I’ve long been a champion of new construction under the RAD program and have consistently explored how “Faircloth” authority could be leveraged to expand deeply affordable housing. Back in 2014, while assisting Mr. Jim Harbison and the Nashville Metropolitan Development Housing Authority (MDHA), we put forward forward-thinking strategies to advance the revitalization of the Cayce Homes in East Nashville. One idea was to convert dormant Faircloth authority under Section 9 into modern senior housing under Section 8, using RAD as the delivery vehicle – an approach that, at the time, was nearly a decade ahead of HUD policy.
In more recent years, we returned to this concept with renewed focus. Yet, HUD’s Affirmatively Furthering Fair Housing (AFFH) site selection criteria limited opportunities in areas of concentrated poverty and redirected development toward mixed-income communities. Now, with the rollout of HUD’s Restore-Rebuild Initiative, we’re finally seeing policy flexibility catch up with practical needs. Restore-Rebuild reactivates previously undevelopable units by streamlining development and financing tools into one cohesive path. It gives PHAs and developers a chance to achieve truly transformative outcomes by tapping into unused Faircloth authority, restoring lost public housing capacity, locking in stable rental subsidies, and investing in stronger, more equitable communities.
The Challenge: Untapped Faircloth Authority
The Faircloth Limit, established in 1999, restricts PHAs from operating more public housing units than they had at that time. Across the nation, many PHAs have demolished or disposed of units but retain the right to rebuild under their original Faircloth authority. While PHAs have statutory authority to redevelop these units, they truly do not have budgetary authority, producing what I call “ghost units” in the housing authority’s inventory. Despite a nationwide affordable housing crisis, this dormant capacity represents somewhere around 220,000 unbuilt units, or ~$55B in development and construction. But a larger challenge exists for building back, Faircloth is rents, and that is the rent structure. The Restore-Rebuild conversion process begins with the PHA’s requesting a Notice of Anticipated RAD Rents (NARR), thereby communicating its interest in developing and converting units from its available Faircloth authority to Recap. NARRs are often lower than RAD rents, so it’s important to know if a PHA can supplement rents through RAD Supp 4B guidance or Move To Work (MTW) authority. In some instances, RAD rents are close to or higher than FMRs, which may make Restore-Rebuild feasible in specific locations.
HUD Innovation: the Restore-Rebuild Program
HUD rebranded and streamlined the Faircloth-to-RAD process as Restore-Rebuild in November 2024. The innovative program allows PHAs to restore rental assistance subsidies that were lost when public housing was demolished or sold over the years, and to use the assurance of new long-term subsidy contracts to finance and rebuild these deeply assisted homes. Through Restore-Rebuild, HUD has activated existing tools for PHAs to serve more families. Once built, HUD ensures residents pay no more than 30% of their income on rent through a long-term rental assistance contract tied to the property. This partnership between HUD’s Office of Urban Revitalization and Office of Recapitalization streamlines the interaction between two HUD programs. It provides underwriting certainty for financing, which allows PHAs to restore these critical rent-assisted homes. Key features include:
- Alignment of Faircloth development approval with RAD conversion
- Secured long-term rental income through PBV or PBRA (now a PHA’s choice)
- Encouragement of mixed-finance deals leveraging LIHTC, bonds, and local gap funding
Opportunities for both Developer & Social Housing Providers (the PHA)
Opportunities abound for Developers in these scenarios, as Restore-Rebuild often involves complex funding mechanisms and capital stacks. Access to public-private partnerships (P3) with guaranteed rental streams is a risk-mitigation strategy for developers (as detailed in a recent D3G white paper on public-private partnerships (P3s), the essence of RAD). Furthermore, these collaborative approaches to housing solutions create a competitive candidate to receive local and state subsidies, grants, and an allocation of Low-Income Housing Tax Credits (LIHTC). Social Housing Providers (SHP) and Public Housing Authorities (PHA) reap the benefits of Restore-Rebuild through increasing affordable housing and replacing once-lost public housing capacity. Even better, these P3 arrangements often put the PHA in a position of land control, leveraging capital and retaining income streams through land lease arrangements. And most importantly, repositioning long-term rental subsidies from the public housing Section 9 funding to the more progressive, stable, and leverageable Section 8 platform mitigates financial risk.
Case Study: Independence Plaza, Almeda, California
The recently completed Independence Plaza in Alameda, California, is an innovative affordable housing project that demonstrates the creative application of Restore-Rebuild. Independence Plaza, nearing 35 years of age, is facing a major challenge with the looming expiration of a city operating subsidy that would have meant raising rents to prevent a budget deficit. However, a collaboration between the local PHA and private developers leveraged unused Faircloth authority, layered LIHTC, and bonds for financing. It converted the new units to RAD PBV for long-term viability. The housing authority had accrued a balance of 120 Faircloth units, which they unlocked and applied the resulting vouchers to Independence Plaza, its single-largest property. According to HUD officials, this was the first acquisition-only Restore-Rebuild transaction in the country. The result is a revitalized community with increased affordable housing and secured long-term rental income. According to a recent AHF article, the $37.5 million transaction allowed AHA to pay off a loan and position the housing authority to borrow against the property for future rehabilitation needs, according to executive director Vanessa Cooper. “We have created a model that means you can use Restore-Rebuild without deep rehab,” she says. “It’s a preservation tool that will unlock funds that couldn’t have been used otherwise.”
Case Study: Curtis Apartments, Worcester, Massachusetts
The Worcester Housing Authority (WHA) has begun implementing a multi-phase vision for redeveloping the 1951-constructed 372-unit Curtis Apartments community. This 70+ year old property desperately needed infrastructure and building improvements to ensure long-term viability and preservation of subsidies. Phase 1 of the project consists of using Section 18 to remove 90 existing units and replace 129 units. Unit density was increased via the use of Faircloth units and Federal rental assistance through Restore-Rebuild. Restore-Rebuild blends the public housing mixed-finance development process and the Rental Assistance Demonstration (RAD) to create Section 8 Project Based Vouchers (PBVs). WHA is also the first public housing authority nationwide to use the rent augmentation flexibility introduced in the 2023 RAD Supplemental Notice 4B. HUD Case Study. Phase 2 is currently under planning, which continues the mission with 116 replacement units and the increased addition of 34 new units.
Strategic Roadmap for PHAs and Developers
- Assess Faircloth availability and understand Restore-Rebuild potential rental income.
- Engage with Restore-Rebuild early with qualified consultants. Early engagement with partners is vital to ensure everyone understands the nuances of the Restore-Rebuild process sequencing.
- Leverage financing tools – LIHTC, bonds, CDBG, HOME for gap funding; and seek mission-driven local philanthropic support.
- Convert to RAD for sustainable operating subsidy.
- Deliver units to market faster with HUD’s streamlined process, and the Office of Recapitalizations collaborative nature to assist in such essential housing initiatives
Conclusion: A Call to Action
Restore-Rebuild is a win-win for PHAs and developers, offering a pathway to address the housing crisis, revitalize neighborhoods, and ensure long-term financial sustainability. Early adoption allows agencies and development partners to seize the opportunity to restore public housing capacity and deliver lasting community impact. While not all PHAs may have the financial ability to pursue Restore-Rebuild at this time, our industry is always asking for more rental assistance to support the program. To get started, contact Dominion Due Diligence Group (D3G) and consult with one of our HUD-RAD experts on how we can navigate your agency through Restore-Rebuild.
