# Presentation: 847901

## Guidance for PHAs: Required and Voluntary Conversion of Public Housing Units

**“****A Toolkit for Change:  **
**From Removal to Redevelopment**”
- September 15-16, 2008
- Chicago, IL

## Introduction

- HUD has adopted a property-based focus for managing a PHA’s housing inventory
- This approach helps PHAs identify poor-performing developments
- When a non-viable development is identified, what can a PHA do?

## Options

- Options include:
- Modernize/revitalize to stabilize the development
- Redevelop the development (HOPE VI, bond financing, etc)
- Demolish the non-viable units
- Keep the land or dispose of the land
- Dispose of the development
- Convert the non-viable units from public housing to vouchers
- This discussion will focus on the conversion option

## Required Conversion

- There are two types of conversions:
- Required conversions
- When HUD determines that units are non-viable
- HUD _WILL_ deprogram these units and the PHA _WILL_ loose subsidy
- Similar to the previous Section 202 Mandatory Conversion process
- The PHA can apply separately for vouchers

## Voluntary Conversion

- Voluntary conversions
- When a PHA requests HUD approval to convert units the PHA believes are non-viable
- Once approved, the PHA can apply separately for vouchers

## Logistics

- Q & A session
- Materials
- Exercises

## Conversion Overview

## Introduction

- QHWRA made changes in requirements governing conversion of PH
- Rules amended 24 CFR 972
- PHAs are required to annually review inventory and identify distressed developments

## Conversion- What Does it Mean?

- In this context, **conversion means **the removal of public housing developments (or portions of developments) **from** a PHA’s public housing inventory and ACC and the provision of tenant-based or project-based assistance for the residents who lived in those developments. Conversion does not require that the PHA convert the development **to** any particular future use after conversion.

## Introduction- continued

- PHAs may at any time determine that units are eligible for voluntary conversion
- Guidance is to summarize
- Eligible activities
- Requirements for required or voluntary conversion
- Outline the rights and responsibilities

## HUD Approval

- Required before a PHA may undertake a voluntary or required conversion
- Approval obtained through Special Application Center (SAC) and/or Office of Public Housing Investments (OPHI)
- SAC- based in Chicago
- Must be contained in the Annual Plan

## Moving to Work (MTW)

- Training materials will also highlight “MTW” provisions
- May follow slightly different process
- Highlighted in text through graphics and text boxes

## Guide Materials

- Summarizes eligible activities and requirements
- Rights and responsibilities
- Must work with the resident group to inform and consider
- Intended to assist PHAs in assessing future viability of the public housing stock
- Planning appropriate actions for use of the stock

## Assistance of Guide to PHAs

- Identify PH units (developments) that PHA is required to convert
- Identify PH units (developments) that PHA is not required to convert but may be legally authorized to convert
- How to conduct and analyze a conversion assessment
- Compare the cost of continuing to operate PH units to the cost of providing tenant-based assistance

## Assistance of Guide to PHAs- continued

- How to develop and implement a conversion plan
- How to provide transition of displaced residents
- How to remove the inventory from PH
- Compliance with
- Forms
- Procedures
- Submission requirements
- Timelines

## Guide Materials

- Guide is not a substitute for the regulations
- Additional notices will be issued

## History of Required and Voluntary Conversion

- Section 537 of QHWRA
- Added new Section 33- Required Conversion
- Section 533 of QHWRA
- Amended Section 22 – Voluntary Conversion
- Separate implementing conversion published September 17, 2003; effective March 15, 2004
- Appendix to the rule addressing methodology for comparing cost published March 21, 2006; effective April 20, 2006

## Regulations

- 24 CFR 972
- Required or voluntary
- Means the **removal of the units from the inventory and the ACC**
- Provisions of tenant-based or project-based assistance for residents of PH being removed
**Conversion does not necessarily mean the removal of the PH development- demolition**

## Annual Review for Required/Voluntary Optional

- Annual review PH inventory
- Identify distressed developments (or parts of developments)
- PHA can also determine at any time the option for determining inventory for voluntary conversion
**HUD approval is required in both cases**
**Approval is obtained from Office of Public Housing Investments (OPHI); processing is through SAC**

## PHA Plan or MTW Plan

- HUD’s approval of the PHA Plan or MTW Plan does not constitute approval of the “Conversion Program”
- Separate approval process for conversion
- Provisions to proceed with conversion are contained in the PHA Plan or MTW Plan

## Required Conversion

## Required Conversion Overview

- Phase One:
- PHA first determines if they have public housing units that MUST be converted
- Phase Two:
- If they do, the PHA then MUST develop a Required Conversion Plan and deprogram the units out of the public housing program

## Determining if Units Must be Converted

- PHAs _must_ identify if they have units that are subject to Required Conversion requirements
- If they do, the PHA _must_ determine if the units fail the HUD viability test
- If they do, the PHA _must_ determine if it would be less expensive to serve the residents with vouchers
- If it is, the PHA **MUST** convert the units

## Converting the Units

- If the PHA _must_ convert units, the PHA _must_ develop a Required Conversion Plan
- The Required Conversion Plan _must_ be included in the PHA’s Annual PHA or MTW Plan
- The PHA _must_ also submit a Required Conversion Inventory Removal Application to SAC
- Once HUD approves the Application, the PHA can then request Vouchers if they are needed
- Once needed Vouchers are available, Conversion can begin

## Required Conversion Nuts & Bolts

- Section 33 of the U.S. Housing Act of 1937 **requires **PHAs to identify developments that must be removed from their public housing inventory and their ACC
- PHAs must _annually_ review eligible units to identify distressed developments
- If these properties do not have long-term viability, residents must be converted to tenant-based or project-based assistance

## Required to Develop Plan

- In instances where either
- (1) the PHA cannot assure the long-term viability of a distressed development, or
- (2) it would be more expensive for the PHA to modernize and operate a development as public housing for its remaining useful life than to provide tenant-based assistance to its residents, the PHA must develop and carry out a Required Conversion Plan to remove the development from its public housing inventory.

## Which Properties are Subject to a Required Conversion?

- Public Housing developments, portions of developments or contiguous developments may be subject if they meet _**all**_ of the following:
- _Must_ be a “Cluster” of 250 or more units on the same or on one contiguous site
- _Must_ be units that are open to “general occupancy” by families
- _Must_ be units that have had chronically high vacancy rates for each of the last 3 years
- Has remained above 15% (before March 16, 2009)
- Has remained above 12% (after March 16, 2009)
- And, these vacancy rates have not significantly decreased

## Properties Long-Term Viability

- The Long-Term viability standard is:
- With reasonable investment, it is probable to:
- Sustain full occupancy
- Be structurally sound
- Not be excessively dense by local standards
- Achieve a broad range of incomes, and
- Have no disqualifying site impairments
- _And_ the property is _**not**_ more expensive to operate as Public Housing than serving the residents with vouchers

## Viability Assessment Based On Comparing

- The projected cost to repair, operate and maintain the public housing units during their remaining useful life

- The cost of a market rate unit utilizing a tenant-based voucher under HUD’s Housing Choice Voucher Program

## How are public housing and voucher costs compared? 

- The public housing cost are described in 24 CR §972.124(c)(2). These are the costs needed to
- Produce a revitalized development
- Operate the revitalized units
- Address future modernization needs
- Address accrual needs
- These public housing costs will be compared to the PHA’s adopted voucher Payment Standards
_**Note:**_  Gross costs are compared, NOT subsidy amounts

## Clusters vs. AMPs

- Conversion clusters are a development, portion of a development, or group of developments of 250 or more dwelling units in the same geographical location
- AMP groupings are the result of PHA’s asset management decisions
- Thus, there is no direct relationship between AMPs and Clusters

## Vacancy Calculation

- Vacancy Data used must be consistent
- PHA must use the same data it relied on for other reports to HUD, including PHAS, Form HUD-51234 Report on Occupancy, or successor reports
- MTW PHAs must use the same vacancy data submitted to HUD as per their MTW agreement.

