September 24, 2020
On October 3, 2019, the Saint Paul Public Housing Agency (PHA) successfully closed its Rental Assistance Demonstration (RAD) transaction, the largest RAD conversion in the history of the program, converting 3,836 units to RAD Project-based Rental Assistance (PBRA). Under RAD PBRA, the PHA retained full ownership, and continues to maintain and operate its portfolio. The conversion was debt-free and did not require access to LIHTC equity or other forms of financing that require the creation of a non-profit affiliate to hold the asset. The conversion from traditional public housing to RAD also allows the PHA to lock in for 20 years the higher 2018 capital and operating funding Congress appropriated, receive annual inflation adjustments of 2% to 3% on that higher funding level over the next 20 years, and meet all projected capital needs for the next 20 years without the need for debt-financing.
The conversion to RAD, given the more complex compliance and regulatory requirements surrounding the combination of Public Housing and Section 8 programs, prompted the PHA to procure and adopt a more state-of-the-art technology platform to oversee its portfolio. This led to the St. Paul PHA-MRI (originally via Tenmast) partnership. After an extensive RFP process, in 2018, the PHA selected MRI to provide enterprise software. A leading provider of technology for public housing authorities and owner-operators of affordable housing, MRI provides the PHA with the following:
- Housing management including extensive tools to simplify the PHA’s process with HUD’s PIC system (Public and Indian Housing Information Center),
- SaaS services, allowing PHA staff to access their systems and data remotely,
- Ongoing software maintenance and software, and
- RAD conversion services.
MRI’s industry-leading RAD conversion services consist of:
- Project management for oversight of the project and to ensure alignment with agency staff goals and timelines set forth.
- Technical data services to convert, configure, and prepare the system for the transition to the new subsidy and tracking methodology.
- Functional assistance with handling waiting lists and validating calculations for accuracy, creation of the End of Participations for Public Housing as well as the Move Ins and Initial Certifications into the new Multi-Family subsidy.
- Dedicated assistance for the initial Multi-Family voucher submissions and continued support through voucher acceptance and signature collection for all required documentation.
If your housing agency is considering a RAD conversion, contact us to learn more about MRI’s software and services and how we can help you navigate this process.
In September 2020, the Executive Director of the PHA, Jon Gutzmann, virtually sat down with Allen Feliz, MRI’s Industry Principal for Affordable and Public Housing, to discuss the PHA’s near-portfolio-wide conversion to RAD PBRA and the PHA’s experience working with MRI. The following is an excerpt from that interview.
Allen: Please tell us the St. Paul PHA RAD story. How did the PHA arrive at the RAD decision?
Jon: First, I want to acknowledge the tremendous job HUD did - the Office of Recapitalization - who helped us get the largest single RAD closing. They have been so efficient, innovative and customer-service focused.
The St. Paul PHA has been a longtime believer in the traditional Public Housing program and Housing Choice Voucher programs. We’re a housing agency with about 9,000 affordable housing opportunities - about 4,300 traditional LIPH and about 4,900 Housing Choice Vouchers. Like many, we have a mission statement. Ours is to help families and individuals with low incomes achieve greater stability and self-reliance by providing safe, affordable and quality housing and links to services. I often distill our mission statement to two words - successful tenancies. We’re about the people and the places and we want our residents to succeed.
Allen: What were some of the leadership challenges the PHA faced as they embarked on the long and complicated RAD process?
Jon: I have a great leadership team. We actually met almost twice a month. We called it our RAD demo-dispo team for a while and we called it our asset preservation and home-ownership initiative team for a while. The leadership team consisted of 15 members representing a total staff of 235 people across the agency who worked on this initiative for over two years. The leadership staff included representatives from various departments including legal, finance and budgeting, maintenance, maintenance contracting, resident services, and policy.
What motivated me to make the decision and activate this team were the numbers. We have a PowerPoint slide that we show our residents which shows our capital fund (and operating fund) history over 20 years trending down. Overall, we knew that the traditional funding vehicle was severely challenged. The thing that triggered my first call about RAD was the Trump Administration’s 2019 proposed capital fund budget which was $0. The year before, in 2018, the proposed budget was a 60% reduction from the prior year. Given my fiduciary responsibility, this really got my attention to begin making inquiries about RAD. My first call was to the accountant, Jason Casterline (now with BDO), who helped the PHA analyze the tools and understanding the finances. When you’re looking at a near portfolio-wide conversion of 3,836 units, there are a lot of steps. I was motivated by my fiduciary obligations as an Executive Director, providing housing to 21,000 people in St. Paul and ensuring this product is here for the next 20 to 30 years.
