HUD Releases Notice on Required Conversions

HUD recently released Notice PIH 2019-10 titled “Required Conversions.” Section 33 of the U.S. Housing Act requires PHAs to convert certain distressed public housing units to Section 8 tenant-based assistance if it would be more expensive to modernize and operate the distressed development for its remaining useful life than to provide tenant-based assistance to all residents; or if the PHA cannot assure the long-term viability of a distressed development. This Notice provides guidance on the requirement that PHAs annually review their inventories to determine whether any of their public housing developments (or parts of developments) meet the criteria for required conversion from public housing. This notice also provides guidance on developing a required conversion plan in such instances.

Public housing units that meet all of the following conditions are considered distressed and subject to required conversion:

• The units comprise a general occupancy project;
• The development is on the same or contiguous site, and;
• The development has a vacancy rate at or above 12 percent for each of the last three years.

Certain units must be excluded from the vacancy rate calculation. These units include:

• Vacant units in an approved Section 18 demo/dispo application;
• Vacant units in which resident property has been abandoned, but only if state law requires the property to be left in the unit for some period of time;
• Vacant units that have sustained casualty damage (if the insurance claim has been adjusted);
• Units occupied by PHA employees;
• Units used for resident services, and;
• Units the Field Office determines are intentionally vacant and do not indicate continued stress.

If a development meets the threshold criteria for required conversion, the PHA must take one of two actions: submit evidence that a conversion plan is not required, or submit a conversion plan through the Inventory Removals Module of IMS/PIC. The PHA will not have to undergo required conversion if HUD determines the reasons a property is distressed are temporary and unlikely to reoccur, or if the PHA is able to assure that the development can remain viable. The PHA can assure the viability of the property by showing it can reasonably revitalize the property, reduce density, or achieve a broader range of household incomes to increase tenant rent.  Ultimately, the PHA must be able to prove that it is less expensive to operate the development as public housing than providing tenant-based assistance.

If a PHA cannot provide evidence that a conversion plan is not required, then it must submit an application to HUD’s Special Application Center (SAC) through IMS/PIC. PHAs must also develop a conversion plan that removes the public housing units from their inventory in 5 years or less, unless the PHA applies for and receives an extension. The SAC application must include the units proposed for required conversion, the PHA plan, proof of resident consultation, the board resolution approving the conversion plan, evidence of local government consultation, the status of any obligated capital funds for that project, a description of the future use of the units, environmental requirements, and resident relocation activities. If the PHA opts to convert the units through demo/dispo, it is not required to submit a separate demo/dispo application.

PHAs will be provided tenant protection vouchers (TPVs) for displaced residents, subject to the availability of funding. HUD determines a PHA’s maximum TPV award based on relevant appropriations and HUD-issued guidance, including the year’s HCV funding implementation notice.

PHAs may be eligible for the asset repositioning fee (ARF) for units approved for conversion, however, PHAs are not eligible to receive demolition disposition transitional funding (DDTF).

If a PHA is removing the last of its public housing units through the proposed conversion, then the PHA must also upload a completed Form HUD-5837 to the SAC.

HUD’s Notice can be found here: https://www.hud.gov/sites/dfiles/PIH/documents/pih2019-10.pdf.