Public Housing is a vital component of our nation's affordable housing policy. Subsidized by federal government resources and managed by local public housing authorities, these units provide over two million renters across the United States with an affordable place to call home.
Unfortunately, as these properties have aged, funding to support the maintenance of the units has not always kept up. According to the Department of Housing and Urban Development (HUD), we are losing 10,000 of these public housing units per year to disrepair. This is important because Public Housing serves many of the most vulnerable members of our society. As shown in Fannie Mae's recently released Multifamily Affordable Housing Economic Commentary, on average, public housing residents earn $14,500 per year and over half of all residents are elderly and/or disabled.
To address this problem, HUD established the Rental Assistance Demonstration (RAD) program as a way to make it easier for private capital to provide financing for these units. For eligible units, RAD will replace the existing public housing subsidy with a long-term project-based Section 8 contract. This allows the local housing authority to leverage the private capital they will need to recapitalize, renovate, or replace the public housing units.
Fannie Mae has a long history of supporting affordable rental housing properties with project-based Section 8 contracts. Since 1988, we have provided more than $8.5 billion to support the construction and/or renovation of over 165,000 units. As a result, we are well positioned to further support the RAD program and are committed to doing even more to ensure the program's success.
Recently we closed on RAD projects in Greensboro, North Carolina and Grand Rapids, Michigan that highlight this important program.
In Greensboro, we worked with the Greensboro Public Housing Authority, Laurel Street, Red Stone Equity Partners and Prudential Mortgage to renovate Claremont Court, a 250-unit public housing community that was built in 1969. Converting this property to Section 8 via the RAD program allowed the housing authority to use 4% Low Income Housing Tax Credits (LIHTC) to generate $4.7 million in equity and $5.75 million in long-term fixed-rate financing.
In Grand Rapids, Fannie Mae worked with Cinnaire to provide a 24-month unfunded forward commitment of approximately $2.3 million to the Grand Rapids Public Housing Authority. Our financing, combined with a $1.6 million loan from the Grand Rapids Housing Commission and nearly $20 million in 9% LIHTC equity from Cinnaire allowed the housing authority to demolish an obsolescent public housing project and replace it with 100 units of new affordable units for all of the tenants of the old property.
Without HUD's RAD program, it would have been impossible to leverage private capital to renovate and replace these properties. We are committed to doing even more to support the efforts of public housing authorities. We recently expanded our underwriting parameters on RAD transactions to enable public housing authorities to get even more private capital to improve and maintain their properties. Because when you have affordable housing, you bring more stability to low-income renters, their families and the neighborhoods in which they live.
For more information on our support for RAD – as well as other affordable rental housing initiatives, please visit fanniemaemultifamilyaffordable.com. Contact the Multifamily Affordable Housing team for assistance with deals or if you would like to contact me directly, I can be reached via email at [email protected] or follow me on twitter @bobsimpson42.