Allen: What did the PHA learn from the community outreach component of your RAD process?
Jon: We have an extremely diverse resident population. We house 21,000 people - half in Public Housing units and half with Housing Choice Vouchers.
The RAD conversion affected the first half, about 11,000 residents. All of our units are low-income - that’s what they have in common. We’re at about 22% AMI with our average rents; about $325 per unit per month rents for over 4,300 units.
We found that we needed to communicate more beyond the HUD parameters with our residents. Our portfolio conversion involved eight (8) projects (formerly AMPs). Within the eight (8) projects are 16 high rises and four (4) family developments. We could have done all of preliminary planning meetings and discussions with residents in two meetings. Instead, we did 42 meetings with the residents. We went to every property. We had the 15 staff leaders we discussed earlier, working from the same PowerPoint. We explained to the residents: “What is RAD?” We told them, “your rent won’t change.” We explained the important things for residents to hear including it’s “primarily a financial and legal transaction”. We’re “locking in better money”.
Our annual capital fund amount used to be $7 million a year. After Congress rejected the administration’s proposal, it made the capital fund healthy and the PHA locked in $11 million a year of Capital Fund money guaranteed for 20 years. That was part of the message with residents - “the PHA can lock in better money”. I called it “momentarily better money” because we don’t know if this deal will continue. We also said, “you don’t have to move”. We did these meetings in four or five different languages simultaneously, translated as we were conducting them. We learned a lot from the residents. We created minutes from all 42 meetings and attached them to our applications. We responded to the resident inquiries. We needed to assure residents their world was not going to change because of this financial and legal transaction.
Allen: How did St. Paul PHA leverage technology during the RAD process?
Jon: I’ve had the fortune of being the Executive Director of St. Paul PHA for 33 years. We had the same software vendor for 26 years but it wasn’t working for us even before we started the RAD conversion. As we researched software vendors, we asked around and told our peers that we were interested in doing RAD. First of all, we were advised to go through the software conversion before undergoing RAD. Second, the decision between PBRA versus PBV also dictated which software vendor we ultimately selected. We selected MRI/Tenmast because of their ability to work PBRA.
MRI was a true partner in the completion of our conversion as it related to the software and the completion of the required certifications. They had staff on-site to assist during our biggest push to complete certifications, they were agile and accepted staff recommendations for how to streamline the process in light of the size of our conversion, and we had a dedicated and talented MRI staff member that we could directly access for questions and fixes.
Join us at MRI Ascend Anywhere to watch the entire interview with Jon Gutzmann and my interview with Tom Davis, Director of the Office of Recapitalization (HUD), which administers the Rental Assistance Demonstration, in addition to other programs.
About the Saint Paul Public Housing Agency:
The PHA administers almost 9,000 federal rent subsidies that provide safe, affordable housing to more than 21,000 Saint Paul residents. Almost half of the residents live in the 4,300 affordable homes and apartments that the PHA owns and manages. The PHA also administers the federal rent subsidy program called “Housing Choice Vouchers”, previously known as Section 8. The rental vouchers help over 4,900 households pay affordable rents in privately-owned apartments and rental homes.
The St. Paul PHA is a 28-consecutive year HUD-designated High Performer that owns and manages residential real estate currently valued at approximately $688 million dollars. We achieve high marks in all operational indicators such as:
- 20 consecutive years of 99% occupancy in public housing and 100% utilization of Housing Choice Vouchers for the last three years
- Collecting 99% of all rents
- Completing approximately 30,000 [emergency 6,602 + non-emergency 22,715 = 29,300 in FY 2018] maintenance work orders/year - emergencies in less than 24 hours, non-emergencies in average 5 days
- 28-year innovative community policing program, a prime reason why major crime rates in public housing family developments are lower than citywide averages
- Completed a 25-year homeownership program in 2014 that helped 300+ low-income families move from subsidized rental to homeownership
- Executed a community solar agreement in 2018 that provides 10 of our hi-rises 100% solar power for electricity while saving $120,000 per year for 25 years
- PHA compiled a 20-year record with zero findings on its annual audits and has won awards for its financial reporting
In the last 25 years, HUD published only one national ranking of large public housing agencies. The St. Paul PHA was the highest-rated large agency in the country.
If you have any questions, please do not hesitate to contact us at email@example.com.