HUD RENTAL 

ASSISTANCE 

DEMONSTRATION

Information on Initial 

Conversions to 

Project-Based 

Vouchers

Report to Congressional Committees

April 2014

GAO-14-402

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-402, a report to 

congressional committees

April 2014

HUD RENTAL ASSISTANCE DEMONSTRATION

Information on Initial Conversions to Project-Based 

Vouchers 

Why GAO Did This Study

Over the next several years, rental 

assistance contracts will expire for 

about 38,000 affordable housing units

currently subsidized through three 

HUD rental programs. Owners of these 

units would no longer be required to 

maintain affordable rents or make their 

units available to low-income residents. 

Residents in these units are eligible to 

receive special tenant-based vouchers

called tenant-protection vouchers to 

shield them from resulting rent 

increases. HUD’s RAD program was 

created in 2011 to preserve affordable 

housing by, among other things, 

allowing owners to convert these 

tenant-protection vouchers to projectbased vouchers for units in three 

designated HUD programs. Projectbased vouchers result in a long-term 

contract between the property owners 

and PHAs, which administer the 

vouchers. 

The Consolidated and Further 

Continuing Appropriations Act of 2012 

mandated that GAO review these

conversions under RAD. This report 

describes the results of these 

conversions. 

GAO reviewed HUD program 

documentation and procedures; 

analyzed data on conversions as of 

March 1, 2014; and conducted 

interviews with HUD officials as well as

nongeneralizable interviews with four

PHAs and five property owners

selected based on geography and 

other factors. 

GAO is not making recommendations 

in this report.

What GAO Found

Conversions to project-based vouchers under the Department of Housing and 

Urban Development’s (HUD) Rental Assistance Demonstration (RAD) program 

will have a small effect on the percentage of total vouchers (made up of project 

and tenant-based) that are project-based. Residents with tenant-based vouchers 

can receive their assistance in any eligible privately owned rental unit, which 

means if they leave the unit, their assistance goes with them. In contrast, 

residents with project-based vouchers can only benefit from the assistance if they 

remain in the specific unit. As of March 1, 2014, property owners had converted a 

total of 6,670 units to project-based vouchers in nine states. The percentage of 

vouchers that are project-based including RAD conversions was 3.81 percent, 

and without RAD, would have been 3.45 percent. Further, the impact of these 

conversions on the overall long-term percentage of project-based vouchers will 

be small because the conversions are limited to the remaining 38,000 units 

assisted through the three designated HUD programs, which is relatively small 

compared to the over 2 million total outstanding vouchers. As the figure shows, 

most conversions have taken place in New York, Massachusetts, Michigan, and

New Jersey—four states with a large concentration of units that were originally 

subsidized under designated HUD programs. 

Number and Percentage of Units Converted to Project-Based Vouchers through the Rental 

Assistance Demonstration, by State, as of March 1, 2014

Note: Percentages may not total to 100 percent due to rounding.

Stakeholders GAO interviewed generally viewed the conversions to projectbased vouchers as a useful tool in preserving affordable housing. Stakeholders 

explained that, absent RAD, property owners would have had few or no options 

for continuing some form of rental subsidy when their contracts expired. Further,

RAD conversions provide a stable subsidy for their properties that allows them to 

better obtain financing. All five owners—representing nine properties GAO

contacted—have recapitalized or plan to recapitalize their properties, including 

refinancing or restructuring their debt, in order to rehabilitate them. Housing 

organization officials and a housing expert also told GAO that RAD has helped to 

preserve the number of affordable housing units. PHA officials, property owners, 

and residents told GAO that these conversions have not adversely affected 

residents’ housing choices. View GAO-14-402. For more information, 

contact Daniel Garcia-Diaz at (202) 512-8678 

or GarciaDiazD@gao.gov.
Page i GAO-14-402 Rental Assistance Demonstration

Letter 1 

Background 4

HUD Established an Effective Process for Conversions to ProjectBased Vouchers under RAD 8

RAD Conversions Will Have a Small Effect on the Long-Term 

Percentage of Project-Based Vouchers 11

Stakeholders Generally Viewed RAD Conversions of Covered 

Program Units as Useful in Preserving Affordable Housing 15

Agency Comments 20

Appendix I Objectives, Scope, and Methodology 21

Appendix II GAO Contact and Staff Acknowledgments 23

Tables

Table 1: Total Vouchers Nationwide, and Percentage of ProjectBased Vouchers, as of March 2014 12

Table 2: Total Vouchers for Selected PHAs, and Percentage of 

Project-Based Vouchers, as of January 2014 13

Figures

Figure 1: Number and Percentage of Units Converted to ProjectBased Vouchers through the Rental Assistance 

Demonstration, by State, as of March 1, 2014 8

Figure 2: Number of Units with Expiring Contracts under the Rent 

Supplement and Rental Assistance Payment Programs, 

by Fiscal Year, as of March 2014 16

Figure 3: Example of Planned Rehabilitation for a RAD 

Conversion in the Bronx, New York 19

Contents
Page ii GAO-14-402 Rental Assistance Demonstration

Abbreviations

HUD Department of Housing and Urban Development

MAHRA Multifamily Assisted Housing Reform and Affordability Act

PHA public housing agency

RAD Rental Assistance Demonstration

RAP Rental Assistance Payment

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Page 1 GAO-14-402 Rental Assistance Demonstration

441 G St. N.W.

Washington, DC 20548

April 24, 2014

The Honorable Patty Murray

Chairman

The Honorable Susan Collins

Ranking Member

Subcommittee on Transportation, Housing and Urban Development, 

 and Related Agencies

Committee on Appropriations

United States Senate

The Honorable Tom Latham

Chairman

The Honorable Ed Pastor

Ranking Member

Subcommittee on Transportation, Housing and Urban Development, 

 and Related Agencies

Committee on Appropriations

House of Representatives

Over the next several years, rental assistance contracts will expire for 

about 38,000 affordable housing units currently assisted through the 

Department of Housing and Urban Development’s (HUD) Rent 

Supplement (Rent Supp), Rental Assistance Payment (RAP), and 

Moderate Rehabilitation (Mod Rehab) programs.1 HUD used the rental 

assistance provided by these programs—referred to as covered programs 

in our report—with other subsidies to develop affordable housing from the 

1960s through the 1980s. Although these programs are no longer used to

develop new units, many properties subsidized under these programs 

continue to offer rental assistance to eligible low-income residents today. 

