation of USDA 515 properties.  

There have been no new USDA 515 properties built since 2012 which has only exacerbated the affordable housing crisis in rural America. Section 515-financed properties are essential for providing affordable housing in rural America, where developers often lack incentives to build affordable units. These properties fill a critical gap, offering housing options in areas that might otherwise be overlooked by the private market. Financing additional 515 properties will help address this need. 

Recommendation: Build additional properties financed with USDA Section 515 mortgages. 

Further, ensuring that properties with Section 514- or 515-financed mortgages remain able to receive USDA Section 521 rental assistance after they have matured will greatly help keep these properties affordable. Implementing and expanding the decoupling demonstration authorized in the recent appropriations act will be key to preserving affordable housing in these areas. 

Recommendation: Support efforts to decouple USDA Section 514- and 515- financed mortgages from USDA Section 521 Rural Rental Assistance. This will ensure that even when a Section 514- or 515-financed mortgage matures, residents will still be able to access important rental assistance. 

Lastly, it can be challenging for rural PHAs to acquire and maintain USDA properties due to differing regulations and statutory requirements. Implementing a program, similar to the Rental Assistance Demonstration, that allows PHAs to acquire USDA properties and then convert them over the Section 8 Project-Based Voucher or Project-Based Rental Assistance Program will greatly streamline requirements. 

Recommendation:  A program similar to the Rental Assistance Demonstration that allows PHAs that acquire USDA 515 properties with Section 521 assistance to convert to the Section 8 funding stream will help simplify programmatic operations for PHAs. This could also encourage more PHAs to acquire and rehabilitate USDA properties that would otherwise lose affordability and fall into disrepair.  

Navigation: Back to Top | Preserve Public Housing | Increase Public Housing Repositioning Options | Maximize Existing Housing Preservation Efforts | Raise Contract Rents for Early RAD Adopters | Protect PBRA Properties and the PBCAs that Ensure Their Compliance | Streamline USDA Rural Housing Service