RAD Conversion: A Complete Guide for Housing Authorities

If you run a housing authority, you already know the arithmetic that brought you here. Your Capital Fund allocation covers a fraction of your physical needs assessment. The roofs, the boilers, the plumbing risers — the work you can't get to keeps getting more expensive than the work you deferred it for. And every year you lose a little more ground.

The Rental Assistance Demonstration exists because Congress could not appropriate its way out of that math. Rather than fund the roughly $70 billion backlog directly, RAD lets you convert your public housing subsidy to a long-term Section 8 contract — and a Section 8 contract, unlike Section 9 operating and capital funds, can support a mortgage and attract tax credit equity.

That is the entire idea. Everything else is mechanics.

What RAD actually does

Under RAD Component 1, a public housing property moves from the Section 9 platform to the Section 8 platform. Your Annual Contributions Contract subsidy converts to either Project-Based Vouchers (PBV) or Project-Based Rental Assistance (PBRA), both long-term project-based Section 8 contracts.

Residents continue paying 30% of adjusted income toward rent. That does not change.

What changes is what the property can do financially. A twenty-year Section 8 contract is an income stream a lender can underwrite and an equity investor can price. Once your subsidy sits on that platform, the property can support FHA-insured permanent debt, 4% or 9% Low-Income Housing Tax Credits, seller financing, and soft sources that were never available to public housing.

The critical thing to understand up front: RAD brings no new federal money. Your converted contract rents are based on your current subsidy levels — your existing operating and capital fund allocation, converted to a rent per unit. RAD does not increase the subsidy. It changes what the subsidy can be leveraged into.

This is where most housing authority boards get confused, and it's worth being direct about it. If your current subsidy is thin, your RAD rents will be thin, and the deal may not support the debt your rehab scope requires. Understanding that gap before you apply is most of the work.

What changed in July 2026

For years, RAD carried two clouds over it: a statutory unit cap that was filling up, and a sunset date that made it a "demonstration" rather than a permanent tool.

Both are gone.

The 21st Century ROAD to Housing Act, enacted in July 2026, expanded RAD substantially. The law increased the conversion cap by 100,000 units — from 455,000 to 555,000 — removed the sunset date, effectively making RAD a permanent preservation tool, and codified existing resident protections in statute so that affordability and tenant rights are secured during and after conversion.

Why this matters for your planning: the previous cap was genuinely constraining. As of late 2024, just over 82% of the 455,000 units had been converted or reserved, leaving roughly 82,000 units of authority available nationally. Housing authorities considering multi-phase repositioning had a legitimate reason to worry about whether authority would still exist by the time Phase 3 came around.

The permanence change is the bigger deal for long-range planning. You can now build a ten-year repositioning strategy around RAD without hedging against the program's expiration.

The additional 100,000 units are not unlimited, and awards remain competitive with priority for obsolete properties and comprehensive neighborhood revitalization plans. But the pipeline anxiety that shaped decisions for the past several years has eased considerably.

PBV or PBRA: which contract type?

You'll choose between two forms of project-based Section 8, and the choice has real consequences.

Project-Based Vouchers (PBV) are administered by a housing authority — often yours — under the Housing Choice Voucher program. Familiar administratively if you already run a voucher program. Rents are subject to voucher program rules and reasonable rent standards.

Project-Based Rental Assistance (PBRA) is administered directly by HUD's Office of Multifamily Housing. Rent adjustments follow the Operating Cost Adjustment Factor. Many lenders and equity investors are more comfortable with PBRA because it's the platform they already underwrite across the rest of the Section 8 portfolio.

The right answer depends on your rents, your lender's preference, your equity investor's requirements, and whether your agency wants to keep contract administration in house. This is a decision to make with your consultant and lender early, not something to default into.

The RAD capital stack

A typical RAD conversion assembles four to eight sources. The most common:

FHA-insured permanent debt. Section 221(d)(4) for substantial rehabilitation or new construction; Section 223(f) for acquisition or refinance with moderate rehab. Forty-year amortization on a 221(d)(4) supports meaningfully more debt than conventional terms.
4% LIHTC with tax-exempt bonds. Non-competitive in most states, which makes it the workhorse of preservation deals. Yields less equity than 9% credits but doesn't require winning a competitive round.
9% LIHTC. More equity, but you're competing in your state's annual round against every other deal in the state.
Public housing funds. Capital Fund and Replacement Housing Factor funds can go into the deal, subject to limits — including proportionality rules in blend transactions.
Seller financing. The housing authority takes back a note on the land or improvements. Often the largest single gap filler in a RAD deal, and frequently underused.
Soft sources. HOME, Housing Trust Fund, CDBG, state and local trust funds, FHLB Affordable Housing Program.

The stack is where consulting fees earn themselves back or don't. The sequencing matters as much as the sources: a HOME commitment that arrives after your bond inducement is worth less than the same commitment three months earlier.

RAD/Section 18 blends: where the money actually comes from

Here's the part that determines whether many deals pencil at all.

Section 18 of the 1937 Act allows demolition or disposition of public housing, which generates Tenant Protection Vouchers. TPVs can be project-based at rents up to 110% of Fair Market Rent — often substantially higher than RAD rents, which are tied to your existing subsidy. In practice the Section 18 unit funding level runs roughly 2.5 times the RAD funding level.

