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									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?



                                                 2
                      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
                                                        3
          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
                                                    4
         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




                                                    5
              Logistics
• Q & A session
• Materials
• Exercises




                          6
Conversion Overview



                      7
               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




                                                   8
 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.

                                                     9
       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



                                                  10
              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



                                                  11
        Moving to Work (MTW)
• Training materials will also highlight “MTW”
  provisions
• May follow slightly different process
• Highlighted in text through graphics and text
  boxes




                                                  12
              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



                                                      13
     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



                                                          14
     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
                                                      15
              Guide Materials
• Guide is not a substitute for the regulations
• Additional notices will be issued




                                                  16
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
                                                 17
                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

                                                  18
         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


                                                      19
         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




                                                    20
Required Conversion



                      21
  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



                                                            25
      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.

                                                            26
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

                                                                     27
   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
                                                       28
          Viability Assessment
          Based On Comparing
• The projected cost to   • The cost of a market
  repair, operate and       rate unit utilizing a
  maintain the public       tenant-based voucher
  housing units during      under HUD’s
  their remaining           Housing Choice
  useful life               Voucher Program




                                                    29
       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
                                                       30
            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


                                                   31
           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.




                                                        32
       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

                                                             33
    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
                                               34
   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
• 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

                                                          35
                     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




                                                                                                                 36
   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
                                                    37
 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

                                                            38
   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

                                                                     39
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
                                                            40
   Timeline Table for Required
           Conversion
Time table for developments identified more than
       13 months before PHA fiscal year
              (Training Manual: Page 12)




                                               41
  Timeline Table for Required
          Conversion
Time table for developments identified less than
       13 months before PHA fiscal year
              (Training Manual: Page 13)




                                                   42
                 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
                                                         43
            HUD Spreadsheet
• The Spreadsheet is located on HUD website:
 ▫ 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



                                                   44
              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.
                                                        45
    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

                                                       46
 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

                                                       47
        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
                                                                 48
     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 (Adobe PDF)
       Cost Comparison Spreadsheet (MS-Excel)

A sample of a completed spreadsheet has been included as
well.
       Sample completed Cost Comparison Spreadsheet
(MS-Excel)




                                                              49
  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



                                                 50
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




                                                  51
 Six Components of the Required
        Conversion Plan
1. Identification of units to be converted
2. Obligation status of public housing capital
   funds allocated to the development
3. Evidence that public officials were consulted
4. Evidence that residents were consulted
5. Description of PHA’s proposed future use of
   the development
6. Relocation Plan

                                                   52
        Identification of Units

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




                                                      53
    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


                                                   54
 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

                                                  55
       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



                                                      56
           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
                                                    57
          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…
                                                 58
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

                                                    59
    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

                                                           60
      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

                                                              62
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


                                                             63
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


                                                              64
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


                                                           65
       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
                                                                66
   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

                                                    67
   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

                                                           68
   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…)
                                                          69
                 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



                                                    70
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


                                       71
  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

                                                             72
                         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



                                                                                           73
      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

                                                         74
    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


                                                    75
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


                                                        76
 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
                                                        77
 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.


                                                      78
Case Study




             79
               5/18/2011




Voluntary Conversion



                           80
                      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

                                                             81
   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

                                                         82
         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



                                                83
      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
                                                     84
    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




                                                 85
                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)

                                                           86
     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
                                                            87
     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


                                                      88
        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

                                                  89
     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


                                               90
         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




                                                                                         91
        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


                                                       92
        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


                                                   93
         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)

                                                       94
        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



                                                      95
          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

                                                   96
 Voluntary Conversion Assessment
           Components
1.   Cost Analysis
2.   Analysis of Market Value
3.   Analysis of Rental Market Conditions
4.   Impact Analysis
5.   Conversion Implementation



                                            97
    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

                                                   98
            HUD Spreadsheet
• Located on HUD website:
 ▫ http://www.hud.gov/offices/pih/centers/sac/docs
   /costcomparison.xls
• Different for Required and Voluntary




                                                 99
               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.



                                                      100
               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



                                                     101
               Cost Analysis
• Must have an independent appraisal to
  determine the market value to complete the cost
  analysis
 ▫ Before the conversion
 ▫ After the conversion




                                                102
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




                                           103
      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
                                                    104
  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




                                                  105
           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

                                                       106
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
                                                     107
      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
                                                  108
      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



                                                109
               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)


                                                110
        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
                                                   111
        Professional Judgment
• In accordance with USPAP
• Conversion requirements
• Common industry practices regarding market
  valuations of real estate




