[Title 24 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 1999 Edition]
[From the U.S. Government Printing Office]


          24



          Housing and Urban Development



[[Page i]]

          PARTS 700 TO 1699

                         Revised as of April 1, 1999

          CONTAINING
          A CODIFICATION OF DOCUMENTS
          OF GENERAL APPLICABILITY
          AND FUTURE EFFECT

          AS OF APRIL 1, 1999
          With Ancillaries
          Published by
          the Office of the Federal Register
          National Archives and Records
          Administration

          as a Special Edition of
          the Federal Register

[[Page ii]]

                                      




                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 1999



               For sale by U.S. Government Printing Office
 Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 24:
  Subtitle B--Regulations Relating to Housing and Urban 
      Development--Continued:
          Chapter VII--Office of the Secretary, Department of 
          Housing and Urban Development (Housing Assistance 
          Programs and Public and Indian Housing Programs)           5
          Chapter VIII--Office of the Assistant Secretary for 
          Housing-Federal Housing Commissioner, Department of 
          Housing and Urban Development (Section 8 Housing 
          Assistance Programs, Section 202 Direct Loan 
          Program, Section 202 Supportive Housing for the 
          Elderly Program and Section 811 Supportive Housing 
          for Persons With Disabilities Program)                    37
          Chapter IX--Office of Assistant Secretary for Public 
          and Indian Housing, Department of Housing and Urban 
          Development                                              239
  Finding Aids:
    Table of CFR Titles and Chapters..........................     749
    Alphabetical List of Agencies Appearing in the CFR........     767
    List of CFR Sections Affected.............................     777

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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus,  24 CFR 700.100 
                       refers to title 24, part 
                       700, section 100.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
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parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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OMB CONTROL NUMBERS

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Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
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the revision dates of the 50 CFR titles.

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in the Code of Federal Regulations.

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[[Page vii]]

    The Office of the Federal Register also offers a free service on the 
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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

April 1, 1999.

[[Page ix]]



                               THIS TITLE

    Title 24--Housing and Urban Development is composed of five volumes. 
The first four volumes containing parts 0-199, parts 200-499, parts 500-
699, parts 700-1699, represent the regulations of the Department of 
Housing and Urban Development. The fifth volume, containing part 1700 to 
end continues with regulations of the Department of Housing and Urban 
Development and also includes regulations of the Neighborhood 
Reinvestment Corporation. The contents of these volumes represent all 
current regulations codified under this title of the CFR as of April 1, 
1999.

    For this volume, Gregory R. Walton was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Frances D. McDonald, assisted by Alomha S. Morris.

[[Page x]]





                 TITLE 24--HOUSING AND URBAN DEVELOPMENT




                 (This book contains parts 700 to 1699)

  --------------------------------------------------------------------
                                                                    Part

   SUBTITLE B--Regulations Relating to Housing and Urban Development--
                                Continued:

chapter vii--Office of the Secretary, Department of Housing 
  and Urban Development (Housing Assistance Programs and 
  Public and Indian Housing Programs).......................         700

chapter viii--Office of the Assistant Secretary for Housing-
  Federal Housing Commissioner, Department of Housing and 
  Urban Development (Section 8 Housing Assistance Programs, 
  Section 202 Direct Loan Program, Section 202 Supportive 
  Housing for the Elderly Program and Section 811 Supportive 
  Housing for Persons With Disabilities Program)............         811

chapter ix--Office of Assistant Secretary for Public and 
  Indian Housing, Department of Housing and Urban 
  Development...............................................         901

Cross References: Office of Thrift Supervision, Department of the 
  Treasury, 12 CFR chapter V.

  Department of Veterans Affairs regulations on assistance to certain 
veterans in acquiring specially adapted housing and guaranty of loans on 
homes: See Loan Guaranty, 38 CFR part 36.
   Subtitle B--Regulations Relating to Housing and Urban Development--
                                Continued

  --------------------------------------------------------------------



 CHAPTER VII--OFFICE OF THE SECRETARY, DEPARTMENT OF HOUSING AND URBAN 
 DEVELOPMENT (HOUSING ASSISTANCE PROGRAMS AND PUBLIC AND INDIAN HOUSING 
                                PROGRAMS)




  --------------------------------------------------------------------
Part                                                                Page
700             Congregate Housing Services Program.........           7
701-760

[Reserved]

761             Drug Elimination Programs...................          17
762-790

[Reserved]

791             Review of applications for housing 
                    assistance and allocations of housing 
                    assistance funds........................          27
792             Housing agency section 8 fraud recoveries...          33
793-798

[Reserved]


  Editorial Note: For nomenclature changes to chapter VII, see 59 FR 
14090, Mar. 25, 1994.

[[Page 7]]



PART 700--CONGREGATE HOUSING SERVICES PROGRAM--Table of Contents




Sec.
700.100  Purpose.
700.105  Definitions.
700.110  Announcement of fund availability, application process and 
          selection.
700.115  Program costs.
700.120  Eligible supportive services.
700.125  Eligibility for services.
700.130  Service coordinator.
700.135  Professional assessment committee.
700.140  Participatory agreement.
700.145  Cost distribution.
700.150  Program participant fees.
700.155  Grant agreement and administration.
700.160  Eligibility and priority for 1978 Act recipients.
700.165  Evaluation of Congregate Housing Services Programs.
700.170  Reserve for supplemental adjustment.
700.175  Other Federal requirements.

    Authority: 42 U.S.C. 3535(d) and 8011.

    Source: 61 FR 42943, 42949, Aug. 19, 1996.



Sec. 700.100  Purpose.

    The requirements of this part augment the requirements of section 
802 of the National Affordable Housing Act of 1990 (approved November 
28, 1990, Public Law 101-625) (42 U.S.C. 8011), (hereinafter, section 
802), as amended by the Housing and Community Development Act of 1992 
(Public Law 102-550, approved October 28, 1992), which authorizes the 
Congregate Housing Services Program (hereinafter, CHSP or Program).



Sec. 700.105  Definitions.

    In addition to the definitions in section 802(k), the following 
definitions apply to CHSP:
    Activity of Daily Living (ADL) means an activity regularly necessary 
for personal care.
    (1) The minimum requirements of ADLs include:
    (i) Eating (may need assistance with cooking, preparing or serving 
food, but must be able to feed self);
    (ii) Dressing (must be able to dress self, but may need occasional 
assistance);
    (iii) Bathing (may need assistance in getting in and out of the 
shower or tub, but must be able to wash self);
    (iv) Grooming (may need assistance in washing hair, but must be able 
to take care of personal appearance);
    (v) Getting in and out of bed and chairs, walking, going outdoors, 
using the toilet; and
    (vi) Household management activities (may need assistance in doing 
housework, grocery shopping or laundry, or getting to and from one 
location to another for activities such as going to the doctor and 
shopping, but must be mobile. The mobility requirement does not exclude 
persons in wheelchairs or those requiring mobility devices.)
    (2) Each of the Activities of Daily Living noted in paragraph (1) of 
this definition includes a requirement that a person must be able to 
perform at a specified minimal level (e.g., to satisfy the eating ADL, 
the person must be able to feed himself or herself). The determination 
of whether a person meets this minimal level of performance must include 
consideration of those services that will be performed by a person's 
spouse, relatives or other attendants to be provided by the individual. 
For example, if a person requires assistance with cooking, preparing or 
serving food plus assistance in feeding himself or herself, the 
individual would meet the minimal performance level and thus satisfy the 
eating ADL, if a spouse, relative or attendant provides assistance with 
feeding the person. Should such assistance become unavailable at any 
time, the owner is not obligated at any time to provide individualized 
services beyond those offered to the resident population in general. The 
Activities of Daily Living analysis is relevant only with regard to 
determination of a person's eligibility to receive supportive services 
paid for by CHSP and is not a determination of eligibility for 
occupancy;
    Adjusted income means adjusted income as defined in 24 CFR parts 813 
or 913.
    Applicant means a State, Indian tribe, unit of general local 
government, public housing authority (PHA), Indian housing authority 
(IHA) or local nonprofit housing sponsor. A State, Indian tribe, or unit 
of general local government may apply on behalf of a local

[[Page 8]]

nonprofit housing sponsor or a for-profit owner of eligible housing for 
the elderly.
    Area agency on aging means the single agency designated by the State 
Agency on Aging to administer the program described in Title III of the 
Older Americans Act of 1965 (45 CFR chapter 13).
    Assistant Secretary means the HUD Assistant Secretary for Housing-
Federal Housing Commissioner or the HUD Assistant Secretary for Public 
and Indian Housing.
    Case management means implementing the processes of: establishing 
linkages with appropriate agencies and service providers in the general 
community in order to tailor the needed services to the program 
participant; linking program participants to providers of services that 
the participant needs; making decisions about the way resources are 
allocated to an individual on the basis of needs; developing and 
monitoring of case plans in coordination with a formal assessment of 
services needed; and educating participants on issues, including, but 
not limited to, supportive service availability, application procedures 
and client rights.
    Eligible housing for the elderly means any eligible project 
including any building within a mixed-use project that was designated 
for occupancy by elderly persons, or persons with disabilities at its 
inception or, although not so designated, for which the eligible owner 
or grantee gives preference in tenant selection (with HUD approval) for 
all units in the eligible project (or for a building within an eligible 
mixed-use project) to eligible elderly persons, persons with 
disabilities, or temporarily disabled individuals. For purposes of this 
part, this term does not include projects assisted under the Low-Rent 
Housing Homeownership Opportunity program (Turnkey III (24 CFR part 905, 
subpart G)).
    Eligible owner means an owner of an eligible housing project.
    Excess residual receipts mean residual receipts of more than $500 
per unit in the project which are available and not committed to other 
uses at the time of application to HUD for CHSP. Such receipts may be 
used as matching funds and may be spent down to a minimum of $500/unit.
    For-profit owner of eligible housing for the elderly means an owner 
of an eligible housing project in which some part of the project's 
earnings lawfully inure to the benefit of any private shareholder or 
individual.
    Grantee or Grant recipient means the recipient of funding under 
CHSP. Grantees under this Program may be states, units of general local 
government, Indian tribes, PHAs, IHAs, and local nonprofit housing 
sponsors.
    Local nonprofit housing sponsor means an owner or borrower of 
eligible housing for the elderly; no part of the net earnings of the 
owning organization shall lawfully inure to the benefit of any 
shareholder or individual.
    Nonprofit includes a public housing agency as that term is defined 
in section 3(b)(6) of the United States Housing Act of 1937.
    Person with disabilities means a household composed of one or more 
persons, at least one of whom is an adult who has a disability.
    (1) A person shall be considered to have a disability if such person 
is determined under regulations issued by the Secretary to have a 
physical, mental, or emotional impairment which:
    (i) Is expected to be of long-continued and indefinite duration;
    (ii) Substantially impedes his or her ability to live independently; 
and
    (iii) Is of such a nature that the person's ability could be 
improved by more suitable housing conditions.
    (2) A person shall also be considered to have a disability if the 
person has a developmental disability as defined in section 102(5) of 
the Developmental Disabilities Assistance and Bill of Rights Act (42 
U.S.C. 6001-7). Notwithstanding the preceding provisions of this 
paragraph, the terms ``person with disabilities'' or ``temporarily 
disabled'' include two or more persons with disabilities living 
together, one or more such persons living with another person who is 
determined (under regulations prescribed by the Secretary of HUD) to be 
essential to their care or well-being, and the surviving member or 
members of any household where at least one or more persons was an adult 
with a disability who was living, in a

[[Page 9]]

unit assisted under this section, with the deceased member of the 
household at the time of his or her death.
    Program participant (participant) means any project resident as 
defined in section 802(e)(1) who is formally accepted into CHSP, 
receives CHSP services, and resides in the eligible housing project 
served by CHSP grant.
    Qualifying supportive services means those services described in 
section 802(k)(16). Under this Program, ``health-related services'' mean 
non-medical supervision, wellness programs, preventive health screening, 
monitoring of medication consistent with state law, and non-medical 
components of adult day care. The Secretary concerned may also approve 
other requested supportive services essential for achieving and 
maintaining independent living.
    Rural Housing Service (RHS) means a credit agency for rural housing 
and rural development in the U.S. Department of Agriculture (USDA).
    Secretary concerned means (1) The Secretary of Housing and Urban 
Development, with respect to eligible federally assisted housing 
administered by HUD; and
    (2) The Secretary of Agriculture with reference to programs 
administered by the Administrator of the Rural Housing Service.
    Service coordinator means CHSP staff person responsible for 
coordinating Program services as described in section 700.130.
    Service provider means a person or organization licensed or 
otherwise approved in writing by a State or local agency (e.g., 
Department of Health, Department of Human Services or Welfare) to 
provide supportive services.
    State agency means the State or an agency or instrumentality of the 
State.
    State agency on aging means the single agency designated by the 
Governor to administer the program described in Title III of the Older 
Americans Act of 1965 (See 45 CFR part 13).



Sec. 700.110  Announcement of fund availability, application process and selection.

    (a) Notice of funding availability. A Notice of Funding Availability 
(NOFA) will be published periodically in the Federal Register by the 
Secretary concerned containing the amounts of funds available, 
allocation or distribution of funds available among eligible applicant 
groups, where to obtain and submit applications, the deadline for 
submissions, and further explanation of the selection criteria, review 
and selection process. The Secretary concerned will designate the 
maximum allowable size for grants.
    (b) Selection criteria are set forth in section 802(h)(1) and shall 
include additional criteria specified by the Secretary concerned.



Sec. 700.115  Program costs.

    (a) Allowable costs. (1) Allowable costs for direct provision of 
supportive services includes the provision of supportive services and 
others approved by the Secretary concerned for:
    (i) Direct hiring of staff, including a service coordinator;
    (ii) Supportive service contracts with third parties;
    (iii) Equipment and supplies (including food) necessary to provide 
services;
    (iv) Operational costs of a transportation service (e.g., mileage, 
insurance, gasoline and maintenance, driver wages, taxi or bus 
vouchers);
    (v) Purchase or leasing of vehicles;
    (vi) Direct and indirect administrative expenses for administrative 
costs such as annual fiscal review and audit, telephones, postage, 
travel, professional education, furniture and equipment, and costs 
associated with self evaluation or assessment (not to exceed one percent 
of the total budget for the activities approved); and
    (vii) States, Indian tribes and units of general local government 
with more than one project included in the grant may receive up to 1% of 
the total cost of the grant for monitoring the projects.
    (2) Allowable costs shall be reasonable, necessary and recognized as 
expenditures in compliance with OMB Cost Policies, i.e., OMB Circular A-
87, 24 CFR 85.36, and OMB Circular A-128.
    (b) Nonallowable costs. (1) CHSP funds may not be used to cover 
expenses related to any grantee program, service, or activity existing 
at the time of application to CHSP.

[[Page 10]]

    (2) Examples of nonallowable costs under the program are:
    (i) Capital funding (such as purchase of buildings, related 
facilities or land and certain major kitchen items such as stoves, 
refrigerators, freezers, dishwashers, trash compactors or sinks);
    (ii) Administrative costs that represent a non-proportional share of 
costs charged to the Congregate Housing Services Program for rent or 
lease, utilities, staff time;
    (iii) Cost of supportive services other than those approved by the 
Secretary concerned;
    (iv) Modernization, renovation or new construction of a building or 
facility, including kitchens;
    (v) Any costs related to the development of the application and plan 
of operations before the effective date of CHSP grant award;
    (vi) Emergency medical services and ongoing and regular care from 
doctors and nurses, including but not limited to administering 
medication, purchase of medical supplies, equipment and medications, 
overnight nursing services, and other institutional forms of service, 
care or support;
    (vii) Occupational therapy and vocational rehabilitation services; 
or
    (viii) Other items defined as unallowable costs elsewhere in this 
part, in CHSP grant agreement, and OMB Circular A-87 or 122.
    (c) Administrative cost limitation. Grantees are subject to the 
limitation in section 802(j)(4).



Sec. 700.120  Eligible supportive services.

    (a) Supportive services or funding for such services may be provided 
by state, local, public or private providers and CHSP funds. A CHSP 
under this section shall provide meal and other qualifying services for 
program participants (and other residents and nonresidents, as described 
in Sec. 700.125(a)) that are coordinated on site.
    (b) Qualifying supportive services are those listed in section 
802(k)(16) and in section 700.105.
    (c) Meal services shall meet the following guidelines:
    (1) Type of service. At least one meal a day must be served in a 
group setting for some or all of the participants; if more than one meal 
a day is provided, a combination of a group setting and carry-out meals 
may be utilized.
    (2) Hot meals. At least one meal a day must be hot. A hot meal for 
the purpose of this program is one in which the principal food item is 
hot at the time of serving.
    (3) Special menus. Grantees shall provide special menus as necessary 
for meeting the dietary needs arising from the health requirements of 
conditions such as diabetes and hypertension. Grantees should attempt to 
meet the dietary needs of varying religious and ethnic backgrounds.
    (4) Meal service standards. Grantees shall plan for and provide 
meals which are wholesome, nutritious, and each of which meets a minimum 
of one-third of the minimum daily dietary allowances as established by 
the Food and Nutrition Board of the National Academy of Sciences-
National Research Council (or State or local standards, if these 
standards are higher). Grantees must have an annual certification, 
prepared and signed by a registered dietitian, which states that each 
meal provided under CHSP meets the minimum daily dietary allowances.
    (5) Food stamps and agricultural commodities. In providing meal 
services grantees must apply for and use food stamps and agricultural 
commodities as set forth in section 802(d)(2)(A).
    (6) Preference for nutrition providers: In contracting for or 
otherwise providing for meal services grantees must follow the 
requirements of section 802(d)(2)(B). These requirements do not preclude 
a grantee or owner from directly preparing and providing meals under its 
own auspices.



Sec. 700.125  Eligibility for services.

    (a) Participants, other residents, and nonresidents. Such 
individuals are eligible either to participate in CHSP or to receive 
CHSP services, if they qualify under section 802(e)(1), (4) and (5). 
Under this paragraph, temporarily disabled persons are also eligible.
    (b) Economic need. In providing services under CHSP, grantees shall 
give priority to very low income individuals, and shall consider their 
service needs in selecting program participants.

[[Page 11]]



Sec. 700.130  Service coordinator.

    (a) Each grantee must have at least one service coordinator who 
shall perform the responsibilities listed in section 802(d)(4).
    (b) The service coordinator shall comply with the qualifications and 
standards required by the Secretary concerned. The service coordinator 
shall be trained in the subject areas set forth in section 802(d)(4), 
and in any other areas required by the Secretary concerned.
    (c) The service coordinator may be employed directly by the grantee, 
or employed under a contract with a case management agency on a fee-for-
service basis, and may serve less than full-time. The service 
coordinator or the case management agency providing service coordination 
shall not provide supportive services under a CHSP grant or have a 
financial interest in a service provider agency which intends to provide 
services to the grantee for CHSP.
    (d) The service coordinator shall:
    (1) Provide general case management and referral services to all 
potential participants in CHSP. This involves intake screening, upon 
referral from the grantee of potential program participants, and 
preliminary assessment of frailty or disability, using a commonly 
accepted assessment tool. The service coordinator then will refer to the 
professional assessment committee (PAC) those individuals who appear 
eligible for CHSP;
    (2) Establish professional relationships with all agencies and 
service providers in the community, and develop a directory of providers 
for use by program staff and program participants;
    (3) Refer proposed participants to service providers in the 
community, or those of the grantee;
    (4) Serve as staff to the PAC;
    (5) Complete, for the PAC, all paperwork necessary for the 
assessment, referral, case monitoring and reassessment processes;
    (6) Implement any case plan developed by the PAC and agreed to by 
the program participant;
    (7) Maintain necessary case files on each program participant, 
containing such information and kept in such form as HUD and RHS shall 
require;
    (8) Provide the necessary case files to PAC members upon request, in 
connection with PAC duties;
    (9) Monitor the ongoing provision of services from community 
agencies and keep the PAC and the agency providing the supportive 
service informed of the progress of the participant;
    (10) Educate grant recipient's program participants on such issues 
as benefits application procedures (e.g. SSI, food stamps, Medicaid), 
service availability, and program participant options and 
responsibilities;
    (11) Establish volunteer support programs with service organizations 
in the community;
    (12) Assist the grant recipient in building informal support 
networks with neighbors, friends and family; and
    (13) Educate other project management staff on issues related to 
``aging-in-place'' and services coordination, to help them to work with 
and assist other persons receiving housing assistance through the 
grantee.
    (e) The service coordinator shall tailor each participant's case 
plan to the individual's particular needs. The service coordinator shall 
work with community agencies, the grantee and third party service 
providers to ensure that the services are provided on a regular, 
ongoing, and satisfactory basis, in accordance with the case plan 
approved by the PAC and the participant.
    (f) Service coordinators shall not serve as members of the PAC.



Sec. 700.135  Professional assessment committee.

    (a) General. (1) A professional assessment committee (PAC), as 
described in this section, shall recommend services appropriate to the 
functional abilities and needs of each eligible project resident. The 
PAC shall be either a voluntary committee appointed by the project 
management or an agency in the community which provides assessment 
services and conforms to section 802(e)(3)(A) and (B). PAC members are 
subject to the conflict of interest provisions in section 700.175(b).
    (2) The PAC shall utilize procedures that ensure that the process of 
determining eligibility of individuals for congregate services affords 
individuals fair treatment, due process, and a right

[[Page 12]]

of appeal of the determination of eligibility, and shall ensure the 
confidentiality of personal and medical records.
    (3) The dollar value of PAC members' time spent on regular 
assessments after initial approval of program participants may be 
counted as match. If a community agency discharges the duties of the 
PAC, staff time is counted as its imputed value, and if the members are 
volunteers, their time is counted as volunteer time, according to 
sections 700.145(c)(2) (ii) and (iv).
    (b) Duties of the PAC. The PAC is required to:
    (1) Perform a formal assessment of each potential elderly program 
participant to determine if the individual is frail. To qualify as 
frail, the PAC must determine if the elderly person is deficient in at 
least three ADLs, as defined in section 700.105. This assessment shall 
be based upon the screening done by the service coordinator, and shall 
include a review of the adequacy of the informal support network (i.e., 
family and friends available to the potential participant to assist in 
meeting the ADL needs of that individual), and may include a more in-
depth medical evaluation, if necessary;
    (2) Determine if non-elderly disabled individuals qualify under the 
definition of person with disabilities under section 700.105. If they do 
qualify, this is the acceptance criterion for them for CHSP. Persons 
with disabilities do not require an assessment by the PAC;
    (3) Perform a regular assessment and updating of the case plan of 
all participants;
    (4) Obtain and retain information in participant files, containing 
such information and maintained in such form, as HUD or RHS shall 
require;
    (5) Replace any members of the PAC within 30 days after a member 
resigns. A PAC shall not do formal assessments if its membership drops 
below three, or if the qualified medical professional leaves the PAC and 
has not been replaced.
    (6) Notify the grantee or eligible owner and the program 
participants of any proposed modifications to PAC procedures, and 
provide these parties with a process and reasonable time period in which 
to review and comment, before adoption of a modification;
    (7) Provide assurance of nondiscrimination in selection of CHSP 
participants, with respect to race, religion, color, sex, national 
origin, familial status or type of disability;
    (8) Provide complete confidentiality of information related to any 
individual examined, in accordance with the Privacy Act of 1974;
    (9) Provide all formal information and reports in writing.
    (c) Prohibitions relating to the PAC. (1) At least one PAC member 
shall not have any direct or indirect relationship to the grantee.
    (2) No PAC member may be affiliated with organizations providing 
services under the grant.
    (3) Individuals or staff of third party organizations that act as 
PAC members may not be paid with CHSP grant funds.
    (d) Eligibility and admissions. (1) Before selecting potential 
program participants, each grantee (with PAC assistance) shall develop a 
CHSP application form. The information in the individual's application 
is crucial to the PAC's ability to determine the need for further 
physical or psychological evaluation.
    (2) The PAC, upon completion of a potential program participant's 
initial assessment, must make a recommendation to the service 
coordinator for that individual's acceptance or denial into CHSP.
    (3) Once a program participant is accepted into CHSP, the PAC must 
provide a supportive services case plan for each participant. In 
developing this plan, the PAC must take into consideration the 
participant's needs and wants. The case plan must provide the minimum 
supportive services necessary to maintain independence.
    (e) Transition-out procedures. The grantee or PAC must develop 
procedures for providing for an individual's transition out of CHSP to 
another setting. Transition out is based upon the degree of supportive 
services needed by an individual to continue to live independently. If a 
program participant leaves the program, but wishes to retain supportive 
services, he or she may do so, as long as he or she continues to live in 
an eligible project, pays the full

[[Page 13]]

cost of services provided, and management agrees (section 802(e)(4) and 
(5)). A participant can be moved out of CHSP if he or she:
    (1) Gains physical and mental health and is able to function without 
supportive services, even if only for a short time (in which case 
readmission, based upon reassessment to determine the degree of frailty 
or the disability, is acceptable);
    (2) Requires a higher level of care than that which can be provided 
under CHSP; or
    (3) Fails to pay services fees.
    (f) Procedural rights of participants. (1) The PAC must provide an 
informal process that recognizes the right to due process of individuals 
receiving assistance. This process, at a minimum, must consist of:
    (i) Serving the participant with a written notice containing a clear 
statement of the reasons for termination;
    (ii) A review of the decision, in which the participant is given the 
opportunity to present written or oral objections before a person other 
than the person (or a subordinate of that person) who made or approved 
the termination decision; and
    (iii) Prompt written notification of the final decision to the 
participant.
    (2) Procedures must ensure that any potential or current program 
participant, at the time of initial or regular assessment, has the 
option of refusing offered services and requesting other supportive 
services as part of the case planning process.
    (3) In situations where an individual requests additional services, 
not initially recommended by the PAC, the PAC must make a determination 
of whether the request is legitimately a needs-based service that can be 
covered under CHSP subsidy. Individuals can pay for services other than 
those recommended by the PAC as long as the additional services do not 
interfere with the efficient operation of the program.



Sec. 700.140  Participatory agreement.

    (a) Before actual acceptance into CHSP, potential participants must 
work with the PAC and the service coordinator in developing supportive 
services case plans. A participant has the option of accepting any of 
the services under the case plan.
    (b) Once the plan is approved by the PAC and the program 
participant, the participant must sign a participatory agreement 
governing the utilization of the plan's supportive services and the 
payment of supportive services fees. The grantee annually must 
renegotiate the agreement with the participant.



Sec. 700.145  Cost distribution.

    (a) General. (1) Grantees, the Secretary concerned, and participants 
shall all contribute to the cost of providing supportive services 
according to section 802(i)(A)(i). Grantees must contribute at least 50 
percent of program cost, participants must contribute fees that in total 
are at least 10 percent of program cost, and the Secretary concerned 
will provide funds in an amount not to exceed 40 percent.
    (2) Section 802(i)(1)(B)(ii) creates a cost-sharing provision 
between grantee and the Secretary concerned if total participant fees 
collected over a year are less than 10 percent of total program cost. 
This provision is subject to availability of appropriated grant funds. 
If funds are not available, the grantee must assume the funding 
shortfall.
    (b) Prohibition on substitution of funds and maintenance of existing 
supportive services. Grantees shall maintain existing funding for and 
provision of supportive services prior to the application date, as set 
forth in section 802(i)(1)(D). The grantee shall ensure that the 
activities provided to the project under a CHSP grant will be in 
addition to, and not in substitution for, these previously existing 
services. The value of these services do not qualify as matching funds. 
Such services must be maintained either for the time the participant 
remains in CHSP, or for the duration of CHSP grant. The grantee shall 
certify compliance with this paragraph to the Secretary concerned.
    (c) Eligible matching funds. (1) All sources of matching funds must 
be directly related to the types of supportive services prescribed by 
the PAC or used for administration of CHSP.
    (2) Matching funds may include:

[[Page 14]]

    (i) Cash (which may include funds from Federal, State and local 
governments, third party contributions, available payments authorized 
under Medicaid for specific individuals in CHSP, Community Development 
Block Grants or Community Services Block Grants, Older American Act 
programs or excess residual funds with the approval of the Secretary 
concerned),
    (ii) The imputed dollar value of other agency or third party-
provided direct services or staff who will work with or provide services 
to program participants; these services must be justified in the 
application to assure that they are the new or expanded services of CHSP 
necessary to keep the program participants independent. If services are 
provided by the state, Indian tribe, unit of general local government, 
or local nonprofit housing sponsor, IHA, PHA, or for-profit or not-for-
profit owner, any salary paid to staff from governmental sources to 
carry out the program of the grantee and any funds paid to residents 
employed by the Program (other than from amounts under a contract under 
section 700.155) is allowable match.
    (iii) In-kind items (these are limited to 10 percent of the 50 
percent matching amount), such as the current market value of donated 
common or office space, utility costs, furniture, material, supplies, 
equipment and food used in direct provision of services. The applicant 
must provide an explanation for the estimated donated value of any item 
listed.
    (iv) The value of services performed by volunteers to CHSP, at the 
rate of $5.00 an hour.
    (d) Limitation. (1) The following are not eligible for use as 
matching funds:
    (i) PHA operating funds;
    (ii) CHSP funds;
    (iii) Section 8 funds other than excess residual receipts;
    (iv) Funds under section 14 of the U.S. Housing Act of 1937, unless 
used for service coordination or case management; and
    (v) Comprehensive grant funds unless used for service coordination 
or case management;
    (2) Local government contributions are limited by section 
802(i)(1)(E).
    (e) Annual review of match. The Secretary concerned will review the 
infusion of matching funds annually, as part of the program or budget 
review. If there are insufficient matching funds available to meet 
program requirements at any point after grant start-up, or at any time 
during the term of the grant (i.e., if matching funds from sources other 
than program participant fees drop below 50 percent of total supportive 
services cost), the Secretary concerned may decrease the federal grant 
share of supportive services funds accordingly.



Sec. 700.150  Program participant fees.

    (a) Eligible program participants. The grantee shall establish fees 
consistent with section 700.145(a). Each program participant shall pay 
CHSP fees as stated in paragraphs (d) and (e) of this section, up to a 
maximum of 20 percent of the program participant's adjusted income. 
Consistent with section 802(d)(7)(A), the Secretary concerned shall 
provide for the waiver of fees for individuals who are without 
sufficient income to provide for any payment.
    (b) Fees shall include: (1) Cash contributions of the program 
participant;
    (2) Food Stamps; and
    (3) Contributions or donations to other eligible programs acceptable 
as matching funds under section 700.145(c).
    (c) Older Americans Act programs. No fee may be charged for any 
meals or supportive services under CHSP if that service is funded under 
an Older Americans Act Program.
    (d) Meals fees: (1) For full meal services, the fees for residents 
receiving more than one meal per day, seven days per week, shall be 
reasonable and shall equal between 10 and 20 percent of the adjusted 
income of the project resident, or the cost of providing the services, 
whichever is less.
    (2) The fees for residents receiving meal services less frequently 
than as described in paragraph (d)(1) of this section shall be in an 
amount equal to 10 percent of the adjusted income of the project 
resident, or the cost of providing the services, whichever is less.
    (e) Other service fees. The grantee may also establish fees for 
other supportive services so that the total fees collected

[[Page 15]]

from all participants for meals and other services is at least 10 
percent of the total cost of CHSP. However, no program participants may 
be required to pay more than 20 percent of their adjusted incomes for 
any combination of services.
    (f) Other residents and nonresidents. Fees shall be established for 
residents of eligible housing projects (other than eligible project 
residents) and for nonresidents who receive meals and other services 
from CHSP under section 700.125(a). These fees shall be in an amount 
equal to the cost of providing the services.



Sec. 700.155  Grant agreement and administration.

    (a) General. HUD will enter into grant agreements with grantees, to 
provide congregate services for program participants in eligible housing 
projects, in order to meet the purposes of CHSP.
    (b) Term of grant agreement and reservation of amount. A grant will 
be for a term of five years and the Secretary concerned shall reserve a 
sum equal to the total approved grant amount for each grantee. Grants 
will be renewable at the expiration of a term, subject to the 
availability of funds and conformance with the regulations in this part, 
except as otherwise provided in section 700.160.
    (c) Monitoring of project sites by governmental units. States, 
Indian tribes, and units of general local government with a grant 
covering multiple projects shall monitor, review, and evaluate Program 
performance at each project site for compliance with CHSP regulations 
and procedures, in such manner as prescribed by HUD or RHS.
    (d) Reports. Each grantee shall submit program and fiscal reports 
and program budgets to the Secretary concerned in such form and at such 
times, as the Secretary concerned requires.
    (e) Enforcement. The Secretary concerned will enforce the 
obligations of the grantee under the agreement through such action as 
may be necessary, including terminating grants, recapturing grant funds, 
and imposing sanctions.
    (1) These actions may be taken for:
    (i) A grantee's non-compliance with the grant agreement or HUD or 
RHS regulations;
    (ii) Failure of the grantee to provide supportive services within 12 
months of execution of the grant agreement.
    (2) Sanctions include but are not limited to the following:
    (i) Temporary withholding of reimbursements or extensions or 
renewals under the grant agreement, pending correction of deficiencies 
by the grantee;
    (ii) Setting conditions in the contract;
    (iii) Termination of the grant;
    (iv) Substitution of grantee; and
    (v) Any other action deemed necessary by the Secretary concerned.
    (f) Renewal of grants. Subject to the availability of funding, 
satisfactory performance, and compliance with the regulations in this 
part:
    (1) Grantees funded initially under this part shall be eligible to 
receive continued, non-competitive renewals after the initial five-year 
term of the grant.
    (2) Grantees will receive priority funding and grants will be 
renewed within time periods prescribed by the Secretary concerned.
    (g) Use of Grant Funds. If during any year, grantees use less than 
the annual amount of CHSP funds provided to them for that year, the 
excess amount can be carried forward for use in later years.



Sec. 700.160  Eligibility and priority for 1978 Act recipients.

    Grantees funded initially under 42 U.S.C. 8001 shall be eligible to 
receive continued, non-competitive funding subject to its availability. 
These grantees will be eligible to receive priority funding under this 
part if they comply with the regulations in this part and with the 
requirements of any NOFA issued in a particular fiscal year.



Sec. 700.165  Evaluation of Congregate Housing Services Programs.

    (a) Grantees shall submit annually to the Secretary concerned, a 
report evaluating the impact and effectiveness of CHSPs at the grant 
sites, in such form as the Secretary concerned shall require.

[[Page 16]]

    (b) The Secretaries concerned shall further review and evaluate the 
performance of CHSPs at these sites and shall evaluate the Program as a 
whole.
    (c) Each grantee shall submit a certification with its application, 
agreeing to cooperate with and to provide requested data to the entity 
responsible for the Program's evaluation, if requested to do so by the 
Secretary concerned.



Sec. 700.170  Reserve for supplemental adjustment.

    The Secretary concerned may reserve funds subject to section 802(o). 
Requests to utilize supplemental funds by the grantee shall be 
transmitted to the Secretary concerned in such form as may be required.



Sec. 700.175  Other Federal requirements.

    In addition to the Federal Requirements set forth in 24 CFR part 5, 
the following requirements apply to grant recipient organizations in 
this program:
    (a) Office of Management and Budget (OMB) Circulars and 
Administrative Requirements. The policies, guidelines, and requirements 
of OMB Circular No. A-87 and 24 CFR part 85 apply to the acceptance and 
use of assistance under this program by public body grantees. The 
policies, guidelines, and requirements of OMB Circular No. A-122 apply 
to the acceptance and use of assistance under this program by non-profit 
grantees. Grantees are also subject to the audit requirements described 
in 24 CFR part 44 (OMB Circular A-128).
    (b) Conflict of interest. In addition to the conflict of interest 
requirements in OMB Circular A-87 and 24 CFR part 85, no person who is 
an employee, agent, consultant, officer, or elected or appointed 
official of the applicant, and who exercises or has exercised any 
function or responsibilities with respect to activities assisted with 
CHSP grant funds, or who is in a position to participate in a decision-
making process or gain inside information with regard to such 
activities, may obtain a personal or financial interest or benefit from 
the activity, or have an interest in any contract, subcontract, or 
agreement with respect thereto, or any proceeds thereunder, either for 
himself or herself or for those with whom he or she has family or 
business ties during his or her tenure, or for one year thereafter. CHSP 
employees may receive reasonable salary and benefits.
    (c) Disclosures required by Reform Act. Section 102(c) of the HUD 
Reform Act of 1989 (42 U.S.C. 3545(c)) requires disclosure concerning 
other government assistance to be made available with respect to the 
Program and parties with a pecuniary interest in CHSP and submission of 
a report on expected sources and uses of funds to be made available for 
CHSP. Each applicant shall include information required by 24 CFR part 
12 on form HUD-2880 ``Applicant/Recipient Disclosure/Update Report,'' as 
required by the Federal Register Notice published on January 16, 1992, 
at 57 FR 1942.
    (d) Nondiscrimination and equal opportunity. (1) The fair housing 
poster regulations (24 CFR part 110) and advertising guidelines (24 CFR 
part 109);
    (2) The Affirmative Fair Housing Marketing Program requirements of 
24 CFR part 200, subpart M, and the implementing regulations at 24 CFR 
part 108; and
    (3) Racial and ethnic collection requirements--Recipients must 
maintain current data on the race, ethnicity and gender of program 
applicants and beneficiaries in accordance with section 562 of the 
Housing and Community Development Act of 1987 and section 808(e)(6) of 
the Fair Housing Act.
    (e) Environmental requirements. Support services, including the 
operating and administrative expenses described in section 700.115(a), 
are categorically excluded from the requirements of the National 
Environmental Policy Act (NEPA) of 1969. These actions, however, are not 
excluded from individual compliance requirements of other environmental 
statutes, Executive Orders, and agency regulations where appropriate. 
When the responsible official determines that any action under this part 
may have an environmental effect because of extraordinary circumstances, 
the requirements of NEPA shall apply.

                        PARTS 701-760 [RESERVED]

[[Page 17]]



PART 761--DRUG ELIMINATION PROGRAMS--Table of Contents




                           Subpart A--General

Sec.
761.1  Purpose and scope.
761.5  Public and Indian housing; encouragement of resident 
          participation.
761.10  Definitions.

                      Subpart B--Use of Grant Funds

761.15  Applicants and activities.

                  Subpart C--Application and Selection

761.20  Application selection and requirements.
761.25  Resident comments on grant application.

                     Subpart D--Grant Administration

761.30  Grant administration.
761.35  Periodic grantee reports.
761.40  Other Federal requirements.

    Authority: 42 U.S.C. 3535(d) and 11901 et seq.

    Source: 61 FR 13987, Mar. 28, 1996, unless otherwise noted.



                           Subpart A--General



Sec. 761.1  Purpose and scope.

    This part 761 contains the regulatory requirements for the Assisted 
Housing Drug Elimination Program and the Public Housing Drug Elimination 
Program. The purposes of these programs are to:
    (a) Eliminate drug-related crime and problems associated with it in 
and around the premises of Federally assisted low-income housing, and 
public and Indian housing developments;
    (b) Encourage owners of Federally assisted low-income housing, 
public housing agencies and Indian housing authorities (collectively 
referred to as HAs), and resident management corporations to develop a 
plan that includes initiatives that can be sustained over a period of 
several years for addressing drug-related crime and problems associated 
with it in and around the premises of housing proposed for funding under 
this part; and
    (c) Make available Federal grants to help owners of Federally 
assisted low-income housing, HAs, and RMCs carry out their plans.



Sec. 761.5  Public and Indian housing; encouragement of resident participation.

    For the purposes of the Public Housing Drug Elimination Program, the 
elimination of drug-related crime and problems associated with it within 
public housing developments requires the active involvement and 
commitment of public housing residents and their organizations. To 
enhance the ability of HAs to combat drug-related crime and problems 
associated with it within their developments, Resident Councils (RCs), 
Resident Management Corporations (RMCs), and Resident Organizations 
(ROs) will be permitted to undertake management functions specified in 
this part, notwithstanding the otherwise applicable requirements of 24 
CFR parts 950 and 964.



Sec. 761.10  Definitions.

    The definitions Department, HUD, Indian, Indian Housing Authority 
(IHA), and Public Housing Agency (PHA) are defined in 24 CFR part 5.
    Controlled substance shall have the meaning provided in section 102 
of the Controlled Substance Act (21 U.S.C. 802).
    Drug intervention means a process to identify assisted housing or 
public housing resident drug users, to assist them in modifying their 
behavior, and/or to refer them to drug treatment to reduce or eliminate 
drug abuse.
    Drug prevention means a process to provide goods and services 
designed to alter factors, including activities, environmental 
influences, risks, and expectations, that lead to drug abuse.
    Drug-related crime shall have the meaning provided in 42 U.S.C. 
11905(2).
    Drug treatment means a program for the residents of an applicant's 
development that strives to end drug abuse and to eliminate its negative 
effects through rehabilitation and relapse prevention.
    Federally assisted low-income housing, or assisted housing, shall 
have the meaning provided in 42 U.S.C. 11905(4). However, sections 
221(d)(3) and 221(d)(4) market rate projects with tenant-based 
assistance contracts and section 8 projects with tenant-based assistance 
are not considered federally assisted

[[Page 18]]

low-income housing and are not eligible for funding under this part 761.
    Governmental jurisdiction means the unit of general local 
government, State, or area of operation of an Indian tribe in which the 
housing development administered by the applicant is located.
    In and around means within, or adjacent to, the physical boundaries 
of a housing development.
    Indian tribe means any tribe, band, pueblo, group, community, or 
nation of Indians, or Alaska Natives.
    Local law enforcement agency means a police department, sheriff's 
office, or other entity of the governmental jurisdiction that has law 
enforcement responsibilities for the community at large, including the 
housing developments owned or administered by the applicant. In Indian 
jurisdictions, this includes tribal prosecutors that assume law 
enforcement functions analogous to a police department or the Bureau of 
Indian Affairs (BIA). More than one law enforcement agency may have 
these responsibilities for the jurisdiction that includes the 
applicant's developments.
    Problems associated with drug-related crime means the negative 
physical, social, educational, and economic impact of drug-related crime 
on assisted housing residents or public and Indian housing residents, 
and the deterioration of the assisted housing or public and Indian 
housing environment because of drug-related crime.
    Program income means gross income received by a grantee and directly 
generated from the use of program funds. When program income is 
generated by an activity only partially assisted with program funds, the 
income shall be prorated to reflect the percentage of program funds 
used.
    Resident council (RC), for purposes of the Public Housing Program, 
means an incorporated or unincorporated nonprofit organization or 
association that meets each of the following requirements:
    (1) It must be representative of the residents it purports to 
represent;
    (2) It may represent residents in more than one development or in 
all of the developments of a HA, but it must fairly represent residents 
from each development that it represents;
    (3) It must adopt written procedures providing for the election of 
specific officers on a regular basis (but at least once every three 
years); and
    (4) It must have a democratically elected governing board. The 
voting membership of the board must consist of residents of the 
development or developments that the resident organization or resident 
council represents.
    Resident Management Corporation (RMC), for purposes of the Public 
Housing Program, means the entity that proposes to enter into, or that 
enters into, a management contract with a PHA under 24 CFR part 964 in 
accordance with the requirements of that part, or with an IHA under 24 
CFR part 950, or with an IHA in accordance with the requirements of this 
part 761. The corporation must have each of the following 
characteristics:
    (1) It must be a nonprofit organization that is incorporated under 
the laws of the State or the Indian tribe in which it is located;
    (2) It may be established by more than one resident organization or 
resident council, so long as each such organization or council:
    (i) Approves the establishment of the corporation, and;
    (ii) Has representation on the Board of Directors of the 
corporation;
    (3) It must have an elected Board of Directors;
    (4) Its by-laws must require the Board of Directors to include 
representatives of each resident organization or resident council 
involved in establishing the corporation;
    (5) Its voting members must be residents of the development or 
developments it manages;
    (6) It must be approved by the resident council or resident 
organization. If there is no council or organization, a majority of the 
households of the development must approve the establishment of such an 
organization to determine the feasibility of establishing a corporation 
to manage the development; and
    (7) It may serve as both the resident management corporation and the 
resident council or the resident organization, so long as the 
corporation meets

[[Page 19]]

the requirements of part 964 of this chapter for a resident council or 
the requirements of this part for a resident organization.
    Resident organization (RO) shall have the same meaning as Resident 
council (RC), as defined in this Sec. 761.10.
    State means any of the several States of the United States, the 
District of Columbia, the Commonwealth of Puerto Rico, any territory or 
possession of the United States, or any agency or instrumentality of a 
State exclusive of local governments. The term does not include any 
public or Indian housing agency under the United States Housing Act of 
1937 (42 U.S.C. 1437 note).
    Unit of general local government means any city, county, town, 
municipality, township, parish, village, local public authority 
(including any public or Indian housing agency under the United States 
Housing Act of 1937) or other general purpose political subdivision of a 
State.



                      Subpart B--Use of Grant Funds



Sec. 761.15  Applicants and activities.

    In any particular funding round, the separate Notices of Funding 
Availability (NOFAs) published in the Federal Register will contain 
specific information concerning eligible and ineligible applicants and 
activities.
    (a) Eligible applicants. (1) Under the Public Housing Drug 
Elimination Program (PHDEP), specific information with regard to 
eligible applicants will appear in the NOFA for each funding round.
    (2) Under the Assisted Housing Program (AHDEP), eligible applicants 
are owners of federally assisted low-income housing, as the term 
``Federally assisted low-income housing'' is defined in Sec. 761.10.
    (b) Eligible activities. An application for funding under the 
Assisted Housing Program or the Public Housing Program may be for one or 
more of the eligible activities described in 42 U.S.C. 11903, as further 
explained or limited in paragraph (b) of this section and in the 
separate annual Notices of Funding Availability (NOFAs) for each 
program. All personnel funded by these programs in accordance with an 
eligible activity must meet, and demonstrate compliance with, all 
relevant Federal, State, tribal, or local government insurance, 
licensing, certification, training, bonding, or other similar law 
enforcement requirements.
    (1) Employment of security personnel, as provided in 42 U.S.C. 
11903(a)(1). For purposes of the Public Housing Program, the following 
provisions in paragraphs (b)(1)(i) and (b)(1)(ii) of this section apply:
    (i) Security guard personnel. (A) Contract security personnel funded 
by this program must perform services not usually performed by local law 
enforcement agencies on a routine basis.
    (B) The applicant, the cooperating local law enforcement agency, and 
the provider (contractor) of the security personnel are required, as a 
part of the security personnel contract, to enter into and execute a 
written agreement that describes the following:
    (1) The activities to be performed by the security personnel, their 
scope of authority, and how they will coordinate their activities with 
the local law enforcement agency;
    (2) The types of activities that the security personnel are 
expressly prohibited from undertaking.
    (ii) Employment of HA police. (A) If additional HA police are to be 
employed for a service that is also provided by a local law enforcement 
agency, the applicant must provide a cost analysis that demonstrates the 
employment of HA police is more cost efficient than obtaining the 
service from the local law enforcement agency.
    (B) Additional HA police services to be funded under this program 
must be over and above those that the existing HA police, if any, 
provides, and the tribal, State or local government is contractually 
obligated to provide under its Cooperation Agreement with the applying 
HA (as required by the HA's Annual Contributions Contract). An applicant 
seeking funding for this activity must first establish a baseline by 
describing the current level of services provided by both the local law 
enforcement agency and the HA police, if any (in terms of the kinds of 
services provided, the number of officers and equipment and the actual 
percent of their time assigned to the developments proposed for 
funding), and then

[[Page 20]]

demonstrate to what extent the funded activity will represent an 
increase over this baseline.
    (C) The applicant and the cooperating local law enforcement agency 
are required to enter into and execute a written agreement that 
describes the following:
    (1) The activities to be performed by the HA police, their scope of 
authority, and how they will coordinate their activities with the local 
law enforcement agency;
    (2) The types of activities that the HA police are expressly 
prohibited from undertaking.
    (2) Reimbursement of local law enforcement agencies for additional 
security and protective services, as provided in 42 U.S.C. 11903(a)(2). 
For purposes of the Public Housing Program, the following provisions in 
paragraphs (b)(2)(i) and (b)(2)(ii) of this section apply:
    (i) Additional security and protective services to be funded must be 
over and above those that the tribal, State, or local government is 
contractually obligated to provide under its Cooperation Agreement with 
the applying HA (as required by the HA's Annual Contributions Contract). 
An application seeking funding for this activity must first establish a 
baseline by describing the current level of services (in terms of the 
kinds of services provided, the number of officers and equipment, and 
the actual percent of their time assigned to the developments proposed 
for funding) and then demonstrate to what extent the funded activity 
will represent an increase over this baseline.
    (ii) Communications and security equipment to improve the 
collection, analysis, and use of information about drug-related criminal 
activities in a public housing community may be eligible items if used 
exclusively in connection with the establishment of a law enforcement 
substation on the funded premises or scattered site developments of the 
applicant. Funds for activities under this section may not be drawn 
until the grantee has executed a contract for the additional law 
enforcement services.
    (3) Physical improvements to enhance security, as provided in 42 
U.S.C. 11903(a)(3). For purposes of the Public Housing Program, the 
following provisions in paragraphs (b)(3)(i) through (b)(3)(iv) of this 
section apply:
    (i) An activity that is funded under any other HUD program shall not 
also be funded by this program.
    (ii) Funding is not permitted for physical improvements that involve 
the demolition of any units in a development.
    (iii) Funding is not permitted for any physical improvements that 
would result in the displacement of persons.
    (iv) Funding is not permitted for the acquisition of real property.
    (4) Employment of investigating individuals, as provided in 42 
U.S.C. 11903(a)(4). For purposes of the Public Housing Program, the 
following provisions in paragraphs (b)(4)(i) and (b)(4)(ii) of this 
section apply:
    (i) If one or more investigators are to be employed for a service 
that is also provided by a local law enforcement agency, the applicant 
must provide a cost analysis that demonstrates the employment of 
investigators is more cost efficient than obtaining the service from the 
local law enforcement agency.
    (ii) The applicant, the cooperating local law enforcement agency, 
and the investigator(s) are required, before any investigators are 
employed, to enter into and execute a written agreement that describes 
the following:
    (A) The nature of the activities to be performed by the 
investigators, their scope of authority, and how they will coordinate 
their activities with the local law enforcement agency;
    (B) The types of activities that the investigators are expressly 
prohibited from undertaking.
    (5) Voluntary tenant patrols, as provided in 42 U.S.C. 11903(a)(5). 
For purposes of the Public Housing Program, the following provisions in 
paragraphs (b)(5)(i) through (b)(5)(iv) of this section apply:
    (i) The provision of training, communications equipment, and other 
related equipment (including uniforms), for use by voluntary tenant 
patrols acting in cooperation with officials of local law enforcement 
agencies is permitted. Grantees are required to obtain liability 
insurance to protect themselves

[[Page 21]]

and the members of the voluntary tenant patrol against potential 
liability for the activities of the patrol. The cost of this insurance 
will be considered an eligible program expense.
    (ii) The applicant, the cooperating local law enforcement agency, 
and the members of the tenant patrol are required, before putting the 
tenant patrol into effect, to enter into and execute a written agreement 
that describes the following:
    (A) The nature of the activities to be performed by the tenant 
patrol, the patrol's scope of authority, and how the patrol will 
coordinate its activities with the local law enforcement agency;
    (B) The types of activities that a tenant patrol is expressly 
prohibited from undertaking, to include but not limited to, the carrying 
or use of firearms or other weapons, nightsticks, clubs, handcuffs, or 
mace in the course of their duties under this program;
    (C) The type of initial tenant patrol training and continuing 
training the members receive from the local law enforcement agency 
(training by the local law enforcement agency is required before putting 
the tenant patrol into effect).
    (iii) Tenant patrol members must be advised that they may be subject 
to individual or collective liability for any actions undertaken outside 
the scope of their authority and that such acts are not covered under a 
HA's or RMC's liability insurance.
    (iv) Grant funds may not be used for any type of financial 
compensation for voluntary tenant patrol participants. However, the use 
of program funds for a grant coordinator for volunteer tenant foot 
patrols is permitted.
    (6) Drug prevention, intervention, and treatment programs, as 
provided in 42 U.S.C. 11903(a)(6).
    (7) Funding resident management corporations (RMCs), resident 
councils (RCs), and resident organizations (ROs). For purposes of the 
Public Housing Program, funding may be provided for HAs that receive 
grants to contract with RMCs and incorporated RCs and ROs to develop 
security and drug abuse prevention programs involving site residents, as 
provided in 42 U.S.C. 11903(a)(7).
    (8) Eliminating drug-related crime in HA-owned housing, under the 
Public Housing Program, as provided in 42 U.S.C. 11903(b).
    (c) Continuation of current program activities. For purposes of both 
drug elimination programs, the Department will evaluate an applicant's 
performance under any previous Drug Elimination Program grants within 
the past five years. Subject to evaluation and review are the 
applicant's financial and program performance; reporting and special 
condition compliance; accomplishment of stated goals and objectives 
under the previous grant; and program adjustments made in response to 
previous ineffective performance. If the evaluation discloses a pattern 
under past grants of ineffective performance with no corrective measures 
attempted, it will result in a deduction of points from the current 
application.
    (d) Ineligible activities. For purposes of the Public Housing 
Program, the following provisions in paragraph (d) of this section 
apply:
    (1) Joint applications are not eligible for funding under this 
program.
    (2) Funding is not permitted for costs incurred before the effective 
date of the grant agreement, including, but not limited to, consultant 
fees for surveys related to the application or the actual writing of the 
application.
    (3) Funding is not permitted for the costs related to screening or 
evicting residents for drug-related crime. However, investigators funded 
under this program may participate in judicial and administrative 
proceedings.



                  Subpart C--Application and Selection



Sec. 761.20  Application selection and requirements.

    (a) Selection criteria. HUD will review each application that it 
determines meets the requirements of this part 761 and evaluate it by 
assigning points in accordance with the selection criteria in 42 U.S.C. 
11904 and in the separate NOFAs published for each program.
    (b) Plan requirement. Each application must include a plan for 
addressing the problem of drug-related crime and/or the problems 
associated with it on the premises of the housing for which the

[[Page 22]]

application is being submitted. For applications that cover more than 
one development, the plan does not have to address each development 
separately if the same activities will apply to each development. The 
plan must address each development separately only where program 
activities will differ from one development to another.
    (c) Notices of Funding Availability. HUD will publish specific 
Notices of Funding Availability (NOFAs) in the Federal Register as 
appropriate for each program to inform the public of the availability of 
grant amounts under this part 761. The NOFAs will provide specific 
guidance with respect to the grant process, including the deadlines for 
the submission of grant applications; the limits (if any) on maximum 
grant amounts; the information that must be submitted to permit HUD to 
score each of the selection criteria; the maximum number of points to be 
awarded for each selection criterion; the contents of the plan for 
addressing drug-related crime and problems associated with it that must 
be included with the application; the listing of any certifications and 
assurances that must be submitted with the application; and the process 
for ranking and selecting applicants. NOFAs will also include any 
additional information, factors, and requirements that HUD has 
determined to be necessary and appropriate to provide for the 
implementation and administration of the program under this part 761.
    (d) Environmental review. Grants under this part 761 are 
categorically excluded from review under the National Environmental 
Policy Act of 1969 (NEPA) (42 U.S.C. 4321), in accordance with 24 CFR 
50.20(p). However, prior to an award of grant funds under this part, HUD 
will perform an environmental review to the extent required by HUD's 
environmental regulations in 24 CFR part 50, including the applicable 
related authorities in 24 CFR 50.4.



Sec. 761.25  Resident comments on grant application.

    The applicant must provide the residents of developments proposed 
for funding under this part 761, as well as any RMCs, RCs, or ROs that 
represent those residents (including any HA-wide RMC, RC, or RO), if 
applicable, with a reasonable opportunity to comment on its application 
for funding under these programs. The applicant must give these comments 
careful consideration in developing its plan and application, as well as 
in the implementation of funded programs. Grantees must maintain copies 
of all written comments submitted for three years.



                     Subpart D--Grant Administration



Sec. 761.30  Grant administration.

    (a) General. Each grantee is responsible for ensuring that grant 
funds are administered in accordance with the requirements of this part 
761, any specific Notices of Funding Availability (NOFAs) issued for 
these programs, 24 CFR part 85 (as applicable), applicable laws and 
regulations, applicable OMB circulars, HUD fiscal and audit controls, 
grant agreements, grant special conditions, the grantee's approved 
budget (SF-424A), budget narrative, plan, and activity timetable.
    (b) Grant term extensions. (1) Grant term. Terms of the grant 
agreement may not exceed 12 months for the Assisted Housing Program, and 
24 months for the Public Housing Program, unless an extension is 
approved by the local HUD Office or local HUD Office of Native American 
Programs. Any funds not expended at the end of the grant term shall be 
remitted to HUD.
    (2) Extension. HUD may grant an extension of the grant term in 
response to a written request for an extension stating the need for the 
extension and indicating the additional time required. HUD will not 
consider requests for retroactive extension of program periods. HUD will 
permit only one extension. HUD will only consider extensions if the 
grantee meets the extension criteria of paragraph (b)(5) of this section 
at the time the grantee submits for approval the request for the 
extension.
    (3) Receipt. The request must be received by the local HUD Office or 
local HUD Office of Native American Programs prior to the termination of 
the grant, and requires approval by the local HUD Office or local HUD 
Office of

[[Page 23]]

Native American Programs with jurisdiction over the grantee.
    (4) Term. The maximum extension allowable for any program period is 
6 months.
    (5) Extension criteria. The following criteria must be met by the 
grantee when submitting a request to extend the expenditure deadline for 
a program or set of programs.
    (i) Financial status reports. There must be on file with the local 
HUD Office or local HUD Office of Native American Programs current and 
acceptable Financial Status Reports, SF-269As.
    (ii) Grant agreement special conditions. The grantee must have 
satisfied all grant agreement special conditions except those conditions 
that the grantee must fulfill in the remaining period of the grant. This 
also includes the performance and resolution of audit findings in a 
timely manner.
    (iii) Justification. The grantee must submit a narrative 
justification with the program extension request. The justification must 
provide complete details, including the circumstances that require the 
proposed extension, and an explanation of the impact of denying the 
request.
    (6) HUD action. The local HUD Office or local HUD Office of Native 
American Programs will attempt to take action on any proposed extension 
request within 15 days after receipt of the request.
    (c) Duplication of funds. To prevent duplicate funding of any 
activity, the grantee must establish controls to assure that an activity 
or program that is funded by other HUD programs, or programs of other 
Federal agencies, shall not also be funded by the Drug Elimination 
Program. The grantee must establish an auditable system to provide 
adequate accountability for funds that it has been awarded. The grantee 
is responsible for ensuring that there is no duplication of funds.
    (d) Insurance. Each grantee shall obtain adequate insurance coverage 
to protect itself against any potential liability arising out of the 
eligible activities under this part. In particular, applicants shall 
assess their potential liability arising out of the employment or 
contracting of security personnel, law enforcement personnel, 
investigators, and drug treatment providers, and the establishment of 
voluntary tenant patrols; evaluate the qualifications and training of 
the individuals or firms undertaking these functions; and consider any 
limitations on liability under tribal, State, or local law. Grantees 
shall obtain liability insurance to protect the members of the voluntary 
tenant patrol against potential liability as a result of the patrol's 
activities under Sec. 761.15(b)(5). Voluntary tenant patrol liability 
insurance costs are eligible program expenses. Subgrantees shall obtain 
their own liability insurance.
    (e) Failure to implement program. If the grant plan, approved 
budget, and timetable, as described in the approved application, are not 
operational within 60 days of the grant agreement date, the grantee must 
report by letter to the local HUD Office or the local HUD Office of 
Native American Programs the steps being taken to initiate the plan and 
timetable, the reason for the delay, and the expected starting date. Any 
timetable revisions that resulted from the delay must be included. The 
local HUD Office or local HUD Office of Native American Programs will 
determine if the delay is acceptable, approve/disapprove the revised 
plan and timetable, and take any additional appropriate action.
    (f) Sanctions. (1) HUD may impose sanctions if the grantee:
    (i) Is not complying with the requirements of this part 761, or of 
other applicable Federal law;
    (ii) Fails to make satisfactory progress toward its drug elimination 
goals, as specified in its plan and as reflected in its performance and 
financial status reports;
    (iii) Does not establish procedures that will minimize the time 
elapsing between drawdowns and disbursements;
    (iv) Does not adhere to grant agreement requirements or special 
conditions;
    (v) Proposes substantial plan changes to the extent that, if 
originally submitted, the applications would not have been selected for 
funding;
    (vi) Engages in the improper award or administration of grant 
subcontracts;
    (vii) Does not submit reports; or

[[Page 24]]

    (viii) Files a false certification.
    (2) HUD may impose the following sanctions:
    (i) Temporarily withhold cash payments pending correction of the 
deficiency by the grantee or subgrantee;
    (ii) Disallow all or part of the cost of the activity or action not 
in compliance;
    (iii) Wholly or partly suspend or terminate the current award for 
the grantee's or subgrantee's program;
    (iv) Require that some or all of the grant amounts be remitted to 
HUD;
    (v) Condition a future grant and elect not to provide future grant 
funds to the grantee until appropriate actions are taken to ensure 
compliance;
    (vi) Withhold further awards for the program; or
    (vii) Take other remedies that may be legally available.



Sec. 761.35  Periodic grantee reports.

    Grantees are responsible for managing the day-to-day operations of 
grant and subgrant supported activities. Grantees must monitor grant and 
subgrant supported activities to assure compliance with applicable 
Federal requirements and that performance goals are being achieved. 
Grantee monitoring must cover each program, function or activity of the 
grant.
    (a) Semi-annual (nonconstruction) performance reports. For purposes 
of the Public Housing Program only, the following provisions in 
paragraph (a) of this section apply:
    (1) In accordance with 24 CFR 85.40(b)(1)(2) and 85.50(b), grantees 
are required to provide the local HUD Office or the local HUD Office of 
Native American Programs with a semi-annual performance report that 
evaluates the grantee's performance against its plan. These reports 
shall include (but are not limited to) the following in summary form:
    (i) Any change or lack of change in crime statistics or other 
indicators drawn from the applicant's plan assessment and an explanation 
of any difference;
    (ii) Successful completion of any of the strategy components 
identified in the applicant's plan;
    (iii) A discussion of any problems encountered in implementing the 
plan and how they were addressed;
    (iv) An evaluation of whether the rate of progress meets 
expectations;
    (v) A discussion of the grantee's efforts in encouraging resident 
participation; and
    (vi) A description of any other programs that may have been 
initiated, expanded, or deleted as a result of the plan, with an 
identification of the resources and the number of people involved in the 
programs and their relation to the plan.
    (2) Reporting period. Semi-annual performance reports (for periods 
ending June 30 and December 31) are due to the local HUD Office or the 
local HUD Office of Native American Programs on July 30 and January 31 
of each year. If the reports are not received by the local HUD Office or 
the local HUD Office of Native American Programs on or before the due 
date, grant funds will not be advanced until the reports are received.
    (b) Final performance report. For purposes of both the Assisted 
Housing Program and the Public Housing Program, the following provisions 
in paragraph (b) of this section apply:
    (1) Evaluation. Grantees are required to provide the local HUD 
Office or the local HUD Office of Native American Programs, as 
applicable, with a final cumulative performance report that evaluates 
the grantee's overall performance against its plan. This report shall 
include (but is not limited to) the information listed in paragraphs 
(a)(1)(i) through (a)(1)(vi) of this section, in summary form.
    (2) Reporting period. The final performance report shall cover the 
period from the date of the grant agreement to the termination date of 
the grant agreement. The report is due to the local HUD Office or the 
local HUD Office of Native American Programs, as applicable, within 90 
days after termination of the grant agreement.
    (c) Semi-annual financial status reporting requirements. For 
purposes of both the Assisted Housing Program and the Public Housing 
Program, the following provisions in paragraph (c) of this section 
apply, as specified below:

[[Page 25]]

    (1) Forms. The grantee shall provide a semi-annual financial status 
report. For purposes of the Public Housing Program, this report shall be 
in accordance with 24 CFR 85.41 (b) and (c). For both the Assisted 
Housing and Public Housing Programs, the grantee shall use the form SF-
269A, Financial Status Report-Long Form, to report the status of funds 
for nonconstruction programs. The grantee shall use SF-269A, block 12, 
``Remarks,'' to report on the status of programs, functions, or 
activities within the program.
    (2) Reporting period. Semi-annual financial status reports (SF-269A) 
must be submitted as follows:
    (i) For purposes of the Assisted Housing Program, semi-annual 
financial status reports covering the first 180 days of funded 
activities must be submitted to the local HUD Office between 190 and 210 
days after the date of the grant agreement. If the SF-269A is not 
received on or before the due date (210 days after the date of the grant 
agreement) by the local HUD Office, grant funds will not be advanced 
until the reports are received.
    (ii) For purposes of the Public Housing Program, semi-annual 
financial status reports (for periods ending June 30 and December 31) 
must be submitted to the local HUD Office or the local Office of Indian 
Programs, as applicable, by July 30 and January 31 of each year. If the 
local HUD Office or the local HUD Office of Native American Programs, as 
applicable, does not receive the SF-269A on or before the due date, the 
grant funds will not be advanced until the reports are received.
    (d) Final financial status report (SF-269A). For purposes of both 
the Assisted Housing Program and the Public Housing Program, the 
following provisions in paragraph (d) of this section apply:
    (1) Cumulative summary. The final report will be a cumulative 
summary of expenditures to date and must indicate the exact balance of 
unexpended funds. The grantee shall remit all Drug Elimination Program 
funds owed to HUD, including any unexpended funds, as follows:
    (i) For purposes of the Assisted Housing Program, the grantee must 
remit such funds to HUD within 90 days after the termination of the 
grant agreement.
    (ii) For purposes of the Public Housing Program, the local HUD 
Office or the local HUD Office of Native American Programs shall notify 
the grantee, in writing, of the requirement to remit such funds to HUD. 
The grantee shall remit such funds prior to or upon receipt of the 
notice.
    (2) Reporting period. The final financial status report shall cover 
the period from the date of the grant agreement to the termination date 
of the grant agreement. The report is due to the local HUD Office or the 
local HUD Office of Native American Programs, as applicable, within 90 
days after the termination of the grant agreement.



Sec. 761.40  Other Federal requirements.

    In addition to the nondiscrimination and equal opportunity 
requirements set forth in 24 CFR part 5, subpart A, use of grant funds 
requires compliance with the following Federal requirements:
    (a) Labor standards. (1) When grant funds are used to undertake 
physical improvements to increase security under Sec. 761.15(b)(3), the 
following labor standards apply:
    (i) The grantee and its contractors and subcontractors must pay the 
following prevailing wage rates, and must comply with all related rules, 
regulations and requirements:
    (A) For laborers and mechanics employed in the program, the wage 
rate determined by the Secretary of Labor pursuant to the Davis-Bacon 
Act (40 U.S.C. 276a et seq.) to be prevailing in the locality with 
respect to such trades;
    (B) For laborers and mechanics employed in carrying out nonroutine 
maintenance in the program, the HUD-determined prevailing wage rate. As 
used in paragraph (a) of this section, nonroutine maintenance means work 
items that ordinarily would be performed on a regular basis in the 
course of upkeep of a property, but have become substantial in scope 
because they have been put off, and that involve expenditures that would 
otherwise materially distort the level trend of maintenance expenses. 
Nonroutine maintenance may include replacement of

[[Page 26]]

equipment and materials rendered unsatisfactory because of normal wear 
and tear by items of substantially the same kind. Work that constitutes 
reconstruction, a substantial improvement in the quality or kind of 
original equipment and materials, or remodeling that alters the nature 
or type of housing units is not nonroutine maintenance.
    (ii) The employment of laborers and mechanics is subject to the 
provisions of the Contract Work Hours and Safety Standards Act (40 
U.S.C. 327-333).
    (2) The provisions of paragraph (a)(1) of this section shall not 
apply to labor contributed under the following circumstances:
    (i) Upon the request of any resident management corporation, HUD 
may, subject to applicable collective bargaining agreements, permit 
residents (for purposes of the Public Housing Program, residents of a 
program managed by the resident management corporation) to volunteer a 
portion of their labor.
    (ii) An individual may volunteer to perform services if:
    (A) The individual does not receive compensation for the voluntary 
services, or is paid expenses, reasonable benefits, or a nominal fee for 
voluntary services; and
    (B) Is not otherwise employed at any time in the work subject to 
paragraphs (a)(1)(i)(A) or (a)(1)(i)(B) of this section.
    (b) Flood insurance. Grants will not be awarded for proposed 
activities that involve acquisition, construction, reconstruction, 
repair or improvement of a building or mobile home located in an area 
that has been identified by the Federal Emergency Management Agency 
(FEMA) as having special flood hazards unless:
    (1) The community in which the area is situated is participating in 
the National Flood Insurance Program in accordance with 44 CFR parts 59 
through 79; or
    (2) Less than a year has passed since FEMA notification to the 
community regarding such hazards; and
    (3) Flood insurance on the structure is obtained in accordance with 
section 102(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 
4001).
    (c) Lead-based paint. The provisions of section 302 of the Lead-
Based Paint Poisoning Prevention Act, 42 U.S.C. 4821-4846, and 
implementing regulations in 24 CFR part 965, subpart H apply to 
activities under these programs as set out in this paragraph (c). 
Paragraph (c) of this section is promulgated pursuant to the authority 
granted in 24 CFR 35.24(b)(4) and supersedes, with respect to all 
housing to which it applies, the requirements (not including 
definitions) prescribed by subpart C of 24 CFR part 35.
    (1) Applicability. The provisions of paragraph (c) of this section 
shall apply to all developments constructed or substantially 
rehabilitated before January 1, 1978, and for which assistance under 
this part is being used for physical improvements to enhance security 
under Sec. 761.15(b)(3).
    (2) Definitions. The term applicable surfaces means all intact and 
nonintact interior and exterior painted surfaces of a residential 
structure.
    (3) Exceptions. The following activities are not covered by this 
section:
    (i) Installation of security devices;
    (ii) Other similar types of single-purpose programs that do not 
involve physical repairs or remodeling of applicable surfaces of 
residential structures; or
    (iii) Any non-single-purpose rehabilitation that does not involve 
applicable surfaces and that does not exceed $3,000 per unit.
    (d) Conflicts of interest. In addition to the conflict of interest 
requirements in 24 CFR part 85 for the Public Housing Program, no 
person, as described in paragraphs (d)(1) and (d)(2) of this section, 
may obtain a personal or financial interest or benefit from an activity 
funded under these drug elimination programs, or have an interest in any 
contract, subcontract, or agreement with respect thereto, or the 
proceeds thereunder, either for him or herself or for those with whom he 
or she has family or business ties, during his or her tenure, or for one 
year thereafter:
    (1) Who is an employee, agent, consultant, officer, or elected or 
appointed official of the grantee, that receives assistance under the 
program and who

[[Page 27]]

exercises or has exercised any functions or responsibilities with 
respect to assisted activities; or
    (2) Who is in a position to participate in a decisionmaking process 
or gain inside information with regard to such activities.
    (e) For IHAs, Sec. 950.115 of this title, ``Applicability of civil 
rights requirements,'' and Sec. 950.120 of this title, ``Compliance with 
other Federal requirements,'' apply and control to the extent they may 
differ from other requirements of this section;
    (f) Indian preference. For purposes of the Public Housing Program, 
applicants are subject to the Indian Civil Rights Act (24 U.S.C. 1301), 
the provisions of section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450e(b)), and the Indian preference 
rules in the IHA procurement regulations at 24 CFR 950, subpart B. These 
provisions require that, to the greatest extent feasible, preference and 
opportunities for training and employment be given to Indians, and that 
preference in the award of subcontracts and subgrants be given to Indian 
Organizations and Indian Owned Economic Enterprises.
    (g) Intergovernmental Review. The requirements of Executive Order 
12372 (3 CFR, 1982 Comp., p. 197) and the regulations issued under the 
Order in 24 CFR part 52, to the extent provided by Federal Register 
notice in accordance with 24 CFR 52.3, apply to these programs.

                        PARTS 762-790 [RESERVED]



PART 791--REVIEW OF APPLICATIONS FOR HOUSING ASSISTANCE AND ALLOCATIONS OF HOUSING ASSISTANCE FUNDS--Table of Contents




                      Subpart A--General Provisions

Sec.
791.101  Applicability and scope.
791.102  Definitions.

                          Subpart B--[Reserved]

             Subpart C--Applications for Housing Assistance

791.301  General.
791.302  Finding of need for housing assistance.
791.303  Notification of local government.
791.304  Review and comment period.
791.305  HUD review of applications for housing assistance.

    Subpart D--Allocation of Budget Authority for Housing Assistance

791.401  General.
791.402  Determination of low-income housing needs.
791.403  Allocation of housing assistance.
791.404  Field Office allocation planning.
791.405  Reallocations of budget authority.
791.406  Competition.
791.407  Headquarters Reserve.

    Authority: 42 U.S.C. 1439 and 3535(d).

    Source: 61 FR 10849, Mar. 15, 1996, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 791.101  Applicability and scope.

    This part describes the roles and responsibilities of HUD and local 
governments under section 213 of the Housing and Community Development 
Act of 1974 (42 U.S.C. 1437). It applies to the allocation of budget 
authority, and the review and approval of applications for housing 
assistance under the United States Housing Act of 1937 (42 U.S.C. 1437-
1437q), section 101 of the Housing and Urban Development Act of 1965 (12 
U.S.C. 1701s), and with respect to subpart D only, section 202 of the 
Housing Act of 1959 (12 U.S.C. 1710q), except as follows:
    (a) This part does not apply to programs for public housing 
operating subsidy, public housing modernization, or rental 
rehabilitation grant assistance under section 9, 14, or 17 of the United 
States Housing Act of 1937; and
    (b) Subpart D of this part does not apply to the allocation of 
budget authority for housing development grant assistance under section 
17 of the U.S. Housing Act of 1937.



Sec. 791.102  Definitions.

    Act. The Housing and Community Development Act of 1974 (42 U.S.D. 
1437), as amended.
    Allocation area. A municipality, county, or group of municipalities 
or counties or Indian areas identified by the

[[Page 28]]

HUD field office for the purpose of allocating housing assistance.
    Application for housing assistance. The first submission to HUD for 
housing assistance under one of the programs identified in 
Sec. 791.101(a). For the purposes of this part, the term includes an 
application, a preliminary proposal, or a proposal, so long as it meets 
the applicable program regulations. For the public housing program, the 
first application identifying a project site will be considered the 
application for housing assistance.
    Assistant Secretary. The Assistant Secretary for Housing or the 
Assistant Secretary for Public and Indian Housing, as appropriate to the 
housing assistance under consideration.
    Budget authority. The maximum amount authorized by the Congress for 
payments over the term of assistance contracts.
    Chief executive officer. The elected official or legally designated 
official who has the primary responsibility for conducting the 
governmental affairs of a unit of general local government. Examples of 
the ``chief executive officer'' include: the elected mayor of a 
municipality; the elected county executive of a county; the presiding 
officer of a county commission or board in a county that has no elected 
county executive; the official designated by the governing body of the 
local government pursuant to law (e.g., the city manager or city 
administrator); and the chairman, governor, chief or president of an 
Indian tribe or Alaskan native village.
    Fiscal year. The official operating period of the Federal 
government, beginning on October 1 and ending on September 30.
    Household type. The three household types are: elderly, small 
family, and large family. References to household type shall mean the 
household type within the appropriate tenure type.
    Housing type. The three housing types are:
    (1) New construction;
    (2) Rehabilitation; and
    (3) Existing housing.
    Local government. Any city, county, town, township, parish, village 
or other unit of general local government which is a general purpose 
political subdivision of a State or the Commonwealth of Puerto Rico; 
Guam, the Commonwealth of the Northern Marianas, the Virgin Islands and 
American Samoa, or a general purpose political subdivision thereof; a 
combination of such political subdivisions recognized by the Secretary 
of HUD: the District of Columbia; the former Trust Territories of the 
Pacific Islands, as applicable ; Indian tribes, bands, groups and 
nations, including Alaska Indians, Aleuts and Eskimos; and any Alaskan 
native village of the United States. The term also includes a State or 
local public body or agency, community association, or other entity 
which is approved by HUD to provide public facilities or services to a 
new community meeting the requirements of Title IV of the Housing and 
Urban Development Act of 1968 (42 U.S.C. 3901) or Title VII of the 
Housing and Urban Development Act of 1970 (42 U.S.C. 4501).
    Metropolitan area. See MSA.
    MSA. A metropolitan statistical area established by the Office of 
Management and Budget. The term also includes primary metropolitan 
statistical areas (PMSAs), which are the component parts of larger 
urbanized areas designated as consolidated metropolitan statistical 
areas (CMSAs). Where an MSA is divided among two or more field offices, 
references to an MSA mean the portion of the MSA within the State/Area 
Office jurisdiction.
    Public housing agency. Any State, county, municipality, or other 
governmental entity or public body (or agency or instrumentality 
thereof) which is authorized to engage in or assist in the development 
or operation of housing for low-income families.
    Tenure type. The two tenure types are owners and renters.
    Urban county. Any county within a metropolitan area which is 
authorized under State law to undertake essential community development 
and housing assistance activities in its unincorporated areas, and which 
meets the other requirements of 24 CFR 570.307 for qualification as an 
urban county.

[[Page 29]]



                          Subpart B--[Reserved]



             Subpart C--Applications for Housing Assistance



Sec. 791.301  General.

    This subpart C establishes the policies and procedures governing 
reviews and determinations, pursuant to section 213(c) of the Act, with 
respect to applications for housing assistance, under the programs 
identified in Sec. 791.101(a).



Sec. 791.302  Finding of need for housing assistance.

    With respect to each application for housing assistance, the field 
office is required to make a determination as to whether there is a need 
for such housing and whether the public facilities and services 
available in the area will be adequate to serve the proposed housing.
    (a) The initial determination of need for housing assistance within 
an allocation area is made as part of the allocation process in 
Sec. 791.404. In making this determination, the field office shall give 
consideration to the contents of any applicable State or areawide 
housing plan proposing housing assistance in the area, as well as 
generally available data on population, poverty, housing overcrowding, 
housing vacancies, amount of substandard housing, or other objectively 
measurable conditions pertaining to low-income housing needs.
    (b) Prior to making a determination with regard to a specific 
application, the field office shall give the local government in which 
the proposed assistance is to be provided an opportunity to provide 
comments, during a 30-calendar-day period, concerning the need for 
housing assistance and the adequacy of public facilities and services. 
If the local government finding is negative, it must be accompanied by 
supporting evidence.



Sec. 791.303  Notification of local government.

    (a) The field office shall notify the chief executive officer no 
later than 10 working days after receipt (or completion of any 
preliminary review and determination that the application is acceptable 
for further processing) that an application for housing assistance to be 
provided in that jurisdiction has been received and is under 
consideration.
    (1) When the application is for housing assistance in newly 
constructed or rehabilitated housing within the overlapping 
jurisdictions of more than one local government (e.g., a municipality 
which is also within a county), the field office shall notify the chief 
executive officer of each local government.
    (2) When the application is for housing assistance in newly 
constructed or rehabilitated housing within several nonoverlapping 
political jurisdictions (e.g., a scattered site project), the field 
office shall notify the chief executive officer of each local government 
where housing assistance is proposed.
    (3) For a Section 8 existing housing, moderate rehabilitation, or 
housing voucher application submitted in accordance with 24 CFR part 
982, the field office shall notify the chief executive officers of the 
localities that are identified in the application as:
    (i) Primary areas from which households to be assisted under the 
existing housing program will be drawn; or
    (ii) Primary areas in which units will be rehabilitated under the 
moderate rehabilitation program.
    (b) The notification to the chief executive officer shall:
    (1) Indicate that the field office has received and is considering 
an application for housing assistance, and identify the housing program, 
the housing type, the number of units by bedroom size and household 
type, and the proposed location(s).
    (2) Invite the submission, within a period of 30 calendar days from 
the date of the field office letter, of a statement on behalf of the 
local government concerning the need for housing assistance and the 
adequacy of public facilities and services and any other comments which 
are relevant to a determination by the field office concerning the 
proposed housing assistance (e.g., comments on the site; whether the 
project is approvable under local codes and zoning ordinances).

[[Page 30]]



Sec. 791.304  Review and comment period.

    The chief executive officer shall have a 30-calendar day comment 
period, beginning on the date of the notification letter described in 
Sec. 791.303, to submit written comments relevant to a determination by 
the field office concerning the approval of an application for housing 
assistance. The field office shall consider the comment period closed 
when the written comments are received. In no case shall the Program 
Office Director in the field office be obligated to consider subsequent 
or revised comments unless the initial response indicated that 
additional comments would be provided and such comments are received 
prior to the expiration of the 30-day comment period. As an alternative 
to this process, the chief executive officer may submit any comments on 
the application with the application at the time it is submitted to HUD. 
Such early comment shall state whether such comment is intended to be 
the final comment, notwithstanding the 30-day period otherwise provided 
under this paragraph.



Sec. 791.305  HUD review of applications for housing assistance.

    (a) The field office shall not approve an application for housing 
assistance prior to either:
    (1) Receipt of comments pursuant to Sec. 791.304; or
    (2) Expiration of the 30-day comment period, whichever occurs 
earlier.
    (b) In determining whether an application will be approved, the 
field office shall consider the comments provided by the local 
government including comments submitted by the chief executive officer 
on behalf of the local government. The field office shall make an 
independent determination as to whether there is a need for housing 
assistance and whether facilities and services are adequate before 
approving the application.
    (c) The field office shall promptly notify both the chief executive 
officer and the applicant of the HUD determination with respect to the 
approval or disapproval of the application for housing assistance.



    Subpart D--Allocation of Budget Authority for Housing Assistance



Sec. 791.401  General.

    This subpart D establishes the procedures for allocating budget 
authority under section 213(d) of the Act for the programs identified in 
Sec. 791.101(a). It describes the allocation of budget authority by the 
appropriate Assistant Secretary to the applicable Program Office 
Director in the HUD field office, and by the Program Office Director to 
allocation areas within their jurisdiction.



Sec. 791.402  Determination of low-income housing needs.

    (a) Before budget authority is allocated, the Assistant Secretary 
for Policy Development and Research shall determine the relative need 
for low-income housing assistance in each HUD field office jurisdiction. 
This determination shall be based upon data from the most recent, 
available decennial census and, where appropriate, upon more recent data 
from the Bureau of the Census or other Federal agencies, or from the 
American Housing Survey.
    (b) Except for paragraph (c) of this section, the factors used to 
determine the relative need for assistance shall be based upon the 
following criteria:
    (1) Population. The renter population;
    (2) Poverty. The number of renter households with annual incomes at 
or below the poverty level, as defined by the Bureau of the Census;
    (3) Housing overcrowding. The number of renter-occupied housing 
units with an occupancy ratio of 1.01 or more persons per room;
    (4) Housing vacancies. The number of renter housing units that would 
be required to maintain vacancies at levels typical of balanced market 
conditions;
    (5) Substandard housing. The number of housing units built before 
1940 and occupied by renter households with annual incomes at or below 
the poverty level, as defined by the Bureau of the Census; and
    (6) Other objectively measurable conditions. Data indicating 
potential need for rental housing assistance, such as the number of 
renter households with incomes below specified levels and paying a gross 
rent of more than 30 percent of household income.

[[Page 31]]

    (c)(1) For the section 202 elderly program, the data used shall 
reflect relevant characteristics of the elderly population. The data 
shall use the criteria specified in paragraph (b)(1) and (6) of this 
section, as modified to apply specifically to the needs of the elderly 
population.
    (2) Budget authority for the Indian housing program under 24 CFR 
part 905 shall be allocated on the basis of the relative housing needs 
of the Indian tribal population, as measured by the Bureau of Indian 
Affairs, and by data for non-BIA recognized groups served by the Indian 
housing program.
    (d) Based on the criteria in paragraphs (b) and (c)(1) of this 
section, the Assistant Secretary for Policy Development and Research 
shall establish housing needs factors for each county and independent 
city in the field office jurisdiction, and shall aggregate the factors 
into metropolitan and nonmetropolitan totals for the field office. The 
field office total for each metropolitan and nonmetropolitan factor is 
then divided by the respective national total for that factor. The 
resulting housing needs ratios under paragraph (b) of this section are 
then weighted to provide metropolitan and nonmetropolitan housing needs 
percentages for each field office, using the following weights: 
Population, 20 percent; poverty, 20 percent; housing overcrowding, 10 
percent; housing vacancies, 10 percent; substandard housing, 20 percent; 
other objectively measurable conditions, 20 percent. For the section 202 
elderly program, the two criteria described in paragraph (c)(1) of this 
section are weighted equally.
    (e) The Assistant Secretary for Policy Development and Research 
shall adjust the housing needs percentages derived in paragraph (d) of 
this section to reflect the relative cost of providing housing among the 
field office jurisdictions.



Sec. 791.403  Allocation of housing assistance.

    (a) The total budget authority available for any fiscal year shall 
be determined by adding any available, unreserved budget authority from 
prior fiscal years to any newly appropriated budget authority for each 
housing program. On a nationwide basis, at least 20 percent, but not 
more than 25 percent, of the total budget authority available for any 
fiscal year, which is allocated pursuant to paragraph (b)(2) of this 
section and any amounts which are retained pursuant to Sec. 791.407, 
shall be allocated for use in nonmetropolitan areas.
    (b) Budget authority available for the fiscal year, except for that 
retained pursuant to Sec. 791.407, shall be allocated to the field 
offices as follows:
    (1) Budget authority shall be allocated as needed for uses that the 
Secretary determines are incapable of geographic allocation by formula, 
including--
    (i) Amendments of existing contracts, renewal of assistance 
contracts, assistance to families that would otherwise lose assistance 
due to the decision of the project owner to prepay the project mortgage 
or not to renew the assistance contract, assistance to prevent 
displacement or to provide replacement housing in connection with the 
demolition or disposition of public and Indian housing, assistance in 
support of the property disposition and loan management functions of the 
Secretary;
    (ii) Assistance which is--
    (A) The subject of a line item identification in the HUD 
appropriations law, or in the table customarily included in the 
Conference Report on the appropriation for the Fiscal Year in which the 
funds are to be allocated;
    (B) Reported in the Operating Plan submitted by HUD to the 
Committees on Appropriations; or
    (C) Included in an authorization statute where the nature of the 
assistance, such as a prescribed set-aside, is, in the determination of 
the Secretary, incapable of geographic allocation by formula,
    (iii) Assistance determined by the Secretary to be necessary in 
carrying out the following programs authorized by the Cranston-Gonzalez 
National Affordable Housing Act: the Homeownership and Opportunity 
Through HOPE Act under title IV and HOPE for Elderly Independence under 
section 803.
    (2) Budget authority remaining after carrying out allocation steps 
outlined in paragraph (b)(1) of this section shall

[[Page 32]]

be allocated in accordance with the housing needs percentages calculated 
under paragraphs (b), (c), (d), and (e) of Sec. 791.402. HUD may 
allocate assistance under this paragraph in such a manner that each 
State shall receive not less than one-half of one percent of the amount 
of funds available for each program referred to in Sec. 791.101(a) in 
each fiscal year. If the budget authority for a particular program is 
insufficient to fund feasible projects, or to promote meaningful 
competition, at the field office level, budget authority may be 
allocated among the ten geographic areas of the country. The funds so 
allocated will be assigned by Headquarters to the field office(s) with 
the highest ranked applications within the ten geographic areas.
    (c) At least annually HUD will publish a notice in the Federal 
Register informing the public of all allocations under 
Sec. 791.403(b)(2).



Sec. 791.404  Field Office allocation planning.

    (a) General objective. The allocation planning process should 
provide for the equitable distribution of available budget authority, 
consistent with the relative housing needs of each allocation area 
within the field office jurisdiction.
    (b) Establishing allocation areas. Allocation areas, consisting of 
one or more counties or independent cities, shall be established by the 
field office in accordance with the following criteria:
    (1) Each allocation shall be to the smallest practicable area, but 
of sufficient size so that at least three eligible entities are viable 
competitors for funds in the allocation area, and so that all applicable 
statutory requirements can be met. (It is expected that in many 
instances individual MSAs will be established as metropolitan allocation 
areas.) For the section 202 program for the elderly, the allocation area 
must include sufficient units to promote a meaningful competition among 
disparate types of providers of such housing (e.g., local as well as 
national sponsors, minority as well as non-minority sponsors). The 
preceding sentence shall not apply to projects acquired from the 
Resolution Trust Corporation under section 21A(c) of the Federal Home 
Loan Bank Act.
    (2) Each allocation area shall also be of sufficient size, in terms 
of population and housing need, that the amount of budget authority 
being allocated to the area will support at least one feasible program 
or project.
    (3) In establishing allocation areas, counties and independent 
cities within MSAs should not be combined with counties that are not in 
MSAs.
    (c) Determining the amount of budget authority. Where the field 
office establishes more than one allocation area, it shall determine the 
amount of budget authority to be allocated to each allocation area, 
based upon a housing needs percentage which represents the needs of that 
area relative to the needs of the metropolitan or nonmetropolitan 
portion of the field office jurisdiction, whichever is appropriate. For 
each program, a composite housing needs percentage developed under 
Sec. 791.402 for those counties and independent cities comprising the 
allocation area shall be aggregated into allocation area totals.
    (d) Planning for the allocation. The field office should develop an 
allocation plan which reflects the amount of budget authority determined 
for each allocation area in paragraph (c). The plan should include a map 
or maps clearly showing the allocation areas within the field office 
jurisdiction. The relative share of budget authority by individual 
program type need not be the same for each allocation area, so long as 
the total amount of budget authority made available to the allocation 
area is not significantly reduced.



Sec. 791.405  Reallocations of budget authority.

    (a) The field office shall make every reasonable effort to use the 
budget authority made available for each allocation area within such 
area. If the Program Office Director determines that not all of the 
budget authority allocated for a particular allocation area is likely to 
be used during the fiscal year, the remaining authority may be allocated 
to other allocation areas where it is likely to be used during that 
fiscal year.

[[Page 33]]

    (b) If the Assistant Secretary determines that not all of the budget 
authority allocated to a field office is likely to be used during the 
fiscal year, the remaining authority may be reallocated to another field 
office where it is likely to be used during that fiscal year.
    (c) Any reallocations of budget authority among allocation areas or 
field offices shall be consistent with the assignment of budget 
authority for the specific program type and established set-asides.
    (d) Notwithstanding the requirements of paragraphs (a) through (c) 
of this section, budget authority shall not be reallocated for use in 
another State unless the Program Office Director or the Assistant 
Secretary has determined that other allocation areas within the same 
State cannot use the available authority during the fiscal year.



Sec. 791.406  Competition.

    (a) All budget authority allocated pursuant to Sec. 791.403(b)(2) 
shall be reserved and obligated pursuant to a competition. Any such 
competition shall be conducted pursuant to specific criteria for the 
selection of recipients of assistance. These criteria shall be contained 
in a regulation promulgated after notice and public comment or, to the 
extent authorized by law, a notice published in the Federal Register.
    (b) This section shall not apply to assistance referred to in 
Secs. 791.403(b)(1) and 791.407.



Sec. 791.407  Headquarters Reserve.

    (a) A portion of the budget authority available for the housing 
programs listed in Sec. 791.101(a), not to exceed an amount equal to 
five percent of the total amount of budget authority available for the 
fiscal year for programs under the United States Housing Act of 1937 
listed in Sec. 791.101(a), may be retained by the Assistant Secretary 
for subsequent allocation to specific areas and communities, and may 
only be used for:
    (1) Unforeseen housing needs resulting from natural and other 
disasters, including hurricanes, tornadoes, storms, high water, wind 
driven water, tidal waves, tsunamis, earthquakes, volcanic eruptions, 
landslides, mudslides, snowstorms, drought, fires, floods, or 
explosions, which in the determination of the Secretary cause damage of 
sufficient severity and magnitude to warrant Federal housing assistance;
    (2) Housing needs resulting from emergencies, as certified by the 
Secretary, other than disasters described in paragraph (a)(1) of this 
section. Emergency housing needs that can be certified are only those 
that result from unpredictable and sudden circumstances causing housing 
deprivation (such as physical displacement, loss of Federal rental 
assistance, or substandard housing conditions) or causing an unforeseen 
and significant increase in low-income housing demand in a housing 
market (such as influx of refugees or plant closings);
    (3) Housing needs resulting from the settlement of litigation; and
    (4) Housing in support of desegregation efforts.
    (b) Applications for funds retained under paragraph (a) of this 
section shall be made to the field office, which will make 
recommendations to Headquarters for approval or rejection of the 
application. Applications generally will be considered for funding on a 
first-come, first-served basis. Specific instructions governing access 
to the Headquarters Reserve shall be published by notice in the Federal 
Register, as necessary.
    (c) Any amounts retained in any fiscal year under paragraph (a) of 
this section that are not reserved by the end of such fiscal year shall 
remain available for the following fiscal year in the program under 
Sec. 791.101(a) from which the amount was retained. Such amounts shall 
be allocated pursuant to Sec. 791.403(b)(2).



PART 792--HOUSING AGENCY SECTION 8 FRAUD RECOVERIES--Table of Contents




                      Subpart A--General Provisions

Sec.
792.101  Purpose.
792.102  Applicability.
792.103  Definitions.

                 Subpart B--Recovery of Section 8 Funds

792.201  Conduct of litigation.

[[Page 34]]

792.202  HA retention of proceeds.
792.203  Application of amounts recovered.
792.204  Recordkeeping and reporting.

    Authority: 42 U.S.C. 1437f note and 3535(d).

    Source: 59 FR 9409, Feb. 28, 1994, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 792.101  Purpose.

    The purpose of this part is to encourage public housing agencies and 
Indian housing authorities (HAs) to investigate and pursue instances of 
tenant and owner fraud and abuse in the operation of the section 8 
housing assistance payments programs.



Sec. 792.102  Applicability.

    (a) This part applies to an HA acting as a contract administrator 
under an annual contributions contract with HUD in any section 8 housing 
assistance payments program. To be eligible to retain section 8 tenant 
or owner fraud recoveries, the HA must be the principal party initiating 
or sustaining an action to recover amounts from families.
    (b) This part applies only to those instances when a tenant or owner 
committed fraud, and the fraud recoveries are obtained through 
litigation brought by the HA (including settlement of the lawsuit), a 
court-ordered restitution pursuant to a criminal proceeding, or an 
administrative repayment agreement with the family or owner as a result 
of an HA administrative grievance procedure pursuant to, or 
incorporating the requirements of, Sec. 882.216 or 887.405. This part 
does not apply to cases of owner fraud in HA-owned or controlled units, 
or where incorrect payments were made or benefits received because of 
calculation errors instead of willful fraudulent activities.
    (c) This part applies to all tenant and owner fraud recoveries 
resulting from litigation brought by the HA (including settlement of the 
lawsuit), or a court-ordered restitution pursuant to a criminal 
proceeding obtained on or after October 8, 1986, and to all tenant and 
owner fraud recoveries obtained through administrative repayment 
agreements signed on or after October 28, 1992.



Sec. 792.103  Definitions.

    Fraud and abuse. Fraud and abuse means a single act or pattern of 
actions:
    (1) That constitutes false statement, omission, or concealment of a 
substantive fact, made with intent to deceive or mislead; and
    (2) That results in payment of section 8 program funds in violation 
of section 8 program requirements.
    HA (Housing Agency) is the collective term for Public Housing 
Agencies and Indian Housing Authorities. The terms Public Housing Agency 
(PHA) and Indian Housing Authority (IHA) are defined in 24 CFR part 5.
    Judgment. Judgment means a provision for recovery of section 8 
program funds obtained through fraud and abuse, by order of a court in 
litigation or by a settlement of a claim in litigation, whether or not 
stated in a court order.
    Litigation. A lawsuit brought by a HA to recover section 8 program 
funds obtained as a result of fraud and abuse.
    Principal party in initiating or sustaining an action to recover. 
Principal party in initiating or sustaining an action to recover means 
the party that incurs more than half the costs incurred in:
    (1) Recertifying tenants who fraudulently obtained section 8 rental 
assistance;
    (2) Recomputing the correct amounts owed by tenants; and
    (3) Taking needed actions to recoup the excess benefits received, 
such as initiating litigation.
    Costs incurred to detect potential excessive benefits in the routine 
day-to-day operations of the program are excluded in determining the 
principal party in initiating or sustaining an action to recover. For 
example, the cost of income verification during an annual 
recertification would not be counted in determining the principal party 
in initiating or sustaining an action to recover.
    Repayment agreement. Repayment agreement means a formal document 
signed by a tenant or owner and provided to an HA in which a tenant or

[[Page 35]]

owner acknowledges a debt, in a specific amount, and agrees to repay the 
amount due at specific time period(s).

[59 FR 9409, Feb. 28, 1994, as amended at 61 FR 5212, Feb. 9, 1996]



                 Subpart B--Recovery of Section 8 Funds



Sec. 792.201  Conduct of litigation.

    The HA must obtain HUD approval before initiating litigation in 
which the HA is requesting HUD assistance or participation.



Sec. 792.202  HA retention of proceeds.

    (a) Where the HA is the principal party initiating or sustaining an 
action to recover amounts from tenants that are due as a result of fraud 
and abuse, the HA may retain, the greater of:
    (1) Fifty percent of the amount it actually collects from a 
judgment, litigation (including settlement of lawsuit) or an 
administrative repayment agreement pursuant to, or incorporating the 
requirements of, Sec. 882.216 or Sec. 887.405; or
    (2) Reasonable and necessary costs that the HA incurs related to the 
collection from a judgment, litigation (including settlement of lawsuit) 
or an administrative repayment agreement pursuant to, or incorporating 
the requirements of, Sec. 882.216 or Sec. 887.405. Reasonable and 
necessary costs include the costs of the investigation, legal fees and 
collection agency fees.
    (b) If HUD incurs costs on behalf of the HA in obtaining the 
judgment, these costs must be deducted from the amount to be retained by 
the HA.



Sec. 792.203  Application of amounts recovered.

    (a) The HA may only use the amount of the recovery it is authorized 
to retain in support of the section 8 program in which the fraud 
occurred.
    (b) The remaining balance of the recovery proceeds (i.e., the 
portion of recovery the HA is not authorized to retain) must be applied 
as directed by HUD.



Sec. 792.204  Recordkeeping and reporting.

    To permit HUD to audit amounts retained under this part, an HA must 
maintain all records required by HUD, including:
    (a) Amounts recovered on any judgment or repayment agreement;
    (b) The nature of the judgment or repayment agreement; and
    (c) The amount of the legal fees and expenses incurred in obtaining 
the judgment or repayment agreement and recovery.

(Approved by the Office of Management and Budget under Control Number 
2577-0053)

                        PARTS 793-798 [RESERVED]

[[Page 37]]



CHAPTER VIII--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL 
HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
 
(SECTION 8 HOUSING ASSISTANCE PROGRAMS, SECTION 202 DIRECT LOAN PROGRAM, 
 SECTION 202 SUPPORTIVE HOUSING FOR THE ELDERLY PROGRAM AND SECTION 811 
        SUPPORTIVE HOUSING FOR PERSONS WITH DISABILITIES PROGRAM)




  --------------------------------------------------------------------
Part                                                                Page
800-810

[Reserved]

811             Tax exemption of obligations of public 
                    housing agencies and related amendments.          39
850             Housing development grants..................          45
880             Section 8 housing assistance payments 
                    program for new construction............          48
881             Section 8 housing assistance payments 
                    program for substantial rehabilitation..          69
882             Section 8 moderate rehabilitation programs..          76
883             Section 8 housing assistance payments 
                    program--State housing agencies.........         101
884             Section 8 housing assistance payments 
                    program, new construction set-aside for 
                    Section 515 rural rental housing 
                    projects................................         112
886             Section 8 housing assistance payments 
                    program--special allocations............         132
887             Housing vouchers............................         170

[[Page 38]]

888             Section 8 housing assistance payments 
                    program--fair market rents and contract 
                    rent annual adjustment factors..........         182
891             Supportive housing for the elderly and 
                    persons with disabilities...............         191


  Editorial Note: For nomenclature changes to chapter VIII, see 59 FR 
14090, Mar. 25, 1994.

[[Page 39]]

                       PARTS 800--810  [RESERVED]



PART 811--TAX EXEMPTION OF OBLIGATIONS OF PUBLIC HOUSING AGENCIES AND RELATED AMENDMENTS--Table of Contents




Sec.
811.101  Purpose and scope.
811.102  Definitions.
811.103  General.
811.104  Approval of Public Housing Agencies (other than agency or 
          instrumentality PHAS).
811.105  Approval of agency or instrumentality PHA.
811.106  Default under the contract.
811.107  Financing documents and data.
811.108  Debt service reserve.
811.109  Trust indenture provisions.
811.110  Refunding of obligations issued to finance Section 8 projects.

    Authority: Sec. 7(d), Dept. of HUD Act (42 U.S.C. 3535(d)); secs. 
3(6), 5(b), 8, 11(b) of the U.S. Housing Act of 1937 (42 U.S.C. 1437a, 
1437c, 1437f, and 1437).

    Source: 44 FR 12360, Mar. 6, 1979, unless otherwise noted.



Sec. 811.101  Purpose and scope.

    (a) The purpose of this part is to provide a basis for determining 
tax exemption of obligations issued by public housing agencies pursuant 
to Section 11(b) of the United States Housing Act of 1937 (42 U.S.C. 
1437i) to refund bonds for Section 8 new construction or substantial 
rehabilitation projects.
    (b) This part does not apply to tax exemption pursuant to Section 
11(b) for low-income housing projects developed pursuant to 24 CFR parts 
950 and 941.

[61 FR 14460, Apr. 1, 1996]



Sec. 811.102  Definitions.

    The terms HUD and Public Housing Agency (PHA) are defined in 24 CFR 
part 5.
    Act. The United States Housing Act of 1937 (42 U.S.C. 1437, et 
seq.).
    Agency or Instrumentality PHA. A not-for-profit private or public 
organization that is authorized to engage in or assist in the 
development or operation of low-income housing and that has the 
relationship to a parent entity PHA required by this subpart.
    Agreement. An Agreement to Enter Into Housing Assistance Payments 
Contract as defined in the applicable Section 8 regulations. The form of 
agreement for projects financed with tax-exempt obligations shall be 
amended in accordance with this subpart.
    Annual Contributions Contract (ACC). An Annual Contributions 
Contract as defined in the applicable Section 8 regulations. The form of 
ACC for projects financed with tax-exempt obligations shall be amended 
in accordance with this subpart.
    Applicable Section 8 Regulations. The provisions of 24 CFR parts 
880, 881, or 883 that apply to the project.
    Contract. A Housing Assistance Payments Contract as defined in the 
applicable Section 8 regulations. The form of contract for projects 
financed with tax-exempt obligations shall be amended in accordance with 
this subpart.
    Cost of issuance. Ordinary, necessary, and reasonable costs in 
connection with the issuance of obligations. These costs shall include 
attorney fees, rating agency fees, trustee fees, printing costs, bond 
counsel fees, feasibility studies (for non-FHA-insured projects only), 
consultant fees and other fees or expenses approved by HUD.
    Debt service reserve. A fund maintained by the trustee as a 
supplemental source of money for the payment of debt service on the 
obligations.
    Financing Agency. The PHA (parent entity PHA or agency or 
instrumentality PHA) that issues the tax-exempt obligations for 
financing of the project.
    Low-income Housing Project. Housing for families and persons of low-
income developed, acquired or assisted by a PHA under Section 8 of the 
Act and the improvement of any such housing.
    Obligations. Bonds or other evidence of indebtedness that are issued 
to provide permanent financing of a low-income housing project. Pursuant 
to Section 319(b) of the Housing and Community Development Act of 1974, 
the term obligation shall not include any obligation secured by a 
mortgage insured under Section 221(d)(3) of the National Housing Act (12 
U.S.C. 1715l) and issued by a public agency as mortgagor in connection 
with the financing of a project assisted under Section 8 of the Act. 
This exclusion does not apply to a public agency as mortgagee.
    Owner. An owner as defined in the applicable Section 8 regulations.
    Parent Entity PHA. Any state, county, municipality or other 
governmental entity or public body that is authorized

[[Page 40]]

to engage in or assist in the development or operation of low-income 
housing and that has the relationship to an agency or instrumentality 
PHA required by this subpart.
    Servicing fees. The annual costs of servicing the obligations 
0including any debt service reserve), including trustee fees, mortgage 
servicing fees, PHA expenses in connection with annual reviews, 
maintenance of books and accounts, audit expenses, agent fees and other 
costs of servicing the obligations.
    Trust indenture. A contract setting forth the rights and obligations 
of the issuer, bondholders, owner and trustee in connection with the 
tax-exempt obligations. The trust indenture may also include provisions 
regarding the loan to the owner or these may be set forth in a separate 
mortgage.
    Trustee. The entity that has legal responsibility under the trust 
indenture for disposition of the proceeds of a bond issuance and 
servicing of the debt represented by the obligations. The trustee must 
be a bank or other financial institution that is legally qualified and 
experienced in performing fiduciary responsibilities with respect to the 
care and investment of funds of a magnitude comparable to those involved 
in the financing.
    Yield. That percentage rate at which the present worth of all 
payments of principal and interest to be paid on the obligations is 
equal to the purchase price.

[44 FR 12360, Mar. 6, 1979, as amended at 61 FR 5212, Feb. 9, 1996; 61 
FR 14460, Apr. 1, 1996]



Sec. 811.103  General.

    (a) In order for obligations to be tax-exempt under this subpart the 
obligations must be issued by a PHA in connection with a low-income 
housing project approved by HUD under the Act and the applicable Section 
8 regulations.
    (1) Except as needed for a resident manager or similar requirement, 
all dwelling units in a low-income housing project that is to be 
financed with obligations issued pursuant to this subpart must be 
Section 8 contract units.
    (2) A low-income housing project that is to be financed with 
obligations issued pursuant to this subpart may include necessary 
appurtenances. Such appurtenances may include commerical space not to 
exceed 10% of the total net rentable area.
    (b) Where the parent entity PHA is not the owner of the project, the 
parent entity PHA or other PHA approvable under Sec. 811.104 must agree 
to administer the contract pursuant to an ACC with HUD, and such a PHA 
must agree that in the event there is a default under the contract it 
will pursue all available remedies to achieve correction of the default, 
including operation and possession of the project, if called upon by HUD 
to do so. If the field office finds that the PHA does not have the 
capacity to perform these functions, the Assistant Secretary may approve 
alternative contractual arrangements for performing these functions.



Sec. 811.104  Approval of Public Housing Agencies (other than agency or instrumentality PHAS).

    (a)(1) An application to the field office for approval as a Public 
Housing Agency, other than an agency or instrumentality PHA, for 
purposes of this subpart shall be supported by evidence satisfactory to 
HUD to establish that:
    (i) The applicant is a PHA as defined in this subpart, and has the 
legal authority to meet the requirements of this subpart and applicable 
Section 8 regulations, as described in its application. This evidence 
shall be supported by the opinion of counsel for the applicant.
    (ii) The applicant has or will have the administrative capability to 
carry out the responsibilities described in its application.
    (2) The evidence shall include any facts or documents relevant to 
the determinations required by paragraph (a)(1) of this section, 
including identification of any pending application the applicant has 
submitted under the Act. In the absence of evidence indicating the 
applicant may not be qualified, the field office may accept as 
satisfactory evidence:
    (i) Identification of any previous HUD approval of the applicant as 
a PHA pursuant to this section;

[[Page 41]]

    (ii) Identification of any prior ACC with the applicant under the 
Act; or
    (iii) A statement, where applicable, that the applicant is an 
approved participating agency under 24 CFR Part 883 (State Housing 
Finance and Development Agencies).
    (b) The applicant shall receive no compensation in connection with 
the financing of a project, except for its expenses. Such expenses shall 
be subject to approval by HUD in determining the development cost, cost 
of issuance and servicing fee, as appropriate. Should the applicant 
receive any compensation in excess of such expenses, the excess is to be 
placed in the debt service reserve.
    (c) Where the applicant acts as the financing agency, the applicant 
shall be required to furnish to HUD an audit by an independent public 
accountant of its books and records in connection with the financing of 
the project within 90 days after the execution of the contract or final 
endorsement and at least biennially thereafter.
    (d) Any subsequent amendments to the documents submitted to HUD 
pursuant to this section must be approved by HUD.



Sec. 811.105  Approval of agency or instrumentality PHA.

    (a) An application to the field office for approval as an agency or 
instrumentality PHA for purposes of this subpart shall:
    (1) Identify the parent entity PHA.
    (2) Establish by evidence satisfactory to HUD that:
    (i) The parent entity PHA meets the requirements of Sec. 811.104.
    (ii) The applicant was properly created pursuant to state law as a 
not-for-profit entity; is an agency or instrumentality PHA, as defined 
in this subpart; has the legal authority to meet the requirements of 
this subpart and applicable Section 8 regulations, as described in its 
application; and the actions required to establish the legal 
relationship with the parent entity PHA prescribed by paragraph (c) of 
this section have been taken and are not prohibited by State law. This 
evidence shall be supported by the opinion of counsel for the applicant 
and counsel for the parent entity PHA.
    (iii) The applicant has, or will have, the administrative capability 
to carry out the responsibilities described in its application.
    (b) The charter or other organic document establishing the applicant 
shall limit the activities to be performed by the applicant, and funds 
and assets connected therewith, to carrying out or assisting in carrying 
out Section 8 projects and other low-income housing projects approved by 
the Secretary. Such organic documents shall provide that the applicant 
shall receive no compensation in connection with the financing of a 
project, except for its expenses. Such expenses shall be subject to 
approval by HUD in determining the development cost, cost of issuance 
and servicing fee, as appropriate. Should the applicant receive any 
compensation in excess of such expenses, the excess is to be placed in 
the debt service reserve.
    (c) The documents submitted by the applicant shall include the 
following with respect to the relationship between the parent entity PHA 
and the agency or instrumentality PHA:
    (1) Provisions requiring approval by the parent entity PHA of the 
charter or other organic instrument and of the bylaws of the applicant, 
which organic instrument and bylaws shall specify that any amendments 
are subject to approval by the parent entity PHA and by HUD.
    (2) Provisions requiring approval by the parent entity PHA of each 
project and of the program and expenditures of the applicant.
    (3) Provisions requiring approval by the parent entity PHA of each 
issue of obligations by the applicant not more than 60 days prior to the 
date of issue and approval of any substantive changes to the terms and 
conditions of the issuance prior to date of issue.
    (4) Provisions requiring the applicant to furnish an audit of all 
its books and records by an independent public accountant to the parent 
entity PHA within 90 days after execution of the contract or final 
endorsement and at least bennially thereafter; and provisions requiring 
the parent entity PHA to perform an annual review of the applicant's 
performance and to provide

[[Page 42]]

HUD with a copy of such review together with any audits performed during 
the reporting period.
    (5) Provisions giving the parent entity PHA right of access at any 
time to all books and records of the applicant.
    (6) Provisions that upon dissolution of the applicant, title to or 
other interest in any real or personal property that is owned by such 
applicant at the time of dissolution shall be transferred to the parent 
entity PHA or to another PHA or to another not-for-profit entity as 
determined by the parent entity PHA and approved by HUD, to be used only 
for purposes approved by HUD.
    (7) Evidence of agreement by the parent entity PHA, or other entity 
as may be provided for in alternative contractual arrangements pursuant 
to Sec. 811.103(b), to accept title to any real or personal property 
pursuant to paragraph (c)(6) of this section.
    (d) Any subsequent amendments to the documents submitted to HUD 
pursuant to this section must be approved by HUD.
    (e) Members, officers, or employees of the parent entity PHA may be 
directors or officers of the applicant unless this is contrary to state 
law.

[44 FR 12360, Mar. 6, 1979, as amended at 61 FR 14461, Apr. 1, 1996]



Sec. 811.106  Default under the contract.

    If HUD finds there is a default under the Contract, the field office 
shall so notify the trustee and give the trustee a specified reasonable 
time to take action to require the owner to correct such default prior 
to any suspension or termination of payments under the contract. In the 
event of a default under the contract, HUD may terminate or suspend 
payments under the contract, may seek specific performance of the 
contract and may pursue other remedies.

[44 FR 12360, Mar. 6, 1979, as amended at 61 FR 14461, Apr. 1, 1996]



Sec. 811.107  Financing documents and data.

    (a) The financing agency shall assure that any official statement or 
prospectus or other disclosure statement prepared in connection with the 
financing shall state on the first page that:
    (1) In addition to any security cited in the statement, the bonds 
may be secured by a pledge of an Annual Contributions Contract and a 
Housing Assistance Payments Contract, executed by HUD;
    (2) The faith of the United States is solemnly pledged to the 
payment of annual contributions pursuant to the Annual Contributions 
Contact or to the payment of housing assistance payments pursuant to the 
Housing Assistance Payments Contract, and funds have been obligated by 
HUD for such payments;
    (3) Except as provided in any contract of mortgage insurance, the 
bonds are not insured by HUD;
    (4) The bonds are not to be construed as a debt or indebtedness of 
HUD or the United States, and payment of the bonds is not guaranteed by 
the United States;
    (5) Nothing in the text of a disclosure statement is to be 
interpreted to conflict with the above; and
    (6) HUD has not reviewed or approved and bears no responsibility for 
the content of disclosure statements.
    (b) The financing agency shall retain in its files the documentation 
relating to the financing. A copy of this documentation shall be 
furnished to HUD upon request.

[61 FR 14461, Apr. 1, 1996]



Sec. 811.108  Debt service reserve.

    (a) FHA-Insured projects. (1) The debt service reserve shall be 
invested and the income used to pay principal and interest on that 
portion of the obligations which is attributable to the funding of the 
debt service reserve. Any excess investment income shall be added to the 
debt service reserve. In the event such investment income is 
insufficient, surplus cash or residual receipts, to the extent approved 
by the field office, may be used to pay such principal and interest 
costs.
    (2) The debt service reserve and its investment income shall be 
available only for the purpose of paying principal or interest on the 
obligations. The use of the debt service reserve for this purpose shall 
not be a cure for any failure by the owner to make required payments.

[[Page 43]]

    (3) Upon full payment of the principal and interest on the 
obligations (including that portion of the obligations attributable to 
the funding of the debt service reserve), any funds remaining in the 
debt service reserve shall be remitted to HUD.
    (b) Non-FHA-insured projects. (1) Investment income from the debt 
service reserve, up to the amount required for debt service on the bonds 
attributable to the debt service reserve, shall be credited toward the 
owner's debt service payment. Any excess investment income shall be 
added to and become part of the debt service reserve.
    (2) The debt service reserve and investment income thereon shall be 
available only for the purpose of paying principal or interest on the 
obligations. The use of the debt service reserve for this purpose shall 
not be a cure for any failure by the owner to make required payments.
    (3) Upon full payment of the principal and interest on the 
obligations (including that portion of the obligations attributable to 
the funding of the debt service reserve), any funds remaining in the 
debt service reserve shall be remitted to HUD.

[61 FR 14461, Apr. 1, 1996]



Sec. 811.109  Trust indenture provisions.

    Obligations shall be prepaid only under such conditions as HUD shall 
require, including reduction of contract rents and continued operation 
of the project for the housing of low-income families.

[44 FR 12360, Mar. 6, 1979. Redesignated at 61 FR 14461, Apr. 1, 1996]



Sec. 811.110  Refunding of obligations issued to finance Section 8 projects.

    (a) This section states the terms and conditions under which HUD 
will approve refunding or defeasance of certain outstanding debt 
obligations which financed new construction or substantial 
rehabilitation of Section 8 projects, including fully and partially 
assisted projects.
    (b) In the case of bonds issued by State Agencies qualified under 24 
CFR part 883 to refund bonds which financed projects assisted pursuant 
to 24 CFR part 883, HUD requires compliance with the prohibition on 
duplicative fees contained in 24 CFR part 883 and with paragraphs (f) 
and (h) of this section, as applicable to the projects to be refunded.
    (c) No agency shall issue obligations to refund outstanding 11(b) 
obligations until the Office of the Assistant Secretary for Housing 
sends the financing agency a Notification of Tax Exemption based on 
approval of the proposed refunding's terms and conditions as conforming 
to this part's requirements, including continued operation of the 
project as housing for low-income families, and where possible, 
reduction of Section 8 assistance payments through lower contract rents 
or an equivalent cash rebate to the U.S. Treasury (i.e. Trustee Sweep). 
The agency shall submit such documentation as HUD determines is 
necessary for review and approval of the refunding transaction. Upon 
conclusion of the closing of refunding bonds, written confirmation must 
be sent to the Office of Multifamily Housing by bond counsel, or other 
acceptable closing participant, including a schedule of the specific 
amount of savings in Section 8 assistance where applicable, CUSIP number 
information, and a final statement of Sources and Uses.
    (d)(1) HUD approval of the terms and conditions of a Section 8 
refunding proposal requires evaluation by HUD's Office of Multifamily 
Housing of the reasonableness of the terms of the Agency's proposed 
financing plan, including projected reductions in project debt service 
where warranted by market conditions and bond yields. This evaluation 
shall determine that the proposed amount of refunding obligations is the 
amount needed to: pay off outstanding bonds; fund a debt service reserve 
to the extent required by credit enhancers or bond rating agencies, or 
bond underwriters in the case of unrated refunding bonds; pay credit 
enhancement fees acceptable to HUD; and pay transaction costs as 
approved by HUD according to a sliding scale ceiling based on par amount 
of refunding bond principal. Exceptions may be approved by HUD, if 
consistent with applicable statutes, in the event that an additional 
issue amount is required for project purposes.

[[Page 44]]

    (2) The stated maturity of the refunding bonds may not exceed by 
more than one year the remaining term of the project mortgage, or in the 
case of an uninsured loan, the later of expiration date of the Housing 
Assistance Payments Contract (the ``HAPC'') or final maturity of the 
refunded bonds.
    (3) The bond yield may not exceed by more than 75 basis points the 
20 Bond General Obligation Index published by the Daily Bond Buyer for 
the week immediately preceding the sale of the bonds, except as 
otherwise approved by HUD. An amount not to exceed one-fourth of one 
percent annually of the bonds' outstanding principal balance may be 
allowed for servicing and trustee fees.
    (e) For projects for which the Agreement to enter into the HAPC was 
executed between January 1, 1979, and December 31, 1984 (otherwise known 
as ``McKinney Act Projects''), for which a State or local agency 
initiates a refunding, the Secretary shall make available to an eligible 
issuing agency 50 percent of the Section 8 savings of a refunding, as 
determined by HUD on a project-by-project basis, to be used by the 
agency in accordance with the terms of a Refunding Agreement executed by 
the Agency and HUD which incorporates the Agency's Housing Plan for use 
of savings to provide decent, safe, and sanitary housing for very low-
income households. In determining the amount of savings recaptured on a 
project-by-project basis, as authorized by section 1012(b) of the 
McKinney Act, HUD will take into account the physical condition of the 
projects participating in the refunding which generate the McKinney Act 
savings and, if necessary, HUD will finance in refunding bond debt 
service correction of existing deficiencies which cannot be funded 
completely by existing project replacement reserves or by a portion of 
reserves released from the refunded bond's indenture. For McKinney Act 
refundings of projects which did not receive a Financing Adjustment 
Factor (``FAF''), HUD will allow up to 50 percent of debt service 
savings to be allocated to the project account; in which case, the 
remainder will be shared equally by the Agency and the U.S. Treasury.
    (f) For refundings of Section 8 projects other than McKinney Act 
Projects, and for all transactions which substitute collateral for, but 
do not redeem, outstanding obligations, and for which a HUD approval is 
needed (such as assignment of a HAPC or insured mortgage note), the 
Office of Multifamily Housing in consultation with HUD Field Office 
Counsel will review the HAPC, the Trust Indenture for the outstanding 
obligations, applicable HUD regulations, and reasonableness of proposed 
financing terms. In particular, HUD review should be obtained for the 
release of reserves from the trust indenture of the outstanding 11(b) 
bonds that are being refunded, defeased, or pre-paid. A proposal to 
distribute to a non-Federal entity the benefits of a refinancing, such 
as debt service savings and/or balances in reserves held under the 
original Trust Indenture, should be referred to the Office of 
Multifamily Housing for further review. In proposals submitted for HUD 
approval, HUD will consent to release reserves, as provided by the Trust 
Indenture, in an amount remaining after correction of project physical 
deficiencies and/or replenishment of replacement reserves, where needed. 
In the case of a refunding of 11(b) bonds by a public agency issuer 
which is the owner of the project and is entitled to reserves held under 
the Trust Indenture, HUD requires execution by the project owner of a 
use agreement, and amendment of a regulatory agreement, if applicable, 
to extend low-income tenant occupancy for ten years after expiration of 
the original HAPC term. In the case of HAP contracts with renewable 5-
year terms, the Use Agreement shall extend for 10 years after the 
project owners first opt-out date. The Use Agreement may also be 
required of private entity owners, unless the refunding is incidental to 
a transfer of project ownership or a transaction which provides a 
substantial public benefit, as determined by the Office of Multifamily 
Housing. Proposed use of benefits shall be consistent with applicable 
appropriations law, the HAPC, and other requirements applicable to the 
original project financing, and the proposed financing terms must be 
reasonable in relation to bond market

[[Page 45]]

yields and transaction fees, as approved by the HUD Office of 
Multifamily Housing.
    (g) Agencies shall have wide latitude in the design of specific 
delivery vehicles for use of McKinney Act savings, subject to HUD audit 
of each Agency's performance in serving the targeted income eligible 
population. Savings may be used for shelter costs of providing housing, 
rental, or owner-occupied, to very low-income households through new 
construction, rehabilitation, repairs, and acquisition with or without 
rehab, including assistance to very low-income units in mixed-income 
developments. These include programs designed to assist in obtaining 
shelter, such as rent or homeownership subsidies. Self-sufficiency 
services in support of very low-income housing are also eligible, and 
may include, but are not limited to, homeownership counseling, 
additional security measures in high-crime areas, construction job 
training for residents' repair of housing units occupied by very low-
income families, and empowerment activities designed to support 
formation and growth of resident entities. Except for the cost of 
providing third-party program audit reports to HUD, eligible costs 
exclude consultant fees or reimbursement of Agency staff expenses, but 
may include fees for professional services required in the Agency's 
McKinney Act programs of assistance to very low-income families. Unless 
otherwise specified by HUD in a McKinney Agreement, savings shall be 
subject to the above use requirements for 10 years from the date of 
receipt of the savings.
    (h) Refunding bonds, including interest thereon, approved under this 
Section shall be exempt from all taxation now or hereafter imposed by 
the United States, and the notification of approval of tax exemption 
shall not be subject to revocation by HUD. Whether refunding bonds 
approved under this section meet the requirements of Section 103 or any 
other provisions of the Internal Revenue Code is not within the 
responsibilities of HUD to determine. Such bonds shall be prepaid during 
the HAPC term only under such conditions as HUD shall require.

[61 FR 14461, Apr. 1, 1996]



PART 850--HOUSING DEVELOPMENT GRANTS--Table of Contents




                      Subpart A--General Provisions

Sec.
850.1  Applicability and savings clause.

                         Subparts B-E [Reserved]

                      Subpart F--Project Management

850.151  Project restrictions.
850.153  Rent control.
850.155  Securing owner's responsibilities.

    Authority: 42 U.S.C. 1437o, 3535(d).

    Source: 49 FR 24641, June 14, 1984, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 850.1  Applicability and savings clause.

    (a) Applicability. This part implements the Housing Development 
Grant Program contained in section 17 of the United States Housing Act 
of 1937 (42 U.S.C. 1437o). The Program authorized the Secretary to make 
housing development grants to support the new construction or 
substantial rehabilitation of real property to be used primarily for 
residential rental purposes. Section 289(b)(1) of the Cranston-Gonzalez 
National Affordable Housing Act (42 U.S.C. 12839) repealed section 17 
effective October 1, 1991. Section 289(a) prohibited new grants under 
the Housing Development Grant Program except for projects for which 
binding commitments had been entered into prior to October 1, 1991.
    (b) Savings clause. Any grant made pursuant to a binding commitment 
entered into before October 1, 1991 will continue to be governed by 
subparts A through E of this part in effect immediately before April 1, 
1996, and by subpart F of this part as currently in effect.

[61 FR 7944, Feb. 29, 1996]



                         Subparts B-E [Reserved]



                      Subpart F--Project Management



Sec. 850.151  Project restrictions.

    (a) Owner-grantee agreement. The grantee and the owner must enter 
into

[[Page 46]]

an agreement that requires the owner (including its successors in 
interest) to carry out the requirements of this section and of the grant 
agreement, as appropriate. The grantee-owner agreement must require the 
grantee to monitor (where required) and to take appropriate legal action 
to enforce compliance with the owner's responsibilities thereunder. The 
owner's compliance with its obligations under this section must be 
secured by a mortgage or other security instrument meeting the 
requirements of Sec. 850.155. Nothing in this section shall preclude 
enforcement by the Federal government of grant agreement provisions, 
civil rights statutes, or other provisions of law that apply to the 
Housing Development Grant Program.
    (b) Restriction on conversion. The owner shall not convert the units 
in the project to condominium ownership or to a form of cooperative 
ownership that is not eligible to receive a housing development grant, 
during the 20-year period from the date on which the units in the 
project are available for occupancy.
    (c) Tenant selection. The owner shall determine the eligibility of 
applicants for lower income units in accordance with the requirements of 
24 CFR parts 812 and 813, including the provisions of these parts 
concerning citizenship or eligible immigration status and income limits, 
and certain assistance to mixed families (families whose members include 
those with eligible immigration status, and those without eligible 
immigration status.). The owner shall not, during the 20-year period 
from the date on which the units in the project are available for 
occupancy, discriminate against prospective tenants on the basis of 
their receipt of, or eligibility for, housing assistance under any 
Federal, State, or local housing assistance program or, except for an 
elderly housing project, on the basis that they have a minor child or 
children who will be living with them.
    (d) Restriction on leasing assisted units. The owner shall assure 
that the percentage of low-income units specified in the grant agreement 
is occupied, or is available for occupancy, by low-income households 
during the period beginning on the date on which the units in the 
project are available for occupancy through 20 years from the date on 
which 50 percent of the units are occupied. The owner may lease a low-
income unit only to a tenant that is a low-income household at the time 
of its initial occupancy. An owner may continue to lease a low-income 
unit to a tenant that ceases to qualify as a low-income household only 
as provided in paragraph (f) of this section.
    (e) Low-income unit rent. (1) Section 17(d)(8)(A) of the U.S. 
Housing Act of 1937 prohibits the rents for low-income units from 
exceeding ``30 per centum of the adjusted income of a family whose 
income equals 50 per centum of the median income for the area, as 
determined by the Secretary with adjustments for smaller and larger 
families.'' This paragraph describes how these maximum rent 
determinations are made.
    (2) The maximum rents that may be charged for low-income units are 
based on the size of the unit by number of bedrooms, and are calculated 
in accordance with the following procedure. For each unit size, HUD will 
provide the Section 8 very low-income limits. HUD will also provide 
income adjustments for each unit size, consistent with 24 CFR part 813. 
An adjusted income amount for each unit size is calculated by the owner 
or grantee by subtracting the income adjustment from the Section 8 
limit. The adjusted income amount is multiplied by 30 percent and 
divided by 12 to obtain the maximum monthly gross rent for each low-
income unit. A monthly allowance for the utilities and services 
(excluding telephone) to be paid by the tenant is subtracted from the 
maximum monthly gross rent to obtain the maximum monthly rent that may 
be charged for low-income units. Information to be provided by HUD will 
be available from the responsible HUD Field Office.
    (3) The initial monthly allowance for utilities and services to be 
paid by the tenant must be approved by HUD. Subsequent calculations of 
this allowance must be approved by the grantee in connection with its 
review and approval of rent schedules under paragraph (e)(4) of this 
section. The maximum monthly rent must be recalculated annually, and may 
change as

[[Page 47]]

changes in the Section 8 very low-income limit, the income adjustments, 
or the monthly allowance for utilities and services warrant.
    (4) The grantee must review and approve any schedule of rents 
proposed by the owner for low-income units. Any schedule submitted by an 
owner within the permissible maximum will be deemed approved, unless the 
grantee informs the owner, within 60 days after receiving the schedule, 
that it is disapproved.
    (5) Any increase in rents for low-income units is subject to the 
provisions of outstanding leases, in any event, the owner must provide 
tenants of those units not less than 30 days prior written notice before 
implementing any increase in rents.
    (f) Reexamination of tenant income and composition. (1) The owner 
shall reexamine the income of each tenant household living in low-income 
units at least once a year. At the first regular reexamination after 
June 19, 1995 the owner shall follow the requirements of 24 CFR part 812 
concerning obtaining and processing evidence of citizenship or eligible 
immigration status of all family members. Thereafter, at each regular 
reexamination, the owner shall follow the requirements of 24 CFR part 
812 concerning verification of the immigration status of any new family 
member.
    (2) If this reexamination indicates that the tenant no longer 
qualifies as a low-income household, the owner must take one of the 
following actions, as appropriate: (i) If the unit occupied by the 
tenant must be leased to a low- income household to maintain the 
percentage of low-income units specified in the grant agreement, the 
owner must notify the tenant that it must move when the current lease 
expires or six months after the date of the notification, whichever is 
later; (ii) If the owner can meet this percentage without the unit 
occupied by the tenant (for example, by designating another comparable 
unit as a low-income unit), the owner may continue to lease to that 
tenant, but is free to renegotiate the rent at the expiration of the 
current lease.
    (3) For provisions related to termination of assistance for failure 
to establish citizenship or eligible immigration status, see 24 CFR 
812.9, and also 24 CFR 812.10 for provisions related to certain 
assistance to mixed families (families whose members include those with 
eligible immigration status, and those without eligible immigration 
status) in lieu of termination of assistance, and for provisions related 
to deferral of termination of assistance.
    (g) Affirmative fair housing marketing. Marketing must be done in 
accordance with the HUD-approved Affirmative Fair Housing Marketing 
Plan, Form HUD-935.2, and all fair housing and equal opportunity 
requirements. The purpose of the Plan and the requirements is to provide 
for affirmative marketing through the provision of information regarding 
the availability of units in projects assisted. Affirmative marketing 
steps consist of good faith efforts to provide information and otherwise 
attract eligible persons from all racial, ethnic and gender groups in 
the housing market area to the available housing.
    (h) Management and maintenance functions. The owner must perform all 
management and maintenance functions in compliance with equal 
opportunity requirements. These functions include selection of tenants, 
reexamination of family income, evictions and other terminations of 
tenancy, and all ordinary and extraordinary maintenance and repairs, 
including replacement of capital items.
    (i) Residency preferences. Local residency requirements are 
prohibited. Local residency preferences may be applied in selecting 
tenants only to the extent that they are not inconsistent with 
affirmative fair housing marketing objectives and the owner's HUD-
approved AFHM Plan. With respect to any residency preference, persons 
expected to reside in the community as a result of current or planned 
employment will be treated as residents.

[49 FR 24641, June 14, 1984, as amended at 60 FR 14841, Mar. 20, 1995]



Sec. 850.153  Rent control.

    A project constructed or substantially rehabilitated with a housing 
development grant is not subject to State or local rent control unless 
the rent control requirements or agreements (a)

[[Page 48]]

(1) were entered into under a State law or local ordinance of general 
applicability that was enacted and in effect in the jurisdiction before 
November 30, 1983 and (2) apply generally to rental housing projects not 
assisted under the Housing Development Grant Program, or (b) are imposed 
under this subpart. State and local rent controls expressly preempted by 
this section include, but are not limited to, rent laws or ordinances, 
rent regulating agreements, rent regulations, occupancy agreements, or 
financial penalties for failure to achieve certain occupancy or rent 
projections.



Sec. 850.155  Securing owner's responsibilities.

    Assistance provided under this part shall constitute a debt of the 
owner (including its successors in interest) to the grantee, and shall 
be secured by a mortgage or other security instrument. The debt shall be 
repayable in the event of a substantive, uncorrected violation by an 
owner of the obligations contained in paragraphs (b), (c), (d) and (e) 
of Sec. 850.151. The instruments securing this debt shall provide for 
repayment to the grantee in an amount equal to the total amount of 
housing development grant assistance outstanding, plus interest which is 
determined by the Secretary by adding two percent to the average yield 
on outstanding marketable long-term obligations of the United States 
during the month preceding the date on which assistance was made 
available. The amount to be repaid shall be reduced by 10 percent for 
each full year in excess of 10 years that intervened between the 
beginning of the term of the owner-grantee agreement and the violation.



PART 880--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW CONSTRUCTION--Table of Contents




                  Subpart A--Summary and Applicability

Sec.
880.101  General.
880.104  Applicability of part 880 in effect as of November 5, 1979.
880.105  Applicability to proposals and projects under 24 CFR part 811.

              Subpart B--Definitions and Other Requirements

880.201  Definitions.
880.205  Limitation on distributions.
880.207  Property standards.
880.208  Financing.
880.211  Audit.

                         Subparts C-D [Reserved]

             Subpart E--Housing Assistance Payments Contract

880.501  The contract.
880.502  Term of contract.
880.503  Maximum annual commitment and project account.
880.504  Leasing to eligible families.
880.505  Contract administration and conversions.
880.506  Default by owner (private-owner/HUD and PHA-owner/HUD 
          projects).
880.507  Default by PHA and/or owner (private-owner/PHA projects).
880.508  Notice upon contract expiration.

                          Subpart F--Management

880.601  Responsibilities of owner.
880.602  Replacement reserve.
880.603  Selection and admission of assisted tenants.
880.604  Tenant rent.
880.605  Overcrowded and underoccupied units.
880.606  Lease requirements.
880.607  Termination of tenancy and modification of lease.
880.608  Security deposits.
880.609  Adjustment of contract rents.
880.610  Adjustment of utility allowances.
880.611  Conditions for receipt of vacancy payments.
880.612  Reviews during management period.
880.612a  Preference for occupancy by elderly families.

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 13611-
13619.

    Source: 44 FR 59410, Oct. 15, 1979, unless otherwise noted.



                  Subpart A--Summary and Applicability



Sec. 880.101  General.

    (a) The purpose of the Section 8 program is to provide low-income 
families with decent, safe and sanitary rental housing through the use 
of a system of housing assistance payments. This part contains the 
policies and procedures applicable to the Section 8 new construction 
program. The assistance may

[[Page 49]]

be provided to public housing agency owners or to private owners either 
directly from HUD or through public housing agencies.
    (b) This part does not apply to projects developed under other 
Section 8 program regulations, including 24 CFR parts 881, 882, 883, 
884, and 885, except to the extent specifically stated in those parts. 
Portions of subparts E and F of this part 880 have been cross-referenced 
in 24 CFR parts 881 and 883.

[61 FR 13587, Mar. 27, 1996]



Sec. 880.104  Applicability of part 880 in effect as of November 5, 1979.

    (a) Part 880, in effect as of November 5, 1979, applies to all 
proposals for which a notification of selection was not issued before 
the November 5, 1979 effective date of part 880. (See 24 CFR part 880, 
revised as of April 1, 1980.) Where a notification of selection was 
issued for a proposal before the November 5, 1979 effective date, part 
880, in effect as of November 5, 1979, applies if the owner notified HUD 
within 60 calendar days that the owner wished the provisions of part 
880, effective November 5, 1979, to apply and promptly brought the 
proposal into conformance.
    (b) Subparts E (Housing Assistance Payments Contract) and F 
(Management) of this part apply to all projects for which an Agreement 
was not executed before the November 5, 1979, effective date of part 
880. Where an Agreement was so executed:
    (1) The owner and HUD may agree to make the revised subpart E of 
this part applicable and to execute appropriate amendments to the 
Agreement and/or Contract.
    (2) The owner and HUD may agree to make the revised subpart F of 
this part applicable (with or without the limitation on distributions) 
and to execute appropriate amendments to the Agreement and/or Contract.
    (c) Section 880.607, Termination of Tenancy and Modification of 
Leases, applies to new families who begin occupancy or execute a lease 
on or after 30 days after the November 5, 1979, effective date of part 
880. This section also applies to families not covered by the preceding 
sentence, including existing families under lease, with respect to all 
leases in which a renewal becomes effective on or after the 60th day 
following the November 5, 1979 effective date of part 880. A lease is 
considered to be renewed where both the landlord and the family fail to 
terminate a tenancy under a lease permitting either party to terminate.
    (d) Notwithstanding the provisions of paragraph (b) of this section, 
the provisions of 24 CFR part 5 (concerning preferences for selection of 
applicants) apply to all projects, regardless of when an Agreement was 
executed.

[61 FR 13587, Mar. 27, 1996]



Sec. 880.105  Applicability to proposals and projects under 24 CFR part 811.

    Where proposals and projects are financed with tax-exempt 
obligations under 24 CFR part 811, the provisions of part 811 will be 
complied with in addition to all requirements of this part. In the event 
of any conflict between this part and part 811, part 811 will control.



              Subpart B--Definitions and Other Requirements



Sec. 880.201  Definitions.

    The terms Fair Market Rent (FMR), HUD, NOFA, and Public Housing 
Agency (PHA) are defined in 24 CFR part 5.
    ACC. (Annual Contributions Contract) For a private-owner/PHA 
project, for which the Contract is administered by a PHA, the ACC is the 
contract between the PHA (as contract administrator) and HUD. Under the 
ACC, HUD commits to provide the PHA with the funds needed to make 
housing assistance payments to the owner and to pay the PHA for HUD-
approved administrative fees, and the PHA agrees to perform the duties 
of a contract administrator.
    Agency. As defined in 24 CFR part 883.
    Agreement. (Agreement to Enter into Housing Assistance Payments 
Contract) The Agreement between the owner and the contract administrator 
which provides that, upon satisfactory completion of the project in 
accordance with the HUD-approved final proposal, the administrator will 
enter into the Contract with the owner.
    Annual income. As defined in part 813 of this chapter.

[[Page 50]]

    Assisted unit. A dwelling unit eligible for assistance under a 
Contract.
    Contract. (Housing Assistance Payments Contract) The Contract 
entered into by the owner and the contract administrator upon 
satisfactory completion of the project, which sets forth the rights and 
duties of the parties with respect to the project and the payments under 
the Contract.
    Contract Administrator. The entity which enters into the Contract 
with the owner and is responsible for monitoring performance by the 
owner. The contract administrator is a PHA in the case of private-owner/
PHA projects, and HUD in private-owner/HUD and PHA-owner/HUD projects.
    Contract Rent. The total amount of rent specified in the Contract as 
payable by HUD and the tenant to the owner for an assisted unit. In the 
case of the rental of only a manufactured home space, ``contract rent'' 
is the total rent specified in the Contract as payable by HUD and the 
tenant to the owner for rental of the space, including fees or charges 
for management and maintenance services with respect to the space, but 
excluding utility charges for the manufactured home.
    Decent, safe, and sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition requirements in 24 CFR part 5, subpart 
G.
    Drug-related criminal activity. The illegal manufacture, sale, 
distribution, use or possession with the intent to manufacture, sell, 
distribute, or use, of a controlled substance as defined in section 102 
of the Controlled Substances Act, 21 U.S.C. 802.
    Elderly Family. As defined in parts 812 and 813 of this chapter.
    Family (eligible family). As defined in part 812 of this chapter.
    Final proposal. The detailed description of a proposed project to be 
assisted under this part, which an owner submits after selection of the 
preliminary proposal, except where a preliminary proposal is not 
required under Sec. 880.303(c). (The final proposal becomes an exhibit 
to the Agreement and is the standard by which HUD judges acceptable 
construction of the project.)
    Gross Rent. As defined in part 813 of this chapter.
    Household type. The three household types are (1) elderly and 
handicapped, (2) family, and (3) large family.
    Housing Assistance Payment. The payment made by the contract 
administrator to the Owner of an assisted unit as provided in the 
Contract. Where the unit is leased to an eligible Family, the payment is 
the difference between the Contract Rent and the Tenant Rent. An 
additional payment is made to the Family when the Utility Allowance is 
greater than the Total Tenant Payment. In the case of a Family renting 
only a manufactured home space as provided in Sec. 880.202(j), the 
Housing Assistance Payment is the difference between the Gross Rent and 
the Total Tenant Payment, but such payment may not exceed the Contract 
Rent for the space, and no additional payment is made to the Family. A 
Housing Assistance Payment, known as a ``vacancy payment'', may be made 
to the Owner when an assisted unit is vacant, in accordance with the 
terms of the Contract.
    Housing Assistance Plan. A housing plan which is submitted by a unit 
of general local government and approved by HUD as being acceptable 
under the standards of 24 CFR, part 570.
    Housing type. The three housing types are new construction, 
rehabilitation, and existing housing.
    Independent Public Accountant. A Certified Public Accountant or a 
licensed or registered public accountant, having no business 
relationship with the owner except for the performance of audit, systems 
work and tax preparation. If not certified, the Independent Public 
Accountant must have been licensed or registered by a regulatory 
authority of a State or other political subdivision of the United States 
on or before December 31, 1970. In States that do not regulate the use 
of the title ``public accountant,'' only Certified Public Accountants 
may be used.
    Low-Income Family. As defined in part 813 of this chapter.
    Owner. Any private person or entity (including a cooperative) or a 
public entity which qualifies as a PHA, having the legal right to lease 
or sublease newly constructed dwelling units assisted under this part. 
The term owner

[[Page 51]]

also includes the person or entity submitting a proposal under this 
part.
    Partially-assisted Project. A project for non-elderly families under 
this part which includes more than 50 units of which 20 percent or fewer 
are assisted.
    PHA-Owner/HUD Project. A project under this part which is owned by a 
PHA. For this type of project, the Agreement and the Contract are 
entered into by the PHA, as owner, and HUD, as contract administrator.
    Private-Owner/HUD Project. A project under this part which is owned 
by a private owner. For this type of project, the Agreement and Contract 
are entered into by the private owner, as owner, and HUD, as contract 
administrator.
    Private-Owner/PHA Project. A project under this part which is owned 
by a private owner. For this type of project, the Agreement and Contract 
are entered into by the private owner, as owner, and the PHA, as 
contract administrator, pursuant to an ACC between the PHA and HUD. The 
term also covers the situation where the ACC is with one PHA and the 
owner is another PHA.
    Project Account. A specifically identified and segregated account 
for each project which is established in accordance with Sec. 880.503(b) 
out of the amounts by which the maximum annual commitment exceeds the 
amount actually paid out under the Contract or ACC, as applicable, each 
year.
    Rent. In the case of an assisted unit in a cooperative project, rent 
means the carrying charges payable to the cooperative with respect to 
occupancy of the unit.
    Replacement cost. The estimated construction cost of the project 
when the proposed improvements are completed. The replacement cost may 
include the land, the physical improvements, utilities within the 
boundaries of the land, architect's fees, and miscellaneous charges 
incident to construction as approved by the Assistant Secretary.
    Secretary. The Secretary of Housing and Urban Development (or 
designee).
    Small Project. A project for non-elderly families under this part 
which includes a total of 50 or fewer (assisted and unassisted) units.
    Tenant Rent. The monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total Tenant Payment. The monthly amount defined in, and determined 
in accordance with part 813 of this chapter.
    Utility allowance As defined in part 813 of this chapter, made or 
approved by HUD.
    Utility reimbursement. As defined in part 813 of this chapter.
    Vacancy payment. The housing assistance payment made to the owner by 
the contract administrator for a vacant assisted unit if certain 
conditions are fulfilled as provided in the Contract. The amount of the 
vacancy payment varies with the length of the vacancy period and is less 
after the first 60 days of any vacancy.
    Very Low-income Family. As defined in part 813 of this chapter.

[44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18923, Mar. 24, 1980; 
48 FR 12703, Mar. 28, 1983; 49 FR 6714, Feb. 23, 1984; 49 FR 17449, Apr. 
24, 1984; 49 FR 19943, May 10, 1984; 61 FR 5212, Feb. 9, 1996; 61 FR 
13587, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996; 63 FR 46578, Sept. 1, 
1998]



Sec. 880.205  Limitation on distributions.

    (a) Non-profit owners are not entitled to distributions of project 
funds.
    (b) For the life of the Contract, project funds may only be 
distributed to profit-motivated owners at the end of each fiscal year of 
project operation following the effective date of the Contract after all 
project expenses have been paid, or funds have been set aside for 
payment, and all reserve requirements have been met. The first year's 
distribution may not be made until cost certification, where applicable, 
is completed. Distributions may not exceed the following maximum 
returns:
    (1) For projects for elderly families, the first year's distribution 
will be limited to 6 percent on equity. The Assistant Secretary may 
provide for increases in subsequent years' distributions on an annual or 
other basis so that the permitted return reflects a 6 percent return on 
the value in subsequent years, as determined by HUD, of the approved 
initial equity. Any such adjustment will be made by Notice in the 
Federal Register.

[[Page 52]]

    (2) For projects for non-elderly families, the first year's 
distribution will be limited to 10 percent on equity. The Assistant 
Secretary may provide for increases in subsequent years' distributions 
on an annual or other basis so that the permitted return reflects a 10 
percent return on the value in subsequent years, as determined by HUD, 
of the approved initial equity. Any such adjustment will be made by 
Notice in the Federal Register.
    (c) For the purpose of determining the allowable distribution, an 
owner's equity investment in a project is deemed to be 10 percent of the 
replacement cost of the part of the project attributable to dwelling use 
accepted by HUD at cost certification (see Sec. 880.405) unless the 
owner justifies a higher equity contribution by cost certification 
documentation in accordance with HUD mortgage insurance procedures.
    (d) Any short-fall in return may be made up from surplus project 
funds in future years.
    (e) If HUD determines at any time that project funds are more than 
the amount needed for project operations, reserve requirements and 
permitted distribution, HUD may require the excess to be placed in an 
account to be used to reduce housing assistance payments or for other 
project purposes. Upon termination of the Contract, any excess funds 
must be remitted to HUD.
    (f) Owners of small projects or partially-assisted projects are 
exempt from the limitation on distributions contained in paragraphs (b) 
through (d) of this section.
    (g) In the case of HUD-insured projects, the provisions of this 
section will apply instead of the otherwise applicable mortgage 
insurance program provisions.

[44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18923, Mar. 24, 1980; 
49 FR 6714, Feb. 23, 1984; 61 FR 5212, Feb. 9, 1996]



Sec. 880.207  Property standards.

    Projects must comply with:
    (a) [Reserved]
    (b) In the case of manufactured homes, the Federal Manufactured Home 
Construction and Safety Standards, pursuant to Title VI of the Housing 
and Community Development Act of 1974, and 24 CFR part 3280;
    (c) In the case of congregate or single room occupant housing, the 
appropriate HUD guidelines and standards;
    (d) HUD requirements pursuant to section 209 of the Housing and 
Community Development Act of 1974 for projects for the elderly or 
handicapped;
    (e) HUD requirements pertaining to noise abatement and control; and
    (f) Applicable State and local laws, codes, ordinances and 
regulations.
    (g) Smoke detectors. (1) Performance requirement. After October 30, 
1992, each dwelling unit must include at least one battery-operated or 
hard-wired smoke detector, in proper working condition, on each level of 
the unit. If the unit is occupied by hearing-impaired persons, smoke 
detectors must have an alarm system, designed for hearing-impaired 
persons, in each bedroom occupied by a hearing-impaired person.
    (2) Acceptability criteria. The smoke detector must be located, to 
the extent practicable, in a hallway adjacent to a bedroom, unless the 
unit is occupied by a hearing-impaired person, in which case each 
bedroom occupied by a hearing-impaired person must have an alarm system 
connected to the smoke detector installed in the hallway.

[44 FR 59410, Oct. 15, 1979, as amended at 50 FR 9269, Mar. 7, 1985; 57 
FR 33851, July 30, 1992; 63 FR 46578, Sept. 1, 1998]



Sec. 880.208  Financing.

    (a) Types of financing. Any type of construction financing and long-
term financing may be used, including:
    (1) Conventional loans from commercial banks, savings banks, savings 
and loan associations, pension funds, insurance companies or other 
financial institutions;
    (2) Mortgage insurance programs under the National Housing Act;
    (3) Mortgage and loan programs of the Farmers' Home Administration 
of the Department of Agriculture compatible with the Section 8 program; 
and
    (4) Financing by tax-exempt bonds or other obligations.
    (b) HUD approval. HUD must approve the terms and conditions of the 
financing to determine consistency with these regulations and to assure 
they do not purport to pledge or give greater rights or funds to any 
party than are

[[Page 53]]

provided under the Agreement, Contract, and/or ACC. Where the project is 
financed with tax-exempt obligations, the terms and conditions will be 
approved in accordance with the following:
    (1) An issuer of obligations that are tax-exempt under any provision 
of Federal law or regulation, the proceeds of the sale of which are to 
be used to purchase GNMA mortgage-backed securities issued by the 
mortgagee of the Section 8 project, will be subject to 24 CFR part 811, 
subpart B.
    (2) Issuers of obligations that are tax-exempt under Section 11(b) 
of the U.S. Housing Act of 1937 will be subject to 24 CFR part 811, 
subpart A if paragraph (b)(1) of this section is not applicable.
    (3) Issuers of obligations that are tax-exempt under any provision 
of Federal law or regulation other than section 11(b) of the U.S. 
Housing Act of 1937 will be subject to 24 CFR part 811, subpart A if 
paragraph (b)(1) of this section is not applicable, except that such 
issuers that are State Agencies qualified under 24 CFR part 883 are not 
subject to 24 CFR part 811 subpart A and are subject solely to the 
requirements of 24 CFR part 883 with regard to the approval of tax-
exempt financing.
    (c) Pledge of Contracts. An owner may pledge, or offer as security 
for any loan or obligation, an Agreement, Contract or ACC entered into 
pursuant to this part: Provided, however, That such financing is in 
connection with a project constructed pursuant to this part and approved 
by HUD. Any pledge of the Agreement, Contract, or ACC, or payments 
thereunder, will be limited to the amounts payable under the Contract or 
ACC in accordance with its terms. If the pledge or other document 
provides that all payments will be paid directly to the mortgagee or the 
trustee for bondholders, the mortgagee or trustee will make all payments 
or deposits required under the mortgage or trust indenture or HUD 
regulations and remit any excess to the owner.
    (d) Foreclosure and other transfers. In the event of foreclosure, 
assignment or sale approved by HUD in lieu of foreclosure, or other 
assignment or sale approved by HUD:
    (1) The Agreement, the Contract and the ACC, if applicable, will 
continue in effect, and
    (2) Housing assistance payments will continue in accordance with the 
terms of the Contract.
    (e) Financing of manufactured home parks. In the case of a newly 
constructed manufactured home park, the principal amount of any mortgage 
attributable to the rental spaces in the park may not exceed an amount 
per space determined in accordance with Sec. 207.33(b) of this title.

[44 FR 59410, Oct. 15, 1979, as amended at 45 FR 62797, Sept. 22, 1980; 
48 FR 12704, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984]



Sec. 880.211  Audit.

    (a) Where a State or local government is the eligible owner of a 
project or a contract administrator under Sec. 880.505 receiving 
financial assistance under this part, the audit requirements in 24 CFR 
part 44 shall apply.
    (b) Where a nonprofit organization is the eligible owner of a 
project, receiving financial assistance under this part, the audit 
requirements in 24 CFR part 45 shall apply.

[50 FR 39091, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986; 57 FR 33256, 
July 27, 1992]



                         Subparts C-D [Reserved]



             Subpart E--Housing Assistance Payments Contract



Sec. 880.501  The contract.

    (a) Contract. The Housing Assistance Payments Contract sets forth 
rights and duties of the owner and the contract administrator with 
respect to the project and the housing assistance payments. The owner 
and contract administrator execute the Contract in the form prescribed 
by HUD upon satisfactory completion of the project.
    (b) [Reserved]
    (c) Housing Assistance Payments to Owners under the Contract. The 
housing assistance payments made under the Contract are:
    (1) Payments to the owner to assist eligible families leasing 
assisted units, and
    (2) Payments to the owner for vacant assisted units (``vacancy 
payments'') if

[[Page 54]]

the conditions specified in Sec. 880.610 are satisfied.

The housing assistance payments are made monthly by the contract 
administrator upon proper requisition by the owner, except payments for 
vacancies of more than 60 days, which are made semi-annually by the 
contract administrator upon requisition by the owner.
    (d) Amount of Housing Assistance Payments to Owner. (1) The amount 
of the housing assistance payment made to the owner of a unit being 
leased by an eligible family is the difference between the contract rent 
for the unit and the tenant rent payable by the family.
    (2) A housing assistance payment will be made to the owner for a 
vacant assisted unit in an amount equal to 80 percent of the contract 
rent for the first 60 days of vacancy, subject to the conditions in 
Sec. 880.611. If the owner collects any tenant rent or other amount for 
this period which, when added to this vacancy payment, exceeds the 
contract rent, the excess must be repaid as HUD directs.
    (3) For a vacancy that exceeds 60 days, a housing assistance payment 
for the vacant unit will be made, subject to the conditions in 
Sec. 880.611, in an amount equal to the principal and interest payments 
required to amortize that portion of the debt attributable to the vacant 
unit for up to 12 additional months.
    (e) Payment of Utility Reimbursement. Where applicable, the Utility 
Reimbursement will be paid to the Family as an additional Housing 
Assistance Payment. The Contract will provide that the Owner will make 
this payment on behalf of the contract administrator. Funds will be paid 
to the Owner in trust solely for the purpose of making the additional 
payment. If the Family and the utility company consent, the Owner may 
pay the Utility Reimbursement jointly to the Family and the utility 
company or directly to the utility company.

[44 FR 59410, Oct. 15, 1979, as amended at 49 FR 19943, May 10, 1984; 61 
FR 13587, Mar. 27, 1996]



Sec. 880.502  Term of contract.

    (a) Term (except for Manufactured Home Parks). The term of the 
contract will be as follows:
    (1) For assisted units in a project financed with the aid of a loan 
insured or co-insured by the Federal government or a loan made, 
guaranteed or intended for purchase by the Federal government, the term 
will be 20 years.
    (2) For assisted units in a project financed other than as described 
in paragraph (a)(1) of this section, the term will be the lesser of (i) 
the term of the project's financing (but not less than 20 years), or 
(ii) 30 years, or 40 years if (A) the project is owned or financed by a 
loan or loan guarantee from a state or local agency, (B) the project is 
intended for occupancy by non-elderly families and (C) the project is 
located in an area designated by HUD as one requiring special financing 
assistance.
    (b) Term for Manufactured Home Parks. For manufactured home units or 
spaces in newly constructed manufactured home parks, the term of the 
Contract will be 20 years.
    (c) Staged Projects. If the project is completed in stages, the term 
of the Contract must relate separately to the units in each stage. The 
total Contract term for the units in all stages, beginning with the 
effective date of the Contract for the first stage, may not exceed the 
overall maximum term allowable for any one unit under this section, plus 
two years.

[44 FR 59410, Oct. 15, 1979, as amended at 45 FR 18924, Mar. 24, 1980; 
48 FR 12705, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984]



Sec. 880.503  Maximum annual commitment and project account.

    (a) Maximum Annual Commitment. Where HUD is the contract 
administrator, the maximum annual amount that may be committed under the 
Contract is the total of the contract rents and utility allowances for 
all assisted units in the project. Where the PHA is the contract 
administrator, the maximum annual contribution that may be contracted 
for in the ACC is the total of the contract rents and utility allowances 
for all assisted units plus an administrative fee for the PHA as 
approved by HUD.

[[Page 55]]

    (b) Project Account. (1) A project account will be established and 
maintained by HUD as a specifically identified and segregated account 
for each project. The account will be established out of the amounts by 
which the maximum annual commitment exceeds the amount actually paid out 
under the Contract or ACC each year. Payments will be made from this 
account for housing assistance payments (and fees for PHA 
administration, if appropriate) when needed to cover increases in 
contract rents or decreases in tenant rents and for other cost 
specifically approved by the Secretary.
    (2) Whenever a HUD-approved estimate of required annual payments 
under the Contract or ACC for a fiscal year exceeds the maximum annual 
commitment and would cause the amount in the project account to be less 
than 40 percent of the maximum, HUD will, within a reasonable period of 
time, take such additional steps authorized by Section 8(c)(6) of the 
U.S. Housing Act of 1937, as may be necessary, to assure that payments 
under the Contract or ACC will be adequate to cover increases in 
Contract rents and decreases in tenant rents.



Sec. 880.504  Leasing to eligible families.

    (a) Availability of units for occupancy by Eligible Families. During 
the term of the Contract, an owner shall make available for occupancy by 
eligible families the total number of units for which assistance is 
committed under the Contract. For purposes of this section, making units 
available for occupancy by eligible families means that the owner: (1) 
Is conducting marketing in accordance with Sec. 880.601(a); (2) has 
leased or is making good faith efforts to lease the units to eligible 
and otherwise acceptable families, including taking all feasible actions 
to fill vacancies by renting to such families; and (3) has not rejected 
any such applicant family except for reasons acceptable to the contract 
administrator. If the owner is temporarily unable to lease all units for 
which assistance is committed under the Contract to eligible families, 
one or more units may be leased to ineligible families with the prior 
approval of the contract administrator in accordance with HUD 
guidelines. Failure on the part of the owner to comply with these 
requirements is a violation of the Contract and grounds for all 
available legal remedies, including specific performance of the 
Contract, suspension or debarment from HUD programs, and reduction of 
the number of units under the Contract as set forth in paragraph (b) of 
this section.
    (b) Reduction of number of units covered by Contract. (1) Part 880 
and 24 CFR part 881 projects. HUD (or the PHA at the direction of HUD, 
as appropriate) may reduce the number of units covered by the Contract 
to the number of units available for occupancy by eligible families if:
    (i) The owner fails to comply with the requirements of paragraph (a) 
of this section; or
    (ii) Notwithstanding any prior approval by the contract 
administrator to lease such units to ineligible families, HUD (or the 
PHA at the direction of HUD, as appropriate) determines that the 
inability to lease units to eligible families is not a temporary 
problem.
    (2) For 24 CFR part 883 projects. HUD and the Agency may reduce the 
number of units covered by the Contract to the number of units available 
for occupancy by eligible families if:
    (i) The owner fails to comply with the requirements of paragraph (a) 
of this section; or
    (ii) Notwithstanding any prior approval by the Agency to lease such 
units to ineligible families, HUD and the Agency determine that the 
inability to lease units to eligible families is not a temporary 
problem.
    (c) Restoration. For this part 880 and 24 CFR part 881 projects, HUD 
will agree to an amendment of the ACC or the Contract, as appropriate, 
to provide for subsequent restoration of any reduction made pursuant to 
paragraph (b) of this section, and for 24 CFR part 883 projects, HUD 
will agree to an amendment of the ACC and the Agency may agree to an 
amendment to the Contract to provide for subsequent restoration of any 
reduction made pursuant to paragraph (b) of this section, if:

[[Page 56]]

    (1) HUD determines (for 24 CFR part 883 projects, HUD and the Agency 
determine) that the restoration is justified by demand,
    (2) The owner otherwise has a record of compliance with his 
obligations under the Contract, and
    (3) Contract and budget authority is available.
    (d) Applicability. In accordance with section 555 of the Cranston-
Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and (b) 
of this section apply to all Contracts. An owner who had leased an 
assisted unit to an ineligible family consistent with the regulations in 
effect at the time will continue to lease the unit to that family. 
However, the owner must make the unit available for occupancy by an 
eligible family when the ineligible family vacates the unit.
    (e) Termination of assistance for failure to submit evidence of 
citizenship or eligible immigration status. If an owner who is subject 
to paragraphs (a) and (b) of this section is required to terminate 
housing assistance payments for the family in accordance with 24 CFR 
part 5 because the owner determines that the entire family does not have 
U.S. citizenship or eligible immigration status, the owner may allow 
continued occupancy of the unit by the family without Section 8 
assistance following the termination of assistance, or if the family 
constitutes a mixed family, as defined in 24 CFR part 5, the owner shall 
comply with the provisions of 24 CFR part 5 concerning assistance to 
mixed families, and deferral of termination of assistance.

[44 FR 59410, Oct. 15, 1979, as amended at 49 FR 31397, Aug. 7, 1984; 51 
FR 11224, Apr. 1, 1986; 53 FR 846, Jan. 13, 1988; 53 FR 6601, Mar. 2, 
1988; 59 FR 13652, Mar. 23, 1994; 60 FR 14841, Mar. 20, 1995; 61 FR 
13587, Mar. 27, 1996]



Sec. 880.505  Contract administration and conversions.

    (a) Contract administration. For private-owner/PHA projects, the PHA 
is primarily responsible for administration of the Contract, subject to 
review and audit by HUD. For private-owner/HUD and PHA-owner/HUD 
projects, HUD is responsible for administration of the Contract.The PHA 
or HUD may contract with another entity for the performance of some or 
all of its contract administration functions.
    (b) PHA fee for Contract administration. A PHA will be entitled to a 
reasonable fee, determined by HUD, for administering a Contract except 
under certain circumstances (see 24 CFR part 883) where a state housing 
finance agency is the PHA and finances the project.
    (c) Conversion of Projects from one Ownership/Contractual 
arrangement to another. Any project may be converted from one ownership/
contractual arrangement to another (for example, from a private-owner/
HUD to a private-owner/PHA project) if:
    (1) The owner, the PHA and HUD agree,
    (2) HUD determines that conversion would be in the best interest of 
the project, and
    (3) In the case of conversion from a private-owner/HUD to a private-
owner/PHA project, contract authority is available to cover the PHA fee 
for administering the Contract.



Sec. 880.506  Default by owner (private-owner/HUD and PHA-owner/HUD projects).

    The Contract will provide:
    (a) That if HUD determines that the owner is in default under the 
Contract, HUD will notify the owner and the lender of the actions 
required to be taken to cure the default and of the remedies to be 
applied by HUD including specific performance under the Contract, 
reduction or suspension of housing assistance payments and recovery of 
overpayments, where appropriate; and
    (b) That if the owner fails to cure the default, HUD has the right 
to terminate the Contract or to take other corrective action.



Sec. 880.507  Default by PHA and/or owner (private-owner/PHA projects).

    (a) Rights of Owner if PHA defaults under Agreement or Contract. The 
ACC, the Agreement and the Contract will provide that, in the event of 
failure of the PHA to comply with the Agreement or Contract with the 
owner, the owner will have the right, if he is not in default, to demand 
that HUD investigate. HUD will first give the PHA a

[[Page 57]]

reasonable opportunity to take corrective action. If HUD determines that 
a substantial default exists, HUD will assume the PHA's rights and 
obligations under the Agreement or Contract and meet the obligations of 
the PHA under the Agreement or Contract including the obligations to 
enter into the Contract.
    (b) Rights of HUD if PHA defaults under ACC. The ACC will provide 
that, if the PHA fails to comply with any of its obligations, HUD may 
determine that there is a substantial default and require the PHA to 
assign to HUD all of its rights and interests under the Contract; 
however, HUD will continue to pay annual contributions in accordance 
with the terms of the ACC and the Contract. Before determining that a 
PHA is in substantial default, HUD will give the PHA a reasonable 
opportunity to take corrective action.
    (c) Rights of PHA and HUD if Owner defaults under Contract. (1) The 
Contract will provide that if the PHA determines that the owner is in 
default under the Contract, the PHA will notify the owner and lender, 
with a copy to HUD, (i) of the actions required to be taken to cure the 
default, (ii) of the remedies to be applied by the PHA including 
specific performance under the Contract, abatement of housing assistance 
payments and recovery of overpayments, where appropriate, and (iii) that 
if he fails to cure the default, the PHA has the right to terminate the 
Contract or to take other corrective action, in its discretion or as 
directed by HUD.
    (2) If the PHA is the lender, the Contract will also provide that 
HUD has an independent right to determine whether the owner is in 
default and to take corrective action and apply appropriate remedies, 
except that HUD will not have the right to terminate the Contract 
without proceeding in accordance with paragraph (b) of this section.



Sec. 880.508  Notice upon contract expiration.

    (a) The Contract will provide that the owner will notify each 
assisted family, at least 90 days before the end of the Contract term, 
of any increase in the amount the family will be required to pay as rent 
which may occur as a result of its expiration. If the Contract is to be 
renewed but with a reduction in the number of units covered by it, this 
notice shall be given to each family who will no longer be assisted 
under the Contract.
    (b) The notice provided for in paragraph (a) of this section shall 
be accomplished by: (1) Sending a letter by first class mail, properly 
stamped and addressed, to the family at its address at the project, with 
a proper return address; and (2) serving a copy of the notice on any 
adult person answering the door at the leased dwelling unit, or if no 
adult responds, by placing the notice under or through the door, if 
possible, or else by affixing the notice to the door. Service shall not 
considered to be effective until both required notices have been 
accomplished. The date on which the notice shall be considered to be 
received by the family shall be the date on which the owner mails the 
first class letter provided for in this paragraph, or the date on which 
the notice provided for in this paragraph is properly given, whichever 
is later.
    (c) The notice shall advise each affected family that, after the 
expiration date of the Contract, the family will be required to bear the 
entire cost of the rent and that the owner will be free (to the extent 
the project is not otherwise regulated by HUD) to alter the rent without 
HUD approval, but subject to any applicable requirements or restrictions 
under the lease or under State or local law. The notice shall also 
state: (1) The actual (if known) or the estimated rent which will be 
charged following the expiration of the Contract; (2) the difference 
between the rent and the Total Tenant Payment toward rent under the 
Contract; and (3) the date the Contract will expire.
    (d) The owner shall give HUD a certification that families have been 
notified in accordance with this section with an example of the text of 
the notice attached.
    (e) This section applies to all Contracts entered into pursuant to 
an Agreement executed on or after October 1, 1981, or entered into 
pursuant to an Agreement executed before October 1, 1981, but renewed or 
amended on or after October 1, 1984.

[49 FR 31283, Aug. 6, 1984]

[[Page 58]]



                          Subpart F--Management



Sec. 880.601  Responsibilities of owner.

    (a) Marketing. (1) The owner must commence diligent marketing 
activities in accordance with the Agreement not later than 90 days prior 
to the anticipated date of availability for occupancy of the first unit 
of the project.
    (2) Marketing must be done in accordance with the HUD-approved 
Affirmative Fair Housing Marketing Plan and all Fair Housing and Equal 
Opportunity requirements. The purpose of the Plan and requirements is to 
assure that eligible families of similar income in the same housing 
market area have an equal opportunity to apply and be selected for a 
unit in projects assisted under this part regardless of their race, 
color, creed, religion, sex or national origin.
    (3) With respect to non-elderly family units, the owner must 
undertake marketing activities in advance of marketing to other 
prospective tenants in order to provide opportunities to reside in the 
project to non-elderly families who are least likely to apply, as 
determined in the Affirmative Fair Housing Marketing Plan, and to non-
elderly families expected to reside in the community by reason of 
current or planned employment.
    (4) At the time of Contract execution, the owner must submit a list 
of leased and unleased units, with justification for the unleased units, 
in order to qualify for vacancy payments for the unleased units.
    (b) Management and maintenance. The owner is responsible for all 
management functions, including determining eligibility of applicants in 
accordance with 24 CFR parts 5 and 24 CFR part 813, provision of Federal 
selection preferences in accordance with 24 CFR part 5, selection of 
tenants, obtaining and verifying Social Security Numbers submitted by 
families (as provided by 24 CFR part 5), obtaining signed consent forms 
from families for the obtaining of wage and claim information from State 
Wage Information Collection Agencies (as provided by 24 CFR part 5), 
reexamination of family income, evictions and other terminations of 
tenancy, and collection of rents, and all repair and maintenance 
functions (including ordinary and extraordinary maintenance and 
replacement of capital items). All these functions shall be performed in 
compliance with applicable Equal Opportunity requirements.
    (c) Contracting for services. (1) For this part 880 and 24 CFR part 
881 projects, with HUD approval, the owner may contract with a private 
or public entity (except the contract administrator) for performance of 
the services or duties required in paragraphs (a) and (b) of this 
section.
    (2) For 24 CFR part 883 projects, with approval of the Agency, the 
owner may contract with a private or public entity (but not with the 
Agency unless temporarily necessary for the Agency to protect its 
financial interest and to uphold its program responsibilities where no 
alternative management agent is immediately available) for performance 
of the services or duties required in paragraphs (a) and (b) of this 
section.
    (3) However, such an arrangement does not relieve the owner of 
responsibility for these services and duties.
    (d) Submission of financial and operating statements. After 
execution of the Contract, the owner must submit to the contract 
adminstrator:
    (1) Financial information in accordance with 24 CFR part 5, subpart 
H; and
    (2) Other statements as to project operation, financial conditions 
and occupancy as HUD may require pertinent to administration of the 
Contract and monitoring of project operations.
    (e) Use of project funds. (1) Project funds must be used for the 
benefit of the project, to make required deposits to the replacement 
reserve in accordance with Sec. 880.602 and to provide distributions to 
the owner as provided in Sec. 880.205, Sec. 881.205 of this chapter, or 
Sec. 883.306 of this chapter, as appropriate.
    (2) For this part 880 and 24 CFR part 881 projects:
    (i) Any remaining project funds must be deposited with the mortgagee 
or other HUD-approved depository in an interest-bearing residual 
receipts account. Withdrawals from this account will be made only for 
project purposes and with the approval of HUD.
    (ii) Partially-assisted projects are exempt from the provisions of 
this section.

[[Page 59]]

    (iii) In the case of HUD-insured projects, the provisions of this 
paragraph (e) will apply instead of the otherwise applicable mortgage 
insurance provisions.
    (3) For 24 CFR part 883 projects:
    (i) Any remaining project funds must be deposited with the Agency, 
other mortgagee or other Agency-approved depository in an interest-
bearing account. Withdrawals from this account may be made only for 
project purposes and with the approval of the Agency.
    (ii) In the case of HUD-insured projects, the provisions of this 
paragraph will apply instead of the otherwise applicable mortgage 
insurance provisions, except in the case of partially-assisted projects 
which are subject to the applicable mortgage insurance provisions.

(Approved by the Office of Management and Budget under control number 
2502-0204)

[44 FR 59410, Oct 15, 1979, as amended at 45 FR 18924, Mar. 24, 1980; 51 
FR 11224, Apr. 1, 1986; 53 FR 846, Jan. 13, 1988; 53 FR 1145, Jan. 15, 
1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39702, Sept. 27, 1989; 56 FR 7536, 
Feb. 22, 1991; 60 FR 14841, Mar. 20, 1995; 61 FR 13588, Mar. 27, 1996; 
63 FR 46593, Sept. 1, 1998]



Sec. 880.602  Replacement reserve.

    (a) A replacement reserve must be established and maintained in an 
interest-bearing account to aid in funding extraordinary maintenance and 
repair and replacement of capital items.
    (1) Part 880 and 24 CFR part 881 projects. (i) For this part 880 and 
24 CFR part 811 projects, an amount equivalent to .006 of the cost of 
total structures, including main buildings, accessory buildings, garages 
and other buildings, or any higher rate as required by HUD from time to 
time, will be deposited in the replacement reserve annually. This amount 
will be adjusted each year by the amount of the automatic annual 
adjustment factor.
    (ii) The reserve must be built up to and maintained at a level 
determined by HUD to be sufficient to meet projected requirements. 
Should the reserve achieve that level, the rate of deposit to the 
reserve may be reduced with the approval of HUD.
    (iii) All earnings including interest on the reserve must be added 
to the reserve.
    (iv) Funds will be held by the mortgagee or trustee for bondholders, 
and may be drawn from the reserve and used only in accordance with HUD 
guidelines and with the approval of, or as directed by, HUD.
    (v) Partially-assisted part 880 and 24 CFR part 881 projects are 
exempt from the provisions of this section.
    (2) Part 883 of this chapter projects. (i) For 24 CFR part 883 
projects, an amount equivalent to at least .006 of the cost of total 
structures, including main buildings, accessory buildings, garages and 
other buildings, or any higher rate as required from time to time by:
    (A) The Agency, in the case of projects approved under 24 CFR part 
883, subpart D; or
    (B) HUD, in the case of all other projects, will be deposited in the 
replacement reserve annually. For projects approved under 24 CFR part 
883, subpart D, this amount may be adjusted each year by up to the 
amount of the automatic annual adjustment factor. For all projects not 
approved under 24 CFR part 883, subpart D, this amount must be adjusted 
each year by the amount of the automatic annual adjustment factor.
    (ii) The reserve must be built up to and maintained at a level 
determined to be sufficient by the Agency to meet projected 
requirements. Should the reserve achieve that level, the rate of deposit 
to the reserve may be reduced with the approval of the Agency.
    (iii) All earnings, including interest on the reserve, must be added 
to the reserve.
    (iv) Funds will be held by the Agency, other mortgagee or trustee 
for bondholders, as determined by the Agency, and may be drawn from the 
reserve and used only in accordance with Agency guidelines and with the 
approval of, or as directed by, the Agency.
    (v) The Agency may exempt partially-assisted projects approved under 
24 CFR part 883, subpart D, from the provisions of this section. All 
partially-assisted projects not approved under the Fast Track Procedures 
formerly in 24 CFR part 883, subpart D, are exempt from the provisions 
of this section.

[[Page 60]]

    (b) In the case of HUD-insured projects, the provisions of this 
section will apply instead of the otherwise applicable mortgage 
insurance provisions, except in the case of partially-assisted insured 
projects which are subject to the applicable mortgage insurance 
provisions.

[61 FR 13588, Mar. 27, 1996]



Sec. 880.603  Selection and admission of assisted tenants.

    (a) Application. The owner must accept applications for admission to 
the project in the form prescribed by HUD. Both the owner (or designee) 
and the applicant must complete and sign the application. For this part 
880 and 24 CFR part 881 projects, on request, the owner must furnish 
copies of all applications to HUD and the PHA, if applicable. For 24 CFR 
part 883 projects, on request, the owner must furnish to the Agency or 
HUD copies of all applications received.
    (b) Determination of eligibility and selection of tenants. The owner 
is responsible for obtaining and verifying information related to income 
in accordance with 24 CFR part 813, and evidence related to citizenship 
and eligible immigration status in accordance with 24 CFR part 5, to 
determine whether the applicant is eligible for assistance in accordance 
with the requirements of 24 CFR part 5, and 24 CFR part 813, and to 
select families for admission to the program, which includes giving 
selection preferences in accordance with 24 CFR part 5, subpart D.
    (1) If the owner determines that the family is eligible and is 
otherwise acceptable and units are available, the owner will assign the 
family a unit of the appropriate size in accordance with HUD standards. 
If no suitable unit is available, the owner will place the family on a 
waiting list for the project and notify the family of when a suitable 
unit may become available. If the waiting list is so long that the 
applicant would not be likely to be admitted for the next 12 months, the 
owner may advise the applicant that no additional applications are being 
accepted for that reason, provided the owner complies with the 
procedures for informing applicants about admission preferences as 
provided in 24 CFR part 5, subpart D.
    (2) If the owner determines that an applicant is ineligible on the 
basis of income or family composition, or because of failure to meet the 
disclosure and verification requirements for Social Security Numbers (as 
provided by 24 CFR part 5), or because of failure by an applicant to 
sign and submit consent forms for the obtaining of wage and claim 
information from State Wage Information Collection Agencies (as provided 
by 24 CFR parts 5 and 813), or that the owner is not selecting the 
applicant for other reasons, the owner will promptly notify the 
applicant in writing of the determination and its reasons, and that the 
applicant has the right to meet with the owner or managing agent in 
accordance with HUD requirements. Where the owner is a PHA, the 
applicant may request an informal hearing. If the PHA determines that 
the applicant is not eligible, the PHA will notify the applicant and 
inform the applicant that he or she has the right to request HUD review 
of the PHA's determination. The applicant may also exercise other rights 
if the applicant believes that he or she is being discriminated against 
on the basis of race, color, creed, religion, sex, or national origin. 
See 24 CFR part 5 for the informal review provisions for the denial of a 
Federal preference or the failure to establish citizenship or eligible 
immigration status and for notice requirements where assistance is 
terminated, denied, suspended, or reduced based on wage and claim 
information obtained by HUD from a State Wage Information Collection 
Agency.
    (3) Records on applicants and approved eligible families, which 
provide racial, ethnic, gender and place of previous residency data 
required by HUD, must be maintained and retained for three years.
    (c) Reexamination of family income and composition--(1) Regular 
reexaminations. The owner must reexamine the income and composition of 
all families at least every 12 months. After consultation with the 
family and upon verification of the information, the owner must make 
appropriate adjustments in the Total Tenant Payment in accordance with 
24 CFR part 813 and determine whether the family's unit size is still 
appropriate. The owner must adjust

[[Page 61]]

Tenant Rent and the Housing Assistance Payment to reflect any change in 
Total Tenant Payment and must carry out any unit transfer required by 
HUD. At the time of the annual reexamination of family income and 
composition, the owner must require the family to disclose the verify 
Social Security Numbers, as provided by 24 CFR part 5. For requirements 
regarding the signing and submitting of consent forms by families for 
the obtaining of wage and claim information from State Wage Information 
Collection Agencies, see 24 CFR part 5. At the first regular 
reexamination after June 19, 1995, the owner shall follow the 
requirements of 24 CFR part 5 concerning obtaining and processing 
evidence of citizenship or eligible immigration status of all family 
members. Thereafter, at each regular reexamination, the owner shall 
follow the requirements of 24 CFR part 5 and verify the immigration 
status of any new family member.
    (2) Interim reexaminations. The family must comply with provisions 
in its lease regarding interim reporting of changes in income. If the 
owner receives information concerning a change in the family's income or 
other circumstances between regularly scheduled reexaminations, the 
owner must consult with the family and make any adjustments determined 
to be appropriate. Any change in the family's income or other 
circumstances that results in an adjustment in the Total Tenant Payment, 
Tenant Rent and Housing Assistance Payment must be verified. See 24 CFR 
part 5 for the requirements for the disclosure and verification of 
Social Security Numbers at interim reexaminations involving new family 
members. For requirements regarding the signing and submitting of 
consent forms for the obtaining of wage and claim information from State 
Wage Information Collection Agencies, see 24 CFR part 5. At any interim 
reexamination after June 19, 1995, when a new family member has been 
added, the owner shall follow the requirements of 24 CFR part 5 
concerning obtaining and processing evidence of the citizenship or 
eligible immigration status of any new family member.
    (3) Continuation of housing assistance payments. A family's 
eligibility for Housing Assistance Payments continues until the Total 
Tenant Payment equals the Gross Rent. The termination of eligibility at 
such point will not affect the family's other rights under its lease, 
nor will such termination preclude the resumption of payments as a 
result of later changes in income, rents, or other relevant 
circumstances during the term of the Contract. However, eligibility also 
may be terminated in accordance with HUD requirements, for such reasons 
as failure to submit requested verification information, including 
failure to meet the disclosure and verification requirements for Social 
Security Numbers, as provided by 24 CFR part 5, or failure to sign and 
submit consent forms for the obtaining wage and claim information from 
State Wage Information Collection Agencies, as provided by 24 CFR part 
5. See 24 CFR part 5 for provisions requiring termination of assistance 
for failure to establish citizenship or eligible immigration status and 
also for provisions concerning certain assistance for mixed families 
(families whose members include those with eligible immigration status, 
and those without eligible immigration status) in lieu of termination of 
assistance, and for provisions concerning deferral of termination of 
assistance.

(Approved by the Office of Management and Budget under control number 
2502-0204.)

[61 FR 13589, Mar. 27, 1996]



Sec. 880.604  Tenant rent.

    The eligible Family pays the Tenant Rent directly to the Owner.

[49 FR 19943, May 10, 1984]



Sec. 880.605  Overcrowded and underoccupied units.

    If the contract administrator determines that because of change in 
family size an assisted unit is smaller than appropriate for the 
eligible family to which it is leased, or that the unit is larger than 
appropriate, housing assistance payments with respect to the unit will 
not be reduced or terminated until the eligible family has been 
relocated to an appropriate alternative unit. If possible, the owner 
will, as promptly as

[[Page 62]]

possible, offer the family an appropriate unit. The owner may receive 
vacancy payments for the vacated unit if he complies with the 
requirements of Sec. 880.611.



Sec. 880.606  Lease requirements.

    (a) Term of Lease. The term of the lease will be for not less than 
one year. The lease may, or in the case of a lease for a term of more 
than one year must, contain a provision permitting termination on 30 
days advance written notice by the family.
    (b) Form. (1) Part 880 and 24 CFR part 881 projects. For this part 
880 and 24 CFR part 881 projects, the form of lease must contain all 
required provisions, and none of the prohibited provisions specified in 
the developer's packet, and must conform to the form of lease included 
in the approved final proposal.
    (2) 24 CFR part 883 projects. For 24 CFR part 883 projects, the form 
of lease must contain all required provisions, and none of the 
prohibited provisions specified below.
    (i) Required provisions (Addendum to lease).

                            Addendum to Lease

    The following additional Lease provisions are incorporated in full 
in the Lease between ____ (Landlord) and ____ (Tenant) for the following 
dwelling unit: ____. In case of any conflict between these and any other 
provisions of the Lease, these provisions will prevail.
    a. The total rent will be $____ per month.
    b. Of the total rent, $____ will be payable by the State Agency 
(Agency) as housing assistance payments on behalf of the Tenant and 
$____ will be payable by the Tenant. These amounts will be subject to 
change by reason of changes in the Tenant's family income, family 
composition, or extent of exceptional medical or other unusual expenses, 
in accordance with HUD-established schedules and criteria; or by reason 
of adjustment by the Agency of any applicable Utility Allowance; or by 
reasons of changes in program rules. Any such change will be effective 
as of the date stated in a notification to the Tenant.
    c. The Landlord will not discriminate against the Tenant in the 
provision of services, or in any other manner, on the grounds of race, 
color, creed, religion, sex, or national origin.
    d. The Landlord will provide the following services and maintenance: 
____________
    e. A violation of the Tenant's responsibilities under the Section 8 
Program, as determined by the Agency, is also a violation of the lease.

Landlord________________________________________________________________

By______________________________________________________________________

Date____________________________________________________________________

Tenant__________________________________________________________________

Date____________________________________________________________________

[End of addendum]

    (ii) Prohibited provisions. Lease clauses which fall within the 
classifications listed below must not be included in any Lease.

                              Lease Clauses

    a. Confession of Judgment. Consent by the tenant to be sued, to 
admit guilt, or to accept without question any judgment favoring the 
landlord in a lawsuit brought in connection with the lease.
    b. Seize or Hold Property for Rent or Other Charges. Authorization 
to the landlord to take property of the tenant and/or hold it until the 
tenant meets any obligation which the landlord has determined the tenant 
has failed to perform.
    c. Exculpatory Clause. Prior agreement by the tenant not to hold the 
landlord or landlord's agents legally responsible for acts done 
improperly or for failure to act when the landlord or landlord's agent 
was required to do so.
    d. Waiver of Legal Notice. Agreement by the tenant that the landlord 
need not give any notices in connection with (1) a lawsuit against the 
tenant for eviction, money damages, or other purposes, or (2) any other 
action affecting the tenant's rights under the lease.
    e. Waiver of Legal Proceeding. Agreement by the tenant to allow 
eviction without a court determination.
    f. Waiver of Jury Trial. Authorization to the landlord's lawyer to 
give up the tenant's right to trial by jury.
    g. Waiver of Right to Appeal Court Decision. Authorization to the 
landlord's lawyer to give up the tenant's right to appeal a decision on 
the ground of judicial error or to give up the tenant's right to sue to 
prevent a judgment being put into effect.
    h. Tenant Chargeable with Cost of Legal Actions Regardless of 
Outcome of Lawsuit. Agreement by the tenant to pay lawyer's fees or 
other legal costs whenever the landlord decides to sue the tenant 
whether or not the tenant wins. (Omission of such a clause does not mean 
that the tenant, as a party to a lawsuit, may not have to pay lawyer's 
fees or other costs if the court so orders.)

[End of clauses]

[44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13590, Mar. 27, 1996]

[[Page 63]]



Sec. 880.607  Termination of tenancy and modification of lease.

    (a) Applicability. The provisions of this section apply to all 
decisions by an owner to terminate the tenancy of a family residing in a 
unit under Contract during or at the end of the family's lease term.
    (b) Entitlement of Families to occupancy--(1) Grounds. The owner may 
not terminate any tenancy except upon the following grounds:
    (i) Material noncompliance with the lease;
    (ii) Material failure to carry out obligations under any State 
landlord and tenant act;
    (iii) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the premises by other residents; any 
criminal activity that threatens the health, safety, or right to 
peaceful enjoyment of their residences by persons residing in the 
immediate vicinity of the premises; any criminal activity that threatens 
the health, or safety of any on-site property management staff 
responsible for managing the premises; or any drug-related criminal 
activity on or near such premises, engaged in by a resident, any member 
of the resident's household, or any guest or other person under the 
resident's control shall be grounds for termination of tenancy.
    (iv) Other good cause, which may include the refusal of a family to 
accept an approved modified lease form (see paragraph (d) of this 
section). No termination by an owner will be valid to the extent it is 
based upon a lease or a provisions of State law permitting termination 
of a tenancy solely because of expiration of an initial or subsequent 
renewal term. All terminations must also be in accordance with the 
provisions of any State and local landlord tenant law and paragraph (c) 
of this section.
    (2) Notice of good cause. The conduct of a tenant cannot be deemed 
``other good cause'' under paragraph (b)(1)(iv) of this section unless 
the owner has given the family prior notice that the grounds constitute 
a basis for termination of tenancy. The notice must be served on the 
family in the same manner as that provided for termination notices under 
paragraph (c) of this section and State and local law.
    (3) Material noncompliance. (i) Material noncompliance with the 
lease includes:
    (A) One or more substantial violations of the lease; or
    (B) Repeated minor violations of the lease that disrupt the 
livability of the building; adversely affect the health or safety of any 
person or the right of any tenant to the quiet enjoyment of the leased 
premises and related facilities; interfere with the management of the 
building or have an adverse financial effect on the building.

    (ii) Failure of the family to timely submit all required information 
on family income and composition, including failure to submit required 
evidence of citizenship or eligible immigration status (as provided by 
24 CFR part 5), failure to disclose and verify Social Security Numbers 
(as provided by 24 CFR part 5), failure to sign and submit consent forms 
(as provided by 24 CFR part 5), or knowingly providing incomplete or 
inaccurate information, shall constitute a substantial violation of the 
lease.
    (c) Termination notice. (1) The owner must give the family a written 
notice of any proposed termination of tenancy, stating the grounds and 
that the tenancy is terminated on a specified date and advising the 
family that it has an opportunity to respond to the owner.
    (2) When a termination notice is issued for other good cause 
(paragraph (b)(1)(iv) of this section), the notice will be effective, 
and it will so state, at the end of a term and in accordance with the 
termination provisions of the lease, but in no case earlier than 30 days 
after receipt by the family of the notice. Where the termination notice 
is based on material noncompliance with the lease or material failure to 
carry out obligations under a State landlord and tenant act pursuant to 
paragraph (b)(1)(i) or (b)(1)(ii) of this section, the time of service 
must be in accord with the lease and State law.
    (3) In any judicial action instituted to evict the family, the owner 
may not rely on any grounds which are different from the reasons set 
forth in the notice.

[[Page 64]]

    (4) See 24 CFR part 5 for provisions related to termination of 
assistance because of failure to establish citizenship or eligible 
immigration status, including informal hearing procedures and also for 
provisions concerning certain assistance for mixed families (families 
whose members include those with eligible immigration status, and those 
without eligible immigration status) in lieu of termination of 
assistance, and for provisions concerning deferral of termination of 
assistance.
    (d) Modification of Lease form. The owner, with the prior approval 
of HUD or, for a 24 CFR part 883 project, the Agency, may modify the 
terms and conditions of the lease form effective at the end of the 
initial term or a successive term, by serving an appropriate notice on 
the family, together with the offer of a revised lease or an addendum 
revising the existing lease. This notice and offer must be received by 
the family at least 30 days prior to the last date on which the family 
has the right to terminate the tenancy without being bound by the 
modified terms and conditions. The family may accept the modified terms 
and conditions by executing the offered revised lease or addendum, or 
may reject the modified terms and conditions by giving the owner written 
notice in accordance with the lease that the family intends to terminate 
the tenancy. Any increase in rent must in all cases be governed by 
Sec. 880.609 and other applicable HUD regulations.

(Approved by the Office of Management and Budget under control number 
2502-0204)

[44 FR 59410, Oct. 15, 1979, as amended at 51 FR 11225, Apr. 1, 1986; 53 
FR 846, Jan. 13, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39703, Sept. 27, 
1989; 56 FR 7537, Feb. 22, 1991; 60 FR 14842, Mar. 20, 1995; 61 FR 
13590, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996]



Sec. 880.608  Security deposits.

    (a) At the time of the initial execution of the lease, the owner 
will require each family to pay a security deposit in an amount equal to 
one month's Total Tenant Payment or $50, whichever is greater. The 
family is expected to pay the security deposit from its own resources 
and/or other public sources. The owner may collect the security deposit 
on an installment basis.
    (b) The owner must place the security deposits in a segregated, 
interest-bearing account. The balance of this account must at all times 
be equal to the total amount collected from the families then in 
occupancy, plus any accrued interest. The owner must comply with any 
applicable State and local laws concerning interest payments on security 
deposits.
    (c) In order to be considered for the return of the security 
deposit, a family which vacates its unit will provide the owner with its 
forwarding address or arrange to pick up the refund.
    (d) The owner, subject to State and local law and the requirements 
of this paragraph, may use the security deposit, plus any accrued 
interest, as reimbursement for any unpaid family contribution or other 
amount which the family owes under the lease. Within 30 days (or shorter 
time if required by State, or local law) after receiving notification of 
the family's forwarding address, the owner must:
    (1) Refund to a family owing no rent or other amount under the lease 
the full amount of the security deposit, plus accrued interest;
    (2) Provide to a family owing rent or other amount under the lease a 
list itemizing any unpaid rent, damages to the unit, and estimated costs 
for repair, along with a statement of the family's rights under State 
and local law. If the amount which the owner claims is owed by the 
family is less than the amount of the security deposit, plus accrued 
interest, the owner must refund the unused balance to the family. If the 
owner fails to provide the list, the family will be entitled to the 
refund of the full amount of the security deposit plus accrued interest.
    (e) In the event a disagreement arises concerning reimbursement of 
the security deposit, the family will have the right to present 
objections to the owner in an informal meeting. The owner must keep a 
record of any disagreements and meetings in a tenant file for inspection 
by the contract administrator. The procedures of this paragraph do not 
preclude the family from exercising its rights under State and local 
law.
    (f) If the security deposit, including any accrued interest, is 
insufficient to

[[Page 65]]

reimburse the owner for any unpaid tenant rent or other amount which the 
family owes under the lease, and the owner has provided the family with 
the list required by paragraph (d)(2) of this section, the owner may 
claim reimbursement from the contract administrator, as appropriate, for 
an amount not to exceed the lesser of:
    (1) The amount owed the owner, or
    (2) One month's contract rent, minus the amount of the security 
deposit plus accrued interest. Any reimbursement under this section will 
be applied first toward any unpaid tenant rent due under the lease. No 
reimbursement may be claimed for unpaid rent for the period after 
termination of the tenancy.

[44 FR 59410, Oct. 15, 1979, as amended at 49 FR 19943, May 10, 1984; 61 
FR 13591, Mar. 27, 1996]



Sec. 880.609  Adjustment of contract rents.

    (a) Automatic annual adjustment of Contract Rents. Upon request from 
the owner to the contract administrator, contract rents will be adjusted 
on the anniversary date of the contract in accordance with 24 CFR part 
888.
    (b) Special additional adjustments. For all projects, special 
additional adjustments will be granted, to the extent determined 
necessary by HUD (for 24 CFR part 883 projects, by the Agency and HUD), 
to reflect increases in the actual and necessary expenses of owning and 
maintaining the assisted units which have resulted from substantial 
general increases in real property taxes, assessments, utility rates, 
and utilities not covered by regulated rates, and which are not 
adequately compensated for by annual adjustments under paragraph (a) of 
this section. The owner must submit to the contract administrator 
required supporting data, financial statements and certifications.
    (c) Overall limitation. Any adjustments of contract rents for a unit 
after Contract execution or cost certification, where applicable, must 
not result in material differences between the rents charged for 
assisted units and comparable unassisted units except to the extent that 
the differences existed with respect to the contract rents set at 
Contract execution or cost certification, where applicable.

[44 FR 59410, Oct. 15, 1979, as amended at 59 FR 22755, May 3, 1994; 61 
FR 13591, Mar. 27, 1996]



Sec. 880.610  Adjustment of utility allowances.

    In connection with annual and special adjustments of contract rents, 
the owner must submit an analysis of the project's Utility Allowances. 
Such data as changes in utility rates and other facts affecting utility 
consumption should be provided as part of this analysis to permit 
appropriate adjustments in the Utility Allowances. In addition, when 
approval of a utility rate change would result in a cumulative increase 
of 10 percent or more in the most recently approved Utility Allowances, 
the project owner must advise the contract administrator and request 
approval of new Utility Allowances. Whenever a Utility Allowance for a 
unit is adjusted, the owner will promptly notify affected families and 
make a corresponding adjustment of the tenant rent and the amount of the 
housing assistance payment for the unit.

(Approved by the Office of Management and Budget under control number 
2502-0161)

[50 FR 39097, Sept. 27, 1985]



Sec. 880.611  Conditions for receipt of vacancy payments.

    (a) General. Vacancy payments under the Contract will not be made 
unless the conditions for receipt of these housing assistance payments 
set forth in this section are fulfilled.
    (b) Vacancies during Rent-up. For each assisted unit that is not 
leased as of the effective date of the Contract, the owner is entitled 
to vacancy payments in the amount of 80 percent of the contract rent for 
the first 60 days of vacancy if the owner:
    (1) Conducted marketing in accordance with Sec. 880.601(a) and 
otherwise complied with Sec. 880.601;
    (2) Has taken and continues to take all feasible actions to fill the 
vacancy; and
    (3) Has not rejected any eligible applicant except for good cause 
acceptable to the contract administrator.

[[Page 66]]

    (c) Vacancies after Rent-Up. If an eligible family vacates a unit, 
the owner is entitled to vacancy payments in the amount of 80 percent of 
the contract rent for the first 60 days of vacancy if the owner:
    (1) Certifies that he did not cause the vacancy by violating the 
lease, the Contract or any applicable law;
    (2) Notified the contract administrator of the vacancy or 
prospective vacancy and the reasons for the vacancy immediately upon 
learning of the vacancy or prospective vacancy;
    (3) Has fulfilled and continues to fulfill the requirements 
specified in Sec. 880.601(a) (2) and (3) and paragraph (b) (2) and (3) 
of this section; and
    (4) For any vacancy resulting from the owner's eviction of an 
eligible family, certifies that he has complied with Sec. 880.607.
    (d) Vacancies for longer than 60 days. If an assisted unit continues 
to be vacant after the 60-day period specified in paragraph (b) or (c) 
of this section, the owner may apply to receive additional vacancy 
payments in an amount equal to the principal and interest payments 
required to amortize that portion of the debt service attributable to 
the vacant unit for up to 12 additional months for the unit if:
    (1) The unit was in decent, safe and sanitary condition during the 
vacancy period for which payments are claimed;
    (2) The owner has fulfilled and continues to fulfill the 
requirements specified in paragraph (b) or (c) of this section, as 
appropriate; and
    (3) The owner has (for 24 CFR part 883 projects, the owner and the 
Agency have) demonstrated to the satisfaction of HUD that:
    (i) For the period of vacancy, the project is not providing the 
owner with revenues at least equal to project expenses (exclusive of 
depreciation), and the amount of payments requested is not more than the 
portion of the deficiency attributable to the vacant unit, and
    (ii) The project can achieve financial soundness within a reasonable 
time.
    (e) Prohibition of double compensation for vacancies. The owner is 
not entitled to vacancy payments for vacant units to the extent he can 
collect for the vacancy from other sources (such as security deposits, 
payments under Sec. 880.608(f), and governmental payments under other 
programs).

[44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13591, Mar. 27, 1996]



Sec. 880.612  Reviews during management period.

    (a) After the effective date of the Contract, the contract 
administrator will inspect the project and review its operation at least 
annually to determine whether the owner is in compliance with the 
Contract and the assisted units are in decent, safe and sanitary 
condition.
    (b) In addition:
    (1)(i) For this part 880 and 24 CFR part 881 private-owner/PHA 
projects, HUD will review the PHA's administration of the Contract at 
least annually to determine whether the PHA is in compliance with the 
ACC; and
    (ii) For 24 CFR part 883 projects, HUD will periodically review the 
Agency's administration of the Contract to determine whether it is in 
compliance with the Contract.
    (2) HUD may independently inspect project operations and units at 
any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

[44 FR 59410, Oct. 15, 1979, as amended at 61 FR 13591, Mar. 27, 1996]



Sec. 880.612a  Preference for occupancy by elderly families.

    (a) Election of preference for occupancy by elderly families--(1) 
Election by owners of eligible projects. (i) An owner of a project 
assisted under this part (including a partially assisted project) that 
was originally designed primarily for occupancy by elderly families (an 
``eligible project'') may, at any time, elect to give preference to 
elderly families in selecting tenants for assisted, vacant units in the 
project, subject to the requirements of this section.
    (ii) For purposes of this section, a project eligible for the 
preference provided by this section, and for which the owner makes an 
election to give preference in occupancy to elderly families is referred 
to as an ``elderly project.'' ``Elderly families'' refers to families 
whose heads of household, their

[[Page 67]]

spouses or sole members are 62 years or older.
    (iii) An owner who elects to provide a preference to elderly 
families in accordance with this section is required to notify families 
on the waiting list who are not elderly that the election has been made 
and how the election may affect them if:
    (A) The percentage of disabled families currently residing in the 
project who are neither elderly nor near-elderly (hereafter, 
collectively referred to as ``non-elderly disabled families'') is equal 
to or exceeds the minimum required percentage of units established for 
the elderly project in accordance with paragraph (c)(1) of this section, 
and therefore non-elderly families on the waiting list (including non-
elderly disabled families) may be passed over for covered section 8 
units; or
    (B) The project, after making the calculation set forth in paragraph 
(c)(1) of this section, will have no units set aside for non-elderly 
disabled families.
    (iv) An owner who elects to give a preference for elderly families 
in accordance with this section shall not remove an applicant from the 
project's waiting list on the basis of having made the election.
    (2) HUD approval of election not required. (i) An owner is not 
required to solicit or obtain the approval of HUD before exercising the 
election of preference for occupancy provided in paragraph (a)(1) of 
this section. The owner, however, if challenged on the issue of 
eligibility of the project for the election provided in paragraph (a)(1) 
of this section must be able to support the project's eligibility 
through the production of all relevant documentation in the possession 
of the owner that pertains to the original design of the project.
    (ii) The Department reserves the right at any time to review and 
make determinations regarding the accuracy of the identification of the 
project as an elderly project. The Department can make such 
determinations as a result of ongoing monitoring activities, or the 
conduct of complaint investigations under the Fair Housing Act (42 
U.S.C. 3601 through 3619), or compliance reviews and complaint 
investigations under section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and other applicable statutes.
    (b) Determining projects eligible for preference for occupancy by 
elderly families--(1) Evidence supporting project eligibility. Evidence 
that a project assisted under this part (or portion of a project) was 
originally designed primarily for occupancy by elderly families, and is 
therefore eligible for the election of occupancy preference provided by 
this section, shall consist of at least one item from the sources 
(``primary'' sources) listed in paragraph (b)(1)(i) of this section, or 
at least two items from the sources (``secondary'' sources) listed in 
paragraph (b)(1)(ii) of this section:
    (i) Primary sources. Identification of the project (or portion of a 
project) as serving elderly (seniors) families in at least one primary 
source such as: The application in response to the notice of funding 
availability; the terms of the notice of funding availability under 
which the application was solicited; the regulatory agreement; the loan 
commitment; the bid invitation; the owner's management plan, or any 
underwriting or financial document collected at or before loan closing; 
or
    (ii) Secondary sources. Two or more sources of evidence such as: 
lease records from the earliest two years of occupancy for which records 
are available showing that occupancy has been restricted primarily to 
households where the head, spouse or sole member is 62 years of age or 
older; evidence that services for elderly persons have been provided, 
such as services funded by the Older Americans Act, transportation to 
senior citizen centers, or programs coordinated with the Area Agency on 
Aging; project unit mix with more than fifty percent of efficiency and 
one-bedroom units [a secondary source particularly relevant to 
distinguishing elderly projects under the previous section 3(b) 
definition (in which disabled families were included in the definition 
of ``elderly families'') from non-elderly projects and which in 
combination with other factors (such as the number of accessible units) 
may be useful in distinguishing projects for seniors from those serving 
the broader definition of ``elderly families'' which includes disabled 
families]; or any

[[Page 68]]

other relevant type of historical data, unless clearly contradicted by 
other comparable evidence.
    (2) Sources in conflict. If a primary source establishes a design 
contrary to that established by the primary source upon which the owner 
would base support that the project is an eligible project (as defined 
in this section), the owner cannot make the election of preferences for 
elderly families as provided by this section based upon primary sources 
alone. In any case where primary sources do not provide clear evidence 
of original design of the project for occupancy primarily by elderly 
families, including those cases where primary sources conflict, 
secondary sources may be used to establish the use for which the project 
was originally designed.
    (c) Reservation of units in elderly projects for non-elderly 
disabled families. The owner of an elderly project is required to 
reserve, at a minimum, the number of units specified in paragraph (c)(1) 
of this section for occupancy by non-elderly disabled families.
    (1) Minimum number of units to be reserved for non-elderly disabled 
families. The number of units in an elderly project required to be 
reserved for occupancy by non-elderly disabled families, shall be, at a 
minimum, the lesser of:
    (i) The number of units equivalent to the higher of--
    (A) The percentage of units assisted under this part in the elderly 
project that were occupied by non-elderly disabled families on October 
28, 1992; and
    (B) The percentage of units assisted under this part in the elderly 
project that were occupied by non-elderly disabled families upon January 
1, 1992; or
    (ii) 10 percent of the number of units assisted under this part in 
the eligible project.
    (2) Option to reserve greater number of units for non-elderly 
disabled families. The owner, at the owner's option, and at any time, 
may reserve a greater number of units for non-elderly disabled families 
than that provided for in paragraph (c)(1) of this section. The option 
to provide a greater number of units to non-elderly disabled families 
will not obligate the owner to always provide that greater number to 
non-elderly disabled families. The number of units required to be 
provided to non-elderly disabled families at any time in an elderly 
project is that number determined under paragraph (c)(1) of this 
section.
    (d) Secondary preferences. An owner of an elderly project also may 
elect to establish secondary preferences in accordance with the 
provisions of paragraph (d) of this section.
    (1) Preference for near-elderly disabled families in units reserved 
for elderly families. If the owner of an elderly project determines, in 
accordance with paragraph (f) of this section, that there are an 
insufficient number of elderly families who have applied for occupancy 
to fill all the vacant units in the elderly project reserved for elderly 
families (that is, all units except those reserved for the non-elderly 
disabled families as provided in paragraph (c) of this section), the 
owner may give preference for occupancy of such units to disabled 
families who are near-elderly families.
    (2) Preference for near-elderly disabled families in units reserved 
for non-elderly disabled families. If the owner of an elderly project 
determines, in accordance with paragraph (f) of this section, that there 
are an insufficient number of non-elderly disabled families to fill all 
the vacant units in the elderly project reserved for non-elderly 
disabled families as provided in paragraph (c) of this section, the 
owner may give preference for occupancy of these units to disabled 
families who are near-elderly families.
    (e) Availability of units to families without regard to preference. 
An owner shall make vacant units in an elderly project generally 
available to otherwise eligible families who apply for housing, without 
regard to the preferences and reservation of units provided in this 
section if either:
    (1) The owner has adopted the secondary preferences and there are an 
insufficient number of families for whom elderly preference, reserve 
preference, and secondary preference has been given, to fill all the 
vacant units; or
    (2) The owner has not adopted the secondary preferences and there 
are an insufficient number of families for whom elderly preference, and 
reserve preference has been given to fill all the vacant units.

[[Page 69]]

    (f) Determination of insufficient number of applicants qualifying 
for preference. To make a determination that there are an insufficient 
number of applicants who qualify for the preferences, including 
secondary preferences, provided by this section, the owner must:
    (1) Conduct marketing in accordance with Sec. 880.601(a) to attract 
applicants qualifying for the preferences and reservation of units set 
forth in this section; and
    (2) Make a good faith effort to lease to applicants who qualify for 
the preferences provided in this section, including taking all feasible 
actions to fill vacancies by renting to such families.
    (g) Federal preferences. An owner that gives preferences to elderly 
families and reserves units for non-elderly disabled families in 
accordance with this section also shall select applicants among each 
respective group in accordance with the Federal preferences contained in 
24 CFR part 5. Projects under National Housing Act programs and 
receiving section 8 assistance may be subject to preferences in addition 
to those contained in 24 CFR part 5 which also must be applied in 
selecting applicants among each respective group.
    (h) Prohibition of evictions. An owner may not evict a tenant 
without good cause, or require that a tenant vacate a unit, in whole or 
in part because of any reservation or preference provided in this 
section, or because of any action taken by the Secretary pursuant to 
subtitle D (sections 651 through 661) of title VI of the Housing and 
Community Development Act of 1992 (42 U.S.C. 13611 through 13620).

[59 FR 65850, Dec. 21, 1994, as amended at 61 FR 9046, Mar. 6, 1996]



PART 881--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR SUBSTANTIAL REHABILITATION--Table of Contents




                  Subpart A--Summary and Applicability

Sec.
881.101  General.
881.104  Applicability of part 881 in effect as of February 20, 1980.
881.105  Applicability to proposals and projects under 24 CFR part 811.

              Subpart B--Definitions and Other Requirements

881.201  Definitions.
881.205  Limitation on distributions.
881.207  Property standards.
881.208  Financing.
881.211  Audit.

                         Subparts C-D [Reserved]

             Subpart E--Housing Assistance Payments Contract

881.501  The contract.
881.502  Term of contract.
881.503  Cross-reference.

                          Subpart F--Management

881.601  Cross-reference.

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), 12701, and 13611-
13619.

    Source: 45 FR 7085, Jan. 31, 1980, unless otherwise noted.



                  Subpart A--Summary and Applicability



Sec. 881.101  General.

    (a) The purpose of the Section 8 program is to provide low-income 
families with decent, safe and sanitary rental housing through the use 
of a system of housing assistance payments. This part contains the 
policies and procedures applicable to the Section 8 substantial 
rehabilitation program. The assistance may be provided to public housing 
agency owners or to private owners either directly from HUD or through 
public housing agencies.
    (b) This part does not apply to projects developed under other 
Section 8 program regulations, including 24 CFR parts 880, 882, 883, 
884, and 885, except to the extent specifically stated in those parts.

[61 FR 13591, Mar. 27, 1996]



Sec. 881.104  Applicability of part 881 in effect as of February 20, 1980.

    (a) Part 881, in effect as of February 20, 1980, applies to all 
proposals for which a notification of selection was not issued before 
the February 20, 1980 effective date of part 881. (See 24 CFR part 881, 
revised as of April 1, 1980). Where a notification of selection was 
issued for a proposal before the February 20, 1980, effective date, part 
881 in

[[Page 70]]

effect as of February 20, 1980 applies if the owner notified HUD within 
60 calendar days that the owner wished the provisions of part 881, 
effective February 20, 1980, to apply and promptly brought the proposal 
into conformance.
    (b) Subparts E (Housing Assistance Payments Contract) and F 
(Management) of this part apply to all projects for which an Agreement 
was not executed before the February 20, 1980, effective date of part 
881. Where an Agreement was so executed:
    (1) The owner and HUD may agree to make the revised subpart E of 
this part applicable and to execute appropriate amendments to the 
Agreement and/or Contract.
    (2) The owner and HUD may agree to make the revised subpart F of 
this part applicable (with or without the limitation on distributions) 
and to execute appropriate amendments to the Agreement and/or Contract.
    (c) Section 880.607 of this chapter, Termination of Tenancy and 
Modification of Leases, applies to new families who begin occupancy or 
execute a lease on or after 30 days after the February 20, 1980, 
effective date of part 881. This section also applies to families not 
covered by the preceding sentence, including existing families under 
lease, with respect to all leases in which a renewal becomes effective 
on or after the 60th day following the February 20, 1980 effective date 
of part 881. A lease is considered to be renewed where both the landlord 
and the family fail to terminate a tenancy under a lease permitting 
either party to terminate.
    (d) Notwithstanding the provisions of paragraph (b) of this section, 
the provisions of 24 CFR part 5 (concerning preferences for selection of 
applicants) apply to all projects, regardless of when an Agreement was 
executed.

[61 FR 13591, Mar. 27, 1996]



Sec. 881.105  Applicability to proposals and projects under 24 CFR part 811.

    Where proposals and projects are financed with tax-exempt 
obligations under 24 CFR part 811, the provisions of part 811 will be 
complied with in addition to all requirements of this part. In the event 
of any conflict between this part and part 811, part 811 will control.



              Subpart B--Definitions and Other Requirements



Sec. 881.201  Definitions.

    The terms Fair Market Rent (FMR), HUD, NOFA, and Public Housing 
Agency (PHA) are defined in 24 CFR part 5.
    ACC. (Annual Contributions Contract) For a private-owner/PHA 
project, for which the Contract is administered by a PHA, the ACC is the 
contract between the PHA (as contract administrator) and HUD. Under the 
ACC, HUD commits to provide the PHA with the funds needed to make 
housing assistance payments to the owner and to pay the PHA for HUD-
approved administrative fees, and the PHA agrees to perform the duties 
of a contract administrator.
    Agreement. (Agreement to Enter into Housing Assistance Payments 
Contract) The Agreement between the owner and the contract administrator 
which provides that, upon satisfactory completion of the project in 
accordance with the HUD-approved final proposal, the administrator will 
enter into the Contract with the owner.
    Annual income. As defined in part 813 of this chapter.
    Assisted unit. A dwelling unit eligible for assistance under a 
Contract.
    Contract. (Housing Assistance Payments Contract) The Contract 
entered into by the owner and the contract administrator upon 
satisfactory completion of the project, which sets forth the rights and 
duties of the parties with respect to the project and the payments under 
the Contract.
    Contract Administrator. The entity which enters into the Contract 
with the owner and is responsible for monitoring performance by the 
owner. The contract administrator is a PHA in the case of private-owner/
PHA projects, and HUD is private-owner/HUD and PHA-owner/HUD projects.
    Contract Rent. The total amount of rent specified in the Contract as 
payable by HUD and the tenant to the owner for an assisted unit. In the 
case of the rental of only a manufactured home space, ``contract rent'' 
is the total rent specified in the Contract as payable by HUD and the 
tenant to the owner for rental of the space, including fees or charges 
for management and

[[Page 71]]

maintenance services with respect to the space, but excluding utility 
charges for the manufactured home.
    Decent, safe, and sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition requirements in 24 CFR part 5, subpart 
G.
    Elderly Family. As defined in parts 812 and 813 of this chapter.
    Family (eligible family). As defined in part 812 of this chapter.
    Final proposal. The detailed description of a proposed project to be 
assisted under this part, which an owner submits after selection of the 
preliminary proposal, except where a preliminary proposal is not 
required under Sec. 881.303(c). The final proposal becomes an exhibit to 
the Agreement and is the standard by which HUD judges acceptable 
construction of the project.
    Gross rent. As defined in part 813 of this chapter.
    Household type. The three household types are (1) elderly and 
handicapped, (2) family, and (3) large family.
    Housing Assistance Payment. The payment made by the PHA to the Owner 
of a unit as provided in the Contract. The payment is the difference 
between the Contract Rent and the Tenant Rent. An additional payment is 
made to the Family when the Utility Allowance is greater than the Total 
Tenant Payment. In the case of a Family renting only a manufactured home 
space, as provided in Sec. 881.202(i), the Housing Assistance Payment is 
the difference between the Gross Rent and the Total Tenant Payment, but 
such payment may not exceed the Contract Rent for the space. A Housing 
Assistance Payment, known as a ``vacancy payment'', may be made to the 
Owner when an assisted unit is vacant, in accordance with the terms of 
the Contract.
    Housing Assistance Plan. A housing plan which is submitted by a unit 
of general local government and approved by HUD as being acceptable 
under the standards of 24 CFR part 570.
    Housing type. The three housing types are new construction, 
rehabilitation, and existing housing.
    Independent Public Accountant. A Certified Public Accountant or a 
licensed or registered public accountant, having no business 
relationship with the owner except for the performance of audit, systems 
work and tax preparation. If not certified, the Independent Public 
Accountant must have been licensed or registered by a regulatory 
authority of a State or other political subdivision of the United States 
on or before December 31, 1970. In States that do not regulate the use 
of the title ``public accountant,'' only Certified Public Accountants 
may be used.
    Low-Income Family. As defined in part 813 of this chapter.
    Owner. Any private person or entity (including a cooperative) or a 
public entity which qualifies as a PHA, having the legal right to lease 
or sublease substantially rehabilitated dwelling units assisted under 
this part. The term owner also includes the person or entity submitting 
a proposal under this part.
    Partially-assisted Project. A project for non-elderly families under 
this part which includes more than 50 units of which 20 percent or fewer 
are assisted.
    PHA-Owner/HUD Project. A project under this part which is owned by a 
PHA. For this type of project, the Agreement and the Contract are 
entered into by the PHA, as owner, and HUD, as contract administrator.
    Private-Owner/HUD Project. A project under this part which is owned 
by a private owner. For this type of project, the Agreement and Contract 
are entered into by the private owner, as owner, and HUD, as contract 
administrator.
    Private-Owner/PHA Project. A project under this part which is owned 
by a private owner. For this type of project, the Agreement and Contract 
are entered into by the private owner, as owner, and the PHA, as 
contract administrator, pursuant to an ACC between the PHA and HUD. The 
term also covers the situation where the ACC is with one PHA and the 
owner is another PHA.
    Project Account. A specifically identified and segregated account 
for each project which is established in accordance with Sec. 881.503(b) 
out of the amounts by which the maximum annual commitment exceeds the 
amount actually paid out under the Contract or ACC, as applicable, each 
year.
    Rent. In the case of an assisted unit in a cooperative project, rent 
means

[[Page 72]]

the carrying charges payable to the cooperative with respect to 
occupancy of the unit.
    Replacement cost. The sum of the ``as is'' value before 
rehabilitation of the property as determined by HUD and the estimated 
cost of rehabilitation, including carrying and finance charges.
    Secretary. The Secretary of Housing and Urban Development (or 
designee).
    Single Room Occupancy (SRO) Housing. A unit for occupancy by a 
single eligible individual capable of independent living, which does not 
contain food preparation and/or sanitary facilities and is located 
within a multifamily structure consisting of more than 12 units.
    Small project. A project for non-elderly families under this part 
which includes a total of 50 or fewer (assisted and unassisted) units.
    Substantial rehabilitation. (a) The improvement of a property to 
decent, safe and sanitary condition in accordance with the standards of 
this part from a condition below those standards. Substantial 
rehabilitation may vary in degree from gutting and extensive 
reconstruction to the cure of substantial accumulation of deferred 
maintenance. Cosmetic improvements alone do not qualify as substantial 
rehabilitation under this definition.
    (b) Substantial rehabilitation may also include renovation, 
alteration or remodeling for the conversion or adaptation of 
structurally sound property to the design and condition required for use 
under this part or the repair or replacement of major building systems 
or components in danger of failure.
    Tenant Rent. The monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total Tenant Payment. The monthly amount defined in, and determined 
in accordance with part 813 of this chapter.
    Utility allowance. As defined in part 813 of this chapter, made or 
approved by HUD.
    Utility reimbursement. As defined in part 813 of this chapter.
    Vacancy payment. The housing assistance payment made to the owner by 
the contract administrator for a vacant assisted unit if certain 
conditions are fulfilled as provided in the Contract. The amount of the 
vacancy payment varies with the length of the vacancy period and is less 
after the first 60 days of any vacancy.
    Very Low-income Family. As defined in part 813 of this chapter.

[45 FR 7085, Jan. 31, 1980, as amended at 48 FR 12705, Mar. 28, 1983; 49 
FR 17449, Apr. 24, 1984; 49 FR 19944, May 10, 1984; 61 FR 5212, Feb. 9, 
1996; 61 FR 13591, Mar. 27, 1996; 63 FR 46578, Sept. 1, 1998]



Sec. 881.205  Limitation on distributions.

    (a) Non-profit owners are not entitled to distributions of project 
funds.
    (b) For the life of the Contract, project funds may only be 
distributed to profit-motivated owners at the end of each fiscal year of 
project operation following the effective date of the Contract after all 
project expenses have been paid, or funds have been set aside for 
payment, and all reserve requirements have been met. The first year's 
distribution may not be made until cost certification, where applicable, 
is completed. Distributions may not exceed the following maximum 
returns:
    (1) For projects for elderly families, the first year's distribution 
will be limited to 6 percent on equity. The Assistant Secretary may 
provide for increases in subsequent years' distributions on an annual or 
other basis so that the permitted return reflects a 6 percent return on 
the value in subsequent years, as determined by HUD, of the approved 
initial equity. Any such adjustment will be made by Notice in the 
Federal Register.
    (2) For projects for non-elderly families, the first year's 
distribution will be limited to 10 percent on equity. The Assistant 
Secretary may provide for increases in subsequent years' distributions 
on an annual or other basis so that the permitted return reflects a 10 
percent return on the value in subsequent years, as determined by HUD, 
of the approved initial equity. Any such adjustment will be made by 
Notice in the Federal Register.
    (c) For the purpose of determining the allowable distribution, an 
owner's equity investment in a project is deemed to be 10 percent of the 
replacement cost of the part of the project attributable to dwelling use 
accepted by HUD at cost certification (see Sec. 881.405),

[[Page 73]]

unless the owner justifies a higher equity contribution by cost 
certification documentation in accordance with HUD mortgage insurance 
procedures.
    (d) Any short-fall in return may be made up from surplus project 
funds in future years.
    (e) If HUD determines at any time that project funds are more than 
the amount needed for project operations, reserve requirements and 
permitted distribution, HUD may require the excess to be placed in an 
account to be used to reduce housing assistance payments or for other 
project purposes. Upon termination of the Contract, any excess funds 
must be remitted to HUD.
    (f) Owners of small projects or partially-assisted projects are 
exempt from the limitation on distributions contained in paragraphs (b) 
through (d) of this section.
    (g) In the case of HUD-insured projects, the provisions of this 
section will apply instead of the otherwise applicable mortgage 
insurance program provisions.



Sec. 881.207  Property standards.

    Projects must comply with:
    (a) [Reserved]
    (b) In the case of congregate or single room occupant housing, the 
appropriate HUD guidelines and standards;
    (c) HUD requirements pursuant to section 209 of the Housing and 
Community Development Act of 1974 for projects for the elderly or 
handicapped;
    (d) HUD requirements pertaining to noise abatement and control;
    (e) The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-
4846), 24 CFR part 35 and 24 CFR part 200, subpart O; and
    (f) Applicable State and local laws, codes, ordinances and 
regulations.
    (g) Smoke detectors. (1) Performance requirement. After October 30, 
1992, each dwelling unit must include at least one battery-operated or 
hard-wired smoke detector, in proper working condition, on each level of 
the unit. If the unit is occupied by hearing-impaired persons, smoke 
detectors must have an alarm system, designed for hearing-impaired 
persons, in each bedroom occupied by a hearing-impaired person.
    (2) Acceptability criteria. The smoke detector must be located, to 
the extent practicable, in a hallway adjacent to a bedroom, unless the 
unit is occupied by a hearing-impaired person, in which case each 
bedroom occupied by a hearing-impaired person must have an alarm system 
connected to the smoke detector installed in the hallway.

[45 FR 7085, Jan. 31, 1980, as amended at 52 FR 1893, Jan. 15, 1987; 57 
FR 33851, July 30, 1992; 63 FR 46578, Sept. 1, 1998]



Sec. 881.208  Financing.

    (a) Types of financing. Any type of construction financing and long-
term financing may be used, including:
    (1) Conventional loans from commercial banks, savings banks, savings 
and loan associations, pension funds, insurance companies or other 
financial institutions;
    (2) Mortgage insurance programs under the National Housing Act; and
    (3) Financing by tax-exmpt bonds or other obligations.
    (b) HUD approval. HUD must approve the terms and conditions of the 
financing to determine consistency with these regulations and to assure 
they do not purport to pledge or give greater rights or funds to any 
party than are provided under the Agreement, Contract, and/or ACC. Where 
the project is financed with tax-exempt obligations, the terms and 
conditions will be approved in accordance with the following:
    (1) An issuer of obligations that are tax-exempt under any provision 
of Federal law or regulation, the proceeds of the sale of which are to 
be used to purchase GNMA mortgage-backed securities issued by the 
mortgagee of the Section 8 project, will be subject to 24 CFR part 811, 
subpart B.
    (2) Issuers of obligations that are tax-exempt under Section 11(b) 
of the U.S. Housing Act of 1937 will be subject to 24 CFR part 811, 
subpart A if paragraph (b)(1) of this section is not applicable.
    (3) Issuers of obligations that are tax-exempt under any provision 
of Federal law or regulation other than Section 11(b) of the U.S. 
Housing Act of 1937 will be subject to 24 CFR 811, subpart A if 
paragraph (b)(1) of this section is not applicable, except that such 
issuers that are State Agencies qualified under 24 CFR part 883 are not 
subject to 24 CFR part 811, subpart A and are subject

[[Page 74]]

solely to the requirements of 24 CFR part 883 with regard to the 
approval of tax-exempt financing.
    (c) Pledge of contracts. An owner may pledge, or offer as security 
for any loan or obligation, an Agreement, Contract or ACC entered into 
pursuant to this part: Provided, however, That such financing is in 
connection with a project constructed pursuant to this part and approved 
by HUD. Any pledge of the Agreement, Contract, or ACC, or payments 
thereunder, will be limited to the amounts payable under the Contract or 
ACC in accordance with its terms. If the pledge or other document 
provides that all payments will be paid directly to the mortgagee or the 
trustee for bondholders, the mortgagee or trustee will make all payments 
or deposits required under the mortgage, trust indenture of HUD 
regulations and remit any excess to the owner.
    (d) Foreclosure and other transfers. In the event of foreclosure, 
assignment or sale approved by HUD in lieu of foreclosure, or other 
assignment or sale approved by HUD:
    (1) The Agreement, the Contract and the ACC, if applicable, will 
continue in effect, and
    (2) Housing assistance payments will continue in accordance with the 
terms of the Contract.
    (e) Financing of manufactured home parks. In the case of a 
substantially rehabilitated manufactured home park, the principal amount 
of any mortgage attributable to the rental spaces in the park may not 
exceed an amount per space determined in accordance with Sec. 207.33(b) 
of this Title.

[45 FR 7085, Jan. 31, 1980, as amended at 45 FR 62797, Sept. 22, 1980; 
48 FR 12706, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984]



Sec. 881.211  Audit.

    (a) Where a State or local government is the eligible owner of a 
project or a contract administrator under Sec. 881.505 receiving 
financial assistance under this part, the audit requirements in 24 CFR 
part 44 shall apply.
    (b) Where a nonprofit organization is the eligible owner of a 
project, receiving financial assistance under this part, the audit 
requirements in 24 CFR part 45 shall apply.

[50 FR 39091, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986, as amended at 
57 FR 33257, July 27, 1992; 59 FR 2738, Jan. 19, 1994]



                         Subparts C-D [Reserved]



             Subpart E--Housing Assistance Payments Contract



Sec. 881.501  The contract.

    (a) Contract. The Housing Assistance Payments Contract sets forth 
rights and duties of the owner and the contract administrator with 
respect to the project and the housing assistance payments. The owner 
and contract administrator execute the Contract in the form prescribed 
by HUD upon satisfactory completion of the project.
    (b) [Reserved]
    (c) Housing assistance payments to owners under the contract. The 
housing assistance payments made under the Contract are:
    (1) Payments to the owner to assist eligible families leasing 
assisted units, and
    (2) Payments to the owner for vacant assisted units (``vacancy 
payments'') if the conditions specified in Sec. 881.611 are satisfied.

The housing assistance payments are made monthly by the contract 
administrator upon proper requisition by the owner, except payments for 
vacancies of more than 60 days, which are made semi-annually by the 
contract administrator upon requisition by the owner.
    (d) Amount of housing assistance payments to owner. (1) The amount 
of the housing assistance payment made to the owner of a unit being 
leased by an eligible family is the difference between the contract rent 
for the unit and the tenant rent payable by the family.
    (2) A housing assistance payment will be made to the owner for a 
vacant assisted unit in an amount equal to 80 percent of the contract 
rent for the first 60 days of vacancy, subject to the conditions in 
Sec. 881.611. If the owner collects any tenant rent or other amount for 
this period which, when added to

[[Page 75]]

this vacancy payment, exceeds the contract rent, the excess must be 
repaid as HUD directs.
    (3) For a vacancy that exceeds 60 days, a housing assistance payment 
for the vacant unit will be made, subject to the conditions in 
Sec. 881.611, in an amount equal to the principal and interest payments 
required to amortize that portion of the debt attributable to the vacant 
unit for up to 12 additional months.
    (e) Payment of utility reimbursement. Where applicable, the Utility 
Reimbursement will be paid to the Family as an additional Housing 
Assistance Payment. The Contract will provide that the Owner will make 
this payment on behalf of the contract administrator. Funds for this 
purpose will be paid to the Owner in trust solely for the purpose of 
making the additional payment. If the Family and the utility company 
consent, the Owner may pay the Utility Reimbursement jointly to the 
Family and the utility company or directly to the utility company.

[45 FR 7085, Jan. 31, 1980, as amended at 49 FR 19944, May 10, 1984; 61 
FR 13591, Mar. 27, 1996]



Sec. 881.502  Term of contract.

    (a) Term (except for Manufactured Home Parks). The term of the 
Contract will be as follows:
    (1) Where the estimated cost of the rehabilitation is less than 25 
percent of the estimated value of the project after completion of the 
rehabilitation, the contract will be for a term of 20 years for any 
dwelling unit.
    (2) Where the estimated cost of rehabilitation is 25 percent or more 
of the estimated value of the project after completion of 
rehabilitation, the contract may be for a term which:
    (i) Will cover the longest term, but not less than 20 years, of a 
single credit instrument covering:
    (A) The cost of rehabilitation, or
    (B) The existing indebtedness, or
    (C) The cost of rehabilitation and the refinancing of the existing 
indebtedness, or
    (D) The cost of rehabilitation and the acquisition of the property; 
and
    (ii) For assisted units in a project financed with the aid of a loan 
insured or co-insured by the Federal government or a loan made, 
guaranteed or intended for purchase by the Federal government, will be 
20 years for any dwelling unit; or
    (iii) For units in a project financed other than as described in 
paragraph (a)(2)(ii) of this section will not exceed 30 years for any 
dwelling unit except that this limit will be 40 years if (A) the project 
is owned or financed by a loan or loan guarantee from a state or local 
agency, (B) the project is intended for occupancy by non-elderly 
families and (C) the project is located in an area designated by HUD as 
one requiring special financing assistance.
    (b) Term for manufactured home parks. For manufactured home units or 
spaces in substantially rehabilitated manufactured home parks, the term 
of the Contract will be 20 years.
    (c) Staged projects. If the project is completed in stages, the term 
of the Contract must relate separately to the units in each stage. The 
total Contract term for the units in all stages, beginning with the 
effective date of the Contract for the first stage, may not exceed the 
overall maximum term allowable for any one unit under this section, plus 
two years.

[48 FR 12707, Mar. 28, 1983, and 49 FR 17449, Apr. 24, 1984]



Sec. 881.503  Cross-reference.

    All of the provisions of Secs. 880.503, 880.504, 880.505, 880.506, 
880.507, and 880.508 of this chapter apply to projects assisted under 
this part, subject to the requirements of Sec. 881.104.

[61 FR 13592, Mar. 27, 1996]



                          Subpart F--Management



Sec. 881.601  Cross-reference.

    All of the provisions of part 880, subpart F, of this chapter apply 
to projects assisted under this part, subject to the requirements of 
Sec. 881.104.

[61 FR 13592, Mar. 27, 1996]

[[Page 76]]



PART 882--SECTION 8 MODERATE REHABILITATION PROGRAMS--Table of Contents




           Subpart A--Applicability, Scope and Basic Policies

Sec.
882.101  Applicability.
882.102  Definitions.
882.103-882.111  [Reserved]
882.113-882.122  [Reserved]
882.123  Conversion of Section 23 Units to Section 8 and Section 23 
          monitoring.
882.124  Audit.

                         Subpart B-C  [Reserved]

    Subpart D--Special Procedures for Moderate Rehabilitation--Basic 
                                Policies

882.401  Eligible properties.
882.402  [Reserved]
882.403  ACC, housing assistance payments contract, and lease.
882.404  Physical condition standards; physical inspection requirements.
882.405  Financing.
882.406  [Reserved]
882.407  Other Federal requirements.
882.408  Initial contract rents.
882.409  Contract rents at end of rehabilitation loan term.
882.410  Rent adjustments.
882.411  Payments for vacancies.
882.412  Subcontracting of owner services.
882.413  Responsibility of the Family.
882.414  Security and utility deposits.

   Subpart E--Special Procedures for Moderate Rehabilitation--Program 
                        Development and Operation

882.501-882.506  [Reserved]
882.507  Completion of rehabilitation.
882.508  [Reserved]
882.509  Overcrowded and under occupied units.
882.510  Adjustment of utility allowance.
882.511  Lease and termination of tenancy.
882.512  Reduction of number of units covered by contract.
882.513  Public notice to low-income families; waiting list.
882.514  Family participation.
882.515  Reexamination of family income and composition.
882.516  Maintenance, operation and inspections.
882.517  HUD review of contract compliance.

                         Subpart F-G  [Reserved]

   Subpart H--Section 8 Moderate Rehabilitation Single Room Occupancy 
                    Program for Homeless Individuals

Sec.
882.801  Purpose.
882.802  Definitions.
882.803  Project eligibility and other requirements.
882.804  Other Federal requirements.
882.805  HA application process, ACC execution, and pre-rehabilitation 
          activities.
882.806  Agreement to enter into housing assistance payments contract.
882.807  Housing assistance payments contract.
882.808  Management.
882.809  Waivers.
882.810  Displacement, relocation, and acquisition.

    Authority: 42 U.S.C. 1437f and 3535(d).

    Source: 43 FR 61246, Dec. 29, 1978, unless otherwise noted.



           Subpart A--Applicability, Scope and Basic Policies



Sec. 882.101  Applicability.