However, upon contract expiration, owners of these properties will have 

 

1

Rent Supp and RAP contracts are authorized under Section 101 of the Housing and 

Urban Development Act of 1965 and Section 236(f)(2) of the National Housing Act 

respectively, Rent Supp and RAP contracts cannot be renewed under the Multifamily 

Assisted Housing Reform and Affordability Act (MAHRA), and lose their project-based 

rental assistance when their contracts expire. The Mod Rehab program was established in 

1978 as a form of project-based rental assistance to upgrade substandard, privately 

owned rental housing. While no new commitments are authorized under the Mod Rehab 

program, expiring contracts covering units in multifamily housing projects are eligible for 

renewal.
 

Page 2 GAO-14-402 Rental Assistance Demonstration

few options for renewing the assistance and will no longer be required to 

maintain affordable rents or make their units available to low-income 

residents.

HUD’s Rental Assistance Demonstration (RAD) program was created, in 

part, to respond to this concern. Prior to the creation of RAD in 2011, 

HUD had limited authority to extend the availability of rental assistance at 

these properties when the contracts expired (or owners terminated them). 

However, HUD would make tenant-protection vouchers available to the 

residents living in these units to keep their rents affordable and prevent 

them from being displaced. Tenant-protection vouchers are “tenantbased”—that is, tied to the resident, not the unit. When the resident with a 

tenant-protection voucher leaves the unit, rental assistance is no longer 

available at that unit. As a result, the number of permanent housing units 

that target low-income residents and offer subsidized rents declines.

Among other things, the RAD program allows the owners of properties 

receiving rental assistance under the covered programs to convert these 

tenant-protection vouchers to project-based vouchers upon contract 

expiration or termination.2 As preservation of affordable housing is one of 

HUD’s goals for its housing policies, project-based vouchers tie the 

assistance to the property—and preserve the property’s long-term 

affordability—because residents with project-based vouchers can only 

benefit from the subsidy if they remain in the specific unit. The 

conversions result in a contract between the property owners and a public 

housing agency (PHA), which administers the program. These 

conversions are also intended to allow property owners to leverage 

private debt and equity in order to address immediate capital needs.

The Consolidated and Further Continuing Appropriations Act of 2012 

mandated that we review the long-term impact of conversions under RAD 

 

2

Conversion of units for which assistance has expired (known as retroactive conversions) 

requires individual consent from tenants because they have already been, or will soon be, 

issued tenant-protection vouchers. Units for which residing tenants do not provide consent 

are not converted to project-based vouchers. Conversion of units for upcoming expiration 

or termination of assistance (known as prospective conversions) does not require tenant 

consent, but it does require the owner of the property to provide tenants with a notice of 

the conversion, a briefing about the conversion, and an opportunity to comment on the 

briefing, and owners must submit tenant comments and the owner’s responses to HUD. 

For both retroactive and prospective conversions, tenants may choose to move from their 

unit 1 year after the project-based contract is put in place for their unit and receive a 

voucher from their local housing agency, if available, to seek housing elsewhere. 
 

Page 3 GAO-14-402 Rental Assistance Demonstration

on the ratio of project-based vouchers to tenant-based vouchers.3 This 

report examines (1) how HUD has implemented RAD conversions of 

tenant-protection vouchers to project-based vouchers for properties under 

the covered programs; (2) how these conversions are expected to affect 

the long-term percentage of project-based vouchers and costs to the 

voucher program; and (3) how these conversions have affected selected 

converted units and the housing choices available to assisted residents.

To address these objectives, we reviewed and assessed HUD guidance 

and procedures for implementing the RAD program. Specifically, to 

describe how HUD has implemented conversions of the covered 

programs under RAD, we reviewed HUD’s RAD notices and guidance on 

processes and procedures the agency uses to process applications 

submitted for conversions. We compared HUD’s guidance and 

procedures to the applicable federal internal control standards.4 We also 

selected nine properties in four geographically diverse locations that 

converted assistance to project-based vouchers, and we interviewed 

HUD field office staff who had worked on those conversions. To describe 

how conversions have affected the percentage of project-based vouchers 

to tenant-based vouchers and costs to the voucher program, we obtained 

and analyzed HUD data on conversions and data on the total number of 

tenant-based and project-based vouchers as of March 1, 2014. We 

assessed the reliability of the data by verifying that data fields, such as 

the total number of units in a property, total number of units converted to 

project-based vouchers, and dates for conversions, were reasonable and 

consistent with our data request, and determined that the data were 

sufficiently reliable for purposes of this report. We also obtained and 

analyzed documentation from HUD to determine the impact of these 

conversions on the budget. To determine how the conversions have 

affected selected converted units and the housing choices available to 

assisted residents, we interviewed the five property owners (or their 

representatives) for the nine converted properties we selected, and we 

interviewed assisted residents from the converted properties where 

possible. We also interviewed officials representing property owners and 

PHAs from the Council for Large Public Housing Authorities, the Public 

Housing Authorities Directors Association, the National Association of 

 

3

Pub. L. No. 112-55 125 Stat. 673-675. 

