On September 19, 2025, HUD published Housing Notice H-2025-04 (the “Notice”) amending and expanding the eligibility criteria for properties originally developed with a Section 202 Capital Advance and assisted with a Project Rental Assistance Contract (“Eligible Properties”) to receive rent increases in connection with preservation transactions under the Rental Assistance Demonstration (“RAD”).
The Notice supersedes Section I.2. of Rental Assistance Demonstration – Supplemental Notice 4B (H-2023-08/PIH 2023-19) (“RAD Notice 4B”) issued in July 2023,[1] which indicated HUD’s intention to use funding provided under the Consolidated Appropriations Act of 2022 and the Consolidated Appropriations Act of 2023 to allow for rent increases (“Preservation Rent Increases”) in RAD for PRAC conversions involving new construction or substantial rehabilitation of Eligible Properties that would enhance climate resilience, energy and water efficiency, and/or design features to assist elderly residents age-in-place.
Under the Notice, HUD has amended and expanded the opportunities for Eligible Properties undergoing a RAD conversion involving new construction or substantial rehabilitation to receive a PRI, calculated as follows:
- (1) $300 per unit per month (“PUM”) for transactions where costs for hard construction, overhead and profit, and payment and performance bonds are in excess of 60% of the Housing Construction Costs [1] for the market area (previously $250 PUM under RAD Notice 4B);
- (2) $200 PUM for transactions where costs for hard construction, overhead and profit, and payment and performance bonds are in excess of 30% and less than or equal to 60% of the Housing Construction Costs for the market area (previously $100 PUM under RAD Notice 4B);
- (3) $50 PUM for transactions that include the installation or upgrade of “broadband infrastructure” [2] at the project (not previously included in RAD Notice 4B); and
- (4) As an alternative to (1)-(3) above, an increase to the PRAC rent up to 120% of the fair market rent for Eligible Properties with 20 or fewer total units (not previously included under RAD Notice 4B).
There is no longer a requirement that the construction or rehabilitation include climate resilience, energy and water efficiency, or elderly design enhancements to be eligible for a PRI under the Notice.
Funds for PRIs will continue to be reserved on a first-come, first-serve basis based on the time of the request through the RAD Resource Desk. While PRIs are continuing to be funded from the $12 million previously appropriated under the FY 2022 and FY 2023 appropriations bills, the Notice affirms that HUD may apply the new guidance issued under the Notice to the use of funds in any subsequent appropriations act to support preservation transactions of Section 202 housing for the elderly projects.
Should you have any questions about this KH Housing Alert, please contact Adam Norlander or Adam Cohen.
[1] Please note that the provisions of RAD Notice 4B unrelated to PRIs and summarized in the KH Alert issued on August 2, 2023, remain in effect and are not impacted by the Notice.
[2] Housing Construction Costs for market areas are published annually. For the most recently published Housing Construction Costs, see https://www.hud.gov/sites/dfiles/PIH/documents/2024_Units_TDC_Limits.pdf.
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