    (a) The provisions of this part apply to the Section 8 Moderate 
Rehabilitation program.
    (b) This part states the policies and procedures to be used by a PHA 
in administering a Section 8 Moderate Rehabilitation program. The 
purpose of this program is to upgrade substandard rental housing and to 
provide rental subsidies for low-income families.
    (c) Subpart H of this part only applies to the Section 8 Moderate 
Rehabilitation Single Room Occupancy Program for Homeless Individuals.

[63 FR 23853, Apr. 30, 1998]



Sec. 882.102  Definitions.

    (a) The definitions in 24 CFR part 5 apply to this part.
    (b) In addition, the following definitions apply to this part:
    ACC reserve account (or ``project account''). The account 
established and maintained in accordance with Sec. 882.403(b).
    Agreement to enter into Housing Assistance Payments Contract 
(``Agreement''). A written agreement between the

[[Page 77]]

Owner and the PHA that, upon satisfactory completion of the 
rehabilitation in accordance with requirements specified in the 
Agreement, the PHA will enter into a Housing Assistance Payments 
Contract with the Owner.
    Annual Contributions Contract (``ACC''). The written agreement 
between HUD and a PHA to provide annual contributions to the PHA to 
cover housing assistance payments and other expenses pursuant to the 
1937 Act.
    Assisted lease (or ``lease''). A written agreement between an Owner 
and a Family for the leasing of a unit by the Owner to the Family with 
housing assistance payments under a Housing Assistance Payments Contract 
between the Owner and the PHA.
    Congregate housing. Housing for elderly persons or persons with 
disabilities that meets the HQS for congregate housing.
    Contract. See definition of Housing Assistance Payments Contract.
    Contract rent. The total amount of rent specified in the Housing 
Assistance Payments Contract as payable to the Owner by the Family and 
by the PHA to the Owner on the Family's behalf.
    Decent, safe, and sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition standards in 24 CFR part 5, subpart G.
    Drug-related criminal activity means the illegal manufacture, sale, 
distribution, use, or the possession with intent to manufacture, sell, 
distribute or use, of a controlled substance (as defined in Section 102 
of the Controlled Substances Act (21 U.S.C. 802)).
    Drug-trafficking. The illegal manufacture, sale, or distribution, or 
the possession with intent to manufacture, sell or distribute, of a 
controlled substance (as defined in Section 102 of the Controlled 
Substances Act (21 U.S.C. 802)).
    Gross rent. The total monthly cost of housing an eligible Family, 
which is the sum of the Contract Rent and any utility allowance.
    Group home. A dwelling unit that is licensed by a State as a group 
home for the exclusive residential use of two to twelve persons who are 
elderly or persons with disabilities (including any live-in aide).
    Housing Assistance Payment. The payment made by the PHA to the Owner 
of a unit under lease by an eligible Family, as provided under the 
Contract. The payment is the difference between the Contract Rent and 
the tenant rent. An additional payment (the ``utility reimbursement'') 
is made by the PHA when the utility allowance is greater than the total 
tenant payment.
    Housing Assistance Payments Contract (``Contract''). A written 
contract between a PHA and an Owner for the purpose of providing housing 
assistance payments to the Owner on behalf of an eligible Family.
    Moderate rehabilitation. Rehabilitation involving a minimum 
expenditure of $1000 for a unit, including its prorated share of work to 
be accomplished on common areas or systems, to:
    (1) Upgrade to decent, safe and sanitary condition to comply with 
the Housing Quality Standards or other standards approved by HUD, from a 
condition below these standards (improvements being of a modest nature 
and other than routine maintenance); or
    (2) Repair or replace major building systems or components in danger 
of failure.
    Owner. Any person or entity, including a cooperative, having the 
legal right to lease or sublease existing housing.
    Single room occupancy housing (SRO). A unit that contains no 
sanitary facilities or food preparation facilities, or contains either, 
but not both, types of facilities.
    Statement of Family responsibility. An agreement in the form 
prescribed by HUD, between the PHA and a Family to be assisted under the 
Program, stating the obligations and responsibilities of the Family.
    Violent criminal activity. Any criminal activity that has as one of 
its elements the use, attempted use, or threatened use of physical force 
against the person or property of another.

[63 FR 23853, Apr. 30, 1998, as amended at 63 FR 46578, Sept. 1, 1998]

[[Page 78]]



Secs. 882.103-882.111  [Reserved]



Secs. 882.113--882.122  [Reserved]



Sec. 882.123  Conversion of Section 23 Units to Section 8 and Section 23 monitoring.

    (a)--(d)  [Reserved]
    (e) Section 23 policies for units planned for conversion on or 
before September 30, 1981. (1) PHAs shall not enter into new leases with 
owners for additional units nor shall they renew or extend leases with 
owners except consistent with the conversion schedules.
    (2) Subject to the rights of families under existing leases, PHAs 
may continue to lease units to families under Section 23 only on a 
month-to-month basis.
    (3) PHAs shall conduct annual inspections of all units to determine 
whether the units are decent, safe and sanitary.
    (4) PHAs shall certify with their requisitions to HUD for payments 
under the ACC that the units are decent, safe and sanitary, or the PHA 
shall furnish HUD with a report of the nature of the deficiencies of the 
units which are not so certified. If an owner's units are not decent, 
safe and sanitary.
    (i) Where the owner is responsible under the terms of the lease for 
correcting the deficiencies, the PHA shall send the owner written 
notification requiring the owner to take specified corrective action 
within a specified time. The notification shall also state that, if the 
owner fails to comply, rent payments will be suspended. If the owner 
fails to comply with the first notification, he shall be notified by the 
PHA of the noncompliance and rent payments shall be suspended 
immediately. In the event of such suspension of rent payments, the PHA 
shall requisition a correspondingly lower ACC payment.
    (ii) Where the PHA is responsible under the terms of the lease for 
correcting the deficiencies, the Field Office shall send written 
notification requiring the PHA to take specified corrective action 
within a specified time. The notification shall also state that, if the 
PHA fails to comply, HUD will make reduced payments to the PHA only in 
the amount of the rent due the owner. If the PHA fails to comply with 
the first notification, the PHA shall be notified of the noncompliance, 
and the PHA shall not receive any fees for performing management 
functions until the PHA has complied with the Field Office request and 
has corrected the noted deficiencies.
    (f)  [Reserved]
    (g) Section 23 policies for units not planned to be converted. (1) 
PHAs shall not enter into new leases with owners for additional units 
nor shall they renew or extend leases with owners for more than one 
year.
    (2) The provisions contained in paragraphs (e) (3) and (4) of this 
section shall apply.
    (h) Request for rent increases. An owner may submit to the PHA a 
request for rent increase because of increases in operating cost, when 
the rents to the owner, after adjustments based on provisions in the 
lease, are insufficient to provide decent, safe and sanitary housing. 
Such a request shall be supported by an audited financial statement, and 
the data shall clearly show that failure to obtain additional revenue 
will result in deterioriation of units and loss of decent, safe and 
sanitary housing for low-income families. The PHA shall inspect the 
units to determine whether the units are decent, safe and sanitary. 
Where the need for an adjustment under this paragraph is shown:
    (1) Subject to available contract authority and prior approval by 
the HUD Field Office, the PHA may grant an adjustment to the extent 
documented and justified for those items of expenses (excluding debt 
service) for which the owner is responsible under the lease.
    (2) The amount of the adjustment must be reasonable when compared 
with similar items under the Section 8 Existing Housing program.
    (3) The adjusted amount for expenses shall not exceed the result of 
applying the appropriate Section 8 Existing Housing Annual Adjustment 
Factor (24 CFR part 888) most recently published by HUD in the Federal 
Register to the appropriate expense base in effect under the lease prior 
to this adjustment.
    (4) The adjustment shall not be retroactive to pay for costs that 
the owner had previously incurred.

[[Page 79]]

    (5) The adjustment shall be effective for a period not to exceed one 
year.

[44 FR 28276, Nov. 14, 1979, as amended at 60 FR 34694, July 3, 1995]



Sec. 882.124  Audit.

    PHAs receiving financial assistance under this part are subject to 
audit requirements in 24 CFR part 44.

[50 FR 39091, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986]



                         Subpart B-C  [Reserved]



    Subpart D--Special Procedures for Moderate Rehabilitation--Basic 
                                Policies

    Source: 47 FR 34379, Aug. 9, 1982, unless otherwise noted.



Sec. 882.401  Eligible properties.

    (a) Eligible properties. Except as provided in paragraph (b) of this 
section, housing suitable for moderate rehabilitation as defined in 
Sec. 882.102 is eligible for inclusion under the Moderate Rehabilitation 
Program. Existing structures of various types may be appropriate for 
this program, including single-family houses, multi-family structures 
and group homes.
    (b) Ineligible properties. (1) Nursing homes, units within the 
grounds of penal, reformatory, medical, mental and similar public or 
private institutions, and facilities providing continual psychiatric, 
medical or nursing services are not eligible for assistance under the 
Moderate Rehabilitation Program.
    (2) Housing owned by a State or unit of general local government is 
not eligible for assistance under this program.
    (3) High rise elevator projects for families with children may not 
be utilized unless HUD determines there is no practical alternative. 
(HUD may make this determination for a locality's Moderate 
Rehabilitation Program in whole or in part and need not review each 
building on a case-by-case basis.)
    (4) Single room occupancy (SRO) housing may not be utilized unless:
    (i) The property is located in an area in which there is a 
significant demand for such units as determined by the HUD Field Office; 
and
    (ii) The PHA and the unit of general local government in which the 
property is located approve of such units being utilized for such 
purpose.
    (5) No Section 8 assistance may be provided with respect to any unit 
occupied by an Owner; however, cooperatives will be considered as rental 
housing for purposes of the Moderate Rehabilitation Program.

[63 FR 23854, Apr. 30, 1998, as amended at 64 FR 14832, Mar. 29, 1999]



Sec. 882.402  [Reserved]



Sec. 882.403  ACC, housing assistance payments contract, and lease.

    (a) Maximum Total ACC Commitments. The maximum total annual 
contribution that may be contracted for is the total of the Moderate 
Rehabilitation Fair Market Rents for all the units. The fee for the 
costs of PHA administration is payable out of the annual contribution.
    (b) Project account. (1) A project account will be established and 
maintained by HUD as a specifically identified and segregated account 
for each project. The account will contain the sum of the amounts by 
which the maximum annual commitment exceeds the amount actually paid out 
for the project under the ACC each year. Payments will be made from this 
account when needed to cover increases in Contract Rents or decreases in 
Gross Family Contributions for (i) housing assistance (including 
vacancy) payments, (ii) the amount of the fee for PHA costs of 
administration, and (iii) other costs specifically approved by the 
Secretary.
    (2) When a HUD-approved estimate of required payments under the ACC 
for a fiscal year exceeds the maximum annual commitment, and would cause 
the amount in the project account to be less than 40 percent of the 
maximum, HUD will, within a reasonable period of time, take such 
additional steps authorized by Section 8(c)(6) of the U.S. Housing Act 
of 1937, as may be necessary, to assure that payments under the ACC will 
be adequate to cover increases in Contract Rents and decreases in Gross 
Family Contributions.

[[Page 80]]

    (c) Term of Housing Assistance Payments Contract. The Contract for 
any unit rehabilitated in accordance with the Program must be for a term 
of 15 years.
    (d) Term of Lease. The initial Lease between the Family and Owner 
must be for at least one year. Any renewal or extension of the Lease 
term for any unit must in no case extend beyond the remaining term of 
the Contract.



Sec. 882.404  Physical condition standards; physical inspection requirements.

    (a) Compliance with physical condition standards. Housing in this 
program must be maintained and inspected in accordance with the 
requirements in 24 CFR part 5, subpart G.
    (b) Space and security. In addition to the standards in 24 CFR part 
5, subpart G, a dwelling unit used in the Section 8 moderate 
rehabilitation program that is not SRO housing must have a living room, 
a kitchen area, and a bathroom. Such a dwelling unit must have at least 
one bedroom or living/sleeping room for each two persons.
    (c) Special housing types. The following provisions in 24 CFR part 
982, subpart M (Special Housing Types) apply to the Section 8 moderate 
rehabilitation program:
    (1) 24 CFR 982.605(b) (for SRO housing). For the Section 8 moderate 
rehabilitation SRO program under subpart H of this part 882, see also 
Sec. 882.803(b).
    (2) 24 CFR 982.609(b) (for congregate housing).
    (3) 24 CFR 982.614(c) (for group homes).
    (d) Compliance with lead-based paint requirements. Housing used in 
the Section 8 moderate rehabilitation program must comply with the lead-
based paint requirements in Sec. 982.401(j). For purposes of the SRO 
program, however, see Sec. 882.803(b).

[63 FR 46579, Sept. 1, 1998]



Sec. 882.405  Financing.

    (a) Types. Any type of public or private financing may be utilized 
with the exception of the rehabilitation loan program under Section 312 
of the Housing Act of 1964.
    (b) Use of Contract as security for financing. An Owner may pledge, 
or offer as security for any loan or obligation, an Agreement or 
Contract entered into pursuant to this Program, Provided That (1) such 
security is in connection with a unit(s) rehabilitated pursuant to this 
Program and (2) the terms of the financing or any refinancing must be 
approved by the PHA in accordance with standards provided by HUD. Any 
pledge of the Agreement or Contract, or payments thereunder, will be 
limited to the amounts payable under the Contract in accordance with its 
terms.



Sec. 882.406  [Reserved]



Sec. 882.407  Other Federal requirements.

    The moderate rehabilitation program is subject to applicable federal 
requirements in 24 CFR 5.105.

[63 FR 23855, Apr. 30, 1998]



Sec. 882.408  Initial contract rents.

    (a) Fair Market Rent limitation. The Fair Market Rent Schedule for 
Moderate Rehabilitation is 120 percent of the Existing Housing Fair 
Market Rent Schedule, except that the Fair Market Rent limitation 
applicable to single room occupancy housing is 75 percent of the 
Moderate Rehabilitation Fair Market Rent for a 0-bedroom unit. The 
initial Gross Rent for any Moderate Rehabilitation unit must not exceed 
the Moderate Rehabilitation Fair Market Rent applicable to the unit on 
the date that the Agreement is executed except by up to 10 percent as 
provided in paragraph (b) of this section. Additionally, to the extent 
provided in paragraph (d) of this section, the PHA may approve changes 
in the Contract Rent subsequent to execution of the Agreement which 
result in an initial Gross Rent which exceeds the Moderate 
Rehabilitation Fair Market Rent applicable to the unit by up to 20 
percent.
    (b) Exception rents. With HUD Field Office approval, the PHA may 
approve initial Gross Rents which exceed the applicable Moderate 
Rehabilitation Fair Market Rents by up to 10 percent for all units of a 
given size in specified areas where HUD has determined that the rents 
for standard units suitable for the Existing Housing Program are more 
than 10 percent higher than the Existing Housing Fair Market Rents. The 
PHA must submit documentation demonstrating the necessity for such

[[Page 81]]

exception rents in the area to the HUD Field Office. In areas where HUD 
has approved the use of exception rents for 0-bedroom units, the single 
room occupancy housing exception rent will be 75 percent of the 
exception rent applicable to Moderate Rehabilitation 0-bedroom units.
    (c) Determination Initial Contract Rents. (1) The initial Contract 
Rent and base rent for each unit must be computed in accordance with HUD 
requirements. These amounts may be determined in accordance with 
paragraph (c)(2), or in accordance with an alternative method prescribed 
by HUD. However, the initial Contract Rent may in no event be more 
than--
    (i) The Moderate Rehabilitation Fair Market Rent or exception rent 
applicable to the unit on the date that the Agreement is executed, minus
    (ii) Any applicable allowance for utilities and other services 
attributable to the unit.
    (2) When the initial Contract Rent is computed under this paragraph, 
the rent will be equal to the base rent plus the monthly cost of a 
rehabilitation loan (but not more than the maximum stated in paragraph 
(c)(1)). The base rent must be calculated using the rent charged for the 
unit or the estimated costs to the Owner of owning, managing and 
maintaining the rehabilitated unit. The monthly cost of a rehabilitation 
loan must be calculated using:
    (i) The actual interest rate on the portion of the rehabilitation 
costs borrowed by the Owner,
    (ii) The HUD-FHA maximum interest rate for multifamily housing (or 
another rate prescribed by HUD) for rehabilitation costs paid by the 
Owner out of nonborrowed funds, and
    (iii) At least a 15 year loan term, except that if the total amount 
of rehabilitation is less than $15,000, the actual loan term will be 
used for the portion of the rehabilitation costs borrowed by the Owner. 
(HUD Field Offices may authorize loan terms which differ from the above 
in accordance with HUD requirements.)
    (d) Changes in Initial Contract Rents during rehabilitation. (1) The 
initial Contract Rents established pursuant to paragraph (c) of this 
section will be the Contract Rents on the effective date of the Contract 
except under the following circumstances:
    (i) When, during rehabilitation, work items (including substantial 
and necessary design changes) which (A) could not reasonably have been 
anticipated or are necessitated by a change in local codes or 
ordinances, and (B) were not listed in the work write-up prepared or 
approved by the PHA, are subsequently required and approved by the PHA.
    (ii) When the actual cost of the rehabilitation performed is less 
than that estimated in the calculation of Contract Rents for the 
Agreement or the actual, certified costs are more than estimated due to 
unforeseen factors beyond the owner's control (e.g., strikes, weather 
delays or unexpected delays caused by local governments).
    (iii) When the PHA (or HUD) approves changes in financing.
    (iv) When the actual relocation payments made by the Owner to 
temporarily relocated Families varies from the cost estimated in the 
calculation of Contract Rents for the Agreement.
    (v) When necessary to correct errors in computation of the base and 
Contract Rents to comply with the HUD requirements.
    (2) Should changes occur as specified in paragraph (d)(1) (either an 
increase or decrease), the PHA will approve any necessary change in work 
and amendment of the work write-up and cost estimate, recalculate the 
initial Contract Rents in accordance with paragraph (d)(3) of this 
section, and amend the Contract or Agreement, as appropriate, to reflect 
the revised rents.
    (3) In establishing the revised Contract Rents, the PHA must 
determine that the resulting Gross Rents do not exceed the Moderate 
Rehabilitation Fair Market Rent or the exception rent in effect at the 
time of execution of the Agreement. The Fair Market Rent or exception 
rent, as appropriate, may only be exceeded when the PHA determines in 
accordance with paragraph (d)(1) of this section that it will be 
necessary for the revised Gross Rent to exceed the Moderate 
Rehabilitation Fair Market Rent or exception rent. Should this 
determination be made, the PHA may not execute a revised Agreement or 
Contract for Gross Rents exceeding

[[Page 82]]

the Fair Market Rents by more than 10 percent until it receives HUD 
Field Office approval. The HUD Field Office may approve revised Gross 
Rents which exceed the Fair Market Rents by up to 20 percent for reasons 
specified in paragraph (d)(1) of this section upon proper justification 
by the PHA of the necessity for the increase.

[47 FR 34379, Aug. 9, 1982, as amended at 52 FR 19725, May 27, 1987]



Sec. 882.409  Contract rents at end of rehabilitation loan term.

    For a Contract where the initial Contract Rent was based upon a loan 
term shorter than 15 years, the Contract must provide for reduction of 
the Contract Rent effective with the rent for the month following the 
end of the term of the rehabilitation loan. The amount of the reduction 
will be the monthly cost of amortization of the rehabilitation loan. 
This reduction should result in a new Contract Rent equal to the base 
rent established pursuant to Sec. 882.408(c) plus all subsequent 
adjustments.



Sec. 882.410  Rent adjustments.

    (a) Annual and special adjustments. Contract Rents will be adjusted 
as provided in paragraphs (a) (1) and (2) of this section upon submittal 
to the PHA by the Owner of a revised schedule of Contract Rents, 
provided that the unit is in decent, safe, and sanitary condition and 
that the Owner is otherwise in compliance with the terms of the Lease 
and Contract. Subject to the foregoing, adjustments of Contract Rents 
will be as follows:
    (1) The Annual Adjustment Factors which are published annually by 
HUD (see Schedule C, 24 CFR part 888) will be utilized. On or after each 
annual anniversary date of the Contract, the Contract Rents may be 
adjusted in accordance with HUD procedures, effective for the month 
following the submittal by the Owner of a revised schedule of Contract 
Rents. The changes in rent as a result of the adjustment cannot exceed 
the amount established by multiplying the Annual Adjustment Factor by 
the base rents. However, if the amounts borrowed to finance the 
rehabilitation costs or to finance purchase of the property are subject 
to a variable rate or are otherwise renegotiable, Contract Rents may be 
adjusted in accordance with other procedures as prescribed by HUD, and 
specified in the Contract, provided that the adjusted Contract Rents 
cannot exceed the rents established by multiplying the Annual Adjustment 
Factor by the Contract Rents. Adjusted Contract Rents must then be 
examined in accordance with paragraph (b) of this section and may be 
adjusted accordingly. Contract Rents may be adjusted upward or downward, 
as may be appropriate.
    (2) Special Adjustments. (i) A special adjustment, to the extent 
determined by HUD to reflect increases in the actual and necessary 
expenses of owning and maintaining the unit which have resulted from 
substantial general increases in real property taxes, assessments, 
utility rates and utilities not covered by regulated rates, may be 
recommended by the PHA for approval by HUD. Subject to appropriations, a 
special adjustment may also be recommended by the PHA for approval by 
HUD when HUD determines that a project is located in a community where 
drug-related criminal activity is generally prevalent, and not specific 
to a particular project, and the project's operating, maintenance, and 
capital repair expenses have substantially increased primarily as a 
result of the prevalence of such drug-related activity. HUD may, on a 
project-by-project basis, provide adjustments to the maximum monthly 
rents, to a level no greater than 120 percent of the current gross rents 
for each unit size under a Housing Assistance Payments Contract, to 
cover the costs of maintenance, security, capital repairs and reserves 
required for the Owner to carry out a strategy acceptable to HUD for 
addressing the problem of drug-related criminal activity. Prior to 
approval of a special adjustment to cover the cost of physical 
improvements, HUD will perform an environmental review to the extent 
required by HUD's environmental regulations at 24 CFR part 50, including 
the applicable related authorities at 24 CFR 50.4.
    (ii) The aforementioned special rent adjustments will only be 
approved if and to the extent the Owner clearly

[[Page 83]]

demonstrates that these general increases have caused increases in the 
owners operating costs which are not adequately compensated for by 
annual adjustments.
    (iii) The Owner must submit financial information to the PHA which 
clearly supports the increase. For Contracts of more than twenty units, 
the Owner must submit audited financial information.
    (b) Overall limitation. Notwithstanding any other provisions of this 
part, adjustments as provided in this section must not result in 
material differences between the rents charged for assisted and 
comparable unassisted units, as determined by the PHA (and approved by 
HUD in the case of adjustments under paragraph (a)(2) of this section). 
However, unless the rents have been adjusted in accordance with 
Sec. 882.409, this limitation should not be construed to prohibit 
differences in rents between assisted and comparable unassisted units to 
the extent that differences existed with respect to the initial Contract 
Rents.

(Approved by the Office of Management and Budget under OMB approval 
number 2577-0196)

[47 FR 34379, Aug. 9, 1982, as amended at 59 FR 47773, Sept. 16, 1994]



Sec. 882.411  Payments for vacancies.

    (a) Vacancies from execution of Contract to initial occupancy. If a 
Contract unit which has been rehabilitated in accordance with this 
Program is not leased within 15 days of the effective date of the 
Contract, the Owner will be entitled to housing assistance payments in 
the amount of 80 percent of the Contract Rent for the unit for a vacancy 
period not exceeding 60 days from the effective date of the Contract, 
provided that the Owner (1) has complied with Secs. 882.506(d) and 
882.508(c); (2) has taken and continues to take all feasible actions to 
fill the vacancy; and (3) has not rejected any eligible applicant except 
for good cause acceptable to the PHA.
    (b) Vacancies after initial occupancy. (1) If an Eligible Family 
vacates its unit (other than as a result of action by the Owner which is 
in violation of the Lease or the Contract or any applicable law), the 
Owner may receive the housing assistance payments due under the Contract 
for so much of the month in which the Family vacates the unit as the 
unit remains vacant. Should the unit continue to remain vacant, the 
Owner may receive from the PHA a housing assistance payment in the 
amount of 80 percent of the Contract Rent for a vacancy period not 
exceeding an additional month. However, if the Owner collects any of the 
Family's share of the rent for this period, the payment must be reduced 
to an amount which, when added to the Family's payment, does not exceed 
80 percent of the Contract Rent. Any such excess must be reimbursed by 
the Owner to the PHA. The Owner will not be entitled to any payment 
under this paragraph (b)(1) of this section unless the Owner:
    (i) Immediately upon learning of the vacancy, has notified the PHA 
of the vacancy or prospective vacancy, and
    (ii) has taken and continues to take all feasible actions specified 
in paragraphs (a) (2) and (3) of this section.
    (2) If the Owner evicts an Eligible Family, the Owner will not be 
entitled to any payment under paragraph (b)(1) of this section unless 
the PHA determines that the Owner complied with all requirements of the 
Contract.
    (c) Prohibition of double compensation for vacancies. The Owner will 
not be entitled to housing assistance payments with respect to vacant 
units under this section if the Owner is entitled to payments from other 
sources (for example, payments for losses of rental income incurred for 
holding units vacant for relocatees pursuant to Title I of the HCD Act 
of 1974 or payments for unpaid rent under Sec. 882.414 (Security and 
Utility Deposits)).

[47 FR 34379, Aug. 9, 1982, as amended at 63 FR 23855, Apr. 30, 1998]



Sec. 882.412  Subcontracting of owner services.

    (a) General. Any Owner may contract with any private or public 
entity to perform for a fee the services required by the Agreement, 
Contract or Lease, provided that such contract may not shift any of the 
Owner's responsibilities or obligations.

[[Page 84]]

    (b) PHA management. If the Owner and a PHA wish to enter into a 
management contract, they may do so provided that:
    (1) The Housing Assistance Payments Contract with respect to the 
housing involved is administered by another PHA, or
    (2) Should another PHA not be available and willing to administer 
the Housing Assistance Payments Contract and no other management 
alternative exists, the HUD Field Office may authorize PHA management of 
units administered by the PHA in accordance with specified criteria.
    (3) Notwithstanding the provisions of Sec. 882.408 (b) and (c), a 
PHA may not approve, without prior HUD approval, rents which exceed the 
appropriate Moderate Rehabilitation Fair Market Rent for a unit for 
which it provides the management functions under this section.



Sec. 882.413  Responsibility of the Family.

    (a) A family receiving housing assistance under this Program must 
fulfill all of its obligations under the Lease and Statement of Family 
Responsibility.
    (b) No family member may engage in drug-related criminal activity or 
violent criminal activity. Failure of the Family to meet its 
responsibilities under the Lease, the Statement of Family 
Responsibility, or this section shall constitute rounds for termination 
of assistance by the PHA. Should the PHA determine to terminate 
assistance to the Family, the provisions of Sec. 882.514(f) must be 
followed.

[55 FR 28546, July 11, 1990, as amended at 63 FR 23855, Apr. 30, 1998]



Sec. 882.414  Security and utility deposits.

    (a) If at the time of the initial execution of the Lease the Owner 
wishes to collect a security deposit, the maximum amount shall be the 
greater of one month's Total Tenant Payment or $50. However, this amount 
shall not exceed the maximum amount allowable under State or local law. 
For units leased in place, security deposits collected prior to the 
execution of a Contract which are in excess of this maximum amount do 
not have to be refunded until the Family vacates the unit subject to the 
lease terms. The Family is expected to pay security deposits and utility 
deposits from its resources and/or other public or private sources.
    (b) If a Family vacates the unit, the Owner, subject to State and 
local law, may use the security deposit as reimbursement for any unpaid 
Tenant Rent or other amount which the Family owes under the Lease. If a 
Family vacates the unit owing no rent or other amount under the Lease 
consistent with State or local law or if such amount is less than the 
amount of the security deposit, the Owner shall refund the full amount 
or the unused balance to the Family.
    (c) In those jurisdictions where interest is payable by the Owner on 
security deposits, the refunded amount shall include the amount of 
interest payable. The Owner shall comply with all State and local laws 
regarding interest payments on security deposits.
    (d) If the security deposit is insufficient to reimburse the Owner 
for the unpaid Tenant Rent or other amounts which the Family owes under 
the Lease, or if the Owner did not collect a security deposit, the Owner 
may claim reimbursement from the PHA for an amount not to exceed the 
lesser of:
    (1) The amount owed the Owner, or
    (2) Two month's Contract Rent; minus, in either case, the greater of 
the security deposit actually collected or the amount of security 
deposit the Owner could have collected under the program (pursuant to 
paragraph (a) of this section). Any reimbursement under this section 
must be applied first toward any unpaid Tenant Rent due under the Lease 
and then to any other amounts owed. No reimbursement may be claimed for 
unpaid rent for the period after the Family vacates.

[43 FR 61246, Dec. 29, 1978, as amended at 44 FR 31176, May 31, 1979; 49 
FR 19945, May 10, 1984. Redesignated at 63 FR 23854, Apr. 30, 1998]

[[Page 85]]



   Subpart E--Special Procedures for Moderate Rehabilitation--Program 
                        Development and Operation

    Source: 47 FR 34383, Aug. 9, 1982, unless otherwise noted.



Sec. 882.501-882.506  [Reserved]



Sec. 882.507  Completion of rehabilitation.

    (a) Notification of completion. The Owner must notify the PHA when 
the work is completed and submit to the PHA the evidence of completion 
and certifications described in paragraphs (b) and (c) of this section.
    (b) Evidence of completion. Completion of the unit(s) must be 
evidenced by furnishing the PHA with the following:
    (1) A certificate of occupancy and/or other official approvals as 
required by the locality.
    (2) A certification by the Owner that:
    (i) The unit(s) has been completed in accordance with the 
requirements of the Agreement;
    (ii) The unit(s) is in good and tenantable condition;
    (iii) The unit(s) has been rehabilitated in accordance with the 
applicable zoning, building, housing and other codes, ordinances or 
regulations, as modified by any waivers obtained from the appropriate 
officials;
    (iv) Any unit(s) built prior to 1973 are in compliance with 
Sec. 882.404(c)(3) and Sec. 882.404(c)(4).
    (v) If applicable, the Owner has complied with the provisions of the 
Agreement relating to the payment of not less than prevailing wage rates 
and that to the best of the Owner's knowledge and belief there are no 
claims of underpayment concerning alleged violations of said provisions 
of the Agreement. In the event there are any such pending claims to the 
knowledge of the Owner, PHA or HUD, the Owner will be required to place 
sufficient amount in escrow, as determined by the PHA or HUD, to assure 
such payments.
    (c) Actual cost and rehabilitation loan certifications. The Owner 
must provide the PHA with a certification of the costs incurred for the 
rehabilitation and any temporary relocation as well as the interest rate 
and term of any rehabilitation loan. The Owner must certify that these 
are the actual costs, interest rate, and term.

The PHA must review for completeness and accuracy and accept these 
certifications subject to the right of post audit. The PHA must then 
establish the Contract Rents as provided in Sec. 882.408 which will be 
subject to reduction based on a post audit.
    (d) Review and inspections. The PHA must review the evidence of 
completion for compliance with paragraph (b) of this section. The PHA 
also must inspect the unit(s) to be assisted to determine that the 
unit(s) has been completed in accordance with the Agreement and meets 
the Housing Quality Standards or other standards approved by HUD for the 
Program. If the inspection discloses defects or deficiencies, the 
inspector must report these in detail.
    (e) Acceptance. (1) If the PHA determines from the review and 
inspection that the unit(s) has been completed in accordance with the 
Agreement, the unit(s) will be accepted.
    (2) If there are any items of delayed completion which are minor 
items or which are incomplete because of weather conditions, and in any 
case which do not preclude or affect occupancy, and all other 
requirements of the Agreement have been met, the unit(s) must be 
accepted. An escrow fund determined by the PHA to be sufficient to 
assure completion for items of delayed completion must be required, as 
well as a written agreement between the PHA and the Owner, to be 
included as an exhibit to the Contract, specifying the schedule for 
completion. If the items are not completed within the agreed time 
period, the PHA may terminate the Contract or exercise other rights 
under the Contract.
    (3) If other deficiencies exist, the PHA must determine whether and 
to what extent the deficiencies are correctable, and whether the 
Contract Rents should be reduced. The Owner must be notified of the 
PHA's decision. If the corrections required by the PHA are possible, the 
PHA and the Owner must enter into an agreement for the correction of the 
deficiencies within a specified time. If the deficiencies are corrected 
within the agreed period of time, the PHA must accept the unit(s).

[[Page 86]]

    (4) Otherwise, the unit(s) may not be accepted, and the Owner must 
be notified with a statement of the reasons for nonacceptance.

[47 FR 34383, Aug. 9, 1982, as amended at 52 FR 1895, Jan. 15, 1987]



Sec. 882.508  [Reserved]



Sec. 882.509  Overcrowded and under occupied units.

    If the PHA determines that a Contract unit is not decent, safe, and 
sanitary by reason of increase in Family size, or that a Contract unit 
is larger than appropriate for the size of the Family in occupancy, 
housing assistance payments with respect to the unit will not be abated; 
However, the Owner must offer the Family a suitable alternative unit 
should one be available and the Family will be required to move. If the 
Owner does not have a suitable available unit, the PHA must assist the 
Family in locating other standard housing in the locality within the 
Family's ability to pay and require the Family to move to such a unit as 
soon as possible. In no case will a Family be forced to move nor will 
housing assistance payments under the Contract be terminated unless the 
Family rejects without good reason the offer of a unit which the PHA 
judges to be acceptable.



Sec. 882.510  Adjustment of utility allowance.

    The PHA must determine, at least annually, whether an adjustment is 
required in the Utility Allowance applicable to the dwelling units in 
the Program, on grounds of changes in utility rates or other change of 
general applicability to all units in the Program. The PHA may also 
establish a separate schedule of allowances for each building of 20 or 
more assisted units, based upon at least one year's actual utility 
consumption data following rehabilitation under the Program. If the PHA 
determines that an adjustment should be made in its Schedule of 
Allowances or if it establishes a separate schedule for a building which 
will change the allowance, the PHA must then determine the amounts of 
adjustments to be made in the amount of rent to be paid by affected 
Families and the amount of housing assistance payments and must notify 
the Owners and Families accordingly. Any adjustment to the Allowance 
must be implemented no later than at the Family's next reexamination or 
at lease renewal, whichever is earlier.

[47 FR 34383, Aug. 9, 1982, as amended at 49 FR 19946, May 10, 1984]



Sec. 882.511  Lease and termination of tenancy.

    (a) Lease. The lease must include all provisions required by HUD, 
and must not include any provisions prohibited by HUD.
    (b) Applicability. The provisions of this section apply to decisions 
by an Owner to terminate the tenancy of a Family during or at the end of 
the Family's lease term.
    (c) Grounds for termination of or refusal to renew the lease. The 
Owner must not terminate or refuse to renew the lease except upon the 
following grounds:
    (1) Serious or repeated violation of the terms and conditions of the 
lease.
    (2) Violation of applicable Federal, State or local law.
    (3) Other good cause.
    (d) Notice of termination of tenancy. (1) The Owner must serve a 
written notice of termination of tenancy on the Family which states the 
date the tenancy shall terminate. Such date must be in accordance with 
the following:
    (i) When termination is based on failure to pay rent, the date of 
termination must be not less than five working days after the Family's 
receipt of the notice.
    (ii) When termination is based on serious or repeated violation of 
the terms and conditions of the lease or on violation of applicable 
Federal, State or local law, the date of termination must be in 
accordance with State and local law.
    (iii) When termination is based on other good cause, the date of 
termination must be no earlier than 30 days after the notice is served 
on the Family.
    (2) The notice of termination must:
    (i) State the reasons for such termination with enough specificity 
to enable the Family to prepare a defense.

[[Page 87]]

    (ii) Advise the Family that if a judicial proceeding for eviction is 
instituted, the tenant may present a defense in that proceeding.
    (iii) Be served on the Family by sending a prepaid first class 
properly addressed letter (return receipt requested) to the tenant at 
the dwelling unit or by delivering a copy of the notice to the dwelling 
unit.
    (3) Substitution of State and local requirements. In the case of 
failure to pay rent, a notice of termination which is issued pursuant to 
State or local law or is common practice in the locality and which 
satisfies paragraph (c)(2) may be substituted for or run concurrently 
with the notice required herein.
    (e) Eviction. All evictions must be carried out through judical 
process under State and local law. ``Eviction'' means the dispossession 
of the Family from the dwelling unit pursuant to State or local court 
action.
    (f) Lease. The requirements of this section shall be incorporated 
into the dwelling lease between the Owner and the Family.

[47 FR 34383, Aug. 9, 1982, as amended at 63 FR 23855, Apr. 30, 1998]



Sec. 882.512  Reduction of number of units covered by contract.

    (a) Limitation on leasing to ineligible Families. Owners must lease 
all assisted units under Contract to Eligible Families. Leasing of 
vacant, assisted units to ineligible tenants is a violation of the 
Contract and grounds for all available legal remedies, including 
suspension or debarment from HUD programs and reduction of the number of 
units under the Contract, as set forth in paragraph (b) of this section. 
Once the PHA has determined that a violation exists, the PHA must notify 
HUD of its determination and the suggested remedies. At the direction of 
HUD, the PHA must take the appropriate action.
    (b) Reduction for failure to lease to Eligible Families. If, at any 
time beginning six months after the effective date of the Contract, the 
Owner fails for a period of six continuous months to have at least 90 
percent of the assisted units leased or available for leasing by 
Eligible Families (because families initially eligible have become 
ineligible), the PHA may, on at least 30 days' notice, reduce the number 
of units covered by the Contract. The PHA may reduce the number of units 
to the number of units actually leased or available for leasing by 
Eligible Families plus 10 percent (rounded up). If the Owner has only 
one unit under Contract and if one year has elapsed since the date of 
the last housing assistance payment, the Contract may be terminated with 
the consent of the Owner.
    (c) Restoration. The PHA will agree to an amendment of the Contract, 
to provide for subsequent restoration of any reduction made pursuant to 
paragraph (b) if:
    (1) The PHA determines that the restoration is justified by demand,
    (2) The Owner otherwise has a record of compliance with obligations 
under the Contract, and
    (3) Contract authority is available.



Sec. 882.513  Public notice to low-income families; waiting list.

    (a) Public notice to low-income Families. (1) If the PHA does not 
have a waiting list which is sufficient to provide applicants for the 
units under the Moderate Rehabilitation Program, the PHA must, promptly 
after receiving the executed ACC, make known to the public the 
availability of the Program.
    (i) The notice must state that assistance under this Program will be 
available only in specified units which have been rehabilitated under 
the Program.
    (ii) The notice must be made in accordance with the PHA's HUD-
approved application and with the HUD guidelines for fair housing 
requiring the use of the equal housing opportunity logotype, statement 
and slogan.
    (b) Waiting list. The PHA must maintain a waiting list for 
applicants for the Moderate Rehabilitation Program. This requirement may 
be met through the use of waiting lists for other subsidized housing 
programs such as the Existing Housing Program.



Sec. 882.514  Family participation.

    (a) Initial determination of family eligibility. (1) The PHA is 
responsible for receipt and review of applications, and determination of 
family eligibility for participation in accordance with HUD regulations 
(see 24 CFR parts 5, 750 and 760). The PHA is responsible for

[[Page 88]]

verifying the sources and amount of the family's income and other 
information necessary for determining income eligibility and the amount 
of the assistance payments.
    (2) A PHA may determine that an applicant Family is ineligible for 
participation because one or more Family members have engaged in drug-
related criminal activity or violent criminal activity, as defined in 
Sec. 882.413(b).
    (3) PHA records on applicants and Families selected to participate 
must be maintained so as to provide HUD with racial, gender, and ethnic 
data.
    (b) Selection of Families for participation. When vacancies occur, 
the PHA will refer to the Owner one or more appropriate size Families on 
its waiting list. The PHA must select Families for participation in 
accordance with the provisions of the Program and in accordance with the 
PHA's application, including any PHA requirement or preferences as 
approved by HUD. The PHA must select Families eligible for housing 
assistance payments currently residing in units that are designated for 
rehabilitation under the Program without requiring that these Families 
be placed on the waiting list. Notwithstanding the fact that the PHA may 
not be accepting additional applications for participation because of 
the length of the waiting list, the PHA may not refuse to place an 
applicant on the waiting list if the applicant is otherwise eligible for 
partcipation and claims that he or she qualifies for a Federal 
preference as provided in 24 CFR part 5, unless the PHA determines, on 
the basis of the number of applicants who are already on the waiting 
list and who claim a Federal preference, and the anticipated number of 
admissions under this part, that--
    (1) There is an adequate pool of applicants who are likely to 
qualify for a Federal preference and
    (2) It is unlikely that, on the basis of the PHA's system for 
applying the Federal preferences, the preference or preferences that the 
applicant claims, and the preferences claimed by applicants on the 
waiting list, the applicant would qualify for assistance before other 
applicants on the waiting list.
    (c) Owner selection of Families. All vacant units under Contract 
must be rented to Eligible Families referred by the PHA from its waiting 
list. However, if the PHA is unable to refer a sufficient number of 
interested applicants on the waiting list to the Owner within 30 days of 
the Owner's notification to the PHA of a vacancy, the Owner may 
advertise or solicit applications from Low-Income Families and refer 
such Families to the PHA to determine eligibility. Since the Owner is 
responsible for tenant selection, the Owner may refuse any Family 
provided that the Owner does not unlawfully discriminate. Should the 
Owner reject a Family, and should the Family believe that the Owner's 
rejection was the result of unlawful discrimination, the Family may 
request the assistance of the PHA in resolving the issue. If the issue 
cannot be resolved promptly, the Family may file a complaint with HUD, 
and the PHA may refer the Family to the next available Moderate 
Rehabilitation unit.
    (d) Briefing of Families. (1) When a Family is initially determined 
to be eligible for housing assistance payments or is selected for 
participation in accordance with this section, the PHA must provide the 
Family with information as to the Tenant Rent and the PHA's schedule of 
Utility Allowances. Each Family must also, either in group or individual 
sessions, be provided with a full explanation of the following:
    (i) Family and Owner responsibilities under the Lease and Contract;
    (ii) Significant aspects of the applicable State and local laws;
    (iii) Significant aspects of Federal, State and local fair housing 
laws;
    (iv) The fact that the subsidy is tied to the unit and the Family 
must occupy a unit rehabilitated under the Program;
    (v) The Family's options under the Program should the Family be 
required to move due to an increase or decrease in Family size; and
    (vi) The advisability and availability of blood lead level screening 
for children under seven years of age and HUD's requirements for 
inspecting, testing and, in certain circumstances, abating lead-based 
paint.
    (2) For all Families to be temporarily relocated, the briefing must 
include a discussion of the relocation policies.

[[Page 89]]

    (e) Continued participation of Family when Contract is terminated. 
If an Owner evicts an assisted family in violation of the Contract or 
otherwise breaches the Contract, and the Contract for the unit is 
terminated, and if the Family was not at fault and is eligible for 
continued assistance, the Family may continue to receive housing 
assistance through the conversion of the Moderate Rehabilitation 
assistance to tenant-based assistance under the Section 8 certificate or 
voucher program. The Family must then be issued a certificate or 
voucher, and treated as any participant in the tenant-based programs 
under 24 CFR part 982, and must be assisted by the PHA in finding a 
suitable unit. All requirements of 24 CFR part 982 will be applicable 
except that the term of any housing assistance payments contract may not 
extend beyond the term of the initial Moderate Rehabilitation Contract. 
If the Family is determined ineligible for continued assistance, the 
certificate or voucher may be offered to the next Family on the PHA's 
waiting list. The unit will remain under the Moderate Rehabilitation ACC 
which provides for such a conversion of the units; therefore no 
amendment to the ACC will be necessary to convert to the Section 8 
tenant-based assistance programs.
    (f) Families determined by the PHA to be ineligible. If a Family is 
determined to be ineligible in accordance with the PHA's HUD-approved 
application, either at the application stage or after assistance has 
been provided on behalf of the Family, the PHA shall promptly notify the 
Family by letter of the determination and the reasons for it and the 
letter shall state that the Family has the right within a reasonable 
time (specified in the letter) to request an informal hearing. If, after 
conducting such an informal hearing, the PHA determines, based on a 
preponderance of the evidence, that the Family is ineligible, it shall 
notify the Family in writing. The procedures of this paragraph do not 
preclude the Family from exercising its other rights if it believes it 
is being discriminated against on the basis of race, color, religion, 
sex, age, handicap, familial status, or national origin. The informal 
review provisions for the denial of a Federal selection preference under 
Sec. 882.517 are contained in paragraph (k) of that section. The 
informal hearing requirements for denial and termination of assistance 
on the basis of ineligible immigration status are contained in 24 CFR 
part 5.
    (g) Considerations in certain denials and terminations. In 
determining whether to deny or terminate assistance based on drug-
related criminal activity or violent criminal activity:
    (1) A PHA may deny or terminate assistance if the preponderance of 
evidence indicates that a Family member has engaged in such activity, 
regardless of whether the Family member has been arrested or convicted;
    (2) A PHA shall have discretion to consider all of the circumstances 
in each case, including the seriousness of the offense, the extent of 
participation by Family members, and the effects that denial or 
termination would have on Family members not involved in the proscribed 
activity. PHAs, in appropriate cases, may permit the remaining members 
of the Family to continue receiving assistance and may impose a 
condition that Family members determined to have engaged in the 
proscribed activities will not reside in the unit. A PHA may require a 
Family member that has engaged in the illegal use of drugs to submit 
evidence of successful completion of a treatment program as a condition 
to being allowed to reside in the unit.

(Approved by the Office of Management and Budget under control number 
2502-0123)

[47 FR 34383, Aug. 9, 1982, as amended at 49 FR 19945, May 10, 1984; 51 
FR 11226, Apr. 1, 1986; 52 FR 1895, Jan. 15, 1987; 53 FR 847, Jan. 13, 
1988; 53 FR 1155, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39705, 
Sept. 27, 1989; 55 FR 28547, July 11, 1990; 56 FR 7539, Feb. 22, 1991; 
60 FR 14844, Mar. 20, 1995; 61 FR 9046, Mar. 6, 1996; 61 FR 13625, Mar. 
27, 1996; 63 FR 23855, Apr. 30, 1998]



Sec. 882.515  Reexamination of family income and composition.

    (a) Regular reexaminations. The PHA must reexamine the income and 
composition of all families at least once every 12 months. After 
consultation with the family and upon verification of the information, 
the PHA must make appropriate adjustments in the Total Tenant Payment in 
accordance

[[Page 90]]

with part 813 of this chapter and determine whether the family's unit 
size is still appropriate (see Sec. 882.213). The PHA must adjust Tenant 
Rent and the Housing Assistance Payment to reflect any change in Total 
Tenant Payment. At the time of the annual reexamination of family income 
and composition, the PHA must require the family to disclose and verify 
Social Security Numbers. For requirements regarding the signing and 
submitting of consent forms by families for the obtaining of wage and 
claim information from State Wage Information Collection Agencies, see 
part 5, subpart B, of this title. At the first regular reexamination 
after June 19, 1995, the PHA shall follow the requirements of 24 CFR 
part 5 concerning obtaining and processing evidence of citizenship or 
eligible immigration status of all family members. Thereafter, at each 
regular reexamination, the PHA shall follow the requirements of 24 CFR 
part 5 concerning verification of immigration status of any new family 
member.
    (b) Interim reexaminations. If the PHA receives information 
concerning a change in the family's income or other circumstances 
between regularly scheduled reexaminations, the PHA must consult with 
the family and make any adjustments determined to be appropriate. Any 
change in the family's income or other circumstances that results in an 
adjustment in the Total Tenant Payment, Tenant Rent, and Housing 
Assistance Payment must be verified. See part 5, subpart B, of this 
title for the requirements for the disclosure and verification of Social 
Security Numbers at interim reexaminations involving new family members. 
For requirements regarding the signing and submitting of consent forms 
by families for the obtaining of wage and claim information from State 
Wage Information Collection Agencies, see part 5, subpart B, of this 
title. At any interim reexamination after June 19, 1995 when there is a 
new family member, the PHA shall follow the requirements of 24 CFR part 
5 concerning obtaining and processing evidence of citizenship or 
eligible immigration status of the new family member.
    (c) Obligation to supply information. The family must supply such 
certification, release, information or documentation as the PHA or HUD 
determine to be necessary, including submission of required evidence of 
citizenship or eligible immigration status, submission of social 
security numbers and verifying documentation, submission of signed 
consent forms for the obtaining of wage and claim information from State 
Wage Information Collection Agencies, and submissions required for an 
annual or interim reexamination of family income and composition. See 24 
CFR part 5.
    (d) Continuation of housing assistance payments. A family's 
eligibility for Housing Assistance Payments shall continue until the 
Total Tenant Payment equals the Gross Rent. The termination of 
eligibility at such point will not affect the family's other rights 
under its lease, nor will such termination preclude the resumption of 
payments as a result of later changes in income, rents or other relevant 
circumstances during the term of the Contract. However, eligibility also 
may be terminated in accordance with HUD requirements for such reasons 
as failure to submit requested verification information, including 
failure to meet the disclosure and verification requirements for Social 
Security Numbers, as provided by part 5, subpart B, of this title, or 
failure to sign and submit consent forms for the obtaining of wage and 
claim information from State Wage Information Collection Agencies, as 
provided by part 5, subpart B, of this title. For provisions requiring 
termination of assistance when the PHA determines that a family member 
is not a U.S. citizen or does not have eligible immigration status, see 
24 CFR parts 5 and 982 for provisions concerning certain assistance for 
mixed families (families whose members include those with eligible 
immigration status, and those without eligible immigration status) in 
lieu of termination of assistance, and for provisions concerning 
deferral of termination of assistance.

[56 FR 7539, Feb. 22, 1991, as amended at 60 FR 14844, Mar. 20, 1995; 61 
FR 11118, Mar. 18, 1996; 61 FR 13625, Mar. 27, 1996; 63 FR 23855, Apr. 
30, 1998]

[[Page 91]]



Sec. 882.516  Maintenance, operation and inspections.

    (a) Maintenance and operation. The Owner must provide all the 
services, maintenance and utilities as agreed to under the Contract, 
subject to abatement of housing assistance payments or other applicable 
remedies if the Owner fails to meet these obligations.
    (b) Periodic inspection. In addition to the inspections required 
prior to execution of the Contract, the PHA must inspect or cause to be 
inspected each dwelling unit under Contract at least annually and at 
such other times as may be necessary to assure that the Owner is meeting 
the obligations to maintain the unit in decent, safe and sanitary 
condition and to provide the agreed upon utilities and other services. 
The PHA must take into account complaints and any other information 
coming to its attention in scheduling inspections.
    (c) Units not decent, safe and sanitary. If the PHA notifies the 
Owner that the unit(s) under Contract are not being maintained in 
decent, safe and sanitary condition and the Owner fails to take 
corrective action (including corrective action with respect to the 
Family where the condition of the unit is the fault of the Family) 
within the time prescribed in the notice, the PHA may exercise any of 
its rights or remedies under the Contract, including abatement of 
housing assistance payments (even if the Family continues in occupancy), 
termination of the Contract on the affected unit(s) and assistance to 
the Family in accordance with Sec. 882.514(e).
    (d) PHA management. Where the PHA is managing units on which it is 
also administering the Housing Assistance Payments Contract pursuant to 
a management contract approved by HUD in accordance with Sec. 882.412, 
HUD will make reviews of project operations, including inspections, in 
addition to required PHA reviews. These HUD reviews will be sufficient 
to assure that the Owner and the PHA are in full compliance with the 
terms and conditions of the Contract and the ACC. Should HUD determine 
that there are deficiencies, it may exercise any rights or remedies 
specified for the PHA under the Contract or reserved for HUD in the ACC, 
require termination of the management contract, or take other 
appropriate action.
    (e) Periodic PHA audits must be conducted as required by HUD, in 
accordance with guidelines prescribed by 24 CFR part 44.

[47 FR 34383, Aug. 9, 1982, as amended at 53 FR 8065, Mar. 11, 1988]



Sec. 882.517  HUD review of contract compliance.

    HUD will review program operations at such intervals as it deems 
necessary to ensure that the Owner and the PHA are in full compliance 
with the terms and conditions of the Contract and the ACC. Equal 
Opportunity review may be conducted with the scheduled HUD review or at 
any time deemed appropriate by HUD.

[43 FR 61246, Dec. 29, 1978. Redesignated at 63 FR 23854, Apr. 30, 1998]



                         Subpart F-G  [Reserved]



   Subpart H--Section 8 Moderate Rehabilitation Single Room Occupancy 
                    Program for Homeless Individuals

    Source: 61 FR 48057, Sept. 11, 1996, unless otherwise noted.



Sec. 882.801  Purpose.

    The purpose of the Section 8 Moderate Rehabilitation Program for 
Single Room Occupancy (SRO) Dwellings for Homeless Individuals is to 
provide rental assistance for homeless individuals in rehabilitated SRO 
housing. The Section 8 assistance is in the form of rental assistance 
payments. These payments equal the rent for the unit, including 
utilities, minus the portion of the rent payable by the tenant under the 
U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.).



Sec. 882.802  Definitions.

    In addition to the definitions set forth in 24 CFR part 5 and 
Sec. 882.102 (except for the definition of ``Single Room Occupancy (SRO) 
Housing'' therein) the following will apply:
    Agreement to enter into housing assistance payments contract 
(Agreement). A

[[Page 92]]

written agreement between the owner and the HA that, upon satisfactory 
completion of the rehabilitation in accordance with requirements 
specified in the Agreement, the HA will enter into a housing assistance 
payments contract with the owner.
    Applicant. A public housing agency or Indian housing authority 
(collectively referred to as HAs), or a private nonprofit organization 
that applies for assistance under this program. HUD will require private 
nonprofit applicants to subcontract with public housing agencies to 
administer their rental assistance.
    Eligible individual (``individual''). An individual who is capable 
of independent living and is authorized for admission to assisted 
housing under 24 CFR part 5.
    Homeless individual. An individual as described in section 103 of 
the McKinney Act (42 U.S.C. 11302).
    McKinney Act. The Stewart B. McKinney Homeless Assistance Act (42 
U.S.C. 11301 et seq.).
    Moderate rehabilitation. Rehabilitation involving a minimum 
expenditure of $3,000 for a unit, including its prorated share of work 
to be accomplished on common areas or systems, to upgrade to decent, 
safe, and sanitary condition to comply with the Housing Quality 
Standards or other standards approved by HUD, from a condition below 
those standards (improvements being of a modest nature and other than 
routine maintenance).
    Private nonprofit organization. An organization, no part of the net 
earnings of which inures to the benefit of any member, founder, 
contributor, or individual. The organization must:
    (1) Have a voluntary board;
    (2) Have a functioning accounting system that is operated in 
accordance with generally accepted accounting principles, or designate 
an entity that will maintain a functioning accounting system for the 
organization in accordance with generally accepted accounting 
principles; and
    (3) Practice nondiscrimination in the provision of assistance.
    Single room occupancy (SRO) housing. A unit for occupancy by one 
person, which need not but may contain food preparation, sanitary 
facilities, or both.
    Statement of individual responsibility. An agreement, in the form 
prescribed by HUD, between the HA and an individual to be assisted under 
the program, stating the obligations and responsibilities of the two 
parties.

[61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23855, Apr. 30, 1998]



Sec. 882.803  Project eligibility and other requirements.

    (a) Eligible and ineligible properties. (1) Except as otherwise 
provided in paragraph (a) of this section, housing suitable for moderate 
rehabilitation is eligible for inclusion under this program. Existing 
structures of various types may be appropriate for this program, 
including single family houses and multifamily structures.
    (2) Housing is not eligible for assistance under this program if it 
is receiving Federal funding for rental assistance or operating costs 
under other HUD programs.
    (3) Nursing homes and related facilities such as intermediate care 
or board and care homes; units within the grounds of penal, reformatory, 
medical, mental, and similar public or private institutions; and 
facilities providing continual psychiatric, medical, or nursing services 
are not eligible for assistance under this program.
    (4) No Section 8 assistance may be provided with respect to any unit 
occupied by an owner.
    (5) Housing located in the Coastal Barrier Resources System 
designated under the Coastal Barriers Resources Act is not eligible.
    (6) Single-sex facilities are allowable under this program, provided 
that the HA determines that because of the physical limitations or 
configuration of the facility, considerations of personal privacy 
require that the facility (or parts of the facility) be available only 
to members of a single sex.
    (b)(1) Physical condition standards. Section 882.404 applies to this 
program; however, the lead-based paint requirements in Sec. 982.401(j) 
of this title do not apply to this program, since these SRO units will 
not house children.
    (2) Site standards. (i) The site must be adequate in size, exposure, 
and contour

[[Page 93]]

to accommodate the number and type of units proposed; adequate utilities 
and streets must be available to service the site. (The existence of a 
private disposal system and private sanitary water supply for the site, 
approved in accordance with local law, may be considered adequate 
utilities.)
    (ii) The site must be suitable from the standpoint of facilitating 
and furthering full compliance with the applicable provisions of title 
VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d-4), title VIII 
of the Civil Rights Act of 1968 (42 U.S.C. 3601-19), E.O. 11063 (as 
amended by E.O. 12259; 3 CFR, 1959-1963 Comp., p. 652 and 3 CFR, 1980 
Comp., p. 307), and HUD regulations issued pursuant thereto.
    (iii) The site must be accessible to social, recreational, 
educational, commercial, and health facilities, and other appropriate 
municipal facilities and services.
    (c) Financing. Section 882.405 applies to this program.
    (d) Relocation. Section 882.406 applies to a project assisted under 
this program.
    (e) HA-owned housing. (1) A unit that is owned by the HA that 
administers the assistance under the ACC (including a unit owned by an 
entity substantially controlled by the HA) may only be assisted if:
    (i) The unit is not ineligible under Sec. 882.803(a); and
    (ii) HUD approves the base and contract rent calculations prior to 
execution of the Agreement and prior to execution of the HAP contract.
    (2) The HA as owner is subject to the same program requirements that 
apply to other owners in the program.

[61 FR 48057, Sept. 11, 1996, as amended at 63 FR 46579, Sept. 1, 1998]



Sec. 882.804  Other Federal requirements.

    (a) Participation in this program requires compliance with the 
Federal requirements set forth in 24 CFR 5.105, and with the Americans 
with Disabilities Act (42 U.S.C. 12101 et seq.).
    (b) For agreements covering nine or more assisted units, the 
following requirements for labor standards apply:
    (1) Not less than the wages prevailing in the locality, as 
determined by the Secretary of Labor under the Davis-Bacon Act (40 
U.S.C. 276a through 276a-5), must be paid to all laborers and mechanics 
employed in the development of the project, other than volunteers under 
the conditions set out in 24 CFR part 70;
    (2) The employment of laborers and mechanics is subject to the 
provisions of the Contract Work Hours and Safety Standards Act (40 
U.S.C. 327-333); and
    (3) HAs, owners, contractors, and subcontractors must comply with 
all related rules, regulations, and requirements.
    (c) The environmental review requirements of 24 CFR part 58, 
implementing the National Environmental Policy Act and related 
environmental laws and authorities, apply to this program.



Sec. 882.805  HA application process, ACC execution, and pre-rehabilitation activities.

    (a) Review. When funds are made available for assistance, HUD will 
publish a notice of funding availability (NOFA) in the Federal Register 
in accordance with the requirements of 24 CFR part 4. HUD will review 
and screen applications in accordance with the guidelines, rating 
criteria, and procedures published in the NOFA.
    (b) ACC Execution. (1) Before execution of the annual contributions 
contract (ACC), the HA must submit to the appropriate HUD field office 
the following:
    (i) Estimates of Required Annual Contributions, Forms HUD-52672 and 
HUD-52673;
    (ii) Administrative Plan, which should include:
    (A) Procedures for tenant outreach;
    (B) A policy governing temporary relocation; and
    (C) A mechanism to monitor the provision of supportive services.
    (iii) Proposed Schedule of Allowances for Tenant-Furnished Utilities 
and Other Services, Form HUD-52667, with a justification of the amounts 
proposed;
    (iv) If applicable, proposed variations to the acceptability 
criteria of the Housing Quality Standards (see Sec. 882.803(b)); and
    (v) The fire and building code applicable to each structure.

[[Page 94]]

    (2) After HUD has approved the HA's application, the review and 
comment requirements of 24 CFR part 791 have been complied with, and the 
HA has submitted (and HUD has approved) the items required by paragraph 
(b)(1) of this section, HUD and the HA must execute the ACC in the form 
prescribed by HUD. The initial term of the ACC must be 11 years. This 
term allows one year to rehabilitate the units and place them under a 
10-year HAP contract. The ACC must give HUD the option to renew the ACC 
for an additional 10 years.
    (3) Section 882.403(a) (Maximum Total ACC Commitments) applies to 
this program.
    (4) Section 882.403(b) (Project account) applies to this program.
    (c)(1) If an owner is proposing to accomplish at least $3000 per 
unit of rehabilitation by including work to make the unit(s) accessible 
to a person with disabilities occupying the unit(s) or expected to 
occupy the unit(s), the PHA may approve such units not to exceed 5 
percent of the units under its Program, provided that accessible units 
are necessary to meet the requirements of 24 CFR part 8, which 
implements section 504 of the Rehabilitation Act of 1973. The 
rehabilitation must make the unit(s), and access and egress to the 
unit(s), barrier-free with respect to the disability of the individual 
in residence or expected to be in residence.
    (2) The PHA must take the applications and determine the eligibility 
of all tenants residing in the approved units who wish to apply for the 
Program. After eligibility of all the tenants has been determined, the 
Owner must be informed of any adjustment in the number of units to be 
assisted. In order to make the most efficient use of housing assistance 
funds, an Agreement may not be entered into covering any unit occupied 
by a family which is not eligible to receive housing assistance 
payments. Therefore, the number of units approved by the PHA for a 
particular proposal must be adjusted to exclude any unit(s) determined 
by the PHA to be occupied by a family not eligible to receive housing 
assistance payments. Eligible Families must also be briefed at this 
stage as to their rights and responsibilities under the Program.
    (3) Should the Owner agree with the assessment of the PHA as to the 
work that must be accomplished, the preliminary feasibility of the 
proposal, and the number of units to be assisted, the Owner, with the 
assistance of the PHA where necessary, must prepare detailed work write-
ups including specifications and plans (where necessary) so that a cost 
estimate may be prepared. The work write-up will describe how the 
deficiencies eligible for amortization through the Contract Rents are to 
be corrected including minimum acceptable levels of workmanship and 
materials. From this work write-up, the Owner, with the assistance of 
the PHA, must prepare a cost estimate for the accomplishment of all 
specified items.
    (4) The owner is responsible for selecting a competent contractor to 
undertake the rehabilitation. The PHA must propose opportunities for 
minority contractors to participate in the program.
    (5) The PHA must discuss with the Owner the various financing 
options available. The terms of the financing must be approved by the 
PHA in accordance with standards prescribed by HUD.
    (6) Before execution of the Agreement, the HA must:
    (i)(A) Inspect the structure to determine the specific work items 
that need to be accomplished to bring the units to be assisted up to the 
Housing Quality Standards (see Sec. 882.803(b)) or other standards 
approved by HUD;
    (B) Conduct a feasibility analysis, and determine whether cost-
effective energy conserving improvements can be added;
    (C) Ensure that the owner prepares the work write-ups and cost 
estimates required by paragraph (c)(3) of this section;
    (D) Determine initial base rents and contract rents;
    (ii) Assure that the owner has selected a contractor in accordance 
with paragraph (c)(4) of this section;
    (iii) After the financing and a contractor are obtained, determine 
whether the costs can be covered by initial contract rents, computed in 
accordance

[[Page 95]]

with paragraph (d) of this section; and, if a structure contains more 
than 50 units to be assisted, submit the base rent and contract rent 
calculations to the appropriate HUD field office for review and approval 
in sufficient time for execution of the Agreement in a timely manner;
    (iv) Obtain firm commitments to provide necessary supportive 
services;
    (v) Obtain firm commitments for other resources to be provided;
    (vi) Determine that the $3,000 minimum amount of work requirement 
and other requirements in paragraph (c)(1) of this section are met;
    (vii) Determine eligibility of current tenants, and select the units 
to be assisted, in accordance with paragraph (c)(2) of this section;
    (viii) Comply with the financing requirements in paragraph (c)(5) of 
this section;
    (ix) Assure compliance with all other applicable requirements of 
this subpart; and
    (x) If the HA determines that any structure proposed in its 
application is infeasible, or the HA proposes to select a different 
structure for any other reason, the HA must submit information for the 
proposed alternative structure to HUD for review and approval. HUD will 
rate the proposed structure in accordance with procedures in the 
applicable notice of funding availability. The HA may not proceed with 
processing for the proposed structure or execute an Agreement until HUD 
notifies the HA that HUD has approved the proposed alternative structure 
and that all requirements have been met.
    (d) Initial contract rents. Section 882.408 (Initial contract 
rents), including the establishment of fair market rents for SRO units 
at 75 percent of the O-bedroom Moderate Rehabilitation Fair Market Rent, 
applies to this program, except as follows:
    (1)(i) In determining the monthly cost of a rehabilitation loan, in 
accordance with Sec. 882.408(c)(2), a loan term of a least 10 years 
(instead of 15 years) may be used. The exception in 
Sec. 882.408(c)(2)(iii) for using the actual loan term if the total 
amount of the rehabilitation is less than $15,000 continues to apply. In 
addition, the cost of the rehabilitation that may be included for the 
purpose of calculating the amount of the initial contract rent for any 
unit must not exceed the lower of:
    (A) The projected cost of rehabilitation; or
    (B) The per unit cost limitation that is established by Federal 
Register notice, plus the cost of the fire and safety improvements 
required by 24 CFR 982.605(b)(4). HUD may, however, increase the 
limitation in paragraph (d)(1)(i)(B) of this section by an amount HUD 
determines is reasonable and necessary to accommodate special local 
conditions, including high construction costs or stringent fire or 
building codes. HUD will publish future cost limitation changes in the 
Federal Register in the Notice of Funding Availability issued each year.
    (ii) If the Federal Housing Administration (FHA) believes that high 
construction costs warrant an increase in the per unit cost limitation 
in paragraph (d)(1)(i)(B) of this section, the HA must demonstrate to 
HUD's satisfaction that a higher average per unit amount is necessary to 
conduct this program, and that every appropriate step has been taken to 
contain the amount of the rehabilitation within the published per unit 
cost limitation established at that time, plus the cost of the required 
fire and safety improvements. These higher amounts will be determined as 
follows:
    (A) HUD may approve a higher per unit amount up to, but not to 
exceed, an amount computed by multiplying the HUD-approved High Cost 
Percentage for Base Cities (used for computing FHA high cost area 
adjustments) for the area, by the current published cost limitation plus 
the cost of the required fire and safety improvements.
    (B) HUD may, on a structure-by-structure basis, increase the level 
approved in paragraph (d)(1)(i) of this section to up to an amount 
computed by multiplying 2.4 by the current published cost limitation 
plus the cost of the required fire and safety improvements.
    (2) In approving changes to initial contract rents during 
rehabilitation in accordance with Sec. 882.408(d), the revised initial 
contract rents may not reflect an average per unit rehabilitation cost

[[Page 96]]

that exceeds the limitation specified in paragraph (d)(1) of this 
section.
    (3) If the structure contains four or fewer SRO units, the Fair 
Market Rent for that size structure (the Fair Market Rent for a 1-, 2-, 
3-, or 4-bedroom unit, as applicable) must be used to determine the Fair 
Market Rent limitation instead of using the separate Fair Market Rent 
for each SRO unit. To determine the Fair Market Rent limitation for each 
SRO unit, the Fair Market Rent for the structure must be apportioned 
equally to each SRO unit.
    (4) Contract rents must not include the costs of providing 
supportive services, transportation, furniture, or other nonhousing 
costs, as determined by HUD. SRO program assistance may be used for 
efficiency units selected for rehabilitation under this program, but the 
gross rent (contract rent plus any Utility Allowance) for these units 
will be no higher than for SRO units (i.e., 75 percent of the 0-bedroom 
Moderate Rehabilitation Fair Market Rent).

(Approved by the Office of Management and Budget under control number 
2506-0131)

[61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23855, Apr. 30, 1998]



Sec. 882.806  Agreement to enter into housing assistance payments contract.

    (a) Rehabilitation period. (1) Agreement. Before the owner begins 
any rehabilitation, the HA must enter into an Agreement with the owner 
in the form prescribed by HUD.
    (2) Timely performance of work. (i) After execution of the 
Agreement, the Owner must promptly proceed with the rehabilitation work 
as provided in the Agreement. If the work is not so commenced, 
diligently continued, or completed, the PHA will have the right to 
rescind the Agreement, or take other appropriate action.
    (ii) The Agreement must provide that the work must be completed and 
the contract executed within 12 months of execution of the ACC. HUD may 
reduce the number of units or the amount of the annual contribution 
commitment if, in HUD's determination, the HA fails to demonstrate a 
good faith effort to adhere to this schedule or if other reasons justify 
reducing the number of units.
    (3) Inspections. The PHA must inspect, as appropriate, during 
rehabilitation to ensure that work is proceeding on schedule and is 
being accomplished in accordance with the terms of the Agreement, 
particularly that the work meets the acceptable levels of workmanship 
and materials specified in the work write-up.
    (4) Changes. (i) The Owner must submit to the PHA for approval any 
changes from the work specified in the Agreement which would alter the 
design or the quality of the required rehabilitation. The PHA may 
condition its approval of such changes on a reduction of the Contract 
Rents. If changes are made without prior PHA approval, the PHA may 
determine that Contract Rents must be reduced or that the Owner must 
remedy any deficiency as a condition for acceptance of the unit(s).
    (ii) Contract rents may not be increased except in accordance with 
Secs. 882.408(d) and 882.805(d)(2).
    (b) Completion of rehabilitation. (1) Notification of completion. 
Section 882.507(a) applies to this program.
    (2) Evidence of completion. Section 882.507(b) applies to this 
program, except that Sec. 882.507(b)(2)(iv), concerning lead-based paint 
requirements, does not apply.
    (3) Actual cost and rehabilitation loan certifications. Section 
882.507(c) applies to this program, except that contract rents must be 
established in accordance with Sec. 882.805(d).
    (4) Review and inspections. Section 882.507(d) applies to this 
program.
    (5) Acceptance. Section 882.507(e) applies to this program.

(Approved by the Office of Management and Budget under control number 
2502-0367)

[61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23856, Apr. 30, 1998]



Sec. 882.807  Housing assistance payments contract.

    (a) Time of execution. Upon PHA acceptance of the unit(s) and 
certifications pursuant to Sec. 882.507, the Contract will be executed 
by the Owner and the PHA. The effective date must be no earlier than the 
PHA inspection which provides the basis for acceptance as specified in 
Sec. 882.507(e).

[[Page 97]]

    (b) Term of contract. The contract for any unit rehabilitated in 
accordance with this program must be for a term of 10 years. The 
contract must give the HA the option to renew the contract for an 
additional 10 years.
    (c) Changes in contract rents from agreement. The contract rents may 
be higher or lower than those specified in the Agreement, in accordance 
with Sec. 882.805(d).
    (d) Unleased unit(s). At the time of execution of the Contract, the 
Owner will be required to submit a list of dwelling unit(s) leased and 
not leased as of the effective date of the Contract.
    (e) Contract rents at end of rehabilitation loan term. For a 
contract in which the initial contract rent was based upon a loan term 
shorter than 10 years, the contract must provide for reduction of the 
contract rent effective with the rent for the month following the end of 
the term of the rehabilitation loan. The amount of the reduction will be 
the monthly cost of amortization of the rehabilitation loan. This 
reduction should result in a new contract rent equal to the base rent 
plus all subsequent adjustments.

(Approved by the Office of Management and Budget under control number 
2502-0367)

[61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23856, Apr. 30, 1998]



Sec. 882.808  Management.

    (a) Outreach to homeless individuals and appropriate organizations. 
(1) The HA or the owner must undertake outreach efforts to homeless 
individuals so that they may be brought into the program. The outreach 
effort should include notification to emergency shelter providers and 
other organizations that could provide referrals of homeless 
individuals. If the owner conducts the outreach effort, the owner must 
notify the HA so that it may provide referrals of homeless individuals.
    (2) Additional outreach concerns. If the procedures that the HA or 
owner intends to use to publicize the availability of this program are 
unlikely to reach persons of any particular race, color, religion, sex, 
age, national origin, or mental or physical disability who may qualify 
for admission to the program, the HA or owner must establish additional 
procedures that will ensure that such persons are made aware of the 
availability of the program. The HA or owner must also adopt and 
implement procedures to ensure that interested persons can obtain 
information concerning the existence and location of services and 
facilities that are accessible to persons with disabilities.
    (3) First priority for homeless individuals. Homeless individuals 
must have the first priority for occupancy of housing rehabilitated 
under this program.
    (b) Individual participation. (1) Initial determination of 
individual eligibility. Section 882.514(a) applies to this program.
    (2) Owner selection of individuals. The owner must rent all vacant 
units under contract to homeless individuals located through HA or owner 
outreach efforts and determined by the HA to be eligible. The owner is 
responsible for tenant selection and may refuse any individual, provided 
the owner does not unlawfully discriminate. If the owner rejects an 
individual, and the individual believes that the owner's rejection was 
the result of unlawful discrimination, the individual may request the 
assistance of the HA in resolving the issue and may also file a 
complaint with HUD's Office of Fair Housing and Equal Opportunity in 
accordance with 24 CFR 103.25. If the individual requests the assistance 
of the HA, and if the HA cannot resolve the complaint promptly, the HA 
should advise the individual that he or she may file a complaint with 
HUD, and provide the individual with the address of the nearest HUD 
Office of Fair Housing and Equal Opportunity.
    (3) Briefing of individuals. Section 882.514(d) applies to this 
program, except that Sec. 882.514(d)(1)(vi) does not apply.
    (4) Continued participation of individual when contract is 
terminated. Section 882.514(e) applies to this program.
    (5) Individuals determined by the HA to be ineligible. Section 
882.514(f) applies to this program. In addition, individuals are not 
precluded from exercising other rights if they believe they have been 
discriminated against on the basis of age.

[[Page 98]]

    (c) Lease. Sections 882.403(d) and 882.511(a) apply to this program. 
In addition, the lease must limit occupancy to one eligible individual.
    (d) Security and utility deposits. Section 882.414 applies to this 
program.
    (e) Rent adjustments. Section 882.410 applies to this program.
    (f) Payments for vacancies. Section 882.411 applies to this program.
    (g) Subcontracting of owner services. Section 882.412 applies to 
this program.
    (h) Responsibility of the individual. Section 882.413 applies to 
this program.
    (i) Reexamination of individual income. (1) Regular reexaminations. 
The HA must reexamine the income of all individuals at least once every 
12 months. After consultation with the individual and upon verification 
of the information, the HA must make appropriate adjustments in the 
Total Tenant Payment in accordance with 24 CFR part 5, subpart F, and 
verify that only one individual is occupying the unit. The HA must 
adjust Tenant Rent and the Housing Assistance Payment to reflect any 
change in Total Tenant Payment. At each regular reexamination, the HA 
must follow the requirements of 24 CFR part 5, subpart E concerning 
verification of immigration status of any new family member.
    (2) Interim reexaminations. The individual shall supply such 
certification, release, information, or documentation as the PHA or HUD 
determines to be necessary, including submissions required for interim 
reexaminations of individual income and determinations as to whether 
only one individual is occupying the unit. In addition Sec. 882.515(b) 
shall apply.
    (3) Continuation of Housing Assistance Payments. Section 882.515(d) 
applies to this program.
    (j) Overcrowded units. If the HA determines that anyone other than, 
or in addition to, the eligible individual is occupying an SRO unit 
assisted under this program, the HA must take all necessary action, as 
soon as reasonably feasible, to ensure that the unit is occupied by only 
one eligible individual.
    (k) Adjustment of utility allowance. Section 882.510 applies to this 
program.
    (l) Termination of tenancy. Section 882.511 applies to this program. 
For provisions requiring termination of assistance when the HA 
determines that a family member is not a U.S. citizen or does not have 
eligible immigration status, see 24 CFR part 5, subpart E for provisions 
concerning certain assistance for mixed families (families whose members 
include those with eligible immigration status, and those without 
eligible immigration status) in lieu of termination of assistance, or 
for provisions concerning deferral of termination of assistance.
    (m) Reduction of number of units covered by contract. Section 
882.512 applies to this program.
    (n) Maintenance, operation, and inspections. Section 882.516 applies 
to this program.
    (o) HUD review of contract compliance. Section 882.517 applies to 
this program.
    (p) Records and reports. Each recipient of assistance under this 
subpart must keep any records and make any reports that HUD may require 
within the timeframe required.
    (q) Participation of homeless individuals. (1) Each approved 
applicant receiving assistance under this program, except HAs, must 
provide for the participation of not less than one homeless individual 
or formerly homeless individual on the board of directors or other 
equivalent policymaking entity of such applicant, to the extent that the 
entity considers and makes policies and decisions regarding the 
rehabilitation of any housing with assistance under this subpart. This 
requirement is waived if the applicant is unable to meet this 
requirement and presents a plan that HUD approves to consult with 
homeless or formerly homeless individuals in considering and making such 
policies and decisions.
    (2) To the maximum extent practicable, each approved applicant must 
involve homeless individuals and families, through employment, volunteer 
services, or otherwise, in rehabilitating and operating facilities 
assisted under this subpart, and in providing services for occupants of 
such facilities.

(Approved by the Office of Management and Budget under control number 
2506-0131)

[61 FR 48057, Sept. 11, 1996, as amended at 63 FR 23857, Apr. 30, 1998]

[[Page 99]]



Sec. 882.809  Waivers.

    Section 5.405(b) of this title does not apply to this program.



Sec. 882.810  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. (1) Consistent with the other goals and 
objectives of this part, owners must assure that they have taken all 
reasonable steps to minimize the displacement of persons (households, 
businesses, nonprofit organizations, and farms) as a result of a project 
assisted under this part. To the extent feasible, residential tenants 
must be provided a reasonable opportunity to lease and occupy a 
suitable, decent, safe, sanitary, and affordable dwelling unit in the 
project upon its completion.
    (2) Whenever a building/complex is rehabilitated, and some but not 
all of the rehabilitated units will be assisted upon completion of the 
rehabilitation, the relocation requirements described in this section 
apply to the occupants of each rehabilitated unit, whether or not 
Section 8 assistance will be provided for the unit.
    (b) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation;
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe, and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the project 
upon completion; and
    (iv) The assistance required under paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A ``displaced 
person'' (defined in paragraph (g) of this section) must be provided 
relocation assistance at the levels described in, and in accordance with 
the requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4601-4655) 
and implementing regulations in 49 CFR part 24. A displaced person must 
be advised of his or her rights under the Fair Housing Act (42 U.S.C. 
3601-19) and, if the comparable replacement dwelling used to establish 
the amount of the replacement housing payment to be provided to a 
minority is located in an area of minority concentration, such person 
also must be given, if possible, referrals to comparable and suitable, 
decent, safe, and sanitary replacement dwellings not located in such 
areas.
    (d) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (e) Appeals. A person who disagrees with the HA's determination 
concerning whether the person qualifies as a displaced person, or the 
amount of relocation assistance for which the person is eligible, may 
file a written appeal of that determination with the HA. A person who is 
dissatisfied with the HA's determination on his or her appeal may submit 
a written request for review of that determination to the HUD field 
office.
    (f) Responsibility of HA. (1) The HA must certify (i.e., provide 
assurance of compliance as required by 49 CFR part 24) that it will 
comply with the URA, the regulations in 49 CFR part 24, and the 
requirements of this section, and must ensure such compliance 
notwithstanding any third party's contractual obligation to the HA to 
comply with these provisions.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. Such costs may be paid for with local public funds or funds 
available from other sources. The cost of HA advisory services for 
temporary relocation of tenants to be assisted under the program also 
may be paid from preliminary administrative funds.

[[Page 100]]

    (3) The HA must maintain records in sufficient detail to demonstrate 
compliance with the provisions of this section. The HA must maintain 
data on the racial, ethnic, gender, and disability status of displaced 
persons.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means a person (household, business, 
nonprofit organization, or farm) that moves from real property, or moves 
personal property from real property, permanently, as a direct result of 
acquisition, rehabilitation, or demolition for a project assisted under 
this part. The term displaced person includes, but may not be limited 
to:
    (i) A person who moves permanently from the real property after 
receiving notice requiring such move, if the move occurs on or after the 
date the owner submits to the HA the owner proposal that is later 
approved;
    (ii) A person, including a person who moves from the property before 
the date the owner submits the proposal to the HA, if the HA or HUD 
determines that the displacement resulted directly from acquisition, 
rehabilitation, or demolition for the assisted project; or
    (iii) A tenant-occupant of a dwelling unit who moves from the 
building/complex permanently after the execution of the Agreement 
between the owner and the HA (or, for projects assisted under subpart H 
of this part, after the ``initiation of negotiations'' (see paragraph 
(h) of this section)), if the move occurs before the tenant is provided 
a written notice offering him or her the opportunity to lease and occupy 
a suitable, decent, safe, and sanitary dwelling in the same building/
complex, under reasonable terms and conditions, upon its completion. 
Such reasonable terms and conditions must include a monthly rent and 
estimated average monthly utility costs that do not exceed the greater 
of:
    (A) The tenant's monthly rent before the execution of the agreement 
and estimated average monthly utility costs; or
    (B) Thirty percent of gross household income.
    (C) For projects assisted under subpart H of this part, the amount 
cannot exceed the greater of the tenant's monthly rent before the 
``initiation of negotiations'' and estimated average monthly utility 
costs; or (if the tenant is low-income) the total tenant payment, as 
determined under 24 CFR 5.613, or (if the tenant is not low-income) 30 
percent of gross household income; or
    (iv) A tenant-occupant of a dwelling, who is required to relocate 
temporarily, but does not return to the building/complex, if either:
    (A) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation; or
    (B) Other conditions of the temporary relocation are not reasonable; 
or
    (v) A tenant-occupant of a dwelling who moves from the building/
complex permanently after he or she has been required to move to another 
dwelling unit in the building/complex, if either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) Other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a displaced person (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
of applicable Federal, State, or local law, or other good cause, and the 
HA determines that the eviction was not undertaken for the purpose of 
evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the submission of the 
preliminary proposal (or application, if there is no preliminary 
proposal), and before signing a lease and commencing occupancy, received 
written notice of the project and its possible impact on the person 
(e.g., the person may be displaced, temporarily relocated, or suffer a 
rent increase) and the fact that the person would not qualify as a 
displaced person (or for any assistance provided under this section) as 
a result of the project;

[[Page 101]]

    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The HA may request, at any time, HUD's determination of whether 
a displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a residential tenant displaced as a direct result of 
private-owner rehabilitation or demolition of the real property, the 
term initiation of negotiations means the execution of the Agreement 
between the owner and the HA.

(Approved by Office of Management and Budget under OMB control number 
2506-0121).

[61 FR 48056, Sept. 11, 1996. Redesignated and amended at 63 FR 23857, 
Apr. 30, 1998]



PART 883--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--STATE HOUSING AGENCIES--Table of Contents




                      Subpart A--Summary and Guide

Sec.
883.101  General.
883.105  Applicability of part 883 in effect as of February 29, 1980.
883.106  Applicability and relationships between HUD and State agencies.

                          Subpart B [Reserved]

              Subpart C--Definitions and Other Requirements

883.301  Applicability.
883.302  Definitions.
883.306  Limitation on distributions.
883.307  Financing.
883.308  Adjustments to reflect changes in terms of financing.
883.310  Property standards.
883.313  Audit.

                         Subparts D-E [Reserved]

             Subpart F--Housing Assistance Payments Contract

883.601  Applicability.
883.602  The contract.
883.603  Term of contract.
883.604  Maximum annual commitment and project account.
883.605  Leasing to eligible families.
883.606  Administration fee.
883.607  Default by owner and/or agency.
883.608  Notice upon contract expiration.

                          Subpart G--Management

883.701  Cross-reference.

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619.

    Source: 45 FR 6889, Jan. 30, 1980, unless otherwise noted.



                      Subpart A--Summary and Guide



Sec. 883.101  General.

    (a) The purpose of the Section 8 program is to provide decent, safe 
and sanitary housing for low-income families through the use of a system 
of housing assistance payments. These needs may be met by statewide or 
special purpose housing agencies established by the various States.
    (b) The regulations in this part 883 contain the policies and 
procedures applicable to the Section 8 program for these State agencies.

[61 FR 13592, Mar. 27, 1996]



Sec. 883.105  Applicability of part 883 in effect as of February 29, 1980.

    (a) Part 883, in effect as of February 29, 1980, applies to projects 
for which the initial application was submitted on or after the February 
29, 1980, effective date. (See 24 CFR part 883, revised as of April 1, 
1980.) Projects for which applications or proposals were submitted 
before the February 29, 1980, effective date of part 883 have been 
processed under the part 883 regulations and procedures in effect at the 
date of submission. If, however, the agency notified HUD within 60 
calendar days of the February 29, 1980, effective date of the part 883 
regulations that they chose to have the provisions of part 883, in 
effect as of February 29, 1980, apply to a specific case, it must have 
promptly modified the application(s) and proposal(s) to comply.
    (b) Subpart F of this part, dealing with the HAP contract and 
subpart G of this part, dealing with management, apply to all projects 
for which an Agreement was not executed before the

[[Page 102]]

February 29, 1980, effective date of part 883. In cases where an 
Agreement has been executed:
    (1) The Agency, owner and HUD may agree to make the revised subpart 
F of this part applicable and execute appropriate amendments to the 
Agreement or Contract;
    (2) The Agency, Owner and HUD may agree to make the revised subpart 
G of this part applicable (with or without the limitation on 
distributions) and execute appropriate amendments to the Agreement or 
Contract.
    (c) Section 883.708, Termination of Tenancy and Modifications of 
Leases, applies to new families who begin occupancy or execute a lease 
on or after 30 days following the February 29, 1980, effective date of 
part 883. This section also applies to families not covered by the 
preceding sentence, including families currently under lease, who have a 
lease in which a renewal becomes effective on or after the 60th day 
following the February 29, 1980 effective date of part 883. A lease is 
considered renewed when both the landlord and the family fail to 
terminate a tenancy under a lease permitting either to terminate.
    (d) Notwithstanding the provisions of paragraph (b) of this section, 
the provisions of 24 CFR part 5 (concerning preferences for selection of 
applicants) apply to all projects, regardless of when am Agreement was 
executed.

[61 FR 13592, Mar. 27, 1996]



Sec. 883.106  Applicability and relationships between HUD and State agencies.

    (a) Applicability. This subpart A applies to contract authority set 
aside for a State Agency.
    (b) General responsibilities and relationships. Subject to audit and 
review by HUD to assure compliance with Federal requirements and 
objectives, Housing Finance Agencies (HFAs) shall assume responsibility 
for project development and for supervision of the development, 
management and maintenance functions of owners.
    (c) Certifications and HUD monitoring. (1) Generally, when reviewing 
any of the certifications of an HFA required by this part, HUD shall 
accept the certification as correct. If HUD has substantial reason to 
question the correctness of any element in a certification, HUD shall 
promptly bring the matter to the attention of the HFA and ask it to 
provide documentation supporting the certifications. When the HFA 
provides such evidence, HUD will act in accordance with the HFA's 
judgment or evaluation unless HUD determines that the certification is 
clearly not supported by the documentation.
    (2) HUD will periodically monitor the activities of HFA's 
participating under this part only with respect to Section 8 or other 
HUD programs. This monitoring is intended primarily to ensure that 
certifications submitted and projects operated under this part reflect 
appropriate compliance with Federal law and requirements.

[61 FR 13592, Mar. 27, 1996]



                          Subpart B--[Reserved]



              Subpart C--Definitions and Other Requirements



Sec. 883.301  Applicability.

    The provisions of this subpart are applicable to newly constructed 
and substantially rehabilitated housing allocated contract authority 
under subpart B of this part and processed and constructed under the 
Fast Tract Procedures of subpart D. The definitions contained in 
Sec. 883.302 and the provisions of Sec. 883.307(b) regarding review and 
approval of financing documents, however, apply to all of this part.



Sec. 883.302  Definitions.

    The terms Fair Market Rent (FMR), HUD, and Public Housing Agency 
(PHA) are defined in 24 CFR part 5.
    ACC (Annual Contributions Contract). The contract between the State 
Agency and HUD under which HUD commits to provide the Agency with the 
funds needed to make housing assistance payments to the Owner and to pay 
the Agency for administrative fees in cases where it is eligible for 
them.
    Agency. See State Agency.
    Agreement--(Agreement to enter into Housing Assistance Payments 
Contract). The agreement between the owner and the State Agency on new 
construction and substantial rehabilitation projects which provides 
that, upon satisfactory

[[Page 103]]

completion of the project in accordance with the HUD-approved proposal 
or final proposal, the Agency will enter into a Housing Assistance 
Payments Contract with the owner.
    Annual income. As defined in part 813 of this chapter.
    Assisted unit. A dwelling unit eligible for assistance under a 
Contract.
    Application. A request, submitted by a State Agency, to assign a 
portion of its set-aside to a specific jurisdiction or project.
    Contract--(Housing Assistance Payments Contract). The Contract 
entered into by the owner and the State Agency upon satisfactory 
completion of a new construction or substantial rehabilitation project 
which sets forth the rights and duties of the parties with respect to 
the project and the payments under the Contract.
    Contract Rent. The total amount of rent specified in the Contract as 
payable by the Agency and the tenant to the owner for an assisted unit. 
In the case of the rental of only a manufactured home space, ``contract 
rent'' is the total rent specified in the Contract as payable by the 
Agency and the tenant to the owner for rental of the space, including 
fees or charges for management and maintenance services with respect to 
the space, but excluding utility charges for the manufactured home.
    Decent, safe, and sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition requirements in 24 CFR part 5, subpart 
G.
    Existing Housing. Housing assisted under a contract entered into 
pursuant to 24 CFR part 882. (See subpart E of this part.)
    Family (Eligible Family). As defined in part 812 of this chapter.
    Fast Track procedures. The procedures contained in subpart D for 
processing and construction of new construction and substantial 
rehabilitation projects. In order to be eligible for these procedures, a 
State Agency must provide permanent financing without Federal mortgage 
insurance or a Federal guarantee except coinsurance under Section 244 of 
the National Housing Act.
    Financing Cost Contingency (FCC). The maximum amount of contract 
authority which may be used to amend the Annual Contributions Contract 
(ACC) and Housing Assistance Payments Contract (HAP Contract) to provide 
increased contract rents to cover higher than anticipated debt service 
on the loan for a new construction or substantial rehabilitation 
project.
    Gross Rent. As defined in part 813 of this chapter.
    Household type. The three household types are (1) elderly and 
handicapped, (2) family, and (3) large family.
    Housing Assistance Payment. The payment made to the Owner of an 
assisted unit by the State Agency as provided in the Contract. Where the 
unit is leased to an eligible Family, the payment is the difference 
between the Contract Rent and the Tenant Rent. An additional payment is 
made to the Family when the Utility Allowance is greater than Total 
Tenant Payment. In the case of a Family renting only a manufactured home 
space as provided in Sec. 883.303(i), the Housing Assistance Payment is 
the difference between Gross Rent and the Total Tenant Payment, but such 
payment may not exceed the Contract Rent for the space, and no 
additional payment is made to the Family. A Housing Assistance Payment, 
known as a ``vacancy payment'', may be made to the Owner when an 
assisted unit is vacant, as provided in Sec. 883.712.
    Housing Assistance Plan (HAP). A housing plan submitted by a unit of 
general local or State government and approved by HUD as being 
acceptable under the standards of 24 CFR part 570.
    Housing type. The three housing types are new construction, 
substantial rehabilitation, and existing housing/moderate 
rehabilitation.
    HFA (Housing Finance Agency). A State Agency which provides 
permanent financing for newly constructed or substantially rehabilitated 
housing processed under subpart D and financed without Federal mortgage 
insurance or a Federal guarantee except coinsurance under Section 244 of 
the National Housing Act.
    Independent Public Accountant. Certified Public Accountant or a 
licensed or registered public accountant, none of which has a business 
relationship with the owner or State Agency except for the performance 
of audit, systems

[[Page 104]]

work and tax preparation. If not certified, the Independent Public 
Accountant must have been licensed or registered by a regulatory 
authority of a State or other political subdivision of the United States 
on or before December 31, 1970. In States that do not regulate the use 
of the title ``public accountant,'' only Certified Public Accountants 
may be used.
    Low-Income Family. As defined in part 813 of this chapter.
    Moderate rehabilitation. The improvement of dwelling units in 
accordance with HUD requirements, under 24 CFR part 882.
    New construction. Housing for which construction starts after 
execution of an Agreement, or housing which is already under 
construction when the Agreement is executed provided that:
    (a) At the date an application is submitted to HUD, a substantial 
amount of construction (generally at least 25 percent) remains to be 
completed;
    (b) At the date of application to HUD, the project cannot be 
completed and occupied by eligible families without assistance under 
this part; and
    (c) At the time construction was initiated, all of the parties 
reasonably expected that the project would be completed without 
assistance under this part.
    Override. The difference between an HFA's cost of borrowing on 
obligations issued to finance a new construction or substantial 
rehabilitation project and the lending rate at which they provide 
permanent financing for the project.
    Owner. Any private person or entity (including a cooperative) or a 
public entity, having the legal right to lease or sublease dwelling 
units assisted under this part. The term Owner also includes the person 
or entity submitting a proposal to a State Agency under this part.
    Partially-assisted Project. A project for non-elderly families under 
this part which includes more than 50 units, of which the number of 
assisted units does not exceed the greater of (a) 20 percent of the 
units in the project, rounded to the next highest whole number of units, 
or (b) the minimum percentage required by State law as a condition of 
HFA permanent financing, if the Assistant Secretary approves such 
minimum percentage for purposes of applicability of this definition.
    Permanent financing. An Agency is determined to provide permanent 
financing if HUD determines that (a) the Agency permanently finances a 
project from its own funds, including the sale of its obligations; or 
(b) permanent financing for projects developed or administered by the 
Agency is provided by the State government or by an agency or 
instrumentality thereof other than the Agency; or (c) the permanent 
financing (by a public or private entity other than the Agency) is 
backed by the commitment of the Agency to assume the risks of loss on 
default or foreclosure of the loan.
    Project Account. A specifically identified and segregated account 
for each project which is established in accordance with Sec. 883.604(b) 
out of the amounts by which the maximum Annual Contributions Contract 
commitment exceeds the amount actually paid out under the ACC each year.
    Proposal. A proposal for a project that is submitted by an HFA to 
HUD for Section 8 assistance under this part.
    Rent. In the case of an assisted unit in a cooperative project, rent 
means the carrying charges payable to the cooperative with respect to 
occupancy of the unit.
    Replacement cost--(a) New construction. The estimated construction 
cost of the project when the proposed improvements are completed. The 
replacement cost may include the land, the physical improvements, 
utilities within the boundaries of the land, architect's fees, 
miscellaneous charges incident to construction as approved by the 
Assistant Secretary.
    (b) Substantial rehabilitation. The sum of the ``as is'' value 
before rehabilitation of the property as determined by the Agency and 
the estimated cost of rehabilitation, including carrying and finance 
charges.
    Single Room Occupancy (SRO) Housing. A unit for occupancy by a 
single eligible individual capable of independent living, which does not 
contain food preparation and/or sanitary facilities and is located 
within a multifamily structure consisting of more than 12 units.

[[Page 105]]

    Secretary. The Secretary of Housing and Urban Development (or 
designee).
    Small Project. A project for non-elderly families under this part 
which includes a total of 50 or fewer units (assisted and unassisted).
    State Agency (Agency). An agency which has been notified by HUD in 
accordance with Sec. 883.203 that it is authorized to apply for a set-
aside and/or to use the Fast Track Procedures of this part.
    Substantial rehabilitation. (a) The improvement of a property to 
decent, safe and sanitary condition in accordance with the standards of 
this part from a condition below these standards. Substantial 
Rehabilitation may vary in degree from gutting and extensive 
reconstruction to the cure of substantial accumulation of deferred 
maintenance. Cosmetic improvements alone do not qualify as Substantial 
Rehabilitation under this definition.
    (b) Substantial Rehabilitation may also include renovation, 
alteration or remodeling for the conversion or adaptation of 
structurally sound property to the design and condition required for use 
under this part, or the repair or replacement of major building systems 
or components in danger of failure.
    (c) Housing on which rehabilitation work has already started when 
the Agreement is executed is eligible for assistance as a Substantial 
Rehabilitation project under this part provided:
    (1) At the date of application to HUD, a substantial amount of 
construction (generally at least 25 percent) remains to be completed;
    (2) At the date of application to HUD, the project cannot be 
completed and occupied by eligible families without assistance under 
this part; and
    (3) At the time construction was initiated, all of the parties 
reasonably expected that the project would be completed without 
assistance under this part.
    Tenant Rent. The monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total Tenant Payment. The monthly amount defined in, and determined 
in accordance with part 813 of this chapter.
    Utility Allowance. As defined in part 813 of this chapter, made or 
approved by HUD.
    Utility reimbursement. As defined in part 813 of this chapter.
    Vacancy payments. The housing assistance payment made to the owner 
by the State Agency for a vacant, assisted unit if certain conditions 
are fulfilled as provided in the Contract. The amount of vacancy payment 
varies with the length of the vacancy period and is less after the first 
60 days of any vacancy.
    Very Low-Income Family. As defined in part 813 of this chapter.

[45 FR 6889, Jan. 30, 1980, as amended at 45 FR 56326, Aug. 22, 1980; 48 
FR 12708, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 49 FR 19946, May 
10, 1984; 61 FR 5213, Feb. 9, 1996; 61 FR 13592, Mar. 27, 1996; 63 FR 
46579, Sept. 1, 1998]



Sec. 883.306  Limitation on distributions.

    (a) Non-profit owners are not entitled to distributions of project 
funds.
    (b) For the life of the Contract, project funds may only be 
distributed to profit-motivated owners at the end of each fiscal year of 
project operation following the effective date of the Contract and after 
all project expenses have been paid, or funds have been set aside for 
payment, and all reserve requirements have been met. The first year's 
distribution may not be made until the HFA certification of project 
costs, (See Sec. 883.411), where applicable, has been submitted to HUD. 
The HFA must certify that distributions will not exceed the following 
maximum returns:
    (1) For projects for elderly families, the first year's distribution 
will be limited to 6 percent on equity. The Assistant Secretary may 
provide for increases in subsequent years' distributions on an annual or 
other basis so that the permitted return reflects a 6 percent return on 
the value, in subsequent years, as determined in accordance with HUD 
guidelines, of the approved initial equity. Any such adjustments will be 
made in accordance with a Notice in the Federal Register. The HFA may 
approve a lesser increase or no increase in subsequent years' 
distributions.
    (2) For projects for non-elderly families the first year's 
distribution will be

[[Page 106]]

limited to 10 percent on equity. The Assistant Secretary may provide for 
increases in subsequent years' distributions on an annual or other basis 
so that the permitted return reflects a 10 percent return on the value, 
in subsequent years, as determined in accordance with HUD guidelines, of 
the approved initial equity. Any such adjustments will be made in 
accordance with a Notice in the Federal Register. The HFA may approve a 
lesser increase or no increase in subsequent years' distributions.
    (c) For the purpose of determining the allowable distribution, an 
owner's equity investment in a project is deemed to be 10 percent of the 
replacement cost of the part of the project attributable to dwelling use 
accepted by the HFA at cost certification (See Sec. 883.411), or as 
specified in the Proposal where cost certification is not required, 
unless the owner justifies a higher equity contribution through cost 
certification documentation accepted by the HFA.
    (d) Any short-fall in return may be made up from surplus project 
funds in future years.
    (e) If the HFA determines at any time that surplus project funds are 
more than the amount needed for project operations, reserve requirements 
and permitted distributions, the HFA may require the excess to be placed 
in a separate account to be used to reduce housing assistance payments 
or for other project purposes. Upon termination of the Contract, any 
excess project funds must be remitted to HUD.
    (f) Owners of small projects or partially assisted projects are 
exempt from the limitation on distributions contained in paragraphs (b) 
through (d) of this section.



Sec. 883.307  Financing.

    (a) Types of financing. A State Agency that used the Fast Track 
Procedures formerly in this part must provide permanent financing for 
any new construction or substantial rehabilitation project without 
Federal mortgage insurance, except coinsurance under section 244 under 
the National Housing Act (12 U.S.C. 1701 et seq). Obligations issued by 
the HFA for this purpose may be taxable under section 802 of the Housing 
and Community Development Act of 1974 (42 U.S.C. 1440) or tax-exempt 
under section 103 of the Internal Revenue Code (26 U.S.C. 103), 24 CFR 
part 811 or other Federal Law.
    (b) HUD approval. (1) A State Agency, prior to receiving HUD 
approval of its first New Construction or Substantial Rehabilitation 
Proposal using contract authority under this part, must submit copies of 
the documents relating to the method of financing Section 8 projects to 
HUD for review. These documents shall include bond resolutions or 
indentures, loan agreements, regulatory agreements, notes, mortgages or 
deeds of trust and other related documents, if any, but does not need to 
include the ``official statement'' or copies of the prospectus for 
individual bond issues. HUD review will be limited to making certain 
that the documents are not inconsistent with or in violation of these 
regulations and the administrative procedures used to implement them. 
After review, HUD must notify the Agency that the documents are 
acceptable or, if unacceptable, will request clarification or changes. 
This review and approval will meet the requirements of 24 CFR 
811.107(a).
    (2) When an Agency which has received HUD approval of its financing 
documents proposes substantive changes in them which affect the Section 
8 program, the revised documents must be submitted for review. HUD 
review will be limited to the areas indicated in paragraph (b)(1) of 
this section and must be carried out promptly. HUD will notify the 
Agency that the revised documents are acceptable, or, if unacceptable, 
will request clarification or changes.
    (3) The review and approval of financing documents required under 24 
CFR part 811 will constitute HUD approval under this section.
    (4) The Agency must retain in its files, and make available for HUD 
inspection, the documentation relating to its financing of Section 8 
projects, including any relating to the certifications of compliance 
with applicable Department of Treasury or HUD regulations (24 CFR part 
811) regarding tax-exempt financing.

[[Page 107]]

    (c) Pledge of Contracts. The HFA or owner may pledge, or offer as 
security for any loan or obligation, an Agreement, Contract, or ACC 
entered into pursuant this part provided that such security is in 
connection with a project constructed pursuant to this part. Any pledge 
of the Agreement, Contract, or ACC, or payments thereunder will be 
limited to the amounts payable under the Contract or ACC in accordance 
with its terms. If the pledge or other document provides that all 
payments will be paid directly to the HFA, other mortgagee or the 
trustee for bondholders, the HFA, other mortgagee or trustee may make 
all payments or deposits required under the mortgage or trust indenture 
and remit any excess to the owner.
    (d) Foreclosure and other transfers. In the event of assignment, 
sale, or other disposition of the project or the contracts agreed to by 
the HFA and approved by HUD (which approval shall not be unreasonably 
delayed or withheld), foreclosure, or assignment of the mortgage or deed 
in lieu of foreclosure,
    (1) The Agreement, the Contract and the ACC will continue in effect, 
and
    (2) Housing assistance payments will continue in accordance with the 
terms of the Contract, unless approval to amend or terminate the 
Agreement, the Contract or the ACC has been obtained from the Assistant 
Secretary.
    (e) In the case of a newly constructed or substantially 
rehabilitated manufactured home park, the principal amount of any 
mortgage attributable to the rental spaces in the park may not exceed an 
amount per space determined in accordance with Sec. 207.33(b) of this 
title.

[45 FR 6889, Jan. 30, 1980, as amended at 45 FR 56327, Aug. 22, 1980; 48 
FR 12709, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 61 FR 13592, Mar. 
27, 1996]



Sec. 883.308  Adjustments to reflect changes in terms of financing.

    (a) Certifications of projected financing terms. When an HFA, under 
this part, provides permanent financing for a project through the 
issuance of obligations and these are not sold until after the contract 
rents for a project have been set, the HFA must submit, with the 
Proposal, a certification of:
    (1) Its projected rate of borrowing (net interest cost), based on a 
reasonable evaluation of market conditions, on obligations issued to 
provide interim and permanent financing for the project,
    (2) The projected cost of borrowing to the owner on interim 
financing for the project,
    (3) The projected loan amount for the project,
    (4) The projected cost of borrowing and the term of the permanent 
financing to be provided to the owner for the project,
    (5) The projected annual debt service for the permanent financing on 
which the Contract Rents are based, and
    (6) The override, if any.
    (b) Revised certifications. If, at any time prior to the execution 
of the Agreement, the terms and conditions of financing change, other 
than the HFA's projected cost of borrowing, the HFA must submit revised 
certifications based upon the new terms.
    (c) Certifications of actual financing terms. After a project has 
been permanently financed, the HFA must submit a certification which 
specifies the actual financing terms. The items that must be included in 
this certification include:
    (1) The HFA's actual cost of borrowing (net interest cost) on 
obligations from which funds were used to permanently finance the 
project,
    (2) The override, if any, added to the actual cost of borrowing on 
obligations in setting the rate of lending to the owner,
    (3) The annual debt service to the owner for the permanent financing 
on which contract rents are based; and,
    (4) The actual loan amount and the term on which the annual debt 
service is based.
    (d) Reduction of Contract Rents. If the actual debt service to the 
owner under the permanent financing is lower than the anticipated debt 
service on which the Contract Rents were based, the initial Contract 
Rents, or the Contract Rents currently in effect, must be reduced 
commensurately, and the amount of the savings credited to the project 
account.
    (e) Increase of Contract Rents. This paragraph (e) applies only if 
the HFA is

[[Page 108]]

using its set-aside for the project and it is processed under subpart D. 
If the actual debt service to the owner under the permanent financing is 
higher than the anticipated debt service on which the Contract Rents are 
based, the initial Contract Rents or the Contract Rents currently in 
effect may, if sufficient contract and budget authority is available, be 
increased commensurately based on the certification submitted under 
paragraph (c) of this section. The amount of this increase may not 
exceed the amount of the Financing Cost Contingency (FCC) authorized but 
not reserved for the project at the time the proposal is approved. The 
adjustment must not exceed the amount necessary to reflect an increase 
in debt service (based on the difference between the projected and 
actual terms of the permanent financing) resulting from an increase over 
the projected interest rate of not more than:
    (1) One and one-half percent if the projected override was three-
fourths of one percent or less, or
    (2) One percent if such projected override was more than three-
fourths of one percent but not more than one percent, or
    (3) One-half of one percent if such projected override was more than 
one percent.
    (f) Recoupment of savings in financing costs. In the event that 
interim financing is continued after the first year of the term of the 
Contract and the debt service of the interim financing for any period of 
three months after such first year is less than the anticipated debt 
service under the permanent financing on which the Contract Rents were 
based, an appropriate amount reflecting the savings in financing cost 
will be credited by HUD to the Project Account and withheld from housing 
assistance payments payable to the owner. If during the course of the 
same year there is any period of three months in which the debt service 
is greater than the anticipated debt service under the projected 
permanent financing, an adjustment will be made so that only the net 
amount of savings in debt service for the year is credited by HUD to the 
Project Account and withheld from housing assistance payments to the 
owner. No increased payments will be made to the owner on account of any 
net excess for the year of actual interim debt service over the 
anticipated debt service under the permanent financing. Nothing in this 
paragraph will be construed as requiring a permanent reduction in the 
Contract Rents or precluding adjustments of Contract Rents in accordance 
with paragraphs (d) or (e) of this section.
    (g) Compliance with other regulations. The HFA must also submit a 
certification specifying:
    (1) That the terms of financing, the amount of the obligations 
issued with respect to the project and the use of the funds will be in 
compliance with any regulation governing the issuance of the 
obligations, e.g., Department of the Treasury regulations regarding 
arbitrage or HUD regulations regarding Tax Exemption of Obligations of 
Public Housing Agencies (24 CFR part 811), and
    (2) That the override, if any, on the permanent financing for the 
project will not be greater than the projected override nor greater than 
the override allowed for the borrowing as a whole under applicable 
regulations, e.g., the Department of Treasury regulations regarding 
arbitrage. The certifications required under 24 CFR 811.107(a)(2) will 
be sufficient to meet the certification requirements of this paragraph 
(g).



Sec. 883.310  Property standards.

    (a) New Construction. Projects must comply with:
    (1) [Reserved]
    (2) In the case of manufactured homes, the Federal Manufactured Home 
Construction and Safety Standards, pursuant to Title VI of the Housing 
and Community Development Act of 1974, and 24 CFR part 3280;
    (3) In the case of congregate or single room occupant housing, the 
appropriate HUD guidelines and standards,
    (4) HUD requirements pursuant to Section 209 of the Housing and 
Community Development Act of 1974 for projects for the elderly or the 
handicapped;
    (5) HUD requirements pertaining to noise abatement and control; and
    (6) Applicable state and local laws, codes, ordinances, and 
regulations.

[[Page 109]]

    (b) Substantial Rehabilitation. Projects must comply with:
    (1) [Reserved]
    (2) In the case of congregate or single room occupant housing, the 
appropriate HUD guidelines and standards,
    (3) HUD requirements pursuant to Section 209 of the HCD Act for 
projects for the elderly or the handicapped;
    (4) HUD requirements pertaining to noise abatement and control;
    (5) HUD regulations issued pursuant to the Lead Based Paint 
Poisoning Prevention Act, 42 U.S.C. 4801; and
    (6) Applicable State and local laws, codes, ordinances, and 
regulations.
    (c) Smoke detectors. (1) Performance requirement. After October 30, 
1992, each dwelling unit must include at least one battery-operated or 
hard-wired smoke detector, in proper working condition, on each level of 
the unit. If the unit is occupied by hearing-impaired persons, smoke 
detectors must have an alarm system, designed for hearing-impaired 
persons, in each bedroom occupied by a hearing-impaired person.
    (2) Acceptability criteria. The smoke detector must be located, to 
the extent practicable, in a hallway adjacent to a bedroom, unless the 
unit is occupied by a hearing-impaired person, in which case each 
bedroom occupied by a hearing-impaired person must have an alarm system 
connected to the smoke detector installed in the hallway.

[45 FR 6889, Jan. 30, 1980, as amended at 50 FR 9269, Mar. 7, 1985; 57 
FR 33851, July 30, 1992; 63 FR 46579, Sept. 1, 1998]



Sec. 883.313  Audit.

    (a) Where housing assistance under the Section 8 Program is provided 
for projects developed by State agencies, these agencies shall follow 
audit requirements in 24 CFR part 44.
    (b) Where a nonprofit organization is the eligible owner of a 
project receiving financial assistance under this part, the audit 
requirements in 24 CFR part 45 shall apply.

[50 FR 39092, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986, as amended at 
57 FR 33257, July 27, 1992]



                         Subparts D-E [Reserved]



             Subpart F--Housing Assistance Payments Contract



Sec. 883.601  Applicability.

    The provisions of this subpart apply to new construction and 
substantial rehabilitation projects using contract authority allocated 
under subpart B, Allocation and Assignment of Contract Authority, or 
processed and constructed under subpart D, Fast Track Procedures.



Sec. 883.602  The contract.

    (a) Contract. The Housing Assistance Payments Contract sets forth 
rights and duties of the owner and State Agency with respect to the 
project and the Housing Assistance payments.
    (b) Housing Assistance Payments to Owners under the Contract. The 
Housing Assistance Payments made under the Contract are:
    (1) Payments to the owner to assist eligible families leasing 
assisted units, and
    (2) Payments to the owner for vacant assisted units (``vacancy 
payments'') if the conditions specified in Sec. 880.611 of this chapter 
are satisfied.

The housing assistance payments are made monthly by the State Agency 
upon proper requisition by the owner, except payments for vacancies of 
more than 60 days, which are made semi-annually by the Agency upon 
proper requisition by the owner.
    (c) Amount of Housing Assistance Payments to the Owner. (1) The 
amount of the housing assistance payments made to the owner of a unit 
being leased by an eligible family is the difference between the 
contract rent for the unit and the tenant rent payable by the family.
    (2) A housing assistance payment will be made to the owner for a 
vacant assisted unit in an amount equal to 80 percent of the contract 
rent for the first 60 days of vacancy, subject to the conditions in 
Sec. 880.611 of this chapter. If the owner collects any tenant rent or 
other amount for this period which, when added to this vacancy payment, 
exceeds the contract rent, the excess

[[Page 110]]

must be repaid as the Agency directs in accordance with HUD guidelines.
    (3) For a vacancy that exceeds 60 days, a housing assistance payment 
for the vacant unit will be made, subject to the conditions in 
Sec. 880.611 of this chapter, in an amount equal to the principal and 
interest payments required to amortize that portion of the debt 
attributable to the vacant unit for up to 12 additional months.
    (d) Payment of utility reimbursement. Where applicable, the Utility 
Reimbursement will be paid to the Family as an additional Housing 
Assistance Payment. The Contract will provide that the Owner will make 
this payment on behalf of the Agency. Funds will be paid to the Owner in 
trust solely for the purpose of making this additional payment. If the 
Family and the utility company consent, the Owner may pay the Utility 
Reimbursement jointly to the Family and the utility company or directly 
to the utility company.

[45 FR 6889, Jan. 30, 1980, as amended at 49 FR 19946, May 10, 1984; 61 
FR 13593, Mar. 27, 1996]



Sec. 883.603  Term of contract.

    (a) New Construction. The term of the Contract will be governed by 
the following provisions:
    (1) For assisted units in a project financed with the aid of a loan 
insured by the Federal government (including coinsurance under Section 
244 of the National Housing Act) or a loan made, guaranteed or intended 
for purchase by the Federal government and for assisted units in newly 
constructed manufactured home parks, the term of the Contract will be 20 
years.
    (2) For assisted units in a project owned by or financed by a loan 
or loan guarantee from a State or local agency, where the assisted units 
are intended for occupancy by non-elderly families and where it is 
located in an area designated by the Assistant Secretary as one 
requiring special financial assistance, the Contract will be for an 
initial term of 20 years for any dwelling unit, with provision for 
renewal for additional terms of not more than 5 years each. The total 
term of initial and renewal terms will not exceed the lesser of (i) 40 
years for any dwelling unit, or (ii) the term of the permanent financing 
(but not less than 20 years).
    (3) For assisted units in all other projects, the Contract will be 
for an initial term of 20 years for any dwelling unit, with provision 
for renewal for additional terms of not more than 5 years each. The 
total term of initial and renewal terms will not exceed the lesser of 
(i) 30 years for any dwelling unit, or (ii) the term of the permanent 
financing (but not less than 20 years).
    (b) Substantial Rehabilitation. The Contract will be for a term 
which is consistent with paragraph (b)(1) and with paragraph (b) (2), 
(3), or (4) of this section.
    (1) The Contract term will cover the longest term, but not less than 
20 years, of a single credit instrument covering:
    (i) The cost of rehabilitation or
    (ii) The existing indebtedness, or
    (iii) The cost of rehabilitation and the refinancing of the existing 
indebtedness, or
    (iv) The cost of rehabilitation and the acquisition of the property; 
and
    (2) For assisted units in a project financed with the aid of a loan 
(including coinsurance under Section 244 of the National Housing Act), 
or a loan made, guaranteed or intended for purchase by the Federal 
Government, and for assisted units in a substantially rehabilitated 
manufactured home park, the term of the Contract will not exceed 20 
years; or
    (3) For assisted units in a project owned or financed by a loan or 
loan guarantee from a State or local agency where the assisted units are 
intended for occupancy by non-elderly families and where it is located 
in an area designated by the Assistant Secretary as one requiring 
special financial assistance, the Contract will be for an initial term 
of 20 years for any dwelling unit. There will be a provision for renewal 
for additional terms of not more than 5 years each. The total of initial 
and renewal terms will not exceed the lesser of (i) 40 years for any 
dwelling unit, or (ii) the term of the permanent financing (but not less 
than 20 years); or
    (4) For assisted units in projects financed other than as described 
in paragraph (b) (2) or (3) of this section, the Contract will be for an 
initial term of

[[Page 111]]

20 years for any dwelling unit. There will be a provision for renewal 
for additional terms of not more than 5 years each. The total of initial 
and renewal terms will not exceed the lesser of (i) 30 years for any 
dwelling unit, or (ii) the term of the permanent financing (but not less 
than 20 years).
    (c) Staged Projects. If a project is completed in stages, the term 
of the Contract must relate separately to the units in each stage unless 
the Agency and the owner agree that only the units in the first stage 
will be assisted for the maximum term of the Contract. The total 
Contract term, for the units in all stages, beginning with the effective 
date of the Contract for the first stage, may not exceed the overall 
maximum term allowable for any one unit under this section, plus two 
years.

[45 FR 56327, Aug. 22, 1980, as amended at 48 FR 12710, Mar. 28, 1983; 
49 FR 17449, Apr. 24, 1984]



Sec. 883.604  Maximum annual commitment and project account.

    (a) Maximum annual commitment. The maximum annual contribution that 
may be contracted for in the ACC is the total of the contract rents and 
utility allowances for all assisted units in the project, plus the HUD-
approved fees, if any, for State Agency administration of the Contract. 
(See Sec. 883.606)
    (b) Project Account. (1) A project account will be established and 
maintained by HUD as a specifically identified and segregated account 
for each project. The account will be established out of the amounts by 
which the maximum annual commitment exceeds the amount actually paid out 
under the ACC each year. Payments will be made from this account for 
housing assistance payments (and fees for Agency admininstration, if 
appropriate) when needed to cover increases in contract rents or 
decreases in tenant rents and for other costs specifically approved by 
the Secretary.
    (2) Whenever a HUD-approved estimate of required payments under the 
ACC for a fiscal year exceeds the maximum annual commitment and would 
cause the amount in the project account to be less than 40 percent of 
the maximum, HUD will, within a reasonable period of time, take such 
additional steps authorized by Section 8(c)(6) of the 1937 Act, as may 
be necessary, to assure that payments under the ACC will be adequate to 
cover increases in contract rents and decreases in tenant rents.

[45 FR 6889, Jan. 30, 1980, as amended at 61 FR 13593, Mar. 27, 1996]



Sec. 883.605  Leasing to eligible families.

    The provisions of Sec. 880.504 of this chapter apply, subject to the 
requirements of Sec. 883.105.

[61 FR 13593, Mar. 27, 1996]



Sec. 883.606  Administration fee.

    (a) The State Agency is responsible for administration of the 
Contract subject to periodic review and audit by HUD.
    (b) The Agency is entitled to a reasonable fee, determined by HUD, 
for administering a Contract on newly constructed or substantially 
rehabilitated units provided there is no override on the permanent loan 
granted by the Agency to the owner for a project containing assisted 
units.



Sec. 883.607  Default by owner and/or agency.

    (a) Rights of Owner if Agency defaults under Agreement or Contract. 
The ACC, the Agreement and the Contract will provide that, in the event 
of failure of the Agency to comply with the Agreement or Contract with 
the owner, the owner will have the right, if he/she is not in default, 
to demand that HUD investigate. HUD will first give the Agency a 
reasonable opportunity to take corrective action. If HUD determines that 
a substantial default exists, HUD will assume the Agency's rights and 
obligations under the Agreement or Contract and meet the obligations of 
the Agency under the Agreement or Contract including the obligation to 
enter into the Contract.
    (b) Rights of HUD if Agency defaults under ACC. The ACC will provide 
that, if the Agency fails to comply with any of its obligations, HUD may 
determine that there is a substantial default and require the Agency to 
assign to HUD all of its rights and interests under the Contract; 
however, HUD will continue

[[Page 112]]

to pay annual contributions in accordance with the terms of the ACC and 
the Contract. Before determining that an Agency is in substantial 
default, HUD will give the Agency a reasonable opportunity to take 
corrective action.
    (c) Rights of Agency and HUD if Owner defaults under Contract. (1) 
The Contract will provide that if the Agency determines that the owner 
is in default under the Contract, the Agency will notify the owner, and 
lender, if applicable, with a copy to HUD,
    (i) Of the actions required to be taken to cure the default,
    (ii) Of the remedies to be applied by the Agency including specific 
performance under the Contract, abatement of housing assistance payments 
and recovery of overpayments, where appropriate; and
    (iii) That, if he/she fails to cure the default, the Agency has the 
right to terminate the Contract or to take other corrective action, in 
its discretion.
    (2) If the Agency provided the permanent financing, the Contract 
will also provide that HUD has an independent right to determine whether 
the owner is in default and to take corrective action and apply 
appropriate remedies, except that HUD will not have the right to 
terminate the Contract without proceeding in accordance with paragraph 
(c) of this section.



Sec. 883.608  Notice upon contract expiration.

    The provisions of Sec. 880.508 of this chapter apply, subject to the 
requirements of Sec. 883.105.

[61 FR 13593, Mar. 27, 1996]



                          Subpart G--Management



Sec. 883.701  Cross-reference.

    All of the provisions of part 880, subpart F, of this chapter apply 
to projects assisted under this part, subject to the requirements of 
Sec. 883.105. For purposes of this subpart G, all references in part 
880, subpart F, of this chapter to ``contract administrator'' shall be 
construed to refer to ``Agency''.

[61 FR 13593, Mar. 27, 1996]



PART 884--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING PROJECTS--Table of Contents




           Subpart A--Applicability, Scope and Basic Policies

Sec.
884.101  Applicability and scope.
884.102  Definitions.
884.104  Maximum total annual contract commitment and project account 
          (private-owner or PHA-owner projects).
884.105  Maximum total ACC commitment and project account (private-
          owner/PHA projects).
884.106  Housing assistance payments to owners.
884.108  Term of housing assistance payments contract.
884.108a  Notice upon contract expiration.
884.109  Rent adjustments.
884.110  Types of housing and property standards.
884.114  Financing.
884.115  Security and utility deposits.
884.116  Establishment of income limit schedules; 30 percent occupancy 
          by very-low income families.
884.117  Disclosure and verification of Social Security and Employer 
          Identification Numbers by owners.
884.118  Responsibilities of the owner.
884.119  Responsibility for contract administration and defaults 
          (private-owner and PHA-owner projects).
884.120  Responsibility for contract administration and defaults 
          (private-owner/PHA projects).
884.121  Rights of owner if PHA defaults under agreement (private-owner/
          PHA projects).
884.122  Separate project requirement.
884.123  Conversions.
884.124  Audit.

              Subpart B--Project Development and Operation

884.212  Project completion.
884.213  Execution of housing assistance payments contract.
884.214  Marketing.
884.215  Lease requirements.
884.216  Termination of tenancy.
884.217  Maintenance, operation and inspections.
884.218  Reexamination of family income and composition.
884.219  Overcrowded and underoccupied units.
884.220  Adjustment of utility allowances.

[[Page 113]]

884.221  Continued family participation.
884.222  Inapplicability of low-rent public housing model lease and 
          grievance procedures.
884.223  Leasing to eligible families.
884.223a  Preference for occupancy by elderly families.
884.224  HUD review of contract compliance.
884.225  PHA reporting requirements. [Reserved]

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619.

    Source: 41 FR 47168, Oct. 27, 1976, unless otherwise noted. 
Redesignated at 45 FR 6909, Jan. 30, 1980.



           Subpart A--Applicability, Scope and Basic Policies



Sec. 884.101  Applicability and scope.

    (a) The policies and procedures in subparts A and B of this part 
apply to the making of Housing Assistance Payments on behalf of Eligible 
Families leasing newly constructed housing pursuant to the provisions of 
section 8 of the 1937 Act. They are applicable only to proposals 
submitted by the Department of Agriculture/Farmers Home Administration 
(now the Department of Agriculture/Rural Housing and Community 
Development Service) that have been charged against the set-aside of 
section 8 contract authority specifically established for projects to be 
funded under section 515 of title V of the Housing Act of 1949 (42 
U.S.C. 1485).
    (b) For the purpose of these subparts A and B, ``new construction'' 
shall mean newly constructed housing for which, prior to the start of 
construction, an Agreement to Enter into Housing Assistance Payments 
Contract is executed between the Owner and HUD or a Public Housing 
Agency.

[41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996]



Sec. 884.102  Definitions.

    The terms Fair Market Rent (FMR), HUD, Public housing agency (PHA), 
and Secretary are defined in 24 CFR part 5.
    Agreement to enter into housing assistance payments contract 
(``agreement''). (a) In the case of a Private-Owner Project or a PHA-
Owner Project, a written agreement between the Owner and HUD that, upon 
satisfactory completion of the housing in accordance with the HUD-
approved Proposal and submission by RHCDS of the required 
certifications, HUD will enter into a Housing Assistance Payments 
Contract with the Owner.
    (b) In the case of a Private-Owner/PHA Project, a written agreement 
between the private owner and the PHA, approved by HUD, that, upon 
satisfactory completion of the housing in accordance with the HUD-
approved Proposal and submission by RHCDS of the required 
certifications, the PHA will enter into a Housing Assistance Payments 
Contract with the Private Owner.
    Annual contributions contract (``ACC''). In the case of a Private-
Owner/PHA Project, a written agreement between HUD and the PHA to 
provide annual contributions to the PHA with respect to the project.
    Annual Income. As defined in part 813 of this chapter.
    Contract. See definition of Housing Assistance Payments Contract.
    Contract rent. The rent payable to the Owner under his Contract 
including the portion of the rent payable by the Family. In the case of 
a cooperative, the term ``Contract Rent'' means charges under the 
occupancy agreements between the members and the cooperative.
    Decent, safe, and sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition requirements in 24 CFR part 5, subpart 
G.
    Drug-related criminal activity. The illegal manufacture, sale, 
distribution, use or possession with the intent to manufacture, sell, 
distribute, or use, of a controlled substance as defined in section 102 
of the Controlled Substances Act, 21 U.S.C. 802.
    Family (eligible family). As defined in part 812 of this chapter.
    Gross Rent. As defined in part 813 of this chapter.
    HCD Act. The Housing and Community Development Act of 1974.
    Housing Assistance Payment. The payment made by the contract 
administrator to the Owner of an assisted unit as provided in the 
Contract. Where the unit is leased to an eligible Family, the payment is 
the difference between the Contract Rent and Tenant Rent. An additional 
Housing Assistance Payment

[[Page 114]]

is made to the Family when the Utility Allowance is greater than the 
Total Tenant Payment. A Housing Assistance Payment may be made to the 
Owner when a unit becomes vacant, in accordance with the terms of the 
Contract.
    Housing assistance payments contract (``Contract''). (a) In the case 
of a Private-Owner Project or a PHA-Owner Project, a written contract 
between the Owner and HUD for the purpose of providing housing 
assistance payments to the Owner on behalf of Eligible Families.
    (b) In the case of a Private-Owner/PHA Project, a written contract 
between the private Owner, and the PHA, approved by HUD, for the purpose 
of providing housing assistance payments to the Owner on behalf of 
Eligible Families.
    Income. Income from all sources of each member of the household as 
determined in accordance with criteria established by HUD.
    Lease. A written agreement between an Owner and an Eligible Family 
for the leasing of a Decent, Safe, and Sanitary dwelling unit in 
accordance with the applicable Contract, which agreement is in 
compliance with the provisions of this part.
    Local housing assistance plan. A housing assistance plan submitted 
by a unit of general local government and approved by HUD under Section 
104 of the HCD Act or, in the case of a unit of general local government 
not participating under Title I of the HCD Act, a housing plan which 
contains the elements set forth in Section 104(a)(4) of the HCD Act and 
which is approved by the Secretary as meeting the requirements of 
Section 213 of that Act.
    Low-Income Family. As defined in part 813 of this chapter.
    Owner. Any private person or entity, including a cooperative or a 
PHA, having the legal right to lease or sublease newly constructed 
dwelling units.
    PHA-owner proposal and PHA-owner project. A proposal for a project 
under this part (and the resulting project) to be owned by a PHA 
throughout the term of the Agreement and Contract where such Agreement 
and Contract are to be entered into between the PHA and HUD.
    Private-owner/PHA proposal and private-owner/PHA project. A proposal 
for a project under this part (and the resulting project) to be owned by 
a private Owner throughout the term of the Agreement and Contract where 
such Agreement and Contract are to be entered into between the private 
Owner and the PHA pursuant to an ACC between the PHA and HUD. The term 
also covers the situation where the ACC is with one PHA and the Owner is 
another PHA.
    Private-owner proposal and private-owner project. A proposal for a 
project under this part (and the resulting project) to be owned by a 
private Owner throughout the term of the Agreement and Contract where 
such Agreement and Contract are to be entered into between the private 
Owner and HUD.
    Project account. The account established and maintained in 
accordance with Sec. 884.104 or Sec. 884.105.
    Proposal. A proposal for a Private-Owner or PHA-Owner/PHA Project to 
provide newly constructed housing submitted to HUD by RHCDS on the 
prescribed RHCDS form.
    RHCDS. The Rural Housing and Community Development Service.
    Tenant Rent. The monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total Tenant Payment. The monthly amount defined in, and determined 
in accordance with part 813 of this chapter.
    Utility Allowance. As defined in part 813 of this chapter, made or 
approved by HUD.
    Utility Reimbursement. As defined in part 813 of this chapter.
    Very Low-Income Family. As defined in part 813 of this chapter.

[41 FR 47168, Oct. 27, 1976, as amended at 42 FR 63745, Dec. 19, 1977. 
Redesignated at 45 FR 6909, Jan. 30, 1980, and amended at 48 FR 12710, 
Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 49 FR 19947, May 10, 1984; 50 
FR 38795, Sept. 25, 1985; 61 FR 5213, Feb. 9, 1996; 61 FR 13593, Mar. 
27, 1996; 61 FR 47382, Sept. 6, 1996; 63 FR 46579, Sept. 1, 1998]

[[Page 115]]



Sec. 884.104  Maximum total annual contract commitment and project account (private-owner or PHA-owner projects).

    (a) Maximum total annual contract commitment. The maximum total 
annual housing assistance payments that may be committed under the 
Contract shall be the total of the Gross Rents for all the Contract 
units in the project.
    (b) Project account. In order to assure that housing assistance 
payments will be increased on a timely basis to cover increases in 
Contract Rents or decreases in Family Incomes:
    (1) A Project Account shall be established and maintained in an 
amount as determined by the Secretary consistent with his 
responsibilities under Section 8(c)(6) of the Act, out of amounts by 
which the maximum annual Contract commitment per year exceeds amounts 
paid under the Contract for any year. This account shall be established 
and maintained by HUD as a specifically identified and segregated 
account, and payment shall be made therefrom only for the purposes of 
(i) housing assistance payments, and (ii) other costs specifically 
authorized or approved by the Secretary.
    (2) Whenever a HUD-approved estimate of required housing assistance 
payments for a fiscal year exceeds the maximum annual Contract 
commitment, and would cause the amount in the Project Account to be less 
than an amount equal to 40 percent of such maximum annual Contract 
commitment, HUD shall, within a reasonable period of time, take such 
additional steps authorized by Section 8(c)(6) of the Act as may be 
necessary to carry out this assurance, including (as provided in that 
section of the Act) ``the reservation of annual contributions authority 
for the purpose of amending housing assistance contracts or the 
allocation of a portion of new authorizations for the purpose of 
amending housing assistance contracts.''



Sec. 884.105  Maximum total ACC commitment and project account (private-owner/PHA projects).

    (a) Maximum total ACC commitment. The maximum total annual 
contribution that may be contracted for in the ACC for a project shall 
be the total of the Gross Rents for all the Contract units in the 
project, plus a fee for the regular costs of PHA administration. HUD-
approved preliminary costs for administration (including administrative 
costs in connection with PHA activities related to relocation of 
occupants) shall be payable out of this total.
    (b) Project account. In order to assure that housing assistance 
payments will be increased on a timely basis to cover increases in 
Contract Rents or decreases in Family Incomes:
    (1) A Project Account shall be established and maintained, in an 
amount as determined by the Secretary consistent with his 
responsibilities under Section 8(c)(6) of the 1937 Act, out of amounts 
by which the maximum ACC commitment per year exceeds amounts paid under 
the ACC for any year. This account shall be established and maintained 
by HUD as a specifically identified and segregated account, and payment 
shall be made therefrom only for the purposes of (i) housing assistance 
payments and (ii) other costs specifically authorized or approved by the 
Secretary.
    (2) Whenever a HUD-approved estimate of required Annual Contribution 
exceeds the maximum ACC commitment then in effect, and would cause the 
amount in the Project Account to be less than an amount equal to 40 
percent of such maximum ACC commitment, HUD shall, within a reasonable 
period of time, take such additional steps authorized by Section 8(c)(6) 
of the 1937 Act as may be necessary to carry out this assurance, 
including (as provided in that section of the Act) ``the reservation of 
annual contributions authority for the purpose of amending housing 
assistance contracts or the allocation of a portion of new 
authorizations for the purpose of amending housing assistance 
contracts.''

[41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996]



Sec. 884.106  Housing assistance payments to owners.

    (a) General. Housing Assistance Payments shall be paid to Owners for 
units

[[Page 116]]

under lease by eligible families, in accordance with the Contract and as 
provided in this section. These Housing Assistance Payments will cover 
the difference between the Contract Rent and the Tenant Rent. Where 
applicable, the Utility Reimbursement will be paid to the Family as an 
additional Housing Assistance Payment. The Contract will provide that 
the Owner will make this payment on behalf of the contract 
administrator. Funds will be paid to the Owner in trust solely for the 
purpose of making this additional payment. If the Family and the utility 
company consent, the Owner may pay the utility reimbursement jointly to 
the Family and the utility company or directly to the utility company. 
No Section 8 assistance may be provided for any unit occupied by an 
Owner; however, cooperatives are considered rental housing, rather than 
Owner-occupied housing, for this purpose.
    (b) Vacancies during rent-up. If a Contract Unit is not leased as of 
the effective date of the Contract, the Owner shall be entitled to 
housing assistance payments in the amount of 80 percent of the Contract 
Rent for the unit for a vacancy period not exceeding 60 days from the 
effective date of the Contract, in accordance with the procedure set 
forth in Sec. 884.213(b): Provided, That the Owner: (1) Commenced 
marketing and otherwise complied with Sec. 884.211(e), (2) has taken and 
continues to take all feasible actions to fill the vacancy, including, 
but not limited to, contacting applicants on his waiting list, if any, 
requesting the PHA and other appropriate sources to refer eligible 
applicants, and advertising the availability of the unit, and (3) has 
not rejected any eligible applicant, except for good cause acceptable to 
HUD or the PHA, as the case may be.
    (c) Vacancies after rent-up. (1) If an Eligible Family vacates its 
unit (other than as a result of action by the Owner which is in 
violation of the Lease or the Contract or any applicable law), the Owner 
shall receive housing assistance payments in the amount of 80 percent of 
the Contract Rent for a vacancy period not exceeding 60 days; provided, 
however, That if the Owner collects any of the Family's share of the 
rent for this period in an amount which, when added to the 80 percent 
payments, results in more than the Contract Rent, such excess shall be 
payable to HUD or as HUD may direct. (See also Sec. 884.115). The Owner 
shall not be entitled to any payment under this paragraph (c)(1) unless 
he: (i) Immediately upon learning of the vacancy, has notified HUD or 
the PHA, as the case may be, of the vacancy or prospective vacancy and 
the reasons for the vacancy, and (ii) has taken and continues to take 
the actions specified in paragraphs (b) (2) and (3) of this section.
    (2) If the Owner evicts an Eligible Family, he shall not be entitled 
to any payment under paragraph (c)(1) of this section unless the request 
for such payment is supported by a certification that: (i) He gave such 
Family a written notice of the proposed eviction, stating the grounds 
and advising the Family that it had 10 days within which to present its 
objections to the Owner in writing or in person and (ii) the proposed 
eviction was not in violation of the Lease or the Contract or any 
applicable law.
    (d) Debt-service vacancy payments. (1) If a unit continues to be 
vacant after the 60-day period specified in paragraph (b) or (c) of this 
section, the owner may submit a claim to receive additional housing 
assistance payments on a semiannual basis with respect to the vacant 
unit in an amount equal to the principal and interest payments required 
to amortize the portion of the debt attributable to that unit for the 
period of the vacancy, whether the vacancy commenced during rent-up or 
after rent-up.
    (2) Additional payments under this paragraph (d) for any unit shall 
not be for more than 12 months for any vacancy period, and shall be made 
only if:
    (i) The unit was in decent, safe and sanitary condition during the 
vacancy period for which payments are claimed.
    (ii) The Owner has taken and is continuing to take the actions 
specified in paragraphs (b) (1), (2) and (3) or paragraphs (c)(1) (i) 
and (ii) and (c)(2) of this section, as appropriate.
    (iii) The owner has demonstrated, in connection with the semiannual 
claim on a form and in accordance wih the

[[Page 117]]

standards prescribed by HUD with respect to the period of the vacancy, 
that the project is not providing the owner with revenues at least equal 
to the project costs incurred by the owner and that the amount of the 
payments requested is not in excess of the amount needed to make up the 
deficiency.
    (iv) The owner has submitted to HUD or the PHA, as appropriate, in 
connection with the semiannual claim, a statement with relevant 
supporting evidence that there is a reasonable prospect that the project 
can achieve financial soundness within a reasonable time. The statement 
shall indicate the causes of the deficiency; the corrective steps that 
have been and will be taken; and the time by which it is expected that 
the project revenues will at least equal project costs without the 
additional payments provided under this paragraph.
    (3) HUD or the PHA, as appropriate, may deny any claim for 
additional payments or suspend or terminate payments if it determines 
that, based on the owner's statement and other evidence, there is not a 
reasonable prospect that the project can achieve financial soundness 
within a reasonable time.
    (e) Prohibition of double compensation for vacancies. The Owner 
shall not be entitled to housing assistance payments with respect to 
vacant units under this section to the extent he is entitled to payments 
from other sources (for example, payments for losses of rental income 
incurred for holding units vacant for relocatees pursuant to Title I of 
the HCD Act or payments under Sec. 884.115).

[41 FR 47168, Oct. 27, 1976, as amended at 42 FR 12983, Mar. 7, 1977; 43 
FR 33880, Aug. 1, 1978. Redesignated at 45 FR 6909, Jan. 30, 1980; 49 FR 
19947, May 10, 1984]



Sec. 884.108  Term of housing assistance payments contract.

    (a) Except in the case of a Contract described in paragraph (b) of 
this section, the Contract shall be for an initial term of 20 years: 
Provided, That at the end of such Contract term and at the request of 
RHCDS, HUD may, subject to the availability of contract and budget 
authority, authorize the execution of a new Contract providing for a 
total Contract term of an additional 20 years.
    (b) In the case of a Contract under which housing assistance 
payments are made with respect to a project owned by a State or local 
agency, the total Contract term may be equal to the term of such 
financing but may not exceed 40 years for any dwelling unit.
    (c) If the project is completed in stages, the dates for the initial 
and the renewal terms shall be separately related to the units in each 
stage: Provided, however, That the total Contract term for the units in 
all the stages, beginning with the effective date of the Contract with 
respect to the first stage, may not exceed the overall maximum term 
allowable for any one unit, plus two years.

[41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, 
and amended at 48 FR 12710, Mar. 28, 1983; 49 FR 17449, Apr. 24, 1984; 
61 FR 13593, Mar. 27, 1996]



Sec. 884.108a  Notice upon contract expiration.

    (a) The Contract will provide that the owner will notify each 
assisted family, at least 90 days before the end of the Contract term, 
of any increase in the amount the family will be required to pay as rent 
which may occur as a result of its expiration. If the Contract is to be 
renewed but with a reduction in the number of units covered by it, this 
notice shall be given to each family who will no longer be assisted 
under the Contract.
    (b) The notice provided for in paragraph (a) of this section shall 
be accomplished by: (1) Sending a letter by first class mail, properly 
stamped and addressed, to the family at its address at the project, with 
a proper return address, and (2) serving a copy of the notice on any 
adult person answering the door at the leased dwelling unit, or if no 
adult responds, by placing the notice under or through the door, if 
possible, or else by afffixing the notice to the door. Service shall not 
be considered to be effective until both required notices have been 
accomplished. The date on which the notice shall be considered to be 
received by the family shall be the date on which the owner mails the 
first class letter provided for in this paragraph, or the date on which

[[Page 118]]

the notice provided for in this paragraph is properly given, whichever 
is later.
    (c) The notice shall advise each affected family that, after the 
expiration date of the Contract, the family will be required to bear the 
entire cost of the rent and that the owner will be free (to the extent 
the project is not otherwise regulated by HUD) to alter the rent without 
HUD approval, but subject to any applicable requirements or restrictions 
under the lease or under State or local law. The notice shall also 
state: (1) The actual (if known) or the estimated rent which will be 
charged following the expiration of the Contract; (2) the difference 
between the rent and the Total Tenant Payment toward rent under the 
Contract; and (3) the date the Contract will expire.
    (d) The owner shall give HUD a certification that families have been 
notified in accordance with this section with an example of the text of 
the notice attached.
    (e) This section applies to all Contracts entered into pursuant to 
an Agreement executed on or after October 1, 1981, or entered into 
pursuant to an Agreement executed before October 1, 1981, but renewed or 
amended on or after October 1, 1984.

[49 FR 31284, Aug. 6, 1984]



Sec. 884.109  Rent adjustments.

    (a) Funding of adjustments. Housing assistance payments will be made 
in increased amounts commensurate with Contract Rent adjustments under 
this paragraph, up to the maximum amount authorized under the Contract. 
(See Secs. 884.104 and 884.105).
    (b) Automatic annual adjustments. (1) Automatic Annual Adjustment 
Factors will be determined by HUD at least annually; interim revisions 
may be made as market conditions warrant. Such Factors and the basis for 
their determination will be published in the Federal Register. These 
published Factors will be reduced appropriately by HUD where utilities 
are paid directly by Families.
    (2) On each anniversary date of the Contract, the Contract Rents 
shall be adjusted by applying the applicable Automatic Annual Adjustment 
Factor most recently published by HUD. Contract Rents may be adjusted 
upward or downward, as may be appropriate; however, in no case shall the 
adjusted rents be less than the Contract Rents on the effective date of 
the Contract.
    (c) Special additional adjustments. Special additional adjustments 
shall be granted, when approved by HUD, to reflect increases in the 
actual and necessary expenses of owning and maintaining the Contract 
Units which have resulted from substantial general increases in real 
property taxes, utility rates, or similar costs (i.e., assessments, and 
utilities not covered by regulated rates), but only if and to the extent 
that the Owner clearly demonstrates that such general increases have 
caused increases in the Owner's operating costs which are not adequately 
compensated for by automatic annual adjustments. The Owner shall submit 
to HUD financial statements which clearly support the increase.
    (d) Overall limitation. Notwithstanding any other provisions of this 
part, adjustments as provided in this section shall not result in 
material differences between the rents charged for assisted and 
comparable unassisted units, as determined by HUD: Provided, however, 
That this limitation shall not be construed to prohibit differences in 
rents between assisted and comparable unassisted units to the extent 
that such differences may have existed with respect to the initial 
Contract Rents.



Sec. 884.110  Types of housing and property standards.

    (a) Newly constructed single-family houses and multifamily 
structures may be utilized in this program. Congregate housing may be 
developed for elderly, disabled, or handicapped Families and 
individuals. Except in the case of housing predominantly for the 
elderly, high-rise elevator projects for Families with children may not 
be utilized unless HUD determines there is no practical alternative.
    (b) Participation in this program requires compliance with:
    (1) [Reserved]
    (2) In the case of congregate housing, the appropriate HUD 
guidelines and standards;
    (3) HUD requirements pursuant to section 209 of the HCD Act for 
projects

[[Page 119]]

for the elderly, disabled, or handicapped;
    (4) HUD requirements pertaining to noise abatement and control; and
    (5) Applicable State and local laws, codes, ordinances, and 
regulations.
    (c) Housing assisted under this part shall be modest in design. 
Amenities in projects assisted under this part (except partially 
assisted projects) will be limited to those amenities, as determined by 
HUD, which are generally provided in unassisted, decent, safe and 
sanitary housing for low-income families, in the market area. The use of 
more durable, high-quality materials to control or reduce maintenance, 
repair and replacement costs will not be considered an excess amenity.
    (d) Smoke detectors. (1) Performance requirement. After October 30, 
1992, each dwelling unit must include at least one battery-operated or 
hard-wired smoke detector, in proper working condition, on each level of 
the unit. If the unit is occupied by hearing-impaired persons, smoke 
detectors must have an alarm system, designed for hearing-impaired 
persons, in each bedroom occupied by a hearing-impaired person.
    (2) Acceptability criteria. The smoke detector must be located, to 
the extent practicable, in a hallway adjacent to a bedroom, unless the 
unit is occupied by a hearing-impaired person, in which case each 
bedroom occupied by a hearing-impaired person must have an alarm system 
connected to the smoke detector installed in the hallway.

[48 FR 12710, Mar. 28, 1983, as amended at 57 FR 33852, July 30, 1992; 
63 FR 46579, Sept. 1, 1998]



Sec. 884.114  Financing.

    (a) Types. Eligible projects under this program shall be financed 
under Section 515, Title V of the Housing Act of 1949.
    (b) Use of contract as security for financing. (1) An Owner may 
pledge, or offer as security for any loan or obligation, an Agreement or 
Contract entered into pursuant to this part: Provided, however, That 
such security is in connection with a project constructed pursuant to 
this part, and the terms of the financing or any refinancing have been 
approved by HUD. It is the Owner's responsibility to request such 
approval in sufficient time before he needs the financing to permit 
review of the method and terms of the financing and the instrument of 
pledge, offer or other assignment that HUD is requested to approve.
    (2) Any pledge of the Agreement, Contract, or ACC, or payments 
thereunder, shall be limited to the amounts payable under the Contract 
or ACC in accordance with its terms.
    (3) In the event of foreclosure and in the event of assignment or 
sale agreed to by HUD, housing assistance payments shall continue in 
accordance with the Terms of the Contract.



Sec. 884.115  Security and utility deposits.

    (a) An Owner may require Families to pay a security deposit in an 
amount equal to one month's Gross Family Contribution. If a Family 
vacates its unit, the Owner, subject to State and local laws, may 
utilize the deposit as reimbursement for any unpaid rent or other amount 
owed under the Lease. If the Family has provided a security deposit, and 
it is insufficient for such reimbursement, the Owner may claim 
reimbursement from HUD or the PHA, as appropriate, not to exceed an 
amount equal to the remainder of one month's Contract Rent. Any 
reimbursement under this section shall be applied first toward any 
unpaid rent. If a Family vacates the unit owing no rent or other amount 
under the Lease or if such amount is less than the amount of the 
security deposit, the Owner shall refund the full amount or the unused 
balance, as the case may be, to the Family.
    (b) In those jurisdictions where interest is payable by the Owner on 
security deposits, the refunded amount shall include the amount of 
interest payable. All security deposit funds shall be deposited by the 
Owner in a segregated bank account, and the balance of this account, at 
all times, shall be equal to the total amount collected from tenants 
then in occupancy, plus any accrued interest. The Owner shall comply 
with all State and local laws regarding interest payments on security 
deposits.
    (c) Families shall be expected to obtain the funds to pay security 
and utility deposits, if required, from their own

[[Page 120]]

resources and/or other private or public sources.



Sec. 884.116  Establishment of income limit schedules; 30 percent occupancy by very-low income families.

    (a) HUD will establish schedules of Income limits for determining 
whether families qualify as Low-Income Families and Very Low-Income 
Families.
    (b) In the leasing of units, the Owner shall comply with HUD 
requirements concerning the permissible income levels of families, as 
prescribed in 24 CFR part 813.

[41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, 
and amended at 49 FR 19947, May 10, 1984]



Sec. 884.117  Disclosure and verification of Social Security and Employer Identification Numbers by owners.

    To be eligible to become an owner of housing assisted under this 
part, the owner (other than a PHA) must meet the disclosure and 
verification requirements for Social Security and Employer 
Identification Numbers, as provided by 24 CFR part 5.

(Approved by the Office of Management and Budget under control number 
2502-0204)

[54 FR 39707, Sept. 27, 1989, as amended at 61 FR 13593, Mar. 27, 1996]



Sec. 884.118  Responsibilities of the owner.

    (a) The Owner shall be responsible (subject to post-review or audit 
by HUD or the PHA, as the case may be) for management and maintenance of 
the project. These responsibilities shall include but not be limited to:
    (1) Payment for utilities and services (unless paid directly by the 
Family), insurance and taxes;
    (2) Performance of all ordinary and extraordinary maintenance;
    (3) Performance of all management functions, including the taking of 
applications; determining eligibility of applicants in accordance with 
24 CFR parts 5 and 813; selection of families, including verification of 
income, provision of Federal selection preferences in accordance with 24 
CFR part 5, obtaining and verifying Social Security Numbers submitted by 
applicants (as provided by 24 CFR part 5), obtaining signed consent 
forms from applicants for the obtaining of wage and claim information 
from State Wage Information Collection Agencies (as provided in 24 CFR 
part 5), and other pertinent requirements; and determination of the 
amount of tenant rent in accordance with HUD established schedules and 
criteria;
    (4) Collection of Tenant Rents;
    (5) Termination of tenancies, including evictions;
    (6) Preparation and furnishing of information required under the 
Contract;
    (7) Reexamination of family income and composition; redetermination, 
as appropriate, of the amount of Tenant Rent and the amount of housing 
assistance payment in accordance with 24 CFR part 813; obtaining and 
verifying Social Security Numbers submitted by participants, as provided 
by 24 CFR part 5; and obtaining signed consent forms from participants 
for the obtaining of wage and claim information from State Wage 
Information Collection Agencies, as provided by 24 CFR part 5;
    (8) Redetermination of amount of Tenant Rent and amount of housing 
assistance payment in accordance with part 813 of this chapter as a 
result of an adjustment by the PHA or HUD, as appropriate, of any 
applicable Utility Allowance; and
    (9) Compliance with equal opportunity requirements issued by RHCDS 
and HUD with respect to project operation.
    (b) Subject to HUD approval, any Owner may contract with any private 
or public entity to perform for a fee the services required by paragraph 
(a) of this section: Provided, That such contract shall not relieve the 
Owner of his responsibilities or obligations. However, no entity which 
is responsible for administration of the Contract (for example, a PHA in 
the case of a Private-Owner/PHA Project) may contract to perform 
management and maintenance of the project: Provided, however, That this 
prohibition shall not preclude management by the PHA in the event it 
takes possession as the result of foreclosure or assignment in lieu of 
foreclosure. (See, however, Sec. 884.123(b), which permits conversion of 
a Private-

[[Page 121]]

Owner/PHA Project to a Private-Owner Project.)

(Approved by the Office of Management and Budget under control number 
2502-0204).

[41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, 
and amended at 49 FR 19947, May 10, 1984; 51 FR 11227, Apr. 1, 1986; 53 
FR 847, Jan. 13, 1988; 53 FR 1162, Jan. 15, 1988; 53 FR 6601, Mar. 2, 
1988; 54 FR 39707, Sept. 27, 1989; 56 FR 7540, Feb. 22, 1991; 60 FR 
14845, Mar. 20, 1995; 61 FR 13593, Mar. 27, 1996]



Sec. 884.119  Responsibility for contract administration and defaults (private-owner and PHA-owner projects).

    (a) Contract administration. HUD is responsible for administration 
of the Contract. HUD may contract with another entity for the 
performance of some or all of its Contract administration functions.
    (b) Defaults by owner. The Contract shall contain a provision to the 
effect (1) that if HUD determines that the Owner is in default under the 
Contract, HUD shall notify the Owner (with a copy to RHCDS) of the 
actions required to be taken to cure the default and of the remedies to 
be applied by HUD including abatement of housing assistance payments and 
recovery of overpayments, where appropriate; and (2) that if he fails to 
cure the default, HUD has the right to terminate the Contract or to take 
other corrective action.

[41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996]



Sec. 884.120  Responsibility for contract administration and defaults (private-owner/PHA projects).

    (a) Contract administration. The PHA is primarily responsible for 
administration of the Contract, subject to review and audit by HUD.
    (b) Defaults by PHA and/or owner. (1) The ACC and the Contract shall 
contain a provision to the effect that in the event of failure of the 
PHA to comply with the Contract with the Owner, the Owner shall have the 
right, if he is not in default, to demand that HUD determine, after 
notice to the PHA giving it a reasonable opportunity to take corrective 
action, whether a substantial default exists, and if HUD determines that 
such a default exists, that HUD assure that the obligations of the PHA 
to the Owner are carried out.
    (2) The ACC shall contain a provision to the effect that if the PHA 
fails to comply with any of its obligations (including specifically 
failure to enforce its rights under the Contract, in the event of any 
default by the Owner, to achieve compliance to the satisfaction of HUD 
or to terminate the Contract in whole or in part, as directed by HUD), 
HUD may, after notice to the PHA giving it a reasonable opportunity to 
take corrective action, determine that there is a substantial default 
and require the PHA to assign to HUD all of the PHA's rights and 
interests under the Contract. In such case, HUD will continue to pay 
annual contributions in accordance with the terms of the ACC and the 
Contract.
    (3) The Contract shall contain a provision to the effect (i) that if 
the PHA determines that the Owner is in default under the Contract, the 
PHA shall notify the Owner, with a copy to HUD and RHCDS, of the actions 
required to be taken to cure the default and of the remedies to be 
applied by the PHA including abatement of housing assistance payments 
and recovery of overpayments, where appropriate; and (ii) that if he 
fails to cure the default, the PHA has the right to terminate the 
Contract or to take other corrective action, in its discretion or as 
directed by HUD.

[41 FR 47168, Oct. 27, 1976, as amended at 61 FR 13593, Mar. 27, 1996]



Sec. 884.121  Rights of owner if PHA defaults under agreement (private-owner/PHA projects).

    The ACC and the Agreement shall contain a provision to the effect 
that in the event of failure of the PHA to comply with the Agreement 
with the Owner, the Owner shall have the right, if he is not in default, 
to demand that HUD determine, after notice to the PHA giving it a 
reasonable opportunity to take corrective action, whether a substantial 
default exists, and if HUD determines that such a default exists, that 
HUD assume the PHA's rights and obligations under the Agreement, and 
carry out the obligations of the PHA under the Agreement, including the 
obligation to enter into the Contract.

[[Page 122]]



Sec. 884.122  Separate project requirement.

    (a) In the case of a Private-Owner Project or a PHA-Owner Project, 
each Agreement and Contract shall constitute a separate project.
    (b) In the case of a Private-Owner/PHA Project such project may not 
include more than one type of Section 8 assistance, shall be processed 
with a separate ACC List and ACC Part I and shall be assigned a separate 
project number. All new construction units to be placed under a single 
Contract shall comprise a separate project. However, the field office 
director may designate as a single project the units to be covered by 
two or more such Contracts for new construction projects where:
    (1) The units are placed under ACC on the same date; and
    (2) Such consolidation is necessary in the interest of 
administrative efficiency.



Sec. 884.123  Conversions.

    (a) Conversion of private-owner project to private-owner/PHA 
project. HUD may request the Owner of a Private-Owner Project and an 
appropriate PHA to agree, if they are willing, to a conversion of any 
such project to a Private-Owner/PHA Project if HUD determines that such 
conversion would promote efficient project administration.
    (b) Conversion of private-owner/PHA project to private-owner 
project. The Private Owner and the PHA, in the case of a Private-Owner/
PHA Project, may request HUD to agree to a conversion of any such 
project to a Private-Owner or PHA-Owner Project. HUD shall agree to such 
conversion if it determines it to be in the best interest of the 
project.



Sec. 884.124  Audit.

    (a) Where a State or local government is the eligible owner of a 
project, or is a contract administrator under Sec. 884.119 or 
Sec. 884.120, receiving financial assistance under this part, the audit 
requirements in 24 CFR part 44 shall apply.
    (b) Where a nonprofit organization is the eligible owner of a 
project, receiving financial assistance under this part, the audit 
requirements in 24 CFR part 45 shall apply.

[50 FR 39092, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986, as amended at 
57 FR 33257, July 27, 1992]



              Subpart B--Project Development and Operation



Sec. 884.212  Project completion.

    (a) FmHA certifications upon completion. Upon completion of the 
project, FmHA shall inspect the project and, if determined to be 
acceptable, submit to the HUD field office the following certifications:
    (1) The project has been completed in accordance with the 
requirements of the Agreement;
    (2) The project is in good and tenantable condition;
    (3) There are no defects or deficiencies in the project other than 
punchlist items, or incomplete work awaiting seasonal opportunity;
    (4) There has been no change in management capability.
    (b) HUD review. HUD shall promptly review the certifications 
submitted pursuant to paragraphs (a) and (b) of this section (see 
Sec. 884.203(b)).
    (c) HUD acceptance. If HUD determines from the review that the 
certifications are acceptable in accordance with these subparts, the 
project shall be accepted.
    (d) Acceptance where defects or deficiencies reported. If the only 
defects or deficiencies are punchlist items or incomplete items awaiting 
seasonal opportunity, the project may be accepted and the Contract 
executed. If the Owner fails to complete the items within a reasonable 
time to the satisfaction of HUD (and the PHA, if applicable), HUD may, 
after consultation with FmHA, upon 30 days notice to the Owner (and the 
PHA, if applicable), terminate the Contract and/or exercise its other 
rights thereunder or, if the Contract is with a PHA, cancel its approval 
of the Contract and require its termination and/or exercise its other 
rights under the Contract and the ACC.
    (e) Arbitration. In the event the Owner disputes HUD determinations, 
he may submit the controversy to third-party arbitration at his expense,

[[Page 123]]

provided that the arbitration is advisory only.
    (f) Completion in stages. If the project is to be completed in 
stages, the procedures of this section shall apply to each stage.



Sec. 884.213  Execution of housing assistance payments contract.

    (a) Time of execution. Upon acceptance of the project by HUD 
pursuant to Sec. 884.212, the Contract shall be executed first by the 
Owner and then by HUD, or, in the case of a Private-Owner/PHA Project, 
executed by the Owner and the PHA and then approved by HUD.
    (b) Unleased units. At the time of execution of the Contract, HUD 
(or the PHA, as appropriate) shall examine the lists of dwelling units 
leased and not leased, referred to in Sec. 884.211(e) and shall 
determine whether or not the Owner has met his obligations under that 
section with respect to any unleased units. HUD (or the PHA, as 
appropriate) shall state in writing its determination with respect to 
the unleased units and for which of those units it will make housing 
assistance payments. The Owner shall indicate in writing his concurrence 
with this determination or his disagreement, reserving his rights to 
claim housing assistance payments for the unleased units pursuant to the 
Contract, without prejudice by reason of his signing the Contract. 
Copies of all documents referred to this paragraph shall be furnished to 
HUD in the case of a Private-Owner/PHA Project.



Sec. 884.214  Marketing.

    (a) Compliance with equal opportunity requirements. Marketing of 
units and selection of Families by the Owner shall be in accordance with 
the Owner's FmHA-approved Affirmative Fair Housing Marketing Plan, if 
required, and with all regulations relating to fair housing advertising 
including use of the equal opportunity logotype statement and slogan in 
all advertising. Projects shall be managed and operated without regard 
to race, color, creed, religion, sex, or national origin.
    (b) Eligibility, selection and admission of families. (1) The owner 
is responsible for determination of eligibility of applicants in 
accordance with the procedure of 24 CFR part part 5, selection of 
families from among those determined to be eligible (including provision 
of Federal selection preferences in accordance with 24 CFR part 5), and 
computation of the amount of housing assistance payments on behalf of 
each selected family, in accordance with schedules and criteria 
established by HUD.
    (2) For every family that applies for admission, the owner and the 
applicant will complete and sign the form of application prescribed by 
HUD. However, if there are no vacant units and the owner's waiting list 
is such that there would be an unreasonable length of time before the 
applicant could be admitted, the owner may advise the applicant that the 
owner is not accepting applications for that reason, except that the 
owner may not refuse to place an applicant on the waiting list if the 
applicant is otherwise eligible for assistance and claims that he or she 
qualifies for a Federal preference as provided in 24 CFR part 5, unless 
the owner determines, on the basis of the number of applicants who are 
already on the waiting list and who claim a Federal preference, and the 
anticipated number of admissions to the project, that:
    (i) There is an adequate pool of applicants who are likely to 
qualify for a Federal preference, and
    (ii) It is unlikely that, on the basis of the owner's system for 
applying the Federal preferences, the preference or the preferences that 
the applicant claims, and the preferences claimed by applicants on the 
waiting list, the applicant would qualify for admission before other 
applicants on the waiting list.

The owner must retain copies of all completed applications together with 
any related correspondence for three years. For each family selected for 
admission, the owner must submit one copy of the completed and signed 
application to the HUD field office (in the case of private-owner/PHA 
projects, the owner simultaneously must send a copy of the form to the 
PHA). Housing assistance payments will not be made on behalf of an 
admitted family unit after this copy has been received by the

[[Page 124]]

HUD field office (or, in the case of private-owner/PHA projects, until 
the copy has been received by the PHA with a certification by the owner 
that the owner has sent a copy to HUD).
    (3) If the Owner determines that the applicant is eligible on the 
basis of Income and family composition and is otherwise acceptable but 
the Owner does not have a suitable unit to offer, the Owner shall place 
such Family on his waiting list and so advise the Family.
    (4) If the Owner determines that the applicant is eligible on the 
basis of Income and family composition and is otherwise acceptable and 
if the Owner has a suitable unit, the Owner and the Family shall enter 
into a Lease. Such Lease shall be on the form of Lease included in the 
Owner's approved Final Proposal and shall otherwise be in conformity 
with the provisions of this part.
    (5) Records on applicant families and approved Families shall be 
maintained by the Owner so as to provide HUD with racial, ethnic and 
gender data and shall be retained by the Owner for three years.
    (6) In the case of a PHA-Owner project, (i) if the PHA places a 
Family on its waiting list, it shall notify the Family of the 
approximate date of availability of a suitable unit insofar as such date 
can be reasonably determined, and (ii) if the PHA determines that an 
applicant is ineligible on the basis of income or family composition, or 
that the PHA is not selecting the applicant for other reasons, the PHA 
shall promptly send the applicant a letter notifying him of the 
determination and the reasons and that the applicant has the right 
within a reasonable time (specified in the letter) to request an 
informal hearing. If, after conducting such an informal hearing, the PHA 
determines that the applicant shall not be admitted, the PHA shall so 
notify the applicant in writing and such notice shall inform the 
applicant that he has the right to request a review by HUD of the PHA's 
determination. The procedures of this subparagraph do not preclude the 
applicant from exercising his other rights if he believes he is being 
discriminated against on the basis of race, color, creed, religion, sex, 
or national origin. The PHA shall retain for three years a copy of the 
application, the letter, the applicant's response if any, the record of 
any informal hearing, and a statement of final disposition.
    (7) See 24 CFR part 5 for the informal review provisions for the 
denial of a Federal selection preference.
    (8) For the informal hearing provisions related to denial of 
assistance based upon failure to establish citizenship or eligible 
immigration status, see 24 CFR 812.9, and also 24 CFR 812.10 for 
provisions concerning certain assistance for mixed families (families 
whose members include those with eligible immigration status, and those 
without eligible immigration status) in lieu of denial of assistance.

[41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, 
and amended at 53 FR 1162, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 60 
FR 14845, Mar. 20, 1995; 61 FR 9047, Mar. 6, 1996; 61 FR 13594, Mar. 27, 
1996]



Sec. 884.215  Lease requirements.

    The Lease shall contain all required provisions specified in 
paragraph (b) of this section and none of the prohibited provisions 
listed in paragraph (c) of this section.
    (a) Term of lease. The term of the Lease shall be for not less than 
one year. The Lease may (or, in the case of a Lease for a term of more 
than one year, shall) contain a provision permitting termination upon 30 
days advance written notice by either party.
    (b) Required provisions. The Lease between the Owner (Lessor) and 
the Family (Lessee) shall contain the following provisions:

                            Addendum to Lease

    The following additional Lease provisions are incorporated in full 
in the Lease between ____________________ (Lessor) and 
____________________ (Lessee) for the following dwelling unit: 
____________________. In case of any conflict between these and any 
other provisions of the Lease, these provisions shall prevail.
    a. The total rent shall be $____________ per month.
    b. Of the total rent, $____________ shall be payable by or at the 
direction of the Department of Housing and Urban Development (``HUD'') 
as housing assistance payments on behalf of the Lessee and $____________ 
shall be payable by the Lessee. These amounts shall

[[Page 125]]

be subject to change by reason of changes in the Lessee's family income, 
family composition, or extent of exceptional medical or other unusual 
expenses, in accordance with HUD-established schedules and criteria; or 
by reason of adjustment by HUD, or the PHA, if appropriate, of any 
applicable Allowance for Utilities and Other Services. Any such change 
shall be effective as of the date stated in a notification to the 
Lessee.
    c. The Lessor shall not discriminate against the Lessee in the 
provision of services, or in any other manner, on the grounds of race, 
color, creed, religion, sex, or national origin.
    d. The Lessor shall provide the following services and maintenance:

Lessor__________________________________________________________________
By______________________________________________________________________
Date____________________________________________________________________
Lessee__________________________________________________________________
Date____________________________________________________________________

    (c) Prohibited provisions. Lease clauses which fall within the 
classifications listed below shall not be included in any Lease.
    (1) Confession of judgment. Prior consent by tenant to any lawsuit 
the landlord may bring against him in connection with the Lease and to a 
judgment in favor of the landlord.
    (2) Distraint for rent or other charges. Authorization to the 
landlord to take property of the tenant and hold it as a pledge until 
the tenant performs any obligation which the landlord has determined the 
tenant has failed to perform.
    (3) Exculpatory clause. Agreement by tenant not to hold the landlord 
or landlord's agents liable for any acts or omissions whether 
intentional or negligent on the part of the landlord or the landlord's 
authorized representative or agents.
    (4) Waiver of legal notice to tenant prior to actions for eviction 
or money judgments. Agreement by tenant that the landlord may institute 
suit without any notice to the tenant that the suit has been filed.
    (5) Waiver of legal proceedings. Authorization to the landlord to 
evict the tenant or hold or sell the tenant's possessions whenever the 
landlord determines that a breach or default has occurred, without 
notice to the tenant or any determination by a court of the rights and 
liabilities of the parties.
    (6) Waiver of jury trial. Authorization to the landlord's lawyer to 
appear in court for the tenant and to waive the tenant's right to a 
trial by jury.
    (7) Waiver of right to appeal judicial error in legal proceedings. 
Authorization to the landlord's lawyer to waive the tenant's right to 
appeal on the ground of judicial error in any suit or the tenant's right 
to file a suit in equity to prevent the execution of a judgment.
    (8) Tenant chargeable with costs of legal actions regardless of 
outcome. Agreement by the tenant to pay attorney's fees or other legal 
costs whenever the landlord decides to take action against the tenant 
even though the court finds in favor of the tenant. (Omission of such 
clause does not mean that the tenant as a party to a lawsuit may not be 
obligated to pay attorney's fee or other costs if he loses the suit.)



Sec. 884.216  Termination of tenancy.

    (a) The owner is responsible for termination of tenancies, including 
evictions. However, conditions for payment of housing assistance 
payments for any resulting vacancies must be as set forth in 
Sec. 884.106(c)(1). Failure of the family to sign and submit consent 
forms for the obtaining of wage and claim information from State Wage 
Information Collection Agencies, as provided by 24 CFR part 5, shall be 
grounds for termination of tenancy. For provisions requiring termination 
of assistance for failure to establish citizenship or eligible 
immigration status, including the applicable informal requirements, see 
24 CFR part 5 and also for provisions concerning assistance for mixed 
families (families whose members include those with eligible immigration 
status, and those without eligible immigration status) in lieu of 
termination of assistance, and for provisions concerning deferral of 
termination of assistance.
    (b) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the premises by other residents; any 
criminal activity that threatens the health, safety, or right to 
peaceful enjoyment of their residences by persons residing in the 
immediate vicinity of the premises; any criminal activity that threatens 
the health, or safety of any on-site property management staff 
responsible for managing the premises; or any

[[Page 126]]

drug-related criminal activity on or near such premises; or any drug-
related criminal activity on or near such premises, engaged in by a 
resident, any member of the resident's household, or any guest or other 
person under the resident's control shall be grounds for termination of 
tenancy.

[56 FR 7541, Feb. 22, 1991, as amended at 60 FR 14845, Mar. 20, 1995; 61 
FR 13594, Mar. 27, 1996; 61 FR 47382, Sept. 6, 1996]



Sec. 884.217  Maintenance, operation and inspections.

    (a) Maintenance and operation. The Owner shall maintain and operate 
the project so as to provide Decent, Safe, and Sanitary housing and he 
shall provide all the services, maintenance and utilities which he 
agrees to provide under the Contract, subject to abatement of housing 
assistance payments or other applicable remedies if he fails to meet 
these obligations.
    (b) Inspection prior to occupancy. Prior to occupancy of any unit by 
a Family, the Owner and the Family shall inspect the unit and both shall 
certify, on forms prescribed by HUD, that they have inspected the unit 
and have determined it to be Decent, Safe, and Sanitary in accordance 
with the criteria provided in the prescribed forms. Copies of these 
reports shall be kept on file by the Owner for at least three years.
    (c) Periodic inspections. HUD (or the PHA, as appropriate) will 
inspect or cause to be inspected each Contract unit and related 
facilities at least annually and at such other times (including prior to 
initial occupancy and rerenting of any unit) as HUD (or the PHA) may 
determine to be necessary to assure that the Owner is meeting his 
obligation to maintain the units in Decent, Safe, and Sanitary condition 
and to provide the agreed upon utilities and other services. HUD (or the 
PHA) will take into account complaints by occupants and any other 
information coming to its attention in scheduling inspections and shall 
notify the Owner and the Family of its determination.
    (d) Units not decent, safe, and sanitary. If HUD (or the PHA, as 
appropriate) notifies the Owner that he has failed to maintain a 
dwelling unit in Decent, Safe, and Sanitary condition and the Owner 
fails to take corrective action within the time prescribed in the 
notice, HUD (or the PHA) may exercise any of its rights or remedies 
under the Contract, including abatement of housing assistance payments, 
even if the Family continues to occupy the unit. If, however, the Family 
wishes to be rehoused in another dwelling unit with Section 8 assistance 
and HUD (or the PHA) does not have other Section 8 funds for such 
purposes, HUD (or the PHA) may use the abated housing assistance 
payments for the purpose of rehousing the Family in another dwelling 
unit. Where this is done, the Owner shall be notified that he will be 
entitled to resumption of housing assistance payments for the vacated 
dwelling unit if:
    (1) The unit is restored to Decent, Safe, and Sanitary condition;
    (2) The Family is willing to and does move back to the restored 
dwelling unit; and
    (3) A deduction is made for the expenses incurred by the Family for 
both moves.



Sec. 884.218  Reexamination of family income and composition.

    (a) Regular reexaminations. The owner must reexamine the income and 
composition of all families at least once each year. Upon verification 
of the information, the owner must make appropriate adjustments in the 
Total Tenant Payment in accordance with part 813 of this chapter and 
determine whether the family's unit size is still appropriate. The owner 
must adjust Tenant Rent and the Housing Assistance Payment to reflect 
any change in Total Tenant Payment and carry out any unit transfer 
required by HUD. At the time of the annual reexamination of family 
income and composition, the owner must require the family to disclose 
and verify Social Security Numbers, as provided by 24 CFR part 5. For 
requirements regarding the signing and submitting of consent forms by 
families for the obtaining of wage and claim information from State Wage 
Information Collection Agencies, see 24 CFR part 5. At the first regular 
reexamination after June 19, 1995, the owner shall follow the 
requirements of 24 CFR part 5 concerning obtaining and processing

[[Page 127]]

evidence of citizenship or eligible immigration status of all family 
members. Thereafter, at each regular reexamination, the owner shall 
follow the requirements of 24 CFR part 5 concerning verification of the 
immigration status of any new family member.
    (b) Interim reexaminations. The family must comply with provisions 
of its lease regarding interim reporting of changes in income. If the 
owner receives information concerning a change in the family's income or 
other circumstances between regularly scheduled reexaminations, the 
owner must consult with the family and make any adjustments determined 
to be appropriate. Any change in the family's income or other 
circumstances that results in an adjustment in the Total Tenant Payment, 
Tenant Rent and Housing Assistance Payment must be verified. See 24 CFR 
750.10(d)(2)(i) for the requirements for the disclosure and verification 
of Social Security Numbers at interim reexaminations involving new 
family members. For requirements regarding the signing and submitting of 
consent forms by families for the obtaining of wage and claim 
information from State Wage Information Collection Agencies, see 24 CFR 
part 5. At any interim reexamination after June 19, 1995 when there is a 
new family member, the owner shall follow the requirements of 24 CFR 
part 5 concerning obtaining and processing evidence of citizenship or 
eligible immigration status of the new family member.
    (c) Continuation of housing assistance payments. A family's 
eligibility for Housing Assistance Payments continues until the Total 
Tenant Payment equals the Gross Rent, or until the family loses 
eligibility for continued occupancy under Farmer's Home Administration 
regulations. However, eligibility also may be terminated in accordance 
with HUD requirements, for such reasons as failure to submit requested 
verification information, including failure to meet the disclosure and 
verification requirements for Social Security Numbers, as provided by 24 
CFR part 5, or failure to sign and submit consent forms for the 
obtaining of wage and claim information from State Wage Information 
Collection Agencies, as provided by 24 CFR part 5. For provisions 
requiring termination of assistance for failure to establish citizenship 
or eligible immigration status, see 24 CFR part 5 and also for 
provisions concerning certain assistance for mixed families (families 
whose members include those with eligible immigration status, and those 
without eligible immigration status) in lieu of termination of 
assistance, and for provisions concerning deferral of termination of 
assistance.

[56 FR 7541, Feb. 22, 1991, as amended at 60 FR 14845, Mar. 20, 1995; 61 
FR 13594, Mar. 27, 1996]



Sec. 884.219  Overcrowded and underoccupied units.

    If HUD or the PHA, as the case may be, determines that a Contract 
unit assisted under this part is not Decent, Safe, and Sanitary by 
reason of increase in Family size, or that a Contract unit is larger 
than appropriate for the size of the Family in occupancy, housing 
assistance payments with respect to such unit will not be abated, unless 
the Owner fails to offer the Family a suitable unit as soon as one 
becomes vacant and ready for occupancy. In the case of an overcrowded 
unit, if the Owner does not have any suitable units or if no vacancy of 
a suitable unit occurs within a reasonable time, HUD (or the PHA) will 
assist the Family in finding a suitable dwelling unit and require the 
Family to move to such a unit as soon as possible. The Owner may receive 
housing assistance payments for the vacated unit if he complies with the 
requirements of Sec. 884.106(c)(1).



Sec. 884.220  Adjustment of utility allowances.

    In connection with annual and special adjustments of contract rents, 
the owner must submit an analysis of the project's Utility Allowances. 
Such data as changes in utility rates and other facts affecting utility 
consumption should be provided as part of this analysis to permit 
appropriate adjustments in the Utility Allowances. In addition, when 
approval of a utility rate change would result in a cumulative increase 
of 10 percent or more in the most recently approved Utility Allowances,

[[Page 128]]

the project owner must advise the Secretary and request approval of new 
Utility Allowances. Whenever a Utility Allowance for a unit is adjusted, 
the owner will promptly notify affected families and make a 
corresponding adjustment of the tenant rent and the amount of the 
housing assistance payment for the unit.

(Approved by the Office of Management and Budget under control number 
2502-0161)

[50 FR 39098, Sept. 27, 1985]



Sec. 884.221  Continued family participation.

    A Family must continue to occupy its approved unit to remain 
eligible for participation in the Housing Assistance Payments Program 
except that if the Family (a) wishes to vacate its unit at the end of 
the Lease term (or prior thereto but in accordance with the provisions 
of the Lease), or (b) is required to move for reasons other than 
violation of the Lease on the part of the Family, and if the Family 
wishes to receive the benefit of housing assistance payments in another 
approvable unit, the Family should give reasonable notice of the 
circumstances to HUD or to the PHA, as appropriate, so that HUD or the 
PHA may have the opportunity to consider the Family's request.



Sec. 884.222  Inapplicability of low-rent public housing model lease and grievance procedures.

    Model lease and grievance procedures established by HUD for PHA-
owned low-rent public housing are applicable only to PHA-Owner Projects 
under the Section 8 Housing Assistance Payments Program.



Sec. 884.223  Leasing to eligible families.

    (a) Availability of units for occupancy by Eligible Families. During 
the term of the Contract, an owner shall make available for occupancy by 
eligible families the total number of units for which assistance is 
committed under the Contract. For purposes of this section, making units 
available for occupancy by eligible families means that the owner: (1) 
Is conducting marketing in accordance with Sec. 884.214; (2) has leased 
or is making good faith efforts to lease the units to eligible and 
otherwise acceptable families, including taking all feasible actions to 
fill vacancies by renting to such families; and (3) has not rejected any 
such applicant family except for reasons acceptable to HUD (or the PHA 
in accordance with HUD guidelines and at the direction of HUD, as 
appropriate). If the owner is temporarily unable to lease all units for 
which assistance is committed under the Contract to eligible families, 
one or more units may be leased to ineligible families with the prior 
approval of HUD (or the PHA in accordance with HUD guidelines and at the 
direction of HUD, as appropriate). Failure on the part of the owner to 
comply with these requirements is a violation of the Contract and 
grounds for all available legal remedies, including specific performance 
of the Contract, suspension or debarment from HUD programs, and 
reduction of the number of units under the Contract as set forth in 
paragraph (b) of this section.
    (b) Reduction of number of units covered by Contract. HUD (or the 
PHA at the direction of HUD, as appropriate), after consultation with 
the Farmers Home Administration, may reduce the number of units covered 
by the Contract to the number of units available for occupancy by 
eligible families if:
    (1) The owner fails to comply with the requirements of paragraph (a) 
of this section; or
    (2) Notwithstanding any prior approval by HUD (or the PHA at the 
direction of HUD, as appropriate) to lease such units to ineligible 
families, HUD (or the PHA at the direction of HUD, as appropriate) 
determines that the inability to lease units to eligible families is not 
a temporary problem.
    (c) Restoration. HUD will agree to an amendment of the ACC or the 
Contract, as appropriate, to provide for subsequent restoration of any 
reduction made pursuant to paragraph (b) of this section if:
    (1) HUD determines that the restoration is justified by demand;
    (2) The owner otherwise has a record of compliance with his or her 
obligations under the Contract; and
    (3) Contract and budget authority are available.
    (d) Applicability. In accordance with section 555 of the Cranston-
Gonzalez National Affordable Housing Act of

[[Page 129]]

1990, paragraphs (a) and (b) of this section apply to all contracts. An 
owner who had leased an assisted unit to an ineligible family consistent 
with the regulations in effect at the time will continue to lease the 
unit to that family. However, the owner must make the unit available for 
occupancy by an eligible family when the ineligible family vacates the 
unit.
    (e) Termination of assistance for failure to establish citizenship 
or eligible immigration status. If an owner subject to paragraphs (a) 
and (b) of this section is required to terminate housing assistance 
payments for the family in accordance with 24 CFR part 5 because the 
owner determines that the entire family does not have U.S. citizenship 
or eligible immigration status, the owner may allow continued occupancy 
of the unit by the family without Section 8 assistance following the 
termination of assistance, or if the family constitutes a mixed family, 
as defined in 24 CFR part 5, the owner shall comply with the provisions 
of 24 CFR part 5 concerning assistance to mixed families, and deferral 
of termination of assistance.

[49 FR 31398, Aug. 7, 1984, as amended at 53 FR 847, Jan. 13, 1988; 53 
FR 6601, Mar. 2, 1988; 59 FR 13653, Mar. 23, 1994; 60 FR 14846, Mar. 20, 
1995; 61 FR 13594, Mar. 27, 1996]



Sec. 884.223a  Preference for occupancy by elderly families.

    (a) Election of preference for occupancy by elderly families--(1) 
Election by owners of eligible projects. (i) An owner of a project 
assisted under this part (including a partially assisted project) that 
was originally designed primarily for occupancy by elderly families (an 
``eligible project'') may, at any time, elect to give preference to 
elderly families in selecting tenants for assisted, vacant units in the 
project, subject to the requirements of this section.
    (ii) For purposes of this section, a project eligible for the 
preference provided by this section, and for which the owner makes an 
election to give preference in occupancy to elderly families is referred 
to as an ``elderly project.'' ``Elderly families'' refers to families 
whose heads of household, their spouses or sole members are 62 years or 
older.
    (iii) An owner who elects to provide a preference to elderly 
families in accordance with this section is required to notify families 
on the waiting list who are not elderly that the election has been made 
and how the election may affect them if:
    (A) The percentage of disabled families currently residing in the 
project who are neither elderly nor near-elderly (hereafter, 
collectively referred to as ``non-elderly disabled families'') is equal 
to or exceeds the minimum required percentage of units established for 
the elderly project in accordance with paragraph (c)(1) of this section, 
and therefore non-elderly families on the waiting list (including non-
elderly disabled families) may be passed over for covered section 8 
units; or
    (B) The project, after making the calculation set forth in paragraph 
(c)(1) of this section, will have no units set aside for non-elderly 
disabled families.
    (iv) An owner who elects to give a preference for elderly families 
in accordance with this section shall not remove an applicant from the 
project's waiting list solely on the basis of having made the election.
    (2) HUD approval of election not required. (i) An owner is not 
required to solicit or obtain the approval of HUD before exercising the 
election of preference for occupancy provided in paragraph (a)(1) of 
this section. The owner, however, if challenged on the issue of 
eligibility of the project for the election provided in paragraph (a)(1) 
of this section must be able to support the project's eligibility 
through the production of all relevant documentation in the possession 
of the owner that pertains to the original design of the project.
    (ii) The Department reserves the right at any time to review and 
make determinations regarding the accuracy of the identification of the 
project as an elderly project. The Department can make such 
determinations as a result of ongoing monitoring activities, or the 
conduct of complaint investigations under the Fair Housing Act (42 
U.S.C. 3601 through 3619), or compliance reviews and complaint 
investigations under section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and other applicable statutes.

[[Page 130]]

    (b) Determining projects eligible for preference for occupancy by 
elderly families--(1) Evidence supporting project eligibility. Evidence 
that a project assisted under this part (or portion of a project) was 
originally designed primarily for occupancy by elderly families, and is 
therefore eligible for the election of occupancy preference provided by 
this section, shall consist of at least one item from the sources 
(``primary'' sources) listed in paragraph (b)(1)(i) of this section, or 
at least two items from the sources (``secondary'' sources) listed in 
paragraph (b)(1)(ii) of this section:
    (i) Primary sources. Identification of the project (or portion of a 
project) as serving elderly (seniors) families in at least one primary 
source such as: the application in response to the notice of funding 
availability; the terms of the notice of funding availability under 
which the application was solicited; the regulatory agreement; the loan 
commitment; the bid invitation; the owner's management plan, or any 
underwriting or financial document collected at or before loan closing; 
or
    (ii) Secondary sources. Two or more sources of evidence such as: 
lease records from the earliest two years of occupancy for which records 
are available showing that occupancy has been restricted primarily to 
households where the head, spouse or sole member is 62 years of age or 
older; evidence that services for elderly persons have been provided, 
such as services funded by the Older Americans Act, transportation to 
senior citizen centers, or programs coordinated with the Area Agency on 
Aging; project unit mix with more than fifty percent of efficiency and 
one-bedroom units [a secondary source particularly relevant to 
distinguishing elderly projects under the previous section 3(b) 
definition (in which disabled families were included in the definition 
of ``elderly families'') from non-elderly projects and which in 
combination with other factors (such as the number of accessible units) 
may be useful in distinguishing projects for seniors from those serving 
the broader definition of ``elderly families'' which includes disabled 
families]; or any other relevant type of historical data, unless clearly 
contradicted by other comparable evidence.
    (2) Sources in conflict. If a primary source establishes a design 
contrary to that established by the primary source upon which the owner 
would base support that the project is an eligible project (as defined 
in this section), the owner cannot make the election of preferences for 
elderly families as provided by this section based upon primary sources 
alone. In any case where primary sources do not provide clear evidence 
of original design of the project for occupancy primarily by elderly 
families, including those cases where sources documents conflict, 
secondary sources may be used to establish the use for which the project 
was originally designed.
    (c) Reservation of units in elderly projects for non-elderly 
disabled families. The owner of an elderly project is required to 
reserve, at a minimum, the number of units specified in paragraph (c)(1) 
of this section for occupancy by non-elderly disabled families.
    (1) Minimum number of units to be reserved for non-elderly disabled 
families. The number of units in an elderly project required to be 
reserved for occupancy by non-elderly disabled families, shall be, at a 
minimum, the lesser of:
    (i) The number of units equivalent to the higher of--
    (A) The percentage of units assisted under this part in the elderly 
project that were occupied by non-elderly disabled families on October 
28, 1992; and
    (B) The percentage of units assisted under this part in the elderly 
project that were occupied by non-elderly disabled families upon January 
1, 1992; or
    (ii) 10 percent of the number of units assisted under this part in 
the eligible project.
    (2) Option to reserve greater number of units for non-elderly 
disabled families. The owner, at the owner's option, and at any time, 
may reserve a greater number of units for non-elderly disabled families 
than that provided for in paragraph (c)(1) of this section. The option 
to provide a greater number of units to non-elderly disabled families 
will not obligate the owner to always provide that greater number to 
non-elderly disabled families. The number of

[[Page 131]]

units required to be provided to non-elderly disabled families at any 
time in an elderly project is that number determined under paragraph 
(c)(1) of this section.
    (d) Secondary preferences. An owner of an elderly project also may 
elect to establish secondary preferences in accordance with the 
provisions of this paragraph (d) of this section.
    (1) Preference for near-elderly disabled families in units reserved 
for elderly families. If the owner of an elderly project determines, in 
accordance with paragraph (f) of this section, that there are an 
insufficient number of elderly families who have applied for occupancy 
to fill all the vacant units in the elderly project reserved for elderly 
families (that is, all units except those reserved for the non-elderly 
disabled families as provided in paragraph (c) of this section), the 
owner may give preference for occupancy of such units to disabled 
families who are near-elderly families.
    (2) Preference for near-elderly disabled families in units reserved 
for non-elderly disabled families. If the owner of an elderly project 
determines, in accordance with paragraph (f) of this section, that there 
are an insufficient number of non-elderly disabled families to fill all 
the vacant units in the elderly project reserved for non-elderly 
disabled families as provided in paragraph (c) of this section, the 
owner may give preference for occupancy of these units to disabled 
families who are near-elderly families.
    (e) Availability of units to families without regard to preference. 
An owner shall make vacant units in an elderly project generally 
available to otherwise eligible families who apply for housing, without 
regard to the preferences and reservation of units provided in this 
section if either:
    (1) The owner has adopted the secondary preferences and there are an 
insufficient number of families for whom elderly preference, reserve 
preference, and secondary preference has been given, to fill all the 
vacant units; or
    (2) The owner has not adopted the secondary preferences and there 
are an insufficient number of families for whom elderly preference, and 
reserve preference has been given to fill all the vacant units.
    (f) Determination of insufficient number of applicants qualifying 
for preference. To make a determination that there are an insufficient 
number of applicants who qualify for the preferences, including 
secondary preferences, provided by this section, the owner must:
    (1) Conduct marketing in accordance with Sec. 884.214(a) to attract 
applicants qualifying for the preferences and reservation of units set 
forth in this section; and
    (2) Make a good faith effort to lease to applicants who qualify for 
the preferences provided in this section, including taking all feasible 
actions to fill vacancies by renting to such families.
    (g) Federal preferences. An owner that gives preferences to elderly 
families and reserves units for non-elderly disabled families in 
accordance with this section also shall select applicants among each 
respective group in accordance with the Federal preferences contained in 
24 CFR part 5. Projects under National Housing Act programs and 
receiving section 8 assistance may be subject to preferences in addition 
to those contained in 24 CFR part 5 which also must be applied in 
selecting applicants among each respective group.
    (h) Prohibition of evictions. An owner may not evict a tenant 
without good cause, or require that a tenant vacate a unit, in whole or 
in part because of any reservation or preference provided in this 
section, or because of any action taken by the Secretary pursuant to 
subtitle D (sections 651 through 661) of title VI of the Housing and 
Community Development Act of 1992 (42 U.S.C. 13611 through 13620).

[59 FR 65855, Dec. 21, 1994, as amended at 61 FR 9047, Mar. 6, 1996]



Sec. 884.224  HUD review of contract compliance.

    HUD will review project operation at such intervals as it deems 
necessary to ensure that the Owner is in full compliance with the terms 
and conditions of the Contract. Equal Opportunity review may be 
conducted with the scheduled HUD review or at any time deemed 
appropriate by HUD.

[[Page 132]]



Sec. 884.225  PHA reporting requirements. [Reserved]



PART 886--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--SPECIAL ALLOCATIONS--Table of Contents




 Subpart A--Additional Assistance Program for Projects With HUD-Insured 
                         and HUD-Held Mortgages

Sec.
886.101  Applicability.
886.102  Definitions.
886.103  Allocation of Section 8 contract authority.
886.104  Invitations to participate.
886.105  Content of application; Disclosure.
886.106  Notices.
886.107  Approval of applications.
886.108  Maximum annual contract commitment.
886.109  Housing assistance payments to owners.
886.110  Contract rents.
886.111  Term of contract.
886.111a  Notice upon contract expiration.
886.112  Rent adjustments.
886.113  Physical condition standard; physical inspection requirements.
886.114  Equal opportunity requirements.
886.115  [Reserved]
886.116  Security and utility deposits.
886.117  [Reserved]
886.118  Amount of housing assistance payments in projects receiving 
          other HUD assistance.
886.119  Responsibilities of the owner.
886.120  Responsibility for contract administration.
886.121  Marketing.
886.122  [Reserved]
886.123  Maintenance, operation and inspections.
886.124  Reexamination of family income and composition.
886.125  Overcrowded and underoccupied units.
886.126  Adjustment of utility allowances.
886.127  Lease requirements.
886.128  Termination of tenancy.
886.129  Leasing to eligible families.
886.130  HUD review of contract compliance.
886.131  Audit.
886.132  Selection preferences.
886.138  Displacement, relocation, and acquisition.

                          Subpart B [Reserved]

 Subpart C--Section 8 Housing Assistance Program for the Disposition of 
                           HUD-Owned Projects

886.301  Purpose.
886.302  Definitions.
886.303  Allocation and reservation of Section 8 contract authority and 
          budget authority.
886.304  Project eligibility criteria.
886.305  Disclosure and verification of Social Security and Employer 
          Identification Numbers by owners.
886.306  Notices.
886.307  Physical condition standards; physical inspection requirements.
886.308  Maximum total annual contract commitment.
886.309  Housing assistance payment to owners.
886.310  Initial contract rents.
886.311  Term of contract.
886.311a  Notice upon contract expiration.
886.312  Rent adjustments.
886.313  Other Federal requirements.
886.314  Financial default.
886.315  Security and utility deposits.
886.316--886.317  [Reserved]
886.318  Responsibilities of the owner.
886.319  Responsibility for contract administration.
886.320  Default under the contract.
886.321  Marketing.
886.322  [Reserved]
886.323  Maintenance, operation, and inspections.
886.324  Reexamination of family income and composition.
886.325  Overcrowded and underoccupied units.
886.326  Adjustment of utility allowances.
886.327  Lease requirements.
886.328  Termination of tenancy.
886.329  Leasing to eligible families.
886.329a  Preferences for occupancy by elderly families.
886.330  Work write-ups and cost estimates.
886.331  Agreement to enter into housing assistance payments contract.
886.332  Rehabilitation period.
886.333  Completion of rehabilitation.
886.334  Execution of housing assistance payments contract.
886.335  HUD review of agreement and contract compliance.
886.336  Audit.
886.337  Selection preferences.
886.338  Displacement, relocation, and acquisition.

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 3535(d), and 13611-13619.



 Subpart A--Additional Assistance Program for Projects With HUD-Insured 
                         and HUD-Held Mortgages

    Source: 42 FR 5603, Jan. 28, 1977, unless otherwise noted.

[[Page 133]]



Sec. 886.101  Applicability.

    (a) The policies and procedures of this subpart apply to Housing 
Assistance Payments under Section 8 of the United States Housing Act of 
1937 on behalf of Eligible Families in Eligible Projects (see 
definitions in Sec. 886.102).
    (b) The primary goal of the Section 8 Loan Management Set-Aside 
Program is to reduce claims on the Department's insurance fund by aiding 
those FHA-insured or Secretary-Held projects with immediately or 
potentially serious financial difficulties. A first priority should be 
given to projects with presently serious financial problems, which are 
likely to result in a claim on the insurance fund in the near future. To 
the extent resources remain available, assistance also may be provided 
to projects with potentially serious financial problems which, on the 
basis of financial and/or management analysis, appear to have a high 
probability of producing a claim on the insurance fund within 
approximately the next five years.

[42 FR 5603, Jan. 28, 1977, as amended at 53 FR 3368, Feb. 5, 1988]



Sec. 886.102  Definitions.

    The terms Fair Market Rent (FMR), HUD, Public Housing Agency (PHA), 
and Secretary are defined in 24 CFR part 5.
    Act. The United States Housing Act of 1937.
    Annual Income. As defined in part 813 of this chapter.
    Contract (See Section 8 Contract).
    Contract Rent. The rent payable to the Owner as required by HUD in 
connection with its mortgage insurance and/or lending functions, 
including the portion of the rent payable by the Family, not to exceed 
the amount stated in the Section 8 Contract as such amount may be 
adjusted in accordance with Sec. 886.112. In the case of a cooperative, 
the term ``Contract Rent'' means charges under the occupancy agreements 
between the members and the cooperative.
    Decent, Safe, and Sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition requirements in 24 CFR part 5, subpart 
G.
    Eligible Project. Any existing subsidized or unsubsidized 
multifamily residential project that is subject to a mortgage insured or 
any section of the National Housing Act; any such project subject to a 
mortgage that has been assigned to the Secretary; any such project 
acquired by the Secretary and thereafter sold under a Secretary-held 
purchase money mortgage; or a project for the elderly financed under 
section 202 of the Housing Act of 1959 (except projects receiving 
assistance under 24 CFR part 885).
    Family (eligible family). As defined in part 812 of this chapter.
    Gross Rent. As defined in part 813 of this chapter,
    HCD Act. The Housing and Community Development Act of 1974.
    Housing Assistance Payment. The payment made by HUD to the Owner of 
an assisted unit as provided in the Contract. Where the unit is leased 
to an eligible Family, the payment is the difference between the 
Contract Rent and the Tenant Rent. An additional Housing Assistance 
Payment is made when the Utility Allowance is greater than the Total 
Tenant Payment. A Housing Assistance Payment may be made to the Owner 
when a unit is vacant, in accordance with Sec. 886.109.
    Income. Income from all sources of each member of the household as 
determined in accordance with criteria established by HUD.
    Lease. A written agreement between the owner and a family for 
leasing of a decent, safe and sanitary dwelling unit to the family.
    Low-income Family. As defined in part 813 of this chapter.
    Owner. The mortgagor of record under a multifamily project mortgage 
insured, or held by the Secretary, including purchase money mortgages; 
the owner of a Section 202 project.
    Project. See Sec. 886.101.
    Project Account. The account established and maintained in 
accordance with Sec. 886.108.
    Section 8 Contract (``Contract''). A written Contract between the 
Owner of an Eligible Project and HUD for providing Housing Assistance 
Payments to the Owner on behalf of Eligible Families pursuant to this 
part.
    Subsidized Rent. In Section 221(d)(3) BMIR, Section 202, or Section 
236 projects, the rent payable to the

[[Page 134]]

project, based on the particular circumstances of any assisted tenant in 
the absence of any Housing Assistance Payment.
    Tenant Rent. The monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total Tenant Payment. The monthly amount defined in, and determined 
in accordance with part 813 of this chapter.
    Utility Allowance. As defined in part 813 of this chapter made or 
approved by HUD.
    Utility Reimbursement. As defined in part 813 of this chapter.
    Very Low-Income Family. As defined in part 813 of this chapter.

[42 FR 5603, Jan. 28, 1977, as amended at 42 FR 63745, Dec. 19, 1977; 49 
FR 19948, May 10, 1984; 50 FR 38795, Sept. 25, 1985; 53 FR 3368, Feb. 5, 
1988; 61 FR 5213, Feb. 9, 1996; 63 FR 46579, Sept. 1, 1998]



Sec. 886.103  Allocation of Section 8 contract authority.

    HUD will allocate to field offices contract authority for Section 8 
project commitments for metropolitan and nonmetropolitan areas in 
conformance with Section 213(d) of the HCD Act.



Sec. 886.104  Invitations to participate.

    (a) HUD shall identify Eligible Projects which are most likely to 
meet the selection criteria set forth in Sec. 886.117, and shall invite 
the Owners of such projects to make application for Section 8 assistance 
under this part.
    (b) An Owner of an Eligible Project who has not been notified 
pursuant to paragraph (a) of this section may also make application for 
such assistance.



Sec. 886.105  Content of application; Disclosure.

    Applications shall be in the form and in accordance with the 
instructions prescribed by HUD, and shall include:
    (a) Information on Gross Income, family size, and amount of rent 
paid to the project by Families currently in residence;
    (b) Information on vacancies and turnover;
    (c) Estimate of effect of the availability of Section 8 assistance 
on marketability of units in the project;
    (d) For projects having a history of financial default, financial 
difficulties or deferred maintenance, a plan and a schedule for 
remedying such defaulted or deferred obligations;
    (e) Total number of units by unit size (by bedroom count) for which 
Section 8 assistance is requested; and
    (f) Affirmative Fair Housing Marketing Plan on a HUD-prescribed 
form.

To be eligible to become an owner of housing assisted under this 
subpart, the owner must meet the disclosure and verification 
requirements for Social Security and Employer Identification Numbers, as 
provided by part 5, subpart B, of this title.

(Approved by the Office of Management and Budget under control number 
2502-0204)

[42 FR 5603, Jan. 28, 1977, as amended at 54 FR 39708, Sept. 27, 1989; 
61 FR 11118, Mar. 18, 1996]



Sec. 886.106  Notices.

    (a) Within 10 days of receipt of each completed application by the 
HUD field office, the field office shall send to the chief executive 
officer of the unit of general local government in which the proposed 
assistance is to be provided, a notification in a form prescribed by HUD 
for purposes of compliance with Section 213 of the HCD Act.
    (b) If an application is approved, HUD shall send to the Owner a 
notice of application approval. If an application can be approved only 
on certain conditions, HUD shall notify the Owner of the conditions and 
specify a time limit by which those conditions must be met. If an 
application is disapproved, HUD shall so notify the Owner by letter 
indicating the reasons for disapproval.

[42 FR 5603, Jan. 28, 1977, as amended at 53 FR 3368, Feb. 5, 1988]



Sec. 886.107  Approval of applications.

    HUD shall approve applications, after considering all pertinent 
information including comments (if any) received during the comment 
period from the unit of general local government, based on the following 
criteria:
    (a) The Owner's Affirmative Fair Housing Marketing Plan is 
approvable.

[[Page 135]]

    (b) The HUD-approved unit rents are approvable within the Fair 
Market Rent limitations contained in Sec. 886.110.
    (c) The residential units meet the housing quality standards set 
forth in Sec. 886.113, except for such variations as HUD may approve. 
Local climatic or geological conditions or local codes are examples 
which may justify such variations.
    (d) A significant number of residents, or potential residents, in 
the case of projects having a vacancy rate over 10 percent, are eligible 
for and in need of Section 8 assistance.
    (e) The infusion of Section 8 assistance into the subject project 
should not affect other HUD-related multifamily housing within the same 
neighborhood in a substantially adverse manner. Examples of such adverse 
effects are (1) substantial move-outs from nearby HUD-related projects 
precipitated by much lower rents in the subject project, or (2) 
substantial diversion of prospective applicants from such projects to 
the subject project.
    (f) A first priority is given to HUD-Insured or Secretary-Held 
projects with presently serious financial problems, which are likely to 
result in a claim on the insurance fund in the near future. To the 
extent resources remain available, assistance also may be provided to 
projects with potentially serious financial problems which, on the basis 
of financial and/or management analysis, appear to have a high 
probability of producing a claim on the insurance funds within 
approximately the next five years.
    (g) The infusion of Section 8 assistance into the subject project 
solves an identifiable problem, e.g., high vacancies and/or turnover, 
and provides a reasonable assurance of long-term project viability. A 
determination of long-term viability shall be based upon the following 
considerations:
    (1) The project is not subject to any serious problems that are non-
economic in nature. Examples of such problems are poor location, 
structural deficiencies or disinterested ownership.
    (2) The Owner is in substantial compliance with the Regulatory 
Agreement. Owners are not diverting project funds for personal use. No 
dividends are being paid during any period of financial difficulty.
    (3) The management agent is in substantial compliance with the 
management agreement. The current management agreement has been approved 
by HUD. Financial records are adequately kept. Occupancy requirements 
are being met. Marketing and maintenance programs are being carried out 
in an adequate manner, based upon available financial resources.
    (4) The project's problems are primarily the result of factors 
beyond the control of the present ownership and management.
    (5) The major problems are traceable to an inadequate cash flow.
    (6) The infusion of Section 8 assistance will solve the cash flow 
problem by:
    (i) Making it possible to grant needed rent increases;
    (ii) Reducing turnover, vacancies and collection losses.
    (7) The Owner's plan for remedying any deferred maintenance, 
financial problems, or other problems is realistic and achievable. There 
is positive evidence that the Owner will carry out the plan. Examples of 
such evidence are the Owner's past performance in correcting problems 
and, in the case of profit-motivated Owners, any cash contributions made 
to correct project problems.
    (h) Any plan submitted pursuant to Sec. 886.105(d) is found by HUD 
to be adequate.



Sec. 886.108  Maximum annual contract commitment.

    (a) Number of units assisted. Based on analysis of housing 
assistance needs of families residing or expected to reside in the 
project, HUD shall determine the number of units to be assisted up to 
100 percent of the units in the project. All units currently assisted 
under section 23 or section 8 shall be converted and included under the 
Contract pursuant to this subpart, unless the parties to the Lease or 
Contract object to such conversion. Units assisted under section 101 of 
the Housing and Urban Development Act of 1965 or under section 236(f)(2) 
of the National Housing Act shall not be included under the Contract 
pursuant to this

[[Page 136]]

subpart unless the Owner proposes and HUD approves such conversion.
    (b) Maximum annual Contract commitment. The maximum annual housing 
assistance payments that may be committed under the Contract shall be 
that amount which, when paid annually over the term of the Contract, is 
determined by HUD to be sufficient to provide for all housing assistance 
payments and fees under the Contract.
    (c) Project Account. In order to assure that housing assistance 
payments will be increased on a timely basis to cover increases in 
Contract Rents or decreases in Family Incomes:
    (1) A Project Account shall be established and maintained, in an 
amount as determined by the Secretary consistent with his 
responsibilities under section 8(c)(6) of the Act, out of amounts by 
which the maximum annual Contract commitment per year exceeds amounts 
paid under the Contract for any year. This account shall be established 
and maintained by HUD for each project as a specifically identified and 
segregated account, and payment shall be made therefrom only for the 
purposes of (i) housing assistance payments, and (ii) other costs 
specifically authorized or approved by the Secretary.
    (2) Whenever a HUD-approved estimate of required housing assistance 
payments for a fiscal year exceeds the maximum annual Contract 
commitment, and would cause the amount in the Project Account to be less 
than an amount equal to 40 percent of such maximum annual Contract 
commitment, HUD shall, within a reasonable period of time, take such 
additional steps authorized by Section 8(c)(6) of the Act as may be 
necessary to carry out this assurance, including (as provided in that 
section of the Act) ``the allocation of a portion of new authorizations 
for the purpose of amending housing assistance contracts.''



Sec. 886.109  Housing assistance payments to owners.

    (a) General. Housing Assistance Payments shall be paid to Owners for 
units under lease by eligible families, in accordance with the Contract 
and as provided in this section. These Housing Assistance Payments will 
cover the difference between the Contract Rent and the Tenant Rent. 
Where applicable, the Utility Reimbursement will be paid to the Family 
as an additional Housing Assistance Payment. The Contract will provide 
that the Owner will make this payment on behalf of HUD. Funds will be 
paid to the Owner in trust solely for the purpose of making this 
additional payment. If the Family and the utility company consent, the 
Owner may pay the Utility Reimbursement jointly to the Family and the 
utility company or directly to the utility company.
    (b) No Section 8 assistance may be provided for any unit occupied by 
an Owner; cooperatives are considered rental housing.
    (c) If an Eligible Family vacates its unit (other than as a result 
of action by the Owner which is in violation of the Lease or the 
Contract or any applicable law), the Owner shall receive housing 
assistance payments in the amount of 80 percent of the Contract Rent for 
a vacancy period not exceeding 60 days: Provided, however, That if the 
Owner collects any of the Family's share of the rent for this period, or 
applies security deposits for unpaid rent, in amounts which when added 
to the 80 percent payments, results in more than the Contract Rent, such 
excess shall be payable to HUD or as HUD may direct. (See also 
Sec. 886.116.) The Owner shall not be entitled to any payment under this 
paragraph unless he:
    (1) Immediately upon learning of the vacancy, has notified HUD of 
the vacancy or prospective vacancy and the reasons for the vacancy, and
    (2) Has taken and continues to take all feasible actions to fill the 
vacancy including, but not limited to, contacting applicants on his 
waiting list (if any), and advising them of the availability of the 
unit, and
    (3) Has not rejected any eligible applicant except for good cause.

[42 FR 5603, Jan. 28, 1977, as amended at 49 FR 19948, May 10, 1984]



Sec. 886.110  Contract rents.

    (a) The sum of the Contract Rents plus an Allowance for Utilities 
and Other Services shall not exceed the published Section 8 Fair Market 
Rents for Existing Housing, except that they may be exceeded by:

[[Page 137]]

    (1) Up to 10 percent if the Field Office Director determines that 
special circumstances warrant such higher rents, or
    (2) By up to 20 percent where the Regional Administrator determines 
that special circumstances warrant such higher rents, and in either 
case, such higher rents meet the test of reasonableness in paragraph (c) 
of this section.
    (b) In the case of any project completed not more than six years 
prior to the application for assistance under that part, or in the case 
of units converted to Section 8 which were previously assisted under 
Section 101 of the Housing and Urban Development Act of 1965 or Section 
236(f)(2) of the National Housing Act, contract rents plus any allowance 
for utilities and other services may be as high as 75 percent of the 
published Section 8 Fair Market Rents for New Construction, which 
limitation may be increased: (1) By up to 10 percent if the Field Office 
Director determines that special circumstances warrant such higher 
rents, or (2) by up to 20 percent where the Regional Administrator 
determines that special circumstances warrant such higher rents, and in 
either case, such higher rents meet the test of reasonableness contained 
in paragraph (c) of this section. The project shall be converted using 
the current HUD approved rent level established pursuant to 24 CFR 
207.19(e)(2)(i).
    (c) In any case, HUD shall determine and so certify that the 
Contract Rents for the project do not exceed rents which are reasonable 
for the location, quality, amenities, facilities, and management and 
maintenance services in relation to the rents paid for comparable units 
in the private unassisted market, nor shall the Contract Rents exceed 
the rents charged by the Owner to unassisted Families for comparable 
units. HUD shall maintain for three years all certifications and 
relevant documentation under this paragraph (c).

[42 FR 5603, Jan. 28, 1977, as amended at 48 FR 36103, Aug. 9, 1983; 48 
FR 56949, Dec. 27, 1983]



Sec. 886.111  Term of contract.

    A Contract may be for an initial term of not more than 5 years, 
renewable for successive 5 year terms by agreement between HUD and the 
Owner: Provided, That the total Contract term, including renewals, shall 
not exceed 15 years.



Sec. 886.111a  Notice upon contract expiration.

    (a) The Contract will provide that the owner will notify each 
assisted family, at least 90 days before the end of the Contract term, 
of any increase in the amount the family will be required to pay as rent 
which may occur as a result of its expiration. If the Contract is to be 
renewed but with a reduction in the number of units covered by it, this 
notice shall be given to each family who will not longer be assisted 
under the Contract.
    (b) The notice provided for in paragraph (a) of this section shall 
be accomplished by: (1) Sending a letter by first class mail, properly 
stamped and addressed, to the family at its address at the project, with 
a proper return address, and (2) serving a copy of the notice on any 
adult person answering the door at the leased dwelling unit, or if no 
adult responds, by placing the notice under or through the door, if 
possible, or else by affixing the notice to the door. Service shall not 
be considered to be effective until both required notices have been 
accomplished. The date on which the notice shall be considered to be 
received by the family shall be the date on which the owner mails the 
first class letter provided for in this paragraph, or the date on which 
the notice provided for in this paragraph is properly given, whichever 
is later.
    (c) The notice shall advise each affected family that, after the 
expiration date of the Contract, the family will be required to bear the 
entire cost of the rent and that the owner will be free (to the extent 
the project is not otherwise regulated by HUD) to alter the rent without 
HUD approval, but subject to any applicable requirements or restrictions 
under the lease or under State or local law. The notice shall also 
state:

[[Page 138]]

(1) The actual (if known) or the estimated rent which will be charged 
following the expiration of the Contract; (2) the difference between the 
rent and the Total Tenant Payment toward rent under the Contract; and 
(3) the date the Contract will expire.
    (d) The owner shall give HUD a certification that families have been 
notified in accordance with this section with an example of the text of 
the notice attached.
    (e) This section applies to all Contracts executed, renewed or 
amended on or after October 1, 1984.

[49 FR 31285, Aug. 6, 1984]



Sec. 886.112  Rent adjustments.

    This section applies to adjustments of the dollar amount stated in 
the Contract as the Maximum Unit Rent. It does not apply to adjustments 
in rents payable to Owners as required by HUD in connection with its 
mortgage insurance and/or lending functions.
    (a) Funding of adjustments. Housing Assistance Payments will be made 
in increased amounts commensurate with Contract Rent adjustments up to 
the maximum annual amount of housing assistance payments specified in 
the Contract pursuant to Sec. 886.108(b).
    (b) Annual adjustments. The contract rents may be adjusted annually, 
or more frequently, at HUD's option, either (1) on the basis of a 
written request for a rent increase submitted by the owner and properly 
supported by substantiating evidence, or (2) by applying, on each 
anniversary date of the contract, the applicable Automatic Annual 
Adjustment Factor most recently published by HUD in the Federal Register 
in accordance with 24 CFR part 888, subpart B. Published Automatic 
Annual Adjustment Factors will be reduced appropriately by HUD where 
utilities are paid directly by Families. If HUD requires that the owner 
submit a written request, HUD, within a reasonable time, shall approve a 
rental schedule that is necessary to compensate for any increase in 
taxes (other than income taxes) and operating and maintenance costs over 
which owners have no effective control, or shall deny the increase 
stating the reasons therefor. Increases in taxes and maintenance and 
operating costs shall be measured against levels of such expenses in 
comparable assisted and unassisted housing in the area to ensure that 
adjustments in the Contract Rents shall not result in material 
differences between the rents charged for assisted and comparable 
unassisted units. Contract Rents may be adjusted upward or downward as 
may be appropriate; however, in no case shall the adjusted rents be less 
than the contract rents on the effective date of the contract.
    (c) Special additional adjustments. Special additional adjustments 
shall be granted, when approved by HUD, to reflect increases in the 
actual and necessary expenses of owning and maintaining the Contract 
units which have resulted from substantial general increases in real 
property taxes, utility rates or similar costs (i.e., assessment, and 
utilities not covered by regulated rates), but only if and to the extent 
that the Owner clearly demonstrates that such general increases have 
caused increases in the Owner's operating costs which are not adequately 
compensated for by automatic annual adjustments. The Owner shall submit 
to HUD financial statements which clearly support the increase.
    (d) Overall limitation. Notwithstanding any other provisions of the 
subpart, adjustments as provided in this section shall not result in 
material differences between the rents charged for assisted and 
comparable unassisted units, as determined by HUD.
    (e) Incorporation of rent adjustments. Any adjustment in Maximum 
Unit Rents shall be incorporated into the Contract by a dated addendum 
to the Contract establishing the effective date of the adjustment.

[42 FR 5603, Jan. 28, 1977, as amended at 45 FR 59149, Sept. 8, 1980; 47 
FR 24700, June 8, 1982]



Sec. 886.113  Physical condition standard; physical inspection requirements.

    (a) General. Housing used in this program must be maintained and 
inspected in accordance with the requirements in 24 CFR part 5, subpart 
G.
    (b) Space and security. In addition to the standards in 24 CFR part 
5, subpart G, the dwelling unit must have a living room, a kitchen area, 
and a bathroom. The dwelling unit must have at least

[[Page 139]]

one bedroom or living/sleeping room for each two persons.
    (c)-(h)  [Reserved]
    (i) Lead-based paint--(1) Purpose and applicability. The purpose of 
this paragraph is to implement the provisions of section 302 of the 
Lead-Based Paint Poisoning Prevention Act, 42 U.S.C. 4822, by 
establishing procedures to eliminate as far as practicable the hazards 
of lead-based paint poisoning with respect to existing housing units for 
which application for assistance is made under this subpart. This 
paragraph is promulgated under the authorization granted in 24 CFR 
35.24(b)(4) and supersedes, with respect to all housing to which it 
applies, the requirements prescribed by subpart C of 24 CFR part 35. The 
requirements of this paragraph do not apply to 0-bedroom units. The 
requirements of paragraph (i)(4) of this section are applicable to units 
for which applications are approved on or after May 1, 1987. The 
requirements of subpart A of 24 CFR part 35 apply to all units 
constructed prior to 1978 covered by a Housing Assistance Payments 
Contract under this subpart. This section does not apply to projects for 
the elderly or handicapped (except for units housing children under 
seven years of age).
    (2) Definitions--Applicable surface. All intact and nonintact 
interior and exterior painted surfaces of a residential structure.
    Chewable surface. All chewable protruding painted surfaces up to 
five feet from the floor or ground, which are readily accessible to 
children under seven years of age, e.g., protruding corners, windowsills 
and frames, doors and frames, and other protruding woodwork.
    Defective paint surface. Paint on applicable surfaces that is 
cracking, scaling, chipping, peeling or loose.
    Elevated blood lead level or EBL. Excessive absorption of lead, that 
is, a confirmed concentration of lead in whole blood of 25 ug/dl 
(micrograms of lead per deciliter of whole blood) or greater.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1 mg/cm\2\.
    (3) Defective paint. Residential units which were constructed prior 
to 1978 shall be inspected for defective paint surfaces. If defective 
paint surfaces are found, treatment as required by 24 CFR 
35.24(b)(2)(ii) shall be required as a condition of satisfaction of the 
requirements of Sec. 886.107(c).
    (4)(i) Chewable surfaces. In the case of a residential structure 
constructed prior to 1978, a random sample of dwelling units shall be 
tested for lead-based paint on chewable surfaces. Ten units shall be 
tested in projects with twenty or more units, and six units shall be 
tested in projects with fewer than twenty units, together with a sample 
of common areas and exterior applicable surfaces. Common areas included 
in the sample should include non-dwelling facilities commonly used by 
children under seven years of age, such as day care centers. All 
chewable surfaces in selected units shall be tested. If none of the 
tested units, common areas or exterior applicable surfaces contain lead-
based paint, the project may be considered free of lead-based paint, and 
no further testing or abatement action will be required. If lead-based 
paint is found in any units in the sample, all assisted units in the 
project are required to be tested. If lead-based paint is found in any 
common areas, all common areas in the project are required to be tested. 
If lead-based paint is found in any exterior applicable surface, all 
exterior applicable surfaces in the projects are required to be tested. 
Testing shall be performed using an X-ray fluorescence analyzer (XRF) or 
other method approved by HUD. Test readings of 1 mg/cm\2\ or higher 
using an XRF shall be considered positive for presence of lead-based 
paint. Testing of chewable surfaces shall be performed by a State or 
local health or housing agency, an inspector certified or regulated by 
the State or local health or housing agency, or an organization 
recognized by HUD. The testing entity shall certify to the results of 
the test. The Owner shall be responsible for obtaining these testing 
services. Where lead-based paint on chewable surfaces is identified, the 
entire interior or exterior chewable surface shall be treated. Covering 
or removal of the paint surface in accordance with 24 CFR 35.24

[[Page 140]]

(b)(2)(ii) shall be required as a condition of satisfaction of the 
requirements of Sec. 886.107(c).
    (ii) EBL Child. In the case of a residential structure constructed 
prior to 1978, if the owner is presented with test results that indicate 
a child seven years of age or younger living in a unit has an elevated 
blood lead level or EBL, the owner must test the unit occupied by the 
child and if such test is positive for lead-based paint, abate the unit 
surfaces in accordance with the methods set out at 24 CFR 
35.24(b)(2)(ii) or choose not to test and abate all the unit surfaces.
    (iii) Abatement without testing. In lieu of the procedures set forth 
in paragraphs (i)(3) and (4) of this section, in the case of a 
residential structure constructed prior to 1978, the owner may forego 
testing and abatement, and abate all applicable surfaces in accordance 
with the methods set out at 24 CFR 35.24(b)(2)(iii).
    (5) Tenant protection. The Owner shall take appropriate action to 
protect tenants from hazards associated with abatement procedures.
    (j)-(m)  [Reserved]
    (n) Congregate housing. In addition to the foregoing standards, the 
following standards apply to congregate housing:
    (1) The unit shall contain a refrigerator of appropriate size.
    (2) The central dining facility (and kitchen facility, if any) shall 
contain suitable space and equipment to store, prepare and serve food in 
a sanitary manner, and there shall be adequate facilities and services 
for the sanitary disposal of food wastes and refuse, including 
facilities for temporary storage where necessary (e.g., garbage cans).

[42 FR 5603, Jan. 28, 1977, as amended at 52 FR 1895, Jan. 15, 1987; 52 
FR 9828, Mar. 27, 1987; 53 FR 20802, June 6, 1988; 57 FR 33852, July 30, 
1992; 63 FR 46579, Sept. 1, 1998]



Sec. 886.114  Equal opportunity requirements.

    Participation in the program authorized in this subpart requires 
compliance with (a) Title VI of the Civil Rights Act of 1964, Title VIII 
of the Civil Rights Act of 1968, Executive Orders 11063 and 11246, and 
section 3 of the Housing and Urban Development Act of 1968; and (b) all 
rules, regulations, and requirements issued pursuant thereto.



Sec. 886.115  [Reserved]



Sec. 886.116  Security and utility deposits.

    (a) An Owner may require Families to pay a security deposit in an 
amount up to, but not more than, one month's Gross Family Contribution. 
If a Family vacates its unit, the Owner, subject to State and local 
laws, may utilize the deposit as reimbursement for any unpaid rent or 
other amount owed under the Lease. If the Family has provided a security 
deposit and it is insufficient for such reimbursement, the Owner may 
claim reimbursement from HUD, not to exceed an amount equal to the 
remainder of one month's Contract Rent. Any reimbursement under this 
section shall be applied first toward any unpaid rent. If a Family 
vacates the unit owing no rent or other amount under the Lease or if 
such amount is less than the amount of the security deposit, the Owner 
shall refund the full amount or the unused balance, as the case may be, 
to the Family.
    (b) In those jurisdictions where interest is payable by the Owner on 
security deposits, the refunded amount shall include the amount of 
interest payable. All security deposit funds shall be deposited by the 
Owner in a segregated bank account, and the balance of this account, at 
all times, shall be equal to the total amount collected from tenants 
then in occupancy, plus any accrued interest. The Owner shall comply 
with all State and local laws regarding interest payments on security 
deposits.
    (c) Families shall be expected to obtain the funds to pay security 
and utility deposits, if required, from their own resources and/or other 
private or public sources.



Sec. 886.117  [Reserved]



Sec. 886.118  Amount of housing assistance payments in projects receiving other HUD assistance.

    (a) For any Section 221(d)(3) BMIR, Section 236, or Section 202 
project, the Housing Assistance Payment shall be the amount by which the 
rent payable by the eligible Family under Section 8 is less than the 
subsidized rent (which

[[Page 141]]

subsidy shall not be reduced by reason of any Section 8 assistance).
    (b) In no event may any tenant benefit from more than one of the 
following subsidies: Rent Supplements, Section 236 deep subsidies, 
Section 23 leasing assistance, and Section 8 housing assistance.

[42 FR 5603, Jan. 28, 1977, as amended at 49 FR 19948, May 10, 1984]



Sec. 886.119  Responsibilities of the owner.

    (a) The Owner shall be responsible for management and maintenance of 
the project in conformance with requirements of the Regulatory 
Agreement. These responsibilities shall include but not be limited to:
    (1) Payment for utilities and services (unless paid directly by the 
Family), insurance and taxes;
    (2) Performance of all ordinary and extraordinary maintenance;
    (3) Performance of all management functions, including the taking of 
applications; determining eligibility of applicants in accordance with 
24 CFR parts 812 and 813; selection of families, including verification 
of income, provision of Federal selection preferences in accordance with 
24 CFR part 5, obtaining and verifying Social Security Numbers submitted 
by applicants (as provided by part 5, subpart B, of this title), 
obtaining signed consent forms from applicants for the obtaining of wage 
and claim information from State Wage Information Collection Agencies 
(as provided in part 5, subpart B, of this title), and other pertinent 
requirements; and determination of the amount of tenant rent in 
accordance with HUD established schedules and criteria.
    (4) Collection of Tenant Rents;
    (5) Termination of tenancies, including evictions;
    (6) Preparation and furnishing of information required under the 
Contract;
    (7) Reexamination of family income and composition, redetermination, 
as appropriate, of the amount of Tenant Rent and the amount of housing 
assistance payment in accordance with part 813 of this chapter; 
collection of rent; obtaining and verifying participant Social Security 
Numbers, as provided by part 5, subpart B, of this title; and obtaining 
signed consent forms from participants for the obtaining of wage and 
claim information from State Wage Information Collection Agencies, as 
provided by part 5, subpart B, of this title.
    (8) Redeterminations of amount of Tenant Rent and amount of Housing 
Assistance Payment in accordance with part 813 of this chapter as a 
result of an adjustment by HUD of any applicable Utility Allowance; and
    (9) Compliance with equal opportunity requirements.
    (b) In the event of a financial default under the project mortgage, 
HUD shall have the right to make subsequent Housing Assistance Payments 
to the mortgagee until such time as the default is cured, or, at the 
option of the mortgagee and subject to HUD approval, until some other 
agreed-upon time.
    (c) Subject to HUD approval, any Owner may contract with any private 
or public entity to perform for a fee the services required by paragraph 
(a) of this section: Provided, That such contract shall not shift any of 
the Owner's responsibilities or obligations.

(Approved by the Office of Management and Budget under control number 
2502-0204)

[42 FR 5603, Jan. 28, 1977, as amended at 49 FR 19948, May 10, 1984; 51 
FR 11227, Apr. 1, 1986; 53 FR 847, Jan. 13, 1988; 53 FR 1165, Jan. 15, 
1988; 53 FR 3368, Feb. 5, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39708, 
Sept. 27, 1989; 56 FR 7542, Feb. 22, 1991; 60 FR 14846, Mar. 20, 1995; 
61 FR 9047, Mar. 6, 1996; 61 FR 11119, Mar. 18, 1996]



Sec. 886.120  Responsibility for contract administration.

    (a) HUD is responsible for administration of the Contract. HUD may 
contract with another entity for the performance of some or all of its 
Contract administration functions.
    (b) The Contract shall contain a provision to the effect (1) that if 
HUD determines that the Owner is not in compliance under the Contract, 
HUD shall notify the Owner of the actions required to be taken to 
restore compliance and of the remedies to be applied by HUD including 
abatement of Housing Assistance Payments and recovery of overpayments, 
where appropriate; and (2) that if he fails to comply, HUD

[[Page 142]]

has the right to terminate the Contract or to take other corrective 
action. A default under the Regulatory Agreement shall be treated as 
non-compliance under the Contract.



Sec. 886.121  Marketing.

    (a) Marketing of units and selection of Families by the Owner shall 
be in accordance with the Owner's HUD-approved Affirmative Fair Housing 
Marketing Plan, if required, and with all regulations relating to fair 
housing advertising including use of the equal opportunity logotype, 
statement, and slogan in all advertising. Projects shall be managed and 
operated without regard to race, color, creed, religion, sex, or 
national origin.
    (b) The Owner shall comply with the applicable provisions of the 
Contract, this subpart A, and the procedures of 24 CFR part 812 in 
taking applications, selecting families, and all related determinations.
    (c) For the informal hearing provisions related to denial of 
assistance based upon failure to establish citizenship or eligible 
immigration status, see 24 CFR 812.9, and also 24 CFR 812.10 for 
provisions concerning certain assistance for mixed families (families 
whose members include those with eligible immigration status, and those 
without eligible immigration status) in lieu of denial of assistance.

[42 FR 5603, Jan. 28, 1977, as amended at 53 FR 1166, Jan. 15, 1988; 53 
FR 6601, Mar. 2, 1988; 60 FR 14846, Mar. 20, 1995]



Sec. 886.122  [Reserved]



Sec. 886.123  Maintenance, operation and inspections.

    (a) Maintenance and operation. The Owner shall maintain and operate 
the project so as to provide Decent, Safe, and Sanitary housing and he 
shall provide all the services, maintenance and utilities which he 
agrees to provide under the Contract, subject to abatement of housing 
assistance payments or other applicable remedies if he fails to meet 
these obligations.
    (b) Inspection prior to occupancy. Prior to occupancy of any unit by 
a Family, the Owner and the Family shall inspect the unit and both shall 
certify, on forms prescribed by HUD that they have inspected the unit 
and have determined it to be Decent, Safe, and Sanitary in accordance 
with the criteria provided in the prescribed forms. Copies of these 
reports shall be kept on file by the Owner for at least three years.
    (c) Periodic inspections. HUD will inspect or cause to be inspected 
a reasonable sample of contract units at least annually and at such 
other times as may be necessary to assure that the owner is meeting his 
contractual obligations. HUD will take into account complaints by 
occupants and any other information coming to its attention in 
scheduling inspections and shall notify the owner of its determination.
    (d) Units not Decent, Safe, and Sanitary. If HUD notifies the Owner 
that he has failed to maintain a dwelling unit in Decent, Safe, and 
Sanitary condition and the Owner fails to take corrective action within 
the time prescribed in the notice, HUD may exercise any of its rights or 
remedies under the Contract, including abatement of housing assistance 
payments, even if the Family continues to occupy the unit.

[42 FR 5603, Jan. 28, 1977, as amended at 43 FR 60157, Dec. 26, 1978]



Sec. 886.124  Reexamination of family income and composition.

    (a) Regular reexaminations. The owner must reexamine the income and 
composition of all families at least once each year. Upon verification 
of the information, the owner must make appropriate adjustments in the 
Total Tenant Payment in accordance with part 813 of this chapter and 
determine whether the family's unit size is still appropriate. The owner 
must adjust Tenant Rent and the Housing Assistance Payment to reflect 
any change in Total Tenant Payment and carry out any unit transfer 
required by HUD. At the time of the annual reexamination of family 
income and composition, the owner must require the family to disclose 
and verify Social Security Numbers. For requirements regarding the 
signing and submitting of consent forms by families for the obtaining of 
wage and claim information from State Wage Information Collection 
Agencies, see part 5, subpart B, of this title. At the first regular 
reexamination after June 19, 1995, the owner shall follow the

[[Page 143]]

requirements of 24 CFR part 812 concerning obtaining and processing 
evidence of citizenship or eligible immigration status of all family 
members. Thereafter, at each regular reexamination, the owner shall 
follow the requirements of 24 CFR part 812 concerning verification of 
the immigration status of any new family member.
    (b) Interim reexaminations. The family must comply with provisions 
in its lease regarding interim reporting of changes in income. If the 
owner receives information concerning a change in the family's income or 
other circumstances between regularly scheduled reexaminations, the 
owner must consult with the family and make any adjustments determined 
to be appropriate. Any change in the family's income or other 
circumstances that results in an adjustment in the Total Tenant Payment, 
Tenant Rent and Housing Assistance Payment must be verified. See part 5, 
subpart B, of this title for the requirements for the disclosure and 
verification of Social Security Numbers at interim reexaminations 
involving new family members. For requirements regarding the signing and 
submitting of consent forms by families for the obtaining of wage and 
claim information from State Wage Information Collection Agencies, see 
part 5, subpart B, of this title. At any interim reexamination after 
June 19, 1995, when there is a new family member, the owner shall follow 
the requirements of 24 CFR part 812 concerning obtaining and processing 
evidence of citizenship or eligible immigration status of the new family 
member.
    (c) Continuation of housing assistance payments. A family's 
eligibility for housing assistance payments will continue until the 
Total Tenant Payment equals the Gross Rent. The termination of 
eligibility will not affect the family's other rights under its lease, 
nor will such termination preclude the resumption of payments as a 
result of later changes in income, rents, or other relevant 
circumstances during the term of the Contract. However, eligibility also 
may be terminated in accordance with program requirements, for such 
reasons as failure to submit requested verification information, 
including failure to meet the disclosure and verification requirements 
for Social Security Numbers, as provided by part 5, subpart B, of this 
title, or failure to sign and submit consent forms for the obtaining of 
wage and claim information from State Wage Information Collection 
Agencies, as provided by part 5, subpart B, of this title. For 
provisions requiring termination of assistance for failure to establish 
citizenship or eligible immigration status, see 24 CFR 812.9 and also 24 
CFR 812.10 for provisions concerning certain assistance for mixed 
families (families whose members include those with eligible immigration 
status, and those without eligible immigration status) in lieu of 
termination of assistance, and for provisions concerning deferral of 
termination of assistance

[56 FR 7542, Feb. 22, 1991, as amended at 60 FR 14846, Mar. 20, 1995; 61 
FR 11119, Mar. 18, 1996]



Sec. 886.125  Overcrowded and underoccupied units.

    If HUD determines that a contract unit assisted under this part is 
not Decent, Safe, and Sanitary by reason of increase in Family size or 
that a Contract unit is larger than appropriate for the size of the 
Family in occupancy, housing assistance payments with respect to such 
unit will not be abated, unless the Owner fails to offer the Family a 
suitable unit as soon as one becomes vacant and ready for occupancy. The 
Owner may receive housing assistance payments for the vacated unit if he 
complies with the requirements of Sec. 886.109.



Sec. 886.126  Adjustment of utility allowances.