4

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 
 

Page 4 GAO-14-402 Rental Assistance Demonstration

Housing and Redevelopment Officials, the National Affordable Housing 

Management Association, and the National Leased Housing Association.5

We conducted this performance audit from September 2013 through April 

2014 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

The RAD program was authorized by Congress in November 2011 under 

the Consolidated and Further Continuing Appropriations Act of 2012.6 The 

RAD program provides HUD the opportunity to test the conversion of 

units subsidized under HUD’s public housing and certain other programs 

to long-term (typically 15 to 20 years), project-based voucher or rental 

assistance contracts—two forms of rental assistance that tie the 

assistance to the unit in order to provide subsidized housing to lowincome residents.7 The goals of the RAD program include maintaining the 

affordability of federally assisted rental properties and improving their 

physical and financial condition. Specifically, property owners and PHAs 

(for the public housing program) can leverage the subsidy payments 

under the newly converted contracts to raise capital through private debt 

and equity investments to make improvements. The RAD program 

consists of two components. The first component focuses on the 

voluntary conversion of public housing properties, while the second 

component of RAD—and the focus of our review—addresses the 

following programs that provide subsidized rents to residents. The 

project-based contracts under these programs—generally between HUD 

and the owners of private rental housing—were entered into in the 1960s, 

 

5 There were only five property owners for the nine properties because some of the 

owners owned more than one property.

6

Pub. L. No. 112-55 125 Stat. 673-675. 

7

Project-based voucher contracts are between a PHA and the property owner, while 

project-based rental assistance contracts are between HUD and the property owner. HUD 

provides subsidies to PHAs to operate and maintain public housing units. The public 

housing program serves eligible low-income families and individuals including, the elderly

and persons with disabilities. 

Background
 

Page 5 GAO-14-402 Rental Assistance Demonstration

1970s, and 1980s, typically for terms of 15, 20, or 40 years. New 

contracts cannot be authorized under these programs, and current 

contracts are either not eligible for renewal or have limited contract 

renewal provisions.

• The Rent Supp program was authorized in Section 101 of the Housing 

and Urban Development Act of 1965, which authorized rent 

supplements on behalf of needy tenants living in privately owned 

housing and was the first project-based assistance program for 

mortgages insured by HUD’s Office of Housing. Eligible tenants pay 

30 percent of the rent or 30 percent of their income toward the rent, 

whichever is greater. The Rent Supp program provides payments 

directly to the project owner to cover the difference between the 

tenant’s payment and the HUD-approved rent. Rental assistance 

under Rent Supp contracts is not eligible for renewal.

• The RAP program was established by the Housing and Community 

Development Act of 1974 to provide additional rental assistance 

subsidies to property owners on behalf of very low-income tenants. 

RAP was available only to Section 236 properties and was the 

predecessor of the project-based Section 8 program.8 Eligible tenants 

under the RAP program generally pay 30 percent of their monthly 

adjusted income or 10 percent of gross income toward rents, 

whichever is greater. HUD pays the difference between the tenant 

payment and the HUD-approved rent directly to the owner. Rental 

assistance under RAP contracts is not eligible for renewal.

• The Mod Rehab program provides project-based rental assistance for 

low-income families and is intended for housing units that require a 

moderate level of repair. Contracts under the Mod Rehab program are 

between the owner and PHA.9 Eligible tenants generally pay 30 

 

8

The Section 236 program, which was established by the Housing and Urban 

Development Act of 1968, combined federal mortgage insurance with interest reduction 

payments to the mortgagee for the production of low-cost rental housing. Under this 

program, HUD provided interest subsidies to lower a project’s mortgage interest rate to as 

low as 1 percent. This program no longer provides insurance or subsidies for new 

mortgage loans, but existing Section 236 properties continue to operate under the 

program. The interest reduction payment results in lower operating costs and 

subsequently a reduced rent structure.

9

HUD and the PHAs have an annual contributions contract—a written contract under 

which HUD agrees to make payments to the PHA and the PHA agrees to administer the 

housing program in accordance with HUD regulations and requirements.
 

Page 6 GAO-14-402 Rental Assistance Demonstration

percent of their monthly adjusted income toward rents. PHAs pay the 

difference between the tenant payment and the approved rent directly 

to the owner. Mod Rehab projects with expiring housing assistance 

payment contracts are eligible for renewal, but renewal options are 

limited in that the assistance is generally only renewed in the form of a 

1-year contract, which makes it difficult for property owners to secure 

financing for capital improvements.

Under RAD, owners may elect to apply for a long-term, project-based 

voucher contract for their property rather than have PHAs provide eligible 

residents tenant-protection vouchers when a property’s rental assistance 

contract with HUD (or with a PHA in the case of the Mod Rehab program) 

expires or the contract is terminated due to prepayment of the mortgage 

(in the case of Rent Supp and RAP).10 Tenant-protection vouchers are a 

type of assistance provided under the Housing Choice Voucher (voucher) 

program. The voucher program pays subsidies to property owners to help 

very low- and extremely low-income households rent units on the private 

market.11 The voucher program currently serves over 2 million 

households. PHAs administer the program on HUD’s behalf, including 

special-purpose vouchers, such as tenant-protection, and project-based 

vouchers.12 Eligible owners apply to HUD to request approval for the 

conversions and must take specific steps and meet certain criteria, such 

as notifying residents of the conversions, obtaining consent from each 

resident who has already received a tenant-protection voucher in order to 

convert their unit, and passing housing-quality-standards inspections for 

 

10In some cases, such as certain types of prepayments, PHAs can issue an “enhanced” 

voucher. Enhanced vouchers are a special purpose voucher, similar to a tenant protection 

voucher, that provides some benefits that supplement the regular vouchers—such as a 

special payment standard, which can sometimes result in a PHA subsidizing rent that 

exceeds the voucher program’s limits. However, if enhanced vouchers are converted to 

project-based vouchers, PHAs are to administer them in accordance with project-based 

voucher program requirements.