HUD permits blending the two. A portion of your units convert under RAD, a portion under Section 18, and the higher Section 18 rents raise the property's overall net operating income and therefore its debt capacity.

Notice PIH 2024-40, issued December 26, 2024, superseded the prior guidance and made the blends more generous. The current tiers, based on hard construction costs measured against HUD's published Housing Construction Costs for your market:

Up to 90% Section 18 / at least 10% RAD — where hard construction costs exceed 90% of HCC, or the project involves demolition and new construction, or the assistance is transferred to a new site.
Up to 60% Section 18 / at least 40% RAD — where hard construction costs exceed 60% of HCC.
Up to 30% Section 18 / at least 70% RAD — where hard construction costs exceed 30% of HCC.

The 2024 notice made two changes worth flagging. It raised the top tier from 80% to 90%. And it added demolition-and-new-construction and transfer of assistance as standalone qualifying factors — previously neither, on its own, got you to the highest blend regardless of construction cost.

The practical effect is significant. On a 100-unit property, a 90/10 blend rather than RAD rents alone can be the difference between supporting roughly $7 million of rehabilitation debt and supporting something in the neighborhood of $16 million. That is frequently the difference between a scope that addresses your actual physical needs and a scope that kicks the problem down the road another decade.

Two cautions. First, the blend percentage is driven by your construction scope, which means scope and financing have to be designed together — you cannot finalize a rehab budget and then ask what blend you qualify for. Second, Section 18 units carry inspection requirements that RAD units can defer, which is a real scheduling constraint on occupied rehab.

What RAD means for residents

Resident protections are the most misunderstood part of RAD, and the area where housing authorities get into the most trouble politically by explaining it badly.

The core protections:

Right to return. Residents relocated for construction have a right to return to the property.
No re-screening. Existing residents are not re-screened at conversion. Nobody loses their home because they wouldn't qualify under new tenant selection criteria.
Continued 30% of income. Rent calculation doesn't change.
Relocation rights. Residents temporarily or permanently relocated are covered by URA protections and RAD-specific requirements, including notice and counseling.
Choice mobility. After an initial occupancy period, residents can request a voucher and move.
Resident participation. Funding and organizing rights carry over, along with grievance procedures.
One-for-one replacement, with limited exceptions for de minimis unit reductions.

The ROAD to Housing Act codified these protections in statute rather than leaving them to program notice. That's a meaningful durability improvement — protections in a HUD notice can be revised by a subsequent notice; protections in statute cannot.

If you take one thing into your first resident meeting: residents are not losing their homes, their rent formula, or their tenancy. What changes is the funding platform, the ownership structure, and — if you've done it right — the condition of the building.

How long does a RAD conversion take?

Longer than anyone wants.

The path runs from application, to a Commitment to Enter into a Housing Assistance Payment Contract (CHAP), through a Financing Plan submission to HUD's Office of Recapitalization, to closing, then construction, then conversion.

Historically, projects converting in 2019 had been in the pipeline an average of about two and a half years from CHAP award. That figure has improved somewhat as HUD's processing has matured and as practitioners have gotten better at assembling complete Financing Plans, but two to three years from application to closing remains a realistic planning assumption for a conversion involving tax credit equity.

The delays cluster in predictable places: incomplete Financing Plan submissions, LIHTC allocation timing that doesn't align with HUD review, environmental review, and relocation planning that started too late. Most of these are avoidable with sequencing discipline. None of them are avoidable by hoping.

When RAD isn't the right answer

An honest guide has to include this section.

RAD is the wrong tool when:

Your current subsidy is too thin to support the necessary scope, and your construction costs don't reach a blend threshold that fixes it. Converting into a deal that can't fund real rehabilitation just moves your capital problem onto a mortgaged property.
The property should not be preserved in place. If the site is wrong, the buildings are functionally obsolete, or the neighborhood context argues for relocation, a straight Section 18 disposition with transfer of assistance may serve residents better.
You want to build new units. RAD converts existing units. If you have unused Faircloth authority, Faircloth-to-RAD is a different and often better pathway.
Your agency lacks the capacity to be a development sponsor, and there's no partner arrangement that fills the gap. RAD conversions are real estate transactions. They require someone at the table who has closed one.

Section 18 disposition, Section 22 voluntary conversion, Section 32 homeownership, and Section 33 required conversion are all in the repositioning toolkit. RAD is the most used, not the automatically correct one.

Where to start

Before you apply, you need three things on paper:

A current physical needs assessment with a realistic construction cost estimate — not a number from four years ago escalated by guesswork.
A subsidy analysis showing what your converted RAD rents would actually be, and what blend tier your construction scope would qualify for.
A preliminary capital stack showing whether the sources exist to close the gap between what the property needs and what the rents will support.

If those three documents show a feasible deal, the application is worth the effort. If they don't, you've learned something far more valuable than a CHAP award: you've learned which of the other repositioning tools you should be looking at instead.

I've spent more than a decade structuring RAD conversions, Section 18 dispositions, and Faircloth-to-RAD transactions for housing authorities, and building the capital and debt that finances them. If you have a property you're evaluating and want a straight answer on whether it works, get in touch , the initial conversation costs nothing.