    When the owner requests HUD approval of adjustment in Contract Rents 
under Sec. 886.112, an analysis of the project's Utility Allowances must 
be included. Such data as changes in utility rates and other facts 
affecting utility consumption should be provided as part of this 
analysis to permit appropriate adjustments in the Utility Allowances. In 
addition, when approval of a utility rate change would result in a 
cumulative increase of 10 percent or more in the most recently approved

[[Page 144]]

Utility Allowances, the owner must advise the Secretary and request 
approval of new Utility Allowances.

(Approved by the Office of Management and Budget under control numbers 
2502-0352 and 2502-0354)

[51 FR 21863, June 16, 1986]



Sec. 886.127  Lease requirements.

    (a) Term of lease. (1) The term of a lease, including a new lease or 
a lease amendment, executed by the owner and the family must be for at 
least one year, or the remaining term of the contract if the remaining 
term of the contract is less than one year.
    (2) During the first year of the lease term, the owner may not 
terminate the tenancy for ``other good cause'' under 24 CFR 247.3(a)(3), 
unless the termination is based on family malfeasance or nonfeasance. 
For example, during the first year of the lease term, the owner may not 
terminate the tenancy for ``other good cause'' based on the failure by 
the family to accept the offer of a new lease.
    (3) The lease may contain a provision permitting the family to 
terminate the lease on 30 days advance written notice to the owner. In 
the case of a lease term for more than one year, the lease must contain 
this provision.
    (b) Required and prohibited provisions. The lease between the owner 
and the family must comply with HUD regulations and requirements, and 
must be in the form required by HUD. The lease may not contain any of 
the following types of prohibited provisions:
    (1) Admission of guilt. Agreement by the family (i) to be sued, (ii) 
to admit guilt, or (iii) to a judgment in favor of the owner, in a court 
proceeding against the family in connection with the lease.
    (2) Treatment of family property. Agreement by the family that the 
owner may take or hold family property, or may sell family property, 
without notice to the family and a court decision on the rights of the 
parties.
    (3) Excusing owner from responsibility. Agreement by the family not 
to hold the owner or the owner's agents responsible for any action or 
failure to act, whether intentional or negligent.
    (4) Waiver of notice. Agreement by the family that the owner does 
not need to give notice of a court proceeding against the family in 
connection with the lease, or does not need to give any notice required 
by HUD.
    (5) Waiver of court proceeding for eviction. Agreement by the family 
that the owner may evict the family (i) without instituting a civil 
court proceeding in which the family has the opportunity to present a 
defense, or (ii) before a decision by the court on the rights of the 
parties.
    (6) Waiver of jury trial. Agreement by the family to waive any right 
to a trial by jury.
    (7) Waiver of appeal. Agreement by the family to waive the right to 
appeal, or to otherwise challenge in court, a court decision in 
connection with the lease.
    (8) Family chargeable with legal costs regardless of outcome. 
Agreement by the family to pay lawyer's fees or other legal costs of the 
owner, even if the family wins in a court proceeding by the owner 
against the family. (However, the family may have to pay these fees and 
costs if the family loses.)

[53 FR 3368, Feb. 5, 1988]



Sec. 886.128  Termination of tenancy.

    Part 247 of this title applies to the termination of tenancy and 
eviction of a family assisted under this subpart. For cases involving 
termination of tenancy because of a failure to establish citizenship or 
eligible immigration status, the procedures of 24 parts 247 and 812 
shall apply. The provisions of 24 CFR 812.10 concerning certain 
assistance for mixed families (families whose members include those with 
eligible immigration status, and those without eligible immigration 
status) in lieu of termination of assistance, and concerning deferral of 
termination of assistance also shall apply.

[60 FR 14846, Mar. 20, 1995]



Sec. 886.129  Leasing to eligible families.

    (a) Availability of units for occupancy by Eligible Families. During 
the term of the Contract, an owner shall make available for occupancy by 
eligible families the total number of units for which assistance is 
committed under

[[Page 145]]

the Contract. For purposes of this section, making units available for 
occupancy by eligible families means that the owner: (1) Is conducting 
marketing in accordance with Sec. 886.121; (2) has leased or is making 
good faith efforts to lease the units to eligible and otherwise 
acceptable families, including taking all feasible actions to fill 
vacancies by renting to such families; and (3) has not rejected any such 
applicant family except for reasons acceptable to HUD. If the owner is 
temporarily unable to lease all units for which assistance is committed 
under the Contract to eligible families, one or more units may be leased 
to ineligible families with the prior approval of HUD. Failure on the 
part of the owner to comply with these requirements is a violation of 
the Contract and grounds for all available legal remedies, including 
specific performance of the Contract, suspension or debarment from HUD 
programs, and reduction of the number of units under the Contract as set 
forth in paragraph (b) of this section.
    (b) Reduction of number of units covered by Contract. HUD may reduce 
the number of units covered by the Contract to the number of units 
available for occupancy by eligible families if:
    (1) The owner fails to comply with the requirements of paragraph (a) 
of this section; or
    (2) Notwithstanding any prior approval by HUD to lease such units to 
ineligible families, HUD determines that the inability to lease units to 
eligible families is not a temporary problem.
    (c) Restoration. HUD will agree to an amendment of the Contract to 
provide for subsequent restoration of any reduction made pursuant to 
paragraph (b) of this section if:
    (1) HUD determines that the restoration is justified by demand;
    (2) The owner otherwise has a record of compliance with his or her 
obligations under the Contract; and
    (3) Contract and budget authority are available.
    (d) Applicability. Paragraphs (a) and (b) of this section apply to 
Contracts executed on or after October 3, 1984.
    (e) Termination of assistance for failure to establish citizenship 
or eligible immigration status. If an owner subject to paragraphs (a) 
and (b) of this section is required to terminate housing assistance 
payments for the family in accordance with 24 CFR 812.9 because the 
owner determines that the entire family does not have U.S. citizenship 
or eligible immigration status, the owner may allow continued occupancy 
of the unit by the family without Section 8 assistance following the 
termination of assistance, or if the family constitutes a mixed family, 
as defined in 24 CFR 812.10, the owner shall comply with the provisions 
of 24 CFR 812.10 concerning assistance to mixed families, and deferral 
of termination of assistance.

[49 FR 31399, Aug. 7, 1984, as amended at 53 FR 847, Jan. 13, 1988; 53 
FR 6601, Mar. 2, 1988; 60 FR 14846, Mar. 20, 1995]



Sec. 886.130  HUD review of contract compliance.

    HUD will review project operation at such intervals as it deems 
necessary to ensure that the Owner is in full compliance with the terms 
and conditions of the Contract. Equal Opportunity review may be 
conducted with the scheduled HUD review or at any time deemed 
appropriate by HUD.



Sec. 886.131  Audit.

    (a) Where a State or local government is the eligible owner of a 
project, or is a contract administrator under Sec. 886.120, receiving 
financial assistance under this part, the audit requirements in 24 CFR 
part 44 shall apply.
    (b) Where a nonprofit organization is the eligible owner of a 
project, receiving financial assistance under this part, the audit 
requirements of 24 CFR part 45 shall apply.

[50 FR 39092, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986, as amended at 
57 FR 33257, July 27, 1992]



Sec. 886.132  Selection preferences.

    Sections 5.410 through 5.430 of this title govern the use of 
preferences in the selection of tenants under this subpart A.

[61 FR 9047, Mar. 6, 1996]

[[Page 146]]



Sec. 886.138  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, owners shall assure that they have taken all 
reasonable steps to minimize the displacement of persons (families, 
individuals, businesses, nonprofit organization, and farms) as a result 
of a project assisted under this part.
    (b) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided;
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporary housing and any increase in monthly 
rent/utility costs; and
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe, and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the building/
complex following completion of the rehabilitation; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A ``displaced 
person'' (as defined in paragraph (g) of this section) must be provided 
relocation assistance at the levels described in, and in accordance with 
the requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and 
implementing regulations at 49 CFR part 24. A ``displaced person'' shall 
be advised of his or her rights under the Fair Housing Act (42 U.S.C. 
3601-19), and, if the representative comparable replacement dwelling 
used to establish the amount of the replacement housing payment to be 
provided to a minority person is located in an area of minority 
concentration, such person also shall be given, if possible, referrals 
to comparable and suitable, decent, safe, and sanitary replacement 
dwellings not located in such areas.
    (d) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (e) Appeals. A person who disagrees with the Owner's determination 
concerning whether the person qualifies as a ``displaced person,'' or 
the amount of relocation assistance for which the person is found to be 
eligible, may file a written appeal of that determination with the 
owner. A low-income person who is dissatisfied with the owner's 
determination on such appeal may submit a written request for review of 
that determination to the HUD Field Office.
    (f) Responsibility of owner. (1) The owner shall certify (i.e., 
provide assurance of compliance, as required by 49 CFR part 24) that he 
or she will comply with the URA, the regulations at 49 CFR part 24, and 
the requirements of this section. The owner is responsible for such 
compliance notwithstanding and third party's contractual obligation to 
the owner to comply with these provisions.
    (2) The cost of providing required relocation assistance is an 
eligible project cost to the same extent and in the same manner as other 
project costs. Such costs also may be paid for with funds available from 
other sources.
    (3) The owner shall maintain records in sufficient detail to 
demonstrate compliance with the provisions of this section. The owner 
shall maintain data on the race, ethnic, gender, and handicap status of 
displaced persons.
    (g) Definition of displaced person. (1) for purposes of this 
section, the term displaced person means a person (family, individual, 
business, nonprofit organization, or farm) that moves from real 
property, or moves personal property from real property, permanently, as 
a direct result of acquisition, rehabilitation, or demolition for a 
project assisted under this part. This includes any permanent, 
involuntary move for

[[Page 147]]

an assisted project, including any permanent move from the real property 
that is made:
    (i) After notice by the owner to move permanently from the property, 
if the move occurs on or after the date of the submission of the 
application to HUD;
    (ii) Before submission of the application to HUD, if HUD determines 
that the displacement resulted directly from acquisition, 
rehabilitation, or demolition for the assisted project; or
    (iii) By a tenant-occupant of a dwelling unit, if any one of the 
following three situations occurs;
    (A) The tenant moves after execution of the Housing Assistance 
Payments Contract, and the move occurs before the tenant is provided 
written notice offering him or her the opportunity to lease and occupy a 
suitable, decent, safe, and sanitary dwelling in the same building/
complex, under reasonable terms and conditions, upon completion of the 
project. Such reasonable terms and conditions include a monthly rent and 
estimated average monthly utility costs that do not exceed the greater 
of:
    (1) The tenant's monthly rent before execution of the Housing 
Assistance Payments Contract and estimated average monthly utility 
costs; or
    (2) The total tenant payment, as determined under 24 CFR 813.107, if 
the tenant is low-income, or 30 percent of gross household income, if 
the tenant is not low-income;
    (B) The tenant is required to relocate temporarily, does not return 
to the building/complex, and either:
    (1) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, or
    (2) Other conditions of the temporary relocation are not reasonable; 
or
    (C) The tenant is required to move to another dwelling unit in the 
same building/complex but is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move, 
or other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
of applicable Federal, State or local law, or other good cause, and HUD 
determines that the eviction was not undertaken for the purpose of 
evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the submission of the 
application and, before signing a lease and commencing occupancy, 
received written notice of the project, its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated, or 
suffer a rent increase) and the fact that he or she would not qualify as 
a ``displaced person'' (or for assistance under this section) as a 
result of the project;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The owner may ask HUD, at any time, to determine whether a 
displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a residential tenant displaced as a direct result of 
private-owner rehabilitation, demolition or acquisition of the real 
property, the term ``initiation of negotiations'' means the owner's 
execution of the Housing Assistance Payments Contract.

(Approved by Office of Management and Budget under OMB Control Number 
2506-0121)

[58 FR 43721, Aug. 17, 1993. Redesignated at 59 FR 36643, July 18, 1994]



                          Subpart B--[Reserved]



 Subpart C--Section 8 Housing Assistance Program for the Disposition of 
                           HUD-Owned Projects

    Source: 44 FR 70365, Dec. 6, 1979, unless otherwise noted.

[[Page 148]]



Sec. 886.301  Purpose.

    The purpose of this subpart is to provide for the use of Section 8 
housing assistance in connection with the sale of HUD-owned multifamily 
rental housing projects and the foreclosure of HUD-held mortgages on 
rental housing projects (as defined in 24 CFR 290.5).

[58 FR 43722, Aug. 17, 1993]



Sec. 886.302  Definitions.

    The terms Fair Market Rent (FMR), HUD, and Public Housing Agency 
(PHA) are defined in 24 CFR part 5.
    Act. The United States Housing Act of 1937.
    Agreement. An Agreement to Enter into a Housing Assistance Payments 
Contract. See Sec. 886.332.
    Annual Income. As defined in part 813 of this chapter.
    Contract. (See Section 8 contract.)
    Contract rent. The rent payable to the owner under the contract, 
including the portion of the rent payable by the family. In the case of 
a cooperative, the term ``contract rent'' means charges under the 
occupancy agreements between the members and the cooperative.
    Decent, safe, and sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition requirements in 24 CFR part 5, subpart 
G.
    Eligible project or project. A multifamily housing project (see 24 
CFR part 290):
    (1) For which the disposition in accordance with the provisions of 
24 CFR part 290 involves sale with Section 8 housing assistance to 
enable the project to be used, in whole or in part, to provide housing 
for lower income families; and
    (2) The units of which are decent, safe, and sanitary.
    Family (eligible family). As defined in part 812 of this chapter.
    Gross Rent. As defined in part 813 of this chapter.
    HCD Act. The Housing and Community Development Act of 1974.
    Housing Assistance Payment. The payment made by the contract 
administrator to the Owner of an assisted unit as provided in the 
Contract. Where the unit is leased to an eligible Family, the payment is 
the difference between the Contract Rent and the Tenant Rent. A Housing 
Assistance Payment may be made to the Owner when a unit is vacant, in 
accordance with the terms of the Contract. An additional Housing 
Assistance Payment is made when the Utility Allowance is greater than 
the Total Tenant Payment.
    Lease. A written agreement between the owner and a family for 
leasing of decent, safe and sanitary dwelling unit to the family.
    Low-Income Family. As defined in part 813 of this chapter.
    Owner. The purchaser, including a cooperative entity or an agency of 
the Federal Government, under this subpart, of a HUD-owned project; or 
the purchaser, including a cooperative entity or an agency of the 
Federal Government, through a foreclosure sale of a project that was 
subject to a HUD-held mortgage.
    Project account. The account established and maintained in 
accordance with Sec. 886.308.
    Rehabilitation. The rehabilitation of an eligible project to upgrade 
the property to decent, safe, and sanitary condition to comply with the 
Housing Quality Standards described in Sec. 886.307 of this part, or 
other standards approved by HUD, from a condition below those standards 
and requiring repairs that may vary in degree from gutting and extensive 
reconstruction to the cure of deferred maintenance. Rehabilitation may 
exceed the requirements of Sec. 886.307 of this part.
    Section 8 contract (``Contract''). A written contract between the 
owner of an eligible project and HUD providing housing assistance 
payments to the owner on behalf of eligible families pursuant to this 
subpart.
    Tenant Rent. The monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total Tenant Payment. The monthly amount defined in, and determined 
in accordance with part 813 of this chapter.
    Utility Allowance. As defined in part 813 of this chapter, made or 
approved by HUD.
    Utility reimbursement. As defined in part 813 of this chapter.

[[Page 149]]

    Very Low-Income Family. As defined in part 813 of this chapter.

[44 FR 70365, Dec. 6, 1979, as amended at 49 FR 19949, May 10, 1984; 50 
FR 9269, Mar. 7, 1985; 50 FR 38795, Sept. 25, 1985; 53 FR 3369, Feb. 5, 
1988; 58 FR 43722, Aug. 17, 1993; 60 FR 11859, Mar. 2, 1995; 61 FR 5213, 
Feb. 9, 1996; 63 FR 46580, Sept. 1, 1998]



Sec. 886.303  Allocation and reservation of Section 8 contract authority and budget authority.

    Allocation. The contract authority and budget authority for this 
program will be provided from the Headquarters reserve authority 
approved specifically for use in connection with the sale of eligible 
projects.



Sec. 886.304  Project eligibility criteria.

    (a) Selection of projects. HUD shall select projects for sale with 
assistance under this subpart on the basis of the final disposition 
programs developed and approved in accordance with part 290 and the 
requirements of this subpart. In the evaluation of projects, 
consideration shall be given to whether there are site occupants who 
would have to be displaced, whether the relocation of site occupants is 
feasible, and the degree of hardship which displacement might cause.
    (b) Projects needing rehabilitation. A project, which is sold 
subject to the condition that following sale the project will be 
rehabilitated by the owner so as to become decent, safe and sanitary, 
will be sold with an Agreement that Section 8 assistance will be 
provided after the repairs are completed by the owner and the project is 
inspected and accepted by HUD. In these projects, Section 8 payments may 
be made only for project units which are determined to be decent, safe 
and sanitary.
    (c) High-rise elevator projects. High-rise elevator projects for 
families with children will not be assisted under this subpart unless 
the final disposition program, prepared in accordance with 24 CFR part 
290 indicates that there is a need for assisted housing for families and 
there is no other practical alternative for providing the needed 
housing.

[44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993]



Sec. 886.305  Disclosure and verification of Social Security and Employer Identification Numbers by owners.

    To be eligible to become an owner of housing assisted under this 
subpart, the owner must meet the disclosure and verification 
requirements for Social Security and Employer Identification Numbers, as 
provided by part 5, subpart B, of this title.

(Approved by the Office of Management and Budget under control number 
2502-0204)

[54 FR 39709, Sept. 27, 1989; 55 FR 11905, Mar. 30, 1990, as amended at 
61 FR 11119, Mar. 18, 1996]



Sec. 886.306  Notices.

    Before a project is approved for sale in accordance with this 
subpart, and as a part of the process of preparing a disposition 
recommendation in accordance with 24 CFR part 290, the field office 
manager must notify in writing the chief executive officer of the unit 
of general local government in which the project is located (or the 
designee of that officer) of the proposed sale with housing assistance, 
and must afford the unit of local government an opportunity to review 
and comment upon the proposed sale in accordance with 24 CFR part 791. 
Local government review should address consistency with the housing 
needs and strategy of the community, rather than strict conformance to 
the limitations on variations from housing assistance plan goals which 
are contained in part 791.

[53 FR 3369, Feb. 5, 1988]



Sec. 886.307  Physical condition standards; physical inspection requirements.

    (a) General. Housing assisted under this part must be maintained and 
inspected in accordance with the requirements in 24 CFR part 5, subpart 
G.
    (b) Space and security. In addition to the standards in 24 CFR part 
5, subpart G, the dwelling unit must have a living room, a kitchen area, 
and a bathroom. The dwelling unit must have at least one bedroom or 
living/sleeping room for each two persons.
    (c)-(h)  [Reserved]
    (i) Lead-based paint--(1) Performance requirements. (i) The dwelling 
unit shall

[[Page 150]]

comply with HUD lead-based paint regulations, 24 CFR parts 35 and 200, 
subpart O, issued under the Lead-Based Paint Poisoning Prevention Act, 
42 U.S.C. 4821-4846, and the owner shall certify that the dwelling is in 
accordance with such HUD regulations.
    (ii) If the property was constructed prior to 1950, the family upon 
occupancy shall have been furnished the notice required by HUD lead-
based paint regulations and procedures regarding the hazards of lead-
based paint poisoning, the symptoms and treatment of lead poisoning and 
the precautions to be taken against lead poisoning.
    (2) Acceptability criteria. Same as performance requirement.
    (j)-(l)  [Reserved]
    (m) Congregate housing. In addition to the foregoing standards, the 
following standards apply to congregate housing:
    (1) The unit shall contain and have ready access to a flush toilet 
which can be used in privacy, a fixed basin with hot and cold running 
water, and a shower and/or tub equipped with hot and cold running water 
all in proper operating condition and adequate for personal cleanliness 
and the disposal of human wastes. These facilities shall utilize an 
approved public or private disposal system, and shall be sufficient in 
number so that they need not be shared by more than four occupants. 
Those units accommodating physically handicapped occupants with 
wheelchairs or other special equipment shall provide access to all 
sanitary facilities, and shall provide, as appropriate to needs of the 
occupants, basins and toilets of appropriate height; grab bars to 
toilets, showers and/or bathtubs; shower seats; and adequate space for 
movement.
    (2) The unit shall contain suitable space to store, prepare and 
serve foods in a sanitary manner. A cooking stove or range, a 
refrigerator(s) of appropriate size and in sufficient quantity for the 
number of occupants, and a kitchen sink with hot and cold running water 
shall be present in proper operating condition. The sink shall drain 
into an approved private or public system. Adequate space for the 
storage, preparation and serving of food shall be provided. There shall 
be adequate facilities and services for the sanitary disposal of food 
wastes and refuse, including facilities for temporary storage where 
necessary (e.g., garbage cans).
    (3) The dwelling unit shall afford the Family adequate space and 
security. A living room, kitchen, dining area, bathroom, and other 
appropriate social and/or recreational community space shall be within 
the unit and the dwelling unit shall contain at least one sleeping room 
of appropriate size for each two persons. Exterior doors and windows 
accessible from outside each unit shall be capable of being locked. An 
emergency exit plan shall be developed and occupants shall be apprised 
of the details of the plan. Regular fire inspections shall be conducted 
by appropriate local officials. Readily accessible first aid supplies 
and fire extinguishers shall be provided throughout the unit, smoke 
detectors shall be provided and emergency phone numbers (police, 
ambulance, fire department, etc.) shall be available at every phone and 
individual copies shall be provided to each occupant. All emergency and 
safety features and procedures shall meet applicable State and local 
standards.
    (n) Independent group residence. In addition to the foregoing 
standards, the standards in 24 CFR 887.467 (a) through (g) apply to 
independent group residences.

[44 FR 70365, Dec. 6, 1979, as amended at 50 FR 9269, Mar. 7, 1985; 52 
FR 1986, Jan. 15, 1987; 57 FR 33852, July 30, 1992; 58 FR 43722, Aug. 
17, 1993; 63 FR 46580, Sept. 1, 1998]



Sec. 886.308  Maximum total annual contract commitment.

    (a) Number of units assisted. Based on the final disposition program 
developed in accordance with 24 CFR part 290, HUD shall determine the 
number of units to be assisted up to 100 percent of the units in the 
project.
    (b) Maximum assistance. The maximum total annual housing assistance 
payments that may be committed under the contract shall be the total of 
the gross rents for all the contract units in the project.
    (c) Changes in contract amounts. In order to assure that housing 
assistance payments will be increased on a timely basis to cover 
increases in contract rents, changes in family composition, or decreases 
in family incomes:

[[Page 151]]

    (1) A project account shall be established and maintained, in an 
amount as determined by HUD consistent with section 8(c)(6) of the Act, 
out of amounts by which the maximum annual contract commitment per year 
exceeds amounts paid under the contract for any fiscal year. This 
account shall be established and maintained by HUD as a specifically 
identified and segregated account, and payment shall be made therefrom 
only for the purposes of:
    (i) Housing assistance payments, and
    (ii) Other costs specifically authorized or approved by HUD.
    (2) Whenever a HUD-approved estimate of required housing assistance 
payments for a fiscal year exceeds the maximum annual contract 
commitment, causing the amount in the project account to be less than an 
amount equal to 40 percent of the maximum annual contract commitment, 
HUD, within a reasonable period of time, shall take such additional 
steps authorized by Section 8(c)(6) of the Act as may be necessary to 
carry out this assurance, including (as provided in that section of the 
Act) ``the reservation of annual contributions authority for the purpose 
of amending housing assistance contracts or the allocation of a portion 
of new authorizations for the purpose of amending housing assistance 
contracts.''



Sec. 886.309  Housing assistance payment to owners.

    (a) General. Housing Assistance Payments shall be paid to Owners for 
units under lease by eligible Families, in accordance with the Contract 
and as provided in this section. These Housing Assistance Payments will 
cover the difference between the Contract Rent and the Tenant Rent. 
Where applicable, the Utility Reimbursement will be paid to the Family 
as an additional Housing Assistance Payment. The Contract will provide 
that the Owner will make this payment on behalf of HUD. Funds will be 
paid to the Owner in trust solely for the purpose of making this 
additional payment. If the Family and the utility company consent, the 
Owner may pay the Utility Reimbursement jointly to the Family and the 
utility company or directly to the utility company.
    (b) No assistance for owners. No Section 8 assistance may be 
provided for any unit occupied by an owner. However, cooperatives are 
considered rental housing rather than owner-occupied housing under this 
subpart.
    (c) Payments for vacancies from execution of contract to initial 
occupancy. If a Contract unit which is decent, safe and sanitary and has 
been accepted by HUD as available as of the effective date of the 
Contract is not leased within 15 days of the effective date of the 
Contract, the Owner will be entitled to housing assistance payments in 
the amount of 80 percent of the Contract Rent for the unit for a vacancy 
period not exceeding 60 days from the effective date of the Contract 
provided that the Owner (1) has submitted a list of units leased as of 
the effective date and a list of the units not so leased; (2) 60 days 
prior to the completion of the rehabilitation or the date the agreement 
was executed, whichever is later, had notified the PHA of any units 
which the owner anticipated would be vacant on the anticipated effective 
date of the contract; (3) has taken and continues to take all feasible 
actions to fill the vacancy including, but not limited to: contracting 
applicants on the Owner's waiting list, if any, requesting the PHA and 
other appropriate sources to refer eligible applicants, and advertising 
the availability of the units in a manner specifically designed to reach 
low-income families; and (4) has not rejected any eligible applicant 
except for good cause acceptable to HUD.
    (d) Payments for vacancies after initial occupancy. If an eligible 
family vacates its unit (other than as a result of action by the Owner 
which is in violation of the Lease or the Contract or any applicable 
law), the owner may receive housing assistance payments for so much of 
the month in which the Family vacates the unit as the unit remains 
vacant. Should the unit remain vacant, the Owner may receive from HUD a 
housing assistance payment in the amount of 80 percent of Contract Rent 
for a vacancy period not exceeding an additional month. However, if the 
owner collects any of the family's share of the rent for this period, 
the payment must be reduced to an

[[Page 152]]

amount which, when added to the family's payments, does not exceed 80 
percent of the Contract Rent. Any such excess shall be reimbursed by the 
Owner to HUD or as HUD may direct. (See also Sec. 886.315.) The owner 
shall not be entitled to any payment under this paragraph unless he or 
she: (1) Immediately upon learning of the vacancy, has notified HUD of 
the vacancy or prospective vacancy and the reasons for the vacancy, and 
(2) has made and continues to make a good faith effort to fill the 
vacancy, including but not limited to, contacting applicants on the 
waiting list, if any, requesting the PHA and other appropriate sources 
to refer eligible applicants, and advertising the availability of the 
unit, and (3) has not rejected any eligible applicant, except for good 
cause acceptable to HUD.
    (e) Payments for units where family is evicted. If the owner evicts 
a family, the owner shall not be entitled to any payments pursuant to 
paragraph (d) of this section unless the request for such payment is 
supported by a certification that the provisions of Sec. 886.327 and 
part 247 of this title have been followed.
    (f) Prohibition for double compensation for vacancies. The owner 
shall not be entitled to housing assistance payments with respect to 
vacant units under this section to the extent he or she is entitled to 
payments from other sources (for example, payments for losses of rental 
income incurred for holding units vacant for relocatees pursuant to 
Title I of the HCD Act or payments under Sec. 886.315).
    (g) Debt service payments. (1) If a contract unit continues to be 
vacant after the 60-day period specified in paragraph (c) or (d) of this 
section, the Owner may submit a claim and receive additional housing 
assistance payments on a semiannual basis with respect to such a vacant 
unit in an amount equal to the principal and interest payments required 
to amortize the portion of the debt attributable to that unit for the 
period of the vacancy, whether such vacancy commenced during rent-up or 
after rent-up.
    (2) Additional payments under this paragraph (g) for any unit shall 
not be for more than 12 months for any vacancy period, and shall be made 
only if:
    (i) The unit is not in a project insured under the National Housing 
Act except pursuant to section 244 of that Act.
    (ii) The unit was in decent, safe, and sanitary condition during the 
vacancy period for which payments are claimed.
    (iii) The owner has taken and is continuing to take the actions 
specified in paragraphs (c)(1), (2) and (3) or paragraphs (d)(1) and (2) 
of this section, as appropriate.
    (iv) The Owner has demonstrated in connection with the semiannual 
claim on a form and in accordance with the standards prescribed by HUD 
with respect to the period of the vacancy, that the project is not 
providing the Owner with revenues at least equal to the project costs 
incurred by the Owner, and that the amount of the payments requested is 
not in excess of that portion of the deficiency which is attributable to 
the vacant units for the period of the vacancies.
    (v) The Owner has submitted, in connection with the semiannual 
claim, a statement with relevant supporting evidence that there is a 
reasonable prospect that the project can achieve financial soundness 
within a reasonable time. The statement shall indicate the causes of the 
deficiency; the corrective steps that have been and will be taken; and 
the time by which it is expected that the project revenues will at least 
equal project costs without the additional payments provided under this 
paragraph.
    (3) HUD may deny any claim for additional payments or suspend or 
terminate payments if it determines that based on the Owner's statement 
and other evidence, there is not a reasonable prospect that the project 
can achieve financial soundness within a reasonable time.

[44 FR 70365, Dec. 6, 1979, as amended at 49 FR 19949, May 10, 1984; 53 
FR 3369, Feb. 5, 1988; 58 FR 43722, Aug. 17, 1993]



Sec. 886.310  Initial contract rents.

    HUD will establish contract rents at levels that, together with 
other resources available to the purchasers, provide sufficient amounts 
for the necessary costs of rehabilitating and operating the multifamily 
housing project and do not exceed 120 percent of the

[[Page 153]]

most recently published Section 8 Fair Market Rents for Existing Housing 
(24 CFR part 888, subpart A).

[60 FR 11859, Mar. 2, 1995]



Sec. 886.311  Term of contract.

    The contract term for any unit shall not exceed 15 years, except 
that the term may be less than 15 years as provided under either 
paragraph (a) or (b) of this section.
    (a) The contract term may be less than 15 years if HUD finds that, 
based on the rental charges and financing for the multifamily housing 
project to which the contract relates, the financial viability of the 
project can be maintained under a contract having a term less than 15 
years. Where a contract of less than 15 years is provided under this 
paragraph, the amount of rent payable by tenants of the project for 
units assisted under such a contract shall not exceed the amount payable 
for rent under section 3(a) of the United States Housing Act of 1937 for 
a period of at least 15 years.
    (b) The contract term may be less than 15 years if the assistance is 
provided under a contract authorized under section 6 of the HUD 
Demonstration Act of 1993, and pursuant to a disposition plan under this 
part for a project that is determined by the HUD to be otherwise in 
compliance with this part.

[60 FR 11859, Mar. 2, 1995]



Sec. 886.311a  Notice upon contract expiration.

    (a) The Contract will provide that the owner will notify each 
assisted family, at least 90 days before the end of the Contract term, 
of any increase in the amount the family will be required to pay as rent 
which may occur as a result of its expiration. If the Contract is to be 
renewed but with a reduction in the number of units covered by it, this 
notice shall be given to each family who will no longer be assisted 
under the Contract.
    (b) The notice provided for in paragraph (a) of this section shall 
be accomplished by: (1) Sending a letter by first class mail, properly 
stamped and addressed, to the family at its address at the project, with 
a proper return address, and (2) serving a copy of the notice on any 
adult person answering the door at the leased dwelling unit, or if no 
adult responds, by placing the notice under or through the door, if 
possible, or else by affixing the notice to the door. Service shall not 
be considered to be effective until both required notices have been 
accomplished. The date on which the notice shall be considered to be 
received by the family shall be the date on which the owner mails the 
first class letter provided for in this paragraph, or the date on which 
the notice provided for in this paragraph is properly given, whichever 
is later.
    (c) The notice shall advise each affected family that, after the 
expiration date of the Contract, the family will be required to bear the 
entire cost of the rent and that the owner will be free (to the extent 
the project is not otherwise regulated by HUD) to alter the rent without 
HUD approval, but subject to any applicable requirements or restrictions 
under the lease or under State or local law. The notice shall also 
state:
    (1) The actual (if known) or the estimated rent which will be 
charged following the expiration of the Contract;
    (2) The difference between the rent and the Total Tenant Payment 
toward rent under the Contract; and
    (3) The date the Contract will expire.
    (d) The owner shall give HUD a certification that families have been 
notified in accordance with this section with an example of the text of 
the notice attached.
    (e) This section shall apply to (1) Contracts involving Substantial 
Rehabilitation entered into pursuant to Agreements executed on or after 
October 1, 1981, or Contracts involving Substantial Rehabilitation 
entered into pursuant to Agreements executed before October 1, 1981, but 
renewed or amended on or after October 1, 1984 and (2) all other 
Contracts executed, renewed or amended on or after October 1, 1984.

[49 FR 31285, Aug. 6, 1984]



Sec. 886.312  Rent adjustments.

    (a) Limits. Housing assistance payments will be made in amounts 
commensurate with contract rent adjustments under this paragraph, up to 
the

[[Page 154]]

maximum amount authorized under the contract. (See Sec. 886.308.)
    (b) Annual adjustments. The contract rents may be adjusted annually, 
at HUD's option, either (1) on the basis of a written request for a rent 
increase submitted by the owner and properly supported by substantiating 
evidence, or (2) by applying, on each anniversary date of the contract, 
the applicable automatic annual adjustment factor most recently 
published by HUD in the Federal Register. If HUD requires that the owner 
submit a written request, HUD within a reasonable time shall approve a 
rental schedule that is necessary to compensate for any increase 
occurring since the last approved rental schedule in taxes (other than 
income taxes) and operating and maintenance costs over which owners have 
no effective control, or shall deny the increase stating the reasons 
therefor. Increases in taxes and maintenance and operating costs shall 
be measured against levels of such expenses in comparable assisted and 
unassisted housing in the area to ensure that adjustments in the 
contract rents shall not result in material differences between the 
rents charged for assisted and comparable unassisted units. Contract 
rents may be adjusted upward or downward as may be appropriate; however, 
in no case shall the adjusted rents be less than the contract rents on 
the effective date of the contract, provided there was no fraud or 
mistake adverse to the Department's interest in determining the initial 
contract rent.
    (c) Special adjustments. Special adjustments in the contract rents 
shall be requested in writing by the owner and may be authorized by HUD 
to the extent HUD determines such adjustments are necessary to reflect 
increases in the actual and necessary expenses of owning and maintaining 
the contract units which have resulted from substantial general 
increases in real property taxes, utility rates or similar costs (i.e., 
assessments and utilities not covered be regulated rates) which are not 
adequately compensated for by the adjustment authorized by paragraph (b) 
of this section.
    (d) Comparability between assisted and unassisted units. 
Notwithstanding any other provisions of this subpart, adjustments as 
provided in this section shall not result in material differences 
between the rents charged for assisted and comparable unassisted units, 
as determined by HUD: Provided, however, That this limitation shall not 
be construed to prohibit differences in rents between assisted and 
comparable unassisted units to the extent that such differences may have 
existed with respect to the initial contract rents assuming no fraud or 
mistake adverse to the Department's interest.
    (e) Addendums to contract and leases. Any adjustment in contract 
rents shall be incorporated into the contract and leases by dated 
addendums to the contract and leases establishing the effective date of 
the adjustment.



Sec. 886.313  Other Federal requirements.

    Participation in this program requires:
    (a) Compliance with (1) title VI of the Civil Rights Act of 1964, 
title VIII of the Civil Rights Act of 1968, Executive Orders 11063 and 
11246, and Section 3 of the Housing and Urban Development Act of 1968, 
and (2) all rules, regulations, and requirements issued pursuant 
thereto.
    (b) Submission of an approvable Affirmative Fair Housing Marketing 
Plan.
    (c) For projects where rehabilitation is to be completed by or at 
the direction of the owner, compliance with:
    (1) The Clean Air Act and Federal Water Pollution Control Act;
    (2) Where the property contains nine or more units to be assisted, 
the requirement to pay not less than the wage rates prevailing in the 
locality, as predetermined by the Secretary of Labor under the Davis-
Bacon Act (40 U.S.C. 276a-276a-5) to all laborers and mechanics (other 
than volunteers under the conditions set out in 24 CFR part 70) who are 
employed in the rehabilitation work, and the labor standards provisions 
contained in the Contract Work Hours and Safety Standards Act, Copeland 
Anti-Kickback Act, and implementing regulations of the Department of 
Labor.
    (3) Section 504 of the Rehabilitation Act of 1973;
    (4) The National Historic Preservation Act (Pub. L. 89-665);

[[Page 155]]

    (5) The Archeological and Historic Preservation Act of 1974 (Pub. L. 
93-291);
    (6) Executive Order 11593 on Protection and Enhancement of the 
Cultural Environment, including the procedures prescribed by the 
Advisory Council on Historic Preservation at 36 CFR part 800;
    (7) The National Environmental Policy Act of 1969;
    (8) The Flood Disaster Protection Act of 1973;
    (9) Executive Order 11988, Flood Plains Management;
    (10) Executive Order 11990, Protection of Wetlands.

[44 FR 70365, Dec. 6, 1979, as amended at 57 FR 14760, Apr. 22, 1992]



Sec. 886.314  Financial default.

    In the event of a financial default under the project mortgage, HUD 
shall have the right to make subsequent housing assistance payments to 
the mortgagee until such time as the default is cured, or until some 
other time agreeable to the mortgagee and approved by HUD.



Sec. 886.315  Security and utility deposits.

    (a) Amount of deposits. If at the time of the initial execution of 
the Lease the Owner wishes to collect a security deposit, the maximum 
amount shall be the greater of one month's Gross Family Contribution or 
$50. However, this amount shall not exceed the maximum amount allowable 
under State or local law. For units leased in place, security deposits 
collected prior to the execution of a Contract which are in excess of 
this maximum amount do not have to be refunded until the Family is 
expected to pay security deposits and utility deposits from its 
resources and/or other public or private sources.
    (b) When a Family vacates. If a Family vacates the unit, the Owner, 
subject to State and local law, may use the security deposit as 
reimbursement for any unpaid Family Contribution or other amount which 
the Family owes under the Lease. If a Family vacates the unit owing no 
rent or other amount under the Lease consistent with State or local law 
or if such amount is less than the amount of the security deposit, the 
Owner shall refund the full amount or the unused balance to the Family.
    (c) Interest payable on deposits. In those jurisdictions where 
interest is payable by the Owner on security deposits, the refunded 
amount shall include the amount of interest payable. The Owner shall 
comply with all State and local laws regarding interest payments on 
security deposits.
    (d) Insufficient deposits. If the security deposit is insufficient 
to reimburse the Owner for the unpaid Family Contribution or other 
amounts which the Family owes under the Lease, or if the Owner did not 
collect a security deposit, the Owner may claim reimbursement from HUD 
for an amount not to exceed the lesser of: (1) The amount owed the 
Owner, (2) two months' Contract Rent, minus, in either case, the greater 
of the security deposit actually collected or the amount of security 
deposit the owner could have collected under the program (pursuant to 
paragraph (a) of this section). Any reimbursement under this section 
must be applied first toward any unpaid Family Contribution due under 
the Lease and then to any other amounts owed. No reimbursement shall be 
claimed for unpaid rent for the period after the family vacates.



Secs. 886.316-886.317  [Reserved]



Sec. 886.318  Responsibilities of the owner.

    (a) Management and maintenance. The owner shall be responsible for 
the management and maintenance of the project in accordance with 
requirements established by HUD. These responsibilities shall include 
but not be limited to:
    (1) Payment for utilities and services (unless paid directly by the 
family), insurance and taxes;
    (2) Performance of all ordinary and extraordinary maintenance;
    (3) Performance of all management functions, including the taking of 
applications; determining eligibility of applicants in accordance with 
24 CFR parts 812 and 813; selection of families, including verification 
of income, provision of Federal selection preferences in accordance with 
Sec. 886.337, obtaining and verifying Social Security Numbers submitted 
by applicants (as provided by

[[Page 156]]

part 5, subpart B, of this title), obtaining signed consent forms from 
applicants for the obtaining of wage and claim information from State 
Wage Information Collection Agencies (as provided in part 5, subpart B, 
of this title), and other pertinent requirements; and determination of 
the amount of tenant rent in accordance with HUD established schedules 
and criteria.
    (4) Collection of Tenant Rents;
    (5) Preparation and furnishing of information required under the 
contract;
    (6) Reexamination of family income, composition, and extent of 
exceptional medical or other unusual expenses; redeterminations, as 
appropriate, of the amount of Tenant Rent and amount of housing 
assistance payment in accordance with part 813 of the chapter; obtaining 
and verifying Social Security Numbers submitted by participants, as 
provided by CFR part 750; and obtaining signed consent forms from 
participants for the obtaining of wage and claim information from State 
Wage Information Collection Agencies, as provided by part 5, subpart B, 
of this title.
    (7) Redeterminations of the amount of Tenant Rent and the amount of 
housing assistance payment in accordance with part 813 of this chapter 
as a result of an adjustment by HUD of any applicable utility allowance;
    (8) Notifying families in writing when they are determined to be 
qualified for assistance under this subpart where they have not already 
been notified by HUD prior to sale;
    (9) Reviewing at least annually the allowance for utilities and 
other services;
    (10) Compliance with equal opportunity requirements; and
    (11) Compliance with Federal requirements set forth in 
Sec. 886.313(c).
    (b) Contracting for Services. Subject to HUD approval, any owner may 
contract with any private or public entity to perform for a fee the 
services required by paragraph (a) of this section: Provided, That such 
contract shall not shift any of the owner's responsibilities or 
obligations.
    (c) HUD review. The owner shall permit HUD to review and audit the 
management and maintenance of the project at any time.
    (d) Submission of financial and operating statements. After 
execution of the Contract, the owner must submit to HUD:
    (1) Financial information in accordance with 24 CFR part 5, subpart 
H; and
    (2) Other statements as to project operation, financial conditions 
and occupancy as HUD may require pertinent to administration of the 
Contract and monitoring of project operations.

(Approved by the Office of Management and Budget under control numbers 
2502-0204 and 2505-0052)

[44 FR 70365, Dec. 6, 1979, as amended at 49 FR 19949, May 10, 1984; 53 
FR 1169, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39709, Sep. 27, 
1989; 56 FR 7542, Feb. 22, 1991; 58 FR 43722, Aug. 17, 1993; 60 FR 
14846, Mar. 20, 1995; 61 FR 11119, Mar. 18, 1996; 63 FR 46593, Sept. 1, 
1998]



Sec. 886.319  Responsibility for contract administration.

    HUD is responsible for administration of the Contract. HUD may 
contract with another entity for the performance of some or all of its 
Contract administration functions.

[60 FR 11860, Mar. 2, 1995]



Sec. 886.320  Default under the contract.

    The contract shall contain a provision to the effect that if HUD 
determines that the owner is in default under the contract, HUD shall 
notify the owner of the actions required to be taken to cure the default 
and of the remedies to be applied by HUD including recovery of 
overpayments, where appropriate, and that if the owner fails to cure the 
default within a reasonable time as determined by HUD, HUD has the right 
to terminate the contract or to take other corrective action, including 
recission of the sale. When contract termination is under consideration 
by HUD, HUD shall give eligible families an opportunity to submit 
written and other comments. Where the project is sold under the 
arrangement that involves a regulatory agreement between HUD and the 
owner, a default under the regulatory agreement shall be treated as 
default under the contract.



Sec. 886.321  Marketing.

    (a) Marketing in accordance with HUD-Approved Plan. Marketing of 
units and selection of families by the owner shall

[[Page 157]]

be in accordance with the owner's HUD-approved Affirmative Fair Housing 
Marketing Plan, HUD-approved tenant selection factors and with all 
regulations relating to fair housing advertising including use of the 
equal opportunity logotype, statement, and slogan in all advertising. 
Projects shall be managed and operated without regard to race, color, 
creed, religion, sex, or national origin.
    (b)(1) HUD will determine the eligibility for assistance of families 
in occupancy before sales closing. After the sale, the owner shall be 
responsible for determining the eligibility of applicants for tenancy 
(including compliance with the procedures of 24 CFR part 812 on evidence 
of citizenship or eligible immigration status), selection of families 
from among those determined to be eligible (including provision of 
Federal preferences in accordance with Sec. 886.337), and computation of 
the among of housing assistance payments on behalf of each selected 
family, in accordance with the Gross Rent and the Total Tenant Payment 
computed in accordance with 24 CFR part 813. The owner shall pay any 
utility reimbursement to each family each month it is due. Local 
residency requirements are prohibited. Local residency preferences are 
discouraged and may be applied in selecting tenants only to the extent 
that they are not inconsistent with HUD's affirmative fair housing 
marketing objectives and the owner's HUD-approved Affirmative Fair 
Housing Marketing Plan. With respect to any residency preferences, 
persons expected to reside in the community as a result of current or 
planned employment must be treated as residents.
    (2) For every family that applies for admission, the owner and the 
applicant must complete and sign the form of application prescribed by 
HUD. When the owner decides no longer to accept applications or to 
accept applications only from families that claim a Federal preference 
under Sec. 886.337, the owner must publish a notice to that effect in a 
publication likely to be read by potential applicants. The notice must 
state the reasons for the owner's refusal to accept additional 
applications. When the owner agrees to accept applications again, a 
notice to this effect must also be published. Notwithstanding the fact 
that the owner may not be accepting additional applications for tenancy 
because of the length of the waiting list, the owner may not refuse to 
place an applicant on the waiting list if the applicant is otherwise 
eligible for participation and claims that he or she qualifies for a 
Federal preference as provided in Sec. 886.337(c)(2), unless the owner 
determines, on the basis of the number of applicants who are already on 
the waiting list and who claim a Federal preference, and the anticipated 
number of admissions to the project, that (i) there is an adequate pool 
of applicants who are likely to qualify for a Federal preference and 
(ii) it is unlikely that, on the basis of the owner's system for 
applying the Federal preferences, the preference or preferences that the 
applicant claims, and the preferences claimed by applicants on the 
waiting list, the applicant would qualify for admissions before other 
applicants on the waiting list. The owner must retain copies of all 
completed applications together with any related correspondence for 
three years. For each family selected for admission, the owner must 
submit one copy of the completed and signed application to HUD. Housing 
assistance payments will not be made on behalf of an admitted family 
until after this copy has been received by HUD.
    (3) If the owner determines that the applicant is eligible on the 
basis of income and family composition and is otherwise acceptable but 
the owner does not have a suitable unit to offer, the owner shall place 
such family on the waiting list and so advise the family indicating 
approximately when a unit may be available.
    (4) If the owner determines that the applicant is eligible on the 
basis of income and family composition and is otherwise acceptable in 
accordance with the HUD approved tenant selection factors and if the 
owner has a suitable unit, the owner and the family shall enter into a 
lease. The lease shall be on a form approved by HUD and shall otherwise 
be in conformity with the provisions of this subpart.

[[Page 158]]

    (5) Records on applicant families and approved families shall be 
maintained by the owner so as to provide HUD with racial, ethnic, and 
gender data and shall be retained by the owner for 3 years.
    (6) If the owner determines that an applicant is not eligible, or, 
if eligible, not selected, the owner must notify the applicant in 
writing of the determination, the reasons upon which the determination 
is made, and inform the applicant that the applicant has the right 
within a reasonable time (specified in the letter) to request an 
informal hearing if the applicant believes that the owner's 
determination is based on erroneous information. The procedures of this 
paragraph (b)(6) do not preclude an applicant from exercising his or her 
other rights if the applicant believes that he or she is being 
discriminated against on the basis of race, color, religion, sex, 
national origin, age, or handicap. The owner must retain for three years 
a copy of the application, the letter, the applicant's response, if any, 
the record of any informal hearing, and a statement of final 
disposition. The informal review provisions for the denial of a tenant 
selection preference under Sec. 886.337 are contained in paragraph (k) 
of that section.
    (7) For the informal hearing provisions related to denial of 
assistance based upon failure to establish citizenship or eligible 
immigration status, see 24 CFR 812.9, and 24 CFR 812.10 for provisions 
concerning certain assistance for mixed families (families whose members 
include those with eligible immigration status, and those without 
eligible immigration status) in lieu of denial of assistance.
    (c) Initial occupancy. (1) Where rehabilitation is involved, sixty 
days prior to the completion of the rehabilitation, or when the 
rehabilitation is begun, whichever is later, the Owner shall determine 
whether the tenant population of the project generally reflects the 
racial/ethnic makeup of the housing market area. Based on this 
determination, the Owner shall then conduct appropriate marketing 
activities in accordance with a HUD-approved Affirmative Fair Housing 
Marketing Plan. Such activities may include special outreach to those 
groups identified as not ordinarily expected to apply for these units 
without special outreach; notification to PHA's in the housing market 
area of any anticipated vacancies; and formulation of waiting lists 
based on the Owner's HUD-approved tenant selection factors.
    (2) Where a PHA is notified, the PHA shall notify an appropriate 
size family (families) on its waiting list of the availability of the 
unit and refer the family (families) to the owner. (Since the Owner is 
responsible for tenant selection, the owner is not required to lease to 
a PHA selected family, but the owner must comply with 
Sec. 886.321(b)(6).)

[44 FR 70365, Dec. 6, 1979, as amended at 53 FR 1169, Jan. 15, 1988; 53 
FR 6601, Mar. 2, 1988; 58 FR 43722, Aug. 17, 1993; 60 FR 14846, Mar. 20, 
1995]



Sec. 886.322  [Reserved]



Sec. 886.323  Maintenance, operation, and inspections.

    (a) Maintain decent, safe, and sanitary housing. The owner shall 
maintain and operate the project so as to provide decent, safe, and 
sanitary housing and the owner shall provide all the services, 
maintenance, and utilities which he or she agrees to provide under the 
contract and the lease. Failure to do so shall be considered a material 
default under the contract and Regulatory Agreement, if any.
    (b) HUD inspection. Prior to execution of the contract, HUD shall 
inspect (or cause to be inspected) each proposed contract unit and 
related facilities to ensure that they are in decent, safe, and sanitary 
condition.
    (c) Owner and family inspection. Prior to occupancy of any vacant 
until by a family, the owner and the family shall inspect the unit and 
both shall certify that they have inspected the unit and have determined 
it to be decent, safe, and sanitary. Copies of these reports shall be 
kept on file by the owner for at least 3 years.
    (d) Annual inspections. HUD will inspect the project (or cause it to 
be inspected) at least annually and at such other times as HUD may 
determine to be necessary to assure that the owner is meeting his or her 
obligation to maintain the units and the related facilities in decent, 
safe, and sanitary

[[Page 159]]

condition and to provide the agreed-upon utilities and other services. 
HUD will take into account complaints by occupants and any other 
information coming to its attention in scheduling inspections and shall 
notify the owner and the family of its determination regarding the 
condition of the units.
    (e) Failure to maintain decent, safe, and sanitary units. If HUD 
notifies the owner that he/she has failed to maintain a dwelling unit in 
decent, safe, and sanitary condition, and the owner fails to take 
corrective action within the time prescribed in the notice, HUD may 
exercise any of its rights or remedies under the contract, or Regulatory 
Agreement, if any, including abatement of housing assistance payments 
(even if the family continues to occupy the unit) and rescission of the 
sale. If, however, the family wishes to be rehoused in another dwelling 
unit, HUD shall provide assistance in finding such a unit for the 
family.



Sec. 886.324  Reexamination of family income and composition.

    (a) Regular reexaminations. The owner must reexamine the income and 
composition of all families at least once each year. Upon verification 
of the information, the owner must make appropriate adjustments in the 
Total Tenant Payment in accordance with part 813 of this chapter and 
determine whether the family's unit size is still appropriate. The owner 
must adjust Tenant Rent and the Housing Assistance Payment to reflect 
any change in Total Tenant Payment and carry out any unit transfer 
required by HUD. At the time of the annual reexamination of family 
income and composition, the owner must require the family to disclose 
and verify Social Security Numbers, as provided by part 5, subpart B, of 
this title. For requirements regarding the signing and submitting of 
consent forms by families for the obtaining of wage and claim 
information from State Wage Information Collection Agencies, see part 5, 
subpart B, of this title. At the first regular reexamination after June 
19, 1995, the owner shall follow the requirements of 24 CFR part 812 
concerning obtaining and processing evidence of citizenship or eligible 
immigration status of all family members. Thereafter, at each regular 
reexamination, the owner shall follow the requirements of part 812 
concerning verification of the immigration status of any new family 
member.
    (b) Interim reexaminations. The family must comply with provisions 
in its lease regarding interim reporting of changes in income. If the 
owner receives information concerning a change in the family's income or 
other circumstances between regularly scheduled reexaminations, the 
owner must consult with the family and make any adjustments determined 
to be appropriate. Any change in the family's income or other 
circumstances that results in an adjustment in the Total Tenant Payment, 
Tenant Rent and Housing Assistance Payment must be verified. See part 5, 
subpart B, of this title for the requirements for the disclosure and 
verification of Social Security Numbers at interim reexaminations 
involving new family members. For requirements regarding the signing and 
submitting of consent forms by families for the obtaining of wage and 
claim information from State Wage Information Collection Agencies, see 
part 5, subpart B, of this title. At any interim reexamination after 
June 19, 1995 when there is a new family member, the owner shall follow 
the requirements of 24 CFR part 812 concerning obtaining and processing 
evidence of citizenship or eligible immigration status of the new family 
member.
    (c) Continuation of housing assistance payments. A family's 
eligibility for Housing Assistance Payments will continue until the 
Total Tenant Payment equals the Gross Rent. The termination of 
eligibility at such point will not affect the family's other rights 
under its lease, nor will such termination preclude the resumption of 
payments as a result of later changes in income, rents, or other 
relevant circumstances during the term of the contract. However, 
eligibility also may be terminated in accordance with HUD requirements, 
for such reasons as failure to submit requested verification 
information, including failure to meet the disclosure and verification 
requirements for Social Security Numbers, as provided by part 5, subpart 
B, of this

[[Page 160]]

title, or failure to sign and submit consent forms for the obtaining of 
wage and claim information from State Wage Information Collection 
Agencies, as provided by part 5, subpart B, of this title. For 
provisions requiring termination of assistance for failure to establish 
citizenship or eligible immigration status, see 24 CFR 812.9, and also 
24 CFR 812.10 for provisions concerning certain assistance for mixed 
families (families whose members include those with eligible immigration 
status, and those without eligible immigration status) in lieu of 
termination of assistance, and for provisions concerning deferral of 
termination of assistance.

[56 FR 7543, Feb. 22, 1991, as amended at 60 FR 14847, Mar. 20, 1995; 61 
FR 11119, Mar. 18, 1996]



Sec. 886.325  Overcrowded and underoccupied units.

    (a) Change in family composition, family's notification. The family 
shall notify the owner of a change in family composition and shall 
transfer to an appropriate size dwelling unit, based on family 
composition, upon appropriate notice by the owner of HUD that such a 
dwelling unit is available. Such a family shall have priority over a 
family on the owner's waiting list seeking the same size unit.
    (b) Change in family composition, owner's responsibilities. Upon 
receipt by the owner of a notification by the family of a change in the 
family size, the owner agrees to offer the family a suitable unit as 
soon as one becomes vacant and ready for occupancy. If the owner does 
not have any suitable units or if no vacancy of a suitable unit occurs 
within a reasonable time, HUD may assist the family in finding a 
suitable dwelling unit and require the family to move to such unit as 
soon as possible.
    (c) HUD actions if appropriate size unit is not made available. If 
the owner fails to offer the family a unit appropriate for the size of 
the family when such unit becomes vacant and ready for occupancy, HUD 
may abate housing assistance payments to the owner for the unit occupied 
by the family and assist the family in finding a suitable dwelling unit 
elsewhere.

[46 FR 19467, Mar. 31, 1981]



Sec. 886.326  Adjustment of utility allowances.

    When the owner requests HUD approval of an adjustment in Contract 
Rents under Sec. 886.312, an analysis of the project's Utility 
Allowances must be included. Such data as changes in utility rates and 
other facts affecting utility consumption should be provided as part of 
this analysis to permit appropriate adjustments in the Utility 
Allowances. In addition, when approval of a utility rate change would 
result in a cumulative increase of 10 percent or more in the most 
recently approved Utility Allowances, the owner must advise the 
Secretary and request approval of new Utility Allowances.

(Approved by the Office of Management and Budget under control numbers 
2502-0352 and 2502-0354)

[51 FR 21864, June 16, 1986]



Sec. 886.327  Lease requirements.

    (a) Term of lease. (1) The term of a lease, including a new lease or 
a lease amendment, executed by the owner and the family must be for at 
least one year, or the remaining term of the contract if the remaining 
term of the contract is less than one year.
    (2) During the first year of the lease term, the owner may not 
terminate the tenancy for ``other good cause'' under 24 CFR 247.3(a)(3), 
unless the termination is based on family malfeasance or nonfeasance. 
For example, during the first year of the lease term, the owner may not 
terminate the tenancy for ``other good cause'' based on the failure of 
the family to accept the offer of a new lease.
    (3) The lease may contain a provision permitting the family to 
terminate on 30 days advance written notice to the owner. In this case 
of a lease term for more than one year, the lease must contain this 
provision.
    (b) Required and prohibited provisions. The lease between the owner 
and the family must comply with HUD regulations and requirements, and 
must be in the form required by HUD. The lease may not contain any of 
the following types of prohibited provisions:
    (1) Admission of guilt. Agreement by the family (i) to be sued, and 
(ii) to admit guilt, or (iii) to a judgment in

[[Page 161]]

favor of the owner, in a court proceeding against the family in 
connection with the lease.
    (2) Treatment of family property. Agreement by the family that the 
owner may take or hold family property, or may sell family property, 
without notice to the family and a court decision on the rights of the 
parties.
    (3) Excusing owner from responsibility. Agreement by the family not 
to hold the owner or the owner's agents responsible for any action or 
failure to act, whether intentional or negligent.
    (4) Waiver of notice. Agreement by the family that the owner does 
not need to give notice of a court proceeding against the family in 
connection with the lease, or does not need to give any notice required 
by HUD.
    (5) Waiver of court proceeding for eviction. Agreement by the family 
that the owner may evict the family (i) without instituting a civil 
court proceeding in which the family has the opportunity to present a 
defense, or (ii) before a decision by the court on the rights of the 
parties.
    (6) Waiver of jury trial. Agreement by the family to waive any right 
to a trial by jury.
    (7) Waiver of appeal. Agreement by the family to waive the right to 
appeal, or to otherwise challenge in court, a court decision in 
connection with the lease.
    (8) Family chargeable with legal costs regardless of outcome. 
Agreement by the family to pay lawyer's fees or other legal costs of the 
owner, even if the family wins in a court proceeding by the owner 
against the family. (However, the family may have to pay these fees and 
costs if the family loses.)

[53 FR 3369, Feb. 5, 1988]



Sec. 886.328  Termination of tenancy.

    Part 247 of this title applies to the termination of tenancy and 
eviction of a family assisted under this subpart. For cases involving 
termination of tenancy because of a failure to establish citizenship or 
eligible immigration status, the procedures of 24 CFR parts 247 and 812 
shall apply. The provisions of 24 CFR 812.10 concerning certain 
assistance for mixed families (families whose members include those with 
eligible immigration status, and those without eligible immigration 
status) in lieu of termination of assistance, and concerning deferral of 
termination of assistance also shall apply.

[60 FR 14847, Mar. 20, 1995]



Sec. 886.329  Leasing to eligible families.

    (a) Availability of units for occupancy by Eligible Families. During 
the term of the Contract, an owner shall make available for occupancy by 
eligible families the total number of units for which assistance is 
committed under the Contract. For purposes of this section, making units 
available for occupancy by eligible families means that the owner: (1) 
Is conducting marketing in accordance with Sec. 886.321; (2) has leased 
or is making good faith efforts to lease the units to eligible and 
otherwise acceptable families, including taking all feasible actions to 
fill vacancies by renting to such families; and (3) has not rejected any 
such applicant family except for reasons acceptable to HUD. If the owner 
is temporarily unable to lease all units for which assistance is 
committed under the Contract to eligible families, one or more units may 
be leased to ineligible families with the prior approval of HUD. Failure 
on the part of the owner to comply with these requirements is a 
violation of the Contract and grounds for all available legal remedies, 
including specific performance of the Contract, suspension or debarment 
from HUD programs, and reduction of the number of units under the 
Contract as set forth in paragraph (b) of this section.
    (b) Reduction of number of units covered by Contract. HUD may reduce 
the number of units covered by the Contract to the number of units 
available for occupancy by eligible families if:
    (1) The owner fails to comply with the requirements of paragraph (a) 
of this section; or
    (2) Notwithstanding any prior approval by HUD to lease such units to 
ineligible families, HUD determines that the inability to lease units to 
eligible families is not a temporary problem.
    (c) Restoration. HUD will agree to an amendment of the Contract to 
provide for subsequent restoration of any reduction made pursuant to 
paragraph (b) of this section if:

[[Page 162]]

    (1) HUD determines that the restoration is justified by demand;
    (2) The owner otherwise has a record of compliance with his or her 
obligations under the Contract; and
    (3) Contract and budget authority are available.
    (d) Applicability. In accordance with section 555 of the Cranston-
Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and (b) 
of this section apply to all contracts involving substantial 
rehabilitation. These paragraphs apply to all other Contracts executed 
on or after October, 3, 1984. An owner who had leased an assisted unit 
to an ineligible family consistent with the regulations in effect at the 
time will continue to lease the unit to that family. However, the 
Borrower must make the unit available for occupancy by an eligible 
family when the ineligible family vacates the unit.
    (e) Termination of assistance for failure to establish citizenship 
or eligible immigration status. If an owner who is subject to paragraphs 
(a) and (b) of this section is required to terminate housing assistance 
payments for the family in accordance with 24 CFR 812.9 because the 
owner determines that the entire family does not have U.S. citizenship 
or eligible immigration status, the owner may allow continued occupancy 
of the unit by the family without Section 8 assistance following the 
termination of assistance, or if the family constitutes a mixed family, 
as defined in 24 CFR 812.10, the owner shall comply with the provisions 
of 24 CFR 812.10 concerning assistance to mixed families, and deferral 
of termination of assistance.

[49 FR 31399, Aug. 7, 1984, as amended at 53 FR 847, Jan. 13, 1988; 53 
FR 6601, Mar. 2, 1988; 58 FR 43722, Aug. 17, 1993; 59 FR 13653, Mar. 23, 
1994; 60 FR 14847, Mar. 20, 1995]



Sec. 886.329a  Preferences for occupancy by elderly families.

    (a) Election of preference for occupancy by elderly families--(1) 
Election by owners of eligible projects. (i) An owner of a project 
involving substantial rehabilitation and assisted under this part 
(including a partially assisted project) that was originally designed 
primarily for occupancy by elderly families (an ``eligible project'') 
may, at any time, elect to give preference to elderly families in 
selecting tenants for assisted, vacant units in the project, subject to 
the requirements of this section.
    (ii) For purposes of this section, a project eligible for the 
preference provided by this section, and for which the owner makes an 
election to give preference in occupancy to elderly families is referred 
to as an ``elderly project.'' ``Elderly families'' refers to families 
whose heads of household, their spouses or sole members are 62 years or 
older.
    (iii) An owner who elects to provide a preference to elderly 
families in accordance with this section is required to notify families 
on the waiting list who are not elderly that the election has been made 
and how the election may affect them if:
    (A) The percentage of disabled families currently residing in the 
project who are neither elderly nor near-elderly (hereafter, 
collectively referred to as ``non-elderly disabled families'') is equal 
to or exceeds the minimum required percentage of units established for 
the elderly project in accordance with paragraph (c)(1) of this section, 
and therefore non-elderly families on the waiting list (including non-
elderly disabled families) may be passed over for covered section 8 
units; or
    (B) The project, after making the calculation set forth in paragraph 
(c)(1) of this section, will have no units set aside for non-elderly 
disabled families.
    (iv) An owner who elects to give a preference for elderly families 
in accordance with this section shall not remove an applicant from the 
project's waiting list solely on the basis of having made the election.
    (2) HUD approval of election not required. (i) An owner is not 
required to solicit or obtain the approval of HUD before exercising the 
election of preference for occupancy provided in paragraph (a)(1) of 
this section. The owner, however, if challenged on the issue of 
eligibility of the project for the election provided in paragraph (a)(1) 
of this section must be able to support the project's eligibility 
through the production of all relevant documentation in the possession 
of the owner that pertains to the original design of the project.

[[Page 163]]

    (ii) The Department reserves the right at any time to review and 
make determinations regarding the accuracy of the identification of the 
project as an elderly project. The Department can make such 
determinations as a result of ongoing monitoring activities, or the 
conduct of complaint investigations under the Fair Housing Act (42 
U.S.C. 3601 through 3619), or compliance reviews and complaint 
investigations under section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and other applicable statutes.
    (b) Determining projects eligible for preference for occupancy by 
elderly families. (1) Evidence supporting project eligibility. Evidence 
that a project assisted under this part (or portion of a project) was 
originally designed primarily for occupancy by elderly families, and is 
therefore eligible for the election of occupancy preference provided by 
this section, shall consist of at least one item from the sources 
(``primary'' sources) listed in paragraph (b)(1)(i), or at least two 
items from the sources (``secondary'' sources) listed in paragraph 
(b)(1)(ii) of this section:
    (i) Primary sources. Identification of the project (or portion of a 
project) as serving elderly (seniors) families in at least one primary 
source such as: the application in response to the notice of funding 
availability; the terms of the notice of funding availability under 
which the application was solicited; the regulatory agreement; the loan 
commitment; the bid invitation; the owner's management plan, or any 
underwriting or financial document collected at or before loan closing; 
or
    (ii) Secondary sources. Two or more sources of evidence such as: 
lease records from the earliest two years of occupancy for which records 
are available showing that occupancy has been restricted primarily to 
households where the head, spouse or sole member is 62 years of age or 
older; evidence that services for elderly persons have been provided, 
such as services funded by the Older Americans Act, transportation to 
senior citizen centers, or programs coordinated with the Area Agency on 
Aging; project unit mix with more than fifty percent of efficiency and 
one-bedroom units [a secondary source particularly relevant to 
distinguishing elderly projects under the previous section 3(b) 
definition (in which disabled families were included in the definition 
of ``elderly families'') from non-elderly projects and which in 
combination with other factors (such as the number of accessible units) 
may be useful in distinguishing projects for seniors from those serving 
the broader definition of ``elderly families'' which includes disabled 
families]; or any other relevant type of historical data, unless clearly 
contradicted by other comparable evidence.
    (2) Sources in conflict. If a primary source establishes a design 
contrary to that established by the primary source upon which the owner 
would base support that the project is an eligible project (as defined 
in this section), the owner cannot make the election of preferences for 
elderly families as provided by this section based upon primary sources 
alone. In any case where primary sources do not provide clear evidence 
of original design of the project for occupancy primarily by elderly 
families, including those cases where primary sources conflict, 
secondary sources may be used to establish the use for which the project 
was originally designed.
    (c) Reservation of units in elderly projects for non-elderly 
disabled families. The owner of an elderly project is required to 
reserve, at a minimum, the number of units specified in paragraph (c)(1) 
of this section for occupancy by non-elderly disabled families.
    (1) Minimum number of units to be reserved for non-elderly disabled 
families. The number of units in an elderly project required to be 
reserved for occupancy by non-elderly disabled families, shall be, at a 
minimum, the lesser of:
    (i) The number of units equivalent to the higher of--
    (A) The percentage of units assisted under this part in the elderly 
project that were occupied by non-elderly disabled families on October 
28, 1992; and
    (B) The percentage of units assisted under this part in the elderly 
project that were occupied by non-elderly disabled families upon January 
1, 1992; or
    (ii) 10 percent of the number of units assisted under this part in 
the eligible project.

[[Page 164]]

    (2) Option to reserve greater number of units for non-elderly 
disabled families. The owner, at the owner's option, and at any time, 
may reserve a greater number of units for non-elderly disabled families 
than that provided for in paragraph (c)(1) of this section. The option 
to provide a greater number of units to non-elderly disabled families 
will not obligate the owner to always provide that greater number to 
non-elderly disabled families. The number of units required to be 
provided to non-elderly disabled families at any time in an elderly 
project is that number determined under paragraph (c)(1) of this 
section.
    (d) Secondary preferences. An owner of an elderly project also may 
elect to establish secondary preferences in accordance with the 
provisions of this paragraph (d) of this section.
    (1) Preference for near-elderly disabled families in units reserved 
for elderly families. If the owner of an elderly project determines, in 
accordance with paragraph (f) of this section, that there are an 
insufficient number of elderly families who have applied for occupancy 
to fill all the vacant units in the elderly project reserved for elderly 
families (that is, all units except those reserved for the non-elderly 
disabled families as provided in paragraph (c) of this section), the 
owner may give preference for occupancy of such units to disabled 
families who are near-elderly families.
    (2) Preference for near-elderly disabled families in units reserved 
for non-elderly disabled families. If the owner of an elderly project 
determines, in accordance with paragraph (f) of this section, that there 
are an insufficient number of non-elderly disabled families to fill all 
the vacant units in the elderly project reserved for non-elderly 
disabled families as provided in paragraph (c) of this section, the 
owner may give preference for occupancy of these units to disabled 
families who are near-elderly families.
    (e) Availability of units to families without regard to preference. 
An owner shall make vacant units in an elderly project generally 
available to otherwise eligible families who apply for housing, without 
regard to the preferences and reservation of units provided in this 
section if either:
    (1) The owner has adopted the secondary preferences and there are an 
insufficient number of families for whom elderly preference, reserve 
preference, and secondary preference has been given, to fill all the 
vacant units; or
    (2) The owner has not adopted the secondary preferences and there 
are an insufficient number of families for whom elderly preference, and 
reserve preference has been given to fill all the vacant units.
    (f) Determination of insufficient number of applicants qualifying 
for preference. To make a determination that there are an insufficient 
number of applicants who qualify for the preferences, including 
secondary preferences, provided by this section, the owner must:
    (1) Conduct marketing in accordance with Sec. 886.321(a) to attract 
applicants qualifying for the preferences and reservation of units set 
forth in this section; and
    (2) Make a good faith effort to lease to applicants who qualify for 
the preferences provided in this section, including taking all feasible 
actions to fill vacancies by renting to such families.
    (g) Federal preferences. An owner that gives preferences to elderly 
families and reserves units for non-elderly disabled families in 
accordance with this section also shall select applicants among each 
respective group in accordance with the Federal preferences contained in 
Sec. 886.337. Projects under National Housing Act programs and receiving 
section 8 assistance may be subject to preferences in addition to those 
contained in Sec. 886.337 which also must be applied in selecting 
applicants among each respective group.
    (h) Prohibition of evictions. An owner may not evict a tenant 
without good cause, or require that a tenant vacate a unit, in whole or 
in part because of any reservation or preference provided in this 
section, or because of any action taken by the Secretary pursuant to 
subtitle D (sections 651 through 661) of title VI of the Housing and 
Community Development Act of 1992 (42 U.S.C. 13611 through 13620).

[59 FR 65857, Dec. 21, 1994]

[[Page 165]]



Sec. 886.330  Work write-ups and cost estimates.

    (a) HUD preparation of work write-ups. If needed, a work write-up, 
including plans and specifications, will be made by HUD specifying 
necessary rehabilitation.
    (b) HUD specifies deficiencies and corrective action. The work 
write-up will specify deficiencies noted by HUD and describe the manner 
in which the deficiencies are to be corrected, including minimum 
acceptable levels of workmanship and materials.
    (c) HUD preparation of cost estimates. HUD shall perform or cause to 
be performed a cost estimate to complete rehabilitation. The cost of any 
necessary relocation, as determined by HUD as being necessary to 
expedite the rehabilitation and the estimated cost to the owner of 
maintaining project rents at the Section 8 level, as required by HUD 
prior to execution of the Contract, plus other costs allowable by HUD 
will be included in the cost estimate. The work write-up and cost 
estimate shall become part of the disposition package and will be used 
in determining the sales price of the project.

[44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993]



Sec. 886.331  Agreement to enter into housing assistance payments contract.

    (a) Execution of agreement. At the sales closing and prior to the 
Owner's commencement of any rehabilitation under this subpart, HUD will 
enter into an Agreement with the Owner which contains the following:
    (1) A statement that the Owner agrees to rehabilitate the project 
unit(s) to make the unit(s) decent, safe, and sanitary in accordance 
with the work write-up, cost estimates, and this subpart.
    (2) A date by which rehabilitation will have commenced and a 
deadline date by which the rehabilitated project unit(s) will be 
completed and ready for occupancy. The Agreement may provide for staged 
rehabilitation, occupancy, and payments under the contract.
    (3) The Contract Rent which will be paid to the Owner once 
rehabilitation is completed, the Contract is executed, and the unit(s) 
is/are occupied by an eligible family.
    (4) A date for final inspection of the unit(s) by HUD and the owner 
shall be specified. This date shall be as soon as possible after the 
deadline date specified pursuant to paragraph (a)(2) of this section.
    (5) The term of the contract.
    (b) Agreement part of sales contract. The Agreement will be prepared 
by HUD and incorporated into the Contract of Sale and Purchase. The 
Agreement shall include all required information in paragraph (a) of 
this section and a statement specifying the Owner's responsibility for 
making relocation payments to Families temporarily displaced.

[44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993]



Sec. 886.332  Rehabilitation period.

    (a) Immediate start of rehabilitation after sales closing. After the 
execution of the Agreement and the sales closing, the owner shall 
immediately proceed with the rehabilitation work as provided in the 
Agreement. In the event the work is not immediately commenced, 
diligently continued, and/or completed by the deadline date stated on 
the Agreement, HUD will have the right, upon written notification to the 
owner, to rescind the Agreement and the sale, or take other appropriate 
action.
    (b) Extensions. Although extensions of time may be granted by HUD 
upon a written request from the owner stating the grounds for the 
extension, no increases in Contract Rents shall be granted for delays.
    (c) Changes. (1) The Owner must submit to HUD for approval any 
changes from the work specified in the Agreement which would materially 
reduce or alter the Owner's obligations or the quality or amenities of 
the project. HUD may condition its approval of such changes on a 
reduction of the Contract Rents. If changes are made without prior HUD 
approval, HUD will have the right to take action consistent with the 
purpose of this subpart, including action intended to preclude the owner 
from benefiting from a change in the work specified without

[[Page 166]]

HUD approval. HUD action shall include but is not limited to reducing 
the Contract Rents, requiring the owner to remedy the deficiency, or 
rescission of the Contract of Sale with reimbursement to the owner for 
the HUD determined reasonable cost of work items completed by the Owner 
and acceptable to HUD.
    (2) Contract Rents for project units being rehabilitated shall not 
be increased except in accordance with this subpart. Should an increase 
in Contract Rents be necessitated by changes in local codes or 
ordinances or other unanticipated changes in work items which could not 
have been anticipated by HUD, an increase will only be approved if HUD 
approval is obtained prior to incorporation of any changes in the 
project.

[44 FR 70365, Dec. 6, 1979, as amended at 58 FR 43722, Aug. 17, 1993]



Sec. 886.333  Completion of rehabilitation.

    (a) Notification of completion. The owner must notify HUD in writing 
when work is completed and submit to HUD the evidence of completion and 
cost certifications described in paragraph (b) and (c) of this section.
    (b) Evidence of completion. Completion of the project must be 
evidenced by furnishing HUD with the following:
    (1) A certificate of occupancy and/or other official approvals 
necessary for occupancy as required by the locality.
    (2) A certification by the owner that:
    (i) The project unit(s) has been completed in accordance with the 
requirements of the Agreement;
    (ii) The project unit(s) is/are decent, safe, and sanitary;
    (iii) The project unit(s) has/have been rehabilitated in accordance 
with the applicable zoning, building, housing and other codes, 
ordinances or regulations, as modified by any waivers obtained from the 
appropriate officials;
    (iv) The project was treated and is in compliance with applicable 
HUD lead-based paint regulations (24 CFR parts 35 and 200, subpart O).
    (v) If applicable, the owner has complied with the provisions of the 
Agreement relating to the payment of not less than prevailing wage rates 
and that to the best of the owner's knowledge and belief there are no 
claims of underpayment in alleged violation of said provisions of the 
Agreement. In the event there are any such pending claims to the 
knowledge of the owner of HUD, the owner shall be required to place a 
sufficient amount in escrow, as determined by HUD, to assure such 
payments;
    (vi) There are no defects or deficiencies in the project except for 
ordinary punchlist items, or incomplete work awaiting seasonal 
opportunity such as landscaping and heating system test (such excepted 
items to be specified); and
    (vii) There has been no change in the evidence of management 
capability or in the proposed management program (if one was required) 
specified in the approved purchase proposal other than changes approved 
in writing by HUD in accordance with the Agreement.
    (c) Actual cost and interest rate certifications. The Owner must 
provide HUD with statements of the actual costs, including the interest 
rate incurred for the rehabilitation, Contract Rent shortfalls, and any 
relocation approved by HUD. The owner shall certify that these are the 
actual costs. HUD shall review and approve these costs subject to post 
audit.
    (d) Review and inspections. (1) Within fifteen working days of the 
receipt of the evidence of completion, and the owner's certification of 
costs, HUD shall review the evidence of completion for compliance with 
paragraphs (b) and (c) of this section.
    (2) Within the same time period, a HUD representative shall inspect 
the units, to determine whether the units meet the Housing Quality 
Standards, the Agreement to Enter into the HAP, and any applicable work 
write-up.
    (e) If the inspection discloses defects or deficiencies, the 
inspector shall report these with sufficient detail and information for 
purposes of paragraphs (g) (1) and (2) of this section.
    (f) Acceptance. If HUD determines from the review and inspection 
that the project has been completed in accordance with the Agreement, 
the project shall be accepted.
    (g) Acceptance where defects or deficiencies reported. If the 
projects unit(s) are not acceptable under paragraph (f)

[[Page 167]]

of this section, the following shall apply:
    (1) If the only defects or deficiencies are punchlist items or 
incomplete items awaiting seasonal opportunity, the project may be 
accepted and the contract executed. If the owner fails to complete the 
items within a reasonable time to the satisfaction of HUD, HUD may, upon 
30 days notice to the owner terminate the contract and/or exercise its 
other rights thereunder, including rescission of the sale.
    (2) If the defects or deficiencies are other than punchlist items or 
incomplete work awaiting seasonal opportunity, HUD shall determine 
whether and to what extent the defects or deficiencies can be corrected, 
what corrections are essential to permit HUD to accept the project, 
whether and to what extent a reduction of Contract Rents will be 
required as a condition to acceptance of the project, and the extension 
of time required for the remaining work to be done. The owner shall be 
notified of HUD's determinations and, if the owner agrees to comply with 
the conditions, an addendum to the Agreement shall be entered into, 
specifying the remaining work, pursuant to which the defects or 
deficiencies will be corrected and the unit(s) then accepted. If the 
owner is unwilling to enter into such an addendum or fails to perform 
under the addendum, the units will not be accepted and appropriate 
remedies will be sought by HUD. Paragraphs (a) through (g) will apply 
when the remaining work is completed satisfactorily.
    (h) Notification of non-acceptance. If HUD determines that, based on 
the review of the evidence of completion and inspection, the unit(s) 
cannot be accepted, the Owner must be promptly notified of this decision 
and the reasons and steps shall be taken immediately to rescind the 
sale, or such other action deemed appropriate by HUD.

[44 FR 70365, Dec. 6, 1979, as amended at 52 FR 1896, Jan. 15, 1987; 58 
FR 43723, Aug. 17, 1993]



Sec. 886.334  Execution of housing assistance payments contract.

    (a) Time of execution. Upon acceptance of the unit(s) by HUD 
pursuant to Sec. 886.333(f), the contract will be executed first by the 
Owner and then by HUD. The effective date must be no earlier than the 
HUD inspection which provides the basis for unconditional acceptance.
    (b) Changes in initial contract rents during rehabilitation. (1) The 
Contract Rents established pursuant to Sec. 886.310 and 24 CFR part 290 
will be the Contract Rents on the effective date of the Contract except 
under the following circumstances:
    (i) When, during rehabilitation, work items are discovered which 
could not reasonably have been anticipated by HUD or are necessitated by 
an unforeseen change in local codes or ordinances; were not listed in 
the work write-up prepared by HUD but are deemed by HUD, in writing, to 
be necessary work; and will require additional expenditures which would 
make the rehabilitations infeasible at the Contract Rents established in 
the Agreement. Under these circumstances, HUD will:
    (A) Approve a change order to the rehabilitation contract, or amend 
the work write-up if there is no rehabilitation contract, specifying the 
additional work to be accomplished and the additional cost for this 
work,
    (B) Recompute the Contract Rents, within the limits specified in 
paragraph (b)(4) of this section, based upon the revised cost estimate, 
and
    (C) Prepare and execute an amendment to the Agreement stating the 
additional work required and the revised Contract Rents.
    (ii) When the actual cost of the rehabilitation performed is less 
than that estimated in the calculation of Contract Rents for the 
Agreement.
    (iii) When, due to unforeseen factors, the actual certified 
relocation payments made by the Owner to temporarily relocated Families 
varies from the cost estimated by HUD.
    (2) Should changes occur as specified in paragraph (b)(1) (ii) or 
(iii) (either an increase or decrease), HUD may recalculate the Contract 
Rents and amend the Contract or Agreement, as appropriate, to reflect 
the revised rents. The rents shall not be recalculated based on 
increased costs to maintain rents at

[[Page 168]]

the Section 8 level during the rehabilitation period.
    (3) HUD must review and approve the Owner's certification that the 
rehabilitation costs and relocation costs are the actual costs incurred.
    (4) In establishing the revised Contract Rents, HUD must determine 
that the resulting Gross Rents do not exceed the Fair Market Rent or the 
exception rent provided in Sec. 886.310 in effect at the time of 
execution of the Agreement.
    (c) Unleased unit(s). At the time the contract is executed, HUD will 
provide a list of dwelling unit(s) leased as of the effective date of 
the Contract and a list of the unit(s) not so leased, if any, and shall 
determine whether or not the owner has met the obligations with respect 
to any unleased unit(s) and for which of those unit(s) vacancy payments 
will be made by HUD. The owner must indicate in writing either 
concurrence with this determination or disagreement reserving all rights 
to claim vacancy payments for the unleased unit(s) pursuant to the 
contract, without prejudice by reason of the owner's signing the 
contract.

[44 FR 70365, Dec. 6, 1979, as amended at 48 FR 12711, Mar. 28, 1983; 49 
FR 17449, Apr. 24, 1984]



Sec. 886.335  HUD review of agreement and contract compliance.

    HUD will review project operations at such intervals as it deems 
necessary to ensure that the owner is in full compliance with the terms 
and conditions of the contract, Regulatory Agreement, and Agreement to 
Enter into a Housing Assistance Contract, if any. The equal opportunity 
review may be conducted with the scheduled HUD review or at any time 
deemed appropriate by HUD.



Sec. 886.336  Audit.

    (a) Where a State or local government is the eligible owner of a 
project receiving financial assistance under this part, the audit 
requirements in 24 CFR part 44 shall apply.
    (b) Where a nonprofit organization is the eligible owner of a 
project receiving financial assistance under this part, the audit 
requirements in 24 CFR part 45 shall apply.

[50 FR 39092, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986, as amended at 
57 FR 33257, July 27, 1992]



Sec. 886.337  Selection preferences.

    Sections 5.410 through 5.430 govern the use of preferences in the 
selection of tenants under this subpart.

[59 FR 36647, July 18, 1994, as amended at 61 FR 9047, Mar. 6, 1996]



Sec. 886.338  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, owners shall assure that they have taken all 
reasonable steps to minimize the displacement of persons (families, 
individuals, businesses, nonprofit organizations, and farms) as a result 
of a project assisted under this part.
    (b) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporary housing and any increase in monthly 
rent/utility costs; and
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe, and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the building/
complex following completion of the rehabilitation; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A ``displaced 
person'' (defined in paragraph (g) of this section) must be provided 
relocation assistance at

[[Page 169]]

the levels described in, and in accordance with the requirements of, the 
Uniform Relocation Assistance and Real Property Acquisition Policies Act 
of 1970 (URA) (42 U.S.C. 4601-4655) and implementing regulations at 49 
CFR part 24. A ``displaced person'' shall be advised of his or her 
rights under the Fair Housing Act (42 U.S.C. 3601-19), and, if the 
representative comparable replacement dwelling used to establish the 
amount of the replacement housing payment to be provided to a minority 
person is located in an area of minority concentration, such person also 
shall be given, if possible, referrals to comparable and suitable, 
decent, safe, and sanitary replacement dwellings not located in such 
areas.
    (d) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (e) Appeals. A person who disagrees with the owner's determination 
concerning whether the person qualifies as a ``displaced person,'' or 
the amount of relocation assistance for which the person is found to be 
eligible, may file a written appeal of that determination with the 
owner. A low-income person who is dissatisfied with the owner's 
determination on such appeal may submit a written request for review of 
that determination to the HUD Field Office.
    (f) Responsibility of owner. (1) The owner shall certify (i.e., 
provide assurance of compliance, as required by 49 CFR part 24) that he 
or she will comply with the URA, the regulations at 49 CFR part 24, and 
the requirements of this section. The owner is responsible for such 
compliance notwithstanding any third party's contractual obligation to 
the owner to comply with these provisions.
    (2) The cost of providing required relocation assistance is an 
eligible project cost to the same extent and in the same manner as other 
project costs. Such costs may also be paid for with funds available from 
other sources.
    (3) The owner shall maintain records in sufficient detail to 
demonstrate compliance with the provisions of this section. The owner 
shall maintain data on the race, ethnic, gender, and handicap status of 
displaced persons.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means a person (family, individual, 
business, nonprofit organization, or farm) that moves from real 
property, or moves personal property from real property, permanently, as 
a direct result of acquisition, rehabilitation, or demolition for a 
project assisted under this part. This includes any permanent, 
involuntary move for an assisted project, including any permanent move 
from the real property that is made:
    (i) After notice by the owner to move permanently from the property, 
if the move occurs on or after the date of the submission of the 
application to HUD;
    (ii) Before submission of the application to HUD, if HUD determines 
that the displacement resulted directly from acquisition, 
rehabilitation, or demolition for the assisted project; or
    (iii) By a tenant-occupant of a dwelling unit, if any one of the 
following three situations occurs:
    (A) The tenant moves after the execution of the contract to provide 
Housing Assistance Payments, and the move occurs before the tenant is 
provided written notice offering him or her the opportunity to lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the same 
building/complex, under reasonable terms and conditions, upon completion 
of the project. Such reasonable terms and conditions include a monthly 
rent and estimated average monthly utility costs that do not exceed the 
greater of:
    (1) The tenant's monthly rent before execution of the Housing 
Assistance Payments Contract and estimated average monthly utility 
costs; or
    (2) The total tenant payment, as determined under 24 CFR 813.107, if 
the tenant is low-income, or 30 percent of gross household income, if 
the tenant is not low-income; or
    (B) The tenant is required to relocate temporarily, does not return 
to the building/complex, and either:
    (1) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, or

[[Page 170]]

    (2) Other conditions of the temporary relocation are not reasonable; 
or
    (C) The tenant is required to move to another dwelling unit in the 
same building/complex but is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move, 
or other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
of applicable Federal, State or local law, or other good cause, and HUD 
determines that the eviction was not undertaken for the purpose of 
evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the submission of the 
application and, before signing a lease and commencing occupancy, 
received written notice of the project, its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated, or 
suffer a rent increase) and the fact that he or she would not qualify as 
a ``displaced person'' (or for assistance under this section) as a 
result of the project;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The owner may ask HUD, at any time, to determine whether a 
displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a residential tenant displaced as a direct result of 
privately undertaken rehabilitation, demolition, or acquisition of the 
real property, the term ``initiation of negotiations'' means the owner's 
execution of the Housing Assistance Payments Contract.

(Approved by Office of Management and Budget under OMB Control Number 
2506-0121)

[58 FR 43723, Aug. 17, 1993]



PART 887--HOUSING VOUCHERS--Table of Contents




                     Subpart A--General Information

Sec.
887.1  Purpose of the Housing Voucher Program.
887.3  Scope and applicability.
887.7  Definitions.

                         Subparts B-G [Reserved]

       Subpart H--Payment Standard and Housing Assistance Payment

887.351  Determining the payment standard and the payment standard 
          schedule.
887.353  Determining housing assistance payments amounts.
887.355  Regular reexamination of family income and composition.
887.357  Interim reexamination of family income and composition.
887.359  Changes in family size or composition.
887.361  Adjustment of utility allowances.
887.363  Housing assistance payments equal to zero.

                          Subpart I [Reserved]

                    Subpart J--Special Housing Types

887.451  Purpose of this subpart.
887.453  Cooperative or mutual housing: Definition.
887.455  Cooperative or mutual housing: Limitation on the use of housing 
          voucher authority.
887.461  Independent group residences (IGR): Definitions.
887.463  Independent group residences: Selection preferences.
887.465  Independent group residences: Additional lease requirements.
887.467  Independent group residences: Housing quality standards.
887.469  Independent group residences: Payment standard.
887.471  Manufactured homes: Definition.
887.473  Manufactured homes: Housing quality standards.
887.481  Single room occupancy (SRO): Definition.
887.483  Single room occupancy: Additional eligibility criteria.

[[Page 171]]

887.485  Single room occupancy: Housing quality standards.
887.487  Single room occupancy: Payment standard.
887.489  Congregate housing: Definition.
887.491  Congregate housing: Housing quality standards.
887.493  Congregate housing: Payment standard.

                        Subpart K--Shared Housing

887.501  Applicability, scope, and purpose.
887.503  Definitions.
887.505  Types of shared housing and applicable requirements.
887.507  PHA administration of shared housing.
887.509  Housing quality standards for shared housing.
887.511  Occupancy of a shared housing unit.
887.513  Determining amount of housing assistance.
887.515  Payment standard for shared housing.

    Authority: 42 U.S.C. 1437f(o) and 3535(d).

    Source: 53 FR 34388, Sept. 6, 1988, unless otherwise noted.

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, part 887 was 
removed and reserved, effective Apr. 15, 1999.



                     Subpart A--General Information



Sec. 887.1  Purpose of the Housing Voucher Program.

    Section 8(o) of the United States Housing Act of 1937 (42 U.S.C. 
1437f(o)) authorizes the Housing Voucher Program. The purpose of the 
Housing Voucher Program is to assist eligible families to pay rent for 
decent, safe, and sanitary housing.



Sec. 887.3  Scope and applicability.

    (a) The provisions of this part apply to the Section 8 voucher 
program authorized by section 8(o) of the 1937 Act. This part states 
voucher program requirements concerning the payment standard and housing 
assistance payment, and concerning special housing types. Other program 
regulations for the Section 8 tenant-based certificate and voucher 
programs are located at 24 CFR part 982.
    (b) The definitions in Sec. 887.7 are applicable in applying the 
provision of this part.

[60 FR 34694, July 3, 1995]



Sec. 887.7  Definitions.

    The terms 1937 Act, Elderly person, Fair Market Rent (FMR), HUD, and 
Public Housing Agency (PHA) are defined in 24 CFR part 5.
    Adjusted income. See Sec. 813.102 of this chapter.
    Annual contributions contract (ACC). A written agreement between HUD 
and a PHA to provide annual contributions to the PHA for housing 
assistance payments and administrative fees.
    Annual income. See Sec. 813.106 of this chapter.
    Assisted lease (or lease). A written agreement between an owner and 
a family for the leasing of a dwelling unit by the owner to the family 
with assistance payments under a housing voucher contract between the 
owner and the PHA. In the case of cooperative or mutual housing, 
``lease'' means the occupancy agreement or other written agreement 
establishing the conditions for occupancy of the unit.
    Common space. Defined in Sec. 887.503 for purposes of shared 
housing.
    Congregate housing. Defined in Sec. 887.489.
    Cooperative or mutual housing. Defined in Sec. 887.453.
    Disabled person. See Sec. 812.2 of this chapter.
    Displaced person. See Sec. 812.2 of this chapter.
    Eligible family (family). See Sec. 887.151(a)
    Handicapped person. See Sec. 813.102 of this chapter.
    HCD Act of 1974. The Housing and Community Development Act of 1974.
    Housing assistance payment. The monthly payment by the PHA to an 
owner on behalf of a family participating in the Housing Voucher 
Program. The maximum housing assistance payment is determined by 
subtracting 30 percent of a family's monthly adjusted income from the 
payment standard that applies to the family. For additional detail see 
Sec. 887.353.
    Housing assistance plan. (a) A housing assistance plan submitted by 
a local government participating in the Community Development Block 
Grant Program as part of the block grant application, in accordance with 
the requirements of the Community Development Block Grant regulations in 
Sec. 570.306 of this title and approved by HUD; or

[[Page 172]]

    (b) A housing assistance plan meeting the requirements of 
Sec. 570.306 of this title, submitted by a local government not 
participating in the Community Development Block Grant Program and 
approved by HUD.
    Housing voucher. A document issued by a PHA declaring a family to be 
eligible for participation in the Housing Voucher Program and stating 
the terms and conditions for the family's participation.
    Housing voucher contract. A written contract between a PHA and an 
owner, in the form prescribed by HUD for the Housing Voucher Program, in 
which the PHA agrees to make housing assistance payments to the owner on 
behalf of an eligible family.
    Housing voucher holder. A family that has an unexpired housing 
voucher.
    Independent group residence (IGR). Defined in Sec. 887.461.
    Individual lease shared housing. Defined in Sec. 887.503 for 
purposes of shared housing.
    Initial PHA. Defined in Sec. 887.553 for purposes of portability.
    Lease. See assisted lease.
    Low-income family. A family whose annual income does not exceed 80 
percent of the median income for the area, as determined by HUD, with 
adjustments for smaller and larger families. HUD may establish income 
limits higher or lower than 80 percent of the median income for the area 
on the basis of its finding that such variations are necessary because 
of the prevailing levels of construction costs or unusually high or low 
family income.
    Manufactured home. Defined in Sec. 887.471.
    Occupancy standards. Standards that the PHA establishes for 
determining the appropriate number of bedrooms needed to house families 
of different sizes or composition.
    Owner. Any person or entity having the legal right to lease or 
sublease decent, safe, and sanitary housing.
    Participant. A family becomes a participant in the PHA's Housing 
Voucher Program when the PHA executes a housing voucher contract with an 
owner for housing assistance payments on behalf of the family.
    Payment standard. An amount, adopted by a PHA for each bedroom size 
and Fair Market Rent area, that is used to determine the amount of 
assistance that is to be paid by the PHA on behalf of a family 
participating in the Housing Voucher Program. For additional detail see 
Secs. 887.351 and 887.353.
    Private space. Defined in Sec. 887.503 for purposes of shared 
housing.
    PHA jurisdiction. The area in which the PHA is not legally barred 
from entering into housing voucher contracts.
    Receiving PHA. Defined in Sec. 887.553 for purposes of portability.
    Rent to owner. The total of the monthly amount paid under the 
housing voucher contract by the PHA to the owner on behalf of the family 
and the monthly amount the family must pay to the owner to cover the 
balance of rent due the owner under the lease.
    Resident assistant. Defined in Sec. 887.461 for purposes of IGRs.
    Secretary. The Secretary of Housing and Urban Development, or 
designee.
    Service agency. Defined in Sec. 887.461 for purposes of IGRs.
    Service agreement. Defined in Sec. 887.461 for purposes of IGRs.
    Shared housing. Defined in Sec. 887.503.
    Single room occupancy (SRO) housing. Defined in Sec. 887.481.
    Utility allowance. An amount that applies when the cost of utilities 
(except telephone) and other housing services (e.g., garbage collection) 
for an assisted unit is not included in the rent to owner and is instead 
the responsibility of the family. The allowance is an amount equal to 
the estimate made or approved by the PHA (see Sec. 887.101) of the 
monthly costs of a reasonable consumption of these utilities and other 
services for the unit by an energy-conservative household of modest 
circumstances, consistent with the requirements of a safe, sanitary, and 
healthful living environment. In the case of shared housing, the amount 
of the utility allowance for an assisted family is a pro rata portion of 
the utility allowance for the entire unit, based on the number of 
bedrooms in the assisted family's private space. In the case of an 
assisted individual sharing a one-bedroom unit with another person, the 
amount of the utility allowance for the assisted individual is one half 
the utility allowance for the entire unit.

[[Page 173]]

    Very low-income family. A low-income family whose annual income does 
not exceed 50 percent of the median income for the area, as determined 
by HUD, with adjustments for smaller or larger families. HUD may 
establish income limits higher or lower than 50 percent of the median 
income for the area on the basis of its finding that such variations are 
necessary because of unusually high or low family incomes.

[43 FR 34388, Sept. 6, 1988; 53 FR 36450, Sept. 20, 1988, as amended at 
61 FR 5213, Feb. 9, 1996]



                         Subparts B-G [Reserved]



       Subpart H--Payment Standard and Housing Assistance Payment



Sec. 887.351  Determining the payment standard and the payment standard schedule.

    (a) Payment standard amount. (1) The payment standard is an amount 
used to calculate the monthly housing assistance payment. (Section 
887.353 states how to calculate the monthly amount of the housing 
assistance.)
    (2) Each payment standard amount is based on the published Section 8 
Existing Housing fair market rent. The PHA must establish a separate 
payment standard amount by unit size (single room occupany, zero-
bedroom, one-bedroom, etc.) for each fair market rent area within its 
jurisdiction.
    (b) Payment standard schedule. (1) The payment standard schedule is 
a list of the payment standard amounts for each unit size in a fair 
market rent area in the PHA's jurisdiction. A PHA must adopt and 
maintain a payment standard schedule for each fair market rent area in 
the PHA jurisdiction. A PHA may have only one payment standard schedule 
for each fair market rent area. Each payment standard schedule may have 
only one payment standard amount for each unit size in the fair market 
rent area.
    (2) Each payment standard amount on the schedule may not be less 
than 80 percent of the published Section 8 Existing Housing fair market 
rent (in effect when the payment standard amount is adopted) for the 
unit size, nor more than the fair market rent or HUD-approved community-
wide exception rent (in effect when the payment standard amount is 
adopted) for the unit size. (Community-wide exception rents are maximum 
gross rents approved by HUD for the Certificate Program under 
Sec. 882.106(a)(3) of this chapter for a designated municipality, 
county, or similar locality, which apply to the whole PHA jurisdiction.)
    (c) Increasing payment standard amounts on the payment standard 
schedule. The PHA, in its discretion, may adopt annual increases of 
payment standard amounts on the payment standard schedule so that 
families can continue to afford to lease units with assistance under the 
Housing Voucher Program.
    (d) Decreasing payment standard amounts on the payment standard 
schedule. When revised Section 8 Existing Housing fair market rents are 
published for effect in the Federal Register and any fair market rent or 
HUD-approved community-wide exception rent is lower than the 
corresponding payment standard amount on the PHA's payment standard 
schedule, the PHA must adopt a new payment standard amount not more than 
the revised FMR or the HUD-approved community-wide exception rent.

[43 FR 34388, Sept. 6, 1988; 53 FR 36450, Sept. 20, 1988]



Sec. 887.353  Determining housing assistance payments amounts.

    (a) General--(1) Using the payment standard. A PHA uses the payment 
standard schedule to determine the appropriate payment standard for a 
particular family, based on the family size and composition and the PHA 
occupancy standards. Once the PHA determines the appropriate payment 
standard amount from the schedule, the PHA subtracts 30 percent of the 
family's monthly adjusted income (as computed under Part 813) to arrive 
at the monthly housing assistance payments that the PHA will make to the 
owner on behalf of the family. (For example, if a family qualifies for a 
four-bedroom housing voucher under the PHA occupancy standards and has 
monthly adjusted income of $500, and the payment standard amount for a 
four-bedroom housing voucher is $600, the housing assistance payment for 
the family is the

[[Page 174]]

payment standard amount ($600) minus 30 percent of the family's monthly 
adjusted income ($150) which is $450.) Before entering into a housing 
voucher contract with the owner for this amount, the PHA must also 
complete the ``minimum rent'' calculation in paragraph (a)(2) of this 
section.
    (2) Minimum rent. The housing assistance payment may not be more 
than the amount by which the rent to owner plus any applicable utility 
allowance exceeds 10 percent of the family's monthly gross income, 
determined in accordance with Part 813. (Except for the minimum rent 
calculation, actual rent to owner for a unit does not affect the amount 
of the housing assistance payment.)
    (3) Shopper's incentive. If a unit rents for less than the payment 
standard, the family benefits by paying less than 30 percent of its 
monthly adjusted income toward rent, subject to the minimum rent 
calculation. It a unit rents for more than the payment standard, the 
housing assistance payment is not increased, nor is the family told it 
must find another unit, as in the Certificate Program. Instead, the 
family pays the entire difference between the rent and the housing 
assistance payment.
    (b) When changes in the payment standard apply to an existing 
housing assistance payment--(1) General. The payment standard that is 
applied to a family may be changed only:
    (i) At regular reexamination (see paragraph (b)(2) of this section); 
or
    (ii) At the time a family moves to another unit (see paragraph 
(b)(3) of this section).
    (2) Rules at regular reexamination. At regular reexamination, the 
PHA must apply a different payment standard if one of the following 
circumstances applies:
    (i) If the PHA has increased the payment standard applicable to the 
family, the increased payment standard is used;
    (ii) If the PHA has adopted new occupancy standards, the payment 
standard for the appropriate unit size under the PHA's new occupancy 
standards is used;
    (iii) If the family's size or composition has changed, the payment 
standard for the appropriate unit size is used.
    (3) Rule when a family moves. When a family moves to another unit, 
the PHA must apply a different payment standard if one of the following 
circumstances applies:
    (i) If the PHA has increased or decreased the payment standard 
applicable to the family, the new payment standard is used;
    (ii) If the PHA has adopted new occupancy standards, the payment 
standard for the appropriate size under the PHA's new occupancy 
standards is used;
    (iii) If the family's size or composition has changed, the payment 
standard for the appropriate unit size is used.
    (4) Request for interim reexamination. Redetermination of the 
housing assistance payment as a result of an interim reexamination under 
Sec. 887.357 does not affect the payment standard applicable to the 
family.
    (c) No housing assistance payments for vacancies. If a family moves 
out of the unit, the owner must notify the PHA promptly, and the PHA may 
not make any additional housing assistance payments to the owner for any 
month after the month during which the family moves. The owner may 
retain the housing assistance payment for the month during which the 
family moves.
    (d) When the housing assistance payment exceeds the rent to owner. 
Normally, the entire housing assistance payment, determined under 
paragraph (a)(1) of this section, is paid by the PHA to the owner. When 
the family must pay some or all of its utilities directly, however, the 
housing assistance payment may occasionally exceed the rent to owner. In 
this case, the PHA must pay the excess (subject to the minimum rent 
determination in paragraph (a)(3) of this section) to the family or, 
with the consent of the family and the utility company, either jointly 
to the family and the utility company or directly to the utility 
company. For example, if the payment standard is $500, and 30 percent of 
a family's monthly adjusted income equals $120, the housing assistance 
payment would be $380. If the rent to owner is $350, and the utility 
allowance is $150, the PHA

[[Page 175]]

pays $350 to the owner and the remaining $30 of the housing assistance 
payment to the family as a utility reimbursement.
    (e) Assisting more families. If a PHA determines that some or all of 
the available annual contributions under its ACC are not needed for 
participating families, including future adjustments of housing 
assistance payments and portability moves, it may assist more families.



Sec. 887.355  Regular reexamination of family income and composition.

    (a) The PHA must reexamine family income and family size and 
composition at least annually, and in accordance with part 813 of this 
chapter. At the time of the annual reexamination of family income and 
composition, the PHA must require the family to disclose and verify 
Social Security Numbers, as provided by part 5, subpart B, of this 
title. For requirements regarding the signing and submitting of consent 
forms by families for the obtaining of wage and claim information from 
State Wage Information Collection Agencies, see part 5, subpart B, of 
this title.
    (b) At the first regular reexamination after June 19, 1995, the PHA 
shall follow the requirements of 24 CFR part 5 concerning obtaining and 
processing evidence of citizenship or eligible immigration status of all 
family members. Thereafter, at each regular reexamination, the PHA shall 
follow the requirements of 24 CFR part 5 concerning verification of the 
immigration status of any new family member.
    (c) At the regular reexamination, the PHA must adjust the housing 
assistance payment made on behalf of the family to reflect any changes 
in the family's monthly income, monthly adjusted income, size, or 
composition. The PHA must use the appropriate payment standard, as 
provided in Sec. 887.353.

(Approved by the Office of Management and Budget under control number 
2577-0083)

[53 FR 34388, Sept. 6, 1988, as amended at 54 FR 39709, Sept. 27, 1989; 
56 FR 7543, Feb. 22, 1991; 60 FR 14847, Mar. 20, 1995; 61 FR 11119, Mar. 
18, 1996; 61 FR 13625, Mar. 27, 1996]



Sec. 887.357  Interim reexamination of family income and composition.

    A family may request a redetermination of the housing assistance 
payment at any time, based on a change in the family's income, adjusted 
income, size or composition. See 24 CFR 750.10(d)(2)(i) for the 
requirements for the disclosure and verification of Social Security 
Numbers at interim reexaminations involving new family members. For 
requirements regarding the signing and submitting of consent forms by 
families for the obtaining of wage and claim information from State Wage 
Information Collection Agencies, see 24 CFR part 760. At any interim 
reexamination after June 19, 1995 that involves the addition of a new 
family member, the PHA shall follow the requirements of 24 CFR part 5 
concerning obtaining and processing evidence of citizenship or eligible 
immigration status of the new family member.

[56 FR 7543, Feb. 22, 1991, as amended at 60 FR 14847, Mar. 20, 1995; 61 
FR 13626, Mar. 27, 1996]



Sec. 887.359  Changes in family size or composition.

    (a) If the PHA determines that a unit does not meet the housing 
quality standards because of an increase in family size or a change in 
family composition, the PHA must issue the family a new housing voucher. 
The PHA must comply with requirements of Sec. 887.261.
    (b) A family may not be required to move because of a decrease in 
family size after initial occupancy of a unit. The family may rent a 
unit with a greater number of bedrooms than indicated on the housing 
voucher.



Sec. 887.361  Adjustment of utility allowances.

    (a) Annual review. At least annually, the PHA must determine: if 
there has been a substantial change in utility rates or other charges of 
general applicability that would require an adjustment in any utility 
allowance on the PHA's utility allowance schedule; or if there were 
errors in the original determination of the utility rates or other 
charges of general applicability that would require an adjustment in any 
utility allowances on the schedule.

[[Page 176]]

    (b) Required adjustment. If the PHA determines that an adjustment is 
necessary under paragraph (a) of this section, it must establish a new 
schedule of utility allowances, taking into account the size and type of 
dwelling units and other applicable factors.
    (c) Adjustments in housing assistance payments. The PHA must 
determine if adjustments to utility allowances affect the amount of 
housing assistance paid on behalf of the family by recalculating the 
minimum rent under Sec. 887.353(a)(2).

(Information collection requirements contained in this section have been 
approved by the Office of Management and Budget under control number 
2502-0161)



Sec. 887.363  Housing assistance payments equal to zero.

    (a) Under the formula in Sec. 887.353 for calculating the housing 
assistance payment on behalf of a family, no housing assistance payment 
is made whenever either 30 percent of the family's monthly adjusted 
income equals or exceeds the payment standard or 10 percent of the 
family's monthly income equals or exceeds the rent to owner plus any 
applicable utility allowance. Cessation of housing assistance payments 
does not affect the family's other rights under the lease, nor does it 
prevent the resumption of payments as the result of later changes in 
family income, family size or composition, or other relevant 
circumstances during the term of the housing voucher contract.
    (b) When one year has elapsed since the date of the last housing 
assistance payment made under the housing voucher contract, the contract 
terminates automatically.



                          Subpart I [Reserved]



                    Subpart J--Special Housing Types



Sec. 887.451  Purpose of this subpart.

    (a) This subpart contains the additional program requirements for 
the following specialized types of housing: Cooperative or mutual 
housing; independent group residences; manufactured homes; single room 
occupancy; and congregate housing. (The requirements that are unique to 
shared housing, another special housing type, are set out in subpart K 
of this part.)
    (b) Except as modified by this subpart J, all of the requirements in 
the other subparts of this part apply to these special housing types.



Sec. 887.453  Cooperative or mutual housing: Definition.

    ``Cooperative or mutual housing'' means a type of housing authorized 
by State law that is owned by a corporation where ownership of a share 
in the corporation entitles the owner to exclusive occupancy of a unit, 
and participation in the operation of the project.



Sec. 887.455  Cooperative or mutual housing: Limitation on the use of housing voucher authority.

    A PHA may use its housing voucher authority to provide assistance 
with respect to cooperative or mutual housing, if the following 
circumstances exist:
    (a) The cooperative or mutual housing occupancy agreement requires 
that the housing units be owned-occupied, unless authorization is 
obtained from the board to sublet a unit;
    (b) The cooperative or mutual housing occupancy agreement provides 
that any sale of the occupant's interest in the unit (such as a sale of 
a certificate in the corporation) is controlled by a formula set out in 
the corporation's by-laws or occupancy agreement. The formula must be 
adopted by the corporation's board of directors and must be designed to 
ensure continued affordability of the cooperative or mutual housing to 
low-income families (as defined by HUD in part 813 of this chapter) for 
a period that extends at least fifteen years; and
    (c) The PHA determines that providing assistance under this part 
will help in maintaining the affordability of this housing to low-income 
families.



Sec. 887.461  Independent group residences (IGR): Definitions.

    The following additional definitions apply to independent group 
residences:

[[Page 177]]

    Independent group residence (IGR). A dwelling unit for the exclusive 
residential use of two to twelve elderly, handicapped, or disabled 
individuals (excluding any live-in resident), who are not capable of 
living completely independently and who require a planned program of 
continual supportive services. Residents of an IGR receiving Section 8 
assistance must not require continual medical or nursing care, must be 
ambulatory or not continuously confined to a bed, and must be capable of 
taking appropriate actions for their own safety in a emergency.
    Resident assistant. A person who lives in an independent group 
residence and provides on a daily basis some or all of the necessary 
support services to elderly, handicapped, or disabled individuals 
receiving Section 8 housing assistance and who is essential to these 
individuals' care or well being. A resident assistant may not be related 
by blood, marriage, or operation of law to any of the individuals 
receiving section 8 housing assistance, and may not contribute any 
portion of his or her income or resources toward the expenses of these 
individuals.
    Service agency. A public or private nonprofit organization that is 
recognized by the State as qualified to determine the supportive service 
needs of individuals who will reside in Independent Group Residences. 
The service agency may perform outreach to potential residents of 
Independent Group Residences and assist these individuals in applying 
for housing assistance, provide all or a portion of the supportive 
services and may identify and coordinate appropriate local, public or 
private resources to furnish these services. The service agency may own 
or sublease an independent group residence.
    Service agreement. A written agreement, approved by the State, 
between the owner (including an entity with the right to sublease) of an 
independent group residence and the service agency or other entities 
providing the supportive services to the occupants of independent group 
residences. The agreement specifies the types and frequency of the 
supportive services to be furnished.

[43 FR 34388, Sept. 6, 1988; 53 FR 36450, Sept. 20, 1988]



Sec. 887.463  Independent group residences: Selection preferences.

    In addition to the preferences provided in Sec. 887.155, a PHA may 
establish a preference for selecting an eligible applicant who has 
indicated a desire to reside in an independent group residence.



Sec. 887.465  Independent group residences: Additional lease requirements.

    Leases for independent group residences must incorporate by 
reference the supportive services to be provided in accordance with the 
written service agreement between the owner and the service agency or 
other entities providing the necessary supportive services. When the 
owner provides the necessary supportive service, there is no service 
agreement and the provision of these services must be contained in the 
lease. The service agreement or analogous lease provisions must be 
approved in writing by the State before the PHA executes the housing 
voucher contract.



Sec. 887.467  Independent group residences: Housing quality standards.

    The housing quality standards in Sec. 887.251(a) apply to IGRs, 
except that the standards in this section apply in place of 
Secs. 887.251 (a), (b), (c), (f), and (k).
    (a) Sanitary facilities. The dwelling unit must contain and have 
ready access to a flush toilet that can be used in privacy, a fixed 
basin with hot and cold running water, and a shower or tub equipped with 
hot and cold running water all in proper operating condition and 
adequate for personal cleanliness and the disposal of human waste. These 
facilities must utilize an approvable public or private disposal system, 
and must be sufficient in number so that they need not be shared by more 
than four occupants. Those units accommodating physically handicapped 
occupants with wheelchairs or other special equipment must provide 
access to all sanitary facilities, and must provide,

[[Page 178]]

as appropriate to the needs of the occupants, basins and toilets, of the 
appropriate heights; grab bars to toilets and to showers and/or 
bathtubs; shower seats; and adequate space for movement.
    (b) The kitchen facilities of the unit must contain adequate space 
to store, prepare, and serve foods in a sanitary manner. A cooking stove 
or range, a refrigerator of appropriate size and in sufficient quantity 
for the number of occupants, and a kitchen sink with hot and cold 
running water must be present in proper operating condition. The sink 
must drain into an approvable private or public system. There must be 
adequate facilities and services for the sanitary disposal of food waste 
and refuse, including facilities for temporary storage where necessary 
(e.g., garbage cans).
    (c) Space and security. The dwelling unit must provide the family 
adequate space and security. A living room, kitchen, dining area, 
bathroom, and other appropriate social, recreational or community space 
must be within the unit, and the unit must contain at least one bedroom 
of appropriate size for each two persons. Exterior doors and windows 
accessible from outside each unit must be lockable. An emergency exit 
plan must be developed and occupants must be apprised of the details of 
the plan. All emergency and safety features and procedures must meet 
applicable State and local standards.
    (d) Structure and material. The unit must be structurally sound to 
avoid any threat to the health and safety of the occupants and to 
protect the occupants from the environment. Ceilings, walls, and floors 
must not have any serious defects such as severe bulging or leaning, 
large holes, loose surface materials, severe buckling or noticeable 
movement under walking stress, missing parts or other significant 
damage. The roof structure must be firm and the roof must be 
weathertight. The exterior or wall structure and exterior wall surface 
may not have any serious defects such as serious leaning, buckling, 
sagging, cracks or holes, loose siding, or other serious damage. The 
condition and equipment of interior and exterior stairways, halls, 
porches, walkways, etc., must not present a danger of tripping or 
falling. Elevators must be maintained in safe and operating condition. 
Units accommodating physically handicapped occupants with wheelchairs 
and other special equipment may not contain architectural barriers that 
impede access or use, and handrails and ramps must be provided as 
appropriate.
    (e) Site and neighborhood must be reasonably free from disturbing 
noises and reverberations and other hazards to the health, safety, and 
general welfare of the occupants, and must not be subject to serious 
adverse environmental conditions, natural or manmade, such as dangerous 
walks, steps, instability, flooding, poor drainage, septic tank back-
ups, sewage hazards or mudslides; abnormal air pollution, smoke or dust; 
excessive noise, vibrations or vehicular traffic; excessive 
accumulations of trash; vermin or rodent infestation; or fire hazards. 
The unit must be located in a residential setting and be similar in size 
and appearance to housing generally found in the neighborhood, and be 
within walking distance or accessible via public and available private 
transportation to medical and other appropriate commercial and community 
service facilities.
    (f) Supportive Services. (1) A planned program of adequate 
supportive service appropriate to the needs of the occupants must be 
provided on a continual basis by a qualified resident assistant(s) 
residing in the unit, or other qualified person(s) not residing in the 
unit, who will provide these services on a continual, planned basis. 
Supportive services that are provided within the unit may include the 
following types of services: counseling; social services that promote 
physical activity, intellectual stimulation, or social motivation; 
training or assistance with activities of daily living, including 
housekeeping, dressing, personal hygiene, or grooming; provision of 
basic first aid skills in case of emergencies; supervision of self-
administration of medications, diet, and nutrition; and assurance that 
occupants obtain incidental medical care, as needed, by

[[Page 179]]

facilitiating the making of appointments at, and transportation to, 
medical facilities. Supportive services provided within the unit may not 
include the provision of continual nursing, medical, or psychiatric 
care.
    (2) The provision for and quality of the planned program of 
supportive services, including the minimal qualifications, quantity, and 
working hours of the resident assistant(s) living in the unit or other 
qualified person(s) providing supportive services must be determined 
initially by the service agency in accordance with the standards 
established by the State. Compliance with these standards by the service 
agency must be monitored regularly throughout the term of the housing 
voucher contract by the PHA and the State (e.g., Department of Human 
Resources, Mental Health, Mental Retardation, Social Services), or a 
local authority (other than the service agency providing services) 
designated by the State to establish, maintain, and enforce these 
standards.
    (3) A written service agreement, approved by the State and in effect 
between the owner and the service agency or the entities that provide 
the necessary supportive service, must be submitted to the PHA with the 
request for lease approval. The lease between the eligible individual 
and the owner must set forth the owner's obligation for and means of 
providing these services. If the owner provides the supportive services, 
a service agreement is not required and the provision of these services 
must be incorporated into the lease and must be approved by the State. 
(See Sec. 887.465.)
    (g) State approval. Independent group residences must be licensed, 
certified, or otherwise approved in writing by the State (e.g., 
Department of Human Resources, Mental Health, Retardation, Social 
Services, etc.) before the execution of the initial housing voucher 
contract. This approval must be reexamined periodically based on a 
schedule established by the State. To assure that facilities and the 
supportive services are appropriate to the needs of the occupants, the 
State must also approve the written service agreement (or lease, if the 
provider of services is the lessor) for each independent group 
residence.

[43 FR 34388, Sept. 6, 1988; 53 FR 36450, Sept. 20, 1988]



Sec. 887.469  Independent group residences: Payment standard.

    The payment standard for a participant in an IGR is determined by 
dividing the dollar amount of the payment standard for the entire 
residence (for example, the 4-bedroom payment standard for a 4-bedroom 
residence) by the total number of potential occupants (assisted or 
unassisted), excluding a resident assistant (if any) occupying no more 
than one bedroom.



Sec. 887.471  Manufactured homes: Definition.

    A ``manufactured home'' is a structure, with or without a permanent 
foundation, that is built on a permanent chassis, is designed for use as 
a principal place of residence, and meets the housing quality standards 
in Sec. 887.473.



Sec. 887.473  Manufactured homes: Housing quality standards.

    (a) Performance requirement. In addition to meeting the housing 
quality standards in Sec. 887.251, a manufactured home unit must:
    (1) Be equipped with at least one smoke detector in working 
condition; and
    (2) Must be placed on the site in a stable manner and be free from 
hazards such as sliding or wind damage.
    (b) Acceptability criteria. A manufactured home must be securely 
anchored by a tie-down device that distributes and transforms the loads 
imposed by the unit to appropriate ground anchors to resist wind 
overturning and sliding.



Sec. 887.481  Single room occupancy (SRO): Definition.

    ``Single room occupancy housing'' means a unit that contains no 
sanitary facilities or food preparation facilities, or contains one but 
not both types of facilities (as those facilities are defined in 887.251 
(a) and (b), that is suitable for occupancy by an eligible individual 
capable of independent living.

[[Page 180]]



Sec. 887.483  Single room occupancy: Additional eligibility criteria.

    Elderly, handicapped, and disabled persons may use SRO housing only 
if the following conditions exist:
    (a) The property is located in an area in which there is significant 
demand for SRO units, as determined by the HUD Field Office;
    (b) The PHA and the unit of general local government in which the 
property is located approve the use of SRO units for this purpose; and
    (c) The unit of general local government and the local PHA certify 
to HUD that the property meets applicable local health and safety 
standards for SRO housing.



Sec. 887.485  Single room occupancy: Housing quality standards.

    The housing quality standards in Sec. 887.251 apply to SROs, except 
887.251 (a), (b), and (c). In addition, the following performance 
requirements apply:
    (a) Each SRO unit may be occupied by no more than one person.
    (b) Exterior doors and windows accessible from outside the SRO unit 
must be lockable.
    (c) Sanitary facilities, space and security characteristics must 
meet local code standards for single room occupancy housing. In the 
absence of applicable local code standards, the requirements for 
habitable rooms used for living and sleeping purposes contained in the 
American Public Health Association's Recommended Housing Maintenance and 
Occupancy Ordinance shall be used.



Sec. 887.487  Single room occupancy: Payment standard.

    (a) The payment standard amount for SRO units is equal to 75 percent 
of the Section 8 Existing Housing 0-bedroom fair market rent, or, if HUD 
has approved the use of community-wide exception rents for 0-bedroom 
units under Sec. 882.106(a)(3) of this chapter, the payment standard 
amount for SRO units is equal to 75 percent of the HUD-approved 
community-wide exception rent. (Community-wide exception rents are 
maximum gross rents approved by HUD for the Certificate Program under 
Sec. 882.106(a)(3) of this chapter for a designated municipality, 
county, or similar locality, which apply to the whole PHA jurisdiction.)
    (b) HUD may approve a higher SRO payment standard amount, not to 
exceed 100 percent of the Section 8 Existing Housing fair market rent or 
HUD-approved community-wide exception rent referred to in paragraph (a) 
of this section, if the PHA can justify a change based on data 
reflecting the SRO rent levels that exist within the entire market area.



Sec. 887.489  Congregate housing: Definition.

    ``Congregate housing'' means housing for elderly, handicapped, or 
disabled participants, that meets the housing quality standards for 
congregate housing specified in Sec. 887.491.

[43 FR 34388, Sept. 6, 1988; 53 FR 36450, Sept. 20, 1988]



Sec. 887.491  Congregate housing: Housing quality standards.

    The housing quality standards in Sec. 887.251 apply to congregate 
housing, except that Sec. 887.251(b), food preparation and refuse 
disposal, and the requirement in Sec. 887.251(c) for adequate space for 
kitchen area, do not apply. In addition, the following standards apply:
    (a) The unit must contain a refrigerator of appropriate size.
    (b) The sanitary facilities described in Sec. 887.251 (a) of this 
section must be contained within the unit.
    (c) The central dining facility and central kitchen must be located 
within the building or housing complex and be accessible to the 
occupants of the congregate units, and must contain suitable space and 
equipment to store, prepare, and serve food in a sanitary manner by a 
food service or persons other than the occupants. The facilities must be 
for the primary use of occupants of the congregate units and be 
sufficient in size to accommodate the occupants. There must be adequate 
facilities and services for the sanitary disposal of food waste and 
refuse, including facilities for temporary storage where necessary 
(e.g., garbage cans).

[43 FR 34388, Sept. 6, 1988, as amended at 53 FR 36450, Sept. 20, 1988]

[[Page 181]]



Sec. 887.493  Congregate housing: Payment standard.

    The payment standard amount for congregate housing units is equal to 
the Section 8 Existing Housing 0-bedroom fair market rent, or, if HUD 
has approved the use of community-wide exception rents for 0-bedroom 
units under Sec. 882.106(a)(3) of this chapter and the exception rent 
applies throughout the PHA's jurisdiction, the payment standard amount 
for congregate housing units is equal to the HUD-approved community-wide 
exception rent.



                        Subpart K--Shared Housing



Sec. 887.501  Applicability, scope, and purpose.

    In shared housing, an assisted family shares a housing unit (such as 
a house or an apartment) with the other resident or residents of the 
unit. The authorization for use of shared housing in the Housing Voucher 
Program is designed to provide additional choices in living arrangements 
for assisted families. The PHA has discretion to determine whether to 
include shared housing in its Housing Voucher Program and to design the 
shared housing component to meet local needs and circumstances.



Sec. 887.503  Definitions.

    For purposes of shared housing, the following definitions apply:
    Common space. Space available for use by the assisted family(ies) 
and other occupants of the unit.
    Individual lease shared housing. The type of shared housing in which 
the PHA enters into a separate housing voucher contract for each 
assisted family residing in a shared housing unit.
    Private space. The portion of the dwelling unit that is for the 
exclusive use of an assisted family.
    Shared housing. A housing unit occupied by two or more families, 
consisting of common space for shared use by the occupants of the units 
and (except in the case of a shared one-bedroom unit) separate private 
space for each assisted family.



Sec. 887.505  Types of shared housing and applicable requirements.

    (a) Shared housing types. Individual lease shared housing is the 
only type of shared housing authorized under this subpart K. Related 
lease shared housing (see part 882, subpart C of this chapter) is not 
authorized under this subpart K.
    (b) Applicable requirements. Except as modified by this subpart K, 
all of the requirements in the other subparts of this part apply to 
shared housing.



Sec. 887.507  PHA administration of shared housing.

    (a) PHA election. A PHA is not required to permit use of shared 
housing in its Housing Voucher Program. At any time, a PHA may change a 
decision to include shared housing in its program. The PHA, however, 
must continue to administer, in accordance with applicable requirements, 
any shared housing housing voucher contracts that it has executed.
    (b) Administrative/equal opportunity housing plan. (1) If the PHA 
decides to permit shared housing in its program, or to change or 
discontinue shared housing, it must submit an amendment to its 
administrative/equal opportunity housing plan for HUD approval.
    (2) The administrative/equal opportunity housing plan must state the 
PHA's policies for operating shared housing. The plan may not set aside 
housing vouchers for, or otherwise restrict the use of housing vouchers 
to, shared housing.



Sec. 887.509  Housing quality standards for shared housing.

    (a) Applicability of housing quality standards to entire unit. The 
entire unit must comply with the performance requirements and 
acceptability criteria, as provided in Secs. 887.251 (a) and (b) and in 
Secs. 887.251 (d) through (k).
    (b) Facilities available for family. The facilities available for 
the use of each assisted family in shared housing under the family's 
lease must include (whether in the family's private space or in the 
common space) a living room, sanitary facilities in accordance with 
Sec. 887.251(a), and food preparation and refuse disposal facilities in 
accordance with Sec. 887.251(b).

[[Page 182]]

    (c) Space and security--(1) Inapplicability of Sec. 887.251(c). 
Section 887.251(c) does not apply to shared housing.
    (2) Performance requirement. The entire unit must provide adequate 
space and security for all its occupants (whether assisted or 
unassisted). The total number of occupants in the unit may not exceed 12 
persons. Each unit must contain private space containing at least one 
bedroom for each assisted family, plus common space for shared use by 
the occupants of the unit. The private space for each assisted family 
must contain at least one bedroom for each two persons in the family. 
(The two preceding sentences do not apply to the case of two individuals 
sharing a one-bedroom unit. However, in that situation, no other persons 
may occupy the unit.) Common space must be appropriate for shared use by 
the occupants. If any members of the family are physically handicapped 
(at the time of lease approval), the unit's common space and the 
family's private space must be accessible and usable by them.
    (3) Acceptability criteria. The unit must contain a living room, a 
kitchen, bathroom(s), and bedroom(s). Persons of opposite sex, other 
than husband and wife or very young children, may not be required to 
occupy the same bedroom. Exterior doors and windows accessible from 
outside the unit must be lockable.



Sec. 887.511  Occupancy of a shared housing unit.

    (a) Who may share a unit. (1) Persons who are not assisted under the 
Housing Voucher Program may reside in a shared housing unit.
    (2) Except for a one-bedroom unit, an owner of a shared housing unit 
may reside in the unit, and a resident owner may enter into a housing 
voucher contract with the PHA. Housing assistance, however, may not be 
provided on behalf of an owner who is not an owner-shareholder in mutual 
or cooperative housing. An assisted person may not be related to a 
resident owner.
    (3) One or more assisted families may reside in a shared housing 
unit. A PHA may not execute a housing voucher contract for individual 
lease shared housing and a housing assistance payments contract for 
related lease shared housing under the Certificate Program for the same 
unit.
    (b) Size of unit and family space. The number of bedrooms in the 
private space of an assisted family initially must be the same as the 
number stated on the family's housing voucher, except in the case of two 
individuals sharing a one bedroom unit. The PHA may not approve a lease 
or execute a housing voucher contract for shared housing unless the 
unit, including the portion of the unit available for use by the 
assisted family under its lease, meets the housing quality standards 
under Sec. 887.509.

[43 FR 34388, Sept. 6, 1988; 53 FR 36450, Sept. 20, 1988]



Sec. 887.513  Determining amount of housing assistance.

    For purposes of computing the minimum rent under Sec. 887.353, the 
PHA must prorate the rent to owner attributable to the family on the 
basis of a ratio that is equal to the number of bedrooms indicated on 
the housing voucher divided by the number of bedrooms in the unit.



Sec. 887.515  Payment standard for shared housing.

    The payment standard for a family in a shared housing unit is 
determined by multiplying the dollar amount of the payment standard for 
the entire unit (for example, the 4-bedroom payment standard for a 4-
bedroom unit) by a ratio that is equal to the number of bedrooms 
indicated on the family's housing voucher divided by the number of 
bedrooms in the unit.



PART 888--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM--FAIR MARKET RENTS AND CONTRACT RENT ANNUAL ADJUSTMENT FACTORS--Table of Contents




                      Subpart A--Fair Market Rents

Sec.
888.111  Fair market rents for existing housing: Applicability.
888.113  Fair market rents for existing housing: Methodology.
888.115  Fair market rents for existing housing: Manner of publication.

[[Page 183]]

           Subpart B--Contract Rent Annual Adjustment Factors

888.201  Purpose.
888.202  Manner of publication.
888.203  Use of contract rent automatic annual adjustment factors.
888.204  Revision to the automatic annual adjustment factors.

Subpart C--Retroactive Housing Assistance Payments for New Construction, 
Substantial Rehabilitation, State Finance Agencies, Section 515 Farmers
 
  Home Administration, Section 202 Elderly or Handicapped, and Special 
                          Allocations Projects

888.301  Purpose and scope.
888.305  Amount of the retroactive Housing Assistance Payments.
888.310  Notice of eligibility requirements for retroactive payments.
888.315  Restrictions on retroactive payments.
888.320  One-time Contract Rent determination.

    Subpart D--Retroactive Housing Assistance Payments for Moderate 
                         Rehabilitation Projects

888.401  Purpose and scope.
888.405  Amount of the retroactive Housing Assistance Payments.
888.410  Notice of eligibility requirements for retroactive payments.
888.415  Restrictions on retroactive payments.
888.420  One-time Contract Rent determination.

    Authority: 42 U.S.C. 1437c, 1437f, and 3535(d).

    Source: 50 FR 38796, Sept. 25, 1985, unless otherwise noted.

    Editorial Note: For revisions and amendments affecting Schedules A, 
B, C, and D, issued under part 888, but not carried in the Code of 
Federal Regulations, see the List of CFR Sections Affected, in the 
Finding Aids section of this volume.



                      Subpart A--Fair Market Rents



Sec. 888.111  Fair market rents for existing housing: Applicability.

    The Fair Market Rents (FMRs) for existing housing (see definition in 
Sec. 882.102 of this chapter) are determined by the Department of 
Housing and Urban Development (HUD) and apply to the Section 8 
Certificate Program, including space rentals by owners of manufactured 
homes under the Section 8 Certificate Program, the Section 8 Moderate 
Rehabilitation Program, Section 8 existing housing project-based 
assistance, and Section 8 existing housing assisted under part 886 of 
this chapter. FMRs are also used to determine payment standard schedules 
in the Rental Voucher program.

[60 FR 42226, Aug. 15, 1995]



Sec. 888.113  Fair market rents for existing housing: Methodology.

    (a) Basis for setting fair market rents. Fair Market Rents (FMRs) 
are estimates of rent plus the cost of utilities, except telephone. They 
are housing market-wide estimates of rents that provide opportunities to 
rent standard quality housing throughout the geographic area in which 
rental housing units are in competition. The level at which FMRs are set 
is expressed as a percentile point within the rent distribution of 
standard quality rental housing units in the FMR area. FMRs are set at 
the 40th percentile rent--the dollar amount below which 40 percent of 
standard quality rental housing units rent. The 40th percentile rent is 
drawn from the distribution of rents of all units that are occupied by 
recent movers. Adjustments are made to exclude public housing units, 
newly built units and substandard units.
    (b) FMR Areas. FMR areas are metropolitan areas and nonmetropolitan 
counties (nonmetropolitan parts of counties in the New England States). 
With several exceptions, the most current Office of Management and 
Budget (OMB) metropolitan area definitions of Metropolitan Statistical 
Areas (MSAs) and Primary Metropolitan Statistical Areas (PMSAs) are used 
because of their generally close correspondence with housing market area 
definitions. HUD may make exceptions to OMB definitions if the MSAs or 
PMSAs encompass areas that are larger than housing market areas. The 
counties deleted from the HUD-defined FMR areas in those cases are 
established as separate metropolitan county FMR areas. FMRs are 
established for all areas in the United States, the District of 
Columbia, Puerto Rico, the Virgin Islands, and the Pacific Islands.

[[Page 184]]

    (c) Data sources. (1) HUD uses the most accurate and current data 
available to develop the FMR estimates and may add other data sources as 
they are discovered and determined to be statistically valid. The 
following sources of survey data are used to develop the base-year FMR 
estimates:
    (i) The most recent decennial Census, which provides statistically 
reliable rent data.
    (ii) The American Housing Survey (AHS) data, conducted by the Bureau 
of the Census for HUD. AHS's have comparable accuracy to the decennial 
Census, and are used to develop between-census revisions for the largest 
metropolitan areas on a four-year revolving schedule.
    (iii) Random Digit Dialing (RDD) telephone survey data, based on a 
sampling procedure that uses computers to select statistically random 
samples of rental housing.
    (iv) Statistically valid information, as determined by HUD, 
presented to HUD during the public comment and review period.
    (2) Base-year FMRs are updated and trended to the midpoint of the 
program year they are to be effective using Consumer Price Index (CPI) 
data for rents and for utilities or using rent-change factors obtained 
from the RDD regional surveys. The RDD rent-change factors are developed 
annually for the metropolitan and nonmetropolitan parts of the HUD-
specified geographic regions not covered by CPI surveys, and are used to 
update the base-year FMR estimates within these regions.
    (d) Bedroom size adjustments. (1) For most areas the ratios 
developed from the most recent decennial Census are applied to the two-
bedroom FMR estimates to derive FMRs for other bedroom sizes. Exceptions 
to this procedure may be made for areas with local bedroom intervals 
below an acceptable range. To help the largest most difficult to house 
families find units, higher ratios than the actual market ratios may be 
used for three-bedroom and larger-size units.
    (2) The FMR for single room occupancy housing is 75 percent of the 
FMR for a zero bedroom unit.
    (e) Manufactured home space. The FMR for a manufactured home space 
is 30 percent of the FMR for a two-bedroom unit, or, where approved by 
HUD on the basis of survey data submitted in public comments, the 40th 
percentile of the rental distribution of manufactured home spaces for 
the FMR area. HUD accepts public comments requesting revision of the 
proposed manufactured home space FMRs for areas where space rentals are 
thought to differ from the 30 percent standard. To be considered for 
approval, the comments must contain statistically-valid survey data that 
show the 40th percentile manufactured home space rent (excluding the 
cost of utilities) for the FMR area. Once approved, the revised 
manufactured home space FMRs establish new base-year estimates that will 
be updated annually using the same data used to update the Rental 
Certificate program FMRs.

[60 FR 42226, Aug. 15, 1995]



Sec. 888.115  Fair market rents for existing housing: Manner of publication.

    FMRs will be published at least annually in the Federal Register. 
The Department will propose FMRs and provide a comment period of at 
least 30 days for the purpose of identifying areas where the FMRs are 
believed to be too high or too low. To be considered for FMR revisions, 
public comments must include statistically valid rental housing survey 
data that justify the requested changes. After the comments have been 
considered, the Department will publish a final notice announcing FMRs 
to be effective on October 1 each year.

[60 FR 42227, Aug. 15, 1995]



           Subpart B--Contract Rent Annual Adjustment Factors



Sec. 888.201  Purpose.

    Automatic Annual Adjustment Factors are used to adjust rents under 
the Section 8 Housing Assistance Payments Program.

[44 FR 75383, Dec. 20, 1979]



Sec. 888.202  Manner of publication.

    Adjustment Factors will be published in the Federal Register at 
least annually by Notice. Interim revisions

[[Page 185]]

may be published as market conditions indicate. In the case of revised 
factors applicable only to specific areas, the HUD Field Office will 
publish a notice appropriate to the limited scope of the revised factors 
(see Sec. 888.204).

[42 FR 60508, Nov. 25, 1977, as amended at 44 FR 75383, Dec. 20, 1979; 
47 FR 4252, Jan. 29, 1982]



Sec. 888.203  Use of contract rent automatic annual adjustment factors.

    (a) To compute an adjustment to a Contract Rent, find the schedule 
of Automatic Annual Adjustment Factors for the appropriate Census Region 
or Standard Metropolitan Statistical Area--
    (1) If the Contract Rent includes all utilities, use the factor 
shown on the basic schedule for the rent bracket within which the 
particular Contract Rent falls and for the applicable size of unit (by 
number of bedrooms).
    (2) If the Contract Rent does not include all utilities but does 
include the highest cost utility, use the appropriate factor shown on 
the basic schedule.
    (3) If the Contract Rent does not include any utilities or includes 
some utilities but not the highest cost utility, use the Annual 
Adjustment Factor for Contract Rent (Excluding Utilities).
    (b) The adjusted monthly amount of the Contract Rent of a dwelling 
unit shall be determined by multiplying the Contract Rent in effect on 
the anniversary date of the contract by the applicable Automatic Annual 
Adjustment Factor (see paragraph (a) of this section) and rounding the 
result as follows:
    (1) If the result contains a fractional dollar amount ranging from 
$0.01 to $0.49, round to the next lower whole dollar amount;
    (2) If the result contains a fractional dollar amount ranging from 
$0.50 to $0.99, round to the next higher whole dollar amount.

[42 FR 60508, Nov. 25, 1977, as amended at 44 FR 21769, Apr. 12, 1979; 
47 FR 4252, Jan. 29, 1982; 59 FR 38564, July 29, 1994]



Sec. 888.204  Revision to the automatic annual adjustment factors.

    If the application of the Annual Adjustment Factors results in rents 
that are substantially lower than rents charged for comparable units not 
receiving assistance under the U.S. Housing Act of 1937, in the area for 
which the factor was published or a portion thereof, and it is shown to 
HUD that the costs of operating comparable rental housing have increased 
at a substantially greater rate than the Adjustment Factors, the HUD 
Field Office will consider establishing separate or revised Automatic 
Annual Adjustment Factors for that particular area. Any request for 
revision of the factors must be accompanied by an identification of the 
area, its boundaries and evidence that the area constitutes the largest 
contiguous area in which substantially the same rent levels prevail. The 
HUD Field Office will publish appropriate notice of the establishment of 
any such revised Automatic Annual Adjustment Factors. These factors will 
remain in effect until superseded by the subsequent publication of 
Automatic Annual Adjustment Factors pursuant to Sec. 888.202.

[44 FR 21769, Apr. 12, 1979]



Subpart C--Retroactive Housing Assistance Payments for New Construction, 
Substantial Rehabilitation, State Finance Agencies, Section 515 Farmers
 
  Home Administration, Section 202 Elderly or Handicapped, and Special 
                          Allocations Projects

    Source: 56 FR 20084, May 1, 1991, unless otherwise noted.



Sec. 888.301  Purpose and scope.

    (a) Purpose. This subpart describes the basic policies and 
procedures for the retroactive payment of Housing Assistance Payments to 
eligible project owners for the period from October 1, 1979 to May 31, 
1991 and for one-time Contract Rent determinations for such eligible 
project owners.
    (b) Applicability. This subpart applies to all project-based Section 
8 Housing Assistance Payments Contracts under New Construction (Part 
880); Substantial Rehabilitation (Part 881); State Finance Agencies 
(Part 883); and Section

[[Page 186]]

515 Farmers Home Administration (Part 884). It also applies to those 
projects under Section 202 Elderly or Handicapped (Part 885) and Special 
Allocations (Part 886, Subparts A and C) whose Contract Rents are 
adjusted by use of the Annual Adjustment Factors (AAFs), as described in 
subpart B of this part.
    (c) Eligible project owners. Project owners may be eligible for 
retroactive payments if, during the period from October 1, 1979 to May 
31, 1991:
    (1) The use of a comparability study by HUD (or the Contract 
Administrator), which was conducted as an independent limitation on the 
amount of rent adjustment that would have resulted from use of the 
applicable AAF, resulted in the reduction of the maximum monthly 
Contract Rents for units covered by a Housing Assistance Payments (HAP) 
contract or resulted in less than the maximum increase for those units 
than would otherwise be permitted by the AAF; or
    (2) The HAP contract required a project owner to request annual rent 
adjustments, and the project owner certifies that a request was not made 
because of an anticipated reduction of the maximum monthly Contract 
Rents resulting from a comparability study.



Sec. 888.305  Amount of the retroactive Housing Assistance Payments.

    (a) Recalculating the total rent adjustment. To establish the amount 
of the retroactive HAP payment for which a project owner meeting the 
criteria in Sec. 888.301(c) is eligible, the total rent adjustment will 
be recalculated for the period from October 1, 1979 to May 31, 1991. For 
purposes of establishing the amount of the retroactive payment only, the 
total rent adjustment will be an amount equal to the Contract Rent, 
minus the amount of the Contract Rent attributable to debt service, 
multiplied by the applicable AAF, for each year.
    (b) Calculating the retroactive payment. HUD (or the Contract 
Administrator) will pay, as a retroactive Housing Assistance Payment, 
the amount, if any, by which the total rent adjustment, calculated under 
paragraph (a) of this section, exceeds the rent adjustments actually 
approved for the same time period, except that in no event will any 
payment be an amount less than 30 percent of the aggregate of the full 
Contract Rent multiplied by the applicable AAF, minus the sum of the 
rent adjustments actually approved for the same time period, adjusted by 
the average occupancy rate.
    (c) Occupancy rates. (1) Retroactive payments will be made only for 
units that were occupied, based on average occupancy rate, including 
units qualifying for vacancy payments under 24 CFR 880.611, 881.611, 
883.712, 884.106, 885.985, 886.109, or 886.309, during the time period 
from October 1, 1979 to May 31, 1991.
    (2) When requesting retroactive payment, a project owner must, if 
the information is available, submit documentation of occupancy rates, 
on either an annual or monthly basis, for the same time period. The 
average occupancy rate will be based on these records. If records are 
unavailable for the full time period, HUD (or the Contract 
Administrator) will establish an average occupancy rate, to be used for 
the entire period, from the occupancy rate for the three years 
immediately preceding May 31, 1991.
    (d) Revised AAFs. For any year during the period from October 1, 
1979 to May 31, 1991, where a HUD field office published a revised 
Annual Adjustment Factor that replaced the applicable AAF for a specific 
locality under 24 CFR 888.204, the revised Annual Adjustment Factor, 
which applied to all projects in that area, will be used to recalculate 
the total rent adjustment under paragraph (a) of this section, and to 
establish the amount of the retroactive payments.
    (e) Special adjustments. When calculating the total rent adjustments 
and establishing the amount of the retroactive payments under paragraphs 
(a) and (b) of this section, any special adjustments granted under 24 
CFR 880.609(b), 881,609(b), 883.710(b), 884.109(c), 886.112(c), or 
886.312(c) during the time period from October 1, 1979 to May 31, 1991, 
to reflect substantial general increases in real property taxes, 
assessments, utility rates, utilities not covered by regulated rates, or 
for special adjustments for any other purpose

[[Page 187]]

authorized by a waiver of the regulations, will be deducted from the 
Contract Rent before applying the AAF.
    (f) AAFs less than 1.0. For any area where an AAF of less than 1.0 
was published, a factor of 1.0 will be used to recalculate the total 
rent adjustments and to establish the amount of the retroactive payments 
under paragraphs (a) and (b) of this section.
    (g) Debt service. (1) For purposes of this section, debt service 
includes principal, interest, and the mortgage insurance premium, if 
any.
    (2) The monthly debt service set forth in the original mortgage 
documents for a project will be used to compute the debt service portion 
of the contract rent. The debt service will be compared to the spread of 
unit sizes included in the original HAP contract, and the amount used in 
the calculation will be based on the percentage of total rent potential 
of the various unit types.
    (3) If, in some cases, HUD or the Contract Administrator cannot 
determine the debt service for a project, the project owner will be 
asked to provide documentation of the debt service. The project owner 
will be notified by the HUD Field Office or the Contract Administrator 
of the need for documentation of the debt service, and allowed 30 days 
to respond, or for such longer period as approved by HUD or the Contract 
Administrator on a case-by-case basis. Where the debt service is not 
available to HUD or the Contract Administrator and the owner is unable 
to provide the necessary information, retroactive payments cannot be 
made.
    (h) Applicable AAF. The applicable AAF is the factor in effect on 
the anniversary date of the contract and appropriate for the area, for 
the size of the unit, and for the treatment of utilities; except where, 
for any year when AAFs were published after November 8 and made 
retroactive to November 8, a project owner was given the option to 
choose the factor in effect on the anniversary date or the retroactive 
factor, the applicable AAF is the factor chosen by the project owner in 
that year.

(Approved by the Office of Management and Budget under control number 
2502-0042)



Sec. 888.310  Notice of eligibility requirements for retroactive payments.

    (a) Notice of eligibility requirements. HUD (or the Contract 
Administrator) will give written notice to all current owners of 
projects of the eligibility requirements for retroactive payments. 
Eligible project owners must make a request for payment and a request 
for a one-time contract determination within 60 days from the date of 
the notice.
    (b) Request for payment. (1) Owners eligible for retroactive 
payments under Sec. 888.301(c) must submit a request for a calculation 
of the total rent adjustments and the establishment of the amount of the 
retroactive payment, as described in Sec. 888.301 (a) and (b), and 
documentation of the occupancy rate for the period from October 1, 1979, 
to May 31, 1991, if available.
    (2) Owners whose HAP contract requires a request to be made for 
annual rent adjustments must certify that a request was not made because 
of an anticipated reduction in the Contract Rents as a result of a 
comparability study. The certification must contain the year or years 
upon which the request for payment is based and a statement of the basis 
for the belief that rents would have been reduced.
    (3) Retroactive payments will be made to owners over a three-year 
period as funds are appropriated for that purpose. When funds are 
available for payment, HUD will publish a Federal Register notice 
containing procedures for claiming payments.
    (c) Request for one-time contract rent determination. When making a 
request for payment, eligible owners may also request a one-time 
contract rent determination, as described in Sec. 888.320. Eligible 
owners may request a one-time contract rent determination even if they 
choose not to request retroactive payments, provided they are eligible 
for retroactive payments.
    (d) Transfer of ownership since October 1, 1979. Eligible owners who 
request retroactive payments must certify that they are entitled to the 
entire amount of the payment. Any owner who is unable to certify must 
present documentation of an agreement between the current and former 
owners of the

[[Page 188]]

proportionate share of the payment for which each is eligible.

(Approved by the Office of Management and Budget under control number 
2502-0042)



Sec. 888.315  Restrictions on retroactive payments.

    (a) Restrictions on distribution of surplus cash. Retroactive 
payments for HUD-insured projects and other projects subject to 
limitations on the distribution of surplus cash will be deposited, in 
the manner of Housing Assistance Payments, into the appropriate project 
account. The payments will be subject to HUD rules and procedures (or 
rules and procedures of other agencies, as appropriate), described in 
the applicable regulations and the HAP contracts, for distribution of 
surplus cash to project owners.
    (b) Replacement reserve. Projects required by HUD regulations to 
maintain a reserve for replacement account and to adjust the annual 
payment to the account each year by the amount of the annual rent 
adjustment must deposit into the account the proportionate share of any 
retroactive payment received, in accordance with HUD regulations and the 
HAP contract.
    (c) Physical condition of HUD-insured or State-financed projects. If 
the most recent physical inspection report of a HUD-insured project, 
completed by the mortgagee, or by HUD or the Contract Administrator if a 
mortgagee inspection is not present, shows significant deficiencies that 
have not been addressed to the satisfaction of HUD by the date the 
retroactive payment is deposited into the project account, the payment 
will not be made available for surplus cash distribution until the 
deficiencies are resolved or a plan for their resolution has been 
approved by HUD.



Sec. 888.320  One-time Contract Rent determination.

    (a) Determining the amount of the new Contract Rent. Project owners 
eligible for retroactive payments, as described in Sec. 888.301(c), may 
request a one-time Contract Rent determination, to be effective as 
described in paragraph (c) of this section. The request for a one-time 
rent determination must be made when submitting a request for 
retroactive payments, as described in Sec. 888.315. If no claim for 
retroactive payments is made, an owner may submit only the request for a 
one-time rent determination, provided the owner is eligible for 
retroactive payments. The new Contract Rent under this provision will be 
the greater of:
    (1) The Contract Rent currently approved by HUD (or the Contract 
Administrator); or
    (2) An amount equal to the applicable AAF multipled by the Contract 
Rent minus debt service, calculated for each year from October 1, 1979, 
to May 31, 1991.
    (b) Currently approved rent. The Contract Rent currently approved by 
HUD (or the Contract Administrator) is the Contract Rent stated in the 
most recent amendment to the HAP Contract signed by both HUD (or the 
Contract Administrator) and the owner, or as shown on HUD Form 92458 
(Rental Schedule) if the most recent amendment to the HAP Contract 
cannot be located.
    (c) Effective date of new Contract Rent. The new Contract Rent, 
determined under paragraph (a) of this section, will be effective on May 
31, 1991.

(Approved by the Office of Management and Budget under control number 
2505-0042)



    Subpart D--Retroactive Housing Assistance Payments for Moderate 
                         Rehabilitation Projects

    Source: 56 FR 20085, May 1, 1991, unless otherwise noted.



Sec. 888.401  Purpose and scope.

    (a) Purpose. This subpart describes the basic policies and 
procedures for the retroactive payment of Housing Assistance Payments to 
eligible project owners for the period from October 1, 1979 to May 31, 
1991 and a one-time Contract Rent determination for such eligible 
project owners.
    (b) Applicability. This subpart applies to all Moderate 
Rehabilitation projects under 24 CFR part 882, subparts D, E, and H.
    (c) Eligible project owners. Project owners may be eligible for 
retroactive payments if, during the period from October 1, 1979 to May 
31, 1991:

[[Page 189]]

    (1) The use of a comparability study by the Public Housing Agency 
(PHA) as contract administrator, which was conducted as an independent 
limitation on the amount of rent adjustment that would have resulted 
from use of the applicable AAF, resulted in the reduction of the maximum 
monthly Contract Rents for units covered by a Housing Assistance 
Payments (HAP) contract or resulted in less than the maximum increase 
for those units than would otherwise be permitted by the AAF; or
    (2) The project owner certifies that a request for an annual rent 
adjustment was not made because of an anticipated reduction of the 
maximum monthly Contract Rents resulting from a comparability study.



Sec. 888.405  Amount of the retroactive Housing Assistance Payments.

    (a) Recalculating the total rent adjustment. To establish the amount 
of the retroactive HAP payment for which a project owner meeting the 
criteria in Sec. 888.401(c) is eligible, the total rent adjustment will 
be recalculated for the period from October 1, 1979 to May 31, 1991. 
Rents for that period will be recalculated, under the procedures set out 
in 24 CFR 882.410(a)(1), by applying the AAF for any affected year, and 
recalculating the rents for the remainder of the period as necessary. 
For each year thereafter, all rent adjustments made at the request of 
the owner at the time will be recalculated, under the procedures in 24 
CFR 882.410(a)(1), to account for the new adjustments.
    (b) Calculating the retroactive payment. HUD will pay, through the 
PHA, as a retroactive Housing Assistance Payment the amount, if any, by 
which the total rent adjustment, calculated under paragraph (a) of this 
section exceeds the rent adjustments actually approved for the same time 
period.
    (c) Occupancy rate. (1) Retroactive payments will be made only for 
units that were occupied, based on average occupancy rate, including 
units qualifying for vacancy payments under 24 CFR 882.411, during the 
time period from October 1, 1979 to May 31, 1991.
    (2) When requesting a retroactive payment, a project owner must, if 
the information is available, submit documentation of occupancy rates, 
on either an annual or monthly basis, for the same time period. The 
average occupancy rate will be based on these records. If records are 
unavailable for the full time period, the PHA will establish an average 
occupancy rate, to be used for the entire period, from the occupancy 
rate for the three years immediately preceding May 31, 1991.
    (d) Revised AAFs. For any year during the period from October 1, 
1979 to May 31, 1991, where a HUD field office published a revised 
Annual Adjustment Factor that replaced the applicable AAF for a specific 
locality under 24 CFR 888.204, the revised Annual Adjustment Factor, 
which applied to all projects in that area, will be used to recalculate 
the total rent adjustment under paragraph (a) of this section, and to 
establish the amount of the retroactive payments.
    (e) Special adjustments. When calculating the total rent adjustments 
and establishing the amount of the retroactive payments under paragraphs 
(a) and (b) of this section, any special adjustments granted under 24 
CFR 882.410(a)(2) during the period from October 1, 1979 to May 31, 
1991, to reflect substantial general increases in real property taxes, 
assessments, utility rates, utilities not covered by regulated rates, or 
for special adjustments for any other purpose authorized by a waiver of 
the regulations, will be deducted from the base rent before applying the 
AAF.
    (f) AAFs less than 1.0. For any area where an AAF of less than 1.0 
was published, a factor of 1.0 will be used to recalculate the total 
rent adjustments and to establish the amount of the retroactive payments 
under paragraphs (a) and (b) of this section.

(Approved by the Office of Management and Budget under control number 
2502-0042)



Sec. 888.410  Notice of eligibility requirements for retroactive payments.

    (a) Notice of eligibility requirements. PHAs will give written 
notice to all current owners of projects, for which they are the 
Contract Administrators, of the eligibility requirements for retroactive 
payments. Eligible project

[[Page 190]]

owners must make a request for payment or a request for a one-time 
contract determination within 60 days from the date of the notice.
    (b) Request for payment. (1) Owners eligible for retroactive 
payments under Sec. 888.401(c) must submit a request for a calculation 
of the total rent adjustments and the establishment of the amount of the 
retroactive payment, as described in Sec. 888.401 (a) and (b), and 
documentation of the occupancy rate for the period from October 1, 1979 
to May 31, 1991, if available.
    (2) Owners claiming eligibility under Sec. 888.401(c)(2) must 
certify that a request was not made because of an anticipated reduction 
in the Contract Rents as a result of a comparability study. The 
certification must contain the year or years upon which the request for 
payment is based and a statement of the basis for the belief that rents 
would have been reduced.
    (3) Retroactive payments will be made to owners over a three-year 
period as funds are appropriated for that purpose. When funds are 
available for payment, HUD will publish a Federal Register Notice 
containing procedures for claiming payments.
    (c) Request for one-time contract rent determination. When making a 
request for payment, eligible owners may also request a one-time 
contract rent determination, as described in Sec. 888.420. Eligible 
owners may request a one-time contract rent determination even if they 
choose to forgo receiving retroactive payments, provided they are 
eligible for retroactive payments.
    (d) Transfer of ownership since October 1, 1979. Eligible owners 
requesting retroactive payments must certify that they are entitled to 
the entire amount of the payment. Any owner who is unable to certify 
must present documentation of an agreement between the current and 
former owners of the proportionate share of the payment for which each 
is eligible.

(Approved by the Office of Management and Budget under control number 
2502-0042)



Sec. 888.415  Restrictions on retroactive payments.

    (a) Restrictions. Retroactive payments are subject to all 
regulations, procedures, or restrictions that apply to Housing 
Assistance Payments.
    (b) Review of initial rents. Before calculating the amount of any 
retroactive payment, the PHA, if directed by HUD, will review whether 
rents were excessive when initially set.
    (c) Physical condition of projects. If the most recent physical 
inspection report by the PHA shows significant deficiencies that have 
not been addressed to the satisfaction of the PHA by the date the 
retroactive payment is deposited into the project account, the payment 
will not be made available until the deficiencies are resolved or a plan 
for their resolution has been approved by the PHA.



Sec. 888.420  One-time Contract Rent determination.

    (a) Determining the amount of the new Contract Rent. Project owners 
eligible for retroactive payments, as described in Sec. 888.401(c), may 
request a one-time Contract Rent determination, to be effective as 
described in paragraph (c) of this section. The request for a one-time 
rent determinaton must be made when submitting a request for retroactive 
payments, as described in Sec. 888.415. If no claim for retroactive 
payments is made, an owner may submit only the request for a one-time 
rent determinaton, provided the owner is eligible for retroactive 
payments. The new Contract Rent under this provision will be the greater 
of:
    (1) The Contract Rent currently approved by the PHA; or
    (2) An amount equal to the Contract Rent as adjusted to May 31, 1991 
under Sec. 888.405(a).
    (b) Currently approved rent. The Contract Rent currently approved by 
the PHA is the Contract Rent stated in the most recent amendment to the 
HAP Contract signed by both the PHA and the owner.
    (c) Effective date of new Contract Rent. The new Contract Rent, 
determined under paragraph (a) of this section, will be effective on May 
31, 1991.

(Approved by the Office of Management and Budget under control number 
2502-0042)

[[Page 191]]



PART 891--SUPPORTIVE HOUSING FOR THE ELDERLY AND PERSONS WITH DISABILITIES--Table of Contents




                 Subpart A--General Program Requirements

Sec.
891.100  Purpose and policy.
891.105  Definitions.
891.110  Allocation of authority.
891.115  Notice of funding availability.
891.120  Project design and cost standards.
891.125  Site and neighborhood standards.
891.130  Prohibited relationships.
891.135  Amount and terms of capital advances.
891.140  Development cost limits.
891.145  Owner deposit (Minimum Capital Investment).
891.150  Operating cost standards.
891.155  Other Federal requirements.
891.160  Audit requirements.
891.165  Duration of capital advance.
891.170  Repayment of capital advance.
891.175  Technical assistance.
891.180  Physical condition standards; physical inspection requirements.
891.185  Preemption of rent control laws.

        Subpart B--Section 202 Supportive Housing for the Elderly

891.200  Applicability.
891.205  Definitions.
891.210  Special project standards.
891.215  Limits on number of units.
891.220  Prohibited facilities.
891.225  Provision of services.
891.230  Selection preferences.

 Subpart C--Section 811 Supportive Housing for Persons With Disabilities

891.300  Applicability.
891.305  Definitions.
891.310  Special project standards.
891.315  Prohibited facilities.
891.320  Site and neighborhood standards.
891.325  Lead-based paint requirements.

                      Subpart D--Project Management

891.400  Responsibilities of owner.
891.405  Replacement reserve.
891.410  Selection and admission of tenants.
891.415  Obligations of the household or family.
891.420  Overcrowded and underoccupied units.
891.425  Lease requirements.
891.430  Termination of tenancy and modification of lease.
891.435  Security deposits.
891.440  Adjustment of utility allowances.
891.445  Conditions for receipt of vacancy payments for assisted units.
891.450  HUD review.

      Subpart E--Loans for Housing for the Elderly and Handicapped

891.500  Purpose and policy.
891.505  Definitions
891.510  Displacement, relocation, and real property acquisition.
891.515  Audit requirements.

     Section 202 Projects for the Elderly or Handicapped--Section 8 
                               Assistance

891.520  Definitions applicable to 202/8 projects.
891.525  Amount and terms of financing.
891.530  Prepayment privileges.
891.535  Requirements for awarding construction contracts.
891.540  Loan disbursement procedures.
891.545  Completion of project, cost certification, and HUD approvals.
891.550  Selection preferences.
891.555  Smoke detectors.
891.560  HAP contract.
891.565  Term of HAP contract.
891.570  Maximum annual commitment and project account.
891.575  Leasing to eligible families.
891.580  HAP contract administration.
891.585  Default by Borrower.
891.590  Notice upon HAP contract expiration.
891.595  HAP contract extension or renewal.
891.600  Responsibilities of Borrower.
891.605  Replacement reserve.
891.610  Selection and admission of tenants.
891.615  Obligations of the family.
891.620  Overcrowded and underoccupied units.
891.625  Lease requirements.
891.630  Termination of tenancy and modification of lease.
891.635  Security deposits.
891.640  Adjustment of rents.
891.645  Adjustment of utility allowances.
891.650  Conditions for receipt of vacancy payments for assisted units.

    Section 202 Projects for the Nonelderly Handicapped Families and 
                   Individuals--Section 162 Assistance

891.655  Definitions applicable to 202/162 projects.
891.660  Project standards.
891.665  Project size limitations.
891.670  Cost containment and modest design standards.
891.675  Prohibited facilities.
891.680  Site and neighborhood standards.
891.685  Prohibited relationships.
891.690  Other Federal requirements.
891.695  Operating cost standards.
891.700  Prepayment of loans.
891.705  Project assistance contract.
891.710  Term of PAC.

[[Page 192]]

891.715  Maximum annual commitment and project account.
891.720  Leasing to eligible families.
891.725  PAC administration.
891.730  Default by Borrower.
891.735  Notice upon PAC expiration.
891.740  Responsibilities of Borrower.
891.745  Replacement reserve.
891.750  Selection and admission of tenants.
891.755  Obligations of the family.
891.760  Overcrowded and underoccupied units.
891.765  Lease requirements.
891.770  Termination of tenancy and modification of lease.
891.775  Security deposits.
891.780  Adjustment of rents.
891.785  Adjustment of utility allowances.
891.790  Conditions for receipt of vacancy payments for assisted units.

    Authority: 12 U.S.C. 1701q; 42 U.S.C. 1437f, 3535(d), and 8013.

    Source: 61 FR 11956, Mar. 22, 1996, unless otherwise noted.



                 Subpart A--General Program Requirements



Sec. 891.100  Purpose and policy.

    (a) Purpose. The Section 202 Program of Supportive Housing for the 
Elderly and the Section 811 Program of Supportive Housing for Persons 
with Disabilities provide Federal capital advances and project rental 
assistance under section 202 of the Housing Act of 1959 (12 U.S.C. 
1701q) (section 202) and section 811 of the National Affordable Housing 
Act (42 U.S.C. 8013) (section 811), respectively, for housing projects 
serving elderly households and persons with disabilities. Section 202 
projects shall provide a range of services that are tailored to the 
needs of the residents. Owners of Section 811 projects shall ensure that 
the residents are provided with any necessary supportive services that 
address their individual needs.
    (b) General policy. (1) Supportive Housing for the Elderly. A 
capital advance and contract for project rental assistance provided 
under this program shall be used for the purposes described in Section 
202 (12 U.S.C. 1701q(b)).
    (2) Supportive Housing for Persons with Disabilities. A capital 
advance and contract for project rental assistance provided under this 
program shall be used for the purposes described in Section 811 (42 
U.S.C. 8013(b)).
    (c) Use of capital advance funds. No part of the funds reserved may 
be transferred by the Sponsor, except to the Owner caused to be formed 
by the Sponsor. This action must be accomplished prior to issuance of a 
commitment for capital advance funding.
    (d) Amendments. Subject to the availability of funds, HUD may amend 
the amount of an approved capital advance only after initial closing has 
occurred.



Sec. 891.105  Definitions.

    The following definitions apply, as appropriate, throughout this 
part. Other terms with definitions unique to the particular program are 
defined in Secs. 891.205, 891.305, and 891.505, as applicable.
    Affiliated entities means entities that the field office determines 
to be related to each other in such a manner that it is appropriate to 
treat them as a single entity. Such relationship shall include any 
identity of interest among such entities or their principals and the use 
by any otherwise unaffiliated entities of a single Sponsor or of 
Sponsors (or of a single Borrower or of Borrowers, as applicable) that 
have any identity of interest themselves or their principals.
    Annual income is defined in part 813 of this chapter. In the case of 
an individual residing in an intermediate care facility for the 
developmentally disabled that is assisted under title XIX of the Social 
Security Act and this part, the annual income of the individual shall 
exclude protected personal income as provided under that Act. For the 
purposes of determining the total tenant payment, the income of such 
individuals shall be imputed to be the amount that the household would 
receive if assisted under title XVI of the Social Security Act.
    Household (eligible household) means an elderly or disabled 
household (as defined in Secs. 891.205 or 891.305, respectively), as 
applicable, that meets the project occupancy requirements approved by 
HUD and, if the household occupies an assisted unit, meets the very low-
income requirements described in Sec. 813.102 of this chapter, as 
modified by the definition of annual income in this section.
    Housing and related facilities means rental housing structures 
constructed,

[[Page 193]]

rehabilitated, or acquired as permanent residences for use by elderly or 
disabled households, as applicable. The term includes necessary 
community space. Except for intermediate care facilities for individuals 
with developmental disabilities, this term does not include nursing 
homes, hospitals, intermediate care facilities, or transitional care 
facilities. For the Loans for the Elderly and Persons with Disabilities 
Program, see Sec. 891.505.
    Low-income families shall have the same meaning provided in section 
3(b)(2) of the United States Housing Act of 1937 (42 U.S.C. 1437a).
    National Sponsor means a Sponsor that has one or more Section 202 or 
one or more Section 811 project(s) under reservation, construction, or 
management in two or more different HUD geographical regions.
    Operating costs means HUD-approved expenses related to the provision 
of housing and includes:
    (1) Administrative expenses, including salary and management 
expenses related to the provision of shelter and, in the case of the 
Section 202 Program, the coordination of services;
    (2) Maintenance expenses, including routine and minor repairs and 
groundskeeping;
    (3) Security expenses;
    (4) Utilities expenses, including gas, oil, electricity, water, 
sewer, trash removal, and extermination services. The term ``operating 
costs'' excludes telephone services for households;
    (5) Taxes and insurance;
    (6) Allowances for reserves; and
    (7) Allowances for services (in the Section 202 Program only).
    Project rental assistance contract (PRAC) means the contract entered 
into by the Owner and HUD setting forth the rights and duties of the 
parties with respect to the project and the payments under the PRAC.
    Project rental assistance payment means the payment made by HUD to 
the Owner for assisted units as provided in the PRAC. The payment is the 
difference between the total tenant payment and the HUD-approved per 
unit operating expenses except for expenses related to items not 
eligible under design and cost provisions. An additional payment is made 
to a household occupying an assisted unit when the utility allowance is 
greater than the total tenant payment. A project rental assistance 
payment, known as a ``vacancy payment,'' may be made to the Owner when 
an assisted unit is vacant, in accordance with the terms of the PRAC.
    Rehabilitation means the improvement of the condition of a property 
from deteriorated or substandard to good condition. Rehabilitation may 
vary in degree from the gutting and extensive reconstruction to the cure 
of substantial accumulation of deferred maintenance. Cosmetic 
improvements alone do not qualify as rehabilitation under this 
definition. Rehabilitation may also include renovation, alteration, or 
remodeling for the conversion or adaptation of structurally sound 
property to the design and condition required for use under this part, 
or the repair or replacement of major building systems or components in 
danger of failure. Improvement of an existing structure must require 15 
percent or more of the estimated development cost to rehabilitate the 
project to a useful life of 55 years.
    Replacement Reserve Account means a project account into which 
specified funds are deposited. Such funds may be used only with the 
approval of the Secretary for repairs, replacement, and capital 
improvements to the project.
    Section 202 means section 202 of the Housing Act of 1959 (12 U.S.C. 
1701q), as amended, or the Supportive Housing for the Elderly Program 
authorized by that section.
    Section 811 means section 811 of the National Affordable Housing Act 
(42 U.S.C. 8013), as amended, or the Supportive Housing for Persons with 
Disabilities Program authorized by that section.
    Start-up expenses mean necessary costs (to plan a Section 202 or 
Section 811 project, as applicable) incurred by the Sponsor or Owner 
prior to initial closing.
    Tenant payment to Owner equals total tenant payment less utility 
allowance, if any.
    Total tenant payment means the monthly amount defined in, and 
determined in accordance with part 813 of this chapter.

[[Page 194]]

    Utility allowance is defined in part 813 of this chapter and is 
determined or approved by HUD.
    Very low-income families shall have the same meaning provided in 
section 3(b)(2) of the United States Housing Act of 1937 (42 U.S.C. 
1437a).



Sec. 891.110  Allocation of authority.

    In accordance with 24 CFR part 791, the Assistant Secretary will 
separately allocate the amounts available for capital advances for the 
development of housing for elderly households and for disabled 
households, less amounts set aside by Congress for specific types of 
projects, and for amendments of fund reservations made in prior years, 
for technical assistance, and for other contracted services.



Sec. 891.115  Notice of funding availability.

    Following an allocation of authority under Sec. 891.110, HUD shall 
publish a separate Notice of Funding Availability (NOFA) for the Section 
202 Program of Supportive Housing for the Elderly and for the Section 
811 Program of Supportive Housing for Persons with Disabilities in the 
Federal Register. The NOFAs will contain specific information on how and 
when to apply for the available capital advance authority, the contents 
of the application, and the selection process.



Sec. 891.120  Project design and cost standards.

    In addition to the special project standards described in 
Secs. 891.210 and 891.310, as applicable, the following standards apply:
    (a) Property standards. Projects under this part must comply with 
HUD Minimum Property Standards, unless otherwise indicated in this part.
    (b) Accessibility requirements. Projects under this part must comply 
with the Uniform Federal Accessibility Standards (See 24 CFR 40.7 for 
availability), section 504 of the Rehabilitation Act of 1973 and HUD's 
implementing regulations (24 CFR part 8), and for new construction 
multifamily housing projects, the design and construction requirements 
of the Fair Housing Act and HUD's implementing regulations at 24 CFR 
part 100. For the Section 811 Program of Supportive Housing for Persons 
with Disabilities, see additional accessibility requirements in 
Sec. 891.310(b).
    (c) Restrictions on amenities. Projects must be modest in design. 
Amenities not eligible for HUD funding include individual unit balconies 
and decks, atriums, bowling alleys, swimming pools, saunas, jacuzzis, 
and dishwashers, trash compactors, and washers and dryers in individual 
units in supportive housing for the elderly or in independent living 
facilities for persons with disabilities. Sponsors may include certain 
excess amenities but they must pay for them from sources other than the 
section 202 or 811 capital advance. They must also pay for the 
continuing operating costs associated with any excess amenities from 
sources other than the Section 202 or 811 project rental assistance 
contract.
    (d) Smoke detectors. After October 30, 1992, each dwelling unit must 
include at least one battery-operated or hard-wired smoke detector, in 
proper working condition, on each level of the unit.



Sec. 891.125  Site and neighborhood standards.

    All sites must meet the following site and neighborhood 
requirements:
    (a) The site must be adequate in size, exposure, and contour to 
accommodate the number and type of units proposed, and adequate 
utilities (water, sewer, gas, and electricity) and streets must be 
available to service the site.
    (b) The site and neighborhood must be suitable from the standpoint 
of facilitating and furthering full compliance with the applicable 
provisions of Title VI of the Civil Rights Act of 1964, the Fair Housing 
Act, Executive Order 11063 (27 FR 11527, 3 CFR, 1958-1963 Comp., p. 
652); as amended by Executive Order 12259, (46 FR 1253, 3 CFR, 1980 
Comp., p. 307)); section 504 of the Rehabilitation Act of 1973, and 
implementing HUD regulations.
    (c) New construction sites must meet the following site and 
neighborhood requirements:
    (1) The site must not be located in an area of minority 
concentration (or minority elderly concentration under the Section 202 
Program) except as permitted under paragraph (c)(2) of this

[[Page 195]]

section, and must not be located in a racially mixed area if the project 
will cause a significant increase in the proportion of minority to 
nonminority residents (or minority elderly to nonminority elderly 
residents, under the Section 202 Program) in the area.
    (2) A project may be located in an area of minority concentration 
(or minority elderly concentration, under the Section 202 Program) only 
if:
    (i) Sufficient, comparable opportunities exist for housing for 
minority elderly households or minority disabled households, as 
applicable (or minority families, for projects funded under 
Secs. 891.655 through 891.790), in the income range to be served by the 
proposed project, outside areas of minority concentration (see paragraph 
(c)(3) of this section for further guidance on this criterion); or
    (ii) The project is necessary to meet overriding housing needs that 
cannot be met in that housing market area (see paragraph (c)(4) of this 
section for further guidance on this criterion).
    (3)(i) Sufficient does not require that in every locality there be 
an equal number of assisted units within and outside of areas of 
minority concentration. Rather, application of this standard should 
produce a reasonable distribution of assisted units each year which over 
a period of several years will approach an appropriate balance of 
housing opportunities within and outside areas of minority 
concentration. An appropriate balance in any jurisdiction must be 
determined in light of local conditions affecting the range of housing 
choices available for very low-income minority elderly or disabled 
households, as applicable (or low-income minority families, for projects 
funded under Secs. 891.655 through 891.790), and in relation to the 
racial mix of the locality's population.
    (ii) Units may be considered to be comparable opportunities if they 
have the same household type (elderly or disabled, as applicable) and 
tenure type (owner/renter); require approximately the same total tenant 
payment; serve the same income group; are located in the same housing 
market; and are in standard condition.
    (iii) Application of this sufficient, comparable opportunities 
standard involves assessing the overall impact of HUD-assisted housing 
on the availability of housing choices for very low-income minority 
elderly or disabled households, as applicable (or low-income minority 
families, for projects funded under Secs. 891.655 through 891.790), in 
and outside areas of minority concentration, and must take into account 
the extent to which the following factors are present, along with any 
other factor relevant to housing choice:
    (A) A significant number of assisted housing units are available 
outside areas of minority concentration.
    (B) There is significant integration of assisted housing projects 
constructed or rehabilitated in the past ten years, relative to the 
racial mix of the eligible population.
    (C) There are racially integrated neighborhoods in the locality.
    (D) Programs are operated by the locality to assist minority elderly 
or disabled households, as applicable (or minority families, for 
projects funded under Secs. 891.655 through 891.790), that wish to find 
housing outside areas of minority concentration.
    (E) Minority elderly or disabled households, as applicable (or 
minority families, for projects funded under Secs. 891.655 through 
891.790), have benefitted from local activities (e.g., acquisition and 
write-down of sites, tax relief programs for homeowners, acquisitions of 
units for use as assisted housing units) undertaken to expand choice for 
minority households (or families) outside of areas of minority 
concentration.
    (F) A significant proportion of minority elderly or disabled 
households, as applicable (or minority households, for projects funded 
under Secs. 891.655 through 891.790), have been successful in finding 
units in nonminority areas under the Section 8 Certificate and Housing 
Voucher programs.
    (G) Comparable housing opportunities have been made available 
outside areas of minority concentration through other programs.
    (4) Application of the overriding housing needs criterion, for 
example, permits approval of sites that are an integral part of an 
overall local strategy for the preservation or restoration of the 
immediate neighborhood and of

[[Page 196]]

sites in a neighborhood experiencing significant private investment that 
is demonstrably changing the economic character of the area (a 
``revitalizing area''). An overriding housing need, however, may not 
serve as the basis for determining that a site is acceptable if the only 
reason the need cannot otherwise be feasibly met is that discrimination 
on the basis of race, color, creed, sex, or national origin renders 
sites outside areas of minority concentration unavailable, or if the use 
of this standard in recent years has had the effect of circumventing the 
obligation to provide housing choice.
    (d) The neighborhood must not be one that is seriously detrimental 
to family life or in which substandard dwellings or other undesirable 
conditions predominate, unless there is actively in progress a concerted 
program to remedy the undesirable conditions.
    (e) The housing must be accessible to social, recreational, 
educational, commercial, and health facilities and services, and other 
municipal facilities and services that are at least equivalent to those 
typically found in neighborhoods consisting largely of unassisted, 
standard housing of similar market rents.
    (f) For the Section 811 Program of Supportive Housing for Persons 
with Disabilities, the additional site and neighborhood requirements in 
Sec. 891.320 apply.



Sec. 891.130  Prohibited relationships.

    This section shall apply to capital advances under the Section 202 
Program and the Section 811 Program, as well as to loans financed under 
Secs. 891.655 through 891.790.
    (a) Conflicts of interest. (1) Officers and Board members of either 
the Sponsor or the Owner (or Borrower, as applicable) may not have any 
financial interest in any contract with the Owner or in any firm which 
has a contract with the Owner. This restriction applies so long as the 
individual is serving on the Board and for a period of three years 
following resignation or final closing, whichever occurs later.
    (2) The following contracts between the Owner (or Borrower, as 
applicable) and the Sponsor or the Sponsor's nonprofit affiliate will 
not constitute a conflict of interest if no more than two persons 
salaried by the Sponsor or management affiliate serve as nonvoting 
directors on the Owner's board of directors:
    (i) Management contracts (including associated management fees);
    (ii) Supportive services contracts (including service fees) under 
the Supportive Housing for the Elderly Program; and
    (iii) Developer (consultant) contracts.
    (b) Identity of interest. An identity of interest between the 
Sponsor or Owner (or Borrower, as applicable) and any development team 
member or between development team members is prohibited until two years 
after final closing.



Sec. 891.135  Amount and terms of capital advances.

    (a) Amount of capital advances. The amount of capital advances 
approved shall be the amount stated in the notification of fund 
reservation, including any adjustment required by HUD before the final 
closing. The amount of the capital advance may not exceed the 
appropriate development cost limit.
    (b) Estimated development cost. The amount of the capital advance 
may not exceed the total estimated development cost of the project (as 
determined by HUD), less the incremental development cost associated 
with excess amenities and design features to be paid for by the Sponsor 
under Sec. 891.120.



Sec. 891.140  Development cost limits.

    (a) HUD shall use the development cost limits, established by Notice 
in the Federal Register and adjusted by locality, to calculate the fund 
reservation amount of the capital advance to be made available to 
individual Owners. Owners that incur actual development costs that are 
less than the amount of the initial fund reservation shall be entitled 
to retain 50 percent of the savings in a Replacement Reserve Account. 
Such percentage shall be increased to 75 percent for Owners that add 
energy efficiency features.
    (b) The Replacement Reserve Account established under paragraph (a) 
of this section may only be used for repairs, replacements, and capital 
improvements to the project.

[[Page 197]]



Sec. 891.145  Owner deposit (Minimum Capital Investment).

    As a Minimum Capital Investment, the Owner must deposit in a special 
escrow account one-half of one percent (0.5%) of the HUD-approved 
capital advance, not to exceed $10,000, to assure the Owner's commitment 
to the housing. Under the Section 202 Program, if an Owner has a 
National Sponsor or a National Co-Sponsor, the Minimum Capital 
Investment shall be one-half of one percent (0.5%) of the HUD-approved 
capital advance, not to exceed $25,000.



Sec. 891.150  Operating cost standards.

    HUD shall establish operating cost standards based on the average 
annual operating cost of comparable housing for the elderly or for 
persons with disabilities in each field office, and shall adjust the 
standard annually based on appropriate indices of increases in housing 
costs such as the Consumer Price Index. The operating cost standards 
shall be developed based on the number of units. However, under the 
Section 811 Program and for projects funded under Secs. 891.655 through 
891.790, the operating cost standard for group homes shall be based on 
the number of residents. HUD may adjust the operating cost standard 
applicable to an approved project to reflect such factors as differences 
in costs based on location within the field office jurisdiction. The 
operating cost standard will be used to determine the amount of the 
project assistance initially reserved for a project.



Sec. 891.155  Other Federal requirements.

    In addition to the requirements set forth in 24 CFR part 5, the 
following requirements in this Sec. 891.155 apply to the Section 202 and 
Section 811 Programs, as well as projects funded under Secs. 891.655 
through 891.790. Other requirements unique to a particular program are 
described in subparts B and C of this part, as applicable.
    (a) Affirmative fair housing marketing. (1) The affirmative fair 
housing marketing requirements of 24 CFR part 200, subpart M and the 
implementing regulations at 24 CFR part 108; and
    (2) The fair housing advertising and poster guidelines at 24 CFR 
parts 109 and 110.
    (b) Environmental. The National Environmental Policy Act of 1969, 
HUD's implementing regulations at 24 CFR part 50, including the related 
authorities described in 24 CFR 50.4. For the purposes of Executive 
Order No. 11988, Floodplain Management (42 FR 26951, 3 CFR, 1977 Comp., 
p. 117); as amended by Executive Order 12148 (44 FR 43239, 3 CFR, 1979 
Comp., p. 412)), and implementing regulations in 24 CFR part 55, all 
applications for intermediate care facilities for persons with 
developmental disabilities shall be treated as critical actions 
requiring consideration of the 500-year floodplain.
    (c) Flood insurance. The Flood Disaster Protection Act of 1973 (42 
U.S.C. 4001).
    (d) Labor standards. (1) All laborers and mechanics (other than 
volunteers under the conditions set out in 24 CFR part 70) employed by 
contractors and subcontractors in the construction (including 
rehabilitation) of housing with 12 or more units assisted under this 
part shall be paid wages at rates not less than those prevailing in the 
locality, as determined by the Secretary of Labor in accordance with the 
Davis-Bacon Act (40 U.S.C. 276a-276a-5). A group home for persons with 
disabilities is not covered by the labor standards.
    (2) Contracts involving employment of laborers and mechanics shall 
be subject to the provisions of the Contract Work Hours and Safety 
Standards Act (40 U.S.C. 327-333).
    (3) Sponsors, Owners, contractors, and subcontractors must comply 
with all related rules, regulations, and requirements.
    (e) Displacement, relocation, and real property acquisition. (1) 
Minimizing displacement. Consistent with the other goals and objectives 
of this part, Sponsors and Owners (or Borrowers, if applicable) shall 
assure that they have taken all reasonable steps to minimize the 
displacement of persons (families, individuals, businesses, nonprofit 
organizations, and farms) as a result of a project assisted under this 
part.
    (2) Relocation assistance for displaced persons. A displaced person 
must be provided relocation assistance at the levels described in, and 
in accordance with the requirements of, the Uniform

[[Page 198]]

Relocation Assistance and Real Property Acquisition Policies Act of 
1970, as amended (URA) (42 U.S.C. 4201-4655), as implemented by 49 CFR 
part 24.
    (3) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (f) Intergovernmental review. The requirements for intergovernmental 
review in Executive Order No. 12372 (47 FR 30959, 3 CFR, 1982 Comp., p. 
197; as amended by Executive Order No. 12416 (48 FR 15587, 3 CFR, 1983 
Comp., p. 186)) and the implementing regulations at 24 CFR part 52 are 
applicable to this program.
    (g) Lead-based paint. (1) The requirements of the Lead-Based Paint 
Poisoning Prevention Act (42 U.S.C. 4821-4846) and implementing 
regulations at 24 CFR part 35 apply to any dwellings (except zero-
bedroom dwelling units) in section 811 housing that were:
    (i) Constructed or substantially rehabilitated before 1978; and
    (ii) In which any child under 6 years of age resides or is expected 
to reside.
    (2) Under the Section 811 Program and projects funded under 
Secs. 891.655 through 891.790, the lead-based paint requirements 
described in Sec. 891.325 also apply.



Sec. 891.160  Audit requirements.

    Nonprofits receiving assistance under this part are subject to the 
audit requirements in 24 CFR part 45.



Sec. 891.165  Duration of capital advance.

    The duration of the fund reservation for the capital advance is 18 
months from the date of issuance with limited exceptions up to 24 
months, as approved by HUD on a case-by-case basis.



Sec. 891.170  Repayment of capital advance.

    (a) Interest prohibition and repayment. A capital advance provided 
under this part shall bear no interest and its repayment shall not be 
required so long as the housing project remains available for very low-
income elderly families or persons with disabilities, as applicable, in 
accordance with this part. The capital advance may not be repaid to 
extinguish the requirements of this part. To ensure its interest in the 
capital advance, HUD shall require a note and mortgage, use agreement, 
capital advance agreement and regulatory agreement from the Owner in a 
form to be prescribed by HUD.
    (b) The transfer of physical and financial assets of any project 
under this part is prohibited, unless HUD gives prior written approval. 
Approval for transfer will not be granted unless HUD determines that the 
transfer to a private nonprofit corporation or consumer cooperative 
(under the Section 202 Program) or a nonprofit organization (under the 
Section 811 Program) is part of a transaction that will ensure the 
continued operation of the project for not less than 40 years (from the 
date of original closing) in a manner that will provide rental housing 
for very low-income elderly persons or persons with disabilities, as 
applicable, on terms at least as advantageous to existing and future 
tenants as the terms required by the original capital advance.



Sec. 891.175  Technical assistance.

    For purposes of the Section 202 Program and the Section 811 Program, 
the Secretary shall make available appropriate technical assistance to 
assure that applicants having limited resources, particularly minority 
applicants, are able to participate more fully in the programs.



Sec. 891.180  Physical condition standards; physical inspection requirements.

    Housing assisted under this part must be maintained and inspected in 
accordance with the requirements in 24 CFR part 5, subpart G.

[63 FR 46580, Sept. 1, 1998]



Sec. 891.185  Preemption of rent control laws.

    The Department finds that it is necessary and desirable to assist 
project owners to preserve the continued viability of each project 
assisted under this part (except subpart E) as a housing resource for 
very low-income elderly persons or persons with disabilities. The 
Department also finds that it is necessary to protect the substantial 
economic interest of the Federal Government in those projects. 
Therefore,

[[Page 199]]

the Department concludes that it is in the national interest to preempt, 
and it does hereby preempt, the entire field of rent regulation by local 
rent control boards or other authority acting pursuant to state or local 
law as it affects those projects. Part 246 of this title applies to 
projects covered by subpart E of this part.

[63 FR 64803, Nov. 23, 1998]



        Subpart B--Section 202 Supportive Housing for the Elderly



Sec. 891.200  Applicability.

    The requirements set forth in this subpart B apply to the Section 
202 Program of Supportive Housing for the Elderly only, and to 
applicants, Sponsors, and Owners under that program.



Sec. 891.205  Definitions.

    As used in this part in reference to the Section 202 Program, and in 
addition to the applicable definitions in Sec. 891.105:
    Acquisition means the purchase of (or otherwise obtaining title to) 
existing housing and related facilities from the Resolution Trust 
Corporation.
    Activities of daily living (ADL) means eating, dressing, bathing, 
grooming, and household management activities, as further described 
below:
    (1) Eating--May need assistance with cooking, preparing, or serving 
food, but must be able to feed self;
    (2) Bathing--May need assistance in getting in and out of the shower 
or tub, but must be able to wash self;
    (3) Grooming--May need assistance in washing hair, but must be able 
to take care of personal appearance;
    (4) Dressing--Must be able to dress self, but may need occasional 
assistance; and
    (5) Home management activities--May need assistance in doing 
housework, grocery shopping, laundry, or getting to and from activities 
such as going to the doctor and shopping, but must be mobile. The 
mobility requirement does not exclude persons in wheelchairs or those 
requiring mobility devices.
    Congregate space (hereinafter referred to as community space) shall 
have the meaning provided in section 202 (12 U.S.C. 1701q(h)(1)). The 
term ``community spaces'' excludes offices, halls, mechanical rooms, 
laundry rooms, parking areas, dwelling units, and lobbies. Community 
space does not include commercial areas.
    Elderly person means a household composed of one or more persons at 
least one of whom is 62 years of age or more at the time of initial 
occupancy.
    Frail elderly means an elderly person who is unable to perform at 
least three activities of daily living as defined in this section. 
Owners may establish additional eligibility requirements acceptable to 
HUD based on the standards in local supportive services programs.
    Owner means a single-purpose private nonprofit organization that may 
be established by the Sponsor that will receive a capital advance and 
project rental assistance payments to develop and operate supportive 
housing for the elderly as its legal owner. Owner does not mean a public 
body or the instrumentality of any public body. The purposes of the 
Owner must include the promotion of the welfare of the elderly. The 
Owner may not be controlled by or under the direction of persons or 
firms seeking to derive profit or gain therefrom.
    Private nonprofit organization means any incorporated private 
institution or foundation:
    (1) That has tax-exempt status under section 501(c)(3) or (c)(4) of 
the Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);
    (2) No part of the net earnings of which inures to the benefit of 
any member, founder, contributor, or individual;
    (3) That has a governing board:
    (i) The membership of which is selected in a manner to assure that 
there is significant representation of the views of the community in 
which such housing is located; and
    (ii) That is responsible for the operation of the housing assisted 
under this part; and
    (4) That is approved by HUD as to administrative and financial 
responsibility.
    Services expenses means those costs needed to provide the necessary 
services for the elderly tenants, which may include, but are not limited 
to: health

[[Page 200]]

related activities, continuing education, welfare, informational, 
recreational, homemaking, meal and nutritional services, counseling, and 
referral services as well as transportation as necessary to facilitate 
access to these services.
    Sponsor means any private nonprofit entity, including a consumer 
cooperative:
    (1) No part of the net earnings of which inures to the benefit of 
any private shareholder, member, founder, contributor, or individual;
    (2) That is not controlled by, or under the direction of, persons or 
firms seeking to derive profit or gain therefrom; and
    (3) That is approved by the Secretary as to administrative and 
financial capacity and responsibility. The term Sponsor does not mean a 
public body or the instrumentality of a public body.



Sec. 891.210  Special project standards.

    In addition to the applicable project standards in Sec. 891.120, 
resident units in Section 202 projects are limited to efficiencies or 
one-bedroom units. If a resident manager is proposed for a project, up 
to two bedrooms could be provided for the resident manager unit.



Sec. 891.215  Limits on number of units.

    (a) HUD may establish, through publication of a notice in the 
Federal Register, limits on the number of units that can be applied for 
by a Sponsor or Co-sponsor in a single geographical region and/or 
nationwide.
    (b) Affiliated entities that submit separate applications shall be 
deemed to be a single entity for purposes of these limits.
    (c) HUD may also establish, through publication of a notice in the 
Federal Register, the minimum size of a single project.



Sec. 891.220  Prohibited facilities.

    Projects may not include facilities for infirmaries, nursing 
stations, or spaces for overnight care.



Sec. 891.225  Provision of services.

    (a) In carrying out the provisions of this part, HUD shall ensure 
that housing assisted under this part provides services as described in 
section 202 (12 U.S.C. 1701q(g)(1)).
    (b)(1) HUD shall ensure that Owners have the managerial capacity to 
perform the coordination of services described in 12 U.S.C. 1701q(g)(2).
    (2) Any cost associated with this paragraph shall be an eligible 
cost under the contract for project rental assistance. Any cost 
associated with the employment of a service coordinator shall also be an 
eligible cost, except if the project is receiving congregate housing 
services assistance under section 802 of the National Affordable Housing 
Act. The HUD-approved service costs will be an eligible expense to be 
paid from project rental assistance, not to exceed $15 per unit per 
month. The balance of service costs shall be provided from other 
sources, which may include co-payment by the tenant receiving the 
service. Such co-payment shall not be included in the Total Tenant 
Payment.



Sec. 891.230  Selection preferences.

    For purposes of the Section 202 Program, the selection preferences 
in 24 CFR part 5, subpart D apply.



 Subpart C--Section 811 Supportive Housing for Persons With Disabilities



Sec. 891.300  Applicability.

    The requirements set forth in this subpart C apply to the Section 
811 Program of Supportive Housing for Persons with Disabilities only, 
and to applicants, Sponsors, and Owners under that program.



Sec. 891.305  Definitions.

    As used in this part in reference to the Section 811 Program, and in 
addition to the applicable definitions in Sec. 891.105:
    Acquisition means the purchase of (or otherwise obtaining title to) 
existing structures to be used as housing for persons with disabilities, 
including housing and related facilities from the Resolution Trust 
Corporation. Capital advances are not available in connection with 
facilities owned and operated by the Sponsor as housing for persons with 
disabilities.

[[Page 201]]

    Congregate space (hereinafter referred to as community space) means 
space for multipurpose rooms, common areas, and other space necessary 
for the provision of supportive services. Community space does not 
include commercial areas.
    Disabled household means a household composed of:
    (1) One or more persons at least one of whom is an adult (18 years 
or older) who has a disability;
    (2) Two or more persons with disabilities living together, or one or 
more such persons living with another person who is determined by HUD, 
based upon a certification from an appropriate professional (e.g., a 
rehabilitation counselor, social worker, or licensed physician) to be 
important to their care or well being; or
    (3) The surviving member or members of any household described in 
paragraph (1) of this definition who were living in a unit assisted 
under this part, with the deceased member of the household at the time 
of his or her death.
    Nonprofit organization means any institution or foundation:
    (1) That has tax-exempt status under section 501(c)(3) of the 
Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);
    (2) No part of the net earnings of which inures to the benefit of 
any Board member, founder, contributor, or individual;
    (3) That has a governing board;
    (i) The membership of which is selected in a manner to assure that 
there is significant representation of the views of the community in 
which such housing is located (including persons with disabilities); and
    (ii) That is responsible for the operation of the housing assisted 
under this part; and
    (4) That is approved by HUD as to financial responsibility.
    Owner means a single-purpose nonprofit organization established by 
the Sponsor that will receive a capital advance and project rental 
assistance payments to develop and operate, as its legal owner, 
supportive housing for persons with disabilities under this part. The 
purposes of the Owner must include the promotion of the welfare of 
persons with disabilities. The Owner may not be controlled by or under 
the direction of persons or firms seeking to derive profit or gain 
therefrom.
    Person with disabilities shall have the meaning provided in Section 
811 (42 U.S.C. 8013(k)(2)). The term ``person with disabilities'' shall 
also include the following:
    (1) A person who has a developmental disability, as defined in 
section 102(7) of the Developmental Disabilities Assistance and Bill of 
Rights Act (42 U.S.C. 6001(5)), i.e., if he or she has a severe chronic 
disability which:
    (i) Is attributable to a mental or physical impairment or 
combination of mental and physical impairments;
    (ii) Is manifested before the person attains age twenty-two;
    (iii) Is likely to continue indefinitely;
    (iv) Results in substantial functional limitation in three or more 
of the following areas of major life activity:
    (A) Self-care;
    (B) Receptive and expressive language;
    (C) Learning;
    (D) Mobility;
    (E) Self-direction;
    (F) Capacity for independent living;
    (G) Economic self-sufficiency; and
    (v) Reflects the person's need for a combination and sequence of 
special, interdisciplinary, or generic care, treatment, or other 
services which are of lifelong or extended duration and are individually 
planned and coordinated.
    (2) A person with a chronic mental illness, i.e., a severe and 
persistent mental or emotional impairment that seriously limits his or 
her ability to live independently, and which impairment could be 
improved by more suitable housing conditions.
    (3) A person infected with the human acquired immunodeficiency virus 
(HIV) and a person who suffers from alcoholism or drug addiction, 
provided they meet the definition of ``person with disabilities'' in 
Section 811 (42 U.S.C. 8013(k)(2)). A person whose sole impairment is a 
diagnosis of HIV positive or alcoholism or drug addiction (i.e., does 
not meet the qualifying criteria in section 811 (42 U.S.C. 8013(k)(2)) 
will not be eligible for occupancy in a section 811 project.
    Sponsor means any nonprofit entity:

[[Page 202]]

    (1) That has tax-exempt status under section 501(c)(3) of the 
Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.);
    (2) No part of the net earnings of which inures to the benefit of 
any private shareholder, member, founder, contributor or individual;
    (3) That is not controlled by or under the direction of persons or 
firms seeking to derive profit or gain therefrom;
    (4) That has a governing board the membership of which is selected 
in a manner to assure that there is significant representation of the 
views of persons with disabilities; and
    (5) That is approved by HUD as to administrative and financial 
capacity and responsibility.



Sec. 891.310  Special project standards.

    In addition to the applicable project standards in Sec. 891.120, the 
following special standards apply to the Section 811 Program and to 
projects funded under Secs. 891.655 through 891.790:
    (a) Minimum group home standards. Each group home must provide a 
minimum of 290 square feet of prorated space for each resident, 
including a minimum area of 80 square feet for each resident in a shared 
bedroom (with no more than two residents occupying a shared bedroom) and 
a minimum area of 100 square feet for a single occupant bedroom; at 
least one full bathroom for every four residents; space for recreation 
at indoor and outdoor locations on the project site; and sufficient 
storage for each resident in the bedroom and other storage space 
necessary for the operation of the home. If the project involves 
acquisition (with or without rehabilitation), the structure must at 
least be in compliance with applicable State requirements. In the 
absence of such requirements, the above standards shall apply.
    (b) Additional accessibility requirements. In addition to the 
accessibility requirements in Sec. 891.120(b), the following 
requirements apply to the Section 811 Program and to projects funded 
under Secs. 891.655 through 891.790:
    (1) All entrances, common areas, units to be occupied by resident 
staff, and amenities must be readily accessible to and usable by persons 
with disabilities.
    (2) In projects for chronically mentally ill individuals, a minimum 
of 10 percent of all dwelling units in an independent living facility 
(or 10 percent of all bedrooms and bathrooms in a group home, but at 
least one of each such space), must be designed to be accessible or 
adaptable for persons with disabilities.
    (3) In projects for developmentally disabled or physically disabled 
persons, all dwelling units in an independent living facility (or all 
bedrooms and bathrooms in a group home) must be designed to be 
accessible or adaptable for persons with physical disabilities. A 
project involving acquisition and/or rehabilitation may provide a lesser 
number if:
    (i) The cost of providing full accessibility makes the project 
financially infeasible;
    (ii) Fewer than one-half of the intended occupants have mobility 
impairments; and
    (iii) The project complies with the requirements of 24 CFR 8.23.
    (4) For the purposes of paragraph (b) of this section, the following 
definitions apply:
    (i) Accessible describes a site, building, facility, or portion 
thereof that complies with the Uniform Federal Accessibility Standards 
and that can be approached, entered, and used by physically disabled 
people;
    (ii) Adaptability means the ability of certain building spaces and 
elements, such as kitchen counters, sinks, and grab bars, to be added or 
altered so as to accommodate the needs of either disabled or nondisabled 
persons, or to accommodate the needs of either disabled or nondisabled 
persons, or to accommodate the needs of persons with different types or 
degrees of disability.



Sec. 891.315  Prohibited facilities.

    This section shall apply to capital advances under the Section 811 
Program, as well as loans financed under subpart E of this part. Project 
facilities may not include infirmaries, nursing stations, spaces 
dedicated to the delivery of medical treatment or physical therapy, 
padded rooms, or space for respite care or sheltered workshops, even if 
paid for from sources other than

[[Page 203]]

the HUD capital advance or loan. Except for office space used by the 
Owner (or Borrower, if applicable) exclusively for the administration of 
the project, project facilities may not include office space.



Sec. 891.320  Site and neighborhood standards.

    In addition to the requirements in Sec. 891.125 and Sec. 891.680, if 
applicable, the following site and neighborhood requirements apply to 
the Section 811 Program:
    (a) Travel time and cost via public transportation or private 
automobile, from the neighborhood to places of employment providing a 
range of jobs for very low-income workers (or low-income workers, as 
applicable), must not be excessive.
    (b) Projects should be located in neighborhoods where other family 
housing is located. Projects should not be located adjacent to the 
following facilities, or in areas where such facilities are 
concentrated: schools or day-care centers for persons with disabilities, 
workshops, medical facilities, or other housing primarily serving 
persons with disabilities. Not more than one group home may be located 
on any one site and no such home may be located on a site contiguous to 
another site containing such a home.



Sec. 891.325  Lead-based paint requirements.

    In addition to the other Federal requirements described in 
Sec. 891.155, the following lead-based paint requirements apply to the 
Section 811 Program and to projects funded under Secs. 891.655 through 
891.790:
    (a) The requirements of the Lead-Based Paint Poisoning Prevention 
Act (42 U.S.C. 4821-4846) and implementing regulations at 24 CFR part 35 
(except as superseded in paragraph (b) of this section) apply to the 
dwellings (except zero-bedroom dwelling units or units that are 
certified by a qualified inspector to be free of lead-based paint or the 
lead-based paint hazards have been eliminated) in housing assisted under 
this subpart and to projects funded under Secs. 891.655 through 891.790 
that:
    (1) Were constructed before 1978; and
    (2) In which any child under 6 years of age resides or is expected 
to reside.
    (b)(1) This paragraph (b) implements the provisions of the Lead-
Based Paint Poisoning Prevention Act, 42 U.S.C. 4821 et seq., by 
establishing procedures to eliminate, as far as practicable, the hazards 
of lead-based paint poisoning with respect to covered structures for 
which assistance is provided under the Section 811 Program and under 
Secs. 891.655 through 891.790. This paragraph (b) is promulgated under 
24 CFR 35.24(b)(4) and supersedes, with respect to these programs, the 
requirements prescribed in subpart C of 24 CFR part 35.
    (2) The following definitions apply to this section:
    Applicable surface means all intact and nonintact painted interior 
and exterior surfaces of a residential structure.
    Chewable surface means all protruding painted surfaces up to five 
feet from the floor or ground, that are readily accessible to children 
under 6 years of age, e.g., protruding corners, windowsills and frames, 
doors and frames, and other protruding woodwork.
    Defective paint surfaces means a surface on which the paint is 
cracking, scaling, chipping, peeling, or loose.
    Elevated blood lead level or EBL means excessive absorption of lead: 
that is, a confirmed concentration of lead in whole blood of 20 ug/dl 
(micrograms of lead per deciliter) for a single test or of 15-19 ug/dl 
in two consecutive tests 3-4 months apart.
    Lead-based paint means a paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1 mg/cm2 
(milligram per square centimeter) or .5 percent by weight or 5000 parts 
per million (PPM).
    (3) In the case of a structure constructed before 1978, the Sponsor 
must inspect the structure for defective paint surfaces before it 
submits site information. If defective paint surfaces are found, 
treatment in accordance with paragraph (a)(5) of this section is 
required. Correction of defective surfaces found during the initial 
inspection must be completed before initial occupancy of the project. 
Correction of defective paint conditions discovered

[[Page 204]]

at periodic inspection must be completed within 30 calendar days of 
their discovery. When weather conditions prevent completion of 
repainting of exterior surfaces within the 30-day period, repainting may 
be delayed, but covering or removal of the defective paint must be 
completed within the prescribed period.
    (4) In the case of a structure constructed before 1978, if the Owner 
(or Borrower, if applicable) is presented with test results that 
indicate that a child under the age of 6 years occupies the structure 
and has an elevated blood lead level (EBL), the Owner (or Borrower, if 
applicable) must cause the unit to be tested for lead-based paint on 
chewable surfaces. Testing must be conducted by a State or local health 
or housing agency, by an inspector certified or regulated by a State or 
local health or housing agency, or an organization recognized by HUD. 
Lead content shall be tested by using an X-ray fluorescence analysis 
(XRF) or by laboratory analysis of paint samples. Where lead-based paint 
on chewable surfaces is identified, covering or removal of the paint 
surface in accordance with paragraph (a)(5) of this section is required 
and treatment shall be completed within the time limits in paragraph 
(b)(3) of this section.
    (5) Treatment of defective paint surfaces and chewable surfaces must 
consist of covering or removal of the paint in accordance with the 
following requirements:
    (i) A defective paint surface shall be treated if the total area of 
defective paint on a component is:
    (A) More than 10 square feet on an exterior wall;
    (B) More than 2 square feet on an interior or exterior component 
with a large surface area, excluding exterior walls and including, but 
not limited to, ceilings, floors, doors, and interior walls; or
    (C) More than 10 percent of the total surface area on an interior or 
exterior component with a small surface area, including, but not limited 
to, window sills, baseboards and trim.
    (ii) Acceptable methods of treatment are: removal by wet scraping, 
wet sanding, chemical stripping on or off site, replacing painted 
components, scraping with infra-red or coil type heat gun with 
temperatures below 1100 degrees, HEPA vacuum sanding, HEPA vacuum needle 
gun, contained hydroblasting or high pressure wash with HEPA vacuum, and 
abrasive sandblasting with HEPA vacuum. Surfaces must be covered with 
durable materials with joints and edges sealed and caulked as needed to 
prevent the escape of lead contaminated dust.
    (iii) Prohibited methods of removal are: open flame burning or 
torching; machine sanding or grinding without a HEPA exhaust; 
uncontained hydroblasting or high pressure wash; and dry scraping except 
around electrical outlets or except when treating defective paint spots 
no more than two square feet in any one interior room or space (hallway, 
pantry, etc.) or totalling no more than twenty square feet on exterior 
surfaces.
    (iv) During exterior treatment, soil and playground equipment must 
be protected from contamination.
    (v) All treatment procedures must be concluded with a thorough 
cleaning of all surfaces in the room or area of treatment to remove fine 
dust particles. Cleanup must be accomplished by wet washing surfaces 
with a lead solubilizing detergent such as trisodium phosphate or an 
equivalent solution.
    (vi) Waste and debris must be disposed of in accordance with all 
applicable Federal, State and local laws.
    (6) In lieu of the procedures set forth in the preceding clause, the 
Owner (or Borrower, if applicable) may, at its discretion, abate all 
interior and exterior chewable surfaces in accordance with the methods 
set out paragraph (a)(5) of this section.
    (7) The Owner (or Borrower, if applicable) must take appropriate 
action to protect tenants from hazards associated with abatement 
procedures.
    (8) The Owner (or Borrower, if applicable) must keep a copy of each 
inspection report for at least three years. If a unit requires testing, 
or treatment of chewable surfaces based on the testing, the Owner must 
keep the test results, and, if applicable, the certification of 
treatment indefinitely. The records must indicate which chewable 
surfaces

[[Page 205]]

in the units have been tested or treated. If records establish that 
certain chewable surfaces were tested, or tested and treated, in 
accordance with the standards prescribed in this section, these surfaces 
do not have to be tested or treated at any subsequent time.



                      Subpart D--Project Management



Sec. 891.400  Responsibilities of owner.

    (a) Marketing. (1) The Owner must commence and continue diligent 
marketing activities not later than 90 days before the anticipated date 
of availability of the first unit or occupancy of the group home. Market 
activities shall include the provision of notices of the availability of 
housing under the program to operators of temporary housing for the 
homeless in the same housing market.
    (2) Marketing must be done in accordance with a HUD-approved 
affirmative fair housing marketing plan and all Federal, State or local 
fair housing and equal opportunity requirements. The purpose of the plan 
and requirements is to achieve a condition in which eligible households 
of similar income levels in the same housing market area have a like 
range of housing choices available to them regardless of discriminatory 
considerations such as their race, color, creed, religion, familial 
status, disability, sex or national origin.
    (3) At the time of PRAC execution, the Owner must submit to HUD a 
list of leased and unleased assisted units (or in the case of a group 
home, leased and unleased residential spaces) with a justification for 
the unleased units or residential spaces, in order to qualify for 
vacancy payments for the unleased units or residential spaces.
    (b) Management and maintenance. The Owner is responsible for all 
management functions. These functions include selection and admission of 
tenants, required reexaminations of incomes for households occupying 
assisted units or residential spaces, collection of tenant payments, 
termination of tenancy and eviction, and all repair and maintenance 
functions (including ordinary and extraordinary maintenance and 
replacement of capital items). All functions must be performed in 
compliance with equal opportunity requirements.
    (c) Contracting for services. (1) With HUD approval, the Owner may 
contract with a private or public entity for performance of the services 
or duties required in paragraphs (a) and (b) of this section. However, 
such an arrangement does not relieve the Owner of responsibility for 
these services and duties. All such contracts are subject to the 
restrictions governing prohibited contractual relationships described in 
Sec. 891.130. (These prohibitions do not extend to management contracts 
entered into by the Owner with the Sponsor or its nonprofit affiliate.)
    (2) Consistent with the objectives of Executive Order No. 11625 (36 
FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order 
No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139)); Executive Order No. 
12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 198); and Executive Order No. 
12138 (44 FR 29637, 3 CFR, 1979 Comp., p. 393; as amended by Executive 
Order No. 12608 (52 FR 34617, 3 CFR, 1987 Comp., p. 245)), the Owner 
will promote awareness and participation of minority and women's 
business enterprises in contracting and procurement activities.
    (d) Submission of financial and operating statements. The Owner must 
submit to HUD:
    (1) Within 60 days after the end of each fiscal year of project 
operations, financial statements for the project audited by an 
independent public accountant and in the form required by HUD; and
    (2) Other statements regarding project operation, financial 
conditions and occupancy as HUD may require to administer the PRAC and 
to monitor project operations.
    (e) Use of project funds. The Owner shall maintain a separate 
interest bearing project fund account in a depository or depositories 
which are members of the Federal Deposit Insurance Corporation or 
National Credit Union Share Insurance Fund and shall deposit all tenant 
payments, charges, income and revenues arising from project operation or 
ownership to this account. All project funds are to be deposited in 
Federally insured accounts. All balances shall be fully insured at

[[Page 206]]

all times, to the maximum extent possible. Project funds must be used 
for the operation of the project (including required insurance 
coverage), and to make required deposits to the replacement reserve 
under Sec. 891.405, in accordance with HUD-approved budget. Any 
remaining project funds in the project funds account (including earned 
interest) following the expiration of the fiscal year shall be deposited 
in a Federally-insured residual receipts account within 60 days 
following the end of the fiscal year. Withdrawals from this account may 
be made only for project purposes and with the approval of HUD. If there 
are funds remaining in the residual receipts account when the mortgage 
is satisfied, such funds shall be returned to HUD.
    (f) Reports. The Owner shall submit such reports as HUD may 
prescribe to demonstrate compliance with applicable civil rights and 
equal opportunity requirements. See Sec. 891.410(a).

(Approved by the Office of Management and Budget under control number 
2502-0470)



Sec. 891.405  Replacement reserve.

    (a) Establishment of reserve. The Owner shall establish and maintain 
a replacement reserve to aid in funding extraordinary maintenance and 
repair and replacement of capital items.
    (b) Deposits to reserve. The Owner shall make monthly deposits to 
the replacement reserve in an amount determined by HUD.
    (c) Level of reserve. The reserve must be built up to and maintained 
at a level determined by HUD to be sufficient to meet projected 
requirements. Should the reserve reach that level, the amount of the 
deposit to the reserve may be reduced with the approval of HUD.
    (d) Administration of reserve. Replacement reserve funds must be 
deposited with HUD or in a Federally-insured depository in an interest-
bearing account(s) whose balances(s) are fully insured at all times. All 
earnings including interest on the reserve must be added to the reserve. 
Funds may be drawn from the reserve and used only in accordance with HUD 
guidelines and with the approval of, or as directed by, HUD.



Sec. 891.410  Selection and admission of tenants.

    (a) Written procedures. The Owner shall adopt written tenant 
selection procedures that ensure nondiscrimination in the selection of 
tenants and that are consistent with the purpose of improving housing 
opportunities for very low-income elderly persons and persons with 
disabilities (as applicable); and reasonably related to program 
eligibility and an applicant's ability to perform the obligations of the 
lease. Owners shall promptly inform in writing any rejected applicant of 
the grounds for any rejection. Additionally, Owners shall maintain a 
written, chronological waiting list showing the name, race, gender, 
ethnicity, and date of each person applying for the program.
    (b) Application for admission. The Owner must accept applications 
for admission to the project in the form prescribed by HUD, and (under 
the Section 202 Program only) is obligated to confirm all information 
provided by applicant families on the application. Applicant households 
applying for assisted units (or residential spaces in a group home) must 
complete a certification of eligibility as part of the application for 
admission. Applicant households must meet the disclosure and 
verification requirements for Social Security Numbers, as provided by 24 
CFR part 5, subpart B. Applicant families must sign and submit consent 
forms for the obtaining of wage and claim information from State Wage 
Information Collection Agencies, as provided by 24 CFR part 5, subpart 
B. Both the Owner and the applicant household must complete and sign the 
application for admission. On request, the Owner must furnish copies of 
all applications for admission to HUD.
    (c) Determination of eligibility and selection of tenants. (1) The 
Owner is responsible for determining whether applicants are eligible for 
admission and for the selection of households. To be eligible for 
admission, an applicant must be an elderly person or a person with 
disabilities, as applicable (as defined in Secs. 891.205 and 891.305, 
respectively); must meet the disclosure and verification requirements 
for Social Security Numbers, as provided by 24

[[Page 207]]

CFR part 5, subpart B; must sign and submit consent forms for the 
obtaining of wage and claim information from State Wage Information 
Collection Agencies, as provided by 24 CFR part 5, subpart B; and must 
be a very low-income family, as defined in Sec. 891.105.
    (2) Under the Section 811 Program:
    (i) In order to be eligible for admission, the applicant must also 
meet any project occupancy requirements approved by HUD.
    (ii) Owners shall make selections in a nondiscriminatory manner 
without regard to considerations such as race, religion, color, sex, 
national origin, familial status, or disability. An Owner may, with the 
approval of the Secretary, limit occupancy within housing developed 
under this part 891 to persons with disabilities who have similar 
disabilities and require a similar set of supportive services in a 
supportive housing environment. However, the Owner must permit occupancy 
by any qualified person with a disability who could benefit from the 
housing and/or services provided regardless of the person's disability.
    (d) Unit assignment. If the Owner determines that the household is 
eligible and is otherwise acceptable and units (or residential spaces in 
a group home) are available, the Owner will assign the household a unit 
or residential space in a group home. If the household will occupy an 
assisted unit, the Owner will assign the household a unit of the 
appropriate size in accordance with HUD's general occupancy guidelines. 
If no suitable unit (or residential space in a group home) is available, 
the Owner will place the household on a waiting list for the project and 
notify the household when a suitable unit or residential space may 
become available. If the waiting list is so long that the applicant 
would not be likely to be admitted for the next 12 months, the Owner may 
advise the applicant that no additional applications for admission are 
being considered for that reason.
    (e) Ineligibility determination. If the Owner determines that an 
applicant is ineligible for admission or the Owner is not selecting the 
applicant for other reasons, the Owner will promptly notify the 
applicant in writing of the determination, the reasons for the 
determination, and the applicant's right to request a meeting to review 
the rejection, in accordance with HUD requirements. The review, if 
requested, may not be conducted by a member of the Owner's staff who 
made the initial decision to reject the applicant. The applicant may 
also exercise other rights (e.g., rights granted under Federal, State or 
local civil rights laws) if the applicant believes he or she is being 
discriminated against on a prohibited basis.
    (f) Records. Records on applicants and approved eligible households, 
which provide racial, ethnic, gender and place of previous residency 
data required by HUD, must be retained for three years. See 
Sec. 891.410(a).
    (g) Reexamination of household family income and composition--(1) 
Regular reexaminations. The Owner must reexamine the income and 
composition of the household at least every 12 months. Upon verification 
of the information, the Owner must make appropriate adjustments in the 
total tenant payment in accordance with part 813 of this chapter, as 
modified by Sec. 891.105, and must determine whether the household's 
unit size is still appropriate. The Owner must adjust tenant payment and 
the project rental assistance payment, and must carry out any unit 
transfer in accordance with HUD standards. At the time of reexamination 
under paragraph (g)(1) of this section, the Owner must require the 
household to meet the disclosure and verification requirements for 
Social Security Numbers, as provided by 24 CFR part 5, subpart B. For 
requirements regarding the signing and submitting of consent forms by 
families for obtaining of wage and claim information from State Wage 
Information Collection Agencies, see 24 CFR part 5, subpart B.
    (2) Interim reexaminations. The household must comply with the 
provisions in its lease regarding interim reporting of changes in 
income. If the Owner receives information concerning a change in the 
household's income or other circumstances between regularly scheduled 
reexaminations, the Owner must consult with the household and make any 
adjustments determined to

[[Page 208]]

be appropriate. See 24 CFR part 5, subpart B for the requirements for 
the disclosure and verification of Social Security Number at interim 
reexaminations involving new household members. For requirements 
regarding the signing and submitting of consent forms by families for 
the obtaining of wage and claim information from State Wage Information 
Collection Agencies, see 24 CFR part 5, subpart B. Any change in the 
household's income or other circumstances that result in an adjustment 
in the total tenant payment, tenant payment, and project rental 
assistance payment must be verified.
    (3) Continuation of project rental assistance payment. (i) A 
household shall remain eligible for project rental assistance payment 
until the total tenant payment equals or exceeds the gross rent (or a 
pro rata share of the gross rent in a group home). The termination of 
subsidy eligibility will not affect the household's other rights under 
its lease. Project rental assistance payment may be resumed if, as a 
result of changes in income, rent or other relevant circumstances during 
the term of the PRAC, the household meets the income eligibility 
requirements of 24 CFR part 813 (as modified in Sec. 891.105) and 
project rental assistance is available for the unit or residential space 
under the terms of the PRAC. The household will not be required to 
establish its eligibility for admission to the project under the 
remaining requirements of paragraph (c) of this section.
    (ii) A household's eligibility for project rental assistance payment 
may be terminated in accordance with HUD requirements for such reasons 
as failure to submit requested verification information, including 
information related to disclosure and verification of Social Security 
Numbers, as provided by 24 CFR part 5, subpart B or failure to sign and 
submit consent forms for the obtaining of wage and claim information 
from State Wage Information Collection Agencies (as provided by 24 CFR 
part 5, subpart B).
    (h) Selection preferences. Under the Section 202 Program, the 
selection preferences in 24 CFR part 5, subpart D apply.



Sec. 891.415  Obligations of the household or family.

    This section shall apply to capital advances under the Section 202 
Program and the Section 811 Program, as well as loans financed under 
subpart E of this part.
    (a) Requirements. The household (or family, as applicable) shall:
    (1) Pay amounts due under the lease directly to the Owner (or 
Borrower, as applicable);
    (2) Supply such certification, release of information, consent, 
completed forms or documentation as the Owner (or Borrower, as 
applicable) or HUD determines necessary, including information and 
documentation relating to the disclosure and verification of Social 
Security Numbers, as provided by 24 CFR part 5, subpart B, and the 
signing and submission of consent forms for the obtaining of wage and 
claim information from State Wage Information Collection Agencies, as 
provided by 24 CFR part 5, subpart B;
    (3) Allow the Owner (or Borrower, as applicable) to inspect the 
dwelling unit or residential space at reasonable times and after 
reasonable notice;
    (4) Notify the Owner (or Borrower, as applicable) before vacating 
the dwelling unit or residential space; and
    (5) Use the dwelling unit or residential space solely for residence 
by the household (or family, as applicable) and as the household's (or 
family's) principal place of residence.
    (b) Prohibitions. The household (or family, as applicable) shall 
not:
    (1) Assign the lease or transfer the unit or residential space; or
    (2) Occupy, or receive assistance for the occupancy of, a unit or 
residential space governed under this part 891 while occupying, or 
receiving assistance for the occupancy of, another unit assisted under 
any Federal housing assistance program, including any section 8 program.

(Approved by the Office of Management and Budget under control number 
2502-0470)



Sec. 891.420  Overcrowded and underoccupied units.

    If the Owner determines that because of change in household size, an 
assisted unit is smaller than appropriate for the eligible household to 
which it is leased,

[[Page 209]]

or that the assisted unit is larger than appropriate, project rental 
assistance payment with respect to the unit will not be reduced or 
terminated until the eligible household has been relocated to an 
appropriate alternate unit. If possible, the Owner will, as promptly as 
possible, offer the household an appropriate alternate unit. The Owner 
may receive vacancy payments for the vacated unit if the Owner complies 
with the requirements of Sec. 891.445.



Sec. 891.425  Lease requirements.

    This section shall apply to capital advances under the Section 202 
Program and the Section 811 Program, as well as loans financed under 
subpart E of this part.
    (a) Term of lease. The term of the lease may not be less than one 
year. Unless the lease has been terminated by appropriate action, upon 
expiration of the lease term, the household and Owner (or family and 
Borrower, as applicable) may execute a new lease for a term not less 
than one year, or may take no action. If no action is taken, the lease 
will automatically be renewed for successive terms of one month.
    (b) Termination by the household (or family, as applicable). All 
leases may contain a provision that permits the household (or family) to 
terminate the lease upon 30 days advance notice. A lease for a term that 
exceeds one year must contain such provision.
    (c) Form. The Owner (or Borrower, as applicable) shall use the lease 
form prescribed by HUD. In addition to required provisions of the lease 
form, the Owner (or Borrower) may include a provision in the lease 
permitting the Owner (or Borrower) to enter the leased premises at any 
time without advance notice when there is reasonable cause to believe 
that an emergency exists or that health or safety of a family member is 
endangered.



Sec. 891.430  Termination of tenancy and modification of lease.

    The provisions of part 247 of this title apply to all decisions by 
an Owner to terminate the tenancy or modify the lease of a household 
residing in a unit (or residential space in a group home).



Sec. 891.435  Security deposits.

    This section shall apply to capital advances under the Section 202 
Program and the Section 811 Program, as well as loans financed under 
subpart E of this part. For loans financed under subpart E of this part, 
the requirements in Sec. 891.635 also apply.
    (a) Collection of security deposits. At the time of the initial 
execution of the lease, the Owner (or Borrower, as applicable) will 
require each household (or family, as applicable) occupying an assisted 
unit or residential space in a group home to pay a security deposit in 
an amount equal to one month's tenant payment or $50, whichever is 
greater. The household (or family) is expected to pay the security 
deposit from its own resources and other available public or private 
resources. The Owner (or Borrower) may collect the security deposit on 
an installment basis.
    (b) Security deposit provisions applicable to units-- (1) 
Administration of security deposit. The Owner (or Borrower, as 
applicable) must place the security deposits in a segregated interest-
bearing account. The amount of the segregated, interest-bearing account 
maintained by the Owner (or Borrower) must at all times equal the total 
amount collected from the households (or families, as applicable) then 
in occupancy plus any accrued interest and less allowable administrative 
cost adjustments. The Owner (or Borrower) must comply with any 
applicable State and local laws concerning interest payments on security 
deposits.
    (2) Household (or family, as applicable) notification requirement. 
In order to be considered for the refund of the security deposit, a 
household (or family) must provide the Owner (or Borrower, as 
applicable) with a forwarding address or arrange to pick up the refund.
    (3) Use of security deposit. The Owner (or Borrower, as applicable), 
subject to State and local law and the requirements of paragraphs (b)(1) 
and (b)(3) of this section, may use the household's (or family's, as 
applicable) security deposit balance as reimbursement for any unpaid 
amounts that the household (or family) owes under the lease. Within 30 
days (or shorter time if required by

[[Page 210]]

State or local law) after receiving notification under paragraph (b)(2) 
of this section, the Owner (or Borrower) must:
    (i) Refund to a household (or family) that does not owe any amount 
under the lease the full amount of the household's (or family's) 
security deposit balance;
    (ii) Provide to a household (or family) owing amounts under the 
lease a list itemizing each amount, along with a statement of the 
household's (or family's) rights under State and local law. If the 
amount that the Owner (or Borrower) claims is owed by the household (or 
family) is less than the amount of the household's (or family's) 
security deposit balance, the Owner (or Borrower) must refund the excess 
balance to the household (or family). If the Owner (or Borrower) fails 
to provide the list, the household (or family) will be entitled to the 
refund of the full amount of the household's (or family's) security 
deposit balance.
    (4) Disagreements. If a disagreement arises concerning reimbursement 
of the security deposit, the household (or family, if applicable) will 
have the right to present objections to the Owner (or Borrower, if 
applicable) in an informal meeting. The Owner (or Borrower) must keep a 
record of any disagreements and meetings in a tenant file for inspection 
by HUD. The procedures of this paragraph do not preclude the household 
(or family) from exercising its rights under State or local law.
    (5) Decedent's interest in security deposit. Upon the death of a 
member of a household (or family, as applicable), the decedent's 
interest, if any, in the security deposit will be governed by State or 
local law.
    (c) Reimbursement by HUD for assisted units. If the household's (or 
family's, if applicable) security deposit balance is insufficient to 
reimburse the Owner (or Borrower, if applicable) for any amount that the 
household (or family) owes under the lease for an assisted unit or 
residential space, and the Owner (or Borrower) has provided the 
household (or family) with the list required by paragraph (b)(3)(ii) of 
this section, the Owner (or Borrower) may claim reimbursement from HUD 
for an amount not to exceed the lesser of:
    (1) The amount owed the Owner (or Borrower); or
    (2) One month's per unit operating cost (or contract rent, if 
applicable), minus the amount of the household's (or family's) security 
deposit balance. Any reimbursement under this section will be applied 
first toward any unpaid tenant payment (or rent, if applicable) due 
under the lease. No reimbursement may be claimed for any unpaid tenant 
payment (or rent) for the period after termination of the tenancy. The 
Owner (or Borrower) may be eligible for vacancy payments following a 
vacancy in accordance with the requirements of Sec. 891.445 (or 
Secs. 891.650 or 891.790, as applicable).



Sec. 891.440  Adjustment of utility allowances.

    This section shall apply to projects funded under the Section 202 
Program, to independent living complexes funded under Section 811 
Program, and to projects financed with loans under subpart E of this 
part. The Owner (or Borrower, as applicable) must submit an analysis of 
any utility allowances applicable. Such data as changes in utility rates 
and other facts affecting utility consumption should be provided as part 
of this analysis to permit appropriate adjustments in the utility 
allowances for assisted units. In addition, when utility rate changes 
would result in a cumulative increase of 10 percent or more in the most 
recently approved utility allowances, the Owner (or Borrower) must 
advise HUD and request approval of new utility allowances. Whenever a 
utility allowance for an assisted unit is adjusted, the Owner (or 
Borrower) will promptly notify affected households (or families, as 
applicable) and make a corresponding adjustment of the tenant payment 
(or rent, as applicable) and the amount of the project rental assistance 
payment (or housing or project assistance payment, as applicable).

(Approved by the Office of Management and Budget under control number 
2502-0470)



Sec. 891.445  Conditions for receipt of vacancy payments for assisted units.

    (a) General. Vacancy payments under the PRAC will not be made unless 
the conditions for receipt of these project

[[Page 211]]

rental assistance payments set forth in this section are fulfilled.
    (b) Vacancies during rent-up. For each unit (or residential space in 
a group home) that is not leased as of the effective date of the PRAC, 
the Owner is entitled to vacancy payments in the amount of 50 percent of 
the per unit operating cost (or pro rata share of the group home 
operating cost) for the first 60 days of vacancy, if the Owner:
    (1) Conducted marketing in accordance with Sec. 891.400(a) and 
otherwise complied with Sec. 891.400;
    (2) Has taken and continues to take all feasible actions to fill the 
vacancy; and
    (3) Has not rejected any eligible applicant except for good cause 
acceptable to HUD.
    (c) Vacancies after rent-up. If an eligible household vacates an 
assisted unit (or residential space in a group home) the Owner is 
entitled to vacancy payments in the amount of 50 percent of the approved 
per unit operating cost (or pro rata share of the group home operating 
cost) for the first 60 days of vacancy if the Owner:
    (1) Certifies that it did not cause the vacancy by violating the 
lease, the PRAC, or any applicable law;
    (2) Notified HUD of the vacancy or prospective vacancy and the 
reasons for the vacancy upon learning of the vacancy or prospective 
vacancy;
    (3) Has fulfilled and continues to fulfill the requirements 
specified in Sec. 891.400(a) (2) and (3) and Sec. 891.445(b) (2) and 
(3); and
    (4) For any vacancy resulting from the Owner's eviction of an 
eligible household, certifies that it has complied with Sec. 891.430.
    (d) Prohibition of double compensation for vacancies. If the Owner 
collects payments for vacancies from other sources (tenant payment, 
security deposits, payments under Sec. 891.435(c), or governmental 
payments under other programs), the Owner shall not be entitled to 
collect vacancy payments to the extent these collections from other 
sources plus the vacancy payment exceed the approved per unit operating 
cost.



Sec. 891.450  HUD review.

    HUD shall conduct periodic on-site management reviews of the Owner's 
compliance with the requirements of this part.



      Subpart E--Loans for Housing for the Elderly and Handicapped



Sec. 891.500  Purpose and policy.

    (a) Purpose. The program under subpart E of this part provides 
direct Federal loans under section 202 of the Housing Act of 1959 (42 
U.S.C. 1701q) for housing projects serving elderly or handicapped 
families and individuals. The housing projects shall provide the 
necessary services for the occupants which may include, but are not 
limited to: Health, continuing education, welfare, informational, 
recreational, homemaking, meal and nutritional services, counseling, and 
referral services, as well as transportation where necessary to 
facilitate access to these services.
    (b) General policy. A loan made under subpart E of this part shall 
be used to finance the construction or the substantial rehabilitation of 
projects for elderly or handicapped families, or for the acquisition 
with or without moderate rehabilitation of existing housing and related 
facilities for group homes for nonelderly handicapped individuals.
    (c) Applicability. Subpart E of this part applies to all fund 
reservations made before October 1, 1990, except for loans not initially 
closed that were converted to capital advances. Specifically, 
Sec. 891.520 through 891.650 of subpart E apply to projects for elderly 
or handicapped families that received reservations under section 202 of 
the Housing Act of 1959 (12 U.S.C. 1701q) and housing assistance under 
section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437 et 
seq). Sections 891.655 through 891.790 of subpart E apply to projects 
for nonelderly handicapped families receiving reservations under section 
202 and project assistance payments under section 202(h) of the Housing 
Act of 1959.



Sec. 891.505  Definitions.

