> ## Content Index > Fetch the complete content index at: https://blog.phadevelopment.com/llms.txt > Use this file to discover other available public pages before exploring further. # RAD vs. Section 18: How to Choose - URL: https://blog.phadevelopment.com/rad-vs-section-18-how-to-choose/ - Published: 2026-09-03T17:55:22.000Z - Updated: 2026-09-03T17:55:22.000Z - Author: Brian West Most housing authorities approach this as a fork in the road: convert under RAD, or dispose under Section 18\. Pick one. That framing is usually wrong. For substantial rehabilitation, the answer is almost always *both* — a blend, in some ratio determined by your construction scope. The real questions are what mix you qualify for, and whether your property belongs in the small set of cases where one path alone is correct. Here's how to work through it. ## What each tool actually does **RAD** converts your public housing subsidy from the Section 9 platform to a long-term Section 8 contract, either PBV or PBRA. The property stays in the affordable portfolio under a recorded RAD Use Agreement. Residents keep the right to return, cannot be re-screened, continue paying 30% of income, and gain choice mobility after an initial period. Those protections are now codified in statute rather than sitting in a HUD notice. The constraint: RAD rents are based on your existing subsidy. Conversion doesn't add money. If your current per-unit funding is thin, your converted rents will be thin. **Section 18** removes units from the public housing inventory through demolition or disposition, with approval from HUD's Special Applications Center. Approved actions can generate Tenant Protection Vouchers, which can be project-based at rents up to 110% of Fair Market Rent. That rent difference is the whole ballgame. Section 18 unit funding runs roughly two and a half times the RAD funding level. On a 100-unit property, the gap between RAD rents alone and a heavily Section 18 blend can be the difference between supporting around $7 million of rehabilitation debt and something closer to $16 million. The constraint: Section 18 residents are covered by the relocation requirements at 24 CFR 970.21 — comparable housing, 90-day notice, counseling, moving costs — rather than RAD's protection package. It's a real safety net, but it is not the same safety net. **So the core trade is money against protections and permanence.** More Section 18 means more rent, more debt, and a bigger scope. More RAD means stronger resident protections and a recorded long-term use agreement. ## The blend is the default HUD permits combining the two, and the current guidance under Notice PIH 2026-23 sets the mix by construction scope, measured against HUD's published Housing Construction Costs for your market: | Trigger | Maximum mix | | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | | Hard costs exceed 90% of HCC, **or** demolition and redevelopment, **or** transfer of assistance, **or** Choice Neighborhoods severely distressed designation, **or** qualifying mixed-finance development | Up to 90% Section 18 / at least 10% RAD | | Hard costs exceed 60% of HCC | Up to 60% / at least 40% | | Hard costs exceed 30% of HCC | Up to 30% / at least 70% | Hard construction costs include general requirements, overhead and profit, and payment and performance bonds. Separately, a PHA with **250 or fewer ACC units** may use the small PHA blend to dispose of up to 90% of a converting project under Section 18 regardless of construction scope — but it must submit a board-approved Repositioning Plan, acceptable to HUD, explaining how it will remove all remaining public housing and close out its Section 9 ACC. The practical consequence: **scope and financing have to be designed together.** You cannot finalize a rehab budget and then ask what blend you qualify for. I've seen agencies land just under a threshold and leave millions of dollars of debt capacity on the table over a scope decision nobody realized was a financing decision. ## When straight RAD is the right answer - **Your scope is light.** Below 30% of HCC, no construction blend authority is available. If the building is in decent shape and needs systems work rather than a gut, RAD alone is the tool. - **Your subsidy is already adequate.** Some properties, particularly in lower-cost markets with favorable funding histories, convert into rents that support the necessary work without help. - **The politics require it.** If your board, your residents, or your local officials are wary of anything that reads as "removing public housing," the RAD protection package is the strongest answer you have — and it's now statutory. Sometimes the deliverable is trust, not debt capacity. - **You're building new units under Faircloth authority.** Faircloth-to-RAD is its own pathway. Section 18 doesn't apply to units that don't exist yet. ## When straight Section 18 is the right answer - **The property shouldn't be preserved in place.** Wrong site, FEMA floodway, neighborhood converted to industrial, environmental conditions that can't be cured. Disposition with transfer of assistance may serve residents far better than a beautifully renovated building in the wrong location. - **The obsolescence math has already decided.** If rehabilitation costs exceed 90% of TDC, HUD's position is that your options are demolition, disposition, or funding the work with something other than capital funds. Retention isn't on the menu. - **Functional obsolescence applies.** Construction completed in 1950 or earlier, design flaws addressable only through reconstruction, cost to cure exceeding 57.14% of TDC for non-elevator buildings or 62.5% for elevator buildings. One hard constraint: **you cannot place PBVs at an existing structure approved under the functional obsolescence justification.