The ROAD to Housing Act Raises the RAD Cap to 555,000 Units

Public housing authorities have spent more than a decade leaning on the Rental Assistance Demonstration program to solve a problem federal appropriations never fully solved: funding the rehabilitation of aging public housing stock. RAD lets an authority convert units off the pure public housing subsidy platform and onto Section 8, and that conversion is what unlocks financing. Once a property sits on a long-term, HUD-backed rental assistance contract instead of an annual public housing appropriation, owners can borrow against it, and private debt and equity has flowed in on that basis for years. More than 100,000 units have converted under RAD since the program began, making it the default financing tool for authorities sitting on capital needs their budgets cannot cover.

That tool had a hard ceiling. Congress capped RAD conversions at 455,000 units, a fixed number in statute that tracked neither demand nor investor appetite. Every unit above it required a legislative fix, and no such vehicle was moving through Congress. That left lenders and equity investors underwriting RAD deals against a program that could, in theory, stop accepting new conversions before a given authority's pipeline got there. For a financing tool this central to public housing capital, a statutory cap acts as a governor on total deal volume industry-wide.

The 21st Century ROAD to Housing Act, signed into law July 11, addressed it directly. The Act raised the RAD cap by 100,000 units, from 455,000 to 555,000, in the same provision that codifies RAD's tenant protections into statute rather than leaving them in HUD program notice guidance subject to administrative revision. The two changes together expand how much volume the program can carry and make the tenant-protection terms investors underwrite against more durable, since they now sit in law instead of guidance HUD can amend on its own.

A 100,000-unit increase does not itself convert a single property; PHAs still apply and structure each transaction one at a time. But it removes the ceiling that was going to bind as more authorities turned to RAD for capital backlogs appropriations have never kept pace with, with enough margin that the program should not need another legislative fix for years. For firms placing debt and equity into HUD and FHA-backed multifamily, that directly expands addressable deal flow.

Worth watching over the next several quarters: how quickly HUD moves converted volume toward the new ceiling, and whether PHAs that held back RAD applications anticipating a cap increase now bring a wave of deals to market at once.

Sources

• Nixon Peabody
• Bipartisan Policy Center