    For the purposes of this subpart E:

[[Page 212]]

    Act means section 202 of the Housing Act of 1959, as amended (12 
U.S.C. 1701q).
    Borrower means a private nonprofit corporation or a nonprofit 
consumer cooperative that may be established by the Sponsor, which will 
obtain a Section 202 loan and execute a mortgage in connection therewith 
as the legal owner of the project. ``Borrower'' does not mean a public 
body or the instrumentality of any public body. The purposes of the 
Borrower must include the promotion of the welfare of elderly and/or 
handicapped families. No part of the net earnings of the Borrower may 
inure to the benefit of any private shareholder, contributor, or 
individual, and the Borrower may not be controlled by or under the 
direction of persons or firms seeking to derive profit or gain 
therefrom. Because of the nonprofit nature of the Section 202 program, 
no officer or director, or trustee, member, stockholder or authorized 
representative of the Borrower is permitted to have any financial 
interest in any contract in connection with the rendition of services, 
the provision of goods or supplies, project management, procurement of 
furnishings and equipment, construction of the project, procurement of 
the site or other matters whatsoever.
    Elderly family means:
    (1) Families of two or more persons the head of which (or his or her 
spouse) is 62 years of age or older;
    (2) The surviving member or members of any family described in 
paragraph (1) of this definition living in a unit assisted under subpart 
E of this part with the deceased member of the family at the time of his 
or her death;
    (3) A single person who is 62 years of age or older; or
    (4) Two or more elderly persons living together, or one or more such 
persons living with another person who is determined by HUD, based upon 
a licensed physician's certificate provided by the family, to be 
essential to their care or well being.
    Handicapped family means:
    (1) Families of two or more persons the head of which (or his or her 
spouse) is handicapped;
    (2) The surviving member or members of any family described in 
paragraph (1) of this definition living in a unit assisted under subpart 
E of this part with the deceased member of the family at the time of his 
or her death;
    (3) A single handicapped person over the age of 18; or
    (4) Two or more handicapped persons living together, or one or more 
such persons living with another person who is determined by HUD, based 
upon a licensed physician's certificate provided by the family, to be 
essential to their care or well being.
    Handicapped person or individual means:
    (1) Any adult having a physical, mental, or emotional impairment 
that is expected to be of long-continued and indefinite duration, 
substantially impedes his or her ability to live independently, and is 
of a nature that such ability could be improved by more suitable housing 
conditions.
    (2) A person with a developmental disability, as defined in section 
102(7) of the Developmental Disabilities Assistance and Bill of Rights 
Act (42 U.S.C. 6001(5), i.e., a person with a severe chronic disability 
that:
    (i) Is attributable to a mental or physical impairment or 
combination of mental and physical impairments;
    (ii) Is manifested before the person attains age twenty-two;
    (iii) Is likely to continue indefinitely;
    (iv) Results in substantial functional limitation in three or more 
of the following areas of major life activity:
    (A) Self-care;
    (B) Receptive and expressive language;
    (C) Learning;
    (D) Mobility;
    (E) Self-direction;
    (F) Capacity for independent living;
    (G) Economic self-sufficiency; and
    (v) Reflects the person's need for a combination and sequence of 
special, interdisciplinary, or generic care, treatment, or other 
services that are of lifelong or extended duration and are individually 
planned and coordinated.
    (3) A person with a chronic mental illness, i.e., if he or she has a 
severe and persistent mental or emotional impairment that seriously 
limits his or her ability to live independently, and

[[Page 213]]

whose impairment could be improved by more suitable housing conditions.
    (4) Persons infected with the human acquired immunodeficiency virus 
(HIV) who are disabled as a result of infection with the HIV are 
eligible for occupancy in section 202 projects designed for the 
physically disabled, developmentally disabled, or chronically mentally 
ill depending upon the nature of the person's disability. A person whose 
sole impairment is alcoholism or drug addition (i.e., who does not have 
a developmental disability, chronic mental illness, or physical 
disability that is the disabling condition required for eligibility in a 
particular project) will not be considered to be disabled for the 
purposes of the section 202 program.
    Housing and related facilities means rental or cooperative housing 
structures constructed or substantially rehabilitated as permanent 
residences for use by elderly or handicapped families, or acquired with 
or without moderate rehabilitation for use by nonelderly handicapped 
families as group homes. The term includes structures suitable for use 
by families residing in the project or in the area, such as cafeterias 
or dining halls, community rooms, or buildings, or other essential 
service facilities. In the case of acquisition with or without moderate 
rehabilitation, at least three years must have elapsed from the later of 
the date of completion of the project or the beginning of occupancy to 
the date of the application for a Section 202 fund reservation. Except 
for intermediate care facilities for the mentally retarded and 
individuals with related conditions, this term does not include nursing 
homes, hospitals, intermediate care facilities, or transitional care 
facilities.
    Nonelderly handicapped family means a handicapped family in which 
the head of the family (and spouse, if any) is less than 62 years of age 
at the time of the family's initial occupancy of a project.
    Section 8 Program means the housing assistance payments program that 
implements section 8 of the United States Housing Act of 1937 (42 U.S.C. 
1437f note).



Sec. 891.510  Displacement, relocation, and real property acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of subpart E of this part, Sponsors and Borrowers shall 
assure that they have taken all reasonable steps to minimize the 
displacement of persons (families, individuals, businesses, nonprofit 
organizations, and farms) as a result of a project assisted under 
subpart E of this part.
    (b) Relocation assistance for displaced persons. A displaced person 
(defined in paragraph (f) of this section) must be provided relocation 
assistance at the levels described in, and in accordance with the 
requirements of the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4201-
4655), as implemented by 49 CFR part 24. A displaced person shall be 
advised of his or her rights under the Fair Housing Act (42 U.S.C. 3601-
3619). If the comparable replacement dwellings are located in areas of 
minority concentration, minority persons also must be given, if 
possible, referrals to suitable, decent, safe, and sanitary replacement 
dwellings not located in such areas.
    (c) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (d) Appeals. A person who disagrees with the Sponsor's/Borrower's 
determination concerning whether the person qualifies as a ``displaced 
person,'' or with the amount of relocation assistance for which the 
person is eligible, may file a written appeal of that determination with 
the Sponsor/Borrower. A low-income person who is dissatisfied with the 
Sponsor's/Borrower's determination on his or her appeal may submit a 
written request for review of that determination to the HUD field 
office.
    (e) Responsibility of Sponsor/Borrower. The Sponsor/Borrower shall 
certify that it will comply (i.e., provide assurance of compliance, as 
required by 49 CFR part 24) with the URA, the regulations at 49 CFR part 
24, and the requirements of this section, and shall

[[Page 214]]

ensure such compliance notwithstanding any third party's contractual 
obligation to comply with these provisions. The Sponsor/Borrower shall 
maintain records in sufficient detail to demonstrate compliance with the 
provisions of this section. The Sponsor/Borrower shall maintain data on 
the race, ethnic, gender, and handicap status of displaced persons.
    (f) Definition of a displaced person. (1) For purposes of this 
section, the term displaced person means a person (family, individual, 
business, nonprofit organization, or farm) that moves from real 
property, or moves personal property from real property, permanently, as 
a direct result of acquisition, rehabilitation, or demolition for a 
project assisted under this part. This includes any permanent, 
involuntary move for an assisted project including any permanent move 
from the real property that is made:
    (i) After notice by the Sponsor/Borrower to move permanently from 
the property if the move occurs on or after:
    (A) The date of the submission of an application to HUD that is 
later approved, if the Sponsor has control of an appropriate site; or
    (B) The date that the Sponsor obtains control of an approvable site, 
if such control is obtained after the submission of an application to 
HUD:
    (ii) Before the date described in paragraph (f)(1)(i) of this 
section, if the Sponsor, Borrower or HUD determines that the 
displacement resulted directly from acquisition, rehabilitation, or 
demolition for the project;
    (iii) By a tenant-occupant of a dwelling unit, if any one of the 
following three situations occurs;
    (A) The tenant moves after execution of the Agreement between the 
Sponsor/Borrower and HUD, and the move occurs before the tenant is 
provided written notice offering him or her the opportunity to lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the same 
building/complex upon completion of the project under reasonable terms 
and conditions. Such reasonable terms and conditions include a monthly 
rent and estimated average monthly utility costs that do not exceed the 
greater of:
    (1) The tenant's monthly rent and estimated average monthly utility 
costs before the Agreement; or
    (2) The total tenant payment, as determined under 24 CFR 813.107, if 
the tenant is low-income, or 30 percent of gross household income, if 
the tenant is not low-income; or
    (B) The tenant is required to relocate temporarily, does not return 
to the building/complex, and either:
    (1) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation; or
    (2) Other conditions of the temporary relocation are not reasonable; 
or
    (C) The tenant is required to move to another dwelling in the same 
building/complex but is not offered reimbursement for all reasonable 
out-of-pocket expenses incurred in connection with the move, or other 
conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (f)(1) of this 
section, however, a person does not qualify as a ``displaced person'' 
(and is not eligible for relocation assistance at URA levels), if:
    (i) The person has been evicted for cause based upon a serious or 
repeated violation of the terms and conditions of the lease or occupancy 
agreement, violation of applicable Federal, State, or local law, or 
other good cause, and HUD determines that the eviction was not 
undertaken for the purpose of evading the obligation to provide 
relocation assistance.
    (ii) The person moved into the property after the submission of the 
application and, before signing a lease and commencing occupancy, was 
provided written notice of the project, its possible impact on the 
person (e.g., displacement, temporary relocation or a rent increase) and 
the fact that he or she will not qualify as a displaced person as a 
result of the project;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project;

[[Page 215]]

    (3) The Sponsor/Borrower may request, at any time, a HUD 
determination of whether a displacement is or would be covered by this 
section.



Sec. 891.515  Audit requirements.

    Nonprofits receiving assistance under this part are subject to the 
audit requirements in 24 CFR part 45.

     Section 202 Projects for the Elderly or Handicapped--Section 8 
                               Assistance



Sec. 891.520  Definitions applicable to 202/8 projects.

    The following definitions apply to projects for eligible families 
receiving assistance under section 8 of the United States Housing Act of 
1937 in addition to reservations under section 202 of the Housing Act of 
1959 (202/8 projects):
    Assisted unit means a dwelling unit eligible for assistance under a 
HAP contract.
    Contract rent means the total amount of rent specified in the HAP 
contract as payable by HUD and the tenant to the Borrower for an 
assisted unit.
    Family (eligible family) means an elderly or handicapped family that 
meets the project occupancy requirements approved by HUD and, if the 
family occupies an assisted unit, meets the requirements described in 
part 813 of this chapter.
    Gross rent is defined in part 813 of this chapter.
    HAP contract (housing assistance payments contract) means the 
contract entered into by the Borrower and HUD setting forth the rights 
and duties of the parties with respect to the project and the payments 
under the HAP contract.
    Housing assistance payment means the payment made by HUD to the 
Borrower for assisted units as provided in the HAP contract. The payment 
is the difference between the contract rent and the tenant rent. An 
additional payment is made to a family occupying an assisted unit when 
the utility allowance is greater than the total tenant payment. A 
housing assistance payment, known as a ``vacancy payment,'' may be made 
to the Borrower when an assisted unit is vacant, in accordance with the 
terms of the HAP contract.
    Project account means a specifically identified and segregated 
account for each project that is established in accordance with 
Sec. 891.570(b) out of the amounts by which the maximum annual 
commitment exceeds the amount actually paid out under the HAP contract 
each year.
    Project occupancy requirements means that eligible populations to be 
served under the Section 202 program are qualified individuals or 
families whose head of household or spouse is elderly, physically 
handicapped, developmentally disabled, or chronically mentally ill. 
Projects are designed to meet the special needs of the particular tenant 
population that the Borrower was selected to serve. Individuals from one 
eligible group may not be accepted for occupancy in a project designed 
for a different tenant group. However, a Sponsor can propose to house 
eligible tenant groups other than the one it was selected to serve, but 
must apply to the HUD field office for permission to do so, based on a 
plan that demonstrates that it can adequately serve the proposed tenant 
group. Upon review and recommendation by the field office, HUD 
Headquarters will approve or disapprove the request.
    Rent, in the case of a unit in a cooperative project, means the 
carrying charges payable to the cooperative with respect to occupancy of 
the unit.
    Tenant rent means the monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total tenant payment means the monthly amount defined in, and 
determined in accordance with part 813 of this chapter.
    Utility allowance is defined in part 813 of this chapter and is 
determined or approved by HUD.
    Utility reimbursement is defined in part 813 of this chapter.
    Vacancy payment means the housing assistance payment made to the 
Borrower by HUD for a vacant assisted unit if certain conditions are 
fulfilled, as provided in the HAP contract. The amount of the vacancy 
payment varies with the length of the vacancy period

[[Page 216]]

and is less after the first 60 days of any vacancy.



Sec. 891.525  Amount and terms of financing.

    (a) The amount of financing approved shall be the amount stated in 
the Notice of Section 202 Fund Reservation, including any increase 
approved by the field office prior to the final closing of a loan; 
provided, however, that the amount of financing provided shall not 
exceed the lesser of:
    (1) The dollar amounts stated in paragraphs (b) through (f) of this 
section; or
    (2) The total development cost of the project as determined by the 
field office.
    (b) For such part of the property or project attributable to 
dwelling use (excluding exterior land improvements, as defined by the 
Assistant Secretary) the maximum loan amount, depending on the number of 
bedrooms, may not exceed:
    (1) $28,032 per family unit without a bedroom.
    (2) $32,321 per family unit with one bedroom.
    (3) $38,979 per family unit with two bedrooms.
    (c) In order to compensate for the higher costs incident to 
construction of elevator type structures of sound standards of 
construction and design, the field office may increase the dollar 
limitations per family unit, as provided in paragraph (b) of this 
section, to not to exceed:
    (1) $29,500 per family unit without a bedroom.
    (2) $33,816 per family unit with one bedroom.
    (3) $41,120 per family unit with two bedrooms.
    (d) Reduced loan amount--leaseholds. In the event the loan is 
secured by a leasehold estate rather than a fee simple estate, the 
allowable cost of the property upon which the loan amount is based shall 
be reduced by the value of the leased fee.
    (e) Adjusted loan amount--rehabilitation projects. A loan amount 
that involves a project to be rehabilitated shall be subject to the 
following additional limitations:
    (1) Property held in fee. If the Borrower is the fee simple owner of 
the project not encumbered by a mortgage, the maximum loan amount shall 
not exceed 100 percent of the cost of the proposed rehabilitation.
    (2) Property subject to existing mortgage. If the Borrower owns the 
project subject to an outstanding indebtedness, which is to be 
refinanced with part of the Section 202 loan, the maximum loan amount 
shall not exceed the cost of rehabilitation plus such portion of the 
outstanding indebtedness as does not exceed the fair market value of 
such land and improvements prior to the rehabilitation, as determined by 
the field office.
    (3) Property to be acquired. If the project is to be acquired by the 
Borrower and the purchase price is to be financed with a part of the 
Section 202 loan, the maximum loan amount shall not exceed the cost of 
the rehabilitation plus such portion of the purchase price as does not 
exceed the fair market value of such land and improvements prior to the 
rehabilitation, as determined by the field office.
    (f) Increased Mortgage Limits--High Cost Areas. (1)(i) The Assistant 
Secretary may increase the dollar amount limitations in paragraphs (b) 
and (c) of this section:
    (A) By not to exceed 110 percent in any geographical area in which 
the Assistant Secretary finds that cost levels so require; and
    (B) By not to exceed 140 percent where the Assistant Secretary 
determines it necessary on a project-by-project basis.
    (ii) In no case, however, may any such increase exceed 90 percent, 
where the Assistant Secretary determines that there is involved a 
mortgage purchased or to be purchased by the Government National 
Mortgage Association (GNMA) in implementing its Special Assistance 
Functions under section 305 of the National Housing Act (as section 305 
existed immediately before its repeal on November 30, 1983).
    (2) If the Assistant Secretary finds that because of high costs in 
Alaska, Guam, or Hawaii it is not feasible to construct dwellings 
without the sacrifice of sound standards of construction, design, and 
livability within the

[[Page 217]]

limitations of maximum loan amounts provided in this section, the 
principal amount of mortgages may be increased by such amounts as may be 
necessary to compensate for such costs, but not to exceed in any event 
the maximum, including high cost area increases, if any, otherwise 
applicable by more than one-half thereof.
    (g) Loan interest rate. Loans shall bear interest at a rate 
determined by HUD in accordance with this section.
    (1) Annual interest rate. Except as provided under paragraph (g)(2), 
loans shall bear interest at the rate in effect at the time the loan is 
made. The loan interest rate shall not exceed:
    (i) The average yield on the most recently issued 30-year marketable 
obligations of the United States during the 3-month period immediately 
preceding the fiscal year in which the loan is made (adjusted to the 
nearest one-eighth of one percent), plus an allowance to cover 
administrative costs and probable losses under the program; and
    (ii) Any applicable statutory ceiling on the loan interest rate 
including the allowance to cover administrative costs and probable 
losses.
    (2) Optional interest rate. The Borrower may elect an optional loan 
interest rate. To elect the optional rate, the Borrower must request 
that HUD determine the loan interest rate at the time of the Borrower's 
request for conditional or firm commitment for direct loan financing.
    (i) If the Borrower elects the optional loan interest rate, the loan 
interest rate shall not exceed:
    (A) The average yield on the most recently issued 30-year marketable 
obligations of the United States during the 3-month period immediately 
preceding the fiscal year in which the request for commitment is 
submitted (adjusted to the nearest one-eighth of one percent), plus an 
allowance to cover administrative costs and probable losses under the 
program;
    (B) The average yield on the most recently issued 30-year marketable 
obligations of the United States during the 1-month period immediately 
preceding the month in which the request for commitment is submitted 
(adjusted to the nearest one-eighth of one percent), plus an allowance 
to cover the administrative costs and probable losses under the program; 
and (C) Any applicable statutory ceiling on the loan interest rate 
including an allowance to cover administrative costs and probable losses 
under the program.
    (ii) The date of submission of a request for conditional or firm 
commitment is the date that the Borrower submits the complete and 
acceptable request to HUD. The date of the submission of a request for 
commitment will not be affected by any subsequent resubmission of the 
request by the Borrower or by any reprocessing of the request by HUD.
    (iii) The Borrower may withdraw its election of the optional 
interest rate at any time before initial loan closing. If the Borrower 
elected the optional interest rate with its request for conditional 
commitment and withdraws its election, the loan will bear interest at 
the rate determined under paragraph (g)(1) of this section, unless the 
Borrower elects an optional interest rate with its request for firm 
commitment. If the Borrower withdraws its election after the date of 
submission of its request for firm commitment, the loan will bear 
interest at the rate determined under paragraph (g)(1) of this section.
    (iv) If initial loan closing has not occurred within 18 months after 
the Notice of Section 202 Fund Reservation is issued, the Borrower's 
election of the optional rate will be cancelled and the loan will bear 
interest at the rate determined under paragraph (g)(1) of this section.
    (3) Allowance for administrative costs and probable losses. For the 
purpose of computing the loan interest rate under paragraphs (g) (1) and 
(2) of this section, the allowance to cover administrative costs and 
probable losses under the program is one-fourth of one percent (.25%) 
per annum for both the construction and permanent loan periods.
    (h) Announcement of interest rates. (1) HUD will annually announce 
the loan interest rate determination under paragraph (g)(1) of this 
section by publishing notice of the rate in the Federal Register. The 
Federal Register notice will include a statement explaining the basis 
for the interest rate determination.

[[Page 218]]

    (2) Upon the Borrower's request, HUD will provide available current 
information concerning the determination of the interest rate under 
paragraph (g)(2) of this section.
    (i) The loan shall be secured by a first mortgage on real estate in 
fee simple or long term leasehold. The mortgage shall be repayable 
during a term not to exceed 40 years and shall be subject to such terms 
and conditions as shall be determined by the Assistant Secretary.
    (j) In order to assure HUD of the Borrower's continued commitment to 
the development, management, and operation of the project, a minimum 
capital investment is required of Section 202 Borrowers of one-half of 
one percent (0.5%) of the mortgage amount committed to be disbursed, not 
to exceed the amount of $10,000. Section 106(b) loans made pursuant to 
section 106 of the Housing Act of 1968 may not be utilized to meet the 
minimum capital investment requirement. Such minimum capital investment 
shall be placed in escrow at the initial closing of the Section 202 loan 
and shall be held by HUD or other escrow agent acceptable to the field 
office for not less than a 3-year period from the date of initial 
occupancy and may be used for operating expenses or deficits as may be 
directed by the field office. Any unexpended balance remaining in the 
minimum capital investment account at the end of the escrow period shall 
be returned to the Borrower.



Sec. 891.530  Prepayment privileges.

    (a) The prepayment (whether in whole or in part) or the assignment 
or transfer of physical and financial assets of any Section 202 project 
is prohibited, unless the Secretary gives prior written approval.
    (b) The Secretary may not grant approval unless he or she has 
determined that the prepayment or transfer of the loan is part of a 
transaction that will ensure the continued operation of the project, 
until the original maturity date of the loan, in a manner that will 
provide rental housing for the elderly and handicapped on terms at least 
as advantageous to existing and future tenants as the terms required by 
the original Section 202 loan agreement and any other loan agreements 
entered into under other provisions of law.



Sec. 891.535  Requirements for awarding construction contracts.

    (a) Awards shall be made only to responsible contractors that 
possess the potential ability to perform successfully under the terms 
and conditions of a proposed construction contract. Consideration shall 
be given to such matters as contractor integrity, compliance with public 
policy, record of past performance, and financial and technical 
resources.
    (b) Each Borrower is permitted to use either competitive bidding 
(formal advertising) in selecting a construction contractor or the 
negotiated noncompetitive method of contract award under paragraph (c) 
of this section. In competitive bidding, sealed bids are publicly 
solicited and a firm, fixed-price contract is awarded (in accordance 
with the requirements of this paragraph (b)) to the responsible bidder 
whose bid, conforming with all the material terms and conditions of the 
invitation for bids, is lowest in price. Regardless of which method a 
Borrower uses, there should be an opportunity for minority owned and 
women owned businesses to be awarded a contract.
    (1) Bids shall be solicited from an adequate number of known 
contractors a reasonable time prior to the date set forth for opening of 
bids. In addition, the invitation shall be publicly advertised.
    (2) The invitation for bids shall specify:
    (i) The name of the Borrower;
    (ii) A brief description of the proposed project and the proposed 
construction contract;
    (iii) A preliminary estimate of cost;
    (iv) That bids will be received at a specified place until a 
specified time at which time and place all bids will be publicly opened;
    (v) The location where the proposed forms of contract and bid 
documents, including plans and specifications, are on file and may be 
obtained on payment of a specified returnable deposit;
    (vi) That a certified check or bank draft or satisfactory bid bond 
in the amount of 5 percent of the bid shall be submitted with the bid;

[[Page 219]]

    (vii) That the successful bidder will be required to provide 
assurance of completion in the form of a performance and payment bond or 
cash escrow; and
    (viii) That the Borrower reserves the right to reject any or all 
bids and to waive any informality.
    (3) The bid form, which must be submitted by all bidders, must 
specify:
    (i) The name of the project;
    (ii) The name and address of the bidder;
    (iii) That the bidder proposes to furnish all labor, materials, 
equipment and services required to construct and complete the project, 
as described in the invitation for bids (including the contents of all 
documents on file), for a specified lump-sum price;
    (iv) That the security specified in paragraph (b)(2)(vi) of this 
section accompanies the bid;
    (v) The period after the bid opening during which the bid shall not 
be withdrawn without the consent of the Borrower;
    (vi) That the bidder will, if notified of acceptance of such bid 
within a specified period after the opening, execute and deliver a 
contract in the prescribed form and furnish the required bond within ten 
days thereafter;
    (vii) That the bidder acknowledges any amendments to the invitation 
for bids; and
    (viii) That the bidder certifies that the bid is in strict 
accordance with all terms of the invitation for bids (including the 
contents of all documents on file) and that the bid is signed by a 
person authorized to bind the bidder.
    (4) Bidding shall be open to all general contractors who furnish the 
security guaranteeing their bid, as described in paragraph (b)(2)(vi) of 
this section.
    (5) All bids shall be opened publicly at the time and place stated 
in the invitation for bids, in the presence of the HUD Regional 
Administrator or his designee.
    (6) A firm, fixed-price contract award shall be made by written 
notice to the responsible bidder whose bid, conforming to the invitation 
for bids, is lowest. The contract may provide for an incentive payment 
to the contractor for an early completion.
    (c) A Sponsor or Borrower may award a negotiated, noncompetitive 
construction contract.



Sec. 891.540  Loan disbursement procedures.

    (a) Disbursements of loan proceeds shall be made directly by HUD to 
or for the account of the Borrower and may be made through an approved 
lender, mortgage servicer, title insurance company, or other agent 
satisfactory to the Borrower and HUD.
    (b) All disbursements to the Borrower shall be made on a periodic 
basis in an amount not to exceed the HUD-approved cost of portions of 
construction or rehabilitation work completed and in place (except as 
modified in paragraph (d) of this section), minus the appropriate 
holdback, as determined by the field office.
    (c) Requisitions for loan disbursements shall be submitted by the 
Borrower on forms to be prescribed by the Assistant Secretary and shall 
be accompanied by such additional information as the field office may 
require in order to approve loan disbursements under subpart E of this 
part, including but not limited to evidence of compliance with the 
Davis-Bacon Act, Department of Labor regulations, all applicable zoning, 
building, and other governmental requirements, and such evidence of 
continued priority of the mortgage of the Borrower as the Assistant 
Secretary may prescribe.
    (d) In loan disbursements for building components stored off-site, 
the term building component shall mean any manufactured or preassembled 
part of a structure as defined by HUD and that the Assistant Secretary 
has designated for off-site storage because it is of such size or weight 
that storage of the components required for timely construction progress 
at the construction site is impractical, or weather damage or other 
adverse conditions prevailing at the construction site would make 
storage at the site impractical or unduly costly. Each building 
component must be specifically identified for incorporation into the 
property as provided under paragraph (d)(1)(ii) of this section.
    (1) Storage. (i) A loan disbursement may be made for up to 90 
percent of the

[[Page 220]]

invoice value (to exclude costs of transportation and storage) of the 
building components stored off-site if the components are stored at a 
location approved by HUD.
    (ii) Each building component shall be adequately marked so as to be 
readily identifiable in the inventory of the off-site location. It shall 
be kept together with all other building components of the same 
manufacturer intended for use in the same project for which loan 
disbursements have been made and separate and apart from similar units 
not for use in the project.
    (iii) Storage costs, if any, shall be borne the general contractor.
    (2) Responsibility for transportation, storage and insurance of off-
site building components. The general contractor of the project shall 
have the responsibility for:
    (i) Insuring the components in the name of the Borrower while in 
transit and storage; and
    (ii) Delivering or contracting for the delivery of the components to 
the storage area and to the construction site, including payment of 
freight.
    (3) Loan disbursements. (i) Before a loan disbursement for a 
building component stored off-site is made, the Borrower shall:
    (A) Obtain a bill of sale for the component;
    (B) Provide HUD with a security agreement pledged by a first lien on 
the building components with the exception of such other liens or 
encumbrances as may be approved by HUD; and
    (C) File a financing statement in accordance with the Uniform 
Commercial Code.
    (ii) Before each loan disbursement for building components stored 
off-site is made the manufacturer and the general contractor shall 
certify to HUD that the components, in their intended use, comply with 
HUD-approved contract plan and specifications.
    (iii) Loan disbursements may be made only for components stored off-
site in a quantity required to permit uninterrupted installation at the 
site.
    (iv) At no time shall the invoice value of building components being 
stored off-site, for which advances have been insured, represent more 
than 25 percent of the total estimated construction costs for the 
insured mortgaged project as specified in the construction contract. 
Notwithstanding the preceding sentence and other regulatory requirements 
that set bonding requirements, the percentage of total estimated 
construction costs insured by advances under this section may exceed 25 
percent but not 50 percent if the mortgagor furnishes assurance of 
completion in the form of a corporate surety bond for the payment and 
performance each in the amount of 100 percent of the amount of the 
construction contract. In no event will insurance of components stored 
off-site be made in the absence of a payment and performance bond.
    (v) No single loan disbursement which is to be made shall be in an 
amount less than ten thousand ($10,000) dollars.



Sec. 891.545  Completion of project, cost certification, and HUD approvals.

    (a) The Borrower must satisfy the requirements for completion of 
construction and substantial rehabilitation and approvals by HUD before 
submission of a final requisition for disbursement of loan proceeds.
    (b) The Borrower shall submit to the field office all documentation 
required for final disbursement of the loan, including:
    (1) A Borrower's/Mortgagor's Certificate of Actual Cost, showing the 
actual cost to the mortgagor of the construction contract, 
architectural, legal, organizational, offsite costs, and all other items 
of eligible expense. The certificate shall not include as actual cost 
any kickbacks, rebates, trade discounts, or other similar payments to 
the mortgagor or to any of its officers, directors, or members.
    (2) A verification of the Certificate of Actual Cost by an 
independent Certified Public Accountant or independent public accountant 
acceptable to the field office.
    (3) In the case of projects not subject to competitive bidding, a 
certification of the general contractor (and of such subcontractors, 
material suppliers, and equipment lessors as the Assistant Secretary or 
field office may require), on a

[[Page 221]]

form prescribed by the Assistant Secretary, as to all actual costs paid 
for labor, materials, and subcontract work under the general contract 
exclusive of the builder's fee and kickbacks, rebates, trade discounts, 
or other similar payments to the general contractor, the mortgagor, or 
any of its officers, directors, stockholders, partners, or members.
    (c) In lieu of the requirements set forth in paragraphs (c)(1) and 
(3) of this section, a simplified form of cost certification prescribed 
by the Secretary may be completed and submitted by the Borrower for 
projects with mortgages of $500,000 or less. The simplified cost 
certification shall be verified by an independent Certified Public 
Accountant or an independent public accountant in a manner acceptable to 
the Secretary.
    (d) If the Borrower's certified costs provided in accordance with 
paragraph (c) or (d) of this section and as approved by HUD are less 
than the loan amount, the contract rents will be reduced accordingly.
    (e) If the contract rents are reduced pursuant to paragraph (e) of 
this section, the maximum annual HAP Contract commitment will be 
reduced. If contract rents are reduced based on cost certification after 
HAP Contract execution, any overpayment after the effective date of the 
Contract will be recovered from the Borrower by HUD.

(Approved by the Office of Management and Budget under control number 
2502-0044.)



Sec. 891.550  Selection preferences.

    For purposes of projects assisted under Secs. 891.520 through 
891.650, the selection preferences in 24 CFR part 5, subpart D apply.



Sec. 891.555  Smoke detectors.

    (a) Performance requirement. After October 30, 1992, each dwelling 
unit must include at least one battery-operated or hard-wired smoke 
detector, in proper working condition, on each level of the unit. If the 
unit is occupied by hearing-impaired persons, smoke detectors must have 
an alarm system designed for hearing-impaired persons in each bedroom 
occupied by a hearing-impaired person.
    (b) Acceptability criteria. The smoke detector must be located, to 
the extent practicable, in a hallway adjacent to a bedroom, unless the 
unit is occupied by a hearing-impaired person, in which case each 
bedroom occupied by a hearing-impaired person must have an alarm system 
connected to the smoke detector installed in the hallway.



Sec. 891.560  HAP contract.

    (a) HAP contract. The housing assistance payments contract sets 
forth rights and duties of the Borrower and HUD with respect to the 
project and the housing assistance payments.
    (b) HAP contract execution. (1) Upon satisfactory completion of the 
project, the Borrower and HUD shall execute the HAP contract on the form 
prescribed by HUD.
    (2) The effective date of the HAP contract may be earlier than the 
date of execution, but no earlier than the date of HUD's issuance of the 
permission to occupy.
    (3) If the project is completed in stages, the procedures of 
paragraph (b) of this section shall apply to each stage.
    (c) Housing assistance payments to owners under the HAP contract. 
The housing assistance payments made under the HAP contract are:
    (1) Payments to the Borrower to assist eligible families leasing 
assisted units. The amount of the housing assistance payment made to the 
Borrower for an assisted unit leased to an eligible family is equal to 
the difference between the contract rent for the unit and the tenant 
rent payable by the family.
    (2) Payments to the Borrower for vacant assisted units (vacancy 
payments). The amount of and conditions for vacancy payments are 
described in Sec. 891.650. The housing assistance payments are made 
monthly by HUD upon proper requisition by the Borrower, except payments 
for vacancies of more than 60 days, which are made semiannually by HUD 
upon requisition by the Borrower.
    (d) Payment of utility reimbursement. As applicable, a utility 
reimbursement will be paid to a family occupying an assisted unit as an 
additional housing assistance payment. The HAP contract will provide 
that the Borrower will make this payment on behalf of HUD.

[[Page 222]]

Funds will be paid to the Borrower in trust solely for the purpose of 
making the additional payment. The Borrower may pay the utility 
reimbursement jointly to the family and the utility company, or, if the 
family and utility company consent, directly to the utility company.



Sec. 891.565  Term of HAP contract.

    The term of the HAP contract for assisted units shall be 20 years. 
If the project is completed in stages, the term of the HAP contract for 
assisted units in each stage shall be 20 years. The term of the HAP 
contract for all assisted units in all stages of a project shall not 
exceed 22 years.



Sec. 891.570  Maximum annual commitment and project account.

    (a) Maximum annual commitment. The maximum annual amount that may be 
committed under the HAP contract is the total of the contract rents and 
utility allowances for all assisted units in the project.
    (b) Project account. (1) HUD will establish and maintain a 
specifically identified and segregated project account for each project. 
The project account will be established out of the amounts by which the 
maximum annual commitment exceeds the amount actually paid out under the 
HAP contract each year. HUD will make payments from this account for 
housing assistance payments as needed to cover increases in contract 
rents or decreases in tenant income and other payments for costs 
specifically approved by the Secretary.
    (2) If the HUD-approved estimate of required annual payments under 
the HAP contract for a fiscal year exceeds the maximum annual commitment 
for that fiscal year plus the current balance in the project account, 
HUD will, within a reasonable time, take such steps authorized by 
section 8(c)(6) of the United States Housing Act of 1937 (42 U.S.C. 
1437f note), as may be necessary, to assure that payments under the HAP 
contract will be adequate to cover increases in contract rents and 
decreases in tenant income.



Sec. 891.575  Leasing to eligible families.

    (a) Availability of assisted units for occupancy by eligible 
families. (1) During the term of the HAP contract, a Borrower shall make 
available for occupancy by eligible families the total number of units 
for which assistance is committed under the HAP contract. For purposes 
of this section, making units available for occupancy by eligible 
families means that the Borrower:
    (i) Is conducting marketing in accordance with Sec. 891.600(a);
    (ii) Has leased or is making good faith efforts to lease the units 
to eligible and otherwise acceptable families, including taking all 
feasible actions to fill vacancies by renting to such families;
    (iii) Has not rejected any such applicant family except for reasons 
acceptable to HUD.
    (2) If the Borrower is temporarily unable to lease all units for 
which assistance is committed under the HAP contract to eligible 
families, one or more units may, with the prior approval of HUD, be 
leased to otherwise eligible families that do not meet the income 
eligibility requirements of part 813 of this chapter. Failure on the 
part of the Borrower to comply with these requirements is a violation of 
the HAP contract and grounds for all available legal remedies, including 
an action for specific performance of the HAP contract, suspension or 
debarment from HUD programs, and reduction of the number of units under 
the HAP contract as set forth in paragraph (b) of this section.
    (b) Reduction of number of units covered by the HAP contract. HUD 
may reduce the number of units covered by the HAP contract to the number 
of units available for occupancy by eligible families if:
    (1) The Borrower fails to comply with the requirements of paragraph 
(a) of this section; or
    (2) Notwithstanding any prior approval by HUD, HUD determines that 
the inability to lease units to eligible families is not a temporary 
problem.
    (c) Restoration. HUD will agree to an amendment of the HAP contract 
to provide for subsequent restoration of any reduction made under 
paragraph (b) of this section if:

[[Page 223]]

    (1) HUD determines that the restoration is justified by demand;
    (2) The Borrower otherwise has a record of compliance with the 
Borrower's obligations under the HAP contract; and
    (3) Contract and budget authority is available.
    (d) Applicability. In accordance with section 555 of the Cranston-
Gonzalez National Affordable Housing Act of 1990, paragraphs (a) and (b) 
of this section apply to all contracts. An owner who had leased an 
assisted unit to an ineligible family consistent with the regulations in 
effect at the time will continue to lease the unit to that family. 
However, the owner must make the unit available for occupancy by an 
eligible family when the ineligible family vacates the unit.
    (e) Occupancy by families that are not elderly or handicapped. HUD 
may permit units in the project to be leased to other than elderly or 
handicapped families if:
    (1) The Borrower has made reasonable efforts to lease assisted and 
unassisted units to eligible families;
    (2) The Borrower has been granted HUD approval under paragraph (a) 
of this section; and
    (3) The Borrower is temporarily unable to achieve or maintain a 
level of occupancy sufficient to prevent financial default and 
foreclosure under the Section 202 loan documents. HUD approval under 
paragraph (e)(3) of this section will be of limited duration. HUD may 
impose terms and conditions to this approval that are consistent with 
program objectives and necessary to protect its interest in the Section 
202 loan.



Sec. 891.580  HAP contract administration.

    HUD is responsible for the administration of the HAP contract.



Sec. 891.585  Default by Borrower.

    (a) HAP contract provisions. The HAP contract will provide:
    (1) That if HUD determines that the Borrower is in default under the 
HAP contract, HUD will notify the Borrower of the actions required to be 
taken to cure the default and of the remedies to be applied by HUD 
including an action for specific performance under the HAP contract, 
reduction or suspension of housing assistance payments and recovery of 
overpayments, where appropriate; and
    (2) That if the Borrower fails to cure the default, HUD has the 
right to terminate the HAP contract or to take other corrective action.
    (b) Loan provisions. Additional provisions governing default under 
the section 202 loan are included in the regulatory agreement and other 
loan documents.



Sec. 891.590  Notice upon HAP contract expiration.

    (a) Notice required. The HAP contract will provide that the Borrower 
will, at least one year before the end of the HAP contract term, notify 
each family leasing an assisted unit of any increase in the amount the 
family will be required to pay as rent as a result of the expiration.
    (b) Service requirements. The notice under paragraph (a) of this 
section shall be accomplished by sending a letter by first class mail, 
properly stamped and addressed, to the family at its address at the 
project, with a proper return address; and serving a copy of the notice 
on any adult person answering the door at the leased dwelling unit, or 
if no adult responds, by placing the notice under or through the door, 
if possible, or else by affixing the notice to the door. Service shall 
not be considered to be effective until both required notices have been 
accomplished. The date on which the notice shall be considered to be 
received by the family shall be the date on which the Borrower mails the 
first class letter provided for in paragraph (b) of this section, or the 
date on which the notice provided for in paragraph (b) of this section 
is properly given, whichever is later.
    (c) Contents of notice. The notice shall advise each affected family 
that, after the expiration date of the HAP contract, the family will be 
required to bear the entire cost of the rent and that the Borrower may, 
subject to requirements and restrictions contained in the regulatory 
agreement, the lease, and State or local law, change the rent. The 
notice also shall state:

[[Page 224]]

    (1) The actual (if known) or the estimated rent that will be charged 
following the expiration of the HAP contract;
    (2) The difference between the new rent and the total tenant payment 
toward rent under the HAP contract; and
    (3) The date the HAP contract will expire.
    (d) Certification to HUD. The Borrower shall give HUD a 
certification that families have been notified in accordance with this 
section and shall attach to the certification an example of the text of 
the notice.
    (e) Applicability. This section applies to all HAP contracts entered 
into under an agreement to enter into a housing assistance payments 
contract executed on or after October 1, 1981, or entered into under 
such an agreement executed before October 1, 1981 but renewed or amended 
after February 9, 1995.

(Approved by the Office of Management and Budget under control number 
2502-0371.)



Sec. 891.595  HAP contract extension or renewal.

    Upon expiration of the term of the HAP contract, HUD and the 
Borrower may agree (subject to available funds) to extend the term of 
the HAP contract or to renew the HAP contract. The number of assisted 
units under the extended or renewed HAP contract shall equal the number 
of assisted units under the original HAP contract, except that:
    (a) HUD and the Borrower may agree to reduce the number of assisted 
units by the number of assisted units that are not occupied by eligible 
families at the time of the extension or renewal; and
    (b) HUD and the Borrower may agree to permit reductions in the 
number of assisted units during the term of the extended or renewed HAP 
contract as assisted units are vacated by eligible families. Nothing in 
this section shall prohibit HUD from reducing the number of units 
covered under the extended or renewed HAP contract in accordance with 
Sec. 891.575(b).



Sec. 891.600  Responsibilities of Borrower.

    (a) Marketing. (1) The Borrower must commence and continue diligent 
marketing activities not later than 90 days before the anticipated date 
of availability for occupancy of the first unit of the project. Market 
activities shall include the provision of notices of availability of 
housing under the program to operators of temporary housing for the 
homeless in the same housing market.
    (2) Marketing must be done in accordance with the HUD-approved 
affirmative fair housing marketing plan and all Federal, State, or local 
fair housing and equal opportunity requirements. The purpose of the plan 
and requirements is to achieve a condition in which eligible families of 
similar income levels in the same housing market have a like range of 
housing choices available to them regardless of discriminatory 
considerations, such as their race, color, creed, religion, familial 
status, disability, sex or national origin. Marketing must also be done 
in accordance with the communication and notice requirements of Section 
504 at 24 CFR 8.6 and 24 CFR 8.54.
    (3) At the time of HAP contract execution, the Borrower must submit 
to HUD a list of leased and unleased assisted units, with a 
justification for the unleased units, in order to qualify for vacancy 
payments for the unleased units.
    (b) Management and maintenance. The Borrower is responsible for all 
management functions. These functions include selection and admission of 
tenants, required reexaminations of incomes for families occupying 
assisted units (or residential spaces, as applicable), collection of 
rents, termination of tenancy and eviction, and all repair and 
maintenance functions (including ordinary and extraordinary maintenance 
and replacement of capital items). All functions must be performed in 
compliance with equal opportunity requirements.
    (c) Contracting for services. (1) With HUD approval, the Borrower 
may contract with a private or public entity for performance of the 
services or duties required in paragraphs (a) and (b) of this section. 
However, such an arrangement does not relieve the Borrower of 
responsibility for these services and duties. All such contracts are 
subject

[[Page 225]]

to the restrictions governing prohibited contractual relationships 
described in Secs. 891.130 and 891.505, if applicable. (These 
prohibitions do not extend to management contracts entered into by the 
Borrower with the Sponsor or its nonprofit affiliate).
    (2) Consistent with the objectives of Executive Order No. 11625 (36 
FR 19967, 3 CFR, 1971-1975 Comp., p. 616; as amended by Executive Order 
No. 12007 (42 FR 42839, 3 CFR, 1977 Comp., p. 139; unless otherwise 
noted); Executive Order No. 12432 (48 FR 32551, 3 CFR, 1983 Comp., p. 
198; unless otherwise noted); and Executive Order No. 12138 (44 FR 
29637, 3 CFR, 1979 Comp., p. 393; unless otherwise noted), the Borrower 
will promote awareness and participation of minority and women's 
business enterprises in contracting and procurement activities.
    (d) Submission of financial and operating statements. The Borrower 
must submit to HUD:
    (1) Within 60 days after the end of each fiscal year of project 
operations, financial statements for the project audited by an 
independent public accountant and in the form required by HUD; and
    (2) Other statements regarding project operation, financial 
conditions and occupancy as HUD may require to administer the housing 
assistance payments contract (HAP contract) or the project assistance 
contract (PAC), as applicable, and to monitor project operations.
    (e) Use of project funds. The Borrower shall maintain a separate 
project fund account in a depository or depositories that are members of 
the Federal Deposit Insurance Corporation or National Credit Union Share 
Insurance Fund and shall deposit all rents, charges, income and revenues 
arising from project operation or ownership to this account. All project 
funds are to be deposited in Federally-insured accounts. All balances 
shall be fully insured at all times, to the maximum extent possible. 
Project funds must be used for the operation of the project (including 
required insurance coverage), to make required principal and interest 
payments on the Section 202 loan, and to make required deposits to the 
replacement reserve under Secs. 891.605 and 891.745 (as applicable), in 
accordance with a HUD-approved budget. Any project funds in the project 
funds account (including earned interest) following the expiration of 
the fiscal year shall be deposited in a Federally-insured residual 
receipts account within 60 days following the end of the fiscal year. 
Withdrawals from this account may be made only for project purposes and 
with the approval of HUD. If there are funds remaining in the residual 
receipts account when the mortgage is satisfied, such funds shall be 
returned to HUD.
    (f) Reports. The Borrower shall submit such reports as HUD may 
prescribe to demonstrate compliance with applicable civil rights and 
equal opportunity requirements.

(Approved by the Office of Management and Budget under control number 
2502-0371.)



Sec. 891.605  Replacement reserve.

    (a) Establishment of reserve. The Borrower shall establish and 
maintain a replacement reserve to aid in funding extraordinary 
maintenance, and repair and replacement of capital items.
    (b) Deposits to reserve. The Borrower shall make monthly deposits to 
the replacement reserve in an amount determined by HUD. Further 
requirements regarding the amount of the deposits for projects funded 
under Secs. 891.655 through 891.790 are provided in Sec. 891.745.
    (c) Level of reserve. The reserve must be built up to and maintained 
at a level determined by HUD to be sufficient to meet projected 
requirements. Should the reserve reach that level, the amount of the 
deposit to the reserve may be reduced with the approval of HUD.
    (d) Administration of reserve. Replacement reserve funds must be 
deposited with HUD or in a Federally-insured depository in an interest-
bearing account(s) whose balances are fully insured at all times. All 
earnings including interest on the reserve must be added to the reserve. 
Funds may be drawn from the reserve and used only in accordance with HUD 
guidelines and with the approval of, or as directed by, HUD.

[[Page 226]]



Sec. 891.610  Selection and admission of tenants.

    (a) Written procedures. The Owner shall adopt written tenant 
selection procedures that ensure nondiscrimination in the selection of 
tenants and that are consistent with the purpose of improving housing 
opportunities for very low-income elderly or handicapped persons; and 
reasonably related to program eligibility and an applicant's ability to 
perform the obligations of the lease. Owners shall promptly notify in 
writing any rejected applicant of the grounds for any rejection. 
Additionally, owners shall maintain a written, chronological waiting 
list showing the name, race, gender, ethnicity and date of each person 
applying for the program.
    (b) Application for admission. The Borrower must accept applications 
for admission to the project in the form prescribed by HUD and is 
obligated to confirm all information provided by the applicant families 
on the application. Applicant families must be requested to complete a 
release of information consent for verification of information. 
Applicants applying for assisted units must complete a certification of 
eligibility as part of the application for admission. Applicant families 
must meet the disclosure and verification requirements for Social 
Security Numbers, and sign and submit consent forms for the obtaining of 
wage and claim information from State Wage Information Collection 
Agencies, as provided by 24 CFR part 5, subpart B. Both the Borrower and 
the applicant must complete and sign the application for admission. On 
request, the Borrower must furnish copies of all applications for 
admission to HUD.
    (c) Determination of eligibility and selection of tenants. The 
Borrower is responsible for determining whether applicants are eligible 
for admission and for the selection of families. To be eligible for 
admission, an applicant must be an elderly or handicapped family as 
defined in Sec. 891.505; meet any project occupancy requirements 
approved by HUD; meet the disclosure and verification requirements for 
Social Security Numbers and sign and submit consent forms for obtaining 
of wage and claim information from State Wage Information Collection 
Agencies, as provided by 24 CFR part 5, subpart B; and, if applying for 
an assisted unit, be eligible for admission under part 813 of this 
chapter.
    (d) Unit assignment. If the Borrower determines that the family is 
eligible and is otherwise acceptable and units are available, the 
Borrower will assign the family a unit. The Borrower will assign the 
family a unit of the appropriate size in accordance with HUD's general 
occupancy guidelines. If no suitable unit is available, the Borrower 
will place the family on a waiting list for the project and notify the 
family of when a suitable unit may become available. If the waiting list 
is so long that the applicant would not be likely to be admitted within 
the next 12 months, the Borrower may advise the applicant that no 
additional applications for admission are being considered for that 
reason, except that the Borrower may not refuse to place an applicant on 
the waiting list if the applicant is otherwise eligible for assistance 
and claims that he or she qualifies for a Federal preference as provided 
in 24 CFR part 5, subpart D.
    (e) Ineligibility determination. If the Borrower determines that an 
applicant is ineligible for admission or the Borrower is not selecting 
the applicant for other reasons, the Borrower will promptly notify the 
applicant in writing of the determination, the reasons for the 
determination, and that the applicant has a right to request a meeting 
with the Borrower or managing agent to review the rejection, in 
accordance with HUD requirements. The review, if requested, may not be 
conducted by a member of the Borrower's staff who made the initial 
decision to reject the applicant. The applicant may also exercise other 
rights (e.g., rights granted under Federal, State, or local civil rights 
laws) if the applicant believes he or she is being discriminated against 
on a prohibited basis. The informal review provisions for the denial of 
a Federal preference are provided in Sec. 5.410(g) of this title.
    (f) Records. Records on applicants and approved eligible families, 
which provide racial, ethnic, gender, handicap status, and place of 
previous residency

[[Page 227]]

data required by HUD, must be retained for three years.
    (g) Reexamination of family income and composition. (1) Regular 
reexaminations. The Borrower must reexamine the income and composition 
of the family at least every 12 months. Upon verification of the 
information, the Borrower shall make appropriate adjustments in the 
total tenant payment in accordance with part 813 of this chapter and 
determine whether the family's unit size is still appropriate. The 
Borrower must adjust tenant rent and the housing assistance payment and 
must carry out any unit transfer in accordance with the administrative 
instructions issued by HUD. At the time of reexamination under paragraph 
(g)(1) of this section, the Borrower must require the family to meet the 
disclosure and verification requirements for Social Security Numbers, as 
provided by 24 CFR part 5, subpart B.
    (2) Interim reexaminations. The family must comply with the 
provisions in its lease regarding interim reporting of changes in 
income. If the Borrower receives information concerning a change in the 
family's income or other circumstances between regularly scheduled 
reexaminations, the Borrower must consult with the family and make any 
adjustments determined to be appropriate. Any change in the family's 
income or other circumstances that results in an adjustment in the total 
tenant payment, tenant rent and housing assistance payment must be 
verified.
    (3) Continuation of housing assistance payments. (i) A family shall 
remain eligible for housing assistance payments until the total tenant 
payment equals or exceeds the gross rent. The termination of subsidy 
eligibility will not affect the family's other rights under its lease. 
Housing assistance payments may be resumed if, as a result of changes in 
income, rent or other relevant circumstances during the term of the HAP 
contract, the family meets the income eligibility requirements of part 
813 of this chapter and housing assistance is available for the unit 
under the terms of the HAP contract. The family will not be required to 
establish its eligibility for admission to the project under the 
remaining requirements of paragraph (c) of this section.
    (ii) A family's eligibility for housing assistance payments may be 
terminated in accordance with HUD requirements for such reasons as 
failure to submit requested verification information, including 
information related to disclosure and verification of Social Security 
Numbers, or failure to sign and submit consent forms for the obtaining 
of wage and claim information from State wage information collection 
agencies, as provided by 24 CFR part 5, subpart B.

(Approved by the Office of Management and Budget under control number 
2502-0371.)



Sec. 891.615  Obligations of the family.

    The obligations of the family are provided in Sec. 891.415.



Sec. 891.620  Overcrowded and underoccupied units.

    If the Borrower determines that because of change in family size, an 
assisted unit is smaller than appropriate for the eligible family to 
which it is leased, or that the assisted unit is larger than 
appropriate, housing assistance payments or project assistance payments 
(as applicable) with respect to the unit will not be reduced or 
terminated until the eligible family has been relocated to an 
appropriate alternate unit. If possible, the Borrower will, as promptly 
as possible, offer the family an appropriate alternate unit. The 
Borrower may receive vacancy payments for the vacated unit if the 
Borrower complies with the requirements of Sec. 891.650.



Sec. 891.625  Lease requirements.

    The lease requirements are provided in Sec. 891.425.



Sec. 891.630  Termination of tenancy and modification of lease.

    The provisions of part 247 of this title apply to all decisions by a 
Borrower to terminate the tenancy or modify the lease of a family 
residing in a unit.

[[Page 228]]



Sec. 891.635  Security deposits.

    The general requirements for security deposits on assisted units are 
provided in Sec. 891.435. For purposes of subpart E of this part, the 
additional requirements apply:
    (a) The Borrower may require each family occupying an unassisted 
unit (or residential space in a group home) to pay a security deposit 
equal to one month's rent payable by the family.
    (b) The Borrower shall maintain a record of the amount in the 
segregated interest-bearing account that is attributable to each family 
in residence in the project. Annually for all families, and when 
computing the amount available for disbursement under 
Sec. 891.435(b)(3), the Borrower shall allocate to the family's balance 
the interest accrued on the balance during the year. Unless prohibited 
by State or local law, the Borrower may deduct for the family, from the 
accrued interest for the year, the administrative cost of computing the 
allocation to the family's balance. The amount of the administrative 
cost adjustment shall not exceed the accrued interest allocated to the 
family's balance for the year.



Sec. 891.640  Adjustment of rents.

    (a) Contract rents. (1) Adjustment based on approved budget. If the 
HAP contract provides, or has been amended to provide, that contract 
rents will be adjusted based upon a HUD-approved budget, HUD will 
calculate contract rent adjustments based on the sum of the project's 
operating costs and debt service (as calculated by HUD), with 
adjustments for vacancies, the project's nonrental income, and other 
factors that HUD deems appropriate. The calculation will be made on the 
basis of information provided by the Borrower on a form acceptable to 
the Secretary. The automatic adjustment factor described in part 888 of 
this chapter is not used to adjust contract rents under paragraph (a)(1) 
of this section, except to the extent that the amount of the replacement 
reserve deposit is adjusted under Sec. 880.602 of this chapter.
    (2) Annual and special adjustments. If the HAP contract provides 
that contract rents will be adjusted based on the application of an 
automatic adjustment factor and by special additional adjustments:
    (i) Consistent with the HAP contract, contract rents may be adjusted 
in accordance with part 888 of this chapter;
    (ii) Special additional adjustments will be granted, to the extent 
determined necessary by HUD, to reflect increases in the actual and 
necessary expenses of owning and maintaining the assisted units that 
have resulted from substantial general increases in real property taxes, 
assessments, utility rates or similar costs (i.e., assessments and 
utilities not covered by regulated rates), and that are not adequately 
compensated for by an annual adjustment. The Borrower must submit to HUD 
required supporting data, financial statements, and certifications for 
the special additional adjustment.
    (b) Rent for unassisted units. The rent payable by families 
occupying units that are not assisted under the HAP contract shall be 
equal to the contract rent computed under paragraph (a) of this section.

(Approved by the Office of Management and Budget under control number 
2502-0371.)



Sec. 891.645  Adjustment of utility allowances.

    In connection with adjustments of contract rents as provided in 
Sec. 891.640(a), the requirements for the adjustment of utility 
allowances provided in Sec. 891.440 apply.



Sec. 891.650  Conditions for receipt of vacancy payments for assisted units.

    (a) General. Vacancy payments under the HAP contract will not be 
made unless the conditions for receipt of these housing assistance 
payments set forth in this section are fulfilled.
    (b) Vacancies during rent-up. For each unit that is not leased as of 
the effective date of the HAP contract, the Borrower is entitled to 
vacancy payments in the amount of 80 percent of the contract rent for 
the first 60 days of vacancy, if the Borrower:
    (1) Complied with Sec. 891.600;
    (2) Has taken and continues to take all feasible actions to fill the 
vacancy; and
    (3) Has not rejected any eligible applicant except for good cause 
acceptable to HUD.

[[Page 229]]

    (c) Vacancies after rent-up. If an eligible family vacates a unit, 
the Borrower is entitled to vacancy payments in the amount of 80 percent 
of the contract rent for the first 60 days of vacancy if the Borrower:
    (1) Certifies that it did not cause the vacancy by violating the 
lease, the HAP contract, or any applicable law;
    (2) Notified HUD of the vacancy or prospective vacancy and the 
reasons for the vacancy immediately upon learning of the vacancy or 
prospective vacancy;
    (3) Has fulfilled and continues to fulfill the requirements 
specified in Sec. 891.600(a)(2) and (3), and in paragraphs (b)(2) and 
(3) of this section; and
    (4) For any vacancy resulting from the Borrower's eviction of an 
eligible family, certifies that it has complied with Sec. 891.630.
    (d) Vacancies for longer than 60 days. If a unit continues to be 
vacant after the 60-day period specified in paragraph (b) or (c) of this 
section, the Borrower may apply to receive additional vacancy payments 
in an amount equal to the principal and interest payments required to 
amortize that portion of the debt service attributable to the vacant 
unit for up to 12 additional months for the unit if:
    (1) The unit was in decent, safe, and sanitary condition during the 
vacancy period for which payment is claimed;
    (2) The Borrower has fulfilled and continues to fulfill the 
requirements specified in paragraph (b) or (c) of this section, as 
appropriate; and
    (3) The Borrower has demonstrated to the satisfaction of HUD that:
    (i) For the period of vacancy, the project is not providing the 
Borrower with revenues at least equal to project expenses (exclusive of 
depreciation) and the amount of payments requested is not more than the 
portion of the deficiency attributable to the vacant unit; and
    (ii) The project can achieve financial soundness within a reasonable 
time.
    (e) Prohibition of double compensation for vacancies. If the 
Borrower collects payments for vacancies from other sources (tenant 
rent, security deposits, payments under Sec. 891.435(c), or governmental 
payments under other programs), the Borrower shall not be entitled to 
collect vacancy payments to the extent these collections from other 
sources plus the vacancy payment exceed contract rent.

(Approved by the Office of Management and Budget under control number 
2502-0371.)

    Section 202 Projects for the Nonelderly Handicapped Families and 
                   Individuals--Section 162 Assistance



Sec. 891.655  Definitions applicable to 202/162 projects.

    The following definitions apply to projects for eligible families 
receiving project assistance payments under section 202(h) of the 
Housing Act of 1959 in addition to reservations under section 202 (202/
162 projects):
    Annual income is defined in part 813 of this chapter. In the case of 
an individual residing in an intermediate care facility for the mentally 
retarded that is assisted under Title XIX of the Social Security Act and 
subpart E of this part, the annual income of the individual shall 
exclude protected personal income as provided under that Act. For the 
purposes of determining the total tenant payment, the income of such 
individuals shall be imputed to be the amount that the family would 
receive if assisted under Title XVI of the Social Security Act.
    Assisted unit means a dwelling unit that is eligible for assistance 
under a project assistance contract (PAC).
    Contract rent means the total amount of rent specified in the PAC as 
payable by HUD and the family to the Borrower for an assisted unit or 
residential space.
    Family (eligible family) means a handicapped family (as defined in 
Sec. 891.505) that meets the project occupancy requirements approved by 
HUD and, if the family occupies an assisted unit, meets the low-income 
requirements described in Sec. 813.102 of this chapter, as modified by 
the definition of ``annual income'' in this section.
    Gross rent is defined in part 813 of this chapter.
    Group home means a single family residential structure designed or 
adapted for occupancy by nonelderly handicapped individuals.
    Housing for handicapped families means housing and related 
facilities

[[Page 230]]

occupied by handicapped families that are primarily nonelderly 
handicapped families.
    Independent living complex means a project designed for occupancy by 
nonelderly handicapped families in separate dwelling units where each 
dwelling unit includes a kitchen and a bath.
     Operating costs means expenses related to the provision of housing 
and excludes expenses related to administering, or managing the 
provision of, supportive services. Operating costs include:
    (1) Administrative expenses, including salary and management 
expenses related to the provision of shelter;
    (2) Maintenance expenses, including routine and minor repairs and 
groundskeeping;
    (3) Security expenses;
    (4) Utilities expenses, including gas, oil, electricity, water, 
sewer, trash removal, and extermination services. Operating costs 
exclude telephone services for families;
    (5) Taxes and insurance; and
    (6) Allowances for reserves.
     PAC (project assistance contract) means the contract entered into 
by the Borrower and HUD setting forth the rights and duties of the 
parties with respect to the project and the payments under the PAC.
    Project account means a specifically identified and segregated 
account for each project which is established in accordance with 
Sec. 891.715(b) out of the amounts by which the maximum annual 
commitment exceeds the amount actually paid out under the PAC each year.
    Project assistance payment means the payment made by HUD to the 
Borrower for assisted units as provided in the PAC. The payment is the 
difference between the contract rent and the tenant rent. An additional 
payment is made to a family occupying an assisted unit in an independent 
living complex when the utility allowance is greater than the total 
tenant payment. A project assistance payment, known as a ``vacancy 
payment,'' may be made to the Borrower when an assisted unit (or 
residential space in a group home) is vacant, in accordance with the 
terms of the PAC.
     Rent is defined in Sec. 891.505.
    Tenant rent means the monthly amount defined in, and determined in 
accordance with part 813 of this chapter.
    Total tenant payment means the monthly amount defined in, and 
determined in accordance with part 813 of this chapter.
    Utility allowance is defined in part 813 of this chapter and is 
determined or approved by HUD.
    Utility reimbursement is defined in part 813 of this chapter.
     Vacancy payment means the project assistance payment made to the 
Borrower by HUD for a vacant assisted unit (or residential space in a 
group home) if certain conditions are fulfilled, as provided in the PAC. 
The amount of the vacancy payment varies with the length of the vacancy 
period and is less after the first 60 days of any vacancy.



Sec. 891.660  Project standards.

    (a) Property standards. The property standards for 202/162 projects 
are provided in Sec. 891.120(a).
    (b) Minimum group home standards. The minimum group home standards 
for 202/162 projects are provided in Sec. 891.310(a).
    (c) Accessibility requirements. The accessibility requirements for 
202/162 projects are provided in Secs. 891.120(b) and 891.310(b).
    (d) Smoke detectors. The requirements for smoke detectors for 202/
162 projects are provided in Sec. 891.120(d).



Sec. 891.665  Project size limitations.

    (a) Maximum project size. Projects funded under Secs. 891.655 
through 891.790 are subject to the following project size limitations:
    (1) Group homes may not be designed to serve more than 15 persons on 
one site;
    (2) Independent living complexes for chronically mentally ill 
individuals may not be designed to serve more than 20 persons on one 
site; and
    (3) Independent living complexes for handicapped families in the 
developmental disability or physically handicapped occupancy categories 
may not have more than 24 units nor more than 24 households on one site. 
For the purposes of this section, household has the

[[Page 231]]

same meaning as handicapped family, except that unrelated handicapped 
individuals sharing a unit (other than a handicapped person living with 
another person who is essential to the handicapped person's well-being) 
are counted as separate households. For independent living complexes for 
handicapped families in the developmental disability or physically 
handicapped occupancy categories, units with three or more bedrooms may 
only be developed to serve handicapped families of one or two parents 
with children.
    (b) Additional limitations. Based on the amount of loan authority 
appropriated for a fiscal year, HUD may have imposed additional 
limitations on the number of units or residents that may be proposed 
under an application for Section 202 loan fund reservation, as published 
in the annual notice of funding availability or the invitation for 
Section 202 fund reservation.
    (c) Exemptions. On a case-by-case basis, HUD may approve independent 
living complexes that do not comply with the project size limitations 
prescribed in paragraphs (a)(2), (a)(3), or (b) of this section. HUD may 
approve such projects if the Sponsor demonstrates:
    (1) The increased number of units is necessary for the economic 
feasibility of the project;
    (2) A project of the size proposed is compatible with other 
residential development and the population density of the area in which 
the project is to be located;
    (3) A project of the size proposed can be successfully integrated 
into the community; and
    (4) A project of the size proposed is marketable in the community.



Sec. 891.670  Cost containment and modest design standards.

    (a) Restrictions on amenities. Projects must be modest in design. 
Except as provided in paragraph (d) of this section, amenities must be 
limited to those amenities, as determined by HUD, that are generally 
provided in unassisted decent, safe, and sanitary housing for low-income 
families in the market area. Amenities not eligible for HUD funding 
include balconies, atriums, decks, bowling alleys, swimming pools, 
saunas, and jacuzzis. Dishwashers, trash compactors, and washers and 
dryers in individual units will not be funded in independent living 
complexes. The use of durable materials to control or reduce 
maintenance, repair, and replacement costs is not an excess amenity.
    (b) Unit sizes. For independent living complexes, HUD will establish 
limitations on the size of units and number of bathrooms, based on the 
number of bedrooms that are in the unit.
    (c) Special spaces and accommodations. (1) The costs of construction 
of special spaces and accommodations may not exceed 10 percent of the 
total cost of construction, except as provided in paragraph (d) of this 
section. Special spaces and accommodations include multipurpose rooms, 
game rooms, libraries, lounges, and, in independent living complexes, 
central kitchens and dining rooms.
    (2) Special spaces and accommodations exclude offices, halls, 
mechanical rooms, laundry rooms, and parking areas; dwelling units and 
lobbies in independent living complexes; and bedrooms, living rooms, 
dining and kitchen areas, shared bathrooms, and resident staff dwelling 
units in group homes.
    (d) Exceptions. HUD may approve a project that does not comply with 
the cost containment and modest design standards of paragraphs (a) 
through (c) of this section if:
    (1) The Sponsor demonstrates a willingness and ability to contribute 
the incremental development cost and continuing operating costs 
associated with the additional amenities or design features; or
    (2) The proposed project involves substantial rehabilitation or 
acquisition with or without moderate rehabilitation, the additional 
amenities or design features were incorporated into the existing 
structure before the submission of the application, and the total 
development cost of the project with the additional amenities or design 
features does not exceed the cost limits.



Sec. 891.675  Prohibited facilities.

    The requirements for prohibited facilities for 202/162 projects are 
provided in Sec. 891.315, except that Section 202/162

[[Page 232]]

projects may not include commercial spaces.



Sec. 891.680  Site and neighborhood standards.

    The general requirements for site and neighborhood standards for 
202/162 projects are provided in Secs. 891.125 and 891.320. In addition 
to the requirements in Secs. 891.125 and 891.320, the following 
requirements apply to 202/162 projects:
    (a) The site must promote greater choice of housing opportunities 
and avoid undue concentration of assisted persons in areas containing a 
high proportion of low-income persons.
    (b) Projects must be located in neighborhoods where other family 
housing is located. Except as provided below, projects may not be 
located adjacent to the following facilities, or in areas where such 
facilities are concentrated: schools or day care centers for handicapped 
persons, workshops, medical facilities, or other housing primarily 
serving handicapped persons. Projects may be located adjacent to other 
housing primarily serving handicapped persons if the projects together 
do not exceed the project size limitations under Sec. 891.665(a).



Sec. 891.685  Prohibited relationships.

    The requirements for prohibited relationships for 202/162 projects 
are provided in Sec. 891.130.



Sec. 891.690  Other Federal requirements.

    In addition to the Federal requirements set forth in 24 CFR part 5, 
other Federal requirements for the 202/162 projects are provided in 
Secs. 891.155 and 891.325.



Sec. 891.695  Operating cost standards.

    The requirements for the operating cost standards are provided in 
Sec. 891.150.



Sec. 891.700  Prepayment of loans.

    (a) Prepayment prohibition. The prepayment (whether in whole or in 
part) or the assignment or transfer of physical and financial assets of 
any Section 202 project is prohibited, unless the Assistant Secretary 
gives prior written approval.
    (b) HUD-approved prepayment. Approval for prepayment or transfer 
will not be granted unless HUD determines that the prepayment or 
transfer of the loan is a part of a transaction that will ensure the 
continued operation of the project until the original maturity date of 
the loan in a manner that will provide rental housing for the 
handicapped families on terms at least as advantageous to existing and 
future tenants as the terms required by the original Section 202 loan 
agreement and any other loan agreements entered into under other 
provisions of law.



Sec. 891.705  Project assistance contract.

    (a) Project assistance contract (PAC). The PAC sets forth rights and 
duties of the Borrower and HUD with respect to the project and the 
project assistance payments.
    (b) PAC execution. (1) Upon satisfactory completion of the project, 
the Borrower and HUD shall execute the PAC on the form prescribed by 
HUD.
    (2) The effective date of the PAC may be earlier than the date of 
execution, but no earlier than the date of HUD's issuance of the 
permission to occupy.
    (3) If the project is completed in stages, the procedures of 
paragraph (b) of this section shall apply to each stage.
    (c) Project assistance payments to owners under the PAC. The project 
assistance payments made under the PAC are:
    (1) Payments to the Borrower to assist eligible families leasing 
assisted units. The amount of the project assistance payment made to the 
Borrower for an assisted unit (or residential space in a group home) 
that is leased to an eligible family is equal to the difference between 
the contract rent for the unit (or pro rata share of the contract rent 
in a group home) and the tenant rent payable by the family.
    (2) Payments to the Borrower for vacant assisted units (``vacancy 
payments''). The amount of and conditions for vacancy payments are 
described in Sec. 891.790. HUD makes the project assistance payments 
monthly upon proper requisition by the Borrower, except payments for 
vacancies of more than 60 days, which HUD makes semiannually upon 
requisition by the Borrower.
    (d) Payment of utility reimbursement. If applicable, a utility 
reimbursement will be paid to a family occupying an

[[Page 233]]

assisted unit in an independent living complex as an additional project 
assistance payment. The PAC will provide that the Borrower will make 
this payment on behalf of HUD. Funds will be paid to the Borrower in 
trust solely for the purpose of making the additional payment. The 
Borrower may pay the utility reimbursement jointly to the family and the 
utility company, or, if the family and utility company consent, directly 
to the utility company.



Sec. 891.710  Term of PAC.

    The term of the PAC shall be 20 years. If the project is completed 
in stages, the term of the PAC for each stage shall be 20 years. The 
term of the PAC for stages of a project shall not exceed 22 years.



Sec. 891.715  Maximum annual commitment and project account.

    (a) Maximum annual commitment. The maximum annual amount that may be 
committed under the PAC is the total of the initial contract rents and 
utility allowances for all assisted units in the project.
    (b) Project account. (1) HUD will establish and maintain a 
specifically identified and segregated project account for each project. 
The project account will be established out of the amounts by which the 
maximum annual commitment exceeds the amount actually paid out under the 
PAC each year. HUD will make payments from this account for project 
assistance payments as needed to cover increases in contract rents or 
decreases in tenant income and other payments for costs specifically 
approved by the Secretary.
    (2) If the HUD-approved estimate of required annual payments under 
the PAC for a fiscal year exceeds the maximum annual commitment for that 
fiscal year plus the current balance in the project account, HUD will, 
within a reasonable time, take such steps authorized by section 
202(h)(4)(A) of the Housing Act of 1959, as may be necessary, to assure 
that payments under the PAC will be adequate to cover increases in 
contract rents and decreases in tenant income.



Sec. 891.720  Leasing to eligible families.

    (a) Availability of assisted units for occupancy by eligible 
families. During the term of the PAC, a Borrower shall make all units 
(or residential spaces in a group home) available for eligible families. 
For purposes of this section, making units or residential spaces 
available for occupancy by eligible families means that the Borrower:
    (1) Is conducting marketing in accordance with Sec. 891.740(a);
    (2) Has leased or is making good faith efforts to lease the units or 
residential spaces to eligible and otherwise acceptable families, 
including taking all feasible actions to fill vacancies by renting to 
such families; and (3) Has not rejected any such applicant family except 
for reasons acceptable to HUD. If the Borrower is temporarily unable to 
lease all units or residential spaces to eligible families, one or more 
units or residential spaces may, with the prior approval of HUD, be 
leased to otherwise eligible families that do not meet the income 
requirements of part 813 of this chapter, as modified by Sec. 891.505. 
Failure on the part of the Borrower to comply with these requirements is 
a violation of the PAC and grounds for all available legal remedies, 
including an action for specific performance of the PAC, suspension or 
debarment from HUD programs, and reduction of the number of units (or in 
the case of group homes, reduction of the number of residential spaces) 
under the PAC as set forth in paragraph (b) of this section.
    (b) Reduction of number of units covered by the PAC. HUD may reduce 
the number of units (or in the case of group homes, the number of 
residential spaces) covered by the PAC to the number of units or 
residential spaces available for occupancy by eligible families if:
    (1) The Borrower fails to comply with the requirements of paragraph 
(a) of this section; or
    (2) Notwithstanding any prior approval by HUD, HUD determines that 
the inability to lease units or residential spaces to eligible families 
is not a temporary problem.
    (c) Restoration. HUD will agree to an amendment of the PAC to 
provide for

[[Page 234]]

subsequent restoration of any reduction made under paragraph (b) of this 
section if:
    (1) HUD determines that the restoration is justified by demand;
    (2) The Borrower otherwise has a record of compliance with the 
Borrower's obligations under the PAC; and
    (3) Contract and budget authority is available.
    (d) Occupancy by families that are not handicapped. HUD may relieve 
the Borrower of the requirement that all units in the project (or 
residential spaces in a group home) must be leased to handicapped 
families if:
    (1) The Borrower has made reasonable efforts to lease to eligible 
families;
    (2) The Borrower has been granted HUD approval under paragraph (a) 
of this section; and
    (3) The Borrower is temporarily unable to achieve or maintain a 
level of occupancy sufficient to prevent financial default and 
foreclosure under the Section 202 loan documents. HUD approval under 
this paragraph will be of limited duration. HUD may impose terms and 
conditions to this approval that are consistent with program objectives 
and necessary to protect its interest in the Section 202 loan.



Sec. 891.725  PAC administration.

    HUD is responsible for the administration of the PAC.



Sec. 891.730  Default by Borrower.

    (a) PAC provisions. The PAC will provide:
    (1) That if HUD determines that the Borrower is in default under the 
PAC, HUD will notify the Borrower of the actions required to be taken to 
cure the default and of the remedies to be applied by HUD, including an 
action for specific performance under the PAC, reduction or suspension 
of project assistance payment and recovery of overpayments, as 
appropriate; and
    (2) That if the Borrower fails to cure the default, HUD has the 
right to terminate the PAC or to take other corrective action.
    (b) Loan provisions. Additional provisions governing default under 
the Section 202 loan are included in the regulatory agreement and other 
loan documents.



Sec. 891.735  Notice upon PAC expiration.

    The PAC will provide that the Borrower will, at least 90 days before 
the end of the PAC contract term, notify each family occupying an 
assisted unit (or residential space in a group home) of any increase in 
the amount the family will be required to pay as rent as a result of the 
expiration. The notice of expiration will contain such information and 
will be served in such manner as HUD may prescribe.



Sec. 891.740  Responsibilities of Borrower.

    (a) Marketing. (1) The Borrower must commence and continue diligent 
marketing activities not later than 90 days before the anticipated date 
of availability for occupancy of the group home or the anticipated date 
of availability of the first unit in an independent living complex. 
Market activities shall include the provision of notices of the 
availability of housing under the program to operators of temporary 
housing for the homeless in the same housing market.
    (2) Marketing must be done in accordance with the HUD-approved 
affirmative fair housing marketing plan and all fair housing and equal 
opportunity requirements. The purpose of the plan and requirements is to 
achieve a condition in which eligible families of similar income levels 
in the same housing market have a like range of housing choices 
available to them regardless of their race, color, creed, religion, sex, 
or national origin.
    (3) At the time of PAC execution, the Borrower must submit to HUD a 
list of leased and unleased assisted units (or in the case of a group 
home, leased and unleased residential spaces) with a justification for 
the unleased units or residential spaces, in order to qualify for 
vacancy payments for the unleased units or residential spaces.
    (b) Management and maintenance. The responsibilities of the Borrower 
with regard to management and maintenance are provided in 
Sec. 891.600(b).
    (c) Contracting for services. The responsibilities of the Borrower 
with regard to contracting for services are provided in Sec. 891.600(c).

[[Page 235]]

    (d) Submission of financial and operating statements. The 
responsibilities of the Borrower with regard to the submission of 
financial and operating statements are provided in Sec. 891.600(d).
    (e) Use of project funds. The responsibilities of the Borrower with 
regard to the use of project funds are provided in Sec. 891.600(e).
    (f) Reports. The responsibilities of the Borrower with regard to 
reports are provided in Sec. 891.600(f).



Sec. 891.745  Replacement reserve.

    The general requirements for the replacement reserve are provided in 
Sec. 891.605. For projects funded under Secs. 891.655 through 891.790, 
the amount of the deposits for the initial year of operation shall be an 
amount equal to 0.6 percent of the cost of the total structures (for new 
construction projects), 0.4 percent of the cost of the initial mortgage 
amount (for all other projects), or such higher rate as required by HUD. 
For the purposes of this section, total structures include main 
buildings, accessory buildings, garages, and other buildings. The amount 
of the deposits will be adjusted each year by the amount of the annual 
adjustment factor as described in part 888 of this chapter.



Sec. 891.750  Selection and admission of tenants.

    (a) Application for admission. The Borrower must accept applications 
for admission to the project in the form prescribed by HUD. Applicant 
families applying for assisted units (or residential spaces in a group 
home) must complete a certification of eligibility as part of the 
application for admission. Applicant families must meet the disclosure 
and verification requirements for Social Security Numbers, and sign and 
submit consent forms for the obtaining of wage and claim information 
from State Wage Information Collection Agencies, as provided by 24 CFR 
part 5, subpart B. Both the Borrower and the applicant family must 
complete and sign the application for admission. On request, the 
Borrower must furnish copies of all applications for admission to HUD.
    (b) Determination of eligibility and selection of tenants. The 
Borrower is responsible for determining whether applicants are eligible 
for admission and for the selection of families. To be eligible for 
admission, an applicant family must be a handicapped family (as defined 
in Sec. 891.505); meet any project occupancy requirements approved by 
HUD; meet the disclosure and verification requirements for Social 
Security Numbers, as provided by 24 CFR part 5, subpart B; and be a low-
income family, as defined in Sec. 813.102 of this chapter (as modified 
by Sec. 891.505). Under certain circumstances, HUD may permit the 
leasing of units (or residential space in a group home) to ineligible 
families under Sec. 891.720.
    (1) Local residency requirements are prohibited. Local residency 
preferences may be applied in selecting tenants only to the extent that 
they are not inconsistent with affirmative fair housing marketing 
objectives and the Borrower's HUD-approved affirmative fair housing 
marketing plan. Preferences may not be based on the length of time the 
applicant has resided in the jurisdiction. With respect to any residency 
preference, persons expected to reside in the community as a result of 
current or planned employment will be treated as residents.
    (2) If the Borrower determines that the family is eligible and is 
otherwise acceptable and units (or residential spaces in a group home) 
are available, the Borrower will assign the family a unit or residential 
space in a group home. If the family will occupy an assisted unit the 
Borrower will assign the family a unit of the appropriate size in 
accordance with HUD standards. If no suitable unit (or residential space 
in a group home) is available, the Borrower will place the family on a 
waiting list for the project and notify the family when a suitable unit 
or residential space may become available. If the waiting list is so 
long that the applicant would not be likely to be admitted within the 
next 12 months, the Borrower may advise the applicant that no additional 
applications for admission are being considered for that reason.
    (3) If the Borrower determines that an applicant is ineligible for 
admission or the Borrower is not selecting the applicant for other 
reasons, the Borrower will promptly notify the applicant in

[[Page 236]]

writing of the determination, the reasons for the determination, and 
that the applicant has a right to request a meeting to review the 
rejection, in accordance with HUD requirements. The review, if 
requested, may not be conducted by the member of the Borrower's staff 
who made the initial decision to reject the applicant. The applicant may 
also exercise other rights if the applicant believes the applicant is 
being discriminated against on the basis of race, color, creed, 
religion, sex, handicap, or national origin.
    (4) Records on applicants and approved eligible families, which 
provide racial, ethnic, gender and place of previous residency data 
required by HUD, must be maintained and retained for three years.
    (c) Reexamination of family income and composition--(1) Regular 
reexaminations. If the family occupies an assisted unit (or residential 
space in a group home), the Borrower must reexamine the income and 
composition of the family at least every 12 months. Upon verification of 
the information, the Borrower shall make appropriate adjustments in the 
total tenant payment in accordance with part 813 of this chapter, as 
modified by Sec. 891.505, and determine whether the family's unit size 
is still appropriate. The Borrower must adjust tenant rent and the 
project assistance payment and must carry out any unit transfer in 
accordance with HUD standards. At the time of the annual reexamination 
of family income and composition, the Borrower must require the family 
to meet the disclosure and verification requirements for Social Security 
Numbers, as provided by 24 CFR part 5, subpart B.
    (2) Interim reexamination. If the family occupies an assisted unit 
(or residential space in a group home) the family must comply with 
provisions in the lease regarding interim reporting of changes in 
income. If the Borrower receives information concerning a change in the 
family's income or other circumstances between regularly scheduled 
reexaminations, the Borrower must consult with the family and make any 
adjustments determined to be appropriate. Any change in the family's 
income or other circumstances that results in an adjustment in the total 
tenant payment, tenant rent, and project assistance payment must be 
verified.
    (3) Continuation of project assistance payment. (i) A family 
occupying an assisted unit (or residential space in a group home) shall 
remain eligible for project assistance payment until the total tenant 
payment equals or exceeds the gross rent (or a pro rata share of the 
gross rent in a group home). The termination of subsidy eligibility will 
not affect the family's other rights under its lease. Project assistance 
payment may be resumed if, as a result of changes in income, rent, or 
other relevant circumstances during the term of the PAC, the family 
meets the income eligibility requirements of part 813 of this chapter 
(as modified in Sec. 891.505) and project assistance is available for 
the unit or residential space under the terms of the PAC. The family 
will not be required to establish its eligibility for admission to the 
project under the remaining requirements of paragraph (b) of this 
section.
    (ii) A family's eligibility for project assistance payment may also 
be terminated in accordance with HUD requirements for such reasons as 
failure to submit requested verification information, including failure 
to meet the disclosure and verification requirements for Social Security 
Numbers, or failure to sign and submit consent forms for the obtaining 
of wage and claim information from State Wage Information Collection 
Agencies, as provided by 24 CFR part 5, subpart B.

(Approved by the Office of Management and Budget under control number 
2502-0204 and 2505-0267.)



Sec. 891.755  Obligations of the family.

    The obligations of the family are provided in Sec. 891.415.



Sec. 891.760  Overcrowded and underoccupied units.

    The requirements for overcrowded and underoccupied units are 
provided in Sec. 891.620.



Sec. 891.765  Lease requirements.

    The lease requirements are provided in Sec. 891.425.

[[Page 237]]



Sec. 891.770  Termination of tenancy and modification of lease.

    The provisions of part 247 of this title apply to all decisions by a 
Borrower to terminate the tenancy or modify the lease of a family 
residing in a unit (or residential space in a group home).



Sec. 891.775  Security deposits.

    The general requirements for security deposits on assisted units are 
provided in Sec. 891.435. For purposes of subpart E of this part, the 
additional requirements in Sec. 891.635 apply.



Sec. 891.780  Adjustment of rents.

    (a) Contract rents. HUD will calculate contract rent adjustments 
based on the sum of the project's operating costs and debt service (as 
calculated by HUD), with adjustments for vacancies, the project's 
nonrental income, and other factors that HUD deems appropriate. The 
calculation will be made on the basis of information provided by the 
Borrower on a form prescribed by HUD.
    (b) Rent for unassisted units. The rent payable by families 
occupying units or residential spaces that are not assisted under the 
PAC shall be equal to the contract rent computed under paragraph (a) of 
this section.



Sec. 891.785  Adjustment of utility allowances.

    In connection with adjustments of contract rents as provided in 
Sec. 891.780(a), the requirements for the adjustment of utility 
allowances provided in Sec. 891.440 apply.



Sec. 891.790  Conditions for receipt of vacancy payments for assisted units.

    (a) General. Vacancy payments under the PAC will not be made unless 
the conditions for receipt of these project assistance payments set 
forth in this section are fulfilled.
    (b) Vacancies during rent-up. For each unit (or residential space in 
a group home) that is not leased as of the effective date of the PAC, 
the Borrower is entitled to vacancy payments in the amount of 80 percent 
of the contract rent (or pro rata share of the contract rent for a group 
home) for the first 60 days of vacancy, if the Borrower:
    (1) Complied with Sec. 891.740;
    (2) Has taken and continues to take all feasible actions to fill the 
vacancy; and
    (3) Has not rejected any eligible applicant except for good cause 
acceptable to HUD.
    (c) Vacancies after rent-up. If an eligible family vacates an 
assisted unit (or residential space in a group home) the Borrower is 
entitled to vacancy payments in the amount of 80 percent of the contract 
rent (or pro rata share of the contract rent in a group home) for the 
first 60 days of vacancy if the Borrower:
    (1) Certifies that it did not cause the vacancy by violating the 
lease, the PAC, or any applicable law;
    (2) Notified HUD of the vacancy or prospective vacancy and the 
reasons for the vacancy immediately upon learning of the vacancy or 
prospective vacancy;
    (3) Has fulfilled and continues to fulfill the requirements 
specified in Sec. 891.740(a)(2) and (3), and in paragraphs (b)(2) and 
(3) of this section; and
    (4) For any vacancy resulting from the Borrower's eviction of an 
eligible family, certifies that it has complied with Sec. 891.770.
    (d) Vacancies for longer than 60 days. If an assisted unit (or 
residential space in a group home) continues to be vacant after the 60-
day period specified in paragraph (b) or (c) of this section, HUD may 
approve additional vacancy payments for 60-day periods up to a total of 
12 months in an amount equal to the principal and interest payments 
required to amortize that portion of the debt service attributable to 
the vacant unit (or, in the case of group homes, the residential space). 
Such payments may be approved if:
    (1) The unit was in decent, safe, and sanitary condition during the 
vacancy period for which payment is claimed;
    (2) The Borrower has fulfilled and continues to fulfill the 
requirements specified in paragraph (b) or (c) of this section, as 
appropriate; and
    (3) The Borrower has demonstrated to the satisfaction of HUD that:
    (i) For the period of vacancy, the project is not providing the 
Borrower with revenues at least equal to project expenses (exclusive of 
depreciation) and the amount of payments requested

[[Page 238]]

is not more than the portion of the deficiency attributable to the 
vacant unit (or residential space in a group home); and
    (ii) The project can achieve financial soundness within a reasonable 
time.
    (e) Prohibition of double compensation for vacancies. If the 
Borrower collects payments for vacancies from other sources (tenant 
rent, security deposits, payments under Sec. 891.435(c), or governmental 
payments under other programs), the Borrower shall not be entitled to 
collect vacancy payments to the extent these collections from other 
sources plus the vacancy payment exceed contract rent.

[[Page 239]]



CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, 
               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT




  --------------------------------------------------------------------
Part                                                                Page
901             Public Housing Management Assessment Program         241
902             Public Housing Assessment System............         270
903             Public housing agency plans.................         287
904             Low rent housing homeownership opportunities         295
905

[Reserved]

906             Section 5(h) homeownership program..........         340
908             Electronic transmission of required family 
                    data for public housing, indian housing, 
                    and the section 8 rental certificate, 
                    rental voucher, and moderate 
                    rehabilitation programs.................         351
941             Public housing development..................         353
945             Designated housing--public housing 
                    designated for occupancy by disabled, 
                    elderly, or disabled and elderly 
                    families................................         376
954             Indian home program.........................         385
960             Admission to, and occupancy of, public 
                    housing.................................         411
963             Public Housing--Contracting with resident-
                    owned businesses........................         418
964             Tenant participation and tenant 
                    opportunities in public housing.........         421
965             PHA-owned or leased projects--general 
                    provisions..............................         436
966             Lease and grievance procedures..............         451
968             Public housing modernization................         462
969             PHA-owned projects--continued operation as 
                    low-income housing after completion of 
                    debt service............................         504
970             Public housing program--demolition or 
                    disposition of public housing projects..         506
971             Assessment of the reasonable revitalization 
                    potential of certain public housing 
                    required by law.........................         521

[[Page 240]]

982             Section 8 tenant-based assistance: unified 
                    rule for tenant-based assistance under 
                    the Section 8 rental certificate program 
                    and the Section 8 rental voucher program         528
983             Section 8 project-based certificate program.         589
984             Section 8 and public housing family self-
                    sufficiency program.....................         612
985             Section 8 management assessment program 
                    (SEMAP).................................         626
990             Annual contributions for operating subsidy..         636
1000            Native American housing activities..........         660
1001-1002

[Reserved]

1003            Community development block grants for 
                    Indian tribes and Alaska native villages         703
1004

[Reserved]

1005            Loan guarantees for Indian housing..........         743
1006-1699

[Reserved]


  Editorial Note: For nomenclature changes to chapter IX, see 59 FR 
14090, Mar. 25, 1994.

[[Page 241]]



PART 901--PUBLIC HOUSING MANAGEMENT ASSESSMENT PROGRAM--Table of Contents




Sec.
901.1   Purpose, program scope and applicability.
901.5   Definitions.
901.10   Indicator #1, vacancy rate and unit turnaround time.
901.15   Indicator #2, modernization.
901.20   Indicator #3, rents uncollected.
901.25   Indicator #4, work orders.
901.30   Indicator #5, annual inspection of units and systems.
901.35   Indicator #6, financial management.
901.40   Indicator #7, resident services and community building.
901.45   Indicator #8, security.
901.100   Data collection.
901.105   Computing assessment score.
901.110   PHA request for exclusion or modification of an indicator or 
          component.
901.115   PHA score and status.
901.120   State/Area Office functions.
901.125   PHA right of appeal.
901.130   Incentives.
901.135   Memorandum of Agreement.
901.140   Removal from troubled status and mod-troubled status.
901.145   Improvement Plan.
901.150   PHAs troubled with respect to the program under section 14 
          (mod-troubled PHAs).
901.155   PHMAP public record.
901.200   Events or conditions that constitute substantial default.
901.205   Notice and response.
901.210   Interventions.
901.215   Contracting and funding.
901.220   Resident participation in competitive proposals to manage the 
          housing of a PHA.
901.225   Resident petitions for remedial action.
901.230   Receivership.
901.235   Technical assistance.

    Authority: 42 U.S.C. 1437d(j); 42 U.S.C. 3535(d).

    Source: 61 FR 68933, Dec. 30, 1996, unless otherwise noted.



Sec. 901.1  Purpose, program scope and applicability.

    (a) Purpose. This part establishes the Public Housing Management 
Assessment Program (PHMAP) to implement and augment section 6(j) of the 
1937 Act. PHMAP provides policies and procedures to identify public 
housing agency (PHA), resident management corporation (RMC), and 
alternative management entity (AME) management capabilities and 
deficiencies, recognize high-performing PHAs, designate criteria for 
defining troubled PHAs and PHAs that are troubled with respect to the 
program under section 14 (Public Housing Modernization Program), and 
improve the management practices of troubled PHAs and mod-troubled PHAs.
    (b) Program scope. The PHMAP reflects only one aspect of PHA 
operations, i.e., the results of its management performance in specific 
program areas. The PHMAP should not be viewed by PHAs, the Department or 
other interested parties as an all-inclusive and encompassing view of 
overall PHA operations. When viewing overall PHA operations, other 
criteria, including but not limited to, the quality of a PHA's housing 
stock, compliance issues, Fair Housing and Equal Opportunity issues, 
Board knowledge and oversight of PHA operation, etc., even though not 
covered under the PHMAP, are necessary in order to determine the 
adequacy of overall PHA operations. The PHMAP can never be designed to 
be the sole method of viewing a PHA's overall operations. A PHA should 
not manipulate the PHMAP system in the short-term in order to achieve a 
higher PHMAP score, thereby delaying or negating long-term improvement. 
Making a correct and viable long-term decision (doing the right thing) 
may hurt a PHA in the short-term (i.e., lower PHMAP score), but will 
result in improved housing stock and better overall management of a PHA 
over the long-term and a higher sustainable PHMAP score.
    (c) Applicability. (1)(i) The provisions of this part remain 
applicable to PHAs and RMC/AMEs as described in paragraph (c)(1)(ii) 
until September 30, 1999.
    (ii) The provisions of this part apply to PHAs and RMC/AMEs as noted 
in the sections of this part. The management assessment of an RMC/AME 
differs from that of a PHA. Because an RMC/AME enters into a contract 
with a PHA to perform specific management functions on a development-by-
development or program basis, and because the scope of the management 
that is undertaken varies, not every indicator that applies to a PHA 
would be applicable to each RMC/AME.

[[Page 242]]

    (2) Due to the fact that the PHA and not the RMC/AME is ultimately 
responsible to the Department under the ACC, a PHA's score will be based 
on all of the developments covered by the ACC, including those with 
management functions assumed by an RMC or AME (pursuant to a court 
ordered receivership agreement, if applicable). This is necessary 
because of the limited nature of an RMC/AME's management functions and 
the regulatory and contractual relationships among the Department, PHAs 
and RMC/AMEs.
    (3) A significant feature of RMC management is that 24 CFR 
Secs. 964.225 (d) and (h) provide that a PHA may enter into a management 
contract with an RMC, but a PHA may not contract for assumption by the 
RMC of the PHA's underlying responsibilities to the Department under the 
Annual Contributions Contract (ACC).
    (4) When a PHA's management functions have been assumed by an AME:
    (i) If the AME assumes only a portion of the PHA's management 
functions, the provisions of this part that apply to RMCs apply to the 
AME (pursuant to a court ordered receivership agreement, if applicable); 
or
    (ii) If the AME assumes all, or substantially all, of the PHA's 
management functions, the provisions of this part that apply to PHAs 
apply to the AME (pursuant to a court ordered receivership agreement, if 
applicable).
    (5) To ensure quality management results from a contract between an 
AME and a PHA, or between an AME and HUD, minimum performance criteria 
that relate to the PHMAP indicators, as applicable, should be included 
in such contract. Failure to meet the performance criteria would be a 
basis for termination of the contract. However, even in the absence of 
explicit contractual provisions, this part applies to AMEs in accordance 
with paragraph (b)(4) of this section, above.

[61 FR 68933, Dec. 30, 1996, as amended at 63 FR 46617, Sept. 1, 1998]



Sec. 901.5  Definitions.

    Actual vacancy rate is the vacancy rate calculated by dividing the 
total number of vacancy days in the fiscal year by the total number of 
unit days available in the fiscal year.
    Adjusted vacancy rate is the vacancy rate calculated after excluding 
the vacancy days that are exempted for any of the eligible reasons. It 
is calculated by dividing the total number of adjusted vacancy days in 
the fiscal year by the total number of unit days available in the fiscal 
year.
    Alternative management entity (AME) is a receiver, private 
contractor, private manager, or any other entity that is under contract 
with a PHA, or that is otherwise duly appointed or contracted (for 
example, by court order, pursuant to a court ordered receivership 
agreement, if applicable, or agency action), to manage all or part of a 
PHA's operations. Depending upon the scope of PHA management functions 
assumed by the AME, in accordance with Sec. 901.1(b)(2), the AME is 
treated as a PHA or an RMC for purposes of this part and, as 
appropriate, the terms PHA and RMC include AME.
    Assessed fiscal year is the PHA fiscal year that has been reviewed 
for management performance using the PHMAP indicators. Unless otherwise 
indicated, the assessed fiscal year is the immediate past fiscal year of 
a PHA.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing of the Department.
    Available units are dwelling units, (occupied or vacant) under a 
PHA's Annual Contributions Contract, that are available for occupancy, 
after excluding or adjusting for units approved for non-dwelling use, 
employee-occupied units, and vacant units approved for deprogramming 
(units approved for demolition, disposition or units that have been 
combined).
    Average number of days for non-emergency work orders to be completed 
is calculated by dividing the total of the:
    (1) Number of days in the assessed fiscal year it takes to close 
active non-emergency work orders carried over from the previous fiscal 
year;
    (2) The number of days it takes to complete non-emergency work 
orders issued and closed during the assessed fiscal year; and
    (3) The number of days all active non-emergency work orders are open 
in the assessed fiscal year, but not completed, by the total number of 
non-

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emergency work orders used in the calculation of paragraphs (1), (2) and 
(3), of this definition.
    Average turnaround time is the annual average of the total number of 
turnaround days between the latter of the legal expiration date of the 
immediate past lease or the actual move-out date of the former tenant 
(whenever that occurred, including in some previous fiscal year) and the 
date a new lease takes effect. Each time an individual unit is re-
occupied (turned around) during the fiscal year, the turnaround days for 
that unit shall be counted in the turnaround time. Average turnaround 
time is calculated by dividing the total turnaround days for all units 
re-occupied during the assessed fiscal year by the total number of units 
re-occupied during the assessed fiscal year.
    Cash reserve is the amount of cash available for operations at the 
end of an annual reporting period after all necessary expenses of a PHA 
or development have been paid or funds have been set-aside for such 
payment. The cash reserve computation takes into consideration both 
short-term accounts receivable and accounts payable.
    Confirmatory review is an on-site review for the purposes of State/
Area Office verification of the performance level of a PHA, the accuracy 
of the data certified to by a PHA, and the accuracy of the data derived 
from State/Area Office files.
    Correct means to improve performance in an indicator to a level of 
grade C or better.
    Cyclical work orders are work orders issued for the performance of 
routine maintenance work that is done in the same way at regular 
intervals. Examples of cyclical work include, but are not limited to, 
mopping hallways; picking up litter; cleaning a trash compactor; 
changing light bulbs in an entryway; etc. (Cyclical work orders should 
not be confused with preventive maintenance work orders.)
    Deficiency means any grade below C in an indicator or component.
    Down time is the number of calendar days a unit is vacant between 
the later of the legal expiration date of the immediate past lease or 
the actual move-out date of the former resident, and the date the work 
order is issued to maintenance.
    Dwelling rent refers to the resident dwelling rent charges reflected 
in the monthly rent roll(s) and excludes utility reimbursements, 
retroactive rent charges, and any other charges not specifically 
identified as dwelling rent, such as maintenance charges, excess utility 
charges and late charges.
    Dwelling rent to be collected means dwelling rent owed by residents 
in possession at the beginning of the assessed fiscal year, plus 
dwelling rent charged to residents during the assessed fiscal year.
    Dwelling rent uncollected means unpaid resident dwelling rent owed 
by any resident in possession during the assessed fiscal year, but not 
collected by the last day of the assessed fiscal year.
    Dwelling unit is a unit that is either leased or available for lease 
to eligible low-income residents.
    Effective lease date is the date when the executed lease contract 
becomes effective and rent is due and payable and all other provisions 
of the lease are enforceable.
    Emergency means physical work items that pose an immediate threat to 
life, health, safety, or property, or that are related to fire safety.
    Emergency status abated means that an emergency work order is either 
fully completed, or the emergency condition is temporarily eliminated 
and no longer poses an immediate threat. If the work cannot be 
completed, emergency status can be abated by transferring the resident 
away from the emergency situation.
    Emergency work order is a work order, from any source, that involves 
a circumstance that poses an immediate threat to life, health, safety or 
property, or that is related to fire safety.
    Employee occupied units refers to units that are occupied by 
employees who are required to live in public housing as a condition of 
their job, rather than the occupancy being subject to the normal 
resident selection process.
    HQS means Housing Quality Standards as set forth at 24 CFR 
Sec. 882.109 and amended by the Lead-Based Paint regulation at 24 CFR 
Sec. 35.

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    Improvement Plan is a document developed by a PHA, specifying the 
actions to be taken, including timetables, that may be required to 
correct deficiencies where the grade for an indicator is a grade D or E, 
and shall be required to correct deficiencies of failed indicators, 
identified as a result of the PHMAP assessment when an MOA is not 
required.
    Indicators means the major categories of PHA management functions 
that are examined under this program for assessment purposes. The list 
of individual indicators and the way they are graded is provided in 
Sec. 901.10 through Sec. 901.45.
    Lease up time is the number of calendar days between the time the 
repair of a unit is completed and a new lease takes effect.
    Local occupancy/housing codes are the minimum standards for human 
occupancy, if any, as defined by the local ordinance(s) of the 
jurisdiction in which the housing is located.
    Maintenance plan is a comprehensive annual plan of a PHA's 
maintenance operation that contains the fiscal year's estimated work 
schedule and which is supported by a staffing plan, contract schedule, 
materials and procurement plan, training, and approved budget. The plan 
should establish a strategy for meeting the goals and time frames of the 
facilities management planning and execution, capital improvements, 
utilities, and energy conservation activities.
    Major systems include, but are not limited to, structural/building 
envelopes which include roofing, walls, windows, hardware, flashing and 
caulking; mechanical systems which include heating, ventilation, air 
conditioning, plumbing, drainage, underground utilities (gas, electrical 
and water), and fuel storage tanks; electrical systems which include 
underground systems, above ground systems, elevators, emergency 
generators, door bells, electronic security devices, fire alarms, smoke 
alarms, outdoor lighting, and indoor lighting (halls, stairwells, public 
areas and exit signs); and transformers.
    Make ready time is the number of calendar days between the date the 
unit is referred to maintenance for repair by a work order and occupancy 
is notified that the unit is ready for re-occupancy.
    Memorandum of Agreement (MOA) is a binding contractual agreement 
between a PHA and HUD that is required for each PHA designated as 
troubled and/or mod-troubled. The MOA sets forth target dates, 
strategies and incentives for improving management performance; and 
provides sanctions if performance does not result.
    Move-out date is the actual date when the resident vacates the unit, 
which may or may not coincide with the legal expiration of the lease 
agreement.
    Non-emergency work order is any work order that covers a situation 
that is not an immediate threat to life, health, safety, or property, or 
that is unrelated to fire safety.
    Percent of dwelling rent uncollected is calculated by dividing the 
amount of dwelling rent uncollected by the total dwelling rent to be 
collected.
    PHA means a public housing agency. As appropriate in accordance with 
Sec. 901.1(b)(2), PHA also includes AME.
    Percentage of emergency work orders completed within 24 hours is the 
ratio of emergency work orders completed in 24 hours to the total number 
of emergency work orders. The formula for calculating this ratio is: 
total emergency work orders completed (or emergency status abated) in 24 
hours or less, divided by the total number of emergency work orders.
    PHA-generated work order is any work order that is issued in 
response to a request from within the PHA administration.
    Preventive maintenance program is a program under which certain 
maintenance procedures are systematically performed at regular intervals 
to prevent premature deterioration of buildings and systems. The program 
is developed and regularly updated by the PHA, and fully documents what 
work is to be performed and at what intervals. The program includes a 
system for tracking the performance of preventive maintenance work.
    Preventive maintenance work order is any work done on a regularly 
scheduled basis in order to prevent deterioration or breakdowns in 
individual units or major systems.

[[Page 245]]

    Reduced actual vacancy rate within the previous three years is a 
comparison of the vacancy rate in the PHMAP assessment year (the 
immediate past fiscal year) with the vacancy rate of that fiscal year 
which is two years previous to the assessment year. It is calculated by 
subtracting the vacancy rate in the assessment year from the vacancy 
rate in the earlier year. If a PHA elects to certify to the reduction of 
the vacancy rate within the previous three years, the PHA shall retain 
justifying documentation to support its certification for HUD post 
review.
    Reduced the average time it took to complete non-emergency work 
orders during the previous three years is a comparison of the average 
time it took to complete non-emergency work orders in the PHMAP 
assessment year (the immediate past fiscal year) with the average time 
it took to complete non-emergency work orders of that fiscal year which 
is two years previous to the assessment year. It is calculated by 
subtracting the average time it took to complete non-emergency work 
orders in the PHMAP assessment year from the average time it took to 
complete non-emergency work orders in the earlier year. If a PHA elects 
to certify to the reduction of the average time it took to complete non-
emergency work orders during the previous three years, the PHA shall 
retain justifying documentation to support its certification for HUD 
post review.
    Resident-generated work order is a work order issued by a PHA in 
response to a request from a lease holder or family member of a lease 
holder.
    Resident management corporation (RMC) means the entity that proposes 
to enter into, or that enters into, a management contract with a PHA in 
accordance with 24 CFR 964.120. As appropriate in accordance with 
Sec. 901.1(b)(2), RMC also includes AME.
    Routine operating expenses are all expenses which are normal, 
recurring fiscal year expenditures. Routine expenses exclude those 
expenditures that are not normal fiscal year expenditures and those that 
clearly represent work of such a substantial nature that the expense is 
clearly not a routine occurrence.
    Standards equivalent to HQS are housing/occupancy inspection 
standards that are equal to HUD's Section 8 HQS.
    Substantial default means a PHA is determined by the Department to 
be in violation of statutory, regulatory or contractual provisions or 
requirements, whether or not these violations would constitute a 
substantial default or a substantial breach under explicit provisions of 
the relevant Annual Contributions Contract (ACC) or a Memorandum of 
Agreement.
    Unit days available are the number of days that the available units 
were available for occupancy in a PHA fiscal year. Unit days available 
are calculated by adding the number of days that each unit was available 
for occupancy in the year.
    Units approved for non-dwelling use refers to units approved for 
non-dwelling status for use in the provision of social services, 
charitable purposes, public safety activities and resident services, or 
used in the support of economic self-sufficiency and anti-drug 
activities.
    Units vacant due to circumstances and actions beyond the PHA's 
control are dwelling units that are vacant due to circumstances and 
actions that prohibit the PHA from occupying, selling, demolishing, 
rehabilitating, reconstructing, consolidating or modernizing the units. 
For purposes of this definition, circumstances and actions beyond the 
PHA's control are limited to:
    (1) Litigation. The effect of court litigation such as a court order 
or settlement agreement that is legally enforceable. An example would be 
units that are required to remain vacant because of fire/police 
investigations, coroner's seal, or as part of a court-ordered or HUD-
approved desegregation effort.
    (2) Laws. Federal or State laws of general applicability, or their 
implementing regulations. This category does not include units vacant 
only because they do not meet minimum housing and building code 
standards pertaining to construction or habitability under Federal, 
State, or local laws or regulations, except when these code violations 
are caused for reasons beyond the control of the PHA, rather than as a 
result of management and/or

[[Page 246]]

maintenance failures by the PHA. Examples of exempted units under this 
category are: vacant units that are documented to be uninhabitable for 
reasons beyond the PHA's control due to high/unsafe levels of hazardous/
toxic materials (e.g., lead-based paint or asbestos), by order of the 
local health department or directive of the Environmental Protection 
Agency, where the conditions causing the order are beyond the control of 
the PHA, and units kept vacant because they became structurally unsound 
(e.g., buildings damaged by shrinking/swelling subsoil or similar 
situations). Other examples are vacant units in which resident property 
has been abandoned, but only if State law requires the property to be 
left in the unit for some period of time, and only for the period stated 
in the law and vacant units required to remain vacant because of fire/
police investigations, coroner's seal, or court order.
    (3) Changing market conditions. Example of units in this category 
are small PHAs that are located in areas experiencing population loss or 
economic dislocations that face a lack of demand in the foreseeable 
future, even after the PHA has taken aggressive marketing and outreach 
measures. Where a PHA claims extraordinary market conditions, the PHA 
will be expected to document the market conditions to which it refers 
(the examples of changing population base and competing projects are the 
simplest), the explicit efforts that the PHA has made to address those 
conditions, the likelihood that those conditions will be mitigated or 
eliminated in the near term, and why the market conditions are such that 
the PHA is prevented from occupying, selling, demolishing, 
rehabilitating, reconstructing, consolidating or modernizing the vacant 
units. In order to justify the adjustment, the PHA will need to document 
the specific market conditions that exist and document marketing and 
outreach efforts. The PHA will need to describe when the downturn in 
market conditions occurred, the location(s) of the unit(s) effected, the 
likelihood that these circumstances will be mitigated or eliminated in 
the near term and why the market conditions are such that they are 
preventing the PHA from occupying, selling, demolishing, rehabilitating, 
reconstructing, consolidating, or modernizing the vacant units.
    (4) Natural disasters. These are vacant units that are documented to 
be uninhabitable because of damaged suffered as a result of natural 
disasters such as floods, earthquakes, hurricanes, tornadoes, etc. In 
the case of a ``natural disaster'' claim, the PHA would be expected to 
point to a proclamation by the President or the Governor that the county 
or other local area in question has, in fact, been declared a disaster 
area.
    (5) Insufficient funding. Lack of funding for otherwise approvable 
applications made for Comprehensive Improvement Assistance Program 
(CIAP) funds (only PHAs with less than 250 units are eligible to apply 
and compete for CIAP funds). This definition will cease to be used if 
CIAP is replaced by a formula grant.
    (6) Casualty Losses. Vacant units that have sustained casualty 
damage and are pending resolution of insurance claims or settlements, 
but only until the insurance claim is adjusted, i.e., funds to repair 
the unit are received. The vacancy days exempted are those included in 
the period of time between the casualty loss and the receipt of funds 
from the insurer to cover the loss in whole or in part.
    Vacancy day is a day when an available unit is not under lease by an 
eligible low-income resident. The maximum number of vacancy days for any 
unit is the number of days in the year, regardless of the total amount 
of time the unit has been vacant. Vacancy days are calculated by adding 
the total number of days vacant from all available units that were 
vacant for any reason during the PHA's fiscal year.
    Vacant unit is an available unit that is not under lease to an 
eligible low-income family.
    Vacant unit turnaround work order is a work order issued that 
directs a vacant unit to be made ready to lease to a new resident and 
reflects all work items to prepare the unit for occupancy.

[[Page 247]]

    Vacant unit undergoing modernization as defined in 24 CFR 
Sec. 990.102. In addition, the following apply when computing time 
periods for a vacant unit undergoing modernization:
    (1) If a unit is vacant prior to being included in a HUD-approved 
modernization budget, those vacancy days that had accumulated prior to 
the unit being included in the modernization budget must be included as 
non-exempted vacancy days in the calculation.
    (2) The calculation of turnaround time for newly modernized units 
starts when the unit in turned over to the PHA from the contractor and 
ends when the lease is effective for the new or returning resident. 
Thus, the total turnaround time would be the sum of the pre-
modernization vacancy time, and the post-modernization vacancy time.
    (3) Unit-by-unit documentation, showing when a vacant unit was 
included in a HUD-approved modernization budget, when it was released to 
the PHA by the contractor, and when a new lease is effective for the new 
or returning resident, must be maintained by the PHA.
    (4) Units remaining vacant more than two FFYs after the FFY in which 
the modernization funds are approved, may no longer be exempted from the 
calculation of the adjusted vacancy rate if the construction contract 
has not been let. These units may be exempted again, but only after a 
contract is let.
    Vacant units approved for deprogramming exist when a PHA's 
application for the demolition and/or disposition of public housing 
units has received written approval from HUD; or when a PHA's 
application to combine/convert has received written approval from HUD.
    Work order is a directive, containing one or more tasks issued to a 
PHA employee or contractor to perform one or more tasks on PHA property. 
This directive describes the location and the type of work to be 
performed; the date and time of receipt; date and time issued to the 
person or entity performing the work; the date and time the work is 
satisfactorily completed; the parts used to complete the repairs and the 
cost of the parts; whether the damage was caused by the resident; and 
the charges to the resident for resident-caused damage. The work order 
is entered into a log which indicates at all times the status of all 
work orders as to type (emergency, non-emergency), when issued, and when 
completed.
    Work order completed during the immediate past fiscal year is any 
work order that is completed during the PHA's fiscal year regardless of 
when it may have been received.
    Work order deferred for modernization is any work order that is 
combined with similar work items and completed within the current PHMAP 
assessment year, or will be completed in the following year if there are 
less than three months remaining before the end of the PHA fiscal year 
when the work order was generated, under the PHA's modernization program 
or other PHA capital improvements program.



Sec. 901.10  Indicator #1, vacancy rate and unit turnaround time.

    This indicator examines the vacancy rate, a PHA's progress in 
reducing vacancies, and unit turnaround time. Implicit in this indicator 
is the adequacy of the PHA's system to track the duration of vacancies 
and unit turnaround, including down time, make ready time, and lease up 
time. This indicator has a weight of x2.
    (a) For the calculation of the actual and adjusted vacancy rate 
(and, if applicable, unit turnaround time), the following three 
categories of units (as defined in the rule at Sec. 901.5), that are not 
considered available for occupancy, will be completely excluded from the 
computation:
    (1) Units approved for non-dwelling use.
    (2) Employee occupied units.
    (3) Vacant units approved for deprogramming (i.e., demolition, 
disposition or units that have been combined).
    (b) For the calculation of the adjusted vacancy rate and turnaround 
time, the vacancy days for units in the following categories (fully 
defined in the rule at Sec. 901.5) shall be exempted:
    (1) Vacant units undergoing modernization as defined in Sec. 901.5.

[[Page 248]]

    (i) Only vacancy days associated with a vacant unit that meets the 
conditions of being a unit undergoing modernization will be exempted 
when calculating the adjusted vacancy rate or, if necessary, the unit 
turnaround time. Neither vacancy days associated with a vacant unit 
prior to that unit meeting the conditions of being a unit undergoing 
modernization nor vacancy days associated with a vacant unit after 
construction work has been completed or after the time period for 
placing the vacant unit under construction has expired shall be 
exempted.
    (ii) A PHA must maintain the following documentation to support its 
determination of vacancy days associated with a vacant unit that meets 
the conditions of being a unit undergoing modernization:
    (A) The date on which the unit met the conditions of being a vacant 
unit undergoing modernization: and
    (B) The date on which construction work was completed or the time 
period for placing the vacant unit under construction expired.
    (2) Units vacant due to circumstances and actions beyond the PHA's 
control as defined in Sec. 901.5. Such circumstances and actions may 
include:
    (i) Litigation, such as a court order or settlement agreement that 
is legally enforceable.
    (ii) Federal or, when not preempted by Federal requirements, State 
law of general applicability or their implementing regulations.
    (iii) Changing market conditions.
    (iv) Natural disasters.
    (v) Insufficient funding for otherwise approvable applications made 
for CIAP funds. This definition will cease to be used if CIAP is 
replaced by a formula grant.
    (vi) Vacant units that have sustained casualty damage and are 
pending resolution of insurance claims or settlements, but only until 
the insurance claim is adjusted. A PHA must maintain at least the 
following documentation to support its determination of vacancy days 
associated with units vacant due to circumstances and actions beyond the 
PHA's control:
    (A) The date on which the unit met the conditions of being a unit 
vacant due to circumstances and actions beyond the PHA's control;
    (B) Documentation identifying the specific conditions that 
distinguish the unit as a unit vacant due to circumstances and actions 
beyond the PHA's control as defined in Sec. 901.5;
    (C) The actions taken by the PHA to eliminate or mitigate these 
conditions; and
    (D) The date on which the unit ceased to meet such conditions and 
became an available unit.
    (E) This supporting documentation is subject to review and may be 
requested for verification purposes at any time by HUD.
    (c) Component #1, vacancy percentage and progress in reducing 
vacancies. A PHA may choose whether to use the actual vacancy rate, the 
adjusted vacancy rate or a reduction in the actual vacancy rate within 
the past three years. This component has a weight of x2.
    (1) Grade A: The PHA is in one of the following categories:
    (i) An actual vacancy rate of 3% or less; or
    (ii) An adjusted vacancy rate of 2% or less.
    (2) Grade B: The PHA is in one of the following categories:
    (i) An actual vacancy rate of greater than 3% and less than or equal 
to 5%; or
    (ii) An adjusted vacancy rate of greater than 2% and less than or 
equal to 3%.
    (3) Grade C: The PHA is in one of the following categories:
    (i) An actual vacancy rate of greater than 5% and less than or equal 
to 7%; or
    (ii) An adjusted vacancy rate of greater than 3% and less than or 
equal to 4%; or
    (iii) The PHA has reduced its actual vacancy rate by at least 15 
percentage points within the past three years and has an adjusted 
vacancy rate of greater than 4% and less than or equal to 5%.
    (4) Grade D: The PHA is in one of the following categories:
    (i) An actual vacancy rate of greater than 7% and less than or equal 
to 9%; or

[[Page 249]]

    (ii) An adjusted vacancy rate of greater than 4% and less than or 
equal to 5%; or
    (iii) The PHA has reduced its actual vacancy rate by at least 10 
percentage points within the past three years and has an adjusted 
vacancy rate of greater than 5% and less than or equal to 6%.
    (5) Grade E: The PHA is in one of the following categories:
    (i) An actual vacancy rate of greater than 9% and less than or equal 
to 10%; or
    (ii) An adjusted vacancy rate of greater than 5% and less than or 
equal to 6%; or
    (iii) The PHA has reduced its actual vacancy rate by at least five 
percentage points within the past three years and has an adjusted 
vacancy rate of greater than 6% and less than or equal to 7%.
    (6) Grade F: The PHA is in one of the following categories:
    (i) An actual vacancy rate greater than 10%; or
    (ii) An adjusted vacancy rate greater than 7%; or
    (iii) An adjusted vacancy rate of greater than 6% and less than or 
equal to 7% and the PHA has not reduced its actual vacancy rate by at 
least five percentage points within the past three years.
    (d) Component #2, unit turnaround time. This component is to be 
completed only by PHAs scoring below a grade C on component #1. This 
component has a weight of x1.
    (1) Grade A: The average number of calendar days between the time 
when a unit is vacated and a new lease takes effect for units re-
occupied during the PHA's assessed fiscal year, is less than or equal to 
20 calendar days.
    (2) Grade B: The average number of calendar days between the time 
when a unit is vacated and a new lease takes effect for units re-
occupied during the PHA's assessed fiscal year, is greater than 20 
calendar days and less than or equal to 25 calendar days.
    (3) Grade C: The average number of calendar days between the time 
when a unit is vacated and a new lease takes effect for units re-
occupied during the PHA's assessed fiscal year, is greater than 25 
calendar days and less than or equal to 30 calendar days.
    (4) Grade D: The average number of calendar days between the time 
when a unit is vacated and a new lease takes effect for units re-
occupied during the PHA's assessed fiscal year, is greater than 30 
calendar days and less than or equal to 40 calendar days.
    (5) Grade E: The average number of calendar days between the time 
when a unit is vacated and a new lease takes effect for units re-
occupied during the PHA's assessed fiscal year, is greater than 40 
calendar days and less than or equal to 50 calendar days.
    (6) Grade F: The average number of calendar days between the time 
when a unit is vacated and a new lease takes effect for units re-
occupied during the PHA's assessed fiscal year, is greater than 50 
calendar days.



Sec. 901.15  Indicator #2, modernization.

    This indicator is automatically excluded if a PHA does not have a 
modernization program. This indicator examines the amount of unexpended 
funds over three Federal fiscal years (FFY) old, the timeliness of fund 
obligation, the adequacy of contract administration, the quality of the 
physical work, and the adequacy of budget controls. All components apply 
to both the Comprehensive Grant Program (CGP), the Comprehensive 
Improvement Assistance Program (CIAP) and lead based paint risk 
assessment funding (1992-1995), and any successor program(s) to the CGP 
or the CIAP. Only components #3, #4 and #5 apply to funding under the 
Hope VI Program and the Vacancy Reduction Program for the assessment of 
this indicator. This indicator has a weight of x1.5.
    (a) Component #1, unexpended funds over three Federal fiscal years 
(FFYs) old. This component has a weight of x1.
    (1) Grade A: The PHA has no unexpended funds over three FFYs old or 
is able to demonstrate one of the following:
    (i) The unexpended funds are leftover funds and will be recaptured 
after audit;
    (ii) There are no unexpended funds past the original HUD-approved 
implementation schedule deadline that allowed longer than three FFYs; or

[[Page 250]]

    (iii) The PHA has extended the time within 30 calendar days after 
the expenditure deadline and the time extension is based on reasons 
outside of the PHA's control, such as need to use leftover funds, 
unforeseen delays in contracting or contract administration, litigation, 
material shortages, or other non-PHA institutional delay.
    (2) Grade F: The PHA has unexpended funds over three FFYs old and is 
unable to demonstrate any of the above three conditions; or the PHA 
requests HUD approval of a time extension based on reasons within the 
PHA's control.
    (b) Component #2, timeliness of fund obligation. This component has 
a weight of x2.
    (1) Grade A: The PHA has no unobligated funds over two FFYs old or 
is able to demonstrate one of the following:
    (i) There are no unobligated funds past the original HUD-approved 
implementation schedule deadline that allowed longer than two FFYs; or
    (ii) The PHA has extended the time within 30 calendar days after the 
obligation deadline and the time extension is based on reasons outside 
of the PHA's control, such as need to use leftover funds, unforeseen 
delays in contracting or contract administration, litigation, material 
shortages, or other non-PHA institutional delay.
    (2) Grade F: The PHA has unobligated funds over two FFYs old and is 
unable to demonstrate any of the above two conditions; or the PHA 
requests HUD approval of a time extension based on reasons within the 
PHA's control.
    (c) Component #3, adequacy of contract administration. For the 
purposes of this component, the term ``findings'' means a violation of a 
statute, regulation, Annual Contributions Contract or other HUD 
requirement in the area of contract administration. This component has a 
weight of x1.5.
    (1) Grade A: Based on HUD's latest on-site inspection and/or audit, 
where a written report was provided to the PHA at least 75 calendar days 
before the end of the PHA's fiscal year, there were no findings related 
to contract administration or the PHA has corrected all such findings.
    (2) Grade C: Based on HUD's latest on-site inspection and/or audit, 
where a written report was provided to the PHA at least 75 calendar days 
before the end of the PHA's fiscal year, there were findings related to 
contract administration and the PHA is in the process of correcting all 
such findings.
    (3) Grade F: Based on HUD's latest on-site inspection and/or audit, 
where a written report was provided to the PHA at least 75 calendar days 
before the end of the PHA's fiscal year, there were findings related to 
contract administration and the PHA has failed to initiate corrective 
actions for all such findings or those actions which have been initiated 
have not resulted in progress toward remedying all of the findings.
    (d) Component #4, quality of the physical work. For the purposes of 
this component, the term ``findings'' means a violation of a statute, 
regulation, Annual Contributions Contract or other HUD requirement in 
the area of physical work quality. This component has a weight of x3.
    (1) Grade A: Based on HUD's latest on-site inspection, where a 
written report was provided to the PHA at least 75 calendar days before 
the end of the PHA's fiscal year, there were no findings related to the 
quality of the physical work or the PHA has corrected all such findings.
    (2) Grade C: Based on HUD's latest on-site inspection, where a 
written report was provided to the PHA at least 75 calendar days before 
the end of the PHA's fiscal year, there were findings related to the 
quality of the physical work and the PHA is in the process of correcting 
all such findings.
    (3) Grade F: Based on HUD's latest on-site inspection, where a 
written report was provided to the PHA at least 75 calendar days before 
the end of the PHA's fiscal year, there were findings related to the 
quality of the physical work and the PHA has failed to initiate 
corrective actions for all such findings or those actions which have 
been initiated have not resulted in progress toward remedying all of the 
findings.
    (e) Component #5, adequacy of budget controls. This component has a 
weight of x1.

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    (1) Grade A: The CGP PHA has expended modernization funds only on 
work in HUD-approved CGP Annual Statements, CGP Five-Year Action Plan, 
excluding emergencies, or CIAP Budgets, or has obtained prior HUD 
approval for required budget revisions. The CIAP PHA has expended 
modernization funds only on work in HUD-approved CIAP Budgets or related 
to originally approved work or has obtained prior HUD approval for 
required budget revisions.
    (2) Grade F: The CGP PHA has expended modernization funds on work 
that was not in HUD-approved CGP Annual Statements, CGP Five-Year Action 
Plan, excluding emergencies, or CIAP Budgets, and did not obtain prior 
HUD approval for required budget revisions. The CIAP PHA has expended 
modernization funds on work that was not in HUD-approved CIAP Budgets or 
was unrelated to originally approved work and did not obtain prior HUD 
approval for required budget revisions.



Sec. 901.20  Indicator #3, rents uncollected.

    This indicator examines the PHA's ability to collect dwelling rent 
owed by residents in possession during the immediate past fiscal year by 
measuring the balance of dwelling rents uncollected as a percentage of 
total dwelling rents to be collected. This indicator has a weight of 
x1.5.
    (a) Grade A: The percent of dwelling rent uncollected in the 
immediate past fiscal year is less than or equal to 2% of total dwelling 
rent to be collected.
    (b) Grade B: The percent of dwelling rent uncollected in the 
immediate past fiscal year is greater than 2% and less than or equal to 
4% of total dwelling rent to be collected.
    (c) Grade C: The percent of dwelling rent uncollected in the 
immediate past fiscal year is greater than 4% and less than or equal to 
6% of total dwelling rent to be collected.
    (d) Grade D: The percent of dwelling rent uncollected in the 
immediate past fiscal year is greater than 6% and less than or equal to 
8% of total dwelling rent to be collected.
    (e) Grade E: The percent of dwelling rent uncollected in the 
immediate past fiscal year is greater than 8% and less than or equal to 
10% of total dwelling rent to be collected.
    (f) Grade F: The percent of dwelling rent uncollected in the 
immediate past fiscal year is greater than 10% of total dwelling rent to 
be collected.



Sec. 901.25  Indicator #4, work orders.

    This indicator examines the average number of days it takes for a 
work order to be completed, and any progress a PHA has made during the 
preceding three years to reduce the period of time required to complete 
maintenance work orders. Implicit in this indicator is the adequacy of 
the PHA's work order system in terms of how a PHA accounts for and 
controls its work orders, and its timeliness in preparing/issuing work 
orders. This indicator has a weight of x1.
    (a) Component #1, emergency work orders completed within 24 hours or 
less. All emergency work orders should be tracked. This component has a 
weight of x1.
    (1) Grade A: At least 99% of emergency work orders were completed or 
the emergency was abated within 24 hours or less during the PHA's 
immediate past fiscal year.
    (2) Grade B: At least 98% of emergency work orders were completed or 
the emergency was abated within 24 hours or less during the PHA's 
immediate past fiscal year.
    (3) Grade C: At least 97% of emergency work orders were completed or 
the emergency was abated within 24 hours or less during the PHA's 
immediate past fiscal year.
    (4) Grade D: At least 96% of emergency work orders were completed or 
the emergency was abated within 24 hours or less during the PHA's 
immediate past fiscal year.
    (5) Grade E: At least 95% of emergency work orders were completed or 
the emergency was abated within 24 hours or less during the PHA's 
immediate past fiscal year.
    (6) Grade F: Less than 95% of emergency work orders were completed 
or the emergency was abated within 24 hours or less during the PHA's 
immediate past fiscal year.
    (b) Component #2, average number of days for non-emergency work 
orders to be

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completed. All non-emergency work orders that were active during the 
assessed fiscal year should be tracked (including preventive maintenance 
work orders), except non-emergency work orders from the date they are 
deferred for modernization, issued to prepare a vacant unit for re-
rental, or issued for the performance of cyclical maintenance. This 
component has a weight of x2.
    (1) Grade A: All non-emergency work orders are completed within an 
average of 25 calendar days.
    (2) Grade B: All non-emergency work orders are completed within an 
average of greater than 25 calendar days and less than or equal to 30 
calendar days.
    (3) Grade C: The PHA is in one of the following categories:
    (i) All non-emergency work orders are completed within an average of 
greater than 30 calendar days and less than or equal to 40 calendar 
days; or
    (ii) The PHA has reduced the average time it takes to complete non-
emergency work orders by at least 15 days during the past three years.
    (4) Grade D: The PHA is in one of the following categories:
    (i) All non-emergency work orders are completed within an average of 
greater than 40 calendar days and less than or equal to 50 calendar 
days; or
    (ii) The PHA has reduced the average time it takes to complete non 
emergency work orders by at least 10 days during the past three years.
    (5) Grade E: The PHA is in one of the following categories:
    (i) All non-emergency work orders are completed within an average of 
greater than 50 calendar days and less than or equal to 60 calendar 
days; or
    (ii) The PHA has reduced the average time it takes to complete non-
emergency work orders by at least 5 days during the past three years.
    (6) Grade F: The PHA is in one of the following categories:
    (i) All non-emergency work orders are completed within an average of 
greater than 60 calendar days; or
    (ii) The PHA has not reduced the average time it takes to complete 
non-emergency work orders by at least 5 days during the past three 
years.



Sec. 901.30  Indicator #5, annual inspection of units and systems.

    This indicator examines the percentage of units that a PHA inspects 
on an annual basis in order to determine short-term maintenance needs 
and long-term modernization needs. Implicit in this indicator is the 
adequacy of the PHA's inspection program in terms of the quality of a 
PHA's inspections, and how a PHA tracks both inspections and needed 
repairs. All occupied units are required to be inspected. This indicator 
has a weight of x1.
    (a) Units in the following categories are exempted and not included 
in the calculation of the total number of units, and the number and 
percentage of units inspected. Systems that are a part of individual 
dwelling units that are exempted, or a part of a building where all of 
the dwelling units in the building are exempted, are also exempted from 
the calculation of this indicator:
    (1) Occupied units where the PHA has made two documented attempts to 
inspect, but only if the PHA can document that appropriate legal action 
(up to and including eviction of the legal or illegal occupant(s)), has 
been taken under provisions of the lease to ensure that the unit can be 
subsequently inspected.
    (2) Units vacant for the full immediate past fiscal year for the 
following reasons, as defined at Sec. 901.5:
    (i) Vacant units undergoing modernization; and
    (ii) Vacant units that are documented to be uninhabitable for 
reasons beyond a PHA's control due to:
    (A) High/unsafe levels of hazardous/toxic materials;
    (B) By order of the local health department or a directive of the 
Environmental Protection Agency;
    (C) Natural disasters; and
    (D) Units kept vacant because they became structurally unsound.
    (b) Component #1, annual inspection of units. This component refers 
to an inspection using either the local housing and/or occupancy code, 
or HUD HQS if there is no local code or the local code is less stringent 
that HQS. This component has a weight of x1.

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    (1) Grade A: The PHA inspected 100% of its units and, if repairs 
were necessary for local code or HQS compliance, either completed the 
repairs during the inspection; issued work orders for the repairs; or 
referred similar work items to the current year's modernization program, 
or to next year's modernization program if there are less than three 
months remaining before the end of the PHA fiscal year when the 
inspection was completed.
    (2) Grade B: The PHA inspected less than 100% but at least 97% of 
its units and, if repairs were necessary for local code or HQS 
compliance, either completed the repairs during the inspection; issued 
work orders for the repairs; or referred similar work items to the 
current year's modernization program, or to next year's modernization 
program if there are less than three months remaining before the end of 
the PHA fiscal year when the inspection was completed.
    (3) Grade C: The PHA inspected less than 97% but at least 95% of its 
units and, if repairs were necessary for local code or HQS compliance, 
either completed the repairs during the inspection; issued work orders 
for the repairs; or referred similar work items to the current year's 
modernization program, or to next year's modernization program if there 
are less than three months remaining before the end of the PHA fiscal 
year when the inspection was completed.
    (4) Grade D: The PHA inspected less than 95% but at least 93% of its 
units and, if repairs were necessary for local code or HQS compliance, 
either completed the repairs during the inspection; issued work orders 
for the repairs; or referred similar work items to the current year's 
modernization program, or to next year's modernization program if there 
are less than three months remaining before the end of the PHA fiscal 
year when the inspection was completed.
    (5) Grade E: The PHA inspected less than 93% but at least 90% of its 
units and, if repairs were necessary for local code or HQS compliance, 
either completed the repairs during the inspection; issued work orders 
for the repairs; or referred similar work items to the current year's 
modernization program, or to next year's modernization program if there 
are less than three months remaining before the end of the PHA fiscal 
year when the inspection was completed.
    (6) Grade F: The PHA has failed to inspect at least 90% of its 
units; or failed to correct deficiencies during the inspection or issue 
work orders for the repairs; or failed to refer similar work items to 
the current year's modernization program, or to next year's 
modernization program if there are less than three months remaining 
before the end of the PHA fiscal year when the inspection was completed.
    (c) Component #2, annual inspection of systems. This component 
examines the inspection of buildings and sites according to the PHA's 
maintenance plan, including performing the required maintenance on 
structures and systems in accordance with manufacturer's specifications 
and established local/PHA standards, or issuing work orders for 
maintenance/repairs, or including identified deficiencies in this year's 
modernization program, or in next year's modernization program if there 
are less than three months remaining before the end of the PHA fiscal 
year when the inspection was performed. This component has a weight of 
x1.
    (1) Grade A: The PHA inspected all major systems at 100% of its 
buildings and sites, according to its maintenance plan. The inspection 
included performing the required maintenance on structures and systems 
in accordance with manufacturer's specifications and established local/
PHA standards, or issuing work orders for maintenance/repairs, or 
including identified deficiencies in the current year's modernization 
program, or in next year's modernization program if there are less than 
three months remaining before the end of the PHA fiscal year when the 
inspection was performed.
    (2) Grade B: The PHA inspected all major systems of at least a 
minimum of 90% but less than 100% of its buildings and sites, according 
to its maintenance plan. The inspection included performing the required 
maintenance

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on structures and systems in accordance with manufacturer's 
specifications and established local/PHA standards, or issuing work 
orders for maintenance/ repairs, or including identified deficiencies in 
the current year's modernization program, or in next year's 
modernization program if there are less than three months remaining 
before the end of the PHA fiscal year when the inspection was performed.
    (3) Grade C: The PHA inspected all major systems of at least a 
minimum of 80% but less than 90% of its buildings and sites, according 
to its maintenance plan. The inspection included performing the required 
maintenance on structures and systems in accordance with manufacturer's 
specifications and established local/PHA standards, or issuing work 
orders for maintenance/ repairs, or including identified deficiencies in 
the current year's modernization program, or in next year's 
modernization program if there are less than three months remaining 
before the end of the PHA fiscal year when the inspection was performed.
    (4) Grade D: The PHA inspected all major systems of at least a 
minimum of 70% but less than 80% of its buildings and sites, according 
to its maintenance plan. The inspection included performing the required 
maintenance on structures and systems in accordance with manufacturer's 
specifications and established local/PHA standards, or issuing work 
orders for maintenance/ repairs, or including identified deficiencies in 
the current year's modernization program, or in next year's 
modernization program if there are less than three months remaining 
before the end of the PHA fiscal year when the inspection was performed.
    (5) Grade E: The PHA inspected all major systems of at least a 
minimum of 60% but less than 70% of its buildings and sites, according 
to its maintenance plan. The inspection included performing the required 
maintenance on structures and systems in accordance with manufacturer's 
specifications and established local/PHA standards, or issuing work 
orders for maintenance/ repairs, or including identified deficiencies in 
the current year's modernization program, or in next year's 
modernization program if there are less than three months remaining 
before the end of the PHA fiscal year when the inspection was performed.
    (6) Grade F: The PHA failed to inspect all major systems of at least 
60% of its buildings and sites and perform the required maintenance on 
these systems in accordance with manufacturers specifications and 
established local/PHA standards, or did not issue work orders for 
maintenance/repairs, or did not include identified deficiencies in the 
current year's modernization program, or in next year's modernization 
program if there are less than three months remaining before the end of 
the PHA fiscal year when the inspection was performed.



Sec. 901.35  Indicator #6, financial management.

    This indicator examines the amount of cash reserves available for 
operations and, for PHAs scoring below a grade C on cash reserves, 
energy/ utility consumption expenses. This indicator has a weight of x1.
    (a) Component #1, cash reserves. This component has a weight of x2.
    (a) Grade A: Cash reserves available for operations are greater than 
or equal to 15% of total actual routine expenditures, or the PHA has 
cash reserves of $3 million or more.
    (2) Grade B: Cash reserves available for operations are greater than 
or equal to 12.5%, but less than 15% of total actual routine 
expenditures.
    (3) Grade C: Cash reserves available for operations are greater than 
or equal to 10%, but less than 12.5% of total actual routine 
expenditures.
    (4) Grade D: Cash reserves available for operations are greater than 
or equal to 7.5%, but less than 10% of total actual routine 
expenditures.
    (5) Grade E: Cash reserves are greater than or equal to 5%, but less 
than 7.5% of total actual routine expenditures.
    (6) Grade F: Cash reserves available for operations are less than 5% 
of total actual routine expenditures.
    (b) Component #2, energy consumption. Either option A or option B of 
this component is to be completed only by

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PHAs that score below a grade C on component #1. Regardless of a PHA's 
score on component #1, it will not be scored on component #2 if all its 
units have tenant paid utilities. Annual energy/utility consumption 
expenses includes water and sewage usage. This component has a weight of 
x1.
    (1) Option A, annual energy/utility consumption expenses.
    (i) Grade A: Annual energy/utility consumption expenses, as compared 
to the average of the three years' rolling base consumption expenses, 
have not increased.
    (ii) Grade B: Annual energy/utility consumption expenses, as 
compared to the average of the three years' rolling base consumption 
expenses, have not increased by more than 3%.
    (iii) Grade C: Annual energy/utility consumption expenses, as 
compared to the average of the three years' rolling base consumption 
expenses, have increased by more than 3% and less than or equal to 5%.
    (iv) Grade D: Annual energy/utility consumption expenses, as 
compared to the average of the three years' rolling base consumption 
expenses, have increased by more than 5% and less than or equal to 7%.
    (v) Grade E: Annual energy/utility consumption expenses, as compared 
to the average of the three years' rolling base consumption expenses, 
have increased by more than 7% and less than or equal to 9%.
    (vi) Grade F: Annual energy/utility consumption expenses, as 
compared to the average of the three years' rolling base consumption 
expenses, have increased by more than 9%.
    (2) Option B, energy audit.
    (i) Grade A: The PHA has completed or updated its energy audit 
within the past five years and has implemented all of the 
recommendations that were cost effective.
    (ii) Grade C: The PHA has completed or updated its energy audit 
within the past five years, has developed an implementation plan and is 
on schedule with the implementation plan, based on available funds. The 
implementation plan identifies at a minimum, the items from the audit, 
the estimated cost, the planned funding source, and the anticipated date 
of completion for each item.
    (iii) Grade F: The PHA has not completed or updated its energy audit 
within the past five years, or has not developed an implementation plan 
or is not on schedule with its implementation plan, or has not 
implemented all of the recommendations that were cost effective, based 
on available funds.



Sec. 901.40  Indicator #7, Resident Services and Community Building.

    This indicator examines the PHA's efforts to deliver quality 
customer services and to encourage partnerships with residents, resident 
organizations, and the local community, including non-PHA service 
providers, that help improve management operations at the PHA; and to 
encourage programs that promote individual responsibility, self 
improvement and community involvement among residents and assist them to 
achieve economic uplift and develop self-sufficiency. Also, if 
applicable, this indicator examines PHA performance under any special 
HUD grant(s) administered by the PHA. PHAs can get credit for 
performance under non-HUD funded programs if they choose to be assessed 
for these programs. PHAs with fewer than 250 units or with 100% elderly 
developments will not be assessed under this indicator unless they 
request to be assessed at the time of PHMAP certification submission. 
This indicator has a weight of x1.
    (a) Component #1, economic uplift and self-improvement. PHAs will be 
assessed for all the programs that the PHA has HUD funding to implement. 
Also, PHAs can get credit for implementation of programs through 
partnerships with non-PHA providers, even if the programs are not funded 
by HUD or the PHA, if they choose to be assessed for them. PHAs must 
select either to be assessed for all or none of the non-HUD funded 
programs. This component has a weight of x1.
    (1) Grade A: The PHA Board of Commissioners, by resolution, has 
adopted one or more economic uplift and self-improvement programs, 
examples include but are not limited to, the Section 3 program, 
homeownership, PHA

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support for resident education, training, child-care, job-placement 
programs, Head Start, etc., and the PHA can document that it has 
implemented these programs in developments covering at least 90% of its 
family occupied units, either directly or through partnerships with non-
PHA providers, and the PHA monitors performance under the programs and 
issues reports concerning progress, including residents receiving 
services and residents employed, under these programs.
    (2) Grade C: The PHA Board of Commissioners, by resolution, has 
adopted one or more economic uplift and self-improvement programs, 
including but not limited to, the programs described in grade A, above, 
and the PHA can document that it has implemented these programs in 
developments covering at least 60% of its family occupied units, either 
directly or through partnerships with non-PHA providers, and the PHA 
staff monitors performance under the programs and issues reports to the 
Board concerning progress, including residents receiving services and 
residents employed, under these programs.
    (3) Grade F: The PHA Board of Commissioners, by resolution, has not 
adopted one or more economic uplift and self-improvement programs, 
including but not limited to, the programs described in grade A, above, 
or the PHA has not implemented these programs in developments covering 
at least 60% of its family occupied units, either directly or through 
partnerships with non-PHA providers.
    (b) Component #2, resident organization. This component has a weight 
of x1.
    (1) Grade A: The PHA can document formal recognition of, a system of 
communication and collaboration with, and support for resident councils 
where these exist, and where no resident council exists, the PHA can 
document its encouragement for the formation of such councils.
    (2) Grade F: The PHA cannot document formal recognition of, or a 
system of communication and collaboration with, or document its support 
for resident councils where these exist, or where no resident council 
exists, the PHA cannot document its encouragement for the formation of 
such councils.
    (c) Component #3, resident involvement. Implicit in this component 
is the need to ensure a PHA's delivery of quality customer services to 
residents. This component has a weight of x1.
    (1) Grade A: The PHA Board of Commissioners, by resolution, provides 
for resident representation on the Board and committees, and the PHA has 
implemented measures that ensure the opportunity for regular resident 
input into plans and the evaluation for ongoing quality of life and 
housing management conditions, including but not limited to, 
modernization and development programs, screening and other occupancy 
matters, relocation, the operating budget, resident programs, security 
and maintenance programs.
    (2) Grade C: The PHA Board of Commissioners, by resolution, provides 
for resident representation on the Board and committees, and the PHA has 
implemented measures that ensure the opportunity for regular resident 
input into plans and the evaluation for ongoing quality of life and 
housing management conditions in the modernization and development 
programs and at least three of the remaining six areas described in 
grade A, above.
    (3) Grade F: The PHA Board of Commissioners, by resolution, did not 
provide for resident representation on the Board and committees, or the 
PHA has not implemented measures that ensure the opportunity for regular 
resident input into plans and the evaluation for ongoing quality of life 
and housing management conditions in the modernization and development 
programs and at least three of the remaining six areas described in 
grade A, above.
    (d) Component #4, resident programs management. This component 
examines a PHA's management of HUD funded resident programs. However, 
PHAs can also get credit for performance under non-HUD funded programs 
if they choose to be assessed for them. PHAs must select either to be 
assessed for all or none of the non-HUD funded programs. This component 
has a weight of x1.
    (1) Grade A: If the PHA has any HUD funded special programs that 
benefit the residents, including but not limited

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to, the Family Investment Center (FIC), Youth Sports (YS), Food Banks, 
Health Clinics, Youth Apprenticeship Program (YAP), Family Self-
Sufficiency (FSS), or a Resident Management (RM) or Tenant Opportunity 
Programs (TOP) where the PHA is the contract administrator, the PHA can 
document that it is meeting at least 90% of its goals under the 
implementation plan for any and all of these programs.
    (2) Grade C: If the PHA has any HUD-funded special programs that 
benefit the residents, including but not limited to, the programs 
described in grade A, above, the PHA can document that it is meeting at 
least 60% of its goals under the implementation plan for any and all of 
these programs.
    (3) Grade F: If the PHA has any HUD-funded special programs that 
benefit the residents, including but not limited to, the programs 
described in grade A, above, the PHA cannot document that it is meeting 
at least 60% of its goals under the implementation plan for all of these 
programs.



Sec. 901.45  Indicator #8, security.

    This indicator evaluates the PHAs performance in tracking crime 
related problems in their developments, reporting incidence of crime to 
local law enforcement agencies, the adoption and implementation of tough 
applicant screening and resident eviction policies and procedures, and, 
as applicable, PHA performance under any HUD drug prevention or crime 
reduction grant(s). PHAs can get credit for performance under non-HUD 
funded programs if they choose to be assessed for these programs. PHAs 
with fewer than 250 units will not be assessed under this indicator 
unless they request to be assessed at the time of PHMAP certification 
submission. This indicator has a weight of x1.
    (a) Component #1, Tracking and Reporting Crime Related Problems. 
This component has a weight of x1.
    (1) Grade A: The PHA Board, by resolution, has adopted policies and 
the PHA has implemented procedures and can document that it (1) tracks 
crime and crime-related problems in at least 90% of its developments, 
and (2) has a cooperative system for tracking and reporting incidents of 
crime to local police authorities to improve law enforcement and crime 
prevention.
    (2) Grade C: The PHA Board, by resolution, has adopted policies and 
the PHA has implemented procedures and can document that it (1) tracks 
crime and crime-related problems in at least 60% of its developments, 
and (2) reports incidents of crime to local police authorities to 
improve law enforcement and crime prevention.
    (3) Grade F: The PHA Board, by resolution, has not adopted policies 
and the PHA has not implemented procedures or cannot document that it 
(1) tracks crime and crime-related problems in at least 60% of its 
developments, or (2) reports incidents of crime to local police 
authorities to improve law enforcement and crime prevention.
    (b) Component #2, Screening of Applicants. This component has a 
weight of x1.
    (1) Grade A: The PHA Board, by resolution, has adopted policies and 
the PHA has implemented procedures and can document that it successfully 
screens out and denies admission to a public housing applicant who:
    (i) Has a recent history of criminal activity involving crimes to 
persons or property and/or other criminal acts that would adversely 
affect the health, safety or welfare of other residents or PHA 
personnel;
    (ii) Was evicted, because of drug-related criminal activity, from 
housing assisted under the U.S. Housing Act of 1937, for a minimum of a 
three year period beginning on the date of such eviction, unless the 
applicant has successfully completed, since the eviction, a 
rehabilitation program approved by the public housing agency;
    (iii) The PHA has reasonable cause to believe is illegally using a 
controlled substance; or
    (iv) The PHA has reasonable cause to believe abuses alcohol in a way 
that causes behavior that may interfere with the health, safety, or 
right to peaceful enjoyment of the premises by other residents or PHA 
personnel.
    (2) Grade C: The PHA Board, by resolution, has adopted policies and 
the PHA has implemented procedures, but cannot document results in 
successfully screening out and denying admission to a public housing 
applicant who

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meets the criteria as described in grade A, above.
    (3) Grade F: The PHA has not adopted policies or has not implemented 
procedures that result in screening out and denying admission to a 
public housing applicant who meets the criteria as described in grade A, 
above, or the screening procedures do not result in the denial of 
admission to a public housing applicant who meets the criteria as 
described in grade A, above.
    (c) Component #3, Lease Enforcement. This component has a weight of 
x1.
    (1) Grade A: The PHA Board, by resolution, has adopted policies and 
the PHA has implemented procedures and can document that it 
appropriately evicts any public housing resident who:
    (i) The PHA has reasonable cause to believe engages in any criminal 
activity that threatens the health, safety, or right to peaceful 
enjoyment of the premises by other residents or PHA personnel;
    (ii) The PHA has reasonable cause to believe engages in any drug-
related criminal activity (as defined at section 6(l) of the 1937 Act 
(42 U.S.C. 1437d(l)) on or off the PHA's property; or
    (iii) The PHA has reasonable cause to believe abuses alcohol in such 
a way that causes behavior that may interfere with the health, safety, 
or right to peaceful enjoyment of the premises by other residents or PHA 
personnel.
    (2) Grade C: The PHA Board, by resolution, has adopted policies and 
the PHA has implemented procedures, but cannot document results in 
appropriately evicting any public housing resident who meets the 
criteria as described in grade A, above.
    (3) Grade F: The PHA has not adopted policies or has not implemented 
procedures that document results in the eviction of any public housing 
resident who meets the criteria as described in grade A, above, or the 
eviction procedures do not result in the eviction of public housing 
residents who meet the criteria as described in grade A, above.
    (d) Component #4, Grant Program Goals. This component examines a 
PHA's management of HUD-funded drug prevention or crime reduction 
programs. However, PHAs can also get credit for performance under non-
HUD funded programs if they choose to be assessed for them. PHAs must 
select either to be assessed for all or none of the non-HUD funded 
programs. This component has a weight of x1.
    (1) Grade A: If the PHA has any special drug prevention program or 
crime reduction program funded by any HUD funds, the PHA can document 
that the goals are related to drug and crime rates, and it is meeting at 
least 90% of its goals under the implementation plan for any and all of 
these programs.
    (2) Grade C: If the PHA has any special drug prevention program or 
crime reduction program funded by any HUD funds, the PHA can document 
that the goals are related to drug and crime rates, and it is meeting at 
least 60% of its goals under the implementation plan for any and all of 
these programs.
    (3) Grade F: If the PHA has any special drug prevention program or 
crime reduction program funded by any HUD funds, the PHA does not have a 
system for documenting or cannot document that the goals are related to 
drug and crime rates, or cannot document that it is meeting 60% or more 
of its goals under the implementation plan for any and all of these 
programs.



Sec. 901.100  Data collection.

    (a) Information on some of the indicators will be derived by the 
State/Area Office from existing reporting and data forms.
    (b) A PHA shall provide certification as to data on indicators not 
collected according to paragraph (a) of this section, by submitting a 
certified questionnaire within 60 calendar days after the end of the 
fiscal year covered by the certification:
    (1) The certification shall be approved by PHA Board resolution, and 
signed and attested to by the Executive Director.
    (2) PHAs shall maintain documentation for three years verifying all 
certified indicators for HUD on-site review.
    (3) A PHA may include along with its certification submission, 
rather than through an exclusion or modification request, any 
information bearing on the accuracy or completeness of the data used by 
HUD (corrected data, late reports, previously omitted required reports, 
etc.) in grading an indicator.

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HUD will consider this assertion in grading the affected indicator.
    (4) If a PHA does not submit its certification, or submits its 
certification late, appropriate sanctions may be imposed, including a 
presumptive rating of failure in all of the PHMAP indicators, which may 
result in troubled and mod-troubled designations.
    (5) A PHA that cannot provide justifying documentation to HUD during 
the conduct of a confirmatory review, or other verification review(s), 
for any indicator(s) or component(s) certified to, shall receive a 
failing grade in that indicator(s) or component(s), and its overall 
PHMAP score shall be lowered.
    (6) If the data for any indicator(s) or component(s) that a PHA 
certified to cannot be verified by HUD during the conduct of a 
confirmatory review, or any other verification review(s), the State/Area 
Office shall change a PHA's grade for any indicator(s) or component(s), 
and its overall PHMAP score, as appropriate, to reflect the verified 
data obtained during the conduct of such review.
    (7) A PHA that cannot provide justifying documentation to the 
independent auditor for the indicator(s) or component(s) that the PHA 
certified to, as reflected in the audit report, shall receive a grade of 
F for that indicator(s) or component(s), and its overall PHMAP score 
shall be lowered.
    (8) A PHA's PHMAP score for individual indicators or components, or 
its overall PHMAP score, may be changed by the State/Area Office 
pursuant to the data included in the independent audit report, as 
applicable.
    (9) A PHA's certification and supporting documentation will be post-
reviewed by HUD during the next on-site review as determined by risk 
management, but is subject to verification at any time. Appropriate 
sanctions for intentional false certification will be imposed, including 
suspension or debarment of the signatories, the loss of high performer 
designation, a lower grade for individual indicators and a lower PHMAP 
total weighted score.
    (c) For those developments of a PHA where management functions have 
been assumed by an RMC, the PHA's certification shall identify the 
development and the management functions assumed by the RMC. The PHA 
shall obtain a certified questionnaire from the RMC as to the management 
functions undertaken by the RMC. The PHA shall submit the RMC's 
certified questionnaire along with its own. The RMC's certification 
shall be approved by its Executive Director or Chief Executive Officer 
of whatever title.



Sec. 901.105  Computing assessment score.

    (a) Grades within indicators and components have the following point 
values:
    (1) Grade A = 10.0 points;
    (2) Grade B = 8.5 points;
    (3) Grade C = 7.0 points;
    (4) Grade D = 5.0 points;
    (5) Grade E = 3.0 point; and
    (6) Grade F = 0.0 points.
    (b) If indicators or components are designated as having additional 
weight (e.g., x1.5 or x2), the points in each grade will be multiplied 
times the additional weight.
    (c) Indicators will be graded individually. Components within an 
indicator will be graded individually, and then will be used to 
determine a single grade for the indicator, by dividing the total number 
of component points by the total number of component weights and 
rounding off to two decimal places. The total number of component 
weights for this purpose includes a one for components that are 
unweighted (i.e., they are weighted x1, rather than x1.5 or x2).
    (d) Adjustment for physical condition and neighborhood environment. 
The overall PHMAP score will be adjusted by adding additional points 
that reflect the adjustment to be given to the differences in the 
difficulty of managing developments that result from physical condition 
and neighborhood environment:
    (1) Adjustments shall apply to the following three indicators only:
    (i) Indicator #1, vacancy rate and unit turnaround;
    (ii) Indicator #4, work orders; and
    (iii) Indicator #5, annual inspection and condition of units and 
systems.
    (2) Definitions of physical condition and neighborhood environment 
are:
    (i) Physical condition: refers to units located in developments over 
ten years

[[Page 260]]

old that require major capital investment in order to meet local codes 
or minimum HQS standards, whichever is applicable. This excludes 
developments that have been comprehensively modernized.
    (ii) Neighborhood environment: refers to units located within 
developments where the immediate surrounding neighborhood (that is a 
majority of the census tracts or census block groups on all sides of the 
development) has at least 51% of families with incomes below the poverty 
rate as documented by the latest census data.
    (3) Any PHA with 5% or more of its units subject to either or both 
of the above conditions shall, if they so choose, be issued an adjusted 
PHMAP score in addition to the regular score based solely upon the 
certification of the PHA. The adjusted score shall be calculated as 
follows:

------------------------------------------------------------------------
     Percent of units subject to physical condition and/or        Extra
                   neighborhood  environment                      points
------------------------------------------------------------------------
At least 5% but less than 10%..................................       .5
At least 10% but less than 20%.................................       .6
At least 20% but less than 30%.................................       .7
At least 30% but less than 40%.................................       .8
At least 40% but less than 50%.................................       .9
At least 50%...................................................      1.0
------------------------------------------------------------------------

    (i) These extra points will be added to the score (grade) of the 
indicator(s) to which these conditions may apply. A PHA is required to 
certify on form HUD-50072, PHMAP Certification, the extent to which the 
conditions apply, and to which of the indicators the extra scoring 
points should be added.
    (ii) Units in developments that have received substantial 
rehabilitation within the past ten years are not eligible to be included 
in the calculation of total PHA units due to physical condition only.
    (iii) A PHA that receives a grade of A under indicators #4 and/or #5 
may not claim the additional adjustment for indicator #1 based on 
physical condition of its developments, but may claim additional 
adjustment based on neighborhood environment.
    (iv) A PHA that receives the maximum potential weighted points on 
indicators #1, #4 and/or #5 may not claim any additional adjustment for 
physical condition and/or neighborhood environment for the respective 
indicator(s).
    (v) A PHA's score for indicators #1, #4 and/or #5, after any 
adjustment(s) for physical condition and/or neighborhood environment, 
may not exceed the maximum potential weighted points assigned to the 
respective indicator(s).
    (4) If only certain units or developments received substantial 
rehabilitation, the additional adjustment shall be prorated to exclude 
the units or developments with substantial rehabilitation.
    (5) The Date of Full Availability (DOFA) shall apply to scattered 
site units, where the age of units and buildings vary, to determine 
whether the units have received substantial rehabilitation within the 
past ten years and are eligible for a adjusted score for the physical 
condition factor.
    (6) PHAs shall maintain supporting documentation to show how they 
arrived at the number and percentage of units out of their total 
inventory that are subject to adjustment.
    (i) If the basis was neighborhood environment, the PHA shall have on 
file the appropriate maps showing the census tracts or census block 
groups surrounding the development(s) in question with supporting census 
data showing the level of poverty. Units that fall into this category 
but which have already been removed from consideration for other reasons 
(permitted exemptions and modifications and/or exclusions) shall not be 
counted in this calculation.
    (ii) For the physical condition factor, a PHA would have to maintain 
documentation showing the age and condition of the units and the record 
of capital improvements, indicating that these particular units have not 
received modernization funds.
    (iii) PHAs shall also document that in all cases, units that were 
exempted for other reasons were not included in the calculation.



Sec. 901.110  PHA request for exclusion or modification of an indicator or component.

    (a) A PHA shall have the right to request the exclusion or 
modification of any indicator or component in its management assessment, 
thereby excluding

[[Page 261]]

or modifying the impact of those indicator's or component's grades in 
its PHMAP total weighted score.
    (b) Exclusion and modification requests shall be submitted by a PHA 
at the time of its PHMAP certification submission to the State/Area 
Office along with supporting documentary justification, rather than 
during the appeal process.
    (c) Requests for exclusions and modifications that do not include 
supporting documentary justification will not be considered.
    (d) Indicator #2, modernization, shall be automatically excluded by 
the State/Area Office if a PHA does not have an open modernization 
program.
    (e) Indicator #7, resident services and community building, shall be 
automatically excluded by the State/Area Office for PHAs with fewer than 
250 units, or with 100% elderly developments, unless they request to be 
assessed at the time of the PHMAP certification submission.
    (f) Indicator #8, security, shall be automatically excluded by the 
State/Area Office for PHAs with fewer than 250 units unless they request 
to be assessed at the time of the PHMAP certification submission.



Sec. 901.115  PHA score and status.

    (a) PHAs that achieve a total weighted score of 90% or greater shall 
be designated high performers. A PHA shall not be designated as a high 
performer if it scores below a grade of C for any indicator. High 
performers will be afforded incentives that include relief from 
reporting and other requirements, as described in Sec. 901.130.
    (b) PHAs that achieve a total weighted score of 90% or greater on 
its overall PHMAP score and on indicator #2, modernization, shall be 
designated mod-high performers.
    (c) PHAs that achieve a total weighted score of less than 90% but 
not less than 60% shall be designated standard. Standard performers will 
be afforded incentives that include relief from reporting and other 
requirements, as described in Sec. 901.130.
    (d) PHAs that achieve a total weighted score of less than 60% shall 
be designated as troubled.
    (e) PHAs that achieve 60% of the maximum calculation for indicator 
#2, modernization, shall be designated as mod-troubled.
    (f) Each PHA shall post a notice of its final PHMAP score and status 
in appropriate conspicuous and accessible locations in its offices 
within two weeks of receipt of its final score and status. In addition, 
HUD will publish every PHA's score and status in the Federal Register.
    (g) A PHA that cannot provide justifying documentation to HUD during 
the conduct of a confirmatory review, or other verification review(s), 
for any indicator(s) or component(s) certified to, shall receive a 
failing grade in that indicator(s) or component(s), and its overall 
PHMAP score shall be lowered.
    (h) If the data for any indicator(s) or component(s) that a PHA 
certified to cannot be verified by HUD during the conduct of a 
confirmatory review, or any other verification review(s), the State/Area 
Office shall change a PHA's grade for any indicator(s) or component(s), 
and its overall PHMAP score, as appropriate, to reflect the verified 
data obtained during the conduct of such review.
    (i) A PHA that cannot provide justifying documentation to the 
independent auditor for the indicator(s) or component(s) that the PHA 
certified to, as reflected in the audit report, will receive a grade of 
F for that indicator(s), and its overall PHMAP score will be lowered.
    (j) A PHA's PHMAP score for individual an indicator(s), component(s) 
or its overall PHMAP score may be changed by the State/Area Office 
pursuant to the data included in the independent audit report, as 
applicable.
    (k) In exceptional circumstances, even though a PHA has satisfied 
all of the indicators for high or standard performer designation, the 
State/Area Office may conduct any review as necessary, including a 
confirmatory review, and deny or rescind incentives or high performer 
status, as described in paragraphs (a) and (b) of this section in the 
case of a PHA that:
    (1) Is operating under a special agreement with HUD;

[[Page 262]]

    (2) Is involved in litigation that bears directly upon the 
management of a PHA;
    (3) Is operating under a court order;
    (4) Demonstrates substantial evidence of fraud or misconduct, 
including evidence that the PHA's certification of indicators is not 
supported by the facts, resulting from such sources as a confirmatory 
review, routine reports and reviews, an Office of Inspector General 
investigation/audit, an independent auditor's audit or an investigation 
by any appropriate legal authority; or
    (5) Demonstrates substantial noncompliance in one or more areas 
(including areas not assessed by the PHMAP). Areas of substantial 
noncompliance include, but are not limited to, noncompliance with 
statutes (e.g., Fair Housing and Equal Opportunity statutes); 
regulations (e.g., 24 CFR Sec. 85); or the Annual Contributions Contract 
(ACC) (e.g., the ACC, form HUD-53012A, Section 4, Mission of the PHA). 
Substantial noncompliance would cast doubt on the PHA's capacity to 
preserve and protect its public housing developments and operate them 
consistent with Federal law and regulations.
    (l) When a State/Area Office Public Housing Director acts for any of 
the reasons stated in paragraph (k) of this section, the State/Area 
Office will send written notification to the PHA with a specific 
explanation of the reasons. An information copy will be forwarded to the 
Assistant Secretary for Public and Indian Housing.
    (m) A PHA may appeal denial of high performer status in accordance 
with Sec. 901.125.



Sec. 901.120  State/Area Office functions.

    (a) The State/Area Office will assess each PHA within its 
jurisdiction on an annual basis:
    (1) The State/Area Office will make determinations for high-
performing, standard, troubled PHAs and mod-troubled PHAs in accordance 
with a PHA's PHMAP weighted score.
    (2) The State/Area Office will also make determinations for 
exclusion and modification requests.
    (b) Each State/Area Office will notify each PHA of the PHA's grade 
and the grade of the RMC (if any) assuming management functions at any 
of the PHA's developments, in each indicator; the PHA's management 
assessment total weighted score and status, and if applicable; its 
adjustment for physical condition and neighborhood environment; any 
determinations concerning exclusion and modification requests; and any 
deadline date by which appeals must be received. PHA notification should 
include offers of pertinent technical assistance in problem areas, 
suggestions for means of improving problem areas, and areas of relief 
and incentives as a result of high performer status. The PHA must notify 
the RMC (if any) in writing, immediately upon receipt of the State/Area 
Office notification, of the RMC's grades.
    (c) An on-site confirmatory review may be conducted of a PHA by HUD. 
The purpose of the on-site confirmatory review is to verify those 
indicators for which a PHA provides certification, as well as the 
accuracy of the information received in the State/Area Office pertaining 
to the remaining indicators.
    (1) Whenever practicable, a confirmatory review should be conducted 
by HUD prior to the issuance of a PHA's initial notification letter. The 
results of the confirmatory review shall be included in the PHA's 
initial notification letter.
    (2) If, in an exceptional circumstance, a confirmatory review is 
conducted after the State/Area Office issues the initial notification 
letter, the State/Area Office shall explain the results of the 
confirmatory review in writing, correct the PHA's total weighted score, 
as appropriate, and reissue the initial notification letter to the PHA.
    (3) The State/Area Office shall conduct a confirmatory review of a 
PHA with 100 or more units under management that scores less than 60% 
for its total weighted score, or less than 60% on indicator #2, 
modernization, before initially designating the PHA as troubled or mod-
troubled. The results of the confirmatory review shall be included in 
the PHA's initial notification letter.
    (4) The State/Area Office shall conduct a confirmatory review on a 
yearly

[[Page 263]]

basis of all troubled and mod-troubled PHAs.
    (5) The State/Area Office shall conduct a confirmatory review of a 
PHA with 100 or more units under management prior to the removal of 
troubled or mod-troubled designation.
    (6) Independent confirmatory reviews (team members from other State/ 
Area Offices) shall be conducted of troubled PHAs with 1250 or more 
units under management prior to the removal of troubled designation.
    (d) A PHA that cannot provide justifying documentation to HUD during 
the conduct of a confirmatory review, or other verification review(s), 
for any indicator(s) or component(s) certified to, shall receive a 
failing grade in that indicator(s) or component(s), and its overall 
PHMAP score shall be lowered by the State/Area Office. The State/Area 
Office shall explain to the PHA the reason(s) for the change(s) in 
writing, correct the PHA's grade for an individual component(s) and/or 
indicator(s) and total weighted score, as appropriate, and reissue the 
initial notification letter to the PHA.
    (e) If the data for any indicator(s) or component(s) that a PHA 
certified to cannot be verified by HUD during the conduct of a 
confirmatory review, or any other verification review(s), the State/Area 
Office shall change a PHA's grade for any indicator(s) or component(s), 
and its overall PHMAP score, as appropriate, to reflect the verified 
data obtained during the conduct of such review. The State/Area Office 
shall explain to the PHA the reason(s) for the change(s) in writing, 
correct the PHA's grade for an individual component(s) and/or 
indicator(s) and total weighted score, as appropriate, and reissue the 
initial notification letter to the PHA.
    (f) A PHA that cannot provide justifying documentation to the 
independent auditor for the indicator(s) or component(s) that the PHA 
certified to, as reflected in the audit report, will receive a grade of 
F for that indicator(s), and its overall PHMAP score will be lowered by 
the State/Area Office. The State/Area Office shall explain to the PHA 
the reason(s) for the change(s) in writing, correct the PHA's grade for 
an individual component(s) and/or indicator(s) and total weighted score, 
as appropriate, and reissue the initial notification letter to the PHA.
    (g) A PHA's PHMAP score for an individual indicator(s), component(s) 
or its overall PHMAP score may be changed by the Area/State Office 
pursuant to the data included in the independent audit report, as 
applicable. The State/Area Office shall explain to the PHA the reason(s) 
for the change(s) in writing, correct the PHA's grade for an individual 
component(s) and/or indicator(s) and total weighted score, as 
appropriate, and reissue the initial notification letter to the PHA.
    (h) Determinations on appeals and on petitions to remove troubled or 
mod-troubled status will be made by the State/Area Office.
    (i) Determinations of intentional false certifications will be made 
by the State/Area Office. State/Area Offices shall consult with the 
local Office of Inspector General for guidance in cases of 
determinations of intentional false certification.
    (j) In exceptional circumstances, the State/Area Office may deny or 
rescind a PHA's status as a standard or high performer, in accordance 
with Sec. 901.115(i), so that it will not be entitled to any of the 
areas of relief and incentives.
    (k) The State/Area Office will maintain PHMAP files for public 
inspection in accordance with Sec. 901.155.



Sec. 901.125  PHA right of appeal.

    (a) A PHA has the right to appeal its PHMAP score to the State/Area 
Office, including a troubled designation or a mod-troubled designation. 
A PHA may appeal its management assessment rating on the basis of data 
errors (any dispute over the accuracy, calculation, or interpretation of 
data employed in the grading process that would affect a PHA's PHMAP 
score), the denial of exclusion or modification requests when their 
denial affects a PHA's total weighted score, the denial of an adjustment 
based on the physical condition and neighborhood environment of a PHA's 
developments, or a determination of intentional false certification:
    (1) A PHA may appeal its management assessment rating to the State/

[[Page 264]]

Area Office only for the reasons stated in paragraph (a) of this 
section:
    (i) A PHA may not appeal its PHMAP score to the State/Area Office 
unless it has submitted its certification to the State/Area Office.
    (ii) A PHA may not appeal its PHMAP score to the State/Area Office 
if the reason the PHA received a deficient grade in any indicator or 
component was due to the fact the PHA did not submit a required report 
in a timely manner or without an approved time extension.
    (iii) A PHA may not appeal its PHMAP score to the State/Area Office 
if the reason the PHA received a failing grade in any indicator or 
component was due to the fact that the PHA did not provide justifying 
documentation to the independent auditor for any indicator(s) or 
component(s) the PHA certified to.
    (2) The appeal shall be submitted to the State/Area Office and shall 
include supporting documentary justification of the reasons for the 
appeal.
    (3) The State/Area Office will make determinations on initial 
appeals and will transmit the determination of the appeal to the PHA in 
a notification letter that will also include the date and place for 
submitting any further appeal.
    (4) Appeals submitted to the State/Area Office without appropriate 
documentation will not be considered and will be returned to the PHA.
    (b) Appeals of rescission of high performer designation shall be 
made directly to the Assistant Secretary for Public and Indian Housing.
    (c) A PHA may appeal the denial of an initial appeal by the State/
Area Office to the Assistant Secretary for Public and Indian Housing for 
the following reasons:
    (1) Initial appeals denying high performer designation;
    (2) Initial appeals denying the removal of troubled designation;
    (3) Initial appeals denying the removal of mod-troubled designation;
    (4) The denial of an appeal of a determination of intentional false 
certification;
    (5) Data errors;
    (6) The denial of exclusion or modification requests when their 
denial affects a PHA's total weighted score;
    (7) The denial of an adjustment based on the physical condition and 
neighborhood environment of a PHA's developments;
    (8) The refusal of a petition in accordance with Sec. 901.140 to 
remove troubled or mod-troubled designations.
    (d) A PHA may appeal its management assessment rating to the 
Assistant Secretary for Public and Indian Housing only for the reasons 
stated in paragraph (c) of this section.
    (e) A PHA may not appeal its PHMAP score to the Assistant Secretary 
unless it has submitted its certification to the State/Area Office.
    (f) Appeals submitted to the Assistant Secretary for Public and 
Indian Housing without appropriate documentation will not be considered 
and will be returned to the PHA.
    (g) The date and place by which any appeal must be submitted will be 
specified in the letter from the State/Area Office notifying the PHA of 
any determination or action. For example, the State/Area Office initial 
notification letter or denial of initial appeal letter will specify the 
date and place by which appeals must be received. The date specified 
will be the 15th calendar day after the letter is mailed, not counting 
the day the letter is mailed. If the 15th day falls on a weekend or 
holiday, the date specified will be the next day that is not on a 
weekend or a holiday. Any appeal not received by the specified time and 
place will not be considered.



Sec. 901.130  Incentives.

    (a) A PHA that is designated high performer or standard performer 
will be relieved of specific HUD requirements, effective upon 
notification of high or standard performer designation.
    (b) A PHA shall not be designated a mod-high performer and be 
entitled to the applicable incentives unless it has been designated an 
overall high performer.
    (c) High-performing PHAs, and RMCs that receive a grade of A on each 
of the indicators for which they are assessed,

[[Page 265]]

will receive a Certificate of Commendation from the Department as well 
as special public recognition.
    (d) Representatives of high-performing PHAs may be requested to 
serve on Departmental working groups that will advise the Department in 
such areas as troubled PHAs and performance standards for all PHAs.
    (e) State/Area Offices may award incentives to PHAs on an individual 
basis for a specific reason(s), such as a PHA making the right decision 
that impacts long-term overall management or the quality of a PHA's 
housing stock, with prior concurrence from the Assistant Secretary.
    (f) Relief from any standard procedural requirements does not mean 
that a PHA is relieved from compliance with the provisions of Federal 
law and regulations or other handbook requirements. For example, 
although a high or standard performer may be relieved of requirements 
for prior HUD approval for certain types of contracts for services, it 
must still comply with all other Federal and State requirements that 
remain in effect, such as those for competitive bidding or competitive 
negotiation (see 24 CFR 85.36):
    (1) PHAs will still be subject to regular independent auditor (IA) 
audits.
    (2) Office of Inspector General (OIG) audits or investigations will 
continue to be conducted as circumstances may warrant.
    (g) In exceptional circumstances, the State/Area Office will have 
discretion to subject a PHA to any requirement that would otherwise be 
omitted under the specified relief, in accordance with Sec. 901.115(i).



Sec. 901.135  Memorandum of Agreement.

    (a) After consulting the independent assessment team and reviewing 
the report identified in section 6(j)(2)(b) of the 1937 Act, a 
Memorandum of Agreement (MOA), a binding contractual agreement between 
HUD and a PHA, shall be required for each PHA designated as troubled 
and/or mod-troubled. The scope of the MOA may vary depending upon the 
extent of the problems present in the PHA, but shall include:
    (1) Baseline data, which should be raw data but may be the PHA's 
score in each of the indicators identified as a problem, or other 
relevant areas identified as problematic;
    (2) Annual and quarterly performance targets, which may be the 
attainment of a higher grade within an indicator that is a problem, or 
the description of a goal to be achieved, for example, the reduction of 
rents uncollected to 6% or less by the end of the MOA annual period;
    (3) Strategies to be used by the PHA in achieving the performance 
targets within the time period of the MOA;
    (4) Technical assistance to the PHA provided or facilitated by the 
Department, for example, the training of PHA employees in specific 
management areas or assistance in the resolution of outstanding HUD 
monitoring findings;
    (5) The PHA's commitment to take all actions within its control to 
achieve the targets;
    (6) Incentives for meeting such targets, such as the removal of 
troubled or mod-troubled designation and Departmental recognition for 
the most improved PHAs;
    (7) The consequences of failing to meet the targets, including such 
sanctions as the imposition of budgetary limitations, declaration of 
substantial default and subsequent actions, limited denial of 
participation, suspension, debarment, or the imposition of operating 
funding and modernization thresholds; and
    (8) A description of the involvement of local public and private 
entities, including PHA resident leaders, in carrying out the agreement 
and rectifying the PHA's problems. A PHA shall have primary 
responsibility for obtaining active local public and private entity 
participation, including the involvement of public housing resident 
leaders, in assisting PHA improvement efforts. Local public and private 
entity participation should be premised upon the participant's knowledge 
of the PHA, ability to contribute technical expertise with regard to the 
PHA's specific problem areas and authority to make preliminary/tentative 
commitments of support, financial or otherwise.
    (b) A MOA shall be executed by:
    (1) The PHA Board Chairperson and accompanied by a Board resolution, 
or

[[Page 266]]

a receiver (pursuant to a court ordered receivership agreement, if 
applicable) or other AME acting in lieu of the PHA Board;
    (2) The PHA Executive Director, or a designated receiver (pursuant 
to a court ordered receivership agreement, if applicable) or other AME-
designated Chief Executive Officer;
    (3) The Director, State/Area Office of Public Housing, except as 
stated in (d) of this section; and
    (4) The appointing authorities of the Board of Commissioners, unless 
exempted by the State/Area Office.
    (c) The Department encourages the inclusion of the resident 
leadership in MOA negotiations and the execution of the MOA.
    (d) Upon designation of a large PHA (1250 or more units under 
management) as troubled, the State/Area Office shall make a referral to 
HUD Headquarters for appropriate recovery intervention and the execution 
of an MOA by the Assistant Secretary for Public and Indian Housing.
    (e) A PHA will monitor MOA implementation to ensure that performance 
targets are met in terms of quantity, timeliness and quality.



Sec. 901.140  Removal from troubled status and mod-troubled status.

    (a) A PHA has the right to petition the State/Area Office for the 
removal of a designation as troubled or mod-troubled.
    (b) A PHA may appeal any refusal to remove troubled and mod-troubled 
designation to the Assistant Secretary for Public and Indian Housing in 
accordance with Sec. 901.125.
    (c) A PHA with fewer that 1250 units under management will be 
removed from troubled status by the State/Area Office upon a 
determination by the State/Area Office that the PHA's assessment 
reflects an improvement to a level sufficient to remove the PHA from 
troubled status, or mod-troubled, i.e., a total weighted management 
assessment score of 60% or more, and upon the conduct of a confirmatory 
review for PHAs with 100 or more units under management.
    (d) A PHA with 1250 units or more under management will be removed 
from troubled status by the Assistant Secretary for Public and Indian 
Housing upon a recommendation by the State/Area Office when a PHA's 
assessment reflects an improvement to a level sufficient to remove the 
PHA from troubled or mod-troubled status, i.e., a total weighted 
management assessment score of 60% or more, and upon the conduct of an 
independent confirmatory review (team members from other State/Area 
Offices).



Sec. 901.145  Improvement Plan.

    (a) After receipt of the State/Area Office notification letter in 
accordance with Sec. 901.120(b) or receipt of a final resolution of an 
appeal in accordance with Sec. 901.125 or, in the case of an RMC, 
notification of its indicator grades from a PHA, a PHA or RMC shall 
correct any deficiency indicated in its management assessment within 90 
calendar days.
    (b) A PHA shall notify the State/Area Office of its action to 
correct a deficiency. A PHA shall also forward to the State/Area Office 
an RMC's report of its action to correct a deficiency.
    (c) If the State/Area Office determines that a PHA or RMC has not 
corrected a deficiency as required within 90 calendar days after receipt 
of its final notification letter, the State/Area Office may require a 
PHA, or a RMC through the PHA, to prepare and submit to the State/Area 
Office an Improvement Plan within an additional 30 calendar days:
    (1) The State/Area Office shall require a PHA or RMC to submit an 
Improvement Plan, which includes the information stated in (d) of this 
section, for each indicator that a PHA or RMC scored a grade of F.
    (2) The State/Area Office may require, on a risk management basis, a 
PHA or RMC to submit an Improvement Plan, which includes the information 
stated in paragraph (d) of this section, for each indicator that a PHA 
scored a grade D or E, as well as other performance and/or compliance 
deficiencies as may be identified as a result of an on-site review of 
the PHA's operations.
    (d) An Improvement Plan shall:
    (1) Identify baseline data, which should be raw data but may be the 
PHA's score in each of the indicators identified as a problem in a PHA's 
or

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RMC's management assessment, or other relevant areas identified as 
problematic;
    (2) Describe the procedures that will be followed to correct each 
deficiency; and
    (3) Provide a timetable for the correction of each deficiency.
    (e) The State/Area Office will approve or deny a PHA's or RMC's 
Improvement Plan, and notify the PHA of its decision. A PHA must notify 
the RMC in writing, immediately upon receipt of the State/Area Office 
notification, of the State/Area Office approval or denial of the RMC's 
Improvement Plan.
    (f) An Improvement Plan that is not approved will be returned to the 
PHA with recommendations from the State/Area Office for revising the 
Improvement Plan to obtain approval. A revised Improvement Plan shall be 
resubmitted by the PHA or RMC within 30 calendar days of its receipt of 
the State/Area Office recommendations.
    (g) If a PHA or RMC fails to submit an acceptable Improvement Plan, 
or to correct deficiencies within the time specified in an Improvement 
Plan or such extensions as may be granted by HUD, the State/Area Office 
will notify the PHA of its or the RMC's noncompliance. The PHA, or the 
RMC through the PHA, will provide HUD its reasons for lack of progress 
in submitting or carrying out the Improvement Plan within 30 calendar 
days of its receipt of the noncompliance notification. HUD will advise 
the PHA as to the acceptability of its reasons for lack of progress and, 
if unacceptable, will notify the PHA that it will be subject to 
sanctions provided for in the ACC and HUD regulations.



Sec. 901.150  PHAs troubled with respect to the program under section 14 (mod-troubled PHAs).

    (a) PHAs that achieve a total weighted score of less than 60% on 
indicator #2, modernization, may be designated as mod-troubled.
    (b) PHAs designated as mod-troubled may be subject, under the 
Comprehensive Grant Program, to a reduction of formula allocation or 
other sanctions (24 CFR Sec. 968, Subpart C) or under the Comprehensive 
Improvement Assistance Program to disapproval of new funding or other 
sanctions (24 CFR Sec. 968, Subpart B).



Sec. 901.155  PHMAP public record.

    The State/Area Office will maintain PHMAP files, including 
certifications, the records of exclusion and modification requests, 
appeals, and designations of status based on physical condition and 
neighborhood environment, as open records, available for public 
inspection for three years consistent with the Freedom of Information 
Act (5 U.S.C. 552) and in accordance with any procedures established by 
the State/Area Office to minimize disruption of normal office 
operations.



Sec. 901.200  Events or conditions that constitute substantial default.

    (a) The Department may determine that events have occurred or that 
conditions exist that constitute a substantial default if a PHA is 
determined to be in violation of Federal statutes, including but not 
limited to, the 1937 Act, or in violation of regulations implementing 
such statutory requirements, whether or not such violations would 
constitute a substantial breach or default under provisions of the 
relevant ACC.
    (b) The Department may determine that a PHA's failure to satisfy the 
terms of a Memorandum of Agreement entered into in accordance with 
Sec. 901.135 of this part, or to make reasonable progress to meet time 
frames included in a Memorandum of Agreement, are events or conditions 
that constitute a substantial default.
    (c) The Department shall determine that a PHA that has been 
designated as troubled and does not show significant improvement (10 
percentage point increase) in its PHMAP score within one year after 
final notification of its PHMAP score are events or conditions that 
constitute a substantial default:
    (1) A PHA shall be notified of such a determination in accordance 
with Sec. 901.205(c).
    (2) A PHA may waive, in writing, receipt of explicit notice from the 
Department as to a finding of substantial default, and voluntarily 
consent to a determination of substantial default. The PHA must concur 
on the existence of substantial default conditions which

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can be remedied by technical assistance, and the PHA shall provide the 
Department with written assurances that all deficiencies will be 
addressed by the PHA. The Department will then immediately proceed with 
interventions as provided in Sec. 901.210.
    (d) The Department may declare a substantial breach or default under 
the ACC, in accordance with its terms and conditions.
    (e) The Department may determine that the events or conditions 
constituting a substantial default are limited to a portion of a PHA's 
public housing operations, designated either by program, by operational 
area, or by development(s).



Sec. 901.205  Notice and response.

    (a) If information from an annual assessment, as described in 
Sec. 901.100, a management review or audit, or any other credible source 
indicates that there may exist events or conditions constituting a 
substantial breach or default, the Department shall advise a PHA of such 
information. The Department is authorized to protect the confidentiality 
of the source(s) of such information in appropriate cases. Before taking 
further action, except in cases of apparent fraud or criminality, and/or 
in cases where emergency conditions exist posing an imminent threat to 
the life, health, or safety of residents, the Department shall afford 
the PHA a timely opportunity to initiate corrective action, including 
the remedies and procedures available to PHAs designated as ``troubled 
PHAs,'' or to demonstrate that the information is incorrect.
    (b) In any situation determined to be an emergency, or in any case 
where the events or conditions precipitating the intervention are 
determined to be the result of criminal or fraudulent activity, the 
Assistant Secretary is authorized to intercede to protect the residents' 
and the Department's interests by causing the proposed interventions to 
be implemented without further appeals or delays.
    (c) Upon a determination or finding that events have occurred or 
that conditions exist that constitute a substantial default, the 
Assistant Secretary shall provide written notification of such 
determination or finding to the affected PHA. Written notification shall 
be transmitted to the Executive Director, the Chairperson of the Board, 
and the appointing authority(s) of the Board, and shall include, but 
need not necessarily be limited to:
    (1) Identification of the specific covenants, conditions, and/or 
agreements under which the PHA is determined to be in noncompliance;
    (2) Identification of the specific events, occurrences, or 
conditions that constitute the determined noncompliance;
    (3) Citation of the communications and opportunities to effect 
remedies afforded pursuant to paragraph (a) of this section;
    (4) Notification to the PHA of a specific time period, to be not 
less than 10 calendar days, except in cases of apparent fraud or other 
criminal behavior, and/or under emergency conditions as described in 
paragraph (a) of this section, nor more than 30 calendar days, during 
which the PHA shall be required to demonstrate that the determination or 
finding is not substantively accurate; and
    (5) Notification to the PHA that, absent a satisfactory response in 
accordance with paragraph (d) of this section, the Department will take 
control of the PHA, using any or all of the interventions specified in 
Sec. 901.210, and determined to be appropriate to remedy the 
noncompliance, citing Sec. 901.210, and any additional authority for 
such action.
    (d) Upon receipt of the notification described in paragraph (c) of 
this section, the PHA must demonstrate, within the time period permitted 
in the notification, factual error in the Department's description of 
events, occurrences, or conditions, or show that the events, 
occurrences, or conditions do not constitute noncompliance with the 
statute, regulation, or covenants or conditions to which the PHA is 
cited in the notification.



Sec. 901.210  Interventions.

    (a) Interventions under this part (including an assumption of 
operating responsibilities) may be limited to one or more of a PHA's 
specific operational

[[Page 269]]

areas (e.g., maintenance, modernization, occupancy, or financial 
management) or to a single development or a group of developments. Under 
this limited intervention procedure, the Department could select, or 
participate in the selection of, an AME to assume management 
responsibility for a specific development, a group of developments in a 
geographical area, or a specific operational area, while permitting the 
PHA to retain responsibility for all programs, operational areas, and 
developments not so designated.
    (b) Upon determining that a substantial default exists under this 
part, the Department may initiate any interventions deemed necessary to 
maintain decent, safe, and sanitary dwellings for residents. Such 
intervention may include:
    (1) Providing technical assistance for existing PHA management 
staff;
    (2) Selecting or participating in the selection of an AME to provide 
technical assistance or other services up to and including contract 
management of all or any part of the public housing developments 
administered by a PHA;
    (3) Assuming possession and operational responsibility for all or 
any part of the public housing administered by a PHA; and
    (4) The provision of intervention and assistance necessary to remedy 
emergency conditions.
    (c) HUD may take the actions described in this part sequentially or 
simultaneously in any combination.



Sec. 901.215  Contracting and funding.

    (a) Upon a declaration of substantial default or breach, and 
subsequent assumption of possession and operational responsibility, the 
Department may enter into agreements, arrangements, and/or contracts for 
or on behalf of a PHA, or to act as the PHA, and to expend or authorize 
expenditure of PHA funds, irrespective of the source of such funds, to 
remedy the events or conditions constituting the substantial default.
    (b) In entering into contracts or other agreements for or on behalf 
of a PHA, the Department shall comply with requirements for competitive 
procurement consistent with 24 CFR 85.36, except that, upon 
determination of public exigency or emergency that will not permit a 
delay, the Department can enter into contracts or agreements on a 
noncompetitive basis, consistent with the standards of 24 CFR 
85.36(d)(4).



Sec. 901.220  Resident participation in competitive proposals to manage the housing of a PHA.

    (a) When a competitive proposal to manage the housing of a PHA in 
substantial default is solicited in a Request for Proposals (RFP) 
pursuant to section 6(j)(3)(A)(i) of the 37 Act, the RFP, in addition to 
publishing the selection criteria, will:
    (1) Include a requirement for residents to notify the Department if 
they want to be involved in the selection process; and
    (2) Include a requirement for the PHA that is the subject of the RFP 
to post a notice and a copy of the RFP in a prominent location on the 
premises of each housing development that would be subject to the 
management chosen under the RFP, for the purposes of notifying affected 
residents that:
    (i) Invites residents to participate in the selection process; and
    (ii) Provides information, to be specified in the RFP, on how to 
notify the Department of their interest.
    (b) Residents must notify the Department by the RFP's application 
due date of their interest in participating in the selection process. In 
order to participate, the total number of residents that notify the 
Department must equal at least 20 percent of the residents, or the 
notification of interest must be from an organization or organizations 
of residents whose membership must equal at least 20 percent of the 
PHA's residents.
    (c) If the required percentage of residents notify the Department, a 
minimum of one resident may be invited to serve as an advisory member on 
the evaluation panel that will review the applications in accordance 
with applicable procurement procedures. Resident advisory members are 
subject to all applicable confidentiality and disclosure restrictions.

[[Page 270]]



Sec. 901.225  Resident petitions for remedial action.

    The total number of residents that petition the Department to take 
remedial action pursuant to sections 6(j)(3)(A)(i) through (iv) of the 
1937 Act must equal at least 20 percent of the residents, or the 
petition must be from an organization or organizations of residents 
whose membership must equal at least 20 percent of the PHA's residents.



Sec. 901.230  Receivership.

    (a) Upon a determination that a substantial default has occurred and 
without regard to the availability of alternate remedies, the Department 
may petition the court for the appointment of a receiver to conduct the 
affairs of the PHA in a manner consistent with statutory, regulatory, 
and contractual obligations of the PHA and in accordance with such 
additional terms and conditions that the court may provide. The court 
shall have authority to grant appropriate temporary or preliminary 
relief pending final disposition of any petition by HUD.
    (b) The appointment of a receiver pursuant to this section may be 
terminated upon the petition to the court by the PHA, the receiver, or 
the Department, and upon a finding by the court that the circumstances 
or conditions that constituted substantial default by the PHA no longer 
exist and that the operations of the PHA will be conducted in accordance 
with applicable statutes and regulations, and contractual covenants and 
conditions to which the PHA and its public housing programs are subject.



Sec. 901.235  Technical assistance.

    (a) The Department may provide technical assistance to a PHA that is 
in substantial default.
    (b) The Department may provide technical assistance to a troubled or 
non-troubled PHA if the assistance will enable the PHA to achieve 
satisfactory performance on any PHMAP indicator. The Department may 
provide such assistance if a PHA demonstrates a commitment to undertake 
improvements appropriate with the given circumstances, and executes an 
Improvement Plan in accordance with Sec. 901.145.
    (c) The Department may provide technical assistance to a PHA if 
without abatement of prevailing or chronic conditions, the PHA can be 
projected to be designated as troubled by its next PHMAP assessment.
    (d) The Department may provide technical assistance to a PHA that is 
in substantial default of the ACC.
    (e) The Department may provide technical assistance to a PHA whose 
troubled designation has been removed and where such assistance is 
necessary to prevent the PHA from being designated as troubled within 
the next two years.



PART 902--PUBLIC HOUSING ASSESSMENT SYSTEM--Table of Contents






                      Subpart A--General Provisions

Sec.
902.1  Purpose and general description.
902.3  Scope.
902.5  Applicability.
902.7  Definitions.

            Subpart B--PHAS Indicator #1: Physical Condition

902.20  Physical condition assessment.
902.23  Physical condition standards for public housing--decent, safe, 
          sanitary and in good repair (DSS/GR).
902.25  Physical condition scoring and thresholds.
902.27  Physical condition portion of total PHAS points.

            Subpart C--PHAS Indicator #2: Financial Condition

902.30  Financial condition assessment.
902.33  Financial reporting requirements.
902.35  Financial condition scoring and thresholds.
902.37  Financial condition portion of total PHAS points.

           Subpart D--PHAS Indicator #3: Management Operations

902.40  Management operations assessment.
902.43  Management operations performance standards.
902.45  Management operations scoring and thresholds.
902.47  Management operations portion of total PHAS points.

[[Page 271]]

     Subpart E--PHAS Indicator #4: Resident Service and Satisfaction

902.50  Resident service and satisfaction assessment.
902.53  Resident service and satisfaction scoring and thresholds.
902.55  Resident service and satisfaction portion of total PHAS points.

                         Subpart F--PHAS Scoring

902.60  Data collection.
902.63  PHAS scoring.
902.67  Score and designation status.
902.69  PHA right of petition and appeal.

                 Subpart G--PHAS Incentives and Remedies

902.71  Incentives for high performers.
902.73  Referral to an Area HUB/Program Center.
902.75  Referral to a TARC.
902.77  Referral to the Enforcement Center.
902.79  Substantial default.
902.83  Interventions.
902.85  Resident petitions for remedial action.

Appendix A to Part 902--Areas and Items to be Inspected

    Authority: 42 U.S.C. 1437d(j), 3535(d).

    Source: 63 FR 46617, Sept. 1, 1998, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 902.1  Purpose and general description.

    (a) Purpose. The purpose of the Public Housing Assessment System 
(PHAS) is to enhance trust in the public housing system among public 
housing agencies (PHAs), public housing residents, HUD and the general 
public by providing a comprehensive management tool for effectively and 
fairly measuring the performance of a public housing agency in essential 
housing operations, including rewards for high performers and 
consequences for poor performers.
    (b) Responsible office for PHAS assessments. The Real Estate 
Assessment Center (REAC) is responsible for assessing and scoring the 
performance of PHAs.
    (c) PHAS indicators of a PHA's performance. REAC will assess and 
score a PHA's performance based on the following four indicators:
    (1) PHAS Indicator #1--the physical condition of a PHA's properties 
(addressed in subpart B of this part);
    (2) PHAS Indicator #2--the financial condition of a PHA (addressed 
in subpart C of this part);
    (3) PHAS Indicator #3--the management operations of a PHA (addressed 
in subpart D of this part); and
    (4) PHAS Indicator #4--the resident service and satisfaction 
feedback on a PHA's operations (addressed in subpart E of this part).
    (d) Assessment tools. REAC will make use of uniform and objective 
protocols for the physical inspection of properties and the financial 
assessment of the PHA, and will gather relevant data from the PHA on the 
Management Operations Indicator and the Resident Service and 
Satisfaction Indicator. On the basis of this data, REAC will assess and 
score the results, advise PHAs of their scores and identify low scoring 
and failing PHAs so that these PHAs will receive the appropriate 
attention and assistance.
    (e) Limitation of change of PHA's fiscal year. To allow for a period 
of consistent assessment of the PHAS indicators, a PHA is not permitted 
to change its fiscal year for the first 3 full fiscal years following 
October 1, 1998.



Sec. 902.3  Scope.

    The PHAS is a strategic measure of a PHA's essential housing 
operations. The PHAS, however, does not evaluate a PHA's compliance with 
or response to every Department-wide or program specific requirement or 
objective. Although not specifically referenced in this part, PHAs 
remain responsible for complying with such requirements as fair housing 
and equal opportunity requirements, requirements under section 504 of 
the Rehabilitation Act of 1973 (29 U.S.C. 794) and requirements of 
programs under which the PHA is receiving assistance. PHAs' adherence to 
these requirements will be monitored in accordance with the applicable 
program regulations and the PHA's annual contributions contract.



Sec. 902.5  Applicability.

    (a) PHAs, RMCs, AMEs. (1) This part applies to PHAs, Resident 
Management Corporations (RMCs) and Alternate

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Management Entities (AMEs). The management assessment of an RMC/AME 
differs from that of a PHA. Because an RMC/AME enters into a contract 
with a PHA to perform specific management functions on a development-by-
development or program basis, and because the scope of the management 
that is undertaken varies, not every indicator that applies to a PHA 
would be applicable to each RMC/AME.
    (2) This part is applicable beginning October 1, 1999.
    (b) PHA ultimate responsible entity under ACC. Due to the fact that 
the PHA and not the RMC/AME is ultimately responsible to HUD under the 
Annual Contributions Contract (ACC), the PHAS score of a PHA will be 
based on all of the developments covered by the ACC, including those 
with management operations assumed by an RMC or AME (pursuant to a court 
ordered receivership agreement, if applicable).
    (c) Assumption of management operations by AME. When a PHA's 
management operations have been assumed by an AME:
    (1) If the AME assumes only a portion of the PHA's management 
operations, the provisions of this part that apply to RMCs apply to the 
AME (pursuant to a court ordered receivership agreement, if applicable); 
or
    (2) If the AME assumes all, or substantially all, of the PHA's 
management functions, the provisions of this part that apply to PHAs 
apply to the AME (pursuant to a court ordered receivership agreement, if 
applicable).



Sec. 902.7  Definitions.

    As used in this part:
    Adjustment for physical condition (project age) and neighborhood 
environment is a total of 3 additional points added to PHAS Indicator #1 
(Physical Condition). The 3 additional points, however, shall not result 
in a total point value over the total points available for PHAS 
Indicator #1 (established in subpart B of this part).
    Alternative management entity (AME) is a receiver, private 
contractor, private manager, or any other entity that is under contract 
with a PHA, or that is otherwise duly appointed or contracted (for 
example, by court order or agency action), to manage all or part of a 
PHA's operations. Depending upon the scope of PHA management functions 
assumed by the AME, in accordance with Sec. 902.5(c), the AME is treated 
as a PHA or an RMC for purposes of this part and, as appropriate, the 
terms PHA and RMC include AME.
    Assessed fiscal year is the PHA fiscal year that has been assessed 
under the PHAS.
    Average number of days nonemergency work orders were active is 
calculated:
    (1) By dividing the total of--
    (i) The number of days in the assessed fiscal year it takes to close 
active nonemergency work orders carried over from the previous fiscal 
year;
    (ii) The number of days it takes to complete nonemergency work 
orders issued and closed during the assessed fiscal year; and
    (iii) The number of days all active nonemergency work orders are 
open in the assessed fiscal year, but not completed;
    (2) By the total number of nonemergency work orders used in the 
calculation of paragraphs (1)(i), (ii) and (iii) of this definition.
    Days Receivable Outstanding is Tenant Receivables divided by Daily 
Tenant Revenue.
    Deficiency means any PHAS score below 60 percent of the available 
points in any indicator, sub-indicator or component.
    Improvement plan is a document developed by a PHA, specifying the 
actions to be taken, including timetables, that shall be required to 
correct deficiencies identified under any of the indicators and 
components within the indicator(s), identified as a result of the PHAS 
assessment when an MOA is not required.
    Reduced actual vacancy rate within the previous 3 years is a 
comparison of the vacancy rate in the PHAS assessed fiscal year (the 
immediate past fiscal year) with the vacancy rate of that fiscal year 
that is 2 years previous to the assessed fiscal year. It is calculated 
by subtracting the vacancy rate in the assessed fiscal year from the 
vacancy rate in the earlier year. If a PHA elects to certify to the 
reduction of the vacancy rate within the previous 3 years,

[[Page 273]]

the PHA shall retain justifying documentation to support its 
certification for HUD post review.
    Reduced the average time nonemergency work orders were active during 
the previous 3 years is a comparison of the average time nonemergency 
work orders were active in the PHAS assessment year (the immediate past 
fiscal year) with the average time nonemergency work orders were active 
in that fiscal year that is 2 years previous to the assessment year. It 
is calculated by subtracting the average time nonemergency work orders 
were active in the PHAS assessment year from the average time 
nonemergency work orders were active in the earlier year. If a PHA 
elects to certify to the reduction of the average time nonemergency work 
orders were active during the previous 3 years, the PHA shall retain 
justifying documentation to support its certification for HUD post 
review.
    Vacancy loss is vacant unit potential rent divided by gross 
potential rent.
    Work order deferred for modernization is any work order that is 
combined with similar work items and completed within the current PHAS 
assessment year, or will be completed in the following year if there are 
less than 3 months remaining before the end of the PHA fiscal year when 
the work order was generated, under the PHA's modernization program or 
other PHA capital improvements program.



            Subpart B--PHAS Indicator #1: Physical Condition



Sec. 902.20  Physical condition assessment.

    (a) Objective. The objective of the Physical Condition Indicator is 
to determine whether a PHA is maintaining its public housing in a 
condition that is decent, safe, sanitary and in good repair (DSS/GR), as 
this standard is defined Sec. 902.23.
    (b) Physical inspection under PHAS Indicator #1. REAC will provide 
for an independent physical inspection of, at minimum, a statistically 
valid sample of the units in the PHA's public housing portfolio to 
determine compliance with DSS/GR standard.
    (c) PHA physical inspection requirement. The HUD-conducted physical 
inspections required by this part do not relieve the PHA of the 
responsibility to inspect public housing units as provided in section 
6(j)(1) of the U.S. Housing Act of 1937 (42 U.S.C. 1437d(j)(1)), and 
Sec. 902.43(a)(5).
    (d) Compliance with State and local codes. The physical condition 
standards in this subpart do not supersede or preempt State and local 
building and maintenance codes with which the PHA's public housing must 
comply. PHAs must continue to adhere to these codes.



Sec. 902.23  Physical condition standards for public housing--decent, safe, sanitary and in good repair (DSS/GR).

    (a) Public housing must be maintained in a manner that meets the 
physical condition standards set forth in this section in order to be 
considered decent, safe, sanitary and in good repair. These standards 
address the major areas of public housing: the site; the building 
exterior; the building systems; the dwelling units; the common areas; 
and health and safety considerations.
    (1) Site. The site components, such as fencing and retaining walls, 
grounds, lighting, mailboxes/project signs, parking lots/driveways, play 
areas and equipment, refuse disposal, roads, storm drainage and walkways 
must be free of health and safety hazards and be in good repair. The 
site must not be subject to material adverse conditions, such as 
abandoned vehicles, dangerous walks or steps, poor drainage, septic tank 
back-ups, sewer hazards, excess accumulations of trash, vermin or rodent 
infestation or fire hazards.
    (2) Building exterior. Each building on the site must be 
structurally sound, secure, habitable, and in good repair. Each 
building's doors, fire escapes, foundations, lighting, roofs, walls, and 
windows, where applicable, must be free of health and safety hazards, 
operable, and in good repair.
    (3) Building systems. Each building's domestic water, electrical 
system, elevators, emergency power, fire protection, HVAC, and sanitary 
system must be free of health and safety hazards, functionally adequate, 
operable, and in good repair.

[[Page 274]]

    (4) Dwelling units. (i) Each dwelling unit within a building must be 
structurally sound, habitable, and in good repair. All areas and aspects 
of the dwelling unit (for example, the unit's bathroom, call-for-aid, 
ceiling, doors, electrical systems, floors, hot water heater, HVAC 
(where individual units are provided), kitchen, lighting, outlets/
switches, patio/porch/balcony, smoke detectors, stairs, walls, and 
windows) must be free of health and safety hazards, functionally 
adequate, operable, and in good repair.
    (ii) Where applicable, the dwelling unit must have hot and cold 
running water, including an adequate source of potable water.
    (iii) If the dwelling unit includes its own sanitary facility, it 
must be in proper operating condition, usable in privacy, and adequate 
for personal hygiene and the disposal of human waste.
    (iv) The dwelling unit must include at least one battery-operated or 
hard-wired smoke detector, in proper working condition, on each level of 
the unit.
    (5) Common areas. The common areas must be structurally sound, 
secure, and functionally adequate for the purposes intended. The 
basement/garage/carport, restrooms, closets, utility, mechanical, 
community rooms, day care, halls/corridors, stairs, kitchens, laundry 
rooms, office, porch, patio, balcony, and trash collection areas, if 
applicable, must be free of health and safety hazards, operable, and in 
good repair. All common area ceilings, doors, floors, HVAC, lighting, 
outlets/switches, smoke detectors, stairs, walls, and windows, to the 
extent applicable, must be free of health and safety hazards, operable, 
and in good repair.
    (6) Health and safety concerns. All areas and components of the 
housing must be free of health and safety hazards. These areas include, 
but are not limited to, air quality, electrical hazards, elevators, 
emergency/fire exits, flammable materials, garbage and debris, handrail 
hazards, infestation, and lead-based paint. For example, the buildings 
must have fire exits that are not blocked and have hand rails that are 
undamaged and have no other observable deficiencies. The housing must 
have no evidence of infestation by rats, mice, or other vermin, or of 
garbage and debris. The housing must have no evidence of electrical 
hazards, natural hazards, or fire hazards. The dwelling units and common 
areas must have proper ventilation and be free of mold, odor (e.g., 
propane, natural gas, methane gas), or other observable deficiencies. 
The housing must comply with all requirements related to the evaluation 
and reduction of lead-based paint hazards and have available proper 
certifications of such (see 24 CFR part 35).
    (b) Appendix A to this part lists the areas to be inspected and the 
items in each area to be inspected.



Sec. 902.25  Physical condition scoring and thresholds.

    (a) Scoring. Under PHAS Indicator #1, REAC will calculate a score of 
the overall condition of the PHA's public housing portfolio that 
reflects weights based on the relative importance of the individual 
inspectable areas and the relative severity of the deficiencies 
observed.
    (b) Adjustment for physical condition (project age) and neighborhood 
environment. In accordance with section 6(j)(1)(I)(2) of the 1937 Act 
(42 U.S.C. 1437d(j)(1)(I)(2)), the physical score for a project will be 
upwardly adjusted to the extent that negative conditions are caused by 
situations outside the control of the PHA. These situations are related 
to the poor physical condition of the project or the overall depressed 
condition of the immediately surrounding neighborhood. The intent of 
this adjustment is to not unfairly penalize the PHA, and to 
appropriately apply the adjustment.
    (1) Adjustments in three areas. Adjustments to the PHA physical 
project score will be made in three factually observed and assessed 
areas (inspectable areas):
    (i) Physical condition of the site;
    (ii) Physical condition of the common areas on the project; and
    (iii) Physical condition of the building exteriors.
    (2) Definitions. Definitions and application of physical condition 
and neighborhood environment factors are:
    (i) Physical condition applies to projects over 10 years old and 
that have

[[Page 275]]

not had substantial rehabilitation in the last 10 years.
    (ii) Neighborhood environment applies to projects located where the 
immediate surrounding neighborhood (that is a majority of the population 
that resides in the census tracts or census block groups on all sides of 
the development) has at least 51 percent of families with incomes below 
the poverty rate as documented by the latest census data.
    (3) Adjustment is for physical condition (project age) and 
neighborhood environment. HUD will adjust the physical score of a PHA's 
project subject to both the physical condition (project age) and 
neighborhood environment conditions. The adjustments will be made to the 
scores assigned to the applicable inspectable areas so as to reflect the 
difficulty in managing. In each instance where the actual physical 
condition of the inspectable area (site, common areas, building 
exterior) is rated below the maximum score for that area, 1 point will 
be added, but not to exceed the maximum number of points available to 
that inspectable area.
    (i) These extra points will be added to the score of the specific 
inspectable area, by project, to which these conditions may apply. A PHA 
is required to certify on form HUD-50072, PHAS Certification (which is 
available from the Department of Housing and Urban Development, HUD 
Customer Service Center, 451 Seventh Street, SW., Room B-102, 
Washington, DC 20410; telephone (800) 767-7468), the extent to which the 
conditions apply, and to the inspectable area the extra scoring point 
should be added.
    (ii) A PHA that receives the maximum potential weighted points on 
the inspectable areas may not claim any additional adjustments for 
physical condition and/or neighborhood environments for the respective 
inspectable area(s). In no circumstance shall a PHA's score for the 
inspectable area, after any adjustment(s) for physical condition and/or 
neighborhood environments, exceed the maximum potential weighted points 
assigned to the respective inspectable area(s).
    (4) Scattered site projects. The Date of Full Availability (DOFA) 
shall apply to scattered site projects, where the age of units and 
buildings vary, to determine whether the projects have received 
substantial rehabilitation within the past 10 years and are eligible for 
an adjusted score for the Physical Condition Indicator.
    (5) Maintenance of supporting documentation. PHAs shall maintain 
supporting documentation to show how they arrived at the determination 
that the project's score is subject to adjustment under this section.
    (i) If the basis was neighborhood environments, the PHA shall have 
on file the appropriate maps showing the census block groups surrounding 
the development(s) in question with supporting census data showing the 
level of poverty. Projects that fall into this category but which have 
already been removed from consideration for other reasons (permitted 
exemptions and modifications and/or exclusions) shall not be counted in 
this calculation.
    (ii) For the physical condition factor, a PHA would have to maintain 
documentation showing the age and condition of the projects and the 
record of capital improvements, indicating that these particular 
projects have not received modernization funds.
    (iii) PHAs shall also document that in all cases, projects that were 
exempted for other reasons were not included in the calculation.
    (c) Thresholds. In order to receive a passing score under the 
Physical Condition Indicator, the PHA's score must fall above a minimum 
threshold of 18 points or 60 percent of the available points under this 
indicator. Further, in order to receive an overall passing score under 
the PHAS, the PHA must receive a passing score on the Physical Condition 
Indicator.



Sec. 902.27  Physical condition portion of total PHAS points.

    Of the total 100 points available for a PHAS score, a PHA may 
receive up to 30 points based on the Physical Condition Indicator.

[[Page 276]]



            Subpart C--PHAS Indicator #2: Financial Condition



Sec. 902.30  Financial condition assessment.

    (a) Objective. The objective of the Financial Condition Indicator is 
to measure the financial condition of a PHA for the purpose of 
evaluating whether it has sufficient financial resources and is capable 
of managing those financial resources effectively to support the 
provision of housing that is decent, safe, sanitary and in good repair.
    (b) Financial reporting standards. A PHA's financial condition will 
be assessed under this indicator on the basis of the annual financial 
report provided in accordance with Sec. 902.33.



Sec. 902.33  Financial reporting requirements.

    (a) Annual financial reports. PHAs must provide to HUD, on an annual 
basis, such financial information, as required by HUD. The financial 
information must be:
    (1) Prepared in accordance with Generally Accepted Accounting 
Principles (GAAP) as further defined by HUD in supplementary guidance;
    (2) Submitted electronically in the electronic format designated by 
HUD; and
    (3) Submitted in such form and substance prescribed by HUD.
    (b) Annual financial report filing dates. The financial information 
to be submitted to HUD in accordance with paragraph (a) of this section, 
must be submitted to HUD annually, no later than 60 days after the end 
of the fiscal year of the reporting period, and as otherwise provided by 
law.
    (c) Reporting compliance dates. The requirement for compliance with 
the financial reporting requirements of this section begins with PHAs 
with fiscal years ending September 30, 1999 and thereafter. Unaudited 
financial statements will be required 60 days after the PHA's fiscal 
year end, and audited financial statements will then be required no 
later than 9 months after the PHA's fiscal year end, in accordance with 
the Single Audit Act and OMB Circular A-133. (See 24 CFR 84.26). A PHA 
with a fiscal year ending September 30, 1999 that elects to submit its 
unaudited report earlier than the due date of November 30, 1999 must 
submit its financial report as required in this section. On or after 
September 30, 1998, but prior to November 30, 1999 (except for a PHA 
with its fiscal year ending September 30, 1999), PHAs may submit their 
financial reports in accordance with this section.



Sec. 902.35  Financial condition scoring and thresholds.

    (a) Scoring. Under PHAS Indicator 2, REAC will calculate a 
score that relies on the key components of financial health and 
management as well as audit and internal control flags.
    (1) The key components of PHAS Indicator #2 include:
    (i) Current Ratio--current assets divided by current liabilities;
    (ii) Number of Months Expendable Fund Balance--number of months a 
PHA can operate on the Expendable Fund Balance without additional 
resources; Expendable Fund Balance is the portion of the fund balance 
representing expendable available financial resources; unreserved and 
undesignated fund balance;
    (iii) Days Receivable Outstanding--average number of days tenant 
receivables are outstanding;
    (iv) Vacancy Loss--loss of potential rent due to vacancy;
    (v) Expense Management/Energy Consumption--expense per unit for key 
expenses, including energy consumption, and other expenses such as 
utilities, maintenance, security; and
    (vi) Net Income or Loss divided by the Expendable Fund Balance--
measures how the year's operations have affected the PHA's viability.
    (2) Additional components. Additional components may be used to 
identify circumstances in which there exists the possibility of higher 
risk of waste, fraud and abuse. These components will be used to detect 
fraud and will be used to generate ``flags'' that will signal field 
staff, Enforcement Center staff, or fraud investigators to take 
appropriate action. These components will primarily relate to financial 
management, but may also be used to provide a PHA with benchmarking 
information to allow the PHA to measure its own performance against its 
peers.

[[Page 277]]

    (b) Thresholds. In order to receive a passing score under the 
Financial Condition Indicator, the PHA's score must fall above a minimum 
threshold of 18 points or 60 percent of the available points under this 
indicator. Further, in order to receive an overall passing score under 
the PHAS, the PHA must receive a passing score on the Financial 
Condition Indicator.



Sec. 902.37  Financial condition portion of total PHAS points.

    Of the total 100 points available for a PHAS score, a PHA may 
receive up to 30 points based on the Financial Condition Indicator.



           Subpart D--PHAS Indicator #3: Management Operations



Sec. 902.40  Management operations assessment.

    (a) Objective. The objective of the Management Operations Indicator 
is to measure certain key management operations and responsibilities of 
a PHA for the purpose of assessing the PHA's management operations 
capabilities.
    (b) Management assessment. PHAS Indicator #3 pertaining to 
Management Operations incorporates the majority of the statutory 
indicators of section 6(j) of the U.S. Housing Act of 1937, and an 
additional nonstatutory indicator (security), as provided in 
Sec. 902.43.



Sec. 902.43  Management operations performance standards.

    (a) Management operations indicators. The following indicators will 
be used to assess a PHA's management operations:
    (1) Management Indicator #1--Vacancy rate and unit turnaround time. 
This management indicator examines the vacancy rate, a PHA's progress in 
reducing vacancies, and unit turnaround time. Implicit in this 
management indicator is the adequacy of the PHA's system to track the 
duration of vacancies and unit turnaround, including down time, make 
ready time, and lease up time.
    (2) Management Indicator #2--Modernization. This management 
indicator is automatically excluded if a PHA does not have a 
modernization program. This management indicator examines the amount of 
unexpended funds over 3 Federal fiscal years (FFY) old, the timeliness 
of fund obligation, the adequacy of contract administration, the quality 
of the physical work, and the adequacy of budget controls. All 
components of this management indicator apply to the Comprehensive Grant 
Program (CGP), the Comprehensive Improvement Assistance Program (CIAP), 
the HOPE VI assistance, vacancy reduction, and lead based paint risk 
assessment funding (1992-1995), and any successor program(s) to the CGP 
or the CIAP.
    (3) Management Indicator #3--Rents uncollected. This management 
indicator examines the PHA's ability to collect dwelling rents owed by 
residents in possession during the immediate past fiscal year by 
measuring the balance of dwelling rents uncollected as a percentage of 
total dwelling rents to be collected.
    (4) Management Indicator #4--Work orders. This management indicator 
examines the time it takes to complete or abate emergency work orders, 
the average number of days nonemergency work order were active, and any 
progress a PHA has made during the preceding 3 years to reduce the 
period of time nonemergency maintenance work orders were active. 
Implicit in this management indicator is the adequacy of the PHA's work 
order system in terms of how a PHA accounts for and controls its work 
orders, and its timeliness in preparing/issuing work orders.
    (5) Management Indicator #5--PHA annual inspection of units and 
systems. This management indicator examines the percentage of units that 
a PHA inspects on an annual basis in order to determine short-term 
maintenance needs and long-term modernization needs. This management 
indicator requires a PHA's inspection to utilize the HUD uniform 
physical condition standards set forth in subpart B of this part. All 
occupied units are required to be inspected.
    (6) Management Indicator #6--Security. This management indicator 
evaluates the PHA's performance in tracking crime related problems in 
their developments, reporting incidence of crime to local law 
enforcement agencies, the

[[Page 278]]

adoption and implementation, consistent with section 9 of the Housing 
Opportunity Program Extension Act of 1996 (One-Strike and You're Out) 
(42 U.S.C. 1437d(r)), of applicant screening and resident eviction 
policies and procedures, and, as applicable, PHA performance under any 
HUD drug prevention or crime reduction grant(s). A PHA may receive 
credit for performance under non-HUD funded programs if it provides 
auditable financial and statistical documentation for these programs.
    (b) Reporting on performance under the Management Operations 
Indicator. Each PHA will provide to HUD a certification on its 
performance under each of the management indicators in paragraph (a) of 
this section. The certifications shall comply with the requirements of 
Sec. 902.60.



Sec. 902.45  Management operations scoring and thresholds.

    (a) Scoring. Under PHAS Indicator #3, REAC will calculate a score of 
the overall management operations of a PHA that reflects weights based 
on the relative importance of the individual management indicators.
    (b) Thresholds. In order to receive a passing score under the 
Management Operations Indicator, the PHA's score must fall above a 
minimum threshold of 18 points or 60 percent of the available points 
under this PHAS Indicator #3. Further, in order to receive an overall 
passing score under the PHAS, the PHA must receive a passing score on 
the Management Operations Indicator.



Sec. 902.47  Management operations portion of total PHAS points.

    Of the total 100 points available for a PHAS score, a PHA may 
receive up to 30 points based on the Management Operations Indicator.



     Subpart E--PHAS Indicator #4: Resident Service and Satisfaction



Sec. 902.50  Resident service and satisfaction assessment.

    (a) Objective. The objective of the Resident Service and 
Satisfaction Indicator is to measure the level of resident satisfaction 
with living conditions at the PHA.
    (b) Reporting information on resident service and satisfaction. The 
assessment will be performed through the use of a resident service and 
satisfaction survey. The survey process will be managed by the PHA in 
accordance with a methodology prescribed by HUD. The PHA will be 
responsible for maintaining original copies of completed survey data, 
subject to independent audit, and for developing a follow-up plan to 
address issues resulting from the survey.



Sec. 902.53  Resident service and satisfaction scoring and thresholds.

    (a) Scoring. Under the PHAS Indicator #4, REAC will calculate a 
score based upon two components that receive points and a third 
component that is a threshold requirement. One component will be the 
point score of the survey results. The survey content will focus on 
resident evaluation of the overall living conditions, to include basic 
constructs such as: maintenance and repair (i.e., work order response); 
communications (i.e, perceived effectiveness); safety (i.e., perception 
of personal security); services (i.e., recreation and personal 
programs); and neighborhood appearance. The second component will be a 
point score based on the level of implementation and follow-up or 
corrective actions based on the results of the survey. The final 
component, which is not scored for points, but which is a threshold 
requirement, is verification that the survey process was managed in a 
manner consistent with guidance provided by HUD.
    (b) Thresholds. A PHA will not receive any points under PHAS 
Indicator #4 if the survey process is not managed as directed by HUD or 
the survey results are determined to be altered. A PHA will receive a 
passing score on the Resident Service and Satisfaction Indicator if it 
receives at least 6 points, or 60% of the available points under this 
PHAS Indicator #4.



Sec. 902.55  Resident service and satisfaction portion of total PHAS points.

    Of the total 100 points available for a PHAS score, a PHA may 
receive up to 10 points based on the Resident Service and Satisfaction 
Indicator.

[[Page 279]]



                         Subpart F--PHAS Scoring



Sec. 902.60  Data collection.

    (a) Fiscal Year Reporting Period--limitation on changes after PHAS 
effectiveness. An assessed fiscal year for purposes of the PHAS 
corresponds to a PHA's fiscal year. To allow for a period of consistent 
assessments to refine and make necessary adjustments to the PHAS, a PHA 
is not permitted to change its fiscal year for the first 3 full fiscal 
years following the effective date of this part (see Sec. 902.1(e)).
    (b) Physical Condition information. Information necessary to conduct 
the physical condition assessment under subpart B of this part will be 
obtained from HUD inspectors during the fiscal year being scored through 
electronic transmission of the data.
    (c) Financial Condition information. Year-end financial information 
to conduct the assessment under subpart C, Financial Condition, of this 
part will be submitted by a PHA through electronic transmission of the 
data to HUD not later than 60 days after the end of the PHA's fiscal 
year. An audited report of the year-end financial information is due not 
later than 9 months after the end of the PHA's fiscal year.
    (d) Management Operations and Resident Service and Satisfaction 
information. A PHA shall provide certification to HUD as to data 
required under subpart D, Management Operations, of this part and 
subpart E, Resident Service and Satisfaction, of this part not later 
than 60 days after the end of the PHA's fiscal year.
    (1) The certification shall be approved by PHA Board resolution, and 
signed and attested to by the Executive Director.
    (2) PHAs shall maintain documentation for 3 years verifying all 
certified indicators for HUD on-site review.
    (e) Failure to submit data by due date. If a PHA without a finding 
of good cause by HUD does not submit its certifications or year-end 
financial information, required by this part, or submits its 
certifications or year-end financial information more than 15 days past 
the due date, appropriate sanctions may be imposed, including a 
reduction of 1 point in the total PHAS score for each 15-day period past 
the due date. If all certifications or year-end financial information 
are not received within 90 days past the due date, the PHA will receive 
a presumptive rating of failure in all of the PHAS indicators and 
components certified to, which shall result in troubled and mod-troubled 
designations.
    (f) Verification of information submitted. (1) A PHA's 
certifications, year-end financial information and any supporting 
documentation are subject to verification by HUD at any time. 
Appropriate sanctions for intentional false certification will be 
imposed, including civil penalties, suspension or debarment of the 
signatories, the loss of high performer designation, a lower score under 
individual PHAS indicators and a lower overall PHAS score.
    (2) A PHA that cannot provide justifying documentation to REAC, or 
to the PHA's independent auditor for the assessment under any 
indicator(s) or component(s) shall receive a score of 0 for the relevant 
indicator(s) or component(s), and its overall PHAS score shall be 
lowered.
    (3) A PHA's PHAS score under individual indicators or components, or 
its overall PHAS score, may be changed by HUD pursuant to the data 
included in the independent audit report, or obtained through such 
sources as HUD on-site review, investigations by HUD's Office of Fair 
Housing and Equal Opportunity, or reinspection by REAC, as applicable.
    (g) Management operations assumed by an RMC. For those developments 
of a PHA where management operations have been assumed by an RMC, the 
PHA's certification shall identify the development and the management 
functions assumed by the RMC. The PHA shall obtain a certified 
questionnaire from the RMC as to the management functions undertaken by 
the RMC. Following verification of the RMC's certification, the PHA 
shall submit the RMC's certified questionnaire along with its own. The 
RMC's certification shall be approved by its Executive Director or Chief 
Executive Officer or responsible party.



Sec. 902.63  PHAS scoring.

    (a) Issuance of score by HUD. An overall PHAS score will be issued 
by REAC

[[Page 280]]

for each PHA 60 to 90 days after the end of the PHA's fiscal year.
    (b) Computing the PHAS score. Each of the four PHAS indicators in 
this part will be scored individually, and then will be used to 
determine an overall score for the PHA. Components within each of the 
four PHAS indicators will be scored individually, and the scores for the 
components will be used to determine a single score for each of the PHAS 
indicators.
    (c) Adjustments to the PHAS score. Adjustments to the score may be 
made after a PHA's audit report for the year being assessed is 
transmitted to HUD. If significant differences (as defined in GAAP 
guidance materials provided to PHAs) are noted between unaudited and 
audited results, a PHA's PHAS score will be raised or lowered, as 
applicable, in accordance with the audited results.
    (d) Posting and publication of PHAS scores. Each PHA shall post a 
notice of its final PHAS score and status in appropriate conspicuous and 
accessible locations in its offices within 2 weeks of receipt of its 
final score and status. In addition, HUD will publish every PHA's score 
and status in the Federal Register.



Sec. 902.67  Score and designation status.

    Designation status corresponding to score. A PHA will be scored with 
a corresponding designation of status as follows:
    (a) High performer. A PHA that achieves a score of at least 60 
percent of the points available under each of the four PHAS Indicators 
(addressed in subparts B through E of this part) and achieves an overall 
PHAS score of 90 percent or greater shall be designated a high 
performer. A PHA shall not be designated a high performer if it scores 
below the threshold established for any indicator. High performers will 
be afforded incentives that include relief from reporting and other 
requirements, as described in Sec. 902.71.
    (b) Standard performer. A PHA that achieves a total PHAS score of 
less than 90 percent but not less than 60 percent shall be designated a 
standard performer. All standard performers must correct reported 
deficiencies. A standard performer that receives a score less than 70 
percent but not less than 60 percent shall be subject to other 
oversight, as described in Sec. 902.73. A PHA that achieves a score of 
less than 60 percent of the total points available under PHAS Indicators 
1, 2, or 3 shall not be designated a standard performer, but shall be 
designated a troubled performer, as provided in paragraph (c) of this 
section.
    (c) Troubled performer. A PHA that achieves a total PHAS score of 
less than 60 percent, or achieves a score of less than 60 percent of the 
total points available under PHAS Indicators 1, 2, or 3, shall be 
designated as troubled, and referred to the TARC as described in 
Sec. 902.75. In accordance with section 6(j)(2) of the 1937 Act, a PHA 
that receives less than 60 percent of the maximum calculation for the 
modernization indicator under PHAS Indicator #3 (Management Operations, 
subpart D of this part) may be subject to the following sanctions: under 
the Comprehensive Grant Program to a reduction of formula allocation or 
other sanctions (24 CFR part 968, subpart C); under the Comprehensive 
Improvement Assistance Program to disapproval of new funding or other 
sanctions (24 CFR part 968, subpart B); or disapproval of funding under 
the HOPE VI Program.



Sec. 902.69  PHA right of petition and appeal.

    (a) Appeal of troubled designation and petition for removal. A PHA 
may:
    (1) Appeal designation as a troubled agency (including designation 
as troubled with respect to the modernization program);
    (2) Petition for removal of such designation; and
    (3) Appeal any refusal to remove such designation.
    (b) Appeal process. The appeal shall be submitted by a PHA to the 
REAC within 30 days of a PHA's receipt of its score, and shall include 
supporting documentation and justification of the reasons for the 
appeal. An appeal submitted to the REAC without appropriate 
documentation will not be considered and will be returned to the PHA.
    (c) Consideration of appeal by REAC. Upon receipt of an appeal from 
a PHA,

[[Page 281]]

the REAC will convene a Board of Review (the Board) to evaluate the 
appeal and its merits for the purpose of determining whether a 
reassessment of the PHA is warranted. Board membership will be comprised 
of a representative from REAC, the Office of Public and Indian Housing, 
and such other office or representative as the Secretary may designate 
(excluding, however, representation from the Troubled Agency Recovery 
Center). For purposes of reassessment, the REAC will schedule a 
reinspection and/or acquire audit services, as determined by the Board, 
and a new score will be issued, if appropriate.
    (d) Final appeal decisions. HUD will make final decisions of appeals 
within 30 days of receipt of an appeal, and may extend this period an 
additional 30 days if further inquiry is necessary. Failure by a PHA to 
submit requested information within the 30-day period or any additional 
period granted by HUD is grounds for denial of an appeal.



                 Subpart G--PHAS Incentives and Remedies



Sec. 902.71  Incentives for high performers.

    (a) Incentives for high-performer PHAs. A PHA that is designated a 
high performer will be eligible for the following incentives:
    (1) Relief from specific HUD requirements. A PHA that is designated 
high performer will be relieved of specific HUD requirements (for 
example, fewer reviews and less monitoring), effective upon notification 
of high performer designation.
    (2) Public recognition. High-performer PHAs and RMCs that receive a 
score of at least 60 percent of the points available under each of the 
four PHAS Indicators and achieves an overall PHAS score of 90, will 
receive a Certificate of Commendation from HUD as well as special public 
recognition, as provided by the HUB/Program Center.
    (3) Bonus points in funding competitions. A high-performer PHA will 
be eligible for bonus points in HUD's funding competitions, where such 
bonus points are not restricted by statute or regulation governing the 
funding program.
    (b) Compliance with applicable Federal laws and regulations. Relief 
from any standard procedural requirement that may be provided under this 
section, does not mean that a PHA is relieved from compliance with the 
provisions of Federal law and regulations or other handbook 
requirements. For example, although a high performer or standard 
performer may be relieved of requirements for prior HUD approval for 
certain types of contracts for services, the PHA must still comply with 
all other Federal and State requirements that remain in effect, such as 
those for competitive bidding or competitive negotiation (see 24 CFR 
85.36).
    (c) Audits and reviews not relieved by designation. A PHA designated 
as a high performer or standard performer remains subject to:
    (1) Regular independent auditor (IA) audits.
    (2) Office of Inspector General (OIG) audits or investigations will 
continue to be conducted as circumstances may warrant.



Sec. 902.73  Referral to an Area HUB/Program Center.

    (a) Standard performers will be referred to the HUB/Program Center 
for appropriate action. A standard performer that receives a total score 
of less than 70 percent but not less than 60 percent shall be required 
to submit an Improvement Plan to eliminate deficiencies in the PHA's 
performance. A standard performer that receives a score of not less than 
70 percent may be required, at the discretion of the appropriate area 
HUB/Program Center, to submit an Improvement Plan to address specific 
deficiencies.
    (b) Submission of an Improvement Plan. (1) Within 30 days after a 
PHAS score is issued, a standard performer with a score less than 70 
percent is required to submit an Improvement Plan, which includes the 
information stated in paragraph (d) of this section and determined 
acceptable by the HUB/Program Center, for each indicator and/or 
component identified as deficient as well as other performance and/or 
compliance deficiencies as may be identified as a result of an on-site 
review of the PHA's operations. An RMC that is required to submit an 
Improvement Plan must develop the plan in consultation with its

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PHA and submit the Plan to the HUB/Program Center through its PHA.
    (2) The HUB/Program Center may require, on a risk management basis, 
a standard performer with a score of not less than 70 percent to submit 
within 30 days after receipt of its PHAS score an Improvement Plan, 
which includes the information stated in paragraph (d) of this section, 
for each indicator and/or component of a PHAS indicator identified as 
deficient.
    (c) Correction of deficiencies. (1) Time period for correction. 
After a PHA's receipt of its PHAS score and designation as a standard 
performer or, in the case of an RMC, notification of its score from a 
PHA, a PHA or RMC shall correct any deficiency indicated in its 
assessment within 90 days, or within such period as provided in the HUD 
approved Improvement Plan if an Improvement Plan is required.
    (2) Notification and report to HUB/Program Center. A PHA shall 
notify the HUB/Program Center of its action to correct a deficiency. A 
PHA shall also forward to the HUB/Program Center an RMC's report of its 
action to correct a deficiency.
    (d) Improvement Plan. An Improvement Plan shall:
    (1) Identify baseline data, which should be raw data but may be the 
PHA's score under each individual PHAS indicator and/or component that 
was identified as a deficiency;
    (2) Describe the procedures that will be followed to correct each 
deficiency;
    (3) Provide a timetable for the correction of each deficiency; and
    (4) Provide for or facilitate technical assistance to the PHA.
    (e) Determination of acceptability of Improvement Plan (1) The HUB/
Program Center will approve or deny a PHA's (or RMC's Improvement Plan 
submitted to the HUB/Program Center through the RMC's PHA), and notify 
the PHA of its decision. A PHA that submits an RMC's Improvement Plan 
must notify the RMC in writing, immediately upon receipt of the HUB/
Program Center notification, of the HUB/Program Center approval or 
denial of the RMC's Improvement Plan.
    (2) An Improvement Plan that is not approved will be returned to the 
PHA with recommendations from the HUB/Program Center for revising the 
Improvement Plan to obtain approval.
    (f) Submission of revised Improvement Plan. A revised Improvement 
Plan shall be resubmitted by the PHA within 30 calendar days of its 
receipt of the HUB/Program Center recommendations.
    (g) Failure to submit acceptable Improvement Plan. If a PHA fails to 
submit an acceptable Improvement Plan, or to correct deficiencies within 
the time specified in an Improvement Plan or such extensions as may be 
granted by HUD, the HUB/Program Center will notify the PHA of its 
noncompliance. The PHA (or the RMC through the PHA) will provide the 
HUB/Program Center its reasons for lack of progress in submitting or 
carrying out the Improvement Plan within 30 calendar days of its receipt 
of the noncompliance notification. HUD will advise the PHA as to the 
acceptability of its reasons for lack of progress and, if unacceptable, 
will notify the PHA that it will be referred to the TARC for remedial 
actions or such actions as the TARC may determine appropriate in 
accordance with the provisions of the ACC, this part and other HUD 
regulations. If the TARC determines that it is appropriate to refer the 
PHA to the Enforcement Center, it will only do so after the PHA has had 
1 year since the issuance of the PHAS score (or, in the case of an RMC, 
notification of its score from a PHA) to correct its deficiencies.



Sec. 902.75  Referral to a TARC.

    Upon designation of a PHA as troubled, in accordance with the 
requirements of section 6(j)(2)(B) of the 1937 Act and in accordance 
with this part, the REAC shall refer each troubled PHA to the PHA's area 
TARC for remedial action. The actions to be taken by the TARC and the 
PHA shall be as follows:
    (a) Recovery plan and MOA. Within 30 days of notification of the 
designation of a troubled PHA within its area, the appropriate TARC will 
deploy an on-site team to develop a Recovery Plan. The Recovery Plan 
shall include recommendations for improvements to correct or eliminate 
deficiencies that resulted in a failing PHAS score and

[[Page 283]]

designation as troubled. The Recovery Plan will incorporate a memorandum 
of agreement (MOA) as described in paragraph (c) of this section.
    (b) PHA review of recovery plan and MOA. The PHA will have 10 days 
to review the recovery plan and the MOA. During this 10-day period, the 
PHA shall resolve any claimed discrepancies in the plan with its area 
TARC, and discuss any recommended changes and target dates for 
improvement to be incorporated in the final MOA. Unless the time period 
is extended by the TARC, the MOA is to be executed 15 days following 
issuance of the preliminary MOA.
    (c) Memorandum of agreement (MOA). The final MOA is a binding 
contractual agreement between HUD and a PHA. The scope of the MOA may 
vary depending upon the extent of the problems present in the PHA, but 
shall include:
    (1) Baseline data, which should be raw data but may be the PHA's 
score in each of the PHAS indicators or components identified as a 
deficiency;
    (2) Annual and quarterly performance targets, which may be the 
attainment of a higher score within an indicator that is a problem, or 
the description of a goal to be achieved;
    (3) Strategies to be used by the PHA in achieving the performance 
targets within the time period of the MOA;
    (4) Technical assistance to the PHA provided or facilitated by HUD, 
for example, the training of PHA employees in specific management areas 
or assistance in the resolution of outstanding HUD monitoring findings;
    (5) The PHA's commitment to take all actions within its control to 
achieve the targets;
    (6) Incentives for meeting such targets, such as the removal of 
troubled or mod-troubled designation and Departmental recognition for 
the most improved PHAs;
    (7) The consequences of failing to meet the targets, including, but 
not limited to, such sanctions as the imposition of budget and 
management controls by the TARC, declaration of substantial default and 
subsequent actions, including referral to the Enforcement Center for 
judicial appointment of a receiver, limited denial of participation, 
suspension, debarment, or other actions deemed appropriate by the 
Enforcement Center; and
    (8) A description of the involvement of local public and private 
entities, including PHA resident leaders, in carrying out the agreement 
and rectifying the PHA's problems. A PHA shall have primary 
responsibility for obtaining active local public and private entity 
participation, including the involvement of public housing resident 
leaders, in assisting PHA improvement efforts. Local public and private 
entity participation should be premised upon the participant's knowledge 
of the PHA, ability to contribute technical expertise with regard to the 
PHA's specific problem areas and authority to make preliminary/tentative 
commitments of support, financial or otherwise.
    (d) Maximum recovery period. Unless extended by the TARC and 
documented in the MOA, the maximum recovery period for a troubled PHA is 
the first full fiscal year following execution of the MOA.
    (e) Parties to the MOA. An MOA shall be executed by:
    (1) The PHA Board Chairperson and accompanied by a Board resolution, 
or a receiver (pursuant to a court ordered receivership agreement, if 
applicable) or other AME acting in lieu of the PHA Board;
    (2) The PHA Executive Director, or a designated receiver (pursuant 
to a court ordered receivership agreement, if applicable) or other AME-
designated Chief Executive Officer;
    (3) The Director of the area TARC; and
    (4) The appointing authorities of the Board of Commissioners, unless 
exempted by the HUD/Program Center.
    (f) Involvement of resident leadership in the MOA. HUD encourages 
the inclusion of the resident leadership in the execution of the MOA.
    (g) Failure to execute MOA or make substantial improvement under 
MOA. (1) If a troubled PHA does not execute an MOA within the period 
provided in paragraph (b) of this section, or the TARC determines that 
the PHA does not show a substantial improvement toward a passing PHAS 
score following the issuance of the failing PHAS score

[[Page 284]]

by the REAC, the TARC shall refer the PHA to the Enforcement Center, 
which shall initiate proceedings for judicial appointment of a receiver, 
and other sanctions as may be appropriate. For purposes of this 
paragraph (g), substantial improvement is defined as 50 percent of the 
points needed to achieve a passing PHAS score as determined by the REAC. 
The maximum period of time for remaining in troubled status before being 
referred to the Enforcement Center is 2 years.
    (2) The following example illustrates the provisions of paragraph 
(g)(1) of this section:

    Example: A PHA receives a score of 50; 60 is a passing score. The 
PHA is referred to the TARC. Within 1 year after the score is issued to 
the PHA, the PHA must achieve a 5-point increase to continue recovery 
efforts in the TARC. If the PHA fails to achieve the 5-point increase, 
the PHA will be referred to the Enforcement Center. The maximum period 
of time for remaining in troubled status before being referred to the 
Enforcement Center is 2 years.