## Units Excluded from Vacancy Calculation

- Units vacated to enable modernization activities
- Vacant units previously approved by HUD for Demolition or Disposition under Section 18 of the Act
- Vacant units where resident belongings are abandoned, but only if state law mandates that such units remain vacant for an established period of time
- Vacant units having sustained casualty damage, but only until the insurance claim is adjusted
- Units occupied by an employee of the PHA
- Units used for resident services activities
- Non-distressed units that were intentionally kept vacant

## Developments Exempt from Required Conversion

- Developments with an **approved** HOPE VI Plan
- Developments restricted to occupancy by Elderly/Disabled residents under a HUD approved Designated Housing Plan
- Developments identified before October 21,1998 for Mandatory Conversion under Section 202 of the Fiscal Year 1996 HUD Appropriations Act (42 USC §1437) _until_ those conversion requirements have been fulfilled

## Identification of Properties on HUD’s Website

- To assist PHAs, SAC has created reports from HUD Field Offices listing clusters that may be Required Conversion candidates
- _[www.hud.gov/offices/pih/centers/sac/rconv.cfm](http://www.hud.gov/offices/pih/centers/sac/rconv.cfm)_
- These cluster reports may not be fully complete and may be further refined with data from HUD field offices and PHAs
- _PHAs are still required to annually monitor their own eligible developments, even if their developments are not on the SAC cluster list_

## Conversion Information from HUD Website

**DETAILED REPORT**
**HA CODE:****	****	****  ****XY 001**
**HA NAME:****	****Sample Housing Authority**
**Cluster Number:****	****XY001C009**
**Cluster Total:****	****308**
**Development ****	****Total Units From PIC ****	****      Designated Units      DD Approved     Non Designated**
**XY001025****	****	****     ****274****	****                                0                                           274**
**XY001040****	****	****         34****	****         ****	****         0                                              34**
**Development****	****Project Name****	****Report Date****	****Total Units****	****Vacant Units****	****Vacant Pct.****	****Distressed**
**XY001025****	****High Point****	****4/5/2008****	****274****	****45****	****16.4****	****Distressed**
**XY001025****	****High Point****	****5/7/2008****	****274****	****47****	****17.1****	****Distressed**

## Required Conversions and PIC

- Accurate vacancy rates are critical for the Required Conversion vacancy calculation
- Vacancy rates are impacted by whether units are reported in PIC as
- ACC-Yes, or
- ACC-No
- PHAs may not move subsidized dwellings to a non-subsidized status to avoid a negative vacancy impact

## Correcting SAC Cluster Report Errors

- If the PHA disputes the SAC Cluster Report information they may report to their _HUD field office __**and**__ SAC_ that:
- The cluster does not contain 250 eligible units
- The occupancy information is inaccurate
- The data relied on for the report is incorrect
- If SAC receives no response from the PHA it will assume the report is correct
- If the development/cluster remains on the SAC cluster report, the PHA _must_ address the development in their next Annual PHA or MTW Plan

## PHAs Responsibility to Respond

- Developments on the SAC report are not required to be converted, the report only identifies possible candidates
- If a development is on the report, PHAs _must_ address the following in their Annual PHA or MTW Plan:
- Explain why the cluster should not be on the report, or
- If the report data is accurate, certify that the cost analysis has been completed and report on the results of the cost analysis, and
- If adequate time is available, complete and submit the Required Conversion Plan if the development is not cost effective to continue as public housing

## Required Conversion Information in the Annual PHA or MTW Plan

- HUD wants PHAs to have adequate time to develop their Required Conversion Plans
- If sufficient time is not available to finalize the Conversion Plan, the PHA _must_ provide the status of required conversion planning activities in their next Annual PHA or MTW Plan submission
- The following timeline tables have been developed to ensure adequate time is available

**Conversion Guide Traning Manual**

## Timeline Table for Required Conversion

- 	Time table for developments identified more than 13 months before PHA fiscal year
- (Training Manual:  Page 12)

## Timeline Table for Required Conversion

- 	Time table for developments identified less than 13 months before PHA fiscal year
- (Training Manual:  Page 13)

## Cost Analysis

- If an eligible cluster fails the vacancy test
- Then, a Cost Analysis _must_ be completed
- PHAs _must_ follow the Calculation Rule
- Comparing the cluster’s operating, capital and accrual cost
- With the cost to serve the residents with vouchers
- HUD has developed an Excel spreadsheet to assist PHAs with this analysis
- PHAs _must_ use this HUD Excel spreadsheet

## HUD Spreadsheet

- The Spreadsheet is located on HUD website:
- _[http://www.hud.gov/offices/pih/centers/sac/docs/costcomparison.xls](http://www.hud.gov/offices/pih/centers/sac/docs/costcomparison.xls)_
- The same spreadsheet is utilized for both Required and Voluntary Conversions, but
- Different portions of the Spreadsheet are used for each type of Conversion

## Other Obligations

- Not all financial factors are included in the Spreadsheet
- PHA _must_ identify additional financial, contractual, or legal obligations that may affect a Conversion
- Energy performance contracts
- Capital fund leveraging agreements
- Legal or Voluntary Compliance Agreements
- Etc.

## Public Housing Cost Analysis

- Can use either Development-Based Method or PHA-Wide Method to determine public housing operating costs
- _Must_ determine the useful life of the development, once it has been revitalized
- 20-year period if only light or moderate rehab is undertaken
- 30-year period if all backlog needs are addressed
- 40-year period if equivalent to new construction

## Determining Long-term Viability

**To achieve long-term viability, all the following conditions **_**must**_** be met**
- The revitalization costs must be reasonable
- The development must be structurally sound
- The development can sustain full occupancy
- The density is  appropriate for the community
- A broader range of family incomes can be achieved
- No site impairments exist to disqualify the site as public housing

## Investment is Reasonable

- Costs for revitalization _must_ be
- Less than 90% of HUD’s TDC
- Less than 100% of TDC for any “infill” new construction
- _Must_ be consistent with the revitalization cost in the most recent Annual Plan or 5-year plan
- Overall cost should not exceed cost estimated in Annual or 5-year plan
- If previous cost was lower PHA _must_ provide a compelling explanation
- Funding _must_ be identified and available

##  	Calculator Rule 24 CFR 972 (Adobe PDF)	

**Extract of HUD Conversion Website for the Spreadsheets**
- A rule addressing the methodology for comparing the cost of individual public housing developments to the cost of tenant-based Section 8 assistance was published in the Federal Register March 21, 2006 (Calculation Rule). The rule is effective April 20, 2006. The cost methodology for Required Conversion is different than that for Voluntary conversion.
-  	_[Calculator Rule 24 CFR 972](http://www.hud.gov/utilities/intercept.cfm?http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/06-2621.pdf)__ (Adobe PDF)_
-  	_[Cost Comparison Spreadsheet](http://www.hud.gov/offices/pih/centers/sac/docs/costcomparison.xls)__ (MS-Excel)_
- A sample of a completed spreadsheet has been included as well.
-  	_[Sample completed Cost Comparison Spreadsheet](http://www.hud.gov/offices/pih/centers/sac/docs/costcomparisonex.xls)__ (MS-Excel)_

## Relationship Between Required Conversion and Section 18 of the Act

**Demolition NO**.  24 CFR §972.112 and 24 CFR §970.3(15), Section 18 of the Act _**does not**_ apply for (full or partial) demolition pursuant to required conversion
**Disposition YES**.  Section 18 of the Act _**does**_ apply to disposition of developments removed pursuant to required conversion