** If your plan was functional obsolescence plus project-based vouchers at the same building, it doesn't work. - **You're a very small PHA closing out.** The threshold moved to 75 or fewer ACC units under the August 2026 notice. If administering a Section 9 program costs more than the program returns, exiting is a legitimate answer. - **Scattered sites.** Six or fewer units on one side of a block, where distance and system inconsistency make public housing operation impractical. - **Aging mixed-finance deals.** Where the LIHTC compliance period has run (or 15 years have passed since the last major recapitalization) and capital needs exceed available resources. ## The decision sequence Work these in order. The first question that returns a clear answer usually settles it. **1\. Should this property be preserved in place?** Site, neighborhood, environmental conditions, and market demand. If the answer is no, you're in Section 18 territory and the rest of the analysis is about where the assistance goes. **2\. What does the property need, in dollars?** A current physical needs assessment with real construction pricing. Not a four-year-old number escalated by feel. Everything downstream depends on this. **3\. Where does that scope land against HCC and TDC?** Against HCC, it sets your blend tier. Against TDC, it tells you whether the obsolescence tests put retention out of reach. **4\. What will the resulting rents support?** Model the stack at each available blend. This is where you find out whether the deal closes the gap between what the property needs and what it can borrow. **5\. What does your agency size allow?** Under 250 units opens the small PHA blend. Under 75 opens the very small PHA close-out. These change the answer materially and get overlooked constantly. **6\. What can your residents and board actually live with?** A technically optimal structure that loses the public hearing is not optimal. ## Differences that surprise people **Inspections.** RAD allows units undergoing rehabilitation to be inspected by the date work is complete. That exemption does not extend to Section 18 units, which must be inspected before assistance is paid. On an occupied rehab with a blend, this is a genuine scheduling problem — plan for it at the outset rather than discovering it during lease-up. **TPVs are not guaranteed.** SAC approval of your application does not automatically produce vouchers. You apply separately for TPVs under HUD's annual HCV funding notice, and awards depend on appropriations. Your approval letter indicates the maximum you may be eligible for, not what you'll receive. **There's a TPV cap on certain justifications.** For dispositions justified on improved efficiency or effectiveness — on-site or off-site development — HUD limits TPV awards to 25% of occupied units. **Different HUD offices.** Straight Section 18 goes to SAC. RAD goes to the Office of Recapitalization. Blends are primarily processed by Recap, with the Section 18 components folded into the RAD Financing Plan. That consolidation is helpful, but it means your Financing Plan carries more weight and more documentation than a RAD-only submission. **Below-FMV dispositions carry strings.** Selling below fair market value requires demonstrating commensurate public benefit, triggers a 30-year use restriction, and requires the property to primarily serve households at or below 80% AMI. Public infrastructure — streets, schools, fire stations — does not count as commensurate public benefit. **Capital Fund proportionality.** In a blend, Capital Fund contributions to the development budget are limited in proportion to the RAD share of units. A 60/40 blend caps Capital Fund at 60% of the development budget. ## The honest version of the resident question You will get asked, in a public hearing, whether Section 18 is worse for residents than RAD. Have a real answer ready. The accurate one: RAD carries a stronger and now statutory protection package — right to return, no re-screening, choice mobility, a recorded use agreement. Section 18 relocation protections under 24 CFR 970.21 are meaningful but different, and where replacement housing is being built, residents retain a first right to return to the new units. The relevant one: a property that can't fund its rehabilitation doesn't protect anyone. A blend that produces enough debt to actually replace the roofs, the risers, and the mechanical systems — while keeping a share of units under RAD's protections and a recorded use agreement on the property — frequently serves residents better than a pure-RAD structure that funds half the work. That's a defensible position, but only if it's true for your specific deal. Run the numbers before you make the argument. ## Where to start Before you can choose, you need three documents: a current physical needs assessment, a subsidy analysis showing your converted RAD rents and your Section 18 TPV rents side by side, and a preliminary capital stack at each blend tier you qualify for. With those in hand, the choice usually makes itself. Without them, you're picking a structure on instinct and finding out at Financing Plan review whether it works. --- *I structure RAD conversions, Section 18 dispositions, and blends for housing authorities, and arrange the LIHTC and financing behind them. If you're weighing these paths for a specific property, I'm glad to walk through it — the first conversation is free.* --- *Related reading:* - [*RAD Conversion: A Complete Guide for Housing Authorities*](https://blog.phadevelopment.com/rad-conversion-a-complete-guide-for-housing-authorities/) - [*HUD's New Section 18 Notice (PIH 2026-23): What Changed*](https://blog.phadevelopment.com/huds-new-section-18-notice-pih-2026-23-what-changed/) - [*The 21st Century ROAD to Housing Act: What It Means for Your Housing Authority*](https://blog.phadevelopment.com/coming-soon/)