    (h) To the extent feasible, while a PHA is under a referral to a 
TARC, all services to residents will continue uninterrupted.



Sec. 902.77  Referral to the Enforcement Center.

    (a) Failure of a troubled PHA to execute or meet the requirements of 
a memorandum of agreement in accordance with Sec. 902.75 constitutes a 
substantial default in accordance with Sec. 902.79 and shall result in 
referral to the Enforcement Center. The Enforcement Center is officially 
responsible for recommending to the Assistant Secretary for Public and 
Indian Housing that a troubled performer PHA be declared in substantial 
default. The Enforcement Center shall initiate the judicial appointment 
of a receiver or the interventions provided in Sec. 902.83; and may 
initiate limited denial of participation, suspension, debarment, the 
imposition of other sanctions available to the Enforcement Center 
including referral to the appropriate Federal government agencies or 
offices for the imposition of civil or criminal sanctions.
    (b) To the extent feasible, while a PHA is under a referral to the 
Enforcement Center, all services to residents will continue 
uninterrupted.



Sec. 902.79  Substantial default.

    (a) Events or conditions that constitute substantial default. The 
following events or conditions shall constitute substantial default.
    (1) HUD may determine that events have occurred or that conditions 
exist that constitute a substantial default if a PHA is determined to be 
in violation of Federal statutes, including but not limited to, the 1937 
Act, or in violation of regulations implementing such statutory 
requirements, whether or not such violations would constitute a 
substantial breach or default under provisions of the relevant ACC.
    (2) HUD may determine that a PHA's failure to satisfy the terms of a 
memorandum of agreement entered into in accordance with Sec. 902.75, or 
to make reasonable progress to execute or meet requirements included in 
a memorandum of agreement, are events or conditions that constitute a 
substantial default.
    (3) HUD shall determine that a PHA that has been designated as 
troubled and does not show substantial improvement, as defined in 
Sec. 902.75(g), in its PHAS score in 1 year following issuance of the 
failed score is in substantial default.
    (4) HUD may declare a substantial breach or default under the ACC, 
in accordance with its terms and conditions.
    (5) HUD may determine that the events or conditions constituting a 
substantial default are limited to a portion of a PHA's public housing 
operations, designated either by program, by operational area, or by 
development(s).
    (b) Notification of substantial default and response. If information 
from an annual assessment or audit, or any other credible source 
(including but not limited to the Office of Fair Housing Enforcement, 
the Office of the Inspector General, a judicial referral or a referral 
from a mayor or other official) indicates that there may exist events or 
conditions constituting a substantial breach or default, HUD shall 
advise a PHA of such information. HUD is authorized to protect the 
confidentiality of the source(s) of such information in

[[Page 285]]

appropriate cases. Before taking further action, except in cases of 
apparent fraud or criminality, and/or in cases where emergency 
conditions exist posing an imminent threat to the life, health, or 
safety of residents, HUD shall afford the PHA a timely opportunity to 
initiate corrective action, including the remedies and procedures 
available to PHAs designated as troubled PHAs, or to demonstrate that 
the information is incorrect.
    (1) Form of notification. Upon a determination or finding that 
events have occurred or that conditions exist that constitute a 
substantial default, the Assistant Secretary shall provide written 
notification of such determination or finding to the affected PHA. 
Written notification shall be transmitted to the Executive Director, the 
Chairperson of the Board, and the appointing authority(ies) of the 
Board, and shall include, but is not limited to:
    (i) Identification of the specific covenants, conditions, and/or 
agreements under which the PHA is determined to be in noncompliance;
    (ii) Identification of the specific events, occurrences, or 
conditions that constitute the determined noncompliance;
    (iii) Citation of the communications and opportunities to effect 
remedies afforded pursuant to paragraph (a) of this section;
    (iv) Notification to the PHA of a specific time period, to be not 
less than 10 calendar days, except in cases of apparent fraud or other 
criminal behavior, and/or under emergency conditions as described in 
paragraph (a) of this section, nor more than 30 calendar days, during 
which the PHA shall be required to demonstrate that the determination or 
finding is not substantively accurate; and
    (v) Notification to the PHA that, absent a satisfactory response in 
accordance with paragraph (b) of this section, HUD will refer the PHA to 
the Enforcement Center, using any or all of the interventions specified 
in Sec. 902.83, and determined to be appropriate to remedy the 
noncompliance, citing Sec. 902.83, and any additional authority for such 
action.
    (2) Receipt of notification. Upon receipt of the notification 
described in paragraph (b)(1) of this section, the PHA must demonstrate, 
within the time period permitted in the notification, factual error in 
HUD's description of events, occurrences, or conditions, or show that 
the events, occurrences, or conditions do not constitute noncompliance 
with the statute, regulation, or covenants or conditions to which the 
PHA is cited in the notification.
    (3) Waiver of notification. A PHA may waive, in writing, receipt of 
explicit notice from HUD as to a finding of substantial default, and 
voluntarily consent to a determination of substantial default. The PHA 
must concur on the existence of substantial default conditions which can 
be remedied by technical assistance, and the PHA shall provide HUD with 
written assurances that all deficiencies will be addressed by the PHA. 
HUD will then immediately proceed with interventions as provided in 
Sec. 902.83.
    (4) Emergency situations. In any situation determined to be an 
emergency, or in any case where the events or conditions precipitating 
the intervention are determined to be the result of criminal or 
fraudulent activity, the Secretary or the Secretary's designee is 
authorized to intercede to protect the residents' and HUD's interests by 
causing the proposed interventions to be implemented without further 
appeals or delays.



Sec. 902.83  Interventions.

    (a) Interventions under this part (including an assumption of 
operating responsibilities) may be limited to one or more of a PHA's 
specific operational areas (e.g., maintenance, modernization, occupancy, 
or financial management) or to a single development or a group of 
developments. Under this limited intervention procedure, HUD could 
select, or participate in the selection of, an AME to assume management 
responsibility for a specific development, a group of developments in a 
geographical area, or a specific operational area, while permitting the 
PHA to retain responsibility for all programs, operational areas, and 
developments not so designated.
    (b) Upon determining that a substantial default exists under this 
part, HUD

[[Page 286]]

may initiate any interventions deemed necessary to maintain decent, 
safe, and sanitary dwellings for residents. Such intervention may 
include:
    (1) Providing technical assistance for existing PHA management 
staff;
    (2) Selecting or participating in the selection of an AME to provide 
technical assistance or other services up to and including contract 
management of all or any part of the public housing developments 
administered by a PHA;
    (3) Assuming possession and operational responsibility for all or 
any part of the public housing administered by a PHA;
    (4) Entering into agreements, arrangements, and/or contracts for or 
on behalf of a PHA, or acting as the PHA, and expending or authorizing 
the expenditure of PHA funds, irrespective of the source of such funds, 
to remedy the events or conditions constituting the substantial default;
    (5) The provision of intervention and assistance necessary to remedy 
emergency conditions;
    (6) After the solicitation of competitive proposals, select an 
administrative receiver to manage and operate all or part of the PHA's 
housing; and
    (7) Petition for the appointment of a receiver to any District Court 
of the United States or any court of the State in which real property of 
the PHA is located.
    (c) The receiver is to conduct the affairs of the PHA in a manner 
consistent with statutory, regulatory, and contractual obligations of 
the PHA and in accordance with such additional terms and conditions that 
the court may provide.
    (d) The appointment of a receiver pursuant to this section may be 
terminated upon the petition to the court by the PHA, the receiver, or 
HUD, and upon a finding by the court that the circumstances or 
conditions that constituted substantial default by the PHA no longer 
exist and that the operations of the PHA will be conducted in accordance 
with applicable statutes and regulations, and contractual covenants and 
conditions to which the PHA and its public housing programs are subject.
    (e) HUD may take the actions described in this part sequentially or 
simultaneously in any combination.



Sec. 902.85  Resident petitions for remedial action.

    The total number of residents that petition HUD to take remedial 
action pursuant to sections 6(j)(3)(A)(i) through (iv) of the 1937 Act 
must equal at least 20 percent of the residents, or the petition must be 
from an organization or organizations of residents whose membership must 
equal at least 20 percent of the PHA's residents.

         Appendix A to Part 902--Areas and Items to be Inspected

                               AREA: Site

                                 Items:

Fencing and Retaining Walls
Grounds
Lighting
Mail Boxes/Project Signs
Market Appeal
Parking Lots/Driveways
Play Areas and Equipment
Refuse Disposal
Roads
Storm Drainage
Walkways

                         AREA: Building Exterior

                                 Items:

Doors
Fire Escapes
Foundations
Lighting
Roofs
Walls
Windows

                         AREA: Building Systems

                                 Items:

Domestic Water
Electrical System
Elevators
Emergency Power
Fire Protection
HVAC
Sanitary System

                           AREA: Dwelling Unit

                                 Items:

Bathroom
Cell-for-Aid
Ceiling
Doors
Electrical System
Floors

[[Page 287]]

Hot Water Heater
HVAC System
Kitchen
Lighting
Outlets/Switches
Patio/Porch/Balcony
Smoke Detector
Stairs
Walls
Windows

                           AREA: Common Areas

                                 Items:

Basement/Garage/Carport
Closets/Utility/Mechanical
Community Room
Day Care
Halls/Corridors/Stairs
Kitchen
Laundry Room
Lobby
Office
Other Community Spaces
Patio/Porch/Balcony
Pools and Related Structures
Restroom
Storage
Trash Collection Areas

                         AREA: Health and Safety

                                 Items:

Air Quality
Electrical Hazards
Elevator
Emergency/Fire Exits
Fire Escapes
Flammable Materials
Garbage and Debris
Ground Fault Interrupters
Handrails
Hazards
Hot Water Heater
Infestation
Lead Paint
Pools and Related Structures
Smoke Detectors



PART 903--PUBLIC HOUSING AGENCY PLANS--Table of Contents




Sec.
903.1  What are the public housing agency plans?
903.3  When must a PHA submit the plans to HUD?
903.5  What information must a PHA provide in the 5-Year Plan?
903.7  What information must a PHA provide in the Annual Plan?
903.9  Must a troubled PHA include additional information in its Annual 
          Plan?
903.11  Are certain PHAs eligible to submit a streamlined Annual Plan?
903.13  What is a Resident Advisory Board and what is its role in 
          development of the Annual Plan?
903.15  What is the relationship of the public housing agency plans to 
          the Consolidated Plan?
903.17  Must the PHA make public the contents of the plans?
903.19  When is the 5-Year Plan or Annual Plan ready for submission to 
          HUD?
903.21  May the PHA amend or modify a plan?
903.23  What is the process by which HUD reviews, approves, or 
          disapproves an Annual Plan?
903.25  How does HUD ensure PHA compliance with its plans?


    Authority: 42 U.S.C. 1437c; 42 U.S.C. 3535(d).

    Source: 64 FR 8181, Feb. 18, 1999, unless otherwise noted.



Sec. 903.1  What are the public housing agency plans?

    (a) There are two public housing agency plans. They are:
    (1) The 5-year plan (the 5-Year Plan) that a public housing agency 
(PHA) must submit to HUD once every 5 PHA fiscal years; and
    (2) The annual plan (Annual Plan) that the PHA must submit to HUD 
for each fiscal year for which the PHA receives:
    (i) Section 8 tenant-based assistance (section 8(o) of the U.S. 
Housing Act of 1937, 42 U.S.C. 1437f(o)) (tenant-based assistance); or
    (ii) Public housing operating subsidy or capital fund (section 9 of 
the U.S. Housing Act of 1937 (42 U.S.C. 1437g) (public housing)).
    (b) The purpose of the plans is to provide a framework for local 
accountability and an easily identifiable source by which public housing 
residents, participants in the tenant-based assistance program, and 
other members of the public may locate basic PHA policies, rules and 
requirements concerning its operations, programs and services.
    (c) HUD may prescribe the format of submission (including electronic 
format submission) of the plans. PHAs will receive appropriate notice of 
any prescribed format.
    (d) The requirements of this part only apply to a PHA that receives 
the type of assistance described in paragraph (a) of this section.

[[Page 288]]

    (e) In addition to the waiver authority provided in 24 CFR 5.110, 
the Secretary may, subject to statutory limitations, waive any provision 
of this title on a program-wide basis, and delegate this authority in 
accordance with section 106 of the Department of Housing and Urban 
Development Reform Act of 1989 (42 U.S.C. 3535(q)) where the Secretary 
determines that such waiver is necessary for the effective 
implementation of this part.



Sec. 903.3  When must a PHA submit the plans to HUD?

    (a) 5-Year Plan. (1) The first PHA fiscal year that is covered by 
the requirements of this part is the PHA fiscal year that begins January 
1, 2000. The first 5-Year Plan submitted by a PHA must be submitted for 
the 5-year period beginning January 1, 2000. The first 5-Year Plans will 
be due no later than 75 days before January 1, 2000. For PHAs whose 
fiscal years begin after January 1, 2000, their 5-Year Plans are due no 
later than 75 days before the commencement of their fiscal year. For all 
PHAs, after submission of their first 5-Year Plan, all subsequent 5-Year 
Plans must be submitted once every 5 PHA fiscal years, no later than 75 
days before the commencement of the PHA's fiscal year.
    (2) PHAs may choose to update their 5-Year Plans every year as good 
management practice. PHAs must explain any substantial deviation from 
their 5-Year Plans in their Annual Plans.
    (b) The Annual Plan. The first Annual Plan submitted by a PHA must 
be submitted 75 days in advance of the first PHA fiscal year in which 
the PHA receives Federal fiscal year 2000 funds. Since the first PHA 
fiscal year funded with Federal Fiscal Year 2000 funds will commence 
January 1, 2000, the first Annual Plan will be due 75 days in advance of 
that date or October 15, 1999. PHAs with later fiscal year commencement 
dates must submit their Annual Plans 75 days in advance of their fiscal 
year commencement date. Subsequent Annual Plans will be due 75 days in 
advance of the commencement of a PHA's fiscal year.



Sec. 903.5  What information must a PHA provide in the 5-Year Plan?

    (a) A PHA must include in its 5-Year Plan for the 5 PHA fiscal years 
immediately following the date on which the 5-Year Plan is due to HUD, a 
statement of:
    (1) The PHA's mission for serving the needs of low-income, very low-
income and extremely low-income families in the PHA's jurisdiction; and
    (2) The PHA's goals and objectives that enable the PHA to serve the 
needs of the families identified in the PHA's Annual Plan. For HUD, the 
PHA and the public to better measure the success of the PHA in meeting 
its goals and objectives, PHAs must adopt quantifiable goals and 
objectives for serving those needs wherever possible.
    (b) After submission of the first 5-Year Plan, a PHA in their 
succeeding 5-Year Plans, in addition to addressing their mission, goals 
and objectives for the next 5 years, must address the progress made by 
the PHA in meeting its goals and objectives described in the previous 5-
Year Plan.



Sec. 903.7  What information must a PHA provide in the Annual Plan?

    The Annual Plan must include the information provided in this 
section, except that for the first Annual Plan, the following 
information need not be submitted: the information required by paragraph 
(l) of this section that pertains to section 12 of the U.S. Housing Act 
of 1937 (42 U.S.C. 1437j(c)); the information required by paragraph (m) 
of this section that relates to drug elimination policies; and the 
information required by paragraph (n) of this section. Additionally, the 
information described in this section applies to both public housing and 
tenant-based assistance, except where specifically stated otherwise, and 
the information that the PHA must submit for HUD approval under the 
Annual Plan are the discretionary policies of the various plan 
components or elements (for example, selection policies) and not the 
statutory or regulatory requirements that govern these components.
    (a) A statement of housing needs. (1) This statement must address 
the housing needs of the low-income and very low-income families who 
reside in the

[[Page 289]]

jurisdiction served by the PHA, and families who are on the public 
housing and Section 8 tenant-based assistance waiting lists, including:
    (i) Families with incomes below 30 percent of area median (extremely 
low-income families);
    (ii) Elderly families and families with disabilities;
    (iii) Households of various races and ethnic groups residing in the 
jurisdiction or on the waiting list.
    (2) The housing needs of each of these groups must be identified 
separately. The identification of housing needs should address issues of 
affordability, supply, quality, accessibility, size of units and 
location. The statement of housing needs also must describe the ways in 
which the PHA intends, to the maximum extent practicable, to address 
those needs, and the PHA's reasons for choosing its strategy.
    (b) A statement of financial resources. This statement must address 
the financial resources that are available to the PHA for the support of 
Federal public housing and tenant-based assistance programs administered 
by the PHA during the plan year. The statement must include a listing of 
the significant PHA operating, capital and other proposed Federal 
resource commitments available to the PHA, as well as tenant rents and 
other income available to support public housing or tenant-based 
assistance. The statement also should include the non-Federal sources of 
funds supporting each federal program. In this statement, the PHA also 
must describe the planned uses for the resources.
    (c) A statement of the PHA's policies that govern eligibility, 
selection, and admissions. This statement must describe the PHA's 
policies governing resident or tenant eligibility, selection and 
admission. This statement also must describe any PHA admission 
preferences, assignment and any occupancy policies that pertain to 
public housing units and housing units assisted under section 8(o) of 
the U.S. Housing Act of 1937. The requirement to submit PHA policies 
governing assignment only applies to public housing. This statement also 
must include the following information:
    (1) The PHA's procedures for maintaining waiting lists for admission 
to the PHA's public housing projects. These procedures must include any 
site-based waiting lists, as provided by section 6(s) of the U.S. 
Housing Act of 1937. This section permits PHAs to establish a system of 
site-based waiting lists that are consistent with all applicable civil 
rights and fair housing laws and regulations. Notwithstanding any other 
regulations, a PHA may adopt site-based waiting lists where:
    (i) The PHA regularly submits required occupancy data to HUD's 
Multifamily Tenant Characteristics Systems (MTCS) in an accurate, 
complete and timely manner;
    (ii) The system of site-based waiting lists provides for full 
disclosure to each applicant of any option available to the applicant in 
the selection of the development in which to reside, including basic 
information about available sites (location, occupancy, number and size 
of accessible units, amenities such as day care, security, 
transportation and training programs) and an estimate of the period of 
time the applicant would likely have to wait to be admitted to units of 
different sizes and types (e.g., regular or accessible) at each site;
    (iii) Adoption of site-based waiting lists would not violate any 
court order or settlement agreement, or be inconsistent with a pending 
complaint brought by HUD;
    (iv) The PHA includes reasonable measures to assure that such 
adoption is consistent with affirmatively furthering fair housing, such 
as reasonable marketing activities;
    (v) The PHA provides for review of its site-based waiting list 
policy to determine if it is consistent with civil rights laws and 
certifications through the following steps:
    (A) As part of the submission of the Annual Plan, the PHA shall 
assess changes in racial, ethnic or disability-related tenant 
composition at each PHA site that may have occurred during the 
implementation of the site-based waiting list, based upon MTCS occupancy 
data that has been confirmed to be complete and accurate by an 
independent audit (which may be the annual independent audit);

[[Page 290]]

    (B) At least biannually use independent testers or other means 
satisfactory to HUD, to assure that the site-based waiting list is not 
being implemented in a discriminatory manner, and that no patterns or 
practices of discrimination exist, and providing the results to HUD; and
    (C) Taking any steps necessary to remedy the problems surfaced 
during the review and the steps necessary to affirmatively further fair 
housing.
    (2) The PHA's admissions policy with respect to deconcentration of 
very low-income families and income-mixing. Deconcentration and income-
mixing is required by section 16 of the U.S. Housing Act of 1937 (42 
U.S.C. 1437n). To implement the requirement, which is applicable 
specifically to public housing, PHAs must:
    (i) Determine and compare the relative tenant incomes of each 
development, as well as the household incomes of census tracts in which 
the developments are located; and
    (ii) Consider what admissions policy measures or incentives, if any, 
will be needed to bring higher-income families into lower-income 
developments (or if appropriate to achieve deconcentration of poverty, 
into developments in lower income census tracts) and lower-income 
families into higher income developments (or if appropriate to achieve 
deconcentration of poverty, into developments in higher income census 
tracts). PHA policies must devote appropriate attention to both of these 
goals. PHA policies must affirmatively further fair housing; and
    (i) Make any appropriate changes in their admissions policies.
    (3) The policies governing eligibility, selection and admissions are 
applicable to public housing and tenant-based assistance, except for the 
information requested on site-based waiting lists and deconcentration. 
This information is applicable only to public housing.
    (d) A statement of the PHA's rent determination policies. This 
statement must describe the PHA's basic discretionary policies that 
pertain to rents charged for public housing units, including applicable 
flat rents, and the rental contributions of families receiving tenant-
based assistance. For tenant-based assistance, this statement shall 
cover any discretionary minimum tenant rents and payment standard 
policies.
    (e) A statement of the PHA's operation and management. (1) This 
statement must describe the PHA's rules, standards, and policies that 
govern maintenance and management of housing owned, assisted, or 
operated by the PHA. This statement also must include a description of 
any measures necessary for the prevention or eradication of pest 
infestation which includes cockroach infestation. Additionally, this 
statement must include a description of PHA management organization, and 
a listing of the programs administered by the PHA.
    (2) The information pertaining to PHA's rules, standards and 
policies regarding management and maintenance of housing applies only to 
public housing. The information pertaining to program management applies 
to public housing and tenant-based assistance.
    (f) A statement of the PHA grievance procedures. This statement 
describes the grievance and informal hearing and review procedures that 
the PHA makes available to its residents and applicants. This includes 
public housing grievance procedures and tenant-based assistance informal 
review procedures for applicants and hearing procedures for 
participants.
    (g) A statement of capital improvements needed. With respect to 
public housing only (public housing projects owned, assisted or operated 
by the PHA), this statement describes the capital improvements necessary 
to ensure long-term physical and social viability of the public housing 
projects, including the capital improvements to be undertaken in the 
year in question and their estimated costs. PHAs are encouraged to 
include 5-Year Plans covering large capital items.
    (h) A statement of any demolition and/or disposition. With respect 
to public housing only, a description of any public housing project, or 
portion of a public housing project, owned by the PHA for which the PHA 
has applied or will apply for demolition and/or disposition approval 
under section 18 of the U.S. Housing Act of 1937 (42 U.S.C. 1437p), and 
the timetable for demolition and/or disposition.

[[Page 291]]

    (i) A statement of the public housing projects designated as housing 
for elderly families or families with disabilities or elderly families 
and families with disabilities. With respect to public housing only, 
this statement identifies any public housing projects owned, assisted, 
or operated by the PHA, or any portion of these projects, that the PHA 
has designated for occupancy only by the elderly families or only by 
families with disabilities, or by elderly families and families with 
disabilities or will apply for designation for occupancy by only elderly 
families or only families with disabilities, or by elderly families and 
families with disabilities as provided by section 7 of the U.S. Housing 
Act of 1937 (42 U.S.C. 1437e).
    (j) A statement of the conversion of public housing to tenant-based 
assistance. (1) This statement describes any building or buildings that 
the PHA is required to convert to tenant-based assistance under section 
33 of the U.S. Housing Act of 1937 (42 U.S.C. 1437z-5), or that the PHA 
plans to voluntarily convert under section 22 of the U.S. Housing Act of 
1937 (42 U.S.C. 1437t). The statement also must include an analysis of 
the projects or buildings required to be converted under section 33, and 
the amount of assistance received commencing in Federal Fiscal 1999 to 
be used for rental assistance or other housing assistance in connection 
with such conversion.
    (2) The information required under this paragraph (j) of this 
section is applicable to public housing and only that tenant-based 
assistance which is to be included in the conversion plan.
    (k) A statement of homeownership programs administered by the PHA. 
This statement describes any homeownership programs administered by the 
PHA under section 8(y) of the U.S. Housing Act of 1937 (42 U.S.C. 
1437f(y)), or under an approved section 5(h) homeownership program (42 
U.S.C. 1437c(h)), or an approved HOPE I program (42 U.S.C. 1437aaa) or 
for any homeownership programs for which the PHA has applied to 
administer or will apply to administer under section 5(h), the HOPE I 
program, or section 32 of the U.S. Housing Act of 1937 (42 U.S.C. 1437z-
4).
    (l) A statement of the PHA's community service and self-sufficiency 
programs. (1) This statement describes:
    (i) Any PHA programs relating to services and amenities coordinated, 
promoted or provided by the PHA for assisted families, including 
programs provided or offered as a result of the PHA's partnership with 
other entities;
    (ii) Any PHA programs coordinated, promoted or provided by the PHA 
for the enhancement of the economic and social self-sufficiency of 
assisted families, including programs provided or offered as a result of 
the PHA's partnerships with other entities, and activities under section 
3 of the Housing and Community Development Act of 1968 and under 
requirements for the Family Self-Sufficiency Program and others. The 
description of programs offered shall include the program's size 
(including required and actual size of the Family Self-Sufficiency 
program) and means of allocating assistance to households.
    (iii) How the PHA will comply with the requirements of section 12(c) 
and (d) of the U.S. Housing Act of 1937 (42 U.S.C. 1437j(c) and (d)). 
These statutory provisions relate to community service by public housing 
residents and treatment of income changes in public housing and tenant-
based assistance recipients resulting from welfare program requirements.
    (2) The information required by paragraph (l) of this section is 
applicable to both public housing and tenant-based assistance except 
that the information regarding the PHA's compliance with the community 
service requirement applies only to public housing.
    (m) A statement of the PHA's safety and crime prevention measures. 
With respect to public housing only, this statement describes the PHA's 
plan for safety and crime prevention to ensure the safety of the public 
housing residents that it serves. The plan for safety and crime 
prevention must be established in consultation with the police officer 
or officers in command of the appropriate precinct or police 
departments, and the plan must provide, on a project-by-project or 
jurisdiction wide-basis, the measures necessary to ensure the safety of 
public housing residents.

[[Page 292]]

    (1) The statement regarding the PHA's safety and crime prevention 
plan must include the following information:
    (i) A description of the need for measures to ensure the safety of 
public housing residents;
    (ii) A description of any crime prevention activities conducted or 
to be conducted by the PHA;
    (iii) A description of the coordination between the PHA and the 
appropriate police precincts for carrying out crime prevention measures 
and activities;
    (iv) The information required to be included by the Public Housing 
Drug Elimination Program regulations if the PHA expects to receive drug 
elimination program grant funds.
    (2) If HUD determines at any time that the security needs of a 
public housing project are not being adequately addressed by the PHA's 
plan, or that the local police precinct is not assisting the PHA with 
compliance with its crime prevention measures as described in the Annual 
Plan, HUD may mediate between the PHA and the local precinct to resolve 
any issues of conflict.
    (n) A statement of the PHA's policies and rules regarding ownership 
of pets in public housing. This statement describes the PHA's policies 
and requirements pertaining to the ownership of pets in public housing 
issued in accordance with section 31 of the U.S. Housing Act of 1937 (42 
U.S.C. 1437a-3).
    (o) Civil rights certification. (1) The PHA must certify that it 
will carry out its plan in conformity with title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d-2000d-4), the Fair Housing Act (42 U.S.C. 
3601-19), section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), 
and title II of the Americans with Disabilities Act of 1990 (42 U.S.C. 
12101 et seq.), and also certify that it will affirmatively further fair 
housing. The certification is applicable to both the 5-Year Plan and the 
Annual Plan.
    (2) PHAs shall be considered in compliance with the obligation to 
affirmatively further fair housing if they examine their programs or 
proposed programs, identify any impediments to fair housing choice 
within those programs, address those impediments in a reasonable fashion 
in view of the resources available, and work with local jurisdictions to 
implement any of the jurisdiction's initiatives to affirmatively further 
fair housing that require the PHA's involvement, and maintain records 
reflecting these analyses and actions.
    (p) Recent results of PHA's fiscal year audit. The PHA's plan must 
include the results of the most recent fiscal year audit of the PHA 
conducted under section 5(h)(2) of the U.S. Housing Act of 1937 (42 U 
S.C. 1437c(h)).
    (q) A statement of asset management. This statement describes how 
the PHA will carry out its asset management functions with respect to 
the PHA's public housing inventory, including how the PHA will plan for 
long-term operating, capital investment, rehabilitation, modernization, 
disposition, and other needs for such inventory.
    (r) Additional information to be provided. PHAs also must include in 
their Annual Plan:
    (1) A table of contents that corresponds to the Annual Plan's 
components in the order listed in this section. The table of contents 
also must identify the location of any materials that are not being 
submitted with the Annual Plan;
    (2) An executive summary that provides a brief overview of the 
information that the PHA is submitting in its Annual Plan and relates 
the Annual Plan programs and activities to the PHA's mission and goals 
as described in the 5-Year Plan, and explains any substantial deviations 
of these activities from the 5-Year Plan; and
    (3) For all Annual Plans following submission of the first Annual 
Plan, a brief summary of the PHA's progress in meeting the mission and 
goals described in the 5-Year Plan.



Sec. 903.9  Must a troubled PHA include additional information in its Annual Plan?

    Yes. A PHA that is at risk of being designated as troubled or is 
designated as troubled under section 6(j)(2) of the U.S. Housing Act of 
1937 (42 U.S.C. 1437d(j)(2)) or under the Public Housing Assessment 
System (24 CFR part 901) must include its operating budget, and include 
or reference any applicable memorandum of agreement with HUD

[[Page 293]]

or other plan to improve performance and such other material as HUD may 
prescribe.



Sec. 903.11  Are certain PHAs eligible to submit a streamlined Annual Plan?

    (a) Yes, the following PHAs may submit a streamlined Annual Plan, as 
described in paragraph (b) of this section:
    (1) PHAs that are determined to be high performing PHAs;
    (2) PHAs with less than 250 public housing units (small PHAs) and 
that have not been designated as troubled under section 6(j)(2); and
    (3) PHAs that only administer tenant-based assistance and that do 
not own or operate public housing.
    (b) All streamlined plans must provide information on how the public 
may reasonably obtain additional information on the PHA policies 
contained in the standard Annual Plan, but excluded from their 
streamlined submissions. A streamlined plan must included the following 
information:
    (1) For high-performing PHAs, the streamlined Annual Plan must 
include the information required by Sec. 903.7(a), (b), (c), (d), (g), 
(h), (m), (n), (o), (p) and (r). The information required by 
Sec. 903.7(m) must be included only to the extent this information is 
required for PHA's participation in the public housing drug elimination 
program and the PHA anticipates participating in this program in the 
upcoming year.
    (2) For small PHAs that are not designated as troubled or that are 
not at risk of being designated as troubled, the streamlined Annual Plan 
must include the information required by Sec. 903.7(a), (b), (c), (d), 
(g), (h), (k), (m), (n), (o), (p) and (r). The information required by 
Sec. 903.7(k) must be include only to the extent that the PHA 
participates in homeownership programs under section 8(y). The 
information required by Sec. 903.7(m) must be included only to the 
extent this information is required for the PHA's participation in the 
public housing drug elimination program and the PHA anticipates 
participating in this program in the upcoming year.
    (3) For PHA's that administer only tenant-based assistance, the 
streamlined Annual Plan must include the information required by 
Sec. 903.7(a), (b), (c), (d), (f), (k), (l), (o), (p) and (r). The 
information required by Sec. 903.7(b) (financial resources) can be a 
statement of the programs the PHA administers and the estimated number 
of new families to be assisted and total families to be assisted in each 
program.



Sec. 903.13  What is a Resident Advisory Board and what is its role in development of the Annual Plan?

    (a) A Resident Advisory Board is a board whose membership is made up 
of individuals who adequately reflect and represent the residents 
assisted by the PHA. The role of the Resident Advisory Board (or 
Resident Advisory Boards) is to participate in the PHA planning process 
and to assist and make recommendations regarding the PHA plan. The PHA 
shall allocate reasonable resources to assure the effective functioning 
of Resident Advisory Boards.
    (b) Each PHA must establish one or more Resident Advisory Boards, 
and the membership on the board must adequately reflect and represent 
the residents assisted by the PHA.
    (1) To the extent a jurisdiction-wide resident council exists that 
complies with the tenant participation regulations in 24 CFR part 964, 
the PHA shall appoint the jurisdiction-wide resident council or its 
representatives as a Resident Advisory Board. If a jurisdiction-wide 
resident council does not exist but resident councils exist that comply 
with the tenant participation regulations, the PHA shall appoint such 
resident councils or their representatives to serve on Resident Advisory 
Boards, provided that the PHA may require that the resident councils 
choose a limited number of representatives.
    (2) Where the PHA has a tenant-based assistance program of 
significant size, the PHA shall assure that the Resident Advisory Board 
or Boards has reasonable representation of families receiving tenant-
based assistance and that a reasonable process is undertaken to choose 
this representation. Where resident councils do not exist which would 
adequately reflect and represent the residents assisted by the PHA, the 
PHA may appoint additional Resident Advisory Boards or Board members, 
provided that the PHA shall provide reasonable notice to residents and 
urge

[[Page 294]]

that they form resident councils that comply with the tenant 
participation regulations.
    (c) The PHA must consider the recommendations of the Resident 
Advisory Board or Boards in preparing the final Annual Plan. In 
submitting the final plan to HUD for approval, the PHA must include a 
copy of the recommendations made by the Resident Advisory Board or 
Boards and a description of the manner in which the PHA addressed these 
recommendations. Notwithstanding the 75-day limitation on HUD review, in 
response to a written request from a Resident Advisory Board claiming 
that the PHA failed to provide adequate notice and opportunity for 
comment, HUD may make a finding of good cause during the required time 
period and require the PHA to remedy the failure before final approval 
of the plan.



Sec. 903.15  What is the relationship of the public housing agency plans to the Consolidated Plan?

    The PHA must ensure that the Annual Plan is consistent with any 
applicable Consolidated Plan to the jurisdiction in which the PHA is 
located. The Consolidated Plan includes the Analysis of Impediments to 
Fair Housing Choice. The PHA must submit a certification by the 
appropriate State or local officials that the Annual Plan is consistent 
with the Consolidated Plan and include a description of the manner in 
which the applicable plan contents are consistent with the Consolidated 
Plans.



Sec. 903.17  Must the PHA make public the contents of the plans?

    (a) Yes. The PHA's board of directors or similar governing body must 
conduct a public hearing to discuss the PHA plan (either the 5-Year Plan 
or Annual Plan, or both as applicable) and invite public comment on the 
plan(s). The hearing must be conducted at a location that is convenient 
to the residents served by the PHA.
    (b) Not later than 45 days before the public hearing is to take 
place, the PHA must:
    (1) Make the proposed PHA plan(s) and all information relevant to 
the public hearing to be conducted, available for inspection by the 
public at the principal office of the PHA during normal business hours; 
and
    (2) Publish a notice informing the public that the information is 
available for review and inspection, and that a public hearing will take 
place on the plan, and the date, time and location of the hearing.



Sec. 903.19  When is the 5-Year Plan or Annual Plan ready for submission to HUD?

    A PHA may adopt its 5-Year Plan or its Annual Plan and submit the 
plan to HUD for approval only after:
    (a) The PHA has conducted the public hearing;
    (b) The PHA has considered all public comments received on the plan;
    (c) The PHA has made any changes to the plan, based on comments, 
after consultation with the Resident Advisory Board or other resident 
organization.



Sec. 903.21  May the PHA amend or modify a plan?

    A PHA, after submitting its 5-Year Plan or Annual Plan to HUD, may 
amend or modify any PHA policy, rule, regulation or other aspect of the 
plan. If the amendment or modification is a significant amendment or 
modification, the PHA:
    (a) May not adopt the amendment or modification until the PHA has 
duly called a meeting of its board of directors (or similar governing 
body) and the meeting, at which the amendment or modification is 
adopted, is open to the public; and
    (b) May not implement the amendment or modification, until 
notification of the amendment or modification is provided to HUD and 
approved by HUD in accordance with HUD's plan review procedures, as 
provided in Sec. 903.23.



Sec. 903.23  What is the process by which HUD reviews, approves, or disapproves an Annual Plan?

    (a) Review of the plan. When the PHA submits its Annual Plan to HUD, 
including any amendment or modification to the plan, HUD reviews the 
plan to determine whether:

[[Page 295]]

    (1) The plan provides all the information that is required to be 
included in the plan;
    (2) The plan is consistent with the information and data available 
to HUD and with any applicable Consolidated Plan for the jurisdiction in 
which the PHA is located; and
    (3) The plan is not prohibited or inconsistent with the U.S. Housing 
Act of 1937 or any other applicable Federal law.
    (b) Disapproval of the plan. (1) HUD may disapprove a PHA plan, in 
its entirety or with respect to any part, or disapprove any amendment or 
modification to the plan, only if HUD determines that the plan, or one 
of its components or elements, or any amendment or modification to the 
plan:
    (i) Does not provide all the information that is required to be 
included in the plan;
    (ii) Is not consistent with the information and data available to 
HUD or with any applicable Consolidated Plan for the jurisdiction in 
which the PHA is located; and
    (iii) Is not consistent with all applicable laws and regulations.
    (2) Not later than 75 days after the date on which the PHA submits 
its plan, or the date on which the PHA submits its amendment or 
modification to the plan, HUD will issue written notice to the PHA if 
the plan has been disapproved. The notice that HUD issues to the PHA 
must state with specificity the reasons for the disapproval. HUD may not 
state as a reason for disapproval the lack of time to review the plan.
    (3) If HUD fails to issue the notice of disapproval on or before the 
75th day after the PHA submits the plan, HUD shall be considered to have 
determined that all elements or components of the plan required to be 
submitted and that were submitted, and reviewed by HUD were in 
compliance with applicable requirements and the plan has been approved.
    (d) Public availability of the approved plan. Once a PHA's plan has 
been approved, a PHA must make its approved plan available for review 
and inspection, at the principal office of the PHA during normal 
business hours.



Sec. 903.25  How does HUD ensure PHA compliance with its plan?

    A PHA must comply with the rules, standards and policies established 
in the plans. To ensure that a PHA is in compliance with all policies, 
rules, and standards adopted in the plan approved by HUD, HUD shall 
respond appropriately to any complaint concerning PHA noncompliance with 
its plan. If HUD determines that a PHA is not in compliance with its 
plan, HUD will take necessary and appropriate action to ensure 
compliance by the PHA.



PART 904--LOW RENT HOUSING HOMEOWNERSHIP OPPORTUNITIES--Table of Contents




 Subpart A--Introduction to Low-Rent Housing Homeownership Opportunity 
                           Program [Reserved]

               Subpart B--Turnkey III Program Description

Sec.
904.101  Introduction.
904.102  Definitions.
904.103  Development.
904.104  Eligibility and selection of homebuyers.
904.105  Counseling of homebuyers.
904.106  Homebuyers Association (HBA).
904.107  Responsibilities of homebuyer.
904.108  Break-even amount.
904.109  Monthly operating expense.
904.110  Earned Home Payments Account. (EHPA)
904.111  Nonroutine Maintenance Reserve (NRMR).
904.112  Operating reserve.
904.113  Achievement of ownership by initial homebuyer.
904.114  Payment upon resale at profit.
904.115  Achievement of ownership by subsequent homebuyers.
904.116  Transfer of title to homebuyer.
904.117  Responsibilities of homebuyer after acquisition of ownership.
904.118  Homeowners association-planned unit development (PUD).
904.119  Homeowners association-condominium.
904.120  Relationship of homeowners association to HBA.
904.121  Use of appendices.
904.122  Statutory preferences.

Appendix I--Annual Contributions Contract
Appendix II--Homebuyers Ownership Opportunity Agreement (Turnkey III)
Appendix III--Certification of Homebuyer Status

[[Page 296]]

Appendix IV--Promissory Note for Payment Upon Resale by Homebuyer at 
          Profit

            Subpart C--Homeownership Counseling and Training

904.201  Purpose.
904.202  Objectives.
904.203  Planning.
904.204  General requirements and information.
904.205  Training methodology.
904.206  Funding.
904.207  Use of appendix.

Appendix I--Content Guide for Counseling and Training Program

                 Subpart D--Homebuyers Association (HBA)

904.301  Purpose.
904.302  Membership.
904.303  Organizing the HBA.
904.304  Functions of the HBA.
904.305  Funding of HBA.
904.306  Performing management services.
904.307  Alternative to HBA.
904.308  Relationship with homeowners association.
904.309  Use of appendices.

Appendix I--Articles of Incorporation and By-Laws of Homebuyers 
          Association
Appendix II--Recognition Agreement Between Local Housing Authority and 
          Homebuyers Association

    Authority: 42 U.S.C. 1437-1437ee and 3535(d).

    Source: 39 FR 10966, Mar. 22, 1974, unless otherwise noted. 
Redesignated at 40 FR 15580, Apr. 7, 1975, and 49 FR 6714, Feb. 23, 
1984.



 Subpart A--Introduction to Low-Rent Housing Homeownership Opportunity 
                           Program [Reserved]



               Subpart B--Turnkey III Program Description



Sec. 904.101  Introduction.

    (a) Purpose. This subpart sets forth the essential elements of the 
HUD Homeownership Opportunities Program for Low-Income Families (Turnkey 
III).
    (b) Applicability. This subpart is applicable to Turnkey III 
developments operated by LHA. For Turnkey III developments operated by 
an Indian Housing Authority, applicable provisions are found at 24 CFR 
part 905, subpart G.
    (1) With respect to any development to be operated as Turnkey III, 
the Annual Contributions Contract (ACC) shall contain the ``Special 
Provisions for Turnkey III Homeownership Opportunity Project'' as set 
forth in Appendix I. A Turnkey III development may include only units 
which are to be operated as such under Homebuyers Ownership Opportunity 
Agreements. If for any reason it is determined that certain units should 
be operated as conventional rental units, such units must comprise or be 
made part of a conventional rental project.
    (2) With respect to Turnkey III developments pursuant to an executed 
ACC where no Agreements with Homebuyers have been signed, the ACC shall 
be amended (i) to include the ``Special Provisions'' set forth in 
Appendix I, (ii) to extend its term to 30 years, and (iii) to reduce its 
Maximum Contribution Percentage to a rate that will amortize the debt in 
30 years at the minimum Loan Interest Rate specified in the ACC for the 
specific Turnkey III project involved. Further development and operation 
shall be in accordance with this subpart including use of the form of 
Homebuyers Ownership Opportunity Agreement set forth in Appendix II.
    (3) With respect to developments where Agreements with homebuyers 
have been signed, the following steps shall be taken:
    (i) The ACC shall be amended to include the Special Provisions'' set 
forth in Appendix I; further development and operation of the Project 
shall be in accordance with this subpart.
    (ii) The LHA shall offer all qualified homebuyers in the development 
a new Homebuyers Ownership Opportunity Agreement as set forth in 
Appendix II with an amendment to section 16a to refer to ``the latest 
approved Development Cost Budget, or Actual Development Cost Certificate 
if issued,'' in lieu of ``the Development Cost Budget in effect upon 
award of the Main Construction Contract or execution of the Contract of 
Sale,'' and, if the ACC for the Project has a term of 25 years, an 
amendment to section 16(b) to refer to a term of 25 years, instead of 
30, for the Purchase Price Schedule. Each Purchase Price Schedule shall 
commence

[[Page 297]]

with the first day of the month following the effective date of the 
initial Agreement. No other modification in the new Agreement may be 
made. In the event the homebuyer refuses to accept the new Agreement, no 
modifications may be made in the old Agreement and the matter shall be 
referred to HUD.
    (4) With respect to Projects which were under ACC on the effective 
date of this subpart, the Total Development Cost Budget shall be 
revised, if financially feasible, to include the cost of the appraisals 
which are necessary for computation of the initial purchase prices 
pursuant to Sec. 904.113. In the event this is not financially feasible, 
the matter shall be referred to HUD, which may, if necessary, authorize 
a different method for computation of such initial purchase prices on an 
equitable basis.
    (5) With respect to all developments which were completed by the 
effective date of this subpart, the appraisals which are necessary for 
computation of the initial purchase prices pursuant to Sec. 904.113 
shall be made as of the date of completion of the development.

[39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, 
and 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 922, Jan. 9, 1991]



Sec. 904.102  Definitions.

    (a) The term common property means the nondwelling structures and 
equipment, common areas, community facilities, and in some cases certain 
component parts of dwelling structures, which are contained in the 
development: Provided, however, That in the case of a development that 
is organized as a condominium or a planned unit development (PUD), the 
term common property shall have the meaning established by the 
condominium or PUD documents and the State law pursuant to which the 
condominium or PUD is organized, under the terms common areas, common 
facilities, common elements, common estate, or other similar terms.
    (b) The term development means the entire undertaking including all 
real and personal property, funds and reserves, rights, interests and 
obligations, and activities related thereto.
    (c) The term EHPA means the Earned Home Payments Account established 
and maintained pursuant to Sec. 904.110.
    (d) The term homebuyer means the member or members of a low-income 
family who have executed a Homebuyers Ownership Opportunity Agreement 
with the LHA.
    (e) The term homebuyers association (HBA) means an organization as 
defined in Sec. 904.106.
    (f) The term homeowner means a homebuyer who has acquired title to 
his home.
    (g) The term homeowners association means an association comprised 
of homeowners, including condominium associations, having 
responsibilities with respect to common property.
    (h) The term LHA means the local housing authority which acquires or 
develops a low-rent housing development with financial assistance from 
HUD, owns the homes until title is transferred to the homebuyers, and is 
responsible for the management of the homeownership opportunity program.
    (i) The term NRMR means the Nonroutine Maintenance Reserve 
established and maintained pursuant to Sec. 904.111.
    (j) The term Project is used to refer to the development in relation 
to matters specifically related to the Annual Contributions Contract.

[39 FR 10966, Mar. 22, 1974, as amended at 61 FR 5214, Feb. 9, 1996]



Sec. 904.103  Development.

    (a) Financial framework. The LHA shall finance development or 
acquisition by sale of its notes (bond financing shall not be used) in 
the amount of the Minimum Development Cost. Payment of the debt service 
on the notes is assured by the HUD commitment to provide annual 
contributions.
    (b) Maximum total development cost. The maximum total development 
cost stated in the ACC is the maximum amount authorized for development 
of a project and shall not exceed the amount approved in accordance with 
Sec. 941.406(a) of this chapter.
    (c) Contractual framework. There are three basic contracts:
    (1) An Annual Contributions Contract containing ``Special Provisions

[[Page 298]]

For Turnkey III Homeownership Opportunity Project,'' Form HUD-53010C 
(see Appendix I);
    (2) A Homebuyers Ownership Opportunity Agreement (see Appendix II) 
which sets forth the respective rights and obligations of the low-income 
occupants and the LHA, including conditions for achieving homeownership; 
and
    (3) A Recognition Agreement (see Appendix II of Subpart D of this 
part) between the LHA and the HBA under which the LHA agrees to 
recognize the HBA as the established representative of the homebuyers.
    (d) Community Participation Committee (CPC). In the necessary 
development of citizens' participation in and understanding of the 
Turnkey III program, the LHA should consider formation and use of a CPC 
to assist the community and the LHA in the development and support of 
the Turnkey III program. The CPC shall be a voluntary group comprised of 
representatives of the low-income population primarily and may also 
include representatives of community service organizations.

[39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, 
and amended at 47 FR 39482, Sept. 8, 1982. Redesignated at 49 FR 6714, 
Feb. 23, 1984, and amended at 53 FR 41598, Oct. 24, 1988]



Sec. 904.104  Eligibility and selection of homebuyers.

    (a) Announcement of availability of housing; fair housing marketing. 
(1) The availability of housing under Turnkey III shall be announced to 
the community at large. Families on the waiting list for LHA 
conventional rental housing who wish to be considered for Turnkey III 
must apply specifically for that program (see paragraph (d) of this 
section).
    (2) The LHA shall submit to HUD an Affirmative Fair Housing 
Marketing Plan and shall otherwise comply with the provisions of the 
Affirmative Fair Housing Marketing Regulations, 24 CFR part 200, subpart 
M, as if the LHA were an applicant for participation in an FHA housing 
program. This Plan shall be submitted with the development program, and 
no development program may be approved without prior approval of the 
Plan pursuant to HUD procedures under said Affirmative Fair Housing 
Marketing Regulations. If the development program has been approved, but 
the Annual Contributions Contract has not been executed, prior to the 
effective date of this subpart, an Affirmative Fair Housing Marketing 
Plan must be approved prior to execution of said contract.
    (b) Eligibility and standards for admission. (1) Homebuyers shall be 
lower income families that are determined to be eligible for admission 
in accordance with the provisions of 24 CFR parts 5 and 913, which 
prescribe income definitions, income limits, and restrictions concerning 
citizenship or eligible immigration status. The HUD-approved standards 
for admission to low-rent housing, including the LHA's established 
priorities and preferences and the requirements for administration of 
low-rent housing under Title VI of the Civil Rights Act of 1964 (Pub. L. 
88-352, 78 Stat. 241, 42 U.S.C. 2000d), shall be applicable except that 
the procedures used for homebuyer selection under Turnkey III shall be 
those set forth in this section. In carrying out these procedures the 
aim shall be to provide for equal housing opportunity in such a way as 
to prevent segregation or other discrimination on the basis of race, 
creed, color or national origin in accordance with the Civil Rights Act 
of 1964 (Pub. L. 88-352, 78 Stat. 241, 42 U.S.C. 2000d) and 1968 (Pub. 
L. 90-284, 82 Stat. 73, 42 U.S.C. 3601).
    (2) An LHA may establish income limits for Turnkey III which are 
different from those for its conventional rental program: Provided That 
those limits are in accord with all applicable statutory and 
administrative requirements and are approved by HUD.
    (c) Determination of eligibility and preparation of list. The LHA, 
without participation of a recommending committee (see paragraph (e)(1) 
of this section), must determine the eligibility of each applicant 
family in respect to the income limits for the development (including 
the requirement that the applicant family disclose and verify Social 
Security Numbers, as provided by 24 CFR part 750, and sign and submit 
consent forms for the obtaining of wage and claim information from State 
Wage Information Collection Agencies,

[[Page 299]]

as provided by 24 CFR part 760), and must then assign each eligible 
applicant its appropriate place on a waiting list for the development, 
in sequence based upon the date of the application, suitable type or 
size of unit, qualification for a Federal preference in accordance with 
Sec. 904.122, and factors affecting preference or priority established 
by the LHA's regulations. Notwithstanding the fact that the LHA may not 
be accepting additional applications because of the length of the 
waiting list, the LHA may not refuse to place an applicant on the 
waiting list if the applicant is otherwise eligible for participation 
and claims that he or she qualifies for a Federal preference as provided 
in Sec. 904.122(c)(2), unless the LHA determines, on the basis of the


number of applicants who are already on the waiting list and who claim a 
Federal preference, and the anticipated number of admissions to housing 
under Turnkey III, that--
    (1) There is an adequate pool of applicants who are likely to 
qualify for a Federal preference, and
    (2) It is unlikely that, on the basis of the LHA's system for 
applying the Federal preferences, the preference or preferences that the 
applicant claims, and the preferences claimed by applicants on the 
waiting list, the applicant would qualify for admission before other 
applicants on the waiting list.
    (d) List of applicants. A separate list of applicants for Turnkey 
III shall be maintained, consisting of families who specifically apply 
and are eligible for admission to such housing.
    (1) Dating of applications. All applications for Turnkey III shall 
be dated as received.
    (2) Effect on applicant status. The filing of an application for 
Turnkey III by a family which is an applicant for LHA conventional 
rental housing or is an occupant of such housing shall in no way affect 
its status with regard to such rental housing. Such an applicant shall 
not lose his place on the rental housing waiting list until his 
application is accepted for Turnkey III and shall not receive any 
different treatment or consideration with respect to conventional rental 
housing because of having applied for Turnkey III.
    (e) Determination of potential for homeownership--(1) Recommending 
committee. The LHA should consider use of a recommending committee to 
assist in the establishment of objective criteria for the determination 
of potential for homeownership and in the selection of homebuyers from 
the families determined to have such potential. If a recommending 
committee is used, it should be composed of representatives of the CPC 
(if any), the LHA and the HBA. The LHA shall submit to the committee 
prompt written justification of any rejection of a committee 
recommendation, stating grounds, the reasonableness of which shall be in 
accord with applicable LHA and HUD regulations. Each member of such a 
committee, at the time of appointment, shall be required to furnish the 
LHA with a signed statement that the member will (i) follow selection 
procedures and policies that do not automatically deny admission to a 
particular class, that insure selection on a nondiscriminatory and 
nonsegregated basis, and that facilitate achievement of the anticipated 
results for occupancy stated in the approved Affirmative Fair Housing 
Marketing Plan, and (ii) maintain strict confidentiality by not 
divulging any information concerning applicants or the deliberations of 
the committee to any person except to the LHA as necessary for purposes 
of the official business of the committee.
    (2) Potential for homeownership. In order to be considered for 
selection, a family must be determined to meet at least all of the 
following standards of potential for homeownership:
    (i) Income sufficient to result in a required monthly payment which 
is not less than the sum of the amounts necessary to pay the EHPA, the 
NRMR, and the estimated average monthly cost of utilities attributable 
to the home;
    (ii) Ability to meet all the obligations of a homebuyer under the 
Homebuyers Ownership Opportunity Agreement;
    (iii) At least one member gainfully employed, or having an 
established source of continuing income.
    (f) Selection of homebuyers. Homebuyers shall be selected from those 
families determined to have potential

[[Page 300]]

for homeownership. Such selection shall be made in sequence from the 
waiting list established in accordance with this section, provided that 
the following shall be assured:
    (1) Selection procedures that do not automatically deny admission to 
a particular class; that ensure selection on a nondiscriminatory and 
nonsegregated basis; that give a Federal preference in accordance with 
Sec. 904.122; and that facilitate achievement of the anticipated results 
for occupancy stated in the approved Affirmative Fair Housing Marketing 
Plan.
    (2) Achievement of an average monthly payment for the Project, 
including consideration of the availability of the Special Family 
Subsidy, which is at least 10 percent more than the breakeven amount for 
the Project (see Sec. 904.108). This standard shall be complied with 
both in the initial selection of homebuyers and in the subsequent 
filling of vacancies at all times during the life of the Project. If 
there is an applicant who has potential for homeownership but whose 
required monthly payment under the LHA's Rent Schedule would be less 
than the break-even amount for the suitable size and type of unit, such 
applicant may be selected as a homebuyer, provided that the incomes of 
all selected homebuyers shall result in the required average monthly 
payment of at least 10 percent more than the break-even amount for the 
Project. Such an average monthly payment for the Project may be achieved 
by selecting other low-income families who can afford to make required 
monthly payments substantially above the break-even amounts for their 
suitable sizes and types of units.
    (g) Notification to applicants. (1) Once a sufficient number of 
applicants have been selected to assure that the provisions of paragraph 
(f)(2) of this section are met, the selected applicant shall be notified 
of the approximate date of occupancy insofar as such date can reasonably 
be determined.
    (2) Applicants who are not selected for a specific Turnkey III 
development shall be notified in accordance with HUD-approved procedure. 
The notice shall state:
    (i) The reason for the applicant's rejection (including a 
nonrecommendation by the recommending committee unless the applicant has 
previously been so notified by the committee);
    (ii) That the applicant will be given an information hearing on such 
determination, regardless of the reason for the rejection, if the 
applicant makes a request for such a hearing within a reasonable time 
(to be specified in the notice) from the date of the notice; and
    (iii) For denial of assistance for failure to establish citizenship 
or eligible immigration status, the applicant may request, in addition 
to the informal hearing, an appeal to the INS, in accordance with 24 CFR 
part 5.
    (h) Eligibility for continued occupancy. (1) A homebuyer shall cease 
to be eligible for continued occupancy with the aid of HUD annual 
contributions when the LHA determines that the homebuyer's adjusted 
monthly income has reached, and is likely to continue at, a level at 
which the current amount of the homebuyer's Total Tenant Payment, 
determined in accordance with part 913 of this chapter, equals or 
exceeds the monthly housing cost (see paragraph (h)(2) of this section). 
In such event, if the LHA determines, with HUD approval, that suitable 
financing is available, the LHA shall notify the homebuyer that he or 
she must either: (1) Purchase the home or (ii) move from the 
development. If, however, the LHA determines that, because of special 
circumstances, the family is unable to find decent, safe, and sanitary 
housing within the family's financial reach although making every 
reasonable effort to do so, the family may be permitted to remain for 
the duration of such a situation if it pays as rent an amount equal to 
Tenant Rent, as determined in accordance with part 913 of this chapter. 
Such a monthly payment shall also be payable by the family if it 
continues in occupancy without purchasing the home because suitable 
financing is not available.
    (2) The term ``monthly housing cost,'' as used in this paragraph, 
means the sum of:
    (i) The monthly debt service amount shown on the Purchase Price 
Schedule

[[Page 301]]

(except where the homebuyer can purchase the home by the method 
described in Sec. 904.113(c)(1) of this part);
    (ii) One-twelfth of the annual real property taxes which the 
homebuyer will be required to pay as a homeowner;
    (iii) One-twelfth of the annual premium attributable to fire and 
extended coverage insurance carried by the LHA with respect to the home;
    (iv) The current monthly per unit amount budgeted for routine 
maintenance (EHPA), and for routine maintenance-common property; and
    (v) The current LHA and HUD approved monthly allowance for utilities 
paid for directly by the homebuyer plus the monthly cost of utilities 
supplied by the LHA.

(Approved by the Office of Management and Budget under control number 
2577-0083)

[39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, 
and at 49 FR 6714, Feb. 23, 1984, and amended at 49 FR 21490, May 21, 
1984; 53 FR 1172, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 FR 39710, 
Sept. 27, 1989; 56 FR 7544, Feb. 22, 1991; 60 FR 14848, Mar. 20, 1995; 
61 FR 13626, Mar. 27, 1996]



Sec. 904.105  Counseling of homebuyers.

    The LHA shall provide counseling and training as provided in subpart 
C of this part, with funding as provided in Sec. 904.206 of this part. 
Applicants for admission shall be advised of the nature of the 
counseling and training program available to them and the application 
for admission shall include a statement that the family agrees to 
participate and cooperate fully in all official pre-occupancy and post-
occupancy training and counseling activities. Failure to participate as 
agreed may result in the family not being selected or retained as a 
homebuyer.



Sec. 904.106  Homebuyers Association (HBA).

    An HBA is an incorporated organization composed of all the families 
who are entitled to occupancy pursuant to a Homebuyers Ownership 
Opportunity Agreement or who are homeowners. It is formed and organized 
for the purposes set forth in Sec. 904.304 of this part. The HBA shall 
be funded as provided in Sec. 904.305 of this part. In the absence of a 
duly organized HBA, the LHA shall be free to act without the HBA action 
required by this subpart.



Sec. 904.107  Responsibilities of homebuyer.

    (a) Repair, maintenance and use of home. The homebuyer shall be 
responsible for the routine maintenance of the home to the satisfaction 
of the HBA and the LHA. This routine maintenance includes the work 
(labor and materials) of keeping the dwelling structure, grounds and 
equipment in good repair, condition and appearance so that they may be 
utilized continually at their designed capacities and at the 
satisfactory level of efficiency for their intended purposes, and in 
conformity with the requirements of local housing code and applicable 
regulations and guidelines of HUD. It includes repairs (labor and 
materials) to the dwelling structure, plumbing fixtures, dwelling 
equipment (such as range and refrigerator), shades and screens, water 
heater, heating equipment and other component parts of the dwelling. It 
also includes all interior painting and the maintenance of grounds (lot) 
on which the dwelling is located. It does not include maintenance and 
replacements provided for by the NRMR described in Sec. 904.111.
    (b) Repair of damage. In addition to the obligation for routine 
maintenance, the homebuyer shall be responsible for repair of any damage 
caused by him, members of his family, or visitors.
    (c) Care of home. A homebuyer shall keep the home in a sanitary 
condition; cooperate with the LHA and the HBA in keeping and maintaining 
the common areas and property, including fixtures and equipment, in good 
condition and appearance; and follow all rules of the LHA and of the HBA 
concerning the use and care of the dwellings and the common areas and 
property.
    (d) Inspections. A homebuyer shall agree to permit officials, 
employees, or agents of the LHA and of the HBA to inspect the home at 
reasonable hours and intervals in accordance with rules established by 
the LHA and the HBA.
    (e) Use of home. A homebuyer shall not (1) sublet the home without 
the prior written approval of the LHA and HUD, (2) use or occupy the 
home for

[[Page 302]]

any unlawful purpose nor for any purpose deemed hazardous by insurance 
companies on account of fire or other risks, or (3) provide 
accommodations (unless approved by the HBA and the LHA) to boarders or 
lodgers. The homebuyer shall agree to use the home only as a place to 
live for the family (as identified in the initial application or by 
subsequent amendment with the approval of the LHA), for children 
thereafter born to or adopted by members of such family, and for aged or 
widowed parents of the homebuyer or spouse who may join the household.
    (f) Obligations with respect to other persons and property. Neither 
the homebuyer nor any member of his family shall interfere with rights 
of other occupants of the development, or damage the common property or 
the property of others, or create physical hazards.
    (g) Structural changes. A homebuyer shall not make any structural 
changes in or additions to the home unless the LHA has first determined 
in writing that such change would not (1) impair the value of the unit, 
the surrounding units, or the development as a whole, or (2) affect the 
use of the home for residential purposes, or (3) violate HUD 
requirements as to construction and design.
    (h) Statements of condition and repair. When each homebuyer moves 
in, the LHA shall inspect the home and shall give the homebuyer a 
written statement, to be signed by the LHA and the homebuyer, of the 
condition of the home and the equipment in it. Should the homebuyer 
vacate the home, the LHA shall inspect it and give the homebuyer a 
written statement of the repairs and other work, if any, required to put 
the home in good condition for the next occupant (see 
Sec. 904.110(j)(1)). The homebuyer, his representative, and a 
representative of the HBA may join in any such inspections by the LHA.
    (i) Maintenance of common property. The homebuyer may participate in 
nonroutine maintenance of his home and in maintenance of common property 
as discussed in Sec. 904.110(d) and Sec. 904.111(c).
    (j) Homebuyer's required monthly payment. (1) The term ``required 
monthly payment'' as used herein means the monthly payment the homebuyer 
is required to pay the LHA on or before the first day of each month. The 
homebuyer's required monthly payment, which is based upon family income, 
shall be an amount equal to the Tenant Rent as determined in accordance 
with part 913 of this chapter. If the Utility Allowance, as defined in 
part 913 of this chapter, exceeds the Homebuyer's Total Tenant Payment, 
as determined in accordance with part 913, the LHA will pay a utility 
reimbursement equal to that excess to the Homebuyer, or as provided in 
Sec. 913.108 of this chapter.
    (2) For purposes of determining eligibility of an applicant (see 24 
CFR parts 5 and 913, as well as this part) and the amount of Homebuyer 
payments under paragraph (j)(1) of this section, the LHA shall examine 
the family's income and composition and follow the procedures required 
by 24 CFR part 5 for determining citizenship or eligible immigration 
status before initial occupancy. Thereafter, for the purposes stated in 
this paragraph and to determine whether a Homebuyer is required to 
purchase the home under Sec. 904.104(h)(1), the LHA shall reexamine the 
Homebuyer's income and composition regularly, at least once every 12 
months, and shall undertake such further determination and verification 
of citizenship or eligible immigration status as required by 24 CFR part 
5. The Homebuyer shall comply with the LHA's policy regarding required 
interim reporting of changes in the family's income and composition. If 
the LHA receives information from the family or other source concerning 
a change in the family income or other circumstances between regularly 
scheduled reexaminations, the LHA, upon consultation with the family and 
verification of the information (in accordance with 24 CFR parts 5 and 
913 of this chapter) shall promptly make any adjustments determined to 
be appropriate in the Homebuyer payment amount or take appropriate 
action concerning the addition of a family member who is not a citizen 
with eligible immigration status. Any change in the family's income or 
other circumstances that results in an adjustment in the Total Tenant 
Payment and Tenant Rent must be verified.
    (3) The LHA shall not refuse to accept monthly payments because of 
any

[[Page 303]]

other charges (other than overdue monthly payments) owed by the 
homebuyer to the LHA; however, by accepting monthly payments under such 
circumstances the LHA shall not be deemed to have waived any of its 
rights and remedies with respect to such other charges.
    (k) Application of monthly payment. The LHA shall apply the 
homebuyer's monthly payment as follows:
    (1) To the credit of the homebuyer's EHPA (see Sec. 904.110);
    (2) To the credit of the homebuyer's NRMR (see Sec. 904.111); and
    (3) For payment of monthly operating expense including contribution 
to operating reserve (see Sec. 904.109).
    (l) Assignment and survivorship. Until such time as the homebuyer 
obtains title to the home, it shall be used only to house a family of 
low income. Therefore:
    (1) A homebuyer shall not assign any right or interest in the home 
or under the Homebuyers Ownership Opportunity Agreement without the 
prior written approval of the LHA and HUD;
    (2) In the event of death, mental incapacity or abandonment of the 
family by the homebuyer, the person designated as the successor in the 
Homebuyers Ownership Opportunity Agreement shall succeed to the rights 
and responsibilities under the Agreement if that person is an occupant 
of the home at the time of the event and is determined by the LHA to 
meet all of the standards of potential for homeownership as set forth in 
Sec. 904.104(e)(2). Such person shall be designated by the homebuyer at 
the time the Homebuyers Ownership Opportunity Agreement is executed. 
This designation may be changed by the homebuyer at any time. If there 
is no such designation or the designee is no longer an occupant of the 
home or does not meet the standards of potential for homeownership, the 
LHA may consider as the homebuyer any family member who was an occupant 
at the time of the event and who meets the standards of potential for 
homeownership.
    (3) If there is no qualified successor in accordance with paragraph 
(l) (2) of this section, the LHA shall terminate the Agreement and 
another family shall be selected except under the following 
circumstances: where a minor child or children of the homebuyer family 
are in occupancy, then in order to protect their continued occupancy and 
opportunity for acquisition of ownership of the home, the LHA may 
approve as occupants of the unit, an appropriate adult(s) who has been 
appointed legal guardian of the children with a duty to perform the 
obligations of the Homebuyers Ownership Opportunity Agreement in their 
interest and behalf.
    (m) Termination by LHA. (1) In the event the homebuyer breaches the 
Homebuyers Ownership Opportunity Agreement by failure to make the 
required monthly payment within ten days after its due date, by 
misrepresenting or withholding of information in applying for admission 
or in connection with any subsequent reexamination of income and family 
composition (including the failure to submit any required evidence of 
citizenship or eligible immigration status, as provided by 24 CFR part 
5; the failure to meet the disclosure and verification requirements for 
Social Security Numbers, as provided by 24 CFR part 5; or the failure to 
sign and submit consent forms for the obtaining of wage and claim 
information from State Wage Information Collection Agencies, as provided 
by 24 CFR part 5), or by failure to comply with any of the other 
homebuyer obligations under the Agreement, the LHA may terminate the 
Agreement. No termination under this paragraph may occur less than 30 
days after the LHA gives the homebuyer notice of its intention to do so, 
in accordance with paragraph (m)(3) of this section. For termination of 
assistance for failure to establish citizenship or eligible immigration 
status under 24 CFR part 5, the requirements of 24 CFR parts 5 and 966 
shall apply.
    (2) Notice of termination by the LHA shall be in writing. Such 
notice shall state
    (i) The reason for termination,
    (ii) That the homebuyer may respond to the LHA, in writing or in 
person, within a specified reasonable period of time regarding the 
reason for termination,

[[Page 304]]

    (iii) That in such response he may be represented or accompanied by 
a person of his choice, including a representative of the HBA,
    (iv) That the LHA will consult the HBA concerning this termination, 
and
    (v) That unless the LHA rescinds or modifies the notice, the 
termination shall be effective at the end of the 30-day notice period.
    (n) Termination by the homebuyer. The homebuyer may terminate the 
Homebuyers Ownership Opportunity Agreement by giving the LHA 30 days 
notice in writing of this intention to terminate and vacate the home. In 
the event that the homebuyer vacates the home without notice to the LHA, 
the Agreement shall be terminated automatically and the LHA may dispose 
of, in any manner deemed suitable by it, any items of personal property 
left by the homebuyer in the home.
    (o) Transfer to rental unit. (1) Inasmuch as the homebuyer was found 
eligible for admission to the Project on the basis of having the 
necessary elements of potential for homeownership, continuation of 
eligibility requires continuation of this potential, subject only to 
temporary unforeseen changes in circumstances. Accordingly, in the event 
it should develop that the homebuyer no longer meets one or more of 
these elements of homeownership potential, the LHA shall investigate the 
circumstances and provide such counseling and assistance as may be 
feasible in order to help the family overcome the deficiency as promptly 
as possible. After a reasonable time, not to exceed 30 days from the 
date of evaluation of the results of the investigation, the LHA shall 
make a re-evaluation as to whether the family has regained the potential 
for homeownership or is likely to do so within a further reasonable 
time, not to exceed 30 days from the date of the reevaluation. Further 
extension of time may be granted in exceptional cases, but in any event, 
a final determination shall be made no later than 90 days from the date 
of evaluation of the results of the initial investigation. The LHA shall 
invite the HBA to participate in all investigations and evaluations.
    (2) If the final determination of the LHA, after considering the 
views of the HBA, is that the homebuyer should be transferred to a 
suitable dwelling unit in an LHA rental project, the LHA shall give the 
homebuyer written notice of the LHA determination of the loss of 
homeownership potential and of the offer of transfer to a rental unit. 
The notice shall state that the transfer shall occur as soon as a 
suitable rental unit is available for occupancy, but no earlier than 30 
days from the date of the notice, provided that an eligible successor 
for the homebuyer unit has been selected by the LHA. The notice shall 
also state that if the homebuyer should refuse to move under such 
circumstances, the family may be required to vacate the homebuyer unit, 
without further notice. The notice shall include a statement (i) that 
the homebuyer may respond to the LHA in writing or in person, within a 
specified reasonable time, regarding the reason for the determination 
and offer of transfer, (ii) that in such response he may be represented 
or accompanied by a person of his choice including a representative of 
the HBA, and (iii) that the LHA has consulted the HBA concerning this 
determination and offer of transfer.
    (3) When a Homebuyers Ownership Opportunity Agreement is terminated 
pursuant to this paragraph (o), the amount in the homebuyer's EHPA shall 
be paid in accordance with the provisions of Sec. 904.110(j).

(Approved by the Office of Management and Budget under control number 
2577-0083)

[39 FR 10966, Mar. 22, 1974. Redesignated at 40 FR 15580, Apr. 7, 1975, 
and at 49 FR 6714, Feb. 23, 1984, and amended at 49 FR 21490, May 21, 
1984; 49 FR 26719, June 29, 1984; 54 FR 39710, Sept. 27, 1989; 56 FR 
7544, Feb. 22, 1991; 60 FR 14848, Mar. 20, 1995; 60 FR 13626, Mar. 27, 
1996]



Sec. 904.108  Break-even amount.

    (a) Definition. The term ``break-even amount'' as used herein means 
the minimum average monthly amount required to provide funds for the 
items listed in the illustration below. A separate break-even amount 
shall be established for each size and type of dwelling unit, as well as 
for the Project as a whole. The break-even amount for EHPA and NRMR will 
vary by size and

[[Page 305]]

type of dwelling unit; similar variations as to other line items may be 
made if the LHA deems this equitable.

    Illustration. The following is an illustration of the computation of 
the break-even amount based upon hypothetical amounts.

(1) Operating Expense (see Sec.  904.109):
  Administration.......................................   $8.50
  Homebuyer services...................................    2.00
  Project supplied utilities...........................    3.00
  Routine maintenance--common property.................    3.00
  Protective services..................................    2.00
  General expense......................................    6.50
  Nonroutine maintenance--common property (Contribution    2.00   $27.00
   to operating reserve)...............................
(2) Earned Home Payments Account (see Sec.  904.110)...  ......    12.00
(3) Nonroutine Maintenance Reserve (see Sec.  904.111).  ......     7.50
Break-Even Amount......................................  ......    46.50
 

The break-even amount does not include the monthly allowance for 
utilities which the homebuyer pays for directly, nor does it include any 
amount for debt service on the Project notes.

    (b) Excess over break-even. When the homebuyer's required monthly 
payment (see Sec. 904.107(j)) exceeds the applicable break-even amount, 
the excess shall constitute additional Project income and shall be 
deposited and used in the same manner as other Project income.
    (c) Deficit in monthly payment. When the homebuyer's required 
monthly payment is less than the applicable break-even amount, the 
deficit shall be applied as a reduction of that portion of the monthly 
payment designated for operating expense (i. e., as a reduction of 
Project income). In all such cases, the EHPA and the NRMR shall be 
credited with the amount included in the break-even amount for these 
accounts.



Sec. 904.109  Monthly operating expense.

    (a) Definition and categories of monthly operating expense. The term 
``monthly operating expense'' means the monthly amount needed for the 
following purposes:
    (1) Administration. Administrative salaries, travel, legal expenses, 
office supplies, postage, telephone and telegraph, etc.;
    (2) Homebuyer services. LHA expenses in the achievement of social 
goals, including costs such as salaries, publications, payments to the 
HBA to assist its operation, contract and other costs;
    (3) Utilities. Those utilities (such as water), if any, to be 
furnished by the LHA as part of operating expense;
    (4) Routine maintenance--common property. For community building, 
grounds, and other common areas, if any. The amount required for routine 
maintenance of common property depends upon the type of common property 
included in the development and the extent of the LHA's responsibility 
for maintenance (see also Sec. 904.109(c));
    (5) Protective services. The cost of supplemental protective 
services paid by the LHA for the protection of persons and property;
    (6) General expense. Premiums for fire and other insurance, payments 
in lieu of taxes to the local taxing body, collection losses, payroll 
taxes, etc.;
    (7) Nonroutine maintenance--common property (Contribution to 
operating reserve). Extraordinary maintenance of equipment applicable to 
the community building and grounds, and unanticipated items for non-
dwelling structures (see Sec. 904.112).
    (b) Monthly operating expense rate. The monthly operating expense 
rate for each fiscal year shall be established on the basis of the LHA's 
HUD-approved operating budget for that fiscal year. The operating budget 
may be revised during the course of the fiscal year in accordance with 
HUD requirements. If it is subsequently determined that the actual 
operating expense for a fiscal year was more or less than the amount 
provided by the monthly operating expense established for that fiscal 
year, the rate of monthly operating expenses to be established for the 
next fiscal year may be adjusted to account for the difference (see 
Sec. 904.112(b)). Such adjustment may result in a change in the required 
monthly payment, see Sec. 904.107(j)(3).
    (c) Provision for common property maintenance. During the period the 
LHA is responsible for the maintenance of common property, the annual 
operating budget and the monthly operating expense rate shall include 
the amount required for routine maintenance of all common property in 
the development, even though a number of the homes may have been 
acquired by homebuyers. During such period, this amount shall be 
computed on the basis

[[Page 306]]

of the total number of homes in the development (i. e., the annual 
amount budgeted for routine maintenance of common property shall be 
divided by the number of homes in the development, resulting in the 
annual amount for each home; this figure shall in turn be divided by 12 
to determine the monthly amount to be included in the monthly operating 
expense (and in the break-even amount) for routine maintenance of common 
property). After the home owners association assumes responsibility for 
maintenance of common property, the monthly operating expense (and 
break-even amount) shall include an amount equal to the monthly 
assessment by the homeowners association for the remaining homes owned 
by the LHA (see Sec. 904.112(b) for nonroutine maintenance of common 
property).
    (d) Posting of monthly operating expense statement. A statement 
showing the budgeted monthly amount allocated in the current operating 
budget to each operating expense category shall be provided to the HBA 
and copies shall be provided to homebuyers upon request.



Sec. 904.110  Earned Home Payments Account (EHPA)

    (a) Credits to the account. The LHA shall establish and maintain a 
separate EHPA for each homebuyer. Since the homebuyer is responsible for 
maintaining the home, a portion of his required monthly payment equal to 
the LHA's estimate, approved by HUD, of the monthly cost for such 
routine maintenance, taking into consideration the relative type and 
size of the homebuyer's home, shall be set aside in his EHPA. In 
addition, this account shall be credited with
    (1) Any voluntary payments made pursuant to paragraph (f) of this 
section, and
    (2) Any amount earned through the performance of maintenance as 
provided in paragraph (d) of this section and Sec. 904.111(c).
    (b) Charges to the account. (1) If for any reason the homebuyer is 
unable or fails to perform any item of required maintenance as described 
in Sec. 904.107(a), the LHA shall arrange to have the work done in 
accordance with the procedures established by the LHA and the HBA and 
the cost thereof shall be charged to the homebuyer's EHPA. Inspections 
of the home shall be made jointly by the LHA and the HBA.
    (2) To the extent NRMR expense is attributable to the negligence of 
the homebuyer as determined by the HBA and approved by the LHA (see 
Sec. 904.111), the cost thereof shall be charged to the EHPA.
    (c) Exercise of option; required amount in EHPA. The homebuyer may 
exercise his option to buy the home, by paying the applicable purchase 
price pursuant to Sec. 904.113 or Sec. 904.115, only after satisfying 
the following conditions precedent:
    (1) Within the first two years of his occupancy, he has achieved a 
balance in his EHPA equal to 20 times the amount of the monthly EHPA 
credit as initially determined in accordance with paragraph (a) of this 
section;
    (2) He has met, and is continuing to meet, the requirements of the 
Homebuyers Ownership Opportunity Agreement;
    (3) He has rendered, and is continuing to render, satisfactory 
performance of his responsibilities to the HBA.

When the homebuyer has met these conditions precedent, the LHA shall 
give the homebuyer a certificate to that effect. After achieving the 
required minimum EHPA balance within the first two years of his 
occupancy, the homebuyer shall continue to provide the required 
maintenance, thereby continuing to add to his EHPA. If the homebuyer 
fails to meet either his obligation to achieve the minimum EHPA balance, 
as specified, or his obligation thereafter to continue adding to the 
EHPA, the LHA and the HBA shall investigate and take appropriate 
corrective action, including termination of the Agreement by the LHA in 
accordance with Sec. 904.107(m).
    (d) Additional equity through maintenance of common property. 
Homebuyers may earn additional EHPA credits by providing in whole or in 
part any of the maintenance necessary to the common property of the 
development. When such maintenance is to be provided by the homebuyer, 
this may be done and credit earned therefor only pursuant to a prior 
written agreement between the

[[Page 307]]

homebuyer and the LHA (or the home owners association, depending on who 
has responsibility for maintenance of the property involved), covering 
the nature and scope of the work and the amount of credit the homebuyer 
is to receive. In such cases, the agreed amount shall be charged to the 
appropriate maintenance account and credited to the homebuyer's EHPA 
upon completion of the work.
    (e) Investment of excess. (1) When the aggregate amount of all EHPA 
balances exceeds the estimated reserve requirements for 90 days, the LHA 
shall notify the HBA and shall invest the excess in federally insured 
savings accounts, federally insured credit unions, and/or securities 
approved by HUD and in accordance with any recommendations made by the 
HBA. If the HBA wishes to participate in the investment program, it 
should submit periodically to the LHA a list of HUD-approved securities, 
bonds, or obligations which the association recommends for investment by 
the LHA of the funds in the EHPAs. Interest earned on the investment of 
such funds shall be prorated and credited to each homebuyer's EHPA in 
proportion to the amount in each such reserve account.
    (2) Periodically, but not less often than semi-annually, the LHA 
shall prepare a statement showing (i) the aggregate amount of all EHPA 
balances; (ii) the aggregate amount of investments (savings accounts 
and/or securities) held for the account of all the homebuyers' EHPAs, 
and (iii) the aggregate uninvested balance of all the homebuyers' EHPAs. 
This statement shall be made available to any authorized representative 
of the HBA.
    (f) Voluntary payments. To enable the homebuyer to acquire title to 
his home within a shorter period, he may, either periodically or in a 
lump sum, voluntarily make payments over and above his required monthly 
payments. Such voluntary payments shall be deposited to his credit in 
his EHPA.
    (g) Delinquent monthly payments. Under exceptional circumstances as 
determined by the HBA and the LHA, a homebuyer's EHPA may be used to pay 
his delinquent required monthly payments, provided the amount used for 
this purpose does not seriously deplete the account and provided that 
the homebuyer agrees to cooperate in such counseling as may be made 
available by the LHA or the HBA.
    (h) Annual statement to homebuyer. The LHA shall provide an annual 
statement to each homebuyer specifying at least (1) the amount in his 
EHPA, and (2) the amount in his NRMR. During the year, any maintenance 
or repair done on the dwelling by the LHA which is chargeable to the 
EHPA or to the NRMR shall be accounted for through a work order. A 
homebuyer shall receive a copy of all such work orders for his home.
    (i) Withdrawal and assignment. The homebuyer shall have no right to 
assign, withdraw, or in any way dispose of the funds in its EHPA except 
as provided in this section or in Sec. 904.113 and Sec. 904.115.
    (j) Application of EHPA upon vacating of dwelling. (1) In the event 
a Homebuyers Ownership Opportunity Agreement with the LHA is terminated 
or if the homebuyer vacates the home (see Sec. 904.107 (m), (n) and 
(o)), the LHA shall charge against the homebuyer's EHPA the amounts 
required to pay
    (i) The amount due the LHA, including the monthly payments the 
homebuyer is obligated to pay up to the date he vacates;
    (ii) The monthly payment for the period the home is vacant, not to 
exceed 30 days from the date of notice of intention to vacate, or, if 
the homebuyer fails to give notice of intention to vacate, 30 days from 
the date the home is put in good condition for the next occupant in 
conformity with Sec. 904.107; and
    (iii) The cost of any routine maintenance, and of any nonroutine 
maintenance attributable to the negligence of the homebuyer, required to 
put the home in good condition for the next occupant in conformity with 
Sec. 904.107.
    (2) If the EHPA balance is not sufficient to cover all of these 
charges, the LHA shall require the homebuyer to pay the additional 
amount due. If the amount in the account exceeds these charges, the 
excess shall be paid to the homebuyer.
    (3) Settlement with the homebuyer shall be made promptly after the 
actual cost of repairs to the dwelling has been determined (see 
paragraph

[[Page 308]]

(j)(1)(iii) of this section), provided that the LHA shall make every 
effort to make such settlement within 30 days from the date the 
homebuyer vacates. The homebuyer may obtain a settlement within 7 days 
of the date he vacates, even though the actual cost of such repair has 
not yet been determined, if he has given the LHA notice of intention to 
vacate at least 30 days prior to the date he vacates and if the amount 
to be charged against his EHPA for such repairs is based on the LHA's 
estimate of the cost thereof (determined after consultation with the 
appropriate representative of the HBA).



Sec. 904.111  Nonroutine Maintenance Reserve (NRMR).

    (a) Purpose of reserve. The LHA shall establish and maintain a 
separate NRMR for each home, using a portion of the homebuyer's monthly 
payment. The purpose of the NRMR is to provide funds for the nonroutine 
maintenance of the home, which consists of the infrequent and costly 
items of maintenance and replacement shown on the Nonroutine Maintenance 
Schedule for the home (see paragraph (b) of this section). Such 
maintenance may include the replacement of dwelling equipment (such as 
range and refrigerator), replacement of roof, exterior painting, major 
repairs to heating and plumbing systems, etc. The NRMR shall not be used 
for nonroutine maintenance of common property, or for nonroutine 
maintenance relating to the home to the extent such maintenance is 
attributable to the Homebuyer's negligence or to defective materials or 
workmanship.
    (b) Amount of reserve. The amount of the monthly payments to be set 
aside for NRMR shall be determined by the LHA, with the approval of HUD, 
on the basis of the Nonroutine Maintenance Schedule showing the amount 
likely to be needed for nonroutine maintenance of the home during the 
term of the Homebuyers Ownership Opportunity Agreement, taking into 
consideration the type of construction and dwelling equipment. This 
Schedule shall (1) list each item of nonroutine maintenance (e.g., 
range, refrigerator, plumbing, heating system, roofing, tile flooring, 
exterior painting, etc.), (2) show for each listed item the estimated 
frequency of maintenance or useful life before replacement, the 
estimated cost of maintenance or replacement (including installation) 
for each occasion, and the annual reserve requirement, and (3) show the 
total reserve requirements for all the listed items, on an annual and a 
monthly basis. This Schedule shall be prepared by the LHA and approved 
by HUD as part of the submission required to determine the financial 
feasibility of the Project. The Schedule shall be revised after approval 
of the working drawings and specifications, and shall thereafter be 
reexamined annually in the light of changing economic conditions and 
experience.
    (c) Charges to NRMR. (1) The LHA shall provide the nonroutine 
maintenance necessary for the home and the cost thereof shall be funded 
as provided in paragraph (c)(2) of this section. Such maintenance may be 
provided by the homebuyer but only pursuant to a prior written agreement 
with the LHA covering the nature and scope of the work and the amount of 
credit the homebuyer is to receive. The amount of any credit shall, upon 
completion of the work, be credited to the homebuyer's EHPA and charged 
as provided in paragraph (c)(2) of this section.
    (2) The cost of nonroutine maintenance shall be charged to the NRMR 
for the home except that (i) to the extent such maintenance is 
attributable to the fault or negligence of the homebuyer, the cost shall 
be charged to the homebuyer's EHPA after consultation with the HBA if 
the hombuyer disagrees, and (ii) to the extent such maintenance is 
attributable to defective materials or workmanship not covered by 
warranty, or even though covered by warranty if not paid for thereunder 
through no fault or negligence of the homebuyer, the cost shall be 
charged to the appropriate operating expense account of the Project.
    (3) In the event the amount charged against the NRMR exceeds the 
balance therein, the difference (deficit) shall be made up from 
continuing monthly credits to the NRMR based upon the homebuyer's 
monthly payments. If there is still a deficit when the homebuyer 
acquires title, the homebuyer

[[Page 309]]

shall pay such deficit at settlement (see paragraph (d)(2) of this 
section).
    (d) Transfer of NRMR. (1) In the event the Homebuyer's Ownership 
Opportunity Agreement is terminated, the homebuyer shall not receive any 
balance or be required to pay any deficit in the NRMR. When a subsequent 
homebuyer moves in, the NRMR shall continue to be applicable to the home 
in the same amount as if the preceding homebuyer had continued in 
occupancy.
    (2) In the event the homebuyer purchases the home, and there remains 
a balance in the NRMR, the LHA shall pay such balance to the homebuyer 
at settlement. In the event the homebuyer purchases and there is a 
deficit in the NRMR, the homebuyer shall pay such deficit to the LHA at 
settlement.
    (e) Investment of excess. (1) When the aggregate amount of the NRMR 
balances for all the homes exceeds the estimated reserve requirements 
for 90 days the LHA shall invest the excess in federally insured savings 
accounts, federally insured credit unions, and/or securities approved by 
HUD. Income earned on the investment of such funds shall be prorated and 
credited to each homebuyer's NRMR in proportion to the amount in each 
reserve account.
    (2) Periodically, but not less often than semi-annually, the LHA 
shall prepare a statement showing (i) the aggregate amount of all NRMR 
balances, (ii) the aggregate amount of investments (savings accounts 
and/or securities) held for the account of the NRMRs, and (iii) the 
aggregate uninvested balance of the NRMRs. A copy of this statement 
shall be made available to any authorized representative of the HBA.



Sec. 904.112  Operating reserve.

    (a) Purpose of reserve. To the extent that total operating receipts 
(including subsidies for operations) exceed total operating expenditures 
of the Project, the LHA shall establish an operating reserve up to the 
maximum approved by HUD in connection with its approval of the annual 
operating budgets for the Project. The purpose of this reserve is to 
provide funds for
    (1) The infrequent but costly items of nonroutine maintenance and 
replacements of common property, taking into consideration the types of 
items which constitute common property, such as nondwelling structures 
and equipment, and in certain cases, common elements of dwelling 
structures,
    (2) Nonroutine maintenance for the homes to the extent such 
maintenance is attributable to defective materials or workmanship not 
covered by warranty,
    (3) Working capital for payment of a deficit in a homebuyer's NRMR, 
until such deficit is offset by future monthly payments by the homebuyer 
or at settlement in the event the homebuyer should purchase, and
    (4) A deficit in the operation of the Project for a fiscal year, 
including a deficit resulting from monthly payments totaling less than 
the break-even amount for the Project.
    (b) Nonroutine maintenance--common property (Contribution to 
operating reserve). The amount under this heading to be included in 
operating expense (and in the break-even amount) established for the 
fiscal year (see Sec. 904.108 and Sec. 904.109) shall be determined by 
the LHA, with the approval of HUD, on the basis of estimates of the 
monthly amount needed to accumulate an adequate reserve for the items 
described in paragraph (a)(1) of this section. This amount shall be 
subject to revision in the light of experience. This contribution to the 
operating reserve shall be made only during the period the LHA is 
responsible for the maintenance of any common property; and during such 
period, the amount shall be determined on the basis of the requirements 
of all common property in the development in a manner similar to that 
explained in Sec. 904.109(c). When the operating reserve reaches the 
maximum authorized in paragraph (c) of this section, the break-even 
(monthly operating expense) computations (see Secs. 904.108 and 904.109) 
for the next and succeeding fiscal years need not include a provision 
for this contribution to the operating reserve unless the balance of the 
reserve is reduced below the maximum during any such succeeding fiscal 
year.
    (c) Maximum operating reserve. The maximum operating reserve that 
may be retained by the LHA at the end of any fiscal year shall be the 
sum of (1)

[[Page 310]]

one-half of total routine expense included in the operating budget 
approved for the next fiscal year and (2) one-third of total break-even 
amounts included in the operating budget approved for the next fiscal 
year; provided that such maximum may be increased if necessary as 
determined or approved by HUD. Total routine expense means the sum of 
the amounts budgeted for administration, homebuyers services, LHA-
supplied utilities, routine maintenance of common property, protective 
services, and general expense or other category of day-to-day routine 
expense (see Sec. 904.109 above for explanation of various categories of 
expense).
    (d) Transfer to homeowners association. The LHA shall be responsible 
for and shall retain custody of the operating reserve until the 
homeowners acquire voting control of the homeowners association (see 
Secs. 904.118(c) and 904.119(f). When the homeowners acquire voting 
control, the homeowners association shall then assume full 
responsibility for management and maintenance of common property under a 
plan approved by HUD, and there shall be transferred to the homeowners 
association a portion of the operating reserve then held by the LHA. The 
amount of the reserve to be transferred shall be based upon the 
proportion that one-half of budgeted routine expense (used as a basis 
for determining the current maximum operating reserve--see paragraph (c) 
of this section) bears to the approved maximum operating reserve. 
Specifically, the portion of operating reserve to be transferred shall 
be computed as follows: Obtain a percentage by dividing one-half of 
budgeted routine expense by the approved maximum operating reserve; and 
multiply the actual operating reserve balance by this percentage.
    (e) Disposition of reserve. If, at the end of a fiscal year, there 
is an excess over the maximum operating reserve this excess shall be 
applied to the operating deficit of the Project, if any, and any 
remainder shall be paid to HUD. Following the end of the fiscal year in 
which the last home has been conveyed by the LHA, the balance of the 
operating reserve held by the LHA shall be paid to HUD, provided that 
the aggregate amount of payments by the LHA under this paragraph shall 
not exceed the aggregate amount of annual contributions paid by HUD with 
respect to the Project.



Sec. 904.113  Achievement of ownership by initial homebuyer.

    (a) Determination of initial purchase price. The LHA shall determine 
the initial purchase price of the home by two basic steps, as follows:

    Step 1: The LHA shall take the Estimated Total Development Cost 
(including the full amount for contingencies as authorized by HUD) of 
the development as shown in the Development Cost Budget in effect upon 
award of the Main Construction Contract or execution of the Contract of 
Sale, and shall deduct therefrom the amounts, if any, attributed to (1) 
relocation costs, (2) counseling and training costs, and (3) the cost of 
any community, administration or management facilities including the 
land, equipment, and furnishings attributable to such facilities as set 
forth in the development program for the development. The resulting 
amount is herein called Estimated Total Development Cost for Homebuyers.
    Step 2: The LHA shall apportion the Estimated Total Development Cost 
for Homebuyers among all the homes in the development. This 
apportionment shall be made by obtaining an FHA appraisal of each home 
and adjusting such appraised values (upward or downward) by the 
percentage difference between the total of the appraisal for all the 
Homes and the Estimated Total Development Cost for Homebuyers. The 
adjusted amount for each home shall be the initial purchase price for 
that home.

    (b) Purchase price schedule. Each homebuyer shall be provided with a 
Purchase Price Schedule showing (1) the monthly declining purchase price 
over a 30-year period,\1\ commencing with the initial purchase price on 
the first day of the month following the effective date of the 
Homebuyers Ownership Opportunity Agreement and (2) the monthly debt 
service amount upon which the Schedule is based. The Schedule and debt 
service amount shall be computed on the basis of the initial purchase 
price, a 30-year period,\2\ and a

[[Page 311]]

rate of interest equal to the minimum loan interest rate as specified in 
the Annual Contributions Contract for the Project on the date of HUD 
approval of the Development Cost Budget, described in paragraph (a) of 
this section, rounded up, if necessary, to the next multiple of one-
fourth of one percent (\1/4\ percent).
---------------------------------------------------------------------------

    \1\ Change to 25-year period where appropriate pursuant to 
Sec. 904.101(b)(3).
    \2\ Under section 234(c) of the National Housing Act, as of the date 
of publication of this subpart, mortgage insurance for a condominium 
unit in a multi-family project is generally authorized only if the 
project is currently or has been covered by a mortgage insured under 
another section of the National Housing Act. There is, however, a 
proviso which authorizes mortgage insurance for a condominium unit in a 
multi-family project even though the project is not or has not been 
covered by such a project mortgage, if the project involves eleven or 
less units.
---------------------------------------------------------------------------

    (c) Methods of purchase. (1) The homebuyer may achieve ownership 
when the amount in his EHPA, plus such portion of the NRMR as he wishes 
to use for the purchase, is equal to the purchase price as shown at that 
time on his Purchase Price Schedule plus all Incidental Costs 
(Incidental Costs mean the costs incidental to acquiring ownership, 
including, but not limited to, the costs for a credit report, field 
survey, title examination, title insurance, and inspections, the fees 
for attorneys other than the LHA's attorney, mortgage application and 
organization, closing and recording, and the transfer taxes and loan 
discount payment, if any). If for any reason title to the home is not 
conveyed to the homebuyer during the month in which such circumstances 
occur, the purchase price shall be fixed at the amount specified for 
such month and the homebuyer shall be refunded (i) the net additions, if 
any, credited to his EHPA subsequent to such month, and (ii) such part 
of the monthly payments made by the homebuyer after the purchase price 
has been fixed which exceeds the sum of the break-even amount 
attributable to the unit and the interest portion of the debt service 
shown in the Purchase Price Schedule.
    (2) Where the sum of the purchase price and Incidental Costs is 
greater than the amounts in the homebuyer's EHPA and NRMR as described 
in paragraph (c)(1) of this section, the homebuyer may achieve ownership 
by obtaining financing for or otherwise paying the excess amount. The 
purchase price shall be the amount shown on his Purchase Price Schedule 
for the month in which the settlement date for the purchase occurs.
    (d) The maximum period for achieving ownership shall be 30 years, 
but depending upon increases in the homebuyers income and the amount of 
credit which the homebuyer can accumulate through maintenance and 
voluntary payments, the period may be shortened accordingly.



Sec. 904.114  Payment upon resale at profit.

    (a) Promissory note. (1) When a homebuyer achieves ownership 
(regardless of whether ownership is achieved under Sec. 904.113 or 
Sec. 904.115), he shall sign a note obligating him to make a payment to 
the LHA, subject to the provisions of paragraph (a)(2) or this section, 
in the event he resells his home at a profit within 5 years of actual 
residence in the home after he becomes a homeowner. If, however, the 
homeowner should purchase and occupy another home within one year (18 
months in case of a newly constructed home) of the resale of the Turnkey 
III home, the LHA shall refund to the homeowner the amount previously 
paid by him under the note, less the amount, if any, by which the resale 
price of the Turnkey III home exceeds the acquisition price of the new 
home, provided that application for such refund shall be made no later 
than 30 days after the date of acquisition of the new home.
    (2) The note to be signed by the homebuyer pursuant to paragraph 
(a)(1) of this section shall be a non interest-bearing promissory note 
(see Appendix IV) to the LHA. The note shall be executed at the time the 
homebuyer becomes a homeowner and shall be secured by a second mortgage. 
The initial amount of the note shall be computed by taking the appraised 
value of the home at the time the homebuyer becomes a homeowner and 
subtracting (i) the homebuyer's purchase price plus the Incidental Costs 
and (ii) the increase in value of the home, determined by appraisal, 
caused by improvements paid for by the homebuyer with funds from sources 
other than the EHPA or NRMR. The note shall provide that this initial 
amount shall be

[[Page 312]]

automatically reduced by 20 percent thereof at the end of each year of 
residency as a homeowner, with the note terminating at the end of the 
five-year period of residency, as determined by the LHA. To protect the 
homeowner, the note shall provide that the amount payable under it shall 
in no event be more than the net profit on the resale, that is, the 
amount by which the resale price exceeds the sum of (A) the homebuyer's 
purchase price plus the Incidental Costs, (B) the costs of the resale, 
including commissions and mortgage prepayment penalties, if any, and (C) 
the increase in value of the home, determined by appraisal, due to 
improvements paid for by him as a homebuyer (with funds from sources 
other than the EHPA or NRMR) or as a homeowner.
    (3) Amounts collected by the LHA under such notes shall be retained 
by the LHA for use in making refunds pursuant to paragraph (a)(1) of 
this section. After expiration of the period for the filing of claims 
for such refunds, any remaining amounts shall be applied (i) to reduce 
the LHA's capital indebtedness on the Project and (ii) after such 
indebtedness has been paid, for such purposes as may be authorized or 
approved by HUD under such Annual Contributions Contract as the LHA may 
then have with HUD.

    Illustration. If the homeowner's purchase price is $10,000, the 
Incidental Costs are $500, the value added by improvements is $1,000, 
and the FHA appraised value at the time he acquires ownership is 
$17,000, the note computation would be as follows:

FHA appraised value.................................  ........   $17,000
Homeowner's purchase price..........................   $10,000  ........
Incidental costs....................................       500  ........
Improvements........................................     1,000    11,500
                                                     -------------------
Initial note amount.................................  ........     5,500
------------------------------------------------------------------------
 

    In this example, the amount of the note during the first year of 
residence is $5,500. In the second year, the amount of the note is 
$4,400, and in the third year, it is $3,300, etc. The note shall 
terminate at the end of the fifth year.
    If the homeowner in this example resells his home during the first 
year for a sales price of $17,500, has resale costs of $1,600 (including 
a sales commission), and has added $1,500 value by further improvements, 
he would be required to pay the LHA $2,900 rather than the $5,500, as 
indicated in the following computations:

Resale price........................................  ........   $17,500
Resale costs........................................    $1,600  ........
Purchase price and Incidental costs.................    10,500  ........
All improvements....................................     2,500    14,600
                                                     -------------------
Payable to LHA......................................  ........     2,900
------------------------------------------------------------------------
 

    (b) Residency requirements. The five-year note period does not end 
if the homeowner rents or otherwise does not use the home as his 
principal place of residence for any period within the first five years 
after he achieves ownership. Only the actual amount of time he is in 
residence is counted and the note shall be in effect until a total of 
five years time of residence has elapsed, at which time the homeowner 
may request the LHA to release him from the note, and the LHA shall do 
so.



Sec. 904.115  Achievement of ownership by subsequent homebuyers.

    (a) Definition. In the event the initial homebuyer and his family 
vacate the home before having acquired ownership, a subsequent occupant 
who enters into a Homebuyer's Ownership Opportunity Agreement and who is 
not a successor pursuant to Sec. 904.107(l)(2) is herein called a 
``subsequent homebuyer.''
    (b) Determination of initial purchase price. The initial purchase 
price for a subsequent homebuyer shall be an amount equal to (1) the 
purchase price shown in the initial homebuyer's Purchase Price Schedule 
as of the date of this Agreement with the subsequent homebuyer plus (2) 
the amount, if any, by which the appraised fair market value of the 
home, determined or approved by HUD as of the same date, exceeds the 
purchase price specified in paragraph (b)(1) of this section.
    (c) Purchase price schedule. The subsequent homebuyer's Purchase 
Price Schedule shall be the same as the unexpired portion of the initial 
homebuyer's Purchase Price Schedule except that where his purchase price 
includes an additional amount as specified in paragraph (b)(2) of this 
section, the initial homebuyer's Purchase Price Schedule shall be 
followed by an Additional Purchase Price Schedule for such additional 
amount based upon the same monthly debt service and the same interest 
rate as applied to the initial homebuyer's Purchase Price Schedule.

[[Page 313]]

    (d) Residual receipts. After payment in full of the LHA's debt, if 
there are any subsequent homebuyers who have not acquired ownership of 
their homes, the LHA shall continue to pay to HUD all residual receipts 
from the operation of the Project, including payments received on 
account of any Additional Purchase Price Schedules applicable to the 
homes, provided the aggregate amount of such payments of residual 
receipts does not exceed the aggregate amount of annual contributions 
paid by HUD with respect to the Project.



Sec. 904.116  Transfer of title to homebuyer.

    When the homebuyer is to obtain ownership as described in 
Sec. 904.113 or Sec. 904.115, a closing date shall be mutually agreed 
upon by the parties. On the closing date the homebuyer shall pay the 
required amount of money to the LHA, sign the promissory note pursuant 
to Sec. 904.114, and receive a deed for the home.



Sec. 904.117  Responsibilities of homebuyer after acquisition of ownership.

    After acquisition of ownership, each homeowner shall be required to 
pay to the LHA or to the homeowners association, as appropriate, a 
monthly fee for (a) the maintenance and operation of community 
facilities including utility facilities, if any, (b) the maintenance of 
grounds and other common areas and, (c) such other purposes as 
determined by the LHA or the homeowners association, as appropriate, 
including taxes and a provision for a reserve. This requirement shall be 
set out in the planned unit development or condominium documents which 
shall be recorded prior to the date of full availability, or in an LHA-
homeowner contract in this regard.



Sec. 904.118  Homeowners association--planned unit development (PUD).

    If the development is organized as a planned unit development:
    (a) Ownership and maintenance of common property. The common areas, 
sidewalks, parking lots, and other common property in the development 
shall be owned and maintained as provided for in the approved planned 
unit development (PUD) program except that the LHA shall be responsible 
for maintenance until such time as the homeowners association assumes 
such responsibility (see Sec. 904.112(d)).
    (b) Title restrictions. The title ultimately conveyed to each 
homebuyer shall be subject to restrictions and encumbrances to protect 
the rights and property of all other owners. The homeowners association 
shall have the right and obligation to enforce such restrictions and 
encumbrances and to assess owners for the costs incurred in connection 
with common areas and property and other responsibilities.
    (c) Votes in association. There shall be as many votes in the 
association as there are homes in the development, and, at the outset, 
all the voting rights shall be held by the LHA. As each home is conveyed 
to the homebuyer, one vote shall automatically go to the homeowner so 
that, when all the homes have been conveyed, the LHA shall no longer 
have any interest in the homeowners association.
    (d) Voting control. The LHA shall not lose its majority voting 
interest in the association as soon as a majority of the homes have been 
conveyed, unless the law of the state requires control to be transferred 
at a particular time, or the LHA so desires. If permitted by state law, 
provision shall be made for each home owned by the LHA to carry three 
votes, while each home owned by a homeowner shall carry one vote. Under 
this weighted voting plan, the LHA shall continue to have voting control 
until 75 percent of the homes have been acquired by homeowners. However, 
at its discretion, the LHA may transfer voting control to the homeowners 
when at least 50 percent of the homes have been acquired by the 
homeowners.



Sec. 904.119  Homeowners association--condominium.

    If the development is organized as a condominium:
    (a) The LHA at the outset shall own each condominium unit and its 
undivided interest in the common areas;
    (b) All the land, including that land under the housing units, shall 
be a part of the common areas;
    (c) The homeowners association shall own no property but shall 
maintain

[[Page 314]]

and operate the common areas for the individual owners of the 
condominium units except that the LHA shall be responsible for 
maintenance until such time as the homeowners association assumes such 
responsibility (see Sec. 904.112(d));
    (d) The percentage of undivided interest attached to each 
condominium unit shall be based on the ratio of the value of the units 
to the value of all units and shall be fixed when the development is 
completed. This percentage shall determine the homeowner's liability for 
the maintenance of the common areas and facilities;
    (e) Each homeowner's vote in the homeowners association shall be 
identical with the percentage of undivided interest attached to his 
unit; and
    (f) The LHA shall not lose its majority voting interest in the 
association as soon as units representing 50 percent of the value of all 
units have been conveyed, unless the law of the state requires control 
to be transferred at a particular time or the LHA so desires. For voting 
purposes, until units representing 75 percent of the value of all units 
have been acquired by homeowners, the total undivided interest 
attributable to the homes owned by the LHA shall be multiplied by three, 
if such weighted voting plan is permitted by state law. Under this plan, 
the LHA shall continue to maintain voting control until 75 percent of 
the homes have been acquired by homeowners. However, at its discretion, 
the LHA may transfer voting control to the homeowners when units 
representing at least 50 percent of the value of all units have been 
acquired by the homeowners.



Sec. 904.120  Relationship of homeowners association to HBA.

    The HBA and the LHA may make arrangements to permit homebuyers to 
participate in homeowners association matters which affect the 
homebuyers. Such arrangements may include rights to attend meetings and 
to participate in homeowners association deliberations and decisions.



Sec. 904.121  Use of appendices.

    Use of the following Appendices is mandatory for Projects developed 
under this subpart:



Sec. 904.122  Statutory preferences.

    In selecting applicants for assistance under this part, the LHA must 
give preference, in accordance with the authorized preference 
requirements described in 24 CFR 5.410 through 5.430. Notwithstanding 
those preferences, the LHA can limit homeownership admission to eligible 
homeownership candidates.

[59 FR 36651, July 18, 1994, as amended at 61 FR 9048, Mar. 6, 1996]

Appendix I--Annual Contributions Contract ``Special Provisions for 
Turnkey III Homeownership Opportunity Project''
Appendix II--Homebuyers Ownership Opportunity Agreement (Turnkey III)
Appendix III--Certificate of Achievement of Homebuyer Status
Appendix IV--Promissory Note for Payment Upon Resale by Homebuyer at 
Profit


No modification may be made in format, content or text of these 
Appendices except (1) as required under state or local law as determined 
by HUD or (2) with approval of HUD.

                Appendix I--Annual Contributions Contract

                               (Subpart B)

    (  ) Special Provisions for Turnkey III Homeownership Opportunity 
Project No. __________.
    (1) The Local Authority agrees to operate the Project in accordance 
with requirements for the Homeownership Opportunity Program for Low-
Income Families (Turnkey III) as prescribed by the Government. The Local 
Authority shall enter into an agreement with the occupant of each 
dwelling unit in the Project which agreement shall be in the form of the 
Homebuyers Ownership Opportunity Agreement approved by the Government, 
which form provides an opportunity for the acquisition of ownership of 
the dwelling unit by each occupant who has performed all of the 
obligations and conditions precedent imposed upon him by such agreement. 
Upon conveyance of any such dwelling unit, the Local Authority's 
outstanding obligations in respect to the Project shall be reduced by 
the amount received for such conveyance, and the Government's obligation 
for payment of annual contributions in respect to the Project shall be 
reduced by the amount allocable to the initial purchase price of the 
dwelling unit. The term ``initial purchase price'' as used in these 
Special Provisions shall have the same meaning as in the Homebuyers 
Ownership Opportunity

[[Page 315]]

Agreement, and the term ``dwelling unit'' shall have the same meaning as 
the term ``Home'' used in the Homebuyers Ownership Opportunity 
Agreement.
    (2) Failure of the Local Authority to enter into such Homebuyers 
Ownership Opportunity Agreements at the time and in the form as required 
by the Government, failure to perform any such agreement, and failure to 
meet any of its obligations under these Special Provisions shall 
constitute a Substantial Default under this Contract.
    (3) The books of account and records of the Local Authority shall be 
maintained to meet the requirements of the Homebuyers Ownership 
Opportunity Agreement as well as the other provisions of this Contract 
and in such manner as will at all times show the operating receipts, 
operating expenditures, reserves, residual receipts, and other required 
accounts for the Project separate and distinct from all other Projects 
under this Contract.
    (4) As of the Date of Full Availability, or at such earlier date as 
the Government may require, the Local Authority shall determine and 
submit to the Government for its approval the amount below which the 
Development Cost of the Project will in no event fall. Upon approval 
thereof by the Government, such amount shall constitute and be known as 
the ``Minimum Development Cost'' of the Project. The Local Authority 
shall issue its Project Loan Notes, Permanent Notes or Project Notes as 
the Government may require to finance the Minimum Development Cost. On 
each Annual Contribution Date the Government shall pay an annual 
contribution for the Project in an amount equal to the Maximum 
Contribution Percentage of the latest approved Minimum Development Cost. 
The first annual contribution shall be paid or made available as of the 
next Annual Contribution Date following the approval of the Minimum 
Development Cost of the Project.
    (5) Notwithstanding section 403(A)(4), the term ``Development Cost'' 
shall include interest on that portion of borrowed monies allocable to 
the Project for the period ending with the Date of Full Availability or 
such earlier date as may be specifically approved by the Government.
    (6) (a) During the __\1\ year Maximum Contribution Period 
established for the Project, the Local Authority shall, within 60 days 
after the end of each Fiscal Year, pay to the Government all Residual 
Receipts of the Project for such Fiscal Year for application to the 
reduction of Annual Contributions payable by the Government with respect 
to the Project.
---------------------------------------------------------------------------

    \1\ 25 or 30, as applicable.
---------------------------------------------------------------------------

    (b) During the period of years immediately following and equal to 
the Maximum Contribution Period established for the Project, the Local 
Authority shall, within 60 days after the end of each Fiscal Year, pay 
to the Government all Residual Receipts of the Project for such Fiscal 
Year.
    (c) Following the end of the Fiscal Year in which the last dwelling 
unit has been conveyed by the Local Authority, the balance of the 
operating reserve held by the Local Authority shall be paid to the 
Government, provided that the aggregate amount of payments under (b) and 
(c) of this paragraph shall not exceed the aggregate amount of annual 
contributions paid by the Government with respect to the Project.
    (7) No part of the Funds on deposit in the Debt Service Fund or the 
Advance Amortization Fund with respect to any other Project under this 
Contract or the funds available for deposit in such Funds for such other 
Projects, shall be applied to the retirement of Notes issued for this 
Project, nor shall any such funds on deposit for this Project be used 
with respect to any other Project or Projects under this Contract.
    (8) To the extent that the provisions of this section conflict with 
other provisions of this Contract, the provisions of this section shall 
be controlling with respect to the Project.

  Appendix II--Homebuyers Ownership Opportunity Agreement (Turnkey III)

                               (Subpart B)

                                 part i

    This Agreement, made and entered into ______, 19__, by and between 
__________ (herein called the ``Authority''), and __________ (herein 
called the ``Homebuyer'');

                               witnesseth:

    In consideration of the agreements and covenants contained in this 
Agreement and in Homebuyers Ownership Opportunity Agreement Part II, 
which is hereby incorporated into this Agreement by reference, the 
Authority leases to the Homebuyer the following described land and 
improvements thereon together with an undivided interest in all common 
areas and property (herein called the ``Home'') located in the ________ 
Development (Project No. ____), which Home is identified and located as 
follows: [Insert address and legal description of location of Home, 
including rights with respect to common areas and property, and making 
reference to Book and Page No. in Recorder of Deeds Recorded].
    A. Term of Agreement. The term of this Agreement shall commence on 
______, 19__, and shall expire at midnight on the last day of this same 
calendar month. Said term shall be extended automatically for successive 
periods of one calendar month for a total term

[[Page 316]]

of ____ \1\ years from the first day of the next calendar month unless 
the Homebuyer acquires title to the home pursuant to section 16 or 17 of 
Part II, as applicable, or unless this Agreement is terminated pursuant 
to section 24 of Part II.
---------------------------------------------------------------------------

    \1\ Fill in term of years equal to term of Purchase Price Schedule 
(and Additional Purchase Price Schedule, if applicable) (see Section 16 
or 17 of Part II as applicable).
---------------------------------------------------------------------------

    B. Monthly Payment. 1. Until changed in accordance with this 
Agreement, the Homebuyer's Monthly Payment shall be $____ per month, due 
and payable on or before the first day of each month. If liability for 
the Monthly Payment shall start on a day other than the first day of a 
calendar month, or if for any reason the effective date of termination 
occurs on other than the last day of the month, the Monthly Payment for 
such month shall be proportionate to the period of occupancy during that 
month.
    2. The amount of the Monthly Payment may be increased or decreased 
only by reason of changes in the Rent Schedule (see section 7c of Part 
II) or changes in the Homebuyer's family income or other circumstances 
(see section 7b of Part II). Any change in Monthly Payment shall become 
effective by written notice from the Authority to the Homebuyer as of 
the date specified in such notice, and such notice shall be deemed to 
constitute an Amendment to this Agreement.
    C. Option to Purchase. In consideration of the covenants contained 
herein, the Authority grants the Homebuyer an option to purchase the 
Home for the applicable purchase price, to be exercised in accordance 
with section 10d of Part II.
    D. Purchase Price. The Initial Purchase Price of this Home is 
$______ (this price has been determined in accordance with section 16 or 
17 of Part II as applicable); this amount shall be reduced periodically 
in accordance with the schedule (hereinafter called Purchase Price 
Schedule) for that amount, which Schedule is hereby furnished the 
Homebuyer.
    E. Amount of NRMR. The balance (or deficit) in the NRMR on the date 
of this Agreement is $______.
    F. Homebuyers Association. Upon the signing of this Agreement, the 
Homebuyer's family automatically becomes a member of the Homebuyers 
Association, as provided in section 5 of Part II.
G. Designation of Successor. For the purpose of section 25 of Part II, 
the designee and his address are:_______________________________________
fxsp0;__________________________________________________________________
  First Name      Initial      Last Name
fxsp0;__________________________________________________________________
          Relationship
    H. Entire Agreement. THIS AGREEMENT (COMPRISING PARTS I AND II, THE 
PURCHASE PRICE SCHEDULE, THE NONROUTINE MAINTENANCE SCHEDULE, AND THE 
PROMISSORY NOTE) IS THE ENTIRE AGREEMENT BETWEEN THE AUTHORITY AND THE 
HOMEBUYER, AND, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, NO 
CHANGES SHALL BE MADE OTHER THAN IN WRITING SIGNED BY THE AUTHORITY AND 
THE HOMEBUYER.
    THIS AGREEMENT is signed in duplicate, original for all purposes. 
The Homebuyer hereby acknowledges receipt of one of these signed copies.

WITNESSES:
_______________________________________________________________________
_______________________________________________________________________
The Authority:
By______________________________________________________________________

                            (Official Title)

The Homebuyer(s):
Initial
Subsequent
_______________________________________________________________________
_______________________________________________________________________

                                 part ii

                          terms and conditions

    1. Introduction-- a. The Home. The Home described in Part I of this 
Agreement is part of a Development, which the Authority has acquired or 
caused to be constructed. This Development contains a number of dwelling 
units including related land, and may also include common areas and 
property as described in Part I for occupancy by low-income families 
under lease-purchase agreements, each in the form of this Homebuyers 
Ownership Opportunity Agreement. This Development is financed by sale of 
the Authority's notes which will be amortized over the period of years 
specified in the Annual Contributions Contract relating to this 
Development.
    b. Annual Contributions Contract. The Authority has entered into an 
Annual Contributions Contract (``ACC'') with the Department of Housing 
and Urban Development (``HUD'') under which the Authority will receive 
Annual Contributions provided by HUD, and will perform certain 
operational functions, to provide housing for the Homebuyers and assist 
the Homebuyers in achieving homeownership.
    c. Management. The Authority may enter into a contract or contracts 
for management of the Development or for performance of management 
functions, by the Homebuyers Association (see section 5) or others.
    d. Definitions.
    (1) The term ``Authority'' means the local housing authority which 
acquires or develops a low-rent housing development with financial 
assistance from HUD, owns the Homes until title is transferred to the

[[Page 317]]

Homebuyers, and is responsible for the management of the homeownership 
opportunity program.
    (2) The term ``common property'' means the nondwelling structures 
and equipment, common areas, community facilities, and in some cases 
certain component parts of dwelling structures, which are contained in 
the Development: Provided, however, That in the case of a Development 
that is organized as a condominium or a planned unit development (PUD), 
the term ``common property'' shall have the meaning established by the 
condominium or PUD documents and the State law pursuant to which the 
condominium or PUD is organized, under the terms, ``common areas,'' 
``common facilities,'' ``common elements,'' ``common estate,'' or other 
similar terms.
    (3) The term ``Development'' means the entire undertaking including 
all real and personal property, funds and reserves, rights, interests 
and obligations, and activities related thereto.
    (4) The term ``EHPA'' means the Earned Home Payments Account 
established and maintained pursuant to section 10 of the Agreement.
    (5) The term ``Homebuyer'' means the member or members of a low-
income family who have executed a Homebuyers Ownership Opportunity 
Agreement with the Authority.
    (6) The term ``Homebuyers Association'' (HBA) means an organization 
as defined in section 5 of this Agreement.
    (7) The term ``Homeowner'' means a Homebuyer who has acquired title 
to his Home.
    (8) The term ``Homeowners Association'' means an association 
comprised of Homeowners, including condominium associations, having 
responsibilities with respect to common property.
    (9) The term ``HUD'' means the Department of Housing and Urban 
Development which provides the Authority with financial assistance 
through loans and annual contributions and technical assistance in 
development and operation.
    (10) The term ``NRMR'' means the Nonroutine Maintenance Reserve 
established and maintained pursuant to section 11 of this Agreement.
    (11) The term ``Project'' is used to refer to the Development in 
relation to matters specifically related to the Annual Contributions 
Contract.
    2. The Homebuyers Ownership Opportunity Agreement. Under this 
Homebuyers Ownership Opportunity Agreement, the Homebuyer may achieve 
ownership of the home described in Part I by making the required monthly 
payments and providing maintenance and repairs to build up a credit in 
his Earned Home Payments Account (hereinafter called ``EHPA''). While 
the Homebuyer is performing his obligations, the purchase price will be 
reduced in accordance with the Purchase Price Schedule, so that, while 
this purchase price is being reduced, the Homebuyer is increasing the 
amount of his EHPA. The Homebuyer may also make voluntary payments to 
his EHPA which will enable him to acquire ownership more quickly. The 
Homebuyer may take title to his Home when he is able to finance or pay 
in full the balance of the purchase price as shown on the Purchase Price 
Schedule plus the costs incidental to acquiring ownership, as provided 
in section 16 or 17, as applicable.
    3. Status of Homebuyer. Until the Homebuyer satisfies the conditions 
set forth in section 10d precedent to the exercise of his option to 
purchase the Home for the applicable purchase price, the Homebuyer shall 
have the status of a lessee of the Authority from month to month with an 
obligation to build up such balance in his EHPA within the first two 
years of his occupancy and to continue adding to his EHPA thereafter. 
For convenience the term ``Homebuyer'' also refers to the occupant 
during his status as a lessee.
    4. Counseling of Homebuyers. The Authority shall provide training 
and counseling, as required and approved by HUD. The Authority's own 
staff and resources, existing community resources, a private agency 
under contract with the Authority, or any combination of the three, 
shall be utilized to prepare Homebuyers for the rights, 
responsibilities, and obligations of homeownership including 
participation in the Homebuyers Association. The Homebuyer agrees to 
participate in and cooperate fully in all official training and 
counseling activities.
    5. Homebuyers Association.\2\ Upon the signing of this Agreement, 
the Homebuyer's family automatically becomes a member of the Homebuyers 
Association having membership and purposes as set forth in the Articles 
of Incorporation of said Association. In the absence of a duly organized 
Homebuyers Association, the Authority shall be free to act without the 
HBA action required by this Agreement.
---------------------------------------------------------------------------

    \2\ There may be cases, such as where the homes are on scattered 
sites, where there is no Homebuyers Association but an alternative 
method for homebuyer representation and counseling is provided (see 24 
CFR 904.307). In such cases, section 5 and other portions of this 
Agreement referring to the Homebuyers Association should be modified to 
reflect the alternative method provided for homebuyer representation and 
counseling.
---------------------------------------------------------------------------

    6. Routine maintenance, repair and use of premises. a. Routine 
maintenance. The Homebuyer shall be responsible for the routine 
maintenance of his dwelling and grounds, to

[[Page 318]]

the satisfaction of the Homebuyers Association and the Authority. This 
routine maintenance includes the work (labor and materials) of keeping 
the dwelling structure, grounds and equipment in good repair, condition 
and appearance so that they may be utilized continually at their 
designed capacities and at the satisfactory level of efficiency for 
their intended purposes, and in conformity with the requirements of 
local housing codes and applicable regulations and guidelines of HUD. It 
includes repairs (labor and materials) to the dwelling structure, 
plumbing fixtures, dwelling equipment (such as range and refrigerator), 
shades and screens, water heaters, heating equipment and other component 
parts of the dwelling. It also includes all interior painting and 
maintenance of the grounds (lot) on which the dwelling is located. It 
does not include maintenance and replacements provided for by the 
Nonroutine Maintenance Reserve described in Section 11.
    b. Repair of damage. In addition to his obligation for routine 
maintenance, the Homebuyer shall be responsible for repair of any damage 
caused by the Homebuyer, members of his family, or visitors.
    c. Care of Home. The Homebuyer agrees to keep his dwelling in a 
sanitary condition; to cooperate with the Authority and the Homebuyers 
Association in keeping and maintaining the common area and property, 
including fixtures and equipment, in good condition and appearance; and 
to follow all rules of the Authority and of the Homebuyers Association 
concerning the use and care of the dwellings and the common areas and 
property.
    d. Inspections. The Homebuyer agrees to permit officials, employees, 
or agents of the Authority, and of the Homebuyers Association to inspect 
his Home at reasonable hours and intervals in accordance with rules 
established by the Authority and the Homebuyers Association.
    e. Use of Home. The Homebuyer shall not (1) sublet his Home without 
the prior written approval of the Authority and HUD, (2) use or occupy 
his home for any unlawful purpose nor for any purpose deemed hazardous 
by insurance companies on account of fire and other risks, or (3) 
provide accommodations (unless approved by the Homebuyers Association 
and the Authority) to boarders or lodgers. The Homebuyer agrees to use 
the Home only as a place to live for himself and his family (as 
identified in his initial application or by subsequent amendment with 
the approval of the Authority), for children thereafter born to or 
adopted by members of such family, and for aged or widowed parents of 
the Homebuyer or spouse who may join the household.
    f. Obligations with respect to other persons and property. Neither 
the Homebuyer nor any member of his family shall interfere with rights 
of other occupants of the Development, or damage the common property or 
the property of others, or create physical hazards.
    g. Structural changes. A Homebuyer shall not make any structural 
changes in or additions to his Home unless the Authority has first 
determined in writing that such change would not (1) impair the value of 
the unit, the surrounding units, or the Development as a whole, or (2) 
affect the use of the Home for residential purposes, or (3) violate HUD 
requirements as to construction and design. Any changes made in 
accordance with this paragraph shall be at the Homebuyer's expense, and 
in the event of termination of this Agreement before the Homebuyer 
acquires title to the Home, whether by reason of the Homebuyer's default 
or otherwise, the Homebuyer shall not be entitled to any compensation on 
account of his having made such changes.
    h. Statement of condition and repair. When the Homebuyer moves in, 
the Authority shall inspect the Home and shall give the Homebuyer a 
written statement, to be signed by the Authority and the Homebuyer, of 
the condition of the Home and the equipment in it. Should the Homebuyer 
vacate, the Authority shall inspect the Home and give the Homebuyer a 
written statement of the repairs and other work, if any, required to put 
the Home in good condition for the next occupant (see section 10k). The 
Homebuyer or his representative, or both, may join in any such 
inspections with the Authority and the Homebuyer Association.
    7. Monthly payments by Homebuyer-- a. Determination of amount. 
Except as otherwise provided hereinafter, the Homebuyer agrees to pay to 
the Authority, so long as this Agreement is in effect, a required 
Monthly Payment as lease rental in an amount determined in accordance 
with a schedule adopted by the Authority and approved by HUD. Although 
the total monthly housing cost consists of the sum of the break-even 
amount (see section 8) and the debt service (payment of principal and 
interest) on the applicable share of the capital cost of the 
Development, the Homebuyer, so long as he qualifies as low income, is 
not required to pay the full amount, but is assisted by HUD annual 
contributions. The schedule shall provide for payments to be based upon 
a percentage of the family's adjusted monthly income and shall indicate 
allowances for those utilities which the Homebuyer will pay for 
directly.
    b. Changes in monthly payment due to changes in family income or 
other circumstances. The required Monthly Payment may be adjusted as a 
result of the Authority's regularly or specially scheduled reexamination 
of the Homebuyer's family income and family composition. Interim changes 
may be made in accordance with the Authority's policy on reexaminations, 
or under unusual circumstances, at the request

[[Page 319]]

of the Homebuyer, if both the Authority and the Homebuyers Association 
agree that such action is warranted.
    c. Changes in monthly payment due to changes in rent schedules. The 
required Monthly Payment may also be adjusted by changes in the required 
percentage of income to reflect (1) changes in operating expense as 
described in section 9b and (2) changes in utility allowances.
    d. Acceptance of monthly payment. The Authority shall not refuse to 
accept monthly payments because of any other charges (i.e., other than 
overdue monthly payments) owed by the Homebuyer to the Authority; 
however, by accepting monthly payments under such circumstances the 
Authority shall not be deemed to have waived any of its rights and 
remedies with respect to such other charges.
    e. Application of monthly payment. The Homebuyer's Monthly Payment 
shall be applied by the Authority as follows: First, to the credit of 
the Homebuyer's EHPA pursuant to section 10 below; second, to the credit 
of the Nonroutine Maintenance Reserve for the Home pursuant to Section 
11 below; and third, for payment of Monthly Operating Expense, including 
contribution to Operating Reserve, as provided in section 9 below.
    8. Break-even amount-- a. Definition. The term ``Break-even Amount'' 
means the minimum monthly amount needed to provide funds for:
    (1) Monthly Operating Expense, including provision for a 
contribution to Operating Reserve, pursuant to section 9a below;
    (2) The monthly amount to be credited to the Homebuyer's EHPA 
pursuant to Section 10 below; and
    (3) The monthly amount to be credited to the Nonroutine Maintenance 
Reserve for the Home pursuant to section 11 below.
    b. Monthly payment in excess of break-even amount. When the 
Homebuyer's required Monthly Payment exceeds the applicable Break-even 
Amount, the excess shall constitute additional Project income and shall 
be deposited and used in the same manner as other Project income.
    c. Monthly payment below break-even amount. When the Homebuyer's 
required Monthly Payment is less than the applicable Break-even Amount, 
the deficit shall be applied as a reduction of that portion of the 
Monthly Payment designated for Operating Expense (i.e., as a reduction 
of project income). In all such cases, the EHPA and the NRMR shall be 
credited with the amount included in the Break-even Amount for these 
accounts.
    9. Monthly operating expense-- a. Definition and categories of 
monthly operating expense. The term ``monthly operating expense'' means 
the monthly amount needed for the following purposes:
    (1) Administration. Administrative salaries, travel, legal expenses, 
office supplies, postage, telephone and telegraph, etc.;
    (2) Homebuyer services.-- Authority expenses in the achievement of 
social goals, including costs such as salaries, publications, payments 
to the HBA to assist its operation, contract and other costs;
    (3) Utilities. Those utilities (such as water), if any to be 
furnished by the Authority as part of operating expense;
    (4) Routine maintenance--Common property. For community building, 
grounds, and other common areas, if any. The amount required for routine 
maintenance of common property depends upon the type of common property 
included in the Development and the extent of the Authority's 
responsibility for maintenance (see also section 9c);
    (5) Protective services. The cost of supplemental protective 
services paid by the Authority for the protection of persons and 
property;
    (6) General expense. Premiums for fire and other insurance, payments 
in lieu of taxes to the local taxing body, collection losses, payroll 
taxes, etc.;
    (7) Nonroutine maintenance--Common property (contribution to 
operating reserve). Extraordinary maintenance of equipment applicable to 
the community building and grounds, and unanticipated items for non-
dwelling structures (see section 12).
    b. Monthly operating expense rate. The monthly operating expense 
rate for each fiscal year shall be established on the basis of the 
Authority's HUD-approved operating budget for that fiscal year. The 
operating budget may be revised during the course of the fiscal year in 
accordance with HUD requirements. If it is subsequently determined that 
the actual operating expense for a fiscal year was more or less than the 
amount provided by the monthly operating expense established for that 
fiscal year, the rate of monthly operating expense to be established for 
the next fiscal year may be adjusted to account for the difference (see 
section 12). Such adjustment may result in a change in the required 
monthly payment (see section 7c).
    c. Provision for common property maintenance. During the period the 
Authority is responsible for the maintenance of common property, the 
annual operating budget and the monthly operating expense rate shall 
include the amount required for routine maintenance of all common 
property in the Development, even though a number of the homes may have 
been acquired by homebuyers. During such period, this amount shall be 
computed on the basis of the total number of homes in the Development 
(i.e., the annual amount budgeted for routine maintenance of common 
property shall be divided by the number of Homes in the Development, 
resulting in the annual amount

[[Page 320]]

for each Home; this figure shall in turn be divided by 12 to determine 
the monthly amount to be included in the monthly operating expense (and 
in the break-even amount) for routine maintenance of common property). 
After the Homeowners Association assumes responsibility for maintenance 
of common property, the monthly operating expense (and break-even 
amount) shall include an amount equal to the monthly assessment by the 
homeowners association for the remaining homes owned by the Authority 
(see section 11 for nonroutine maintenance of common property).
    d. Posting of monthly operating expense statement. A statement 
showing the budgeted monthly amount allocated in the current operating 
budget to each operating expense category shall be provided to the HBA 
and a copy shall be provided to the Homebuyer upon request.
    10. Earned Home Payments Account (EHPA)-- a. Credits to the account. 
The Authority shall establish and maintain a separate EHPA for each 
Homebuyer. Since the Homebuyer is responsible for maintaining his Home 
as provided in section 6, a portion of his required Monthly Payment 
equal to the Authority's estimate, approved by HUD, of the monthly cost 
for such routine maintenance, taking into consideration the relative 
type and size of the Home, shall be set aside in his EHPA. In addition, 
this account shall also be credited with (1) any voluntary payments made 
pursuant to section 10g and (2) any amount earned through the 
performance of maintenance pursuant to paragraph e of this section. All 
amounts received by the Authority for credit to the Homebuyer's account, 
including credits for performance of maintenance pursuant to paragraph e 
of this section, shall be held by the Authority for the account of the 
Homebuyer.
    b. Use of EHPA funds. The unused balance in the Homebuyer's EHPA may 
be used toward purchase of the Home as provided in section 16 or 17 as 
applicable, or shall be payable to the Homebuyer if he leaves the 
Project as provided in paragraph k of this section.
    c. Charges to the account. (1) If for any reason the Homebuyer is 
unable or fails to perform any item of required maintenance as described 
in section 6, the Authority shall arrange to have the work done in 
accordance with the procedures established by the Authority and the HBA 
and the cost thereof shall be charged to the Homebuyer's EHPA. 
Inspections of the Home shall be made jointly by the Authority and the 
HBA.
    (2) To the extent nonroutine maintenance expense is made necessary 
by the negligence of the Homebuyer as determined by the HBA and the 
Authority (see section 11), the cost thereof shall be charged to the 
EHPA.
    d. Exercise of option; required amount in EHPA. The Homebuyer may 
exercise his option to buy the Home, by paying the applicable purchase 
price pursuant to section 16 or 17, only after satisfying the following 
conditions precedent:
    (1) Within the first two years of his occupancy, he has achieved a 
balance in his EHPA equal to 20 times the amount of the monthly EHPA 
credit as initially determined in accordance with paragraph a of this 
section;
    (2) He has met, and is continuing to meet, the requirements of this 
Agreement;
    (3) He has rendered, and is continuing to render, satisfactory 
performance of his responsibilities to the HBA.
    When the Homebuyer has met these conditions precedent, the Authority 
shall give the Homebuyer a certificate to that effect. After achieving 
the required minimum EHPA balance within the first two years of his 
occupancy, the Homebuyer shall continue to be obligated to provide the 
required maintenance, thereby continuing to add to his EHPA. If the 
Homebuyer fails to meet either his obligation to achieve the minimum 
EHPA balance as specified or his obligation thereafter to continue 
adding to the EHPA, the Authority and the HBA shall investigate and take 
appropriate corrective action, including termination of this Agreement 
by the Authority in accordance with section 24.
    e. Additional equity through other maintenance. Besides the 
maintenance which the Homebuyer must provide pursuant to section 6, the 
Homebuyer may earn additional EHPA credits by providing in whole or in 
part any of the maintenance necessary to the common property of the 
Development or maintenance for which the Nonroutine Maintenance Reserve 
is established (see section 11). Such maintenance may be provided by the 
Homebuyer and credit earned therefor only pursuant to a prior written 
agreement between the Homebuyer and the Authority (or the Homeowners 
Association, depending on who has responsibility for maintenance of the 
property involved), covering the nature and scope of the work and the 
amount of credit the Homebuyer is to receive. Upon completion of such 
work, the agreed amount shall be charged to the appropriate maintenance 
account and credited to the Homebuyer's EHPA.
    f. Investment of excess. When the aggregate amount of all EHPA 
balances exceeds the estimated reserve requirements for 90 days, the 
Authority shall notify the HBA and shall invest the excess in federally-
insured savings accounts, federally insured credit unions, and/or 
securities approved by HUD and in accordance with any recommendations 
made by the HBA. If the HBA wishes to participate in the investment 
program it should submit periodically to the Authority a list of HUD 
approved securities, bonds, or obligations which the HBA reecommends for 
investment by the Authority of the funds in the EHPAs.

[[Page 321]]

Interest earned on the investment of such funds shall be prorated and 
credited to each Homebuyer's EHPA in proportion to the amount in each 
such reserve account.
    Periodically, but not less often than semi-annually, the Authority 
shall prepare a statement showing: (1) the aggregate amount of all EHPA 
balances; (2) the aggregate amount of investments (savings accounts and/
or securities) held for the account of all the Homebuyers' EHPAs, and 
(3) the aggregate uninvested balance of all the Homebuyers' EHPAs. This 
statement shall be made available to any authorized representative of 
the HBA.
    g. Voluntary payments. To enable the Homebuyer to acquire title to 
the Home within a shorter period, he may either periodically or in a 
lump sum voluntarily make payments over and above his required monthly 
payments. Such voluntary payments shall be deposited to his credit in 
his EHPA.
    h. Delinquent monthly payments. Under exceptional circumstances as 
determined by the HBA and the Authority, the Homebuyer's EHPA may be 
used to pay his delinquent required monthly payments, provided the 
amount used for this purpose does not seriously deplete the account and 
provided that the Homebuyer agrees to cooperate in such counseling as 
may be made available by the Authority or the HBA.
    i. Annual statement to homebuyer. The Authority shall provide an 
annual statement to the Homebuyer specifying at least (1) the amount in 
his EHPA, and (2) the amount in his Nonroutine Maintenance Reserve. 
During the year, any maintenance or repair done on the dwelling by the 
Authority which is chargeable to the EHPA or to the Nonroutine 
Maintenance Reserve, shall be accounted for through a work order. The 
Homebuyer shall receive a copy of all such work orders for his Home.
    j. Withdrawal and assignment. The Homebuyer shall have no right to 
assign, withdraw, or in any way dispose of the funds in his EHPA except 
as provided in this section or in sections 16 and 17.
    k. Application of EHPA upon vacating of dwelling. (1) In the event 
this Agreement is terminated or if the Homebuyer vacates the Home, the 
Authority shall charge against the Homebuyer's EHPA the amounts required 
to pay; (i) The amount due the Authority, including the monthly payments 
the Homebuyer is obligated to pay up to the date he vacates; (ii) the 
monthly payment for the period the Home is vacant, not to exceed 30 days 
from the date of notice of intention to vacate, or if the Homebuyer 
failed to give notice of intention to vacate, 30 days from the date the 
Home is put in good condition for the next occupant in conformity with 
section 6; and (iii) the cost of any routine maintenance, and of any 
nonroutine maintenance attributable to the negligence of the Homebuyer, 
required to put the Home in good condition for the next occupant in 
conformity with section 6.
    (2) If the Homebuyer's EHPA balance is not sufficient to cover all 
of these charges, the Authority shall require the Homebuyer to pay the 
additional amount due. If the amount in the EHPA exceeds these charges, 
the excess shall be paid the Homebuyer.
    (3) Settlement with the Homebuyer shall be made promptly after the 
actual cost of repairs to the dwelling has been determined (see 
paragraph k(1)(iii) of this section), provided that the Authority shall 
make every effort to make such settlement within 30 days from the date 
the Homebuyer vacates. The Homebuyer may obtain a settlement within 7 
days of the date he vacates, even though the actual cost of such repairs 
has not yet been determined, if he has given the Authority notice of 
intention to vacate 30 days prior to the date he vacates and if the 
amount to be charged against his EHPA for such repairs is based on the 
Authority's estimate of the cost thereof (determined after consultation 
with the appropriate representative of the HBA).
    11. Nonroutine maintenance reserve (NRMR)-- a. Purpose of reserve. 
The Authority shall establish and maintain a separate nonroutine 
maintenance reserve (NRMR) for the Home, using a portion of the 
Homebuyer's monthly payment. The purpose of the NRMR is to provide funds 
for the nonroutine maintenance of the Home, which consists of the 
infrequent and costly items of maintenance and replacement shown on the 
Nonroutine Maintenance Schedule for the Home (see paragraph b of this 
section). Such maintenance may include the replacement of dwelling 
equipment (such as range and refrigerator), replacement of roof, 
exterior painting, major repairs to heating and plumbing systems, etc. 
The NRMR shall not be used for nonroutine maintenance of common 
property, or for nonroutine maintenance relating to the Home to the 
extent such maintenance is attributable to the Homebuyer's negligence or 
to defective materials or workmanship.
    b. Amount of reserve. The amount of the monthly payments to be set 
aside for NRMR shall be determined by the Authority, with the approval 
of HUD, on the basis of the Nonroutine Maintenance Schedule showing the 
amount estimated to be needed for nonroutine maintenance of the Home 
during the term of this Agreement, taking into consideration the type of 
construction and dwelling equipment. This Schedule shall (1) list each 
item of nonroutine maintenance (e.g., range, refrigerator, plumbing, 
heating system, roofing, tile flooring, exterior painting, etc.), (2) 
show for each listed item the estimated frequency of maintenance or 
useful life before replacement, the estimated cost

[[Page 322]]

of maintenance or replacement (including installation) for each 
occasion, and the annual reserve requirement, and (3) show the total 
reserve requirements for all the listed items, on an annual and a 
monthly basis. This Schedule shall be prepared by the Authority and 
approved by HUD as part of the Submission required to determine the 
financial feasibility of the Project. The Schedule shall be revised 
after approval of the working drawings and specifications, and shall 
thereafter be reexamined annually in the light of changing economic 
conditions and experience.
    c. Charges to reserve. (1) The Authority shall provide the 
nonroutine maintenance necessary for the Home and the cost thereof shall 
be funded as provided in paragraph c(2) and c(3) of this section. Such 
maintenance may be provided by the Homebuyer but only pursuant to a 
prior written agreement with the Authority covering the nature and scope 
of the work and the amount of credit the Homebuyer is to receive. The 
amount of any credit shall, upon completion of the work, be credited to 
the Homebuyer's EHPA and charged as provided in paragraph c(2) of this 
section.
    (2) The cost of nonroutine maintenance shall be charged to the NRMR 
for the Home except that (i) to the extent such maintenance is 
attributable to the fault or negligence of the Homebuyer, the cost shall 
be charged to the Homebuyer's EHPA after consultation with the HBA if 
the Homebuyer disagrees, and (ii) to the extent such maintenance is 
attributable to defective materials or workmanship not covered by 
warranty, or even though covered by warranty if not paid for through no 
fault or negligence of the Homebuyer, the cost shall be charged to the 
appropriate operating expense account of the Project.
    (3) In the event the amount charged against the NRMR exceeds the 
balance therein, the difference (deficit) shall be made up from 
continuing monthly credits to the NRMR based upon the Homebuyer's 
monthly payments. If there is still a deficit when the Homebuyer 
acquires title, the Homebuyer shall pay such deficit at settlement.
    d. Transfer of NRMR. (1) In the event this Agreement is terminated, 
the Homebuyer shall not receive any balance or be required to pay any 
deficit in the NRMR. When a subsequent Homebuyer moves in, the NRMR 
shall continue to be applicable to the Home in the same amount as if the 
preceding Homebuyer had continued in occupancy.
    (2) In the event the Homebuyer purchases the Home, and there remains 
a balance in the NRMR, the Authority shall pay such balance to the 
Homebuyer at settlement. In the event the Homebuyer purchases the Home 
and there is a deficit in the NRMR, the Homebuyer shall pay such deficit 
to the Authority at settlement.
    e. Investment of excess. (1) When the aggregate amount of the NRMR 
balances for all the Homes exceeds the estimated reserve requirements 
for 90 days, the Authority shall invest the excess in federally insured 
savings accounts, federally insured credit unions, and/or securities 
approved by HUD. Income earned on the investment of such funds shall be 
prorated and credited to each Homebuyer's NRMR in proportion to the 
amount in each reserve account.
    (2) Periodically, but not less often that semi-annually, the 
Authority shall prepare a statement showing (i) the aggregate amount of 
all NRMR balances, (ii) the aggregate amount of investments (savings 
accounts and/or securities) held for the account of the NRMR and (iii) 
the aggregate uninvested balance of the NRMRs. A copy of this statement 
shall be made available to any authorized representative of the HBA.
    12. Operating reserve-- a. Purpose of reserve. To the extent that 
total operating receipts (including subsidies for operations) exceeds 
total operating expenditures of the Project, the LHA shall establish an 
operating reserve up to the maximum approved by HUD in connection with 
its approval of the annual operating budgets for the Project. The 
purpose of this reserve is to provide funds for (1) the infrequent but 
costly items of nonroutine maintenance and replacements of common 
property, taking into consideration the types of items which constitute 
common property, such as nondwelling structures and equipment, and, in 
certain cases, common elements of dwelling structures, (2) nonroutine 
maintenance for the Homes to the extent such maintenance is attributable 
to defective materials or workmanship not covered by warranty, (3) 
working capital for payment of a deficit in a Homebuyer's NRMR, until 
such deficit is offset by future monthly payments by the Homebuyer or at 
settlement in the event the Homebuyer should purchase, and (4) a deficit 
in the operation of the Project for a fiscal year, including a deficit 
resulting from monthly payments totaling less than the break-even amount 
for the Project.
    b. Nonroutine maintenance--__________ common property (contribution 
to operating reserve). The amount under this heading to be included in 
operating expense (and in the break-even amount) established for the 
fiscal year (see sections 8 and 9) shall be determined by the Authority, 
with the approval of HUD, on the basis of estimates of the monthly 
amount needed to accumulate an adequate reserve for the items described 
in paragraph a(1) of this section. This amount shall be subject to 
revision in the light of experience. This contribution to the Operating 
Reserve shall be made only during the period the Authority is 
responsible for the maintenance of any common property; and during such 
period, the amount shall be determined on the

[[Page 323]]

basis of the requirements of all common property in the Development in a 
manner similar to that explained in Section 9. When the Operating 
Reserve reaches the maximum authorized in paragraph c of this Section, 
the break-even (monthly operating expense) computations (see Sections 8 
and 9) for the next and succeeding fiscal years need not include a 
provision for this contribution to the Operating Reserve unless the 
balance of the Reserve is reduced below the maximum during any such 
succeeding fiscal year.
    c. Maximum operating reserve. The maximum operating reserve that may 
be retained by the Authority at the end of any fiscal year shall be the 
sum of (1) one-half of total routine expense included in the operating 
budget approved for the next fiscal year and (2) one-third of total 
break-even amounts included in the operating budget approved for the 
next fiscal year; provided that such maximum may be increased if 
necessary as determined or approved by HUD. Total routine expense means 
the sum of the amounts budgeted for administration, homebuyer services. 
Authority-supplied utilities, routine maintenance of common property, 
protective services, and general expense or other category of day-to-day 
routine expense (see section 9 above for explanation of various 
categories of expense).
    d. Transfer to Homeowners Association. The Authority shall be 
responsible for and shall retain custody of the Operating Reserve until 
the Homeowners acquire voting control of the Homeowners Association (see 
sections 21c and 22f). When the Homeowners acquire voting control, the 
Homeowners Association shall then assume full responsibility for 
management and maintenance of common property under a plan approved by 
HUD, and there shall be transferred to the Homeowners Association a 
portion of the Operating Reserve then held by the Authority, as 
determined by the Authority with the approval of HUD.
    e. Disposition of reserve. If, at the end of a fiscal year, there is 
an excess over the maximum Operating Reserve, this excess shall be 
applied to the operating deficit of the Project, if any, and any 
remainder shall be paid to HUD. Following the end of the fiscal year in 
which the last Home has been conveyed by the Authority, the balance of 
the Operating Reserve held by the Authority shall be paid to HUD, 
provided that the aggregate amount of payments by the Authority under 
this paragraph shall not exceed the aggregate amount of annual 
contributions paid by HUD with respect to the Project.
    13. Annual statement and copies of work orders to homebuyer. a. The 
Authority shall maintain books of accounts and provide a statement at 
least annually to each Homebuyer which will show (i) the amount in his 
EHPA, and (2) the amount in the NRMR for his Home.
    b. During the year, any maintenance or repair done on the dwelling 
by the Authority, which is chargeable to the EHPA or to the NRMR shall 
be accounted for through a work order. The Homebuyer shall receive a 
copy of all such work orders for his Home.
    14. Insurance. a. Until transfer of title to the Homebuyer, the 
Authority shall carry all insurance prescribed by HUD including fire and 
extended coverage insurance upon the Home in such form and amount and 
with such company or companies as it determines. The Authority shall not 
carry any insurance on the Homebuyer's furniture, clothing, automobile, 
or any other personal property, or personal liability insurance covering 
the Homebuyer.
    b. In the event the Home is damaged or destroyed by fire or other 
casualty, the Authority shall consult with the Homebuyer as to whether 
the Home shall be repaired or rebuilt. If the Authority determines that 
the Home should not be repaired or rebuilt but the Homebuyer disagrees, 
the matter shall be submitted to HUD for final determination. If the 
final determination is that the Home should not be repaired or rebuilt, 
the Authority shall terminate this Agreement upon reasonable notice to 
the Homebuyer. In such case, the Homebuyer shall be paid the balance in 
his EHPA and (to assist him in connection with relocation expenses) the 
balance in his NRMR, less amounts, if any, due from him to the 
Authority, including Monthly Payments he may be obligated to pay.
    c. In the event of termination or if the Home must be vacated during 
the repair period, the Authority will use its best efforts to assist in 
relocating the Homebuyer. If the Home must be vacated during the repair 
period, Monthly Payments shall be suspended during the vacancy period.
    15. Eligibility for continued occupancy. a. The Homebuyer shall 
cease to be eligible for continued occupancy with the aid of HUD annual 
contributions when the Authority determines the Homebuyer's adjusted 
monthly income has reached, and is likely to continue at, a level at 
which the Homebuyer's total payment equals or exceeds the monthly 
housing cost (see paragraph b of this section). In such an event, if the 
Authority determines, with HUD approval, that suitable financing is 
available, the Authority shall notify the Homebuyer that he or she must 
either: (1) Purchase the Home; or (2) move from the Development. If, 
however, the Authority determines that, because of special 
circumstances, the family is unable to find decent, safe and sanitary 
housing within the family's financial reach although making every 
reasonable effort to do so, the family may be permitted to remain for 
the duration of such a situation if it pays as rent a monthly payment 
consistent with its adjusted monthly income, in accordance with

[[Page 324]]

applicable HUD regulations prescribing rental payments for families in 
housing assisted under the United States Housing Act of 1937. Such a 
monthly payment shall also be payable by the family if it continues in 
occupancy without purchasing the home because suitable financing is not 
available.
    b. The term ``monthly housing cost,'' as used in this section means 
the sum of: (1) The monthly debt service amount shown on the Purchase 
Price Schedule (except where the Homebuyer can purchase the Home by the 
method described in section 16 below); (2) one-twelfth of the annual 
real property taxes which the Homebuyer will be required to pay as a 
Homeowner; (3) one-twelfth of the annual premium attributable to fire 
and extended coverage insurance carried by the Authority with respect to 
the Home; (4) the current monthly per unit amount budgeted for routine 
maintenance (EHPA) and routine maintenance-common property; and (5) the 
current Authority and HUD approved monthly allowance for utilities paid 
for directly by the Homebuyer plus the monthly cost of utilities 
supplied by the Authority.
    16. Achievement of ownership by initial homebuyer-- a. Determination 
of initial purchase price. The Authority shall determine the initial 
purchase prices of the Homes by two basic steps, as follows:
    Step 1. The Authority shall take the Estimated Total Development 
Cost (including the full amount for contingencies as authorized by HUD) 
of the Development as shown in the Development Cost Budget in effect 
upon award of the Main Construction Contract or execution of the 
Contract of Sale, and shall deduct therefrom the amounts, if any, 
attributed to (1) relocation costs, (2) counseling and training costs, 
and (3) the cost of any community, administration or management 
facilities including the land, equipment and furnishings attributable to 
such facilities as set forth in the development program for the 
Development.
    The resulting amount is herein called Estimated Total Development 
Cost for Homebuyers.
    Step 2. The Authority shall apportion the Estimated Total 
Development Cost for Homebuyers among all the Homes in the Development. 
This apportionment shall be made by obtaining an FHA appraisal of each 
Home, and adjusting such appraised values (upward or downward) by the 
percentage difference between the total of the appraisal for all the 
Homes and the Estimated Total Development Cost for Homebuyers. The 
adjusted amount for each Home shall be the Initial Purchase Price for 
that Home.
    b. Purchase Price Schedule. The Homebuyer shall be provided with a 
Purchase Price Schedule showing (1) the monthly declining purchase price 
over a 30-year period,\3\ commencing with the initial purchase price on 
the first day of the month following the effective date of this 
Agreement and (2) the monthly debt service amount upon which the 
Schedule is based. This Schedule and debt service amount shall be 
computed on the basis of the initial purchase price, a 30-year 
period,3  and a rate of interest equal to the minimum loan 
interest rate as specified in the Annual Contributions Contract for the 
Project on the date of HUD approval of the Development Cost Budget, 
described in paragraph a of this section, rounded up, if necessary, to 
the next multiple of one-fourth of one percent (\1/4\ percent).
---------------------------------------------------------------------------

    \3\ Change to 25-year period where appropriate pursuant to 
Sec. 904.101(b)(3) of this subpart.
---------------------------------------------------------------------------

    c. Methods of Purchase. (1) The Homebuyer may achieve ownership when 
the amount in his EHPA, plus such portion of the NRMR as he wishes to 
use for the purchase, is equal to the purchase price as shown at that 
time on his Purchase Price Schedule plus all Incidental Costs 
(``Incidental Costs'' means the costs incidental to acquiring ownership, 
including, but not limited to, the costs for a credit report, field 
survey title examination, title insurance, and inspections, the fees for 
attorneys other than the LHA's attorney, mortgage application and 
organization, closing and recording, and the transfer taxes and loan 
discount payment if any). If for any reason title to the Home is not 
conveyed to the Homebuyer during the month in which such circumstances 
occur, the purchase price shall be fixed at the amount specified for 
such month and the Homebuyer shall be refunded (i) the net additions, if 
any, credited to his EHPA subsequent to such month, and (ii) such part 
of the monthly payments made by the Homebuyer after the purchase price 
has been fixed which exceeds the sum of the break-even amount 
attributable to the Home and the interest portion of the debt service 
shown in the Purchase Price Schedule.
    (2) Where the sum of the purchase price and Incidental Costs is 
greater than the amounts in the Homebuyer's EHPA and NRMR, the Homebuyer 
may achieve ownership by obtaining financing for or otherwise paying the 
excess amount. The purchase price shall be the amount shown on his 
Purchase Price Schedule for the month in which the settlement date for 
the purchase occurs.
    d. The maximum period for achieving ownership shall be 30 years, but 
depending upon increases in the Homebuyer's income and the amount of 
credit which the Homebuyer can accumulate through maintenance and 
voluntary payments, the period may be shortened accordingly.
    17. Achievement of Ownership by Subsequent Homebuyer--a. Definition. 
In the event the

[[Page 325]]

initial Homebuyer and his family vacate the Home before having acquired 
ownership, a subsequent occupant who enters into a Homebuyer's Ownership 
Opportunity Agreement and who is not a successor pursuant to section 25 
is herein called ``Subsequent Homebuyer.''
    b. Determination of Initial Purchase Price. The initial purchase 
price for a subsequent Homebuyer shall be an amount equal to (1) the 
purchase price shown in the initial Homebuyer's Purchase Price Schedule 
as of the date of this Agreement with the subsequent Homebuyer plus (2) 
the amount, if any, by which the appraised fair market value of the Home 
determined or approved by HUD as of the same date, exceeds the purchase 
price specified in (1). In the event such appraised value has not been 
determined by the date of execution of this Agreement, the amount of the 
Initial Purchase Price shall be inserted in part I, section D after this 
determination has been made, with appropriate initialling or signing by 
the parties.
    c. Purchase Price Schedule. The Subsequent Homebuyer's Purchase 
Price Schedule shall be the same as the unexpired portion of the initial 
Homebuyer's Purchase Price Schedule except that where his purchase price 
includes an additional amount as specified in paragraph b(2) of this 
section, the initial Homebuyer's Purchase Price Schedule shall be 
followed by an Additional Purchase Price Schedule for such additional 
amount based upon the same monthly debt service and the same interest 
rate as applied to the initial Homebuyer's Purchase Price Schedule.
    18. Transfer of Title to Homebuyer. When the Homebuyer is to obtain 
ownership, a closing date shall be mutually agreed upon by the parties. 
On the closing date, the Homebuyer shall pay the required amount of 
money to the Authority, sign the promissory note pursuant to section 19, 
and receive a deed for the Home.
    19. Payment Upon Resale at Profit-- a. Promissory Note. (1) When a 
Homebuyer (whether Initial or Subsequent Homebuyer) achieves ownership, 
he shall sign a note obligating him to make a payment to the Authority, 
subject to the provisions of paragraph (a)(2) of this section, in the 
event he resells his Home at a profit within 5 years of actual residence 
in the Home after he becomes a Homeowner. If, however, the Homeowner 
should purchase and occupy another Home within one year (18 months in 
case of a newly constructed home) of the resale of the Turnkey III Home, 
the Authority shall refund to the Homeowner the amount previously paid 
by him under the note, less the amount, if any, by which the resale 
price of the Turnkey III Home exceeds the acquisition price of the new 
home, provided that application for such refund shall be made no later 
than 30 days after the date of acquisition of the new home.
    (2) The note to be signed by the Homebuyer pursuant to paragraph 
(a)(1) of this section shall be secured by a second mortgage. The 
initial amount of the note shall be computed by taking the appraised 
value of the Home at the time the Homebuyer becomes a Homeowner and 
subtracting (i) the Homebuyer's purchase price plus the Incidental Costs 
and (ii) the increase in value of the Home, determined by appraisal, 
caused by improvements paid for by the Homebuyer with funds from sources 
other than the EHPA or NRMR. The note shall provide that this initial 
amount shall be automatically reduced by 20 percent thereof at the end 
of each year of residency as Homeowner, with the note terminating at the 
end of the five-year period of residency, as determined by the 
Authority. To protect the Homeowner, the note shall provide that the 
amount payable under it shall in no event be more than the net profit on 
the resale, that is, the amount by which the resale price exceeds the 
sum of (i) the Homebuyer's purchase price plus the Incidental Costs, 
(ii) the costs of the resale, including commissions and mortgage 
prepayment penalties, if any, and (iii) the increase in value of the 
Home, determined by appraisal, resulting from improvements paid for by 
him as a Homebuyer (with funds other than from the EHPA or NRMR) or as a 
Homeowner.
    (b) Residency requirements. The five-year note periods does not end 
if the Homeowner rents or otherwise does not use the Home as his 
principal place of residence for any period within the first five years 
after he achieves ownership. Only the actual amount of time he is in 
residence is counted and the note shall be in effect until a total of 
five years time of residence has elapsed, at which time the Homeowner 
may request the Authority to release him from the note, and the 
Authority shall do so.
    20. Responsibilities of Homeowner. After acquisition of ownership, 
the Homeowner shall pay to the Authority or to the Homeowners 
Association, as appropriate, a monthly fee for (a) the maintenance and 
operation of community facilities including utility facilities, if any, 
(b) the maintenance of grounds and other common areas, and (c) such 
other purpose as determined by the Authority or the Homeowners 
Association, as appropriate, including taxes and a provision for a 
reserve.
    21. Homeowners Association--Planned Unit Development (PUD) \4\
---------------------------------------------------------------------------

    \4\If this Home is a Development of scattered sites, delete both 
sections 21 and 22. If this Home is in a Planned Unit Development, 
delete section 22. If this Home is in a Condominium, delete section 21.
---------------------------------------------------------------------------

    If the Development is organized as a planned unit development:

[[Page 326]]

    a. The common areas, sidewalks, parking lots and other common 
property in the Development shall be owned and maintained as provided 
for in the approved planned unit development (PUD) program, except that 
the Authority shall be responsible for maintenance until such time as 
the Homeowners Association assumes such responsibility (see section 12 
above).
    b. The title ultimately conveyed to the Homebuyer shall be subject 
to restrictions and encumbrances to protect the rights and property of 
all other Homeowners. The Homeowners Association shall have the right 
and obligation to enforce such restrictions and encumbrances and to 
assess Homeowners for the costs incurred in connection with common areas 
and property and other responsibilities.
    c. There shall be as many votes in the Association as there are 
Homes in the Development, and at the outset all the voting rights will 
be held by the Authority. As each Home is conveyed to a Homebuyer, one 
vote shall automatically go to that Homebuyer so that when all the Homes 
have been conveyed, the Authority shall no longer have any interest in 
the Homeowners Association.
    d. The Authority shall not lose its majority voting interest in the 
Association as soon as a majority of the Homes have been conveyed, 
unless the law of the state requires control to be transferred at a 
particular time or the Authority so desires. If permitted by state law, 
provisions shall be made for each Home owned by the Authority to carry 
three votes while each Home owned by a Homeowner shall carry one vote. 
Under this weighted voting plan, the Authority will continue to have 
voting control until 75 percent of the Homes have been acquired by 
Homeowners. However, at its discretion, the Authority may transfer 
voting control to the Homeowners when at least 50 percent of the Homes 
have been acquired by the Homeowners.
    22. Homeowners Association--Condominium.\5\ If the Development is 
organized as a condominium:
---------------------------------------------------------------------------

    \5\ If this Home is a Development of scattered sites, delete both 
sections 21 and 22. If this Home is in a Planned Unit Development, 
delete section 22. If this Home is in Condominium, delete section 21.
---------------------------------------------------------------------------

    a. The Authority at the outset shall own each condominium unit and 
the undivided interest of such unit in the common areas.
    b. All the land, including that land under the housing units, shall 
be a part of the common areas.
    c. The Homeowners Association shall own no property and shall merely 
maintain and operate the common areas for the individual owners of the 
condominium units, except that the Authority shall be responsible for 
maintenance until such time as the Homeowners Association assumes such 
responsibility (see section 12 above).
    d. The percentage of undivided interest attached to each condominium 
unit shall be based on the ratio of the value of the unit to the value 
of all units and shall be fixed when the Development is completed. This 
percentage shall determine the Homeowner's liability for the maintenance 
of the common areas and facilities.
    e. Each Homeowner vote in the Homeowners Association will be 
identical with the percentage of undivided interest attached to his 
unit.
    f. The Authority shall not lose its majority voting interest in the 
Association as soon as units representing more than 50 percent of the 
value of all units have been conveyed, unless the law of the state 
requires control to be transferred at a particular time or the Authority 
so desires. For voting purposes, until units representing 75 percent of 
the value of all units have been acquired by Homeowners, the total 
undivided interest attributable to the Homes owned by the Authority 
shall be multiplied by three, if such weighted voting plan is permitted 
by state law. Under this plan, the Authority will continue to have 
voting control until units representing 75 percent of the value of all 
units have been acquired by Homeowners. However, at its discretion the 
Authority may transfer voting control to the Homeowners when units 
representing at least 50 percent of the value of all units have been 
acquired by the Homeowners.
    23. Relationship of Homeowners Association to Homebuyers 
Association. The Homebuyers Association and the Authority may make 
arrangements with the Homeowners Association to permit Homebuyers to 
participate in Homeowners Association matters which affect the 
Homebuyers. Such arrangements may include rights to attend meetings and 
to participate in Homeowners Association deliberations and decisions.
    24. Termination of Agreement-- a. Termination by the Authority--(1) 
In the event the Homebuyer should breach this Agreement by failure to 
make a required Monthly Payment within 10 days after its due date, by 
misrepresentation or withholding of information in applying for 
admission or in connection with any subsequent reexamination of income 
and family composition, or by failure to comply with any other Homebuyer 
obligation under this Agreement, the Authority may terminate this 
Agreement 30 days after giving the Homebuyer notice of its intention to 
do so in accordance with paragraph (2) of this section.
    (2) Notice of termination by the Authority shall be in writing. Such 
notice shall state (i) the reason for termination, (ii) that the 
Homebuyer may respond to the Authority, in

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writing or in person, within a specified reasonable period of time 
regarding the reason for termination, (iii) that in such response he may 
be represented or accompanied by a person of his choice, including a 
representative of the HBA, (iv) that the Authority will consult the HBA 
concerning the termination, and (v) that, unless the Authority rescinds 
or modifies the notice, the termination will be effective at the end of 
the 30-day notice period.
    b. Termination by the Homebuyer. The Homebuyer may terminate this 
Agreement by giving the Authority 30 days notice in writing of his 
intention to terminate and to vacate the Home. In the event that the 
Homebuyer vacates the Home without notice to the Authority, this 
Agreement shall be terminated automatically and the Authority may 
dispose of, in any manner deemed suitable by it, any items of personal 
property left by the Homebuyer in the Home.
    c. Transfer to rental unit. (1) Inasmuch as the Homebuyer was found 
eligible for admission to the Project on the basis of having the 
necessary elements, of potential for Homeownership, continuation of 
eligibility requires continuation of this potential, subject only to 
temporary unforeseen changes in circumstances. The standards of 
potential for Homeownership are the following:
    (i) Income sufficient to result in a required monthly payment which 
is not less than the sum of the amounts necessary to pay the EHPA, the 
NRMR, and the estimated average monthly cost of utilities attributable 
to the Home;
    (ii) Ability to meet all the obligations of a Homebuyer under the 
Homebuyers Ownership Opportunity Agreement;
    (iii) At least one member gainfully employed, or having an 
established source of continuing income.
    (2) Accordingly, in the event it should develop that the Homebuyer 
no longer meets one or more of these elements of Homeownership 
potential, the Authority shall investigate the circumstances and provide 
such counseling and assistance as may be feasible in order to help the 
family overcome the deficiency as promptly as possible. After a 
reasonable time, not to exceed 30 days from the date of evaluation of 
the results of the investigation, the Authority shall make a re-
evaluation as to whether the family has regained the potential for 
Homeownership or is likely to do so within a further reasonable time, 
not to exceed 30 days from the date of the re-evaluation. Further 
extension of time may be granted in exceptional cases, but in any event 
a final determination shall be made no later than 90 days from the date 
of evaluation of the results of the initial investigation. The Authority 
shall invite the HBA to participate in all investigations and 
evaluations.
    (3) If the final determination of the Authority, after considering 
the views of the HBA, is that the Homebuyer should be transferred to a 
suitable dwelling unit in an Authority rental project, the Authority 
shall give the Homebuyer written notice of the Authority determination 
of the loss of Homeownership potential and of the offer of transfer to a 
rental unit. The notice shall state that the transfer shall occur as 
soon as a suitable rental unit is available for occupancy but no earlier 
than 30 days from the date of the notice, provided that an eligible 
successor for the Homebuyer unit has been selected by the Authority. The 
notice shall also state that if the Homebuyer should refuse to move 
under such circumstances, the family may be required to vacate the 
Homebuyer unit, without further notice. The notice shall include a 
statement (i) that the Homebuyer may respond to the Authority in writing 
or in person, within a specified reasonable time, regarding the reason 
for the determination and offer of transfer, (ii) that in such response 
he may be represented or accompanied by a person of his choice including 
a representative of the HBA, and (iii) that the Authority has consulted 
the HBA concerning this determination and offer of transfer.
    (4) When a Homebuyers Ownership Opportunity Agreement is terminated 
pursuant to this paragraph 24c, the amount in the Homebuyer's EHPA shall 
be paid in accordance with the provisions of paragraph 10k of this 
Agreement.
    25. Survivorship. (1) In the event of death, mental incapacity or 
abandonment of the family by the Homebuyer, the person designated as the 
successor in part I of this Agreement shall succeed to the rights and 
responsibilities under the Agreement if that person is an occupant of 
the Home at the time of the event and is determined by the Authority to 
meet all of the standards of potential for homeownership as set forth in 
section 24a. This designation may be changed by the Homebuyer at any 
time. If there is no such designation or the designee is no longer an 
occupant of the Home or does not meet the standards of potential for 
homeownership, the Authority may consider as the Homebuyer any family 
member who was in occupancy at the time of the event and who meets the 
standards of potential for homeownership.
    (2) If there is no qualified successor in accordance with the above, 
the Authority shall terminate the Agreement and another family shall be 
selected, except under the following circumstances: where a minor child 
or children of the Homebuyer family are in occupancy, then in order to 
protect their continued occupancy and opportunity for acquisition of 
ownership of the Home, the Authority may approve as occupants of the 
unit, an appropriate adult(s) who has been appointed

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legal guardian of the children with a duty to perform the obligations of 
the Homebuyers Ownership Opportunity Agreement in their interest and 
behalf.
    26. Nonassignability and Use of Reserves and Accounts-- a. 
Nonassignability. The Homebuyer shall not assign this Agreement, or 
assign, mortgage or pledge any right or interest in the Home or in this 
Agreement including any right or interest in any reserve or account, 
except with the prior written approval of the Authority and HUD.
    b. Use of Reserves and Accounts. It is understood and agreed that 
the Homebuyer shall have no right to receive or use the money in any 
reserve or account created pursuant to this Agreement except for the 
limited purposes and under the special circumstances set forth by the 
terms of this Agreement. It is further understood and agreed that both 
the Authority and HUD have a financial and a governmental interest in 
the Earned Home Payments Account and other reserves as security for the 
financial integrity of the Development, as a means of savings in cost to 
the Government by minimizing the amount and period over which HUD annual 
contributions must be paid, and as a means of advancing the public 
interest and welfare by assisting low-income families to achieve 
homeownership.
    27. Notices. Any notice required hereunder or by law shall be 
sufficient if delivered in writing to the Homebuyer personally or to an 
adult member of his family residing in the dwelling unit or if sent by 
certified mail, return receipt requested, properly addressed to the 
Homebuyer, postage prepaid. Notice to the Authority shall be in writing, 
and either delivered to any Authority employee at the office of the 
Authority or sent to the Authority by certified mail, properly 
addressed, postage prepaid.
    28. Grievance Procedure. All grievances or appeals arising under 
this Agreement shall be processed and resolved pursuant to the grievance 
procedure of the Authority, which procedure shall provide for 
participation of the HBA in the grievance process. This grievance 
procedure shall be posted in the Authority's Office.

[39 FR 10966, Mar. 22, 1974. Redesignated at 49 FR 15580, Apr. 7, 1975. 
Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 49 FR 21490, 
May 21, 1984]

             Appendix III--Certification of Homebuyer Status

                               (Subpart B)

State of __________  
County of __________
This is to certify that_________________________________________________
                                                           (Homebuyer)  
of the Home located at ______________
    (1) Has achieved, within the first two years of his occupancy a 
balance in his Earned Home Payments Account (EHPA) of at least 
__________ dollars (representing 20 times the amount of the monthly EHPA 
credit applicable to said Home);
    (2) Has met and is continuing to meet the requirements of his 
Homebuyers Ownership Opportunity Agreement; and
    (3) Has rendered and is continuing to render satisfactory 
performance of his responsibilities to the Homebuyers Association.
    Accordingly, said Homebuyer may, upon payment of the purchase price, 
exercise the option to purchase the Home in accordance with and subject 
to the provisions of his Homebuyers Ownership Opportunity Agreement.
Housing Authority_______________________________________________________
By______________________________________________________________________
      (Signature and official title)

(Date)   ____________________
Homebuyers Association__________________________________________________
By______________________________________________________________________
      (Signature and official title)

(Date)  ____________________

  Appendix IV--Promissory Note for Payment upon Resale by Homebuyer at 
                                 Profit

                               (Subpart B)

FOR VALUE RECEIVED,_____________________________________________________
(Homeowner) promises to pay to__________________________________________
(Authority) or order, the principal sum of ____________________\1\ 
Dollars ($________), without interest, on the date of resale by the 
Homeowner of the property conveyed by the Authority to the Homeowner.
---------------------------------------------------------------------------

    \1\ Amount determined in accordance with section 19 of the 
Homebuyers Ownership Opportunity Agreement.
---------------------------------------------------------------------------

    Such principal sum shall be reduced automatically by 20 percent of 
the initial amount at the end of each year of such residency, as a 
Homeowner, and this note shall terminate at the end of five years of 
such residency, as determined by the Authority; Provided, however, that 
the amount payable under this note shall in no event be more than the 
net profit on the resale, that is, the amount by which the resale price 
exceeds the sum of (1) the Homeowner's purchase price, (2) the costs 
incidental to his acquisition of ownership, (3) the costs of the resale, 
including commissions and mortgage prepayment penalties, if any, and (4) 
the increase in value of the Home, determined by appraisal, due to 
improvements paid for by the Homeowner whether as a Homebuyer (with 
funds from sources other than his Earned Home Payments Account or his 
Nonroutine Maintenance Reserve) or as a Homeowner.

[[Page 329]]

    If the Homeowner shall pay this note at the time and in the manner 
set forth above, or if, by its provisions, the amount of this note shall 
be zero, then the note shall terminate and the Authority shall, within 
thirty (30) days after written demand therefor by the Homeowner, execute 
a release and satisfaction of this note. The Homeowner hereby waives the 
benefits of all statutes or laws which require the earlier execution or 
delivery of such release and satisfaction by the Authority.
    Presentment, protest, and notice are hereby waived.

Dated __________, 19____
Local Housing Authority_________________________________________________

By: ____________________(Homeowner)
____________________ (Homeowner's Spouse)



            Subpart C--Homeownership Counseling and Training



Sec. 904.201  Purpose.

    The purpose of the counseling and training program shall be to 
assure that the homebuyers, individually and collectively through their 
homebuyers association (HBA), will be more capable of dealing with 
situations with which they may be confronted, making decisions related 
to these situations, and understanding and accepting the responsibility 
and consequences that accompany those decisions.



Sec. 904.202  Objectives.

    The counseling and training program should seek to achieve the 
following objectives:
    (a) Enable the potential homebuyer to have a full understanding of 
the responsibilities that accompany his participation in the 
Homeownership Opportunity Program;
    (b) Enable the potential homebuyer to have an understanding of 
homeownership tasks with specific training given to individuals as the 
need and readiness for counseling or training indicates;
    (c) Assure that the role of the HBA is understood and plans for its 
organization are initiated at the earliest practical time;
    (d) Develop an understanding of the role of the LHA and of the need 
for a cooperative relationship between the homebuyer and the LHA;
    (e) Encourage the development of self-help by the homebuyer through 
reducing dependency and increasing independent action;
    (f) Develop an understanding of mutual assistance and cooperation 
that will develop a feeling of self-respect, pride and community 
responsibility;
    (g) Develop local resources that can be of assistance to the 
individual and the community on an on-going basis.



Sec. 904.203  Planning.

    (a) The counseling and training program shall be flexible and 
responsive to the needs of each prospective homebuyer. While many 
subjects lend themselves to group sessions, consideration shall be given 
to individual counseling. Individuals should not be required to attend 
training classes on subject matter they are familiar with unless they 
can actively participate in the instruction process.
    (b) The program may be provided by contract with an outside 
organization, or by the LHA staff, in either case with voluntary 
involvement and assistance of groups and individuals within the 
community. It is essential that the training entity be completely 
knowledgeable and supportive of the entire Homeownership Opportunity 
Program. It may be recognized that most of the objectives stated require 
specialized instructional skill and content knowledge. There shall be 
recognition of the differences in communication and in value systems, 
and an understanding and respect for past experience of the individual. 
Maximum possible use shall be made of indigenous trainers to insure good 
communication and rapport. Special attention shall be directed to the 
needs of working members of the family for counseling and training 
sessions to be held where and during the time they can attend. Where the 
services of outside contractors are utilized, there shall be a close 
working relationship with the LHA and a program for phasing in LHA staff 
who will have the on-going responsibility for the program. The value of 
local agencies, educational institutions, etc., for implementing the 
program rather than an outside firm shall be carefully considered since 
the continuing presence of such agencies and institutions in the 
community can often develop into an

[[Page 330]]

on-going resource beyond the contract period.
    (c) In planning a homeownership counseling and training program, 
whether self-administered or contracted, the LHA shall consult with HUD 
for advice and information on programs, qualified contractors, local 
resources, reasonable costs, and other similar matters.
    (d) Where the program is to be contracted to an outside group, 
proposals shall be secured either by public advertising or by sending 
requests for proposals to a number of competent public or private 
organizations.
    (e) In areas where there are large concentrations of homebuyers who 
do not read, write, or understand English fluently, the native language 
of the people shall be used. If feasible all instructional materials 
shall be in both languages.



Sec. 904.204  General requirements and information.

    (a) The counseling and training program shall be designed to meet 
the needs of the homebuyers and be sufficiently flexible to meet new 
needs as they arise. The nature of the program suggests four phases of 
counseling: (1) Pre-occupancy; (2) move-in; (3) post-occupancy; (4) 
assistance to the HBA. While some elements of the program lend 
themselves more to one phase than another, the program areas shall be 
coordinated and interrelated. It is recommended that the entity 
providing these services work closely with the participants and ensure 
that policies established are agreeable to both the LHA and the 
homebuyer.
    (b) The following is a description of major elements of the program 
which experience thus far has shown to be relevant. More detailed 
information is set forth in Appendix I, ``Content Guide for Counseling 
and Training Program.''
    (1) Pre-occupancy phase. The purpose of this phase is to prepare the 
selected families to assume the responsibilities of homeownership, and 
to provide an opportunity for the LHA and each family to reassess the 
family's potential for successful participation in the homeownership 
development.
    (i) An overload of information should be avoided in this phase since 
many of the subjects will be dealt with in greater depth after the 
family is in occupancy, and experience has shown that much of the 
information will be more relevant at that time.
    (ii) This phase should be completed for each family before the 
beginning of its occupancy.
    (2) Move-in phase. During this phase, the counseling and training 
staff should be available to the homebuyers on an individual basis. 
Services may include (i) inspecting the units, interior and exterior, 
with the homebuyers and a representative of the LHA, (ii) testing 
appliances and equipment, (iii) providing information on the moving 
process (packing, trucks, etc.), and (iv) assisting homebuyers in making 
adjustments occasioned by the move, serving as liaison among homebuyers, 
LHA, builder and other agencies, and assisting homebuyers in meeting new 
neighbors.
    (3) Post-occupancy phase. Before this phase begins, a period 
(possibly one month) should elapse to allow homebuyers an opportunity to 
adjust to their new surroundings. This is a time when new questions and 
problems come to light that can be dealt with in further counseling and 
training. This phase should be designed to cover many of the same basic 
subjects as the pre-occupancy phase, both by review and refresher where 
necessary but in much greater depth.
    (4) Assistance to the HBA. The parties responsible for the 
counseling and training program shall be responsible for the formation, 
incorporation, and development of the HBA, including the execution of 
the Recognition Agreement between the LHA and HBA, as provided in 
subpart D of this part.



Sec. 904.205  Training methodology.

    Equal in importance to the content of the pre- and post-occupancy 
training is the training methodology. Because groups vary, there should 
be adaptability in the communication and learning experience. Methods to 
be utilized may include group presentations,

[[Page 331]]

small discussion groups, special classes, and workshops. Especially 
important to a successful program are individual family home visits for 
discussion and instruction on unique problems and operation of 
equipment.



Sec. 904.206  Funding.

    (a) Source of funds. For purpose of funding counseling and training 
pursuant to this subpart and for establishing the HBA, the LHA shall 
include an amount equal to $500 per dwelling unit in the development 
cost budget. If additional funds should be needed for any of these 
purposes, the LHA with the assistance of the CPC, if any, shall explore 
all other possible sources of services and funds.
    (b) Planned use of $500-per-unit funds. These funds are to be used 
to pay for:
    (1) Pre- and post-occupancy counseling and training;
    (2) Establishment and initial operation of the HBA (for operation in 
the management phase, see Sec. 904.305).

In planning the use of these funds, the LHA shall recognize that for a 
number of years after the initial counseling and training there is 
likely to be some turnover and follow-up counseling and training needs. 
Therefore, the LHA shall limit the amounts for the counseling and 
training of the initial homebuyers and shall reserve a reasonable amount 
for future counseling and training needs during the management phase of 
the development.
    (c) Period of availability of $500-per-unit funds. These funds shall 
be available during the development phase, and a specific amount shall 
be set aside, in accordance with paragraph (b) of this section, to be 
used for ongoing needs after the close of the development period.
    (d) Budgeting of $500-per-unit funds. (1) The Development Cost 
Budget submitted with the Development Program shall include an estimated 
amount for counseling and training program costs. However, such costs 
shall not be incurred until after HUD approval of the counseling and 
training program.
    (2) Upon HUD approval of the counseling and training program, the 
LHA shall include the approved amount in its Contract Award Development 
Cost Budget. This amount shall constitute the maximum amount that may be 
included for such purposes in the project development cost; provided 
that, if the approved amount is less than $500 per dwelling unit, it 
may, if necessary, be amended with HUD approval, but not later than the 
Final Development Cost Budget and subject to the $500-per-unit 
limitation.
    (e) Application for approval of counseling and training program. (1) 
The LHA shall submit an application for approval of a counseling and 
training program and for approval of funds therefor. This application 
shall be submitted to HUD at the time of the submission of the 
development program or as soon thereafter as possible but no later than 
the submission of the working drawings and specifications.
    (2) The application shall include a narrative statement outlining 
the counseling and training program, including any services and funds to 
be obtained from other sources, together with copies of any proposed 
contract and other pertinent documents. This statement shall include the 
following:
    (i) Indication that the training entity is completely knowledgeable 
of the Homeownership Opportunity Program and is aware of the needs and 
problems of prospective homebuyers;
    (ii) The method and/or instruments to be used to determine 
individual training and counseling needs;
    (iii) The scope of the proposed program, including a detailed 
breakdown of tasks to be performed, products to be produced, and a time 
schedule, including provision for progress payments for specific tasks;
    (iv) An outline of the proposed content of the counseling and 
training to be provided, and the local community resources to be 
utilized;
    (v) The methods of counseling and training to be utilized;
    (vi) The experience and qualifications of the organization and of 
personnel who will directly provide the counseling and training;
    (vii) The estimated cost, source of funds, and methods of payment 
for the tasks and products to be performed or produced, including 
estimates of costs for each of the following categories:
    (a) Counseling and training during development phase:


[[Page 332]]


Salaries
Materials, supplies and expendable equipment
Contract costs
Other costs
    (b) Establishment and initial operation of HBA
    (c) Counseling and training during management phase



Sec. 904.207  Use of appendix.

    A Content Guide for Counseling and Training Program (Appendix I) is 
provided as further detailed information for consideration in designing 
the counseling and training program. The items set forth therein are not 
to be considered mandatory.

      Appendix I--Content Guide for Counseling and Training Program

                               (Subpart C)

    Inclusion of the following items in the Counseling and Training 
Program should be considered, keeping in mind that the extent to which 
they are covered will depend on specific needs of homebuyers in the 
given development.

                           preoccupancy phase

    1. Explanation of program. Includes the background and a full 
description of the program with special emphasis on the financial and 
legal responsibilities of the homebuyers, the HBA, and the LHA; and a 
review for homebuyers of the computation of the monthly payment and of 
the accumulation and purpose of EHPA and reserves.
    2. Property care and maintenance. Includes making homebuyers 
generally familiar with the overall operation of the home, including 
fixtures, equipment, interior designing, and building and equipment 
warranties, and the appropriate procedures for obtaining services and 
repairs to which the homebuyers may be entitled. (This aspect will 
probably have to be covered in more detail during the Post-Occupancy 
Phase.)
    3. Money management. Includes budgeting, consumer education, credit 
counseling, insurance, utility costs, etc.
    4. Developing community. Includes a view of the surrounding 
community, and especially how the homebuyer relates to it as an 
individual and as a member of the HBA.
    5. Referrals. Includes information as to community resources and 
services where assistance can be obtained in relation to individual or 
family problems beyond the scope of the contract agency. This may 
include referrals to community services that can upgrade employment 
skills, provide legal services, offer educational opportunities, care 
for health and dental needs, care for children of working mothers, 
provide guidance in marital problems and general family matters, 
including drugs and alcohol.

                          post-occupancy phase

    1. Home maintenance. This should include builder responsibility, 
identification of minor and major repairs, instructions on do-it-
yourself repairs and methods of having major repairs completed.
    2. Money management. This should involve an in-depth study of the 
legal and financial aspects of consumer credit, savings and investments, 
and budget counseling.
    3. Developing community. This will consist primarily of creating an 
awareness on the part of the homebuyer of the nature and function of the 
HBA and the value of his participation in, and working through, the HBA 
as a responsible member of his community. By this means much will be 
learned about relationships with neighbors, community cooperation, and 
the ways in which individual and group problems are solved.

                               other items

    In addition to the above, there are other needs and concerns, 
especially those expressed by the homebuyers, that may be dealt with in 
special classes or workshops. These may include such topics as child 
care, selection of furnishings, decorating and furnishing, refinishing 
of furniture, upholstery, sewing, food and nutrition, care of clothing, 
etc.



                 Subpart D--Homebuyers Association (HBA)



Sec. 904.301  Purpose.

    (a) It is essential that the homebuyers have an organized vehicle 
for pursuing their common interests, for effectively representing the 
needs of residents in dealing with the LHA, and for undertaking eventual 
management responsibility for the development. Although this 
organization, called the homebuyers association (HBA), shall be 
representative of the homebuyers and independent of the LHA, it shall be 
the responsibility of the LHA and the training and counseling staff to 
assist the homebuyers in their initial efforts at organization.
    (b) Except as noted in Sec. 904.307, each Turnkey III development 
shall have an HBA. There shall be a separate HBA for each development or 
developments where there is a physical and financial community of 
interest.

[[Page 333]]



Sec. 904.302  Membership.

    Every family entitled to occupancy pursuant to a Homebuyers 
Ownership Opportunity Agreement and every family which is a homeowner 
shall automatically be a member of the HBA.



Sec. 904.303  Organizing the HBA.

    (a) The HBA should be organized and incorporated as early in the 
life of the development as is feasible, in order to allow selected 
homebuyers an opportunity to meet each other and begin forging a sense 
of community, but in any case the HBA shall be organized and 
incorporated no later than the date on which 50 percent of the 
homebuyers have been selected. Interim officers and directors shall be 
designated as part of the initial organization of the HBA to serve until 
full-term officers and directors are elected. Such full-term officers 
and directors shall be elected when 60 percent of the homebuyers are in 
occupancy, but, in any event, not later than one year from the date the 
first home is occupied.
    (b) The LHA, in cooperation with the CPC, if any, shall be 
responsible for assuring that competent counseling and training 
assistance pursuant to Subpart C of this part will be provided in 
organizing the HBA. These services shall be continued until the HBA is 
fully operational.
    (c) The provision of such services shall include at least the 
following functions:
    (1) Assembling homebuyers for initial orientation and planning;
    (2) Explaining to homebuyers the structure and functions of an HBA 
and the rights and responsibilities of the HBA and the LHA;
    (3) Aiding in the preparation of charters, by-laws, contracts with 
the LHA and other appropriate documents;
    (4) Assisting in the formation of the organization, including such 
things as the initial designation of interim officers and directors and 
subsequent election of full-term HBA officers and directors, and the 
establishment of necessary committees, if any.
    (d) The LHA and the HBA shall execute an agreement recognizing the 
HBA as the official representative of the homebuyers, and establishing 
the functions, rights, and responsibilities of both parties (see 
Appendix II). This agreement shall be executed as soon as possible after 
incorporation of the HBA.



Sec. 904.304  Functions of the HBA.

    (a) Subject to possible variations agreed to by the HBA and approved 
by HUD, the functions of the HBA shall include the following:
    (1) Representing its members, individually and collectively, with 
respect to any deficiencies in the development or in the homes and with 
respect to fulfillment of the construction contract and related 
warranties;
    (2) Representing its members, individually and collectively, in 
their relationships with the LHA and others in regard to financial 
matters such as monthly payments, credits to and charges against 
reserves, settlement upon vacating the home, acquisition of ownership, 
and other matters pertaining to operation and management of the 
development;
    (3) Recommending policies and rules to the LHA for operation and 
management including rules concerning use of the common areas and 
community facilities;
    (4) Participating in the operation of official grievance mechanisms;
    (5) Advising and assisting its members regarding procedures and 
practices relative to the Earned Home Payments Account and the 
acquisition of homeownership;
    (6) Participating with the LHA in periodic maintenance inspections 
of homes after occupancy, and making recommendations in case of 
disagreements arising out of maintenance inspections;
    (7) Participating with the LHA in the selection of subsequent 
homebuyers;
    (8) Coordinating, supervising, or managing the operation of credit 
union, child care, or other supportive services established for the 
development;
    (9) Participating with the LHA in the establishment and 
implementation of policies related to collection of monthly payments, 
termination of occupancy, and resolution of hardship situations; and
    (10) Performing management services as specified under contract with 
the

[[Page 334]]

Authority or with the Homeowners Association and participating in other 
activities pursuant to agreement with the LHA or with the Homeowners 
Association.
    (b) In addition, the HBA may offer such special services as the 
following:
    (1) The development of self-help such as consumer clubs, furniture 
and other co-ops, credit unions, transportation pools, and skill pools;
    (2) Assisting homebuyers in acquiring group insurance;
    (3) Developing programs and contracting for services such as child 
care centers to be located in the community facility where such a 
facility exists;
    (4) Assisting homebuyers in their employment, especially by 
participating in skill development and apprenticeship programs in 
cooperation with local educational organizations;
    (5) Assisting homebuyers in planning the management role of the HBA 
and in negotiating any contract for management services with the LHA.



Sec. 904.305  Funding of HBA.

    (a) In addition to providing the HBA with noncash contributions such 
as office space and duplicating services, the LHA shall make cash 
contributions for operating expenses of the HBA, in the amount provided 
for in paragraph (b) of this section. Until the project goes into 
management, these contributions shall be made from the development funds 
budgeted for the counseling and training program (see Sec. 904.206). 
Thereafter, these contributions shall be provided for in the annual 
operating budgets of the LHA.
    (b) The cash contributions pursuant to paragraph (a) of this section 
shall be in the amount provided for in the LHA budget (development cost 
budget or annual operating budget, as the case may be) and approved by 
HUD. Such contributions shall be subject to whatever restrictions are 
applied by HUD to the funding of tenant councils generally, but they 
shall not exceed $3 per year per dwelling unit; provided that as an 
incentive to the HBA to provide additional funds from other sources such 
as homebuyer's dues, contributions, revenues from special projects or 
activities, etc., the LHA shall, to the extent approved by HUD in the 
LHA budget, match such additional funds beyond the $3 up to a maximum of 
$4.50, for a total LHA share of $7.50 where the total funding for the 
HBA is $12 or more. The HBA shall not be precluded from seeking to 
achieve total funding in excess of $12 per unit where this can be done 
with additional funds from sources other than the LHA. Furthermore, 
funding by the LHA for the normal expenses of the HBA is not to be 
confused with fees paid pursuant to management services contracts as 
described in Sec. 904.306.



Sec. 904.306  Performing management services.

    The LHA may also contract with the HBA to perform some or all of the 
functions of project management for which the HBA may be better suited 
or located than the LHA. Such functions may include security, 
maintenance of common property, or collection of monthly payments. For 
this purpose, the HBA may form a management corporation and the officers 
of the HBA shall be the directors of such corporation. This corporation 
and the LHA shall then negotiate a management services contract. Such 
arrangements are consistent with the objective of providing for maximum 
participation by residents in the management of their developments. As 
an alternative, the HBA and the LHA may elect to undertake any other 
arrangement approved by HUD.



Sec. 904.307  Alternative to HBA.

    Where the homes are on scattered sites (noncontiguous lots 
throughout a multi-block area, with no common property), or where the 
number of homes may be too few to support an HBA, and where an 
alternative method for homebuyer representation and continuing 
counseling is provided, an HBA shall not be required. For such cases, a 
modified form of homebuyers association may be called for or a less 
formal organization may be desirable. This decision shall be made 
jointly by the LHA and the homebuyers, acting on the recommendation of 
HUD.

[[Page 335]]



Sec. 904.308  Relationship with homeowners association.

    The HBA and the homeowners association are, in legal terms, separate 
and distinct organizations with different functions. The homeowners 
association may hold title to and be responsible for maintenance of 
common property (see Secs. 904.119 and 904.120), while the HBA has more 
general service and representative functions. While all residents are 
members of the HBA, only those who have acquired title to their homes 
are members of the homeowners association.



Sec. 904.309  Use of appendices.

    Use of the Articles of Incorporation (Part I of Appendix I) and the 
Recognition Agreement between the Local Housing Authority and Homebuyers 
Association (Appendix II) is mandatory for projects developed under 
subpart B of this part which have homebuyers associations. No 
modification may be made in format, content or text of these Appendices 
except (1) as required under state or local law as determined by HUD or 
(2) with approval of HUD. The By-Laws of the Homebuyers Association is 
provided as a guide for such projects and it may be used or modified to 
the extent required by the HBA and LHA respectively to meet local needs 
and desires.

  Appendix I--Articles of Incorporation and By-Laws of ______________ 
                         Homebuyers Association

                               (Subpart D)

Part I--Articles of Incorporation

In compliance with the requirements of__________________________________
fxsp0;__________________________________________________________________
(reference to statute under which incorporation is sought) the 
undesigned, all of whom are natural persons, residents of 
____________________, of full age, have this day voluntarily associated 
themselves together for the purpose of forming a Corporation, not-for-
profit, and do hereby certify:

                             Article I--Name

The name of the corporation is__________________________________________
______________ Homebuyers Association (hereinafter referred to as the 
``Association'').

                           Article II--Office

    The principal office of the Association is
located at______________________________________________________________

                           Article III--Agent

    ________________________, whose address is ________________________, 
is hereby appointed the initial registered agent of the Association.

                          Article IV--Duration

    The period of duration of the Association is perpetual.

                          Article V--Membership

    Membership in the Association shall be limited to families who are 
entitled to occupancy of a Home in the Development pursuant to a 
Homebuyers Ownership Opportunity Agreement and families who are 
Homeowners in the Development, and all such families shall automatically 
be members so long as they are in occupancy of a Home. For purposes of 
these Articles, the term ``Development'' includes the following 
described Development or Developments in the Homeownership Opportunity 
Program of ____________________ (hereinafter referred to as the 
Authority):
_______________________________________________________________________
_______________________________________________________________________

                          Article VI--Purposes

    The purposes for which this Association is formed shall not result 
in pecuniary gain or profit to the members thereof. These purposes are 
to provide organization and representation for its members in their 
relationships with the Authority in all matters regarding the 
homeownership opportunity program and, if appropriate, to perform 
management responsibilities for the Development under contract with the 
Authority.
    1. In order to carry out these purposes, the Association shall 
perform the following functions:
    a. Represent its members, individually and collectively, with 
respect to any deficiencies in the Development or in the Homes and with 
respect to fulfillment of the construction contract and related 
warranties;
    b. Represent its members, individually and collectively, in their 
relationships with the Authority and others in regard to financial 
matters such as monthly payments, credits to and charges against 
reserves, settlement upon vacating a Home, and acquisition of ownership, 
and other matters pertaining to operation and management of the 
development;
    c. Recommend policies and rules to the Authority for operation and 
management including rules concerning use of the common areas and 
community facilities;
    d. Participate in the operation of official grievance mechanisms;
    e. Advise and assist its members regarding procedures and practices 
relative to their Earned Home Payments Accounts and to their acquisition 
of homeownership;

[[Page 336]]

    f. Participate with the Authority in periodic maintenance 
inspections of the Homes after occupancy and make recommendations in 
case of disagreement arising out of maintenance inspections;
    g. Participate with the Authority in the selection of subsequent 
homebuyers;
    h. Coordinate, supervise, or manage the operation of credit union, 
child care, or other supportive services established for the 
Development;
    i. Participate with the Authority in the establishment and 
implementation of policies related to collection of monthly payments, 
termination of occupancy, and resolution of hardship situations;
    j. Perform management services as specified under contract with the 
Authority or with the Homeowners Association and participate in other 
activities pursuant to agreement with the Authority or with the 
Homeowners Association.
    2. The Association may also offer special services such as:
    a. The development of self-help such as consumer clubs, furniture 
and other co-ops, credit unions, transportation pools, and skill pools;
    b. Assisting Homebuyers in acquiring group insurance;
    c. Developing programs and contracting for services such as child 
care centers to be located in the community facility, where such a 
facility exists;
    d. Assisting Homebuyers in their employment, especially by 
participating in skill development and apprenticeship programs in 
cooperation with local educational organizations; and
    e. Assisting Homebuyers in planning the management role of the 
Association and in negotiating any contract for management services with 
the Authority.

                           Article VII--Powers

    This Association shall have all the powers, privileges, rights and 
immunities which are necessary or convenient for carrying out its 
purposes and which are conferred by the provisions of all applicable 
laws of the State of __________________ pertaining to non-profit 
corporations.

                          Article VIII--Voting

    There shall be only one vote per Home regardless of the number of 
persons in the family that occupies the Home.

               Article IX--Board of Directors and By-laws

    The affairs of the Association shall be managed by a Board of 
Directors, all of whom shall be members of the Association. The number 
of Directors shall be as provided in the By-Laws of the Association. The 
following persons shall serve as the first Board of Directors and as the 
first officers:

------------------------------------------------------------------------
                       Office                              Address
------------------------------------------------------------------------
                                                     ...................
                                                     ...................
                                                     ...................
------------------------------------------------------------------------

This Board shall manage the affairs of the Association until election of 
their successors by the membership.
    Promptly after 60 percent of the Homes are occupied, or one year 
from the date the first Home is occupied, whichever occurs sooner, the 
Board shall call the first annual meeting of the Association at which 
the members shall adopt By-Laws and elect one-third of the Board for a 
term of one year, one-third for a term of two years, and one-third for a 
term of three years. At each annual meeting thereafter the members shall 
elect one-third of the Board for a term of three years.

                         Article X--Dissolution

    After all members have acquired ownership of their Homes, the 
Association shall be dissolved with the assent given in writing and 
signed by not less than two-thirds of the members. The dissolution shall 
be effective when all of the assets of the Association remaining after 
payment of its liabilities have been granted, conveyed and assigned in 
such manner as the Association and Authority may mutually agree.

                          Article XI--Amendment

    Amendment of these Articles shall require the assent of 75 percent 
of the entire membership.
    In witness whereof, for the purposes of incorporating this 
Association under the laws of the State of ______________, we, the 
undersigned constituting the incorporators of this Association, have 
executed these Articles of Incorporation this ______ day of __________, 
19____.

          _____________________________________________________________

          _____________________________________________________________

          _____________________________________________________________
[Witness, Notary, or Acknowledgment as required by state law]

    Note:  The following is a suggested form of By-Laws. Different 
format and content to meet local needs may be used. For example, it may 
be considered desirable to combine HBA offices, eliminate or change 
functions of various committees, provide for other committees, etc.

Part II--By-Laws

    The members of the __________________ Homebuyers Association 
(hereinafter referred to as the ``Association'') do hereby adopt in 
accordance with Article IX of the

[[Page 337]]

Articles of Incorporation the following By-Laws:
    Section 1. Organization--The affairs of the Association shall be 
managed by a Board of Directors elected by and from the members of the 
Association. The Board shall elect officers of the Association, 
including a President, Vice President, Secretary, and Treasurer, who 
shall carry out such functions and duties as are prescribed by these By-
Laws and the Board.
    Sec. 2. Association meetings-- A. Annual meetings. The Association 
shall have an annual meeting at ______________ (time) on the 
__________________ (day of week and month) each year for the purpose of 
transacting such business as may be necessary or appropriate. If the 
date of the annual meeting is a legal holiday, the meeting shall be held 
at the same hour on the first day following which is not a legal 
holiday.
    B. Quarterly and special meetings. Between annual meetings, 
quarterly meetings shall be called by the President and be held for the 
purpose of advising the membership of activities of the Board and 
enabling the members to bring up matters of common concern. Special 
meetings may be called at any time (1) by the President with the written 
concurrence of at least two of the other officers or (2) by a petition 
filed with the Secretary stating the purpose of the meeting and signed 
by at least one-fifth of the total number of members in the Association.
    C. Notice of meetings. Written notice of each annual, quarterly or 
special meeting of the members shall be given by, or at the direction 
of, the Secretary by mailing a copy of such notice at least fifteen days 
before an annual or quarterly meeting or at least seven days before a 
special meeting, addressed to each member at the member's address shown 
on the records of the Association. Such notice shall specify the place, 
date, and hour of the meeting and, in the case of a special meeting, the 
purpose of such meeting. No business shall be transacted at any special 
meeting other than that stated in the notice unless by consent of at 
least one-half of the total number of votes of the Association.
    D. Quorum. A quorum at any meeting shall consist of members entitled 
to cast votes which represent at least one-tenth of the votes of the 
Association. If such a quorum is not present, those present shall have 
the power to reschedule the meeting from time to time without notice 
other than an announcement at the meeting until there is a quorum. At 
any rescheduled meeting at which a quorum is present, the only business 
which may be transacted is that which might have been transacted at the 
original meeting.
    E. Voting. Each family shall designate in writing to the Secretary 
the family member who is to cast the family vote. That designee may 
appoint as a proxy for a specific meeting any other member of the 
Association. A proxy must be in writing and filed with the Secretary not 
later than the time that meeting is called to order. Every proxy shall 
be revocable and shall be automatically revoked when the person who 
appointed the proxy attends the meeting or ceases to have voting 
privileges in the Association. Votes represented by proxy shall be 
counted in determining the presence or absence of a quorum at any 
meeting.
    F. Agenda. An agenda shall be prepared for every meeting.
    Sec. 3. Board of Directors-- A. Number of directors. The affairs of 
the Association shall be managed by a Board of ______ Directors, all of 
whom shall be members of the Association. The number of Directors may be 
changed by amendment of the By-Laws of the Association.
    B. Term of Office. The Board of Directors shall be elected at the 
annual meeting of the Association. At the first annual meeting, the 
members shall elect ______ \1\ Directors for a term of one year, ______ 
\1\ Directors for a term of two years, and ______ \1\ Directors for a 
term of three years. At each annual meeting thereafter the members shall 
elect ______ \1\ Directors for a term of three years.
---------------------------------------------------------------------------

    \1\ Each group shall be one-third of the total number of Directors.
---------------------------------------------------------------------------

    C. Removal and other vacancies of Directors. Any Director may be 
removed from the Board, for cause, by a majority of the votes of the 
Association at any annual or quarterly meeting or any special meeting 
called for such purpose, provided that the Director has been given an 
opportunity to be heard at such meeting. In the event of death, 
resignation or removal of a Director, his successor shall be elected by 
the remaining members of the Board and shall serve for the unexpired 
term of his predecessor.
    D. Chairman of the Board. At the first regular Board meeting after 
each annual meeting, the Board of Directors shall elect a Chairman from 
among their number.
    E. Compensation. No compensation shall be paid to the Board for its 
services. However, any Director may be reimbursed for his actual expense 
incurred in the performance of his duties, as long as such expense 
receives approval of the Board and is within the approved Association 
budget.
    Sec. 4. Nomination and election of the board-- A. Nomination. 
Nomination for election to the Board of Directors (other than for 
filling of vacancies under section 3. C.) shall be made by the 
Nomination Committee; provided, however, that nominations may also be 
made from the floor at the annual meeting by motion properly made and 
seconded, or by a petition which states the name of the

[[Page 338]]

person nominated, is signed by members representing at least ten votes, 
and is filed with the Secretary not later than the day prior to the 
annual meeting. Persons nominated must be members of the Association.
    B. Election. Election of the Board of Directors shall be in 
accordance with Section 2.E., and by secret written ballot. The ballots 
shall be prepared by the Secretary. Cumulative voting is not permitted 
(that is, a voter who refrains from voting with respect to one or more 
vacancies may not on that account cast any extra vote or votes with 
respect to another vacancy). The persons receiving the largest number of 
votes shall be elected.
    Sec. 5. Meetings of Directors-- A. Regular meetings. Regular 
meetings of the Board of Directors shall be held monthly at such time 
and hours as may be fixed from time to time by resolution of the Board. 
Notice of time and place of the meetings shall be mailed to each 
Director no later than seven days before the meeting.
    B. Special meetings. Special meetings of the Board of Directors 
shall be held when called by the President of the Association, the 
Chairman of the Board or by any two Directors, after not less than three 
days notice to each Director.
    C. Quorum. A simple majority of the Board shall constitute a quorum 
for the transaction of business. Every act or decision done or made by a 
majority of the Board present at a duly held meeting shall be regarded 
as an act of the Board.
    D. Action taken without a meeting. Any action which could be 
otherwise taken at a Board meeting may be taken in the absence of a 
meeting, by obtaining the written approval of all Directors. Any action 
so approved shall have the same effect as though taken at a meeting of 
the Board.
    Sec. 6. Power and duties of the Board of Directors-- A. Power and 
duties generally. The Board of Directors shall have and exercise all the 
powers, duties, and authority necessary for the administration of the 
affairs and to carry out the purposes of the Association, excepting only 
those acts and things as are required by law, by the Articles of 
Incorporation, or by these By-Laws to be exercised and done by the 
members or their officers.
    B. Powers. The Board shall have the power to: (1) Adopt and publish 
such rules and regulations as are appropriate in the exercise of its 
powers and duties, including but not limited to rules and regulations 
governing the amount and payment of dues, use of common areas and 
facilities and the conduct of the members and their guests thereon, and 
the establishment of penalties for violation of such rules and 
regulations; (2) appoint or designate officers, agents, and employees, 
and make such delegations of authority as in its judgment are in the 
best interest of the Association; (3) declare the office of a member of 
the Board of Directors to be vacant in the event such member shall be 
absent from at least three consecutive regular meetings of the Board of 
Directors.
    C. Duties. It shall be the duty of the Board of Directors to: (1) 
Cause to be kept a complete record of all its acts and Association 
affairs, and to present a statement thereof to the members at the annual 
meeting, or at any special meeting when such statement is requested in 
writing by members representing at least one-fifth of the votes of the 
Association; (2) cause to be prepared an annual audit of the Association 
books to be made at the completion of each fiscal year; (3) cause to be 
supervised all officers, agents, and employees of the Association, and 
see that their duties are properly performed; (4) procure and maintain 
adequate liability and hazard insurance on any property owned by the 
Association; (5) cause such officers or employees having fiscal 
responsibilities to be bonded as the Board may deem appropriate; (6) 
cause to be performed the functions listed in Article V of the Articles 
of Incorporation.
    Sec. 7. Association officers and their duties-- A. Election. The 
Board of Directors shall elect the following officers of the 
Association: a President, a Vice President, a Secretary, a Treasurer, 
and such other special officers as, in the opinion of the Board, the 
Association may require. The President and Vice President shall be 
elected from members of the Board. The election of officers shall take 
place biennially at the first meeting of the Board of Directors 
following the annual meeting of the members.
    B. Term. The officers shall hold office for two years unless they 
shall resign sooner, be removed, or otherwise be disqualified to serve; 
provided, however, that special officers shall hold office for such 
period as the Board may determine, but not to exceed one year.
    C. Removal and resignation. Any officer may be removed from office, 
for cause, by the Board. Any officer may resign at any time by giving 
written notice to the Board, the President or the Secretary. Such 
resignation shall take effect on the date of receipt of such notice or 
at any later time specified therein; and unless otherwise specified 
therein, the acceptance of such resignation shall not be necessary to 
make it effective.
    D. Vacancies. A vacancy in any office may be filled by appointment 
by the Board. The officer appointed to such vacancy shall serve for the 
remainder of the term of the officer he replaces.
    E. Multiple Officers. No person shall simultaneously hold more than 
one of the offices required by these By-Laws.
    F. Duties. The duties of the officers are as follows:
    (1) President. The President shall preside at all Association 
meetings; shall execute the orders and resolutions of the Board; shall

[[Page 339]]

sign all leases, mortgage, deeds, and other written instruments; and 
shall cosign with the Treasurer all checks and promissory notes.
    (2) Vice President. The Vice President shall act in place and stead 
of the President in the event of his absence or disability and shall 
exercise and discharge such other duties as may be required of him by 
the Board.
    (3) Secretary. The Secretary shall record the votes and keep the 
minutes of all meetings and proceedings of the Board and of the 
Association; shall keep the corporate seal of the Association and affix 
it on all papers requiring said seal; shall serve notice of the meetings 
of the Board and of the Association; shall keep appropriate current 
records showing the names and addresses of the members of the 
Association; and shall perform such duties as may be required by the 
Board.
    (4) Treasurer. The Treasurer shall receive and deposit in 
appropriate bank accounts all funds of the Association and shall 
disburse such funds as directed by resolution of the Board of Directors; 
shall cosign with the President all checks and promissory notes of the 
Association; shall keep proper books of account; and shall prepare an 
annual budget and statement of income and expenditures which shall be 
approved by the Board before presentation to the Association at its 
regular annual meeting, and furnish a copy to each of the members.
    (5) Special officers. Special officers shall have such authority and 
perform such duties as the Board may determine.
    (6) Compensation. Officers may not be compensated except as may be 
determined by the Board, in accordance with the approved Association 
budget.
    Sec. 8. Committees.-- A. Committees to be established. The Board of 
Directors shall establish the following committees:
    (1) Representation Committee which shall represent members, 
individually and collectively, with respect to: any deficiencies in the 
Development or the individual Homes therein; fulfillment of the 
construction contract and related warranties; relationships with the 
Authority and others in regard to financial matters such as monthly 
payments, credits to and charges against reserves, settlement upon 
vacating the home, and acquisition of ownership; matters pertaining to 
project management; and matters in the Authority's official grievance 
mechanisms.
    (2) Rules Committee which shall present to the Board for 
recommendation to the Authority policies for operation and management 
and, where appropriate, assist the Board in establishing Association 
rules in that respect.
    (3) Homeownership Committee which shall advise and assist members in 
regard to maintenance and acquisition of ownership of their homes, 
financial matters and other matters related to homeownership and home 
management.
    (4) Selection Committee which shall recommend proposed homebuyers 
from a list of eligible applicants.
    (5) Nominating Committee which shall consist of a chairman, who 
shall be a member of the Board of Directors, and two or more members of 
the Association, none of whom are Directors. The Nominating Committee 
shall be appointed by the Board of Directors prior to each annual 
meeting, to serve from the close of such annual meeting until the close 
of the next annual meeting and such appointment shall be announced at 
each annual meeting. The Nominating Committee shall make as many 
nominations for election to the Board of Directors as it shall in its 
discretion determine, but not less than the number of vacancies to be 
filled.
    B. Other committees. The Board may establish other committees, 
permanent or temporary, which it deems necessary or desirable to carry 
out the purposes of the Association.
    C. Committee Chairman and Members. The chairmen of all committees, 
except the Nominating Committee, shall be appointed by and serve at the 
pleasure of the President. Committee members shall be appointed by the 
chairman of the committee on which they are to serve and shall serve 
until a new chairman is appointed.
    D. Committee Reports. The chairman of each committee shall make a 
report to the President in writing of committee meetings and activities 
prior to each regular monthly meeting of the Board of Directors.
    E. Authority. Unless specifically authorized in writing by the Board 
of Directors or the President, a committee chairman or a committee shall 
have no authority to legally obligate the Association or incur any 
expenditure on behalf of the Association.
    Sec. 9. Suspension of rights. The Board may suspend, by a majority 
vote of the Board, the voting rights and rights to use the recreational 
facilities, of a member, and his family and guests, during any period in 
which the member shall be in default in the payment of any dues or 
assessment imposed by the Association. Such rights may also be 
suspended, after notice and hearing, for a period not to exceed sixty 
days, for violation of the Association's rules and regulations.
    Sec. 10. Books and records. The books, records and papers of the 
Association shall at all times, during reasonable business hours, be 
subject to inspection by any member.
    Sec. 11. Amendments. Amendments to these By-Laws may be introduced 
and discussed at any annual or special meeting of the Association, 
provided that copies of any proposed amendment shall be mailed to all 
the members with the notice of the meeting at which

[[Page 340]]

such amendment will be introduced. A vote on adopting such amendment 
shall be taken at the first Association meeting held at least two weeks 
subsequent to the meeting at which the amendment was introduced. 
Amendments shall be adopted by a vote of a majority of the members of 
the Association.
    Sec. 12. Corporate seal. The Association shall have a seal which 
shall appear as follows: [seal]
    Sec. 13. Fiscal year. The first fiscal year of the Association shall 
begin on the date of incorporation and shall end on the last day of 
__________ (month, year). Each successive fiscal year shall begin on the 
first day of __________ (month) and end on the last day of __________ 
(month).
    The foregoing By-Laws were adopted at the first annual meeting of 
the Association held __________ by the undersigned members of the 
Association.

 Appendix II--Recognition Agreement Between Local Housing Authority and 
                         Homebuyers Association

                               (Subpart D)

    WHEREAS, the ____________________ (``Authority''), a public body 
corporate and politic, has developed or acquired with the aid of loans 
and annual contributions from the Department of Housing and Urban 
Development (``HUD''), the following Development or Developments in its 
homeownership opportunity program (hereinafter referred to as the 
``Development''): \1\
---------------------------------------------------------------------------

    \1\ List here the specific Development or Developments whose 
Homebuyers are represented by the Homebuyers Association with which this 
Agreement is entered into.
---------------------------------------------------------------------------

_______________________________________________________________________
_______________________________________________________________________
    WHEREAS, an organization of residents (``Homebuyers'') is an 
essential element in such Development for purposes of effective 
participation of the Homebuyers in the management of the Development and 
representation of the Homebuyers in their relationships with the 
Authority, and for other purposes; and
    WHEREAS, the ____________________ Homebuyers Association 
(``Association'') fully represents the Homebuyers of the Development;
    NOW, THEREFORE, this agreement is entered into by and between the 
Authority and the Association and they do hereby agree as follows:
    1. The Association, whose Articles of Incorporation are attached 
hereto and made a part hereof, is hereby recognized as the established 
representative of the Homebuyers of the Development and is the sole 
group entitled to represent them as tenants or Homebuyers before the 
Authority;
    2. For each fiscal year, the Authority shall make available funds to 
the Association for its normal expenses, in such amounts as may be 
available to the Authority for such purposes and subject to whatever 
applicable HUD regulations;
    3. The Association shall be entitled to the use of office space in 
__________ at the Development without charge by the Authority for such 
use;
    4. The Authority and the officers of the Association shall meet at a 
location convenient to both parties on the __________ (day) of each 
month to discuss matters of interest to either party;
    5. In the event the parties later agree that the Association should 
assume management responsibilities now held by the Authority, a contract 
for such purpose will be negotiated by ____________________ the 
Association;
    ____________________ terminate upon dissolution of the Association.
    IN WITNESS HEREOF, the parties have executed this Agreement on 
__________, 19____.
    Local Housing Authority
By (Official Title)_____________________________________________________
    Homebuyers Association
By (Official Title)_____________________________________________________
WITNESSES:______________________________________________________________
                                                ________________________

                          PART 905  [RESERVED]



PART 906--SECTION 5(h) HOMEOWNERSHIP PROGRAM--Table of Contents




Sec.
906.1  Purpose.
906.2  Applicability.
906.3  General authority for sale.
906.4  Fundamental criteria for HUD approval.
906.5  Resident consultation and involvement.
906.6  Property that may be sold.
906.7  Methods of sale and ownership.
906.8  Purchaser eligibility and selection.
906.9  Counseling, training, and technical assistance.
906.10  Nonpurchasing residents.
906.11  Nonroutine maintenance reserve.
906.12  Purchase prices and financing.
906.13  Protection against fraud and abuse.
906.14  Limitation on resale profit.
906.15  Use of sale proceeds.
906.16  Replacement housing.
906.17  Records, reports, and audits.
906.18  Submission and review of homeownership plan.
906.19  HUD approval and PHA-HUD implementing agreement.
906.20  Content of homeownership plan.
906.21  Supporting documentation.


[[Page 341]]


    Authority: 42 U.S.C. 1437c, 1437d and 3535(d).

    Source: 59 FR 56365, Nov. 10, 1994, unless otherwise noted.



Sec. 906.1  Purpose.

    This part codifies the provisions of the Section 5(h) Homeownership 
Program for public housing, as authorized by sections 5(h) and 
6(c)(4)(D) of the United States Housing Act of 1937 (Act) and 
administered by the Department of Housing and Urban Development (HUD).



Sec. 906.2  Applicability.

    (a) General applicability. This part applies to public housing owned 
by public housing agencies (PHAs) (excluding Indian Housing Authorities 
(IHAs)) subject to Annual Contributions Contracts (ACCs) under the Act. 
In reference to housing properties, ``development'' means the same as 
``project'' (as defined in the Act). Except where otherwise indicated by 
the context, ``resident'' means the same as ``tenant'', as the latter 
term is used in the Act, including Turnkey III homebuyers, if 
applicable, as well as rental tenants of public housing and Section 8 
residents, and references to sale, purchase, conveyance and ownership 
include the types of interests and transactions that are incident to 
cooperative ownership.
    (b) Nonretroactivity. In the case of a Section 5(h) homeownership 
plan that was approved by HUD prior to the effective date of the interim 
rule under this part (October 21, 1991), no modifications or additional 
requirements will be imposed under the provisions of the interim or 
final rule, except for reasonable administrative procedures prescribed 
by HUD. Similarly, in the case of a plan that was approved under the 
interim rule, before the effective date of the final rule (December 12, 
1994), no modifications or additional requirements will be imposed under 
the provisions of the final rule, except for such reasonable 
administrative procedures.



Sec. 906.3  General authority for sale.

    A PHA may sell all or a portion of a public housing development to 
eligible residents, as defined under Sec. 906.8, for purposes of 
homeownership, according to a homeownership plan approved by HUD under 
this part. If the development is subject to indebtedness under the ACC, 
HUD will continue to make any debt service contributions for which it is 
obligated under the ACC, and the property sold will not be subject to 
the encumbrance of that indebtedness. (In the case of a development with 
financing restrictions (such as a bond-financed development), however, 
sale is subject to the terms and conditions of the applicable 
restrictions.) Upon sale in accordance with the HUD-approved 
homeownership plan, HUD will execute a release of the title restrictions 
prescribed by the ACC. Because the property will no longer be subject to 
the ACC after sale, it will cease to be eligible for further HUD funding 
for public housing operating subsidies or modernization under the Act 
upon conveyance of title by the PHA. (That does not preclude any other 
types of post-sale subsidies that may be available, under other Federal, 
State, or local programs, such as the possibility of available 
assistance under Section 8 of the Act, in connection with a plan for 
cooperative homeownership, if authorized by the Section 8 regulations.)



Sec. 906.4  Fundamental criteria for HUD approval.

    HUD will approve a PHA's homeownership plan if it meets all three of 
the following criteria:
    (a) Workability. The plan must be practically workable, with sound 
potential for long-term success. Financial viability, including the 
capability of purchasers to meet the financial obligations of 
homeownership, is a critical requirement.
    (b) Legality. The plan must be consistent with law, including the 
requirements of this part and any other applicable Federal, State, and 
local statutes and regulations, and existing contracts. Subject to the 
other two criteria stated in this section, any provision that is not 
contrary to those legal requirements may be included in the plan, at the 
discretion of the PHA, whether or not expressly authorized in this part.

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    (c) Documentation. The plan must be clear and complete enough to 
serve as a working document for implementation, as well as a basis for 
HUD review.



Sec. 906.5  Resident consultation and involvement.

    (a) Resident input. In developing a proposed homeownership plan, and 
in carrying out the plan after HUD approval, the PHA shall consult with 
residents of the development involved, and with any resident 
organization that represents them, as necessary and appropriate to 
provide them with information and a reasonable opportunity to make their 
views and recommendations known to the PHA. If the plan contemplates 
sale of units in an entirely vacant development, the PHA shall consult 
with the PHA-wide resident organization, if any. While the Act gives the 
PHA sole legal authority for final decisions, as to whether or not to 
submit a proposed homeownership plan and the content of such a proposal, 
the PHA shall give residents and their resident organizations full 
opportunity for input in the homeownership planning process, and full 
consideration of their concerns and opinions.
    (b) Resident initiatives. Where individual residents, a Resident 
Management Corporation (RMC), or another form of resident organization 
may wish to initiate discussion of a possible homeownership plan, the 
PHA shall negotiate with them in good faith. Joint development and 
submission of the plan by the PHA and RMC, or other resident 
organization, is encouraged. In addition, participation of an RMC or 
other resident organization in the implementation of the plan is 
encouraged.

(Approved by the Office of Management and Budget under control number 
2577-0201)



Sec. 906.6  Property that may be sold.

    (a) Types of property. Subject to the workability criterion of 
Sec. 906.4(a) (including, for example, consideration of common elements 
and other characteristics of the property), a homeownership plan may 
provide for sale of one or more dwellings, along with interests in any 
common elements, comprising all or a portion of one or more public 
housing developments. A plan may provide for conversion of existing 
public housing to homeownership or for homeownership sale of newly-
developed public housing. (However, for public housing units developed 
as replacement housing for units demolished or disposed of pursuant to 
24 CFR part 970, that part requires that the initial occupants be 
selected solely on the basis of the requirements governing rental 
occupancy, without reference to any additional homeownership eligibility 
or selection requirements under this part.) Turnkey III homeownership 
units may be converted to Section 5(h) homeownership, upon voluntary 
termination by any existing Turnkey III homebuyers of their contractual 
rights and amendment of the ACC, in a form prescribed by HUD.
    (b) Physical condition of property. The property must meet local 
code requirements (or, if no local code exists, the housing quality 
standards established by HUD for the Section 8 Housing Assistance 
Payments Program for Existing Housing, under 24 CFR part 882) and the 
requirements for elimination of lead-based paint hazards in HUD-
associated housing, under subpart C of 24 CFR part 35. When a 
prospective purchaser with disabilities requests accessible features, 
the features must be added in accordance with 24 CFR parts 8 and 9. 
Further, the property must be in good repair, with the major components 
having a remaining useful life that is sufficient to justify a 
reasonable expectation that homeownership will be affordable by the 
purchasers. These standards must be met as a condition for conveyance of 
a dwelling to an individual purchaser, unless the terms of sale include 
measures to assure that the work will be completed within a reasonable 
time after conveyance, not to exceed two years (e.g., as a part of a 
mortgage financing package that provides the purchaser with a home 
improvement loan or pursuant to a sound sweat equity arrangement).



Sec. 906.7  Methods of sale and ownership.

    (a) Permissible methods. Any appropriate method of sale and 
ownership may be used, such as fee-simple conveyance of single-family 
dwellings or conversion of multifamily buildings to resident-owned 
cooperatives or condominiums.

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    (b) Direct or indirect sale. A PHA may sell dwellings to residents 
directly or (with respect to multifamily buildings or a group of single-
family dwellings) through another entity established and governed by, 
and solely composed of, residents of the PHA's public housing, provided 
that:
    (1) The other entity has the necessary legal capacity and practical 
capability to carry out its responsibilities under the plan; and
    (2) The respective rights and obligations of the PHA and the other 
entity will be specified by a written agreement that includes:
    (i) Assurances that the other entity will comply with all provisions 
of the HUD-approved homeownership plan;
    (ii) Assurances that the PHA's conveyance of the property to the 
other entity will be subject to a title restriction providing that the 
property may be resold or otherwise transferred only by conveyance of 
individual dwellings to eligible residents, in accordance with the HUD-
approved homeownership plan, or by reconveyance to the PHA, and that the 
property will not be encumbered by the other entity without the written 
consent of the PHA;
    (iii) Protection against fraud or misuse of funds or other property 
on the part of the other entity, its employees, and agents;
    (iv) Assurances that the resale proceeds will be used only for the 
purposes specified by the HUD-approved homeownership plan;
    (v) Limitation of the other entity's administrative and overhead 
costs, and of any compensation or profit that may be realized by the 
entity, to amounts that are reasonable in relation to its 
responsibilities and risks;
    (vi) Accountability to the PHA and residents for the recordkeeping, 
reporting and audit requirements of Sec. 906.17;
    (vii) Assurances that the other entity will administer its 
responsibilities under the plan on a nondiscriminatory basis, in 
accordance with the Fair Housing Act and implementing regulations; and
    (viii) Adequate legal remedies for the PHA and residents, in the 
event of the other entity's failure to perform in accordance with the 
agreement.



Sec. 906.8  Purchaser eligibility and selection.

    Standards and procedures for eligibility and selection of the 
initial purchasers of individual dwellings shall be consistent with the 
following provisions:
    (a) Applications. Persons who are interested in purchase must submit 
applications for that specific purpose, and those applications shall be 
handled separately from applications for other PHA programs. For vacant 
units, applications shall be dated as received by the PHA and, subject 
to eligibility and preference factors, selection shall be made in the 
order of receipt. Application for homeownership shall not affect an 
applicant's place on any other PHA waiting list.
    (b) Eligibility threshold. Subject to any additional eligibility and 
preference standards that are required or permitted under this section, 
a homeownership plan may provide for the eligibility of residents of 
public housing owned or leased by the seller PHA (including Turnkey III 
homebuyers who may elect to terminate their existing Turnkey III 
homebuyer agreements in favor of purchase under the Section 5(h) 
homeownership plan) and residents of other housing who are receiving 
housing assistance under Section 8 of the Act, under an ACC administered 
by the seller PHA, provided that the resident has been in lawful 
occupancy for a minimum period specified in the plan (not less than 30 
days prior to conveyance of title to the dwelling to be purchased). For 
residents of other housing who are receiving housing assistance under 
Section 8, the minimum occupancy requirement may be satisfied in the 
unit for which the family is receiving Section 8 assistance or the 
public housing unit. If the family is to meet part or all of the minimum 
occupancy requirement in the public housing unit, the Section 8 
assistance must be terminated before the family moves into the public 
housing unit. Public housing units are ineligible for Section 8 
certificate and voucher assistance as long as they remain under ACC as 
public housing.
    (c) Applicants who do not meet minimum residency requirement for 
eligibility.

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(1) A homeownership plan, at PHA discretion, may also permit eligibility 
for applicants who do not meet the minimum residency requirement of 
paragraph (b) of this section (30 days or more, as prescribed by the 
homeownership plan) at the time of application, provided that their 
selection is conditioned upon completion of the minimum residency 
requirement prior to conveyance of title. (A plan may thus allow 
satisfaction of the threshold requirements for eligibility by:
    (i) Existing public housing or Section 8 residents with less than 
the minimum period of residency;
    (ii) Families who are already on the PHA's waiting lists; and
    (iii) Other low-income families who are neither public housing nor 
Section 8 residents at the time of application or selection.)
    (2) Applicants who are not already public housing residents, 
however, must also satisfy the requirements for admission to such 
housing.
    (d) Compliance with lease obligations. Eligibility shall be limited 
to residents who have been current in all of their lease obligations (in 
the case of Turnkey III homebuyers, obligations under their Turnkey III 
homebuyer agreements) over a period of not less than six months prior to 
conveyance of title (or, if so provided by the homeownership plan, such 
lesser period as has elapsed since the beginning of public housing or 
Section 8 tenure), including, but not limited to, payment of rents (or 
homebuyer's monthly payments) and other charges, and reporting of all 
income that is pertinent to determination of rental charges (or 
homebuyer's monthly payments). At the PHA's discretion, the 
homeownership plan may allow a resident to remedy under-reporting of 
income, provided that proper reporting of income would not have resulted 
in ineligibility for admission to public housing or for Section 8 
assistance, by payment of the resulting underpayment for rent (or 
homebuyer's monthly payments) prior to conveyance of title to the 
homeownership dwelling, either in a lump-sum or in installments over a 
reasonable period. Alternatively, the plan may permit payment within a 
reasonable period after conveyance of title, under an agreement secured 
by a mortgage on the property.
    (e) Affordability standard. Eligibility shall be limited to 
residents who are capable of assuming the financial obligations of 
homeownership, under minimum income standards for affordability, taking 
into account the unavailability of public housing operating subsidies 
and modernization funds after conveyance of the property by the PHA. A 
homeownership plan may, however, take account of any available subsidy 
from other sources (e.g., in connection with a plan for cooperative 
ownership, assistance under Section 8 of the Act, if available and 
authorized by the Section 8 regulations). Under this affordability 
standard, an applicant must meet the following requirements:
    (1) On an average monthly estimate, the amount of the applicant's 
payments for mortgage principal and interest, plus insurance, real 
estate taxes, utilities, maintenance and other regularly recurring 
homeownership costs (such as condominium, cooperative, or other 
homeownership association fees) will not exceed the sum of:
    (i) 35 percent of the applicant's adjusted income as defined in 24 
CFR Part 913; and
    (ii) Any subsidy that will be available for such payments.
    (2) The applicant can pay any amounts required for closing, such as 
a downpayment (if any) and closing costs chargeable to the purchaser, in 
accordance with the homeownership plan.
    (f) Option to restrict eligibility. A homeownership plan may, at the 
PHA's discretion, restrict eligibility to one or more residency-based 
categories (e.g., for occupied units, eligibility may be restricted to 
the existing residents of the units to be sold; for vacant units, 
eligibility may be restricted to public housing residents only, or to 
public housing residents plus any one or more of the other residency-
based categories that may be established under paragraphs (b) and (c) of 
this section), as may be reasonable in view of the number of units to be 
offered for sale and the estimated number of eligible applicants in 
various categories, provided

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that the residency-based preference requirements mandated by paragraph 
(g) of this section are observed.
    (g) Residency-based preferences. For occupied units, a preference 
shall be given to the existing residents of each of the dwellings to be 
sold. For vacant units (including units which are voluntarily vacated), 
a preference shall be given to residents of other public housing units 
owned or leased by the seller PHA (over any other residency-based 
categories that may be established by the homeownership plan for Section 
8 residents and any categories of nonresident applicants).
    (h) Self sufficiency preference. For vacant units, a further 
preference shall be given to those applicants who have completed self-
sufficiency and job training programs, as identified in the 
homeownership plan, or who meet equivalent standards of economic self-
sufficiency, such as actual employment experience, as specified in the 
homeownership plan.
    (i) Other eligibility or preference standards. If consistent with 
the other provisions of this section, a homeownership plan may include 
any other standards for eligibility or preference, or both, at the 
discretion of the PHA, that are not contrary to law.

(Approved by the Office of Management and Budget under control number 
2577-0201)



Sec. 906.9  Counseling, training, and technical assistance.

    Appropriate counseling shall be provided to prospective and actual 
purchasers, as necessary for each stage of implementation of the 
homeownership plan. Particular attention must be given to the terms of 
purchase and financing, along with the other financial and maintenance 
responsibilities of homeownership. In addition, where applicable, 
appropriate training and technical assistance shall be provided to any 
entity (such as an RMC, other resident organization, or a cooperative or 
condominium entity) that has responsibilities for carrying out the plan.



Sec. 906.10  Nonpurchasing residents.