## Applicability of Uniform Relocation Act

- URA applies UNLESS it is a Section 18 action
- Thus, **if there is a Disposition – URA does **_**not**_** apply **
- If residents are displaced as a result of **any other Required Conversion action - URA does apply**

## Six Components of the Required Conversion Plan

- Identification of units to be converted
- Obligation status of public housing capital funds allocated to the development
- Evidence that public officials were consulted
- Evidence that residents were consulted
- Description of PHA’s proposed future use of the development
- Relocation Plan

## Identification of Units

- The PHA _must_ list the specific units that will be removed from PHA’s public housing inventory

## Identification and Obligation Status of PH Funds

- The PHA _must_ identify the obligation status of capital funding allocated to the development
- Modernization funds
- Reconstruction funds
- Other capital funds
- The PHA can recommend how un-obligated funds might be transferred to alternative housing authority uses

## Evidence of Local Governmental Consultation

- The PHA _must_ demonstrate the Conversion Plan is consistent with local consolidation plans
- The PHA _must_ obtain a certificate from the appropriate public official
- Can use the same certification issued for the Agency’s Annual PHA Plan - so long as that certification specifically references the Conversion Plan

## Evidence of Significant Participation of Residents

- It is required that the PHA _must_:
- Hold at least one meeting with residents of the development
- Provide a reasonable period for the residents to comment
- Summarize all resident comments and PHA responses

## Resident Meetings

- PHA _must_ include developments duly elected Resident Council (if one exists)
- PHA _must_ explain the requirements of the required conversion
- PHA _must_ supply draft copies to meeting attendees
- It is recommended that the PHA meet numerous times to ensure resident questions and concerns are addressed

## Resident Comments

- PHA _must_ provide a reasonable period for residents comments
- PHA _must_ summarize all resident comments and PHA responses
- PHA _must_ include this summary as part of the finalized Conversion  Plan
- Make sure to document the meetings, sign-in sheets, meeting agendas, handouts, resident written comments, etc...

## Description of Proposed Future Use

- PHA _must_ indicate the proposed use of the development after conversion
- PHA _must_ indicate the means and timetable for carrying out any planned demolition, disposition, or redevelopment
- If disposing of the property,
- Please note that the PHA _must_ also comply with HUD’s Section 18 disposition procedures and requirements

## Relocation Plan Components

- _Must_ note the number of households to be relocated
- Note bedroom size and number of accessible units
- _Must_ describe the relocation resources to be utilized
- Note if additional Section 8 resources will be needed for relocation
- Confirm that PHA unit vacancies will be available when needed to accommodate relocating families

## Relocation Plan Components(continued)

- _Must_ provide the schedule for family relocation and the removal of units
- _Must_ provide proof that residents were given timely written notice of the relocation plan
**If not subject to URA**, written notice to residents _must_ be at least 90 days before displacement
**If subject to URA**, General Information Notice _must_ given to residents no later than date the Conversion Plan is submitted to HUD

## Relocation Notice to Residents

- Contents of the notice pursuant to 24 CFR §972.103(b) _must_ contain:
- Development must be removed from PH inventory
- Residents will be offered comparable housing
- Tenant-based housing
- Project-based housing
- Other PH or PHA owned or operated housing
- Actual and reasonable relocation cost are paid including
- Counseling
- Mobility counseling

## Relocation Notice to the Residents(continued)

- Family _will_ be located to safe and affordable housing, and to the maximum extent possible, to the housing of their choice
- If the PHA retains the development, the family _will_ be given the choice to remain the in the development using tenant-based assistance
- If a voucher will be utilized for relocation, it _will_ be issued at least 90 days before displacement

## Notice to Residents Subject to URA

- The written notice _must also_ contain:
- A family _will not_ be required to move without at least 90-day notice
- A family _will not_ be required to move permanently until they are offered comparable housing
- Aliens not lawfully present in the United States are ineligible for relocation payments or assistance, _unless_ there will be an unusual hardship to a qualifying spouse, parent, or child

## Notice to Resident Subject to URA- (continued)

- The family has the right to appeal the PHA’s determination for relocation assistance
- Families will be provided the URA notice at the date HUD approves the Conversion Plan
- Families moving into the development after the PHA submits the application are eligible for relocation assistance, unless the PHA issues a written move-in notice to the family prior to leasing stating that the family will be ineligible

## Resources for Relocation

- If using local resources for relocation such as vacant public housing units or already allocated vouchers
- Complete an analysis of unit or voucher turnover rates to ensure that units or vouchers will be available when needed
- For example, if PHA is converting 300 units and 100 units that annually turnover, then it would be realistic to anticipate 3 years for relocation without other resources

## Required Conversion Application Submission Requirements

- In addition to submitting a Required Conversion Plan with the Annual PHA or MTW Plan
- PHA _must_ submit a Removal from Inventory Application to SAC via PIC containing the following:
- Removal from Inventory Application (HUD-52860)
- Required Conversion Addendum (HUD-52860-D)
- PHA Certification of Compliance – Section 33 Required Conversion

## Required Conversion Application Submission Requirements

**Disposition** – The PHA may submit one Inventory Removal Application to request approval for both a Required Conversion and for the disposition of the property
- PHA _must_ complete application sections for both removal actions
- PHA _must_ provide evidence of satisfaction of both statutory and regulatory requirements for Section 18 dispositions

## Required Conversion Application Submission Requirements

**Demolition** - HUD may approve a Required Conversion Application without requiring the PHA to comply with Section 18 requirements for demolition
**Environmental Reviews** – Environmental review must be completed under 24 CFR Part 58 or 24 CFR Part 50 for either Disposition and Demolition
- HUD may authorize the PHA to undertake some activities without a completed environmental review (relocation, unit deprogramming, etc...)

## HUD Actions

- To clarify PHA Conversion Application issues
- HUD may conduct a site visit
- HUD may request additional information
- HUD anticipates that the review of a Conversion Plan will normally occur within 90 days following submission of a **complete **Plan
- HUD approval will be issued by OPHI

## PHA Must First Receive HUD Approval

**Under no circumstances should a PHA commence conversion, demolition, or disposition until HUD approves the Required Conversion Application and Plan in writing**

## Referencing a Conversion in the Annual PHA Plan or MTW Plan

- The existing PHA Plan template or MTW Agreement does not include a tool for providing information on Required Conversions
- Following are suggestions for providing this information
- The PHA may provide a summary of the Required Conversion Plan, including the 6 required conversion plan requirements as an attachment to the Annual PHA or MTW Plan document
- The PHA may insert the Sample Conversion Plan table into Part 10.C of the Annual PHA Plan template

## Slide 73

| Required Conversion of Public Housing Activity Description  |
| --- |
| 1a.	Development(s) name(s):
1b.	Development(s) (project) number(s):
1c.	Asset Management Project (AMP) Number(s):
1d.	The specific public housing units that are (or may be) involved in the required conversion if only a portion of a development listed above is to be converted. |
| 2.	Has the PHA completed the Cost Analysis comparing the costs of continuing to operate the units as public housing to the cost of providing tenant-based assistance?    Yes   No |
| 3.	Is a Conversion Plan required?   Yes   No   Not Yet Determined  (If yes, go to block 4; if no or not yet determined, explain below.) |
| 4.  Status of Required Conversion Plan (select the statement that best describes the current status)
 Conversion Plan is in development
 Conversion Plan has been completed and is being submitted as part of this Plan  (if this is the status, complete blocks 5 through 9 below)
 Conversion Plan was submitted to SAC on: (DD/MM/YYYY)
 Conversion Plan was approved by OPHI on: (DD/MM/YYYY)
 Activities pursuant to the HUD-approved Conversion Plan are underway |
| 5. 	Has the PHA identified the obligation status of modernization, reconstruction, or other capital funds for the distressed development(s), and has the PHA made recommendations concerning the transfer of these funds to alternative public housing uses?    Yes   No |
| 6.	Has the PHA consulted with appropriate public officials in developing the required conversion plan?   Yes   No
Has the PHA obtained the required certification?   Yes   No  |
| 7.	Has the PHA consulted with the residents in the development of the conversion plan?   Yes   No   Does not apply because the site is vacant
Does the PHA have documentation to support the consultation?   Yes   No |
| 8.	Has the PHA described how it proposes to use the development after the conversion as well as the means and timetable for accomplishing any planned demolition, disposition, or redevelopment of the development?   Yes   No
  |
| 9.	Has the PHA developed a resident Relocation Plan that complies with 24 CFR 792.130?   Yes   No   Does not apply because the site is vacant |