11The voucher program is authorized under Section 8 of the United States Housing Act of 

1937, as amended. Very low-income and extremely low-income households are those 

with incomes at or below 50 percent and 30 percent, respectively, of the area median 

income. 

12Program regulations allow PHAs to set aside up to 20 percent of their voucher budget 

authority as project-based vouchers, but conversions under RAD are not subject to these 

limits.
 

Page 7 GAO-14-402 Rental Assistance Demonstration

the units proposed for conversion.13 Once approved, the conversions 

allow the owners to convert their current assistance to long-term, projectbased voucher contracts.

After the conversion, if residents decide to move, they would lose their 

assistance because it is tied to the unit. However, project-based vouchers 

provide a mobility option for residents. The mobility option for residents 

allows them to apply for a tenant-based voucher from their local PHA and 

be placed at the top of the PHA’s wait list for tenant-based vouchers after 

having resided in the converted unit for 1 year. The ability of residents to 

relocate, however, is subject to the availability of vouchers from the PHA.

As of March 2014, HUD had approved project-based voucher funding for 

a total of 8,014 units, of which 6,670 units (61 properties) had their rental 

assistance converted to project-based voucher assistance through RAD. 

There is a high concentration of conversions in certain geographic areas 

due to the Rent Supp and RAP programs being concentrated in these 

areas. Specifically, a large percentage of conversions have taken place in 

New York, Massachusetts, Michigan, and New Jersey (see fig. 1). 

Approximately 38,000 affordable housing units continue to be assisted 

under the Rent Supp, RAP, and Mod Rehab programs. This number 

includes 22,233 Mod Rehab units within 385 projects; 4,713 Rent Supp 

units within 89 projects; and 10,915 RAP units in 113 projects.

 

13HUD began accepting applications for conversions to project-based vouchers in March 

2012, and the demonstration was initially set to expire on September 30, 2013, but has 

been extended through December 31, 2014, through the 2014 Consolidated 

Appropriations Act of 2014. Pub. L. No. 113-76, Division L, § 239 (2014). 
 

Page 8 GAO-14-402 Rental Assistance Demonstration

Figure 1: Number and Percentage of Units Converted to Project-Based Vouchers 

through the Rental Assistance Demonstration, by State, as of March 1, 2014

Note: Percentages may not total to 100 percent due to rounding.

HUD has developed an effective process for managing applications and 

implementing conversions of assistance to project-based vouchers under 

RAD. Internal control standards for the federal government state that 

properly communicating, executing, and documenting transactions related 

to a program is critical to establishing effective implementation of that 

program.14 HUD issued notices and hosted webinars to provide program 

instructions and selection criteria for conversions under the RAD 

program. HUD also developed a specific checklist for the processing of 

applications to convert rental assistance under the covered programs to 

project-based vouchers and created a database to track these 

conversions. Property owners and PHA officials we spoke with generally 

 

14GAO/AIMD-00-21.3.1. 

HUD Established an 

Effective Process for 

Conversions to 

Project-Based 

Vouchers under RAD
 

Page 9 GAO-14-402 Rental Assistance Demonstration

stated that HUD provided effective assistance throughout the conversion 

process.

Federal internal control standards note the importance of open and 

effective communication channels for the implementation of programs.15

HUD issued an initial notice in March 2012 that authorized conversions 

under RAD for the covered programs and sought comment through this 

notice on eligibility and selection criteria for the conversions. HUD then 

issued a final notice for implementation of the RAD program in July 2012 

and a revision of the final notice in July 2013. HUD’s notices provided 

guidance to owners of covered-program properties with instructions on 

how to apply to convert the assistance their properties are receiving to 

project-based vouchers. The notices also included requirements property 

owners must meet, such as communicating with the local HUD field office 

and expressing interest in the RAD conversion, contacting a PHA that 

could potentially administer the project-based vouchers, and conducting 

the required resident notifications and briefings on the conversions. The 

July 2013 revised notice also included clarifications related to the 

conversions. For example, the revised notice clarified that only occupied 

units in a property are eligible to be converted to project-based vouchers.

HUD also took steps to communicate program requirements to property 

owners, PHAs, and residents. For example, HUD conducted webinars for 

property owners and PHAs on the process to apply for conversion, 

required documentation, and time frames. HUD has established an online 

resource desk that includes information and web links to various RAD 

program resources, including a searchable list of frequently asked 

questions that can be specifically sorted by questions related to 

conversions under the covered programs. HUD’s RAD website also 

contains an area specifically for residents to learn more about the RAD 

program, how it may impact their assistance, and their housing choices.

 

15GAO/AIMD-00-21.3.1.

HUD Issued Notices and 

Hosted Webinars to Notify 

Applicants of the 

Availability of Conversions 

under the RAD Program
 

Page 10 GAO-14-402 Rental Assistance Demonstration

Federal internal control standards point to the importance of proper 

execution and documentation of transactions when implementing 

program procedures.16 HUD developed a specific checklist for the 

processing of applications to convert rental assistance under the covered 

programs to project-based vouchers. HUD field office staff who review 

RAD applications that owners submit use the checklist to help ensure that 

materials submitted by property owners are complete and meet HUD 

requirements for conversion. For example, the checklist includes specific 

fields for HUD field staff to indicate that the RAD applicant has supplied 

the required resident notification material, such as a copy of the 

notification letter to residents living at the property, any comments 

received from residents regarding the potential conversions, and a copy 

of the property owner’s responses to the residents’ comments. The 

checklist also includes fields for other required information, such as 

documentation of how many units are planned for conversion. HUD 

headquarters officials we spoke with also told us that they conduct regular 

conference calls with staff working on these applications in HUD field 

offices. HUD officials explained that these conference calls help to ensure 

that applications are being processed similarly nationwide.

