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Washington Update

Thursday, July 15, 2010

HUD has released the long-awaited TRA Leverage Calculator, a planning tool intended to assist PHAs in evaluating the effects of converting their public housing properties to the new project-based contract proposed as part of the administration's Transforming Rental Assistance Initiative (TRA). The tool creates a model pro forma which the PHA can use to understand a property's sustainable rents under TRA as well as its debt leveraging potential. To use the tool, a PHA enters data regarding the physical characteristics and capital needs (both currently existing and anticipated within the 20-year term of the contract) of a property, as well as its operating costs. In addition to inputting data, PHAs may also change assumptions built into the spreadsheet, such as the financing terms of the loan.

The PHA also inputs the Fair Market Rent (FMR) for the project location as well as an estimate of a comparable market rent. Using these data, the tool will compare the sustainable rent calculated from the property-specific data with the rent-setting policies outlined in the proposed Preservation, Enhancement, and Transformation of Rental Assistance (PETRA) bill. If the sustainable rent calculated is below 100% of the comparable market rent and 110% of the FMR, a property will be eligible to apply for conversion. For properties where the sustainable rent is higher than 100% of the comparable market rent but below 120% of the comparable market rent or 110% FMR, the Secretary may approve an exception rent if the property is deemed worthy of preservation. Although the spreadsheet indicates that PHAs may use either the traditional FMR or the new small area FMRs, NAHRO recommends that agencies use the small area FMR because HUD has signaled that it intends to move in that direction. However, if the sustainable rent falls outside of the exception rent policies, a PHA would be required to seek other sources of capital to "buy down" the amount of upfront financing needed to a level supported by the allowable rents.

To assist users with the tool, HUD has created a tutorial video that provides a step-by-step explanation of how to input data into the spreadsheet. As NAHRO staff continues its analysis of the PETRA legislation, we would like to collect project-specific information that will help staff evaluate the potential impacts of the proposal. Any agency willing to share this information should email a copy of the completed spreadsheet for each property to policy@nahro.org. All information related to the identity of the agency will be kept confidential, and only aggregate numbers will be published by NAHRO.

To see all of NAHRO's past coverage of TRA, please visit NAHRO's TRA Resource Center. For more information on this Direct News item, please contact Tamar Greenspan (ext. 7234).

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