## Failure to Comply Actions

- Failure to identify or comply with conversion requirements may result in:
- Disqualification from HUD funding competitions
- HUD can direct the PHA to cease additional spending at the development
- HUD can identify non-viable developments the PHA has failed to acknowledge for a Required Conversion
- HUD can ensure that a Conversion is carried out where the PHA has failed to develop or implement a Required Conversion Plan

## Failure to Comply Actions (continued)

- HUD can require a PHA to revise their Conversion Plan, or prohibit a Conversion when a development is erroneously identified
- HUD can authorize or direct the transfer of capital funds associated with the development to use for tenant-based assistance or to pursue an appropriate site revitalization activity
- Any other HUD action determined appropriate

## Effect of a Required Conversion on Operating Subsidy

- A Required Conversion is equivalent to a formal request for a removal of units from the public housing inventory and the PHA’s ACC
- PHAs _may_ be eligible for receiving a Repositioning Fee as a result of a Conversion
- PHAs should contact their HUD financial analyst about Repositioning Fee eligibility
- HUD intends issuing additional guidance on this issue

## Tenant-Based Assistance Funding for Units Approved for Conversion

- HUD can provide funding for one-for-one unit  replacement, **if funds are available**
- HUD may require initial year funding from the PHA’s existing Capital and/or Operating Funds
- Approval of a Conversion Plan does not guarantee tenant based assistance or relocation funds for the PHA
- PHA must submit a separate application for tenant based assistance funds in response to a HUD published application request

## Tenant-Based Assistance Funding for Units Approved for Conversion

- Should needed voucher funding not be available to the PHA after the required Conversion Plan has been approved by OPHI, the PHA may not be able to pursue the conversion per its approved implementation schedule.
- In such cases, the PHA may submit a request to SAC to revise its implementation plan to reflect these conditions.

## Case Study

## Voluntary Conversion

## Overview

- PHA **may** undertake an assessment to determine if units are eligible for conversion
- Compare cost of running as PH versus providing tenant-based rental assistance
- PHA must consider other factors
- Market value of the development
- Rental conditions in the community
- Likely impact of the conversion on affordable housing
- Planned implementation process

## 3 Voluntary Assessment Result Requirements

- PHA could carry out a voluntary plan in instances where the assessment results indicate that the public housing stock would:
- Not be more expensive than continuing to operate as PH stock
- Principally benefit the residents of the development, PHA and community
- Not adversely affect the availability of affordable housing in the community

## Compliance Process

- Completion of a Required Initial Assessment (RIA)
- Complete a new and comprehensive conversion assessment
- Prepare a voluntary conversion plan
- HUD must approve the conversion plan before PHA can proceed

## Compliance Process (RIA)

- PIH Notice 2001-26 instructed PHAs to identify those developments that were potentially appropriate for voluntary conversion
- Non-binding preliminary evaluation
- Known as a Required Initial Assessment (RIA)
- PHA’s Certification of Compliance for Voluntary Conversion
- Included as part of formal submission of an Inventory Removal Application (form HUD-52860) to SAC

## New Conversion Assessment

- Completed in accordance with 24 CFR 972.218-972.224
- Referenced in the PHA Annual Plan submission
- If MTW- in the Annual MTW Plan submission

## Voluntary Plan

- Completed in accordance with 24 CFR 972.227-972.233
- Referenced in the PHA Annual Plan or Annual MTW Annual Plan
**Must **be completed within one year after completing the conversion assessment
- PHA **must **submit information on voluntary conversion plan to SAC via Voluntary Conversion Addendum HUD form 52860-E for formal approval (Appendix 10)
- Written approval required via Office of Public Housing Investments (OPHI)

## Identification of Properties

- Required Initial Assessment (RIA)
- Certification only
- Do not need to submit the RIA as part of the voluntary conversion assessment, plan or application
- Conversion Assessment
- New comprehensive assessment
- Must comply with statutory and regulatory requirements
- Should consider the intended future use of the development or portion of the development

## Identification of Properties- continued

- Conversion Assessment- continued
- PHA must provide a confirmation in PHA Plan or Annual MTW Plan that each of the **5 voluntary conversion elements** has been addressed
- Conversion assessment and supporting documents remain on file at the PHA central office, and be available for resident, public and HUD review

## PHA Plan or MTW Plan

- PHA Plan template form (HUD-50075) does not provide a format for including information on voluntary conversion
- Part 10.B of template reserved for voluntary conversion
- MTW Plan does not specifically reference voluntary conversion
- PHAs must provide sufficient information

## Voluntary Conversion Table

- Recommended but not required
- Used to ensure PHA completes the voluntary conversion assessment components
- MTW agencies can also use the same table
- Inserted into Plan templates
- Assessment sample provided on page 33
- Plan sample provided on page 52

## Assessment Plan Activity for PHA Plan- Page 33

| Voluntary Conversion Assessment Activity Description  |
| --- |
| 1a.	Development(s) name(s):
1b.	Development(s) (project) number(s):
1c.	Asset Management Project (AMP) Number(s):
1d.	The specific public housing units that are (or may be) involved in the voluntary conversion if only a portion of a development listed above is to be converted. |
| 2.	Has the PHA completed the Cost Analysis comparing the costs of continuing to operate the units as public housing to the cost of providing tenant-based assistance?    Yes   No |
| 3.	Has the PHA completed an independent appraisal (market analysis) of the development before and after conversion?    Yes   No  |
| 4.	Has The PHA completed a rental market analysis of existing conditions to determine the likely success of using tenant-based assistance for the residents of the public housing development?    Yes   No    |
| 5. 	Has the PHA completed an analysis of the likely impacts of the voluntary conversion on the community in which the development is located?  
  Yes   No |
| 6.	Has the PHA described its conversion implementation plans, including the actions it plans to take to convert the development and to transition the residents to tenant-based assistance?   Yes   No |
| 7.	Has the PHA consulted with the residents in the development to review the conversion assessment?   Yes   No   Does not apply because the site is vacant
Does the PHA have documentation to support the consultation?   Yes   No |

## Conversion Assessment

- If conversion assessment is more than 1 year old
- Must be updated
- PHA must ensure that analysis of rental market is based on the most recent available data
- HUD cannot approve the voluntary conversion plan or application until PHA has completed information and included it in PHA Plan or Annual MTW Plan

## High Performer “PHAs”

- “High performers” or PHAs who manage less than 250 PH units are exempt from the requirement to submit their conversion assessments to HUD as part of Annual Plans or Annual MTW Plans
- Still must submit documentation to SAC and their HUD Field Office at the time they submit the conversion plan

## Resident Involvement

- Must involve residents in development and preparing the final conversion assessment and conversion plan
- Consultation Requirement (at least the minimum) in addition to the Annual Plan requirements
- At least 1 public meeting with residents on the affected site (including resident council- if one exists)