HUD has also developed a RAD database to track and document 

applications the agency receives for conversions, as well as their 

progress. HUD’s database includes a tracking sheet for each project, 

which provides information on the project, such as date the completed 

RAD application was received, the number of units proposed for 

conversion, and the expiration date of the current rental assistance the 

project is receiving. The tracking sheet also includes a section specifically 

for tracking the various stages of the conversion process, such as HUD’s 

review of the application, the selection of the PHA, and HUD’s notification 

of the owner that the application has been approved. The RAD database 

also contains information on the conversions that have taken place, such 

as the number of units for each project for which rental assistance was 

actually converted to project-based vouchers based on HUD’s verification 

of documentation once the conversions take place, and the PHAs that are 

administering the vouchers. Similar data for projects going through the 

conversion process are also available in the RAD database.

 

16GAO/AIMD-00-21.3.1.

HUD Developed Multiple 

Tools to Help Ensure 

Consistent Processing and 

Approval of RAD 

Applications
 

Page 11 GAO-14-402 Rental Assistance Demonstration

Property owners and PHA officials we spoke with generally stated that 

HUD staff answered questions about the conversion process and 

provided effective assistance to close projects. Most property owners we 

spoke with stated that HUD readily answered questions about the RAD 

conversion process and provided clarification on guidance when 

necessary. For example, most property owners we spoke with stated that 

HUD staff were present at the resident meetings, were effective at 

explaining the process to residents, and helped residents understand that 

the conversions under RAD to project-based vouchers would provide 

rental assistance to keep their units affordable once the assistance their 

units are currently receiving expires. Officials from most PHAs we spoke 

with stated that HUD staff communicated regularly with them and 

provided responses to questions regarding the conversion process. They 

also stated HUD staff provided the necessary assistance to close projects 

in a timely manner. 

Conversions of rental assistance to project-based vouchers under the 

covered programs have not substantially affected the overall percentage 

of project-based vouchers. Further, the impact of the conversions on the 

long-term percentage of project-based vouchers is limited to the 

remaining contracts for the three programs—a relatively small number 

compared to the overall voucher program. Additionally, these conversions 

of rental assistance should not affect voucher program costs because 

HUD uses the same calculation for providing budget authority for the 

project-based vouchers converted under RAD as it does for calculating 

budget authority for the tenant-protection vouchers.

RAD conversions have had a small effect on the number and percentage 

of total vouchers (project-based and tenant-based vouchers). Although 

RAD has increased the number of project-based vouchers nationally, the 

increase was not enough to substantially affect the overall percentage. 

For example, as of March 1, 2014, there were 2,055,349 tenant-based 

vouchers and 81,364 project-based vouchers—8,014 of which HUD 

approved for funding RAD conversions. As a result, the percent of 

project-based vouchers increased slightly from 3.45 to 3.81 percent (see 

table 1).

RAD Conversions 

Will Have a Small 

Effect on the LongTerm Percentage of 

Project-Based 

Vouchers

RAD Conversions Have 

Had a Small Effect on the 

Percentage of ProjectBased Vouchers
 

Page 12 GAO-14-402 Rental Assistance Demonstration

Table 1: Total Vouchers Nationwide, and Percentage of Project-Based Vouchers, as of March 2014

Source: GAO analysis of HUD data.

RAD conversions can have a larger impact on the percentage of projectbased vouchers for smaller PHAs compared to larger PHAs. For 

example, the Brockton Housing Authority (Massachusetts)—a smaller 

local PHA—had a total of 61 project-based vouchers prior to RAD 

conversions of rental assistance under the covered programs. This PHA 

now administers an additional 463 project-based vouchers for three 

properties that converted rental assistance, for a total of 524 projectbased vouchers out of 1,716 total vouchers. Since it has a small portfolio 

of vouchers, the percentage of vouchers that are project-based increased 

from about 5 percent to about 31 percent. Conversely, the percentage of 

project-based vouchers for the Michigan State Housing Development 

Authority—a larger state PHA—changed only slightly. This housing 

agency added 495 vouchers to their 2,075 project-based vouchers, for a 

total of 2,570 project-based vouchers. Since this PHA has a larger 

portfolio of vouchers (24,113 total vouchers), the increase of projectbased vouchers as a result of RAD did not substantially impact the 

percentage of project-based vouchers, increasing it from about 9 percent 

to about 11 percent. The remaining two PHAs we selected had a 

percentage point difference between about 1 percent and 2 percent in 

project-based vouchers due to RAD conversions. Table 2 summarizes the 

number and percentage of project-based vouchers for the PHAs we 

analyzed.

Pre RAD conversions Post RAD conversions

Tenantbased 

vouchers

Projectbased 

vouchers

Total 

vouchers

Percent of total 

vouchers

that are

project-based 

Projectbased 

vouchers 

from RAD 

Total 

projectbased 

vouchers

Total 

vouchers

Percent of total 

vouchers

that are

project-based

Percentage 

point 

difference 

2,055,349 73,350 2,128,699 3.45% 8,014 81,364 2,136,713 3.81% 0.36%
 

Page 13 GAO-14-402 Rental Assistance Demonstration

Table 2: Total Vouchers for Selected PHAs, and Percentage of Project-Based Vouchers, as of January 2014

Source: GAO analysis of PHA data.