    (a) Nonpurchasing resident's options. If an existing resident of a 
dwelling authorized for sale under a homeownership plan is ineligible 
for purchase, or declines to purchase, the resident shall be given the 
choice of either relocation to other suitable and affordable housing or 
continued occupancy of the present dwelling on a rental basis, at a rent 
no higher than that permitted by the Act. Displacement (permanent, 
involuntary move) in order to make a dwelling available for sale, is 
prohibited. In addition to applicable program sanctions, a violation of 
the displacement prohibition may trigger a requirement to provide 
relocation assistance in accordance with the Uniform Relocation 
Assistance and Real Property Acquisition Act of 1970 and implementing 
regulations at 49 CFR Part 24. Where continued rental occupancy by a 
nonpurchasing resident is contemplated after conversion of the property 
to cooperative or condominium ownership, the homeownership plan must 
include provision for any rental subsidy required (e.g., Section 8 
assistance, if available and authorized by the Section 8 regulations). 
As soon as feasible after they can be identified, all nonpurchasing 
residents shall be given written notice of their options under this 
section.
    (b) Relocation assistance. A nonpurchasing resident who chooses to 
relocate pursuant to this section shall be offered the following 
relocation assistance:
    (1) Advisory services to assure full choices and real opportunities 
to obtain relocation within a full range of neighborhoods where suitable 
housing may be found, in and outside areas of minority concentration, 
including timely information, counseling, explanation of the resident's 
rights under the Fair Housing Act, and referrals to suitable, safe, 
sanitary and affordable housing (at a rent no higher than permitted by 
the Act), which is of the resident's choice, on a nondiscriminatory 
basis, without regard to race, color, religion (creed), national origin, 
handicap, age, sex, or familial status, in compliance with applicable 
Federal and State law. This requirement will be met if the resident is 
offered the opportunity to relocate to other suitable housing under the 
Public Housing Program, any of the housing assistance programs under 
Section 8 of the Act, or

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any other Federal, State or local program that is comparable, as to 
standards of housing quality, admission and rent, to the programs under 
the Act, and provides a term of assistance of at least five years; and
    (2) Payment for actual, reasonable moving and related expenses.
    (c) Temporary relocation. A nonpurchasing resident who must relocate 
temporarily to permit work to be carried out shall be provided suitable, 
decent, safe and sanitary housing for the temporary period and 
reimbursed for all reasonable out-of-pocket expenses incurred in 
connection with the temporary relocation, including the cost of moving 
to and from the temporarily occupied housing and any increase in monthly 
rent and utility costs.



Sec. 906.11  Nonroutine maintenance reserve.

    (a) When reserve is required. A nonroutine maintenance reserve shall 
be established for all multifamily properties sold under a homeownership 
plan. For single-family dwellings, such a reserve shall not be required 
if the availability of the funds needed for nonroutine maintenance is 
adequately addressed under the affordability standard prescribed by the 
plan.
    (b) Purpose of reserve. The purpose of this reserve shall be to 
provide a source of reserve funds for nonroutine maintenance (including 
replacement), as necessary to ensure the long-term success of the plan, 
including protection of the interests of the homeowners and the PHA. The 
amounts to be set aside, and other terms of this reserve, shall be as 
necessary and appropriate for the particular homeownership plan, taking 
into account such factors as prospective needs for nonroutine 
maintenance, the homeowners' financial resources, and any special 
factors that may aggravate or mitigate the need for such a reserve.



Sec. 906.12  Purchase prices and financing.

    (a) Below-market terms. To ensure affordability by eligible 
purchasers, by the standard adopted under Sec. 906.8(e), a homeownership 
plan may provide for below-market purchase prices or below-market 
financing, or a combination of the two. Discounted purchase prices may 
be determined on a unit-by-unit basis, based on the particular 
purchaser's ability to pay, or may be determined by any other fair and 
reasonable method (e.g., uniform prices for a group of comparable 
dwellings, within a range of affordability by a group of potential 
purchasers).
    (b) Types of financing. Any type of private or public financing may 
be used (e.g., conventional, Federal Housing Administration (FHA), 
Department of Veterans Affairs (VA), Farmers' Home Administration 
(FmHA), or a State or local program). A PHA may finance or assist in 
financing purchase by any methods it may choose, such as purchase-money 
mortgages, guarantees of mortgage loans from other lenders, shared 
equity, or lease-purchase arrangements.



Sec. 906.13  Protection against fraud and abuse.

    A homeownership plan shall include appropriate protections against 
any risks of fraud or abuse that are presented by the particular plan, 
such as collusive purchase for the benefit of nonresidents, extended use 
of the dwelling by the purchaser as rental property, or collusive sale 
that would circumvent the resale profit limitation of Sec. 906.14.



Sec. 906.14  Limitation on resale profit.

    (a) General. If a dwelling is sold to the initial purchaser for less 
than fair market value, the homeownership plan shall provide for 
appropriate measures to preclude realization by the initial purchaser of 
windfall profit on resale. ``Windfall profit'' means all or a portion of 
the resale proceeds attributable to the purchase price discount (the 
fair market value at date of purchase from the PHA less the below-market 
purchase price), as determined by one of the methods described in 
paragraphs (b) through (d) of this section. Subject to that requirement, 
however, purchasers should be permitted to retain any resale profit 
attributable to appreciation in value after purchase (or a portion of 
such profit under a limited or shared equity arrangement), along with 
any portion of the resale profit

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that is fairly attributable to improvements made by them after purchase.
    (b) Promissory note method. Where there is potential for a windfall 
profit because the dwelling unit is sold to the initial purchaser for 
less than fair market value, without a commensurate limited or shared 
equity restriction, the initial purchaser shall execute a promissory 
note, payable to the PHA, along with a mortgage securing the obligation 
of the note, on the following terms and conditions:
    (1) The principal amount of indebtedness shall be the lesser of:
    (i) The purchase price discount, as determined by the definition in 
paragraph (a) of this section and stated in the note as a dollar amount; 
or
    (ii) The net resale profit, in an amount to be determined upon 
resale by a formula stated in the note. That formula shall define net 
resale profit as the amount by which the gross resale price exceeds the 
sum of:
    (A) The discounted purchase price;
    (B) Reasonable sale costs charged to the initial purchaser upon 
resale; and
    (C) Any increase in the value of the property that is attributable 
to improvements paid for or performed by the initial purchaser during 
tenure as a homeowner.
    (2) At the option of the PHA, the note may provide for automatic 
reduction of the principal amount over a specified period of ownership 
while the property is used as the purchaser's family residence, 
resulting in total forgiveness of the indebtedness over a period of not 
less than five years from the date of conveyance, in annual increments 
of not more than 20 percent. This does not require a PHA's plan to 
provide for any such reduction at all, or preclude it from specifying 
terms that are less generous to the purchaser than those stated in the 
foregoing sentence.
    (3) To preclude collusive resale that would circumvent the intent of 
this section, the PHA shall (by an appropriate form of title 
restriction) condition the initial purchaser's right to resell upon 
approval by the PHA, to be based solely on the PHA's determination that 
the resale price represents fair market value or a lesser amount that 
will result in payment to the PHA, under the note, of the full amount of 
the purchase price discount (subject to any accrued reduction, if 
provided for by the homeownership plan pursuant to paragraph (b)(2) of 
this section). If so determined, the PHA shall be obligated to approve 
the resale.
    (4) The PHA may, in its sole discretion, agree to subordination of 
the mortgage that secures the promissory note, in favor of an additional 
lien granted by the purchaser as security for a loan for home 
improvements or other purposes approved by the PHA.
    (c) Limited equity method. As a second option, the requirement of 
this section may be satisfied by an appropriate form of limited equity 
arrangement, restricting the amount of net resale profit that may be 
realized by the seller (the initial purchaser and successive purchasers 
over a period prescribed by the homeownership plan) to the sum of:
    (1) The seller's paid-in equity;
    (2) The portion of the resale proceeds attributable to any 
improvements paid for or performed by the seller during homeownership 
tenure; and
    (3) An allowance for a portion of the property's appreciation in 
value during homeownership tenure, calculated by a fair and reasonable 
method specified in the homeownership plan (e.g., according to a price 
index factor or other measure).
    (d) Third option. The requirements of this section may be satisfied 
by any other fair and reasonable arrangement that will accomplish the 
essential purposes stated in paragraph (a) of this section.
    (e) Appraisal. Determinations of fair market value under this 
section shall be made on the basis of appraisal within a reasonable time 
prior to sale by an independent appraiser, to be selected by the PHA.



Sec. 906.15  Use of sale proceeds.

    (a) General authority for use. Sale proceeds may, after provision 
for sale and administrative costs that are necessary and reasonable for 
carrying out the homeownership plan, be retained by the PHA and used for 
housing assistance to low-income families (as such families are defined 
under the Act). The term ``sale proceeds'' includes all

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payments made by purchasers for credit to the purchase price (e.g., 
earnest money, downpayments, payments out of the proceeds of mortgage 
loans, and principal and interest payments under purchase-money 
mortgages), along with any amounts payable upon resale under 
Sec. 906.14, and interest earned on all such receipts. (Residual 
receipts, as defined in the ACC, shall not be treated as sale proceeds.)
    (b) Permissible uses. Sale proceeds may be used for any one or more 
of the following forms of housing assistance for low-income families, at 
the discretion of the PHA and as stated in the HUD-approved 
homeownership plan:
    (1) In connection with the homeownership plan from which the funds 
are derived, for purposes that are justified to ensure the success of 
the plan and to protect the interests of the homeowners, the PHA and any 
other entity with responsibility for carrying out the plan. Nonexclusive 
examples include nonroutine maintenance reserves under Sec. 906.11; a 
reserve for loans to homeowners to prevent or cure default or for other 
emergency housing needs; a reserve for any contingent liabilities of the 
PHA under the homeownership plan (such as PHA guaranty of mortgage 
loans); and a reserve for PHA repurchase, repair and resale of homes in 
the event of defaults.
    (2) In connection with another HUD-approved homeownership plan under 
this part, for assistance to purchasers and for reasonable planning and 
implementation costs.
    (3) In connection with a State or local homeownership program for 
low-income families, as described in the homeownership plan, for 
assistance to purchasers and for reasonable planning and implementation 
costs. Under such programs, sales proceeds may be used to construct or 
acquire additional dwellings for sale to low-income families, or to 
assist such families in purchasing other dwellings from public or 
private owners.
    (4) In connection with the PHA's other public housing that remains 
under ACC, for any purposes authorized for the use of operating funds 
under the ACC and applicable provisions of the Act and Federal 
regulations, as included in the HUD-approved operating budgets. Examples 
include maintenance and modernization, augmentation of operating 
reserves, protective services, and resident services. Such use shall not 
result in the reduction of the operating subsidy otherwise payable to 
the PHA under 24 CFR part 990.
    (5) In connection with any other type of Federal, State, or local 
housing program for low-income families, as described in the 
homeownership plan.



Sec. 906.16  Replacement housing.

    (a) Replacement requirement. As a condition for transfer of 
ownership under a HUD-approved homeownership plan, the PHA must obtain a 
funding commitment, from HUD or another source, for the replacement of 
each of the dwellings to be sold under the plan. Replacement housing may 
be provided by one or any combination of the following methods:
    (1) Development by the PHA of additional public housing under 24 CFR 
part 941 (by new construction or acquisition).
    (2) Rehabilitation of vacant public housing owned by the PHA.
    (3) Use of five-year, tenant-based certificate or voucher assistance 
under Section 8 of the Act.
    (4) If the homeownership plan is submitted by the PHA for sale to 
residents through an RMC, resident organization or cooperative 
association which is otherwise eligible to participate under this part, 
acquisition of nonpublicly-owned housing units, which the RMC, resident 
organization or cooperative association will operate as rental housing, 
comparable to public housing as to term of assistance, housing 
standards, eligibility, and contribution to rent.
    (5) Any other Federal, State, or local housing program that is 
comparable, as to housing standards, eligibility and contribution to 
rent, to the programs referred to in paragraphs (a)(1) through (a)(3) of 
this section, and provides a term of assistance of not less than five 
years.
    (b) Funding commitments. Although a HUD funding commitment is 
required if the replacement housing requirement is to be satisfied 
through any of the HUD programs listed in paragraph (a) of this section, 
HUD's approval of a Section 5(h) homeownership plan on

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the expectation that such a funding commitment will be forthcoming shall 
not constitute a binding obligation to make such a commitment. Where the 
requirement is to be satisfied under a State or local program, or a 
Federal program not administered by HUD, a funding commitment shall be 
required from the proper authority.
    (c) Use of sale proceeds to fund replacement housing. Sale proceeds 
that are generated under the homeownership plan may be used under some 
of the replacement housing options under paragraph (a) of this section 
(e.g., rehabilitation of vacant public housing units, or an eligible 
local program). Where a homeownership plan provides for sale proceeds to 
be used for replacement housing, HUD approval of the plan and execution 
of the PHA-HUD implementing agreement shall satisfy the funding 
commitment requirement of paragraph (a) of this section, with regard to 
the amount of replacement housing to be funded out of sale proceeds.
    (d) Consistency with current housing needs. Replacement housing may 
differ from the dwellings sold under the homeownership plan, as to unit 
sizes or family or elderly occupancy, if the PHA determines that such 
change is consistent with current local housing needs for low-income 
families.
    (e) Inapplicability to prior plans. This section shall not apply to 
homeownership plans that were submitted to HUD under the Section 5(h) 
Homeownership Program prior to October 1, 1990.



Sec. 906.17  Records, reports, and audits.

    The PHA shall be responsible for the maintenance of records 
(including sale and financial records, which must include information on 
the racial and ethnic characteristics of the purchasers) for all 
activities incident to implementation of the HUD-approved homeownership 
plan. Until all planned sales of individual dwellings have been 
completed, the PHA shall submit to HUD annual sales reports, in a form 
prescribed by HUD. The receipt, retention, and expenditure of the sale 
proceeds shall be covered in the regular independent audits of the PHA's 
public housing operations, and any supplementary audits that HUD may 
find necessary for monitoring. Where another entity is responsible for 
sale of individual units, pursuant to Sec. 906.7(b), the PHA must ensure 
that the entity's responsibilities include proper recordkeeping and 
accountability to the PHA, sufficient to enable the PHA to monitor 
compliance with the approved homeownership plan, to prepare its reports 
to HUD, and to meet its audit responsibilities. All books and records 
shall be subject to inspection and audit by HUD and the General 
Accounting Office (GAO).

(Approved by the Office of Management and Budget under control number 
2577-0201)



Sec. 906.18  Submission and review of homeownership plan.

    Whether to develop and submit a proposed homeownership plan is a 
matter within the discretion of each PHA. A PHA may initiate a proposal 
at any time, according to the following procedures:
    (a) Preliminary consultation with HUD staff. Before submission of a 
proposed plan, the PHA shall consult informally with the appropriate HUD 
Field Office to assess feasibility and the particulars to be addressed 
by the plan.
    (b) Submission to HUD. The PHA shall submit the proposed plan, 
together with supporting documentation, in a format prescribed by HUD, 
to the appropriate HUD Field Office.
    (c) Conditional approval. Conditional approval may be given, at HUD 
discretion, where HUD determines that to be justified. For example, 
conditional HUD approval might be a necessary precondition for the PHA 
to obtain the funding commitments required to satisfy the requirements 
for final HUD approval of a complete homeownership plan. Where 
conditional approval is granted, HUD will specify the conditions in 
writing.

(Approved by the Office of Management and Budget under control number 
2577-0201)



Sec. 906.19  HUD approval and PHA-HUD implementing agreement.

    Upon HUD notification to the PHA that the homeownership plan is 
approvable (in final form that satisfies all applicable requirements of 
this part), the PHA and HUD will execute a written implementing 
agreement, in a

[[Page 350]]

form prescribed by HUD, to evidence HUD approval and authorization for 
implementation. The plan itself, as approved by HUD, shall be 
incorporated in the implementing agreement. Any of the items of 
supporting documentation may also be incorporated, if agreeable to the 
PHA and HUD. The PHA shall be obligated to carry out the approved 
homeownership plan and other provisions of the implementing agreement 
without modification, except with written approval by HUD.

(Approved by the Office of Management and Budget under control number 
2577-0201)



Sec. 906.20  Content of homeownership plan.

    The homeownership plan must address the following matters, as 
applicable to the particular factual situation:
    (a) Property description. A description of the property, including 
identification of the development and the specific dwellings to be sold.
    (b) Repair or rehabilitation. If applicable, a plan for any repair 
or rehabilitation required under Sec. 906.6, based on the assessment of 
the physical condition of the property that is included in the 
supporting documentation.
    (c) Purchaser eligibility and selection. The standards and 
procedures to be used for homeownership applications and the eligibility 
and selection of purchasers, consistent with the requirements of 
Sec. 906.8. If the homeownership plan allows application for purchase of 
vacant units by families who are not presently public housing or Section 
8 residents and not already on the PHA's waiting lists for those 
programs, the plan must include an affirmative fair housing marketing 
strategy for such families, including specific steps to inform them of 
their eligibility to apply, and to solicit applications from those in 
the housing market who are least likely to apply for the program without 
special outreach.
    (d) Sale and financing. Terms and conditions of sale and financing 
(see, particularly, Secs. 906.11 through 906.14).
    (e) Future consultation with residents. A plan for consultation with 
residents during the implementation stage (See Sec. 906.5). If 
appropriate, this may be combined with the plan for counseling.
    (f) Counseling. Counseling, training, and technical assistance to be 
provided in accordance with Sec. 906.9.
    (g) Sale via resident-controlled entity. If the plan contemplates 
sale to residents via an entity other than the PHA, a description of 
that entity's responsibilities and information demonstrating that the 
requirements of Sec. 906.7(b) have been met or will be met in a timely 
fashion.
    (h) Nonpurchasing residents. If applicable, a plan for nonpurchasing 
residents, in accordance with Sec. 906.10.
    (i) Sale proceeds. An estimate of the sale proceeds and an 
explanation of how they will be used, in accordance with Sec. 906.15.
    (j) Replacement housing. A replacement housing plan, in accordance 
with Sec. 906.16.
    (k) Administration. An administrative plan, including estimated 
staffing requirements.
    (l) Records, accounts and reports. A description of the 
recordkeeping, accounting and reporting procedures to be used, including 
those required by Sec. 906.17.
    (m) Budget. A budget estimate, showing the costs of implementing the 
plan, and the sources of the funds that will be used.
    (n) Timetable. An estimated timetable for the major steps required 
to carry out the plan.

(Approved by the Office of Management and Budget under control number 
2577-0201)



Sec. 906.21  Supporting documentation.

    The following supporting documentation shall be submitted to HUD 
with the proposed homeownership plan, as appropriate for the particular 
plan:
    (a) Property value estimate. An estimate of the fair market value of 
the property, including the range of fair market values of individual 
dwellings, with information to support the reasonableness of the 
estimate. (The purpose of this data is merely to assist HUD in 
determining whether, taking into consideration the estimated fair market 
value of the property, the plan adequately addresses any risks of fraud 
and abuse pursuant to Sec. 906.13 and of windfall profit upon resale, 
pursuant to Sec. 906.14. A formal appraisal need not be

[[Page 351]]

submitted with the proposed homeownership plan.)
    (b) Physical assessment. An assessment of the physical condition of 
the property, based on the standards specified in Sec. 906.6.
    (c) Workability. A statement demonstrating the practical workability 
of the plan, based on analysis of data on such elements as purchase 
prices, costs of repair or rehabilitation, homeownership costs, family 
incomes, availability of financing, and the extent to which there are 
eligible residents who are expected to be interested in purchase. (See 
Sec. 906.4(a)).
    (d) Commitment and capability. Information to substantiate the 
commitment and capability of the PHA and any other entity with 
substantial responsibilities for implementing the plan.
    (e) Resident planning input. A description of resident consultation 
activities carried out pursuant to Sec. 906.5 before submission of the 
plan, with a summary of the views and recommendations of residents and 
copies of any written comments that may have been submitted to the PHA 
by individual residents and resident organizations, and any other 
individuals and organizations.

    (f) Nondiscrimination certification. The PHA's certification that it 
will administer the plan on a nondiscriminatory basis, in accordance 
with the Fair Housing Act, Title VI of the Civil Rights Act of 1964, 
Executive Order 11063, and implementing regulations, and will assure 
compliance with those requirements by any other entity that may assume 
substantial responsibilities for implementing the plan.

    (g) Legal opinion. An opinion by legal counsel to the PHA, stating 
that counsel has reviewed the plan and finds it consistent with all 
applicable requirements of Federal, State, and local law, including 
regulations as well as statutes. In addition, counsel must identify the 
major legal requirements that remain to be met in implementing the plan, 
if approved by HUD as submitted, indicating an opinion about whether 
those requirements can be met without special problems that may disrupt 
the timetable or other features contained in the plan.

    (h) Board resolution. A resolution by the PHA's Board of 
Commissioners, evidencing its approval of the plan.

    (i) Other information. Any other information that may reasonably be 
required for HUD review of the plan. Except for the PHA-HUD implementing 
agreement under Sec. 906.19, HUD approval is not required for documents 
to be prepared and used by the PHA in implementing the plan (such as 
contracts, applications, deeds, mortgages, promissory notes, and 
cooperative or condominium documents), if their essential terms and 
conditions are described in the plan. Consequently, those documents need 
not be submitted as part of the plan or the supporting documentation.

(Approved by the Office of Management and Budget under control number 
2577-0201)



PART 908--ELECTRONIC TRANSMISSION OF REQUIRED FAMILY DATA FOR PUBLIC HOUSING, INDIAN HOUSING, AND THE SECTION 8 RENTAL CERTIFICATE, RENTAL VOUCHER, AND MODERATE REHABILITATION PROGRAMS--Table of Contents




Sec.
908.101  Purpose.
908.104  Requirements.
908.108  Cost.
908.112  Extension of time.

    Authority: 42 U.S.C. 1437f, 3535(d), 3543, 3544, and 3608a.

    Source: 60 FR 11628, Mar. 2, 1995, unless otherwise noted.



Sec. 908.101  Purpose.

    The purpose of this part is to require Housing Agencies (HAs) that 
operate public housing, Indian housing, or Section 8 Rental Certificate, 
Rental Voucher and Moderate Rehabilitation programs to electronically 
submit certain data to HUD for those programs. This electronically 
submitted data is required for HUD Forms HUD-50058, Family Report, and 
HUD-50058-FSS, Family Self-Sufficiency Addendum.



Sec. 908.104  Requirements.

    (a) Automated HAs. Housing agencies that currently use automated 
software

[[Page 352]]

packages to transmit Forms HUD-50058 and HUD-50058-FSS information by 
tape or diskette to the Department's data processing contractor must 
convert to telephonic electronic transmission of that data in a HUD 
specified format by June 30, 1995.
    (b) Nonautomated HAs. Housing agencies that currently prepare and 
transmit the HUD-50058 and HUD-50058-FSS information to HUD paper must:
    (1) Complete a vendor search and obtain either:
    (i) The necessary hardware and software required to develop and 
maintain an in-house automated data processing system (ADP) used to 
generate electronic submission of the data for these forms via 
telephonic network; or
    (ii) A service contract for the operation of an automated system to 
generate electronic submission of the data for these forms via 
telephonic network;
    (2) Complete their data loading; and
    (3) Begin electronic transmission by March 2, 1996.
    (c) Electronic transmission of data. Electronic transmission of data 
consists of submission of all required data fields (correctly formatted) 
from the forms HUD-050058 and HUD-50058-FSS telephonically, in 
accordance with HUD instructions. Regardless of whether an HA obtains 
the ADP system itself or contracts with a service bureau to provide the 
system, the software must be periodically updated to incorporate changes 
or revisions in legislation, regulations, handbooks, notices, or HUD 
electronic transmission data format requirements.
    (d) Service contract. HAs that determine that the purchase of 
hardware and/or software is not cost effective may contract out the 
electronic data transmission function to organizations that provide such 
services, including, but not limited to the following organizations: 
local management associations and management agents with centralized 
facilities. HAs that contract out the electronic transmission function 
must retain the ability to monitor the day-to-day operations of the 
project at the HA site and be able to demonstrate the ability to the 
relevant HUD Field Office.
    (e) Notwithstanding the provisions of paragraphs (a) and (b) of this 
section, the Department may approve transmission of the data by tape or 
diskette if it determines that the cost of telephonic transmission would 
be excessive.

(Approved by the Office of Management and Budget under control number 
2577-0083)



Sec. 908.108  Cost.

    (a) General. The costs of the electronic transmission of the 
correctly formatted data, including either the purchase and maintenance 
of computer hardware or software, or both, the cost of contracting for 
those services, or the cost of centralizing the electronic transmission 
function, shall be considered Section 8 Administrative expenses, or 
eligible public and Indian housing operating expenses that can be 
included in the public and Indian housing operating budget. At the HA's 
option, the cost of the computer software may include service contracts 
to provide maintenance or training, or both.
    (b) Sources of funding. For public and Indian housing, costs may be 
covered from operating subsidy for which the HA is already eligible, or 
the initial cost may be covered by funds received by the HA under HUD's 
Comprehensive Improvement Assistance Program (CIAP) or Comprehensive 
Grant Program (CGP). For Section 8 programs, the costs may be covered 
from ongoing administrative fees or the Section 8 operating reserve.



Sec. 908.112  Extension of time.

    The HUD Field Office may grant an HA an extension of time, of a 
reasonable period, for implementation of the requirements of 
Sec. 908.104, if it determines that such electronic submission is 
infeasible because of one of the following:
    (a) Lack of staff resources;
    (b) Insufficient financial resources to purchase the required 
hardware, software or contractual services; or
    (c) Lack of adequate infrastructure, including, but not limited to, 
the inability to obtain telephone service to transmit the required data.

[[Page 353]]



PART 941--PUBLIC HOUSING DEVELOPMENT--Table of Contents




                           Subpart A--General

Sec.
941.101  Purpose and scope.
941.102  Development methods and funding.
941.103  Definitions.

           Subpart B--PHA Eligibility and Program Requirements

941.201  PHA eligibility.
941.202  Site and neighborhood standards.
941.203  Design and construction standards.
941.205  PHA contracts.
941.207  Displacement, relocation, and acquisition.
941.208  Other Federal requirements.
941.209  Audit.

                   Subpart C--Application and Proposal

Sec.
941.301  Application.
941.302  Annual contributions contract; drawdowns and advances.
941.303  Site acquisition proposal.
941.304  Full proposal content.
941.305  Technical processing and approval.
941.306  Maximum development cost.

                     Subpart D--Project Development

Sec.
941.401  Site and property acquisition.
941.402  Project design and construction.
941.403  Acceptance of work and contract settlement.
941.404  Completion of development.

                      Subpart E--Performance Review

941.501  HUD review of PHA performance; sanctions.

Subpart F--Public/Private Partnerships for the Mixed Finance Development 
                         of Public Housing Units

Sec.
941.600  Purpose.
941.602  Applicability of other requirements.
941.604  Definitions.
941.606  Proposal.
941.608  Technical processing and approval.
941.610  Evidentiary materials and other documents.
941.612  Disbursement of grant funds.
941.614  HUD monitoring and review.
941.616  Sanctions.

    Authority: 42 U.S.C. 1437b, 1437c, 1437g, and 3535(d).

    Source: 45 FR 60838, Sept. 12, 1980, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.



                           Subpart A--General



Sec. 941.101  Purpose and scope.

    (a) Purpose. The U.S. Housing Act of 1937 (Act), 42 U.S.C. 1437, 
authorizes HUD to assist public housing agencies (PHAs) with the 
development and operation of low-income housing projects and financial 
assistance in the form of grants (42 U.S.C. 1437c, 1437g, and 1437l). 
The purpose of the program is to develop units which serve the needs of 
public housing residents over the long term and have the lowest possible 
life cycle costs, taking into account future operating and replacement 
costs, as well as original capital investments.
    (b) Scope. This part is the regulation under which a PHA develops 
low-income housing (excluding Indian housing), herein called public 
housing.
    (c) Approved information collections. The following sections of this 
part have been approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 (42 U.S.C. 3501-
3520) and assigned the OMB approval numbers indicated:

------------------------------------------------------------------------
  Approval
    No.                                Sections
------------------------------------------------------------------------
2577-0033..  941.207, 941.301, 941.303, 941.304, 941.606, 941.610.
2577-0036..  941.205, 941.404.
2577-0039..  941.402.
------------------------------------------------------------------------


[61 FR 38016, July 22, 1996, as amended at 64 FR 13511, Mar. 19, 1999]

    Effective Date Notes: 1. At 61 FR 38016, July 22, 1996, Sec. 941.101 
was revised. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.
    2. At 64 FR 13511, Mar. 19, 1999, Sec. 941.101 was amended by 
revising the chart appearing at the end of paragraph (c), effective Apr. 
19, 1999. For the convenience of the user, the superseded text is set 
forth as follows:

Sec. 941.101  Purpose and scope.

                                * * * * *

    (c) * * *

[[Page 354]]



------------------------------------------------------------------------
  Approval
    No.                                Sections
------------------------------------------------------------------------
2577-0024..  941.304(j).
2577-0033..  941.301, 941.303, 941.304 except para. (j), 941.402,
              941.606, 941.610.
2577-0036..  941.304, except para. (j).
2577-0039..  941.205, 941.404.
------------------------------------------------------------------------



Sec. 941.102  Development methods and funding.

    (a) Methods. A PHA may use any generally accepted method of 
development including, but not limited to, conventional, turnkey, 
acquisition with or without rehabilitation, mixed-finance, and force 
account.
    (1) Conventional. Under this method, the PHA is responsible for 
selecting a site or property and designing the project. The PHA 
advertises for competitive bids to build or rehabilitate the development 
on the PHA-owned site. The PHA awards a construction contract in 
accordance with 24 CFR part 85. The contractor receives progress 
payments from the PHA during construction or rehabilitation and a final 
payment upon completion of the project in accordance with the 
construction contract. The conventional method may be used for either 
new construction or rehabilitation.
    (2) Turnkey. The turnkey method involves the advertisement and 
selection of a turnkey developer by the PHA, based on the best housing 
package for a site or property owned or to be purchased by the 
developer. Following HUD approval of the PHA's full proposal, the 
developer prepares the design and construction documents. The PHA and 
the developer execute the contract of sale to implement the PHA's full 
proposal. The developer is responsible for providing a completed housing 
project, which includes obtaining construction financing. Upon 
completion of project construction or rehabilitation in accordance with 
the contract of sale, the PHA purchases the development from the 
developer. This method may be used for either new construction or 
rehabilitation.
    (3) Acquisition. The acquisition method involves a purchase of 
existing property that requires little or no repair work. Any needed 
repair work is completed after acquisition, either by the PHA 
contracting to have the work done or by having the staff of the PHA 
perform the work.
    (4) Mixed-finance. This method involves financing from both public 
and private sources and may involve ownership of the public housing 
units by an entity other than the PHA. This method of development may be 
carried out by a PHA only in accordance with the requirements set forth 
in subpart F.
    (5) Force account. The force account method involves use of PHA 
staff to carry out new construction or rehabilitation. A PHA may only 
develop a full proposal based on the force account method if HUD has 
determined that the PHA has the capability to develop successfully the 
public housing units using this method.
    (b) Funding. A PHA may develop public housing with:
    (1) Development funds reserved by HUD for that purpose;
    (2) Modernization funds under section 14 of the Act (42 U.S.C. 
1437l), to the extent authorized by law and under procedures approved by 
HUD; and/or
    (3) Funds available to it from any other source, consistent with 
Sec. 941.306(c), or as may be otherwise approved by HUD.
    (c) Limit on number of units. (1) General. A PHA may not develop 
public housing pursuant to this part beyond the lesser of the number of 
units that the PHA had under ACC on August 21, 1996, or the number of 
units for which it was receiving operating subsidy on that date, unless 
authorized by HUD. HUD may condition such authorization on the PHA's 
agreement that such incremental units, once developed, will be 
ineligible for capital and/or operating subsidies from HUD.
    (2) Replacement housing units. With respect to units constructed to 
replace public housing units that were demolished or disposed of, a PHA 
may use (in whole or in part) funding from non-HUD sources or from HUD 
funding not provided under the Act. However, development of such units 
must be approved by HUD in advance for them to be eligible for inclusion 
under the ACC.

[61 FR 38016, July 22, 1996]

[[Page 355]]



Sec. 941.103  Definitions.

    The terms HUD and Public Housing Agency (PHA) are defined in 24 CFR 
part 5.
    Act. The U.S. Housing Act of 1937 (42 U.S.C. 1437).
    Annual Contributions Contract (ACC). A contract (in the form 
prescribed by HUD) for loans and contributions, which may be in the form 
of grants, whereby HUD agrees to provide financial assistance and the 
PHA agrees to comply with HUD requirements for the development and 
operation of a public housing project.
    Construction Contract. A contract between the PHA and a contractor 
to build or rehabilitate a project using the conventional development 
method.
    Construction documents. The working drawings and construction 
specifications and the rehabilitation work write-ups, where applicable, 
that set forth the work to be done under a construction contract or 
contract of sale.
    Contract of sale. A contract between the PHA and a developer whereby 
the PHA agrees to purchase a completed project after construction or 
rehabilitation by a developer using the turnkey development method.
    Cooperation Agreement. An agreement between a PHA and the applicable 
local governing body or bodies which assures exemption from real and 
personal property taxes, provides for local support and services for the 
development and operation of a public housing project, and provides for 
PHA payments in lieu of taxes.
    Design documents. The preliminary drawings and specifications and 
the preliminary rehabilitation work write-ups, where applicable, in 
sufficient detail to define the extent of construction or rehabilitation 
and demonstrate compliance with HUD design and construction standards.
    Proposal. A document submitted by a PHA to HUD, in accordance with 
subpart C of this part, for approval of the development of a public 
housing project. As used in this part, ``proposal'' refers to both the 
``site acquisition proposal'' (Sec. 941.303), and the ``full proposal'' 
(Sec. 941.304), unless specifically indicated otherwise.
    Reformulation. The procedure by which HUD approves division of a 
project (including units and related funds) into two or more projects, 
or combining two or more projects into one, or redistributing units and 
related funds in a project among two or more projects, in order to 
provide PHAs with the flexibility to adapt to site availability, to 
resolve development problems, to acquire buildings ready for development 
(before acquisition of other buildings), and to save on interest and 
initial operating costs.
    Total development cost (TDC). The sum of all HUD-approved costs for 
planning (including proposal preparation), administration, site 
acquisition, relocation, demolition, construction and equipment, 
interest and carrying charges, on-site streets and utilities, non-
dwelling facilities, a contingency allowance, insurance premiums, off-
site facilities, any initial operating deficit, and other costs 
necessary to develop the project. The total development cost in the 
proposal, when reviewed and approved by HUD, becomes the maximum total 
development cost stated in the ACC. Upon completion of the project, the 
actual development cost is determined, and this becomes the maximum 
total development cost of the project for purposes of the ACC. The 
maximum total development cost excludes costs funded from donations.

[45 FR 60838, Sept. 12, 1980, as amended at 56 FR 13282, Apr. 1, 1991; 
58 FR 62524, Nov. 29, 1993; 61 FR 5214, Feb. 9, 1996; 61 FR 38017, July 
22, 1996; 62 FR 27125, May 16, 1997]



           Subpart B--PHA Eligibility and Program Requirements



Sec. 941.201  PHA eligibility.

    (a) General. In order to participate in the public housing program, 
a PHA must be approved as an eligible PHA. HUD will determine 
eligibility based on a showing that the PHA has the legal authority and 
local cooperation required by this part.
    (b) Legal authority. The PHA must demonstrate that it has the legal 
authority to develop, own, and operate a public housing project under 
the Act.
    (c) Troubled PHAs. Unless HUD determines that a PHA that has been 
classified as troubled or modernization-troubled, in accordance with 24 
CFR part 901, has adequate capacity to develop

[[Page 356]]

public housing units, the PHA so classified shall engage a HUD-approved 
program manager to develop and implement the PHA's proposal. HUD shall 
review the solicitation and the selection before award of a contract is 
made by such a PHA.
    (d) Local cooperation. The PHA must provide a cooperation agreement 
between the PHA and the applicable local governing body for the area in 
which the public housing project is to be located as evidence that the 
local governing body will provide the local cooperation required by HUD 
pursuant to the Act. This local cooperation shall include exemption from 
real and personal property taxes, acceptance of PHA payments in lieu of 
taxes, and the provision at no cost or at no greater cost by the local 
governing body of the same public services and facilities normally 
furnished to others in the community.

[45 FR 60838, Sept. 12, 1980. Redesignated at 49 FR 6714, Feb. 23, 1984, 
as amended at 61 FR 38017, July 22, 1996]



Sec. 941.202  Site and neighborhood standards.

    Proposed sites for public housing projects to be newly constructed 
or rehabilitated must be approved by the field office as meeting the 
following standards:
    (a) The site must be adequate in size, exposure and contour to 
accommodate the number and type of units proposed, and adequate 
utilities (e.g., water, sewer, gas and electricity) and streets must be 
available to service the site.
    (b) The site and neighborhood must be suitable from the standpoint 
of facilitating and furthering full compliance with the applicable 
provisions of Title VI of the Civil Rights Act of 1964, Title VIII of 
the Civil Rights Act of 1968, E.O. 11063, and HUD regulations issued 
pursuant thereto.
    (c)(1)The site for new construction projects must not be located in:
    (i) An area of minority concentration unless (A) sufficient, 
comparable opportunities exist for housing for minority families, in the 
income range to be served by the proposed project, outside areas of 
minority concentration, or (B) the project is necessary to meet 
overriding housing needs which cannot otherwise feasibly be met in that 
housing market area. An ``overriding need'' may not serve as the basis 
for determining that a site is acceptable if the only reason the need 
cannot otherwise feasibly be met is that discrimination on the basis of 
race, color, religion, creed, sex, or national origin renders sites 
outside areas of minority concentration unavailable; or
    (ii) A racially mixed area if the project will cause a significant 
increase in the proportion of minority to non-minority residents in the 
area.
    (2) Notwithstanding any other provision of this paragraph (c), 
public housing units constructed after demolition of public housing 
units may be built on the original public housing site, or in the same 
neighborhood, if one of the following criteria is satisfied:
    (i) The number of public housing units being constructed is no more 
than 50 percent of the number of units in the original project;
    (ii) In the case of replacement of a currently occupied project, the 
number of public housing units being constructed is the minimum number 
needed to house current residents who want to remain at the site; or
    (iii) The public housing units being constructed constitute no more 
than twenty-five units.
    (d) The site must promote greater choice of housing opportunities 
and avoid undue concentration of assisted persons in areas containing a 
high proportion of low-income persons.
    (e) The site must be free from adverse environmental conditions, 
natural or manmade, such as instability, flooding, septic tank back-ups, 
sewage hazards or mudslides; harmful air pollution, smoke or dust; 
excessive noise vibration, vehicular traffic, rodent or vermin 
infestation; or fire hazards. The neighborhood must not be one which is 
seriously detrimental to family life or in which substandard dwellings 
or other undesirable elements predominate, unless there is actively in 
progress a concerted program to remedy the undesirable conditions.
    (f) The site must comply with any applicable conditions in the local 
plan approved by HUD.

[[Page 357]]

    (g) The housing must be accessible to social, recreational, 
educational, commercial, and health facilities and services, and other 
municipal facilities and services that are at least equivalent to those 
typically found in neighborhoods consisting largely of similar 
unassisted standard housing.
    (h) Travel time and cost via public transportation or private 
automobile, from the neighborhood to places of employment providing a 
range of jobs for low-income workers, must not be excessive. (While it 
is important that elderly housing not be totally isolated from 
employment opportunities, this requirement need not be adhered to 
rigidly for such projects.)
    (i) The project may not be built on a site that has occupants unless 
the relocation requirements referred to in Sec. 941.207 are met.
    (j) The project may not be built in an area that has been identified 
by HUD as having special flood hazards and in which the sale of flood 
insurance has been made available under the National Flood Insurance Act 
of 1968, unless the project is covered by flood insurance as required by 
the Flood Disaster Protection Act of 1973, and it meets any relevant HUD 
standards and local requirements.

[45 FR 60838, Sept. 12, 1980. Redesignated at 49 FR 6714, Feb. 23, 1984, 
as amended at 61 FR 38017, July 22, 1996]



Sec. 941.203  Design and construction standards.

    (a) Physical structures shall be designed, constructed and equipped 
so as to improve or harmonize with the neighborhoods they occupy, meet 
contemporary standards of modest comfort and liveability, promote 
security, and be attractive and marketable to the people they are 
intended to serve. Building design and construction shall strive to 
encourage in residents a proprietary sense, whether or not homeownership 
is intended or contemplated.
    (b) Projects must comply with:
    (1) A national building code, such as Uniform Building Code, Council 
of American Building Officials Code, or Building Officials Conference of 
America Code;
    (2) Applicable State and local laws, codes, ordinances, and 
regulations; and
    (3) Other Federal requirements, including any Federal fire-safety 
requirements and HUD minimum property standards (e.g., 24 CFR part 200, 
subpart S, and Sec. 941.208).
    (c) Projects for families with children shall consist to the maximum 
extent practicable of low-density housing (e.g., non-elevator 
structures, scattered sites or other types of low-density developments 
appropriate in the community).
    (d) High-rise elevator structures shall not be provided for families 
with children regardless of density, unless the PHA demonstrates and HUD 
determines that there is no practical alternative. High-rise buildings 
for the elderly may be used if the PHA demonstrates and HUD determines 
that such construction is appropriate, taking into consideration land 
costs, the safety and security of the prospective occupants, and the 
availability of community services.

[61 FR 38017, July 22, 1996]



Sec. 941.205  PHA contracts.

    (a) ACC requirements. In order to be considered as eligible project 
expenses, all development related contracts entered into by the PHA 
shall provide for compliance with the provisions of the ACC.
    (b) Contract forms. HUD may prescribe the form of any development 
related contracts, and the PHA shall use such forms. If a form is not 
prescribed, the PHA may develop its own form; however, it must contain 
all applicable federal requirements.
    (c) When HUD approval is required. The PHA is authorized to execute 
all development-related contracts without prior HUD review or approval 
with the exception of:
    (1) All forms of site or property acquisition contracts regardless 
of development method; and
    (2) Contracts whose amount exceeds a contract approval threshold 
established by HUD for that PHA; and
    (3) A contract for the selection of a program manager to develop and 
implement the PHA's proposal (see Sec. 941.201(c)).
    (d) Each PHA shall certify before executing any contract with a 
contractor that the contractor is not suspended,

[[Page 358]]

debarred, or otherwise ineligible under 24 CFR part 24. The PHA also 
shall ensure that all subgrantees, contractors, and subcontractors 
select only contractors who are not listed as suspended, debarred, or 
otherwise ineligible under 24 CFR part 24.

[61 FR 38018, July 22, 1996]

    Effective Date Note:  At 61 FR 38018, July 22, 1996, Sec. 941.205 
was revised. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



Sec. 941.207  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, the PHA shall assure that it has taken all 
reasonable steps to minimize the displacement of persons (households, 
businesses, nonprofit organizations, and farms) as a result of a project 
assisted under this part.
    (b) Temporary relocation. Only residential tenants who are eligible 
under 24 CFR 913.103 and who meet the PHA standards for tenancy 
established pursuant to 24 CFR 960.204 will be permitted to continue in 
occupancy. Any residential tenant who (though not required to move 
permanently) must relocate temporarily (e.g., to permit rehabilitation 
or major reconstruction) shall be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporary housing, any increase in monthly rent/
utility costs and incidental expenses.
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe and sanitary housing 
to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the building/
complex following completion of the project; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A ``displaced 
person'' (defined in paragraph (h) of this section) must be provided 
relocation assistance at the levels described in, and in accordance with 
the requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4601-4655) 
and implementing regulations at 49 CFR part 24. A ``displaced person'' 
shall be advised of his/her rights under the Fair Housing Act (42 U.S.C. 
3601-19), and, if the representative comparable replacement dwelling 
used to establish the amount of the replacement housing payment to be 
provided to a minority person is located in an area of minority 
concentration, such person also shall be given, if possible, referrals 
to comparable and suitable, decent, safe, and sanitary replacement 
dwellings not located in such areas.
    (d) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements in 49 
CFR part 24, subpart B. With respect to the Turnkey method of 
development (see 24 CFR 941.102(b)), 49 CFR 24.101(a) (1) and (2) apply 
to the PHA/developer and developer/owner transactions, respectively.
    (e) Notices. (1) As soon as possible after the date described in 
paragraph (h)(1)(i) of this section, the PHA shall issue a general 
information notice (described in 49 CFR 24.203(a)) to each occupant of 
the property.
    (2) At the time of the initiation of negotiations (defined in 
paragraph (i) of this section), the PHA shall issue an appropriate 
written notice to each person occupying the property. Those to be 
displaced shall be issued a notice of eligibility for relocation 
assistance. (This notice may be combined with the 90-day notice under 49 
CFR 24.203(c).) Tenants (eligible under 24 CFR 913.103 and the standards 
for tenancy established in accordance with 24 CFR 960.204) who will not 
be displaced shall be issued a notice offering the tenant the 
opportunity to enter into a lease to continue in occupancy of the 
property under reasonable terms and conditions.

[[Page 359]]

(Also, see paragraph (h)(1)(iii) of this section.)
    (f) Appeals. A person who disagrees with the PHA's determination 
concerning whether the person qualifies as a ``displaced person,'' or 
the amount of relocation assistance for which the person is eligible, 
may file a written appeal of that determination with the PHA. A person 
who is dissatisfied with the PHA's determination on his or her appeal 
may submit a written request for review of that determination to the HUD 
Field Office.
    (g) Responsibility of PHA. (1) The PHA shall certify (i.e., provide 
assurance of compliance, as required by 49 CFR part 24) that it will 
comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section, and shall ensure such compliance 
notwithstanding any third party's contractual obligation to the PHA to 
comply. The certification in the PHA's ``Resolution in Support of Public 
Housing Project'' that the PHA will comply with all the requirements of 
24 CFR part 941 shall constitute the PHA's certification of compliance 
with the URA, the implementing regulations at 49 CFR part 24, and this 
section.
    (2) The cost of required assistance is an eligible project cost in 
the same manner and to the same extent as other project costs. Such 
costs may also be paid from funds available from other sources.
    (3) The PHA must maintain records in sufficient detail to 
demonstrate compliance with this section, including data indicating the 
race, ethnic, gender and disability status of displaced persons.
    (h) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means a person (household, business, 
nonprofit organization, or farm) that moves from real property, or moves 
personal property from real property, permanently, as a direct result of 
acquisition, rehabilitation, or demolition for a project assisted under 
this part. The term ``displaced person'' includes, but may not be 
limited to:
    (i) A person who moves permanently from the real property after 
receiving a notice from the PHA or property owner that requires such 
move, if the move occurs on or after:
    (A) For conventional or acquisition projects, the date of approval 
by HUD of the PHA proposal incorporating the site, or for scattered 
sites, the date HUD approves the applicable site;
    (B) For turnkey projects, the date the PHA proposal is submitted to 
HUD; or
    (C) For major reconstruction of obsolete public housing projects, 
the date the PHA issues the invitation for bids for the project;
    (ii) Any person, including a person who moves before the date 
described in paragraph (h)(1)(i) of this section, that the PHA or HUD 
determines was displaced as a direct result of acquisition, 
rehabilitation, or demolition for the assisted project; or
    (iii) A tenant-occupant of a dwelling unit who moves from the 
building/complex, permanently, after the ``initiation of negotiations,'' 
(defined in paragraph (i) of this section), if the move occurs before 
the tenant is provided written notice offering him or her the 
opportunity to lease and occupy a suitable, decent, safe, and sanitary 
dwelling in the same building/complex, under reasonable terms and 
conditions, upon completion of the project. Such reasonable terms and 
conditions include a monthly rent and estimated average monthly utility 
costs that do not exceed the amount determined in accordance with 24 CFR 
913.107; or
    (iv) A tenant-occupant of a dwelling who is required to relocate 
temporarily, but does not return to the building/complex, if either:
    (A) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, 
including the cost of moving to and from the temporarily occupied unit, 
any increased housing costs and incidental expenses; or
    (B) Other conditions of the temporary relocation are not reasonable; 
or
    (v) A tenant-occupant of a dwelling who moves from the building/
complex permanently after he or she has been required to move to another 
dwelling unit in the same building/complex in order to carry out the 
project, if either:

[[Page 360]]

    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) Other conditions of the move are not reasonable; or
    (2) Notwithstanding the provisions of paragraph (h)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
of applicable Federal, State or local law, or other good cause, and the 
PHA determines that the eviction was not undertaken for the purpose of 
evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the date described in 
paragraph (h)(1)(i) of this section, but before commencing occupancy, 
received written notice of the project, its possible impact on the 
person (e.g., that the person may be displaced, temporarily relocated, 
or suffer a rent increase) and the fact that he or she would not qualify 
as a ``displaced person'' (or for assistance under this section) as a 
result of the project;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The PHA may, at any time, ask HUD to determine whether a 
displacement is or would be covered by this section.
    (i) Definition of initiation of negotiations. For purposes of this 
section, the term ``initiation of negotiations'' means:
    (1) For conventional or acquisition projects:
    (i) Where the PHA purchases the real property through an arm's-
length transaction (as described in 49 CFR 24.101(a)(1)), the seller's 
acceptance of the PHA's written offer to purchase the property (i.e., 
the seller's execution of form HUD-51971-II), provided the PHA later 
purchases the property; or such other date, as may be determined by the 
PHA with the approval of the HUD Field Office; or
    (ii) Where the PHA's purchase of the real property does not qualify 
as an arm's-length transaction under 49 CFR 24.101(a)(1), the delivery 
of the initial written purchase offer from the PHA to the Owner of the 
property (i.e., the PHA executed form HUD-51971-II). However, if the PHA 
issues a notice of intent to acquire the property, and a person moves 
after that notice, but before the initial written purchase offer, the 
``initiation of negotiations'' is the actual move of the person from the 
property;
    (2) For turnkey projects, HUD Field Office approval of the PHA's 
proposal incorporating the developer's proposal, provided the contract 
of sale is later executed; or
    (3) For major reconstruction of obsolete projects, the PHA's 
issuance of the invitation for bids for the project.

(Approved by Office of Management and Budget under OMB Control Number 
2506-0121)

[59 FR 29344, June 6, 1994]

    Effective Date Note: At 64 FR 13511, Mar. 19, 1999, Sec. 941.207 was 
amended by removing the parenthetical at the end of the section, 
effective Apr. 19, 1999.



Sec. 941.208  Other Federal requirements.

    (a) General. The PHA shall be subject to all statutory, regulatory, 
and executive order requirements applicable to public housing 
development (see, e.g., 24 CFR parts 5, 8, 35, 50, and 965), as may be 
more fully described by HUD in notices, handbooks, or other guidance.
    (b) Lead-based paint. In addition to the applicable requirements of 
24 CFR part 35, all existing properties constructed prior to 1978 and 
proposed to be acquired for family projects under this part shall be 
tested for lead-based paint on applicable surfaces, as defined in 24 CFR 
part 965. If lead based paint is found, the cost of testing and 
abatement shall be considered when justifying new construction or 
meeting maximum total development cost limitations. For any units 
containing lead-based paint, compliance with 24 CFR part 965, subpart H, 
is required, and

[[Page 361]]

abatement shall be completed prior to occupancy.

[61 FR 38018, July 22, 1996]



Sec. 941.209  Audit.

    All PHAs that receive funds under this part for the development of 
low-income housing shall comply with audit requirements in 24 CFR part 
44.

[50 FR 39092, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986]



                   Subpart C--Application and Proposal

    Source: 61 FR 38018, July 22, 1996, unless otherwise noted.



Sec. 941.301  Application.

    If funding is made available for public housing development, HUD 
will provide information about fund allocation, application deadline, 
and selection criteria and procedures through a Notice of Funding 
Availability (NOFA).

    Effective Date Note:  At 61 FR 38018, July 22, 1996, Sec. 941.301 
was revised. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



Sec. 941.302  Annual contributions contract; drawdowns and advances.

    (a) A PHA wishing to develop public housing shall execute an ACC or 
ACC amendment covering the entire amount of reserved development funds 
or the amount of modernization funds (under section 14 of the Act, 42 
U.S.C. 1437l) it proposes to use in accordance with this part. This ACC 
or ACC amendment must be executed by both the PHA and HUD before funds 
can be provided to the PHA.
    (b) Until HUD has approved a PHA's full proposal, a PHA may only 
draw down funds under the ACC for pre-development costs for materials 
and services related to proposal preparation and submission. 
Expenditures for pre-development costs shall not exceed three percent of 
the total development cost stated in the executed ACC.
    (c) HUD may approve the following in writing:
    (1) Amounts in excess of three percent of TDC for pre-development 
costs; and/or
    (2) Drawdown of funds to enable a PHA to acquire a site after 
approval by HUD of the PHA's site acquisition proposal, in accordance 
with Sec. 941.303.
    (d) After HUD approval of the full proposal, the PHA may draw down 
additional funds under the ACC to develop the public housing units in 
accordance with the approved full proposal.



Sec. 941.303  Site acquisition proposal.

    When a PHA determines that it is necessary to acquire land for 
development through new construction, it may spend funds authorized 
under this part to acquire development sites. HUD must approve a PHA's 
proposed use of funds before it may acquire sites in this manner. A PHA 
must submit the following documents for HUD review and approval, in 
accordance with the standards set forth in Sec. 941.305:
    (a) Justification. A justification for acquiring land prior to PHA 
proposal approval;
    (b) Site information. An identification and description of the 
proposed site, site plan, neighborhood, and evidence of PHA control of 
the site for at least sixty (60) days after proposal submission.
    (c) Zoning. Evidence that construction or rehabilitation is 
permitted by current zoning ordinances or regulations or evidence to 
indicate that needed rezoning is likely and will not delay the project.
    (d) Development schedule. A copy of the PHA development schedule, 
including the PHA architect estimates of the time required to complete 
each major development stage.
    (e) Environmental assessment. All available environmental 
information on the proposed development (to expedite the HUD 
environmental review).
    (f) Appraisal. An appraisal of the proposed site by an independent, 
state-certified appraiser.

[[Page 362]]


    Effective Date Note:  At 61 FR 38018, July 22, 1996, Sec. 941.303 
was revised. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



Sec. 941.304  Full proposal content.

    Each full proposal shall include at a minimum the following:
    (a) Project description. A description of the housing, including the 
number of units, schematic drawings of the proposed building and unit 
plans, outline specifications or rehabilitation work write-ups, and the 
types and amounts of non-dwelling space to be provided;
    (b) Description of development method. A description of the PHA's 
proposed development method, and a demonstration by the PHA that it will 
be able to use this method successfully to develop the public housing 
units. If the PHA proposes to use the turnkey method, it must submit a 
Board-approved certification that the developer was selected as the 
result of a public solicitation for proposals and that the selection was 
based on an objective rating system, using such factors as site 
location, project design, price, and developer experience. If the PHA 
proposes to use the acquisition method, the PHA must submit a 
certification by the PHA and owner that the property was not constructed 
with the intent that it would be sold to the PHA. If the PHA proposes to 
use the mixed-finance method, it should have consulted with HUD on its 
plans. If the PHA proposes to use the force account method to develop 
the public housing units, it must have already received approval from 
HUD of its capability to carry out the development successfully in this 
manner;
    (c) Site information. An identification and description of the 
proposed site, site plan, neighborhood, and evidence of PHA or turnkey 
developer control of the site for at least sixty (60) days after 
proposal submission;
    (d) Project costs. (1) Categories of cost. The detailed budget of 
the costs of developing the project, in accordance with the form 
prescribed by HUD. With respect to costs of demolition and relocation, 
the description must distinguish between costs related to existing 
public housing property and costs related to acquisition of a new public 
housing site;
    (2) Budget and payment schedule. A budget that identifies the 
sources of funding for relocation benefits, and a payment schedule 
anticipated to be provided under a construction contract;
    (e) Appraisal. An appraisal of the proposed site or property by an 
independent, state-certified appraiser;
    (f) Financial feasibility. Identification of funds sufficient to 
complete the development, including a reasonable contingency;
    (g) Zoning. Evidence that construction or rehabilitation is 
permitted by current zoning ordinances or regulations or evidence to 
indicate that needed rezoning is likely and will not delay the project;
    (h) Facilities. A statement addressing the adequacy of existing 
facilities and services for the prospective occupants of the project, a 
description of public improvements needed to ensure the viability of the 
proposed project with a description of the sources of funds available to 
carry out such improvements, and, if applicable, a statement addressing 
the minority enrollment and capacity of the school system to absorb the 
number of school-aged children expected to reside in the project;
    (i) Relocation. A certification by the PHA that it will comply with 
all applicable Federal relocation requirements;
    (j) Life-cycle analysis. For new construction and substantial 
rehabilitation, the criteria to be used in equipping the proposed 
project(s) with heating and cooling systems, and which shall include a 
life-cycle cost analysis of the installation, maintenance and operating 
costs of such systems pursuant to section 13 of the Act (42 U.S.C. 
1437k);
    (k) Project development schedule. A copy of the PHA development 
schedule, including the PHA architect or turnkey developer estimates of 
the time required to complete each major development stage;
    (l) Environmental assessment. All available environmental 
information on the proposed development (to expedite the HUD 
environmental review);

[[Page 363]]

    (m) Occupancy and operation policies. Statement of all PHA policies 
and practices that will be used in occupancy and operation that 
contribute to an overall objective of ending the social and economic 
isolation of low income people and promoting their economic 
independence;
    (n) New construction certification. If a PHA's proposal involves new 
construction, evidence of compliance with section 6(h) of the Act in one 
of the following two ways:
    (1) Submission of a PHA comparison of the cost of new construction 
in the neighborhood where the PHA proposes to construct the housing and 
the cost of acquisition of existing housing (with or without 
rehabilitation) in the same neighborhood; or
    (2) Certification by the PHA, accompanied by supporting 
documentation, that there is insufficient existing housing in the 
neighborhood to develop public housing through acquisition; and
    (o) Additional HUD-requested information. Any additional information 
that may be needed for HUD to determine whether it can approve the 
proposal pursuant to Sec. 941.305.

    Effective Date Note:  At 61 FR 38018, July 22, 1996, Sec. 941.304 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



Sec. 941.305  Technical processing and approval.

    (a) Standards. HUD shall review the full proposal, submitted in 
accordance with Sec. 941.304, and the site acquisition proposal, 
submitted in accordance with Sec. 941.303, to determine whether each 
proposal complies with all statutory, executive order, and regulatory 
requirements applicable to public housing development including, if 
applicable, the comments received as a result of Intergovernmental 
Review. In addition, HUD shall carry out any necessary statutory and 
executive order reviews with respect to the proposal under review. If 
HUD determines that the proposal under review is acceptable, it shall 
notify the PHA in writing and shall forward to it for execution an ACC 
(or ACC amendment). If the PHA already has executed an ACC (or ACC 
amendment) for the entire reserved amount, HUD shall notify the PHA that 
it is authorized to draw down funds in accordance with Sec. 941.302.
    (b) Approved proposal. Units developed under this part shall be 
developed only in accordance with an approved proposal.
    (c) Approved amendments. Material changes in the approved proposal, 
including any increase in the budget or any change in the payment 
schedule, require an amendment to the proposal, which must be approved 
by HUD. The determination of what constitutes a material change will be 
made by HUD.



Sec. 941.306  Maximum development cost.

    (a) Limit on approved HUD funds to Total Development Cost. No funds 
provided by HUD pursuant to the Act may be used to pay costs in excess 
of the TDC without the written approval of HUD. Approval of a higher 
project cost will only be given upon the following demonstration by the 
PHA:
    (1) That the excess costs are reasonable and necessary to develop a 
modest non-luxury project consistent with the standards set forth in 
this part, providing for efficient project design, durability, energy 
conservation, safety, security, economical maintenance, and healthy 
family life in a neighborhood environment; and
    (2) That the PHA has the funds available to pay for such excess 
costs.
    (b) Determination of maximum TDC. HUD will determine the maximum 
total development cost (TDC) in accordance with section 6 of the Act. 
The maximum TDC for a development is calculated by multiplying the 
number of units for each bedroom size and structure type in the project 
times the applicable unit TDC limit for the bedroom size and structure 
type and adding the resulting amounts for all units in the project.
    (c) Donations. Donations from other funding sources may be obtained 
by the PHA to supplement project costs which otherwise could not be 
included, provided that the added funds are not used for items that 
would result in substantially increased operating, maintenance or 
replacement costs, and the

[[Page 364]]

HUD certification required under section 102 of the HUD Reform Act (42 
U.S.C. 3545) can be made in accordance with 24 CFR part 12 (subpart D). 
Although donations are not subject to the TDC limitations set forth in 
paragraph (a) of this section, donations must be included in the project 
development cost budget, and legally acceptable written commitments for 
such donations must be provided by the PHA for HUD approval.



                     Subpart D--Project Development

    Source: 61 FR 38020, July 22, 1996, unless otherwise noted.



Sec. 941.401  Site and property acquisition.

    (a) Applicability. The provisions of this section apply to projects 
being developed under the conventional, acquisition, and force account 
methods, and may apply to other development methods, as deemed 
appropriate by HUD.
    (b) Purchase agreement. The purchase agreement shall reflect any 
conditions established by HUD, such as the site engineering studies that 
must be completed to determine whether the site is suitable for 
development of the project.
    (c) Title.--(1) General. After HUD approves the site or property 
acquisition contract and notifies the PHA that it is authorized to take 
title, the PHA shall obtain title in accordance with the following 
certification. The PHA shall certify to HUD that it obtained a title 
insurance policy that guaranteed that the title was good and marketable 
before taking title and that it promptly recorded the deed and 
declaration of trust in the form prescribed by HUD.
    (2) Limitation. After HUD notifies a PHA that has been determined to 
be troubled or modernization troubled in accordance with part 901 of 
this chapter, or a PHA that has for other reasons been notified in 
writing that it may not use the procedure specified in paragraph (c)(1) 
of this section, that the site or property acquisition contract has been 
approved, the PHA shall submit to HUD evidence that title to the site or 
property is good and marketable. If HUD approves the title evidence, it 
will inform the PHA that it is authorized to acquire title to the site 
or property. The PHA shall record promptly the deed and declaration of 
trust in the form prescribed by HUD, and HUD may require the PHA to 
submit evidence of such recordation.



Sec. 941.402  Project design and construction.

    (a) Compliance with HUD construction standards and Federal 
procurement requirements.
    (1) General. A PHA may certify that its proposed design and 
construction plans for the development are in accordance with HUD's 
design and construction standards at Sec. 941.203, and that its bidding 
procedures are in accordance with Federal procurement requirements.
    (2) Limitation. In the case of a PHA determined to be troubled or 
modernization troubled in accordance with part 901 of this chapter or a 
PHA that has for other reasons been notified in writing that it may not 
use the procedure specified in paragraph (a)(1) of this section, the PHA 
must submit the proposed design and construction plans and its bidding 
procedures (unless HUD notifies the PHA that it may use the 
certification procedure specified in paragraph (a)(1) of this section).
    (b) Contract administration. The PHA shall be responsible for 
contract administration and shall contract for the services of an 
architect, or other person licensed under State law, to assist and 
advise the PHA in contract administration and inspections to assure that 
the work is done in accordance with HUD requirements. A HUD 
representative may periodically visit the project site to monitor PHA 
contract administration.
    (c) Prevailing wage rates. See Sec. 965.101 of this chapter.



Sec. 941.403  Acceptance of work and contract settlement.

    (a) Notification of completion. The contractor or developer shall 
notify the PHA in writing when the contract work, including any approved 
off-site work, will be completed and ready for inspection.
    (b) Acceptance. (1) General. A PHA may carry out the final 
inspection of the work and may accept the completed work. If, upon 
inspection, the

[[Page 365]]

PHA determines that the work is complete and satisfactory, except for 
work that is appropriate for delayed completion, the work shall be 
accepted by the PHA. The PHA shall certify to HUD before it pays the 
contractor or developer that it has inspected the work and determined 
that it is acceptable and in compliance with the construction contract 
or contract of sale and HUD requirements. The PHA shall determine any 
hold-back for items of delayed completion, and the amount due and 
payable for the work that has been accepted including any conditions 
precedent to payment that are stated in the construction contract or 
contract of sale. The contractor or developer shall be paid for items of 
delayed construction only after inspection and acceptance of this work 
by the PHA.
    (2) Limitation. In the case of a PHA determined to be troubled or 
modernization troubled in accordance with part 901 of this chapter or a 
PHA that has for other reasons been notified in writing that it may not 
use the procedure specified in paragraph (b)(1) of this section, the 
procedure described in paragraph (b)(1) of this section will be 
followed, except that HUD must concur in the necessary PHA 
determinations and approvals.
    (c) Guarantees and warranties. The construction contract or contract 
of sale shall specify the project guaranty period and amounts to be 
withheld and shall provide for assignment to the PHA of all manufacturer 
and supplier warranties required by the construction documents. The PHA 
shall inspect each dwelling unit and the overall project approximately 
three months after the beginning of the project guaranty period and 
three months before its expiration and also as may be necessary to 
exercise its rights before expiration of any warranties. The PHA shall 
require repair or replacement, prior to the expiration of the guaranty 
or warranty periods, of any defective items.
    (d) Title to turnkey projects. (1) General. When the work has been 
inspected and accepted on a turnkey project, in accordance with 
paragraph (b) of this section, the PHA is authorized to take title to 
the completed project in accordance with the following certification. 
The PHA shall certify to HUD that it obtained a title insurance policy 
that guaranteed that the title was good and marketable before taking 
title and that it promptly recorded the deed and declaration of trust in 
the form prescribed by HUD.
    (2) Limitation. After inspection and acceptance of the work in 
accordance with paragraph (b) of this section, a PHA that has been 
determined to be troubled or modernization troubled in accordance with 
part 901 of this chapter, or a PHA that has for other reasons been 
notified in writing that it may not use the procedure specified in 
paragraph (d)(1) of this section shall submit to HUD evidence that title 
to the completed project is good and marketable. If HUD approves the 
title evidence, it will inform the PHA that it is authorized to acquire 
title to the completed project. The PHA shall record promptly the deed 
and declaration of trust in the form prescribed by HUD, and HUD may 
require submission of evidence of such recordation.



Sec. 941.404  Completion of development.

    (a) When all development has been completed and paid for, but not 
later than 12 months after the end of the initial operating period 
unless a longer period is approved by HUD, the PHA shall submit a 
statement of the actual development cost. For this purpose, the initial 
operating period with respect to each project is the period commencing 
with the date of initiation of the project and ending with the earliest 
of the following three dates: the end of the calendar quarter in which 
ninety-five percent of the dwelling units in the project are occupied; 
the end of the calendar quarter that is six, seven, or eight months 
after the date of full availability of the project; or the end of the 
calendar quarter next preceding the date of physical completion of the 
project.
    (b) HUD shall review the statement and establish the actual 
development cost of the project, which becomes the maximum total 
development cost for purposes of the ACC.

[[Page 366]]


    Effective Date Note:  At 61 FR 38021, July 22, 1996, Sec. 941.404 
was revised. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



                      Subpart E--Performance Review



Sec. 941.501  HUD review of PHA performance; sanctions.

    (a) HUD determination. HUD shall carry out such reviews of the 
performance of each PHA as may be necessary or appropriate to make the 
determinations required by this paragraph (a), taking into consideration 
all available evidence.
    (1) Conformity with PHA proposal. HUD shall determine whether the 
PHA has carried out its activities under this subpart in a timely manner 
and in accordance with its approved proposal.
    (i) In making this determination, HUD shall review the PHA's 
performance under previous inspections, audit findings and other sources 
to determine whether the development activities undertaken during the 
period under review conform substantially to the activities specified in 
the approved PHA proposal. HUD also shall review a PHA's development 
schedule to determine whether the PHA has carried out its development 
activities in a timely manner;
    (ii) HUD shall review a PHA's performance to determine whether the 
activities carried out comply with the requirements of the Act, and 
other applicable laws and regulations.
    (2) Continuing capacity. HUD shall determine whether the PHA has a 
continuing capacity to carry out its development plan in a timely 
manner. The primary factors to be considered in arriving at a 
determination that a PHA has a continuing capacity are those described 
in paragraph (a)(1) of this section (``conformity with PHA proposal''). 
HUD shall give particular attention to PHA efforts to accelerate the 
progress of the program and to prevent the recurrence of past 
deficiencies or noncompliance with applicable laws and regulations.
    (b) Notice of deficiency. Based on HUD reviews of PHA performance 
and findings of any of the deficiencies in paragraph (d) of this 
section, HUD may issue to the PHA a notice of deficiency stating the 
specific program requirements that the PHA has violated and requesting 
the PHA to take any of the actions specified in paragraph (e) of this 
section.
    (c) Corrective action order. (1) Based on HUD reviews of PHA 
performance and findings of any of the deficiencies in paragraph (d) of 
this section, HUD may issue to the PHA a corrective action order, 
whether or not a notice of deficiency has been issued previously with 
respect to the specific deficiency on which the corrective action order 
is based. HUD may order corrective action at any time by notifying the 
PHA of the specific program requirements that the PHA has violated, and 
specifying that any of the corrective actions listed in paragraph (e) of 
this section must be taken. HUD shall design corrective action to 
prevent a continuation of the deficiency, mitigate any adverse effects 
of the deficiency to the extent possible, or prevent a recurrence of the 
same or similar deficiencies;
    (2) Before ordering corrective action, HUD shall notify the PHA and 
give it an opportunity to consult with HUD regarding the proposed 
action;
    (3) Any corrective action ordered by HUD shall become a condition of 
the grant agreement (ACC);
    (d) Basis for corrective action. HUD may order a PHA to take 
corrective action only if it determines:
    (1) The PHA has not carried out its activities under the development 
program in a timely manner and in accordance with its approved proposal, 
or HUD requirements, as determined in paragraph (a)(l) of this section;
    (2) The PHA does not have a continuing capacity to carry out its 
proposal in a timely manner or in accordance with its proposal or HUD 
requirements, as determined in paragraph (a)(2) of this section;
    (3) The PHA has failed to repay HUD for amounts awarded under the 
development programs that were improperly expended;

[[Page 367]]

    (e) Types of corrective action. HUD may direct a PHA to take one or 
more of the following corrective actions:
    (1) Submit additional information:
    (i) Concerning the PHA's administrative, planning, budgeting, 
accounting, management, and evaluation functions to determine the cause 
for a PHA not meeting the standards in paragraphs (a)(1) or (a)(2) of 
this section;
    (ii) Explaining any steps the PHA is taking to correct the 
deficiencies;
    (iii) Documenting that PHA activities were not inconsistent with the 
PHA's proposal or other applicable laws, regulations or program 
requirements; and
    (iv) Demonstrating that the PHA has a continuing capacity to carry 
out the proposal in a timely manner;
    (2) Submit schedules for completing the work identified in its 
proposal and report periodically on its progress in meeting the 
schedules;
    (3) Notwithstanding 24 CFR 941.205(c), 24 CFR 941.402(a) and 24 CFR 
85.36(g), submit to HUD documents for prior approval, which may include, 
but are not limited to:
    (i) Complete design, construction and bid documents (prior to 
soliciting bids);
    (ii) Complete rehabilitation drawings/specifications or work write-
ups;
    (iii) Development budgets, including modifications;
    (iv) Proposed award of contracts, including construction contracts, 
turnkey contracts of sale, letters of commitment, and contracts with the 
architect/engineer (prior to execution);
    (4) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the PHA 
proposal, or periodic performance report;
    (5) Not incur financial obligations, or to suspend payments for one 
or more activities;
    (6) Reimburse, from non-HUD sources, one or more program accounts 
for any amounts improperly expended;
    (f) Failure to take corrective action. In cases where HUD has 
ordered corrective action and the PHA has failed to take the required 
actions within a reasonable time, as specified by HUD, HUD may take one 
or more of the following steps:
    (1) Terminate future draw downs and/or advances to the PHA. In such 
case, the amount of advances made to the PHA shall be repaid by the PHA 
from any funds or assets available for that purpose;
    (2) Require alternative management of development functions by an 
entity other than the PHA;
    (3) Cancel the fund reservation if the PHA fails to start (begin 
construction or rehabilitation), or complete (acquisition) within 30 
months from the date of the fund reservation pursuant to section 5(k) of 
the Act;
    (4) Recapture for good cause any grant amounts previously provided 
to a PHA, based upon a determination that the PHA has failed to comply 
with the requirements of the development program.
    (g) Right to appeal. Before taking any of the actions described in 
paragraph (f) of this section, HUD shall notify the PHA and give it an 
opportunity, within a prescribed period of time, to present any 
arguments or additional facts and data concerning the proposed action.

[61 FR 38021, July 22, 1996]



Subpart F--Public/Private Partnerships for the Mixed Finance Development 
                         of Public Housing Units

    Source: 61 FR 19714, May 2, 1996, unless otherwise noted.



Sec. 941.600  Purpose.

    (a)(1) This subpart authorizes a PHA to use a combination of private 
financing and public housing development funds to develop public housing 
units, and is designed to enable PHAs and their partners to structure 
transactions that make use of private and/or public sources of 
financing. Many potential scenarios for ownership and transaction 
structures exist, ranging from the PHA or its partner(s) holding no 
ownership interest, a partial ownership interest, or 100 percent of the 
ownership interest of the public housing units that are to be developed. 
PHAs and/or their partner(s) may choose to enter into a partnership or 
other contractual arrangement with a third-

[[Page 368]]

party entity for the mixed-finance development and/or ownership of 
public housing units. If this entity has primary responsibility along 
with the PHA for the development of these units, it is referred to for 
purposes of this subpart as the PHA's ``partner.'' The entity that 
ultimately owns the public housing units, whether or not the PHA retains 
an ownership interest, is referred to as the ``owner entity.'' The 
resulting ``mixed-finance'' developments may consist of 100 percent 
public housing units, or may consist of public housing and non-public 
housing units.
    (2) This subpart sets forth the requirements that must be met by the 
PHA and its partner(s) before HUD can approve a proposal for mixed-
finance development, and also sets forth continuing requirements that 
apply throughout the development and operation of the development by the 
owner entity.
    (b) Under this subpart, public housing units that are built in a 
mixed-finance development must be comparable in size, location, external 
appearance, and distribution to the non-public housing units within the 
development.



Sec. 941.602  Applicability of other requirements.

    (a) Relationship of this subpart to other requirements in 24 CFR 
part 941. The requirements contained in this subpart apply only to the 
development of public housing units using mixed-finance development 
methods under this subpart and to the operation of public housing units 
that are owned, or that will be owned, by an owner entity under this 
subpart. Other requirements for the development of public housing, as 
set forth in subparts A through E of this part, shall not apply to the 
development of public housing units pursuant to this subpart, except as 
may be required by HUD. Applicable requirements include, but shall not 
be limited to, the following:
    (1) Section 941.103 (``Definitions'') (definitions of the following 
terms only shall apply to this subpart: ``Annual Contributions Contract 
(ACC),'' ``cooperation agreement,'' ``design documents,'' 
``reformulation,'' and ``Total Development Cost (TDC).''
    (2) Section 941.201 (``PHA eligibility'') (except that specific 
requirements governing the cooperation agreement, as set forth in 
Sec. 941.201(c), shall be determined in accordance with this subpart);
    (3) Section 941.202 (``Site and neighborhood standards'');
    (4) Section 941.203 (``Design and construction standards'');
    (5) Section 941.205 (``PHA contracts'') (except that the reference 
to ``development related contracts entered into by the PHA'' shall be 
construed to mean ``development related contracts entered into by the 
PHA or the owner entity'');
    (6) Section 941.207 (``Relocation and acquisition'');
    (7) Section 941.208 (``Other Federal requirements'');
    (8) Section 941.209 (``Audit'');
    (9) Section 941.306 (``Maximum development cost'');
    (10) Section 941.402 (``Project design and construction'');
    (11) Section 941.403 (``Acceptance of work and contract 
settlement'');
    (12) Section 941.404 (``Completion of development''); and
    (13) Section 941.501 (``HUD review of PHA performance; sanctions'').
    (b) Procedure in the event of a conflict between requirements. In 
the event of a conflict between a requirement contained in this subpart 
and an applicable requirement set forth in subparts A through E of this 
part, the requirements of this subpart shall apply, unless HUD otherwise 
so determines in writing.
    (c) HUD approval. For purposes of this subpart only, any action or 
approval that is required to be taken or provided by HUD or by the HUD 
field office, pursuant to a requirement set forth in subparts A through 
F of this part, shall be construed to mean that HUD Headquarters shall 
take such action or provide such approval, unless the field office is 
authorized in writing by Headquarters to carry out a specific function 
under this subpart.
    (d) Applicability of requirements pursuant to 24 CFR part 85. The 
requirements of 24 CFR part 85 are applicable to this subpart, subject 
to the following two provisos:

[[Page 369]]

    (1) A PHA may select a partner using competitive proposal procedures 
for qualifications-based procurement (subject to negotiation of fair and 
reasonable compensation, including TDC and other applicable cost 
limitations);
    (2) An owner entity (which, as a private entity, would normally not 
be subject to part 24 CFR part 85) shall be required to comply with 24 
CFR part 85 if HUD determines that the PHA or PHA instrumentality 
exercises significant functions within the owner entity with respect to 
managing the development of the proposed units. HUD may, on a case-by-
case basis, exempt such an owner entity from the need to comply with 24 
CFR part 85 if it determines that the owner entity has developed an 
acceptable alternative procurement plan.

[61 FR 19714, May 2, 1996, as amended at 61 FR 38022, July 22, 1996]



Sec. 941.604  Definitions.

    In addition to the definitions set forth in Sec. 941.602(a)(1), the 
following definitions are applicable to this subpart:
    Development. A housing facility consisting of public housing units, 
and that may also consist of non-public housing units, that has been 
developed, or that will be developed, using mixed-finance strategies 
under this subpart.
    Mixed-finance. The combined use of publicly and privately financed 
sources of funds for the development of public housing units under this 
subpart.
    Owner Entity. The entity that will own the public housing units, if 
the PHA holds less than one hundred percent of the ownership interest; 
or the lessee under a ground lease from the PHA. The owner entity may be 
a partnership that includes the PHA.
    Participating party. Any person, firm, corporation, or public or 
private entity that:
    (1) Agrees to provide financial or other resources to carry out the 
approved proposal, or specified activities contained in the proposal; or
    (2) Otherwise participates in the development and/or operation of 
the public housing units and will receive funds derived from HUD with 
respect to such participation. The term ``participating party'' includes 
an owner entity or partner.
    Partner. A third party entity with whom the PHA has entered into a 
partnership or other contractual arrangement to provide for the mixed-
finance development of public housing units pursuant to this subpart, 
and that has primary responsibility with the PHA for the development of 
the housing units under the terms of the approved proposal.
    Proposal. For purposes of this subpart only, the term ``proposal'' 
means a detailed PHA submission of information under Sec. 941.606.
    Public Housing Agency (PHA). Any State, county, municipality, or 
other governmental entity or public body (or agency or instrumentality 
thereof) which is authorized to engage in or assist in the development 
or operation of low-income housing under this part. For purposes of this 
subpart, the term ``PHA'' also encompasses any agency or instrumentality 
of the PHA.
    Public housing unit. A unit that is eligible to receive operating 
subsidy pursuant to section 9 of the Act (42 U.S.C. 1437g).



Sec. 941.606  Proposal.

    Each proposal shall be prepared in the form prescribed by HUD and 
shall include some or all of the following documentation, as deemed 
necessary by HUD. In determining the amount of information to be 
submitted by the PHA under this section, HUD shall consider whether the 
documentation is required for HUD to carry out mandatory statutory or 
executive order reviews, the quality of the PHA's past performance in 
implementing development projects under this part, and the PHA's 
demonstrated administrative capability, as demonstrated by its overall 
score on the PHMAP. The proposal includes:
    (a) Activities; relationship of participating parties. An 
identification of the participating parties and a description of the 
activities to be undertaken by each of the participating parties and the 
PHA, and the legal and business relationships between the PHA and each 
of the participating parties.

[[Page 370]]

    (b) Financing. A detailed description of all financing (including 
public housing development funds) necessary for the implementation of 
the proposal, specifying the sources (with respect to each of the 
proposed categorical uses of all such financing), together with a ten-
year operating pro forma for the development (including all underlying 
assumptions). In addition, the PHA may be required to submit to HUD, for 
such review and approval as HUD deems necessary, all documents 
(including applications for financing) relating to the financing of the 
proposal, including, but not limited to, any loan agreements, notes, 
mortgages or deeds of trust, use restrictions, operating pro formas 
relating to the viability of the development, and other agreements or 
documents pertaining to the financing of the proposal.
    (c) Methodology. If the PHA proposes to provide public housing 
operating subsidy for the public housing units, it must submit a 
methodology acceptable to HUD for the distribution of a portion of its 
operating subsidy to such units;
    (d) Development description. A description of the housing, including 
the number and type (with bedroom count) of public housing units and, if 
applicable, the number and type of non-public housing units (with 
bedroom count) to be developed; schematic drawings and designs of the 
proposed building and unit plans; outline specifications; and the types 
and amounts of non-dwelling space to be provided.
    (e) Site information. An identification and description of the 
proposed site, site plan, and neighborhood.
    (f) Market analysis. An analysis of the projected market for the 
proposed development.
    (g) Development construction cost estimate. A preliminary 
development construction cost estimate based on the schematic drawings 
and outline specifications and current construction costs prevailing in 
the area. In addition, a copy of the PHA development schedule, including 
the architect or contractor estimate of the time required to complete 
each major development stage.
    (h) Facilities. A statement addressing the adequacy of existing or 
proposed facilities and services for the prospective occupants of the 
development.
    (i) Relocation. Information concerning any displacement of site 
occupants, including identification of each displacee, the distribution 
plan for notices, and the anticipated cost and source of funding for 
relocation benefits.
    (j) Operating feasibility. A demonstration of the operating 
feasibility of the development, which shall be accomplished by the PHA's 
showing that the estimated operating expenses of the development will 
not exceed its estimated operating income.
    (k) Life cycle analysis. For new construction and substantial 
rehabilitation, the criteria to be used in equipping the proposed 
development with heating and cooling systems, which shall include a 
life-cycle cost analysis of the installation, maintenance and operating 
costs of such systems pursuant to section 13 of the Act (42 U.S.C. 
1437k).
    (l) Section 213 clearance. To expedite processing of the proposal, a 
PHA may solicit, on behalf of HUD, comments under section 213 (24 CFR 
part 791, subpart C) from the chief executive officer (CEO) (or his or 
her designee) of the unit of general local government. In such case, the 
solicitation letter must state that comments should be sent directly to 
HUD within 30 calendar days of HUD's estimated date of receipt of the 
PHA's proposal. The local government's response must state that the 
comments are to be considered its only response under 24 CFR part 791, 
subpart C. A copy of the solicitation letter must be included in the 
PHA's proposal.
    (m) New construction. If a proposal involves new construction, the 
PHA must comply with section 6(h) of the Act (42 U.S.C. 1437d). This may 
be accomplished by the PHA's submission of a comparison of the cost of 
new construction in the neighborhood where the housing is proposed to be 
constructed and the cost of acquisition of existing housing (with or 
without rehabilitation) in the same neighborhood (including estimated 
costs of lead-based paint testing and abatement). Alternatively, the PHA 
may submit a

[[Page 371]]

certification, accompanied by supporting documentation, that there is 
insufficient existing housing in the neighborhood to develop public 
housing through acquisition.
    (n)(1) Certifications and assurances. The PHA shall submit, as part 
of its proposal, certifications and assurances warranting that it:
    (i) Has the legal authority under State and local law to develop 
public housing units through the establishment or selection of an owner 
entity, and to enter into all agreements and provide all assurances 
required under this subpart. In addition, the PHA shall warrant that it 
has the legal authority necessary to enter into any proposed partnership 
and to fulfill its obligations as a partner thereunder, and that it has 
obtained all necessary approvals for this purpose;
    (ii) Will use an open and competitive process to select the partner 
and/or the owner entity and shall ensure that there is no conflict of 
interest involved in the PHA's selection of the partner and/or owner 
entity to develop and operate the proposed public housing units. In 
addition, the PHA shall ensure that:
    (A) Any selected partner and/or owner entity complies with all 
applicable State and local procurement and conflict of interest 
requirements with respect to its selection of entities to assist in the 
development, and uses a competitive process consistent with the 
requirements set forth in this subpart; and
    (B) If the partner and/or owner entity (or any other entity with an 
identity of interests with such parties) wants to serve as the general 
contractor for the project or development, it may award itself the 
construction contract only if it can demonstrate to HUD's satisfaction 
that its bid is the lowest bid submitted in response to a public request 
for bids;
    (iii) Will be responsible to HUD for ensuring that the public 
housing units are developed and operated in accordance with all 
applicable public housing requirements, including the ACC, and all 
pertinent statutory, regulatory, and executive order requirements, as 
those requirements may be amended from time to time. The PHA must also 
warrant that it will provide for a mechanism to assure, to HUD's 
satisfaction, that the public housing units will remain available for 
use by low-income families for the maximum period required by law. In 
addition, the PHA must warrant that any agreement providing for the 
management of the public housing units by an entity other than the PHA 
shall require that the units be operated in accordance with all 
applicable requirements under this subpart for the full term of any low-
income use restrictions.
    (2) The PHA shall submit a certification of previous participation 
in accordance with procedures set forth in 24 CFR part 200, subpart H, 
and shall ensure that a similar certification is submitted to HUD by the 
participating parties.

    Effective Date Note:  At 61 FR 19715, May 2, 1996, Sec. 941.606 was 
added. This section contains information collection and recordkeeping 
requirements and will not become effective until approval has been given 
by the Office of Management and Budget. When approval is obtained, HUD 
will publish notice of the effective date in the Federal Register.



Sec. 941.608  Technical processing and approval.

    (a) Initial screening. HUD shall perform an initial screening to 
determine that all documentation required as part of the proposal under 
Sec. 941.606 has been submitted. HUD will advise the PHA of any 
deficiencies in the proposal and indicate that additional information 
will be accepted if it is received by a specified date.
    (b) Technical processing. Upon determining that a proposal is 
acceptable for technical processing, HUD will evaluate the proposal to 
determine:
    (1) Whether the PHA has the legal authority necessary to develop 
public housing units through the establishment of an owner entity and 
the use of mixed-finance strategies in accordance with this subpart;
    (2) Whether the proposed sources and uses of funds set forth in the 
proposal are eligible and reasonable, and whether HUD's preliminary 
assessment of the financing and other documentation establishes to HUD's 
satisfaction that

[[Page 372]]

the mixed-finance development is viable and is structured so as to 
adequately protect the Federal investment of funds in the development. 
For this purpose, HUD will consider (among other factors) the PHA's 
proposed methodology for allocating operating subsidies on behalf of the 
public housing units; the projected revenues to be generated by any non-
public housing units in a mixed-finance development; and the l0-year 
operating pro forma and other information contained in the proposal;
    (3) If applicable, whether the public housing units in the proposed 
development will be comparable in size, location, external appearance 
and distribution within the development to the non-public housing units;
    (4) If public housing development funds are to be used to pay for 
more than the pro rata cost of common area improvements, whether the 
proposal ensures that:
    (i) On a per unit basis (taking into consideration the number of 
public housing units for which funds have been reserved) the PHA will 
not exceed TDC limits; and
    (ii) Any common area improvements will benefit all residents of the 
development;
    (5) Whether the proposal complies with all program requirements 
including, if applicable, any comments received from the unit of general 
local government pursuant to section 213 of the Housing and Community 
Development Act of 1974 (42 U.S.C. 1439) (see 24 CFR part 791, subpart 
C); and
    (6) Whether the proposal is approvable following completion by HUD 
of an environmental review in accordance with the requirements of 24 CFR 
part 50.
    (c) Proposal approval. HUD shall send a notification letter to the 
PHA stating that the proposal has been approved or disapproved. For 
approved proposals, the letter shall indicate the approved total 
development cost of the public housing units in the development. HUD 
will also send to the PHA for execution an ACC amendment and/or a grant 
agreement. If the PHA has already executed a front-end ACC amendment, 
HUD will send to the PHA for execution a special ACC amendment for the 
mixed-finance development (and/or a grant agreement). The PHA shall 
execute these documents and return them to HUD for execution.



Sec. 941.610  Evidentiary materials and other documents.

    (a) Submission of documents. As a condition of the release of grant 
funds under Sec. 941.612, the PHA shall submit to HUD, within the 
timeframe prescribed by HUD, evidentiary materials and other 
documentation, as more fully set forth in the special mixed-finance 
amendment to the ACC (and/or grant agreement). Such materials and 
documentation shall include, but shall not be limited to:
    (1) A copy of executed development-related contracts entered into by 
the PHA or owner entity with respect to the development, and the PHA-
executed ACC amendment or special mixed-finance amendment to the ACC 
(and/or grant agreement);
    (2) Agreements that are necessary to implement the proposal and to 
ensure that all requirements of this subpart are satisfied. Such 
agreements must be submitted to HUD for review and approval and shall 
include, but shall not be limited to:
    (i) A deed restriction, covenant running with the land, ground 
lease, or other arrangement of public record, that will assure to HUD's 
satisfaction that the public housing units will be available for use by 
eligible low-income families in accordance with all applicable public 
housing requirements for the maximum period required by law;
    (ii) A regulatory or operating agreement between the PHA and the 
owner entity that provides binding assurances that the operation of the 
public housing units will be in accordance with all applicable public 
housing requirements;
    (iii) An agreement between the PHA and the owner entity with respect 
to the provision of operating subsidy by the PHA in accordance with this 
subpart;
    (iv) A partnership agreement, development agreement, or other 
agreement entered into between the PHA and its partner, or any other 
participating party, that establishes the relationships between the 
parties with respect

[[Page 373]]

to the implementation of the proposal, including all rights and 
liabilities (financial and otherwise) of the parties, a development 
schedule, and the respective commitments of the parties with respect to 
the development of the public housing units. For developments involving 
public and non-public housing units only, the PHA shall also provide for 
an allocation with the owner entity of expenses and risks (e.g., fire, 
exhaustion of, or failure to receive, syndication funds, etc.) 
associated with the development and operation of the development. The 
allocation of expenses and risks shall be based upon a ratio that 
reflects the proposed bedroom mix of the public housing units as 
compared to the bedroom mix and unit count of the non-public housing 
units in the development, or as otherwise approved by HUD;
    (v) Any agreement relating to the management of the public housing 
units by an entity other than the PHA;
    (vi) For developments consisting of public housing and non-public 
housing units, and in lieu of the standard cooperation agreement 
required under Sec. 941.201(c), the PHA shall submit a cooperation 
agreement with the applicable locality concerning PILOT payments, local 
tax exemption and local government services on behalf of the proposed 
public housing units. Such payments, exemption and services must be 
based upon a ratio reflecting the proposed bedroom mix of the public 
housing units as compared to the bedroom mix of the non-public housing 
units in the development, or as otherwise approved by HUD. For 
developments consisting only of public housing units, the PHA shall 
submit the standard cooperation agreement required under 
Sec. 941.201(c);
    (3) All private or public financing documents evidencing the 
availability of the participating party(ies)'s financing, the amount and 
source of financing committed to the proposal by the participating 
party(ies), and the irrevocability of those funds. HUD may require in 
lieu of, or in addition to the submission of these documents, an opinion 
of the PHA's and the owner entity's counsel (or other party designated 
by HUD) attesting that counsel has examined the availability of the 
participating party(ies)'s financing, and the amount and source of 
financing committed to the proposal by the participating party(ies), and 
has determined that such financing has been irrevocably committed by the 
participating party(ies) for use in carrying out the proposal, and that 
such commitment is in the amount required under the terms of the 
proposal;
    (4) The organizational documents of the owner entity, which shall be 
reviewed by HUD (together with all financing documents) to ensure that 
they do not provide equity investors, creditors, and any other parties, 
with rights that would be inconsistent with, or that could interfere 
with, HUD's interest in the proposed development;
    (5) Evidence that all necessary actions have been taken by the PHA 
and other participating parties to confer such legally enforceable 
rights as will enable HUD to protect its investment in the property and 
to ensure the availability of the public housing units for low-income 
persons for the maximum permissible period;
    (6) Evidence of control of the site by the PHA, partner, or owner 
entity following proposal submission, for such period of time as may be 
required by HUD;
    (7) Evidence that construction or rehabilitation is permitted by 
current zoning ordinances or regulations, or evidence to indicate that 
needed rezoning is likely and will not delay construction of the 
development;
    (8) In addition, the PHA shall submit the following certifications 
warranting that:
    (i) For PHAs receiving operating assistance, that:
    (A) There shall be no disposition of the public housing units 
without the prior written approval of HUD during and for ten years after 
the end of the period in which the public housing units receiving 
operating subsidy from the PHA; and
    (B) During a 40-year period (which may be extended for 10 years 
after the end of the period in which the public housing units receive 
operating subsidy from the PHA, or as may be otherwise required by law), 
the public housing units shall be maintained and operated

[[Page 374]]

in accordance with all applicable public housing requirements (including 
the ACC), as those requirements may be amended from time to time;
    (ii) The PHA will develop at least the same number of public housing 
units as were approved by HUD as part of the PHA's proposal. Where the 
PHA proposes to pay for more than its pro rata share of the cost of 
common area improvements, the PHA must also certify that:
    (A) It will develop the same number of public housing units as were 
approved by HUD as part of the PHA's proposal, and will do so within the 
TDC limits; and
    (B) The common area improvements will benefit all residents of the 
development. If the PHA's proposal provides that public housing units 
within a development will not be specifically designated as public 
housing units, but shall instead constitute a fixed percentage of the 
housing units and number of bedrooms developed under the proposal, the 
PHA must provide additional binding assurances that the percentage of 
public housing units and number of bedrooms, as approved by HUD, will be 
maintained as public housing by the owner entity, and that all of the 
requirements of this subpart will be satisfied with respect to those 
units;
    (iii) It will ensure that the requirements of this subpart are 
binding upon the owner entity and any partner of the PHA and, to the 
extent determined necessary by HUD, upon any other participating party. 
In addition, in the event of any noncompliance with the requirements of 
this subpart by any participating party, the PHA agrees to take all 
necessary enforcement action to ensure such compliance or, 
alternatively, to pursue any legal or equitable remedies that HUD deems 
appropriate;
    (iv) It will include in all agreements or contracts with the 
partner, owner entity, or any other participating parties receiving 
development funds under this subpart, an acknowledgement that a transfer 
of the development funds by the PHA to the partner, the owner entity, or 
other participating party, shall not be deemed to be an assignment of 
development grant funds and that, accordingly, the partner, the owner 
entity or other participating party shall not succeed to any rights to 
benefits of the PHA under the ACC, or ACC amendment, nor shall it attain 
any privileges, authorities, interests, or rights in or under the ACC or 
ACC amendment;
    (v) It will include, or cause to be included, in all its agreements 
or contracts with the partner, the owner entity, or other participating 
parties, and in all contracts with any other party involving the use of 
development grant funds under this subpart, a provision stating that 
nothing in the ACC or ACC amendments providing such funds, nor any 
agreement or contract between the party(ies) shall be deemed to create a 
relationship of third-party beneficiary, principal and agent, limited or 
general partnership, joint venture, or any association or relationship 
involving HUD;
    (vi) It will ensure that the development of the public housing units 
will be in compliance with labor standards applicable to the development 
of public housing including, but not limited to, wage rates under the 
Davis-Bacon Act (40 U.S.C. 276a et seq.). If the proposed development 
will include public housing units that are not specifically designated 
units, the PHA shall ensure that such labor requirements are met with 
respect to the development of all units that may, at any time, be used 
as the public housing units;
    (vii) It will take all steps necessary to ensure that, in the event 
of a foreclosure or other adverse action brought against the owner 
entity with respect to the housing units (including, but not limited to, 
the public housing units), the operation of the public housing units 
developed under this subpart shall not be adversely affected.
    (9) Such additional documentation as may be required by HUD.
    (b) Subsidy layering analysis. After the PHA submits the 
documentation required under paragraph (a) of this section, HUD (or its 
designee) shall carry out a subsidy layering analysis pursuant to 
section 102(d) of the Department of Housing and Urban Development Reform 
Act of 1989 (42 U.S.C. 3545) (see 24 CFR part 4) to determine whether 
the amount of assistance being provided

[[Page 375]]

for the development is more than necessary to make the assisted activity 
feasible after taking into account the other governmental assistance.

    Effective Date Note:  At 61 FR 19716, May 2, 1996, Sec. 941.610 was 
added. This section contains information collection and recordkeeping 
requirements and will not become effective until approval has been given 
by the Office of Management and Budget. When approval is obtained, HUD 
will publish notice of the effective date in the Federal Register.



Sec. 941.612  Disbursement of grant funds.

    (a) Front-end drawdowns. A PHA may request front-end assistance for 
both scattered or non-scattered site development in accordance with the 
following requirements:
    (1) Front-end assistance may be used to pay for materials and 
services related to proposal development, and may also be used to pay 
for costs related to the demolition of existing units on a proposed site 
or for preliminary development work;
    (2) HUD shall determine on a case-by-case basis the maximum amount 
that may be drawn down by a PHA to pay for preliminary development 
costs, based upon a consideration of the nature and scope of activities 
proposed to be carried out by the PHA;
    (3) Before a request for front-end assistance may be approved, the 
PHA must provide HUD with such information and documentation as HUD 
deems appropriate from the list set forth at Sec. 941.606. In 
determining the extent of the PHA's submissions under this paragraph 
(a), HUD shall ensure that it has adequate information or documentation 
to enable it to carry out any statutory, executive order, or other 
mandatory upfront reviews under this subpart. These reviews shall 
include, but shall not be limited to, environmental reviews (including 
NEPA and historic preservation), intergovernmental review, section 213 
clearance (24 CFR part 791, subpart C), and subsidy layering. If, upon 
completing these reviews, HUD determines that the proposed development 
is approvable, it may execute with the PHA a front-end ACC amendment and 
the special mixed-finance amendment to the ACC (and/or grant agreement) 
to provide advances for the purposes, and in the amounts, approved by 
HUD.
    (b) Standard drawdown requirements. HUD will review the evidentiary 
materials and other documents submitted pursuant to Sec. 941.610, and, 
upon determining that such documents are satisfactory, may approve a 
drawdown of development funds, consistent with the following 
requirements:
    (1) A PHA may only draw down public housing development funds in an 
approved ratio to other public and private funds, in accordance with a 
draw schedule prepared by the PHA and approved by HUD. The PHA and its 
partner shall certify, in a form prescribed by HUD, prior to the initial 
drawdown of public housing development funds that the PHA will not draw 
down and the partner will not request more public housing grant funds 
than necessary to meet the PHA's pro rata share of the development 
costs. The PHA shall draw down public housing development funds only 
when payment is due and after inspection and acceptance of work covered 
by the draw. The PHA shall release funds to its partner promptly, 
normally within two working days of receipt of the funds from HUD, and 
only in accordance with the ratio approved by HUD. The PHA's partner 
shall take prompt action to distribute the funds, normally within two 
working days of receipt of the funds from the PHA;
    (2) Each drawdown of public housing development funds constitutes a 
certification by the PHA that:
    (i) All the representations and warranties of the PHA, as submitted 
in accordance with this subpart, continue to be valid, true, and in full 
force and effect;
    (ii) The PHA is in full compliance with all of the PHA's obligations 
pursuant to this part which, by their terms, are applicable at the time 
of the drawdown of the public housing development funds, and that to the 
best of the PHA's knowledge, it is not in default under the ACC, as 
amended;
    (iii) All conditions precedent to the PHA's authority to draw down 
the public housing grant funds have been satisfied;

[[Page 376]]

    (iv) The public housing grant funds to be drawn down will be used 
for eligible costs actually incurred or to be incurred in accordance 
with the provisions of this subpart and the approved proposal; and
    (v) The ratio for the draw down of funds is satisfied.
    (c) The standard drawdown requirements set forth in paragraph (b) of 
this section (including the requirement that public housing development 
funds must be drawn down in an approved ratio to other public and 
private funds) do not apply to front-end assistance approved by HUD 
pursuant to paragraph (a) of this section.



Sec. 941.614  HUD monitoring and review.

    HUD shall monitor and review the implementation of the PHA's 
approved proposal in accordance with requirements prescribed by HUD in a 
special mixed-finance amendment to the ACC (and/or grant agreement).



Sec. 941.616  Sanctions.

    In the event the public housing units that are proposed to be 
developed under this subpart are not developed in accordance with the 
projected development schedule, the approved proposal, and all 
applicable Federal requirements, or if the units are not operated in 
accordance with applicable requirements, HUD may impose sanctions on the 
PHA, and/or seek legal and equitable relief, in accordance with 
requirements prescribed by HUD in the special mixed-finance amendment to 
the ACC (and/or grant agreement).



PART 945--DESIGNATED HOUSING--PUBLIC HOUSING DESIGNATED FOR OCCUPANCY BY DISABLED, ELDERLY, OR DISABLED AND ELDERLY FAMILIES--Table of Contents




                           Subpart A--General

Sec.
945.101  Purpose.
945.103  General policies.
945.105  Definitions.

             Subpart B--Application and Approval Procedures

945.201  Approval to designate housing.
945.203  Allocation plan.
945.205  Designated housing for disabled families.

                 Subpart C--Operating Designated Housing

945.301  General requirements.
945.303  Requirements governing occupancy in designated housing.

    Authority: 42 U.S.C. 1473e and 3535(d).

    Source: 59 FR 17662, Apr. 13, 1994, unless otherwise noted.



                           Subpart A--General



Sec. 945.101  Purpose.

    The purpose of this part is to provide for designated housing as 
authorized by section 7 of the U.S. Housing Act of 1937 (42 U.S.C. 
1437e). Section 7 provides public housing agencies with the option, 
subject to the requirements and procedures of this part, to designate 
public housing projects, or portions of public housing projects, for 
occupancy by disabled families, elderly families, or mixed populations 
of disabled families and elderly families.



Sec. 945.103  General policies.

    (a) Agency participation. Participation in this program is limited 
to public housing agencies (PHAs) (as this term is defined in 24 CFR 
913.102) that elect to designate public housing projects for occupancy 
by disabled families, elderly families, or disabled families and elderly 
families, as provided by this part.
    (b) Eligible housing--(1) Designation of public housing. Projects 
eligible for designation under this part are public housing projects as 
described in the definition of ``project'' in Sec. 945.105.
    (2) Additional housing resources. To meet the housing and supportive 
service needs of elderly families, and disabled families, including non-
elderly disabled families, who will not be housed in a designated 
project, PHAs shall utilize housing resources that they own, control, or 
have received preliminary notification that they will obtain (e.g., 
section 8 certificates and vouchers). They also may utilize housing 
resources for which they plan to apply during the period covered by the 
allocation plan, and that they have a reasonable expectation of 
obtaining. PHAs also may utilize, to the extent practicable, any housing 
facilities that

[[Page 377]]

they own or control in which supportive services are already provided, 
facilitated or coordinated, such as mixed housing, shared housing, 
family housing, group homes, and congregate housing.
    (3) Exemption of mixed population projects. A PHA with a public 
housing project with a mixed population of elderly families and disabled 
families that plans to house them in such project in accordance with the 
requirements of 24 CFR part 960, subpart D, is not required to meet the 
designation requirements of this part.
    (c) Family Participation in designated housing--(1) Voluntary 
participation. The election to reside in designated housing is voluntary 
on the part of a family. No disabled family or elderly family may be 
required to reside in designated housing, nor shall a decision not to 
reside in designated housing adversely affect the family with respect to 
occupancy of another appropriate project.
    (2) Meeting stated eligibility requirements. Nothing in this part 
shall be construed to require or permit a PHA to accept for admission to 
a designated project a disabled family or elderly family who does not 
meet the stated eligibility requirements for occupancy in the project 
(for example, income), as set forth in HUD's regulations in 24 CFR parts 
912 and 913, and in the PHA's admission policies.



Sec. 945.105  Definitions.

    The terms Department, Elderly person, HUD, NAHA, Public Housing 
Agency (PHA), and Secretary are defined in 24 CFR part 5.
    Act means the United States Housing Act of 1937 (42 U.S.C. 1437-
1440).
    Accessible units means units that meet the requirement of 
accessibility with respect to dwellings as set forth in the second 
definition of ``accessible'' in 24 CFR 8.3.
    Allocation plan. See Sec. 945.201.
    CHAS means the comprehensive housing affordability strategy required 
by section 105 of the National Affordable Housing Act (42 U.S.C. 12705) 
or any successor plan prescribed by HUD.
    Designated family means the category of family for whom the project 
is designated (e. g., elderly family in a project designated for elderly 
families).
    Designated housing or designated project means a project (or 
projects), or a portion of a project (or projects) (as these terms are 
defined in this section), that has been designated in accordance with 
the requirements of this part.
    Disabled family means a family whose head or spouse or sole member 
is a person with disabilities. The term ``disabled family'' may include 
two or more persons with disabilities living together, and one or more 
persons with disabilities living with one or more persons who are 
determined to be essential to the care or well-being of the person or 
persons with disabilities. A disabled family may include persons with 
disabilities who are elderly.
    Elderly family means a family whose head, spouse, or sole member is 
an elderly person. The term ``elderly family'' includes an elderly 
person, two or more elderly persons living together, and one or more 
elderly persons living with one or more persons who are determined to be 
essential to the care or well-being of the elderly person or persons. An 
elderly family may include elderly persons with disabilities and other 
family members who are not elderly.
    Family includes but is not limited to a single person as defined in 
this part, a displaced person (as defined in 24 CFR part 912), a 
remaining member of a tenant family, a disabled family, an elderly 
family, a near-elderly family, and a family with children. It also 
includes an elderly family or a disabled family composed of one or more 
elderly persons living with one or more disabled persons.
    Housing has the same meaning as ``project,'' which is defined in 
this section.
    Mixed population project means a public housing project reserved for 
elderly families and disabled families. This is the project type 
referred to in NAHA as being designated for elderly and disabled 
families. A PHA that has a mixed population project or intends to 
develop one need not submit an allocation plan or request a designation. 
However, the project must meet the requirements of 24 CFR part 960 
subpart D.

[[Page 378]]

    Near-elderly family means a family whose head, spouse, or sole 
member is a near-elderly person. The term ``near-elderly family'' 
includes two or more near-elderly persons living together, and one or 
more near-elderly persons living with one or more persons who are 
determined to be essential to the care or well-being of the near-elderly 
person or persons. A near-elderly family may include other family 
members who are not near-elderly.
    Near-elderly person means a person who is at least 50 years of age 
but below the age of 62, who may be a person with a disability.
    Non-elderly disabled person means a person with a disability who is 
less than 62 years of age.
    Person with disabilities means a person who--
    (a) Has disability as defined in section 223 of the Social Security 
Act (42 U.S.C. 423), or
    (b) Is determined to have a physical, mental, or emotional 
impairment that--
    (1) Is expected to be of long-continued and indefinite duration,
    (2) Substantially impedes his or her ability to live independently, 
and
    (3) Is of such a nature that such ability could be improved by more 
suitable housing conditions, or
    (c) Has a developmental disability as defined in section 102 of the 
Developmental Disabilities Assistance and Bill of Rights Act (42 U.S.C. 
6001(5)).

The term ``person with disabilities'' does not exclude persons who have 
the disease of acquired immunodeficiency syndrome or any conditions 
arising from the etiologic agent for acquired immunodeficiency syndrome.
    Portion of project includes: One or more buildings in a multi-
building project; one or more floors of a project or projects; a certain 
number of dwelling units in a project or projects. (Designation of a 
portion of a project does not require that the buildings, floors or 
units be contiguous.)
    Project means low-income housing developed, acquired, or assisted by 
a PHA under the U.S. Housing Act of 1937 (other than section 8) for 
which there is an Annual Contributions Contract (ACC) between HUD and 
the PHA. For purposes of this part, the terms housing and public housing 
mean the same as project. Additionally, as used in this part, and unless 
the context indicates otherwise, the term project when used in the 
singular includes the plural, and when used in the plural, includes the 
singular, and also includes a ``portion of a project,'' as defined in 
this section.
    Public housing or public housing project. See definition of 
``project'' in this section.
    Service provider means a person or organization qualified and 
experienced in the provision of supportive services, and that is in 
compliance with any licensing requirements imposed by State or local law 
for the type of service or services to be provided. The service provider 
may provide the service on either a for-profit or not-for-profit basis.
    Single person means a person who lives alone or intends to live 
alone, who is not an elderly person, a person with disabilities, a 
displaced person, or the remaining member of a tenant family.
    Supportive service plan. See Sec. 945.205.
    Supportive services means services available to persons residing in 
a development, requested by disabled families and for which there is a 
need, and may include, but are not limited to, meal services, health-
related services, mental health services, services for nonmedical 
counseling, meals, transportation, personal care, bathing, toileting, 
housekeeping, chore assistance, safety, group and socialization 
activities, assistance with medications (in accordance with any 
applicable State laws), case management, personal emergency response, 
and other appropriate services.

[59 FR 17662, Apr. 13, 1994, as amended at 61 FR 5214, Feb. 9, 1996]



             Subpart B--Application and Approval Procedures



Sec. 945.201  Approval to designate housing.

    (a) Designated housing for elderly families. To designate a project 
for occupancy by elderly families, a PHA must have a HUD-approved 
allocation plan that meets the requirements of Sec. 945.203.

[[Page 379]]

    (b) Designated housing for disabled families. To designate a project 
for occupancy by disabled families, a PHA must have a HUD-approved 
allocation plan that meets the requirements of Sec. 945.203, and a HUD-
approved supportive service plan that meets the requirements of 
Sec. 945.205.
    (c) Designated housing for elderly families and disabled families. 
(1) A PHA that provides or intends to provide a mixed population project 
(a project for both elderly families and disabled families) is not 
required to meet the requirements of this part. The PHA is required to 
meet the requirements of 24 CFR part 960, subpart D.
    (2) A PHA that intends to provide designated housing for elderly 
families or for disabled families must identify any existing or planned 
mixed population projects, reserved under 24 CFR part 960, subpart B, as 
additional housing resources, in its allocation plan, in accordance with 
Sec. 945.203(c)(6).



Sec. 945.203  Allocation plan.

    (a) Applicable terminology. (1) As used in this section, the terms 
``initial allocation plan'' refers to the PHA's first submission of an 
allocation plan, and ``updated allocation plan'' refers to the biennial 
update (once every two years) of this plan, which is described in 
paragraph (f) of this section.
    (2) As provided in Sec. 945.105, the term ``project'' includes the 
plural (``projects'') and includes a portion of a project.
    (b) Consultation in plan development. These consultation 
requirements apply to the development of an initial allocation plan as 
provided in paragraph (c) of this section, or any update of the 
allocation plan as provided in paragraph (f) of this section.
    (1) In preparing the draft plan, the PHA shall consult with:
    (i) The State or unit of general local government where the project 
is located;
    (ii) Public and private service providers;
    (iii) Representative advocacy groups for each of these family types: 
disabled families, elderly families, and families with children, where 
such advocacy groups exist;
    (iv) Representatives of the residents of the PHA's projects proposed 
for designation, including representatives from resident councils or 
resident management corporations where they exist; and
    (v) Other parties that the PHA determines would be interested in the 
plan, or other parties that have contacted the PHA and expressed an 
interest in the plan.
    (2) Following the completion of the draft plan, the PHA shall:
    (i) Issue public notices regarding its intention to designate 
housing and the availability of the draft plan for review;
    (ii) Contact directly those individuals, agencies and other 
interested parties specified in paragraph (b)(1) of this section, and 
advise of the availability of the draft plan for review;
    (iii) Allow not less than 30 days for public comment on the draft 
allocation plan;
    (iv) Make free copies of the draft plan available upon request, and 
in accessible format, when appropriate;
    (v) Conduct at least one public meeting on the draft allocation 
plan;
    (vi) Give fair consideration to all comments received; and
    (vii) Retain any records of public meetings held on the allocation 
plan (or updated plan) and any written comments received on the plan for 
a period of five years commencing from the date of submission of the 
allocation plan to HUD. These records must be available for review by 
HUD.
    (c) Contents of initial plan. The initial allocation plan shall 
contain, at a minimum, the information set forth in this paragraph (c).
    (1) Identification of the project to be designated and type of 
designation to be made. The PHA must:
    (i) Identify the type of designation to be made (i.e., housing for 
disabled families or housing for elderly families);
    (ii) Identify the building(s), floor(s), or unit(s) to be designated 
and their location, or if specific units are not designated, the number 
to be designated; and
    (iii) State the reasons the building(s), floor(s), or unit(s) were 
selected for designation.

[[Page 380]]

    (2) Identification of groups and persons consulted and comments 
submitted. The PHA must:
    (i) Identify the groups and persons with whom the PHA has consulted 
in the development of the allocation plan;
    (ii) Include a summary of comments received on the plan from the 
groups and persons consulted; and
    (iii) Describe how the plan addresses these comments.
    (3) Profile of proposed designated project in pre-designation state. 
This component of the plan must include, for the projects, buildings, or 
portions of buildings to be designated:
    (i) The total number of families currently occupying the project, 
and
    (A) The number of families who are members of the group for whom the 
project is to be designated, and
    (B) The number of families who are not members of the group for whom 
the project is to be designated;
    (ii) An estimate of the total number of elderly families and 
disabled families who are potential tenants of the project (i.e., as the 
project now exists), based on information provided by:
    (A) The waiting list from which vacancies in the project are filled; 
and
    (B) A local housing needs survey, if available, such as the CHAS, 
for the jurisdiction within which the area served by the PHA is located;
    (iii) An estimate of the number of potential tenants who will need 
accessible units based on information provided by:
    (A) The needs assessment prepared in accordance with 24 CFR 8.25, 
and
    (B) A housing needs survey, if available, such as the CHAS or HUD-
prescribed successor survey;
    (iv) The number of units in the project that became vacant and 
available for occupancy during the year preceding the date of submission 
of the allocation plan to HUD;
    (v) The average length of vacancy for dwelling units in the project 
for the year preceding the date of submission of the allocation plan to 
HUD;
    (vi) An estimate of the number of units in the project that the PHA 
expects to become vacant and available for occupancy during the two-year 
period following the date of submission of the allocation plan to HUD 
(i.e., if the project were not to be designated);
    (vii) An estimate of the average length of time elderly families and 
non-elderly persons with disabilities currently have to wait for a 
dwelling unit.
    (4) Projected profile of project in designated state. This component 
of the plan must:
    (i) Identify the source of the families for the designated project 
(e.g., current residents of the project, families currently on the 
waiting list, residents of other projects, and potential tenants based 
on information from the local housing needs survey);
    (ii) For projects proposed to be designated for occupancy by elderly 
families an estimate of the number of:
    (A) Units in the project that are anticipated to become vacant and 
available for occupancy during the two-year period following the date of 
submission of the allocation plan to HUD;
    (B) Near-elderly families who may be needed to fill units in the 
designated project for elderly families, as provided in Sec. 945.303(c);
    (iii) Describe any impact the designation may have on the average 
length of time applicants in the group for which the project is 
designated and other applicants will have to wait for a dwelling unit.
    (5) PHA occupancy policies and procedures. This component of the 
plan must describe any changes the PHA intends to make in its admission 
policies to accommodate the designation, including:
    (i) How the waiting list will be maintained;
    (ii) How dwelling units will be assigned; and
    (iii) How records will be maintained to document the effect on all 
families who would have resided in the designated project if it had not 
been designated.
    (6) Strategy for addressing the current and future housing needs of 
the families in the PHA's jurisdiction. The PHA must:
    (i) Identify the housing resources currently owned or controlled by 
the PHA, including any mixed population projects, in existence, as 
provided in 24 CFR part 960, subpart D, that will be available to these 
families;

[[Page 381]]

    (ii) Describe the steps to be taken by the PHA to respond to any 
need for accessible units that will no longer be available for 
applicants who need them. The PHA has a continuing obligation under 
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) to provide 
accessible dwellings even if the project designation removes accessible 
dwellings from the inventory of possible dwellings for non-elderly 
persons with disabilities;
    (iii) If a project is being designated for elderly families, 
describe the steps the PHA will take to facilitate access to supportive 
services by non-elderly disabled families. The services should be 
equivalent to those available in the designated project and requested by 
non-elderly disabled families. If the PHA funds supportive services for 
the designated project for elderly families, the PHA must provide the 
same level of services, upon the request of non-elderly disabled 
families.
    (iv) If a project is being designated for elderly families, identify 
the additional housing resources that the PHA determines will be 
sufficient to provide assistance to not less than the number of non-
elderly disabled families that would have been housed by the PHA if 
occupancy in units in the designated project were not restricted to 
elderly families (one-for-one replacement is not required). Among these 
resources may be:
    (A) Normal turnover in existing projects;
    (B) Existing housing stock that previously was not available to or 
considered for non-elderly disabled families. Examples are dwellings in 
general occupancy (family) projects that are reconfigured to meet the 
dwelling size needs of the non-elderly disabled families, or were 
previously occupied by elderly families who will relocate to the 
designated project for elderly families, or were previously vacant 
because there had not been a demand for dwellings of that size in that 
location;
    (C) Housing for which the PHA has received preliminary notification 
that it will obtain; and
    (D) Housing for which the PHA plans to apply during the period 
covered by the allocation plan, and which it has a reasonable 
expectation of obtaining.
    (v) Where a project is being designated for elderly families, 
explain how the PHA plans to secure the required additional housing 
resources. In the case of housing for which the PHA plans to apply, the 
PHA must provide sufficient information about the housing resource and 
its application to establish that the PHA can reasonably expect to 
obtain the housing.
    (vi) Describe incentives, if any, that the PHA intends to offer to:
    (A) Families who are members of the group for whom a project was 
designated to achieve voluntary transfers to the designated project; and
    (B) Families who are not members of the group for whom a project was 
designated to achieve voluntary transfers from the project proposed to 
be designated;
    (d) Criteria for allocation plan approval. HUD shall approve an 
initial allocation plan, or updated allocation plan, if HUD determines 
that:
    (1) The information contained in the plan is complete and accurate 
(a plan that is incomplete, i.e., missing required statements or items, 
will be disapproved), and the projections are reasonable;
    (2) Implementation of the plan will not result in a substantial 
increase in the vacancy rates in the designated project;
    (3) Implementation of the plan will not result in a substantial 
increase in delaying or denying housing assistance to families on the 
PHA's waiting list because of designating projects;
    (4) The plan for securing sufficient additional housing resources 
for non-elderly disabled persons can reasonably be achieved; and
    (5) The plan conforms to the requirements of this part.
    (e) Allocation plan approval or disapproval.--(1) Written 
notification. HUD shall notify each PHA, in writing, of approval or 
disapproval of the initial or updated allocation plan.
    (2) Timing of notification. An allocation plan shall be considered 
to be approved by HUD if HUD fails to provide the PHA with notification 
of approval or disapproval of the plan, as required by paragraph (e)(1) 
of this section, within:

[[Page 382]]

    (i) 90 days after the date of submission of an allocation plan that 
contains comments, as provided in paragraph (c)(2) of this section; or
    (ii) 45 days after the date of submission of all other plans, 
including
    (A) Initial plans for which no comments were received;
    (B) Updated plans, as provided in paragraph (f) of this section; and
    (C) Revised initial plans or revised updated plans, as provided in 
paragraph (e)(4) of this section.
    (3) Approval limited solely to approval of designated housing. HUD's 
approval of an initial plan or updated allocation plan under this 
section may not be construed to constitute approval of any request for 
assistance for major reconstruction of obsolete projects, assistance for 
development or acquisition of public housing, or assistance under 24 CFR 
part 890 (supportive housing for persons with disabilities).
    (4) Resubmission following disapproval. If HUD disapproves an 
initial allocation plan, a PHA shall have a period of not less than 45 
days or more than 90 days following notification of disapproval as 
provided in paragraph (e)(2) of this section, to submit amendments to 
the plan, or to submit a revised plan.
    (f) Biennial update of plan--(1) General. Each PHA that owns or 
operates a public housing project that is designated for occupancy under 
this part shall update its allocation plan not less than once every two 
years, from the date of HUD approval of the initial allocation plan. A 
PHA that wishes to amend or revise its plan later than 90 days after HUD 
disapproval must begin the hearing and consultation process again.
    (2) Failure to submit updated plan. If the PHA fails to submit the 
updated plan as required by this paragraph (f), the Secretary may revoke 
the designation in accordance with the provisions of paragraph 
(f)(4)(ii) of this section.
    (3) Contents of updated plan. The updated allocation plan shall 
contain, at a minimum, the following information:
    (i) The most recent update of the allocation plan data, and 
projections for the next two years;
    (ii) An assessment of the accuracy of the projections contained in 
previous plans and in the updated allocation plan;
    (iii) The number of times a vacancy was filled in accordance with 
Sec. 945.303(c);
    (iv) A discussion of the impact of the designation on the designated 
project and the other public housing projects operated by the PHA, using 
the data obtained from the system developed in Sec. 945.203(c), 
including
    (A) The number of times there was a substantial increase in delaying 
housing assistance to families on the PHA's waiting list because 
projects were designated; and
    (B) The number of times there was a substantial increase in denying 
housing assistance to families on the PHA's waiting list because 
projects were designated;
    (v) A plan for adjusting the allocation of designated units, if 
necessary.
    (4) Criteria for approval of updated plan. (i) HUD shall approve an 
updated allocation plan based on HUD's review and assessment of the 
updated plan, using the criteria in (d) of this section. If HUD 
considers it appropriate, the review and assessment shall include any 
on-site review and monitoring of PHA performance in the administration 
of its designated housing and in the allocation of the PHA's housing 
resources. Notification of approval or disapproval of the updated 
allocation plan shall be provided in accordance with paragraph (e) of 
this section;
    (ii) If a PHA's updated plan is not approved, HUD may require PHAs 
to change the designation of existing or planned projects to other 
categories, such as general occupancy or mixed population projects.
    (5) Notification of approval or disapproval of updated plan. HUD 
shall notify each PHA submitting an updated plan of approval or 
disapproval of the updated plan, in accordance with the form of 
notification and within the time periods required by paragraph (e) of 
this section.

(Approved by the Office of Management and Budget under control number 
2577-0192)

[[Page 383]]



Sec. 945.205  Designated housing for disabled families.

    (a) General. (1) In general, HUD will approve designated projects 
for disabled families only if there is a clear demonstration that there 
is both a need and a demand by disabled families for such designation. 
In the absence of such demonstrated need and demand, PHAs should provide 
for the housing needs of disabled families in the most integrated 
setting possible.
    (2) To designate a project for disabled families, a PHA must submit 
the allocation plan required by Sec. 945.203 and the supportive service 
plan described in paragraph (b) of this section.
    (3) In its allocation plan,
    (i) The PHA may not designate a project for persons with a specific 
disability;
    (ii) The designated project does not have to be made up of 
contiguous units. PHAs are encouraged to place the units in the project, 
whether contiguous or not, in the most integrated setting possible.
    (4) The consultation process for the allocation plan provided in 
Sec. 945.203(b) and consultation process for the supportive service plan 
provided in this section may occur concurrently.
    (5) If the PHA conducts surveys to determine the need or demand for 
a designated project for disabled families or for supportive services in 
such project, the PHA must protect the confidentiality of the survey 
responses.
    (b) Supportive Service Plan. The plan shall describe how the PHA 
will provide or arrange for the provision of the appropriate supportive 
services requested by the disabled families who will occupy the 
designated housing and who have expressed a need for these services.
    (1) Contents of plan. The supportive service plan, at a minimum, 
must:
    (i) Identify the number of disabled families who need the supportive 
services and who have expressed an interest in receiving them;
    (ii) Describe the types of supportive services that will be 
provided, and, if known, the length of time the supportive services will 
be available;
    (iii) Identify each service provider to be utilized, and describe 
the experience of the service provider in delivering supportive 
services;
    (iv) Describe how the supportive services will be provided to the 
disabled families that the designated housing is expected to serve (how 
the services will be provided depends upon the type of service offered; 
e.g., if the package includes transportation assistance, how 
transportation assistance will be provided to disabled families);
    (v) Identify all sources of funding upon which the PHA is relying to 
deliver supportive services to residents of the designated housing for 
disabled families, or the supportive service resources to be provided in 
lieu of funding;
    (vi) Submit evidence of a specific contractual commitment or 
commitments provided to the PHA by the sources identified in paragraph 
(b)(1)(v) of this section to make funds available for supportive 
services, or the delivery of supportive services available to the PHA 
for at least two calendar years;
    (vii) Identify any public and private service providers, advocates 
for the interests of designated housing families, and other interested 
parties with whom the PHA consulted in the development of this 
supportive service plan, and summarize the comments and recommendations 
made by these parties. (These comments must be maintained for a period 
of five years, and be available for review by HUD as provided in 
paragraph (b)(2)(vii) of this section.);
    (viii) If applicable, address the need for residential supervision 
of disabled families (on-site supervision within the designated housing) 
and how this supervision is to be provided;
    (ix) Include any other information that the PHA determines would 
assist HUD in assessing the suitability of the PHA's supportive service 
plan; and
    (x) Include any additional information that HUD may request, and 
which is appropriate to a determination of the suitability of the 
supportive service plan.
    (2) Public review and comment on the supportive service plan. In 
preparing the initial supportive service plan, or any update of the 
supportive service plan, the PHA shall:

[[Page 384]]

    (i) Issue public notices regarding its intention to provide 
supportive services to designated housing for disabled families and the 
availability of the draft supportive service plan;
    (ii) Send notices directly to interested individuals and agencies 
that have contacted the PHA and have expressed an interest in the 
supportive service plan, and to parties specified in paragraph 
(b)(1)(vii) of this section;
    (iii) Allow not less than 30 days for public comment on the 
supportive service plan;
    (iv) Make free copies of the draft plan available upon request, and 
in accessible format, when appropriate;
    (v) Conduct at least one public meeting regarding the supportive 
service plan;
    (vi) Give fair consideration to all comments received; and
    (vii) Retain any records of the public meetings held on the 
supportive service plan, and any written comments received on the 
supportive service plan for a period of five years, from the date of 
submission of the supportive service plan. These records must be 
available for review by HUD.
    (c) Approval. HUD shall approve designated housing for disabled 
families if the allocation plan meets the requirements of Sec. 945.203, 
including demonstrating both a need and a demand for designated housing 
for disabled families, and if HUD determines on the basis of the 
information provided in the supportive service plan that:
    (1) There is a sufficient number of persons with disabilities who 
have expressed an interest in occupying a designated project for 
disabled families, and who have expressed a need and demand for the 
supportive services that will be provided;
    (2) The supportive services are adequately designed to meet the 
needs of the disabled families who have indicated a desire for them;
    (3) The service provider has current or past experience 
administering an effective supportive service delivery program for 
persons with disabilities;
    (4) If residential supervision is required, a written commitment to 
provide this supervision in the designated housing.

(Approved by the Office of Management and Budget under control number 
2577-0192)



                 Subpart C--Operating Designated Housing



Sec. 945.301  General requirements.

    The application procedures and operation of designated projects 
shall be in conformity with the regulations of this part, and the 
regulations applicable to PHAs in 24 CFR Chapter IX, including 24 CFR 
parts 913, 960 and 966, and, in particular, the nondiscrimination 
requirements of 24 CFR 960.211(b)(3), that include but are not limited 
to section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), Fair 
Housing Act (42 U.S.C. 3601-3619), title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d), section 3 of the Housing and Urban Development 
Act of 1968 (12 U.S.C. 1701u), the Age Discrimination Act (42 U.S.C. 
6101-6107), Executive Order 11246 (3 CFR 1964-1965 Comp., p. 339), 
Executive Order 11063, as amended by Executive Order 12259 (3 CFR 1958-
1963 Comp., p. 652 and 3 CFR 1980 Comp., p. 307), the Americans with 
Disabilities Act (42 U.S.C. 12101-12213) (to the extent the Americans 
with Disabilities Act is applicable) and the implementing regulations of 
these statutes and authorities; and other applicable Federal, State, and 
local laws prohibiting discrimination and promoting equal opportunity.



Sec. 945.303  Requirements governing occupancy in designated housing.

    (a) Priority for occupancy. Except as provided in paragraph (c) of 
this section, in determining priority for admission to designated 
housing, the PHA shall make units in the designated housing available 
only to designated families.
    (b) Compliance with preference regulations. Among the designated 
families, the PHA shall give preference in accordance with the 
preferences in 24 CFR part 960, subpart B.
    (c) Eligibility of other families for housing designated for elderly 
families--(1) Insufficient elderly families. If there are an 
insufficient number of elderly families for the units in a project 
designated for

[[Page 385]]

elderly families, the PHA may make dwelling units available to near-
elderly families, who qualify for preferences under 24 CFR part 960, 
subpart B. The election to make dwelling units available to near-elderly 
families if there are an insufficient number of elderly families should 
be explained in the PHA's allocation plan.
    (2) Insufficient elderly families and near-elderly families. If 
there are an insufficient number of elderly families and near-elderly 
families for the units in a project designated for elderly families, the 
PHA shall make available to all other families any dwelling unit that 
is:
    (i) Ready for re-rental and for a new lease to take effect; and
    (ii) Vacant for more than 60 consecutive days.
    (d) Tenant choice of housing. (1) Subject to paragraph (d)(2) of 
this section, the decision of any disabled family or elderly family not 
to occupy or accept occupancy in designated housing shall not have an 
adverse affect on:
    (i) The family's admission to or continued occupancy in public 
housing; or
    (ii) The family's position on or placement on a public housing 
waiting list.
    (2) The protection provided by paragraph (d)(1) of this section 
shall not apply to any family who refuses to occupy or accept occupancy 
in designated housing because of the race, color, religion, sex, 
disability, familial status, or national origin of the occupants of the 
designated housing or the surrounding area.
    (3) The protection provided by paragraph (d)(1) of this section 
shall apply to an elderly family or disabled family that declines to 
accept occupancy, respectively, in a designated project for elderly 
families or for disabled families, and requests occupancy in a general 
occupancy project or in a mixed population project.
    (e) Appropriateness of dwelling unit to family size. This part may 
not be construed to require a PHA to offer a dwelling in a designated 
project to any family who is not of appropriate family size for the 
dwelling unit. The temporary absence of a child from the home due to 
placement in foster care is not considered in determining family 
composition and family size.
    (f) Prohibition of evictions. Any tenant who is lawfully residing in 
a dwelling unit in a public housing project may not be evicted or 
otherwise required to vacate the unit because of the designation of the 
project, or because of any action taken by HUD or the PHA in accordance 
with this part.
    (g) Prohibition of coercion to accept supportive services. As with 
other HUD-assisted housing, no disabled family or elderly family 
residing in designated housing may be required to accept supportive 
services made available by the PHA under this part.
    (h) Availability of grievance procedures in 24 CFR part 966. The 
grievance procedures in 24 CFR part 966, subpart B, which applies to 
public housing tenants, is applicable to this part.



PART 954--INDIAN HOME PROGRAM--Table of Contents




                      Subpart A--General Provisions

Sec.
954.1  Overview.
954.2  Definitions.
954.3  Waivers.
954.4  Other Federal requirements.

                   Subpart B--Applying for Assistance

954.100  General.
954.101  Allocation of funds.
954.102  Eligible applicants.
954.103  Housing strategy.
954.104  Performance thresholds.
954.105  Criteria for selection.
954.106  Announcement of competition.
954.107  Grant conditions.
954.108  Project amendment.

            Subpart C--Eligible Activities and Affordability

954.300  Eligible activities.
954.301  Religious organizations.
954.302  Income determinations.
954.303  Eligible project costs.
954.304  Eligible administrative costs.
954.305  Tenant-based rental assistance.
954.306  Rental housing: qualification as affordable housing and income 
          targeting.
954.307  Homeownership: qualification as affordable housing.
954.308  Prohibited activities.

                     Subpart D--Project Requirements

954.400  Maximum per-unit subsidy amount.
954.401  Property standards.
954.402  Tenant and participant protections.

[[Page 386]]

                    Subpart E--Program Administration

954.500  Repayment of investment.
954.501  Grantee responsibilities; written agreements; monitoring.
954.502  Applicability of uniform administrative requirements.
954.503  Audit.
954.504  Closeout.
954.505  Recordkeeping.
954.506  Performance reports.
954.507  Submission of project completion reports.

              Subpart F--Performance Reviews and Sanctions

954.600  Performance reviews.
954.601  Corrective and remedial actions.
954.602  Notice and opportunity for hearing; sanctions.

    Authority: 42 U.S.C. 3535(d) and 12701-12839.

    Source: 61 FR 32223, June 21, 1996, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 954.1  Overview.

    This part implements the Indian HOME Investment Partnerships 
Program. In general, under the Indian HOME Investment Partnerships 
Program, HUD awards funds competitively to eligible applicants to 
provide more affordable housing. Grantees may use HOME funds to carry 
out projects through acquisition, rehabilitation, and new construction 
of housing, and tenant-based rental assistance. Grantees are able to 
provide assistance in a number of eligible forms, including loans, 
advances, equity investments, interest subsidies and other forms of 
investment that HUD approves.



Sec. 954.2  Definitions.

    Adjusted income. See 24 CFR part 950.
    Annual income. See 24 CFR part 950.
    Area Office of Native American Programs (ONAP). See 24 CFR part 950.
    Certification means a written assertion, based on supporting 
evidence, which must be kept available for inspection by HUD, the 
Inspector General and the public, which assertion is deemed to be 
accurate for purposes of this part, unless HUD determines otherwise 
after inspecting the evidence and providing due notice and opportunity 
for comment.
    Community-wide exception rents are maximum gross rents approved by 
HUD for the Rental Certificate program under Sec. 882.106(a)(3) of this 
title for a designated municipality, county, or similar locality, which 
apply to the whole IHA jurisdiction.
    Family. See 24 CFR part 950.
    HOME funds means funds made available under this part through 
grants, plus all repayments and interest or other return on the 
investment of these funds.
    Homeownership means ownership in fee simple title or a leasehold 
interest of not less than 50 years (including 25 years, automatically 
renewable for an additional term of 25 years) in a one-to-four unit 
dwelling or in a condominium unit, ownership or membership in a 
cooperative, or equivalent form of ownership approved by HUD. The 
ownership interest may be subject only to the restrictions on resale 
required under Sec. 954.307(a); mortgages, deeds of trust, or other 
liens or instruments securing debt on the property as approved by the 
tribe; or any other restrictions or encumbrances that do not impair the 
good and marketable nature of title to the ownership interest.
    Household means one or more persons occupying a housing unit.
    Housing includes site constructed, modular, manufactured housing and 
housing lots.
    HUD. See 24 CFR part 950.
    Indian housing authority (IHA). See 24 CFR part 950.
    Low-income family See 24 CFR part 950.
    Monthly adjusted income. See 24 CFR part 950.
    Monthly income. See 24 CFR part 950.
    NOFA means notice of funding availability.
    Project means housing developed, acquired, or assisted with HOME 
funds, and the improvement of this housing. It includes the site on 
which the housing is located and all of the HOME-assisted activities 
associated with the building and the site.
    Project completion means that all necessary title transfer 
requirements and construction work have been performed and the project 
complies with the requirements of this part (including the property 
standards adopted under

[[Page 387]]

Sec. 954.401); the final drawdown has been disbursed for the project; a 
Project Completion Report has been submitted and a final accounting of 
project expenses is provided by the grantee as prescribed by HUD. For 
tenant-based rental assistance, it also means the final drawdown has 
been disbursed for the project and the final payment certification has 
been submitted and processed as prescribed by HUD.
    Secretary means the Secretary of Housing and Urban Development.
    Single room occupancy (SRO) housing means housing consisting of 
single room dwelling units that is the primary residence of its occupant 
or occupants. The unit may contain either food preparation facilities or 
sanitary facilities, or both. Alternatively, sanitary facilities may be 
located outside the unit and be shared by tenants in the project. SRO 
does not include facilities for students.
    Subgrantee means a public agency or nonprofit organization retained 
by the grantee under a written agreement to administer all or a portion 
of the grantee's program for its HOME grant. A public agency or 
nonprofit organization that receives HOME funds solely as a developer or 
owner of housing is not a subgrantee. The grantee's selection of a 
subgrantee is not subject to the procurement procedures and 
requirements.
    Tenant-based rental assistance is a form of rental assistance in 
which the assisted tenant may move from a dwelling unit with a right to 
continued assistance.
    Transitional housing means housing that--
    (1) Is designed to provide housing and supportive services to 
persons, including (but not limited to) deinstitutionalized individuals 
with disabilities, homeless individuals with disabilities, and homeless 
families with children; and
    (2) Has as its purpose facilitating the movement of individuals and 
families to independent living within a time period that is set by the 
grantee before occupancy.
    Very low-income family. See 24 CFR part 950.



Sec. 954.3  Waivers.

    Upon determination of good cause, HUD may waive any provision of 
this part not required by statute. Each waiver must be in writing and 
must be supported by documentation of the pertinent facts and grounds.



Sec. 954.4  Other Federal requirements.

    (a) Equal opportunity. (1) Section 282. Pursuant to the requirements 
of Section 282 of the Cranston-Gonzales National Affordable Housing Act 
(42 U.S.C. 12832), no person in the United States shall on the grounds 
of race, color, national origin, religion, or sex be excluded from 
participation in, be denied the benefits of, or be subjected to 
discrimination under any program or activity funded in whole or in part 
with HOME funds. In addition, HOME funds must be made available in 
accordance with the prohibitions against discrimination on the basis of 
age under the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107) and 
implementing regulations at 24 CFR part 146, and the prohibitions 
against discrimination against handicapped individuals under section 504 
of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing 
regulations at 24 CFR part 8.
    (2) Civil Rights Act. Title VI of the Civil Rights Act of 1964 (42 
U.S.C. 2000d-2000d-4), which prohibits discrimination on the basis of 
race, color or national origin in federally assisted programs, the Fair 
Housing Act (42 U.S.C. 3601-3620), which prohibits discrimination based 
on race, color, religion, sex, or national origin in the sale or rental 
of housing, and Executive Order 11063 (27 FR 11527, 3 CFR 1959-1963 
Comp., p. 652), which provides for equal opportunity in housing, do not 
apply to grantees exercising recognized powers of self-government. 
Indian tribes and tribal organizations applying on behalf of Indian 
tribes that do not exercise recognized powers of self-government must 
make HOME funds available in accordance with Title VI of the Civil 
Rights Act of 1964, the Fair Housing Act, and Executive Order 11063.
    (b) Indian Civil Rights Act. The Indian Civil Rights Act (title II 
of the Civil Rights Act of 1968, 25 U.S.C. 1301-1303) provides, among 
other things, that ``no Indian tribe in exercising powers of

[[Page 388]]

self-government shall. . . deny to any person within its jurisdiction 
the equal protection of its laws or deprive any person of liberty or 
property without due process of law.'' The Indian Civil Rights Act 
(ICRA) applies to any tribe, band, or other group of Indians subject to 
the jurisdiction of the United States in the exercise of recognized 
powers of self-government.
    (c) Indian preference requirements. (1) Applicability. HUD has 
determined that grants under this part are subject to Section 7(b) of 
the Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450e(b)). Section 7(b) provides that any contract, subcontract, grant or 
subgrant pursuant to an act authorizing grants to Indian organizations 
or for the benefit of Indians shall require that, to the greatest extent 
feasible:
    (i) Preference and opportunities for training and employment shall 
be given to Indians; and
    (ii) Preference in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises as 
defined in section 3 of the Indian Financing Act of 1974 (25 U.S.C. 
1452).
    (2) Definitions. (i) The Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450e(b)) defines ``Indian'' to mean a person 
who is a member of an Indian tribe and defines ``Indian tribe'' to mean 
any Indian tribe, band, nation, or other organized group or community 
including any Alaska native village or regional or village corporation 
as defined or established pursuant to the Alaska Native Claims 
Settlement Act, which is recognized as eligible for the special programs 
and services provided by the United States to Indians because of their 
status as Indians.
    (ii) In section 3 of the Indian Financing Act of 1974 (25 U.S.C. 
1452) ``economic enterprise'' is defined as any Indian-owned commercial, 
industrial, or business activity established or organized for the 
purpose of profit, except that Indian ownership must constitute not less 
than 51 percent of the enterprise. This act defines ``Indian 
organization'' to mean the governing body of any Indian tribe or entity 
established or recognized by such governing body.
    (3) Preference in administration of grant. To the greatest extent 
feasible, preference and opportunities for training and employment in 
connection with the administration of grants awarded under this part 
shall be given to Indians.
    (4) Preference in contracting. To the greatest extent feasible, 
grantees shall give preference in the award of contracts for projects 
funded under this part to Indian organizations and Indian-owned economic 
enterprises.
    (i) Each grantee shall:
    (A) Advertise for bids or proposals limited to qualified Indian 
organizations and Indian-owned enterprises; or
    (B) Use a two-stage preference procedure, as follows:
    (1) Stage 1. Invite or otherwise solicit Indian-owned economic 
enterprises to submit a statement of intent to respond to a bid or 
proposal announcement limited to Indian-owned firms.
    (2) Stage 2. If responses are received from more than one Indian 
enterprise found to be qualified, advertise for bids or proposals 
limited to Indian organizations and Indian-owned economic enterprises; 
or
    (C) Develop, subject to area ONAP one-time approval, the grantee's 
own method of providing preference.
    (ii) If the grantee selects a method of providing preference that 
results in fewer than two responsible qualified organizations or 
enterprises submitting a statement of intent, a bid or a proposal to 
perform the contract at a reasonable cost, then the grantee shall:
    (A) Re-bid the contract, using any of the methods described in 
paragraph (d)(1) of this section; or
    (B) Re-bid the contract without limiting the advertisement for bids 
or proposals to Indian organizations and Indian-owned economic 
enterprises; or
    (C) If one approvable bid is received, request area ONAP review and 
approval of the proposed contract and related procurement documents, in 
accordance with 24 CFR 85.36, in order to award the contract to the 
single bidder.
    (iii) Procurements that are within the dollar limitations 
established for small purchases under 24 CFR 85.36 need not follow the 
formal bid procedures of paragraph (d) of this section,

[[Page 389]]

since these procurements are governed by the small purchase procedures 
of 24 CFR 85.36. However, a grantee's small purchase procurement shall, 
to the greatest extent feasible, provide Indian preference in the award 
of contracts.
    (iv) All preferences shall be publicly announced in the 
advertisement and bidding or proposal solicitation and the bidding or 
proposal documents.
    (v) A grantee, at its discretion, may require information of 
prospective contractors seeking to qualify as Indian organizations or 
Indian-owned economic enterprises. Grantees may require prospective 
contractors to include the following information prior to submitting a 
bid or proposal, or at the time of submission:
    (A) Evidence showing fully the extent of Indian ownership and 
interest;
    (B) Evidence of structure, management and financing affecting the 
Indian character of the enterprise, including major subcontracts and 
purchase agreements; materials or equipment supply arrangements; and 
management salary or profit-sharing arrangements; and evidence showing 
the effect of these on the extent of Indian ownership and interest; and
    (C) Evidence sufficient to demonstrate to the satisfaction of the 
grantee that the prospective contractor has the technical, 
administrative, and financial capability to perform contract work of the 
size and type involved.
    (vi) The grantee shall incorporate the following clause (referred to 
as the Section 7(b) clause) in each contract awarded in connection with 
a project funded under this part:
    (A) The work to be performed under this contract is on a project 
subject to Section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450e(b)) (Indian Act). Section 7(b) requires 
that to the greatest extent feasible preferences and opportunities for 
training and employment shall be given to Indians, and preferences in 
the award of contracts and subcontracts shall be given to Indian 
organizations and Indian-owned economic enterprises.
    (B) The parties to this contract shall comply with the provisions of 
Section 7(b) of the Indian Act.
    (C) In connection with this contract, the contractor shall, to the 
greatest extent feasible, give preference in the award of any 
subcontracts to Indian organizations and Indian-owned economic 
enterprises, and preferences and opportunities for training and 
employment to Indians.
    (D) The contractor shall include this Section 7(b) clause in every 
subcontract in connection with the project, and shall, at the direction 
of the grantee, take appropriate action pursuant to the subcontract upon 
a finding by the grantee or HUD that the subcontractor has violated the 
Section 7(b) clause of the Indian Act.
    (5) Complaint procedures. The following complaint procedures are 
applicable to complaints arising out of any of the methods of providing 
for Indian preference contained in this part, including alternate 
methods enacted and approved in a manner described in this section.
    (i) Each complaint shall be in writing, signed, and filed with the 
grantee.
    (ii) A complaint must be filed with the grantee no later than 20 
calendar days from the date of the action (or omission) upon which the 
complaint is based.
    (iii) Upon receipt of a complaint, the grantee shall promptly stamp 
the date and time of receipt upon the complaint, and immediately 
acknowledge its receipt.
    (iv) Within 20 calendar days of receipt of a complaint, the grantee 
shall either meet, or communicate by mail or telephone, with the 
complainant in an effort to resolve the matter. The grantee shall make a 
determination on a complaint and notify the complainant, in writing, 
within 30 calendar days of the submittal of the complaint to the 
grantee. The decision of the grantee shall constitute final 
administrative action on the complaint.
    (d) Environmental review. The Indian tribe must assume 
responsibility for environmental review, decisionmaking, and action for 
each activity that it carries out with HOME funds, in accordance with 
the requirements imposed on a recipient under 24 CFR part 58. The 
grantee shall also be responsible for compliance with flood insurance, 
coastal barrier resource and airport

[[Page 390]]

clear zone requirements under 24 CFR 58.6.
    (e) Displacement, relocation, and acquisition. (1) Minimizing 
displacement. Consistent with the other goals and objectives of this 
part, the grantee must ensure that it has taken all reasonable steps to 
minimize the displacement of persons (families, individuals, businesses, 
nonprofit organizations, and farms) as a result of a project assisted 
with HOME funds. To the extent feasible, residential tenants must be 
provided a reasonable opportunity to lease and occupy a suitable, 
decent, safe, sanitary, and affordable dwelling unit in the building/
complex upon completion of the project.
    (2) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided:
    (i) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporarily occupied housing and any increase in 
monthly rent/utility costs.
    (ii) Appropriate advisory services, including reasonable advance 
written notice of--
    (A) The date and approximate duration of the temporary relocation;
    (B) The location of the suitable, decent, safe, and sanitary 
dwelling to be made available for the temporary period;
    (C) The terms and conditions under which the tenant may lease and 
occupy a suitable, decent, safe, and sanitary dwelling in the building/
complex upon completion of the project; and
    (D) The provisions of paragraph (e)(2)(i) of this section.
    (3) Relocation assistance for displaced persons. (i) General. A 
displaced person (defined in paragraph (e)(3)(ii) of this section) must 
be provided relocation assistance at the levels described in, and in 
accordance with the requirements of, the Uniform Relocation Assistance 
and Real Property Acquisition Policies Act of 1970 (URA) (42 U.S.C. 
4201-4655) and 49 CFR part 24.
    (ii) Displaced Person. (A) For purposes of paragraph (c) of this 
section, the term displaced person means a person (family individual, 
business, private nonprofit organization, or farm, including any 
corporation, partnership or association) that moves from real property 
or moves personal property from real property, permanently, as a direct 
result of acquisition, rehabilitation, or demolition for a project 
assisted with HOME funds. This includes any permanent, involuntary move 
for an assisted project, including any permanent move from the real 
property that is made:
    (1) After notice by the owner to move permanently from the property, 
if the move occurs on or after:
    (i) The date of the submission of an application to the grantee or 
HUD, if the applicant has site control and the application is later 
approved; or
    (ii) The date the grantee approves the applicable site, if the 
applicant does not have site control at the time of the application; or
    (2) Before the date described in paragraph (e)(3)(ii)(A)(1) of this 
section, if the grantee or HUD determines that the displacement resulted 
directly from acquisition, rehabilitation, or demolition for the 
project; or
    (3) By a tenant-occupant of a dwelling unit, if any one of the 
following three situations occurs:
    (i) The tenant moves after execution of the agreement covering the 
acquisition, rehabilitation, or demolition and the move occurs before 
the tenant is provided written notice offering the tenant the 
opportunity to lease and occupy a suitable, decent, safe, and sanitary 
dwelling in the same building/complex upon completion of the project 
under reasonable terms and conditions. Such reasonable terms and 
conditions must include a term of at least one year at a monthly rent 
and estimated average monthly utility costs that do not exceed the 
greater of: the tenant's monthly rent before such agreement and 
estimated average monthly utility costs; or the total tenant payment, as 
determined under 24 CFR part 5, if the tenant is low-income, or 30 
percent of gross household income, if the tenant is not low-income; or
    (ii) The tenant is required to relocate temporarily, does not return 
to the

[[Page 391]]

building/complex, and either: the tenant is not offered payment for all 
reasonable out-of-pocket expenses incurred in connection with the 
temporary relocation; or other conditions of the temporary relocation 
are not reasonable; or
    (iii) The tenant is required to move to another dwelling unit in the 
same building/complex but is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move, 
or other conditions of the move are not reasonable.
    (B) Notwithstanding paragraph (e)(3)(ii)(A) of this section, a 
person does not qualify as a displaced person if:
    (1) The person has been evicted for cause based upon a serious or 
repeated violation of the terms and conditions of the lease or occupancy 
agreement, violation of applicable Federal or tribal law (or state law, 
which may apply if the grantee is not exercising recognized powers of 
self-government), or other good cause, and the grantee determines that 
the eviction was not undertaken for the purpose of evading the 
obligation to provide relocation assistance. The effective date of any 
termination or refusal to renew must be preceded by at least 30 days 
advance written notice to the tenant specifying the grounds for the 
action.
    (2) The person moved into the property after the submission of the 
application but, before signing a lease and commencing occupancy, was 
provided written notice of the project, its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated, incur 
a rent increase), and the fact that the person would not qualify as a 
``displaced person'' (or for any assistance under this section) as a 
result of the project;
    (3) The person is ineligible under 49 CFR 24.2(g)(2); or
    (4) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (C) The grantee may, at any time, ask HUD to determine whether a 
displacement is or would be covered by this part.
    (iii) Initiation of negotiations. For purposes of determining the 
formula for computing replacement housing assistance to be provided 
under paragraph (e)(3) of this section to a tenant displaced from a 
dwelling as a direct result of private-owner rehabilitation, demolition 
or acquisition of the real property, the term initiation of negotiations 
means the execution of the agreement covering the acquisition, 
rehabilitation, or demolition.
    (4) Optional relocation assistance. The grantee may provide 
relocation payments and other relocation assistance to families, 
individuals, businesses, nonprofit organizations, and farms displaced by 
a project assisted with HOME funds where the displacement is not subject 
to paragraph (e)(3) of this section. The grantee may also provide 
relocation assistance to persons covered under paragraph (e)(3) of this 
section beyond that required. For any such assistance that is not 
required by tribal law (or state law, which may apply if the grantee is 
not exercising recognized powers of self-government), the grantee must 
adopt a written policy available to the public that describes the 
optional relocation assistance that it has elected to furnish and 
provides for equal relocation assistance within each class of displaced 
persons.
    (5) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements of 49 
CFR part 24, subpart B.
    (6) Appeals. A person who disagrees with the grantee's determination 
concerning whether the person qualifies as a displaced person, or the 
amount of relocation assistance for which the person may be eligible, 
may file a written appeal of that determination with the grantee.
    (7) Responsibility of grantee. (i) The grantee must certify that it 
will comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section, and must ensure such compliance 
notwithstanding any third party's contractual obligation to the grantee 
to comply.
    (ii) The cost of required relocation assistance is an eligible 
project cost. This cost also may be paid from tribal funds, or funds 
available from other sources.

[[Page 392]]

    (f) Labor. (1) General. (i) Every contract for the construction 
(rehabilitation or new construction) of housing that includes 12 or more 
units assisted with HOME funds must contain a provision requiring the 
payment of not less than the wages prevailing in the locality, as 
predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act 
(40 U.S.C. 276a-276a-5), to all laborers and mechanics employed in the 
development of any part of the housing. Such contracts must also be 
subject to the overtime provisions, as applicable, of the Contract Work 
Hours and Safety Standards Act (42 CFR 327-332).
    (ii) The contract for construction must contain these wage 
provisions if HOME funds are used for any project costs (as defined in 
subpart C of this part), including construction or non-construction 
costs, of housing with 12 or more HOME-assisted units. When HOME funds 
are only used to assist homebuyers to acquire single-family housing, and 
not for any other project costs, the wage provisions apply to the 
construction of the housing if there is a written agreement with the 
owner or developer of the housing that HOME funds will be used to assist 
homebuyers to buy the housing and the construction contract covers 12 or 
more housing units to be purchased with HOME assistance. The wage 
provisions apply to any construction contract that includes a total of 
12 or more HOME-assisted units, whether one or more than one project 
phase is covered by the construction contract. Once they are determined 
to be applicable, the wage provisions must be contained in the 
construction contract so as to cover all laborers and mechanics employed 
in the development of the entire project, including portions other than 
the assisted units. Arranging multiple construction contracts within a 
single project for the purpose of avoiding the wage provisions is not 
permitted.
    (iii) Grantees, contractors, subcontractors, and other participants 
must comply with regulations issued under these Acts and with other 
Federal laws and regulations pertaining to labor standards and HUD 
Handbook 1344.1 (Federal Labor Standards Compliance in Housing and 
Community Development programs), as applicable. Grantees must require 
certification as to compliance with the provisions of this section 
before making any payment under such contract.
    (2) Volunteers. The prevailing wage provisions of paragraph (f)(1) 
of this section do not apply to an individual who receives no 
compensation or is paid expenses, reasonable benefits, or a nominal fee 
to perform the services for which the individual volunteered and who is 
not otherwise employed at any time in the construction work. See 24 CFR 
part 70.
    (3) Sweat equity. The prevailing wage provisions of paragraph (f)(1) 
of this section do not apply to members of an eligible family who 
provide labor in exchange for acquisition of a property for 
homeownership or provide labor in lieu of, or as a supplement to, rent 
payments.
    (4) Force account. (i) The grantee is responsible for compliance 
with regulatory requirements in the use of grantee work forces for 
construction or renovation activities performed as part of the 
activities funded under this part. The grantee must provide for its 
files the following:
    (A) Documentation to indicate that it has carried out or can carry 
out successfully a project of the size and scope of the proposal;
    (B) Documentation to indicate that it has obtained or can obtain 
adequate supervision for the workers to be used;
    (C) Information showing that the workers to be used are, or will be, 
listed on the grantee payroll and are employed directly by the grantee.
    (ii) Any and all excess funds derived from the force account 
construction or renovation activities shall accrue to the grantee and 
shall be reprogrammed for other activities eligible under this part or 
returned to HUD promptly.
    (iii) Insurance coverage for force account workers and activities 
shall, where applicable, include worker's compensation, public 
liability, property damage, builder's risk, and vehicular liability.
    (iv) The grantee shall specify and apply reasonable labor 
performance, construction, or renovation standards to work performed 
under the force account.

[[Page 393]]

    (v) The contracting and procurement standards set forth in 24 CFR 
85.36 apply to material, equipment, and supply procurement from outside 
vendors under this section.
    (vi) In force account there is no contract. If the grantee which has 
received the HOME grant to construct the housing units performs the 
construction work using force account, i.e., with its own employees, the 
work is not covered by Davis-Bacon and related Acts. If the grantee 
contracts out the work or part of the work, that work is covered.
    (g) Lead-based paint. Housing assisted with HOME funds constitutes 
HUD-associated housing for the purpose of the Lead-Based Paint Poisoning 
Prevention Act (42 U.S.C. 4821, et seq.) and is, therefore, subject to 
24 CFR part 35. Grantees are responsible for testing and abatement 
activities.
    (h) Conflict of interest. (1) Applicability. (i) The conflict of 
interest provisions in 24 CFR part 84 and 24 CFR 85.36 apply to the 
procurement of supplies, equipment, construction, and services by 
grantees and their subgrantees.
    (ii) The provisions of this section apply to all cases not governed 
by 24 CFR part 84 and 24 CFR 85.36. These cases include the acquisition 
and disposition of real property and the provision of assistance by the 
grantee, by subgrantees, or to individuals, housing developers, and 
other private entities under eligible activities which authorize such 
assistance (e.g., rehabilitation of housing).
    (2) Conflicts prohibited. The general rule is that no persons 
described in paragraph (h)(3) of this section who have or had any 
functions or responsibilities with respect to activities assisted under 
this part, or who are in a position to participate in a decision, or 
gain inside information about such activities, may obtain a financial 
interest or benefit from these activities. Further, these persons may 
not have an interest in any contract, subcontract, or agreement 
concerning such activities; and these persons may not, during their 
employment or tenure in office and for one year thereafter, have an 
interest in the proceeds from these activities, either for themselves or 
for those with whom they have family or business ties. This paragraph 
does not apply to approved eligible administrative or personnel costs.
    (3) Persons covered. The conflict of interest provisions of 
paragraph (h)(2) of this section apply to any person who is an employee, 
agent, consultant, officer, or elected or appointed official of the 
grantee or subgrantee receiving HOME funds.
    (4) Exceptions requiring HUD approval. (i) Threshold requirements. 
Upon the written request of a grantee, HUD may grant an exception to the 
provisions of paragraph (h)(2) of this section on a case-by-case basis, 
when it determines that such an exception will serve to further the 
purposes of the HOME program and the effective and efficient 
administration of the grantee's project. An exception may be considered 
only after the grantee has provided the following:
    (A) A disclosure of the nature of the possible conflict, accompanied 
by an assurance that there has been public disclosure of the conflict 
and a description of how the public disclosure was made; and
    (B) An opinion of the grantee's attorney that the interest for which 
the exception is sought would not violate tribal laws on conflict of 
interest (or State law on conflict of interest, which may apply if the 
grantee is not exercising recognized powers of self-government).
    (ii) Factors to be considered for exceptions. In determining whether 
to grant a requested exception after the grantee has satisfactorily met 
the requirements of paragraph (h)(4)(i) of this section, HUD shall 
consider the cumulative effect of the following factors, where 
applicable:
    (A) Whether the exception would provide a significant cost benefit 
or essential expert knowledge to the project which would otherwise not 
be available;
    (B) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or from the decision-making process, with 
reference to the specific assisted activity in question;
    (C) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (h)(2) of this 
section;

[[Page 394]]

    (D) Whether undue hardship will result, either to the grantee or to 
the person affected, when weighed against the public interest served by 
avoiding the prohibited conflict; and
    (E) Any other relevant considerations.
    (5) Circumstances under which the conflict prohibition does not 
apply. (i) In instances where a person who might otherwise be deemed to 
be included under the conflict prohibition is a member of a group or 
class of beneficiaries of the assisted activity and receives generally 
the same interest or benefits as are being made available or provided to 
the group or class, the prohibition does not apply, except that if, by 
not applying the prohibition against conflict of interest, a violation 
of tribal (or State) laws on conflict of interest would result, the 
prohibition does apply.
    (ii) A public disclosure of the nature of the grant assistance to be 
provided and the specific basis for the selection of the proposed 
beneficiaries must be made prior to the submission of an application to 
HUD. Evidence of this disclosure must be provided as a component of the 
application.
    (i) Debarment and suspension. As required by 24 CFR part 24, each 
grantee must require participants in lower tier covered transactions 
(e.g., sub-contractors) to include the certification in appendix B of 24 
CFR part 24 (that neither it nor its principals is presently debarred, 
suspended, proposed for debarment, declared ineligible, or voluntarily 
excluded from participation from the covered transaction) in any 
proposal submitted in connection with the lower tier transactions. A 
grantee may rely on the certification, unless it knows the certification 
is erroneous.



                   Subpart B--Applying for Assistance



Sec. 954.100  General.

    For each fiscal year, HUD will provide funds for the Indian HOME 
program, totaling one percent (or such other percentage or amount as 
authorized by Congress) of the amount appropriated for the HOME program 
to expand the supply of affordable housing. The funds will be awarded 
competitively and will be made available pursuant to a NOFA published in 
the Federal Register, in accordance with the requirements of this part.



Sec. 954.101  Allocation of funds.

    Unless HUD determines for administrative convenience based on the 
amount of HOME funds available to hold a nationwide competition, HOME 
funds will be allocated to the HUD Area ONAPs responsible for the Indian 
HOME program competition based upon relative need for housing as 
measured by the most recent and reliable data available.



Sec. 954.102  Eligible applicants.

    (a) Eligible applicants for HOME funds for Indian tribes are any 
Indian Tribe, band, group, or nation, including Alaskan Indians, Aleuts, 
and Eskimos, and any Alaska native village of the United States which is 
considered an eligible recipient under Title I of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450). Eligible 
recipients under the Indian Self-Determination and Education Assistance 
Act are determined by the Bureau of Indian Affairs.
    (b) Tribal organizations which are eligible under Title I of the 
Indian Self-Determination and Education Assistance Act may apply for 
funds on behalf of any Indian Tribe, band, group, nation, or Alaska 
native village eligible under that Act when one or more of these 
entities have authorized the tribal organization to do so through 
concurring resolutions. Such resolutions must accompany the application 
for funding. Eligible tribal organizations under Title I of the Indian 
Self-Determination and Education Assistance Act will be determined by 
the Bureau of Indian Affairs or Indian Health Service, as appropriate.
    (c) Only eligible applicants shall receive grants. However, eligible 
applicants may contract or otherwise agree with non-eligible entities 
such as States, cities, counties, or other organizations to assist in 
the preparation of applications and to help implement assisted 
activities.
    (d) To apply for funding in a given fiscal year, an applicant must 
be eligible as an Indian Tribe or Alaska native village, as provided in 
paragraph (a) of

[[Page 395]]

this section, or as a tribal organization, as provided in paragraph (b) 
of this section, by the application submission date.



Sec. 954.103  Housing strategy.

    Grantees are not required to submit a housing strategy to receive 
HOME funds. However, the application must demonstrate how the proposed 
project(s) will contribute to a comprehensive approach for expanding the 
supply of affordable housing for members of the Indian tribe.



Sec. 954.104  Performance thresholds.

    Applicants must have the administrative capacity to undertake the 
project proposed, including systems of internal control necessary to 
administer these projects effectively. In addition, an applicant that 
has participated in the HOME program must have performed adequately. In 
cases of previously documented deficient performance, the applicant must 
have taken appropriate corrective action to improve its performance 
prior to submitting a HOME application to HUD. The Area ONAP will 
determine whether or not a grantee is eligible to participate in a 
particular funding round. Examples of deficient performance may include 
unresolved serious audit findings and failure to initiate a previous 
grant.



Sec. 954.105  Criteria for selection.

    There are four categories of projects that may be funded under the 
HOME Indian program: housing rehabilitation; acquisition of housing; new 
housing construction; and tenant-based rental assistance. Each project 
must be evaluated using the following three criteria:
    (a) Project need and design. The degree to which the proposed 
project addresses the housing need(s) of the grantee as identified in 
the application, and the degree to which the proposed project is 
feasible while maximizing benefits to low-income families.
    (b) Planning and implementation. The degree to which the financial, 
administrative, and legal actions necessary to undertake the proposed 
project have been considered and addressed in the application, and the 
degree to which the grantee has the administrative staff to carry out 
the project successfully.
    (c) Leveraging. The degree to which other sources of assistance, 
including mortgage insurance, State funds, other Federal grants, and 
private contributions, are used in conjunction with HOME funds to carry 
out the proposed project.



Sec. 954.106  Announcement of competition.

    A NOFA will describe the maximum points for each of the selection 
criteria and any special factors to be evaluated in awarding points 
under the selection factors. The NOFA will also state the deadline for 
the submission of applications, the total funding available for the 
competition and any maximum amount of individual awards.

[Approved by the Office of Management and Budget under OMB control 
number 2577-0191]



Sec. 954.107  Grant conditions.

    HUD may impose reasonable conditions on grant awards.



Sec. 954.108  Project amendment.

    (a) Grantees shall request prior HUD approval for all project 
amendments.
    (b) HUD can approve an amendment to a project if:
    (1) The amendment is due to factors beyond the control of the 
grantee; and
    (2) The request for approval for a project amendment which involves 
$100,000 or more includes all application components required by the 
NOFA published for the last application cycle (not necessarily the year 
in which the project was rated and ranked) and the modified project 
scores high enough to have been funded in the competition for the last 
application cycle. A rating equal to or greater than the lowest rating 
received by a funded project during the last rating cycle must be 
attained by the modified project. The request for approval of an 
amendment for a project which involves less than $100,000 does not have 
to include the components which address the selection criteria. It does 
require a description of and the reason for the modification.
    (c) Approval of an amendment request is subject to the following:

[[Page 396]]

    (1) Demonstration by the grantee of the capacity to promptly 
complete the modified or new project.
    (2) The preparation of an amended or new environmental review in 
accordance with Part 58 of this title, if there is a significant change 
in the scope or location of approved project.
    (d) If a project amendment fails to be approved and the original 
project is no longer feasible, the grant funds proposed for amendment 
shall be deobligated by HUD and recaptured.



            Subpart C--Eligible Activities and Affordability



Sec. 954.300  Eligible activities.

    (a) Eligible activities. (1) General. HOME funds may be used by a 
grantee to provide incentives to develop and support affordable rental 
housing and homeownership affordability and to provide payment of 
reasonable administrative and planning costs. The housing must be 
permanent or transitional housing, and includes permanent housing for 
disabled homeless persons, and single-room occupancy housing. The 
specific eligible costs for these activities are set forth in 
Sec. 954.303 and Sec. 954.304.
    (2) Acquisition of vacant land or demolition must be undertaken only 
as an integral part of a particular HOME new construction project.
    (3) Manufactured housing. Purchase and/or rehabilitation of a 
manufactured housing unit qualifies as affordable housing only if, at 
the time of project completion, the unit:
    (i) Is situated on a permanent foundation (except--for 
rehabilitation not involving purchase--when assisting existing unit 
owners who rent the lot on which their unit sits);
    (ii) Is connected to permanent utility hook-ups;
    (iii) Is located on land that is held in fee-simple title, land-
trust, or long-term ground lease with a term at least equal to that of 
the appropriate affordability period;
    (iv) Meets the construction standards established under 24 CFR part 
3280 if produced after June 15, 1976. If the unit was produced prior to 
June 16, 1976, it must comply with applicable tribal, State or local 
codes; and
    (v) In cases where the owner of a manufactured housing unit does not 
hold fee-simple title to the land on which the unit is located, the 
owner may be assisted in purchasing the land under provisions governing 
rehabilitation not involving purchase.
    (b) Forms of assistance. A grantee may invest HOME funds as equity 
investments, interest-bearing loans or advances, noninterest-bearing 
loans or advances, interest subsidies consistent with the purposes of 
this part, deferred payment loans, grants, or other forms of assistance 
that HUD determines to be consistent with the purposes of this part. 
Each grantee has the right to establish the terms of assistance, subject 
to the requirements of this part.



Sec. 954.301  Religious organizations.

    HOME funds may not be provided to primarily religious organizations, 
such as churches, for any activity including secular activities. In 
addition, HOME funds may not be used to rehabilitate or construct 
housing owned by primarily religious organizations or to assist 
primarily religious organizations in acquiring housing. However, HOME 
funds may be used by a secular entity to acquire housing from a 
primarily religious organization, and a primarily religious entity may 
transfer title to property to a wholly secular entity and the entity may 
participate in the HOME program in accordance with the requirements of 
this part. The entity may be an existing or newly established entity 
(which may be an entity established, but not controlled, by the 
religious organization). The completed housing project must be used 
exclusively by the owner entity for secular purposes, available to all 
persons regardless of religion. In particular, there must be no 
religious or membership criteria for tenants of the property.



Sec. 954.302  Income determinations.

    Whenever a grantee makes a determination under this part based on 
family income or adjusted family income, it must use the definitions of 
annual income, adjusted income, monthly income, and monthly adjusted 
income, as those terms are defined in 24 CFR part

[[Page 397]]

950, except when determining the income of a homeowner for an owner-
occupied rehabilitation project, the equity in the homeowner's principal 
residence is excluded from ``Net Family Assets.''



Sec. 954.303  Eligible project costs.

    HOME funds may be used to pay the following eligible costs:
    (a) Development hard costs. The actual cost of constructing or 
rehabilitating housing. These costs include the following:
    (1) For new construction, costs to meet the applicable new 
construction standards of the grantee and the Model Energy Code referred 
to in Sec. 954.401;
    (2) For rehabilitation, costs:
    (i) To meet the applicable rehabilitation standards of the grantee 
or correcting substandard conditions (minimally, the housing quality 
standards at Sec. 882.109 of this title), to make essential improvements 
including energy-related repairs or improvements, improvements necessary 
to permit the use by handicapped persons, and the abatement of lead-
based paint hazards, as required by Sec. 954.4, and to repair or replace 
major housing systems in danger of failure; and
    (ii) To refinance existing debt secured by a single-family owner-
occupied unit when loaning HOME funds to rehabilitate the unit, if the 
overall housing costs of the borrower will be reduced and made more 
affordable.
    (3) For both new construction and rehabilitation, costs to demolish 
existing structures and for improvements to the project site that are in 
keeping with improvements of surrounding, standard projects, and costs 
to make utility connections. The ``site'' of the improvements may 
include property adjacent to or near the immediate site of the housing 
if this property and the housing are owned by the same entity (e.g., the 
housing is owned--at least until sold to homebuyers--by the grantee and 
the housing and the improvements are located on a reservation). If the 
site improvements will benefit other housing (existing or future) in 
addition to housing assisted with the particular Indian HOME grant, only 
a pro-rated share of the site improvements may be charged against the 
HOME grant. Site improvements include roads, streets, sidewalks, curbs, 
gutters, and connections to utilities, such as storm and sanitary 
sewers, water supply, gas, and electricity, and the pro rata development 
cost of facilities for water supply and sewerage collection utilities.
    (4) For new construction or substantial rehabilitation (an 
expenditure of $25,000 or more per home) the cost of funding an initial 
operating deficit reserve, which is a reserve to meet any shortfall in 
project income during the period of project rent-up (not to exceed 18 
months) and which may only be used to pay operating expenses, reserve 
for replacement payments, and debt service. Any HOME funds placed in an 
operating deficit reserve that remain unexpended when the reserve 
terminates must be returned to the grantee's account and shall be 
reprogrammed for other activities eligible under this part or returned 
to HUD promptly.
    (b) Acquisition costs. Costs of acquiring improved or unimproved 
real property, including acquisition by homebuyers.
    (c) Related soft costs. Other reasonable and necessary costs 
incurred by the owner and associated with the financing, or development 
(or both) of new construction, rehabilitation or acquisition of housing 
assisted with HOME funds. These costs include, but are not limited to:
    (1) Architectural, engineering or related professional services 
required to prepare plans, drawings, specifications, or work write-ups;
    (2) Costs to process and settle the financing for a project, such as 
private lender origination fees, credit reports, fees for title 
evidence, fees for recordation and filing of legal documents, building 
permits, attorneys' fees, private appraisal fees and fees for an 
independent cost estimate, builder and developer fees;
    (3) Costs of a project audit that the grantee may require with 
respect to the development of a specific project; and
    (4) Costs to pay impact fees that are charged to all housing.
    (d) Relocation costs. Costs of relocation payments and other 
relocation assistance for permanently and temporarily relocated 
individuals, families,

[[Page 398]]

businesses, private nonprofit organizations, and farm operations where 
assistance is required under Sec. 954.4 or determined by the grantee to 
be appropriate under Sec. 954.4.
    (e) Costs related to tenant-based rental assistance. Eligible costs 
are the rental assistance and security deposit payments made to provide 
tenant-based rental assistance for a family.



Sec. 954.304  Eligible administrative costs.

    Eligible administrative costs means reasonable and necessary costs, 
as described in OMB Circular A-87, (available from the Executive Office 
of the President, Publication Service, 725 17th Street, N.W., Suite G-
2200, Washington, DC 20503; Telephone, (202) 395-7332)) incurred by the 
grantee and related to the planning and execution of HOME activities 
assisted in whole or in part with funds provided under this part. The 
grantee may use up to 15 percent of the HOME funds for the payment of 
eligible administrative costs.



Sec. 954.305  Tenant-based rental assistance.

    (a) General. A grantee may use HOME funds for tenant-based rental 
assistance only if the grantee selects families in accordance with 
written tenant selection policies and criteria that are consistent with 
the purpose of providing housing to very low- and low-income families 
and are reasonably related to preference rules established under section 
6(c)(4)(A) of the U.S. Housing Act of 1937 (42 U.S.C. 1437d). The 
grantee may select eligible families currently residing in units that 
are designated for rehabilitation or acquisition under the grantee's 
HOME program without requiring that the family meet the written tenant 
selection policies and written criteria. Families so selected may use 
the tenant-based assistance in the rehabilitated or acquired unit or in 
other qualified housing.
    (b) Program operation. The grantee may operate the program, or may 
contract with another entity with the capacity to operate a rental 
assistance program. The tenant-based rental assistance may be provided 
through an assistance contract to an owner that leases a unit to an 
assisted family or directly to the family.
    (c) Term of rental assistance contract. The term of the rental 
assistance contract providing assistance with HOME funds may not exceed 
24 months, but may be renewed, subject to the availability of HOME 
funds. The term of the rental assistance contract must begin on the 
first day of the term of the lease. For a rental assistance contract 
between a grantee and an owner, the term of the contract must terminate 
on termination of the lease. For a rental assistance contract between a 
grantee and a family, the term of the contract need not end on 
termination of the lease, but no payments may be made after termination 
of the lease until a family enters into a new lease.
    (d) Rent reasonableness. The grantee must disapprove a lease if the 
rent is not reasonable, based on rents that are charged for comparable 
unassisted rental units.
    (e) Lease requirements. The lease must comply with the requirements 
in Sec. 954.402 of this part.
    (f) Maximum subsidy. (1) The amount of the monthly assistance that a 
grantee may pay to, or on behalf of, a family may not exceed the 
difference between a rent standard for the unit size established by the 
grantee and 30 percent of the family's monthly adjusted income.
    (2) The grantee must establish a minimum dollar amount tenant 
contribution to rent.
    (3) The grantee's rent standard for a unit size may not be less than 
80 percent of the published section 8 existing housing fair market rent 
(in effect when the payment standard amount is adopted) for the unit 
size, nor more than the section 8 fair market rent or HUD-approved 
community-wide exception rent (in effect when the grantee adopts its 
rent standard amount) for the unit size. Alternatively, the grantee's 
rent standard for a unit size may be based on local market conditions. 
Further, a grantee may approve on a unit-by-unit basis a subsidy based 
on a rent standard that exceeds the applicable section 8 fair market 
rent by up to 10 percent for 20 percent of units assisted.
    (g) Housing quality standards. Housing occupied by a family 
receiving tenant-

[[Page 399]]

based assistance under this section must meet the performance 
requirements and acceptability criteria set forth in Sec. 882.109 of 
this title.
    (h) Use of section 8 assistance. In any case where assistance under 
section 8 of the United States Housing Act of 1937 becomes available to 
a grantee, recipients of tenant-based rental assistance under this part 
will qualify for tenant selection preferences to the same extent as when 
they received the tenant-based rental assistance under this part.
    (i) Security deposits. (1) A grantee may use HOME funds provided for 
tenant-based rental assistance to provide loans or grants to very low- 
and low-income families for security deposits for rental of dwelling 
units whether or not the grantee provides any other tenant-based rental 
assistance under this section.
    (2) The relevant tribe, State or local definition of ``security 
deposit'' in the jurisdiction where the unit is located is applicable 
for the purposes of this part, except that the amount of HOME funds that 
may be provided for a security deposit may not exceed the equivalent of 
two month's rent for the unit.
    (3) Only the prospective tenant may apply for HOME security deposit 
assistance, although the grantee may pay the funds directly to the 
tenant or to the landlord.
    (4) The lease between a tenant and an owner of rental housing for 
which HOME security deposit assistance is provided must comply with the 
requirements of Sec. 954.402.
    (5) HOME funds for security deposits may be provided as a grant or a 
loan. If they are provided as a loan, the provisions at Sec. 954.501 for 
repayment of HOME investments apply.



Sec. 954.306  Rental housing: qualification as affordable housing and income targeting.

    (a) Rent limitation. A rental housing project (including the non-
owner-occupied units in housing purchased with HOME funds in accordance 
with Sec. 954.306) qualifies as affordable housing under this part only 
if the project:
    (1) Bears rents not greater than the lesser of--
    (i) The section 8 fair market rent for existing housing for 
comparable units in the area as established by HUD under Sec. 888.111 of 
this title, less the monthly allowance for the utilities and services 
(excluding telephone and cable TV) to be paid by the tenant; or
    (ii) A rent that does not exceed 30 percent of the adjusted income 
of a family whose gross income equals 65 percent of the median income 
for the area, as determined by HUD, with adjustment for number of 
bedrooms in the unit, except that HUD may establish income ceilings 
higher or lower than 65 percent of the median for the area on the basis 
of HUD's findings that such variations are necessary because of 
prevailing levels of construction costs or section 8 fair market rents, 
or unusually high or low family incomes. In determining the maximum 
monthly rent that may be charged for a unit that is subject to this 
limitation, the owner or grantee must subtract a monthly allowance for 
any utilities and services (excluding telephone and cable TV) to be paid 
by the tenant. HUD will provide average occupancy costs per unit and 
adjusted income assumptions to be used in calculating the maximum rent 
allowed under this paragraph (a)(1)(ii) of this section;
    (2) Has, in the case of projects with three or more rental units, 
not less than 20 percent of the units--
    (i) Occupied by very low-income families who pay as a contribution 
toward rent (excluding any Federal, State, or tribal rental subsidy 
provided on behalf of the family) not more than 30 percent of the 
family's monthly adjusted income as determined by HUD. To obtain the 
maximum monthly rent that may be charged for a unit that is subject to 
this limitation, the owner or grantee multiplies the annual adjusted 
income of the tenant family by 30 percent and divides by 12 and, if 
applicable, subtracts a monthly allowance for the utilities and services 
(excluding telephone and cable TV) to be paid by the tenant; or
    (ii) Occupied by very low-income families and bearing rents not 
greater than 30 percent of the gross income of a family whose income 
equals 50 percent of the median income for the area,

[[Page 400]]

as determined by HUD, with adjustment for smaller and larger families, 
except that HUD may establish income ceilings higher or lower than 50 
percent of the median for the area on the basis of HUD's findings that 
such variations are necessary because of prevailing levels of 
construction costs or section 8 fair market rents, or unusually high or 
low family incomes. In determining the maximum monthly rent that may be 
charged for a unit that is subject to this limitation, the owner or 
grantee must subtract a monthly allowance for any utilities and services 
(excluding telephone and cable TV) to be paid by the tenant. HUD will 
provide average occupancy per unit assumptions to be used in calculating 
the maximum rent allowed under paragraph (a)(2)(ii) of this section;
    (3) Is occupied only by households that qualify as low-income 
families;
    (4) Is not refused for leasing to a holder of a certificate of 
family participation under 24 CFR part 882 (rental certificate program) 
or a rental voucher under 24 CFR part 887 (rental voucher program) or to 
the holder of a comparable document evidencing participation in a HOME 
tenant-based assistance program because of the status of the prospective 
tenant as a holder of such certificate of family participation, rental 
voucher, or comparable HOME tenant-based assistance document; and
    (5) Will remain affordable without regard to the term of any 
mortgage or the transfer of ownership, pursuant to deed restrictions, 
covenants running with the land, or other mechanisms approved by HUD, 
for not less than the appropriate period, beginning after project 
completion, as specified in the following table, except that the 
affordability restrictions may terminate upon foreclosure or transfer in 
lieu of foreclosure. The tribe may use purchase options, rights of first 
refusal or other preemptive rights to purchase the housing before 
foreclosure or deed in lieu of foreclosure to preserve affordability. 
The affordability restrictions shall be revived according to the 
original terms if, during the affordability period, the owner of record 
before the foreclosure, or deed in lieu of foreclosure, or any entity 
that includes the former owner or those with whom the former owner has 
or had family of business ties, obtains an ownership interest in the 
project or property.

------------------------------------------------------------------------
                                                              Minimum
                                                             period of
                         Activity                          affordability
                                                              in years
------------------------------------------------------------------------
Rehabilitation or acquisition of existing housing per                 5
 unit amount of HOME funds: Under $15,000................
$15,000 to $40,000.......................................            10
Over $40,000.............................................            15
New construction or acquisition of newly constructed                 20
 housing.................................................
------------------------------------------------------------------------

    (b) Rent schedule and utility allowances. The grantee must review 
and approve rents proposed by the owner for units with ``flat rents,'' 
i.e., units subject to the maximum rent limitations in paragraphs 
(a)(1)(i), (a)(1)(ii), or (a)(2)(ii) of this section, and, if 
applicable, must review and approve, for all units subject to the 
maximum rent limitations paragraph (a) of this section, the monthly 
allowances, proposed by the owner, for utilities and services to be paid 
by the tenant. The owner must reexamine the income of each tenant 
household living in lower income units at least annually. The maximum 
monthly rent must be recalculated by the owner and reviewed and approved 
by the grantee annually, and may change as changes in the applicable 
gross rent amounts, the income adjustments, or the monthly allowance for 
utilities and services warrant. Any increase in rents for low-income 
units is subject to the provisions of outstanding leases; in any event, 
the owner must provide tenants of those units not less than 30 days 
prior written notice before implementing any increase in rents.
    (c) Increases in tenant income. Rental housing qualifies as 
affordable housing despite a temporary noncompliance with paragraphs 
(a)(2) or (a)(3) of this

[[Page 401]]

section, if the noncompliance is caused by increases in the incomes of 
existing tenants and if actions satisfactory to HUD are being taken to 
ensure that all vacancies are filled in accordance with this section 
until the noncompliance is corrected. Tenants who no longer qualify as 
low-income families must pay as rent the lesser of the amount payable by 
the tenant under tribal, State or local law or 30 percent of the 
family's adjusted monthly income, as recertified annually. The preceding 
sentence shall not apply with respect to funds made available under this 
part for units that have been allocated a low-income housing tax credit 
by a housing credit agency pursuant to section 42 of the Internal 
Revenue Code 1986 (26 U.S.C. 7805).
    (d) Adjustment of qualifying rent. HUD may adjust the qualifying 
rent established for a project under paragraph (a)(1) of this section, 
only if HUD finds that an adjustment is necessary to support the 
continued financial viability of the project and only by an amount that 
HUD determines is necessary to maintain continued financial viability of 
the project. HUD expects that this authority will be used sparingly. 
Adjustments in section 8 fair market rents and in median income over 
time should help maintain the financial viability of a project within 
the qualifying rent standard in paragraph (a)(1) of this section. 
Regardless of changes in fair market rents and in median income over 
time, the qualifying rents are not required to be lower than the HOME 
rent for the project in effect at the time of project commitment.



Sec. 954.307  Homeownership: qualification as affordable housing.

    (a) Purchase with or without rehabilitation. Housing that is for 
purchase by a family qualifies as affordable housing only if the 
housing: (1)(i) Has an initial purchase price that does not exceed 95% 
of the median purchase price for the type of single family housing (1- 
to 4-family residence, condominium unit, cooperative unit, combination 
manufactured home and lot, or manufactured home lot) for the area as 
determined by HUD, and which may be appealed in accordance with 24 CFR 
203.18b; and
    (ii) Has an estimated appraised value at acquisition, if standard, 
or after any repair needed to meet property standards in Sec. 954.401, 
that does not exceed the limit described in paragraph (a)(1)(i) of this 
section.
    (2) Is the principal residence of an owner whose family qualifies as 
a low-income family at the time of purchase; and
    (3) Is subject--for minimum periods of: 5 years where the per unit 
amount of HOME funds provided is less than $15,000; 10 years where the 
per unit amount of HOME funds provided is $15,000 to $40,000; and 15 
years where the per unit amount of HOME funds provided is greater than 
$40,000--to resale restrictions, as described in paragraph (a)(3)(i) of 
this section, or recapture provisions, as described in paragraph 
(a)(3)(ii) of this section, that are established by the grantee and 
determined by HUD to be appropriate.
    (i) Resale restrictions must make the housing available for 
subsequent purchase only to a low income family that will use the 
property as its principal residence; and
    (A) Provide the owner with a fair return on investment, including 
any improvements; and
    (B) Ensure that the housing will remain affordable, pursuant to deed 
restrictions, covenants running with the land, or other similar 
mechanisms to ensure affordability, to a reasonable range of low-income 
homebuyers. The affordability restrictions must terminate upon 
occurrence of any of the following termination events: foreclosure, 
transfer in lieu of foreclosure or assignment of an FHA insured mortgage 
to HUD. The grantee may use purchase options, rights of first refusal or 
other preemptive rights to purchase the housing before foreclosure to 
preserve affordability. The affordability restrictions shall be revived 
according to the original terms if, during the original affordability 
period, the owner of record before the termination event reacquires 
title to the property.
    (ii) A grantee's recapture provisions must provide for the recapture 
of the full HOME investment out of net proceeds, except as provided in 
paragraph (a)(3)(ii)(B) of this section.

[[Page 402]]

    (A) Net proceeds means the sales price minus loan repayment and 
closing costs.
    (B) If the net proceeds are not sufficient to recapture the full 
HOME investment plus enable the homeowner to recover the amount of the 
homeowner's downpayment, principal payments, and any capital improvement 
investment, the grantee's recapture provisions may allow the HOME 
investment amount that must be recaptured to be reduced. The HOME 
investment amount may be reduced pro rata based on the time the 
homeowner has owned and occupied the unit measured against the required 
affordability period; except that the grantee's recapture provisions may 
not allow the homeowner to recover more than the amount of the 
homeowner's downpayment, principal payments, and any capital improvement 
investment.
    (C) The HOME investment that is subject to recapture is the HOME 
assistance that enabled the first homebuyer to buy the dwelling unit. 
This includes any HOME assistance, whether a direct subsidy to the 
homebuyer or a construction or development subsidy, that reduced the 
purchase price from fair market value to an affordable price. The 
recaptured funds must be used to carry out HOME-eligible activities. If 
no HOME funds will be subject to recapture, the provisions at 
Sec. 954.306(a)(3)(i) apply.
    (D) Upon recapture of the HOME funds used in a single-family, 
homebuyer project with two to four units, the affordability period on 
rental units may be terminated at the discretion of the tribe.
    (b) Rehabilitation not involving purchase. Housing that is currently 
owned by a family qualifies as affordable housing only if--
    (1) The value of the property, after rehabilitation, does not exceed 
95% of the median purchase price for the type of single family housing 
(1- to 4-family residence, condominium unit, combination manufactured 
home and lot, or manufactured home lot) for the area as determined by 
HUD, and which may be appealed in accordance with 24 CFR 203.18b; and
    (2) The housing is the principal residence of an owner whose family 
qualifies as a low-income family at the time HOME funds are committed to 
the housing.



Sec. 954.308  Prohibited activities.

    (a) HOME funds may not be used to--
    (1) Provide a project reserve account for replacements, a project 
reserve account for unanticipated increases in operating costs, or 
operating subsidies; except as authorized under Sec. 954.302; (2) 
Provide nonfederal matching contributions required under any other 
Federal program;
    (3) Provide assistance in connection with programs authorized under 
part 950 (Indian Housing Programs) of this title;
    (4) Provide assistance to eligible low-income housing under part 248 
(Prepayment of Low Income Housing Mortgages) of this title; or
    (5) Provide assistance (other than tenant-based rental assistance or 
assistance to a homebuyer to acquire housing previously assisted with 
HOME funds) to a project previously assisted with HOME funds during the 
period of affordability established by the grantee under Sec. 954.306 or 
Sec. 954.307. However, additional HOME funds may be committed to a 
project up to one year after project completion (see Sec. 954.500), but 
the amount of HOME funds in the project may not exceed the maximum per-
unit subsidy amount established under Sec. 954.400.
    (b) Grantees may not charge monitoring, servicing and origination 
fees in HOME-assisted projects. However, grantees may charge nominal 
application fees (although these fees are not an eligible HOME cost) to 
project owners to discourage frivolous applications.



                     Subpart D--Project Requirements



Sec. 954.400  Maximum per-unit subsidy amount.

    The amount of HOME funds that a grantee may invest on a per-unit 
basis in affordable housing may not exceed the total development cost 
standard for the area, as issued by HUD under 24 CFR 950.220. These 
total development cost standards are available from HUD Area ONAPs.

[[Page 403]]



Sec. 954.401  Property standards.

    (a) Housing that is assisted with HOME funds, at a minimum, must 
meet the housing quality standards in Sec. 882.109 of this title. In 
addition, housing that is newly constructed or substantially 
rehabilitated with HOME funds must meet all applicable local codes, 
rehabilitation standards, ordinances, and zoning ordinances. The grantee 
must have written standards for rehabilitation. Newly constructed 
housing must meet the current edition of the Model Energy Code published 
by the Council of American Building Officials.
    (b) The following requirements apply to housing for homeownership 
that is to be rehabilitated after transfer of the ownership interest:
    (1) Before the transfer of the ownership interest, the grantee must:
    (i) Inspect the housing for any defects that pose a danger to 
health; and
    (ii) Notify the prospective purchaser of the work needed to cure the 
defects and the time by which defects must be cured and applicable 
property standards met.
    (2) The housing must be free from all noted health and safety 
defects before occupancy and not later than 6 months after the transfer 
for completion of the transitional housing tenancy period.
    (3) The housing must meet the applicable property standards (at a 
minimum, the housing quality standards in Sec. 882.109 of this title) 
not later than 2 years after transfer of the ownership interest.



Sec. 954.402  Tenant and participant protections.

    (a) Lease. The lease between a tenant and an owner of rental housing 
assisted with HOME funds must be for not less than one year, unless by 
mutual agreement between the tenant and the owner.
    (b) Prohibited lease terms. The lease may not contain any of the 
following provisions:
    (1) Agreement to be sued. Agreement by the tenant to be sued, to 
admit guilt, or to a judgment in favor of the owner in a lawsuit brought 
in connection with the lease;
    (2) Treatment of property. Agreement by the tenant that the owner 
may take, hold, or sell personal property of household members without 
notice to the tenant and a court decision on the rights of the parties. 
This prohibition, however, does not apply to an agreement by the tenant 
concerning disposition of personal property remaining in the housing 
unit after the tenant has moved out of the unit. The owner may dispose 
of this personal property in accordance with tribal law (or State law, 
which may apply if the Indian tribe is not exercising recognized powers 
of self-government);
    (3) Excusing owner from responsibility. Agreement by the tenant not 
to hold the owner or the owner's agents legally responsible for any 
action or failure to act, whether intentional or negligent;
    (4) Waiver of notice. Agreement of the tenant that the owner may 
institute a lawsuit without notice to the tenant;
    (5) Waiver of legal proceedings. Agreement by the tenant that the 
owner may evict the tenant or household members without instituting a 
civil court proceeding in which the tenant has the opportunity to 
present a defense, or before a court decision on the rights of the 
parties;
    (6) Waiver of a jury trial. Agreement by the tenant to waive any 
right to a trial by jury;
    (7) Waiver of right to appeal court decision. Agreement by the 
tenant to waive the tenant's right to appeal, or to otherwise challenge 
in court, a court decision in connection with the lease; and
    (8) Tenant chargeable with cost of legal actions regardless of 
outcome. Agreement by the tenant to pay attorney's fees or other legal 
costs even if the tenant wins in a court proceeding by the owner against 
the tenant. The tenant, however, may be obligated to pay costs if the 
tenant loses.
    (c) Termination of tenancy. An owner may not terminate the tenancy 
or refuse to renew the lease of a tenant of rental housing assisted with 
HOME funds except for serious or repeated violation of the terms and 
conditions of the lease; for violation of applicable Federal, or tribal 
law (or State law, which may apply if the grantee is not exercising 
recognized powers of self-government); or for other good cause. Any 
termination or refusal to renew must be preceded by not less than 30

[[Page 404]]

days by the owner's service upon the tenant of a written notice 
specifying the grounds for the action.
    (d) Maintenance and replacement. An owner of rental housing assisted 
with HOME funds must maintain the premises in compliance with all 
applicable housing quality standards and local code requirements.
    (e) Tenant selection. An owner of rental housing assisted with HOME 
funds must adopt written tenant selection policies and criteria that--
    (1) Are consistent with the purpose of providing housing for very 
low-income and low-income families;
    (2) Are reasonably related to program eligibility and the 
applicant's ability to perform the obligations of the lease;
    (3) Give reasonable consideration to the housing needs of families 
that would have a preference under section 6(c)(4)(A) of the U.S. 
Housing Act of 1937 (Federal selection preferences for admission to 
public housing); and
    (4) Provide for--
    (i) The selection of tenants from a written waiting list in the 
chronological order of their application, insofar as is practicable; and
    (ii) The prompt written notification to any rejected applicant of 
the grounds for any rejection.



                    Subpart E--Program Administration



Sec. 954.500  Repayment of investment.

    (a) HOME funds will be made available pursuant to a HOME Investment 
Partnership Agreement. The agreement ensures that HOME funds invested in 
affordable housing are repayable if the housing ceases to qualify as 
affordable housing before the period of affordability expires. The 
amount of HOME funds expended on housing assisted with HOME funds that 
does not meet the affordability requirements for the period specified in 
Sec. 954.306 or Sec. 954.307, as applicable, must be repaid in 
accordance with paragraph (b) of this section.
    (b) Any repayment of HOME funds (including repayment required if the 
housing no longer qualifies as affordable housing), and any payment of 
interest or other return on the investment of HOME funds, that is made 
before grant close out must be deposited in the grantee's account and 
used in accordance with the requirements of this part. A grantee may 
retain repayments, interest, and other return on investment of HOME 
funds that are made after grant closeout if the grantee agrees to use 
the funds for eligible activities.
    (c) HUD will recapture HOME funds that are not expended within five 
years after the last day of the month in which it obligated the funds.
    (d) Termination before completion. If a project is terminated before 
its completion, whether voluntarily by the grantee or otherwise, an 
amount equal to the HOME funds disbursed for the project must be paid by 
the grantee to its HOME account. If the HOME funds were disbursed by 
HUD, the amount must be paid to HUD; if the HOME funds were disbursed 
from the grantee's account, the amount must be paid to the grantee's 
account. If the amount is not repaid, the grantee will be subject to 
actions under Sec. 954.600 Performance reviews, Sec. 954.601 Corrective 
and remedial actions, and Sec. 954.602 Notice and opportunity for 
hearing; sanctions.



Sec. 954.501  Grantee responsibilities; written agreements; monitoring.

    (a) Responsibilities. The grantee is responsible for ensuring that 
HOME funds are used in accordance with all program requirements. The use 
of subgrantees and contractors does not relieve the grantee of this 
responsibility.
    (b) Executing a written agreement. Before disbursing any HOME funds 
to any entity (e.g., for-profit housing developer, nonprofit 
organization, homeowner, or IHA) the grantee must enter into a written 
agreement with the entity ensuring compliance with the requirements of 
this part. A subgrantee and a contractor must also enter into a written 
agreement before it disburses funds to any entity. The agreement remains 
in effect during the period for affordability under Sec. 954.306 or 
Sec. 954.307, as applicable, or if the entity is a subgrantee, during 
any period that the entity has control over HOME funds.
    (c) Provisions in written agreement. At a minimum, the written 
agreement must include applicable provisions concerning the following 
items:

[[Page 405]]

    (1) Use of the HOME funds. The agreement must describe the use of 
the HOME funds, including the tasks to be performed, a schedule for 
completing the tasks, and a budget. These items must be in sufficient 
detail to provide a sound basis for the grantee effectively to monitor 
performance under the agreement.
    (2) Affordability. The agreement must require housing assisted with 
HOME funds to meet the affordability requirements of Sec. 954.306 or 
Sec. 954.307, as applicable, and must require repayment of the funds if 
the housing does not meet the affordability requirements for the 
specified time period.
    (3) Repayments. If the entity is a subgrantee, the agreement must 
state if repayment, interest, and other return on the investment of HOME 
funds are to be remitted to the grantee or are to be retained for 
additional eligible activities by the entity.
    (4) Uniform administrative requirements. If the entity is a 
subgrantee, the agreement must require the entity to comply with 
applicable uniform administrative requirements, as described in 
Sec. 954.502.
    (5) Project requirements. The agreement must require compliance with 
project requirements in Sec. 954.400 through Sec. 954.402 of this part, 
as applicable in accordance with the type of project assisted.
    (6) Housing quality standard. The agreement must require owners of 
rental housing assisted with HOME funds to maintain the housing in 
compliance with applicable Housing Quality Standards and local housing 
code requirements for the duration of the agreement.
    (7) Other program requirements. The agreement must require the 
entity to carry out each activity in compliance with all Federal laws 
and regulations described in Sec. 954.4.
    (8) Conditions for religious organizations. Where applicable, the 
agreement must include the conditions prescribed in Sec. 954.301 for the 
use of HOME funds by religious organizations.
    (9) Requests for disbursements of funds. The agreement must specify 
that the entity may not request disbursement of funds under the 
agreement until the funds are needed for payment of eligible costs. The 
amount of each request must be limited to the amount needed.
    (10) Reversion of assets. If the entity is a subgrantee, the 
agreement must specify that upon expiration of the agreement, the entity 
must transfer to the grantee any HOME funds on hand at the time of 
expiration and any accounts receivable attributable to the use of HOME 
funds.
    (11) Records and reports. The agreement must specify the particular 
records that must be maintained and any information or reports that must 
be submitted in order to assist the grantee in meeting its recordkeeping 
and reporting requirements.
    (12) Enforcement of the agreement. The agreement must provide for a 
means of enforcement by the grantee or the intended beneficiaries. In 
addition, the agreement must specify remedies for breach of the 
provisions of the agreement. If the entity is a subgrantee, the 
agreement must specify that, in accordance with 24 CFR 85.43, suspension 
or termination may occur if the entity materially fails to comply with 
any term of the agreement, and that the agreement may be terminated for 
convenience in accordance with 24 CFR 85.44.
    (13) Duration of the agreement. The agreement must specify that the 
agreement is in effect for the period of affordability required by the 
grantee under Sec. 954.306 or Sec. 954.307.
    (d) Monitoring. The grantee is responsible for managing the day-to-
day operations of its HOME program, for monitoring the performance of 
all entities receiving HOME funds from the grantee to assure compliance 
with the requirements of this part, and for taking appropriate action 
when performance problems arise.
    (1) Not less than annually, the grantee must review the activities 
of owners of rental housing assisted with HOME funds to assess 
compliance with the requirement of this part, as set forth in the 
written agreement under paragraphs (b) and (c) of this section. For 
multifamily housing, each review must include on-site inspection to 
determine compliance with housing codes and the requirements of this 
part. For rental housing containing one- to four-dwelling units, an on-
site review must be

[[Page 406]]

made once within each two-year period. The results of each review must 
be included in the grantee's performance report.
    (2) Not less than annually, the grantee must review the performance 
of each contractor and subgrantee.



Sec. 954.502  Applicability of uniform administrative requirements.

    (a) Governmental entities. The requirements of OMB Circular No. A-87 
and the following requirements of 24 CFR part 85 apply to the grantee 
and any governmental subgrantee receiving HOME funds: Secs. 85.6, 85.12, 
85.20, 85.21, 85.22, 85.26, 85.32, 85.33, 85.35, 85.36, 85.43, 85.44, 
85.51, and 85.52.
    (b) Non-profit organizations. The requirements of OMB Circular No. 
A-122 (available from the Executive Office of the President, Publication 
Service, 725 17th Street, N.W., Suite G-2200, Washington, DC 20503; 
Telephone, (202) 395-7332)) and the following requirements of 24 CFR 
part 84 apply to subgrantees receiving HOME funds that are private 
nonprofit organizations: Secs. 84.12, 84.22, 84.23, 84.25, 84.51, 84.52, 
and 84.71.
    (c) Alternatives to bonding. For construction contracts that exceed 
the amount for small purchase under 24 CFR 85.36, each contractor shall 
be required to provide bid guarantees and adequate assurance of 
performance and payment acceptable to HUD in accordance with 24 CFR 
85.36(h). Performance and payment bonds for 100 percent of the total 
contract price are acceptable to HUD. There may be circumstances under 
which the bonding requirements of Sec. 85.36(h) are inconsistent with 
other responsibilities and obligations of the grantee. Alternative 
methods to provide performance and payment assurance may include:
    (1) Deposit with the grantee of a cash escrow of not less than 20 
percent of the total contract price, subject to reduction during the 
warranty period, commensurate with potential risk;
    (2) Letter of credit for 25 percent of the total contract price, 
unconditionally payable upon demand of the grantee, subject to reduction 
during the warranty period commensurate with potential risk.



Sec. 954.503  Audit.

    Audits of the grantee and subgrantees must be conducted in 
accordance with 24 CFR parts 44 and 45, as applicable.



Sec. 954.504  Closeout.

    (a) A grant will be closed out when all the following criteria have 
been met:
    (1) All funds to be closed out have been drawn down and expended for 
completed project costs, or funds not drawn down and expended have been 
deobligated by HUD;
    (2) Project Completion Reports for all projects using funds to be 
closed out have been submitted. HUD will use data contained in the 
project completion reports in the preparation of the Closeout Reports;
    (3) The grantee has been reviewed and audited and HUD has determined 
that all requirements, including affordability (for which also see 
paragraph (b)(2) of this section), are met or all monitoring and audit 
findings have been resolved.
    (i) A signed copy of the grantee's most recent audit report--
covering all funds to be closed out--must be received by HUD. If the 
audit review by the Department of Interior (DOI) results in significant 
delays, the Area ONAP may request a signed copy of the audit prior to 
DOI review and use it as the document needed prior to closeout. If the 
audit does not cover all funds to be closed out, the closeout may 
proceed, provided the grantee agrees in the Closeout Report that any 
costs paid with the funds that were not audited must be subject to the 
grantee's next single audit and that the grantee may be required to 
repay to HUD any disallowed costs based on the results of the audit.
    (ii) The on-site monitoring of the grantee by the Area ONAP must 
include verification of data reflected in the Closeout Report and 
reconciliation of any discrepancies which may exist between HUD data and 
grantee records.
    (b) The Closeout Report contains the final data on the funds and 
must be signed by the grantee and HUD. In addition, the report must 
contain:

[[Page 407]]

    (1) A provision regarding unaudited funds (``closeout subject to 
audit''), required by paragraph (a)(3)(i) of this section; and
    (2) A provision requiring the grantee to continue to meet the 
requirements applicable to housing projects for the period of 
affordability specified in Sec. 954.306 or Sec. 954.307, to keep records 
demonstrating that the requirements have been met and to repay the HOME 
funds, as required by Sec. 954.500, if the housing fails to remain 
affordable for the required period.



Sec. 954.505  Recordkeeping.

    (a) General. Each grantee must establish and maintain sufficient 
records to enable HUD to determine whether the grantee has met the 
requirements of this part. Records must be kept in a manner that 
identifies the source and use of funds for each project.
    (b) Period of record retention. (1) Except as provided in paragraphs 
(b)(2), (b)(3), or (b)(4) of this section, records must be retained for 
three years after closeout of the funds.
    (2) If any litigation, claim, negotiation, audit, or other action 
has been started before the expiration of the regular period specified 
in paragraph (b)(1) of this section, the records must be retained until 
completion of the action and resolution of all issues which arise from 
it, or until the end of the regular period, whichever is later.
    (3) Records regarding project requirements (Sec. 954.400 to 
Sec. 954.402) and other federal requirements (Sec. 954.4) that apply for 
the duration of the period of affordability, as well as the written 
agreement and inspection and monitoring reports must be retained for 
three years after the required period of affordability specified in 
Sec. 954.306 or Sec. 954.307, as applicable.
    (4) Records covering displacements and acquisition must be retained 
for at least three years after the date by which all persons displaced 
from the property and all persons whose property is acquired for the 
project have received the final payment to which they are entitled in 
accordance with Sec. 954.4(e).
    (c) Access to records. (1) The grantee must provide citizens, public 
agencies, and other interested parties with reasonable access to 
records, consistent with applicable tribal laws (or State law, which may 
apply if the Indian tribe is not exercising recognized powers of self-
government) regarding privacy and obligations of confidentiality.
    (2) HUD and the Comptroller General of the United States, or any of 
their representatives, have the right of access to any pertinent books, 
documents, papers or other records of the grantees and subgrantees, in 
order to make audits, examinations, excerpts, and transcripts.

[Approved by the Office of Management and Budget under OMB control 
number 2577-0191]



Sec. 954.506  Performance reports.

    (a) Management reports. Each grantee must submit management reports 
on its HOME program in such format and at such time as HUD may 
prescribe. Each grantee must submit a ``Financial Status Report,'' SF-
269A, short form, at the same time it submits the Semi-Annual 
Performance Report, described below. A separate ``Financial Status 
Report'' is to be submitted for each Indian HOME program grant that the 
grantee has received.
    (b) Semi-Annual performance report. (1) Submission. A grantee must 
submit a semi-annual performance report on its HOME activities to the 
responsible Area ONAP at such time as HUD may prescribe. Single copies 
of the report must be provided to the public upon request at no charge.
    (2) Elements of the semi-annual performance report. The report must 
contain such information and be in such form as HUD may prescribe, and 
must include at least the following:
    (i) A report on the proposed use of HOME funds from the grant 
application, consisting of the number of additional housing 
opportunities to be created for low-income and very low-income families, 
by project category (housing rehabilitation, acquisition of housing, new 
housing construction, and tenant-based rental assistance);
    (ii) A report on the actual use of HOME funds, consisting of the 
number of additional housing opportunities created for low-income and 
very low-income families, by project category (housing rehabilitation, 
acquisition of housing, new housing construction, and

[[Page 408]]

tenant-based rental assistance). This includes a report on project 
income and includes data on the amount of repayments, interest, and 
other return on investment of HOME funds and the use of the funds for 
projects, including number of projects assisted, and characteristics of 
tenants and owners;
    (iii) An assessment of the effectiveness of the efforts in providing 
the preferences and opportunities under section 7(b) of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450e(b)); and
    (iv) Data on the total number of households (families and 
individuals) and business and nonprofit organizations displaced as a 
result of investments of HOME funds, including the cost of relocation 
payments (moving expenses and replacement housing), and the number and 
cost of real property acquisitions.

[Approved by the Office of Management and Budget under OMB control 
number 2577-0191]



Sec. 954.507  Submission of project completion reports.

    A Project Completion Report must be submitted to HUD within 120 days 
of the final drawdown request for the project. If a satisfactory Project 
Completion Report is not submitted by the due date, HUD will suspend 
further HOME disbursements and grant approvals for the grantee. 
Disbursements and grant approvals will remain suspended until a 
satisfactory Project Completion Report is received.

[Approved by the Office of Management and Budget under OMB control 
number 2577-0191]



              Subpart F--Performance Reviews and Sanctions



Sec. 954.600  Performance reviews.

    (a) General. HUD will review the performance of each grantee in 
carrying out its responsibilities under this part whenever determined 
necessary by HUD, but at least annually. In conducting performance 
reviews, HUD will rely primarily on information obtained from the 
grantee's records and reports, findings from on-site monitoring, audit 
reports, and information generated from fund requisition systems. Where 
applicable, HUD may also consider relevant information pertaining to a 
grantee's performance gained from other sources, including citizen 
comments, complaint determinations, and litigation. Reviews to determine 
compliance with specific requirements of this part will be conducted as 
necessary, with or without prior notice to the grantee. Comprehensive 
performance reviews under the standards in paragraph (b) of this section 
will be conducted after prior notice to the grantee.
    (b) Standards for comprehensive performance review. A grantee's 
performance will be comprehensively reviewed periodically, as prescribed 
by HUD, to determine whether the grantee:
    (1) Has committed the HOME funds in the HUD account as required and 
expended the funds as required; and
    (2) Has met the requirements of the grant agreement and this part, 
particularly eligible activities and affordability.



Sec. 954.601  Corrective and remedial actions.

    (a) General. HUD will use the procedures in this section in 
conducting the performance review as provided in Sec. 954.600 and in 
taking corrective and remedial actions. However, HUD may temporarily 
suspend payments based upon HUD's preliminary determination that the 
grantee has failed to comply with the requirements of the Act, 
regulations, or grant agreement if suspension is necessary to preclude 
the further expenditure of funds for activities affected by the failure 
to comply.
    (b) Performance review. (1) If HUD determines preliminarily that the 
grantee has not met a requirement of this part, the grantee will be 
given notice of this determination and an opportunity to demonstrate, 
within the time prescribed by HUD (not to exceed 30 days) and on the 
basis of substantial facts and data, that it has done so.
    (2) If the grantee fails to demonstrate to HUD's satisfaction that 
it has met the requirement, HUD will take corrective or remedial action 
in accordance with this section or Sec. 954.602.
    (c) Corrective and remedial actions. Corrective or remedial actions 
for a performance deficiency (failure to meet

[[Page 409]]

a provision of this part) will be designed to prevent a continuation of 
the deficiency; mitigate, to the extent possible, its adverse effects or 
consequences; and prevent its recurrence.
    (1) HUD may request the grantee to submit and comply with proposals 
for action to correct, mitigate and prevent a performance deficiency, 
including:
    (i) Preparing and following a schedule of actions for carrying out 
the affected activities, consisting of schedules, timetables, and 
milestones necessary to implement the affected activities;
    (ii) Establishing and following a management plan that assigns 
responsibilities for carrying out the remedial actions;
    (iii) Cancelling or revising activities likely to be affected by the 
performance deficiency, before expending HOME funds for the activities;
    (iv) Reprogramming HOME funds in the HUD account that have not yet 
been expended from affected activities to other eligible activities;
    (v) Reimbursing the HUD account in any amount not used in accordance 
with the requirements of this part; and
    (vi) Suspending disbursement of funds in the HUD account for 
affected activities.
    (2) HUD may also--
    (i) Change the method of payment from an advance to reimbursement 
basis; and
    (ii) Take other remedies that may be legally available.



Sec. 954.602  Notice and opportunity for hearing; sanctions.

    (a) If HUD finds after reasonable notice and opportunity for hearing 
that a grantee has failed to comply with any provision of this part and 
until HUD is satisfied that there is no longer any such failure to 
comply:
    (1) HUD shall reduce the funds in the HUD account by the amount of 
any expenditures that were not in accordance with the requirements of 
this part; and
    (2) HUD may--
    (i) Prevent withdrawals from the HUD account for activities affected 
by the failure to comply; or
    (ii) Prohibit the grantee from competing for HOME funds under 
Sec. 954.104; Provided, however, that HUD may on due notice suspend 
payments from the HUD account at any time after the issuance of a notice 
of opportunity for hearing pursuant to paragraph (b)(1) of this section, 
pending such hearing and a final decision, to the extent HUD determines 
such action necessary to preclude the further expenditure of funds for 
activities affected by the failure to comply.
    (b) Proceedings. When HUD proposes to take action pursuant to this 
section, the respondent in the proceedings will be the grantee.
    (1) Notice of opportunity for hearing. HUD shall notify the 
respondent in writing of the proposed action and of the opportunity for 
a hearing. The notice shall be sent by first class mail. The notice 
shall specify:
    (i) In a manner which is adequate to allow the respondent to prepare 
its response, the basis upon which HUD determined that the respondent 
failed to comply with a provision of this part;
    (ii) That the hearing procedures are governed by these rules;
    (iii) That the respondent has 14 days from receipt of the notice 
within which to provide a written request for a hearing to the Chief 
Docket Clerk, Office of Administrative Law Judges, and the address and 
telephone number of the Chief Docket Clerk;
    (iv) The action HUD proposes to take and that the authority for this 
action is Sec. 954.602; and
    (v) That if the respondent fails to request a hearing within the 
time specified, HUD's determination that the respondent failed to comply 
with a provision of this part shall be final and HUD may proceed to take 
the proposed action.
    (2) Initiation of hearing. The respondent shall be allowed 14 days 
from receipt of the notice within which to notify the Chief Docket 
Clerk, Office of Administrative Law Judges, of its request for a 
hearing. If no request is received within the time specified, HUD's 
determination that the respondent failed to comply with a provision of 
this part shall be final and HUD may proceed to take the proposed 
action.
    (3) Administrative Law Judge. Proceedings conducted under these 
rules shall be presided over by an Administrative Law Judge (ALJ), 
appointed as

[[Page 410]]

provided by section 11 of the Administrative Procedures Act (5 U.S.C. 
3105). The case shall be referred to the ALJ at the time a hearing is 
requested. The ALJ shall promptly notify the parties of the time and 
place at which the hearing will be held. The ALJ shall conduct a fair 
and impartial hearing and take all action necessary to avoid delay in 
the disposition of proceedings and to maintain order. The ALJ shall have 
all powers necessary to those ends, including but not limited to the 
power to:
    (i) Administer oaths and affirmations;
    (ii) Issue subpoenas as authorized by law;
    (iii) Rule upon offers of proof and receive relevant evidence;
    (iv) Order or limit discovery before the hearing as the interests of 
justice may require;
    (v) Regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (vi) Hold conferences for the settlement or simplification of the 
issues by consent of the parties;
    (vii) Consider and rule upon all procedural and other motions 
appropriate in adjudicative proceedings; and
    (viii) Make and file initial determinations.
    (4) Ex parte communications. An ex parte communication is any 
communication with an ALJ, direct or indirect, oral or written, 
concerning the merits or procedures of any pending proceeding which is 
made by a party in the absence of any other party. Ex parte 
communications are prohibited except where the purpose and content of 
the communication have been disclosed in advance or simultaneously to 
all parties, or the communication is a request for information 
concerning the status of the case. Any ALJ who receives an ex parte 
communication which the ALJ knows or has reason to believe is 
unauthorized shall promptly place the communication, or its substance, 
in all files and shall furnish copies to all parties. Unauthorized ex 
parte communications shall not be taken into consideration in deciding 
any matter in issue.
    (5) The hearing. All parties shall have the right to be represented 
at the hearing by counsel. The ALJ shall conduct the proceedings in an 
expeditious manner while allowing the parties to present all oral and 
written evidence which tends to support their respective positions, but 
the ALJ shall exclude irrelevant, immaterial or unduly repetitious 
evidence. HUD has the burden of proof in showing by a preponderance of 
the evidence that the respondent failed to comply with a provision of 
this part. Each party shall be allowed to cross-examine adverse 
witnesses and to rebut and comment upon evidence presented by the other 
party. Hearings shall be open to the public. So far as the orderly 
conduct of the hearing permits, interested persons other than the 
parties may appear and participate in the hearing.
    (6) Transcripts. Hearings shall be recorded and transcribed only by 
a reporter under the supervision of the ALJ. The original transcript 
shall be a part of the record and shall constitute the sole official 
transcript. Respondents and the public, at their own expense, may obtain 
copies of the transcript.
    (7) The ALJ's decision. At the conclusion of the hearing, the ALJ 
shall give the parties a reasonable opportunity to submit proposed 
findings and conclusions and supporting reasons therefor. Generally 
within 60 days after the conclusion of the hearing, the ALJ shall 
prepare a written decision which includes a statement of findings and 
conclusions, and the reasons or basis therefor, on all the material 
issues of fact, law or discretion presented on the record and the 
appropriate sanction or denial thereof. The decision shall be based on 
consideration of the whole record or those parts thereof cited by a 
party and supported by and in accordance with the reliable, probative, 
and substantial evidence. A copy of the decision shall be furnished to 
the parties immediately by first class mail and shall include a notice 
that any requests for review by the Secretary must be made in writing to 
the Secretary within 30 days of the receipt of the decision.
    (8) The record. The transcript of testimony and exhibits, together 
with the decision of the ALJ and all papers and

[[Page 411]]

requests filed in the proceeding, constitutes the exclusive record for 
decision and, on payment of its reasonable cost, shall be made available 
to the parties. After reaching the initial decision, the ALJ shall 
certify to the complete record and forward the record to the Secretary.
    (9) Review by the Secretary. The decision by the ALJ shall 
constitute the final decision of the Secretary unless, within 30 days 
after the receipt of the decision, either the respondent or the 
Assistant Secretary files an exception and request for review by the 
Secretary. The excepting party must transmit simultaneously to the 
Secretary and the other party the request for review and the basis of 
the party's exceptions to the findings of the ALJ. The other party shall 
be allowed 30 days from receipt of the exception to provide the 
Secretary and the excepting party with a written reply. The Secretary 
shall then review the record of the case, including the exceptions and 
the reply. On the basis of such review, the Secretary shall issue a 
written determination, including a statement of the rationale therefor, 
affirming, modifying or revoking the decision of the ALJ. The 
Secretary's decision shall be made and transmitted to the parties within 
60 days after the decision of the ALJ was furnished to the parties.



PART 960--ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING--Table of Contents




                          Subpart A [Reserved]

              Subpart B--Admission, Rent and Reexamination

Sec.
960.201  Purpose and scope.
960.202  Applicability.
960.203  [Reserved]
960.204  Tenant selection policies.
960.205  Standards for PHA tenant selection criteria.
960.206  Verification procedures.
960.207  Notification to applicants.
960.208  Rent.
960.209  Reexamination of family income and composition.
960.210  Restriction on eviction of families based upon income.

                Subpart C--Continued Occupancy [Reserved]

  Subpart D--Preference for Elderly Families and Disabled Families in 
                        Mixed Population Projects

960.401  Purpose.
960.403  Applicability.
960.405  Definitions
960.407  Selection preference; other preferences; single person 
          occupancy.

 Subpart E--Exemption From Eligibility Requirements for Police Officers 
                      and Other Security Personnel

960.501  Purpose and scope.
960.503  Definitions.
960.505  Exemption from eligibility requirements; plan submission; plan 
          approval or disapproval.
960.507  Plan standards and criteria.
960.509  Special rent requirements and other terms and conditions.
960.511  Applicability of the annual contributions contract; effect on 
          the Performance Funding System.

    Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, and 3535(d).

    Source: 40 FR 33446, Aug. 8, 1975, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.



                          Subpart A [Reserved]



              Subpart B--Admission, Rent and Reexamination



Sec. 960.201  Purpose and scope.

    The purpose of this subpart is to prescribe standards and criteria 
for tenant selection and annual reexamination of income and family 
composition by each public housing agency (PHA) in accordance with the 
U.S. Housing Act of 1937 (the Act) and the Annual Contributions Contract 
(ACC).

[49 FR 21491, May 21, 1984]



Sec. 960.202  Applicability.

    This subpart is applicable to all dwelling units assisted under the 
U.S. Housing Act of 1937 in projects owned by or leased to PHAs and 
leased or subleased by PHAs to tenants, and is not applicable to Section 
23 and Section 10(c) leased housing projects, the Section 23 Housing 
Assistance Payments Program, and the Section 8 Housing Assistance 
Payments Program where

[[Page 412]]

the owners enter into leases directly with the tenants. This subpart is 
not applicable to the Low-Rent Housing Homeownership Opportunities 
Program (Turnkey III), to the Mutual Help Homeownership Opportunities 
Program, or to Indian Tribal Housing Authorities.



Sec. 960.203  [Reserved]



Sec. 960.204  Tenant selection policies.

    (a) Selection policies. (1) The PHA shall establish and adopt 
written policies for admission of tenants.
    (2) These policies shall be designed:
    (i) To attain, to the maximum extent feasible, a tenant body in each 
project that is composed of families with a broad range of incomes and 
to avoid concentrations of the most economically deprived families with 
serious social problems;
    (ii) To preclude admission of applicants whose habits and practices 
reasonably may be expected to have a detrimental effect on the residents 
or the project environment;
    (iii) To give a preference in selection of tenants to applicants who 
qualify for a federal preference, ranking preference, or local 
preference, in accordance with 24 CFR part 5; and
    (iv) To establish objective and reasonable policies for selection by 
the PHA among otherwise eligible applicants.
    (3) The PHA tenant selection policies shall include the following:
    (i) Requirements for applications and waiting lists (see 24 CFR 
1.4);
    (ii) Description of the policies for selection of applicants from 
the waiting list that includes the following:
    (A) How the ``federal preferences'' (described in 24 CFR part 5) 
will be used;
    (B) How any ``ranking preferences'' (described in 24 CFR part 5) 
will be used;
    (C) How any ``local preferences'' (described in 24 CFR part 5) will 
be used; and
    (D) How any residency preference will be used;
    (iii) Policies for verification and documentation of information 
relevant to acceptance or rejection of an applicant, including 
documentation and verification of citizenship and eligible immigration 
status under 24 CFR part 5; and
    (iv) Policies for participant transfer between units, projects, and 
programs. For example, a PHA could adopt a criterion for voluntary 
transfer that the tenant had met all obligations under the current 
program, including payment of charges to the PHA.
    (b) These selection policies shall:
    (1) Be duly adopted; and
    (2) Be publicized by posting copies thereof in each office where 
applications are received and by furnishing copies to applicants or 
tenants upon request, free or at their expense, at the discretion of the 
PHA.
    (c) Such policies shall be submitted to the HUD field office upon 
request from that office.

[59 FR 36655, July 18, 1994, as amended at 60 FR 14861, Mar. 20, 1995; 
61 FR 9048, Mar. 6, 1996; 61 FR 13626, Mar. 27, 1996]



Sec. 960.205  Standards for PHA tenant selection criteria.

    (a) The tenant selection criteria to be established and information 
to be considered shall be reasonably related to individual attributes 
and behavior of an applicant and shall not be related to those which may 
be imputed to a particular group or category of persons of which an 
applicant may be a member. The PHA may use preferences based on the 
employment status of family members.
    (b) The criteria to be established in relation to avoiding 
concentration of families with serious social problems in PHA projects 
and information to be considered shall be reasonably related to whether 
the conduct of the applicant in present or prior housing has been such 
as would not be likely to interfere with other tenants in such a manner 
as to diminish their enjoyment of the premises by adversely affecting 
their health, safety or welfare or to affect adversely the physical 
environment or the financial stability of the project if the applicant 
were admitted to the project. Relevant information respecting habits or 
practices to be considered may include, but is not limited to:

[[Page 413]]

    (1) An applicant's past performance in meeting financial 
obligations, especially rent;
    (2) A record of disturbance of neighbors, destruction of property, 
or living or housekeeping habits at prior residences which may adversely 
affect the health, safety or welfare of other tenants; and
    (3) A history of criminal activity involving crimes of physical 
violence to persons or property and other criminal acts which would 
adversely affect the health, safety or welfare of other tenants.
    (c) The criteria to be established shall be reasonably related to 
attaining, to the maximum extent feasible, a tenant body in each project 
that is composed of families with a broad range of incomes. PHAs shall 
develop criteria, by local preference or otherwise, which will be 
reasonably calculated to attain the basic objective. The criteria 
developed shall be sufficiently flexible to assure administrative 
feasibility. A dwelling unit should not be allowed to remain vacant for 
the purpose of awaiting application by a family falling within the 
appropriate range.
    (d) In the event of the receipt of unfavorable information with 
respect to an applicant, consideration shall be given to the time, 
nature, and extent of the applicant's conduct and to factors which might 
indicate a reasonable probability of favorable future conduct or 
financial prospects. For example:
    (1) Evidence of rehabilitation;
    (2) Evidence of the applicant family's participation in or 
willingness to participate in social service or other appropriate 
counseling service programs and the availability of such programs;
    (3) Evidence of the applicant family's willingness to attempt to 
increase family income and the availability of training or employment 
programs in the locality.

[40 FR 33446, Aug. 8, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 49 FR 21492, May 21, 1984; 50 FR 9269, Mar. 7, 1985; 59 
FR 36656, July 18, 1994; 61 FR 9048, Mar. 6, 1996]



Sec. 960.206  Verification procedures.

    (a) General. Adequate procedures must be developed to obtain and 
verify information with respect to each applicant. (See 24 CFR parts 5 
and 913.) Information relative to the acceptance or rejection of an 
applicant or the grant or denial of a ranking preference, or a local 
preference under 24 CFR part 5 must be documented and placed in the 
applicant's file.
    (b) Suggested sources of information. Sources of information may 
include, but are not limited to, the applicant (by means of interviews 
or home visits), landlords, employers, family social workers, parole 
officers, court records, drug treatment centers, clinics, physicians or 
police departments where warranted by the particular circumstances.
    (c) Tenant advisory boards. The PHA may establish Tenant Advisory 
Boards for consultation in connection with the tenant selection process.

(Approved by the Office of Management and Budget under control number 
2577-0083)

[40 FR 33446, Aug. 8, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 53 FR 1179, Jan. 15, 1988; 53 FR 6601, Mar. 2, 1988; 54 
FR 39711, Sept. 27, 1989; 56 FR 7545, Feb. 22, 1991; 59 FR 36656, July 
18, 1994; 60 FR 14861, Mar. 20, 1995; 61 FR 13627, Mar. 27, 1996]



Sec. 960.207  Notification to applicants.

    (a) The PHA must promptly notify any applicant determined to be 
ineligible for admission to a project of the basis for such 
determination, and must provide the applicant upon request, within a 
reasonable time after the determination is made, with an opportunity for 
an informal hearing on such determination.
    (b) When a determination has been made that an applicant is eligible 
and satisfies all requirements for admission, including the tenant 
selection criteria, the applicant must be notified of the approximate 
date of occupancy insofar as that date can be reasonably determined.

[53 FR 1179, Jan. 15, 1988 and 53 FR 6601, Mar. 2, 1988, as amended at 
59 FR 36656, July 18, 1994; 61 FR 9048, Mar. 6, 1996]



Sec. 960.208  Rent.

    The amount of rent payable by the tenant to the PHA shall be the 
Tenant

[[Page 414]]

Rent, as defined in 24 CFR part 5, subpart F.

[61 FR 54504, Oct. 18, 1996]



Sec. 960.209  Reexamination of family income and composition.

    (a) Regular reexaminations. The PHA must reexamine the income and 
composition of all tenant families at least once every 12 months and 
determine whether the family's unit size is still appropriate. After 
consultation with the family and upon verification of the information, 
the PHA must make appropriate adjustments in the Total Tenant Payment 
and Tenant Rent in accordance with part 913 of this chapter. At the time 
of the annual reexamination of family income and composition, the PHA 
must require the family to disclose and verify Social Security Numbers, 
as provided by part 5, subpart B, of this title. For requirements 
regarding the signing and submitting of consent forms by families for 
the obtaining of wage and claim information from State Wage Information 
Collection Agencies, see part 5, subpart B, of this title. At the first 
regular reexamination after June 19, 1995, the PHA shall follow the 
requirements of 24 CFR part 5 concerning obtaining and processing 
information on the citizenship or eligible immigration status of all 
family members. Thereafter, at each regular reexamination, the PHA shall 
follow the requirements of 24 CFR part 5 concerning verification of the 
immigration status of any new family member.
    (b) Interim reexaminations. The family must comply with provisions 
in its lease regarding interim reporting of changes in income. If the 
PHA receives information concerning a change in the Family's income or 
other circumstances between regularly scheduled reexaminations, the PHA 
must consult with the family and make any adjustments determined to be 
appropriate. Any change in the family's income or other circumstances 
that results in adjustment in the Total Tenant Payment or Tenant Rent 
must be verified. See part 5, subpart B, of this title for the 
requirements for the disclosure and verification of Social Security 
Numbers at interim reexaminations involving new family members. For 
requirements regarding the signing and submitting of consent forms by 
families for the obtaining of wage and claim information from State Wage 
Information Collection Agencies, see part 5, subpart B, of this title. 
At any interim reexamination after June 19, 1995 when there is a new 
family member, the PHA shall follow the requirements of 24 CFR part 5 
concerning obtaining and processing information on the citizenship or 
eligible immigration status of the new family member.
    (c) Termination. For provisions requiring termination of 
participation for failure to establish citizenship or eligible 
immigration status, see 24 CFR part 5 for provisions concerning 
assistance to certain mixed families (families whose members include 
those with citizenship and eligible immigration status and those without 
eligible immigration status) in lieu of termination of assistance.

[56 FR 7545, Feb. 22, 1991, as amended at 60 FR 14861, Mar. 20, 1995; 61 
FR 11119, Mar. 18, 1996; 61 FR 13627, Mar. 27, 1996]



Sec. 960.210  Restriction on eviction of families based upon income.

    No PHA shall commence eviction proceedings, or refuse to renew a 
lease, based on the income of the tenant family unless: (a) It has 
identified, for possible rental by the family, a unit of decent, safe, 
and sanitary housing of suitable size available at a rent not exceeding 
the Tenant Rent as defined and calculated in accordance with part 913 of 
this chapter, or (b) it is required to do so by local law.

[49 FR 21492, May 21, 1984]



               Subpart C--Continued Occupancy  [Reserved]



  Subpart D--Preference for Elderly Families and Disabled Families in 
                        Mixed Population Projects

    Source: 59 FR 17667, Apr. 13, 1994, unless otherwise noted.

[[Page 415]]



Sec. 960.401  Purpose.

    This subpart establishes a preference for elderly families and 
disabled families for admission to mixed population public housing 
projects, as defined in Sec. 960.405.



Sec. 960.403  Applicability.

    (a) This subpart applies to all dwelling units in mixed population 
projects (as defined in Sec. 960.405), or portions of mixed population 
projects, assisted under the U.S. Housing Act of 1937. These projects 
formerly were known as elderly projects.
    (b) This subpart does not apply to section 23 and section 10(c) 
leased housing projects or the section 23 Housing Assistance Payments 
Program where the owners enter into leases directly with the tenants, or 
to the Section 8 Housing Assistance Payments Program, the Low-Rent 
Housing Homeownership Opportunities Program (Turnkey III), the Mutual 
Help Homeownership Opportunities Program, or to Indian Housing 
Authorities. (For applicability to Indian Housing Authorities, see part 
905 of this chapter.) Additionally, this subpart is not applicable to 
projects designated for elderly families or designated for disabled 
families in accordance with 24 CFR part 945.



Sec. 960.405  Definitions.

    Designated housing. See definition of ``designated housing'' in 24 
CFR part 945.
    Disabled families. See definition of ``disabled families'' in 24 CFR 
part 945.
    Elderly families. See definition of ``elderly families'' in 24 CFR 
part 945.
    Mixed population project is a public housing project, or portion of 
a project, that was reserved for elderly families and disabled families 
at its inception (and has retained that character). If the project was 
not so reserved at its inception, the PHA has obtained HUD approval to 
give preference in tenant selection for all units in the project (or 
portion of project) to elderly families and disabled families. These 
projects formerly were known as elderly projects.



Sec. 960.407  Selection preference; other preferences; single person occupancy.