## Resident Consultation

- In most cases, PHA will have numerous meetings
- Ensure full understanding of reasons
- Understand the anticipated approach
- Have a meaningful opportunity to discuss options and make suggestions to ensure residents will benefit as a result of the conversion

## Meeting Information

- Explain the requirements
- Provide draft copies of conversion assessment and discuss conclusions
- Provide for a reasonable period for comment on the draft conversion assessment
- PHA should contain summary of comments and PHA responses to any significant issues raised by the residents

## Voluntary Conversion Assessment Components

- Cost Analysis
- Analysis of Market Value
- Analysis of Rental Market Conditions
- Impact Analysis
- Conversion Implementation

## Number 1-Cost Analysis for VCA

- Evaluate the viability
- Operating, capital and accrual cost
- Information on tenant-based assistance
- Voluntary conversion only allowed only if they are cost effective
- Follow the Calculation Rule and voluntary conversion Appraisal Notice
- Use the HUD spreadsheet

## HUD Spreadsheet

- Located on HUD website:
- _[http://www.hud.gov/offices/pih/centers/sac/docs/costcomparison.xls](http://www.hud.gov/offices/pih/centers/sac/docs/costcomparison.xls)_
- Different for Required and Voluntary

## Other Obligations

- PHA must identify additional financial, contractual, or legal obligations that may affect the conversion
- Energy performance contracts
- Capital fund leveraging agreements
- Voluntary Compliance Agreements
- Etc.

## Cost Analysis

- PHAs must determine the length of useful life of the development
- 20- light, moderate rehabilitation
- 30- addresses all back log needs and any redesigns
- 40- rehabilitation performed equal to new construction
- Guidance found in 24 CFR 972 Modernization

## Cost Analysis

- Must have an independent appraisal to determine the market value to complete the cost analysis
- Before the conversion
- After the conversion

## Cost Analysis Viability Criteria for Continuing to Operate as PH

- The investment made in the property is reasonable
- Appropriate density is achieved, and
- A greater income mix can be achieved

## Investment is Reasonable

- Cost must not exceed 90% of HUD’s total development cost (TDC) limit
- PHA should use revitalization estimates of most recent Five-Year and Annual Plan
- Exception, if PHA demonstrates another is more realistic
- Must prove compelling evidence
- Must provide information on the source of funding and that it is available to PHA

## Appropriate Density is Achieved

- The resulting revitalized development must have a density that is comparable to or is appropriate for assisted rental housing, or similar types of housing in the community

## Greater Income Mix

- Measures to broaden the income mix of residents
- Includes a significant mix of households with at least one full time worker
- Evidence includes census or other statistical evidence of a broad range of incomes
- Census tract
- Neighborhood tract
- Unique advantages of public housing

## Number 2- Analysis of Market Value for VCA

- Appraisal determines
- “Highest and best use” or “market value” of the property
- Before and after rehabilitation
- Value included in the cost calculator
- Assists PHAs in considering recapitalization decisions
- Assists PHAs and HUD is assessing the market feasibility

## Analysis of Market Value- continued

- PHA’s intended future use after conversion is essential
- Realistic and achievable plan
- Means and timetable for accomplishing
- Demolition
- Disposition
- Redevelopment
- Matrix must be complete and sent to SAC  (HUD-form 52860-E) Appendix 10 of materials

## Analysis of Market Value- New PIH Notice 2008-35

- Issued August 20, 2008
- Applies to voluntary conversions
- Linked to the cost analysis and cost-test
- Market-value analysis will evaluate various proposed development scenarios and sets of assumptions
- Guidance on Procurement of Services

## Procurement

- In accordance with PHA’s procurement policy and Procurement Handbook 7460.8 REV 2, dated March 2, 2007, or subsequent versions
- Generally accepted and recognized standards are found in Uniform Standards of Professional Appraisal Practice (USPAP)
- Standards published by Appraisal Standards Board (ASB)

## Procurement of Services

- Must procure services from a provider that is
- Qualified
- Competent in the relevant specialized area
- Addresses the requirements of the conversion assessment
- The appraisal may be a relatively complex task
- Appraisal as subsidized housing
- Appraisal with proposed improvements
- Appraisal as altered use
- Highest and best use

## Professional Judgment

- In accordance with USPAP
- Conversion requirements
- Common industry practices regarding market valuations of real estate

## Options for Intended Future Use- page 38

| Market Analysis | Approach Used | Market Value
(Insert estimate)  |
| --- | --- | --- |
| 1. Current Value  “As Is” 
    Public Housing | (_)Income
(_)Comparable 
(_)Tax-assessment
(_)Cost Approach |  |
| 2. Future Value  “Post-Rehab”
    Public Housing  | (_)Income
(_)Comparable 
(_)Tax-assessment
(_) Cost Approach |  |
| 3.  Current Value “As Is” (depends on proposed future use) 
 Select One:  
(_)Assisted Housing 
(_)Unassisted Housing 
(_)Market-Rate Housing
(_)Other: _____________________________________   | (_)Income
(_)Comparable 
(_)Tax-assessment
(_)Cost Approach |  |
| 4.  Future Value  “Post-Rehab” (depends on proposed future use)
 Select One:  
(_)Assisted Housing 
(_)Unassisted Housing 
(_)Market-Rate Housing
(_)Other: _____________________________________ | (_)Income
(_)Comparable 
(_)Tax-assessment
(_)Cost Approach |  |
| 5. “Highest and Best Use” Value or “Market Value” 
(*Insert this value at Section 5(c) of the Cost Analysis Excel Spreadsheet as the “market value of property”.  Also insert this value whenever the “market value” of the property is requested in the calculation.) | (_)Income
(_)Comparable  Sale
(_)Tax-assessment
(_)Land Value |  |

## Guidance on Conducting Market Analysis

- Current Value (Box 1)- based on the “as is” condition
- Market Value as Public Housing (Box 2) “Post Rehab”
- 20, 30, 40 years as selected by the PHA depending on the degree of modernization to keep the property viable
- PHA must provide capital needs information to appraiser

## Market Value- Box 2

- Based on operation as public housing, assisted, unassisted, or market-rate housing and a sale based on the remaining value of the property at the end of the specific term assuming no further use restrictions.
- Should be stated as a Net Present Value

## “As is Condition” Box 3

- How the property would like to be used after conversion
- Based on proposed use and either comparable sale, income, or most feasible appraisal method
- If developer already procured, then future use should be provided to the appraiser
- Proposed use will largely depend on:
- Site location and physical condition
- Land use regulations and property tax consideration
- Local market conditions and financing options
- Zoning limitations and other restrictions

## Future Value “Post rehab” Box 4

- At a minimum, the PHA must consider the conversion cost-test that are necessary to keep a property viable for the remainder of its useful life
- Describe the means and timetable to complete these redevelopment activities

## Highest and Best Use Market Value Box 5

- Based on the use that provides the greatest potential return to the PHA
- Assumes the use that will generate the highest economic return associated with the sale of the property
- Value may be determined with or without regard to the plans by the PHA or developer
- Proposed uses in the area and recent changes in the marketplace
- For example- new highway interchange, proposed redevelopment in the area

## Definitions to be used by the Appraiser and PHA

- Public Housing- built and operated under ACC and the Act
- Assisted Housing- subsidized by private, state, or local agencies, Rural Development Agency, tenant-based HCV Assistance, or other non-public housing funding; income levels are regulated
- Unassisted Housing- has no subsidy, but provides a rental cap such as property rent controls; income levels are regulated
- Market Rate- no restrictions on rental rates, operating cost, profits, rental rate increases, or improvements

## Appraisal Methods

- Income Capitalization Appraisal Approach
- Market Comparison Approach
- Tax Assessment Approach
- Cost Approach
- HUD expects appraisers will select the most feasible appraisal methods