Note: Due to rounding, the sum of the percentage point difference and the percent of total vouchers 

that are project-based pre-RAD may not equal the percent of total vouchers that are project-based 

post-RAD.

a

The data for the Michigan State Housing Development Authority are as of December 2013.

Based on completed RAD conversions and the small number of potential 

remaining conversions, the effect of RAD conversions on the long-term 

percentage of project-based vouchers will be relatively small. Specifically, 

the change in the long-term percentage of project-based vouchers is 

limited to the remaining contracts for the covered programs. The 

remaining active contracts for the Rent Supp, RAP, and Mod Rehab 

programs include about 38,000 units, which is relatively small compared 

to the over 2 million vouchers currently assisting low-income residents. 

Further, not all of the units are likely to be converted to project-based 

vouchers.17 Even if all of these units were converted as of March 1, 2014, 

 

17Mod Rehab properties can be converted under the first component of RAD, which allows 

for the assistance to be converted to project-based rental assistance or project-based 

vouchers.

Pre RAD conversions Post RAD conversions

Location

Tenantbased 

vouchers

Projectbased 

vouchers

Total 

vouchers

Percent 

of total 

vouchers 

that are 

projectbased

Projectbased 

vouchers 

from RAD 

Total 

projectbased 

vouchers

Total 

vouchers

Percent

of total 

vouchers 

that are 

projectbased

Percentage 

point 

difference 

Housing 

Authority of the 

County of Los 

Angeles 22,834 305 23,139 1.32% 162 467 23,301 2.00% 0.69%

Michigan State 

Housing 

Development 

Authoritya 21,543 2,075 23,618 8.79% 495 2,570 24,113 10.66% 1.87%

New York State 

Homes and 

Community

Renewal 40,489 3,013 43,502 6.93% 1,077 4,090 44,579 9.17% 2.25%

Brockton 

Housing 

Authority 

(Massachusetts) 1,192 61 1,253 4.87% 463 524 1,716 30.54% 25.67%
 

Page 14 GAO-14-402 Rental Assistance Demonstration

the maximum change in the nationwide percentage of project-based 

vouchers would be an increase from 3.45 percent to 5.48 percent. Finally, 

HUD funding of RAD conversions is limited by the availability of funding 

for tenant-protection vouchers.

On the basis of our review of HUD documentation, conversions to projectbased vouchers should not affect voucher program costs compared to 

providing tenant-protection vouchers. HUD documentation on the 

conversion process shows that HUD uses the same calculation for 

providing budget authority for the project-based vouchers converted 

under RAD as it does for calculating budget authority for the tenantprotection vouchers. Specifically, when HUD issues tenant-protection 

vouchers to protect residents from rent increases upon the expiration of 

rental assistance, a local PHA with jurisdiction in the area is selected to 

administer the tenant-based vouchers. HUD then determines the budget 

authority for these vouchers by calculating the PHA’s average per-unit 

per-month cost of all the vouchers, and multiplying that amount by the 

number of eligible households receiving tenant-protection vouchers. That 

funding is then added to the PHA’s voucher budget authority.

For example, for a property that converted to project-based vouchers 

under RAD in the state of Washington, a total of 35 units were eligible for 

conversion to project-based vouchers upon expiration of a Rent Supp 

contract on July 31, 2013. The average per-unit per-month cost of that 

property’s administering PHA’s voucher program was $475. Therefore, 

the total cost of the tenant-protection vouchers per month would have 

been $16,625 (35 residents x $475). Because RAD allows for the 

conversion of tenant-protection vouchers to project-based voucher 

contracts, HUD used the same exact calculation to fund the 35 projectbased vouchers that were funded for this property. As such, conversions 

of the tenant-protection vouchers to project-based vouchers under RAD 

would result in the same amount used to fund the project-based vouchers 

that would have funded the tenant-protection vouchers. Additionally, 

tenant-based and project-based voucher subsidies are generally subject 

to the same payment standard limits. The subsidies are based on 

payment standards that cannot exceed 110 percent of the fair-market rent 

Conversions to ProjectBased Vouchers Should 

Not Affect Voucher 

Program Costs
 

Page 15 GAO-14-402 Rental Assistance Demonstration

established by HUD for standard rental housing given the unit size the 

voucher will be used for in that area.18

Program requirements that allow assisted households with project-based 

vouchers to move to a different unit will not add to the cost of these 

conversions. According to project-based voucher regulations, residents 

with a converted project-based voucher can move after a year of residing 

in the unit and be eligible for a tenant-based voucher. The project-based 

voucher would remain available for another eligible household, and the 

household intending to move would be placed on the PHA’s waitlist for 

the next voucher that becomes available (i.e., after another voucher 

holder exits the program). As a result, households with project-based 

vouchers that move to another unit and continue receiving voucher 

assistance would not increase the net number of vouchers and the 

amount of funding required.

Stakeholders we spoke with generally said that the RAD program is a 

useful tool in helping to preserve affordable housing and improve units 

converted to project-based vouchers. Furthermore, residents, property 

owners, and PHA officials we spoke with told us that residents’ housing 

choices have not been negatively impacted by the conversions. 

Property owners, PHAs, residents, housing organizations, and a housing 

expert we spoke with generally viewed the RAD program as a useful tool 

for preserving affordable housing. For example, representatives of a 

property owner involved in a large number of conversions told us that 

without RAD, they would not have preserved as many of the affordable 

housing units as they have, and that those units would have most likely 

been lost as affordable housing. Also, one housing expert said that RAD 

provides a good mechanism for keeping properties with expiring 

 

18For tenant-based vouchers, HUD may approve payment standards higher than 110 

percent of fair-market rents in cases of high rent burdens in high-rent areas.