    (a) A PHA must give preference to elderly families and disabled 
families equally in determining priority for admission to mixed 
population projects. A PHA may not establish a limit on the number of 
elderly families or disabled families who may be accepted for occupancy 
in a mixed population project.
    (b) The PHA must follow its policies and procedures for applying the 
Federal preferences contained in subpart B of this part when selecting 
applicants for admission from among elderly families and disabled 
families.
    (c) Elderly families and disabled families who do not qualify for a 
Federal preference contained in subpart B of this part, and who are 
given preference for admission under paragraph (a) of this section over 
non-elderly families and non-disabled families that qualify for such a 
Federal preference, are not subject to the statutory 10 percent 
limitation on admission of families without a Federal preference over 
families with such a Federal preference that may initially receive 
assistance in any one-year period, as provided in 24 CFR 
960.211(b)(2)(ii).
    (d) If an elderly or disabled applicant is a single person, as this 
term is defined in 24 CFR part 945, the elderly single person or the 
disabled single person shall be given a preference for admission to 
mixed population projects over single persons who are neither elderly 
nor disabled.
    (e) In offering available units to elderly families and disabled 
families in mixed population projects, units with accessible features 
should first be offered to persons with disabilities who require the 
accessibility features of the unit in accordance with the requirements 
of 24 CFR 8.27 and 24 CFR 100.202(c)(3).



 Subpart E--Exemption From Eligibility Requirements for Police Officers 
                      and Other Security Personnel

    Source: 59 FR 39405, Aug. 2, 1994, unless otherwise noted.

[[Page 416]]



Sec. 960.501  Purpose and scope.

    The purpose of this subpart is to permit the admission to public 
housing of police officers and other security personnel, who are not 
otherwise eligible for such housing under any other admission 
requirements or procedures, under a plan submitted by a public housing 
agency (HA) and approved by the Department, and to set forth standards 
and criteria for the approval of such plans. The Department's objective 
in granting the exemption allowed by this subpart is to permit long term 
residence in public housing developments by police officers and security 
personnel, whose visible presence is expected to serve as a deterrent to 
criminal activity in and around public housing.



Sec. 960.503  Definitions.

    Eligible families means families that are eligible for residence in 
public housing assisted under the United States Housing Act of 1937.
    Officer means a professional police officer or other professional 
security provider. Police officers and other security personnel are 
considered professional if they are employed full time, i.e., not less 
than 35 hours per week, by a governmental unit or a private employer and 
compensated expressly for providing police or security services. As used 
in this subpart, ``Officer'' may refer to the Officer as so defined or 
to the Officer and his or her family taken together, depending on the 
context.
    Plan means the written plan submitted by a public housing agency 
(PHA) to the Department, under which, if approved, the Department will 
exempt Officers from the normal eligibility requirements for residence 
in public housing and allow Officers, who are otherwise not eligible, to 
reside in public housing units. An HA may have only one plan in effect 
at any one time, which will govern exemptions under this subpart for all 
public housing managed by that HA.

[59 FR 39405, Aug. 2, 1994, as amended at 61 FR 5215, Feb. 9, 1996]



Sec. 960.505  Exemption from eligibility requirements; plan submission; plan approval or disapproval.

    (a) Conditions for exemption. The Department may exempt Officers 
from the eligibility requirements for admission to public housing, 
provided that:
    (1) The Officers would not be eligible, under any other admission 
requirements or procedures, for admission to the public housing 
development without such an exemption; and
    (2) The exemption is given under a properly submitted plan that 
satisfies the standards and criteria set forth in Sec. 960.507 of this 
part and, accordingly, has been approved by the Department.
    (b) Plan submission. A plan is properly submitted when it is 
received by the local HUD Field Office with jurisdiction over the HA.
    (c) Notification of plan approval or disapproval. The Department 
will notify an HA of the approval or disapproval of its plan within 
thirty days of its submission. Plan approval by the Department 
constitutes granting of the exemption for the purposes of this subpart.



Sec. 960.507  Plan standards and criteria.

    (a) Minimum requirements. To be approved, a plan must satisfy the 
following requirements:
    (1) The plan must identify the total number of units under 
management by the HA; the specific housing developments, and the number 
of units they contain, where the HA intends to place Officers; and the 
particular units (stating number of bedrooms) within each development 
that would be allocated to Officers. For each unit identified, the plan 
must state the amount of rent that the Officer will pay and facts and 
circumstances (such as, the rent that would ordinarily be charged for 
the unit, the HA's annual maintenance cost for the unit, the degree of 
difficulty in attracting Officers to reside in the unit, the extent of 
the crime problem in the development, and the anticipated benefits of 
the Officer's presence) that demonstrate the reasonableness of that 
amount, as required under Sec. 960.509(a) of this subpart.

[[Page 417]]

    (2) The plan must identify specifically the benefits to the 
community and to the HA that will result from the presence of Officers 
in each affected development.
    (3) The plan must describe the existing physical and social 
conditions in and around each affected development, providing specific 
evidence of criminal activity (such as, frequency of telephone calls to 
local police, number of arrests and types of offenses involved, and data 
on drug abuse in the community) in order to permit the Department to 
make an informed assessment of the level of need for increased security.
    (4) The plan must afford the Department a reasonable basis, which 
necessarily includes the certifications required under Sec. 960.507(b) 
of this part, for determining that the use by Officers of the identified 
dwelling units will:
    (i) Increase security for other public housing residents;
    (ii) Result in a limited loss of income to the HA; and
    (iii) Not result in a significant reduction of units available for 
residence by Eligible Families.
    (b) Certifications by HA. Only upon making the determination 
described in Sec. 960.507(a)(4) of this part will the Department approve 
a plan. Further, the Department will not make such a determination 
unless the plan contains a written statement, signed by an authorized 
officer or other agent of the HA, certifying that:
    (1) The dwelling units proposed to be allocated to Officers are 
situated so as to place the Officers in close physical proximity to 
other residents;
    (2) No resident families will have to be transferred to other 
dwelling units in order to make available the units proposed to be 
allocated to Officers;
    (3) The dwelling units proposed to be allocated to Officers will be 
rented under a lease that contains the terms described in Sec. 960.509 
of this part; and
    (4) The number of dwelling units proposed to be allocated to 
Officers under the plan does not exceed the limits set forth in 
Sec. 960.507(c) of this part or, in the alternative, any units so 
allocated in excess of the applicable maximum number are vacant units 
for which there are no Eligible Families. This certification on the part 
of the HA satisfies the requirements of Secs. 960.507(a)(4)(ii) and 
(iii) of this part.
    (c) Unit allocation table. For purposes of the certification 
required by Sec. 960.507(b)(4) of this part, the following table sets 
forth the maximum number of units to be allocated to Officers as a 
function of the total number of units under management by the HA:

                          Unit Allocation Table
------------------------------------------------------------------------
                                                             Units to be
                Total units under management                  allocated
------------------------------------------------------------------------
   500-999.................................................            5
  1000-4999................................................           10
  5000-9999................................................           15
 10,000+...................................................           20
------------------------------------------------------------------------

    The maximum number of units to be allocated by HAs with less than 
500 units under management will be determined by the Field Office on a 
case by case basis.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0185)



Sec. 960.509  Special rent requirements and other terms and conditions.

    The HA shall lease units to Officers under a lease agreement that is 
consistent with the requirements of this section and 24 CFR part 966. 
The requirements of this section shall take precedence if there is any 
inconsistency between them and 24 CFR part 966.
    (a) Reasonable rent. The lease shall provide for a reasonable rent, 
which may be a flat amount not related to the Officer's income. The HA 
should attempt to establish a rent that will provide an incentive to 
Officers to reside in the units but that is also consistent with the 
limited loss of income requirement of Sec. 960.507(a)(4)(ii) of this 
part. As required in Sec. 960.507(a)(1) of this part, the plan must 
state facts and circumstances (such as, the rent that would ordinarily 
be charged for the unit, the HA's annual maintenance cost for the unit, 
the degree of difficulty in attracting Officers to reside in the unit, 
the extent of the crime problem in the development, and the anticipated 
benefits of the Officer's presence) that demonstrate the reasonableness 
of the rent amount.

[[Page 418]]

    (b) Continued employment. The lease shall provide that the Officer's 
right of occupancy is dependent on the continuation of the employment 
that qualified the Officer for residency in the development under the 
plan. The lease also shall provide that the Officer will move out of the 
leased unit within a reasonably prompt time, to be established by the 
lease, after termination of employment.



Sec. 960.511  Applicability of the annual contributions contract; effect on the Performance Funding System.

    (a) Annual contributions contract. Except to the extent that 
eligibility requirements are exempted under Sec. 960.505 of this part, 
public housing units occupied by Officers in accordance with a plan 
submitted and approved under this subpart will be subject to the terms 
and conditions of the annual contributions contract (ACC) between the HA 
and the United States of America. This subpart does not override any of 
the terms and conditions of the ACC except insofar as they are 
inconsistent with the provisions of this subpart.
    (b) Performance funding system. For purposes of the operating 
subsidy under the Performance Funding System (PFS) described in part 
990, subpart A of this chapter, dwelling units allocated to Officers in 
accordance with this subpart are excluded from the total unit months 
available, as defined in Sec. 990.102 of this chapter. Also for purposes 
of the operating subsidy under the PFS, the full amount of any rent paid 
by Officers in accordance with this subpart is included in other income, 
as defined in Sec. 990.102 of this chapter. HAs may receive operating 
subsidy for one unit per housing development to promote economic self-
sufficiency services or anti-drug programs, including housing police 
officers and security personnel. An HA may request consideration of such 
units in its calculation of operating subsidy eligibility through the 
appropriate local HUD Office.



PART 963--PUBLIC HOUSING--CONTRACTING WITH RESIDENT-OWNED BUSINESSES--Table of Contents




                           Subpart A--General

Sec.
963.1  Purpose.
963.3  Applicability.
963.5  Definitions.

          Subpart B--Contracting with Resident-Owned Businesses

963.10  Eligible resident-owned businesses.
963.12  Alternative procurement process.

    Authority: 42 U.S.C. 1437 and 3535(d).

    Source: 57 FR 20189, May 11, 1992, unless otherwise noted.



                           Subpart A--General



Sec. 963.1  Purpose.

    The purpose of this part is to enhance the economic opportunities of 
public housing residents by providing public housing agencies with a 
method of soliciting and contracting with eligible and qualifed 
resident-owned businesses (as defined in this part) for public housing 
services, supplies, or construction. The contract award method provided 
by this part is based on the established procurement procedures set 
forth in 24 CFR 85.36, with solicitation as provided by these procedures 
limited to resident-owned businesses. The contract award method provided 
by this part is not a requirement. It is an alternative procurement 
method available to public housing agencies, subject to the conditions 
set forth in this part, and subject to permissibility under State and 
local laws.



Sec. 963.3  Applicability.

    The policies and procedures contained in this part apply to public 
housing developments that are owned by public housing agencies (PHAs) 
and that are covered by Annual Contributions Contracts (ACC) with the 
Department. Public housing contracts eligible to be awarded under the 
alternative procurement process provided by this

[[Page 419]]

part are limited to individual contracts that do not exceed $1,000,000. 
Resident-owned businesses eligible to participate in the alternative 
procurement process are limited to those that meet the eligibility 
requirements of Sec. 963.10. The policies and procedures contained in 
this part are consistent with the objectives of section 3 of the Housing 
and Urban Development Act of 1968 (12 U.S.C. 1701u), and similar Federal 
requirements imposed on public housing programs. (See 24 CFR 941.208(a) 
and 24 CFR 968.110(a)).

[57 FR 20189, May 11, 1992, as amended at 59 FR 33895, June 30, 1994]



Sec. 963.5  Definitions.

    The terms HUD and Public housing agency (PHA) are defined in 24 CFR 
part 5.
    Act. The U.S. Housing Act of 1937 (42 U.S.C. 1437).
    Alternative procurement process. The alternative method of public 
housing contract award available to public housing agencies and eligible 
resident-owned businesses under the conditions set forth in this part.
    Annual Contributions Contract (ACC). See definition in 24 CFR 
968.105.
    Certification. A written assertion based on supporting evidence, 
which shall be kept available for inspection by the Secretary, the 
Inspector General, and the public, which assertion shall be deemed to be 
accurate for purposes of this part, unless the Secretary determines 
otherwise after inspecting the evidence and providing due notice and 
opportunity for comment.
    Contract or public housing contract. Any contract awarded by a PHA 
for services, supplies, or construction necessary for the development, 
operation, modernization, or maintenance of public housing.
    Management officials. The individuals who possess the power to make 
the day-to-day, as well as major, decisions on matters of management, 
policy, and operations of the resident-owned business.
    Principal. An owner, partner, director, or management official of 
the resident-owned business with the power and authority to represent 
the business and to execute contract, leases, agreements, and other 
documents on behalf of the business.
    Public housing or public housing development. Any public housing 
development which is owned by a Public Housing Agency (PHA) and is 
receiving funds under an Annual Contribution Contract (ACC).
    Public housing resident. Any individual who resides in public 
housing as a signatory on a public housing lease, or as a member of the 
family of the individual(s) who is the signatory on the public housing 
lease.
    Resident-owned business. Any business concern which is owned and 
controlled by public housing residents. (The term ``resident-owned 
business'' includes sole proprietorships.) For purposes of this part, 
``owned and controlled'' means a business:
    (1) Which is at least 51 percent owned by one or more public housing 
residents; and
    (2) Whose management and daily business operations are controlled by 
one or more such individuals.

All securities which constitute ownership or control of a corporation 
for purposes of establishing the business as a resident-owned business 
shall be held directly by the public housing residents. No securities 
held in trust, or by any guardian for a minor, shall be considered as 
held by the public housing resident in determining the ownership or 
control of a corporation.

[57 FR 20189, May 11, 1992, as amended at 61 FR 5215, Feb. 9, 1996]



          Subpart B--Contracting With Resident-Owned Businesses



Sec. 963.10  Eligible resident-owned businesses.

    To be eligible for the alternative procurement process provided by 
this part, a business must meet the following requirements, and must 
submit evidence to the PHA, in the form described below, or as the PHA 
may require, that shows how each requirement has been met.
    (a) Legally formed business. The business shall submit certified 
copies of any State, county, or municipal licenses that may be required 
of the

[[Page 420]]

business to engage in the type of business activity for which it was 
formed. Where applicable (as for example, in the case of corporations), 
the business also shall submit a certified copy of its corporate charter 
or other organizational document that verifies that the business was 
properly formed in accordance with State law.
    (b) Resident-owned business. The business shall submit a 
certification that it is a resident-owned business as defined by this 
part. The business shall disclose to the PHA all owners of the business, 
and each owner's percentage of ownership interest in the business. The 
business also shall disclose all individuals who possess the power to 
make the day-to-day, as well as major, decisions on matters of 
management, policy, and operations (management officials). The business 
shall identify all owners and management officials who are not public 
housing residents, and shall disclose any relationship that these owners 
and officials may have to a business (resident- or non-resident-owned) 
engaged in the type of business activity with which the resident-owned 
business is engaged. For purposes of this part, ``relationship'' means 
employment by, or having an ownership interest in, a business. The 
business also shall submit such evidence as the PHA may require to 
verify that the owner or owners identified as public housing residents 
reside within public housing of the PHA.
    (c) Responsibility to complete contract. The business shall submit 
evidence sufficient to demonstrate to the satisfaction of the PHA that 
the business has the ability to perform successfully under the terms and 
conditions of the proposed contract. Consideration will be given to 
various factors, including but not limited to those identified in 24 CFR 
85.36(b)(8) and also to such matters as proof of completion of courses 
in business administration or financial management, and proof of job 
training or apprenticeship in the particular trade, business, 
profession, or occupation.
    (d) Limitation on alternative procurement contract awards. The 
business shall submit a certification as to the number of contracts 
awarded, and the dollar amount of each contract award received, under 
the alternative procurement process provided by this part. A resident-
owned business is not eligible to participate in the alternative 
procurement process provided by this part if the resident-owned business 
has received under this process one or more contracts with a total 
combined dollar value of $1,000,000.

[57 FR 20189, May 11, 1992, as amended at 59 FR 33895, June 30, 1994]



Sec. 963.12  Alternative procurement process.

    (a) Method of procurement. In contracting with resident-owned 
businesses, the PHA shall follow the applicable method of procurement as 
set forth in 24 CFR 85.36(d), with solicitation limited to resident-
owned businesses. Additionally, the PHA shall ensure that the method of 
procurement conforms to the procurement standards set forth in 24 CFR 
85.36(b).
    (b) Contract awards. Contracts awarded under this part shall be made 
only to resident-owned businesses that meet the requirements of 
Sec. 963.10, and that comply with such other requirements as may be 
required of a contractor under the particular procurement and the 
Department's regulations. An award shall not be made to the resident-
owned business if the contract award exceeds the independent cost 
estimate required by 24 CFR 85.36(f), and the price normally paid for 
comparable supplies, services, or construction in the project area.
    (c) Contract requirements. Any contract entered into between a PHA 
and a resident-owned business under this part shall comply with: the 
contract provisions of 24 CFR 85.36(i); the provisions of 24 CFR 
85.36(h), 24 CFR 968.240(d) or 24 CFR 968.335(c)(1) governing bonding 
requirements, where applicable; and such other contract terms that may 
be applicable to the particular procurement under the Department's 
regulations. In addition to the recordkeeping requirements imposed by 24 
CFR 85.36(i), the PHA also shall maintain records sufficient to detail 
the significant history of the procurement made under this part. These 
records will include, but are not necessarily limited to the following: 
The

[[Page 421]]

independent cost estimate and comparable price analysis as required by 
paragraph (b) of this section; the basis for contractor selection, 
including documentation concerning the eligibility of the selected 
resident-owned business under Sec. 963.10; and the basis for determining 
the reasonableness of the proposed contract price.



PART 964--TENANT PARTICIPATION AND TENANT OPPORTUNITIES IN PUBLIC HOUSING--Table of Contents




                      Subpart A--General Provisions

Sec.
964.1  Purpose.
964.3  Applicability and scope.
964.7  Definitions.
964.11  HUD policy on tenant participation.
964.12  HUD policy on the Tenant Opportunities Program (TOP).
964.14  HUD policy on partnerships.
964.15  HUD policy on resident management.
964.16  HUD role in activities under this part.
964.18  HA role in activities under subparts B & C.
964.24  HUD policy on FIC Program.
964.30  Other Program requirements.

                     Subpart B--Tenant Participation

964.100  Role of resident council.
964.105  Role of the jurisdiction-wide resident council.
964.110  Resident membership on HA Board of Commissioners.
964.115  Resident council requirements.
964.117  Resident council partnerships.
964.120  Resident management corporation requirements.
964.125  Eligibility for resident council membership.
964.130  Election procedures and standards.
964.135  Resident involvement in HA management operations.
964.140  Resident training.
964.145  Conflict of interest.
964.150  Funding tenant participation.

                 Subpart C--Tenant Opportunities Program

964.200  General.
964.205  Eligibility.
964.210  Notice of funding availability.
964.215  Grant agreement.
964.220  Technical assistance.
964.225  Resident management requirements.
964.230  Audit and administrative requirements.

           Subpart D--Family Investment Centers (FIC) Program

964.300  General.
964.305  Eligibility.
964.308  Supportive services requirements.
964.310  Audit/compliance requirements.
964.315  HAs role in activities under this part.
964.320  HUD Policy on training, employment, contracting and 
          subcontracting of public housing residents.
964.325  Notice of funding availability.
964.330  Grant set-aside assistance.
964.335  Grant agreement.
964.340  Resident compensation.
964.345  Treatment of income.
964.350  Administrative requirements.

    Authority: 42 U.S.C. 1437d, 1437g, 1437l, 1437r, 1437t, 3535(d).

    Source: 59 FR 43636, Aug. 24, 1994, unless otherwise noted.



                      Subpart A--General Provisions



Sec. 964.1  Purpose.

    The purpose of this part is to recognize the importance of resident 
involvement in creating a positive living environment and in actively 
participating in the overall mission of public housing.



Sec. 964.3  Applicability and scope.

    (a) The policies and procedures contained in this part apply to any 
HA that has a Public Housing Annual Contributions Contract (ACC) with 
HUD. This part does not apply to PHAs with housing assistance payments 
contracts with HUD under section 8 of the U.S. Housing Act of 1937.
    (b) Subpart B of this part contains HUD policies, procedures, and 
requirements for the participation of residents in public housing 
operations. These policies, procedures, and requirements apply to all 
residents participating under this part.
    (c)(1) Subpart C of this part contains HUD policies, procedures, and 
requirements for residents participating in the Tenant Opportunities 
Program (TOP) (replaces the Resident Management Program under Section 20 
of the United States Housing Act of 1937). Resident management in public 
housing is viable and remains an option under TOP.

[[Page 422]]

    (2) Subpart C of this part is not intended to negate any pre-
existing arrangements for resident management in public housing between 
a PHA and a resident management corporation. On or after September 23, 
1994, any new, renewed or renegotiated contracts must meet the 
requirements of this part, the ACC and all applicable laws and 
regulations.
    (d) Subpart D of this part includes requirements for the Family 
Investment Centers (FIC) Program which was established by Section 22 of 
the United States Housing Act of 1937 (42 U.S.C. 1437t) to provide 
families living in public housing and Indian housing with better access 
to educational and employment opportunities.
    (e) The term ``resident,'' as used throughout this part, is 
interchangeable with the term ``tenant,'' to reflect the fact that local 
resident organizations have differing preferences for the terms. Terms 
such as ``resident council'' and ``tenant council'' and ``resident 
management'' and ``tenant management'' are interchangeable. Hereafter, 
for ease of discussion, the rule will use the terms resident, resident 
council and resident management corporation, as appropriate.



Sec. 964.7  Definitions.

    Annual Contributions Contract (ACC). A contract (in the form 
prescribed by HUD) under which HUD agrees to provide financial 
assistance, and the HA agrees to comply with HUD requirements for the 
development and operation of the public housing project.
    Eligible residents for FIC. A participating resident of a 
participating HA. If the HA is combining FIC with the Family Self-
Sufficiency (FSS) program, the term also means Public Housing FSS and 
Section 8 families participating in the FSS program. Although Section 8 
FSS families are eligible residents for FIC, they do not qualify for 
income exclusions that are provided for public housing residents 
participating in employment and supportive service programs.
    Family Investment Centers (FIC). A facility on or near public 
housing which provides families living in public housing with better 
access to educational and employment opportunities to achieve self-
sufficiency and independence.
    FIC service coordinator. Any person who is responsible for:
    (1) Determining the eligibility and assessing needs of families to 
be served by the FIC;
    (2) Assessing training and service needs of eligible residents;
    (3) Working with service providers to coordinate the provision of 
services on a HA-wide or less than HA-wide basis, and to tailor the 
services to the needs and characteristics of eligible residents;
    (4) Mobilizing public and private resources to ensure that the 
supportive services identified can be funded over the five-year period, 
at least, following the initial receipt of funding.
    (5) Monitoring and evaluating the delivery, impact, and 
effectiveness of any supportive service funded with capital or operating 
assistance under the FIC program;
    (6) Coordinating the development and implementation of the FIC 
program with other self-sufficiency programs, and other education and 
employment programs; and
    (7) Performing other duties and functions that are appropriate for 
providing eligible residents with better access to educational and 
employment opportunities.
    HA means the same as Public Housing Agency (PHA).
    Management. All activities for which the HA is responsible to HUD 
under the ACC, within the definition of ``operation'' under the Act and 
the ACC, including the development of resident programs and services.
    Management contract. A written agreement between a resident 
management corporation and a HA, as provided by subpart C.
    Public Housing Agency (PHA) is defined in 24 CFR part 5.
    Public housing development (Development). The term ``development'' 
has the same meaning as that provided for ``low-income housing project'' 
as that term is defined Section 3(b)(1) of the Act.
    Resident management. The performance of one or more management 
activities for one or more projects by a resident management corporation

[[Page 423]]

under a management contract with the HA.
    Resident management corporation. An entity that proposes to enter 
into, or enters into, a contract to manage one or more management 
activities of a HA.
    Resident-owned business. Any business concern which is owned and 
controlled by public housing residents. (The term ``resident-owned 
business'' includes sole proprietorships.) For purposes of this part, 
``owned and controlled'' means a business:
    (1) Which is at least 51 percent owned by one or more public housing 
residents; and
    (2) Whose management and daily business operations are controlled by 
one or more such individuals.
    Supportive services for FIC. New or significantly expanded services 
that are essential to providing families living with children in public 
housing with better access to educational and employment opportunities 
to achieve self-sufficiency and independence.
    Tenant Opportunities Program (TOP). The TOP program is designed to 
prepare residents to experience the dignity of meaningful work, to own 
and operate resident businesses, to move toward financial independence, 
and to enable them to choose where they want to live and engage in 
meaningful participation in the management of housing developments in 
which they live. Financial assistance in the form of technical 
assistance grants is available to RCs/RMCs to prepare to manage 
activities in their public housing developments.
    Vacant unit under FIC. A dwelling unit that is not under an 
effective lease to an eligible family. An effective lease is a lease 
under which an eligible family has a right to possession of the unit and 
is being charged rent, even if the amount of any utility allowance 
equals or exceeds the amount of a total resident payment that is based 
on income and, as a result, the amount paid by the family to the HA is 
zero.

[59 FR 43636, Aug. 24, 1994, as amended at 61 FR 5215, Feb. 9, 1996]



Sec. 964.11  HUD policy on tenant participation.

    HUD promotes resident participation and the active involvement of 
residents in all aspects of a HA's overall mission and operation. 
Residents have a right to organize and elect a resident council to 
represent their interests. As long as proper procedures are followed, 
the HA shall recognize the duly elected resident council to participate 
fully through a working relationship with the HA. HUD encourages HAs and 
residents to work together to determine the most appropriate ways to 
foster constructive relationships, particularly through duly-elected 
resident councils.



Sec. 964.12  HUD policy on the Tenant Opportunities Program (TOP).

    HUD promotes TOP programs to support activities that enable 
residents to improve the quality of life and resident satisfaction, and 
obtain other social and economic benefits for residents and their 
families. Tenant opportunity programs are proven to be effective in 
facilitating economic uplift, as well as in improving the overall 
conditions of the public housing communities.



Sec. 964.14  HUD policy on partnerships.

    HUD promotes partnerships between residents and HAs which are an 
essential component to building, strengthening and improving public 
housing. Strong partnerships are critical for creating positive changes 
in lifestyles thus improving the quality of life for public housing 
residents, and the surrounding community.



Sec. 964.15  HUD policy on resident management.

    It is HUD's policy to encourage resident management. HUD encourages 
HAs, resident councils and resident management corporations to explore 
the various functions involved in management to identify appropriate 
opportunities for contracting with a resident management corporation. 
Potential benefits of resident-managed entities include improved quality 
of life, experiencing the dignity of meaningful work, enabling residents 
to choose where they want to live, and meaningful participation in the 
management of the housing development.

[[Page 424]]



Sec. 964.16  HUD role in activities under this part.

    (a) General. Subject to the requirements of this part and other 
requirements imposed on HAs by the ACC, statute or regulation, the form 
and extent of resident participation including resident management are 
local decisions to be made jointly by resident councils/resident 
management corporations and their HAs. HUD will promote tenant 
participation and tenant opportunities programs, and will provide 
additional guidance, as necessary and appropriate. In addition, HUD will 
endeavor to provide technical assistance in connection with these 
initiatives.
    (b) Monitoring. HUD shall ensure that the requirements under this 
part are operating efficiently and effectively.



Sec. 964.18  HA role in activities under subparts B & C.

    (a) HAs with 250 units or more. (1) A HA shall officially recognize 
a duly elected resident council as the sole representative of the 
residents it purports to represent, and support its tenant participation 
activities.
    (2) When requested by residents, a HA shall provide appropriate 
guidance to residents to assist them in establishing and maintaining a 
resident council.
    (3) A HA may consult with residents, or resident councils (if they 
exist), to determine the extent to which residents desire to participate 
in activities involving their community, including the management of 
specific functions of a public housing development that may be mutually 
agreeable to the HA and the resident council/resident management 
corporation.
    (4) A HA shall provide the residents or any resident council with 
current information concerning the HA's policies on tenant participation 
in management.
    (5) If requested, a HA should provide a duly recognized resident 
council office space and meeting facilities, free of charge, preferably 
within the development it represents. If there is no community or rental 
space available, a request to approve a vacant unit for this non-
dwelling use will be considered on a case-by-case basis.
    (6) If requested, a HA shall negotiate with the duly elected 
resident council on all uses of community space for meetings, recreation 
and social services and other resident participation activities pursuant 
to HUD guidelines. Such agreements shall be put into a written document 
to be signed by the HA and the resident council. If a HA fails to 
negotiate with a resident council in good faith or, after negotiations, 
refuses to permit such usage of community space, the resident council 
may file an informal appeal with HUD, setting out the circumstances and 
providing copies of relevant materials evidencing the resident council's 
efforts to negotiate a written agreement. HUD shall require the HA to 
respond with a report stating the HA's reasons for rejecting the request 
or for refusing to negotiate. HUD shall require the parties (with or 
without direct HUD participation) to undertake or to resume negotiations 
on an agreement. If no resolution is achieved within 90 days from the 
date HUD required the parties to undertake or resume such negotiations, 
HUD shall serve notice on both parties that administrative remedies have 
been exhausted (except that, pursuant to mutual agreement of the 
parties, the time for negotiations may be extended by no more than an 
additional 30 days).
    (7) In no event shall HUD or a HA recognize a competing resident 
council once a duly elected resident council has been established. Any 
funding of resident activities and resident input into decisions 
concerning public housing operations shall be made only through the 
officially recognized resident council.
    (8) The HA shall ensure open communication and frequent meetings 
between HA management and resident councils and shall encourage the 
formation of joint HA management-resident committees to work on issues 
and planning.
    (9) The resident council shall hold frequent meetings with the 
residents to ensure that residents have input, and are aware and 
actively involved in HA management-resident council decisions and 
activities.
    (10) The HA and resident council shall put in writing in the form of 
a Memorandum of Understanding the elements of their partnership 
agreement

[[Page 425]]

and it shall be updated at least once every three (3) years.
    (11) The HA, in collaboration with the resident councils, shall 
assume the lead role for assuring maximum opportunities for skills 
training for public housing residents. To the extent possible, the 
training resources should be local to ensure maximum benefit and on-
going access.
    (b) HAs with fewer than 250 units. (1) HAs with fewer than 250 units 
of public housing have the option of participating in programs under 
this part.
    (2) HAs shall not deny residents the opportunity to organize. If the 
residents decide to organize and form a resident council, the HA shall 
comply with the following:
    (i) A HA shall officially recognize a duly elected resident council 
as the sole representative of the residents it purports to represent, 
and support its tenant participation activities.
    (ii) When requested by residents, a HA shall provide appropriate 
guidance to residents to assist them in establishing and maintaining a 
resident council.
    (iii) A HA shall provide the residents or any resident council with 
current information concerning the HA's policies on tenant participation 
in management.
    (iv) In no event shall HUD or a HA officially recognize a competing 
resident council once a duly elected resident council has been 
established. If a duly elected resident council has been formed, any 
input into changes concerning public housing operations shall be made 
only through the officially recognized resident council.



Sec. 964.24  HUD policy on FIC Program.

    HUD promotes Family Investment Centers which provide better access 
to educational and employment opportunities for residents living in 
public housing. HUD encourages resident involvement in the FIC Program 
and promotes resident-HA partnerships to achieve mutual goals.



Sec. 964.30  Other Program requirements.

    In addition to the requirements set forth in 24 CFR part 5, the 
following Federal requirements apply to this program:
    (a) Affirmative Outreach. (1) The Affirmative Fair Housing Marketing 
Program requirements of 24 CFR part 200, subpart M and the implementing 
regulations at 24 CFR part 108; and
    (2) The fair housing advertising and poster guidelines at 24 CFR 
parts 109 and 110.
    (b) Title II of the Americans with Disabilities Act of 1990 (42 
U.S.C. 12131) and implementing regulations at 28 CFR part 35.

[61 FR 5216, Feb. 9, 1996]



                     Subpart B--Tenant Participation



Sec. 964.100  Role of resident council.

    The role of a resident council is to improve the quality of life and 
resident satisfaction and participate in self-help initiatives to enable 
residents to create a positive living environment for families living in 
public housing. Resident councils may actively participate through a 
working partnership with the HA to advise and assist in all aspects of 
public housing operations.



Sec. 964.105  Role of the jurisdiction-wide resident council.

    (a) Jurisdiction-wide resident council. Resident councils may come 
together to form an organization which can represent the interest of 
residents residing in units under a HA's jurisdiction. This can be 
accomplished by the presidents of duly elected resident councils forming 
an organization, by resident councils electing a representative to the 
organization, or through jurisdiction-wide elections. If duly elected 
resident councils form such an organization, the HA shall recognize it 
as the voice of authority-wide residents for input into housing 
authority policy making.
    (b) Function. The jurisdiction-wide council may advise the Board of 
Commissioners and executive director in all areas of HA operations, 
including but not limited to occupancy, general management, maintenance, 
security, resident training, resident employment, social services and 
modernization priorities.
    (c) Cooperation with other groups. There shall be regularly 
scheduled meetings between the HA and the local duly elected resident 
council, and the

[[Page 426]]

jurisdiction-wide resident council to discuss problems, plan activities 
and review progress.



Sec. 964.110  Resident membership on HA Board of Commissioners.

    HUD encourages to the maximum extent possible resident membership on 
HA Board of Commissioners, for the purpose of having maximum input into 
HA policy and decision-making on matters concerning public housing.



Sec. 964.115  Resident council requirements.

    A resident council shall consist of persons residing in public 
housing and must meet each of the following requirements in order to 
receive official recognition from the HA/HUD, and be eligible to receive 
funds for resident council activities, and stipends for officers for 
their related costs for volunteer work in public housing:
    (a) It may represent residents residing:
    (1) In scattered site buildings;
    (2) In areas of contiguous row houses; or
    (3) In one or more contiguous buildings;
    (4) In a development; or
    (5) In a combination of these buildings or developments;
    (b) It must adopt written procedures such as by-laws, or a 
constitution which provides for the election of residents to the 
governing board by the voting membership of the residents residing in 
public housing, described in paragraph (b) of this section, on a regular 
basis but at least once every three (3) years. The written procedures 
must provide for the recall of the resident board by the voting 
membership. These provisions shall allow for a petition or other 
expression of the voting membership's desire for a recall election, and 
set the number of percentage of voting membership (``threshold'') who 
must be in agreement in order to hold a recall election. This threshold 
shall not be less than 10 percent of the voting membership.
    (c) It must have a democratically elected governing board that is 
elected by the voting membership. At a minimum, the governing board 
should consist of five (5) elected board members.
    The voting membership must consist of heads of households (any age) 
and other residents at least 18 years of age or older and whose name 
appears on a lease for the unit in the public housing that the resident 
council represents.



Sec. 964.117  Resident council partnerships.

    A resident council may form partnerships with outside organizations, 
provided that such relationships are complementary to the resident 
council in its duty to represent the residents, and provided that such 
outside organizations do not become the governing entity of the resident 
council.



Sec. 964.120  Resident management corporation requirements.

    A resident management corporation must consist of residents residing 
in public housing and have each of the following characteristics in 
order to receive official recognition by the HA and HUD:
    (a) It shall be a non-profit organization that is validly 
incorporated under the laws of the State in which it is located;
    (b) It may be established by more than one resident council, so long 
as each such council:
    (1) Approves the establishment of the corporation; and
    (2) Has representation on the Board of Directors of the corporation;
    (c) It shall have an elected Board of Directors, and elections must 
be held at least once every three (3) years;
    (d) Its by-laws shall require the Board of Directors to include 
resident representatives of each resident council involved in 
establishing the corporation; include qualifications to run for office, 
frequency of elections, procedures for recall, and term limits if 
desired.
    (e) Its voting members shall be heads of households (any age) and 
other residents at least 18 years of age and whose name appears on the 
lease of a unit in the public housing represented by the resident 
management corporation;
    (f) Where a resident council already exists for the development, or 
a portion of the development, the resident management corporation shall 
be approved

[[Page 427]]

by the resident council board and a majority of the residents. If there 
is no resident council, a majority of the residents of the public 
housing development it will represent must approve the establishment of 
such a corporation for the purposes of managing the project; and
    (g) It may serve as both the resident management corporation and the 
resident council, so long as the corporation meets the requirements of 
this part for a resident council.



Sec. 964.125  Eligibility for resident council membership.

    (a) Any member of a public housing household whose name is on the 
lease of a unit in the public housing development and meets the 
requirements of the by-laws is eligible to be a member of a resident 
council. The resident council may establish additional criteria that are 
non-discriminatory and do not infringe on rights of other residents in 
the development. Such criteria must be stated in the by-laws or 
constitution as appropriate.
    (b) The right to vote for resident council board shall be limited to 
designated heads of households (any age) and other members of the 
household who are 18 years or older whose name appears on the lease of a 
unit in the public housing development represented by the resident 
council.
    (c) Any qualified voting member of a resident council who meets the 
requirements described in the by-laws and is in compliance with the 
lease may seek office and serve on the resident council governing board.



Sec. 964.130  Election procedures and standards.

    At a minimum, a resident council may use local election boards/
commissions. The resident council shall use an independent third-party 
to oversee elections and recall procedures.
    (a) Resident councils shall adhere to the following minimum 
standards regarding election procedures:
    (1) All procedures must assure fair and frequent elections of 
resident council members--at least once every three years for each 
member.
    (2) Staggered terms for resident council governing board members and 
term limits shall be discretionary with the resident council.
    (3) Each resident council shall adopt and issue election and recall 
procedures in their by-laws.
    (4) The election procedures shall include qualifications to run for 
office, frequency of elections, procedures for recall, and term limits 
if desired.
    (5) All voting members of the resident community must be given 
sufficient notice (at least 30 days) for nomination and election. The 
notice should include a description of election procedures, eligibility 
requirements, and dates of nominations and elections.
    (b) If a resident council fails to satisfy HUD minimum standards for 
fair and frequent elections, or fails to follow its own election 
procedures as adopted, HUD shall require the HA to withdraw recognition 
of the resident council and to withhold resident services funds as well 
as funds provided in conjunction with services rendered for resident 
participation in public housing.
    (c) HAs shall monitor the resident council election process and 
shall establish a procedure to appeal any adverse decision relating to 
failure to satisfy HUD minimum standards. Such appeal shall be submitted 
to a jointly selected third-party arbitrator at the local level. If 
costs are incurred by using a third-party arbitrator, then such costs 
should be paid from the HAs resident services funds pursuant to 
Sec. 964.150.



Sec. 964.135  Resident involvement in HA management operations.

    Residents shall be involved and participate in the overall policy 
development and direction of Public Housing operations.
    (a) Resident management corporations (RMCs) may contract with HAs to 
perform one or more management functions provided the resident entity 
has received sufficient training and/or has staff with the necessary 
expertise to perform the management functions and provided the RMC meets 
bonding and licensing requirements.
    (b) Residents shall be actively involved in a HA's decision-making 
process and give advice on matters such as modernization, security, 
maintenance,

[[Page 428]]

resident screening and selection, and recreation.
    (c) While a HA has responsibility for management operations, it 
shall ensure strong resident participation in all issues and facets of 
its operations through the duly elected resident councils at public 
housing developments, and with jurisdiction-wide resident councils.
    (d) A HA shall work in partnership with the duly elected resident 
councils.
    (e) HAs, upon request from the duly elected resident council, shall 
ensure that the duly elected resident council officers as defined in 
subpart B of this part, and other residents in the development are fully 
trained and involved in developing and implementing Federal programs 
including but not limited to Comprehensive Improvement Assistance 
Program (CIAP), Comprehensive Grant Program, Urban Revitalization 
Demonstration, Drug Elimination, and FIC.
    (f) HAs shall involve resident council officers and other interested 
residents at the development through education and direct participation 
in all phases of the budgetary process.
    (g) Resident council officers shall be encouraged to become involved 
in the resident screening and selection process for prospective 
residents at the development. Those selected to perform resident 
screening and selection functions must be trained by the HA in resident 
screening and selection and must sign a legal document committing to 
confidentiality.



Sec. 964.140  Resident training.

    (a) Resident training opportunities. HUD encourages a partnership 
between the residents, the HA and HUD, as well as with the public and 
non-profit sectors to provide training opportunities for public housing 
residents. The categories in which training could occur include, but are 
not limited to:
    (1) Community organization and leadership training;
    (2) Organizational development training for Resident Management 
Corporations and duly elected Resident Councils;
    (3) Public housing policies, programs, rights and responsibilities 
training; and
    (4) Business entrepreneurial training, planning and job skills.
    (b) Local training resources. HUD encourages the use of local 
training resources to ensure the ongoing accessibility and availability 
of persons to provide training and technical assistance. Possible 
training resources may include:
    (1) Resident organizations;
    (2) Housing authorities;
    (3) Local community colleges, vocational schools; and
    (4) HUD and other Federal agencies and other local public, private 
and non-profit organizations.



Sec. 964.145  Conflict of interest.

    Resident council officers can not serve as contractors or employees 
if they are in policy making or supervisory positions at the HA.



Sec. 964.150  Funding tenant participation.

    (a) Funding duly elected resident councils and jurisdiction wide 
resident councils. (1) The HA shall provide funds it receives for this 
purpose to the duly elected resident council at each development and/or 
those jurisdiction-wide councils eligible to receive the resident 
portion of the tenant services account to use for resident participation 
activities. This shall be an addition to the Performance Funding System 
(PFS), as provided by 24 CFR part 990, to permit HAs to fund $25 per 
unit per year for units represented by duly elected resident councils 
for resident services, subject to the availability of appropriations. Of 
this amount, $15 per unit per year would be provided to fund tenant 
participation activities under subpart B of this part for duly elected 
resident councils and/or jurisdiction-wide councils and $10 per unit per 
year would be used by the HA to pay for costs incurred in carrying out 
tenant participation activities under subpart B of this part, including 
the expenses for conducting elections, recalls or arbitration required 
under Sec. 964.130 in subpart B. This will guarantee the resources 
necessary to create a bona fide partnership among the duly elected 
resident councils, the HA and HUD. Where both local and jurisdiction-
wide councils exist, the distribution will be

[[Page 429]]

agreed upon by the HA and the respective councils.
    (2) If funds are available through appropriations, the HA must 
provide tenant services funding to the duly elected resident councils 
regardless of the HA's financial status. The resident council funds 
shall not be impacted or restricted by the HA financial status and all 
said funds must be used for the purpose set forth in subparts B and C of 
this part.
    (3) The HA and the duly elected resident council at each development 
and/or those jurisdiction-wide councils shall collaborate on how the 
funds will be distributed for tenant participation activities. If 
disputes regarding funding decisions arise between the parties, the 
matter shall be referred to the Field Office for intervention. HUD Field 
Office shall require the parties to undertake further negotiations to 
resolve the dispute. If no resolution is achieved within 90 days from 
the date of the Field Office intervention, the Field Office shall refer 
the matter to HUD Headquarters for final resolution.
    (b) Stipends. (1) HUD encourages HAs to provide stipends to resident 
council officers who serve as volunteers in their public housing 
developments. The amount of the stipend, up to $200 per month/per 
officer, shall be decided locally by the resident council and the HA. 
Subject to appropriations, the stipends will be funded from the resident 
council's portion of the operating subsidy funding for resident council 
expenses ($15.00 per unit per year).
    (2) Pursuant to Sec. 913.106, stipends are not to be construed as 
salaries and should not be included as income for calculation of rents, 
and are not subject to conflict of interest requirements.
    (3) Funding provided by a HA to a duly elected resident council may 
be made only under a written agreement between the HA and a resident 
council, which includes a resident council budget and assurance that all 
resident council expenditures will not contravene provisions of law and 
will promote serviceability, efficiency, economy and stability in the 
operation of the local development. The agreement must require the local 
resident council to account to the HA for the use of the funds and 
permit the HA to inspect and audit the resident council's financial 
records related to the agreement.



                 Subpart C--Tenant Opportunities Program



Sec. 964.200  General.

    (a) The Tenant Opportunities Program (TOP) provides technical 
assistance for various activities, including but not limited to resident 
management, for resident councils/resident management corporations as 
authorized by Section 20 of the U.S. Housing Act of 1937. The TOP 
provides opportunities for resident organizations to improve living 
conditions and resident satisfaction in public housing communities.
    (b) This subpart establishes the policies, procedures and 
requirements for participating in the TOP with respect to applications 
for funding for programs identified in this subpart.
    (c) This subpart contains the policies, procedures and requirements 
for the resident management program as authorized by section 20 of the 
U.S. Housing Act of 1937.



Sec. 964.205  Eligibility.

    (a) Resident councils/resident management corporations. Any eligible 
resident council/resident management corporation as defined in subpart B 
of this part is eligible to participate in a program administered under 
this subpart.
    (b) Activities. Activities to be funded and carried out by an 
eligible resident council or resident management corporation, as defined 
in subpart B of this part, must improve the living conditions and public 
housing operations and may include any combination of, but are not 
limited to, the following:
    (1) Resident capacity building. (i) Training Board members in 
community organizing, Board development, and leadership training;
    (ii) Determining the feasibility of resident management enablement 
for a specific project or projects; and
    (iii) Assisting in the actual creation of an RMC, such as consulting 
and legal assistance to incorporate, preparing by-laws and drafting a 
corporate charter.

[[Page 430]]

    (2) Resident management. (i) Training residents, as potential 
employees of an RMC, in skills directly related to the operation, 
management, maintenance and financial systems of a project;
    (ii) Training of residents with respect to fair housing 
requirements; and
    (iii) Gaining assistance in negotiating management contracts, and 
designing a long-range planning system.
    (3) Resident management business development. (i) Training related 
to resident-owned business development and technical assistance for job 
training and placement in RMC developments;
    (ii) Technical assistance and training in resident managed business 
development through:
    (A) Feasibility and market studies;
    (B) Development of business plans;
    (C) Outreach activities; and
    (D) Innovative financing methods including revolving loan funds; and
    (iii) Legal advice in establishing a resident managed business 
entity.
    (4) Social support needs (such as self-sufficiency and youth 
initiatives). (i) Feasibility studies to determine training and social 
services needs;
    (ii) Training in management-related trade skills, computer skills, 
etc;
    (iii) Management-related employment training and counseling;
    (iv) Coordination of support services;
    (v) Training for programs such as child care, early childhood 
development, parent involvement, volunteer services, parenting skills, 
before and after school programs;
    (vi) Training programs on health, nutrition and safety;
    (vii) Workshops for youth services, child abuse and neglect 
prevention, tutorial services, in partnership with community-based 
organizations such as local Boys and Girls Clubs, YMCA/YWCA, Boy/Girl 
Scouts, Campfire and Big Brother/Big Sisters, etc. Other HUD programs 
such as the Youth Sports Program and the Public Housing Drug Elimination 
Programs also provide funding in these areas;
    (viii) Training in the development of strategies to successfully 
implement a youth program. For example, assessing the needs and problems 
of the youth, improving youth initiatives that are currently active, and 
training youth, housing authority staff, resident management 
corporations and resident councils on youth initiatives and program 
activities; and
    (5) Homeownership Opportunity. Determining feasibility for 
homeownership by residents, including assessing the feasibility of other 
housing (including HUD owned or held single or multi-family) affordable 
for purchase by residents.
    (6) General. (i) Required training on HUD regulations and policies 
governing the operation of low-income public housing including 
contracting/procurement regulations, financial management, capacity 
building to develop the necessary skills to assume management 
responsibilities at the project and property management;
    (ii) Purchasing hardware, i.e., computers and software, office 
furnishings and supplies, in connection with business development. Every 
effort must be made to acquire donated or discounted hardware;
    (iii) Training in accessing other funding sources; and
    (iv) Hiring trainers or other experts (RCs/RMCs must ensure that 
this training is provided by a qualified housing management specialist, 
a community organizer, the HA, or other sources knowledgeable about the 
program).



Sec. 964.210  Notice of funding availability.

    A Notice of Funding Availability shall be published periodically in 
the Federal Register containing the amounts of funds available, funding 
criteria, where to obtain and submit applications, and the deadline for 
submissions.



Sec. 964.215  Grant agreement.

    (a) General. HUD shall enter into a grant agreement with the 
recipient of a technical assistance grant which defines the legal 
framework for the relationship between HUD and a resident council or 
resident management corporation for the proposed funding.
    (b) Term of grant agreement. A grant shall be for a term of three to 
five years (3-5 years), and renewable at the expiration of the term.

[[Page 431]]



Sec. 964.220  Technical assistance.

    (a) Financial assistance. HUD will provide financial assistance, to 
the extent available, to resident councils or resident management 
corporations for technical assistance and training to further the 
activities under this subpart.
    (b) Requirements for a management specialist. If a resident council 
or resident management corporation seeks to manage a development, it 
must select, in consultation with the HA, a qualified housing management 
specialist to assist in determining the feasibility of, and to help 
establish, a resident management corporation and to provide training and 
other duties in connection with the daily operations of the project.



Sec. 964.225  Resident management requirements.

    The following requirements apply when a HA and its residents are 
interested in providing for resident performance of several management 
functions in one or more projects.
    (a) Resident management corporation responsibilities. Resident 
councils interested in contracting with a HA must establish a resident 
management corporation that meets the requirements for such a 
corporation, as specified in subpart B. The RMC and its employees must 
demonstrate their ability and skill to perform in the particular areas 
of management pursuant to the management contract.
    (b) HA responsibilities. HAs shall give full and serious 
consideration to resident management corporations seeking to enter into 
a management contract with the HA. A HA shall enter into good-faith 
negotiations with a corporation seeking to contract to provide 
management services.
    (c) Duty to bargain in good faith. If a HA refuses to negotiate with 
a resident management corporation in good faith or, after negotiations, 
refuses to enter into a contract, the corporation may file an informal 
appeal with HUD, setting out the circumstances and providing copies of 
relevant materials evidencing the corporation's efforts to negotiate a 
contract. HUD shall require the HA to respond with a report stating the 
HA's reasons for rejecting the corporation's contract offer or for 
refusing to negotiate. Thereafter, HUD shall require the parties (with 
or without direct HUD participation) to undertake or to resume 
negotiations on a contract providing for resident management, and shall 
take such other actions as are necessary to resolve the conflicts 
between the parties. If no resolution is achieved within 90 days from 
the date HUD required the parties to undertake or resume such 
negotiations, HUD shall serve notice on both parties that administrative 
remedies have been exhausted (except that, pursuant to mutual agreement 
of the parties, the time for negotiations may be extended by no more 
than an additional 30 days).
    (d) Management contract. A management contract between the HA and a 
resident management corporation is required for property management. The 
HA and the resident management corporation may agree to the performance 
by the corporation of any or all management functions for which the HA 
is responsible to HUD under the ACC and any other functions not 
inconsistent with the ACC and applicable state and local laws, 
regulations and licensing requirements.
    (e) Procurement requirements. The management contract shall be 
treated as a contracting out of services, and must be subject to any 
provision of a collective bargaining agreement regarding the contracting 
out of services to which the HA is subject. Provisions on competitive 
bidding and requirements of prior written HUD approval of contracts 
contained in the ACC do not apply to the decision of a HA to contract 
with a RMC.
    (f) Rights of families; operation of project. If a resident 
management corporation is approved by the tenant organization 
representing one or more buildings or an area of row houses that are 
part of a public housing project for purposes of part 941 of this 
chapter, the resident management program may not, as determined by the 
HA, interfere with the rights of other residents of such project or harm 
the efficient operation of such project.
    (g) Comprehensive improvement assistance with RMCs. (1) The HA may 
enter

[[Page 432]]

into a contract with the RMC to provide comprehensive improvement 
assistance under part 968 of this chapter to modernize a project managed 
by the RMC.
    (2) The HA shall not retain, for any administrative or other reason, 
any portion of the comprehensive improvement assistance provided, unless 
the PHA and the RMC provide otherwise by contract.
    (3) In assessing the modernization needs of its projects under 24 
CFR part 968, or other grant mechanisms established by the Housing and 
Community Development Act of 1987, the HAs must consult with the tenant 
management corporation regarding any project managed by the corporation, 
in order to determine the modernization needs and preferences of 
resident-managed projects. Evidence of this required consultation must 
be included with a HA's initial submission to HUD.
    (h) Prohibited activities. A HA may not contract for assumption by 
the resident management corporation of the HA's underlying 
responsibilities to HUD under the ACC.
    (i) Bonding and insurance. Before assuming any management 
responsibility under its contract, the RMC must provide fidelity bonding 
and insurance, or equivalent protection that is adequate (as determined 
by HUD and the HA) to protect HUD and the HA against loss, theft, 
embezzlement, or fraudulent acts on the part of the resident management 
corporation or its employees.
    (j) Waiver of HUD requirements. Upon the joint request of a resident 
management corporation and the HA, HUD may waive any requirement that 
HUD has established and that is not required by law, if HUD determines, 
after consultation with the resident management corporation and the HA, 
that the requirement unnecessarily increases the costs to the project or 
restricts the income of the project; and that the waiver would be 
consistent with the management contract and any applicable collective 
bargaining agreement. Any waiver granted to a resident management 
corporation under this section will apply as well to the HA to the 
extent the waiver affects the HA's remaining responsibilities relating 
to the resident management corporation's project.
    (k) Monitoring of RMC performance. The HA must review periodically 
(but not less than annually) the management corporation's performance to 
ensure that it complies with all applicable requirements and meets 
agreed-upon standards of performance. (The method of review and criteria 
used to judge performance should be specified in the management 
contract.)



Sec. 964.230  Audit and administrative requirements.

    (a) TOP grant recipients. The HUD Inspector General, the Comptroller 
General of the United States, or any duly authorized representative 
shall have access to all records required to be retained by this subpart 
or by any agreement with HUD for the purpose of audit or other 
examinations.
    (1) Grant recipients must comply with the requirements of OMB 
Circulars A-110 and A-122, as applicable.
    (2) A final audit shall be required of the financial statements made 
pursuant to this subpart by a Certified Public Accountant (CPA), in 
accordance with generally accepted government audit standards. A written 
report of the audit must be forwarded to HUD within 60 days of issuance.
    (b) Resident management corporations. Resident management 
corporations who have entered into a contract with a HA with respect to 
management of a development(s) must comply with the requirements of OMB 
Circulars A-110 and A-122, as applicable. Resident management 
corporations managing a development(s) must be audited annually by a 
licensed certified public accountant, designated by the corporation, in 
accordance with generally accepted government audit standards. A written 
report of each audit must be forwarded to HUD and the HA within 30 days 
of issuance. These requirements are in addition to any other Federal law 
or other requirement that would apply to the availability and audit of 
books and records of resident management corporations under this part.

[[Page 433]]



           Subpart D--Family Investment Centers (FIC) Program



Sec. 964.300  General.

    The Family Investment Centers Program provides families living in 
public housing with better access to educational and employment 
opportunities by:
    (a) Developing facilities in or near public housing for training and 
support services;
    (b) Mobilizing public and private resources to expand and improve 
the delivery of such services;
    (c) Providing funding for such essential training and support 
services that cannot otherwise be funded; and
    (d) Improving the capacity of management to assess the training and 
service needs of families, coordinate the provision of training and 
services that meet such needs, and ensure the long-term provision of 
such training and services. FIC provides funding to HAs to access 
educational, housing, or other social service programs to assist public 
housing residents toward self-sufficiency.



Sec. 964.305  Eligibility.

    (a) Public Housing Authorities. HAs may apply to establish one or 
more FICs for more than one public housing development.
    (b) FIC Activities. Activities that may be funded and carried out by 
eligible HAs, as defined in Sec. 964.305(a) and Sec. 964.310(a) may 
include:
    (1) The renovation, conversion, or combination of vacant dwelling 
units in a HA development to create common areas to accommodate the 
provision of supportive services;
    (2) The renovation of existing common areas in a HA development to 
accommodate the provision of supportive services;
    (3) The acquisition, construction or renovation of facilities 
located near the premises of one or more HA developments to accommodate 
the provision of supportive services;
    (4) The provision of not more than 15 percent of the total cost of 
supportive services (which may be provided directly to eligible 
residents by the HA or by contract or lease through other appropriate 
agencies or providers), but only if the HA demonstrates that:
    (i) The supportive services are appropriate to improve the access of 
eligible residents to employment and educational opportunities; and
    (ii) The HA has made diligent efforts to use or obtain other 
available resources to fund or provide such services; and
    (5) The employment of service coordinators.
    (c) Follow up. A HA must demonstrate a firm commitment of assistance 
from one or more sources ensuring that supportive services will be 
provided for not less than one year following the completion of 
activities.
    (d) Environmental Review. Any environmental impact regarding 
eligible activities will be addressed through an environmental review of 
that activity as required by 24 CFR part 50, including the applicable 
related laws and authorities under Sec. 50.4, to be completed by HUD, to 
ensure that any environmental impact will be addressed before assistance 
is provided to the HA. Grantees will be expected to adhere to all 
assurances applicable to environmental concerns.



Sec. 964.308  Supportive services requirements.

    HAs shall provide new or significantly expanded services essential 
to providing families in public housing with better access to 
educational and employment opportunities to achieve self-sufficiency and 
independence. HAs applying for funds to provide supportive services must 
demonstrate that the services will be provided at a higher level than 
currently provided. Supportive services may include:
    (a) Child care, of a type that provides sufficient hours of 
operation and serves appropriate ages as needed to facilitate parental 
access to education and job opportunities;
    (b) Employment training and counseling (e.g., job training, 
preparation and counseling, job development and placement, and follow-up 
assistance after job placement);
    (c) Computer skills training;
    (d) Education (e.g., remedial education, literacy training, 
completion of secondary or post-secondary education,

[[Page 434]]

and assistance in the attainment of certificates of high school 
equivalency);
    (e) Business entrepreneurial training and counseling;
    (f) Transportation, as necessary to enable any participating family 
member to receive available services or to commute to his or her place 
of employment;
    (g) Personal welfare (e.g., substance/alcohol abuse treatment and 
counseling, self-development counseling, etc.);
    (h) Supportive Health Care Services (e.g., outreach and referral 
services); and
    (i) Any other services and resources, including case management, 
that are determined to be appropriate in assisting eligible residents.



Sec. 964.310  Audit/compliance requirements.

    HAs cannot have serious unaddressed, outstanding Inspector General 
audit findings or fair housing and equal opportunity monitoring review 
findings or Field Office management review findings. In addition, the HA 
must be in compliance with civil rights laws and equal opportunity 
requirements. A HA will be considered to be in compliance if:
    (a) As a result of formal administrative proceedings, there are no 
outstanding findings of noncompliance with civil rights laws unless the 
HA is operating in compliance with a HUD-approved compliance agreement 
designed to correct the area(s) of noncompliance;
    (b) There is no adjudication of a civil rights violation in a civil 
action brought against it by a private individual, unless the HA 
demonstrates that it is operating in compliance with a court order, or 
implementing a HUD-approved resident selection and assignment plan or 
compliance agreement, designed to correct the area(s) of noncompliance;
    (c) There is no deferral of Federal funding based upon civil rights 
violations;
    (d) HUD has not deferred application processing by HUD under Title 
VI of the Civil Rights Act of 1964, the Attorney General's Guidelines 
(28 CFR 50.3) and HUD's Title VI regulations (24 CFR 1.8) and procedures 
(HUD Handbook 8040.1) [HAs only] or under Section 504 of the 
Rehabilitation Act of 1973 and HUD regulations (24 CFR 8.57) [HAs and 
IHAs];
    (e) There is no pending civil rights suit brought against the HA by 
the Department of Justice; and
    (f) There is no unresolved charge of discrimination against the HA 
issued by the Secretary under Section 810(g) of the Fair Housing Act, as 
implemented by 24 CFR 103.400.



Sec. 964.315  HAs role in activities under this part.

    The HAs shall develop a process that assures that RC/RMC 
representatives and residents are fully briefed and have an opportunity 
to comment on the proposed content of the HA's application for funding. 
The HA shall give full and fair consideration to the comments and 
concerns of the residents. The process shall include:
    (a) Informing residents of the selected developments regarding the 
preparation of the application, and providing for residents to assist in 
the development of the application.
    (b) Once a draft application has been prepared, the HA shall make a 
copy available for reading in the management office; provide copies of 
the draft to any resident organization representing the residents of the 
development(s) involved; and provide adequate opportunity for comment by 
the residents of the development and their representative organizations 
prior to making the application final.
    (c) After HUD approval of a grant, notify the duly elected resident 
organization and if none exists, notify the residents of the development 
of the approval of the grant; provide notification of the availability 
of the HUD-approved implementation schedule in the management office for 
reading; and develop a system to facilitate a regular resident role in 
all aspects of program implementation.

[[Page 435]]



Sec. 964.320  HUD Policy on training, employment, contracting and subcontracting of public housing residents.

    In accordance with Section 3 of the Housing and Urban Development 
Act of 1968 and the implementing regulations at 24 CFR part 135, HAs, 
their contractors and subcontractors shall make best efforts, consistent 
with existing Federal, State, and local laws and regulations, to give 
low and very low-income persons the training and employment 
opportunities generated by Section 3 covered assistance (as this term is 
defined in 24 CFR 135.7) and to give Section 3 business concerns the 
contracting opportunities generated by Section 3 covered assistance. 
Training, employment and contracting opportunities connected with 
programs funded under the FIC and TOP are covered by Section 3.



Sec. 964.325  Notice of funding availability.

    A Notice of Funding Availability will be published periodically in 
the Federal Register containing the amounts of funds available, funding 
criteria, where to obtain and submit applications, the deadline for the 
submissions, and further explanation of the selection criteria.



Sec. 964.330  Grant set-aside assistance.

    The Department may make available five percent (5%) of any amounts 
available in each fiscal year (subsequent to the first funding cycle) 
available to eligible HAs to supplement grants previously awarded under 
this program. These supplemental grants would be awarded if the HA 
demonstrates that the funds cannot otherwise be obtained and are needed 
to maintain adequate levels of services to residents.



Sec. 964.335  Grant agreement.

    (a) General. HUD will enter into a grant agreement with the 
recipients of a Family Investment Centers grant which defines the legal 
framework for the relationship between HUD and a HA.
    (b) Term of grant agreement. A grant will be for a term of three to 
five years depending upon the tasks undertaken, as defined under this 
subpart.



Sec. 964.340  Resident compensation.

    Residents employed to provide services or renovation or conversion 
work funded under this program shall be paid at a rate not less than the 
highest of:
    (a) The minimum wage that would be applicable to the employees under 
the Fair Labor Standards Act of 1938 (FLSA), if section 6(a)(1) of the 
FLSA applied to the resident and if the resident were not exempt under 
section 13 of the FLSA;
    (b) The State or local minimum wage for the most nearly comparable 
covered employment; or
    (c) The prevailing rate of pay for persons employed in similar 
public occupations by the same employer.



Sec. 964.345  Treatment of income.

    Program participation shall begin on the first day the resident 
enters training or begins to receive services. Furthermore, the earnings 
of and benefits to any HA resident resulting from participation in the 
FIC program shall not be considered as income in computing the 
resident's total annual income that is used to determine the resident 
rental payment during:
    (a) The period that the resident participates in the program; and
    (b) The period that begins with the commencement of employment of 
the resident in the first job acquired by the resident after completion 
of the program that is not funded by assistance under the 1937 Act, and 
ends on the earlier of:
    (1) The date the resident ceases to continue employment without good 
cause; or
    (2) The expiration of the 18-month period beginning on the date of 
commencement of employment in the first job not funded by assistance 
under this program. (See Sec. 913.106, Annual Income.) This provision 
does not apply to residents participating in the Family Self-Sufficiency 
Program who are utilizing the escrow account.



Sec. 964.350  Administrative requirements.

    The HUD Inspector General, the Comptroller General of the United 
States, or any duly authorized representative shall have access to all 
records required to be retained by this

[[Page 436]]

subpart or by any agreements with HUD for the purpose of audit or other 
examinations.
    (a) Each HA receiving a grant shall submit to HUD an annual progress 
report, participant evaluation and assessment data and other 
information, as needed, regarding the effectiveness of FIC in achieving 
self-sufficiency.
    (b) The policies, guidelines, and requirements of OMB Circular Nos. 
A-110 and A-122 are applicable with respect to the acceptance and use of 
assistance by private nonprofit organizations.



PART 965--PHA-OWNED OR LEASED PROJECTS--GENERAL PROVISIONS--Table of Contents




       Subpart A--Preemption of State Prevailing Wage Requirements

Sec.
965.101  Preemption of State prevailing wage requirements.

                 Subpart B--Required Insurance Coverage

965.201  Purpose and applicability.
965.205  Qualified PHA-owned insurance entity.
965.215  Lead-based paint liability insurance coverage.

        Subpart C--Energy Audits and Energy Conservation Measures

965.301  Purpose and applicability.
965.302  Requirements for energy audits.
965.303  [Reserved].
965.304  Order of funding.
965.305  Funding.
965.306  Energy conservation equipment and practices.
965.307  Compliance schedule.
965.308  Energy performance contracts.

   Subpart D--Individual Metering of Utilities for Existing PHA-Owned 
                                Projects

965.401  Individually metered utilities.
965.402  Benefit/cost analysis.
965.403  Funding.
965.404  Order of conversion.
965.405  Actions affecting residents.
965.406  Benefit/cost analysis for similar projects.
965.407  Reevaluations of mastermeter systems.

              Subpart E--Resident Allowances for Utilities

965.501  Applicability.
965.502  Establishment of utility allowances by PHAs.
965.503  Categories for establishment of allowances.
965.504  Period for which allowances are established.
965.505  Standards for allowances for utilities.
965.506  Surcharges for excess consumption of PHA-furnished utilities.
965.507  Review and revision of allowances.
965.508  Individual relief.

    Subpart F--Physical Condition Standards and Physical Inspection 
                              Requirements

965.601  Physical condition standards; physical inspection requirements.

                          Subpart G  [Reserved]

            Subpart H--Lead-Based Paint Poisoning Prevention

965.701  Purpose and applicability.
965.702  Definitions.
965.703  Notification.
965.704  Maintenance obligation.
965.705  Insurance coverage.
965.706  Procedures involved in EBLs.
965.707  Tenant protection.
965.708  Disposal of lead-based paint debris.
965.709  Records.
965.710  Compliance with state and local laws.
965.711  Monitoring and enforcement.

                         Subpart I--Fire Safety

965.800  Applicability.
965.805  Smoke detectors.

    Authority: 42 U.S.C. 1437, 1437a, 1437d, 1437g, and 3535(d). Subpart 
H is also issued under 42 U.S.C. 4821-4846.

    Source: 41 FR 20276, May 17, 1976, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.



       Subpart A--Preemption of State Prevailing Wage Requirements



Sec. 965.101  Preemption of State prevailing wage requirements.

    (a) A prevailing wage rate including basic hourly rate and any 
fringe benefits) determined under State law shall be inapplicable to a 
contract or PHA-performed work item for the development, maintenance, 
and modernization of a project whenever:
    (1) The contract or work item: (i) Is otherwise subject to State law 
requiring the payment of wage rates determined by a State or local 
government

[[Page 437]]

or agency to be prevailing and (ii) is assisted with funds for low-
income public housing under the U.S. Housing Act of 1937, as amended; 
and
    (2) The wage rate determined under State law to be prevailing with 
respect to an employee in any trade or position employed in the 
development, maintenance, and modernization of a project exceeds 
whichever of the following Federal wage rates is applicable:
    (i) The wage rate determined by the Secretary of Labor pursuant to 
the Davis-Bacon Act (40 U.S.C. 276a et seq.) to be prevailing in the 
locality with respect to such trade;
    (ii) An applicable apprentice wage rate based thereon specified in 
an apprenticeship program registered with the Department of Labor or a 
DOL-recognized State Apprenticeship Agency;
    (iii) An applicable trainee wage rate based thereon specified in a 
DOL-certified trainee program; or
    (iv) The wage rate determined by the Secretary of HUD to be 
prevailing in the locality with respect to such trade or position.
    (v) For the purpose of ascertaining whether a wage rate determined 
under State law for a trade or position exceeds the Federal wage rate: 
(A) Where a rate determined by the Secretary of Labor or an apprentice 
or trainee wage rate based thereon is applicable, the total wage rate 
determined under State law, including fringe benefits (if any) and basic 
hourly rate, shall be compared to the total wage rate determined by the 
Secretary of Labor or apprentice or trainee wage rate; and (B) where a 
rate determined by the Secretary of HUD is applicable, any fringe 
benefits determined under State law shall be excluded from the 
comparison with the rate determined by the Secretary of HUD.
    (b) Whenever paragraph (a)(1) of this section is applicable:
    (1) Any solicitation of bids or proposals issued by the PHA and any 
contract executed by the PHA for development, maintenance, and 
modernization of the project shall include a statement that any 
prevailing wage rate (including basic hourly rate and any fringe 
benefits) determined under State law to be prevailing with respect to an 
employee in any trade or position employed under the contract is 
inapplicable to the contract and shall not be enforced against the 
contractor or any subcontractor with respect to employees engaged under 
the contract whenever either of the following occurs:
    (i) Such nonfederal prevailing wage rate exceeds: (A) The applicable 
wage rate determined by the Secretary of Labor pursuant to the Davis-
Bacon Act (40 U.S.C. 276a et seq.) to be prevailing in the locality with 
respect to such trade; (B) an applicable apprentice wage rate based 
thereon specified in an apprenticeship program registered with the 
Department of Labor or a DOL-recognized State Apprenticeship Agency or 
(C) an applicable trainee wage rate based thereon specified in a DOL-
certified trainee program; or
    (ii) Such nonfederal prevailing wage rate, exclusive of any fringe 
benefits, exceeds the applicable wage rate determined by the Secretary 
of HUD to be prevailing in the locality with respect to such trade or 
position.

Failure to include this statement may constitute grounds for requiring 
resolicitation of the bid or proposal;
    (2) The PHA itself shall not be required to pay the basic hourly 
rate or any fringe benefits comprising a prevailing wage rate determined 
under State law and described in paragraph (a)(2) of this section to any 
of its own employees who may be engaged in the work item for 
development, maintenance, and modernization of the project; and
    (3) Neither the basic hourly rate nor any fringe benefits comprising 
a prevailing wage rate determined under State law and described in 
paragraph (a)(2) shall be enforced against the PHA or any of its 
contractors or subcontractors with respect to employees engaged in the 
contract or PHA-performed work item for development, maintenance, and 
modernization of the project.
    (c) Nothing in this section shall affect the applicability of any 
wage rate established in a collective bargaining agreement with a PHA or 
its contractors or subcontractors where such wage rate equals or exceeds 
the applicable Federal wage rate referred to in paragraph (a)(2) of this 
section, nor does this section impose a ceiling on wage

[[Page 438]]

rates a PHA or its contractors or subcontractors may choose to pay 
independent of State law.
    (d) The provisions of this section shall be applicable to work 
performed under any prime contract entered into as a result of a 
solicitation of bids or proposals issued on or after October 6, 1988 and 
to any work performed by employees of a PHA on or after October 6, 1988, 
but not to work or contracts administered by Indian Housing Authorities 
(for which, see part 905 of this chapter).

[53 FR 30217, Aug. 10, 1988, as amended at 57 FR 28358, June 24, 1992; 
61 FR 8736, Mar. 5, 1996]



                 Subpart B--Required Insurance Coverage

    Source: 58 FR 51957, Oct. 5, 1993, unless otherwise noted.



Sec. 965.201  Purpose and applicability.

    (a) Purpose. The purpose of this subpart is to implement policies 
concerning insurance coverage required under the Annual Contributions 
Contract (ACC) between the U.S. Department of Housing and Urban 
Development (HUD) and a Public Housing Agency (PHA).
    (b) Applicability. The provisions of this subpart apply to all 
housing owned by PHAs, including Turnkey III housing. However, these 
provisions do not apply to Section 23 and Section 10(c) PHA-leased 
projects or to Section 8 Housing Assistance Payments Program projects.



Sec. 965.205  Qualified PHA-owned insurance entity.

    (a) Contractual requirements for insurance coverage. The Annual 
Contributions Contract (ACC) between PHAs and the U.S. Department of 
Housing and Urban Development requires that PHAs maintain specified 
insurance coverage for property and casualty losses that would 
jeopardize the financial stability of the PHAs. The insurance coverage 
is required to be obtained under procedures that provide ``for open and 
competitive bidding.'' The HUD Appropriations Act for Fiscal Year 1992 
provided that a PHA could purchase insurance coverage without regard to 
competitive selection procedures when it purchases it from a nonprofit 
insurance entity owned and controlled by PHAs approved by HUD in 
accordance with standards established by regulation. This section 
specifies the standards.
    (b) Method of selecting insurance coverage. While 24 CFR part 85 
requires that grantees solicit full and open competition for their 
procurements, the HUD Appropriations Act for Fiscal Year 1992 provides 
an exception to this requirement. PHAs are authorized to obtain any line 
of insurance from a nonprofit insurance entity that is owned and 
controlled by PHAs and approved by HUD in accordance with this section, 
without regard to competitive selection procedures. Procurement of 
insurance from other entities is subject to competitive selection 
procedures.
    (c) Approval of a nonprofit insurance entity. Under the following 
conditions, HUD will approve a nonprofit self-funded insurance entity 
created by PHAs that limits participation to PHAs (and to nonprofit 
entities associated with PHAs that engage in activities or perform 
functions only for housing authorities or housing authority residents):
    (1) An insurance company (including a risk retention group). (i) The 
insurance company is licensed or authorized to do business in the State 
by the State Insurance Commissioner and has submitted documentation of 
this approval to HUD; and
    (ii) The insurance company has not been suspended from providing 
insurance coverage in the State or been suspended or debarred from doing 
business with the federal government. The insurance company is obligated 
to send to HUD a copy of any action taken by the authorizing official to 
withdraw the license or authorization.
    (2) An entity not organized as an insurance company. (i) The entity 
has competent underwriting staff (hired directly or engaged by contract 
with a third party), as evidenced by professionals with an average of at 
least five years of experience in large risk (exceeding $100,000 in 
annual premiums) commercial underwriting or at least

[[Page 439]]

five years of experience in the underwriting of risks for public entity 
risk pools. This standard may be satisfied by submission of evidence of 
competent underwriting staff, including copies of resumes of 
underwriting staff for the entity;
    (ii) The entity has efficient and qualified management (hired 
directly or engaged by contract with a third party), as evidenced by the 
report submitted to HUD in accordance with paragraph (d)(3) of this 
section and by having at least one senior staff person who has a minimum 
of five years of experience:
    (A) At the management level of Vice President of a property/casualty 
insurance entity;
    (B) As a senior branch manager of a branch office with annual 
property/casualty premiums exceeding $5 million; or
    (C) As a senior manager of a public entity risk pool. Documentation 
for this standard must include copies of resumes of key management 
personnel responsible for oversight and for the day-to-day operation of 
the entity;
    (iii) The entity maintains internal controls and cost containment 
measures, as evidenced by an annual budget;
    (iv) The entity maintains sound investments consistent with the 
State insurance commissioner's requirements for licensed insurance 
companies, or other State statutory requirements controlling investments 
of public entities, in the State in which the entity is organized, 
investing only in assets that qualify as ``admitted assets'';
    (v) The entity maintains adequate surplus and reserves for 
undischarged liabilities of all types, as evidenced by a current audited 
financial statement and an actuarial review conducted in accordance with 
paragraph (d) of this section; and
    (vi) Upon application for initial approval, the entity has proper 
organizational documentation, as evidenced by copies of the articles of 
incorporation, by-laws, business plans, copies of contracts with third 
party administrators, and an opinion from legal counsel that 
establishment of the entity conforms with all legal requirements under 
Federal and State law. Any material changes made to these documents 
after initial approval must be submitted for review and approval before 
becoming effective.
    (d) Professional evaluations of performance. Audits and actuarial 
reviews are required to be prepared and submitted annually to the HUD 
Office of Public and Indian Housing, for review and appropriate action, 
by nonprofit insurance entities that are not insurance companies 
approved under paragraph (c)(1) of this section. In addition, an 
evaluation of other management factors is required to be performed by an 
insurance professional every three years. For fiscal years ending on or 
after December 31, 1993, the initial audit, actuarial review, and 
insurance management review required for a nonprofit insurance entity 
must be submitted to HUD within 90 days after the entity's fiscal year.
    (1) The annual financial statement prepared in accordance with 
generally accepted accounting principles (including any supplementary 
data required under GASB 10) is to be audited by an independent auditor 
(see 24 CFR part 44), in accordance with generally accepted auditing 
standards. The independent auditor shall express an opinion on whether 
the entity's financial statement is presented fairly in accordance with 
generally accepted accounting principles. A copy of this audit must be 
submitted to HUD.
    (2) The actuarial review must be done consistent with requirements 
established by the National Association of Insurance Commissioners and 
must be conducted by an independent property/casualty actuary who is an 
Associate or Fellow of a recognized professional actuarial organization, 
such as the Casualty Actuary Society. The report issued, a copy of which 
must be submitted to HUD, must include an opinion on any over or under 
reserving and the adequacy of the reserves maintained for the open 
claims and for incurred but unreported claims.
    (3) A review must be conducted, a copy of which must be submitted to

[[Page 440]]

HUD, by an independent insurance consulting firm that has at least one 
person on staff who has received the professional designation of 
chartered property/casualty underwriter (CPCU), associate in risk 
management (ARM), or associate in claims (AIC), of the following:
    (i) Efficiency of any Third Party Administrator;
    (ii) Timeliness of the claim payments and reserving practices; and
    (iii) The adequacy of reinsurance coverage.
    (e) Revocation of approval of a nonprofit insurance entity. HUD may 
revoke its approval of a nonprofit insurance entity under this section 
when it no longer meets the requirements of this section. The nonprofit 
insurance entity will be notified in writing of: the proposed revocation 
of its approval, the reasons for the action, and the manner and time in 
which to request a hearing to challenge the determination. The procedure 
to be followed is specified in 24 CFR part 26, subpart A.

[41 FR 20276, May 17, 1976, as amended at 61 FR 7969, Feb. 29, 1996; 61 
FR 50219, Sept. 24, 1996]



Sec. 965.215  Lead-based paint liability insurance coverage.

    (a) General. The purpose of this section is to specify what HUD 
deems reasonable insurance coverage with respect to the hazards 
associated with testing for and abatement of lead-based paint that the 
PHA undertakes, in accordance with the PHA's ACC with HUD. The insurance 
coverage does not relieve the PHA of its responsibility for assuring 
that lead-based paint testing and abatement activities are conducted in 
a responsible manner.
    (b) Insurance coverage requirements. When the PHA undertakes lead-
based paint testing and abatement, it must assure that it has reasonable 
insurance coverage for itself for potential personal injury liability 
associated with those activities. If the work is being done by PHA 
employees, the PHA must obtain a liability insurance policy directly to 
protect the PHA. If the work is being done by a contractor, the PHA may 
obtain, from the insurer of the contractor performing this type of work 
in accordance with a contract, a certificate of insurance providing 
evidence of such insurance and naming the PHA as an additional insured; 
or it may obtain such insurance directly. Insurance must remain in 
effect during the entire period of testing and abatement and must comply 
with the following requirements:
    (1) Named insured. If purchased by the PHA, the policy shall name 
the PHA as insured. If purchased by an independent contractor, the 
policy shall name the contractor as insured and the PHA as an additional 
insured, in connection with performing work under the PHA's lead-based 
paint testing and abatement contract. If the PHA has executed a contract 
with a Resident Management Corporation (RMC) to manage a building/
project on behalf of the PHA, the RMC shall be an additional insured 
under the policy in connection with the lead-based paint testing and 
abatement contract. (The duties of the RMC are similar to those of a 
real estate management firm.)
    (2) Coverage limits. The minimum limit of liability shall be 
$500,000 per occurrence written, with a combined single limit for bodily 
injury and property damage.
    (3) Deductible. A deductible, if any, may not exceed $5,000 per 
occurrence.
    (4) Supplementary payments. Payments for such supplementary costs as 
the costs of defending against a claim must be in addition to, and not 
as a reduction of, the limit of liability. However, it will be 
permissible for the policy to have a limit on the amount payable for 
defense costs. If a limit is applicable, it must not be less than 
$250,000 per claim prior to such costs being deducted from the limit of 
liability.
    (5) Occurrence form policy. The form used must be an ``occurrence'' 
form, or a ``claims made'' form that contains an extended reporting 
period of at least five years. (Under an occurrence form, coverage 
applies to any loss regardless of when the claim is made.)
    (6) Aggregate limit. If the policy contains an aggregate limit, the 
minimum acceptable limit is $1,000,000.
    (7) Cancellation. In the event of cancellation, at least 30 days' 
advance notice is to be given to the insured and any additional insured.

[[Page 441]]

    (c) Exception to requirements. Insurance already purchased by the 
PHA or contractor and in force on the date this rule is effective which 
provides coverage for the hazards involved in testing for and abatement 
of lead-based paint, shall be considered as meeting the requirements of 
this rule until the expiration of the policy. This rule is not 
applicable to architects, engineers, or consultants who do not 
physically perform lead-based paint testing and abatement work.
    (d) Insurance for the existence hazard. A PHA may also purchase 
special liability insurance against the existence hazard of lead-based 
paint, although it is not a required coverage. A PHA may purchase this 
coverage if, in the opinion of the PHA, the policy meets the PHA's 
requirements, the premium is reasonable, and the policy is obtained in 
accordance with applicable procurement standards. (See 24 CFR part 85 
and Secs. 965.205.) If this coverage is purchased, the premium must be 
paid from funds available under the Performance Funding System or from 
reserves.

[59 FR 31930, June 21, 1994]



        Subpart C--Energy Audits and Energy Conservation Measures

    Source: 61 FR 7969, Feb. 29, 1996, unless otherwise noted.



Sec. 965.301  Purpose and applicability.

    (a) Purpose. The purpose of this subpart C is to implement HUD 
policies in support of national energy conservation goals by requiring 
PHAs to conduct energy audits and undertake certain cost-effective 
energy conservation measures.
    (b) Applicability. The provisions of this subpart apply to all PHAs 
with PHA-owned housing, but they do not apply to Indian Housing 
Authorities. (For similar provisions applicable to Indian housing, see 
part 950 of this chapter.) No PHA-leased project or Section 8 Housing 
Assistance Payments Program project, including a PHA-owned Section 8 
project, is covered by this subpart.



Sec. 965.302  Requirements for energy audits.

    All PHAs shall complete an energy audit for each PHA-owned project 
under management, not less than once every five years. Standards for 
energy audits shall be equivalent to State standards for energy audits. 
Energy audits shall analyze all of the energy conservation measures, and 
the payback period for these measures, that are pertinent to the type of 
buildings and equipment operated by the PHA.



Sec. 965.303  [Reserved]



Sec. 965.304  Order of funding.

    Within the funds available to a PHA, energy conservation measures 
should be accomplished with the shortest pay-back periods funded first. 
A PHA may make adjustments to this funding order because of insufficient 
funds to accomplish high-cost energy conservation measures (ECM) or 
where an ECM with a longer pay-back period can be more efficiently 
installed in conjunction with other planned modernization. A PHA may not 
install individual utility meters that measure the energy or fuel used 
for space heating in dwelling units that need substantial 
weatherization, when installation of meters would result in economic 
hardship for residents. In these cases, the ECMs related to 
weatherization shall be accomplished before the installation of 
individual utility meters.



Sec. 965.305  Funding.

    (a) The cost of accomplishing cost-effective energy conservation 
measures, including the cost of performing energy audits, shall be 
funded from operating funds of the PHA to the extent feasible. When 
sufficient operating funds are not available for this purpose, such 
costs are eligible for inclusion in a modernization program, for funding 
from any available development funds in the case of projects still in 
development, or for other available funds that HUD may designate to be 
used for energy conservation.
    (b) If a PHA finances energy conservation measures from sources 
other than modernization or operating reserves, such as a loan from a 
utility entity or a guaranteed savings agreement

[[Page 442]]

with a private energy service company, HUD may agree to provide 
adjustments in its calculation of the PHA's operating subsidy 
eligibility under the PFS for the project and utility involved based on 
a determination that payments can be funded from the reasonably 
anticipated energy cost savings (See Sec. 990.107(g) of this chapter).



Sec. 965.306  Energy conservation equipment and practices.

    In purchasing original or, when needed, replacement equipment, PHAs 
shall acquire only equipment that meets or exceeds the minimum 
efficiency requirements established by the U.S. Department of Energy. In 
the operation of their facilities, PHAs shall follow operating practices 
directed to maximum energy conservation.



Sec. 965.307  Compliance schedule.

    All energy conservation measures determined by energy audits to be 
cost effective shall be accomplished as funds are available.



Sec. 965.308  Energy performance contracts.

    (a) Method of procurement. Energy performance contracting shall be 
conducted using one of the following methods of procurement:
    (1) Competitive proposals (see 24 CFR 85.36(d)(3)). In identifying 
the evaluation factors and their relative importance, as required by 
Sec. 85.36(d)(3)(i) of this title, the solicitation shall state that 
technical factors are significantly more important than price (of the 
energy audit); or
    (2) If the services are available only from a single source, 
noncompetitive proposals (see 24 CFR 85.36(d)(4)(i)(A)).
    (b) HUD Review. Solicitations for energy performance contracting 
shall be submitted to the HUD Field Office for review and approval prior 
to issuance. Energy performance contracts shall be submitted to the HUD 
Field Office for review and approval before award.



   Subpart D--Individual Metering of Utilities for Existing PHA-Owned 
                                Projects

    Source: 61 FR 7970, Feb. 29, 1996, unless otherwise noted.



Sec. 965.401  Individually metered utilities.

    (a) All utility service shall be individually metered to residents, 
either through provision of retail service to the residents by the 
utility supplier or through the use of checkmeters, unless:
    (1) Individual metering is impractical, such as in the case of a 
central heating system in an apartment building;
    (2) Change from a mastermetering system to individual meters would 
not be financially justified based upon a benefit/cost analysis; or
    (3) Checkmetering is not permissible under State or local law, or 
under the policies of the particular utility supplier or public service 
commission.
    (b) If checkmetering is not permissible, retail service shall be 
considered. Where checkmetering is permissible, the type of individual 
metering offering the most savings to the PHA shall be selected.



Sec. 965.402  Benefit/cost analysis.

    (a) A benefit/cost analysis shall be made to determine whether a 
change from a mastermetering system to individual meters will be cost 
effective, except as otherwise provided in Sec. 965.405.
    (b) Proposed installation of checkmeters shall be justified on the 
basis that the cost of debt service (interest and amortization) of the 
estimated installation costs plus the operating costs of the checkmeters 
will be more than offset by reduction in future utilities expenditures 
to the PHA under the mastermeter system.
    (c) Proposed conversion to retail service shall be justified on the 
basis of net savings to the PHA. This determination involves making a 
comparison between the reduction in utility expense obtained through 
eliminating the expense to the PHA for PHA-supplied utilities and the 
resultant allowance for resident-supplied utilities, based on the cost 
of utility service to the residents after conversion.



Sec. 965.403  Funding.

    The cost to change mastermeter systems to individual metering of 
resident consumption, including the costs of

[[Page 443]]

benefit/cost analysis and complete installation of checkmeters, shall be 
funded from operating funds of the PHA to the extent feasible. When 
sufficient operating funds are not available for this purpose, such 
costs are eligible for inclusion in a modernization project or for 
funding from any available development funds.



Sec. 965.404  Order of conversion.

    Conversions to individually metered utility service shall be 
accomplished in the following order when a PHA has projects of two or 
more of the designated categories, unless the PHA has a justifiable 
reason to do otherwise, which shall be documented in its files.
    (a) In projects for which retail service is provided by the utility 
supplier and the PHA is paying all the individual utility bills, no 
benefit/cost analysis is necessary, and residents shall be billed 
directly after the PHA adopts revised payment schedules providing 
appropriate allowances for resident-supplied utilities.
    (b) In projects for which checkmeters have been installed but are 
not being utilized as the basis for determining utility charges to the 
residents, no benefit/cost analysis is necessary. The checkmeters shall 
be used as the basis for utility charges, and residents shall be 
surcharged for excess utility use.
    (c) Projects for which meter loops have been installed for 
utilization of checkmeters shall be analyzed both for the installation 
of checkmeters and for conversion to retail service.
    (d) Low- or medium-rise family units with a mastermeter system 
should be analyzed for both checkmetering and conversion to retail 
service, because of their large potential for energy savings.
    (e) Low- or medium-rise housing for the elderly should next be 
analyzed for both checkmetering and conversion to retail service, since 
the potential for energy saving is less than for family units.
    (f) Electric service under mastermeters for high-rise buildings, 
including projects for the elderly, should be analyzed for both use of 
retail service and of checkmeters.



Sec. 965.405  Actions affecting residents.

    (a) Before making any conversion to retail service, the PHA shall 
adopt revised payment schedules, providing appropriate allowances for 
the resident-supplied utilities resulting from the conversion.
    (b) Before implementing any modifications to utility services 
arrangements with the residents or charges with respect thereto, the PHA 
shall make the requisite changes in resident dwelling leases in 
accordance with 24 CFR part 966.
    (c) PHAs must work closely with resident organizations, to the 
extent practicable, in making plans for conversion of utility service to 
individual metering, explaining the national policy objectives of energy 
conservation, the changes in charges and rent structure that will 
result, and the goals of achieving an equitable structure that will be 
advantageous to residents who conserve energy.
    (d) A transition period of at least six months shall be provided in 
the case of initiation of checkmeters, during which residents will be 
advised of the charges but during which no surcharge will be made based 
on the readings. This trial period will afford residents ample notice of 
the effects the checkmetering system will have on their individual 
utility charges and also afford a test period for the adequacy of the 
utility allowances established.
    (e) During and after the transition period, PHAs shall advise and 
assist residents with high utility consumption on methods for reducing 
their usage. This advice and assistance may include counseling, 
installation of new energy conserving equipment or appliances, and 
corrective maintenance.



Sec. 965.406  Benefit/cost analysis for similar projects.

    PHAs with more than one project of similar design and utilities 
service may prepare a benefit/cost analysis for a representative 
project. A finding that a change in metering is not cost effective for 
the representative project is sufficient reason for the PHA not to 
perform a benefit/cost analysis on the remaining similar projects.

[[Page 444]]



Sec. 965.407  Reevaluations of mastermeter systems.

    Because of changes in the cost of utility services and the periodic 
changes in utility regulations, PHAs with mastermeter systems are 
required to reevaluate mastermeter systems without checkmeters by making 
benefit/cost analyses at least every 5 years. These analyses may be 
omitted under the conditions specified in Sec. 965.406.



              Subpart E--Resident Allowances for Utilities

    Source: 61 FR 7971, Feb. 29, 1996, unless otherwise noted.



Sec. 965.501  Applicability.

    (a) This subpart E applies to public housing, including the Turnkey 
III Homeownership Opportunities program. This subpart E also applies to 
units assisted under sections 10(c) and 23 of the U. S. Housing Act of 
1937 (42 U.S.C. 1437 et seq.) as in effect before amendment by the 
Housing and Community Development Act of 1974 (12 U.S.C. 1706e) and to 
which 24 CFR part 900 is not applicable. This subpart E does not apply 
to Indian housing projects (see 24 CFR part 950).
    (b) In rental units for which utilities are furnished by the PHA but 
there are no checkmeters to measure the actual utilities consumption of 
the individual units, residents shall be subject to charges for 
consumption by resident-owned major appliances, or for optional 
functions of PHA-furnished equipment, in accordance with Sec. 965.502(e) 
and 965.506(b), but no utility allowance will be established.



Sec. 965.502  Establishment of utility allowances by PHAs.

    (a) PHAs shall establish allowances for PHA-furnished utilities for 
all checkmetered utilities and allowances for resident-purchased 
utilities for all utilities purchased directly by residents from the 
utilities suppliers.
    (b) The PHA shall maintain a record that documents the basis on 
which allowances and scheduled surcharges, and revisions thereof, are 
established and revised. Such record shall be available for inspection 
by residents.
    (c) The PHA shall give notice to all residents of proposed 
allowances, scheduled surcharges, and revisions thereof. Such notice 
shall be given, in the manner provided in the lease or homebuyer 
agreement, not less than 60 days before the proposed effective date of 
the allowances or scheduled surcharges or revisions; shall describe with 
reasonable particularity the basis for determination of the allowances, 
scheduled surcharges, or revisions, including a statement of the 
specific items of equipment and function whose utility consumption 
requirements were included in determining the amounts of the allowances 
or scheduled surcharges; shall notify residents of the place where the 
PHA's record maintained in accordance with paragraph (b) of this section 
is available for inspection; and shall provide all residents an 
opportunity to submit written comments during a period expiring not less 
than 30 days before the proposed effective date of the allowances or 
scheduled surcharges or revisions. Such written comments shall be 
retained by the PHA and shall be available for inspection by residents.
    (d) Schedules of allowances and scheduled surcharges shall not be 
subject to approval by HUD before becoming effective, but will be 
reviewed in the course of audits or reviews of PHA operations.
    (e) The PHA's determinations of allowances, scheduled surcharges, 
and revisions thereof shall be final and valid unless found to be 
arbitrary, capricious, an abuse of discretion, or otherwise not in 
accordance with the law.



Sec. 965.503  Categories for establishment of allowances.

    Separate allowances shall be established for each utility and for 
each category of dwelling units determined by the PHA to be reasonably 
comparable as to factors affecting utility usage.



Sec. 965.504  Period for which allowances are established.

    (a) PHA-furnished utilities. Allowances will normally be established 
on a quarterly basis; however, residents may be

[[Page 445]]

surcharged on a monthly basis. The allowances established may provide 
for seasonal variations.
    (b) Resident-purchased utilities. Monthly allowances shall be 
established. The allowances established may provide for seasonal 
variations.



Sec. 965.505  Standards for allowances for utilities.

    (a) The objective of a PHA in designing methods of establishing 
utility allowances for each dwelling unit category and unit size shall 
be to approximate a reasonable consumption of utilities by an energy-
conservative household of modest circumstances consistent with the 
requirements of a safe, sanitary, and healthful living environment.
    (b) Allowances for both PHA-furnished and resident-purchased 
utilities shall be designed to include such reasonable consumption for 
major equipment or for utility functions furnished by the PHA for all 
residents (e.g., heating furnace, hot water heater), for essential 
equipment whether or not furnished by the PHA (e.g., range and 
refrigerator), and for minor items of equipment (such as toasters and 
radios) furnished by residents.
    (c) The complexity and elaborateness of the methods chosen by the 
PHA, in its discretion, to achieve the foregoing objective will depend 
upon the nature of the housing stock, data available to the PHA and the 
extent of the administrative resources reasonably available to the PHA 
to be devoted to the collection of such data, the formulation of methods 
of calculation, and actual calculation and monitoring of the allowances.
    (d) In establishing allowances, the PHA shall take into account 
relevant factors affecting consumption requirements, including:
    (1) The equipment and functions intended to be covered by the 
allowance for which the utility will be used. For instance, natural gas 
may be used for cooking, heating domestic water, or space heating, or 
any combination of the three;
    (2) The climatic location of the housing projects;
    (3) The size of the dwelling units and the number of occupants per 
dwelling unit;
    (4) Type of construction and design of the housing project;
    (5) The energy efficiency of PHA-supplied appliances and equipment;
    (6) The utility consumption requirements of appliances and equipment 
whose reasonable consumption is intended to be covered by the total 
resident payment;
    (7) The physical condition, including insulation and weatherization, 
of the housing project;
    (8) Temperature levels intended to be maintained in the unit during 
the day and at night, and in cold and warm weather; and
    (9) Temperature of domestic hot water.
    (e) If a PHA installs air conditioning, it shall provide, to the 
maximum extent economically feasible, systems that give residents the 
option of choosing to use air conditioning in their units. The design of 
systems that offer each resident the option to choose air conditioning 
shall include retail meters or checkmeters, and residents shall pay for 
the energy used in its operation. For systems that offer residents the 
option to choose air conditioning, the PHA shall not include air 
conditioning in the utility allowances. For systems that offer residents 
the option to choose air conditioning but cannot be checkmetered, 
residents are to be surcharged in accordance with Sec. 965.506. If an 
air conditioning system does not provide for resident option, residents 
are not to be charged, and these systems should be avoided whenever 
possible.



Sec. 965.506  Surcharges for excess consumption of PHA-furnished utilities.

    (a) For dwelling units subject to allowances for PHA-furnished 
utilities where checkmeters have been installed, the PHA shall establish 
surcharges for utility consumption in excess of the allowances. 
Surcharges may be computed on a straight per unit of purchase basis 
(e.g., cents per kilowatt hour of electricity) or for stated blocks of 
excess consumption, and shall be based on the PHA's average utility

[[Page 446]]

rate. The basis for calculating such surcharges shall be described in 
the PHA's schedule of allowances. Changes in the dollar amounts of 
surcharges based directly on changes in the PHA's average utility rate 
shall not be subject to the advance notice requirements of this section.
    (b) For dwelling units served by PHA-furnished utilities where 
checkmeters have not been installed, the PHA shall establish schedules 
of surcharges indicating additional dollar amounts residents will be 
required to pay by reason of estimated utility consumption attributable 
to resident-owned major appliances or to optional functions of PHA-
furnished equipment. Such surcharge schedules shall state the resident-
owned equipment (or functions of PHA-furnished equipment) for which 
surcharges shall be made and the amounts of such charges, which shall be 
based on the cost to the PHA of the utility consumption estimated to be 
attributable to reasonable usage of such equipment.



Sec. 965.507  Review and revision of allowances.

    (a) Annual review. The PHA shall review at least annually the basis 
on which utility allowances have been established and, if reasonably 
required in order to continue adherence to the standards stated in 
Sec. 965.505, shall establish revised allowances. The review shall 
include all changes in circumstances (including completion of 
modernization and/or other energy conservation measures implemented by 
the PHA) indicating probability of a significant change in reasonable 
consumption requirements and changes in utility rates.
    (b) Revision as a result of rate changes. The PHA may revise its 
allowances for resident-purchased utilities between annual reviews if 
there is a rate change (including fuel adjustments) and shall be 
required to do so if such change, by itself or together with prior rate 
changes not adjusted for, results in a change of 10 percent or more from 
the rates on which such allowances were based. Adjustments to resident 
payments as a result of such changes shall be retroactive to the first 
day of the month following the month in which the last rate change taken 
into account in such revision became effective. Such rate changes shall 
not be subject to the 60 day notice requirement of Sec. 965.502(c).



Sec. 965.508  Individual relief.

    Requests for relief from surcharges for excess consumption of PHA-
purchased utilities, or from payment of utility supplier billings in 
excess of the allowances for resident-purchased utilities, may be 
granted by the PHA on reasonable grounds, such as special needs of 
elderly, ill or disabled residents, or special factors affecting utility 
usage not within the control of the resident, as the PHA shall deem 
appropriate. The PHA's criteria for granting such relief, and procedures 
for requesting such relief, shall be adopted at the time the PHA adopts 
the methods and procedures for determining utility allowances. Notice of 
the availability of such procedures (including identification of the PHA 
representative with whom initial contact may be made by residents), and 
the PHA's criteria for granting such relief, shall be included in each 
notice to residents given in accordance with Sec. 965.502(c) and in the 
information given to new residents upon admission.



    Subpart F--Physical Condition Standards and Physical Inspection 
                              Requirements



Sec. 965.601  Physical condition standards; physical inspection requirements.

    Housing owned or leased by a PHA, and public housing owned by 
another entity approved by HUD, must be maintained in accordance with 
the physical condition standards in 24 CFR part 5, subpart G. For each 
PHA, HUD will perform an independent physical inspection of a 
statistically valid sample of such housing based upon the physical 
condition standards in 24 CFR part 5, subpart G.

[63 FR 46580, Sept. 1, 1998]

[[Page 447]]



                          Subpart G  [Reserved]



            Subpart H--Lead-Based Paint Poisoning Prevention

    Source: 51 FR 27789, Aug. 1, 1986, unless otherwise noted.



Sec. 965.701  Purpose and applicability.

    The purpose of this subpart is to implement the provisions of 
section 302 of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 
4821-4846) by establishing procedures to eliminate as far as practicable 
the immediate hazards from the presence of paint that may contain lead 
in PHA-owned housing assisted under the United States Housing Act of 
1937. This subpart applies to PHA-owned lower-income public housing 
projects, including Turnkey III, conveyed Lanham Act and Public Works 
Administration projects, and to section 23 Leased Housing Bond-Financed 
projects. This subpart does not apply to projects under the Section 23 
and Section 8 Housing Assistance Payments programs, or to Indian 
Housing. This subpart is promulgated pursuant to the authorization 
granted in 24 CFR 35.24(b)(4) and supersedes, with respect to all 
housing to which it applies, the requirements prescribed by subpart C of 
24 CFR part 35.

[57 FR 28358, June 24, 1992]



Sec. 965.702  Definitions.

    Applicable surface. All intact and nonintact interior and exterior 
painted surfaces of a residential structure.
    Defective lead-based paint surface. Paint on applicable surfaces 
having a lead content of greater than or equal to 1 mg/cm\2\, that is 
cracking, scaling, chipping, peeling or loose.
    Defective paint surface. Paint on applicable surfaces that is 
cracking, scaling, chipping, peeling or loose.
    Elevated blood lead level or EBL. Excessive absorption of lead, that 
is, a confirmed concentration of lead in whole blood of 25 ug/dl 
(micrograms of lead per deciliter of whole blood) or greater.
    Family project. Any project assisted under section 9 of the U.S. 
Housing Act of 1937 which is not an elderly project. For this purpose, 
an elderly project is one which was designated for occupancy by the 
elderly at its inception (and has retained that character) or, although 
not so designated, for which the PHA gives preference in tenant 
selection (with HUD approval) for all units in the project to elderly 
families. A building within a mixed-use project which meets these 
qualifications shall, for purposes of this subpart, be excluded from any 
family project. Zero bedroom units, for purposes of this subpart, are 
excluded from any family project.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1.0 mg/
cm\2\, or .5% by weight.

[51 FR 27789, Aug. 1, 1986, as amended at 53 FR 20802, June 6, 1988; 56 
FR 15174, Apr. 15, 1991]



Sec. 965.703  Notification.

    (a) General LBP Hazard Notification for all Residents. Tenants in 
PHA-owned low income public housing projects constructed prior to 1978 
shall be notified:
    (1) That the property was constructed prior to 1978;
    (2) That the property may contain lead-based paint;
    (3) Of the hazards of lead-based paint;
    (4) Of the symptoms and treatment of lead-based paint poisoning;
    (5) Of the precautions to be taken to avoid lead-based paint 
poisoning (including maintenance and removal techniques for eliminating 
such hazards); and
    (6) Of the advisability and availability of blood lead level 
screening for children under seven years of age.

Tenants shall be advised to notify the PHA if an EBL condition is 
identified.
    (b) Lead-Based Paint Hazard Notification for Applicants and 
Prospective Purchasers. A notice of the dangers of lead-based paint 
poisoning and a notice of the advisability and availability of blood 
lead level screening for children under seven years of age shall be 
provided to every applicant family at the time of application. The 
applicant family shall be advised, if screening is utilized and an EBL 
condition identified, to notify the PHA.
    (c) Notification of Positive Lead-Based Paint Test Results. In the 
event that a

[[Page 448]]

PHA-owned low income public housing project constructed or substantially 
rehabilitated prior to 1978 is tested and the test results using an x-
ray fluorescence analyzer (XRF) are identified as having a lead content 
greater than or equal to 1.0 mg/cm2, or is tested by 
laboratory chemical analysis (atomic absorption spectroscopy (AAS)) and 
found to contain .5% lead by weight or more, the PHA shall provide 
written notification of such result to the current residents, 
applicants, prospective purchasers, and homebuyers of such units in a 
timely manner. The PHA shall retain written records of the notification.

[51 FR 27789, Aug. 1, 1986, as amended at 56 FR 15174, Apr. 15, 1991]



Sec. 965.704  Maintenance obligation.

    In family projects constructed prior to 1978 or substantially 
rehabilitated prior to 1978, the PHA shall visually inspect units for 
defective paint surfaces as part of routine periodic unit inspections. 
If defective paint surfaces are found, covering or removal of the 
defective paint spots as described in Sec. 35.24(b)(2)(ii) of this title 
shall be required. Treatment shall be completed within a reasonable 
period of time.

[53 FR 20802, June 6, 1988]



Sec. 965.705  Insurance coverage.

    For the requirements concerning a PHA's obligation to obtain 
reasonable insurance coverage with respect to the hazards associated 
with testing for and abatement of lead-based paint, see Sec. 965.215.

[59 FR 31930, June 21, 1994]



Sec. 965.706  Procedures involving EBLs.

    (a) Procedures where a current resident child has an EBL. When a 
child residing in a PHA-owned low income family project has been 
identified as having an EBL, the PHA shall: (1) Test all surfaces in the 
unit and applicable surfaces of the PHA-owned or operated child care 
facility if used by the EBL child for lead-based paint and abate the 
surfaces found to contain lead-based paint. Testing of exteriors and 
interior common areas (including non-dwelling PHA facilities which are 
commonly used by the EBL child under seven years of age) will be done as 
considered necessary and appropriate by the PHA and HUD; or (2) assign 
the family to a post-1978 or previously tested unit which was found to 
be free of lead-based paint hazards or in which such hazards have been 
abated as described in this section.
    (b) Procedures where a non-resident child using a PHA-owned or 
operated child care facility has an EBL. When a non-resident child using 
a PHA-owned or operated child facility has been identified as having an 
EBL, the PHA shall test all applicable surfaces of the PHA-owned or 
operated child care facilities and abate the surfaces found to contain 
lead-based paint.
    (c) Testing. Testing shall be completed within five days after 
notification to the PHA of the identification of the EBL child. It is 
strongly recommended, but not required, that PHAs use the testing 
methods outlined in the Lead-Based Paint: Interim Guidelines for Hazard 
Identification and Abatement in Public and Indian Housing (Lead-Based 
Paint Interim Guidelines) for the Comprehensive Improvement Assistance 
Program (CIAP), and other Public and Indian Housing programs, and issued 
and published at 55 FR 14555, April 18, 1990, part II, with an amendment 
of chapter 8 and typographical clarifications at 55 FR 39874, as 
periodically amended or updated, and other future official departmental 
issuances related to lead-based paint. A qualified inspector or 
laboratory shall certify in writing the precise results of the 
inspection. Testing services available from State, local or tribal 
health or housing agencies or an organization recognized by HUD shall be 
utilized to the extent available. If the results equal or exceed a level 
of 1 mg/cm2 or .5% by weight, the results shall be provided 
to the tenant or the family of the EBL child using PHA owned or operated 
child care facilities. Testing will be considered an eligible 
modernization cost under part 968 only upon PHA certification that 
testing services are otherwise unavailable.
    (d) Hazard abatement requirements--(1) Abatement actions. Hazard 
abatement actions shall be carried out in accordance with the following 
requirements and order of priority:

[[Page 449]]

    (i) Unit housing a child with an EBL. Any surface in the unit found 
to contain lead-based paint shall be treated. Where full treatment of a 
unit housing an EBL child cannot be completed within five days after 
positive testing, emergency intervention actions (including removing 
defective lead-based paint and scrubbing surfaces after such removal 
with strong detergents) shall be taken within such time. Full treatment 
of a unit housing an EBL child shall be completed within 14 days after 
positive testing, unless funding sources are not immediately available. 
In such event, the PHA may use its operating reserves and, when 
necessary, may request reimbursement from the current fiscal year CIAP 
funds, or request the reprogramming of previously approved CIAP funds.
    (ii) PHA owned or operated child care facilities used by a child 
with an EBL. Any applicable surface found to contain lead-based paint 
shall be treated.
    (iii) Interior common areas (including non-dwelling PHA facilities 
which are commonly used by EBL children under seven years of age) and 
exterior surfaces of projects in which children with EBLs reside. 
Abatement shall be provided to all surfaces containing lead-based paint.
    (2) Abatement methods. PHAs shall select a safe and cost effective 
treatment for surfaces found to contain lead-based paint, including 
clean-up procedures, and are strongly encouraged, but not required, to 
follow those methods specified in the Lead-Based Paint: Interim 
Guidelines for Hazard Identification and Abatement in Public and Indian 
Housing (Lead-Based Paint Interim Guidelines), and other future official 
departmental issuances relating to lead-based paint abatement in effect 
at the time the surfaces are to be abated. Certain prohibited abatement 
methods are set forth in 24 CFR 35.24(b)(2)(ii). Final inspection and 
certification of the treatment shall be made by a qualified inspector, 
industrial hygienist, or local health official based on clearance levels 
specified in HUD departmental issuances and guidelines.

[53 FR 20803, June 6, 1988, as amended at 56 FR 15175, Apr. 15, 1991]



Sec. 965.707  Tenant protection.

    The PHA shall take appropriate action in order to protect tenants, 
including children with EBLs, other children, and pregnant women, from 
hazards associated with abatement procedures, and is strongly 
encouraged, but not required, to take actions more fully outlined in the 
Lead-Based Paint: Interim Guidelines for Hazard Identification and 
Abatement in Public and Indian Housing (Lead-Based Paint Interim 
Guidelines) and other future official Departmental issuances related to 
tenant protection in effect at the time the abatement procedure is 
undertaken. Tenant relocation may be accomplished with CIAP assistance.

[56 FR 15175, Apr. 15, 1991]



Sec. 965.708  Disposal of lead-based paint debris.

    The PHA shall dispose of lead-based paint debris in accordance with 
applicable local state or Federal requirements. (See e.g., 40 CFR parts 
260 through 271.) Additional information covering disposal practices is 
contained in the Lead-Based Paint: Interim Guidelines for Hazard 
Identification and Abatement in Public and Indian Housing (Lead-Based 
Paint Interim Guidelines) and other future official departmental 
issuances relating to lead-based paint. In any event, EPA has primary 
responsibility for waste disposal regulations and procedures.

[53 FR 20803, June 6, 1988, as amended at 56 FR 15175, Apr. 15, 1991]



Sec. 965.709  Records.

    The PHA shall maintain records on which units, common areas, 
exteriors and PHA child care facilities have been tested, results of the 
testing, and the condition of painted surfaces by location in or on the 
unit, interior common area, exterior surface or PHA child care facility. 
The PHA shall report information regarding such testing, in accordance 
with such requirements as shall be prescribed by HUD. The PHA shall also 
maintain records of abatement provided under this subpart, and shall 
report information regarding such abatement, and its compliance with the 
requirements of 24 CFR part 35, subpart A and Sec. 965.703 of this part,

[[Page 450]]

in accordance with such requirements as shall be prescribed by HUD. If 
records establish that a unit, PHA owned or operated child care 
facility, exterior or interior common area was tested or treated in 
accordance with the standards prescribed in this subpart, such units, 
child care facilities, exterior or interior common areas are not 
required to be re-tested or re-treated.

(Information collection requirements contained in this section were 
approved by the Office of Management and Budget under control number 
2577-0090)

[53 FR 20803, June 6, 1988, as amended at 56 FR 15175, Apr. 15, 1991]



Sec. 965.710  Compliance with state and local laws.

    (a) PHA responsibilities. Nothing in this subpart H is intended to 
relieve a PHA of any responsibility for compliance with state or local 
laws, ordinances, codes or regulations governing lead-based paint 
testing or hazard abatement. The PHA shall maintain records evidencing 
compliance with applicable state or local requirements, and shall report 
information concerning such compliance, in accordance with such 
requirements as shall be prescribed by HUD.
    (b) HUD responsibility. If HUD determines that a state or local law, 
ordinance, code or regulation provides for lead-based paint testing or 
hazard abatement in a manner which provides a comparable level of 
protection from the hazards of lead-based paint poisoning to that 
provided by the requirements of this subpart and that adherence to the 
requirements of this subpart would be duplicative or otherwise cause 
inefficiencies, HUD may modify or waive the requirements of this subpart 
in such manner as may be appropriate to promote efficiency while 
ensuring such comparable level or protection.

(Approved by the Office of Management and Budget under control number 
2577-0090)

[51 FR 27789, Aug. 1, 1986. Redesignated at 53 FR 20803, June 6, 1988]



Sec. 965.711  Monitoring and enforcement.

    PHA compliance with the requirements of this subpart will be 
included in the scope of HUD monitoring of PHA operations. Noncompliance 
with any requirement of this subpart may subject a PHA to sanctions 
provided under the Annual Contribution Contract or to enforcement by 
other means authorized by law.

[51 FR 27789, Aug. 1, 1986. Redesignated at 53 FR 20803, June 6, 1988]



                         Subpart I--Fire Safety

    Source: 57 FR 33853, July 30, 1992, unless otherwise noted.



Sec. 965.800  Applicability.

    This subpart applies to all PHA-owned or -leased housing housing, 
including Mutual Help and Turnkey III.



Sec. 965.805  Smoke detectors.

    (a) Performance requirement. (1) After October 30, 1992, each unit 
covered by this subpart must be equipped with at least one battery-
operated or hard-wired smoke detector, or such greater number as may be 
required by state or local codes, in working condition, on each level of 
the unit. In units occupied by hearing-impaired residents, smoke 
detectors must be hard-wired.
    (2) After October 30, 1992, the public areas of all housing covered 
by this subpart must be equipped with a sufficient number, but not less 
than one for each area, of battery-operated or hard-wired smoke 
detectors to serve as adequate warning of fire. Public areas include, 
but are not limited to, laundry rooms, community rooms, day care 
centers, hallways, stairwells, and other common areas.
    (b) Acceptability criteria. (1) The smoke detector for each 
individual unit must be located, to the extent practicable, in a hallway 
adjacent to the bedroom or bedrooms. In units occupied by hearing-
impaired residents, hard-wired smoke detectors must be connected to an 
alarm system designed for hearing-impaired persons and installed in the 
bedroom or bedrooms occupied by the hearing-impaired residents. 
Individual units that are jointly occupied by both hearing and hearing-
impaired residents must be equipped with both audible and visual types 
of alarm devices.

[[Page 451]]

    (2) If needed, battery-operated smoke detectors, except in units 
occupied by hearing-impaired residents, may be installed as a temporary 
measure where no detectors are present in a unit. Temporary battery-
operated smoke detectors must be replaced with hard-wired electric smoke 
detectors in the normal course of a PHA's planned CIAP or CGP program to 
meet the required HUD Modernization Standards or state or local codes, 
whichever standard is stricter. Smoke detectors for units occupied by 
hearing-impaired residents must be installed in accordance with the 
acceptability criteria in paragraph (b)(1) of this section.
    (c) Funding. PHAs shall use operating funds to provide battery-
operated smoke detectors in units that do not have any smoke detector in 
place. If operating funds or reserves are insufficient to accomplish 
this, PHAs may apply for emergency CIAP funding. The PHAs may apply for 
CIAP or CGP funds to replace battery-operated smoke detectors with hard-
wired smoke detectors in the normal course of a planned modernization 
program.



PART 966--LEASE AND GRIEVANCE PROCEDURES--Table of Contents




         Subpart A--Dwelling Leases, Procedures and Requirements

Sec.
966.1  Purpose and scope.
966.2  [Reserved]
966.3  Tenants' opportunity for comment.
966.4  Lease requirements.
966.5  Posting of policies, rules and regulations.
966.6  Prohibited lease provisions.
966.7  Accommodation of persons with disabilities.

            Subpart B--Grievance Procedures and Requirements

966.50  Purpose and scope.
966.51  Applicability.
966.52  Requirements.
966.53  Definitions.
966.54  Informal settlement of grievance.
966.55  Procedures to obtain a hearing.
966.56  Procedures governing the hearing.
966.57  Decision of the hearing officer or hearing panel.

    Authority: 42 U.S.C. 1437a, 1437d note, and 3535(d).



         Subpart A--Dwelling Leases, Procedures and Requirements

    Source: 40 FR 33402, Aug. 7, 1975, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.



Sec. 966.1  Purpose and scope.

    The purpose of this subpart is to prescribe the provisions that 
shall be incorporated in leases by public housing agencies (PHAs) for 
dwelling units assisted under the U.S. Housing Act of 1937 in projects 
owned by or leased to PHAs and leased or subleased by PHAs to the 
tenants. This subpart is applicable to all such dwelling leases entered 
into directly by PHAs with tenants, and is not applicable to Section 23 
and Section 10(c) leased housing projects, the Section 23 Housing 
Assistance Payments Program, and the Section 8 Housing Assistance 
Payments Program, where the owners enter into leases directly with the 
tenants. This subpart is not applicable to the Low-Rent Housing 
Homeownership Opportunities Program (Turnkey III) or to Indian Housing 
Authorities.

[40 FR 33402, Aug. 7, 1975, as amended at 42 FR 5573, Jan. 28, 1977. 
Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 922, 
Jan. 9, 1991]



Sec. 966.2  [Reserved]



Sec. 966.3  Tenants' opportunity for comment.

    Each PHA shall provide at least 30 days notice to tenants and 
resident organizations setting forth proposed changes in the lease form 
used by the PHA, and providing an opportunity to present written 
comments. Subject to requirements of this rule, comments submitted shall 
be considered by the PHA before formal adoption of any new lease form.

[56 FR 51576, Oct. 11, 1991]



Sec. 966.4  Lease requirements.

    A lease shall be entered into between the PHA and each tenant of a 
dwelling unit which shall contain the provisions described hereinafter.
    (a) Identification of parties and dwelling unit. The names of the 
parties to the lease and the identification of the

[[Page 452]]

dwelling unit leased shall be set forth, including:
    (1) The term of the lease and provisions for renewal, if any;
    (2) The members of the household who will reside in the unit.
    (b) Payments due under the lease. (1) The lease shall state the 
amount fixed as rent, specifying the utilities and quantities thereof 
and the services and equipment furnished by the PHA without additional 
cost.
    (2) The lease shall provide for charges to the tenant for 
maintenance and repair beyond normal wear and tear and for consumption 
of excess utilities. The lease shall state the basis for the 
determination of such charges (e.g., by a posted schedule of charges for 
repair, amounts charged for utility consumption in excess of the 
allowance stated in the lease, etc.). The imposition of charges for 
consumption of excess utilities is permissible only if such charges are 
determined by an individual check meter servicing the leased unit or 
result from the use of major tenant-supplied appliances.
    (3) At the option of the PHA, the lease may provide for payment of 
penalties for late payment.
    (4) The lease shall provide that charges assessed under paragraph 
(b) (2) and (3) of this section shall not be due and collectible until 
two weeks after the PHA gives written notice of the charges. Such notice 
constitutes a notice of adverse action, and must meet the requirements 
governing a notice of adverse action (see Sec. 966.4(e)(8)).
    (5) At the option of the PHA, the lease may provide for security 
deposits which shall not exceed one month's rent or such reasonable 
fixed amount as may be required by the PHA. Provision may be made for 
gradual accumulation of the security deposit by the tenant. Subject to 
applicable laws, interest earned on security deposits may be refunded to 
the tenant on vacation of the dwelling unit or used for tenant services 
or activities.
    (c) Redetermination of rent and family composition. The lease shall 
provide for redetermination of rent and family composition which shall 
include:
    (1) The frequency of regular rental redetermination and the basis 
for interim redetermination.
    (2) An agreement by the tenant to furnish such information and 
certifications regarding family composition and income as may be 
necessary for the PHA to make determinations with respect to rent, 
eligibility, and the appropriateness of dwelling size.
    (3) An agreement by the tenant to transfer to an appropriate size 
dwelling unit based on family composition, upon appropriate notice by 
the PHA that such a dwelling unit is available.
    (4) When the PHA redetermines the amount of rent (Total Tenant 
Payment or Tenant Rent) payable by the tenant, not including 
determination of the PHA's schedule of Utility Allowances for families 
in the PHA's Public Housing Program, or determines that the tenant must 
transfer to another unit based on family composition, the PHA shall 
notify the tenant that the tenant may ask for an explanation stating the 
specific grounds of the PHA determination, and that if the tenant does 
not agree with the determination, the tenant shall have the right to 
request a hearing under the PHA grievance procedure.
    (d) Tenant's right to use and occupancy. (1) The lease shall provide 
that the tenant shall have the right to exclusive use and occupancy of 
the leased unit by the members of the household authorized to reside in 
the unit in accordance with the lease, including reasonable 
accommodation of their guests. For purposes of this subpart, the term 
guest means a person in the leased unit with the consent of a household 
member.
    (2) With the consent of the PHA, members of the household may engage 
in legal profitmaking activities in the dwelling unit, where the PHA 
determines that such activities are incidental to primary use of the 
leased unit for residence by members of the household.
    (3)(i) With the consent of the PHA, a foster child or a live-in aide 
may reside in the unit. The PHA may adopt reasonable policies concerning 
residence by a foster child or a live-in-aide, and defining the 
circumstances in which PHA consent will be given or denied. Under such 
policies, the factors considered by the PHA may include:

[[Page 453]]

    (A) Whether the addition of a new occupant may necessitate a 
transfer of the family to another unit, and whether such units are 
available.
    (B) The PHA's obligation to make reasonable accommodation for 
handicapped persons.
    (ii) Live-in aide means a person who resides with an elderly, 
disabled or handicapped person and who:
    (A) Is determined to be essential to the care and well-being of the 
person;
    (B) Is not obligated for the support of the person; and
    (C) Would not be living in the unit except to provide the necessary 
supportive services.
    (e) The PHA's obligations. The lease shall set forth the PHA's 
obligations under the lease which shall include the following:
    (1) To maintain the dwelling unit and the project in decent, safe 
and sanitary condition;
    (2) To comply with requirements of applicable building codes, 
housing codes, and HUD regulations materially affecting health and 
safety;
    (3) To make necessary repairs to the dwelling unit;
    (4) To keep project buildings, facilities and common areas, not 
otherwise assigned to the tenant for maintenance and upkeep, in a clean 
and safe condition;
    (5) To maintain in good and safe working order and condition 
electrical, plumbing, sanitary, heating, ventilating, and other 
facilities and appliances, including elevators, supplied or required to 
be supplied by the PHA;
    (6) To provide and maintain appropriate receptacles and facilities 
(except containers for the exclusive use of an individual tenant family) 
for the deposit of ashes, garbage, rubbish and other waste removed from 
the dwelling unit by the tenant in accordance with paragraph (f)(7) of 
this section;
    (7) To supply running water and reasonable amounts of hot water and 
reasonable amounts of heat at appropriate times of the year (according 
to local custom and usage) except where the building that includes the 
dwelling unit is not required by law to be equipped for that purpose, or 
where heat or hot water is generated by an installation within the 
exclusive control of the tenant and supplied by a direct utility 
connection; and
    (8)(i) To notify the tenant of the specific grounds for any proposed 
adverse action by the PHA. (Such adverse action includes, but is not 
limited to, a proposed lease termination, transfer of the tenant to 
another unit, or imposition of charges for maintenance and repair, or 
for excess consumption of utilities.)
    (ii) When the PHA is required to afford the tenant the opportunity 
for a hearing under the PHA grievance procedure for a grievance 
concerning a proposed adverse action:
    (A) The notice of proposed adverse action shall inform the tenant of 
the right to request such hearing. In the case of a lease termination, a 
notice of lease termination in accordance with paragraph (l)(3) of this 
section, shall constitute adequate notice of proposed adverse action.
    (B) In the case of a proposed adverse action other than a proposed 
lease termination, the PHA shall not take the proposed action until the 
time for the tenant to request a grievance hearing has expired, and (if 
a hearing was timely requested by the tenant) the grievance process has 
been completed.
    (f) Tenant's obligations. The lease shall provide that the tenant 
shall be obligated:
    (1) Not to assign the lease or to sublease the dwelling unit;
    (2) Not to provide accommodations for boarders or lodgers;
    (3) To use the dwelling unit solely as a private dwelling for the 
tenant and the tenant's household as identified in the lease, and not to 
use or permit its use for any other purpose;
    (4) To abide by necessary and reasonable regulations promulgated by 
the PHA for the benefit and well-being of the housing project and the 
tenants which shall be posted in the project office and incorporated by 
reference in the lease;
    (5) To comply with all obligations imposed upon tenants by 
applicable provisions of building and housing codes materially affecting 
health and safety;
    (6) To keep the dwelling unit and such other areas as may be 
assigned to

[[Page 454]]

the tenant for the tenant's exclusive use in a clean and safe condition;
    (7) To dispose of all ashes, garbage, rubbish, and other waste from 
the dwelling unit in a sanitary and safe manner;
    (8) To use only in a reasonable manner all electrical, plumbing, 
sanitary, heating, ventilating, air-conditioning and other facilities 
and appurtenances including elevators;
    (9) To refrain from, and to cause the household and guests to 
refrain from destroying, defacing, damaging, or removing any part of the 
dwelling unit or project;
    (10) To pay reasonable charges (other than for wear and tear) for 
the repair of damages to the dwelling unit, or to the project (including 
damages to project buildings, facilities or common areas) caused by the 
tenant, a member of the household or a guest.
    (11) To act, and cause household members or guests to act, in a 
manner which will not disturb other residents' peaceful enjoyment of 
their accommodations and will be conducive to maintaining the project in 
a decent, safe and sanitary condition;
    (12)(i) To assure that the tenant, any member of the household, a 
guest, or another person under the tenant's control, shall not engage 
in:
    (A) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the PHA's public housing premises by 
other residents or employees of the PHA, or
    (B) Any drug-related criminal activity on or near such premises.

Any criminal activity in violation of the preceding sentence shall be 
cause for termination of tenancy, and for eviction from the unit.
    (ii) For purposes of subparts A and B of this part 966, the term 
drug-related criminal activity means the illegal manufacture, sale, 
distribution, use, or possession with intent to manufacture, sell, 
distribute, or use, of a controlled substance (as defined in section 102 
of the Controlled Substances Act (21 U.S.C. 802)).
    (g) Tenant maintenance. The lease may provide that the tenant shall 
perform seasonal maintenance or other maintenance tasks, as specified in 
the lease, where performance of such tasks by tenants of dwellings units 
of a similar design and construction is customary: Provided, That such 
provision is included in the lease in good faith and not for the purpose 
of evading the obligations of the PHA. The PHA shall exempt tenants who 
are unable to perform such tasks because of age or disability.
    (h) Defects hazardous to life, health, or safety. The lease shall 
set forth the rights and obligations of the tenant and the PHA if the 
dwelling unit is damaged to the extent that conditions are created which 
are hazardous to life, health, or safety of the occupants and shall 
provide that:
    (1) The tenant shall immediately notify project management of the 
damage;
    (2) The PHA shall be responsible for repair of the unit within a 
reasonable time: Provided, That if the damage was caused by the tenant, 
tenant's household or guests, the reasonable cost of the repairs shall 
be charged to the tenant;
    (3) The PHA shall offer standard alternative accommodations, if 
available, where necessary repairs cannot be made within a reasonable 
time; and
    (4) Provisions shall be made for abatement of rent in proportion to 
the seriousness of the damage and loss in value as a dwelling if repairs 
are not made in accordance with paragraph (h)(2) of this section or 
alternative accommodations not provided in accordance with paragraph 
(h)(3) of this section, except that no abatement of rent shall occur if 
the tenant rejects the alternative accommodation or if the damage was 
caused by the tenant, tenant's household or guests.
    (i) Pre-occupancy and pre-termination inspections. The lease shall 
provide that the PHA and the tenant or representative shall be obligated 
to inspect the dwelling unit prior to commencement of occupancy by the 
tenant. The PHA will furnish the tenant with a written statement of the 
condition of the dwelling unit, and the equipment provided with the 
unit. The statement shall be signed by the PHA and the tenant, and a 
copy of the statement shall be retained by the PHA in the tenant's 
folder. The PHA shall be further obligated to inspect the unit at the 
time

[[Page 455]]

the tenant vacates the unit and to furnish the tenant a statement of any 
charges to be made in accordance with paragraph (b)(2) of this section. 
Provision shall be made for the tenant's participation in the latter 
inspection, unless the tenant vacates without notice to the PHA.
    (j) Entry of dwelling unit during tenancy. The lease shall set forth 
the circumstances under which the PHA may enter the dwelling unit during 
the tenant's possession thereof, which shall include provision that:
    (1) The PHA shall, upon reasonable advance notification to the 
tenant, be permitted to enter the dwelling unit during reasonable hours 
for the purpose of performing routine inspections and maintenance, for 
making improvement or repairs, or to show the dwelling unit for re-
leasing. A written statement specifying the purpose of the PHA entry 
delivered to the dwelling unit at least two days before such entry shall 
be considered reasonable advance notification;
    (2) The PHA may enter the dwelling unit at any time without advance 
notification when there is reasonable cause to believe that an emergency 
exists; and
    (3) If the tenant and all adult members of the household are absent 
from the dwelling unit at the time of entry, the PHA shall leave in the 
dwelling unit a written statement specifying the date, time and purpose 
of entry prior to leaving the dwelling unit.
    (k) Notice procedures. (1) The lease shall provide procedures to be 
followed by the PHA and the tenant in giving notice one to the other 
which shall require that:
    (i) Except as provided in paragraph (j) of this section, notice to a 
tenant shall be in writing and delivered to the tenant or to an adult 
member of the tenant's household residing in the dwelling or sent by 
prepaid first-class mail properly addressed to the tenant; and
    (ii) Notice to the PHA shall be in writing, delivered to the project 
office or the PHA central office or sent by prepaid first-class mail 
properly addressed.
    (2) If the tenant is visually impaired, all notices must be in an 
accessible format.
    (l) Termination of tenancy and eviction--(1) Procedures. The lease 
shall set forth the procedures to be followed by the PHA and by the 
tenant in terminating the lease.
    (2) Grounds for termination. (i) The PHA shall not terminate or 
refuse to renew the lease other than for serious or repeated violation 
of material terms of the lease such as failure to make payments due 
under the lease or to fulfill the tenant obligations set forth in 
Sec. 966.4(f) or for other good cause.
    (ii) Either of the following types of criminal activity by the 
tenant, any member of the household, a guest, or another person under 
the tenant's control, shall be cause for termination of tenancy:
    (A) Any criminal activity that threatens the health, safety or right 
to peaceful enjoyment of the PHA's public housing premises by other 
residents.
    (B) Any drug-related criminal activity on or near such premises.
    (3) Lease termination notice. (i) The PHA shall give written notice 
of lease termination of:
    (A) 14 days in the case of failure to pay rent;
    (B) A reasonable time considering the seriousness of the situation 
(but not to exceed 30 days) when the health or safety of other residents 
or PHA employees is threatened; and
    (C) 30 days in any other case.
    (ii) The notice of lease termination to the tenant shall state 
specific grounds for termination, and shall inform the tenant of the 
tenant's right to make such reply as the tenant may wish. The notice 
shall also inform the tenant of the right (pursuant to Sec. 966.4(m)) to 
examine PHA documents directly relevant to the termination or eviction. 
When the PHA is required to afford the tenant the opportunity for a 
grievance hearing, the notice shall also inform the tenant of the 
tenant's right to request a hearing in accordance with the PHA's 
grievance procedure.
    (iii) A notice to vacate which is required by State or local law may 
be combined with, or run concurrently with, a notice of lease 
termination under paragraph (l)(3)(i) of this section.

[[Page 456]]

    (iv) When the PHA is required to afford the tenant the opportunity 
for a hearing under the PHA grievance procedure for a grievance 
concerning the lease termination (see Sec. 966.51(a)(1)), the tenancy 
shall not terminate (even if any notice to vacate under State or local 
law has expired) until the time for the tenant to request a grievance 
hearing has expired, and (if a hearing was timely requested by the 
tenant) the grievance process has been completed.
    (v) When the PHA is not required to afford the tenant the 
opportunity for a hearing under the PHA administrative grievance 
procedure for a grievance concerning the lease termination (see 
Sec. 966.51(a)(2)), and the PHA has decided to exclude such grievance 
from the PHA grievance procedure, the notice of lease termination under 
paragraph (l)(3)(i) of this section shall:
    (A) State that the tenant is not entitled to a grievance hearing on 
the termination.
    (B) Specify the judicial eviction procedure to be used by the PHA 
for eviction of the tenant, and state that HUD has determined that this 
eviction procedure provides the opportunity for a hearing in court that 
contains the basic elements of due process as defined in HUD 
regulations.
    (C) State whether the eviction is for a criminal activity as 
described in Sec. 966.51(a)(2)(i)(A) or for a drug-related criminal 
activity as described in Sec. 966.51(a)(2)(i)(B).
    (4) How tenant is evicted. The PHA may evict the tenant from the 
unit either:
    (i) By bringing a court action or;
    (ii) By bringing an administrative action if law of the jurisdiction 
permits eviction by administrative action, after a due process 
administrative hearing, and without a court determination of the rights 
and liabilities of the parties. In order to evict without bringing a 
court action, the PHA must afford the tenant the opportunity for a pre-
eviction hearing in accordance with the PHA grievance procedure.
    (5) Eviction for criminal activity--(i) PHA discretion to consider 
circumstances. In deciding to evict for criminal activity, the PHA shall 
have discretion to consider all of the circumstances of the case, 
including the seriousness of the offense, the extent of participation by 
family members, and the effects that the eviction would have on family 
members not involved in the proscribed activity. In appropriate cases, 
the PHA may permit continued occupancy by remaining family members and 
may impose a condition that family members who engaged in the proscribed 
activity will not reside in the unit. A PHA may require a family member 
who has engaged in the illegal use of drugs to present evidence of 
successful completion of a treatment program as a condition to being 
allowed to reside in the unit.
    (ii) Notice to Post Office. When a PHA evicts an individual or 
family from a dwelling unit for engaging in criminal activity, including 
drug-related criminal activity, the PHA shall notify the local post 
office serving that dwelling unit that such individual or family is no 
longer residing in the dwelling unit. (So that the post office will 
terminate delivery of mail for such persons at the unit, and that such 
persons not return to the project for pickup of the mail.)
    (m) Eviction: Right to examine PHA documents before hearing or 
trial. The PHA shall provide the tenant a reasonable opportunity to 
examine, at the tenant's request, before a PHA grievance hearing or 
court trial concerning a termination of tenancy or eviction, any 
documents, including records and regulations, which are in the 
possession of the PHA, and which are directly relevant to the 
termination of tenancy or eviction. The tenant shall be allowed to copy 
any such document at the tenant's expense. A notice of lease termination 
pursuant to Sec. 966.4(l) (3) shall inform the tenant of the tenant's 
right to examine PHA documents concerning the termination of tenancy or 
eviction. If the PHA does not make documents available for examination 
upon request by the tenant (in accordance with this Sec. 966.4(m)), the 
PHA may not proceed with the eviction.
    (n) Grievance procedures. The lease shall provide that all disputes 
concerning the obligations of the tenant or the PHA shall (except as 
provided in Sec. 966.51(a)(2)) be resolved in accordance with the PHA 
grievance procedures.

[[Page 457]]

The grievance procedures shall comply with subpart B of this part.
    (o) Provision for modifications. The lease shall provide that 
modification of the lease must be accomplished by a written rider to the 
lease executed by both parties, except for paragraph (c) of this section 
and Sec. 966.5.
    (p) Signature clause. The lease shall provide a signature clause 
attesting that the lease has been executed by the parties.

[56 FR 51576, Oct. 11, 1991, as amended at 61 FR 13273, Mar. 26, 1996]



Sec. 966.5  Posting of policies, rules and regulations.

    Schedules of special charges for services, repairs and utilities and 
rules and regulations which are required to be incorporated in the lease 
by reference shall be publicly posted in a conspicuous manner in the 
Project Office and shall be furnished to applicants and tenants on 
request. Such schedules, rules and regulations may be modified from time 
to time by the PHA provided that the PHA shall give at least 30-day 
written notice to each affected tenant setting forth the proposed 
modification, the reasons therefor, and providing the tenant an 
opportunity to present written comments which shall be taken into 
consideration by the PHA prior to the proposed modification becoming 
effective. A copy of such notice shall be:
    (a) Delivered directly or mailed to each tenant; or
    (b) Posted in at least three (3) conspicuous places within each 
structure or building in which the affected dwelling units are located, 
as well as in a conspicuous place at the project office, if any, of if 
none, a similar central business location within the project.



Sec. 966.6  Prohibited lease provisions.

    Lease clauses of the nature described below shall not be included in 
new leases between a PHA and a tenant and shall be deleted from existing 
leases either by amendment thereof or execution of a new lease:
    (a) Confession of judgment. Prior consent by the tenant to any 
lawsuit the landlord may bring against him in connection with the lease 
and to a judgment in favor of the landlord.
    (b) Distraint for rent or other charges. Agreement by the tenant 
that landlord is authorized to take property of the tenant and hold it 
as a pledge until the tenant performs the obligation which the landlord 
has determined the tenant has failed to perform.
    (c) Exculpatory clauses. Agreement by the tenant not to hold the 
landlord or landlord's agent liable for any acts or omissions whether 
intentional or negligent on the part of the landlord or the landlord's 
authorized representatives or agents.
    (d) Waiver of legal notice by tenant prior to actions for eviction 
or money judgments. Agreements by the tenant that the landlord may 
institute suit without any notice to the tenant that the suit has been 
filed, thus preventing the tenant from defending against the lawsuit.
    (e) Waiver of legal proceedings. Authorization to the landlord to 
evict the tenant or hold or sell the tenant's possessions whenever the 
landlord determines that a breach or default has occurred without notice 
to the tenant or any determination by a court of the rights and 
liabilities of the parties.
    (f) Waiver of jury trial. Authorization of the landlord's lawyer to 
appear in court for the tenant and waive the right to a trial by jury.
    (g) Waiver of right to appeal judicial error in legal proceeding. 
Authorization to the landlord's lawyer to waive the right to appeal for 
judicial error in any suit or to waive the right to file a suit in 
equity to prevent the execution of a judgment.
    (h) Tenant chargeable with cost of legal actions regardless of 
outcome. Provision that the tenant agrees to pay attorney's fees or 
other legal costs whenever the landlord decides to take action against 
the tenant even though the court determines that the tenant prevails in 
the action. Prohibition of this type of provision does not mean that the 
tenant as a party to the lawsuit may not be obligated to pay attorney's 
fees or other costs if he loses the suit.



Sec. 966.7  Accommodation of persons with disabilities.

    (a) For all aspects of the lease and grievance procedures, a 
handicapped

[[Page 458]]

person shall be provided reasonable accommodation to the extent 
necessary to provide the handicapped person with an opportunity to use 
and occupy the dwelling unit equal to a non-handicapped person.
    (b) The PHA shall provide a notice to each tenant that the tenant 
may, at any time during the tenancy, request reasonable accommodation of 
a handicap of a household member, including reasonable accommodation so 
that the tenant can meet lease requirements or other requirements of 
tenancy.

[56 FR 51579, Oct. 11, 1991]



            Subpart B--Grievance Procedures and Requirements

    Source: 40 FR 33406, Aug. 7, 1975, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.



Sec. 966.50  Purpose and scope.

    The purpose of this subpart is to set forth the requirements, 
standards and criteria for a grievance procedure to be established and 
implemented by public housing agencies (PHAs) to assure that a PHA 
tenant is afforded an opportunity for a hearing if the tenant disputes 
within a reasonable time any PHA action or failure to act involving the 
tenant's lease with the PHA or PHA regulations which adversely affect 
the individual tenant's rights, duties, welfare or status.

[56 FR 51579, Oct. 11, 1991]



Sec. 966.51  Applicablity.

    (a)(1) The PHA grievance procedure shall be applicable (except as 
provided in paragraph (a)(2) of this section) to all individual 
grievances as defined in Sec. 966.53 of this subpart between the tenant 
and the PHA.
    (2)(i) The term due process determination means a determination by 
HUD that law of the jurisdiction requires that the tenant must be given 
the opportunity for a hearing in court which provides the basic elements 
of due process (as defined in Sec. 966.53(c)) before eviction from the 
dwelling unit. If HUD has issued a due process determination, a PHA may 
exclude from the PHA administrative grievance procedure under this 
subpart any grievance concerning a termination of tenancy or eviction 
that involves:
    (A) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the premises of other residents or 
employees of the PHA, or
    (B) Any drug-related criminal activity on or near such premises.
    (ii) The issuance of a due process determination by HUD is not 
subject to 24 CFR part 10, and HUD is not required to use notice and 
comment rulemaking procedures in considering or issuing a due process 
determination.
    (iii) For guidance of the public, HUD will publish in the Federal 
Register a notice listing the judicial eviction procedures for which HUD 
has issued a due process determination. HUD will make available for 
public inspection and copying a copy of the legal analysis on which the 
determinations are based.
    (iv) If HUD has issued a due process determination, the PHA may 
evict the occupants of the dwelling unit through the judicial eviction 
procedures which are the subject of the determination. In this case, the 
PHA is not required to provide the opportunity for a hearing under the 
PHA's administrative grievance procedure.
    (b) The PHA grievance procedure shall not be applicable to disputes 
between tenants not involving the PHA or to class grievances. The 
grievance procedure is not intended as a forum for initiating or 
negotiating policy changes between a group or groups of tenants and the 
PHA's Board of Commissioners.

[40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 56 FR 51579, Oct. 11, 1991; 61 FR 13273, Mar. 26, 1996]



Sec. 966.52  Requirements.

    (a) Each PHA shall adopt a grievance procedure affording each tenant 
an opportunity for a hearing on a grievance as defined in Sec. 966.53 in 
accordance with the requirements, standards, and criteria contained in 
this subpart.
    (b) The PHA grievance procedure shall be included in, or 
incorporated by reference in, all tenant dwelling leases pursuant to 
subpart A of this part.
    (c) The PHA shall provide at least 30 days notice to tenants and 
resident organizations setting forth proposed

[[Page 459]]

changes in the PHA grievance procedure, and providing an opportunity to 
present written comments. Subject to requirements of this subpart, 
comments submitted shall be considered by the PHA before adoption of any 
grievance procedure changes by the PHA.
    (d) The PHA shall furnish a copy of the grievance procedure to each 
tenant and to resident organizations.

[56 FR 51579, Oct. 11, 1991]



Sec. 966.53  Definitions.

    For the purpose of this subpart, the following definitions are 
applicable:
    (a) Grievance shall mean any dispute which a tenant may have with 
respect to PHA action or failure to act in accordance with the 
individual tenant's lease or PHA regulations which adversely affect the 
individual tenant's rights, duties, welfare or status.
    (b) Complainant shall mean any tenant whose grievance is presented 
to the PHA or at the project management office in accordance with 
Secs. 966.54 and 966.55(a).
    (c) Elements of due process shall mean an eviction action or a 
termination of tenancy in a State or local court in which the following 
procedural safeguards are required:
    (1) Adequate notice to the tenant of the grounds for terminating the 
tenancy and for eviction;
    (2) Right of the tenant to be represented by counsel;
    (3) Opportunity for the tenant to refute the evidence presented by 
the PHA including the right to confront and cross-examine witnesses and 
to present any affirmative legal or equitable defense which the tenant 
may have;
    (4) A decision on the merits.
    (d) Hearing officer shall mean a person selected in accordance with 
Sec. 966.55 of this subpart to hear grievances and render a decision 
with respect thereto.
    (e) Hearing panel shall mean a panel selected in accordance with 
Sec. 966.55 of this subpart to hear grievances and render a decision 
with respect thereto.
    (f) Tenant shall mean the adult person (or persons) (other than a 
live-in aide):
    (1) Who resides in the unit, and who executed the lease with the PHA 
as lessee of the dwelling unit, or, if no such person now resides in the 
unit,
    (2) Who resides in the unit, and who is the remaining head of 
household of the tenant family residing in the dwelling unit.
    (g) Resident organization includes a resident management 
corporation.

[40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 56 FR 51579, Oct. 11, 1991]



Sec. 966.54  Informal settlement of grievance.

    Any grievance shall be personally presented, either orally or in 
writing, to the PHA office or to the office of the project in which the 
complainant resides so that the grievance may be discussed informally 
and settled without a hearing. A summary of such discussion shall be 
prepared within a reasonable time and one copy shall be given to the 
tenant and one retained in the PHA's tenant file. The summary shall 
specify the names of the participants, dates of meeting, the nature of 
the proposed disposition of the complaint and the specific reasons 
therefor, and shall specify the procedures by which a hearing under 
Sec. 966.55 may be obtained if the complainant is not satisfied.



Sec. 966.55  Procedures to obtain a hearing.

    (a) Request for hearing. The complainant shall submit a written 
request for a hearing to the PHA or the project office within a 
reasonable time after receipt of the summary of discussion pursuant to 
Sec. 966.54. For a grievance under the expedited grievance procedure 
pursuant to Sec. 966.55(g) (for which Sec. 966.54 is not applicable), 
the complainant shall submit such request at such time as is specified 
by the PHA for a grievance under the expedited grievance procedure. The 
written request shall specify:
    (1) The reasons for the grievance; and
    (2) The action or relief sought.
    (b) Selection of Hearing Officer or Hearing Panel. (1) A grievance 
hearing shall be conducted by an impartial person or persons appointed 
by the PHA, other than a person who made or approved the PHA action 
under review or a subordinate of such person.
    (2) The method or methods for PHA appointment of a hearing officer 
or hearing panel shall be stated in the PHA grievance procedure. The PHA

[[Page 460]]

may use either of the following methods to appoint a hearing officer or 
panel:
    (i) A method approved by the majority of tenants (in any building, 
group of buildings or project, or group of projects to which the method 
is applicable) voting in an election or meeting of tenants held for the 
purpose.
    (ii) Appointment of a person or persons (who may be an officer or 
employee of the PHA) selected in the manner required under the PHA 
grievance procedure.
    (3) The PHA shall consult the resident organizations before PHA 
appointment of each hearing officer or panel member. Any comments or 
recommendations submitted by the tenant organizations shall be 
considered by the PHA before the appointment.
    (c) Failure to request a hearing. If the complainant does not 
request a hearing in accordance with this paragraph, then the PHA's 
disposition of the grievance under Sec. 966.54 shall become final: 
Provided, That failure to request a hearing shall not constitute a 
waiver by the complainant of his right thereafter to contest the PHA's 
action in disposing of the complaint in an appropriate judicial 
proceeding.
    (d) Hearing prerequisite. All grievances shall be personally 
presented either orally or in writing pursuant to the informal procedure 
prescribed in Sec. 966.54 as a condition precedent to a hearing under 
this section: Provided, That if the complainant shall show good cause 
why he failed to proceed in accordance with Sec. 966.54 to the hearing 
officer or hearing panel, the provisions of this subsection may be 
waived by the hearing officer or hearing panel.
    (e) Escrow deposit. Before a hearing is scheduled in any grievance 
involving the amount of rent as defined in Sec. 966.4(b) of subpart A of 
this part which the PHA claims is due, the complainant shall pay to the 
PHA an amount equal to the amount of the rent due and payable as of the 
first of the month preceding the month in which the act or failure to 
act took place. The complainant shall thereafter deposit the same amount 
of the monthly rent in an escrow account monthly until the complaint is 
resolved by decision of the hearing officer or hearing panel. These 
requirements may be waived by the PHA in extenuating circumstances. 
Unless so waived, the failure to make such payments shall result in a 
termination of the grievance procedure: Provided, That failure to make 
payment shall not constitute a waiver of any right the complainant may 
have to contest the PHA's disposition of his grievance in any 
appropriate judicial proceeding.
    (f) Scheduling of hearings. Upon complainant's compliance with 
paragraphs (a), (d) and (e) of this section, a hearing shall be 
scheduled by the hearing officer or hearing panel promptly for a time 
and place reasonably convenient to both the complainant and the PHA. A 
written notification specifying the time, place and the procedures 
governing the hearing shall be delivered to the complainant and the 
appropriate PHA official.
    (g) Expedited grievance procedure. (1) The PHA may establish an 
expedited grievance procedure for any grievance concerning a termination 
of tenancy or eviction that involves:
    (i) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the PHA's public housing premises by 
other residents or employees of the PHA, or
    (ii) Any drug-related criminal activity on or near such premises.
    (2) In the case of a grievance under the expedited grievance 
procedure, Sec. 966.54 (informal settlement of grievances) is not 
applicable.
    (3) Subject to the requirements of this subpart, the PHA may adopt 
special procedures concerning a hearing under the expedited grievance 
procedure, including provisions for expedited notice or scheduling, or 
provisions for expedited decision on the grievance.

[40 FR 33406, Aug. 7, 1975, as amended at 42 FR 5573, Jan. 28, 1977. 
Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 51579, 
Oct. 11, 1991]



Sec. 966.56  Procedures governing the hearing.

    (a) The hearing shall be held before a hearing officer or hearing 
panel, as appropriate.
    (b) The complainant shall be afforded a fair hearing, which shall 
include:

[[Page 461]]

    (1) The opportunity to examine before the grievance hearing any PHA 
documents, including records and regulations, that are directly relevant 
to the hearing. (For a grievance hearing concerning a termination of 
tenancy or eviction, see also Sec. 966.4(m).) The tenant shall be 
allowed to copy any such document at the tenant's expense. If the PHA 
does not make the document available for examination upon request by the 
complainant, the PHA may not rely on such document at the grievance 
hearing.
    (2) The right to be represented by counsel or other person chosen as 
the tenant's representative, and to have such person make statements on 
the tenant's behalf;
    (3) The right to a private hearing unless the complainant requests a 
public hearing;
    (4) The right to present evidence and arguments in support of the 
tenant's complaint, to controvert evidence relied on by the PHA or 
project management, and to confront and cross-examine all witnesses upon 
whose testimony or information the PHA or project management relies; and
    (5) A decision based solely and exclusively upon the facts presented 
at the hearing.
    (c) The hearing officer or hearing panel may render a decision 
without proceeding with the hearing if the hearing officer or hearing 
panel determines that the issue has been previously decided in another 
proceeding.
    (d) If the complainant or the PHA fails to appear at a scheduled 
hearing, the hearing officer or hearing panel may make a determination 
to postpone the hearing for not to exceed five business days or may make 
a determination that the party has waived his right to a hearing. Both 
the complainant and the PHA shall be notified of the determination by 
the hearing officer or hearing panel: Provided, That a determination 
that the complainant has waived his right to a hearing shall not 
constitute a waiver of any right the complainant may have to contest the 
PHA's disposition of the grievance in an appropriate judicial 
proceeding.
    (e) At the hearing, the complainant must first make a showing of an 
entitlement to the relief sought and thereafter the PHA must sustain the 
burden of justifying the PHA action or failure to act against which the 
complaint is directed.
    (f) The hearing shall be conducted informally by the hearing officer 
or hearing panel and oral or documentary evidence pertinent to the facts 
and issues raised by the complaint may be received without regard to 
admissibility under the rules of evidence applicable to judicial 
proceedings. The hearing officer or hearing panel shall require the PHA, 
the complainant, counsel and other participants or spectators to conduct 
themselves in an orderly fashion. Failure to comply with the directions 
of the hearing officer or hearing panel to obtain order may result in 
exclusion from the proceedings or in a decision adverse to the interests 
of the disorderly party and granting or denial of the relief sought, as 
appropriate.
    (g) The complainant or the PHA may arrange, in advance and at the 
expense of the party making the arrangement, for a transcript of the 
hearing. Any interested party may purchase a copy of such transcript.
    (h) Accommodation of persons with disabilities. (1) The PHA must 
provide reasonable accommodation for persons with disabilities to 
participate in the hearing. Reasonable accommodation may include 
qualified sign language interpreters, readers, accessible locations, or 
attendants.
    (2) If the tenant is visually impaired, any notice to the tenant 
which is required under this subpart must be in an accessible format.

[40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 56 FR 51580, Oct. 11, 1991]



Sec. 966.57  Decision of the hearing officer or hearing panel.

    (a) The hearing officer or hearing panel shall prepare a written 
decision, together with the reasons therefor, within a reasonable time 
after the hearing. A copy of the decision shall be sent to the 
complainant and the PHA. The PHA shall retain a copy of the decision in 
the tenant's folder. A copy of such decision, with all names and 
identifying references deleted, shall also be maintained on file by the 
PHA and

[[Page 462]]

made available for inspection by a prospective complainant, his 
representative, or the hearing panel or hearing officer.
    (b) The decision of the hearing officer or hearing panel shall be 
binding on the PHA which shall take all actions, or refrain from any 
actions, necessary to carry out the decision unless the PHA Board of 
Commissioners determines within a reasonable time, and promptly notifies 
the complainant of its determination, that
    (1) The grievance does not concern PHA action or failure to act in 
accordance with or involving the complainant's lease on PHA regulations, 
which adversely affect the complainant's rights, duties, welfare or 
status;
    (2) The decision of the hearing officer or hearing panel is contrary 
to applicable Federal, State or local law, HUD regulations or 
requirements of the annual contributions contract between HUD and the 
PHA.
    (c) A decision by the hearing officer, hearing panel, or Board of 
Commissioners in favor of the PHA or which denies the relief requested 
by the complainant in whole or in part shall not constitute a waiver of, 
nor affect in any manner whatever, any rights the complainant may have 
to a trial de novo or judicial review in any judicial proceedings, which 
may thereafter be brought in the matter.



PART 968--PUBLIC HOUSING MODERNIZATION--Table of Contents




                           Subpart A--General

Sec.
968.101  Purpose and applicability.
968.102  Special requirements for Turnkey III developments.
968.103  Allocation of funds under section 14.
968.104  Reserve for emergencies and disasters.
968.105  Definitions.
968.108  Displacement, relocation, and real property acquisition.
968.110  Other program requirements.
968.112  Eligible costs.
968.115  Modernization and energy conservation standards.
968.120  Force account.
968.125  Initiation of modernization activities.
968.130  Fund requisitions.
968.135  Contracting requirements.
968.140  On-site inspections.
968.145  Fiscal closeout.

 Subpart B--Comprehensive Improvement Assistance Program (For PHAs That 
                  Own or Operate Fewer Than 250 Units)

968.205  Definitions.
968.210  Procedures for obtaining approval of a modernization program.
968.215  Resident and homebuyer participation.
968.225  Budget revisions.
968.230  Progress reports.
968.235  Time extensions.
968.240  HUD review of PHA performance.

Subpart C--Comprehensive Grant Program (for PHAs That Own or Operate 250 
                      or More Public Housing Units)

968.305  Definitions.
968.310  Determination of formula amount.
968.315  Comprehensive Plan (including five-year action plan).
968.320  HUD review and approval of comprehensive plan (including five-
          year action plan).
968.325  Annual submission of activities and expenditures.
968.330  PHA performance and evaluation report.
968.335  HUD review of PHA performance.

                  Subpart D--Vacancy Reduction Program

Sec.
968.416  Fund requisitions.
968.419  Grantee's oversight responsibilities.
968.422  Progress reports and completion schedule.
968.425  HUD review of grantee performance.
968.428  Program closeout.
968.435  Other program requirements.

    Authority: 42 U.S.C. 1437d, 1437l, and 3535(d).

    Source: 54 FR 52689, Dec. 21, 1989, unless otherwise noted.



                           Subpart A--General



Sec. 968.101  Purpose and applicability.

    (a) Purpose. The purpose of this part is to set forth the policies 
and procedures for the Modernization program authorizing HUD to provide 
financial assistance to Public Housing Agencies (PHAs).
    (b) Applicability. (1) Subpart A of this part applies to all 
modernization under this part. Subpart B of this part sets forth the 
requirements and procedures for the Comprehensive Improvement Assistance 
Program (CIAP) for PHAs

[[Page 463]]

that own or operate fewer than 250 public housing units. Subpart C of 
this part sets forth the requirements and procedures for the 
Comprehensive Grant Program (CGP) for PHAs that own or operate 250 or 
more units. A PHA that qualifies for participation in the CGP is not 
eligible to participate in the CIAP. A PHA that has already qualified to 
participate in the CGP may elect to continue to participate in the CGP 
so long as it owns or operates at least 200 units.
    (2) This part applies to PHA-owned low-income public housing 
developments (including developments managed by a resident management 
corporation pursuant to a contract with the PHA); conveyed Lanham Act 
and Public Works Administration (PWA) developments; and to Section 23 
Leased Housing Bond-Financed developments. Rental developments which are 
planned for conversion to homeownership under sections 5(h), 21, or 301 
of the Act, but which have not yet been sold by a PHA, continue to 
qualify for assistance under this part. This part does not apply to 
developments under the Section 23 Leased Housing Non-Bond Financed 
program, the Section 10(c) Leased program, or the Section 23 or Section 
8 Housing Assistance Payments programs.
    (3) A section 23 Leased Housing Bond-Financed development is 
eligible for modernization only if HUD determines that the development 
has met the following conditions:
    (i) The development was financed by the issuance of bonds;
    (ii) Clear title to the development will be conveyed to or vested in 
the PHA at the end of the section 23 lease term;
    (iii) There are no legal obstacles affecting the PHA's use of the 
property as public housing during the 20-year period of the 
modernization;
    (iv) After completion of the modernization, the development will 
have a remaining useful life of at least 20 years and it is in the 
financial interest of the Federal Government to improve the development; 
and
    (v) The development is covered by a cooperation agreement between 
the PHA and local governing body during the 20-year period of the 
modernization.
    (4) A section 23 Leased Housing Bond-Financed development which has 
been conveyed to the PHA after the bonds have been retired is similarly 
eligible for modernization if the conditions specified under paragraph 
(b)(3) of this section have been satisfied.
    (5) A development/building/unit which is assisted under section 
5(j)(2) of the Act (Major Reconstruction of Obsolete Projects) (MROP) is 
eligible for section 14 funding (CIAP or CGP) where it received MROP 
funding after FFY 1988 and has reached Date of Full Availability (DOFA) 
or where it received MROP funding during FFYs 1986-1988 and all MROP 
funds have been expended.
    (c) Transition. Any amount that HUD has approved for a PHA must be 
used for the purposes for which the funding was provided, or:
    (1) For a CGP PHA, for purposes consistent with an approved Annual 
Statement or Five-Year Action Plan submitted by the PHA, as the PHA 
determines to be appropriate; or
    (2) For a CIAP PHA, in accordance with a revised CIAP budget.
    (d) Approved information collections. The following sections of this 
subpart have been approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 and assigned OMB 
approval number 2577-0044: Secs. 968.135, 968.145, 968.210, 968.215, 
968.225, and 968.230. The following sections of this subpart have been 
similarly approved and assigned approval number 2577.0157: 
Secs. 968.310, 968.315, 968.325, and 968.330.

[57 FR 5570, Feb. 14, 1992, as amended at 58 FR 13930, Mar. 15, 1993; 61 
FR 8737, Mar. 5, 1996]



Sec. 968.102  Special requirements for Turnkey III developments.

    (a) Modernization Costs. Modernization work on a Turnkey III unit 
shall not increase the purchase price or amortization period of the 
home.
    (b) Eligibility of paid-off and conveyed units for assistance.--(1) 
Paid-off units. A Turnkey III unit that is paid off but has not been 
conveyed at the time the CIAP application or CGP Annual Submission is 
submitted, is eligible for any

[[Page 464]]

physical improvement under Sec. 968.112(d).
    (2) Conveyed units. Where modernization work has been approved 
before conveyance, the PHA may complete the work even if title to the 
unit is subsequently conveyed before the work is completed. However, 
once conveyed, the unit is not eligible for additional or future 
assistance. A PHA shall not use funds provided under this part for the 
purpose of modernizing units if the modernization work was not approved 
before conveyance of title.
    (c) Other. The homebuyer family must be in compliance with its 
financial obligations under its homebuyer agreement in order to be 
eligible for non-emergency physical improvements, with the exception of 
work necessary to meet statutory and regulatory requirements, (e.g., 
accessibility for disabled persons, lead-based paint testing, interim 
containment, professional risk assessment, and abatement) and the 
correction of development deficiencies. Notwithstanding the above 
requirement, a PHA may, with prior HUD approval, complete non-emergency 
physical improvements on any homeownership unit where the PHA 
demonstrates that, due to economies of scale or geographic constraints, 
substantial cost savings may be realized by completing all necessary 
work in a development at one time.

[59 FR 44837, Aug. 30, 1994, as amended at 61 FR 8737, Mar. 5, 1996; 62 
FR 27126, May 16, 1997]



Sec. 968.103  Allocation of funds under section 14.

    (a) General. This section describes the process for allocating 
modernization funds to the aggregate of PHAs and IHAs participating in 
the CIAP and to individual PHAs and IHAs participating in the CGP.
    (b) Set-aside for emergencies and disasters. For each FFY, HUD shall 
reserve from amounts approved in the appropriation act for grants under 
this part and part 950 of this title, an amount not to exceed $75 
million (which shall include unused reserve amounts carried over from 
previous FFYs), which shall be made available to PHAs and IHAs for 
modernization needs resulting from natural and other disasters, and from 
emergencies. HUD shall replenish this reserve at the beginning of each 
FFY. Any unused funds from previous years may remain in the reserve 
until allocated. The requirements governing the reserve for disasters 
and emergencies and the procedures by which a PHA may request such 
funds, are set forth in Sec. 968.104.
    (c) Set-aside for credits for mod troubled PHAs under subpart C of 
this part. After deducting an amount for the reserve for natural and 
other disasters and for emergencies under paragraph (b) of this section, 
HUD shall set aside from the funds remaining no more than five percent 
for the purpose of providing credits to PHAs that were formerly 
designated as mod troubled agencies under the Public Housing Management 
Assessment Program (PHMAP) (see 24 CFR part 901). The purpose of this 
set-aside is to compensate these PHAs for amounts previously withheld by 
HUD because of a PHA's prior designation as a mod troubled agency. Since 
part 901 of this chapter does not apply to IHAs, they are not classified 
as ``mod troubled'' and they do not participate in the set-aside credits 
established under paragraph (c) of this section.
    (d) Formula allocation based on relative needs. After determining 
the amounts to be reserved under paragraphs (b) and (c) of this section, 
HUD shall allocate the amount remaining pursuant to the formula set 
forth in paragraphs (e) and (f) of this section, which is designed to 
measure the relative backlog and accrual needs of PHAs and IHAs.\1\
---------------------------------------------------------------------------

    \1\ In construing all terms used in the statutory indicators for 
estimating backlog and accrual need, HUD shall use the meanings cited in 
Appendix B of the HUD Report to the Congress on Alternative Methods for 
Funding Public Housing Modernization (April 1990). Copies of the HUD 
Report to Congress may be obtained by contacting the HUD User at 1-800-
245-2691.
---------------------------------------------------------------------------

    (e) Allocation for backlog needs. HUD shall allocate half of the 
formula amount under paragraph (d) of this section based on the relative 
backlog needs of PHAs and IHAs, as follows:
    (1) Determination of backlog need:
    (i) Statistically reliable data are available. Where HUD determines 
that the data concerning the categories of backlog need identified under 
paragraph

[[Page 465]]

(e)(4) of this section are statistically reliable for individual IHAs 
and PHAs with 250 or more units, or for the aggregate of IHAs and PHAs 
with fewer than 250 units, which are not participating in the formula 
funding portion of the modernization program, it will base its 
allocation on direct estimates of the statutory categories of backlog 
need, based on the most recently available, statistically reliable data;
    (ii) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning the categories of 
backlog need identified under paragraph (e)(4) of this section are not 
available for individual PHAs and IHAs with 250 or more units, it will 
base its allocation of funds under this section on estimates of the 
categories of backlog need using:
    (A) The most recently available data on the categories of backlog 
need under paragraph (e)(4) of this section;
    (B) Objectively measurable data concerning the following PHA or IHA, 
community and development characteristics:
    (1) The average number of bedrooms in the units in a development. 
(Weighted at 2858.7);
    (2) The proportion of units in a development available for occupancy 
by very large families. (Weighted at 7295.7);
    (3) The extent to which units for families are in high-rise elevator 
developments. (Weighted at 5555.8);
    (4) The age of the developments, as determined by the DOFA date 
(date of full availability). In the case of acquired developments, HUD 
will use the DOFA date unless the PHA provides HUD with the actual date 
of construction, in which case HUD will use the actual date of 
construction (or, for scattered sites, the average dates of construction 
of all the buildings), subject to a 50 year cap. (Weighted at 206.5);
    (5) In the case of a large agency, the number of units with 2 or 
more bedrooms. (Weighted at .433);
    (6) The cost of rehabilitating property in the area. (Weighted at 
27544.3);
    (7) For family developments, the extent of population decline in the 
unit of general local government determined on the basis of the 1970 and 
1980 censuses. (Weighted at 759.5);
    (C) An equation constant of 1412.9.
    (2) Calibration of backlog need for developments constructed prior 
to 1985. The estimated backlog need, as determined under either 
paragraph (e)(1)(i) or (e)(1)(ii) of this section, shall be adjusted 
upward for developments constructed prior to 1985 by a constant ratio of 
1.5 to more accurately reflect the costs of modernizing the categories 
of backlog need under paragraph (e)(4) of this section for the public 
housing stock as of 1991.
    (3) Replacement factor to reflect backlog need for developments with 
demolition, disposition, or conversion occurring on or after October 1, 
1996. (i) PHAs that have a reduction in units attributable to 
demolition, disposition, or conversion of units during the period 
(reflected in data maintained by HUD) that lowers the formula unit count 
for the Comprehensive Grant formula calculations qualify for application 
of a replacement housing factor, subject to satisfaction of criteria 
stated in paragraph (e)(3)(ii) of this section. The factor will be 
added, where applicable, for the first 5 years after such reduction, and 
consists of 50 percent of the published Total Development Cost for a 
two-bedroom unit in a walkup type structure for the period April 3, 1996 
through April 30, 1997, multiplied times the number of units to be 
demolished, disposed of, or converted. The total relative backlog need 
of the PHA resulting from application of this replacement factor cannot 
exceed the share it would have had if the demolition, disposition, or 
conversion had not taken place.
    (ii) A PHA is eligible for application of this factor only if the 
PHA satisfies the following criteria:
    (A) The PHA requests the application of the replacement factor;
    (B) The restored funding that results from the use of the 
replacement factor is used to provide replacement housing (in any year 
in which replacement housing is an eligible activity) or accelerated 
renovation of vacant but viable units, in accordance with the PHA's 
five-year action plan, approved by HUD (see Sec. 968.315);

[[Page 466]]

    (C) The PHA does not receive funding under the public housing 
development; Major Reconstruction of Obsolete Public Housing, or HOPE VI 
programs for the units developed or modernized with funds received under 
this replacement housing factor;
    (D) A PHA that has been determined by HUD to be troubled or mod-
troubled that is not already under the direction of HUD or a court-
appointed receiver, in accordance with part 901 of this chapter, must 
use an Alternative Management Entity as defined in Sec. 901.5 of this 
chapter for development of replacement housing and must comply with any 
applicable provisions of its Memorandum of Agreement executed with HUD 
under that part; and
    (E) Any development of replacement housing by any PHA must be done 
in accordance with part 941 of this chapter.
    (iii) If the PHA does not use the restored funding that results from 
the use of the replacement factor to provide replacement housing or 
renovate vacant units in a timely fashion, in accordance with 
Sec. 968.125 and Sec. 941.501 of this chapter, and make reasonable 
progress on such use of the funding, in accordance with 
Sec. 968.335(a)(3) and Sec. 941.501, HUD may require appropriate 
corrective action under Sec. 968.335 and Sec. 941.501; may recapture and 
reallocate the funds; or may use other remedies available to HUD.
    (4) Deduction for prior modernization: HUD shall deduct from the 
estimated backlog need, as determined under either paragraph (e)(1)(i) 
or (e)(1)(ii) of this section, amounts previously provided to a PHA or 
IHA for modernization, using one of the following methods:
    (i) Standard deduction for prior CIAP and MROP. HUD shall deduct 60 
percent of the CIAP funds made available on a PHA-wide or IHA-wide basis 
from FFY 1984 to 1991, and 40 percent of the funds made available on a 
development-specific basis for the Major Reconstruction of Obsolete 
Projects (MROP) (not to exceed the estimated formula need for the 
development), subject to a maximum fifty percent deduction of a PHA's or 
IHA's total need for backlog funding;
    (ii) Newly constructed units. Units with a DOFA date of October 1, 
1991 or thereafter will be considered to have a zero backlog; or
    (iii) Acquired developments. Developments acquired by a PHA with a 
DOFA date of October 1, 1991 or thereafter will be considered by HUD to 
have a zero backlog.
    (5) Categories of backlog need. The most recently available data 
used under either paragraph (e)(1)(i) or (e)(1)(ii) of this section must 
pertain to the following categories of backlog need:
    (i) Backlog of needed repairs and replacements of existing physical 
systems in public housing developments;
    (ii) Items that must be added to developments to meet HUD's 
modernization standards under Sec. 968.115, and State and local codes; 
and
    (iii) Items that are necessary or highly desirable for the long-term 
viability of a development, in accordance with HUD's modernization 
standards.
    (f) Allocation for accrual needs. HUD shall allocate the other half 
remaining under the formula allocation under paragraph (d) of this 
section based upon the relative accrual needs of PHAs and IHAs, 
determined as follows:
    (1) Statistically reliable data are available. Where HUD determines 
that statistically reliable data are available concerning the categories 
of need identified under paragraph (f)(3) of this section for individual 
PHAs and IHAs with 250 or more units, and for the aggregate of PHAs and 
IHAs with fewer than 250 units, it shall base its allocation of 
assistance under this section on the needs that are estimated to have 
accrued since the date of the last objective measurement of backlog 
needs under paragraph (e)(1)(i) of this section;
    (2) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning the categories of 
need identified under paragraph (f)(3) of this section are not available 
for individual PHAs and IHAs with 250 or more units, it shall base its 
allocation of assistance under this section on estimates of accrued need 
using:

[[Page 467]]

    (i) The most recently available data on the categories of accrual 
need under paragraph (f)(3) of this section;
    (ii) Objectively measurable data concerning the following PHA or 
IHA, community, and development characteristics:
    (A) The average number of bedrooms in the units in a development. 
(Weighted at 100.1);
    (B) The proportion of units in a development available for occupancy 
by very large families. (Weighted at 356.7);
    (C) The age of the developments. (Weighted 10.4);
    (D) The extent to which the buildings in developments of an agency 
average fewer than 5 units. (Weighted at 87.1);
    (E) The cost of rehabilitating property in the area. (Weighted at 
679.1);
    (F) The total number of units of each PHA or IHA that owns or 
operates 250 or more units. (weighted at .0144);
    (iii) An equation constant of 602.1.
    (3) Categories of need. The data to be provided under either 
paragraph (f)(1) or (2) of this section must pertain to the following 
categories of need:
    (i) Backlog of needed repairs and replacements of existing physical 
systems in public housing developments; and
    (ii) Items that must be added to developments to meet HUD's 
modernization standards under Sec. 968.115, and State and local codes.
    (4) Replacement factor to reflect accrual need for developments with 
demolition, disposition, or conversion occurring on or after October 1, 
1996. (i) PHAs that have a reduction in units attributable to 
demolition, disposition, or conversion of units during the period 
(reflected in data maintained by HUD) that lowers the formula unit count 
for the Comprehensive Grant formula calculations qualify for application 
of a replacement housing factor, subject to satisfaction of criteria 
stated in paragraph (f)(4)(ii) of this section. The factor will be 
added, where applicable, for the first five years after such reduction, 
and consists of two percent of the published Total Development Cost for 
a two-bedroom unit in a walkup type structure for the period April 3, 
1996 through April 30, 1997, multiplied times the number of units to be 
demolished, disposed of, or converted. The total relative accrual need 
of the PHA resulting from application of this replacement factor cannot 
exceed the share it would have had if the demolition, disposition, or 
conversion had not taken place.
    (ii) A PHA is eligible for application of this factor only if the 
PHA satisfies the following criteria:
    (A) The PHA requests the application of the replacement factor;
    (B) The restored funding that results from the use of the 
replacement factor is used to provide replacement housing (in any year 
in which replacement housing is an eligible activity) or accelerated 
renovation of vacant but viable units, in accordance with the PHA's 
five-year action plan, approved by HUD (see Sec. 968.315);
    (C) The PHA does not receive funding under the public housing 
development, Major Reconstruction of Obsolete Public Housing, or HOPE VI 
programs for the units developed or modernized with funding received 
under this replacement housing factor;
    (D) A PHA that has been determined by HUD to be troubled or mod-
troubled, in accordance with part 901 of this chapter that is not 
already under the direction of HUD or a court-appointed receiver, must 
use an Alternative Management Entity as defined in Sec. 901.5 of this 
chapter for development of replacement housing and must comply with any 
applicable provisions of its Memorandum of Agreement executed with HUD 
under that part; and
    (E) Any development of replacement housing by any PHA must be done 
in accordance with part 941 of this chapter.
    (iii) If the PHA does not use the restored funding that results from 
the use of the replacement factor to provide replacement housing or 
renovate vacant units in a timely fashion, in accordance with 
Sec. 968.125 and Sec. 941.501 of this chapter, and make reasonable 
progress on such use of the funding, in accordance with 
Sec. 968.335(a)(3) and Sec. 941.501, HUD may require appropriate 
corrective action under Sec. 968.335 and Sec. 941.501; may recapture and 
reallocate the funds; or may use other remedies available to HUD.
    (g) Allocation of CIAP. The formula amount determined under 
paragraphs (e) and (f) of this section for PHAs and

[[Page 468]]

IHAs with fewer than 250 units shall be allocated to PHAs in accordance 
with the requirements of subpart B of this part (the CIAP), and to IHAs 
in accordance with the requirements of 24 CFR part 950, subpart I.
    (h) Allocation for CGP. The formula amount determined under 
paragraphs (e) and (f) of this section for PHAs with 250 or more units 
shall be allocated in accordance with the requirements of subpart C of 
this part (the CGP), and for IHAs in accordance with the requirements of 
24 CFR part 950, subpart I. A PHA that is eligible to receive a grant 
under the CGP may appeal the amount of its formula allocation in 
accordance with the requirements set forth in Sec. 968.310(b). A PHA 
that is eligible to receive modernization funds under the CGP because it 
owns or operates 250 or more units is disqualified from receiving 
assistance under the CIAP under this part.
    (i) Use of formula allocation. Any amounts allocated to a PHA under 
paragraphs (e) and (f) of this section may be used for any eligible 
activity under this part, notwithstanding that the allocation amount is 
determined by allocating half based on the relative backlog needs and 
half based on the relative accrual needs of PHAs and IHAs.
    (j) Calculation of number of units. For purposes of determining 
under this section the number of units owned or operated by a PHA or 
IHA, and the relative modernization needs of PHAs and IHAs, HUD shall 
count as one unit each existing rental and section 23 bond-financed unit 
under the ACC, except that it shall count as one-fourth of a unit each 
existing unit under the Turnkey III program. In addition, HUD shall 
count as one unit each existing unit under the Mutual Help program. New 
development units that are added to an PHA's or IHA's inventory will be 
added to the overall unit count so long as they are under ACC amendment 
and have reached DOFA by the first day in the FFY in which the formula 
is being run. Any increase in units (reaching DOFA and under ACC 
amendment) as of the beginning of the FFY shall result in an adjustment 
upwards in the number of units under the formula. New units reaching 
DOFA after this date will be counted for formula purposes as of the 
following FFY.
    (k) Demolition, disposition and conversion of units--(1) General. 
Where an existing unit under an ACC is demolished, disposed of, or 
converted into a larger or smaller unit, including the substantial 
rehabilitation of a Mutual Help or Turnkey III unit, HUD shall not 
adjust the amount the PHA or IHA receives under the formula, unless more 
than one percent of the units are affected on a cumulative basis. Where 
more than one percent of the existing units are demolished, disposed of, 
or converted, HUD shall reduce the formula amount for the PHA or IHA 
over a 3-year period to reflect removal of the units from the ACC;
    (2) Determination of one percent cap. In determining whether more 
than one percent of the units are affected on a cumulative basis, HUD 
will compare the units eligible for funding in the initial year under 
formula funding with the number of units eligible for funding for 
formula funding purposes for the current year, and shall base its 
calculations on the following:
    (i) Increases in the number of units resulting from the conversion 
of existing units will be added to the overall unit count so long as 
they are under ACC amendment by the first day in the FFY in which the 
formula is being run;
    (ii) Units which are lost as a result of demolition, disposition or 
conversion shall not be offset against units subsequently added to a 
PHA's or IHA's inventory;
    (iii) For purposes of calculating the number of converted units, HUD 
shall regard the converted size of the unit as the appropriate unit 
count (e.g., a unit that originally was counted as one unit under 
paragraph (j) of this section, but which later was converted into two 
units, shall be counted as two units under the ACC).
    (3) Phased-in reduction of units. (i) Reduction less than one 
percent. If HUD determines that the reduction in units under paragraph 
(k)(2) of this section is less than one percent, the PHA or IHA will be 
funded as though no change had occurred;
    (ii) Reduction greater than one percent. If HUD determines that the 
reduction in units under paragraph (k)(2) of this

[[Page 469]]

section is greater than one percent, the number of units on which 
formula funding is based will be the number of units reported as 
eligible for funding for the current program, plus two thirds of the 
difference between the initial year and the current year in the first 
year, plus one third of the difference in the second year, and at the 
level of the current year in the third year;
    (iii) Exception. A unit which is conveyed under the Mutual Help or 
Turnkey III programs will result in an automatic (rather than a phased-
in) reduction in the unit count. Paid-off Mutual Help or Turnkey III 
units continue to be counted until they are conveyed.
    (4) Subsequent reductions in unit count. (i) Once a PHA's or IHA's 
unit count has been fully reduced under paragraph (k)(3)(ii) of this 
section to reflect the new number of units under the ACC, this new 
number of units will serve as the base for purposes of calculating 
whether there has been a one percent reduction in units on a cumulative 
basis;
    (ii) A reduction in formula funding, based upon additional 
reductions to the number of a PHA's or IHA's units, will also be phased 
in over a three-year period, as described in paragraph (k)(2) of this 
section.

[57 FR 5571, Feb. 14, 1992, as amended at 59 FR 30477, June 13, 1994; 59 
FR 44837, Aug. 30, 1994; 61 FR 8737, Mar. 5, 1996; 63 FR 46107, Aug. 28, 
1998]



Sec. 968.104  Reserve for emergencies and disasters.

    (a) Emergencies--(1) Eligibility for assistance. A PHA (including a 
PHA that has been designated as mod troubled under PHMAP) may obtain 
funds at any time, for any eligible emergency work item as defined in 
Sec. 968.305 (for CGP PHAs) or for any eligible emergency work item 
(described as emergency modernization in Sec. 968.205) (for CIAP PHAs), 
from the reserve established under Sec. 968.103(b). However, emergency 
reserve funds may not be provided to a CGP PHA that has the necessary 
funds available from any other source, including its annual formula 
allocation under Sec. 968.103 (e) and (f), other unobligated 
modernization funds, and its replacement reserves. A PHA is not required 
to have an approved comprehensive plan under Sec. 968.315 before it can 
request emergency assistance from this reserve. Emergency reserve funds 
may not be provided to a CIAP PHA unless it does not have the necessary 
funds available from any other source, including unobligated CIAP, and 
no CIAP modernization funding is available from HUD for the remainder of 
the fiscal year.
    (2) Procedure. To obtain emergency funds, a PHA must submit a 
request, in a form to be prescribed by HUD, which demonstrates that 
without the requested funds from the set-aside, the PHA does not have 
adequate funds available to correct the conditions which present an 
immediate threat to the health or safety of the residents. HUD will 
immediately process a request for such assistance and, if it determines 
that the PHA's request meets the requirements under paragraph (a)(1) of 
this section, it shall approve the request, subject to the availability 
of funds in the reserve;
    (3) Repayment. A CGP PHA that receives assistance for its emergency 
needs from the reserve under Sec. 968.103(b) must repay such assistance 
from its future allocations of assistance, where available. For CGP 
PHAs, HUD shall deduct up to 50 percent of a PHA's succeeding year's 
formula allocation under Sec. 968.103 (e) and (f) to repay emergency 
funds previously provided by HUD to the PHA. The remaining balance, if 
any, shall be deducted from a PHA's succeeding years' formula 
allocations. A CIAP PHA is not required to repay assistance for its 
emergency needs from the reserve.
    (b) Natural and other disasters--(1) Eligibility for assistance. A 
PHA (including a PHA that has been designated as mod troubled under 
PHMAP) may request assistance at any time from the reserve established 
under Sec. 968.103(b) for the purpose of permitting the PHA to address a 
natural or other disaster. To qualify for assistance, the disaster must 
pertain to an extraordinary event affecting only one or a few PHAs, such 
as an earthquake or hurricane. Any disaster declared by the President 
(or which HUD determines would qualify for a Presidential declaration if 
it were

[[Page 470]]

on a larger scale) qualifies for assistance under this paragraph. A PHA 
may receive funds from the reserve regardless of the availability of 
other modernization funds or reserves, but only to the extent that its 
needs are in excess of its insurance coverage or other Federal 
assistance. A CGP PHA is not required to have an approved comprehensive 
plan under Sec. 968.315 before it can request assistance from the 
reserve under Sec. 968.103(b);
    (2) Procedure. To obtain funding for natural or other disasters 
under Sec. 968.103(b), a PHA must submit a request, in a form to be 
prescribed by HUD, which demonstrates that the PHA meets the 
requirements of paragraph (b)(1) of this section. HUD will immediately 
process a request for such assistance and, if it determines that the 
request meets the requirements under paragraph (b)(1) of this section, 
it shall approve the request, subject to the availability of funds in 
the reserve;
    (3) Repayment. Funds provided to a PHA under Sec. 968.103(b) for 
natural and other disasters are not required to be repaid.

[57 FR 5575, Feb. 14, 1992, as amended at 59 FR 44838, Aug. 30, 1994. 
Redesignated and amended at 61 FR 8738, Mar. 5, 1996]



Sec. 968.105  Definitions.

    The terms HUD and Public Housing Agency (PHA) are defined in 24 CFR 
part 5.
    Act. The United States Housing Act of 1937, as amended, (42 U.S.C. 
1437 et seq.).
    Annual contributions contract (ACC). A contract under the Act 
between HUD and the PHA containing the terms and conditions under which 
the Department assists the PHA in providing decent, safe, and sanitary 
housing for low-income families. The ACC must be in a form prescribed by 
HUD under which HUD agrees to provide assistance in the development, 
modernization, and/or operation of a low-income housing project under 
the Act, and the PHA agrees to develop, modernize, and operate the 
project in compliance with all provisions of the ACC and the Act, and 
all HUD regulations and implementing requirements and procedures.
    CGP. The Comprehensive Grant Program, which provides modernization 
funds on a formula basis to PHAs with 250 or more public housing units.
    CIAP. The Comprehensive Improvement Assistance Program, which 
provides modernization funds on a competitive basis to PHAs with fewer 
than 250 public housing units.
    Development. The term development has the same meaning as that 
provided for low-income housing project, as that term is defined in 
section 3(b)(1) of the Act.
    FFY. Federal fiscal year.
    Force account labor. Labor employed directly by the PHA on either a 
permanent or a temporary basis. See Sec. 968.120.
    Hard costs. The physical improvement costs in development accounts 
1450 through 1475 of the Low-Rent Housing Accounting Handbook 7510.1, as 
revised, which include: Account 1450 Site Improvements; Account 1460 
Dwelling Structures; Account 1465.1 Dwelling Equipment--Nonexpendable; 
Account 1470 Nondwelling Structures; and Account 1475 Nondwelling 
Equipment.
    Homebuyer agreement. A Turnkey III Homebuyer Ownership Opportunity 
Agreement.
    Modernization funds. Funds derived from an allocation of budget 
authority for the purpose of funding physical and management 
improvements.
    Modernization program. A PHA's program for carrying out 
modernization, as set forth in the approved CIAP budget or CGP Annual 
Statement.
    Modernization project. The improvement of one or more existing 
public housing developments under a unique number designated for that 
modernization program. For each modernization project, HUD and the PHA 
shall enter into an ACC amendment, requiring low-income use of the 
housing for not less than 20 years from the date of the ACC amendment 
(subject to sale of homeownership units in accordance with the terms of 
the ACC). The terms ``modernization project number'' and ``comprehensive 
grant number'' are used interchangeably.
    Non-routine maintenance. Work items that ordinarily would be 
performed on a regular basis in the course of upkeep of property, but 
have become substantial in scope because they have been put off, and 
involve expenditures that would otherwise materially distort the

[[Page 471]]

level trend of maintenance expenses. Replacement of equipment and 
materials rendered unsatisfactory because of normal wear and tear by 
items of substantially the same kind does qualify, but reconstruction, 
substantial improvement in the quality or kind of original equipment and 
materials, or remodeling that alters the nature or type of housing units 
does not qualify.
    Partnership process. A specific and ongoing process that is designed 
to ensure that residents, resident groups, and the PHA work in a 
cooperative and collaborative manner to develop, implement and monitor 
the CIAP or CGP. At a minimum, a PHA shall ensure that the partnership 
process incorporates full resident participation in each of the required 
program components.
    PHMAP. The Public Housing Management Assessment Program (PHMAP) is a 
process designed to allow HUD and the PHA to identify PHA management 
capabilities and deficiencies, and to lead to overall better management 
of the public housing program, in accordance with 24 CFR part 901.
    Reasonable cost. Total unfunded hard cost needs for a development 
that do not exceed 90 percent of the computed Total Development Cost 
(TDC) for a new development with the same structure type and number and 
size of units in the market area.
    Soft costs. The non-physical improvement costs which exclude any 
costs in development accounts 1450 through 1475.

[54 FR 52689, Dec. 21, 1989, as amended at 56 FR 922, Jan. 9, 1991; 57 
FR 5573, Feb. 14, 1992; 58 FR 13931, Mar. 15, 1993; 61 FR 5216, Feb. 9, 
1996; 61 FR 8738, Mar. 5, 1996]



Sec. 968.108  Displacement, relocation, and real property acquisition.

    (a) Minimizing displacement. Consistent with the other goals and 
objectives of this part, PHAs must assure that they have taken all 
reasonable steps to minimize the displacement of persons (families, 
individuals, businesses, nonprofit organizations, and farms) as a result 
of a project assisted under this part.
    (b) Temporary relocation. Residents who will not be required to move 
permanently, but who must relocate temporarily (e.g., to permit 
rehabilitation), shall be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporary housing and any increase in monthly 
rent/utility costs; and
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe, and sanitary 
housing to be made available for the temporary period;
    (iii) The terms and conditions under which the resident may lease 
and occupy a suitable, decent, safe, and sanitary dwelling in the 
building/complex following completion of the project; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A ``displaced 
person'' (defined in paragraph (g) of this section) must be provided 
relocation assistance at the levels described in, and in accordance with 
the requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4601-4655) 
and implementing regulations at 49 CFR part 24. A ``displaced person'' 
shall be advised of his/her rights under the Fair Housing Act (42 U.S.C. 
3601-19), and, if the representative comparable replacement dwelling 
used to establish the amount of the replacement housing payment to be 
provided to a minority person is located in an area of minority 
concentration, such person also shall be given, if possible, referrals 
to comparable and suitable, decent, safe, and sanitary replacement 
dwellings not located in such areas.
    (d) Real property acquisition requirements. The acquisition of real 
property for a development is subject to the URA and the requirements 
described in 49 CFR part 24, subpart B.
    (e) Appeals. A person who disagrees with the PHA's determination 
concerning whether the person qualifies as a ``displaced person,'' or 
the amount of the relocation assistance for which the

[[Page 472]]

person is eligible, may file a written appeal of that determination with 
the PHA. A lower-income person who is dissatisfied with the PHA's 
determination on his or her appeal may submit a written request for 
review of that determination to the HUD Field Office.
    (f) Responsibility of PHA. (1) The PHA shall certify that it will 
comply (i.e., provide assurance of compliance, as required by 49 CFR 
part 24) with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section and shall ensure such compliance, 
notwithstanding any third party's contractual obligation to the PHA to 
comply with these provisions.
    (2) The PHA shall maintain records in sufficient detail to 
demonstrate compliance with these provisions. The PHA shall maintain 
data on the race, ethnic, gender, and handicap status of displaced 
persons.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means a person (family, individual, 
business, nonprofit organization, or farm) that moves from real 
property, or moves personal property from real property, permanently, as 
a direct result of acquisition, rehabilitation, or demolition for a 
project assisted under this part. This includes any permanent, 
involuntary move for an assisted project, including any permanent move 
from the building/complex that is made:
    (i) On or after the date of the ``initiation of negotiations'' 
(defined in Sec. 968.108(h)), if the person is the resident of a 
dwelling and any one of the following three situations occurs:
    (A) The resident has not been provided, before the move, a written 
notice offering the resident the opportunity to lease and occupy a 
suitable, decent, safe, and sanitary dwelling in the same building/
complex upon completion of the project under reasonable terms and 
conditions. Such reasonable terms and conditions include a monthly rent 
and estimated average monthly utility costs that do not exceed the total 
tenant payment, as determined under 24 CFR 913.107; or
    (B) The resident is required to relocate temporarily, does not 
return to the building/complex, and either:
    (1) The resident is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, or
    (2) Other conditions of the temporary relocation are not reasonable; 
or
    (C) The resident is required to move to another dwelling unit in the 
same building/complex but is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move, 
or other conditions of the move are not reasonable; or
    (ii) Before the ``initiation of negotiations,'' if the PHA or HUD 
determines that the displacement resulted directly from acquisition, 
rehabilitation, or demolition for the assisted project;
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
of applicable Federal, State or local law, or other good cause, and the 
PHA determines that the eviction was not undertaken for the purpose of 
evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the submission of the 
Annual Statement (CGP) or application (CIAP) and, before signing a lease 
and commencing occupancy, was provided written notice of the project, 
its possible impact on the person (e.g., that the person may be 
displaced or temporarily relocated) and the fact that he or she would 
not qualify as a ``displaced person'' (or for assistance under this 
section) as a result of the project;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The PHA may ask HUD, at any time, to determine whether a 
displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a

[[Page 473]]

resident who is displaced by rehabilitation or demolition, the term 
initiation of negotiations means 45 calendar days before (1) the 
issuance of the invitation for bids for the project or (2) the start of 
force account work, whichever is applicable.

(Approved by the Office of Management and Budget under OMB Control 
Number 2506-0121)

[58 FR 13931, Mar. 15, 1993, as amended at 61 FR 8738, Mar. 5, 1996]



Sec. 968.110  Other program requirements.

    In addition to the Federal requirements set forth in 24 CFR part 5, 
the PHA shall comply with the following program requirements:
    (a) Nondiscrimination and equal opportunity. The PHA shall comply 
with Title II of the Americans with Disabilities Act and 28 CFR part 35; 
section 503 of the Rehabilitation Act of 1973 and 41 CFR chapter 60-471; 
and the Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) and 24 
CFR part 40.
    (b) [Reserved]
    (c) Environmental clearance. Before approving a proposed project, 
HUD will comply with the requirements of 24 CFR part 50, implementing 
the National Environmental Policy Act of 1969 (42 U.S.C. 4332 et seq.) 
and related requirements of 24 CFR 50.4.
    (d) Flood insurance. HUD will not approve for acquisition, 
construction, or improvement, a building located in an area that has 
been identified by the Federal Emergency Management Agency as having 
special flood hazards, unless the following conditions are met:
    (1) Flood insurance on the building is obtained in compliance with 
section 102(a) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 
4001 et seq.); and
    (2) The community in which the area is situated is participating in 
the National Flood Insurance Program in accord with 44 CFR parts 59-79, 
or less than one year has passed since FEMA notification regarding flood 
hazards.
    (e) Wage rates. (1) Davis-Bacon. With respect to modernization work 
or contracts over $2,000 (except for nonroutine maintenance work), all 
laborers and mechanics (other than volunteers under the conditions set 
out in 24 CFR part 70) who are employed by the PHA or its contractors 
shall be paid not less than the wages prevailing in the locality, as 
predetermined by the Secretary of Labor pursuant to the Davis-Bacon Act 
(40 U.S.C. 276a-276a-5).
    (2) HUD-determined. With respect to all nonroutine maintenance work 
or contracts, all laborers and mechanics (other than volunteers under 
the conditions set out in 24 CFR part 70) who are employed by the PHA or 
its contractors shall be paid not less than the wages prevailing in the 
locality, as determined or adopted by HUD pursuant to section 12 of the 
United States Housing Act of 1937.
    (3) State. Prevailing wage rates determined under State law are 
inapplicable under the circumstances set forth in Sec. 965.101 of this 
chapter.
    (f) Technical wage rates. All architects, technical engineers, 
draftsmen and technicians (other than volunteers under the conditions 
set out in 24 CFR part 70) who are employed in the development of a 
project shall be paid not less than the wages prevailing in the 
locality, as determined or adopted (subsequent to a determination under 
applicable State or local law) by HUD.
    (g)--(j)  [Reserved]
    (k) Lead-based paint poisoning prevention--(1) General. (i) The PHA 
shall comply with the Lead-Based Paint Poisoning Prevention Act (LPPPA) 
(42 U.S.C. 4821-4846) and HUD implementing regulations (24 CFR parts 35 
and 965, subpart H). The five-year funding request plan for CIAP (as 
described in Sec. 968.210) shall be amended to include the schedule for 
lead-based paint testing and abatement. Random testing shall be 
completed by December 6, 1994 (42 U.S.C. 4822(d)(2)(B)). Testing and 
abatement shall be completed with respect to all family projects 
constructed or substantially rehabilitated prior to 1978 approved for 
(or applications for) comprehensive and homeownership modernization 
(paragraphs (k)(1)(ii) (A) and (B) of this section); other pre-1978 
family projects not undergoing comprehensive and homeownership 
modernization (paragraph (k)(1)(ii)(C) of this section); and special 
purpose modernization. Any previous teting or abatement work which was 
done in accordance with the June 6, 1988 regulation (53 FR 20790) or the 
Lead-Based Paint Poisoning Prevention Act as

[[Page 474]]

amended by the Housing and Community Development Act of 1987 shall not 
be redone in accordance with the requirements of this section.
    (ii) The requirements for lead-based paint testing and abatement 
apply to the following three categories of special purpose 
modernization: Vacant unit reduction; accessibility for handicapped (for 
any dwelling in such housing in which any child who is less than 7 years 
of age resides or is expected to reside); and cost-effective energy 
efficiency measures. In the case of funding for accessibility for the 
handicapped and cost-effective energy efficiency measures, LBP testing 
and abatement shall be performed only when the rehabilitation involves 
removal of walls, doors and windows. The Regional/Field Office may 
determine on a case-by-case basis whether lead-based paint testing and 
abatement should be allowed for a PHA requesting special purpose 
modernization for physical improvements to replace or repair major 
equipment systems or structural elements (such as, the exterior of 
buildings). With regard to lead-based paint testing for special purpose 
modernization, if the project has already been randomly sampled before 
the date of this rule using the criteria found in the June 6, 1988 
regulations or after the date of this rule using the criteria outlined 
in paragraph (k)(2) of this section, no further testing is necessary. 
If, however, the project was not a part of a random sample, then it will 
be necessary for the PHA to test for special purpose modernization in 
accordance with paragraph (k)(2) of this section. If lead-based paint is 
found as a result of previous random testing or current testing, it must 
be abated.
    (A) Comprehensive, Special Purpose, and Homeownership Modernization 
in Progress. With respect to family projects approved for comprehensive, 
special purpose, and homeownership modernization (assisted under section 
14 of the United States Housing Act of 1937) which may contain lead-
based paint for which funds have been reserved by HUD:
    (1) PHAs that have awarded any construction contract (including A&E 
contracts) before April 1, 1990, the provisions regarding random testing 
and abatement in effect at that time of award shall apply and
    (2) PHAs that will advertise for bid or award a construction 
contract (including architectural and engineering (A&E) contracts) or 
plan to start force account work on or after April 1, 1990, excluding 
those contracts solely for emergency work items, shall not execute these 
contracts until random testing as described in this paragraph has taken 
place and any necessary abatement as described in paragraph (k) (2), (3) 
and (4) of this section is included in the modernization budget.
    (B) Applications for Comprehensive, Special Purpose, and 
Homeownership Modernization Projects. With respect to applications for 
family projects for comprehensive, special purpose, and homeownership 
modernization (assisted under section 14 of the United States Housing 
Act of 1937) which may contain lead-based paint, no construction 
contracts awards on or after April 1, 1990 (including architectural and 
engineering (A&E) contracts and force account work, excluding those 
contracts solely for emergency work items, shall be executed until 
random testing as described in paragraph (k) (2), (3) and (4) of this 
section has taken place and any necessary abatement as described in 
paragraph (k)(4) of this section is included in the modernization 
budget.
    (C) Lead-Based Paint Modernization; Other Family Projects Not 
Undergoing Comprehensive, Special Purpose, or Homeownership 
Modernization. Any pre-1978 family projects (assisted under section 14 
of the United States Housing Act of 1937) not undergoing comprehensive, 
special purpose, or homeownership modernization (as covered in paragraph 
(k)(1)(ii) (A) and (B) of this section) including pre-1978 family 
projects which previously have been modernized with comprehensive, 
special purpose or homeownership modernization grants under previous 
regulations shall be randomly tested as described in paragraph (k)(2) of 
this section and abated as described in paragraph (k)(4) of this section 
if lead-based paint is found, unless testing and abatement were 
previously done in accordance with paragraph (k)(1) of this section.

[[Page 475]]

    (2) Random testing. PHA's shall use random testing on family 
projects (including homeownership units) constructed prior to 1978 or 
substantially rehabilitated prior to 1978. It is strongly recommended, 
but not required, that PHA's use the random testing methodology set 
forth in the Lead-Based Paint: Interim Guidelines for Hazard 
Identification and Abatement in Public and Indian Housing (Lead-Based 
Paint Interim Guidelines) drafted for the Comprehensive Improvement 
Assistance Program (CIAP), and other Public and Indian Housing programs, 
and issued and published at 55 FR 14555, April 18, 1990, part II, with 
an amendment of chapter 8 and typographical clarifications at 55 FR 
39874, as periodically amended or upgraded, and other future outstanding 
official Departmental issuances in effect at the time of testing. Random 
testing shall be scheduled or prioritized by age of the family projects 
and whether the family projects are known to have lead-based paint or 
the presence of previous EBL's. If evidence of lead-based paint is found 
in units that were in the random sample, the PHA is required to:
    (i) Test the corresponding surfaces where lead-based paint was found 
in other units of the universe being tested, or
    (ii) Abate all like surface in that universe without further 
testing.

For scattered site family projects involving single unit structures that 
are not contiguous or were built and/or rehabilitated at different 
times, the PHA shall cause each unit to be tested for lead-based paint. 
Interior common areas to be sampled include PHA-owned or operated child 
care facilities. Testing, tenant protection, lead-based paint debris 
disposal, recordkeeping, and state and local law requirements as 
described in Secs. 965.706, 965.707, 965.708, 965.709 and 965.710 of 
this chapter shall be followed. Random testing as described in this 
paragraph (k)(2) is an eligible cost under lead-based paint 
modernization and is a planning cost as described in Sec. 968.205(d).
    (3) Testing methods. Testing shall be performed in accordance with 
Sec. 965.706(c).
    (4) Abatement methods. Abatement shall be performed in accordance 
with Sec. 965.706(d)(2). Abatement within a comprehensive and 
homeownership modernization project should be prioritized in relation to 
the immediacy of the hazards to children under seven years of age.
    (l) [Reserved]
    (m) Coastal barriers. In accordance with the Coastal Barriers 
Resources Act, 16 U.S.C. 3501, no financial assistance under this part 
may be made available within the Coastal Barrier Resources System.

[54 FR 52689, Dec. 21, 1989, as amended at 56 FR 922, Jan. 9, 1991; 56 
FR 15175, Apr. 15, 1991; 57 FR 5573, Feb. 14, 1992; 57 FR 14761, Apr. 
22, 1992; 58 FR 13932, Mar. 15, 1993; 61 FR 5216, Feb. 9, 1996; 61 FR 
8738, Mar. 5, 1996]



Sec. 968.112  Eligible costs.

    (a) General. A PHA may use financial assistance received under this 
part for the following eligible costs:
    (1) For a CGP PHA, the eligible costs are:
    (i) Undertaking activities described in its approved Annual 
Statement under Sec. 968.325 and approved Five-Year Action Plan under 
Sec. 968.315(e)(5);
    (ii) Carrying out emergency work, whether or not the need is 
indicated in the PHA's approved Comprehensive Plan, including Five-Year 
Action Plan, or Annual Statement;
    (iii) Funding a replacement reserve to carry out eligible activities 
in future years, subject to the restrictions set forth in paragraph (f) 
of this section;
    (iv) Preparing the Comprehensive Plan and Five-Year Action Plan 
under Sec. 968.315 and the Annual Submission under Sec. 968.325, 
including reasonable costs necessary to assist residents to participate 
in a meaningful way in the planning, implementation and monitoring 
process; and
    (v) Carrying out an audit, in accordance with 24 CFR part 44.
    (2) For a CIAP PHA, the eligible costs are activities approved by 
HUD and included in an approved CIAP budget.
    (b) Demonstration of viability. Except in the case of emergency 
work, a PHA

[[Page 476]]

shall only expend funds on a development for which the PHA has 
determined, and HUD agrees, that the completion of the improvements and 
replacements (for CGP PHAs, as identified in the Comprehensive Plan) 
will reasonably ensure the long-term physical and social viability of 
the development at a reasonable cost (as defined in Sec. 968.105), or 
for essential non-routine maintenance needed to keep the property 
habitable until the demolition or disposition application is approved 
and residents are relocated.
    (c) Physical improvements. Eligible costs include alterations, 
betterments, additions, replacements, and non-routine maintenance that 
are necessary to meet the modernization and energy conservation 
standards prescribed in Sec. 968.115. These mandatory standards may be 
exceeded when a PHA (and HUD in the case of CIAP PHAs) determines that 
it is necessary or highly desirable for the long-term physical and 
social viability of the individual development. Development specific 
work includes work items that are modest in design and cost, but still 
blend in with the design and architecture of the surrounding community 
by including amenities, quality materials and design and landscaping 
features that are customary for the locality and culture. The Field 
Office has the authority to approve nondwelling space where such space 
is needed to administer, and is of direct benefit to, the public housing 
program. If demolition or disposition is proposed, a PHA shall comply 
with 24 CFR part 970. Additional dwelling space may be added to existing 
units.
    (d) Turnkey III developments. (1) General. Eligible physical 
improvement costs for existing Turnkey III developments are limited to 
work items that are not the responsibility of the homebuyer families and 
that are related to health and safety, correction of development 
deficiencies, physical accessibility, energy audits and cost-effective 
energy conservation measures, or LBP testing, interim containment, 
professional risk assessment and abatement. In addition, management 
improvements are eligible costs.
    (2) Ineligible costs. Routine maintenance or replacements, and items 
that are the responsibility of the homebuyer families are ineligible 
costs.
    (3) Exception for vacant or non-homebuyer-occupied Turnkey III 
units.
    (i) Notwithstanding the requirements of paragraph (d)(1) of this 
section, a PHA may substantially rehabilitate a Turnkey III unit 
whenever the unit becomes vacant or is occupied by a non-homebuyer 
family in order to return the unit to the inventory or make the unit 
suitable for homeownership purposes. A PHA that intends to use funds 
under this paragraph must identify in its CIAP application or CGP annual 
submission the estimated number of units proposed for substantial 
rehabilitation and subsequent sale. In addition, a PHA must demonstrate, 
for each of the Turnkey III units proposed to be substantially 
rehabilitated, that it has homebuyers who both are eligible for 
homeownership, in accordance with the requirements of 24 CFR part 904, 
and have demonstrated their intent to be placed into the unit.
    (ii) Before a PHA may be approved for substantial rehabilitation of 
a unit under this paragraph, it must first deplete any Earned Home 
Payments Account (EHPA) or Non-Routine Maintenance Reserve (NRMR) 
pertaining to the unit, and request the maximum amount of operating 
subsidy. Any increase in the value of a unit caused by its substantial 
rehabilitation under this paragraph shall be reflected solely by its 
subsequent appraised value, and not by an automatic increase in its 
selling price.
    (e) Demolition and conversion costs. Eligible costs include:
    (1) Demolition of dwelling units or non-dwelling facilities, where 
the demolition is approved by HUD under 24 CFR part 970, and related 
costs, such as clearing and grading the site after demolition and 
subsequent site improvement to benefit the remaining portion of the 
existing development; and
    (2) Conversion of existing dwelling units to different bedroom sizes 
or to non-dwelling use.
    (f) Replacement reserve costs (for CGP only). (1) Funding a 
replacement reserve to carry out eligible activities in future years is 
an eligible cost, subject to the following restrictions:

[[Page 477]]

    (i) Annual CGP funds are not needed for existing needs, as 
identified by the PHA in its needs assessments; or
    (ii) A physical improvement requires more funds than the PHA would 
receive under its annual formula allocation; or
    (iii) A management improvement requires more funds than the PHA may 
use under its 20% limit for management improvements (except as provided 
in paragraph (n)(2)(i) of this section), and the PHA needs to save a 
portion of its annual grant, in order to combine it with a portion of 
subsequent year(s) grants to fund the work item.
    (2) The PHA shall invest replacement reserve funds so as to generate 
a return equal to or greater than the average 91-day Treasury bill rate.
    (3) Interest earned on funds in the replacement reserve will not be 
added to the PHA's income in the determination of a PHA's operating 
subsidy eligibility, but must be used for eligible modernization costs.
    (4) To the extent that its annual formula allocation and any 
unobligated balances of modernization funds are not adequate to meet 
emergency needs, a PHA must first use its replacement reserve, where 
funded, to meet emergency needs, before requesting funds from the 
reserve under Sec. 968.104. Use of the replacement reserve is not 
required for emergencies if the amount that otherwise would be used from 
that reserve is an accumulation from application of the replacement 
housing factor (Sec. 968.103(e) (3) and (f)(4)) that is necessary so 
that replacement housing can be provided efficiently and effectively.
    (5) A PHA is not required to use its replacement reserve for costs 
related to natural and other disasters.
    (g) Management improvement costs. (1) General. Management 
improvements that are development-specific or PHA-wide in nature are 
eligible costs where needed to upgrade the operation of the PHA's 
developments, sustain physical improvements at those developments or 
correct management deficiencies. A PHA's ongoing operating expenses are 
ineligible management improvement costs. For CIAP PHAs, management 
improvements may be funded as a single work item.
    (2) Eligible costs. Eligible costs include:
    (i) General management improvement costs. Eligible costs include 
general management improvement costs, such as: management, financial, 
and accounting control systems of the PHA; adequacy and qualifications 
of PHA personnel, including training; resident programs and services 
through the coordination of the provision of social services from tribal 
or local government or other public and private entities; resident and 
development security; resident selection and eviction; occupancy; rent 
collection; maintenance; and equal opportunity.
    (ii) Economic development costs. Eligible costs include job training 
for residents and resident business development activities, for the 
purpose of carrying out activities related to the modernization-funded 
management and physical improvements. HUD encourages PHAs, to the 
greatest extent feasible, to hire residents as trainees, apprentices, or 
employees to carry out the modernization program under this part, and to 
contract with resident-owned businesses for modernization work.
    (iii) Resident management costs. Eligible costs include technical 
assistance to a resident council or resident management corporation 
(RMC), as defined in part 964, in order to: determine the feasibility of 
resident management to carry out management functions for a specific 
development or developments; train residents in skills directly related 
to the operations and management of the development(s) for potential 
employment by the RMC; train RMC board members in community 
organization, board development, and leadership; and assist in the 
formation of an RMC.
    (iv) Resident homeownership costs. Eligible costs are limited to the 
study of the feasibility of converting rental to homeownership units and 
the preparation of an application for conversion to homeownership or 
sale of units.
    (v) Preventive maintenance system. Eligible costs include the 
establishment of a preventive maintenance system or improvement of an 
existing system. A preventive maintenance system must provide for 
regular inspections of

[[Page 478]]

building structures, systems and units and distinguish between work 
eligible for operating funds (routine maintenance) and work eligible for 
modernization funding (non-routine maintenance).
    (h) Drug elimination costs. Eligible costs include drug elimination 
activities involving management or physical improvements, as specified 
by HUD.
    (i) LBP costs. Eligible costs include professional risk assessments 
and interim containment of family developments/buildings constructed 
before 1980, testing and abatement of family developments/buildings 
constructed before 1978, and costs for insurance coverage for pollution 
hazards associated with the testing, abatement, clean-up and disposal of 
LBP on applicable surfaces of family developments/buildings constructed 
before 1978.
    (j) Administrative costs. Administrative costs necessary for the 
planning, design, implementation and monitoring of the physical and 
management improvements are eligible costs and include the following:
    (1) Salaries. The salaries of non-technical and technical PHA 
personnel assigned full-time or part-time to modernization are eligible 
costs only where the scope and volume of the work are beyond that which 
could be reasonably expected to be accomplished by such personnel in the 
performance of their non-modernization duties. A PHA shall properly 
apportion to the appropriate program budget any direct charges for the 
salaries of assigned full- or part-time staff (e.g., to the CIAP, CGP or 
operating budget);
    (2) Employee benefit contributions. PHA contributions to employee 
benefit plans on behalf of non-technical and technical PHA personnel are 
eligible costs in direct proportion to the amount of salary charged to 
the CIAP or CGP, as appropriate;
    (3) Preparation of CIAP or CGP required documents;
    (4) Resident participation. Eligible costs include those associated 
with ensuring the meaningful participation of residents in the 
development of the CIAP Application or the CGP Annual Submission and 
Comprehensive Plan and the implementation and monitoring of the approved 
modernization program; and
    (5) Other administrative costs, such as telephone and facsimile, as 
specified by HUD.
    (k) Audit costs (CGP only). Eligible costs are limited to the 
portion of the audit costs that are attributable to the modernization 
program.
    (l) Architectural/engineering and consultant fees. Eligible costs 
include fees for planning, identification of needs, detailed design 
work, preparation of construction and bid documents and other required 
documents, LBP professional risk assessments and testing, and inspection 
of work in progress.
    (m) Relocation costs. Eligible costs include relocation and other 
assistance for permanent and temporary relocation, as a direct result of 
rehabilitation, demolition or acquisition for a modernization-funded 
activity, where this assistance is required by 49 CFR part 24 or 
Sec. 968.108.
    (n) Cost limitations. (1) CIAP costs. (i) Management improvement 
costs. Management improvement costs shall not exceed a percentage of the 
CIAP funds available to a Field Office in a particular FFY, as specified 
by HUD.
    (ii) Planning costs. Planning costs are costs incurred before HUD 
approval of the CIAP application and which are related to developing the 
CIAP application or carrying out eligible modernization planning, such 
as detailed design work, preparation of solicitations, and LBP 
professional risk assessment and testing. Planning costs may be funded 
as a single work item. If a PHA incurs planning costs without prior HUD 
approval, a PHA does so with the full understanding that the costs may 
not be reimbursed upon approval of the CIAP application. Planning costs 
shall not exceed 5 percent of the CIAP funds available to a Field Office 
in a particular FFY.
    (2) CGP costs. (i) Management improvement costs. Notwithstanding the 
full fungibility of work items, a PHA shall not use more than a total of 
20 percent of its annual grant for management improvement costs in 
account 1408, unless specifically approved by HUD or the PHA has been 
designated as both an over-all high performer and mod-high performer 
under the PHMAP.

[[Page 479]]

    (ii) Administrative costs. Notwithstanding the full fungibility of 
work items, a PHA shall not use more than a total of 10 percent of its 
annual grant on administrative costs in account 1410, excluding any 
costs related to lead-based paint or asbestos testing (whether conducted 
by force account employees or by a contractor), in-house architectural/
engineering (A/E) work, or other special administrative costs required 
by State or local law, unless specifically approved by HUD.
    (3) Program benefit. Where the physical or management improvement, 
including administrative cost, will benefit programs other than Public 
Housing, such as Section 8 or local revitalization programs, eligible 
costs are limited to the amount directly attributable to the public 
housing program.
    (4) No duplication. Any eligible cost for an activity funded by CIAP 
or CGP shall not also be funded by any other HUD program.
    (o) Ineligible costs. Ineligible costs include:
    (1) Luxury improvements;
    (2) Indirect administrative costs (overhead), as defined in OMB 
Circular A-87;
    (3) Public housing operating assistance;
    (4) Direct provision of social services, through either force 
account or contract labor, from FFY 1996 and future FFYs funds, unless 
otherwise provided by law; and
    (5) Other ineligible activities, as specified by HUD.
    (p) Expanded eligibility for FFY 1995 and prior year modernization 
funds. The FFY 1995 Rescissions Act expanded the eligible activities 
that may be funded with CIAP or CGP assistance provided from FFY 1995 
and prior FFY funds. Such activities include, but are not limited to:
    (1) New construction or acquisition of additional public housing 
units, including replacement units;
    (2) Modernization activities related to the public housing portion 
of housing developments held in partnership, or cooperation with non-
public housing entities; and
    (3) Other activities related to public housing, including activities 
eligible under the Urban Revitalization Demonstration (HOPE VI).

[61 FR 8738, Mar. 5, 1996, as amended at 62 FR 27126, May 16, 1997; 63 
FR 46108, Aug. 28, 1998]



Sec. 968.115  Modernization and energy conservation standards.

    All improvements funded under this part shall:
    (a) Meet the modernization standards as prescribed by HUD;
    (b) Incorporate cost-effective energy conservation measures, 
identified in the PHA's most recently updated energy audit, conducted 
pursuant to part 965, subpart C;
    (c) Where changing or installing a new utility system, conduct a 
life-cycle cost analysis, reflecting installation and operating costs; 
and
    (d) Provide decent, safe, and sanitary living conditions in PHA-
owned and PHA-operated public housing.

[61 FR 8740, Mar. 5, 1996]



Sec. 968.120  Force account.

    (a) For both CIAP and CGP, a PHA may undertake the activities using 
force account labor, only where specifically approved by HUD in the CIAP 
budget or CGP Annual Statement, except no prior HUD approval is required 
where the PHA is designated as both an overall high performer and 
Modernization high performer under the PHMAP.
    (b) If the entirety of modernization activity (including the 
planning and architectural design of the rehabilitation) is administered 
by the RMC, the PHA shall not retain for any administrative or other 
reason, any portion of the modernization funds provided, unless the PHA 
and the RMC provide otherwise by contract.

[61 FR 8740, Mar. 5, 1996]



Sec. 968.125  Initiation of modernization activities.

    After HUD has approved the modernization program and entered into an 
ACC amendment with the PHA, a PHA shall undertake the modernization 
activities and expenditures set forth in its approved CIAP budget or CGP 
Annual Statement/Five-Year Action Plan in a timely, efficient and 
economical manner. All approved funding must be obligated within two 
years of approval

[[Page 480]]

and expended within three years of approval unless HUD approves a longer 
time period in the PHA's implementation schedule, as set forth in the 
CIAP budget or CGP Annual Statement. HUD may approve a longer time 
period for such reasons as the large size of the grant or the complexity 
of the work.

[61 FR 8741, Mar. 5, 1996]



Sec. 968.130  Fund requisitions.

    To draw down modernization funds against the approved CIAP budget or 
CGP Annual Statement, a PHA shall comply with requirements prescribed by 
HUD.

[61 FR 8741, Mar. 5, 1996]



Sec. 968.135  Contracting requirements.

    In addition to the requirements specified in 24 CFR parts 5, 85, and 
965, subpart A, and Sec. 968.110(e), the following provisions apply:
    (a) Architect/engineer and other professional services contracts. 
For CIAP only and notwithstanding 24 CFR 85.36(g), a PHA shall comply 
with the following HUD requirements:
    (1) Where the proposed contract amount exceeds the HUD-established 
threshold, submit the contract for prior HUD approval before execution 
or issuance; or
    (2) Where the proposed contract amount does not exceed the HUD-
established threshold, certify that the scope of work is consistent with 
the originally approved modernization program, and that the amount is 
appropriate and does not result in the total HUD-approved CIAP budget 
being exceeded.
    (b) Assurance of completion. For both CIAP and CGP and 
notwithstanding 24 CFR 85.36(h), for each construction contract over 
$100,000, the contractor shall furnish a bid guarantee from each bidder 
equivalent to 5% of the bid price; and one of the following:
    (1) A performance and payment bond for 100 percent of the contract 
price; or
    (2) Separate performance and payment bonds, each for 50% or more of 
the contract price; or
    (3) A 20% cash escrow; or
    (4) a 25% irrevocable letter of credit.
    (c) Construction solicitations. For CIAP only and notwithstanding 24 
CFR 85.36(g), a PHA shall comply with HUD requirements to either:
    (1) Where the estimated contract amount exceeds the HUD-established 
threshold, submit a complete construction solicitation for prior HUD 
approval before issuance; or
    (2) Where the estimated contract amount does not exceed the HUD-
established threshold, certify receipt of the required architect's/
engineer's certification that the construction documents accurately 
reflect HUD-approved work and meet the modernization and energy 
conservation standards and that the construction solicitation is 
complete and includes all mandatory items.
    (d) Contract awards. (1) For CIAP only, a PHA shall obtain HUD 
approval of the proposed award of a contract if the contract work is 
inconsistent with the originally approved modernization program or the 
procurement meets the criteria set forth in 24 CFR 85.36(g)(2)(i) 
through (iv). In all other instances, a PHA shall make the award without 
HUD approval after the PHA has certified that:
    (i) The solicitation and award procedures were conducted in 
compliance with State or local laws and Federal requirements;
    (ii) The award does not meet the criteria in 24 CFR 85.36(g)(2)(i) 
through (iv) for prior HUD approval; and
    (iii) The contractor is not on the Lists of Parties Excluded from 
Federal Procurement or Nonprocurement Programs;
    (2) For CGP only, a PHA shall obtain HUD approval of the proposed 
award of a contract if the procurement meets the criteria set forth in 
24 CFR 85.36(g)(2)(i) through (iv).
    (e) Contract modifications. For CIAP only and notwithstanding 24 CFR 
85.36(g), except in an emergency endangering life or property, a PHA 
shall comply with HUD requirements to either:
    (1) Where the proposed contract modification exceeds the HUD-
established threshold, submit the proposed modification for prior HUD 
approval before issuance; or
    (2) Where the proposed contract modification does not exceed the 
HUD-established threshold, certify that the

[[Page 481]]

proposed modification is within the scope of the contract and that any 
additional costs are within the total HUD-approved CIAP budget amount.
    (f) Construction requirements. Where indicated by poor performance, 
a PHA may be required to submit to HUD periodic progress reports and, 
for prior HUD approval, construction completion documents above a HUD-
specified amount. For CGP only, a PHA is notified of additional 
construction requirements by a notice of deficiency or a corrective 
action order.
    (g) Reward for high performers. For CIAP only, if a PHA is both an 
overall high performer and a modernization high performer under the 
Public Housing Management Assessment Program (PHMAP), HUD will not 
establish thresholds, and the PHA is not required to obtain prior HUD 
approval, under paragraphs (a), (c), and (e) of this section.

[61 FR 8741, Mar. 5, 1996]



Sec. 968.140  On-site inspections.

    It is the responsibility of the PHA, not HUD, to provide, by 
contract or otherwise, adequate and competent supervisory and inspection 
personnel during modernization, whether work is performed by contract or 
force account labor and with or without the services of an architect/
engineer, to ensure work quality and progress.

[58 FR 13938, Mar. 15, 1993. Redesignated at 61 FR 8741, Mar. 5, 1996]



Sec. 968.145  Fiscal closeout.

    (a) Actual modernization cost certificate (AMCC). Upon expenditure 
by the PHA of all funds, or termination by HUD of the activities funded 
in a modernization program, a PHA shall submit the AMCC, in a form 
prescribed by HUD, to HUD for review and approval for audit. After audit 
verification, HUD shall approve the AMCC.
    (b) Audit. The audit shall follow the guidelines prescribed in 24 
CFR part 44, Non-Federal Government Audit Requirements. If the pre-audit 
or post-audit AMCC indicates that there are excess funds, a PHA shall 
immediately remit the excess funds as directed by HUD. If the pre-audit 
or post-audit AMCC discloses unauthorized or ineligible expenditures, a 
PHA shall immediately take such corrective actions as HUD may direct.

[61 FR 8741, Mar. 5, 1996]



 Subpart B--Comprehensive Improvement Assistance Program (For PHAs That 
                  Own or Operate Fewer Than 250 Units)

    Source: 61 FR 8741, Mar. 5, 1996, unless otherwise noted.



Sec. 968.205  Definitions.

    In addition to the definitions in Sec. 968.105, the following 
definitions apply to this subpart:
    Emergency Modernization (CIAP). A type of modernization program for 
a development that is limited to physical work items of an emergency 
nature that poses an immediate threat to the health or safety of 
residents or is related to fire safety, and that must be corrected 
within one year of CIAP funding approval.
    Management capability. A PHA has management capability if it is:
    (1) Not designated as Troubled under part 901 of this chapter, 
Public Housing Management Assessment Program (PHMAP); or
    (2) Designated as Troubled, but has a reasonable prospect of 
acquiring management capability through CIAP-funded management 
improvements and administrative support. A Troubled PHA is eligible for 
Emergency Modernization only, unless it is making reasonable progress 
toward meeting the performance targets established in its memorandum of 
agreement or equivalent under Sec. 901.140 of this chapter or has 
obtained alternative oversight of its management functions.
    Modernization capability. A PHA has modernization capability if it 
is:
    (1) Not designated as Modernization Troubled under part 901 of this 
chapter, PHMAP; or
    (2) Designated as Modernization Troubled, but has a reasonable 
prospect of acquiring modernization capability through CIAP-funded 
management improvements and administrative support, such as hiring staff 
or

[[Page 482]]

contracting for assistance. A Modernization Troubled PHA is eligible for 
Emergency Modernization only, unless it is making reasonable progress 
toward meeting the performance targets established in its memorandum of 
agreement or equivalent under Sec. 901.140 of this chapter or has 
obtained alternative oversight of its modernization functions. Where a 
PHA does not have a funded modernization program in progress, the Field 
Office shall determine whether the PHA has a reasonable prospect of 
acquiring modernization capability through hiring staff or contracting 
for assistance.
    Other Modernization (modernization other than emergency). A type of 
modernization program for a development that includes one or more 
physical work items, where HUD determines that the physical improvements 
are necessary and sufficient to extend substantially the useful life of 
the development, and/or one or more development specific or PHA-wide 
management work items (including planning costs), and/or lead-based 
paint testing, professional risk assessments, interim containment, and 
abatement.
    Work item. Any separately identifiable unit of work constituting a 
part of a modernization program.



Sec. 968.210  Procedures for obtaining approval of a modernization program.

    (a) HUD notification. After modernization funds for a particular FFY 
become available, HUD shall publish in the Federal Register a notice of 
funding availability (NOFA), the time frame for submission of the CIAP 
Application, and other pertinent information.
    (b) PHA consultation with local officials and residents/homebuyers. 
A PHA shall develop the application in consultation with local officials 
and residents/homebuyers, as set forth in Sec. 968.215.
    (c) PHA application. A PHA shall submit to HUD an application, in a 
form prescribed by HUD. Where a PHA has not included some of its 
developments in the CIAP application, HUD may not consider funding any 
non-emergency work at excluded developments or subsequently approve use 
of leftover funds at excluded developments.
    (d) Completeness Review. To be eligible for processing, an 
application must be physically received by HUD by the time and date 
specified in the NOFA. Immediately after the application deadline, HUD 
shall perform a completeness review to determine whether the application 
is complete, responsive to the NOFA, and acceptable for technical 
processing.
    (1) If the application form or any other essential document, as 
specified in the NOFA, is missing, the PHA's application will be 
considered substantially incomplete and, therefore, ineligible for 
further processing. HUD shall immediately notify the PHA in writing.
    (2) If other required documents, including certifications, as 
specified in the NOFA, are missing or there is a technical mistake, such 
as no signature on a submitted form, HUD shall immediately notify the 
PHA in writing to submit or correct the deficiency within a specified 
period of time from the date of HUD's written notification. This is not 
additional time to substantially revise the application. Deficiencies 
which may be corrected at this time are inadvertently omitted documents 
or clarifications of previously submitted material and other changes 
which are not of such a nature as to improve the competitive position of 
the application.
    (3) If a PHA fails to submit or correct the items within the 
required time period, the PHA's application will be ineligible for 
further processing. HUD shall immediately notify the PHA in writing 
after this occurs.
    (4) A PHA may submit an application for Emergency Modernization 
whenever needed.
    (e) Eligibility Review. (1) Eligibility for processing. To be 
eligible for processing:
    (i) Each eligible development for which work is proposed has reached 
the Date of Full Availability (DOFA) and is under ACC at the time of 
CIAP application submission; and
    (ii) Where funded under Major Reconstruction of Obsolete Projects 
(MROP) after FFY 1988, the development/building/unit has reached DOFA 
or, where funded during FFYs 1986-1988, all MROP funds for the 
development/building have been expended.

[[Page 483]]

    (2) Eligibility for processing on reduced scope. When the following 
conditions exist, a PHA will be reviewed on a reduced scope:
    (i) Section 504 compliance. Where a PHA has not completed all 
required structural changes to meet the need for accessible units, as 
identified in the PHA's Section 504 needs assessment, the PHA is 
eligible for processing only for Emergency Modernization or physical 
work needed to meet Section 504 requirements.
    (ii) Lead-based paint (LBP) testing compliance. Where a PHA has not 
complied with the statutory requirement to complete LBP testing on all 
pre-1978 family units, the PHA is eligible for processing only for 
Emergency Modernization or work needed to complete the testing.
    (iii) Fair Housing and Equal Opportunity (FHEO) compliance. Where a 
PHA has not complied with FHEO requirements set forth in Sec. 968.110, 
as evidenced by an enforcement action, finding or determination, the PHA 
is eligible for processing only for Emergency Modernization or for work 
needed to remedy the civil rights deficiencies--unless the PHA is 
implementing a voluntary compliance agreement or settlement agreement 
designed to correct the area(s) of noncompliance. The enforcement 
actions, findings, or determinations that trigger limited eligibility 
are described in paragraphs (e)(2)(iii) (A) through (E) of this section:
    (A) A pending proceeding against the PHA based upon a charge of 
discrimination issued under the Fair Housing Act. A charge of 
discrimination is a charge under section 810(g)(2) of the Fair Housing 
Act (42 U.S.C. 3610(g)(2)), issued by the Department's General Counsel 
or legally authorized designee;
    (B) A pending civil rights suit against the PHA, referred by the 
Department's General Counsel and instituted by the Department of 
Justice;
    (C) Outstanding HUD findings of PHA noncompliance with civil rights 
statutes and executive orders specified in 24 CFR part 5 and 
Sec. 968.110 or implementing regulations, as a result of formal 
administrative proceedings;
    (D) A deferral of the processing of applications from the PHA 
imposed by HUD under Title VI of the Civil Rights Act of 1964 (42 U.S.C. 
2000d-1) and HUD implementing regulations (24 CFR 1.8), the Attorney 
General's Guidelines (28 CFR 50.3), and procedures (HUD Handbook 
8040.1), or under Section 504 of the Rehabilitation Act of 1973 (29 
U.S.C. 794) and HUD implementing regulations (24 CFR 8.57); or
    (E) An adjudication of a violation under any of the civil rights 
authorities specified in 24 CFR part 5 and Sec. 968.110 in a civil 
action filed against the PHA by a private individual.
    (f) Technical processing. After all CIAP applications are reviewed 
for eligibility, HUD shall categorize the eligible PHAs and their 
developments into two processing groups: Group 1 for Emergency 
Modernization; and Group 2 for Other Modernization. PHA developments may 
be included in both groups and the same development may be in each 
group. However, a PHA is only required to submit one CIAP application. 
Group 1 developments are not subject to the technical review rating and 
ranking and the long-term viability and reasonable cost determination. 
Group 2 developments are subject to the technical review rating and 
ranking and the long-term viability and reasonable cost determination. 
Preference will be given to PHAs which request assistance for 
developments having conditions which threaten the health or safety of 
the residents or having a significant number of vacant, substandard 
units, and which have demonstrated a capability of carrying out the 
proposed activities.
    (g) Rating on technical review factors. After categorizing the 
eligible PHAs/developments into Group 1 and Group 2, HUD shall review 
and rate each Group 2 PHA on each of the following technical review 
factors:
    (1) Extent and urgency of need, including need to comply with 
statutory, regulatory or court-ordered deadlines;
    (2) Extent of vacancies, where the vacancies are not due to 
insufficient demand;
    (3) PHA's modernization capability;
    (4) PHA's management capability;
    (5) Degree of resident involvement in PHA operations;

[[Page 484]]

    (6) Degree of PHA activity in resident initiatives, including 
resident management, economic development, and drug elimination efforts;
    (7) Degree of resident employment;
    (8) Local government support for proposed modernization; and
    (9) Such additional factors as the Secretary determines necessary 
and appropriate.
    (h) Ranking and selection for Joint Review. After rating all Group 2 
PHAs/developments, HUD shall then rank each Group 2 PHA based on its 
total score, list Group 2 PHAs in descending order, subject to 
confirmation of need and cost at Joint Review, and identify for Joint 
Review selection the highest PHA ranking applications in Group 2 and 
other Group 2 PHAs with lower ranking applications, but with high 
priority needs, which most reasonably approximate the amount of 
modernization which can be funded. High priority needs are non-emergency 
needs, but related to: health or safety; vacant, substandard units; 
structural or system integrity; or compliance with statutory, regulatory 
or court-ordered deadlines. All Group 1 applications are automatically 
selected for Joint Review.
    (i) Joint Review. The purpose of Joint Review is for HUD to discuss 
with a PHA the proposed modernization program, as set forth in the CIAP 
Application, review long-term viability and cost reasonableness 
determinations, and determine the size of the grant, if any, to be 
awarded. HUD shall notify each PHA whose application has been selected 
for further processing as to whether Joint Review will be conducted on-
site or off-site (e.g., by telephone or in-office meeting). A PHA shall 
prepare for Joint Review by preparing a draft CIAP budget and reviewing 
the other items to be covered during Joint Review, as prescribed by HUD. 
If conducted on-site, Joint Review may include an inspection of the 
proposed physical work. PHAs not selected for Joint Review will be 
advised in writing of the reasons for non-selection.
    (j) Funding decisions. After all Joint Reviews are completed, HUD 
shall adjust the PHAs, developments, and work items to be funded and the 
amounts to be awarded, on the basis of information obtained from Joint 
Reviews, environmental reviews, and FHEO review, and make the funding 
decisions. A PHA will not be selected for CIAP funding if there is a 
duplication of funding. HUD shall select all bona fide emergencies in 
Group 1 before funding Group 2 applications. After funding announcement, 
HUD shall request a funded PHA to submit a CIAP budget, including an 
implementation schedule, and any other required documents, including the 
ACC amendment. PHAs not selected for funding will be advised in writing 
of the reasons for non-selection.
    (k) ACC amendment. After HUD approval of the CIAP budget, HUD and 
the PHA shall enter into an ACC amendment in order for the PHA to draw 
down modernization funds. The ACC amendment shall require low-income use 
of the housing for not less than 20 years from the date of the ACC 
amendment (subject to sale of homeownership units in accordance with the 
terms of the ACC). The PHA Executive Director, where authorized by the 
Board of Commissioners and permitted by State law, may sign the ACC 
amendment on behalf of the PHA. HUD has the authority to condition an 
ACC amendment (e.g., to require a PHA to hire a modernization 
coordinator or contract administrator to administer its modernization 
program).
    (l) Declaration of trust. As HUD may require, the PHA shall execute 
and file for record a Declaration of Trust, as provided under the ACC, 
to protect the rights and interests of HUD throughout the 20-year period 
during which the PHA is obligated to operate its developments in 
accordance with the ACC, the Act, and HUD regulations and requirements.