## Income Capitalization Approach

- Current value by projecting potential net income and the expected rate of return
- In general, these are based on historical income and rent for a property
- Degree of speculation associated with this method
- Requires a pro-forma statement to project cash flow
- Problem in that PH rarely generate net income, profit, or market value since in most cases tenants rents are less than the actual operating expenses
- Appraisers then considers flat rent, HCV Assistance Rent, or rent from a comparable property

## Ten Key Elements of Income Approach

- Rental Income
- Vacancy Rate
- Operating Expenses
- Capital Reserves
- Property Taxes
- Net Operating Income
- Debt Service
- Net Income
- Capitalization Rate
- Market Value

## Rental Income

- Flat rent
- HCV Assistance Rents
- Use rents based on the percentage of area median income (AMI) adjusted for family size (bedroom)
- Rents for Comparable
- If rents differ significantly from existing HCV FMRs, flat, or local market rent, the appraiser may use local standard when adequate justification is provided
- PHA may conduct a Rent Comparable Study (RCS) to determine the rental income- Chapter 9 of Section 8 Renewal Policy Guidebook, HUD-92273 and HUD-92273-S8

## Rental Income

- In no event shall the rents in any appraisal exceed the Tenant-based HCV assistance rents for the area in which the property is located

## Vacancy Rate or Allowance

- Actual condition should be reflected in an “as is” Market Appraisal
- “post rehab” should carry a vacancy allowance appropriate for the market and unit type

## Operating Expenses

- The expenses currently being incurred, unless there is a pattern of deferred maintenance
- “As is” should use pro-rated historical operating expenses, or the expenses recorded under site-based management approved by HUD that includes at least one full year
- Exclude capital cost
- In no case should the appraisal operating expense be less than the current operating expense of the authority
- “Post rehab” uses expenses common to similar affordable units

## Capital Reserves

- “As is” uses the most recent Physical Needs Assessment (PNA) as a guide to establish capital reserves
- Low Income Housing Tax Credits use the standard capital reserve established by the state’s housing finance authority for “post rehab” appraisals
- In all cases, the capital reserves should reflect the actual needs to maintain at UPCS standards

## Property Taxes

- “As is” reflects the current condition, PILOT, etc.
- Post rehab or other should reflect the final outcome of property
- If the appraisal assumes that any real estate taxes will be subject to a PILOT, then evidence of such an agreement must be provided as part of the appraisal

## Net Operating Income (NOI)

- For PH, generally the NOI is a negative number- hence the reason for operating subsidy
- However, once a voluntary conversion has been completed, a PHA can redevelop the subject property in ways to create a positive NOI without the benefit of any direct subsidy

## Debt Service

- When post conversion plan will utilize debt of any kind, appraisal will reflect the revenue, NOI and cover debt service associated with borrowed financing
- Debt can be from bank loan, bond issue, PHA loan, other institutional debt, tax credit investors

## Net Income

- Net Income is NOI less the debt service
- If no debt service, net income= NOI
- Generally the presence of LIHTC adds to the value of the property
- This potential would occur after the conversion of a property if tax credits are secured
- Any savings represent a source of income to the investor that is not wholly dependent upon the subject property, and therefore not part of the Net Income

## Capitalization Rate

- Depends on
- Market conditions
- Perceived risk
- Expectations on desired return for capital invested in the venture
- Use of debt
- Desire to reinvest in the community
- Greater the risk, the higher the rate of return

## Value

- Determined by dividing the net income by the capitalization rate
- Determination of value dependent upon
- Location
- Neighborhood conditions
- Market demand
- Etc

## Special Considerations

- Utilities
- Vacancy
- Physical Needs Assessment (PNA)
- Low Income Housing Tax Credits

## Utilities

- Since “post rehab” units will generally have individual metered units, all “as is” should be adjusted to that standard to avoid skewing any comparison of the two appraisal results

## Vacancy

- Appraisers may exercise professional judgment considering
- Management trends
- Historical patterns
- How trends will be altered in the future under new management practices

## Physical Needs Assessment (PNA)

- Maintenance funding may have been diverted to properties in anticipation of a voluntary conversion plan that is skewed toward high rehabilitation costs

## Low Income Housing Tax Credits (LIHTC)

- LIHTC may
- Increase the value of a property
- Lessen the capital investment required
- Increase a property’s Internal Rate of Return (IRR)
- Provide for more capital for redevelopment
- PHA shall provide this information to appraiser

## Method # 2 Market Comparison Approach

- Look at sales of similar properties within a defined geographic area
- Sales should have occurred in a year or two
- Evaluated for similarities and differences
- Actual condition of property
- Adjust for unit size, amenities, tax credits, rent subsidies, changes in interest rate, location
- More likely to find comparables in urban area than rural area

## Method # 3 Tax Assessment Approach

- Rare instances when this approach has merit
- HUD has discretion to accept a market analysis conducted using this approach
- Often values bear no resemblance to reality, so special care must be taken when using this approach

## Method #4 Cost Approach

- Would be of little use for the “as is” appraisal
- May have elements for Market Value for redevelopment or “post-rehab” appraisal
- Considers
- Value of land
- Additional cost of environmental remediation
- Improvements to be made

## Cost Approach

- Hard cost
- Land
- Improvement cost
- Soft Cost
- Design
- Appraisals
- Bond financing
- Construction loan interest
- Relocation
- Lease-up cost

## Cost Approach- continued

- Total hard + soft cost = total development cost (TDC)
- As a general rule, soft cost can be expected to be at least 20%-30% of the total project cost
- TDC usually represents a total cost and cost per unit

## Number 3-Analysis of Rental Market Conditions for VCA

- Essential that PHA demonstrates the current market can absorb tenants that will be displaced if using vouchers for relocation
- Vacancy rates
- Location of affordable units that pass HQS
- Types of units that will be needed
- Accessible
- Large family
- Etc.

## Analysis of Market

- Takes into account
- The overall use of tenant-based assistance under lease
- The PHAs current success rate for the appropriate bedroom size
- The recent success rate at or below payment standards
- Any particular characteristics of the specific residents that will be affected

## Analysis of Rental Market

- Affordability in the vicinity
- Hard-to-house issues
- Data sources
- Census
- Local consolidated plan
- PHA historical data
- Other available local data

## Analysis of Rental Market- Specific Areas

- An overview of the rental housing market in the jurisdiction in which the development is located
- Identification of the number and location of private rental housing units presently occupied by residents
- Concentration of poverty in the surrounding community and its specific location(s) within the area around the development

## Analysis of Rental Market- Specific Areas

- An evaluation of the types of housing units and rental rates that are available for occupancy that could accommodate the housing needs of the displaced families (i.e., 3, 4, or 5 bedroom units and units that are available to accommodate persons with disabilities) within the community
- Areas where residents would likely reside in the surrounding neighborhood, and an evaluation of housing affordability and availability in those areas
- Location and availability of affordable units in any new housing developments that could accommodate the housing needs of the displaced families

## Number 4- Impact Analysis for VCA

- Impact on the community in which the development is located
- Detailed discussion on
- the availability of affordable housing in the community;
- the concentration of poverty in the community; and
- any other substantial characteristics of the community.

## Impact Analysis- continued

- Market rental rates
- Availability and diversity of housing in the community
- Demand for tenant-based assistance
- How the occupancy patterns and rental rates of the housing market will be affected by the new demand for tenant-based assistance units
- Fair housing choices of housing and issues

## Impact Analysis- continued

- Demonstrate how the conversion will:
- Contribute to the diversification of available housing opportunities (types and prices) within the community;
- Positively impact the affordability of housing for the displaced residents;
- Enable the displaced residents to have easy access to public and private facilities and services, such as retail establishments, parks, public transportation, employment, and schools;

## Impact Analysis- continued

- Demonstrate how the conversion will:
- positively impact the unique needs of special household groups; and
- decrease the concentration of poverty in the community in which the displaced residents will be relocating.