Stakeholders 

Generally Viewed 

RAD Conversions of 

Covered Program 

Units as Useful in 

Preserving Affordable 

Housing

Stakeholders Utilized RAD 

Conversions to Preserve 

and Improve Affordable 

Housing Units
 

Page 16 GAO-14-402 Rental Assistance Demonstration

assistance in the affordable housing pool and putting them on a long-term 

plan that can better maintain the property. Officials from the Brockton 

Housing Authority (Massachusetts) stated that if the owner of a cluster of 

properties in its jurisdiction had not converted, the units would have 

become market rent units, and would no longer be affordable to lowincome residents. Further, a housing expert and some housing officials 

stated that these conversions represent the last opportunity to preserve 

project-based assistance for expiring units under the Rent Supp, RAP, 

and Mod Rehab programs. According to HUD data, contracts subsidizing 

a total of 15,628 units under Rent Supp and RAP will be expiring in the 

coming years, and about half of these units (7,274 units) are scheduled to 

expire in fiscal year 2016 alone (see fig. 2). 

Figure 2: Number of Units with Expiring Contracts under the Rent Supplement and 

Rental Assistance Payment Programs, by Fiscal Year, as of March 2014

Notes: Mod Rehab units with expiring contracts are not included because individual PHAs, and not 

HUD, maintain this information, which is not readily available. Additionally, Mod Rehab contracts can 

be renewed in 1-year increments upon expiration.
 

Page 17 GAO-14-402 Rental Assistance Demonstration

All five property owners we spoke to—representing nine properties—had 

recapitalized their properties or planned to do so in order to conduct 

major rehabilitation on the sites we selected. All are utilizing or 

considering low-income housing tax credits—eligible developers can 

obtain and “sell” low-income housing tax credits to investors to raise 

capital (or equity) for their projects.

19 The long-term (typically 15 year) 

project-based voucher contract provides a stable subsidy that can be 

used to attract investors and strengthen the underwriting. PHA officials 

and HUD field office staff who administer and oversee RAD conversions 

to project-based vouchers consistently told us that, in their experience, 

most property owners plan to recapitalize or have recapitalized their 

properties, in order to rehabilitate the property. The following are 

examples of recapitalization and rehabilitation for some of the property 

owners (or their representatives) we spoke with.

• The owners of a property located in Michigan that converted under 

RAD recapitalized in order to rehabilitate a substantial part of the 

property. This recapitalization included refinancing with a long-term 

mortgage. In addition, the long-term project-based voucher contract 

allowed the owners to obtain a competitive low-income housing tax 

credit that provided significant funds to use toward repairs. The 

owners of the property stated that they completed upgrades to 160 

units and common areas that totaled about $8 million. This 

rehabilitation was completed at the end of December 2013. The types 

of rehabilitation included new cabinets, carpet, vanity, windows, and 

heating and cooling systems.

• The owner of a converted property in California, told us that the 

property will undergo about $11 million in comprehensive 

rehabilitation by early 2015. The owner said he utilized low-income 

housing tax credits and other financing tools. The rehabilitation will

include new flooring, kitchens, bathrooms, windows, doors, and 

appliances. For the exterior, the owner plans to install a new roof, 

paint the exterior, and add community gardens and a playground, 

among other improvements.

 

19The owners of a low-income housing tax credit project are permitted to claim tax credits 

on their income tax return. Technically, what is sold to the investor is not the credit but an 

ownership interest in the project (through a partnership or other entity). 
 

Page 18 GAO-14-402 Rental Assistance Demonstration

• For one of the largest clusters of properties to have converted thus 

far—a set of three buildings located in the Bronx, New York—

representatives of the property owners estimated that there will be 

about $75 million spent on rehabilitation for the three buildings that 

were converted, covering over 1,200 units. In order to fund the 

rehabilitation, the owner’s representatives said they utilized lowincome housing tax credits and other financing tools. The 

rehabilitation is scheduled to be completed by 2016 and includes 

major upgrades to units (including bathrooms and kitchens), common 

areas, site improvements, a more efficient heating system, and 

improvements to the exteriors of the three buildings. Figure 3 shows 

what the planned rehabilitation for each unit’s bathrooms and kitchen

will look like based on a unit that has already been renovated in one 

of the buildings.
 

Page 19 GAO-14-402 Rental Assistance Demonstration

Figure 3: Example of Planned Rehabilitation for a RAD Conversion in the Bronx, New York

Residents, property owners, and PHA officials we spoke with generally 

told us that residents’ housing choices have not been negatively impacted 

by the conversions. Conversions to project-based vouchers include a 

mobility feature for residents who would like to move after living in a 

converted unit for 1 year. A few housing officials we spoke to stated that 

the mobility feature could create resident turnover because if residents 

decide to leave the unit after 1 year, they would be placed at the top of 

the administering PHA’s tenant-based voucher waiting list. This may 

negatively impact individuals who have been on the voucher waiting list 

because they may have to wait longer to receive a voucher, depending on 

availability. Residents, property owners, and PHAs for the most part told 

Stakeholders and 

Residents Generally Said 

That Residents’ Housing 

Choices Have Not Been 

Negatively Impacted
 

Page 20 GAO-14-402 Rental Assistance Demonstration

us that resident mobility did not seem to be an issue at the properties we 

visited, but some also stated that it may be too soon to tell because the 1-

year waiting period for resident mobility had not yet passed. For example, 

one PHA official told us that in low-vacancy areas—including those where 

RAD conversions to project-based vouchers are taking place—

preservation of these units, particularly when rehabilitation is included, 

results in residents preferring to stay in their units and not wanting to be 

relocated. The official explained that in New York City, for example, it can 

be difficult and costly to find units; as a result, residents would prefer to 

not relocate if they are satisfied with the unit they are living in. Further, 

residents we spoke to at three properties told us that they were planning 

on staying at the property, so mobility was not a concern for them. The 

residents also said that they had a good experience with the RAD 

conversion process and were happy with the program because it allowed 

them to stay in their current unit and continue to receive rental assistance. 

