DETROIT – To stem the loss of critically needed public and other forms of subsidized housing due to the severe backlog of capital needs, the U.S. Department of Housing and Urban Development (HUD) today officially launched its Rental Assistance Demonstration, the Obama Administration’s strategy to preserve tens of thousands of public and HUD-assisted housing units.
In the near term, the Rental Assistance Demo is expected to preserve and enhance 893 units of affordable housing in Ecorse, Clinton Township, Plymouth, Ann Arbor, Grand Rapids, Jackson, Madison Heights, and Wayne, and generate private capital to address the significant backlog in capital needs faced by public housing authorities in the U.S. This additional capital will also stimulate employment in the construction trades across the country. Nationally, Rental Assistance Demo is expected to benefit more than 13,000 units of affordable housing and generate more than $650 million in private capital.
“This innovative and cost-effective approach greatly enhances our ability to confront the decline of our public housing and older assisted housing stock,” said HUD secretary Shaun Donovan. “With the initial implementation of Rental Assistance Demo, the Obama Administration has begun to demonstrate that public-private partnership can help preserve our nation’s affordable housing and create jobs in the process.”
“HUD and our local partners are working to protect critically needed affordable housing for the residents in these communities,” said HUD’s midwest regional administrator Antonio R. Riley. “This is a market-based approach to helping local housing authorities tap into private capital to preserve housing for some of our most vulnerable citizens.”
HUD awarded commitments to Ecorse Housing Commission, Clinton Township Housing Commission, Plymouth Housing Commission, Ann Arbor Housing Commission and Grand Rapids Housing Commission in Michigan allowing them to seek private financing to rehabilitate 660 units that are otherwise at risk of being lost from the affordable housing inventory. In addition, HUD approved the owners of Foxfire Apartments, Jackson Madison Towers, Madison Heights and Wayne Towers to convert and extend rental assistance contracts for 233 units. Combined, the commitments announced today are projected to preserve more than 893 public and other HUD-assisted housing units for the next 20 years.
The Rental Assistance Demonstration allows public housing agencies and private owners of certain at-risk, federally assisted properties to convert their current assistance to long-term Section 8 contracts. Such contracts will allow owners to leverage millions of dollars in debt and equity to better address immediate capital needs and preserve these affordable housing units. In addition, participating agencies are freed from antiquated public housing rules and restrictions that hindered their ability to best preserve and manage their housing similar to other affordable housing owners and managers.
In 2011, HUD released Capital Needs in the Public Housing Program, a study that found the nation’s 1.2 million public housing units need nearly $26 billion to keep these homes in safe and decent condition for families, a figure well in excess of the roughly $2 billion Congress appropriates for capital repairs annually. Beyond the potential loss of this public housing, the Moderate Rehabilitation, Rent Supplement, and older Rental Assistance Payment programs are at risk of being lost from the affordable housing stock.
The Rental Assistance Demonstration is part of the Obama Administration’s comprehensive strategy to preserve public and HUD-assisted housing. In November 2011, Congress authorized HUD to implement the Rental Assistance Demonstration as a budget-neutral demonstration program with two components, allowing for the conversion of assistance for both public housing and HUD-assisted properties that have expiring subsidies.