## Number 5- Conversion Implementation for VCA

- Actions and action steps
- Planned use of the development, means and timetable for accomplishing
- Plans for the development after conversion
- Demolished
- Disposed
- Retained and utilized for assisted, unassisted or market-rate housing
- Etc

## Conversion Implementation- Specifically

- PHA must specifically:
- Provide a realistic timeframe to undertake the voluntary conversion;
- Indicate that adequate resources and financing are available for the implementation of the voluntary conversion, including demolition, disposition, or redevelopment;
- Indicate the resources that will be utilized to ensure that residents are appropriately relocated, if such relocation is required; and
- Provide creditable evidence that the PHA’s and its partners, if applicable, have the capacity and capability to successfully achieve the proposed future use of the development.

## Voluntary Conversion Plan

- Completed after the PHA submits a conversion assessment that demonstrates the units are eligible for conversion
- Part of the Annual Plan or Annual MTW Plan
- May submit both assessment and conversion plan in the same Annual Plan or Annual MTW Plan, but must at least submit within 1 year of the assessment
- Implementation of the plan must be complete within 5 years

## Voluntary Conversion Plan

- PHA must reference in several places
- HUD Field Office
- PHA Plan or Annual MTW Plan
- Referenced as a significant amendment
- SAC
- HUD Form 52860-E (appendix 10)
- Submitted via PIC
- HUD strongly encourages PHAs to publish the draft on their websites to encourage additional comments

## Voluntary Conversion Plan

- SAC
- Will evaluated to determine if it is complete
- Determine if it includes all required information required by 24 CFR 972.230
- Determine if it is consistent with the conversion assessment

## Eight Required Components of the Plan

- Future Use of the Development
- Impact Analysis
- Description of How the Voluntary Conversion Plan is Consistent with the Findings of the Conversion Assessment
- Evidence that the Voluntary Conversion Plan was Developed with Significant Participation from Public Housing Residents

## Eight Required Components of the Plan- continued

- Evidence the Voluntary Conversion Plan was Developed with Appropriate Local Government Consultation
- Confirmation that any Proceeds Received from the Conversion are Subject to Limitations under Section 18 Applicable to Proceeds Resulting from Demolition or Disposition
- Relocation Plan
- A Summary of how the Conversion Assessment of the Public Housing Project Supports the Three Conditions Necessary for HUD to Approve a Voluntary Conversion Pursuit to 24 CFR 972.224

## Future Use of the Development

- Plans after the Voluntary Conversion
- Demolition
- Disposition
- Retained
- Assisted
- Unassisted
- Market-rate Housing
- Conversion will remove from ACC, however the underlying land will continue subject to a Declaration of Trust (DOT)

## Release of Declaration of Trust (DOT)

- HUD will provide the release in writing either through
- Section 18 removal action
- Action under 24 CFR 85
- Other Means
- Natural expiration of DOT
- If PHA retains the property and later decides to sell the land, PHA must apply to HUD for approval
- HUD will issue additional guidance

## Impact Analysis

- Same criteria as the conversion assessment
- Additional Information
- How the conversion will contribute to diversification
- Whether rents and housing prices will be affordable

## Impact Analysis- additional information

- Whether relocated residents will have easy access to
- Public and private facilities and services
- Parks
- Public transportation
- Employment
- Schools
- Special Needs
- Concentration of poverty
- Etc.

## Impact Analysis

- If development is retained by the PHA and uses as low-income housing, PHA must:
- Convincingly demonstrate why retention is a viable option versus relocating residents in the community
- Lack of affordable housing
- Market cannot absorb influx of residents
- Market are substandard and will not pass HQS
- Etc.

## Impact Analysis- continued

- Should PHA decide demolition/disposition, then PHA must demonstrate _no_ negative community impact
- Decrease in affordable housing
- Increase in concentration of poverty
- Distress within the local community
- Significant impact on transportation, public services, etc.

## Plan Consistent with the Conversion Assessment

- Plan accurately describes the findings of the assessment
- Address any additional deficiencies or problematic issues identified in the assessment
- Any differences must be fully explained

## Evidence of Significant Participation of PH Residents

- It is required that the PHA must:
- Hold at least one meeting with residents of the development
- Provide a reasonable period for the residents to comment
- Summarize all resident comments and PHA responses

## Resident Meetings

- PHA must hold _**at least**_ one meeting with residents
- Must include developments duly elected Resident Council (if one exists)
- PHA must explain the requirements of the voluntary conversion
- Supply draft copies to meeting attendees
- It is recommended to meet numerous times to ensure residents understand and updated on the process

## Resident Comments

- PHA must provide a reasonable period for residents comments
- Summarize all resident comments and PHA responses
- Include the summary as part of the Voluntary Conversion  Plan
- Make sure to document the meetings, sign-in sheets, meeting agendas, resident comments, etc...

## Evidence of Local Governmental Consultation

- The PHA must demonstrate the conversion plan is consistent with local consolidation plans
- Obtain a certificate from the appropriate public official
- Can use the same certification for Annual Plan and voluntary conversion plan- so long as certification specifically references the voluntary conversion plan

## Confirmation that Proceeds are Subject to Limitations

- All proceeds from conversion activities are subject to Section 18 of the Act resulting from demolition/disposition
- PHAs must use proceeds to pay for reasonable cost of the disposition
- Relocation cost
- Remediation cost

## Conformation that Proceeds are Subject to Limitations- continued

- Unless waived by HUD,  the PHA may use proceeds for any outstanding debt on the original development
- With written HUD approval, proceeds may be used for items listed under Section 18 of the Act

## Section 18 Eligible Activities

- May be used for:
- (i) the provision of low-income housing or to benefit the residents of the PHA; or
- (ii) leveraging amounts for securing commercial enterprises, on-site, in public housing projects of the PHA, that are appropriate to serve the needs of the residents.
- Low-income housing under Section 18(a)(5) of the Act is limited to:
- public housing units under an ACC or
- housing assisted by the HCV Program

## Approval Process on Proceeds

- Include narrative
- SAC will review
- Once SAC approves- PHA cannot change without prior written approval
- When PHA expends, must notify HUD Field Office by providing financial statement showing how funds were expended and amount

## Relocation Plan Components

- Number of households to be relocated
- Description of relocation resources
- Schedule of relocation and removal of units
- Proof residents given timely written notice of the plan
- Not subject to URA, written notice to residents must be at least 90 days before displacement
- Subject to URA, General Information Notice given to residents no later than date of conversion plan submission to SAC

## Notice to Residents

- Contents of the notice pursuant to 24 CFR §972.103(b) must contain:
- Development must be removed from PH inventory
- Residents will be offered comparable housing
- Tenant-based housing
- Project-based housing
- Other PH or PHA owned or operated housing
- Actual and reasonable relocation cost are paid including
- Counseling
- Mobility counseling

## Notice to the Residents

- Family will be located to safe and affordable housing, to the maximum extent possible, the housing of their choice
- If the PHA retains the development tenant is given the choice to remain the in the housing using tenant-based assistance
- Voucher will be issued at least 90 days before displacement

## Notice to Resident Subject to URA

- The written notice must also contain:
- No family required to move without at least 90-day notice
- Family not required to move permanently until offered comparable housing
- Aliens not lawfully present in the United States are ineligible for relocation payments or assistance, unless of unusual hardship to qualifying spouse, parent, or child

## Notice to Resident Subject to URA- continued

- Family has right to appeal determination for relocation assistance
- Families will be provide URA notice at the date HUD approves the voluntary conversion plan
- Families moving into the development after the PHA submits the application are eligible for relocation assistance, unless PHA issues written move-in notice to the family prior to leasing that family will be ineligible

## Resources for Relocation

- HUD may have Vouchers through future allocations
- If using local resources for relocation such as PH or HCV
- Complete an analysis of unit turnover
- For example, if PHA is converting 300 units and 100 units that annually turnover, then it would be realistic to anticipate 3 years for relocation without other resources

## Summary of How the Conversion Assessment Supports the Three Conditions

- PHA **must ** demonstrate to HUD that the voluntary conversion:
- Will not be more expensive than continuing to operate the development (or a portion thereof) as public housing;
- Will principally benefit the residents of the development, the PHA, and the community; and
- Will not adversely affect the availability of affordable housing in the community.