                                               112
                           Options for Intended Future Use- page 38
                       Market Analysis                          Approach Used      Market Value
                                                                                 (Insert estimate)
                                                            (_)Income
1. Current Value “As Is”                                    (_)Comparable
   Public Housing                                           (_)Tax-assessment
                                                            (_)Cost Approach
                                                            (_)Income
2. Future Value “Post-Rehab”                                (_)Comparable
   Public Housing                                           (_)Tax-assessment
                                                            (_) Cost Approach
3. Current Value “As Is” (depends on proposed future
use)                                                        (_)Income
 Select One:                                                (_)Comparable
(_)Assisted Housing
(_)Unassisted Housing                                       (_)Tax-assessment
                                                            (_)Cost Approach
(_)Market-Rate Housing
(_)Other: _____________________________________
4. Future Value “Post-Rehab” (depends on proposed
future use)                                                 (_)Income
 Select One:                                                (_)Comparable
(_)Assisted Housing
(_)Unassisted Housing                                       (_)Tax-assessment
                                                            (_)Cost Approach
(_)Market-Rate Housing
(_)Other: _____________________________________
5. “Highest and Best Use” Value or “Market Value”
(*Insert this value at Section 5(c) of the Cost Analysis    (_)Income
                                                            (_)Comparable Sale
Excel Spreadsheet as the “market value of property”.        (_)Tax-assessment
Also insert this value whenever the “market value” of the
property is requested in the calculation.)                  (_)Land Value



                                                                                                     113
 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

                                                   114
          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




                                                     115
         “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

                                                            116
 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




                                                      117
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

                                                            118
    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
                                                         119
             Appraisal Methods
•   Income Capitalization Appraisal Approach
•   Market Comparison Approach
•   Tax Assessment Approach
•   Cost Approach

• HUD expects appraisers will select the most
  feasible appraisal methods


                                                120
  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
                                                             121
       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
                                    122
                  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
                                                                123
              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




                                                  124
     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




                                                   125
            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
                                                          126
             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
                                                   127
               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



                                                    128
    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




                                                129
                 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




                                                     130
                   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


                                                          131
            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


                                                      132
                      Value
• Determined by dividing the net income by the
  capitalization rate
• Determination of value dependent upon
 ▫   Location
 ▫   Neighborhood conditions
 ▫   Market demand
 ▫   Etc



                                                 133
          Special Considerations
•   Utilities
•   Vacancy
•   Physical Needs Assessment (PNA)
•   Low Income Housing Tax Credits




                                      134
                   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




                                                    135
                   Vacancy
• Appraisers may exercise professional judgment
  considering
 ▫ Management trends
 ▫ Historical patterns
 ▫ How trends will be altered in the future under new
   management practices




                                                    136
 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




                                              137
 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



                                                    138
  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
                                                       139
     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




                                                    140
       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



                                                     141
                 Cost Approach
• Hard cost
  ▫ Land
  ▫ Improvement cost
• Soft Cost
  ▫ Design
  ▫ Appraisals
  ▫ Bond financing
  ▫ Construction loan interest
  ▫ Relocation
  ▫ Lease-up cost
                                 142
      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




                                                       143
    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.

                                                 144
           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

                                                   145
         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



                                     146
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


                                                  147
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

                                                             148
Number 4- Impact Analysis for VCA
• Impact on the community in which the
  development is located
• Detailed discussion on
 a. the availability of affordable housing in the
    community;
 b. the concentration of poverty in the community;
    and
 c. any other substantial characteristics of the
    community.

                                                     149
     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

                                                   150
       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;

                                                                 151
   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.




                                                   152
        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
                                                       153
      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.
                                                                     154
      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

                                                     155
      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
                                                     156
        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




                                                       157
Eight Required Components of the
               Plan
1. Future Use of the Development
2. Impact Analysis
3. Description of How the Voluntary Conversion
   Plan is Consistent with the Findings of the
   Conversion Assessment
4. Evidence that the Voluntary Conversion Plan
   was Developed with Significant Participation
   from Public Housing Residents

                                                  158
Eight Required Components of the
         Plan- continued
5. Evidence the Voluntary Conversion Plan was Developed
   with Appropriate Local Government Consultation
6. Confirmation that any Proceeds Received from the
   Conversion are Subject to Limitations under Section 18
   Applicable to Proceeds Resulting from Demolition or
   Disposition
7. Relocation Plan
8. 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
                                                            159
  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)
                                                  160
   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

                                                          161
             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




                                               162
      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.
                                                      163
                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.

                                                      164
       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.


                                                    165
       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




                                                    166
       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



                                                      167
             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



                                                       168
          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…
                                                 169
 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


                                                    170
  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



                                                    171
 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




                                                      172
     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
                                                                 173
   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



                                                    174
       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


                                                              175
             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


                                                               176
       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


                                                       177
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
                                                   178
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
                                                 179
       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

                                                     180
     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.

                                                       181
     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


                                                    182
     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

                                                           183
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



                                                    184
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




                                                 185
      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.



                                                             186
      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



                                                    187
                 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


                                                      188
   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



                                                                                       189
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


                                                 190
                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

                                                    191
               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

                                                    192
                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.

                                                    193
     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

                                                                   194
            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




                                                  195
  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



                                                196
               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.


                                              197
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

                                                 198
 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
                                                    199
 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
                                                   200
Case Study




             201
Question and Answer Time



    Questions?



                           202

								
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