Does Davis-Bacon apply to a RAD conversion?

Prevailing wages are one of the larger swing factors in a RAD budget, and the rule is narrower than many people assume. It turns on three questions: is the work “development”, when does it start, and how many assisted units does the project have.

The rule for public housing conversions

The RAD notice (§1.4.A.14) applies the Davis-Bacon prevailing wage requirements, including the Contract Work Hours and Safety Standards Act and implementing rules, “to all Work, including any new construction, that is identified in the Financing Plan and RCC to the extent that such Work qualifies as development.”

“Development” for Section 8 projects means work that is:

1. remodeling that alters the nature or type of housing units in the PBV or PBRA project, or
2. reconstruction, or
3. a substantial improvement in the quality or kind of original equipment and materials,

and that is initiated within 18 months following the effective date of the HAP contract.

It does not include replacing equipment and materials worn out by normal wear and tear with items of substantially the same kind. And Davis-Bacon applies “only to projects with nine or more assisted units.”

Decision table

Situation	Davis-Bacon under RAD?
Public housing conversion, 9+ assisted units, gut rehab or unit reconfiguration in the Financing Plan, started within 18 months of the HAP	Yes
Same, new construction on site or at a transfer site	Yes
Like-for-like replacement (roofs, boilers, windows of the same kind) for normal wear and tear	No, not development
Substantial upgrade in kind or quality of equipment (for example, new central air where there was none)	Yes, if started within 18 months of the HAP
Work in the Financing Plan first started more than 18 months after the HAP	No under RAD’s rule
Project with 8 or fewer assisted units	No under RAD’s rule
Conversion with no rehab scope (the HAP is signed, no Work)	No
Component 2 (Mod Rehab, Rent Supp, RAP, 202 PRAC): signing the HAP	No
Component 2: construction or rehab on 9+ units that were not previously assisted or rent restricted and become assisted through the conversion (including by transfer of assistance)	Yes, for those units
Any deal using FHA insurance, HOME, CDBG or another source with its own labor rule	Check that source; it can apply independently

Component 2 is different

For Mod Rehab (Section II of the notice), Rent Supplement and RAP (Section III) and 202 PRAC (Section IV), HUD says execution of the new PBV or PBRA contract “does not trigger Davis-Bacon prevailing wage requirements”. The exception is construction or rehab on nine or more units that were not previously rent assisted or rent restricted and will be newly assisted because of the conversion. For Rent Supp and RAP, the owner must certify in the project description that Davis-Bacon wages will be paid on such units. For PBRA, HUD applies Davis-Bacon to the same extent it would for a PBV conversion. See the Component 2 guide.

Section 3

Section 3 of the Housing and Urban Development Act of 1968 aims hiring and contracting at low-income people and businesses. Under §1.4.A.15 of the RAD notice:

• pre-development conversion costs paid with public housing funds follow Section 3’s public housing rules; and
• any Work required by the conversion after RAD closing that involves housing rehabilitation or construction follows Section 3’s housing and community development rules.

HUD notes that most RAD conversions do not use funding covered by Section 3 on its own terms, which is why it set the post-closing rule as an alternative requirement.

How it shows up in the data

In HUD’s RAD Resource Desk data as of October 24, 2026, the 1,955 closed public housing conversions break down by reported hard cost per unit:

Hard cost per unit	Closed deals
None reported	438
Under $25,000	501
$25,000 to $75,000	238
$75,000 or more	778

Of those deals, 367 included new construction and 240 a transfer of assistance; 452 had one or both. Only 18 had fewer than nine total units. The pattern matters because the low-cost deals are the ones most likely to be like-for-like repairs, while new construction and heavy rehab are squarely “development”. The median hard cost across deals that reported it was $78,428 per unit. Every deal’s figures are in the tracker and the financing breakdown.

Budget effects

Davis-Bacon affects a RAD deal in three places:

1. Hard costs. Wage determinations for the county and construction type set minimum wages and fringes. The effect depends on how far local market wages sit from the determination, so estimate it from your contractor’s bids under both scenarios, not from a rule of thumb.
2. Soft costs and schedule. Certified payroll, posting, interviews and monitoring add contractor and owner administration, and HUD or the lender reviews compliance before draws.
3. Feasibility. 4C’s feasibility tests still apply: the Financing Plan must address all critical, immediate and two-year capital needs from the CNA and fund 20-year needs. Higher hard costs raise the gap that tax credits, seller financing or soft funds have to fill.

The 18-month clock creates a planning choice that HUD’s rule allows but does not invite gaming: work genuinely scheduled after month 18 is outside RAD’s definition, but the Financing Plan and RCC define the Work, and lenders and HUD review the schedule. A Financing Plan should state the wage assumption plainly.

Financing affects coverage too. Other sources in the capital stack, such as FHA mortgage insurance for new construction or substantial rehab, HOME or CDBG, can carry their own prevailing wage rules, so confirm each source separately from RAD’s test. The FHA 221(d)(4) guide and FHA 223(f) guide describe the loan types, and the Financing Plan checklist lists the labor items HUD asks for. For a second look at a budget, Janover Capital LLC’s desk is at get financing.

Related: RAD conversion steps, RAD glossary, what is RAD.

Sources

• HUD, RAD Notice Revision 4 as amended by Supplementals 4B and 4C: §1.4.A.14 (Davis-Bacon), §1.4.A.15 (Section 3), §2.5.I and §2.6.F (Mod Rehab), Section III (Rent Supp and RAP), Section IV, paragraph R (202 PRAC).
• HUD, RAD Supplemental Notice 4C, H-2025-01 / PIH-2025-03, §X (feasibility).
• HUD, Revised RAD Notice in the Federal Register, October 10, 2019 (FR Doc. 2019-22134).
• HUD’s RAD Resource Desk data as of October 24, 2026, tabulated by Conversion Ledger.

This guide is general information, not legal advice. Wage coverage on a specific project should be confirmed with HUD, your lender and labor counsel.