## Summary of How the Conversion Assessment Supports the Three Conditions

- To demonstrate that it meets the conditions the PHA should summarize the:
- Results of the appraisal and cost analysis
- Feedback from residents
- Rental market analysis
- Analysis of impact
- Future use of the development
- Availability of landlords to absorb

## Summary of How the Conversion Assessment Supports the Three Conditions

- Summarize
- Relocated residents access to services, etc
- Conflicts with litigation
- Rental market analysis
- Impact on conversion on the neighborhood
**Overall a PHA must show clear and convincing evidence in its conversion assessment to support the PHA’s assertion that the proposed conversion activity is both necessary and warranted, and satisfies the three required conditions for HUD to approve a voluntary conversion**

## Voluntary Conversion and Section 18 of the Act

- Applies to all dispositions and demolitions of developments
- Must meet all requirements of Section 18 of the Act
- Not required to submit separate application
- Must demonstrate compliance as part of the conversion plan

## Voluntary Conversion and the URA

- The URA also applies to the demolition and disposition of developments related to Voluntary Conversion
- Any demolition or disposition means your PHA has to develop a relocation plan

## The Uniform Relocation Act

**CFR § 972.215 Applicability of the Uniform Relocation Act.**
- To the extent tenants are displaced as a direct result of the demolition, acquisition, or rehabilitation of federally-assisted property converted under this subpart, the requirements of the Uniform Relocation Assistance and the Real Property Acquisition Policies Act of 1970 (42 U.S. C. 4601) (URA), and the implementing regulations issued by the Department of Transportation at 49 CFR part 24, apply.
** **

## Submission Requirements

- Before implementation of the Voluntary Conversion plan and PHA must:
- Submit PHA Annual Plan or Annual MTW Plan
- Submit the Voluntary Conversion Application to SAC
- HUD will review the application and either approve or disapprove

## Annual Plans

- Unless exempt from the Annual Plans, a Voluntary Conversion Plan must be submitted within one year of the Voluntary Conversion Assessment
- The application must reference the assessment in the Annual Plan or MTW Annual Plan
- Must provide and document the 8 conversion plan elements
- There is no Changes to the HUD PHA Plan Template, the template in 3-7 of the guide is recommended

## Voluntary Plan Activity for the PHA Plan- Page 52

| Voluntary Conversion Plan Activity Description  |
| --- |
| 1a.	Development(s) name(s):
1b.	Development(s) (project) number(s):
1c.	Asset Management Project (AMP) Number(s):
1d.	The specific public housing units that are (or may be) involved in the voluntary conversion if only a portion of a development listed above is to be converted. |
| 2.	Has the PHA provided information on its plans for the development after the voluntary conversion?    Yes   No |
| 3.	Has the PHA provided an impact analysis of the voluntary conversion of the development on the community?    Yes   No  |
| 4.	Has the PHA demonstrated that the voluntary conversion plan accurately describes the findings of the conversion assessment?    Yes   No    |
| 5.	Has the PHA consulted with the residents in the development to review the conversion plan?   Yes   No   Does not apply because the site is vacant.
Does the PHA have documentation to support the consultation?   Yes   No |
| 6.	Has the PHA consulted with appropriate public officials in developing the voluntary conversion plan?   Yes   No
Has the PHA obtained the required certification?   Yes   No  |
| 7. 	Has the PHA confirmed that any proceeds received from a conversion activity will be subject to the limitations on the use of these net proceeds found in Section 18 of the 1937 Housing Act?    Yes   No |
| 8.	Has the PHA completed a detailed Relocation Plan in accordance with 24 CFR 972.230(b) as part of its voluntary conversion plan?   Yes   No |
| 9.	Has the PHA summarized how the conversion of these public housing units supports the three conditions necessary for HUD to approve a voluntary conversion pursuant to 24 CFR 972.224?   Yes   No |

## HUD Special Application Center (SAC)

- PHA must submit to SAC Inventory Removal Application (HUD-52860) via PIC
- May submit on Inventory Removal Application for Voluntary Conversion and demolition/disposition  of the development
- HUD will not approve any application until a Environmental Review has been completed under 24 CFR Part 58 and 24 CFR Part 50

## HUD Actions

- HUD reviews the application
- May conduct site visit before plan finalization
- Anticipate review within 90 days of application submission
- If longer than 90 days PHA will be given a preliminary response period
- HUD approval or disapproval of the conversion plan through OPHI after the response period

## HUD Approval

- PHA must show clear and convincing evidence of:
- Conversion is less expensive than continued operation as public housing using cost calculation methodology
- Will principally benefit the residents and community of the development
- Will _**not**_  adversely affect the availability of affordable housing within then community

## Reminder!

**Before proceeding to implement the conversion plan, make sure the PHA has written approval from HUD specifically for the voluntary conversion plan.  **
**Approval of the PHA Annual Plan does not constitute approval of the voluntary conversion plan.  A separate approval that is specific to the voluntary conversion plan must come from HUD.**

## Reasons for HUD Disapproval

- PHA must the demonstrate how impacted families will be relocated
- PHA must demonstrate no significant impact to available affordable housing
- HUD will disapprove a conversion plan if HUD determines that:
- Conversion Plan is inconsistent with the conversion assessment
- There is reliable information contradicting conversion assessment
- Conversion Plan is incomplete and fails to meet the requirements of 24 CFR §972.230

## PHA’s Resolutions

- HUD and PHAs may work together to resolve outstanding issues or submission deficiencies
- HUD may request additional information for clarity or deficiencies during the process of making any determinations

## HUD Approval/Disapproval and What to Do Next

- PHA can resubmit at a later date
- PHA can further consult with HUD and supply additional information
- PHA can obtain other plans that have been approved from other PHAs to use as a guide
- PHA should review comments and correct for the future

## Reminder!

- HUD will investigate any apparent contradiction or written challenge to the information presented in the PHA’s voluntary conversion assessment of plan.
- HUD will not approve a conversion application until a determination has been made by HUD on the validity of the challenge or conflict.

## Effect of Voluntary Conversion on Operating Subsidy

- Equivalent to formal request of removal of units from inventory and ACC
- PHA may be eligible for repositioning fee for approved demolition and disposition
- Contact HUD financial analyst about repositioning fee
- HUD intends issuing additional guidance on this subject

## Tenant-Based Assistance Funding for Units Approved for Conversion

- Approval of Conversion Plan does not guarantee tenant based assistance or relocation funds for the PHA
- Approval or implementation may be delayed until allocation of vouchers is available
- PHA must submit separate HUD published invitation application of request for tenant-based assistance funds

**Conversion Guide Training Manual**

## Tenant-based Assistance Funding

- HUD will issue vouchers subject to funding and availability
- Priority for Voucher request given to
- Relocation for HOPE VI
- Relocation for **required** conversion
- HUD PIH notice will be issued to further qualify this in the near future
- The approval process can be delayed until allocation of Vouchers are available

## Case Study

## Question and Answer Time

**Questions?**