Overview
On May 12, 2026, HUD issued a memorandum announcing the wind-down of the Restore-Rebuild initiative, formerly known as “Faircloth-to-RAD.” The guidance is effective immediately and significantly limits the ability of public housing authorities (“PHAs”) and developer partners to pursue new mixed-finance public housing developments tied to future Rental Assistance Demonstration (“RAD”) conversion. For additional details, refer to HUD’s official May 12, 2026, memorandum titled “Updates to the Restore-Rebuild Initiative.”
This development is significant as HUD will no longer accept new requests for a Notice of Anticipated RAD Rents (“NARR”), which is required to obtain HUD’s conditional approval for a project’s future RAD conversion. Projects that have received or will receive a NARR (because the request was made prior to May 12, 2026) may only proceed under the Restore-Rebuild program if they satisfy certain advancement requirements established by HUD within a strict 90-day period. Projects that fail to meet those thresholds within that timeframe will lose eligibility to proceed under the Restore-Rebuild program.
Because many developments rely on Restore-Rebuild to assure future Section 8 subsidy support necessary for underwriting and financing, the guidance may materially affect pending transactions, development timelines, and future financing structures. This new guidance does not otherwise change HUD’s public housing mixed finance development policies or the RAD program, generally.
Background on Restore-Rebuild
The Restore-Rebuild program was developed as a mechanism to streamline and facilitate the expansion and redevelopment of deeply affordable housing through mixed-finance public housing development or redevelopment paired with future RAD conversion.
Formerly referred to as “Faircloth-to-RAD,” the program was intended to allow PHAs to utilize unused Faircloth authority to acquire, develop or rebuild public housing units that had been lost over time due to demolition, disposition, or reductions in public housing inventory. The program allowed PHAs to secure early-stage approval to convert those newly developed units to long-term Section 8 assistance through RAD following the completion of construction.
The Restore-Rebuild program was an important development and financing tool as it provided greater predictability regarding future subsidy revenue, which assisted developers, lenders, and investors with underwriting and financing mixed-finance affordable housing transactions.
What Changed?
By publishing the May 12, 2026, memorandum, HUD effectively sunsets the Restore-Rebuild program, resulting in the program no longer being available for new public housing transactions. Projects for which a NARR request was not submitted to HUD prior to May 12, 2026, are no longer eligible to utilize the Restore-Rebuild program.
HUD will continue processing NARR requests submitted before May 12, 2026. However, any issued NARR will become void 90 days after the date of the memorandum (i.e. on August 10, 2026) unless the PHA has satisfied the following advancement requirements:
- Received HUD approval for mixed-finance development or public housing acquisition under applicable regulations;
- Submitted a substantially complete mixed-finance development proposal or public housing acquisition proposal to HUD for the proposed project; or
- Demonstrated through documentation from a state allocating agency that an application for Low-Income Housing Tax Credits for the proposed project has been submitted and is under review or has been approved.
Projects that have already achieved mixed-finance closing may still proceed to RAD conversion following completion of construction under the current Restore-Rebuild guidelines. While the termination of the Restore-Rebuild program effectively will reduce the certainty of a long-term Section 8 contract along with any efficiency gains from combining the mixed finance development process with the RAD conversion process, it will not otherwise change the RAD Program. Nor will it prevent PHAs and their partners from developing new mixed-finance housing.
HUD’s Policy Shift and Budget Considerations
The decision to wind down the Restore-Rebuild program was made in connection with the current Administration’s budget proposal for FY2027 and appears consistent with the administration’s focus to limit Federal spending and HUD’s goals of reducing the existing public housing footprint and repositioning public housing units to the Section 8 platform.
Among other requests, the FY2027 budget proposal contemplates recalculating each PHA’s “Faircloth” cap equal to the PHA’s public housing inventory levels as of October 1, 2027. Commentators have noted that the proposed budget changes, if approved, would significantly limit HUD’s ability to continue or reimplement the program in the future, by eliminating the ability of PHAs to fund and develop new public housing units under their pre-existing Faircloth authority.
Impact on Developers and Housing Authorities
The wind-down of the Restore-Rebuild program, as outlined in the May 12, 2026, memorandum, has practical implications for developers, PHAs, lenders, and investors. It removes a widely used structure for supporting new public housing development with anticipated long-term Section 8 subsidy revenue, requiring stakeholders to re-evaluate transaction structures, financing assumptions, and execution timelines.
Transactions involving projects for which a NARR request was not submitted prior to the May 12, 2026, deadline will likely need to be restructured as the projects will no longer be able to obtain early-stage pre-approval for RAD conversion. This removes a major source of certainty regarding future Section 8 subsidy revenue that some developments rely upon in their financial underwriting.
Projects already in process, for which a NARR was requested prior to the May 12, 2026, deadline, may need to move forward on an expedited basis, particularly with respect to LIHTC applications, mixed-finance approvals, development submissions, and coordination with HUD and applicable housing agencies, prior to the NARR becoming void on August 10, 2026.
Recommended Next Steps
Accordingly, we recommend that developers and PHAs with current or planned Restore-Rebuild projects take several steps:
- Determine whether their project is currently within the Restore-Rebuild pipeline;
- Confirm whether a NARR request was submitted to or approved by HUD within applicable timelines;
- Assess whether the project will satisfy HUD’s advancement requirements listed above within the 90-day window;
- Prioritize LIHTC applications, mixed-finance approvals, and development submissions where feasible; and
- Evaluate alternative financing and development structures for projects that may no longer utilize the Restore-Rebuild program.
Given the short implementation timeline, affected parties should coordinate promptly with development partners, lenders, investors, and agency contacts to determine whether projects can preserve eligibility under HUD’s guidance.