Since renovations at the residents’ properties had not yet begun, 

residents we spoke with were not able to comment on improvements as a 

result of the conversions.

We provided a draft of this report to HUD for review and comment. HUD 

did not provide written comments, but did provide technical comments, 

which we incorporated, as appropriate. 

We are sending copies of this report to interested congressional 

committees and HUD. The report also is available at no charge on the 

GAO website at http://www.gao.gov. If you or your staffs have any 

questions about this report, please contact Daniel Garcia-Diaz at (202) 

512-8678 or garciadiazd@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix II. 

Daniel Garcia-Diaz

Director

Financial Markets and Community Investment

Agency Comments
Appendix I: Objectives, Scope, and 

Methodology

Page 21 GAO-14-402 Rental Assistance Demonstration

This report examines aspects of the second component of HUD’s Rental 

Assistance Demonstration (RAD) program, which allows the owners of 

properties receiving rental assistance under the Department of Housing 

and Urban Development’s (HUD) Rental Supplement (Rent Supp), Rental 

Assistance Payment (RAP), and Moderate Rehabilitation (Mod Rehab) 

programs—referred to as covered programs—to convert tenant-protection 

vouchers to project-based vouchers upon contract expiration or 

termination. Specifically, this report examines (1) how HUD has 

implemented RAD conversions of tenant-protection vouchers to projectbased vouchers under the covered programs; (2) how these conversions 

are expected to affect the long-term percentage of project-based 

vouchers and costs to the voucher program; and (3) how these 

conversions have affected selected converted units and the housing

choices available to residents.

To examine how HUD has implemented conversions to project-based 

vouchers, we reviewed RAD program notices and documentation on 

processes and procedures the agency uses to process applications 

submitted for conversions. We also reviewed documentation on what 

information HUD collects for the conversions and how the conversions 

are tracked throughout the various stages of the application process. We 

also reviewed HUD’s online RAD resources and webinars for explaining 

the RAD program. We compared HUD’s guidance and procedures to the 

applicable federal internal control standards.1 We selected nine properties 

in four geographically diverse locations (California, Massachusetts, 

Michigan, and New York) that participated in the conversions, and we 

spoke with cognizant officials from the HUD field offices in these 

locations. We selected the nine properties to reflect a mix of properties 

that have converted under RAD based on the following factors: (1) 

number or units converted at the property; (2) the program that the 

property was receiving rental assistance under (Rent Supp, RAP, or Mod 

Rehab); (3) the location of the property (urban or nonurban); and (4) 

geographic dispersion.

To describe how conversions have affected the percentage of projectbased vouchers to tenant-based vouchers, we obtained and analyzed 

HUD data on conversions and vouchers. The voucher data included the 

 

1

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 

Appendix I: Objectives, Scope, and 

Methodology
Appendix I: Objectives, Scope, and 

Methodology

Page 22 GAO-14-402 Rental Assistance Demonstration

total number of tenant-based and project-based vouchers and the number 

of project-based vouchers created as a result of RAD conversions as of 

March 1, 2014. We calculated the percentage of vouchers that are 

project-based and assessed the extent to which RAD conversions to 

project-based vouchers affected the percentage. We assessed the 

reliability of RAD and voucher data by verifying data fields, such as the 

total number of units in a property, total number of units converted to 

project-based vouchers, and dates for conversions. We also performed 

other electronic tests, such as comparing data to different sources, and 

we conducted interviews with knowledgeable agency officials. We found 

that RAD conversion and voucher data were sufficiently reliable for our 

purposes. We also obtained and analyzed documentation from HUD to 

determine the impact of these conversions on the budget. Specifically, we 

examined HUD documentation on conversions to project-based vouchers 

and the costs of funding tenant-protection vouchers (absent RAD) when 

the rental assistance would have expired compared to the funding of 

project-based vouchers (through the RAD conversion). We also 

interviewed public housing agency (PHA) and HUD officials regarding the 

potential impact of the conversions on the costs of the voucher program.

To examine how the conversions have affected selected converted units 

and the housing choices available to residents, we conducted 

nongeneralizable interviews with the five property owners (or their 

representatives) representing the nine converted properties we selected, 

and we interviewed residents from the three converted properties we 

visited as we were able to schedule meetings with residents on-site. We 

also interviewed officials from the PHAs administering the vouchers for 

the converted properties and HUD field office staff who oversaw the 

conversions for the nine selected properties. Additionally, we interviewed 

officials representing property owners and PHAs, such as the Council for 

Large Public Housing Authorities, the Public Housing Authorities Directors 

Association, the National Association of Housing and Redevelopment 

Officials, the National Affordable Housing Management Association, and 

the National Leased Housing Association.

We conducted this performance audit from September 2013 to April 2014 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 23 GAO-14-402 Rental Assistance Demonstration

Daniel Garcia-Diaz, 202-512-8678 or garciadiazd@gao.gov

In addition to the contact named above, Paul Schmidt (Assistant 

Director), Tarek Mahmassani, John McGrail, Jessica Sandler, Jennifer 

Schwartz, Jena Sinkfield, Andrew Stavisky, and Verginie Tarpinian made 

key contributions to this report. 

Appendix II: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(250749)
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