Sec. 968.215  Resident and homebuyer participation.

    A PHA shall establish a Partnership Process, as defined in 
Sec. 968.105, to develop, implement and monitor the CIAP. Before 
submission of the CIAP application, a PHA shall consult with the 
residents, the resident organization, or the resident management 
corporation (see part 964, subpart C of this

[[Page 485]]

chapter) (herein referred to as the resident) of the development(s) 
being proposed for modernization, regarding its intent to submit an 
application and to solicit resident comments. A PHA shall give residents 
a reasonable opportunity to present their views on the proposed 
modernization and alternatives to it and shall give full and serious 
consideration to resident recommendations. A PHA shall respond in 
writing to the residents, indicating its acceptance or rejection of 
resident recommendations, consistent with HUD requirements and the PHA's 
own determination of efficiency, economy, and need. After HUD approval 
of the modernization program, a PHA shall inform the residents of the 
approved work items and its progress during implementation. Where HUD 
does not approve the modernization program, a PHA shall so inform the 
residents.



Sec. 968.225  Budget revisions.

    (a) A PHA shall not incur any modernization cost in excess of the 
total HUD-approved CIAP budget. A PHA shall submit a budget revision, in 
a form prescribed by HUD, if the PHA plans to deviate from the 
originally approved modernization program, as it was competitively 
funded, by deleting or substantially revising approved work items or 
adding new work items that are unrelated to the originally approved 
modernization program, or to change the method of accomplishment from 
contract to force account labor, except as provided in paragraph (b)(4) 
of this section.
    (b) In addition to the requirements of paragraph (a) of this 
section, a PHA shall comply with the following requirements:
    (1) A PHA is not required to obtain prior HUD approval if, in order 
to complete the originally approved modernization program, the PHA needs 
to delete or revise approved work items or add new related work items 
consistent with the original modernization program. In such case, a PHA 
shall certify that the revisions are necessary to carry out the approved 
work and do not result in substantial changes to the competitively 
funded modernization program.
    (2) A PHA shall not incur any modernization cost on behalf of any 
development that is not covered by the original CIAP application.
    (3) Where there are funds leftover after completion of the 
originally approved modernization program, a PHA may, without prior HUD 
approval, use the remaining funds to carry out eligible modernization 
activities at developments covered by the original CIAP application.
    (4) If a PHA is both an overall high performer and a modernization 
high performer under the Public Housing Management Assessment Program 
(PHMAP), the PHA is not required to obtain prior HUD approval to change 
the method of accomplishment from contract to force account labor.



Sec. 968.230  Progress reports.

    For each six-month period ending March 31 and September 30, until 
completion of the modernization program or expenditure of all funds, a 
PHA shall submit to HUD a progress report, in a form prescribed by HUD. 
Where HUD determines that a PHA is having implementation problems, HUD 
may require more frequent reporting.



Sec. 968.235  Time extensions.

    A PHA shall not obligate or expend funds after the obligation or 
expenditure deadline date approved by HUD in the original implementation 
schedule without a time extension, as follows:
    (a) Certification. A PHA may extend an obligation or expenditure 
deadline date no later than 30 calendar days after the existing deadline 
date, without prior HUD approval, for a period commensurate with the 
delay, where the PHA certifies that the delay is due to reasons outside 
of the PHA's control, such as:
    (1) Need to use leftover funds from a completed modernization 
program for additional work;
    (2) Unforeseen delays in contracting or contract administration;
    (3) Litigation; and
    (4) Delay by HUD or other institutions. Delay by the PHA's staff or 
Board of Commissioners or a change in the Executive Director is not 
considered to be outside of the PHA's control.

[[Page 486]]

    (b) Prior HUD approval. Where a PHA is unable to meet an obligation 
or expenditure deadline date and the delay is due to reasons within the 
PHA's control, the PHA may request HUD approval of a time extension no 
later than 30 calendar days after the deadline date, to avoid recapture 
of funds. The request shall include an explanation of the delay, steps 
take to prevent future delay, and the requested extension.



Sec. 968.240  HUD review of PHA performance.

    HUD shall periodically review PHA performance in carrying out its 
approved modernization program to determine compliance with HUD 
requirements, the adequacy of a PHA's inspections as evidenced by the 
quality of work, and the timeliness of the work. HUD's review may be 
conducted either in-office or on-site. Where conducted in-office, a PHA 
shall forward any requested documents to HUD for post-review. Where 
deficiencies are noted, a PHA shall take such corrective actions as HUD 
may direct.



Subpart C--Comprehensive Grant Program (for PHAs That Own or Operate 250 
                      or More Public Housing Units)

    Source: 57 FR 5575, Feb. 14, 1992, unless otherwise noted.



Sec. 968.305  Definitions.

    In addition to the definitions in Sec. 968.105, the following 
definitions apply to this subpart:
    Action plan. A plan of the actions to be funded by a PHA over a 
period of five years (including a PHA's proposed allocation of its 
modernization funds to a reserve established under Sec. 968.112(f)) to 
make the necessary physical and management improvements identified in 
the PHA's comprehensive plan. The plan shall be based upon HUD's and the 
PHA's best estimates of the funding reasonably expected to become 
available under the next five-year period. The action plan is updated 
annually to reflect a rolling five-year base. (See Sec. 968.315(e)(5).)
    Annual Statement. A work statement covering the first year of the 
Five-Year Action Plan and setting forth the major work categories and 
costs by development or PHA-wide for the current FFY grant, as well as a 
summary of costs by development account and implementation schedules for 
obligation and expenditure of the funds.
    Annual Submission. A collective term for all documents which the PHA 
must submit to HUD for review and approval before accessing the current 
FFY grant funds. Such documents include the Annual Statement, Work 
Statements for years two through five of the Five-Year Action Plan, 
local government statement, PHA Board Resolution, materials 
demonstrating the partnership process and any other documents as 
prescribed by HUD.
    Chief executive officer (CEO). The CEO of a unit of general local 
government means the elected official or the legally designated 
official, who has the primary responsibility for the conduct of that 
entity's governmental affairs. Examples of the CEO of a unit of general 
local government are: the elected mayor of a municipality; the elected 
county executive of a county; the chairperson of a county commission or 
board in a county that has no elected county executive; or the official 
designated pursuant to law by the governing body of a unit of general 
local government (e.g., city manager).
    Comprehensive plan. A plan prepared by a PHA and approved by HUD 
setting forth all of the physical and management improvement needs of 
the PHA and its public housing developments, indicating the relative 
urgency of needs and which includes the PHA's action plan, cost 
estimates, and required local government and PHA certifications. The 
comprehensive plan may be revised, as necessary, but must be revised at 
least every sixth year. (See Sec. 968.315(e).)
    Emergency work. Physical work items of an emergency nature, posing 
an immediate threat to the health or safety of residents, which must be 
completed within one year of CGP funding. Management improvements are 
not eligible as emergency work and, therefore, must be covered by the 
comprehensive

[[Page 487]]

plan (including the action plan) before the PHA may carry them out.
    Fungibility. Fungibility is a concept which permits a PHA to 
substitute any work item from the latest approved Five-Year Action Plan 
to any previously approved CIAP budget or CGP Annual Statement and to 
move work items among approved budgets without prior HUD approval.
    Improvement plan. A document developed by the PHA and approved by 
HUD specifying the actions to be taken, including timetables, to correct 
deficiencies identified as a result of an assessment, either under PHMAP 
or pursuant to HUD monitoring or audit findings.
    Memorandum of Agreement (MOA). A binding contractual agreement 
between HUD and a troubled PHA, or a mod troubled PHA, which is designed 
to bring about significant, expeditious and long-lasting improvements in 
the PHA's management of its PHA-owned units. A MOA is required for each 
PHA designated as troubled or mod troubled.
    Resident groups. Democratically elected resident groups such as PHA-
wide resident groups, area-wide resident groups, single development 
resident groups, or RMCs.
    Substantial rehabilitation. A modernization program for a 
development which provides for all physical and management improvements 
needed to meet the modernization and energy conservation standards and 
to ensure its long-term physical and social viability.
    Work Statements. Work Statements cover the second through the fifth 
years of the Five-Year Action Plan and set forth the major work 
categories and costs by development or PHA-wide which the PHA intends to 
undertake in each year of years two through five. In preparing these 
Work Statements, the PHA shall assume that the current FFY formula 
amount will be available in each year of years two through five.

[57 FR 5575, Feb. 14, 1992, as amended at 58 FR 13931, Mar. 15, 1993; 59 
FR 44837, Aug. 30, 1994; 61 FR 8744, Mar. 5, 1996]



Sec. 968.310  Determination of formula amount.

    (a) Submission of formula characteristics report--(1) Formula 
characteristics report. In its first year of participation in the CGP, 
each PHA shall verify and provide data to HUD, in a form and at a time 
to be prescribed by HUD, concerning PHA and development characteristics 
so that HUD can develop the PHA's annual funding allocation in 
accordance with Sec. 968.103 (e) and (f). If a PHA fails to submit to 
HUD the formula characteristics report by the prescribed deadline, HUD 
will use the data which it has available concerning PHA and development 
characteristics for purposes of calculating the PHA's formula share. 
After its first year of participation in the CGP, a PHA is not required 
to submit formula characteristics data to HUD, but is required to 
respond to data transmitted by HUD if there have been changes to its 
inventory from that previously reported, or where requested by HUD. On 
an annual basis, HUD will transmit to the PHA, the formula 
characteristics report which reflects the data that will be used to 
determine the PHA's formula share. The PHA will have at least 30 
calendar days to review and advise HUD of errors in this HUD report. 
Necessary adjustments will be made to the PHA's data before the formula 
is run for the current FFY.
    (2) PHA Board Resolution. The PHA must include with its formula 
characteristics report under paragraph (a)(1) of this section, a 
resolution adopted by the PHA Board of Commissioners approving the 
report, and certifying that the data contained in the formula 
characteristics report are accurate.
    (b) HUD notification of formula amount; appeal rights--(1) Formula 
amounts notification. After HUD determines a PHA's formula allocation 
under Sec. 968.103 (e) and (f) based upon the PHA, development, and 
community characteristics, it shall notify the PHA of its formula amount 
and provide instructions on the Annual Submission in accordance with 
Secs. 968.315 and 968.325;
    (2) Appeal based upon unique circumstances. A PHA may appeal in 
writing HUD's determination of its formula amount within 60 calendar 
days of the date of HUD's determination on the

[[Page 488]]

basis of ``unique circumstances.'' The PHA must indicate what is unique, 
and specify the manner in which it is different from all other PHAs 
participating in the CGP, and provide any necessary supporting 
documentation. HUD shall render a written decision on an PHA's appeal 
under this paragraph within 60 calendar days of the date of its receipt 
of the PHA's request for an appeal. HUD shall publish in the Federal 
Register a description of the facts supporting any successful appeals 
based upon ``unique circumstances.'' Any adjustments resulting from 
successful appeals in a particular FFY under this paragraph shall be 
made from subsequent years' allocation of funds under this part;
    (3) Appeal based upon error. A PHA may appeal in writing HUD's 
determination of its formula amount within 60 calendar days of the date 
of HUD's determination on the basis of an error. The PHA may appeal on 
the basis of error the correctness of data in the formula 
characteristics report. The PHA must describe the nature of the error, 
and provide any necessary supporting documentation. HUD shall respond to 
the PHA's request within 60 calendar days of the date of its receipt of 
the PHA's request for an appeal. Any adjustment resulting from 
successful appeals in a particular FFY under this paragraph shall be 
made from subsequent years' allocation of funds under this part;
    (c) Reduced formula allocation for PHAs designated as mod troubled 
under PHMAP--(1) Notification. After a PHA is designated as a mod 
troubled agency under PHMAP (24 CFR part 901), HUD shall inform the PHA 
that its funding may be limited under this subpart because of its 
designation as a mod troubled PHA. HUD shall also provide the PHA with 
information concerning the PHA's funding levels for CGP, CIAP and MROP 
for each of the preceding three FFYs for purposes of determining the 
PHA's reduced formula allocation, in accordance with paragraph 
(c)(2)(ii) of this section. In addition, HUD will provide the PHA with 
information on its full formula allocation under Sec. 968.103 (e) and 
(f), and the amount which represents 25 percent of the difference 
between the average amounts provided to the PHA in each of the preceding 
three FFYs and its full formula allocation.
    (2) Calculation of funding for mod troubled PHAs. HUD shall 
calculate the funding level for mod troubled PHAs in accordance with 
paragraph (c)(1) of this section in the following manner:
    (i) The average of the amount that the mod troubled PHA received for 
modernization activities under this part, and for Major Reconstruction 
of Obsolete Projects (MROP), for each of the preceding three FFYs, which 
average shall be adjusted to take into account changes in the cost of 
rehabilitating property based upon the Means Construction Cost Index; 
plus
    (ii) Twenty five percent of the difference between the amount 
determined under paragraph (c)(1)(i) of this section, and the amount 
that would have been allocated to the PHA for the FFY if it were not 
designated as a mod troubled PHA.
    (3) Right of appeal. The notice under paragraph (c)(1) of this 
section shall also specify that a PHA may petition HUD within 30 
calendar days of its receipt of HUD's notice to increase the amount of 
its fund allocation. HUD shall determine whether to increase the amount 
of assistance to be provided a PHA under this paragraph based upon the 
PHA's demonstrated progress in meeting goals and targets set forth in 
the PHA's Memorandum of Agreement (MOA) under PHMAP, and toward 
achieving satisfactory performance under the mod troubled indicator/
standard under PHMAP. In its appeal request, a PHA must specify how it 
is achieving or making progress toward achieving the goals and 
objectives set forth in the MOA. The request must be submitted to HUD 
within 30 calendar days of the date of HUD's notice under this 
paragraph. HUD shall render a decision in writing on the PHA's request 
within 60 calendar days of the date of its receipt of the PHA's appeal 
and any supporting documentation.
    (4) Maximum allowable allocation to mod troubled PHAs. The maximum 
amount that HUD may provide to a PHA under this paragraph is the amount 
that would have been allocated to the PHA for the FFY if it had not been 
designated as a mod troubled PHA

[[Page 489]]

under PHMAP. Where the full formula allocation is less than the average 
of funding received by the PHA for modernization and MROP for each of 
the preceding three FFYs, the PHA will receive its full formula amount, 
and not its average funding level for the preceding three FFYs, plus 25 
percent of the difference between that figure and its full formula 
amount.
    (5) Reallocation of funds withheld from mod troubled PHAs. Any 
amounts which are not provided to a PHA under paragraph (c)(1) of this 
section because the PHA is designated as a mod troubled agency under 
PHMAP, shall be reallocated by HUD to other PHAs under this subpart 
which are not designated as either troubled or mod troubled agencies 
under PHMAP, and to IHAs under 24 CFR part 950 (subpart I) which are not 
determined to be high risk under Sec. 950.135 of this chapter, the ACA, 
and the Field Office Monitoring of IHAs Handbook. Such funds shall be 
reallocated in the next FFY based upon the relative needs of these PHAs 
and IHAs, as determined under the formula.
    (6) Credits for PHAs designated as mod troubled--(i) Accrual of 
credits. A PHA that has received a reduced formula allocation under 
paragraph (c)(1) of this section because it was designated as a mod 
troubled agency under PHMAP may accrue credits under this paragraph, for 
up to three consecutive FFYs, representing the difference between:
    (A) The amount the PHA would have been allocated for the FFY under 
Sec. 968.103(e) and (f) if it were not designated as a mod troubled PHA 
under PHMAP; and
    (B) The reduced funding amount actually provided to the PHA under 
paragraph (c)(2) of this section because it was designated as a mod 
troubled PHA under PHMAP.
    (ii) Failure to remove mod troubled designation. After a three-year 
period during which the mod troubled PHA has accrued credits under 
paragraph (c)(6)(i) of this section, the credits accrued by the PHA 
shall be:
    (A) Decreased by 10 percent of the total accumulated credits if the 
PHA's designation as a mod troubled agency under PHMAP is not removed 
before the end of the first FFY following the three-year accrual period;
    (B) Decreased by an additional 20 percent of the original total 
accumulated credits if the PHA's designation as a mod troubled agency 
under PHMAP is not removed before the end of the second FFY following 
the three-year accrual period;
    (C) Decreased by an additional 30 percent of the original total 
accumulated credits if the PHA's designation as a mod troubled agency 
under PHMAP is not removed before the end of the third FFY following the 
three-year accrual period; and
    (D) Eliminated if the PHA's designation as a mod troubled agency 
under PHMAP is not removed before the end of the fourth FFY following 
the three-year accrual period.
    (iii) Obtaining credits. HUD shall reserve under Sec. 968.103(c) up 
to five percent of the total formula funds available for allocation in 
any FFY for the purpose of providing PHAs that were formerly designated 
as mod troubled PHAs under PHMAP with additional assistance after HUD 
determines that a PHA is no longer a mod troubled agency. HUD shall make 
the determination that a PHA is no longer a mod troubled agency based 
upon its achieving satisfactory performance under the mod indicator/
standard that was initially used to designate the agency as mod troubled 
under PHMAP. The additional assistance shall be provided to the formerly 
mod troubled PHA in the FFY following the year in which the PHA is 
removed from the mod troubled list. Such assistance shall be provided to 
the PHA in addition to a PHA's regular formula allocation under 
Sec. 968.103(e) and (f), and shall consist of:
    (A) The total amount of credits accumulated by the PHA under 
paragraph (c)(6)(i) of this section; minus
    (B) Any reductions under paragraph (c)(6)(ii) of this section to the 
total accumulated credits, based upon the length of time that the PHA 
has taken to remove its mod troubled designation; and
    (C)(1) Adjusted by HUD to take into account the PHA's ability to 
expeditiously expend the accrued credit amounts. HUD shall consult with 
the PHA to determine the rate at which

[[Page 490]]

the PHA shall be provided access to its credits under this section. As a 
general guideline, HUD intends to provide a PHA with 10% of its accrued 
credits in the first year; an additional 20% of its accrued credits in 
the second year; an additional 30% of its accrued credits in the third 
year; and the remaining 40% of its accrued credits in the fourth year;
    (2) In any FFY where formerly mod troubled PHAs are entitled to 
credits exceeding the five percent reserve, HUD shall apply a pro rata 
reduction for each formerly mod troubled PHA for such FFY. A PHA shall 
remain entitled to receive its outstanding balance of credits, including 
any credits not actually received because of such pro rata reduction, in 
future FFYs, depending upon the availability of funds in the set-aside 
under Sec. 968.103(c).

(Approved by the Office of Management and Budget under control number 
2577-0157)

[57 FR 5575, Feb. 14, 1992, as amended at 59 FR 44839, Aug. 30, 1994. 
Redesignated and amended at 61 FR 8744, Mar. 5, 1996]



Sec. 968.315  Comprehensive Plan (including five-year action plan).

    (a) Submission. As soon as possible after modernization funds first 
become available for allocation under this subpart, HUD shall notify 
PHAs in writing of their formula amount. For planning purposes, PHAs may 
use the amount they received under CGP in the prior year in developing 
their comprehensive plan, or they may wait for the annual HUD 
notification of formula amount under Sec. 968.310(b)(1).
    (b)(1) Resident participation. A PHA is required to develop, 
implement, monitor and annually amend portions of its comprehensive plan 
in consultation with residents of the developments covered by the 
comprehensive plan. In addition, the PHA shall consult with resident 
management corporations (RMCs) to the extent that an RMC manages a 
development covered by the comprehensive plan. The PHA, in partnership 
with the residents, must develop and implement a process for resident 
participation that ensures that residents are involved in a meaningful 
way in all phases of the CGP. Such involvement shall involve 
implementing the Partnership Process as a critical element of the CGP.
    (2) Establishment of Partnership Process. The PHA, in partnership 
with the residents of the developments covered by the plan (and which 
may include resident leaders, resident councils, resident advisory 
councils/boards, and RMCs) must establish a Partnership Process to 
develop and implement the goals, needs, strategies and priorities 
identified in the comprehensive plan. After residents have organized to 
participate in the CGP, they may decide to establish a volunteer 
advisory group of experts in various professions to assist them in the 
CGP Partnership Process. The Partnership Process shall be designed to 
achieve the following:
    (i) To ensure that residents are fully briefed and involved in 
developing the content of, and monitoring the implementation of, the 
comprehensive plan including, but not limited to, the physical and 
management needs assessments, viability analysis, Five-Year Action Plan, 
and Annual Statement. If necessary, the PHA shall develop and implement 
capacity building strategies to ensure meaningful resident participation 
in CGP. Such technical assistance efforts for residents are eligible 
management improvement costs under CGP;
    (ii) To enable residents to participate, on a PHA-wide or area-wide 
basis, in ongoing discussions of the comprehensive plan and strategies 
for its implementation, and in all meetings necessary to ensure 
meaningful participation.
    (3) Public notice. Within a reasonable amount of time before the 
advance meeting for residents under paragraph (b)(4) of this section and 
the public hearing under paragraph (b)(5) of this section, the PHA shall 
provide public notice of the advance meeting and the public hearing in a 
manner determined by the PHA that ensures notice to all duly elected 
resident councils.
    (4) Advance meeting for residents. The PHA shall hold, within a 
reasonable amount of time before the public hearing under paragraph 
(b)(5) of this section, a meeting for residents and duly elected 
resident councils at which the PHA shall explain the components of the 
comprehensive plan. The meeting

[[Page 491]]

shall be open to all residents and duly elected resident councils.
    (5) Public hearing. The PHA shall hold at least one public hearing, 
and any appropriate number of additional hearings, to present 
information on the comprehensive plan/annual submission and the status 
of prior approval programs. The public hearing shall provide ample 
opportunity for residents, local government officials, and other 
interested parties to express their priorities and concerns. The PHA 
shall give full consideration to the comments and concerns of residents, 
local government officials, and other interested parties.
    (c) Local government participation. A PHA shall consult with and 
provide information to appropriate local government officials with 
respect to the development of the comprehensive plan to ensure that 
there is coordination between the actions taken under the consolidated 
plan (see 24 CFR part 91) for project and neighborhood improvements 
where public housing units are located or proposed for construction and/
or modernization and improvement and to coordinate meeting public and 
human service needs of the public and assisted housing projects and 
their residents. In the case of a PHA with developments in multiple 
jurisdictions, the PHA may meet this requirement by consulting with an 
advisory group representative of all the jurisdictions. At a minimum, 
such consultation must include providing such officials with:
    (1) Advance written notice of the public hearing required under 
paragraph (b)(5) of this section;
    (2) A copy of the summary of total preliminary estimated costs to 
address physical needs by each development and management/operations 
needs PHA-wide and a specific description of the PHA's process for 
maximizing the level of participation by residents and a summary of the 
general issues raised on the plan by residents and others during the 
public comment process and the PHA's response to the general issues. PHA 
records, such as minutes of planning meetings or resident surveys, shall 
be maintained in the PHA's files and made available to residents, 
resident organizations, and other interested parties upon request; and
    (3) An opportunity to express their priorities and concerns to 
ensure due consideration in the PHA's planning process;
    (d) Participation in coordinating entities. To the extent that 
coordinating entities are set up to plan and implement the consolidated 
plans (under 24 CFR part 91), the PHA shall participate in these 
entities to ensure coordination with broader community development 
strategies.
    (e) Contents of comprehensive plan. The comprehensive plan shall 
identify all of the physical and management improvements needed for a 
PHA and all of its developments, and that represent needs eligible for 
funding under Sec. 968.112. The plan also shall include preliminary 
estimates of the total cost of these improvements. The plan shall set 
forth general strategies for addressing the identified needs, and 
highlight any special strategies, such as major redesign or partial 
demolition of a development, that are necessary to ensure the long-term 
physical and social viability of the development. Where long-term 
physical and social viability of the development is dependent upon 
revitalization of the surrounding neighborhood in the provision of or 
coordination of public services, or the consolidation or coordination of 
drug prevention and other human service initiatives, the PHA shall 
identify these needs and strategies. In addition, the PHA shall identify 
the funds or other resources in the consolidated plan that are to be 
used to help address these needs and strategies and the activities in 
the comprehensive plan that strengthen the consolidated plan. Each 
comprehensive plan shall contain the following elements:
    (1) Executive summary. A PHA shall include as part of its 
comprehensive plan an executive summary to facilitate review and 
comprehension by development residents and by the public. The executive 
summary shall include the following:
    (i) A summary of total preliminary estimated costs to address 
physical needs by each development and PHA-wide physical and management 
needs; and
    (ii) A specific description of the PHA's process for maximizing the 
level

[[Page 492]]

of participation by residents during the development, implementation and 
monitoring of the Comprehensive Plan, a summary of the general issues 
raised on the plan by residents and others during the public comment 
process and the PHA's response to the general issues. PHA records, such 
as minutes of planning meetings or resident surveys, shall be maintained 
in the PHA's files and made available to residents, duly elected 
resident councils, and other interested parties, upon request;
    (2) Physical needs assessment. (i) Requirements. The physical needs 
assessment identifies all of the work that a PHA would need to undertake 
to bring each of its developments up to the modernization and energy 
conservation standards, as required by the Act, to comply with lead-
based paint testing and abatement requirements under this part, and to 
comply with other program requirements under Sec. 968.110. The physical 
needs assessment is completed without regard to the availability of 
funds, and shall include the following:
    (A) A brief summary of the physical improvements necessary to bring 
each such development to a level at least equal to applicable HUD 
standards with respect to modernization standards, energy conservation 
and life-cycle cost effective performance standards, lead-based paint 
testing and abatement standards. This summary must indicate the relative 
urgency of need. If the PHA has no physical improvement needs at a 
particular development at the time it completes its comprehensive plan, 
it must so indicate. Similarly, if the PHA intends to demolish, 
partially demolish, convert, or dispose of a development (or units 
within a development) it must so indicate in the summary of physical 
improvements;
    (B) The replacement needs of equipment systems and structural 
elements that will be required to be met (assuming routine and timely 
maintenance is performed) during the period covered by the action plan;
    (C) A preliminary estimate of the cost to complete the physical 
work;
    (D) Any physical disparities between buildings occupied 
predominantly by one racial or ethnic group and, in such cases, the 
physical improvements required to correct the conditions; and
    (E) In addition, with respect to vacant or non-homebuyer occupied 
Turnkey III units, the estimated number of units that the PHA is 
proposing for substantial rehabilitation and subsequent sale, in 
accordance with Sec. 968.112(d)(3).
    (ii) Source of data. The PHA shall identify in its needs assessment 
the sources from which it derived data to develop the physical needs 
assessment under this paragraph (e)(2) and shall retain such source 
documents in its files;
    (3) Management needs assessment (i) Requirements. The plan shall 
include a comprehensive assessment of the improvements needed to upgrade 
the management and operation of the PHA and of each viable development 
so decent, safe, and sanitary living conditions will be provided. The 
management needs assessment shall include the following, with the 
relative urgency of need indicated:
    (A) An identification of the most current needs related to the 
following areas (to the extent that any of these needs is addressed in a 
HUD-approved memorandum of agreement or improvement plan, the PHA may 
simply include a cross-reference to these documents):
    (1) The management, financial, and accounting control systems of the 
PHA;
    (2) The adequacy and qualifications of personnel employed by the PHA 
in its management and operation, for each significant category of 
employment;
    (3) The adequacy and efficacy of:
    (i) Resident programs and services;
    (ii) Resident and development security;
    (iii) Resident selection and eviction;
    (iv) Occupancy;
    (v) Maintenance;
    (vi) Resident management and resident capacity building programs;
    (vii) Resident opportunities for employment and business development 
and other self-sufficiency opportunities for residents; and
    (viii) Homeownership opportunities for residents;
    (B) Any additional deficiencies identified through PHMAP, audits and 
HUD

[[Page 493]]

monitoring reviews that are not addressed under paragraph (e)(3)(i)(A) 
of this section. To the extent that any of these is addressed in a HUD-
approved memorandum of agreement or improvement plan, the PHA may 
include a cross-reference to these documents;
    (C) Any other management and operations needs that the PHA wants to 
address at the PHA-wide or development level; and
    (D) A PHA-wide preliminary cost estimate for addressing all the 
needs identified in the management needs assessment, without regard to 
the availability of funds;
    (ii) Sources of funds. The PHA shall identify in its needs 
assessment the sources from which it derived data to develop the 
management needs assessment under this paragraph (e)(3) and shall retain 
such source documents in its files;
    (4) Demonstration of long-term physical and social viability. (i) 
General. The plan shall include, on a development-by-development basis, 
an analysis of whether completion of the improvements and replacements 
identified under paragraphs (e)(2) and (e)(3) of this section will 
reasonably ensure the long-term physical and social viability, including 
achieving structural/system soundness and full occupancy, of the 
development at a reasonable cost. For cost reasonableness, the PHA shall 
determine whether the unfunded hard costs satisfy the definition of 
``reasonable cost.'' Where the PHA wishes to fund a development, for 
other than emergencies, where hard costs exceed that reasonable cost, 
the PHA shall submit written justification to the Field Office. If the 
Field Office agrees with the PHA's request, the Field Office shall 
forward its recommendation to Headquarters for final decision. Where the 
estimated per unit unfunded hard cost is equal to or less than the per 
unit TDC for the smallest bedroom size at the development, no further 
computation of the TDC limit is required. The PHA shall keep 
documentation in its files to support all cost determinations. The Field 
Office will review cost reasonableness as part of its review of the 
annual submission and the performance and evaluation report. As 
necessary, HUD will review the PHA's documentation in support of its 
cost reasonableness, taking into account broader efforts to revitalize 
the neighborhoods in which the development is located;
    (ii) Determination of non-viability. Where a PHA's analysis of a 
development under paragraph (e) of this section establishes that 
completion of the identified improvements and replacements will not 
result in the long-term physical and social viability of the development 
at a reasonable cost, the PHA shall not expend CGP funds for the 
development, except for emergencies and essential non-routine 
maintenance necessary to maintain habitability until residents can be 
relocated. The PHA shall specify in its comprehensive plan the actions 
it proposes to take with respect to the non-viable development (e.g., 
demolition or disposition under 24 CFR part 970);
    (5) Five-year action plan. (i) General. The comprehensive plan shall 
include a rolling five-year action plan to carry out the improvements 
and replacements (or a portion thereof) identified under paragraphs 
(e)(2) and (e)(3) of this section. In developing its five-year action 
plan, the PHA shall assume that the current year funding or formula 
amount will be available for each year of its five-year action plan, 
whichever the PHA is using for planning purposes, plus the PHA's 
estimate of the funds that will be available from other sources, such as 
state and local governments. All activities specified in a PHA's five-
year action plan are contingent upon the availability of funds;
    (ii) Requirements. Under the action plan, a PHA must indicate how it 
intends to use the funds available to it under the CGP to address, over 
a five-year period, the deficiencies (or a portion of the deficiencies) 
identified in its physical and management needs assessments, as follows:
    (A) Physical condition. With respect to the physical condition of a 
PHA's developments, a PHA must indicate in its action plan how it 
intends to address, over a five-year period, the deficiencies (or a 
portion of the deficiencies) identified in its physical needs assessment 
so as to bring each of its developments up to a level at least equal to 
the modernization and energy conservation

[[Page 494]]

standards. This includes specifying the work to be undertaken by the PHA 
in major work categories (e.g., kitchens, electrical systems, etc.); 
establishing priorities among the major work categories by development 
and year, based upon the relative urgency of need; and estimating the 
cost of each of the identified major work categories. In developing its 
action plan, a PHA shall give priority to the following:
    (1) Activities required to correct emergency conditions;
    (2) Activities required to meet statutory or other legally mandated 
requirements (e.g., compliance with a court-ordered desegregation plan 
or voluntary compliance agreement);
    (3) Activities required to meet the needs identified in the Section 
504 needs assessment within the regulatory timeframe; and
    (4) Activities required to complete lead-based paint testing and 
abatement requirements;
    (B) Management and operations. A PHA must address in its action plan 
the management and operations deficiencies (or a portion of the 
deficiencies) identified in its management needs assessment, as follows:
    (1) With respect to the management and operations needs of the PHA, 
the PHA must identify how it intends to address with CGP funds, if 
necessary, the deficiencies (or a portion thereof) identified in its 
management needs assessment, including work identified through PHMAP, 
audits, HUD monitoring reviews, and self-assessments. The action plan 
must indicate the relative urgency of need;
    (2) A preliminary PHA-wide cost estimate, by major work category.
    (iii) Procedure for maintaining current five-year action plan. The 
PHA shall maintain a current five-year action plan by annually amending 
its five-year action plan, in conjunction with the annual submission;
    (6) Local government statement. The comprehensive plan shall include 
a statement signed by the chief executive officer of the unit of general 
local government (or, in the case of a PHA with developments in multiple 
jurisdictions, from the CEO of each such jurisdiction) certifying to the 
following:
    (i) The PHA developed the comprehensive plan/five-year action plan 
or amendments thereto in consultation with officials of the appropriate 
governing body and with development residents covered by the 
comprehensive plan/five-year action plan, in accordance with the 
requirements of paragraphs (b) and (c) of this section;
    (ii) The comprehensive plan/five-year action plan or amendments 
thereto are consistent with the appropriate governing body's assessment 
of its low income housing needs (as evidenced by its consolidated plan 
under 24 CFR part 91, if applicable), and that the appropriate governing 
body will cooperate in providing resident programs and services; and
    (iii) The PHA's proposed drug elimination activities are coordinated 
with, and supportive of, local drug elimination strategies and 
neighborhood improvement programs, if applicable; and
    (7) PHA resolution. The plan shall include a resolution, in a form 
prescribed by HUD, adopted by the PHA Board of Commissioners, and signed 
by the Board Chairman of the PHA, approving the comprehensive plan or 
any amendments.
    (f) Amendments to the comprehensive plan--(1) Extension of time for 
performance. A PHA shall have the right to amend its comprehensive plan 
(including the action plan) to extend the time for performance whenever 
HUD has not provided the amount of assistance set forth in the 
comprehensive plan or has not provided the assistance in a timely 
manner;
    (2) Amendments to needs assessments. The PHA shall amend its plan by 
revising its needs assessments whenever it proposes to carry out 
activities in its five-year action plan or annual statement that are not 
reflected in its current needs assessments (except in the case of 
emergencies). The PHA may propose an amendment to its needs assessments, 
in connection with the submission of its annual submission (see 
Sec. 968.325) or at any other time. These amendments shall be reviewed 
by HUD in accordance with Sec. 968.320.
    (3) Six-year revision of comprehensive plan. Every sixth year 
following the initial year of participation, the PHA shall submit to 
HUD, with its annual

[[Page 495]]

submission, a complete update of its comprehensive plan. A PHA may elect 
to revise some or all parts of the comprehensive plan more frequently.
    (4) Annual revision of five-year action plan. Annually, the PHA 
shall submit to HUD, with its annual submission, an update of its five-
year action plan, eliminating the previous year and adding an additional 
year. The PHA shall identify changes in work categories (other than 
those included in the new fifth year) from the previous year five-year 
action plan when making this annual submission.
    (5) Required submissions. Any amendments to the comprehensive plan 
under this section must be submitted with the PHA resolution under 
Sec. 968.315(e)(7).
    (g) Prerequisite for receiving assistance--(1) Prohibition of 
assistance. No financial assistance, except for emergency work to be 
funded under Secs. 968.103(b) and 968.112(a)(1)(ii), and for 
modernization needs resulting from disasters under Sec. 968.103(b), may 
be made available under this subpart unless HUD has approved a 
comprehensive plan submitted by the PHA that meets the requirements of 
this section. A PHA that has failed to obtain approval of its 
comprehensive plan by the end of the FFY shall have its formula 
allocation for that year (less any formula amounts provided to the PHA 
for emergencies) added to the subsequent year's appropriation of funds 
for grants under this part. HUD shall allocate such funds to PHAs and 
IHAs participating in the CGP in accordance with the formula under 
Sec. 968.103(e) and (f) in the subsequent FFY. A PHA that elects in any 
FFY not to participate in the CGP may participate in the CGP in 
subsequent FFYs;
    (2) Requests for emergency assistance. A PHA may receive funds from 
its formula allocation to address emergency modernization needs where 
HUD has not approved a PHA's comprehensive plan. To request such 
assistance, a PHA shall submit to HUD a request for funds in such form 
as HUD may prescribe, including any documentation necessary to support 
its claim that an emergency exists. HUD shall review the request and 
supporting documentation to determine if it meets the definition of 
``emergency work'' as set forth in Sec. 968.305.

(Approved by the Office of Management and Budget under control number 
2577-0157)

[61 FR 8744, Mar. 5, 1996]



Sec. 968.320  HUD review and approval of comprehensive plan (including five-year action plan).

    (a) Submission of comprehensive plan. (1) Upon receipt of a 
comprehensive plan from a PHA, HUD shall determine whether:
    (i) The plan contains each of the required components specified at 
Sec. 968.315(e); and
    (ii) Where applicable, the PHA has submitted any additional 
information or assurances required as a result of HUD monitoring, 
findings of inadequate PHA performance, audit findings, or civil rights 
compliance findings;
    (2) Acceptance for review. If the PHA has submitted a comprehensive 
plan (including the action plan) which meets the criteria of paragraph 
(a)(1) of this section, HUD shall accept the comprehensive plan for 
review, within 14 calendar days of its receipt in the field office. The 
PHA shall be notified in writing that the comprehensive plan has been 
accepted by HUD for review, and that the 75-day review period is 
proceeding;
    (3) Time period for review. A comprehensive plan that is accepted by 
HUD for review shall be considered to be approved unless HUD notifies 
the PHA in writing, postmarked within 75 calendar days of the date of 
HUD's receipt of the comprehensive plan for review, that HUD has 
disapproved the plan. HUD shall not disapprove a comprehensive plan on 
the basis that it cannot complete its review within the 75-day deadline;
    (4) Rejection of comprehensive plan. If a PHA has submitted a 
comprehensive plan (including the action plan), which does not meet the 
requirements of paragraph (a)(1) of this section, HUD shall notify the 
PHA within 14 calendar days of its receipt that HUD has rejected the 
plan for review. In such case, HUD shall indicate the reasons for 
rejection, the modifications required to qualify the comprehensive plan 
for

[[Page 496]]

HUD review, and the deadline date for receipt of any modifications.
    (b) HUD approval of comprehensive plan (including action plan). (1) 
A comprehensive plan (including the action plan) that is accepted by HUD 
for review in accordance with paragraph (a) of this section shall be 
considered to be approved, unless HUD notifies the PHA in writing, 
postmarked within 75 days of the date of HUD's receipt of the 
comprehensive plan for review, that HUD has disapproved the plan, 
indicating the reasons for disapproval, and the modifications required 
to make the comprehensive plan approvable. The PHA must re-submit the 
comprehensive plan to HUD, in accordance with the deadline established 
by HUD, which may allow up to 75 calendar days before the end of the FFY 
for HUD review. If the revised plan is disapproved by HUD following its 
resubmission, or if the PHA fails to resubmit by the deadline 
established by HUD, any funds that would have been allocated to the PHA 
shall be added to the subsequent year's appropriation of funds for 
grants under this part. HUD shall allocate such funds to PHAs and IHAs 
participating in the CGP in accordance with the formula under 
Sec. 968.103(e) and (f). HUD shall not disapprove a comprehensive plan 
on the basis that the Department cannot complete its review under this 
section within the 75-day deadline;
    (2) HUD shall approve the Comprehensive Plan except where it makes a 
determination in accordance with one or more of the following:
    (i) Comprehensive Plan is incomplete in significant matters;
    (ii) Identified needs are plainly inconsistent with facts and data;
    (A) Identified physical improvements and replacements are 
inadequate;
    (B) Identified management improvements are inadequate;
    (C) Proposed physical and management improvements fail to address 
identified needs;
    (iii) Action plan is plainly inappropriate to meeting identified 
needs;
    (iv) Inadequate demonstration of long-term viability at reasonable 
cost; and
    (v) Contradiction of local government certification or PHA 
resolution.
    (c) Effect of HUD approval of Comprehensive Plan. After HUD approves 
the Comprehensive Plan (including the Five-Year Action Plan), or any 
amendments to the plan, it shall be binding upon HUD and the PHA, until 
such time as the PHA submits, and HUD approves, an amendment to its 
plan. The PHA is expected to undertake the work set forth in the Annual 
Statement. However, the PHA may undertake any of the work identified in 
any of the other four years of the latest approved Five-Year Action 
Plan, current approved Annual Statement or previously approved CIAP 
budgets, without further HUD approval. Actual uses of the funds are to 
be reflected in the PHA annual Performance and Evaluation Report for 
each grant. See Sec. 968.330. The PHA is encouraged to inform the 
residents of significant changes (such as changes in scope of work or 
whenever it moves items within the approved Five-Year Action Plan). 
Documentation of that information shall be retained in PHA files. If HUD 
determines as a result of an audit or monitoring findings that a PHA has 
provided false or substantially inaccurate data in its Comprehensive 
Plan/Annual Submission or has circumvented the intent of the program, 
HUD may condition the receipt of assistance, in accordance with 
Sec. 968.335. Moreover, in accordance with 18 U.S.C. 1001, any 
individual or entity who knowingly and willingly makes or uses a 
document or writing containing any false, fictitious or fraudulent 
statement or entry, in any matter within the jurisdiction of any 
department or agency of the United States, shall be fined not more than 
$10,000 or imprisoned for not more than five years, or both.

(Approved by the Office of Management and Budget under control number 
2577-0157)

[57 FR 5575, Feb. 14, 1992, as amended at 59 FR 44841, Aug. 30, 1994. 
Redesignated and amended at 61 FR 8747, Mar. 5, 1996]



Sec. 968.325  Annual submission of activities and expenditures.

    (a) General. The Annual Submission is a collective term for all 
documents which the PHA must submit to HUD for review and approval 
before accessing the current FFY grant funds. Such

[[Page 497]]

documents include the Annual Statement, Work Statements for years two 
through five of the Five-Year Action Plan, local government statement, 
PHA Board Resolution, materials demonstrating the partnership process 
and any other documents as prescribed by HUD. For planning purposes, a 
PHA may use either the amount of funding received in the current year or 
the actual formula amount provided in HUD's notification under 
Sec. 968.310(b)(1) in developing the Five-Year Action Plan for 
presentation at the resident meetings and public hearing. Work 
Statements cover the second through the fifth years of the Five-Year 
Action Plan and set forth the major work categories and costs by 
development or PHA-wide which the PHA intends to undertake in each year 
of years two through five. In preparing these Work Statements, the PHA 
shall assume that the current FFY formula amount will be available in 
each year of years two through five, as discussed in 
Sec. 968.315(d)(5)(i). The Work Statements for all five years will be at 
the same level of detail so that the PHA may interchange work items. A 
PHA may budget up to 8% of its annual grant in a contingency account for 
cost overruns.
    (b) Submission. After receiving HUD notification of the formula 
amount and estimating how much funding will be available from other 
sources, such as State and local governments, and determining its 
activities and costs based on the current FFY formula amount, the PHA 
shall submit its Annual Submission.
    (c) Acceptance for review. (1) Upon receipt of an Annual Submission 
from a PHA, HUD shall determine whether:
    (i) The Annual Submission contains each of the required components; 
and
    (ii) The PHA has submitted any additional information or assurances 
required as a result of HUD monitoring, findings of inadequate PHA 
performance, audit findings, and civil rights compliance findings.
    (2) If the PHA has submitted a complete Annual Submission and all 
required information and assurances, HUD will accept the submission for 
review, as of the date of receipt. If the PHA has not submitted all 
required material, HUD will promptly notify the PHA that it has 
disapproved the submission, indicating the reasons for disapproval, the 
modifications required to qualify the Annual Submission for HUD review, 
and the date by which such modifications must be received by HUD.
    (d) Resident and local government participation. A PHA is required 
to develop its Annual Submission, including any proposed amendments to 
its Comprehensive Plan as provided in Sec. 968.315 (b) and (c), in 
consultation with officials of the appropriate governing body (or, in 
the case of a PHA with developments in multiple jurisdictions, in 
consultation with the CEO of each such jurisdiction or with an advisory 
group representative of all jurisdictions) and with residents and duly 
elected resident councils of the developments covered by the 
Comprehensive Plan, as follows:
    (1) Public notice. Within a reasonable amount of time before the 
advance meeting for residents under paragraph (d)(2) of this section, 
and the public hearing under paragraph (d)(3) of this section, the PHA 
shall annually provide public notice of the advance meeting and the 
public hearing in a manner determined by the PHA and which ensures 
notice to all duly elected resident councils;
    (2) Advance Meeting with residents. The PHA shall at least annually 
hold a meeting open to all residents and duly elected resident councils. 
The advance meeting shall be held within a reasonable amount of time 
before the public hearing under paragraph (d)(3) of this section. The 
PHA will provide residents with information concerning the contents of 
the PHA's Five-Year Action Plan (and any proposed amendments to the 
PHA's Comprehensive Plan to be submitted with the Annual Submission) so 
that residents can comment adequately at the public hearing on the 
contents of the Five-Year Action Plan and any proposed amendments to the 
Comprehensive Plan.
    (3) Public hearing. The PHA shall annually hold at least one public 
hearing, and any appropriate number of additional hearings, to present 
information on the Annual Submission and the status of prior approved 
programs. The

[[Page 498]]

public hearing shall provide ample opportunity for residents of the 
developments covered by the Comprehensive Plan, officials of the 
appropriate governing body, and other interested parties, to express 
their priorities and concerns. The PHA shall give full consideration to 
the comments and concerns of residents, local government officials, and 
other interested parties in developing its Five-Year Action Plan, or any 
amendments to its Comprehensive Plan.
    (4) Expedited scheduling. PHAs are encouraged to hold the meeting 
with residents and duly elected resident councils under paragraph (d)(2) 
of this section, and the public hearing under paragraph (d)(3) of this 
section between July 1 (i.e., after the end of the program year--June 
30) and September 30, using the formula amount for the current FFY. If a 
PHA elects to use such expedited scheduling, it must explain at the 
meeting with residents and duly elected resident councils and at the 
public hearing that the current FFY amount is not the actual grant 
amount for the subsequent year, but is rather the amount used for 
planning purposes. It must also explain that the Five-Year Action Plan 
will be adjusted when HUD provides notification of the actual formula 
amount, and explain which major work categories at which developments 
may be added or deleted to adjust for the actual formula amount and that 
any added work categories/developments will come from the Comprehensive 
Plan.
    (e) Contents of Annual Submission. The Annual Statement for each 
year must include, for each development or on a PHA-wide basis for 
management improvements or certain physical improvements for which work 
is to be funded out of that year's grant:
    (1) A list of development accounts with an identification of major 
work categories;
    (2) The cost for each major work category, as well as a summary of 
cost by development account;
    (3) The PHA-wide or development-specific management improvements to 
be undertaken during the year;
    (4) For each development and for any management improvements not 
covered by a HUD-approved memorandum of agreement or management 
improvement plan, a schedule for the use of current year funds, 
including target dates for the obligation and expenditure of the funds 
(see Sec. 968.125);
    (5) A summary description of the actions to be taken with non-CGP 
funds to meet physical and management improvement needs which have been 
identified by a PHA in its needs assessments;
    (6) Any documentation that HUD needs to assist it in carrying out 
its responsibilities under the National Environmental Policy Act and 
other related authorities in accordance with Sec. 968.110(c) and (d);
    (7) Other information, as specified by HUD and as approved by OMB 
under the Paperwork Reduction Act; and
    (8) A PHA resolution approving the Annual Submission or any 
amendments thereto, as set forth in Sec. 968.315(e)(7).
    (f) Additional submissions with Annual Submission. A PHA shall 
submit with the Annual Submission any amendments to the Comprehensive 
Plan, as set forth in Sec. 968.315(f), and such additional information 
as may be prescribed by HUD. HUD shall review any proposed amendments to 
the Comprehensive Plan in accordance with review standards under 
Sec. 968.320(b).
    (g) HUD review and approval of Annual Submission--(1) General. An 
Annual Submission accepted in accordance with paragraph (a) of this 
section shall be considered to be approved, unless HUD notifies the PHA 
in writing, postmarked within 75 calendar days of the date that HUD 
receives the Annual Submission for review under paragraph (c) of this 
section, that HUD has disapproved the Annual Submission, indicating the 
reasons for disapproval, the modifications required to make the Annual 
Submission approvable, and the date by which such modifications must be 
received by HUD. HUD may request additional information (e.g., for 
eligibility determinations) to facilitate review and approval of the 
Annual Submission during the 75-day review period. HUD shall not 
disapprove an Annual Submission on the basis that the Department cannot 
complete its review under this section within the 75-day deadline;

[[Page 499]]

    (2) Bases for disapproval for Annual Submission. HUD shall approve 
the Annual Submission, except where:
    (i) Plainly inconsistent with Comprehensive Plan. HUD determines 
that the activities and expenditures proposed in the Annual Submission 
are plainly inconsistent with the PHA's approved Comprehensive Plan;
    (ii) Contradiction of PHA resolution. HUD has evidence which tends 
to challenge, in a substantial manner, the certifications contained in 
the board resolution, as required by Sec. 968.315(e)(7).
    (h) Amendments to Annual Statement. The PHA shall advise HUD of all 
changes to the PHA's approved Annual Statement in its Performance and 
Evaluation Report submitted under Sec. 968.330. The PHA shall submit to 
HUD for prior approval any additional work categories (except for 
emergency work) which are not within the PHA's approved Five-Year Action 
Plan.
    (i) Failure to obligate formula funds and extension of time for 
performance--(1) Failure to obligate formula funds. If the PHA fails to 
obligate formula funds within the approved or extended time period, the 
PHA may be subject to an alternative management strategy which may 
involve third-party oversight or administration of the modernization 
function. HUD would only require such action after a corrective action 
order had been issued under Sec. 968.335 and the PHA failed to comply 
with the order. HUD could then require an alternative management 
strategy in a corrective action order. A PHA may appeal in writing the 
corrective action order requiring an alternative management strategy 
within 30 calendar days of that order. HUD Headquarters shall render a 
written decision on a PHA's appeal within 30 calendar days of the date 
of its receipt of the PHA's appeal.
    (2) Extension of time for performance. A PHA may extend the target 
dates for fund obligation and expenditure in the approved Annual 
Statement whenever any delay outside the PHA's control occurs, as 
specified by HUD, and the extension is made in a timely manner. Such 
revision is subject to HUD review under Sec. 968.345(a)(2) as to the 
PHA's continuing capacity. HUD shall not review as to a PHA's continuing 
capacity any revisions to a PHA's Comprehensive Plan and related 
statements where the basis for the revision is that HUD has not provided 
the amount of assistance set forth in the Annual Submission, or has not 
provided such assistance in a timely manner.
    (j) ACC Amendment. After HUD approval of each year's Annual 
Submission, HUD and the PHA shall enter into an ACC amendment in order 
for the PHA to draw down modernization funds. The ACC amendment shall 
require low-income use of housing for not less than 20 years from the 
date of the ACC amendment (subject to sale of homeownership units in 
accordance with the terms of the ACC).
    (k) Declaration of trust. As HUD may require, the PHA shall execute 
and file for record a Declaration of Trust as provided under the ACC to 
protect the rights and interests of HUD throughout the 20-year period 
during which the PHA is obligated to operate its developments in 
accordance with the ACC, the Act, and HUD regulations and requirements.

(Approved by the Office of Management and Budget under control number 
2577-0157)

[57 FR 5575, Feb. 14, 1992, as amended at 59 FR 44841, Aug. 30, 1994. 
Redesignated and amended at 61 FR 8748, Mar. 5, 1996]



Sec. 968.330  PHA performance and evaluation report.

    For any FFY in which a PHA has received assistance under this 
subpart, the PHA shall submit a Performance and Evaluation Report, in a 
form and at a time to be prescribed by HUD, describing its use of 
assistance in accordance with the approved Annual Statement. The PHA 
shall make reasonable efforts to notify residents and officials of the 
appropriate governing body of the availability of the draft report, make 
copies available to residents in the development office, and provide 
residents with at least 30 calendar days in which to comment on the 
report.

(Approved by the Office of Management and Budget under control number 
2577-0157)

[57 FR 5575, Feb. 14, 1992, as amended at 59 FR 44843, Aug. 30, 1994. 
Redesignated and amended at 61 FR 8748, Mar. 5, 1996]

[[Page 500]]



Sec. 968.335  HUD review of PHA performance.

    (a) HUD determination. At least annually, HUD shall carry out such 
reviews of the performance of each PHA as may be necessary or 
appropriate to make the determinations required by this paragraph, 
taking into consideration all available evidence.
    (1) Conformity with comprehensive plan. HUD will determine whether 
the PHA has carried out its activities under this subpart in a timely 
manner and in accordance with its comprehensive plan.
    (2) Continuing capacity. HUD will determine whether the PHA has a 
continuing capacity to carry out its comprehensive plan in a timely 
manner. After the first full operational year of CGP, CIAP experience 
will not be taken into consideration except where the PHA has not yet 
had comparable experience under the CGP.
    (3) Reasonable progress. HUD shall determine whether the PHA has 
satisfied, or has made reasonable progress towards satisfying, the 
following performance standards:
    (i) Conformity with its comprehensive plan, including its annual 
statement and latest HUD-approved five-year action plan, and other 
statutory and regulatory requirements;
    (ii) Continuing capacity to carry out its comprehensive plan in a 
timely manner and expend the annual grant funds; and
    (iii) Reasonable progress toward bringing all of its developments to 
the modernization and energy conservation standards and toward 
implementing the work specified in the annual statement or five-year 
action plan designed to address management deficiencies.
    (b) Notice of deficiency. Based on HUD reviews of PHA performance 
and findings of any of the deficiencies in paragraph (d) of this 
section, HUD may issue to the PHA a notice of deficiency stating the 
specific program requirements which the PHA has violated and requesting 
the PHA to take any of the actions in paragraph (e) of this section.
    (c) Corrective action order. (1) Based on HUD reviews of PHA 
performance and findings of any of the deficiencies in paragraph (d) of 
this section, HUD may issue to the PHA a corrective action order, 
whether or not a notice of deficiency has previously been issued in 
regard to the specific deficiency on which the corrective action order 
is based. HUD may order corrective action at any time by notifying the 
PHA of the specific program requirements which the PHA has violated, and 
specifying that any of the corrective actions listed in paragraph (e) of 
this section must be taken. HUD shall design corrective action to 
prevent a continuation of the deficiency, mitigate any adverse effects 
of the deficiency to the extent possible, or prevent a recurrence of the 
same or similar deficiencies;
    (2) Before ordering corrective action, HUD will notify the PHA and 
give it an opportunity to consult with HUD regarding the proposed 
action;
    (3) Any corrective action ordered by HUD shall become a condition of 
the grant agreement;
    (4) If HUD orders corrective action by a PHA in accordance with this 
section, the PHA's Board of Commissioners must notify affected residents 
of HUD's determination, the bases for the determination, the 
conditioning requirements imposed under this paragraph, and the 
consequences to the PHA if it fails to comply with HUD's requirements.
    (d) Basis for corrective action. HUD may order a PHA to take 
corrective action only if HUD determines:
    (1) The PHA has not submitted a performance and evaluation report, 
in accordance with Sec. 968.330;
    (2) The PHA has not carried out its activities under the CGP program 
in a timely manner and in accordance with its comprehensive plan or HUD 
requirements, as determined in paragraph (a)(1) of this section;
    (3) The PHA does not have a continuing capacity to carry out its 
comprehensive plan in a timely manner or in accordance with its 
comprehensive plan or HUD requirements, as determined in paragraph 
(a)(2) of this section;
    (4) The PHA has not satisfied, or has not made reasonable progress 
towards satisfying, the performance standards specified in paragraph 
(a)(3) of this section;
    (5) An audit conducted in accordance with 24 CFR part 44, or 
pursuant to

[[Page 501]]

other HUD reviews (including monitoring findings) reveals deficiencies 
that HUD reasonably believes require corrective action; or
    (6) The PHA has failed to repay HUD for amounts awarded under the 
CGP program that were improperly expended.
    (e) Types of corrective action. HUD may direct a PHA to take one or 
more of the following corrective actions:
    (1) Submit additional information:
    (i) Concerning the PHA's administrative, planning, budgeting, 
accounting, management, and evaluation functions, to determine the cause 
for a PHA not meeting the standards in paragraph (a)(1), (a)(2), or 
(a)(3) of this section;
    (ii) Explaining any steps the PHA is taking to correct the 
deficiencies;
    (iii) Documenting that PHA activities were not inconsistent with the 
PHA's annual statement or other applicable laws, regulations, or program 
requirements; and
    (iv) Demonstrating that the PHA has a continuing capacity to carry 
out the comprehensive plan in a timely manner;
    (2) Submit detailed schedules for completing the work identified in 
its Annual Statements and report periodically on its progress on meeting 
the schedules;
    (3) Notwithstanding 24 CFR 85.36(g), submit to HUD the following 
documents for prior approval, which may include, but are not limited to:
    (i) Proposed agreement with the architect/engineer (prior to 
execution);
    (ii) Complete construction and bid documents (prior to soliciting 
bids);
    (iii) Proposed award of contracts, including construction and 
equipment contracts and management contracts; or
    (iv) Proposed contract modifications prior to issuance, including 
modifications to construction and equipment contracts, and management 
contracts;
    (4) Submit additional material in support of one or more of the 
statements, resolutions, and certifications submitted as part of the 
PHA's Comprehensive Plan, Five-Year Action Plan, or Performance and 
Evaluation Report;
    (5) Not incur financial obligations, or to suspend payments for one 
or more activities;
    (6) Reimburse, from non-HUD sources, one or more program accounts 
for any amounts improperly expended;
    (7) Submit to an alternative management strategy which may involve 
third-party oversight or administration of the modernization function; 
and
    (8) Take such other corrective actions HUD determines appropriate to 
correct PHA deficiencies.
    (f) Failure to take corrective action. In cases where HUD has 
ordered corrective action and the PHA has failed to take the required 
actions within a reasonable time, as specified by HUD, HUD may take one 
or more of the following steps;
    (1) Withhold some or all of the PHA's grant;
    (2) Declare a breach of the ACC grant amendment with respect to some 
or all of the PHA's functions; or
    (3) Any other sanction authorized by law or regulation.
    (g) Reallocation of funds that have been withheld. Where HUD has 
withheld for a prescribed period of time some or all of a PHA's annual 
grant, HUD may reallocate such amounts to other PHAs/IHAs under the CGP 
program, subject to approval in appropriations acts. The reallocation 
shall be made to IHAs which HUD has determined to be administratively 
capable under Sec. 950.135, and to PHAs under the CGP program which are 
not designated as either troubled or mod troubled under the PHMAP at 24 
CFR part 901, based upon the relative needs of these IHAs and PHAs, as 
determined under the formula at Sec. 968.103(e) and (f).
    (h) Right to appeal. Before withholding some or all of the PHA's 
annual grant, declaring a breach of the ACC grant amendment, or 
reallocating funds that have been withheld, HUD will notify the PHA and 
give it an opportunity, within a prescribed period of time, to present 
to the Assistant Secretary for Public and Indian Housing any arguments 
or additional facts and data concerning the proposed action.
    (i) Notification of residents. The PHA's Board of Commissioners must 
notify affected residents of HUD's final determination to withhold 
funds, declare a

[[Page 502]]

breach of the ACC grant amendment, or reallocate funds, as well as the 
basis for, and the consequences resulting from, such a determination.
    (j) Recapture. In addition, HUD may recapture for good cause any 
grant amounts previously provided to an PHA, based upon a determination 
that the PHA has failed to comply with the requirements of the CGP 
program. Before recapturing any grant amounts, HUD will notify the PHA 
and give it an opportunity to appeal in accordance with paragraph (h) of 
this section. Any reallocation of recaptured amounts will be reallocated 
in accordance with paragraph (g) of this section. The PHA's board of 
Commissioners must notify affected residents of HUD's final 
determination to recapture any funds.
    (k) Cumulative remedies. The authority to condition, withhold, 
reallocate or recapture a PHA's grant, as provided in this section, is 
in addition to the authority contained in Sec. 968.310(c) to reduce a 
PHA's formula allocation based upon its designation as a mod troubled 
PHA.

(Approved by the Office of Management and Budget under control number 
2577-0157)

[57 FR 5575, Feb. 14, 1992, as amended at 59 FR 44843, Aug. 30, 1994. 
Redesignated and amended at 61 FR 8748, Mar. 5, 1996; 62 FR 27126, May 
16, 1997]



                  Subpart D--Vacancy Reduction Program

    Source: 59 FR 30478, June 13, 1994, unless otherwise noted.



Sec. 968.416  Fund requisitions.

    To request funds against the total approved vacancy reduction 
program budget, a PHA must submit a request to HUD in accordance with 
HUD requirements.



Sec. 968.419  Grantee's oversight responsibilities.

    Each grantee shall provide, by contract or otherwise, adequate and 
competent supervisory and inspection personnel to assure work quality 
and progress during modernization, whether work is performed by contract 
or force account labor and with or without the services of an architect/
engineer.



Sec. 968.422  Progress reports and completion schedule.

    (a) Reports required. Until completion of the activities funded 
under the vacancy reduction program, the grantee shall submit to HUD, in 
a form and at a time prescribed by HUD, the following:
    (1) A report on modernization fund expenditures;
    (2) A narrative report that includes an accounting of the grantee's 
progress against the milestones established in its vacancy reduction 
plan. The report shall include the number of both funded and regular 
turn-over units that have been made ready for occupancy; and
    (3) Any additional information as HUD may require.
    (b) Completion schedule. HUD expects that most work items funded 
under this program will be completed within one year. Work items must be 
completed within two years from the date of funding, or by some other 
time as may be specified in the Notice of Funding Availability, unless 
prior approval is obtained from HUD.

(Approved by the Office of Management and Budget under control number 
2577-0181)



Sec. 968.425  HUD review of grantee performance.

    (a) Performance reviews. HUD shall carry out such reviews of the 
performance of each funded PHA as may be necessary or appropriate to 
determine compliance with the PHA's vacancy reduction plan and related 
HUD requirements. In these reviews HUD will determine whether the PHA 
has:
    (1) Carried out its vacancy reduction activities in a timely manner 
and in accordance with its vacancy reduction plan;
    (2) Completed, or made reasonable progress toward completing, the 
physical items funded under the vacancy reduction plan, and whether the 
work items being carried out conform with the modernization and energy 
standards in Sec. 968.115 of this chapter;
    (3) Implemented, or made reasonable progress toward implementing, 
the management improvements funded

[[Page 503]]

under the vacancy reduction program; and
    (4) Made reasonable progress in meeting the goals established in its 
vacancy reduction plan.
    (b) Notice of deficiency. If HUD finds any deficiency in a review of 
a grantee's performance under this part, HUD may issue to the grantee a 
notice of deficiency stating the specific program requirements that the 
grantee has violated and requesting the grantee to take corrective 
action.
    (c) Corrective action order. (1) Issuance. If HUD finds any of the 
deficiencies listed in paragraph (c)(3) of this section in its review of 
the grantee's performance, HUD may issue to the grantee a corrective 
action order, whether or not a notice of deficiency has previously been 
issued on the specific deficiency. The corrective action order shall 
notify the grantee of the specific program requirements that the grantee 
has violated and shall specify the corrective action.
    (2) Consultation with grantee. Before ordering corrective action, 
HUD will give the grantee an opportunity to consult with HUD regarding 
the proposed action.
    (3) Bases for corrective action. HUD may order a grantee to take 
corrective action only if HUD determines:
    (i) The grantee has not submitted a performance report as required 
by HUD;
    (ii) The grantee has not carried out activities under its vacancy 
reduction program in a timely manner and in accordance with HUD 
requirements;
    (iii) The grantee does not have continuing capacity to carry out 
activities in its vacancy reduction plan; or
    (iv) An audit conducted in accordance with 24 CFR part 44, or 
pursuant to other HUD reviews, reveals deficiencies that HUD reasonably 
believes require corrective action.
    (d) Nature of corrective action. (1) HUD shall design corrective 
action to prevent a continuation or recurrence of the same or a similar 
deficiency or to mitigate to the greatest extent feasible any adverse 
effects of the deficiency.
    (2) HUD may order a grantee to take the corrective action that HUD 
determines appropriate for carrying out the elements of the vacancy 
reduction plan. Corrective action may include, but is not limited to, 
suspension of grantee's authority to incur costs against the vacancy 
reduction funding and reimbursement, from sources other than HUD funds, 
of any amount spent improperly.
    (e) Failure to take corrective action. In cases where HUD has 
ordered corrective action and the grantee has failed to take the 
required action within a reasonable time, as specified by HUD, HUD may 
take one or more of the following steps:
    (1) Withhold vacancy reduction funds from the grantee;
    (2) Declare a breach of the ACC by the grantee; and
    (3) Any other sanctions authorized by law or regulation.



Sec. 968.428  Program closeout.

    (a) Requirements for grantees. Upon completion of the activities 
funded in accordance with this part, the grantee shall submit to HUD, 
and in a form prescribed by HUD, the actual modernization cost 
certificate for HUD's review, audit verification, and approval. The 
grantee shall immediately remit any excess funds provided by HUD. If the 
audited modernization cost certificate discloses unauthorized 
expenditures, the grantee shall take such corrective actions as HUD may 
direct.
    (b) Audit. The audit shall follow the guidelines prescribed in 24 
CFR part 44, Non-Federal Government Audit Requirements.

(Approved by the Office of Management and Budget under control number 
2577-0181)



Sec. 968.435  Other program requirements.

    In addition to the program requirements applicable to this subpart 
under Sec. 968.110, each PHA participating in the vacancy reduction 
program under this subpart shall:
    (a) Certify that any modernization, reconstruction, or 
rehabilitation activities that are funded under this subpart will be 
undertaken in accordance with modernization standards, as set forth in 
HUD Handbook 7485.2, as revised;
    (b) Certify that activities undertaken within vacant units will 
bring the affected vacant units into compliance with the Housing Quality 
Standards, as

[[Page 504]]

set forth in 24 CFR 882.109 and amended by the regulations concerning 
lead-based paint in public housing at 24 CFR part 35; and
    (c) Provide for resident involvement, in a manner to be determined 
by the Secretary, in the process of applying for any funding available 
under this part.



PART 969--PHA-OWNED PROJ- ECTS--CONTINUED OPERATION AS LOW-INCOME HOUSING AFTER COMPLETION OF DEBT SERVICE--Table of Contents




Sec.
969.101  Purpose.
969.102  Applicability.
969.103  Definitions.
969.104  Continuing eligibility for operating subsidy.
969.105  Extension of ACC upon payment of operating subsidy.
969.106  ACC extension in absence of current operating subsidy.
969.107  HUD approval of demolition or disposition before ACC 
          expiration.

    Authority: United States Housing Act of 1937 (42 U.S.C. 1437, et 
seq.); sec. 7(d), Department of Housing and Urban Development Act (42 
U.S.C. 3535(d)).

    Source: 45 FR 52372, Aug. 7, 1980, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.

    Editorial Note: Nomenclature changes affecting this part appear at 
49 FR 6714, Feb. 23, 1984.



Sec. 969.101  Purpose.

    This part provides a basis for maintaining the low-income nature of 
a public housing project after the completion of debt service on the 
project, specifying methods for extending the effective period of those 
provisions of the Annual Contributions Contract (ACC) which relate to 
project operation. Such an extension provides a contractual basis for 
the continued operation of the project under the Low-Income Public 
Housing Program, including continued eligibility for Operating Subsidy.



Sec. 969.102  Applicability.

    This part applies to any low-income public housing project that is 
owned by a Public Housing Agency (PHA), including any Turnkey III 
housing, and is subject to an ACC under section 5 of the United States 
Housing Act of 1937 (Act). This part does not apply to the Section 8 and 
Section 23 Housing Assistance Payments Programs, the Section 10(c) and 
Section 23 Leased Housing Programs, Lanham Act and Public Works projects 
that remain under administration contracts, or Indian Housing projects.

[56 FR 922, Jan. 9, 1991]



Sec. 969.103  Definitions.

    (a) ``ACC expiration date'' means the last day of the term during 
which a particular public housing project is subject to all or any of 
the provisions of the ACC. The ACC term for a particular project expires 
at the latest of:
    (1) The end of the ``Debt Service Completion Date,'' which is the 
last day of a one-year period beginning with, and inclusive of, the last 
debt service Annual Contribution Date for the project, as determined 
under the ACC (e.g., if the last debt service Annual Contribution Date 
is June 15, 1983, the one-year period continues through the end of the 
day on June 14, 1984, which is the Debt Service Completion Date); or
    (2) The end of the date of full repayment of any indebtedness of the 
PHA to the Federal government in connection with the project; or
    (3) The end of the last date of an extension of the term of the ACC 
provisions related to project operation, as effected under Sec. 969.105 
or Sec. 969.106.
    (b) ``Operating subsidy'' means additional annual contributions for 
operations under section 9 of the Act.



Sec. 969.104  Continuing eligibility for operating subsidy.

    Until and after the Debt Service Completion Date for any project, 
HUD shall pay Operating Subsidy with respect to such project only in 
accordance with an ACC amendment providing for extension of the term of 
the ACC provisions related to project operation, pursuant to 
Sec. 969.105 or Sec. 969.106. The ACC amendment shall be in the form 
prescribed by HUD and shall specify the particular provisions of the ACC 
which relate to continued project

[[Page 505]]

operation and, therefore, remain in effect for the extended ACC term. 
These provisions shall include a requirement that the PHA execute and 
file for public record an appropriate document evidencing the PHA's 
covenant not to convey, encumber or make any other disposition of the 
project before the end of the project's ACC Expiration Date, without HUD 
approval.



Sec. 969.105  Extension of ACC upon payment of operating subsidy.

    (a) ACC amendment. As a condition for the first HUD approval for 
payment of Operating Subsidy with respect to the projects under a 
particular ACC for a PHA fiscal year beginning after the effective date 
of this part, the PHA and HUD shall enter into an amendment to the ACC 
for all projects under the ACC. This ACC amendment shall provide that 
the ACC provisions related to project operation shall continue in effect 
with respect to each project under the ACC for a period of 10 years 
after the end of the last PHA fiscal year for which Operating Subsidy is 
paid with respect to the project.
    (b) Consolidated ACC. Where a single ACC covers more than one 
project (Consolidated ACC), each annual Operating Subsidy payable under 
that ACC is a lump-sum amount, which is not divided into discrete 
amounts for the individual projects which are subject to the 
Consolidated ACC (see 24 CFR part 990). Accordingly, if a PHA, before 
submitting a request for Operating Subsidy pursuant to paragraph (a) of 
this section, determines that any project(s) under the Consolidated ACC 
will not require Operating Subsidy and should not be subject to the 
provisions of paragraph (a), of this section the PHA shall accompany its 
request with a resolution certifying that no Operating Subsidy shall be 
utilized with respect to such project(s) after the effective date of 
this rule and that all financial records and accounts shall be kept 
separately for such project(s). In such case, the removal of the 
project(s) from the request for Operating Subsidy shall be reflected by 
the exclusion of that number of unit months available for the project(s) 
when making the calculations, under 24 CFR part 990, for determination 
of the total amount of Operating Subsidy payable under the Consolidated 
ACC. In any event, no Operating Subsidy payable under a Consolidated ACC 
or otherwise shall be used to pay, directly or indirectly, any costs 
attributable to a project which is ineligible or otherwise excluded from 
Operating Subsidy under Sec. 969.104. Even if no Operating Subsidy is 
received with respect to a project, the PHA remains obligated to 
maintain and operate the project in accordance with the provisions of 
the ACC related to project operation so long as those ACC provisions 
remain in effect.



Sec. 969.106  ACC extension in absence of current operating subsidy.

    Where Operating Subsidy under an ACC is not approved for payment 
during a time period which results in extension of the term of the ACC 
provisions related to project operation, with respect to a particular 
project, pursuant to Sec. 969.105, the PHA shall, at least one year 
before the anticipated ACC Expiration Date for the project, notify HUD 
as to whether or not the PHA desires to maintain a basis for receiving 
Operating Subsidy with respect to the project after the anticipated ACC 
Expiration Date. This notification shall be submitted to the appropriate 
HUD Field Office in the form of a resolution of the PHA's Board of 
Commissioners. If the PHA does not desire to maintain a basis for 
Operating Subsidy payments with respect to the project after the 
anticipated ACC Expiration Date, the resolution shall certify that no 
Operating Subsidy shall be utilized with respect to the project after 
the effective date of this rule and that all financial records and 
accounts for such a project shall be kept separately. If the PHA does 
desire to maintain a basis for such Operating Subsidy payments, the 
resolution shall include the PHA's request for extension of the term of 
the ACC provisions related to project operation, for a period of not 
less than one nor more than 10 years. Upon HUD's receipt of the request, 
HUD and the PHA shall enter into an ACC amendment effecting the 
extension for the period requested by the PHA, unless HUD finds that 
continued operation of the project cannot be justified under the 
standards

[[Page 506]]

set forth in 24 CFR part 970 (HUD's regulation on demolition or 
disposition of public housing).



Sec. 969.107  HUD approval of demolition or disposition before ACC expiration.

    This part is not intended to preclude or restrict the demolition or 
disposition of a project pursuant to HUD approval in accordance with 24 
CFR part 970. Subject to the requirements of 24 CFR part 970, HUD may 
authorize a PHA to demolish or dispose of public housing at any time 
before the ACC Expiration Date.



PART 970--PUBLIC HOUSING PROGRAM--DEMOLITION OR DISPOSITION OF PUBLIC HOUSING PROJECTS--Table of Contents




Sec.
970.1  Purpose.
970.2  Applicability.
970.3  Definitions.
970.4  General requirements for HUD approval of applications for 
          demolition or disposition.
970.5  Displacement and relocation.
970.6  Specific criteria for HUD approval of demolition requests.
970.7  Specific criteria for HUD approval of disposition requests.
970.8  PHA application for HUD approval.
970.9  Disposition of property; use of proceeds.
970.10  Costs of demolition and relocation of displaced tenants.
970.11  Replacement Housing Plan.
970.12  Required and permitted actions prior to approval.
970.13  Resident organization opportunity to purchase.
970.14  Reports and records.

    Authority: 42 U.S.C. 1437p and 3535(d).

    Source: 50 FR 50894, Dec. 13, 1985, unless otherwise noted.



Sec. 970.1  Purpose.

    This part sets forth requirements for HUD approval of a public 
housing agency's application for demolition or disposition (in whole or 
in part) of public housing projects assisted under Title I of the U.S. 
Housing Act of 1937 (the ``Act''). The rules and procedures contained in 
24 CFR part 85 are inapplicable.

[53 FR 8067, Mar. 11, 1988, as amended at 56 FR 923, Jan. 9, 1991]



Sec. 970.2  Applicability.

    (a) This part applies to public housing projects that are owned by 
public housing agencies (PHAs) and that are subject to Annual 
Contributions Contracts (ACCs) under the Act. It also applies to Section 
23 bond-financed projects that have received modernization (i.e., 
Comprehensive Improvement Assistance Program (CIAP) or Comprehensive 
Grant funds (CGP)). This part does not apply to the following:
    (1) PHA-owned Section 8 housing, or housing leased under section 
10(c) or section 23 of the Act, except for section 23 bond-financed 
projects that have received modernization funding under the CIAP or the 
Comprehensive Grant Programs;
    (2) Demolition or disposition before the End of the Initial 
Operating Period (EIOP), as determined under the ACC, of property 
acquired incident to the development of a public housing project; 
(however, this exception shall not apply to dwelling units);
    (3) The conveyance of public housing for the purpose of providing 
homeownership opportunities for lower income families under section 21 
of the Act, the Turnkey III/IV or Mutual Help Homeownership Opportunity 
Programs, or other homeownership programs established under sections 
5(h) or 6(c)(4)(D) of the Act and in existence before February 5, 1988, 
the date of enactment of the 1987 Act. (Where a plan submitted by the 
PHA for homeownership includes a component of demolition, the plan must 
meet the requirements of section 18 and this part.);
    (4) The leasing of dwelling or nondwelling space incident to the 
normal operation of the project for public housing purposes, as 
permitted by the ACC;
    (5) The reconfiguration of the interior space of buildings (e.g., 
moving or removing interior walls to change the design, sizes, or number 
of units) without ``demolition'', as defined in Sec. 970.3. (This 
includes the conversion of bedroom size, occupancy type, changing

[[Page 507]]

the status of unit from dwelling to nondwelling.);
    (6) Easements, rights-of-way and transfers of utility systems 
incident to the normal operation of the development for public housing 
purposes, as permitted by the ACC;
    (7) A whole or partial taking by a public or quasi-public entity 
through the exercise of its power of eminent domain; however, HUD 
requirements with respect to the replacement housing requirement for 
one-for-one dwelling units shall be followed (see HUD Handbook 7486.1, 
Demolition, Disposition and Conversion);
    (8) Disposition of a public housing project in accordance with an 
approved homeownership program under title III of the United States 
Housing Act of 1937 (42 U.S.C. 1437p) (Hope 1); 1
---------------------------------------------------------------------------

    \1\ In keeping with section 412(b) of the National Affordable 
Housing Act (Pub.L. 101-625), the provisions of this part do not apply 
to the disposition of a public housing project in accordance with an 
approved homeownership program under title III of the United States 
Housing Act of 1937, as added by section 411 of that legislation, (HOPE 
1 for Public and Indian Housing Homeownership). In the case of a HOPE 1 
proposal from a PHA involving partial or total demolition of units, this 
part does apply. HOPE 3 proposals involving public housing units 
approved prior to the 1992 Act are likewise covered by the requirements 
of section 18. [The 1992 Act took scattered-site single family public 
housing from under the requirements of HOPE 3 and moved it to HOPE 1.]
---------------------------------------------------------------------------

    (9) Demolition after conveyance of a public housing project to a 
non-PHA entity in accordance with an approved homeownership program 
under title III of the United States Housing Act of 1937 (42 U.S.C. 
1437p) (HOPE 1);
    (10) Units leased for non-dwelling purposes for one year or less;
    (11) A public housing development that is conveyed by a PHA to an 
owner entity pursuant to an approved proposal under 24 CFR part 941, 
subpart F and prior to the determination of the Actual Development Cost 
to enable an owner entity to develop the project using the mixed-finance 
development method; and
    (12) Public housing units that are developed pursuant to the mixed-
finance development method at 24 CFR part 941, subpart F, and that are 
reconveyed by the owner entity to the PHA.
    (b) Demolition or disposition that was approved by HUD before 
February 5, 1988, but not carried out by that date, may be carried out 
according to the terms of such approval, without reference to subsequent 
amendments to this part and without obtaining any further HUD approval.

[60 FR 3716, Jan. 18, 1995; as amended at 61 FR 19719, May 2, 1996]



Sec. 970.3  Definitions.

    Act means the United States Housing Act of 1937.
    Chief Executive Officer of a unit of general local government means 
the elected official or the legally designated official, who has the 
primary responsibility for the conduct of that entity's governmental 
affairs. Examples of the ``chief executive officer of a unit of general 
local government'' are: the elected mayor of a municipality; the elected 
county executive of a county; the chairperson of a county commission or 
board in a county that has no elected county executive; and the official 
designated pursuant to law by the governing body of a unit of general 
local government.
    Demolition means the razing, in whole or in part, of one or more 
permanent buildings of a public housing project.
    Disposition means the conveyance or other transfer by the PHA, by 
sale or other transaction, of any interest in the real estate of a 
public housing project, subject to the exceptions stated in Sec. 970.2.

[50 FR 50894, Dec. 13, 1985, as amended at 60 FR 3716, Jan. 18, 1995]



Sec. 970.4  General requirements for HUD approval of applications for demolition or disposition.

    HUD will not approve an application for demolition or disposition 
unless:
    (a) The application has been developed in consultation with tenants 
of the project involved, any tenant organizations for the project, and 
any PHA-wide tenant organizations that will be affected by the 
demolition or disposition;
    (b) Demolition or disposition (including any related replacement 
housing plan) will meet the requirements of the

[[Page 508]]

National Environmental Policy Act of 1969 (42 U.S.C. 4321), the National 
Historic Preservation Act of 1966 (16 U.S.C. 469), and related laws, as 
stated in the Department's regulations at 24 CFR part 50.
    (c) Demolition or disposition (including any related replacement 
housing plan) will meet the requirements of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321), the National Historic Preservation 
Act of 1966 (16 U.S.C. 469), and related laws, as stated in the 
Department's regulations at part 50 of this title. Where the site of the 
replacement housing is unknown at the time of submission of the 
application for demolition or disposition, the application shall contain 
an certification that the applicant agrees to assist HUD to comply with 
part 50 of this title and that the applicant shall:
    (1) Supply HUD with all available, relevant information necessary 
for HUD to perform for each property any environmental review required 
by part 50 of this title;
    (2) Carry out mitigating measures required by HUD or select 
alternate eligible property; and
    (3) Not acquire, rehabilitate, convert, lease, repair or construct 
property, or commit HUD or local funds to such program activities with 
respect to any eligible property, until HUD approval is received.
    (d) The public housing agency has developed a replacement housing 
plan, in accordance with Sec. 970.11, and has obtained a commitment for 
the funds necessary to carry out the plan over the approved schedule of 
the plan. To the extent such funding is not provided from other sources 
(e.g., State or local programs or proceeds of disposition), HUD approval 
of the application for demolition or disposition is conditioned on HUD's 
agreement to commit the necessary funds (subject to availability of 
future appropriations).
    (e) The PHA has complied with the offering to resident 
organizations, as required under Sec. 970.13.
    (f) The PHA has prepared a certification regarding relocation of 
residents, in accordance with Sec. 970.5(h)(1). If relocation is 
required, the PHA must submit a relocation plan in accordance with 
Sec. 970.5.
    (g) The PHA has made the appropriate certifications regarding site 
and neighborhood standards, in accordance with Sec. 970.11(h) (2) and 
(4).

[50 FR 50894, Dec. 13, 1985, as amended at 53 FR 30987, Aug. 17, 1988; 
60 FR 3717, Jan. 18, 1995]



Sec. 970.5  Displacement and relocation.

    (a) Relocation of displaced tenants on a nondiscriminatory basis. 
Tenants who are to be displaced as a result of demolition or disposition 
must be offered opportunities to relocate to other comparable/suitable 
(see HUD Handbook 1378, Tenant Assistance, Relocation and Real Property 
Acquisition) decent, safe, sanitary, and affordable housing (at rents no 
higher than permitted under the Act,) which is, to the maximum extent 
practicable, housing of their choice, on a nondiscriminatory basis, 
without regard to race, color, religion (creed), national origin, 
handicap, age, familial status, or sex, in compliance with applicable 
Federal and State laws.
    (b) Relocation resources. Relocation may be to other publicly 
assisted housing. Housing assisted under Section 8 of the Act, including 
housing available for lease under the Section 8 Housing Voucher Program, 
may also be used for relocation, provided the PHA ensures that displaced 
tenants are provided referrals to comparable/suitable relocation 
dwelling units where the family's share of the rent to owner following 
relocation will not exceed the total tenant payment, as calculated in 
accordance with Sec. 813.107 of this title. If the PHA provides 
referrals to suitable/comparable relocation housing (comparable housing 
if the displacement is subject to the URA) and a tenant with a rental 
voucher elects to lease a housing unit where the family's share of rent 
to owner exceeds the amount calculated in accordance with Sec. 813.107 
of this title, the tenant will be responsible for the difference between 
the voucher payment standard and the rent to owner. If there are no 
units with rents at or below the voucher payment standard to which the 
PHA may refer families, then the PHA cannot use vouchers as a relocation 
housing source.

[[Page 509]]

    (c) Applicability of URA rules. (1) The displacement of any person 
(household, business or nonprofit organization) as a direct result of 
acquisition, rehabilitation, or demolition for a Federal or federally 
assisted project (defined in paragraph (j) of this section) is subject 
to the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970, as amended, (URA) (42 U.S.C. 4601-4655) and 
implementing regulations at 49 CFR part 24. Therefore, if the PHA 
demolishes the property, or disposes of it to a Federal agency or to a 
person or entity that is acquiring the property for a federally assisted 
project, the demolition or acquisition is subject to the URA, and any 
person displaced (as described in paragraph (i) of this section) as a 
result of such action is eligible for relocation assistance at the 
levels described in, and in accordance with the requirements of 49 CFR 
part 24.
    (2) As described in Sec. 970.11, public housing units that are 
demolished must be replaced. Any person displaced (see paragraph (i) of 
this section) as a direct result of acquisition, demolition or 
rehabilitation for a project receiving Federal financial assistance 
(e.g., ACC) that provides the required replacement housing, must be 
provided relocation assistance at the levels described in, and in 
accordance with the requirements of 49 CFR part 24.
    (d) Applicability of antidisplacement plan. If CDBG funds (part 570 
of this title), or HOME funds (part 91 of this title) are used to pay 
any part of the cost of the demolition or the cost of a project (defined 
in paragraph (j) of this section) for which the property is acquired, 
the transaction is subject to the Residential Antidisplacement and 
Relocation Assistance Plan, as described in the cited regulations.
    (e) Relocation assistance for other displaced persons. Whenever the 
displacement of a residential tenant (family, individual or other 
household) occurs in connection with the disposition of the real 
property, but the conveyance is not for a Federal or federally assisted 
project (and is, therefore, not covered by the URA), the displaced 
tenant shall be eligible for the following relocation assistance:
    (1) Advance written notice of the expected displacement. The notice 
shall be provided as soon as feasible, describe the assistance to be 
provided and the procedures for obtaining the assistance; and contain 
the name, address and phone number of an official responsible for 
providing the assistance;
    (2) Other advisory services, as appropriate, including counseling 
and referrals to suitable, decent, safe, and sanitary replacement 
housing. Minority persons also shall be given, if possible, referrals to 
suitable decent, safe and sanitary replacement dwellings that are not 
located in an area of minority concentration;
    (3) Payment for actual reasonable moving expenses, as determined by 
the PHA;
    (4) The opportunity to relocate to a suitable, decent, safe and 
sanitary dwelling unit at a rent that does not exceed that permitted 
under section 3(a) of the 1937 Act. All or a portion of the assistance 
may be provided under section 8 of the 1937 Act; and
    (5) Such other Federal, State or local assistance as may be 
available.
    (f) Temporary relocation. Residential tenants who will not be 
required to move permanently, but who must relocate temporarily (e.g., 
to permit property repairs), shall be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporary housing, any increase in monthly rent/
utility costs, and the cost of reinstalling telephone and cable TV 
service.
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The suitable, decent, safe and sanitary housing to be made 
available for the temporary period;
    (iii) The terms and conditions under which the tenant may lease and 
occupy a suitable, decent, safe and sanitary dwelling in the building/
complex following completion of the repairs; and
    (iv) The provision for reimbursement of out-of-pocket expenses (see 
paragraph (f)(1) of this section).

[[Page 510]]

    (g) Appeals. A person who disagrees with the PHA's determination 
concerning whether the person qualifies as a ``displaced person'' or the 
amount of the relocation assistance for which the person is eligible, 
may file a written appeal of that determination with the PHA. A person 
who is dissatisfied with the PHA's determination on his or her appeal 
may submit a written request for review of the PHA's determination to 
the HUD Field Office.
    (h) Responsibility of PHA. (1) The PHA shall certify that it will 
comply with the URA, implementing regulations at 49 CFR part 24, and the 
requirements of this section, and shall ensure such compliance, 
notwithstanding any third party's contractual obligation to the PHA to 
comply with these provisions.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. (See definition of ``project'' in paragraph (j) of this section.) 
Such costs may also be paid for with funds available from other sources.
    (3) The PHA shall maintain records in detail sufficient to 
demonstrate such compliance. The PHA shall maintain data on the race, 
ethnic, gender, and handicap status of displaced persons.
    (i) Definition of displaced person. (1) General definition. For 
purposes of this section, the term ``displaced person'' means any person 
(household, business, nonprofit organization, or farm) that moves from 
real property, or moves personal property from real property, 
permanently, as a direct result of acquisition, rehabilitation, or 
demolition for a Federal or federally assisted project.
    (2) Persons who qualify. The term ``displaced person'' includes, but 
may not be limited to:
    (i) A person who moves permanently from the real property after the 
PHA, or the person acquiring the property, issues a vacate notice to the 
person, or refuses to renew an expiring lease in order to evade the 
responsibility to provide relocation assistance, if the move occurs on 
or after the date of HUD approval of the demolition or disposition;
    (ii) Any person who moves permanently, including a person who moves 
before the date of HUD approval of the demolition or disposition, if HUD 
or the PHA determines that the displacement resulted from the demolition 
or disposition of the property and is subject to the provisions of this 
section; or
    (iii) A tenant-occupant of a dwelling who moves permanently from the 
building/complex on or after the date HUD approves the demolition or 
disposition, if the move occurs before the tenant is provided written 
notice offering him or her the opportunity to lease and occupy a 
suitable, decent, safe, and sanitary dwelling in the same building/
complex, under reasonable terms and conditions, upon completion of the 
project. Such reasonable terms and conditions shall include a monthly 
rent and estimated average monthly utility costs that do not exceed that 
permitted under section 3(a) of the 1937 Act.
    (iv) A tenant-occupant of a dwelling who is required to relocate 
temporarily and does not return to the building/complex, if either:
    (A) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with such temporary relocation 
(including the cost of moving to and from the temporarily occupied unit, 
any increase in rent/utility costs, and the cost of reinstalling 
telephone and cable TV service).
    (B) Other conditions of the temporary relocation are not reasonable.
    (v) A tenant-occupant of a dwelling who moves from the building/
complex permanently after he or she has been required to move to another 
unit in the same building/complex if either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) Other conditions of the move are not reasonable.
    (3) Persons not eligible. Notwithstanding the provisions of 
paragraphs (i)(1) and (i)(2) of this section, a person does not qualify 
as a ``displaced person'' (and is not eligible for relocation assistance 
under this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
of applicable Federal, State or local law, or other

[[Page 511]]

good cause, and the PHA determines that the eviction was not undertaken 
for the purpose of evading the obligation to provide relocation 
assistance;
    (ii) The person moved into the property after the submission of the 
application for the demolition or disposition and, before commencing 
occupancy, received written notice of the project, its possible impact 
on the person (e.g., the person may be displaced, temporarily relocated, 
or suffer a rent increase) and the fact that he or she would not qualify 
as a ``displaced person'' (or for assistance under this section) as a 
result of the project;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of an action covered by this section.
    (j) Definition of project. For purposes of this section, the term 
``project'' means one or more activities (e.g., real property 
acquisition, demolition or construction) paid for in whole or in part 
with Federal financial assistance. Two or more activities that are 
integrally related, each essential to the other(s), are considered one 
project, whether or not all of the component activities are federally 
assisted.
    (k) Definition of initiation of negotiations. For purposes of 
providing the appropriate notices and determining the formula for 
computing a replacement housing payment under the URA to a tenant 
displaced from a dwelling as a direct result of demolition or private 
owner acquisition, the term ``initiation of negotiations'' means HUD 
approval of the demolition or disposition under this part.

[60 FR 3717, Jan. 18, 1995]



Sec. 970.6  Specific criteria for HUD approval of demolition requests.

    In addition to other applicable requirements of this part, HUD will 
not approve an application for demolition unless HUD determines that one 
of the following criteria is met:
    (a) In the case of demolition of all or a portion of a project, the 
project, or portion of the project, is obsolete as to physical 
condition, location, or other factors, making it unusable for housing 
purposes and no reasonable program of modifications, is feasible to 
return the project or portion of the project to useful life. The 
Department generally shall not consider a program of modifications to be 
reasonable if the costs of such program exceed 90 percent of total 
development cost (TDC). Major problems indicative of obsolescence are--
    (1) As to physical condition: Structural deficiencies (e.g. 
settlement of earth below the building caused by inadequate structural 
fills, faulty structural design, or settlement of floors), substantial 
deterioration (e.g., severe termite damage or damage caused by extreme 
weather conditions), or other design or site problems (e.g., severe 
erosion or flooding);
    (2) As to location: physical deterioration of the neighborhood; 
change from residential to industrial or commercial development; or 
environmental conditions as determined by HUD environmental review in 
accord with part 50 of this title, which jeopardize the suitability of 
the site or a portion of the site and its housing structures for 
residential use;
    (3) Other factors which have seriously affected the marketability, 
usefulness, or management of the property.
    (b) In the case of demolition of only a portion of a project, the 
demolition will help to assure the useful life of the remaining portion 
of the project (e.g., to reduce project density to permit better access 
by emergency, fire, or rescue services).

[60 FR 3719, Jan. 18, 1995]



Sec. 970.7  Specific criteria for HUD approval of disposition requests.

    (a) In addition to other applicable requirements of this part, HUD 
will not approve a request for disposition unless HUD determines that 
retention is not in the best interests of the tenants and the PHA 
because at least one of the following criteria is met:
    (1) Developmental changes is the area surrounding the project (e.g., 
density, or industrial or commercial development) adversely affect the 
health or safety of the tenants or the feasible operation of the project 
by the PHA.
    (2) Disposition will allow the acquisition, development, or 
rehabilitation of

[[Page 512]]

other properties that will be more efficiently or effectively operated 
as lower income housing projects, and that will preserve the total 
amount of lower income housing stock available to the community. A PHA 
must be able to demonstrate to the satisfaction of HUD that the 
additional units are being provided in connection with the disposition 
of the property.
    (3) There are other factors justifying disposition that HUD 
determines are consistent with the best interests of the tenants and the 
PHA and that are not inconsistent with other provisions of the Act. As 
an example, if the property meets any of the criteria for demolition 
under Sec. 970.6, it may be disposed of under this criterion 
(Sec. 970.7(a)(3)), subject to conditions that HUD may impose (e.g., 
demolition to follow disposition in order to assure abatement of a 
threat to safety or health).
    (b) In the case of disposition of property other than dwelling 
units, (1) the property is determined by HUD to be excess to the needs 
of the project (after EIOP), or (2) the disposition of the property is 
incidental to, or does not interfere with, continued operation of the 
remaining portion of the project.

[50 FR 50894, Dec. 13, 1985, as amended at 53 FR 30988, Aug. 17, 1988; 
60 FR 3719, Jan. 18, 1995]



Sec. 970.8  PHA application for HUD approval.

    Written approval by HUD shall be required before the PHA may 
undertake any transaction involving demolition or disposition. To 
request approval, the PHA shall submit an application to the appropriate 
HUD Field Office which includes the following:
    (a) A description of the property involved;
    (b) A description of, as well as a timetable for, the specific 
action proposed (including, in the case of disposition, the specific 
method proposed);
    (c) A statement justifying the proposed demolition or disposition 
under one or more of the applicable criteria of Sec. 970.6 or 
Sec. 970.7;
    (d) If applicable, a plan for the relocation of tenants who would be 
displaced by the proposed demolition or disposition (see Sec. 970.5). 
The relocation plan must at least indicate:
    (1) The number of tenants to be displaced;
    (2) What counseling and advisory services the PHA plans to provide;
    (3) What housing resources are expected to be available to provide 
housing for displaced tenants;
    (4) An estimate of the costs for counseling and advisory services 
and tenant moving expenses, and the expected source for payment of these 
costs (see Secs. 970.9); and
    (5) The minimum official notice that the PHA will give tenants 
before they are required to move;
    (e) A description of the PHA's consultations with tenants and any 
tenant organizations (as required under Sec. 970.4(a)), with copies of 
any written comments which may have been submitted to the PHA and the 
PHA's evaluation of the comments;
    (f) A replacement housing plan, as required under Sec. 970.11, and 
approved by the unit of general local government which approval shall be 
provided by the chief executive officer of the jurisdiction in which the 
project is located (e.g., the mayor or the county executive), indicating 
approval of the replacement plan.
    (g) Evidence of compliance with the offering to resident 
organizations, as required under Sec. 970.13.
    (h) A certification regarding relocation of residents, in accordance 
with Sec. 970.5(h)(1).
    (i) Appropriate certifications regarding site and neighborhood 
assessment, in accordance with Secs. 970.11(h) (2), (3), and (4).
    (j) Appropriate certification regarding compliance with 
environmental authorities, where required in accordance with 
Sec. 970.4(c).
    (k) The estimated balance of project debt, under the ACC, for 
development and modernization;
    (l) In the case of disposition, an estimate of the fair market value 
of the property, established on the basis of one independent appraisal 
unless, as determined by HUD, (1) more than one appraisal is warranted, 
or (2) another

[[Page 513]]

method of valuation is clearly sufficient and the expense of an 
independent appraisal is unjustified because of the limited nature of 
the property interest involved or other available data;
    (m) In the case of disposition, estimates of the gross and net 
proceeds to be realized, with an itemization of estimated costs to be 
paid out of gross proceeds and the proposed use of any net proceeds in 
accordance with Sec. 970.9;
    (n) A copy of a resolution by the PHA's Board of Commissioners 
approving the application;
    (o) If determined to be necessary by HUD, an opinion by the PHA's 
legal counsel that the proposed action is consistent with applicable 
requirements of Federal, State, and local laws; and
    (p) Any additional information necessary to support the application 
and assist HUD in making determinations under this part.

(Approved by the Office of Management and Budget under control number 
2577-0075)

[50 FR 50894, Dec. 13, 1985, as amended at 60 FR 3719, Jan. 18, 1995]



Sec. 970.9  Disposition of property; use of proceeds.

    (a) Where HUD approves the disposition of real property of a 
project, in whole or in part, the PHA shall dispose of it promptly by 
public solicitation of bids for not less than fair market value, unless 
HUD authorizes negotiated sale for reasons found to be in the best 
interests of the PHA or the Federal Government, or sale for less than 
fair market value (where permitted by State law), based on commensurate 
public benefits to the community, the PHA or the Federal Government 
justifying such an exception. Reasonable costs of disposition, and of 
relocation of displaced tenants allowable under Sec. 970.5, may be paid 
by the PHA out of the gross proceeds, as approved by HUD.
    (b) Net proceeds, including any interest earned on the proceeds, 
(after payment of HUD-approved costs of disposition and relocation under 
paragraph (a) of this section) shall be used, subject to HUD approval, 
as follows:
    (1) For the retirement of outstanding obligations, if any, issued to 
finance original development or modernization of the project; and
    (2) Thereafter, to the extent that any net proceeds remain, for the 
provision of housing assistance for low-income families, through such 
measures as modernization of low-income housing or the acquisition, 
development or rehabilitation of other properties to operate as low-
income housing.
    (c) In the case of scattered-site housing of a public housing 
agency, the net proceeds of a disposition shall be used for the 
retirement of outstanding obligations issued to finance original 
development or modernization of the project, in an amount that bears the 
same ratio to the total of such costs and obligations as the number of 
units disposed of bears to the total number of units of the project at 
the time of disposition. For example, in cases where debt has not been 
forgiven, if a development project of ten units that cost $100,000 has 
one unit disposed of for $10,000, then there would be no net proceeds 
after paying off the proportional cost ($100,000 divided by 10=$10,000/
unit) of the project. If, however, the unit was disposed of and net 
proceeds were $12,000, there would be $2,000 available that the PHA 
would use for the provision of housing assistance for lower income 
families. Where debt has been forgiven, all the net proceeds may be used 
by the PHA for the provision of low income housing assistance.

[50 FR 50894, Dec. 13, 1985, as amended at 53 FR 30988, Aug. 17, 1988; 
60 FR 3719, Jan. 18, 1995]



Sec. 970.10  Costs of demolition and relocation of displaced tenants.

    Where HUD has approved demolition of a project, or a portion of a 
project, and the proposed action is part of a modernization program 
under the Comprehensive Improvement Assistance Program (24 CFR part 
968), the costs of demolition and of relocation of displaced tenants may 
be included in the modernization budget.



Sec. 970.11  Replacement housing plan.

    (a) One-for-one replacement. HUD may not approve an application or 
furnish assistance under this part unless the PHA submitting the 
application for demolition or disposition also submits

[[Page 514]]

a plan for the provision of an additional decent, safe, sanitary, and 
affordable rental dwelling unit (at rents no higher than permitted under 
the Act) for each public housing dwelling unit to be demolished or 
disposed of under the application, except as provided in paragraph (j) 
of this section. A replacement housing plan may provide for the location 
of the replacement housing outside the political boundaries of the 
locality of the PHA, provided all relevant program requirements are 
satisfied including the approval of the replacement housing plan by the 
unit of general local government in which the project being demolished 
or disposed is located. In order to assure that all program requirements 
are satisfied, the PHA must enter into any necessary agreements, 
including where applicable, the execution of a Cooperation Agreement 
between the PHA and the locality in which the replacement housing will 
be located, prior to submission of the replacement housing plan to HUD 
for approval. In addition, the PHA must ensure that such agreements 
provide that the families selected for occupancy in the replacement 
housing will be families who would have been eligible for occupancy in 
the replacement housing if it had been replaced in the same locality as 
the project being demolished or disposed. The plan must include any one 
or combination of the following:
    (1) The acquisition or development of additional public housing 
dwelling units;
    (2) The use of 15-year project-based assistance under section 8, to 
the extent available, or if such assistance is not available, in the 
case of an application proposing demolition or disposition of 200 or 
more dwelling units in a development, the use of available project-based 
assistance under section 8 having a term of not less than 5 years;
    (3) The use of not less than 15-year project-based assistance under 
other Federal programs, to the extent available, or if such assistance 
is not available, in the case of an application proposing the demolition 
or disposition of 200 or more dwelling units in a development, the use 
of available project-based assistance under other Federal programs 
having a term of not less than 5 years. (NOTE: In the case of 15-year 
project based assistance under other Federal programs, the Department 
has determined that low-income housing credits under Section 42 of the 
Internal Revenue Service Code is a Federal program providing 15-year 
project-based assistance and, therefore, qualifies as a source of 
replacement housing. Any replacement housing plan proposing the use of 
these credits must assure that the low-income housing units in the low-
income housing credit project which are designated as replacement 
housing will be reserved for low-income families for the requisite 
period. Units which at the time of allocation of the credit are also 
receiving Federal assistance under Section 8 (except tenant-based 
assistance) or Section 23 of the Act, or Section 236, 221(d)(3) BMIR or 
Section 221(d)(5) of the National Housing Act (12 U.S.C. 1701 et seq.), 
or Section 101 of the Housing and Urban Development Act of 1965 (12 
U.S.C. 1701s), or other similar Federal program, are not eligible as 
replacement housing under paragraph (a)(3) of this section.);
    (4) The acquisition or development of dwelling units assisted under 
a State or local government program that provides for project-based 
rental assistance comparable in terms of eligibility, contribution to 
rent, and length of assistance contract (not less than 15 years) to 
assistance under section (8)(b)(1) of the Act; or
    (5)(i) The use of 15-year tenant-based assistance under section 8 of 
the Act, (excluding rental vouchers under section 8(o)), under the 
conditions described in paragraph (b) of this section, to the extent 
available, or if such assistance is not available, in the case of an 
application proposing the demolition or disposition of 200 or more 
dwelling units in a development, the use of tenant-based assistance 
under section 8 (excluding rental vouchers under section 8(o)) having a 
term of not less than 5 years.
    (ii) However, in the case of an application proposing demolition or 
disposition of 200 or more units, not less than 50 percent of the 
dwelling units for replacement housing shall be provided

[[Page 515]]

through the acquisition or development of additional public housing 
dwelling units or through project-based assistance, and not more than 50 
percent of the additional dwelling units shall be provided through 
tenant-based assistance under section 8 (excluding vouchers) having a 
term of not less than 5 years. The requirements of Sec. 970.11(b) do not 
apply to applications for demolition or disposition of 200 or more units 
that propose the use of tenant-based assistance under section 8 having a 
term of not less than 5 years for the replacement of not more than 50 
percent of the units to be demolished or disposed of.
    (b) Conditions for use of tenant-based assistance. Fifteen-year 
tenant-based assistance under section 8 may be approved under the 
replacement plan only if provisions listed in paragraphs (b)(1) through 
(3) of this section are met.
    (1) There is a finding by HUD that replacement with project-based 
assistance (including public housing, as well as other types of project-
based assistance under paragraph (a) of this section) is not feasible 
under the feasibility standards established for project-based 
assistance; that the supply of private rental housing actually available 
to those who would receive tenant-based assistance under the plan is 
sufficient for the total number of rental certificates and rental 
vouchers available in the community after implementation of the plan; 
and that this available housing supply is likely to remain available for 
the full 15-year term of the assistance;
    (2) HUD's findings under paragraph (b)(1) of this section are based 
on objective information, which must include rates of participation by 
landlords in the Section 8 program; size, condition, and rent levels of 
available rental housing as compared to Section 8 standards; the supply 
of vacant existing housing meeting the Section 8 housing quality 
standards with rents at or below the fair market rent or the likelihood 
of adjusting the fair market rent; the number of eligible families 
waiting for public housing or housing assistance under Section 8; the 
extent of discrimination practiced against the types of individuals or 
families to be served by the assistance; an assessment of compliance 
with civil rights laws and related program requirements; and such 
additional data as HUD may determine to be relevant in particular 
circumstances; and
    (3) To justify a finding under paragraph (b)(1) of this section, the 
PHA must provide sufficient information to support both parts of the 
finding--why project-based assistance is infeasible and how the 
conditions for tenant-based assistance will be met, based on the 
pertinent data from the local housing market, as prescribed in paragraph 
(b)(2) of this section. The determination as to the lack of feasibility 
of project-based assistance must be based on the standards for 
feasibility stated in the respective regulations which govern each type 
of eligible project-based program identified in paragraph (a) of this 
section, including public housing under paragraph (a)(1) of this section 
as well as the other types of eligible Federal, State and local programs 
of project-based assistance under paragraphs (a)(2) through (4) of this 
section. A finding of lack of feasibility may thus be made only if the 
applicable feasibility standards cannot be met under any of those 
project-based programs, or any combination of them. For example, with 
regard to additional public housing development, feasibility would be 
determined by reference to part 941 of this chapter and any other 
applicable regulations and requirements, to include consideration of 
such factors as local needs for new construction or rehabilitation, 
availability of suitable properties for acquisition or sites for 
construction, and HUD determinations under cost containment policies. 
With regard to Section 8 programs involving rehabilitation, an example 
of a major feasibility factor would be the prospects for participation 
of private owners willing to meet the rehabilitation requirements.
    (c) Approval of unit of general local government. The plan must be 
approved by the unit of general local government in which the project 
proposed for demolition or disposition is located, which approval shall 
be provided by the chief executive officer (e.g., the mayor or the 
county executive).

[[Page 516]]

    (d) Schedule for replacement housing plan. (1) The plan must include 
a schedule for carrying out all its terms within a period consistent 
with the size of the proposed demolition or disposition, except that the 
schedule for completing the plan shall in no event exceed 6 years from 
the date specified to begin plan implementation, which is the date of 
HUD approval of the demolition or disposition application.
    (2) Where demolition or disposition will occur in phases, the 
schedule shall provide for completing the plan within six years from the 
date of the HUD approval letter for a specific demolition or disposition 
action requested. ``Completion'' does not mean that the replacement 
housing must be built or rehabilitated within the six years. For 
replacement units developed under the public housing development 
program, the completion of the plan would be units that have reached the 
stage of notice to proceed for conventional units and contract of sale 
for Turnkey units.
    (e) Housing the same number of individuals and families. The plan 
must include a method which ensures that at least the same total number 
of individuals and families will be provided housing, allowing for 
replacement with units of different sizes to accommodate changes in 
local priority needs, as determined by the PHA and reviewed and approved 
by HUD as a part of the demolition or disposition application.
    (f) Relocation plan. Where existing occupants will be displaced, the 
plan must include a relocation plan in accordance with Secs. 970.5 and 
970.8(d).
    (g) Assurances regarding relocation. The plan must prevent the 
taking of any action to demolish or dispose of any unit until the tenant 
of the unit is relocated in accordance with Sec. 970.5. This does not 
preclude actions permitted under Sec. 970.12, actions required under 
this part for development and submission of the PHA's application for 
HUD approval of demolition or disposition, or actions required to carry 
out a relocation plan which has been approved by HUD in accordance with 
Secs. 970.5 and 970.8(d).
    (h) Site and neighborhood standards assessment. With respect to 
replacement housing, PHAs must comply with site and neighborhood 
standards, as follows:
    (1) If units under the Public Housing Development Program or the 
Section 8 project-based assistance program have been requested as 
replacement housing in the PHA's application, except when the PHA plans 
to build back on the same site, the site and neighborhood standards 
applicable for those programs will apply and be assessed at the 
appropriate time as required by that program rule or handbook and not at 
the time of the demolition or disposition application. The PHA must 
certify to HUD at the time of application for demolition or disposition, 
that once the site is identified, the PHA will comply with the site and 
neighborhood standards applicable for those programs.
    (2) If units under the Public Housing Development Program or the 
Section 8 project-based assistance program have been requested as 
replacement housing in the PHA's application and the PHA plans to build 
back on the same site, the PHA shall comply with the site and 
neighborhood standards applicable for those programs when the demolition 
or disposition application is submitted to HUD. A complete site and 
neighborhood standards review shall be done by HUD subsequent to the 
submission of the demolition or disposition application but prior to 
approval.
    (3)(i) If the replacement housing units are to be provided under a 
State or local program, and the site is known (including building back 
on the same site), the PHA is required to comply with site and 
neighborhood standards comparable to part 882 of this title when the 
demolition or disposition application is submitted to HUD. A complete 
site and neighborhood standards review shall be done by HUD subsequent 
to the submission of the demolition or disposition application but prior 
to approval.
    (ii) However, if the site is not known, the PHA shall include in the 
application for demolition or disposition a certification that it will 
comply with site and neighborhood standards comparable to part 882 of 
this title once the site is known.

[[Page 517]]

    (iii) In the case of replacement housing funded by State or local 
government funds, the PHAs must demonstrate in the application that it 
has a commitment for funding the replacement housing.
    (4)(i) If the replacement housing units are to be provided out of 
the proceeds of the disposition of public housing property, and the site 
is known (including building back on the same site), the PHA is required 
to comply with site and neighborhood standards comparable to part 941 of 
this chapter (or under part 882 of this title in the case of use of 
Section 8 assistance) when the demolition or disposition application is 
submitted to HUD. A complete site and neighborhood standards review 
shall be done by HUD subsequent to the submission of the demolition or 
disposition application but prior to approval.
    (ii) However, if the site is not known, the PHA shall include in the 
application for demolition or disposition a certification that it will 
comply with site and neighborhood standards comparable to part 941 of 
this chapter or under part 882 of this title once the site is known.
    (i) Assurances regarding accessibility. The plan must contain 
assurances that any replacement units acquired, newly constructed or 
rehabilitated will meet the applicable accessibility requirements set 
forth in Sec. 8.25 of this title.
    (j) Exception for replacement housing in cases of demolition. In any 
5-year period, a public housing agency may demolish not more than the 
lesser of 5 dwelling units or 5 percent of the total dwelling units 
owned and operated by the public housing agency, without providing an 
additional dwelling unit for each public housing unit to be demolished, 
but only if the space occupied by the demolished unit is used for 
meeting the service or other needs of public housing residents. If the 
PHA elects to use this exception, it shall meet all other requirements 
of this part except Sec. 970.11.

(Approved by the Office of Management and Budget under control number 
2577-0075)

[60 FR 3719, Jan. 18, 1995]



Sec. 970.12  Required and permitted actions prior to approval.

    A PHA may not take any action to demolish or dispose of a public 
housing project or a portion of a public housing project without 
obtaining HUD approval under this part. Until such time as HUD approval 
may be obtained, the PHA shall continue to meet its ACC obligations to 
maintain and operate the property as housing for low-income families. 
This does not, however, mean that HUD approval under this part is 
required for planning activities, analysis, or consultations, such as 
project viability studies, comprehensive modernization planning or 
comprehensive occupancy planning.

[53 FR 30987, Aug. 17, 1988]



Sec. 970.13  Resident organization opportunity to purchase.

    (a) Applicability. (1) This section applies to applications for 
demolition or disposition of a development which involve dwelling units, 
nondwelling spaces (e.g. administration and community buildings, 
maintenance facilities), and excess land.
    (2) The requirements of this section do not apply to the following 
cases which it has been determined do not present appropriate 
opportunities for resident purchase:
    (i) The PHA has determined that the property proposed for demolition 
is an imminent threat to the health and safety of residents;
    (ii) The local government has condemned the property proposed for 
demolition;
    (iii) A local government agency has determined and notified the PHA 
that units must be demolished to allow access to fire and emergency 
equipment;
    (iv) The PHA has determined that the demolition of selected portions 
of the development in order to reduce density is essential to ensure the 
long term viability of the development or the PHA (but in no case should 
this be used cumulatively to avoid Section 412 requirements);
    (v) A public body has requested to acquire vacant land that is less 
than 2 acres in order to build or expand its

[[Page 518]]

services (e.g., a local government wishes to use the land to build or 
establish a police substation); or
    (vi) PHA seeks disposition outside the public housing program to 
privately finance or otherwise develop a facility to benefit low-income 
families (e.g., day care center, administrative building, other types of 
low-income housing).
    (3) In the situations listed in paragraph (a) of this section, the 
PHA may proceed to submit its request to demolish or dispose of the 
property, or the portion of the property, to HUD, in accordance with 
Section 18 of the United States Housing Act of 1937 and 24 CFR part 970 
without affording an opportunity for purchase by a resident 
organization. However, resident consultation would be required in 
accordance with Sec. 970.4(a). The PHA must submit written 
documentation, on official stationery, with date and signatures to 
justify paragraphs (a)(2)(i), (ii), (iii), (iv), and (v) of this 
section. Examples of such documentation include:
    (i) A certification from a local agency, such as the fire or health 
department, that a condition exists in the development that is an 
imminent threat to residents; or
    (ii) A copy of the condemnation order from the local health 
department. If, however, at some future date, the PHA proposes to sell 
the remaining property described in paragraphs (a)(2)(i) through (iii) 
of this section, the PHA will be required to comply with this section.
    (b) Opportunity for residents to organize. Where the affected 
development does not have an existing resident council, resident 
management corporation or resident cooperative at the time of the PHA 
proposal to demolish or dispose of the development or a portion of the 
development, the PHA shall make a reasonable effort to inform residents 
of the development of the opportunity to organize and purchase the 
property proposed for demolition or disposition. Examples of 
``reasonable effort'' at a minimum include one of the following 
activities: convening a meeting, sending letters to all residents, 
publishing an announcement in the resident newsletter, where available, 
or hiring a consultant to provide technical assistance to the residents. 
The Department will not approve any application that cannot demonstrate 
that the PHA has allowed at least 45 days for the residents to organize 
a resident organization. The PHA should initiate its efforts to inform 
the residents of their right to organize as an integral part of the 
resident consultation requirement under Sec. 970.4(a).
    (c) Established Organizations. Where there are duly formed resident 
councils, resident management corporation, or resident cooperative at 
the affected development, the PHA shall follow the procedures beginning 
in paragraph (d) of this section. Where the affected development is 
fully or partially occupied, the residents must be given the opportunity 
to form under the procedures in paragraph (b) of this section.
    (d) Offer of sale to resident organizations. (1) The PHA shall make 
the formal offer for sale which must include, at a minimum, the 
information listed in this paragraph (d). All contacted organizations 
shall have 30 days to express an interest in the offer. The PHA must 
offer to sell the property proposed for demolition or disposition to the 
resident management corporation, the resident council or resident 
cooperative of the affected development under at least as favorable 
terms and conditions as the PHA would offer it for sale to another 
purchaser:
    (i) An identification of the development, or portion of the 
development, in the proposed demolition or disposition, including the 
development number and location, the number of units and bedroom 
configuration, the amount of space and use for non-dwelling space, the 
current physical condition (e.g., fire damaged, friable asbestos, lead-
based paint test results), and occupancy status (e.g., percent 
occupancy).
    (ii) In the case of disposition, a copy of the appraisal of the 
property and any terms of sale.
    (iii) A PHA disclosure and description of plans proposed for reuse 
of land, if any, after the proposed demolition or disposition.
    (iv) An identification of available resources (including its own and 
HUD's) to provide technical assistance to the resident management 
corporation,

[[Page 519]]

resident council or resident cooperative of the affected development to 
enable the organization to better understand its opportunity to purchase 
the development, the development's value and potential use.
    (v) Any and all terms of sale that the PHA requires for the Section 
18 action. (If the resident management corporation, resident council or 
resident cooperative of the affected development submits a proposal that 
is other than the terms of sale (e.g., purchase at less than fair market 
value with demonstrated commensurate public benefit or for the purposes 
of homeownership), the PHA may consider accepting the offer).
    (vi) A date by which the resident management corporation, resident 
council or resident cooperative of the affected development must respond 
to the HA's offer to sell the property proposed for demolition or 
disposition, which shall be no less than 30 days from the date of the 
official offering of the PHA. The response from the resident management 
corporation, resident council or resident cooperative of the affected 
development shall be in the form of a letter expressing its interest in 
accepting the PHAs written offer.
    (vii) A statement that the resident council, resident management 
corporation, and resident cooperative of the affected development will 
be given 60 days to develop and submit a proposal to the PHA to purchase 
the property and to obtain a firm financial commitment. It shall explain 
that the PHA shall approve the proposal from the resident council, 
resident management corporation or resident cooperative of the affected 
development, if it meets the terms of sale. However, the statement shall 
indicate that the PHA can consider accepting an offer from the resident 
council, resident management corporation or resident cooperative of the 
affected development that is other than the terms of sale; e.g., 
purchase at less than fair market value with demonstrated commensurate 
public benefit or for the purposes of homeownership. The statement shall 
explain that if the PHA receives more than one proposal from a resident 
council, resident management corporation or resident cooperative at the 
affected development, the PHA shall select the proposal that meets the 
terms of sale. In the event that two proposals from the affected 
development meet the terms of sale, the PHA shall chose the best 
proposal.
    (2) After the 30 day time frame for the resident council, resident 
management corporation, or resident cooperative of the affected 
development to respond to the notification letter has expired, the PHA 
is to prepare letters to those organizations that responded 
affirmatively inviting them to submit a formal proposal to purchase the 
property. The organization has 60 days from the date of its affirmative 
response to prepare and submit a proposal to the PHA that provides all 
the information requested in paragraph (g) of this section and meets the 
terms of sale.
    (e) PHA Review of Proposals. The PHA has up to 60 days from the date 
of receipt of the proposal(s) to review them and determine whether they 
meet the terms of sale set forth in its offer. If the resident 
management corporation, resident council or resident cooperative of the 
affected development submits a proposal that is other than the terms of 
sale (e.g., purchase at less than the fair market value with 
demonstrated commensurate public benefit or for the purposes of 
homeownership), the PHA may consider accepting the offer. If the terms 
of sale are met, within 14 days of the PHA's final decision, the PHA 
shall notify the resident management corporation, resident council or 
resident cooperative of the affected development of that fact and that 
the proposal has been accepted or rejected.
    (f) Appeals. The resident management corporation, resident council 
or resident cooperative of the affected development has the right to 
appeal the PHA's decision to the HUD field office. A letter requesting 
an appeal has to be made within 30 days of the decision by the PHA. The 
request should include copies of the proposal and any related 
correspondence. The field office will render a final decision within 30 
days. A letter communicating the decision is to be prepared and sent to 
the PHA and the resident management corporation, resident council or 
resident cooperative of the affected development.

[[Page 520]]

    (g) Contents of Proposal. (1) The proposal from the resident 
management corporation, resident council or resident cooperative of the 
affected development shall at a minimum include the following:
    (i) The length of time the organization has been in existence;
    (ii) A description of current or past activities which demonstrate 
the organization's organizational and management capability or the 
planned acquisition of such capability through a partner or other 
outside entities;
    (iii) A statement of financial capability;
    (iv) A description of involvement of any non-resident organization 
(non-profit, for profit, governmental or other entities), if any, the 
proposed division of responsibilities between these two, and the non-
resident organization's financial capabilities;
    (v) A plan for financing the purchase of the property and a firm 
commitment for funding resources necessary to purchase the property and 
pay for any necessary repairs;
    (vi) A plan for the use of the property;
    (vii) The proposed purchase price in relation to the appraised 
value;
    (viii) Justification for purchase at less than the fair market value 
in accordance with Sec. 970.9, if appropriate;
    (ix) Estimated time schedule for completing the transaction;
    (x) The response to the PHA's terms of sale;
    (xi) A resolution from the resident organization approving the 
proposal; and
    (xii) A proposed date of settlement, generally not to exceed six 
months from the date of PHA approval of the proposal, or such period as 
the PHA may determine to be reasonable.
    (2) If the proposal is to purchase the property for homeownership 
under 5(h) or HOPE 1, then the requirements of Section 18 of the United 
States Housing Act of 1937 and 24 CFR part 970 do not apply, but the 
applicable requirements shall be those under the HOPE 1 guidelines, as 
set forth at 57 FR 1522, or the section 5(h) regulation, as set forth in 
parts 905 and 906 of this chapter. In order for a PHA to consider a 
proposal to purchase under section 412, using homeownership 
opportunities under section 5(h) or HOPE 1, the resident council, 
resident management corporation or resident cooperative of the affected 
development shall meet the provisions of this rule, including paragraphs 
(g)(1)(i) through (g)(1)(xii) of this section.
    (3) If the proposal is to purchase the property for other than the 
aforementioned homeownership programs or for uses other than 
homeownership, then the proposal must meet all the disposition 
requirements of Section 18 of the United States Housing Act of 1937 and 
24 CFR part 970.
    (h) PHA obligations. (1) Prepare and disperse the formal offer of 
sale to the resident council, resident management corporation and 
resident cooperative of the affected development.
    (2) Evaluate proposals received and make the selection based on the 
considerations set forth in paragraph (b) of this section. Issuance of 
letters of acceptance and rejection.
    (3) Prepare certifications, where appropriate, as discussed in 
paragraph (i)(3) of this section.
    (4) The PHA shall comply with its obligations under Sec. 970.4(a) 
regarding tenant consultation and provide evidence to HUD that it has 
met those obligations. The PHA shall not act in an arbitrary manner and 
shall give full and fair consideration to any qualified resident 
management corporation, resident council or resident cooperative of the 
affected development and accept the proposal if it meets the terms of 
sale.
    (i) PHA application submission requirements for proposed demolition 
or disposition. (1) If the proposal from the resident organization is 
rejected by the PHA, and either there is no appeal by the organization 
or the appeal has been denied, the PHA shall submit its demolition or 
disposition application to HUD in accordance with Section 18 of the 
United States Housing Act of 1937 and part 970 of this chapter. The 
demolition or disposition application must include complete 
documentation that the requirements of this section have been met. PHAs 
must submit written documentation that the resident council, resident 
management corporation and tenant cooperative of the affected 
development have been apprised of

[[Page 521]]

their opportunity to purchase under this section. This documentation 
shall include:
    (i) A copy of the signed and dated PHA notification letter(s) to 
each organization informing them of the PHA's intention to submit an 
application for demolition or disposition, the right to purchase; and
    (ii) The responses from each organization.
    (2) If the PHA accepts the proposal of the resident organization, 
the PHA shall submit a disposition application in accordance with 
Section 18 of the United States Housing Act of 1937 and part 970 of this 
chapter, with appropriate justification for a negotiated sale and for 
sale at less than fair market value, if applicable.
    (3) HUD will not process an application for demolition or 
disposition unless the PHA provides the Department with one of the 
following:
    (i) Where no resident management corporation, resident council or 
resident cooperative exists in the affected development and the 
residents of the affected development have not formed a new organization 
in accordance with paragraph (b) of this section, a certification from 
either the executive director or the board of commissioners stating that 
no such organization(s) exists and documentation that a reasonable 
effort to inform residents of their opportunity to organize has been 
made; or
    (ii) Where a resident management corporation, resident council or 
resident cooperative exists in the affected development one of the 
following, either paragraph (i)(3)(ii)(A) or paragraph (i)(3)(ii)(B) of 
this section:
    (A) A board resolution or its equivalent from each resident council, 
resident management corporation or resident cooperative stating that 
such organization has received the PHA letter, and that it understands 
the offer and waives its opportunity to purchase the project, or portion 
of the project, covered by the demolition or disposition application. 
The response should clearly state that the resolution was adopted by the 
entire organization at a formal meeting; or
    (B) A certification from the executive director or board of 
commissioners of the PHA that the thirty (30) day timeframe has expired 
and no response was received to its offer.

(Approved by the Office of Management and Budget under control number 
2577-0075)

[60 FR 3721, Jan. 18, 1995]



Sec. 970.14  Reports and records.

    (a) After HUD approval of demolition or disposition of all or part 
of a project, the PHA shall keep the appropriate HUD Field Office 
informed of significant actions in carrying out the demolition or 
disposition, including any significant delays or other problems. When 
demolition or disposition is completed, the PHA shall submit to the 
Field Office a report confirming such action, certifying compliance with 
all applicable requirements of Federal law and regulations and, in the 
case of disposition, accounting for the proceeds and costs of 
disposition.
    (b) The PHA shall be responsible for keeping records of its HUD-
approved demolition or disposition sufficient for audit by HUD to 
determine the PHA's compliance applicable requirements of Federal law 
and this part.

(Approved by the Office of Management and Budget under control number 
2577-0075)

[50 FR 50894, Dec. 13, 1985. Redesignated at 53 FR 30987, Aug. 17, 1988. 
Redesignated at 60 FR 3721, Jan. 18, 1995]



PART 971--ASSESSMENT OF THE REASONABLE REVITALIZATION POTENTIAL OF CERTAIN PUBLIC HOUSING REQUIRED BY LAW--Table of Contents




Sec.
971.1  Purpose.
971.3  Standards for identifying developments.
971.5  Long-term viability.
971.7  Plan for removal of units from public housing inventories.
971.9  Tenant and local government consultation.
971.11  Hope VI developments.
971.13  HUD enforcement authority.

Appendix to Part 971--Methodology of Comparing Cost of Public Housing 
          With Cost of Tenant-Based Assistance

    Authority: Pub. L. 104-134; 42 U.S.C. 3535(d).

    Source: 62 FR 49576, Sept. 22, 1997, unless otherwise noted.

[[Page 522]]



Sec. 971.1  Purpose.

    Section 202 of the Omnibus Consolidated Rescissions and 
Appropriations Act of 1996 (Pub.L. 104-134, approved April 26, 1996) 
(``OCRA'') requires PHAs to identify certain distressed public housing 
developments that cost more than Section 8 rental assistance and cannot 
be reasonably revitalized. Households in occupancy that will be affected 
by the activities will be offered tenant-based or project-based 
assistance (that can include other public housing units) and will be 
relocated, to other decent, safe, sanitary, and affordable housing which 
is, to the maximum extent practicable, housing of their choice. After 
residents are relocated, the distressed developments (or affected 
buildings) for which no reasonable means of revitalization exists will 
be removed from the public housing inventory.



Sec. 971.3  Standards for identifying developments.

    (a) PHAs shall use the following standards for identifying 
developments or portions thereof which are subject to section 202's 
requirement that PHAs develop and carry out plans for the removal over 
time from the public housing inventory. These standards track section 
202(a) of OCRA. The development, or portions thereof, must:
    (1) Be on the same or contiguous sites. (OCRA Sec. 202(a)(1)). This 
standard and the standard set forth in paragraph (a)(2) of this section 
refer to the actual number and location of units, irrespective of HUD 
development project numbers.
    (2) Total more than 300 dwelling units. (OCRA Sec. 202(a)(2)).
    (3) Have a vacancy rate of at least ten percent for dwelling units 
not in funded, on-schedule modernization. (OCRA Sec. 202(a)(3)). For 
this determination, PHAs and HUD shall use the data the PHA relied upon 
for its last Public Housing Management Assessment Program (PHMAP) 
certification, as reported on the Form HUD-51234 (Report on Occupancy), 
or more recent data which demonstrates improvement in occupancy rates. 
Units in the following categories shall not be included in this 
calculation:
    (i) Vacant units in an approved demolition or disposition program;
    (ii) Vacant units in which resident property has been abandoned, but 
only if State law requires the property to be left in the unit for some 
period of time, and only for the period stated in the law;
    (iii) Vacant units that have sustained casualty damage, but only 
until the insurance claim is adjusted; and
    (iv) Units that are occupied by employees of the PHA and units that 
are utilized for resident services.
    (4) Have an estimated cost of continued operation and modernization 
of the developments as public housing in excess of the cost of providing 
tenant-based assistance under section 8 of the United States Housing Act 
of 1937 for all families in occupancy, based on appropriate indicators 
of cost (such as the percentage of total development cost required for 
modernization). (OCRA Sec. 202(a)(5)).
    (i) For purposes of this determination, the costs used for public 
housing shall be those necessary to produce a revitalized development as 
described in the paragraph (a)(5) of this section.
    (ii) These costs, including estimated operating costs, modernization 
costs and accrual needs must be used to develop a per unit monthly cost 
of continuing the development as public housing.
    (iii) That per unit monthly cost of public housing must be compared 
to the per unit monthly Section 8 cost.
    (iv) Both the method to be used and an example are included in the 
Appendix to this part.
    (5) Be identified as distressed housing that the PHA cannot assure 
the long-term viability as public housing through reasonable 
revitalization, density reduction, or achievement of a broader range of 
household income. (OCRA Sec. 202(a)(4)). [See Sec. 971.5.]
    (b) Properties meeting the standards set forth in paragraphs (a)(1) 
through (3) of this section will be assumed to be ``distressed'' unless 
the PHA can show that the property fails the standard set forth in 
paragraph (a)(3) of this section for reasons that are temporary in 
duration and are unlikely to recur.
    (c) Where the PHA will demolish all of the units in a development, 
or the

[[Page 523]]

portion thereof, that is subject to section 202, section 202 
requirements will be satisfied once the demolition occurs and its 
standards will not be applied further to the use of the site.
    (d) PHAs will meet the test for assuring long-term viability of 
identified housing only if it is probable that, after reasonable 
investment, for at least twenty years (or at least 30 years for 
rehabilitation equivalent to new construction) the development can 
sustain structural/system soundness and full occupancy; will not be 
excessively densely configured relative to standards for similar 
(typically family) housing in the community; will not constitute an 
excessive concentration of very low-income families; and has no other 
site impairments which clearly should disqualify the site from 
continuation as public housing.



Sec. 971.5  Long-term viability.

    (a) Reasonable investment. (1) Proposed revitalization costs for 
viability must be reasonable. Such costs must not exceed, and ordinarily 
would be substantially less than, 90 percent of HUD's total development 
cost limit for the units proposed to be revitalized (100 percent of the 
total development cost limit for any ``infill'' new construction subject 
to this regulation). The revitalization cost estimate used in the PHA's 
most recent comprehensive plan for modernization is to be used for this 
purpose, unless a PHA demonstrates or HUD determines that another cost 
estimate is clearly more realistic to ensure viability and to sustain 
the operating costs that are described in paragraph (a)(2) of this 
section.
    (2) The overall projected cost of the revitalized development must 
not exceed the Section 8 cost under the method contained in the Appendix 
to this part, even if the cost of revitalization is a lower percentage 
of the TDC than the limits stated in paragraph (a)(1) of this section.
    (3) The source of funding for such a revitalization program must be 
identified and already available. In addition to other resources already 
available to the PHA, a PHA may assume that future formula funds 
provided through the Comprehensive Grant Program are available for this 
purpose, provided that they are sufficient to permit completion of the 
revitalization within the statutory five year time frame. (Comprehensive 
plans must be amended accordingly.)
    (b) Density. Density reduction measures would have to result in a 
public housing community with a density approaching that which prevails 
in the community for similar types of housing (typically family), or a 
lower density. If the development's density already meets this 
description, further reduction in density is not a requirement.
    (c) Income mix. (1) Measures generally will be required to broaden 
the range of resident incomes to include over time a significant mix of 
households with at least one full-time worker (for example, at least 20 
percent with an income at least 30 percent of median area income). 
Measures to achieve a broader range of household incomes must be 
realistic in view of the site's location. Evidence of such realism 
typically would include some mix of incomes of other households located 
in the same census tract or neighborhood, or unique advantages of the 
public housing site.
    (2) For purposes of judging appropriateness of density reduction and 
broader range of income measures, overall size of the public housing 
site and its number of dwelling units will be considered. The concerns 
these measures would address generally are greater as the site's size 
and number of dwelling units increase.



Sec. 971.7  Plan for removal of units from public housing inventories.

    (a) Time frames. Section 202 is a continuing requirement, and the 
Secretary will establish time frames for submission of necessary 
information annually through publication of a Federal Register notice.
    (b) Plan for removal. With respect to any development that meets all 
of the standards listed, the PHA shall develop a plan for removal of the 
affected public housing units from the inventory. The plan should 
consider relocation alternatives for households in occupancy, including 
other public housing and Section 8 tenant-based assistance, and shall 
provide for relocation from the

[[Page 524]]

units as soon as possible. For planning purposes, PHAs shall assume that 
HUD will be able to provide in a timely fashion any necessary Section 8 
rental assistance. The plan shall include:
    (1) A listing of the public housing units to be removed from the 
inventory;
    (2) The number of households to be relocated, by bedroom size;
    (3) Identification and obligation status of any previously approved 
CIAP, modernization, or major reconstruction funds for the distressed 
development and PHA recommendations concerning transfer of these funds 
to Section 8 or alternative public housing uses;
    (4) The relocation resources that will be necessary, including a 
request for any necessary Section 8 and a description of actual or 
potential public or other assisted housing vacancies that can be used as 
relocation housing;
    (5) A schedule for relocation and removal of units from the public 
housing inventory;
    (6) Provision for notifying families residing in the development, in 
a timely fashion, that the development shall be removed from the public 
housing inventory; informing such families that they will receive 
tenant-based or project-based assistance; providing any necessary 
counselling with respect to the relocation, including a request for any 
necessary counseling funds; and assuring that such families are 
relocated as necessary to other decent, safe, sanitary and affordable 
housing which is, to the maximum extent possible, housing of their 
choice;
    (7) The displacement and relocation provisions set forth in 24 CFR 
970.5.
    (8) A record indicating compliance with the statute's requirements 
for consultation with applicable public housing tenants of the affected 
development and the unit of local government where the public housing is 
located, as set forth in Sec. 971.9.
    (c) Section 18 of the United States Housing Act of 1937 shall not 
apply to demolition of developments removed from PHA inventories under 
this section, but shall apply to any proposed dispositions of such 
developments or their sites. HUD's review of any such disposition 
application will take into account that the development has been 
required to be removed from the PHA's inventory.
    (d) For purposes of determining operating subsidy eligibility under 
the Performance Funding System (PFS), the submitted plan will be 
considered the equivalent of a formal request to remove dwelling units 
from the PHA's inventory and ACC and approval (or acceptance). The PHA 
will receive written notification that the plan has been approved (or 
accepted). Units that are vacant or vacated on or after the written 
notification date will be treated as approved for deprogramming under 
Sec. 990.108(b)(1) of this chapter and also will be provided the phase-
down of subsidy pursuant to Sec. 990.114 of this chapter.

(Approved by the Office of Management and Budget under control number 
2577-0210).



Sec. 971.9  Tenant and local government consultation.

    (a) PHAs are required to proceed in consultation with affected 
public housing residents. PHAs must provide copies of their submissions 
complying with Secs. 971.3(a) (1) through (3) to the appropriate tenant 
councils and resident groups before or immediately after these 
submissions are provided to HUD.
    (b) PHAs must:
    (1) Hold a meeting with the residents of the affected sites and 
explain the requirements of section 202 of OCRA;
    (2) Provide an outline of the submission(s) complying with 
Sec. 971.3(a) (4) and (5) to affected residents; and
    (3) Provide a reasonable comment period for residents and must 
provide a summary of the resident comments to HUD.
    (c) PHAs must prepare conversion plans in consultation with affected 
tenants and must:
    (1) Hold a meeting with affected residents and provide draft copies 
of the plan; and
    (2) Provide a reasonable comment period for residents and must 
provide a summary of the resident comments to HUD.
    (d) The conversion plan must be approved by the local officials as 
not inconsistent with the Consolidated Plan.

[[Page 525]]



Sec. 971.11  HOPE VI developments.

    Developments with HOPE VI implementation grants that have approved 
HOPE VI revitalization plans will be treated as having shown the ability 
to achieve long-term viability with reasonable revitalization plans. 
Future HUD actions to approve or deny proposed HOPE VI implementation 
grant revitalization plans will be taken with consideration of the 
standards for section 202. Developments with HOPE VI planning or 
implementation grants, but without approved HOPE VI revitalization 
plans, are fully subject to section 202 standards and requirements.



Sec. 971.13  HUD enforcement authority.

    Section 202 provides HUD authority to ensure that certain distressed 
developments are properly identified and removed from PHA inventories. 
Specifically, HUD may:
    (a) Direct a PHA to cease additional spending in connection with a 
development which meets or is likely to meet the statutory criteria, 
except as necessary to ensure decent, safe and sanitary housing until an 
appropriate course of action is approved;
    (b) Identify developments which fall within the statutory criteria 
where a PHA has failed to do so properly;
    (c) Take appropriate actions to ensure the removal of developments 
from the inventory where the PHA has failed to adequately develop or 
implement a plan to do so; and
    (d) Authorize or direct the transfer of capital funds committed to 
or on behalf of the development (including comprehensive improvement 
assistance, comprehensive grant amounts attributable to the 
development's share of funds under the formula, and major reconstruction 
of obsolete projects funds) to tenant-based assistance or appropriate 
site revitalization for the agency.

 Appendix to Part 971--Methodology of Comparing Cost of Public Housing 
                  With Cost of Tenant-Based Assistance

                            I. Public Housing

    The costs used for public housing shall be those necessary to 
produce a revitalized development as described in the next paragraph. 
These costs, including estimated operating costs, modernization costs 
and costs to address accrual needs must be used to develop a per unit 
monthly cost of continuing the development as public housing. That per 
unit monthly cost of public housing must be compared to the per unit 
monthly Section 8 cost. The estimated cost of the continued operation 
and modernization as public housing shall be calculated as the sum of 
total operating, modernization, and accrual costs, expressed on a 
monthly per occupied unit basis. The costs shall be expressed in current 
dollar terms for the period for which the most recent Section 8 costs 
are available.

                           A. Operating Costs

    1. The proposed revitalization plan must indicate how unusually high 
current operating expenses (e.g, security, supportive services, 
maintenance, utilities) will be reduced as a result of post-
revitalization changes in occupancy, density and building configuration, 
income mix and management. The plan must make a realistic projection of 
overall operating costs per occupied unit in the revitalized 
development, by relating those operating costs to the expected occupancy 
rate, tenant composition, physical configuration and management 
structure of the revitalized development. The projected costs should 
also address the comparable costs of buildings or developments whose 
siting, configuration, and tenant mix is similar to that of the 
revitalized public housing development.
    2. The development's operating cost (including all overhead costs 
pro-rated to the development--including a Payment in Lieu of Taxes 
(PILOT) or some other comparable payment, and including utilities and 
utility allowances) shall be expressed as total operating costs per 
month, divided by the number of units occupied by households. For 
example, if a development will have 1,000 units occupied by households 
and will have $300,000 monthly in non-utility costs (including pro-rated 
overhead costs and appropriate P.I.L.O.T.) and $100,000 monthly in 
utility costs paid by the authority and $50,000 monthly in utility 
allowances that are deducted from tenant rental payments to the 
authority because tenants paid some utility bills directly to the 
utility company, then the development's monthly operating cost per 
occupied unit is $450--the sum of $300 per unit in non-utility costs, 
$100 per unit in direct utility costs, and $50 per unit in utility 
allowance costs.
    3. In justifying the operating cost estimates as realistic, the plan 
should link the cost estimates to its assumptions about the level and 
rate of occupancy, the per-unit

[[Page 526]]

funding of modernization, any physical reconfiguration that will result 
from modernization, any planned changes in the surrounding neighborhood 
and security costs. The plan should also show whether developments or 
buildings in viable condition in similar neighborhoods have achieved the 
income mix and occupancy rate projected for the revitalized development. 
The plan should also show how the operating costs of the similar 
developments or buildings compare to the operating costs projected for 
the development.
    4. In addition to presenting evidence that the operating costs of 
the revitalized development are plausible, when the per-unit operating 
cost of the renovated development is more than ten percent lower than 
the current per-unit operating cost of the development, then the plan 
should detail how the revitalized development will achieve its reduction 
in costs. To determine the extent to which projected operating costs are 
lower than current operating costs, the current per-unit operating costs 
of the development will be estimated as follows:
    a. If the development has reliable operating costs and if the 
overall vacancy rate is less than twenty percent, then these costs will 
be divided by the sum of all occupied units and vacant units fully 
funded under PFS plus fifty percent of all units not fully funded under 
PFS. For instance, if the total monthly operating costs of the current 
development are $6.6 million and it has 1,000 occupied units and 200 
vacant units not fully funded under PFS (or a 17 percent overall vacancy 
rate), then the $6.6 million is divided by 1100--1000 plus 50 percent of 
200--to give a per unit figure of $600 per unit month. By this example, 
the current costs of $600 per occupied unit are at least ten percent 
higher than the projected costs per occupied unit of $450 for the 
revitalized development, and the reduction in costs would have to be 
detailed.
    b.If the development currently lacks reliable cost data or has a 
vacancy rate of twenty percent or higher, then its current per unit 
costs will be estimated as follows. First, the per unit cost of the 
entire authority will be computed, with total costs divided by the sum 
of all occupied units and vacant units fully funded under PFS plus fifty 
percent of all vacant units not fully funded under PFS. Second, this 
amount will be multiplied by the ratio of the bedroom adjustment factor 
of the development to the bedroom adjustment factor of the Housing 
Authority. The bedroom adjustment factor, which is based on national 
rent averages for units grouped by the number of bedrooms and which has 
been used by HUD to adjust for costs of units when the number of 
bedrooms vary, assigns to each unit the following factors:.70 for 0-
bedroom units, .85 for 1-bedroom units, 1.0 for 2-bedroom units, 1.25 
for 3-bedroom units, 1.40 for 4-bedroom units, 1.61 for 5-bedroom units, 
and 1.82 for 6 or more bedroom units. The bedroom adjustment factor is 
the unit-weighted average of the distribution. For instance, if the 
development with one thousand occupied units had in occupancy 500 two-
bedroom units and 500 three-bedroom units, then its bedroom adjustment 
factor would be 1.125--500 times 1.0 plus 500 times 1.25, the sum 
divided by 1,000. Where necessary, HUD field offices will arrange for 
assistance in the calculation of the bedroom adjustment factors of the 
Housing Authority and its affected developments.
    c. As an example of estimating development operating costs from PHA 
operating costs, suppose that the Housing Authority had a total monthly 
operating cost per unit of $500 and a bedroom adjustment factor of .90, 
and suppose that the development had a bedroom adjustment factor of 
1.125. Then, the development's estimated current monthly operating cost 
per occupied unit would be $625--or $500 times 1.25 (the ratio of 1.125 
to .90).

                            B. Modernization

    The cost of modernization is the initial revitalization cost to meet 
viability standards, that cost amortized over twenty years (which is 
equivalent to fifteen years at a three percent annual real capital cost 
for the initial outlay). Expressed in monthly terms, the modernization 
cost is divided by 180 (or 15 years times 12 months). Thus, if the 
initial modernization outlay to meet viability standards is $60 million 
for 1,000 units, then the per-unit outlay is $60,000 and the amortized 
modernization cost is $333 per unit per month (or $60,000 divided by 
180). However, when revitalization would be equivalent to new 
construction and the PHA thus is permitted to amortize the proposed cost 
over thirty years (which is equivalent to twenty-two and one-half years 
at a three percent annual real capital cost to the initial outlay), the 
modernization cost will be divided by 270, the product of 22.5 and 12, 
to give a cost per unit month of $222.

                               C. Accrual

    The monthly per occupied unit cost of accrual (i.e., replacement 
needs) will be estimated by using the latest published HUD unit total 
development cost limits for the area and applying them to the 
development's structure type and bedroom distribution after 
modernization, then subtracting from that figure half the per-unit cost 
of modernization, then multiplying that figure by .02 ( representing a 
fifty year replacement cycle), and dividing this product by 12 to get a 
monthly cost. For example, if the development will remain a walkup 
structure containing five hundred two-bedroom occupied and five hundred 
three-bedroom occupied units, if HUD's Total Development Cost

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limit for the area is $70,000 for two-bedroom walkup structures and 
$92,000 for three-bedroom walkup structures, and if the per unit cost of 
modernization is $60,000, then the estimated monthly cost of accrual per 
occupied unit is $85. This is the result of multiplying the value of 
$51,000--the cost guideline value of $81,000 minus half the 
modernization value of $60,000--by .02 and then dividing by 12.

                             D. Overall Cost

    The overall current cost for continuing the development as public 
housing is the sum of its monthly post-revitalization operating cost 
estimates, its monthly modernization cost per occupied unit, and its 
estimated monthly accrual cost per occupied unit. For example, if the 
operating cost per occupied unit month is $450 and the amortized 
modernization cost is $333 and the accrual cost is $85, the overall 
monthly cost per occupied unit is $868.

                       II. Tenant-Based Assistance

    The estimated cost of providing tenant-based assistance under 
Section 8 for all households in occupancy shall be calculated as the 
unit-weighted averaging of the monthly Fair Market Rents for units of 
the applicable bedroom size; plus the administrative fee applicable to 
newly funded Section 8 rental assistance during the year used for 
calculating public housing operating costs (e.g., the administrative fee 
for units funded from 10/1/95 through 9/30/96 is based on column C of 
the January 24, 1995 Federal Register, at 60 FR 4764, and the 
administrative fee for units funded from 10/1/96 through 9/30/97 is 
based on column B of the March 12, 1997 Federal Register, at 62 FR 
11526); plus the amortized cost of demolishing the occupied public 
housing units, where the cost per unit is not to exceed ten percent of 
the TDC prior to amortization. For example, if the development has five 
hundred occupied two-bedroom units and five hundred occupied three-
bedroom units and if the Fair Market Rent in the area is $600 for two 
bedroom units and is $800 for three bedroom units and if the 
administrative fee comes to $46 per unit, and if the cost of demolishing 
1000 occupied units is $5 million, then the per unit monthly cost of 
tenant based assistance is $774 ($700 for the unit-weighted average of 
Fair Market Rents, or 500 times $600 plus 500 times $800 with the sum 
divided by 1,000; plus $46 for the administrative fee; plus $28 for the 
amortized cost of demolition and tenant relocation (including any 
necessary counseling), or $5000 per unit divided by 180 in this 
example). This Section 8 cost would then be compared to the cost of 
revitalized public housing development--in the example of this section, 
the revitalized public housing cost of $868 monthly per occupied unit 
would exceed the Section 8 cost of $774 monthly per occupied unit by 12 
percent. The PHA would have to prepare a conversion plan for the 
property.

      III. Detailing the Section-8 Cost Comparison: A Summary Table

    The Section 8 cost comparison methods are summarized, using the 
example provided in this section III.
    A. Key Data, Development: The revitalized development has 1000 
occupied units. All of the units are in walkup buildings. The 1000 
occupied units will consist of 500 two-bedroom units and 500 three-
bedroom units. The total current operating costs attributable to the 
development are $300,000 per month in non-utility costs, $100,000 in 
utility costs paid by the PHA, and $50,000 in utility allowance expenses 
for utilities paid directly by the tenants to the utility company. Also, 
the modernization cost for revitalization is $60,000,000, or $60,000 per 
occupied unit. This will provide standards for viability but not 
standards for new construction. The cost of demolition and relocation of 
the 1000 occupied units is $5 million, or $5000 per unit, based on 
recent experience.
    B. Key Data, Area: The unit total development cost limit is $70,000 
for two-bedroom walkups and $92,000 for three-bedroom walkups. The two-
bedroom Fair Market Rent is $600 and the three-bedroom Fair Market Rent 
is $800. The applicable monthly administrative fee amount, in column B 
of the March 12, 1997 Federal Register Notice, at 62 FR 11526, is $46.
    C. Preliminary Computation of the Per-Unit Average Total Development 
Cost of the Development: This results from applying the location's unit 
total development cost by structure type and number of bedrooms to the 
occupied units of the development. In this example, five hundred units 
are valued at $70,000 and five hundred units are valued at $92,000 and 
the unit-weighted average is $81,000.
    D. Current Per Unit Monthly Occupied Costs of Public Housing:
    1. Operating Cost--$450 (total monthly costs divided by occupied 
units: in this example, the sum of $300,000 and $100,000 and $50,000--
divided by 1,000 units).
    2. Amortized Modernization Cost--$333 ($60,000 per unit divided by 
180 for standards less than those of new construction).
    3. Estimated Accrual Cost--$85 (the per-unit average total 
development cost minus half of the modernization cost per unit, times 
.02 divided by 12 months: in this example, $51,000 times .02 and then 
divided by 12).
    4. Total per unit public housing costs--$868.
    E. Current per unit monthly occupied costs of section 8:

[[Page 528]]

    1. Unit-weighted Fair Market Rents--$700 (the unit-weighted average 
of the Fair Market Rents of occupied bedrooms: in this example, 500 
times $600 plus 500 times $800, divided by 1000).
    2. Administrative Fee--$46.
    3. Amortized Demolition and Relocation Cost--$28 ($5000 per unit 
divided by 180).
    4. Total per unit section 8 costs--$774.
    F. Result: In this example, because revitalized public housing costs 
exceed current Section 8 costs, a conversion plan for the property would 
be required.



 PART 982--SECTION 8 TENANT-BASED ASSISTANCE: UNIFIED RULE FOR TENANT-BASED ASSISTANCE UNDER THE SECTION 8 RENTAL CERTIFICATE PROGRAM AND THE SECTION 8 RENTAL VOUCHER PROGRAM--Table of Contents




                     Subpart A--General Information

Sec.
982.1  Tenant-based programs: Purpose and structure.
982.2  Applicability.
982.3  HUD.
982.4  Definitions.
982.5  Notices required by this part.

  Subpart B--HUD Requirements and HA Plan for Administration of Program

982.51  HA authority to administer program.
982.52  HUD requirements.
982.53  Equal opportunity requirements.
982.54  Administrative plan.

            Subpart C--Funding and HA Application for Funding

982.101  Allocation of funding.
982.102  HA application for funding.
982.103  HUD review of application.

   Subpart D--Annual Contributions Contract and HA Administration of 
                                 Program

982.151  Annual contributions contract.
982.152  Administrative fee.
982.153  HA responsibilities.
982.154  ACC reserve account.
982.155  Administrative fee reserve.
982.156  Depositary for program funds.
982.157  Budget and expenditure.
982.158  Program accounts and records.
982.159  Audit requirements.
982.160  HUD determination to administer a local program.
982.161  Conflict of interest.
982.162  Use of HUD-required contracts and other forms.
982.163  Fraud recoveries.

              Subpart E--Admission to Tenant-Based Program

982.201  Eligibility.
982.202  How applicants are selected: General requirements.
982.203  Special admission (non-waiting list): Assistance targeted by 
          HUD.
982.204  Waiting list: Administration of waiting list.
982.205  Waiting list: Different programs.
982.206  Waiting list: Opening and closing; public notice.
982.207  Waiting list: Use of preferences.

                          Subpart F  [Reserved]

                        Subpart G--Leasing a Unit

982.301  Information when family is selected.
982.302  Issuance of certificate or voucher; Requesting HA approval to 
          lease a unit.
982.303  Term of certificate or voucher.
982.304  Illegal discrimination: HA assistance to family.
982.305  HA approval to lease a unit.
982.306  HA disapproval of owner.
982.307  Owner responsibility for screening tenants.
982.308  Lease.
982.309  Term of assisted tenancy.
982.310  Owner termination of tenancy.
982.311  When assistance is paid.
982.312  Absence from unit.
982.313  Security deposit; Amounts owed by tenant.
982.314  Move with continued tenant-based assistance.
982.315  Family break-up.
382.316  Live-in aide.

                Subpart H--Where Family Can Live and Move

982.351  Overview.
982.352  Eligible housing.
982.353  Where family can lease a unit with tenant-based assistance.
982.354  Portability: Administration by initial HA outside the initial 
          HA jurisdiction.
982.355  Portability: Administration by receiving HA.

Subpart I--Dwelling Unit: Housing Quality Standards, Subsidy Standards, 
                       Inspection and Maintenance

982.401  Housing quality standards (HQS).
982.402  Subsidy standards.
982.403  Terminating HAP contract: When unit is too big or too small.
982.404  Maintenance: Owner and family responsibility; HA remedies.
982.405  HA periodic unit inspection.
982.406  Enforcement of HQS.

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Subpart J--Housing Assistance Payments Contract and Owner Responsibility

982.451  Housing assistance payments contract.
982.452  Owner responsibilities.
982.453  Owner breach of contract.
982.454  Termination of HAP contract: Insufficient funding.
982.455  Termination of HAP contract: Expiration and opt-out.
982.456  Third parties.
982.457  Owner refusal to lease.

             Subpart K--Rent and Housing Assistance Payment

982.501  Overview.
982.502  Negotiating rent to owner.
982.503  Rent to owner: Reasonable rent.
982.504  Maximum subsidy: FMR/exception rent limit.
982.505  Voucher tenancy or over-FMR tenancy: How to calculate housing 
          assistance payment.
982.506  Over-FMR tenancy: HA approval.
982.507  Regular tenancy: How to calculate housing assistance payment.
982.508  Regular tenancy: Limit on initial rent to owner.
982.509  Regular tenancy: Annual adjustment of rent to owner.
982.510  Regular tenancy: Special adjustment of rent to owner.
982.511  Rent to owner: Effect of rent control.
982.512  Rent to owner in subsidized projects.
982.513  Other fees and charges.
982.514  Distribution of housing assistance payment.
982.515  Family share: Family responsibility.
982.516  Family income and composition: Regular and interim 
          examinations.
982.517  Utility allowance schedule.

   Subpart L--Family Obligations; Denial and Termination of Assistance

982.551  Obligations of participant.
982.552  HA denial or termination of assistance for family.
982.553  Crime by family members.
982.554  Informal review for applicant.
982.555  Informal hearing for participant.

                    Subpart M--Special Housing Types

982.601  Overview.

                       Single Room Occupancy (SRO)

982.602  SRO: General.
982.603  SRO: Lease and HAP contract.
982.604  SRO: Rent and housing assistance payment.
982.605  SRO: Housing quality standards.

                           Congregate Housing

982.606  Congregate housing: Who may reside in congregate housing.
982.607  Congregate housing: Lease and HAP contract.
982.608  Congregate housing: Rent and housing assistance payment; FMR/
          exception rent limit.
982.609  Congregate housing: Housing quality standards.

                               Group Home

982.610  Group home: Who may reside in a group home.
982.611  Group home: Lease and HAP contract.
982.612  Group home: State approval of group home.
982.613  Group home: Rent and housing assistance payment.
982.614  Group home: Housing quality standards.

                             Shared Housing

982.615  Shared housing: Occupancy.
982.616  Shared housing: Lease and HAP contract.
982.617  Shared housing: Rent and housing assistance payment.
982.618  Shared housing: Housing quality standards.

                               Cooperative

982.619  Cooperative housing.

                            Manufactured Home

982.620  Manufactured home: Applicability of requirements.
982.621  Manufactured home: Housing quality standards.

                     Manufactured Home Space Rental

982.622  Manufactured home space rental: Rent to owner.
982.623  Manufactured home space rental: Housing assistance payment.
982.624  Manufactured home space rental: Utility allowance schedule.

    Authority: 42 U.S.C. 1437f and 3535(d).

    Source: 59 FR 36682, July 18, 1994, unless otherwise noted.



                     Subpart A--General Information

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.1  Tenant-based programs: Purpose and structure.

    (a) General description. (1) The HUD rental voucher program and the 
HUD rental certificate program provide rent

[[Page 530]]

subsidies so eligible families can afford rent for decent, safe, and 
sanitary housing. Both programs are administered by State, local 
governmental or tribal bodies called housing agencies (HAs). HUD 
provides funds to an HA for rent subsidy on behalf of eligible families. 
HUD also provides funds for HA administration of the programs.
    (2) Families select and rent units that meet program housing quality 
standards. If the HA approves a family's unit and lease, the HA 
contracts with the owner to make rent subsidy payments on behalf of the 
family. An HA may not approve a lease unless the rent is reasonable.
    (3) In the certificate program, the rental subsidy is generally 
based on the actual rent of a unit leased by the assisted family. In the 
voucher program, the rental subsidy is determined by a formula, and is 
not based on the actual rent of the leased unit.
    (4) In the certificate program, the unit rent generally may not 
exceed a HUD-published fair market rent for rental units in the local 
housing market. For most families, the subsidy is the difference between 
the unit rent and 30 percent of adjusted monthly income. In the voucher 
program, the subsidy for most families is the difference between 30 
percent of adjusted monthly income and a ``payment standard'' that is 
based on the HUD-published fair market rent. If the unit rent is less 
than the voucher payment standard, the family pays a smaller share of 
the rent. If the unit rent is more than the payment standard, the family 
pays a larger share of the rent.
    (b) Tenant-based and project-based assistance. (1) Section 8 
assistance may be ``tenant-based'' or ``project-based''. In project-
based programs, rental assistance is paid for families who live in 
specific housing developments or units. With tenant-based assistance, 
the assisted unit is selected by the family. The family may rent a unit 
anywhere in the United States in the jurisdiction of an HA that runs a 
certificate or voucher program.
    (2) Except for project-based assistance under the certificate 
program (covered in 24 CFR part 983), all assistance under the 
certificate and voucher programs is ``tenant-based''. After the family 
selects a suitable unit, the HA enters into a contract with the owner to 
make rent subsidy payments to the owner to subsidize occupancy by the 
family. The contract only covers a single unit and the specific assisted 
family. If the family moves out of the leased unit, the contract with 
the owner terminates. In the tenant-based programs, the family may move 
to another unit with continued assistance so long as the family is 
complying with program requirements.



Sec. 982.2  Applicability.

    (a) Part 982 is a unified statement of program requirements for the 
tenant-based housing assistance programs under Section 8 of the United 
States Housing Act of 1937 (42 U.S.C. 1437f). The tenant-based programs 
are the Section 8 tenant-based rental certificate program and the 
Section 8 rental voucher program.
    (b) Unless specifically stated in this part, requirements for both 
tenant-based programs are the same.



Sec. 982.3  HUD.

    The HUD field offices have been delegated responsibility for day-to-
day administration of the program by HUD. In exercising these functions, 
the field offices are subject to HUD regulations and other HUD 
requirements issued by HUD headquarters. Some functions are specifically 
reserved to HUD headquarters.



Sec. 982.4  Definitions.

    (a) Definitions found elsewhere:
    (1) Statutory definitions. The terms displaced person, elderly 
person, low-income family, person with disabilities, public housing 
agency, State, and very low-income family are defined in section 3(b) of 
the 1937 Act (42 U.S.C. 1437a(b)). For purposes of reasonable 
accommodation and program accessibility for persons with disabilities, 
the term person with disabilities means individual with handicaps as 
defined in 24 CFR 8.3.
    (2) General definitions. The terms 1937 Act, Housing agency (HA), 
HUD, and MSA, are defined in 24 CFR part 5, subpart A.
    (3) Definitions under the 1937 Act. The terms annual contributions 
contract

[[Page 531]]

(ACC), and live-in aide are defined in 24 CFR part 5, subpart D.
    (4) Definitions concerning family income and rent. The terms 
adjusted income, annual income, tenant rent, total tenant payment, 
utility allowance, and utility reimbursement are defined in 24 CFR part 
5, subpart F.
    (b) In addition to the terms listed in paragraph (a) of this 
section, the following definitions apply:
    Absorption. In portability (under subpart H of this part 982): the 
point at which a receiving HA stops billing the initial HA for 
assistance on behalf of a portability family. The receiving HA uses 
funds available under the receiving HA consolidated ACC.
    Administrative fee. Fee paid by HUD to the HA for administration of 
the program. See Sec. 982.152.
    Administrative fee reserve (formerly ``operating reserve''). Account 
established by HA from excess administrative fee income. The 
administrative fee reserve must be used for housing purposes. See 
Sec. 982.155.
    Administrative plan. The plan that describes HA policies for 
administration of the tenant-based programs. See Sec. 982.54.
    Admission. The point when the family becomes a participant in the 
program. The date used for this purpose is the effective date of the 
first HAP contract for a family (first day of initial lease term) in a 
tenant-based program.
    Amortization payment. In a manufactured home space rental: The 
monthly debt service payment by the family to amortize the purchase 
price of the manufactured home.
    Applicant (applicant family). A family that has applied for 
admission to a program but is not yet a participant in the program.
    Budget authority. An amount authorized and appropriated by the 
Congress for payment to HAs under the program. For each funding 
increment in an HA program, budget authority is the maximum amount that 
may be paid by HUD to the HA over the ACC term of the funding increment.
    Certificate. A document issued by an HA to a family selected for 
admission to the certificate program. The certificate describes the 
program and the procedures for HA approval of a unit selected by the 
family. The certificate also states obligations of the family under the 
program.
    Certificate program. The rental certificate program.
    Certificate or voucher holder. A family holding a certificate or 
voucher with unexpired search time.
    Common space. In shared housing: Space available for use by the 
assisted family and other occupants of the unit.
    Congregate housing. Housing for elderly persons or persons with 
disabilities that meets the HQS for congregate housing. A special 
housing type: see Sec. 982.606 to Sec. 982.609.
    Contiguous MSA. In portability (under subpart H of this part 982): 
An MSA that shares a common boundary with the MSA in which the 
jurisdiction of the initial HA is located.
    Continuously assisted. An applicant is continuously assisted under 
the 1937 Act if the family is already receiving assistance under any 
1937 Act program when the family is admitted to the certificate or 
voucher program.
    Contract authority. The maximum annual payment by HUD to an HA for a 
funding increment.
    Cooperative (term includes mutual housing). Housing owned by a 
nonprofit corporation or association, and where a member of the 
corporation or association has the right to reside in a particular 
apartment, and to participate in management of the housing. A special 
housing type: see Sec. 982.619.
    Domicile. The legal residence of the household head or spouse as 
determined in accordance with State and local law.
    Drug-related criminal activity. As defined in 42 U.S.C. 1437f(f)(5).
    Drug-trafficking. The illegal manufacture, sale, or distribution, or 
the possession with intent to manufacture, sell, or distribute, of a 
controlled substance as defined in section 102 of the Controlled 
Substances Act (21 U.S.C. 802).
    Exception rent. An amount that exceeds the published FMR. See 
Sec. 982.504(b). See also definition of FMR/exception rent limit.
    Fair market rent (FMR). The rent, including the cost of utilities 
(except telephone), as established by HUD for units of varying sizes (by 
number of

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bedrooms), that must be paid in the housing market area to rent 
privately owned, existing, decent, safe and sanitary rental housing of 
modest (non-luxury) nature with suitable amenities. See periodic 
publications in the Federal Register in accordance with 24 CFR part 888.
    Family self-sufficiency program (FSS program). The program 
established by an HA in accordance with 24 CFR part 984 to promote self-
sufficiency of assisted families, including the coordination of 
supportive services (42 U.S.C. 1437u).
    Family share. The portion of rent and utilities paid by the family. 
For calculation of family share, see Sec. 982.515(a).
    Family unit size. The appropriate number of bedrooms for a family, 
as determined by the HA under the HA subsidy standards.
    FMR/exception rent limit. The Section 8 existing housing fair market 
rent published by HUD Headquarters, or any exception rent. For a regular 
tenancy in the certificate program, the initial rent to owner plus any 
utility allowance may not exceed the FMR/exception rent limit (for the 
selected dwelling unit or for the family unit size). For a tenancy in 
the voucher program, the HA may adopt a payment standard up to the FMR/
exception rent limit. For an over-FMR tenancy in the certificate 
program, the payment standard is the FMR/exception rent limit.
    Funding increment. Each commitment of budget authority by HUD to an 
HA under the consolidated annual contributions contract for the HA 
program.
    Gross rent. The sum of the rent to owner plus any utility allowance.
    Group home. A dwelling unit that is licensed by a State as a group 
home for the exclusive residential use of two to twelve persons who are 
elderly or persons with disabilities (including any live-in aide). A 
special housing type: see Sec. 982.610 to Sec. 982.614.
    HAP contract. Housing assistance payments contract.
    Housing assistance payment. The monthly assistance payment by an HA, 
which includes:
    (1) A payment to the owner for rent to the owner under the family's 
lease; and
    (2) An additional payment to the family if the total assistance 
payment exceeds the rent to owner.
    Housing quality standards (HQS). The HUD minimum quality standards 
for housing assisted under the tenant-based programs. See Sec. 982.401.
    Initial HA. In portability, the term refers to both:
    (1) An HA that originally selected a family that later decides to 
move out of the jurisdiction of the selecting HA; and
    (2) An HA that absorbed a family that later decides to move out of 
the jurisdiction of the absorbing HA.
    Initial payment standard. The payment standard at the beginning of 
the HAP contract term.
    Initial rent to owner. The rent to owner at the beginning of the HAP 
contract term.
    Jurisdiction. The area in which the HA has authority under State and 
local law to administer the program.
    Lease. (1) A written agreement between an owner and a tenant for the 
leasing of a dwelling unit to the tenant. The lease establishes the 
conditions for occupancy of the dwelling unit by a family with housing 
assistance payments under a HAP contract between the owner and the HA.
    (2) In cooperative housing, a written agreement between a 
cooperative and a member of the cooperative. The agreement establishes 
the conditions for occupancy of the member's cooperative dwelling unit 
by the member's family with housing assistance payments to the 
cooperative under a HAP contract between the cooperative and the HA. For 
purposes of this part 982, the cooperative is the Section 8 ``owner'' of 
the unit, and the cooperative member is the Section 8 ``tenant.''
    Lease addendum. In the lease between the tenant and the owner, the 
lease language required by HUD.
    Manufactured home. A manufactured structure that is built on a 
permanent chassis, is designed for use as a principal place of 
residence, and meets the HQS. A special housing type: see Sec. 982.620 
and Sec. 982.621.

[[Page 533]]

    Manufactured home space. In manufactured home space rental: A space 
leased by an owner to a family. A manufactured home owned and occupied 
by the family is located on the space. See Sec. 982.622 to Sec. 982.624.
    Mutual housing. Included in the definition of ``cooperative.''
    Notice of Funding Availability (NOFA). For budget authority that HUD 
distributes by competitive process, the Federal Register document that 
invites applications for funding. This document explains how to apply 
for assistance and the criteria for awarding the funding.
    Over-FMR tenancy. In the certificate program: A tenancy for which 
the initial gross rent exceeds the FMR/exception rent limit.
    Owner. Any person or entity with the legal right to lease or 
sublease a unit to a participant.
    Participant (participant family). A family that has been admitted to 
the HA program and is currently assisted in the program. The family 
becomes a participant on the effective date of the first HAP contract 
executed by the HA for the family (first day of initial lease term).
    Payment standard. In a voucher or over-FMR tenancy, the maximum 
subsidy payment for a family (before deducting the family contribution). 
For a voucher tenancy, the HA sets a payment standard in the range from 
80 percent to 100 percent of the current FMR/exception rent limit. For 
an over-FMR tenancy, the payment standard equals the current FMR/
exception rent limit.
    Portability. Renting a dwelling unit with Section 8 tenant-based 
assistance outside the jurisdiction of the initial HA.
    Premises. The building or complex in which the dwelling unit is 
located, including common areas and grounds.
    Private space. In shared housing: The portion of a contract unit 
that is for the exclusive use of an assisted family.
    Reasonable rent. A rent to owner that is not more than rent charged:
    (1) For comparable units in the private unassisted market; and
    (2) For comparable unassisted units in the premises.
    Receiving HA. In portability: An HA that receives a family selected 
for participation in the tenant-based program of another HA. The 
receiving HA issues a certificate or voucher and provides program 
assistance to the family.
    Regular tenancy. In the certificate program: A tenancy other than an 
over-FMR tenancy.
    Rent to owner. The total monthly rent payable to the owner under the 
lease for the unit. Rent to owner covers payment for any housing 
services, maintenance and utilities that the owner is required to 
provide and pay for.
    Set-up charges. In a manufactured home space rental: Charges payable 
by the family for assembling, skirting and anchoring the manufactured 
home.
    Shared housing. A unit occupied by two or more families. The unit 
consists of both common space for shared use by the occupants of the 
unit and separate private space for each assisted family. A special 
housing type: see Sec. 982.615 to Sec. 982.618.
    Single room occupancy housing (SRO). A unit that contains no 
sanitary facilities or food preparation facilities, or contains either, 
but not both, types of facilities. A special housing type: see 
Sec. 982.602 to Sec. 982.605.
    Special admission. Admission of an applicant that is not on the HA 
waiting list or without considering the applicant's waiting list 
position.
    Special housing types. See subpart M of this part 982. Subpart M of 
this part states the special regulatory requirements for: SRO housing, 
congregate housing, group homes, shared housing, cooperatives (including 
mutual housing), and manufactured homes (including manufactured home 
space rental).
    Subsidy standards. Standards established by an HA to determine the 
appropriate number of bedrooms and amount of subsidy for families of 
different sizes and compositions.
    Suspension. Stopping the clock on the term of a family's certificate 
or voucher, for such period as determined by the HA, from the time when 
the family submits a request for HA approval to lease a unit, until the 
time when the HA approves or denies the request.

[[Page 534]]

    Tenant. The person or persons (other than a live-in aide) who 
executes the lease as lessee of the dwelling unit.
    Tenant rent. In the certificate program: The total tenant payment 
minus any utility allowance. (This term applies both to a regular 
tenancy and an over-FMR tenancy.)
    Utility hook-up charge. In a manufactured home space rental: Costs 
payable by a family for connecting the manufactured home to utilities 
such as water, gas, electrical and sewer lines.
    Violent criminal activity. Any illegal criminal activity that has as 
one of its elements the use, attempted use, or threatened use of 
physical force against the person or property of another.
    Voucher (rental voucher). A document issued by an HA to a family 
selected for admission to the voucher program. This document describes 
the program and the procedures for HA approval of a unit selected by the 
family. The voucher also states obligations of the family under the 
program.
    Voucher program. The rental voucher program.
    Waiting list admission. An admission from the HA waiting list.

[63 FR 23857, Apr. 30, 1998; 63 FR 31625, June 10, 1998]



Sec. 982.5  Notices required by this part.

    Where part 982 requires any notice to be given by the HA, the family 
or the owner, the notice must be in writing.



  Subpart B--HUD Requirements and HA Plan for Administration of Program

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.51  HA authority to administer program.

    (a) The HA must be a governmental entity or public body with 
authority to administer the tenant-based program. The HA must provide 
HUD evidence, satisfactory to HUD, of such authority, and of the HA 
jurisdiction.
    (b) The evidence submitted by the HA to HUD must include enabling 
legislation and a supporting legal opinion satisfactory to HUD. The HA 
must submit additional evidence when there is a change that affects its 
status as an HA, authority to administer the program, or the HA 
jurisdiction.



Sec. 982.52  HUD requirements.

    (a) The HA must comply with HUD regulations and other HUD 
requirements for the program. HUD requirements are issued by HUD 
headquarters, as regulations, Federal Register notices or other binding 
program directives.
    (b) The HA must comply with the consolidated ACC and the HA's HUD-
approved applications for program funding.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.53  Equal opportunity requirements.

    (a) The tenant-based program requires compliance with all equal 
opportunity requirements imposed by contract or federal law, including 
the authorities cited at 24 CFR 5.105(a) and title II of the Americans 
with Disabilities Act, 42 U.S.C. 12101 et seq.
    (b) For the application of equal opportunity requirements to an 
Indian Housing Authority, see 24 CFR 950.115.
    (c) The HA must submit a signed certification to HUD of the HA's 
intention to comply with the Fair Housing Act, Title VI of the Civil 
Rights Act of 1964, the Age Discrimination Act of 1975, Executive Order 
11063, Section 504 of the Rehabilitation Act of 1973 and Title II of the 
Americans with Disabilities Act.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23859, Apr. 30, 1998]



Sec. 982.54  Administrative plan.

    (a) The HA must adopt a written administrative plan that establishes 
local policies for administration of the program in accordance with HUD 
requirements. The administrative plan and any revisions of the plan must 
be formally adopted by the HA Board of Commissioners or other authorized 
HA officials. The administrative plan

[[Page 535]]

states HA policy on matters for which the HA has discretion to establish 
local policies.
    (b) The administrative plan must be in accordance with HUD 
regulations and other requirements. The HA must revise the 
administrative plan if needed to comply with HUD requirements. The HA 
must give HUD a copy of the administrative plan.
    (c) The HA must administer the program in accordance with the HA 
administrative plan.
    (d) The HA administrative plan must cover HA policies on these 
subjects:
    (1) How the HA selects applicants from the HA waiting list, 
including applicants with federal and other preferences (see 
Secs. 982.202(b)(2) and 982.208(b)), procedures for removing applicant 
names from the waiting list, and procedures for closing and reopening 
the HA waiting list;
    (2) Issuing or denying vouchers or certificates, including HA policy 
governing the voucher or certificate term and any extensions or 
suspension of the term. ``Suspension'' means stopping the clock on the 
term of a family's certificate or voucher after the family submits a 
request for lease approval. If the HA decides to allow extensions or 
suspensions of the certificate or voucher term, the HA administrative 
plan must describe how the HA determines whether to grant extensions or 
suspensions, and how the HA determines the length of any extension or 
suspension;
    (3) Any special rules for use of available funds when HUD provides 
funding to the HA for a special purpose (e.g., desegregation), including 
funding for specified families or a specified category of families;
    (4) Occupancy policies, including:
    (i) Definition of what group of persons may qualify as a ``family'';
    (ii) Definition of when a family is considered to be ``continuously 
assisted'';
    (5) Encouraging participation by owners of suitable units located 
outside areas of low income or minority concentration;
    (6) Assisting a family that claims that illegal discrimination has 
prevented the family from leasing a suitable unit;
    (7) Providing information about a family to prospective owners;
    (8) Disapproval of owners;
    (9) Subsidy standards;
    (10) Family absence from the dwelling unit;
    (11) How to determine who remains in the program if a family breaks 
up;
    (12) Informal review procedures for applicants;
    (13) Informal hearing procedures for participants;
    (14) For the voucher program: the process for establishing and 
revising payment standards, including affordability adjustments;
    (15) For the certificate and voucher programs, the method for 
determining that rent to owner is a reasonable rent (initially and 
during the term of a HAP contract);
    (16) Approval and administration of over-FMR tenancies in the HA 
certificate program;
    (17) HA choice whether to offer particular special housing types 
(see Sec. 982.601(b));
    (18) Special policies concerning special housing types in the 
program (e.g., use of shared housing);
    (19) Policies concerning payment by a family to the HA of amounts 
the family owes the HA;
    (20) Interim redeterminations of family income and composition;
    (21) Restrictions, if any, on the number of moves by a participant 
family (see Sec. 982.314(c)); and
    (22) Approval by the Board of Commissioners or other authorized 
officials to charge the administrative fee reserve.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 27163, May 30, 1996; 63 FR 23859, Apr. 30, 1998]



            Subpart C--Funding and HA Application for Funding

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.101  Allocation of funding.

    (a) Allocation to HUD offices. The Department allocates budget 
authority

[[Page 536]]

for the tenant-based programs to HUD field offices.
    (b) Section 213(d) allocation. (1) Section 213(d) of the HCD Act of 
1974 (42 U.S.C. 1439) establishes requirements for allocation of 
assisted housing budget authority. Some budget authority is exempt by 
law from allocation under section 213(d). Unless exempted by law, budget 
authority for the tenant-based programs must be allocated in accordance 
with section 213(d).
    (2) Budget authority subject to allocation under section 213(d) is 
allocated in accordance with 24 CFR part 791, subpart D. There are three 
categories of section 213(d) funding allocations under part 791 of this 
title:
    (i) funding retained in a headquarters reserve for purposes 
specified by law (e.g., settlement of litigation);
    (ii) funding incapable of geographic formula allocation (e.g., for 
renewal of expiring funding increments); or
    (iii) funding allocated by an objective fair share formula. Funding 
allocated by fair share formula is distributed by a competitive process.
    (c) Competitive process. For budget authority that is distributed by 
competitive process, the Department solicits applications from HAs by 
publishing one or more notices of funding availability (NOFA) in the 
Federal Register. See 24 CFR part 12, subpart B; and 24 CFR 791.406. The 
NOFA explains how to apply for assistance, and specifies the criteria 
for awarding the assistance. The NOFA may identify any special program 
requirements for use of the funding.



Sec. 982.102  HA application for funding.

    (a) An HA must submit an application for program funding to HUD at 
the time and place and in the form required by HUD.
    (b) For competitive funding under a NOFA, the application must be 
submitted by an HA in accordance with the requirements of the NOFA.
    (c) The application must include all information required by HUD. 
HUD requirements may be stated in the HUD-required form of application, 
the NOFA, or other HUD instructions.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23859, Apr. 30, 1998]



Sec. 982.103  HUD review of application.

    (a) Processing applications. (1) HUD will provide opportunity for 
the chief executive officer of the unit of general local government to 
review and comment on an application for funding for more than 12 units. 
The local comment requirements are stated in 24 CFR part 791, subpart C.
    (2) For competitive funding under a NOFA, HUD must evaluate an 
application on the basis of the selection criteria stated in the NOFA, 
and must consider the HA capability to administer the program.
    (3) HUD must consider any comments received from the unit of general 
local government.
    (b) Approval or disapproval of HA funding application. (1) HUD must 
notify the HA of its approval or disapproval of the HA funding 
application.
    (2) When HUD approves an application, HUD must notify the HA of the 
amount of approved funding.
    (3) For budget authority that is distributed to HAs by competitive 
process, documentation of the basis for provision or denial of 
assistance is available for public inspection in accordance with 24 CFR 
12.14(b).



   Subpart D--Annual Contributions Contract and HA Administration of 
                                 Program

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.151  Annual contributions contract.

    (a) Nature of ACC. (1) An annual contributions contract (ACC) is a 
written contract between HUD and an HA. Under the ACC, HUD agrees to 
make payments to the HA, over a specified term, for housing assistance 
payments

[[Page 537]]

to owners and for the HA administrative fee. The ACC specifies the 
maximum annual payment by HUD, and the maximum payment over the ACC 
term. The HA agrees to administer the program in accordance with HUD 
regulations and requirements.
    (2) HUD's commitment to make payments for each funding increment in 
the HA program constitutes a separate ACC. However, commitments for all 
the funding increments in an HA program are listed in one consolidated 
contractual document called the consolidated annual contributions 
contract (consolidated ACC). A single consolidated ACC covers funding 
for the HA certificate program and voucher program.
    (b) Budget authority and contract authority. (1) Budget authority is 
the maximum amount that may be paid by HUD to an HA over the ACC term of 
a funding increment. Contract authority is the maximum annual payment 
for the funding increment. Budget authority for a funding increment is 
equal to contract authority times the number of years in the increment 
term. Before adding a funding increment to the consolidated ACC for an 
HA program, HUD reserves budget authority from amounts authorized and 
appropriated by the Congress for the program.
    (2) For each funding increment, the ACC specifies the initial term 
over which HUD will make payments for the HA program, and the contract 
authority and budget authority for the funding increment. For a given HA 
fiscal year, the amount of HUD's maximum annual payment for the HA 
program equals the sum of the contract authority for all of the funding 
increments under the consolidated ACC. However, this maximum amount does 
not include contract authority for an expired funding increment. If the 
term of a funding increment expires during the HA fiscal year, this 
maximum amount only includes the pro-rata portion of contract authority 
for the portion of the HA fiscal year prior to expiration. (Additional 
payments may be made from the ACC reserve account described in 
Sec. 982.154.) However, the amount to be paid must be approved by HUD, 
and may be less than the maximum payment.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.152  Administrative fee.

    (a) Purposes of administrative fee. (1) HUD may approve 
administrative fees to the HA for any of the following purposes:
    (i) Ongoing administrative fee;
    (ii) Preliminary fee;
    (iii) Cost to help families who experience difficulty renting 
appropriate housing;
    (iv) Cost to coordinate supportive services for elderly and disabled 
families;
    (v) Cost to coordinate supportive services for families 
participating in the family self-sufficiency (FSS) program;
    (vi) Cost of audit by an independent public accountant; and
    (vii) Other extraordinary costs determined necessary by HUD 
Headquarters.
    (2) For each HA fiscal year, administrative fees are specified in 
the HA budget. The budget is submitted for HUD approval. Fees are paid 
in the amounts approved by HUD. Administrative fees may only be approved 
or paid from amounts appropriated by the Congress.
    (3) HA administrative fees may only be used to cover costs incurred 
to perform HA administrative responsibilities for the program in 
accordance with HUD regulations and requirements.
    (b) Ongoing administrative fee. (1) The HA ongoing administrative 
fee is paid for each program unit under HAP contract on the first day of 
the month. The amount of the ongoing fee is established by HUD.
    (2) If appropriations are available, HUD may pay a higher ongoing 
administrative fee for a small program or a program operating over a 
large geographic area. This higher fee level will not be approved unless 
the HA demonstrates that it is efficiently administering its tenant-
based program, and that the higher ongoing administrative

[[Page 538]]

fee is reasonable and necessary for administration of the program in 
accordance with HUD requirements.
    (3) HUD may pay a lower ongoing administrative fee for HA-owned 
units.
    (c) Preliminary fee. (1) A one-time preliminary fee, in the amount 
of $500, is paid by HUD in the first year an HA administers a tenant-
based assistance program under the 1937 Housing Act. The fee is paid for 
each new unit added to the HA program by the initial funding increment.
    (2) The preliminary fee is used to cover expenses that the HA 
documents it has incurred to help families who inquire about or apply 
for the program, to lease up new units, or to pay for family self-
sufficiency program activities.
    (d) Reducing HA administrative fee. HUD may reduce or offset any 
administrative fee to the HA, in the amount determined by HUD, if the HA 
fails to perform HA administrative responsibilities correctly or 
adequately under the program (for example, HA failure to enforce HQS 
requirements; or to reimburse a receiving HA promptly under portability 
procedures).

[60 FR 23695, July 3, 1995, as amended at 63 FR 23860, Apr. 30, 1998]



Sec. 982.153  HA responsibilities.

    The HA must comply with the consolidated ACC, the application, HUD 
regulations and other requirements, and the HA administrative plan.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 13627, Mar. 27, 1996; 63 FR 23860, Apr. 30, 1998]



Sec. 982.154  ACC reserve account.

    (a)(1) HUD establishes an unfunded reserve account, called the ACC 
reserve account (formerly ``project reserve''), for the HA's program. 
There are separate ACC reserve accounts for the HA's certificate and 
voucher programs. The ACC reserve account is established and maintained 
in the amount determined by HUD.
    (2) At the end of each HA fiscal year, HUD credits the ACC reserve 
account from the amount by which the sum of contract authority for all 
funding increments under the consolidated ACC (maximum annual payment) 
exceeds the amount actually approved and paid for the HA fiscal year. 
However, the maximum annual payment does not include contract authority 
for an expired funding increment. If the term of a funding increment 
expires during the HA fiscal year, this maximum amount only includes the 
pro-rata portion of contract authority for the funding increment 
covering the portion of the HA fiscal year prior to expiration.
    (b) HUD may approve additional payments for the HA program from 
available amounts in the ACC reserve account.



Sec. 982.155  Administrative fee reserve.

    (a) The HA must maintain an administrative fee reserve (formerly 
``operating reserve'') for the program. There are separate 
administrative fee reserve accounts for the HA's certificate and voucher 
programs. The HA must credit to the administrative fee reserve the total 
of:
    (1) The amount by which program administrative fees paid by HUD for 
an HA fiscal year exceed the HA program administrative expenses for the 
fiscal year; plus
    (2) Interest earned on the administrative fee reserve.
    (b)(1) The HA must use funds in the administrative fee reserve to 
pay program administrative expenses in excess of administrative fees 
paid by HUD for an HA fiscal year. If funds in the administrative fee 
reserve are not needed to cover HA administrative expenses (to the end 
of the last expiring funding increment under the consolidated ACC), the 
HA may use these funds for other housing purposes permitted by State and 
local law. However, HUD may prohibit use of the funds for certain 
purposes.
    (2) The HA Board of Commissioners or other authorized officials must 
establish the maximum amount that may be charged against the 
administrative fee reserve without specific approval.
    (3) If the HA has not adequately administered any Section 8 program, 
HUD may prohibit use of funds in the administrative fee reserve, and may 
direct the HA to use funds in the reserve

[[Page 539]]

to improve administration of the program or to reimburse ineligible 
expenses.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.156  Depositary for program funds.

    (a) Unless otherwise required or permitted by HUD, all program 
receipts must be promptly deposited with a financial institution 
selected as depositary by the HA in accordance with HUD requirements.
    (b) The HA may only withdraw deposited program receipts for use in 
connection with the program in accordance with HUD requirements.
    (c) The HA must enter into an agreement with the depositary in the 
form required by HUD.
    (d)(1) If required under a written freeze notice from HUD to the 
depositary:
    (i) The depositary may not permit any withdrawal by the HA of funds 
held under the depositary agreement unless expressly authorized by 
written notice from HUD to the depositary; and
    (ii) The depositary must permit withdrawals of such funds by HUD.
    (2) HUD must send the HA a copy of the freeze notice from HUD to the 
depositary.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.157  Budget and expenditure.

    (a) Budget submission. Each HA fiscal year, the HA must submit its 
proposed budget for the program to HUD for approval at such time and in 
such form as required by HUD.
    (b) HA use of program receipts. (1) HUD payments under the 
consolidated ACC, and any other amounts received by the HA in connection 
with the program, must be used in accordance with the HA HUD-approved 
budget. Such HUD payments and other receipts may only be used for:
    (i) Housing assistance payments; and
    (ii) HA administrative fees.
    (2) The HA must maintain a system to ensure that the HA will be able 
to make housing assistance payments for all participants within the 
amounts contracted under the consolidated ACC.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.158  Program accounts and records.

    (a) The HA must maintain complete and accurate accounts and other 
records for the program in accordance with HUD requirements, in a manner 
that permits a speedy and effective audit. The records must be in the 
form required by HUD, including requirements governing computerized or 
electronic forms of record-keeping. The HA must comply with the 
financial reporting requirements in 24 CFR part 5, subpart H.
    (b) The HA must furnish to HUD accounts and other records, reports, 
documents and information, as required by HUD. For provisions on 
electronic transmission of required family data, see 24 CFR part 908.
    (c) HUD and the Comptroller General of the United States shall have 
full and free access to all HA offices and facilities, and to all 
accounts and other records of the HA that are pertinent to 
administration of the program, including the right to examine or audit 
the records, and to make copies. The HA must grant such access to 
computerized or other electronic records, and to any computers, 
equipment or facilities containing such records, and shall provide any 
information or assistance needed to access the records.
    (d) The HA must prepare a unit inspection report.
    (e) During the term of each assisted lease, and for at least three 
years thereafter, the HA must keep:
    (1) A copy of the executed lease;
    (2) The HAP contract; and
    (3) The application from the family.
    (f) The HA must keep the following records for at least three years:
    (1) Records that provide income, racial, ethnic, gender, and 
disability status data on program applicants and participants;

[[Page 540]]

    (2) An application from each ineligible family and notice that the 
applicant is not eligible;
    (3) HUD-required reports;
    (4) Unit inspection reports;
    (5) Lead-based paint inspection records (as required by 
Sec. 982.401(j));
    (6) Accounts and other records supporting HA budget and financial 
statements for the program;
    (7) Records to document the basis for HA determination that rent to 
owner is a reasonable rent (initially and during the term of a HAP 
contract); and
    (8) Other records specified by HUD.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 27163, May 30, 1996; 63 FR 23860, Apr. 30, 1998; 63 FR 46593, Sept. 
1, 1998]



Sec. 982.159  Audit requirements.

    (a) The HA must engage and pay an independent public accountant to 
conduct audits in accordance with HUD requirements.
    (b) The HA is subject to the audit requirements in 24 CFR part 44.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.160  HUD determination to administer a local program.

    If the Assistant Secretary for Public and Indian Housing determines 
that there is no HA organized, or that there is no HA able and willing 
to implement the provisions of this part for an area, HUD (or an entity 
acting on behalf of HUD) may enter into HAP contracts with owners and 
perform the functions otherwise assigned to HAs under this part with 
respect to the area.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.161  Conflict of interest.

    (a) Neither the HA nor any of its contractors or subcontractors may 
enter into any contract or arrangement in connection with the tenant-
based programs in which any of the following classes of persons has any 
interest, direct or indirect, during tenure or for one year thereafter:
    (1) Any present or former member or officer of the HA (except a 
participant commissioner);
    (2) Any employee of the HA, or any contractor, subcontractor or 
agent of the HA, who formulates policy or who influences decisions with 
respect to the programs;
    (3) Any public official, member of a governing body, or State or 
local legislator, who exercises functions or responsibilities with 
respect to the programs; or
    (4) Any member of the Congress of the United States.
    (b) Any member of the classes described in paragraph (a) of this 
section must disclose their interest or prospective interest to the HA 
and HUD.
    (c) The conflict of interest prohibition under this section may be 
waived by the HUD field office for good cause.



Sec. 982.162  Use of HUD-required contracts and other forms.

    (a) The HA must use program contracts and other forms required by 
HUD headquarters, including:
    (1) The consolidated ACC between HUD and the HA;
    (2) The HAP contract between the HA and the owner; and
    (3) The lease language required by HUD (in the lease between the 
owner and the tenant).
    (b) Required program contracts and other forms must be word-for-word 
in the form required by HUD headquarters. Any additions to or 
modifications of required program contracts or other forms must be 
approved by HUD headquarters.



Sec. 982.163  Fraud recoveries.

    Under 24 CFR part 792, the HA may retain a portion of program fraud 
losses that the HA recovers from a family or owner by litigation, court-
order or a repayment agreement.

[60 FR 34695, July 3, 1995; 60 FR 43840, Aug. 23, 1995]

[[Page 541]]



              Subpart E--Admission to Tenant-Based Program



Sec. 982.201  Eligibility.

    (a) When applicant is eligible: general. The HA may only admit an 
eligible family to a program. To be eligible, the applicant must be a 
``family'', must be income-eligible, and must be a citizen or a 
noncitizen who has eligible immigration status as determined in 
accordance with 24 CFR part 5.
    (b) Income. (1) To be income eligible, the family must be either:
    (i) A ``very low-income'' family; or
    (ii) A ``low-income'' family in any of the following categories:
    (A) A low-income family that is ``continuously assisted'' under the 
1937 Housing Act.
    (B) A low-income family physically displaced by rental 
rehabilitation activity under 24 CFR part 511.
    (C) A low-income non-purchasing family residing in a HOPE 1 (HOPE 
for Public and Indian Housing Homeownership) or HOPE 2 (HOPE for 
Homeownership of Multifamily Units) project.
    (D) A low-income non-purchasing family residing in a project subject 
to a homeownership program under 24 CFR 248.173.
    (E) A low-income family displaced as a result of the prepayment of a 
mortgage or voluntary termination of a mortgage insurance contract under 
24 CFR 248.165.
    (F) For the certificate program only, a low-income family residing 
in a HUD-owned multifamily rental housing project when HUD sells, 
forecloses or demolishes the project.
    (2) The HA determines whether the family is income-eligible by 
comparing the family's annual income (gross income) with the HUD-
established very low-income limit or low-income limit for the area. The 
applicable income limit for issuance of a certificate or voucher when a 
family is selected for the program is the highest income limit (for the 
family unit size) for areas in the HA jurisdiction. The applicable 
income limit for admission to the program is the income limit for the 
area where the family is initially assisted in the program. The family 
may only use the certificate or voucher to rent a unit in an area where 
the family is income eligible at admission to the program.
    (c) Family composition. (1) A ``family'' may be a single person or a 
group of persons.
    (2) A ``family'' includes a family with a child or children.
    (3) A group of persons consisting of two or more elderly persons or 
disabled persons living together, or one or more elderly or disabled 
persons living with one or more live-in aides is a family. The HA 
determines if any other group of persons qualifies as a ``family''.
    (4) A single person family may be:
    (i) An elderly person.
    (ii) A displaced person.
    (iii) A disabled person.
    (iv) Any other single person.
    (5) A child who is temporarily away from the home because of 
placement in foster care is considered a member of the family.
    (d) Continuously assisted. (1) An applicant is continuously assisted 
under the 1937 Housing Act if the family is already receiving assistance 
under any 1937 Housing Act program when the family is admitted to the 
certificate or voucher program.
    (2) The HA must establish policies concerning whether and to what 
extent a brief interruption between assistance under one of these 
programs and admission to the certificate or voucher program will be 
considered to break continuity of assistance under the 1937 Housing Act.
    (e) When HA verifies that applicant is eligible. The HA must receive 
information verifying that an applicant is eligible within the period of 
60 days before the HA issues a certificate or voucher to the applicant.
    (f) Decision to deny assistance--(1) Notice to applicant. The HA 
must give an applicant prompt written notice of a decision denying 
admission to the program (including a decision that the applicant is not 
eligible, or denying assistance for other reasons). The notice must give 
a brief statement of the reasons for the decision. The notice must also 
state that the applicant may request an informal review of the decision, 
and state how to arrange for the informal review.

[[Page 542]]

    (2) Grounds for decision. For a discussion of the grounds for 
denying assistance because of action or inaction by the applicant, see 
Sec. 982.552.

[59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 61 
FR 13627, Mar. 27, 1996]



Sec. 982.202  How applicants are selected: General requirements.

    (a) Waiting list admissions and special admissions. The HA may admit 
an applicant for participation in the program either:
    (1) As a special admission (see Sec. 982.203).
    (2) As a waiting list admission (see Sec. 982.204 through 
Sec. 982.210).
    (b) Prohibited admission criteria--(1) Family suitability for 
tenancy. The owner selects the tenant. The owner decides whether the 
family is suitable for tenancy. The HA decision whether to admit an 
applicant to the program may not be based on an applicant's suitability 
for tenancy. The HA may deny assistance to an applicant because of drug-
related criminal activity or violent criminal activity by family 
members. (See Sec. 982.553.)
    (2) Where family lives. Admission to the program may not be based on 
where the family lives before admission to the program. However, the HA 
may target assistance for families who live in public housing or other 
federally assisted housing, or may adopt a HUD-approved residency 
preference (see Sec. 982.208).
    (3) Where family will live. Admission to the program may not be 
based on where the family will live with assistance under the program.
    (4) Family characteristics. Admission to the program may not be 
based on:
    (i) Discrimination because members of the family are unwed parents, 
recipients of public assistance, or children born out of wedlock;
    (ii) Discrimination because a family includes children (familial 
status discrimination);
    (iii) Discrimination because of age, race, color, religion, sex, or 
national origin;
    (iv) Discrimination because of disability; or
    (v) Whether a family decides to participate in a family self-
sufficiency program.
    (c) Applicant status. An applicant does not have any right or 
entitlement to be listed on the HA waiting list, to any particular 
position on the waiting list, or to admission to the programs. The 
preceding sentence does not affect or prejudice any right, independent 
of this rule, to bring a judicial action challenging an HA violation of 
a constitutional or statutory requirement.
    (d) Admission policy. The HA must admit applicants for participation 
in accordance with HUD regulations and other requirements, and with 
policies stated in the HA administrative plan. The HA admission policy 
must state the system of admission preferences that the HA uses to 
select applicants from the waiting list, including any federal 
preference, ranking preference, local preference and residency 
preference.

[59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 61 
FR 9048, Mar. 6, 1996; 61 FR 27163, May 30, 1996]



Sec. 982.203  Special admission (non-waiting list): Assistance targeted by HUD.

    (a) If HUD awards an HA program funding that is targeted for 
families living in specified units:
    (1) The HA must use the assistance for the families living in these 
units.
    (2) The HA may admit a family that is not on the HA waiting list, or 
without considering the family's waiting list position. The HA must 
maintain records showing that the family was admitted with HUD-targeted 
assistance.
    (b) The following are examples of types of program funding that may 
be targeted for a family living in a specified unit:
    (1) A family displaced because of demolition or disposition of a 
public or Indian housing project;
    (2) A family residing in a multifamily rental housing project when 
HUD sells, forecloses or demolishes the project;
    (3) For housing covered by the Low Income Housing Preservation and 
Resident Homeownership Act of 1990 (41 U.S.C. 4101 et seq.):

[[Page 543]]

    (i) A non-purchasing family residing in a project subject to a 
homeownership program (under 24 CFR 248.173); or
    (ii) A family displaced because of mortgage prepayment or voluntary 
termination of a mortgage insurance contract (as provided in 24 CFR 
248.165);
    (4) A family residing in a project covered by a project-based 
Section 8 HAP contract at or near the end of the HAP contract term; and
    (5) A non-purchasing family residing in a HOPE 1 or HOPE 2 project.



Sec. 982.204  Waiting list: Administration of waiting list.

    (a) Admission from waiting list. Except for special admissions, 
participants must be selected from the HA waiting list. The HA must 
select participants from the waiting list in accordance with admission 
policies in the HA administrative plan.
    (b) Organization of waiting list. The HA must maintain information 
that permits the HA to select participants from the waiting list in 
accordance with the HA admission policies. The waiting list must contain 
the following information for each applicant listed:
    (1) Applicant name;
    (2) Family unit size (number of bedrooms for which family qualifies 
under HA occupancy standards);
    (3) Date and time of application;
    (4) Qualification for federal preference;
    (5) Qualification for any ranking preference or local preference; 
and
    (6) Racial or ethnic designation of the head of household.
    (c) Removing applicant names from the waiting list. (1) The HA 
administrative plan must state HA policy on when applicant names may be 
removed from the waiting list. The policy may provide that the HA will 
remove names of applicants who do not respond to HA requests for 
information or updates.
    (2) An HA decision to withdraw from the waiting list the name of an 
applicant family that includes a person with disabilities is subject to 
reasonable accommodation in accordance with 24 CFR part 8. If the 
applicant did not respond to the HA request for information or updates 
because of the family member's disability, the HA must reinstate the 
applicant in the family's former position on the waiting list.
    (d) Family size. (1) The order of admission from the waiting list 
may not be based on family size, or on the family unit size for which 
the family qualifies under the HA occupancy policy.
    (2) If the HA does not have sufficient funds to subsidize the family 
unit size of the family at the top of the waiting list, the HA may not 
skip the top family to admit an applicant with a smaller family unit 
size. Instead, the family at the top of the waiting list will be 
admitted when sufficient funds are available.
    (e) Funding for specified category of waiting list families. When 
HUD awards an HA program funding for a specified category of families on 
the waiting list, the HA must select applicant families in the specified 
category.

(Approved by the Office of Management and Budget under OMB control 
number 2577-0169)

[59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 63 
FR 23860, Apr. 30, 1998]



Sec. 982.205  Waiting list: Different programs.

    (a) Tenant-based programs: Number of waiting lists. (1) An HA must 
use a single waiting list for admissions to its tenant-based certificate 
and voucher programs. The HA may use a separate waiting list for such 
admissions for an area not smaller than a county or municipality.
    (2) An HA must use the same waiting list for admission to its 
tenant-based certificate and voucher programs.
    (b) Merger and cross-listing--(1) Merged waiting list. An HA may 
merge the waiting list for tenant-based assistance with the HA waiting 
list for admission to another assisted housing program, including a 
federal or local program. In admission from the merged waiting list, 
admission for each federal program is subject to federal regulations and 
requirements for the particular program.
    (2) Non-merged waiting list: Cross-listing. If the HA decides not to 
merge the waiting list for tenant-based assistance with the waiting list 
for the HA's public or Indian housing program, project-based certificate 
program or moderate rehabilitation program:

[[Page 544]]

    (i) If the HA's waiting list for tenant-based assistance is open 
when an applicant is placed on the waiting list for the HA's public or 
Indian housing program, project-based certificate program or moderate 
rehabilitation program, the HA must offer to place the applicant on its 
waiting list for tenant-based assistance.
    (ii) If the HA's waiting list for its public or Indian housing 
program, project-based certificate program or moderate rehabilitation 
program is open when an applicant is placed on the waiting list for its 
tenant-based program, and if the other program includes units suitable 
for the applicant, the HA must offer to place the applicant on its 
waiting list for the other program.
    (c) Other housing assistance: Effect of application for, receipt or 
refusal. (1) For purposes of this section, ``other housing assistance'' 
means a federal, State or local housing subsidy, as determined by HUD, 
including public or Indian housing.
    (2) The HA may not take any of the following actions because an 
applicant has applied for, received, or refused other housing 
assistance:
    (i) Refuse to list the applicant on the HA waiting list for tenant-
based assistance;
    (ii) Deny any admission preference for which the applicant is 
currently qualified;
    (iii) Change the applicant's place on the waiting list based on 
preference, date and time of application, or other factors affecting 
selection under the HA selection policy; or
    (iv) Remove the applicant from the waiting list.
    (3) Notwithstanding paragraph (c)(2) of this section, the HA may 
remove the applicant from the waiting list for tenant-based assistance 
if the HA has offered the applicant assistance under both the 
certificate program and the voucher program.

[59 FR 36682, July 18, 1994, as amended at 61 FR 27163, May 30, 1996; 63 
FR 23860, Apr. 30, 1998]



Sec. 982.206  Waiting list: Opening and closing; public notice.

    (a) Public notice. (1) When the HA opens a waiting list, the HA must 
give public notice that families may apply for tenant-based assistance. 
The public notice must state where and when to apply.
    (2) The HA must give the public notice by publication in a local 
newspaper of general circulation, and also by minority media and other 
suitable means. The notice must comply with HUD fair housing 
requirements.
    (3) The public notice must state any limitations on who may apply 
for available slots in the program.
    (b) Criteria defining what families may apply. (1) The HA may adopt 
criteria defining what families may apply for assistance under a public 
notice.
    (2) If the waiting list is open, the HA must accept applications 
from families for whom the list is open unless there is good cause for 
not accepting the applications (such as a denial of assistance because 
of action or inaction by members of the family) for the grounds stated 
in Sec. 982.552.
    (c) Closing waiting list. (1) If the HA determines that the existing 
waiting list contains an adequate pool for use of available program 
funding, the HA may stop accepting new applications, or may accept only 
applications meeting criteria adopted by the HA.
    (2) Even if the HA is not otherwise accepting additional 
applications, the HA must accept applications from applicants who claim 
a federal preference unless the HA determines that the waiting list 
already contains an adequate pool of applicants who are likely to 
qualify for a federal preference.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 60 
FR 45661, Sept. 1, 1995; 63 FR 23860, Apr. 30, 1998]



Sec. 982.207  Waiting list: Use of preferences.

    (a) The HA must use the following to select among applicants on the 
waiting list with the same preference status:
    (1) Date and time of application; or
    (2) A drawing or other random choice technique.
    (b)(1) The method for selecting applicants from preference 
categories must

[[Page 545]]

be consistent with requirements governing federal preference and the 
singles preference, as described in 24 CFR part 5.
    (2) In its system for applying the preferences described in 24 CFR 
part 5, the following provisions apply:
    (i) The HA may limit the number of applicants that may qualify for 
any ranking preference or local preference.
    (ii) The local preference limit only applies to admission of an 
applicant from the HA waiting list. A special admission is not counted 
against the local preference limit.
    (iii) The local preference limit does not apply when an applicant is 
received in an HA program under portability procedures. The admission of 
a portability family by a receiving HA does not count against the 
receiving HA local preference limit. The admission of such a family (not 
qualified for federal preference) counts against the local preference 
limit of the initial HA.
    (c) The HA may give preference for admission of families that 
include a person with disabilities. However, the HA may not give 
preference for admission of persons with a specific disability.
    (d) The method for selecting applicants from preference categories 
must leave a clear audit trail that can be used to verify that each 
applicant has been selected in accordance with the method specified in 
the administrative plan.

[61 FR 9048, Mar. 6, 1996, as amended at 63 FR 23860, Apr. 30, 1998]



                          Subpart F  [Reserved]



                        Subpart G--Leasing a Unit

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.301  Information when family is selected.

    (a) HA briefing of family. (1) When the HA selects a family to 
participate in a tenant-based program, the HA must give the family an 
oral briefing. The briefing must include information on the following 
subjects:
    (i) A description of how the program works;
    (ii) Family and owner responsibilities; and
    (iii) Where the family may lease a unit, including renting a 
dwelling unit inside or outside the HA jurisdiction.
    (2) For a family that qualifies to lease a unit outside the HA 
jurisdiction under portability procedures, the briefing must include an 
explanation of how portability works. The HA may not discourage the 
family from choosing to live anywhere in the HA jurisdiction, or outside 
the HA jurisdiction under portability procedures.
    (3) If the family is currently living in a high poverty census tract 
in the HA's jurisdiction, the briefing must also explain the advantages 
of moving to an area that does not have a high concentration of poor 
families.
    (4) In briefing a family that includes any disabled person, the HA 
must take appropriate steps to ensure effective communication in 
accordance with 24 CFR 8.6.
    (b) Information packet. When a family is selected to participate in 
the program, the HA must give the family a packet that includes 
information on the following subjects:
    (1) The term of the certificate or voucher, and HA policy on any 
extensions or suspensions of the term. If the HA allows extensions, the 
packet must explain how the family can request an extension;
    (2)(i) How the HA determines the housing assistance payment for a 
family;
    (ii) For the certificate program, information on fair market rents 
and the HA utility allowance schedule;
    (iii) For the voucher program, information on the payment standard 
and the HA utility allowance schedule;
    (3) How the HA determines the maximum rent for an assisted unit;
    (4) Where the family may lease a unit. For a family that qualifies 
to lease a unit outside the HA jurisdiction under portability 
procedures, the information packet must include an explanation of how 
portability works;
    (5) The HUD-required ``lease addendum''. The lease addendum is the 
language that must be included in the lease;

[[Page 546]]

    (6) The form of request for lease approval, and an explanation of 
how to request HA approval to lease a unit;
    (7) A statement of the HA policy on providing information about a 
family to prospective owners;
    (8) HA subsidy standards, including when the HA will consider 
granting exceptions to the standards;
    (9) The HUD brochure on how to select a unit;
    (10) The HUD-required lead-based paint (LBP) brochure;
    (11) Information on federal, State and local equal opportunity laws, 
and a copy of the housing discrimination complaint form;
    (12) A list of landlords or other parties known to the HA who may be 
willing to lease a unit to the family, or help the family find a unit;
    (13) Notice that if the family includes a disabled person, the 
family may request a current listing of accessible units known to the HA 
that may be available;
    (14) Family obligations under the program;
    (15) The grounds on which the HA may terminate assistance for a 
participant family because of family action or failure to act; and
    (16) HA informal hearing procedures. This information must describe 
when the HA is required to give a participant family the opportunity for 
an informal hearing, and how to request a hearing.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 27163, May 30, 1996]



Sec. 982.302  Issuance of certificate or voucher; Requesting HA approval to lease a unit.

    (a) When an applicant family is selected, or when a participant 
family wants to move to a new unit with continued tenant-based 
assistance (see Sec. 982.314), the HA issues a certificate or voucher to 
the family. The family may search for a unit.
    (b) If the family finds a unit, and the owner is willing to lease 
the unit under the program, the family may request HA approval to lease 
the unit. The HA has the discretion to permit a family to submit more 
than one request at a time.
    (c) The family must submit to the HA a request for lease approval 
and a copy of the proposed lease. Both documents must be submitted 
during the term of the certificate or voucher.
    (d) The HA specifies the procedure for requesting approval to lease 
a unit. The family must submit the request for lease approval in the 
form and manner required by the HA.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23860, Apr. 30, 1998]



Sec. 982.303  Term of certificate or voucher.

    (a) Initial term. The initial term of a certificate or voucher must 
be at least 60 calendar days. The initial term must be stated on the 
certificate or voucher.
    (b) Extensions of term. (1) At its discretion the HA may grant a 
family one or more extensions of the initial term in accordance with HA 
policy as described in the HA administrative plan. Except as provided in 
paragraph (b)(2)(ii) of this section, the initial term plus any 
extensions may not exceed a total period of 120 calendar days from the 
beginning of the initial term. Any extension of the term is granted by 
HA notice to the family.
    (2) If the family needs and requests an extension of the initial 
certificate or voucher term as a reasonable accommodation, in accordance 
with 24 CFR part 8, to make the program accessible to and usable by a 
family member with a disability:
    (i) The HA must extend the term of the certificate or voucher up to 
120 days from the beginning of the initial term;
    (ii) The HUD field office may approve an additional extension of the 
term.
    (c) Suspension of term. The HA policy may or may not provide for 
suspension of the initial or any extended term of the certificate or 
voucher. At its discretion, and in accordance with HA policy as 
described in the HA administrative plan, the HA may grant a family a 
suspension of the certificate or

[[Page 547]]

voucher term if the family has submitted a request for lease approval 
during the term of the certificate or voucher. (Sec. 982.4 (definition 
of ``suspension''); Sec. 982.54(d)(2)) The HA may grant a suspension for 
any part of the period after the family has submitted a request for 
lease approval up to the time when the HA approves or denies the 
request.
    (d) Progress report by family to the HA. During the initial or any 
extended term of a certificate or voucher, the HA may require the family 
to report progress in leasing a unit. Such reports may be required at 
such intervals or times as determined by the HA.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23860, Apr. 30, 1998]



Sec. 982.304  Illegal discrimination: HA assistance to family.

    A family may claim that illegal discrimination because of race, 
color, religion, sex, national origin, age, familial status or 
disability prevents the family from finding or leasing a suitable unit 
with assistance under the program. The HA must give the family 
information on how to fill out and file a housing discrimination 
complaint.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.305  HA approval to lease a unit.

    (a) Program requirements. The HA may not give approval for the 
family to lease a dwelling unit, or execute a HAP contract, until the HA 
has determined that all the following meet program requirements:
    (1) The unit is eligible;
    (2) The unit has been inspected by the HA and passes HQS;
    (3) The lease is approvable and includes the lease addendum;
    (4) The rent to owner is reasonable; and
    (5) For a unit leased under the certificate program, the total of 
contract rent plus any utility allowance does not exceed the FMR/
exception rent limit.
    (b) Actions before lease term. All of the following must always be 
completed before the beginning of the lease term:
    (1) The HA has inspected the unit, and has determined that the unit 
satisfies the HQS;
    (2) The landlord and the tenant have executed the lease; and
    (3) The HA has approved leasing of the unit in accordance with 
program requirements.
    (c) When HAP contract is executed. (1) The HA must use best efforts 
to execute the HAP contract before the beginning of the lease term. The 
HAP contract must be executed no later than 60 calendar days from the 
beginning of the lease term.
    (2) The HA may not pay any housing assistance payment to the owner 
until the HAP contract has been executed.
    (3) If the HAP contract is executed during the period of 60 calendar 
days from the beginning of the lease term, the HA will pay housing 
assistance payments after execution of the HAP contract (in accordance 
with the terms of the HAP contract), to cover the portion of the lease 
term before execution of the HAP contract (a maximum of 60 days).
    (4) Any HAP contract executed after the 60 day period is void, and 
the HA may not pay any housing assistance payment to the owner.
    (d) Notice to family and owner. After receiving the family's request 
for approval to lease a unit, the HA must promptly notify the family and 
owner whether the assisted tenancy is approved.
    (e) Procedure after HA approval. If the HA has given approval for 
the family to lease the unit, the owner and the HA execute the HAP 
contract.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.306  HA disapproval of owner.

    (a) The HA must not approve a unit if the HA has been informed (by 
HUD or otherwise) that the owner is debarred, suspended, or subject to a 
limited denial of participation under 24 CFR part 24.
    (b) When directed by HUD, the HA must not approve a unit if:

[[Page 548]]

    (1) The federal government has instituted an administrative or 
judicial action against the owner for violation of the Fair Housing Act 
or other federal equal opportunity requirements, and such action is 
pending; or
    (2) A court or administrative agency has determined that the owner 
violated the Fair Housing Act or other federal equal opportunity 
requirements.
    (c) In its administrative discretion, the HA may deny approval to 
lease a unit from an owner for any of the following reasons:
    (1) The owner has violated obligations under a housing assistance 
payments contract under Section 8 of the 1937 Act (42 U.S.C. 1437f);
    (2) The owner has committed fraud, bribery or any other corrupt or 
criminal act in connection with any federal housing program;
    (3) The owner has engaged in drug-trafficking;
    (4) The owner has a history or practice of non-compliance with the 
HQS for units leased under the tenant-based programs, or with applicable 
housing standards for units leased with project-based Section 8 
assistance or leased under any other federal housing program;
    (5) The owner has a history or practice of renting units that fail 
to meet State or local housing codes; or
    (6) The owner has not paid State or local real estate taxes, fines 
or assessments.
    (d) The HA must not approve a unit if the owner is the parent, 
child, grandparent, grandchild, sister, or brother of any member of the 
family, unless the HA determines that approving the unit would provide 
reasonable accommodation for a family member who is a person with 
disabilities.
    (e) Nothing in this rule is intended to give any owner any right to 
participate in the program.
    (f) For purposes of this section, ``owner'' includes a principal or 
other interested party.

[60 FR 34695, July 3, 1995, as amended at 63 FR 27437, May 18, 1998]



Sec. 982.307  Owner responsibility for screening tenants.

    (a) Owner screening. (1) Listing a family on the HA waiting list, or 
selecting a family for participation in the program, is not a 
representation by the HA to the owner about the family's expected 
behavior, or the family's suitability for tenancy. At or before HA 
approval to lease a unit, the HA must inform the owner that the HA has 
not screened the family's behavior or suitability for tenancy and that 
such screening is the owner's own responsibility.
    (2) Owners are permitted and encouraged to screen families on the 
basis of their tenancy histories. An owner may consider a family's 
background with respect to such factors as:
    (i) Payment of rent and utility bills;
    (ii) Caring for a unit and premises;
    (iii) Respecting the rights of others to the peaceful enjoyment of 
their housing;
    (iv) Drug-related criminal activity or other criminal activity that 
is a threat to the life, safety or property of others; and
    (v) Compliance with other essential conditions of tenancy.
    (b) HA information about tenant. (1) The HA must give the owner:
    (i) The family's current and prior address (as shown in the HA 
records); and
    (ii) The name and address (if known to the HA) of the landlord at 
the family's current and prior address.
    (2) When a family wants to lease a dwelling unit, the HA may offer 
the owner other information in the HA possession, about the family, 
including information about the tenancy history of family members, or 
about drug-trafficking by family members.
    (3) The HA must give the family a statement of the HA policy on 
providing information to owners. The statement must be included in the 
information packet that is given to a family selected to participate in 
the program. The HA policy must provide that the HA will give the same 
types of information to all families and to all owners.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 27163, May 30, 1996]

[[Page 549]]



Sec. 982.308  Lease.

    (a) Tenant's legal capacity to enter lease. The tenant must have 
legal capacity to enter into a lease under State or local law.
    (b) HA approval of lease. The assisted lease between the tenant and 
owner (including any new lease or lease revision) must be approved by 
the HA. Before approving the lease or revision, the HA must determine 
that the lease meets the requirements of this section.
    (c) Required lease provisions. (1) ``Lease addendum'' means the 
lease language required by HUD.
    (2) The lease must include word-for-word all provisions of the lease 
addendum (e.g., by adding the lease addendum to the form of lease used 
by the owner for unassisted tenants). However, the HA may not require 
families and owners to use a model program lease.
    (3) If there is any conflict between the lease addendum and any 
other provisions of the lease, the provisions required by HUD shall 
control.
    (d) Prohibited lease provisions. The lease addendum must state that 
the following types of lease provisions are prohibited:
    (1) Agreement to be sued. Agreement by the tenant to be sued, to 
admit guilt, or to a judgment in favor of the owner, in a lawsuit 
brought in connection with the lease.
    (2) Treatment of personal property. Agreement by the tenant that the 
owner may take, hold, or sell personal property of household members 
without notice to the tenant, and a court decision on the rights of the 
parties. This prohibition, however, does not apply to an agreement by 
the tenant concerning disposition of personal property left in the 
dwelling unit after the tenant has moved out. The owner may dispose of 
this personal property in accordance with State and local law.
    (3) Excusing owner from responsibility. Agreement by the tenant not 
to hold the owner or the owner's agent legally responsible for any 
action or failure to act, whether intentional or negligent.
    (4) Waiver of notice. Agreement by the tenant that the owner may 
bring a lawsuit against the tenant without notice to the tenant.
    (5) Waiver of legal proceedings. Agreement by the tenant that the 
owner may evict the tenant or household members without instituting a 
civil court proceeding in which the tenant has the opportunity to 
present a defense, or before a court decision on the rights of the 
parties.
    (6) Waiver of a jury trial. Agreement by the tenant to waive any 
right to a trial by jury.
    (7) Waiver of right to appeal court decision. Agreement by the 
tenant to waive any right to appeal, or to otherwise challenge in court, 
a court decision in connection with the lease.
    (8) Tenant chargeable with cost of legal actions regardless of 
outcome. Agreement by the tenant to pay the owner's attorney's fees or 
other legal costs even if the tenant wins in a court proceeding by the 
owner against the tenant. However, the tenant may be obligated to pay 
costs if the tenant loses.
    (e) Utilities and appliances. The lease must specify what utilities 
and appliances are to be supplied by the owner, and what utilities and 
appliances are to be supplied by the family.
    (f) State or local law. The HA may review the lease to determine if 
the lease complies with State or local law. The HA may decline to 
approve the lease if the HA determines that the lease does not comply 
with State or local law.



Sec. 982.309  Term of assisted tenancy.

    (a) Term of HAP contract. (1) The term of the HAP contract begins on 
the first day of the term of the lease and ends on the last day of the 
term of the lease.
    (2) The HAP contract terminates if the lease terminates.
    (b) Term of lease. (1) The initial term of the lease must be for at 
least one year.
    (2) The lease must provide for automatic renewal after the initial 
term of the lease. The lease may provide either:
    (i) For automatic renewal for successive definite terms (e.g., 
month-to-month or year-to-year); or
    (ii) For automatic indefinite extension of the lease term.
    (3) The term of the lease terminates if any of the following occurs:
    (i) The owner terminates the lease;
    (ii) The tenant terminates the lease;

[[Page 550]]

    (iii) The owner and the tenant agree to terminate the lease;
    (iv) The HA terminates the HAP contract; or
    (v) The HA terminates assistance for the family.
    (c) Relation of lease to ACC. The HA may approve the lease, and 
execute the HAP contract, even if there is less than one year remaining 
from the beginning of the lease term to the end of the last expiring 
funding increment under the consolidated ACC.
    (d) Lease termination by the family. (1) The family may terminate 
the lease at any time after the first year. The lease may not require 
the family to give more than 60 calendar days notice of such termination 
to the owner.
    (2) If the family terminates the lease on notice to the owner, the 
family must give the HA a copy of the notice of termination at the same 
time. Failure to do this is a breach of family obligations under the 
program.
    (e) New lease or revision. (1) Any new lease or lease revision must 
be approved in advance by the HA. The new lease or revision must meet 
the requirements of this section. The HA and owner must enter a new HAP 
contract for the tenancy under the new or revised lease.
    (2) The owner may offer the family a new lease, for a term beginning 
at any time after the initial term. The owner must give the tenant 
written notice of the offer, with a copy to the HA, at least 60 calendar 
days before the proposed beginning date of the new lease term. The offer 
must specify a reasonable time limit for acceptance by the family.
    (f) Move from unit. The family must notify the HA and the owner 
before the family moves out of the unit. Failure to do this is a breach 
of family obligations under the program.



Sec. 982.310  Owner termination of tenancy.

    (a) Grounds. During the term of the lease, the owner may not 
terminate the tenancy except on the following grounds:
    (1) Serious or repeated violation of the terms and conditions of the 
lease;
    (2) Violation of federal, State, or local law that imposes 
obligations on the tenant in connection with the occupancy or use of the 
premises; or
    (3) Other good cause.
    (b) Nonpayment by HA: Not grounds for termination of tenancy. (1) 
The family is not responsible for payment of the portion of the rent to 
owner covered by the housing assistance payment under the HAP contract 
between the owner and the HA.
    (2) The HA failure to pay the housing assistance payment to the 
owner is not a violation of the lease between the tenant and the owner. 
During the term of the lease the owner may not terminate the tenancy of 
the family for nonpayment of the HA housing assistance payment.
    (c) Criminal activity. Any of the following types of criminal 
activity by the tenant, any member of the household, a guest or another 
person under the tenant's control shall be cause for termination of 
tenancy:
    (1) Any criminal activity that threatens the health, safety or right 
to peaceful enjoyment of the premises by other residents;
    (2) Any criminal activity that threatens the health, safety or right 
to peaceful enjoyment of their residences by persons residing in the 
immediate vicinity of the premises; or
    (3) Any drug-related criminal activity on or near the premises.
    (d) Other good cause. (1) ``Other good cause'' for termination of 
tenancy by the owner may include, but is not limited to, any of the 
following examples:
    (i) Failure by the family to accept the offer of a new lease or 
revision;
    (ii) A family history of disturbance of neighbors or destruction of 
property, or of living or housekeeping habits resulting in damage to the 
unit or premises;
    (iii) The owner's desire to use the unit for personal or family use, 
or for a purpose other than as a residential rental unit; or
    (iv) A business or economic reason for termination of the tenancy 
(such as sale of the property, renovation of the unit, desire to lease 
the unit at a higher rental). (For statutory 90 day notice requirement 
if the owner is terminating the tenancy for a business or economic 
reason, see Sec. 982.455.)

[[Page 551]]

    (2) During the first year of the lease term, the owner may not 
terminate the tenancy for ``other good cause'', unless the owner is 
terminating the tenancy because of something the family did or failed to 
do. For example, during this period, the owner may not terminate the 
tenancy for ``other good cause'' based on any of the following grounds: 
failure by the family to accept the offer of a new lease or revision; 
the owner's desire to use the unit for personal or family use, or for a 
purpose other than as a residential rental unit; or a business or 
economic reason for termination of the tenancy (see paragraph (d)(1)(iv) 
of this section).
    (e) Owner notice--(1) Notice of grounds. (i) The owner must give the 
tenant a written notice that specifies the grounds for termination of 
tenancy. The notice of grounds must be given at or before commencement 
of the eviction action.
    (ii) The notice of grounds may be included in, or may be combined 
with, any owner eviction notice to the tenant.
    (2) Eviction notice. (i) Owner eviction notice means a notice to 
vacate, or a complaint or other initial pleading used under State or 
local law to commence an eviction action.
    (ii) The owner must give the HA a copy of any owner eviction notice 
to the tenant.
    (3) 90 day notice: HAP contract termination. The owner must give 90 
calendar days notice of HAP contract termination (to HUD, the HA and the 
family) in accordance with Sec. 982.455 in the following cases:
    (i) If the owner terminates the tenancy for other good cause that is 
a business or economic reason; or
    (ii) At ``expiration'' of the HAP contract. (``Expiration'' for this 
purpose is defined at Sec. 982.455(b)(2)(iii).)
    (f) Eviction by court action. The owner may only evict the tenant 
from the unit by instituting a court action.
    (g) Regulations not applicable. 24 CFR part 247 (concerning 
evictions from certain subsidized and HUD-owned projects) does not apply 
to a tenancy assisted under this part 982.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.311  When assistance is paid.

    (a) Payments under HAP contract. Housing assistance payments are 
paid to the owner in accordance with the terms of the HAP contract. 
Housing assistance payments may only be paid to the owner during the 
lease term, and while the family is residing in the unit.
    (b) Termination of payment: When owner terminates the lease. Housing 
assistance payments terminate when the lease is terminated by the owner 
in accordance with the lease. However, if the owner has commenced the 
process to evict the tenant, and if the family continues to reside in 
the unit, the HA must continue to make housing assistance payments to 
the owner in accordance with the HAP contract until the owner has 
obtained a court judgment or other process allowing the owner to evict 
the tenant. The HA may continue such payments until the family moves 
from or is evicted from the unit.
    (c) Termination of payment: Other reasons for termination. Housing 
assistance payments terminate if:
    (1) The lease terminates;
    (2) The HAP contract terminates; or
    (3) The HA terminates assistance for the family.
    (d) Family move-out. (1) If the family moves out of the unit, the HA 
may not make any housing assistance payment to the owner for any month 
after the month when the family moves out. The owner may keep the 
housing assistance payment for the month when the family moves out of 
the unit.
    (2) If a participant family moves from an assisted unit with 
continued tenant-based assistance, the term of the assisted lease for 
the new assisted unit may begin during the month the family moves out of 
the first assisted unit. Overlap of the last housing assistance payment 
(for the month when the family moves out of the old unit) and the first 
assistance payment for the

[[Page 552]]

new unit, is not considered to constitute a duplicative housing subsidy.



Sec. 982.312  Absence from unit.

    (a) The family may be absent from the unit for brief periods. For 
longer absences, the HA administrative plan establishes the HA policy on 
how long the family may be absent from the assisted unit. However, the 
family may not be absent from the unit for a period of more than 180 
consecutive calendar days in any circumstance, or for any reason. At its 
discretion, the HA may allow absence for a lesser period in accordance 
with HA policy.
    (b) Housing assistance payments terminate if the family is absent 
for longer than the maximum period permitted. The term of the HAP 
contract and assisted lease also terminate.
    (The owner must reimburse the HA for any housing assistance payment 
for the period after the termination.)
    (c) Absence means that no member of the family is residing in the 
unit.
    (d)(1) The family must supply any information or certification 
requested by the HA to verify that the family is residing in the unit, 
or relating to family absence from the unit. The family must cooperate 
with the HA for this purpose. The family must promptly notify the HA of 
absence from the unit, including any information requested on the 
purposes of family absences.
    (2) The HA may adopt appropriate techniques to verify family 
occupancy or absence, including letters to the family at the unit, phone 
calls, visits or questions to the landlord or neighbors.
    (e) The HA administrative plan must state the HA policies on family 
absence from the dwelling unit. The HA absence policy includes:
    (1) How the HA determines whether or when the family may be absent, 
and for how long. For example, the HA may establish policies on absences 
because of vacation, hospitalization or imprisonment; and
    (2) Any provision for resumption of assistance after an absence, 
including readmission or resumption of assistance to the family.



Sec. 982.313  Security deposit: Amounts owed by tenant.

    (a) The owner may collect a security deposit from the tenant.
    (b) The HA may prohibit security deposits in excess of private 
market practice, or in excess of amounts charged by the owner to 
unassisted tenants.
    (c) When the tenant moves out of the dwelling unit, the owner, 
subject to State or local law, may use the security deposit, including 
any interest on the deposit, in accordance with the lease, as 
reimbursement for any unpaid rent payable by the tenant, damages to the 
unit or for other amounts the tenant owes under the lease.
    (d) The owner must give the tenant a written list of all items 
charged against the security deposit, and the amount of each item. After 
deducting the amount, if any, used to reimburse the owner, the owner 
must refund promptly the full amount of the unused balance to the 
tenant.
    (e) If the security deposit is not sufficient to cover amounts the 
tenant owes under the lease, the owner may seek to collect the balance 
from the tenant.



Sec. 982.314  Move with continued tenant-based assistance.

    (a) Applicability. This section states when a participant family may 
move to a new unit with continued tenant-based assistance:
    (b) When family may move. A family may move to a new unit if:
    (1) The assisted lease for the old unit has terminated. This 
includes a termination because:
    (i) The HA has terminated the HAP contract for the owner's breach; 
or
    (ii) The lease has terminated by mutual agreement of the owner and 
the tenant.
    (2) The owner has given the tenant a notice to vacate, or has 
commenced an action to evict the tenant, or has obtained a court 
judgment or other process allowing the owner to evict the tenant.
    (3) The tenant has given notice of lease termination (if the tenant 
has a right to terminate the lease on notice to the owner, for owner 
breach or otherwise).
    (c) How many moves. (1) A participant family may move one or more 
times

[[Page 553]]

with continued assistance under the program, either inside the HA 
jurisdiction, or under the portability procedures. (See Sec. 982.353)
    (2) The HA may establish:
    (i) Policies that prohibit any move by the family during the initial 
year of assisted occupancy; and
    (ii) Policies that prohibit more than one move by the family during 
any one year period.
    (3) The HA policies may apply to moves within the HA jurisdiction by 
a participant family, and to moves by a participant family outside the 
HA jurisdiction under portability procedures.
    (d) Notice that family wants to move. (1) If the family terminates 
the lease on notice to the owner, the family must give the HA a copy of 
the notice at the same time.
    (2) If the family wants to move to a new unit, the family must 
notify the HA and the owner before moving from the old unit. If the 
family wants to move to a new unit that is located outside the initial 
HA jurisdiction, the notice to the initial HA must specify the area 
where the family wants to move. See portability procedures in subpart H 
of this part.
    (e) When HA may deny permission to move. (1) The HA may deny 
permission to move if the HA does not have sufficient funding for 
continued assistance.
    (2) At any time, the HA may deny permission to move in accordance 
with Sec. 982.552 (grounds for denial or termination of assistance).



Sec. 982.315  Family break-up.

    (a) The HA has discretion to determine which members of an assisted 
family continue to receive assistance in the program if the family 
breaks up. The HA administrative plan must state HA policies on how to 
decide who remains in the program if the family breaks up.
    (b) The factors to be considered in making this decision under the 
HA policy may include:
    (1) Whether the assistance should remain with family members 
remaining in the original assisted unit.
    (2) The interest of minor children or of ill, elderly or disabled 
family members.
    (3) Whether family members are forced to leave the unit as a result 
or actual or threatened physical violence against family members by a 
spouse or other member of the household.
    (4) Other factors specified by the HA.
    (c) If a court determines the disposition of property between 
members of the assisted family in a divorce or separation under a 
settlement or judicial decree, the HA is bound by the court's 
determination of which family members continue to receive assistance in 
the program.



Sec. 982.316  Live-in aide.

    (a) A family that consists of one or more elderly, near-elderly or 
disabled persons may request that the HA approve a live-in aide to 
reside in the unit and provide necessary supportive services for a 
family member who is a person with disabilities. The HA must approve a 
live-in aide if needed as a reasonable accommodation in accordance with 
24 CFR part 8 to make the program accessible to and usable by the family 
member with a disability. (See Sec. 982.402(b)(6) concerning effect of 
live-in aide on family unit size.)
    (b) At any time, the HA may refuse to approve a particular person as 
a live-in aide, or may withdraw such approval, if:
    (1) The person commits fraud, bribery or any other corrupt or 
criminal act in connection with any federal housing program;
    (2) The person commits drug-related criminal activity or violent 
criminal activity; or
    (3) The person currently owes rent or other amounts to the HA or to 
another HA in connection with Section 8 or public housing assistance 
under the 1937 Act.

[63 FR 23860, Apr. 30, 1998; 63 FR 31625, June 10, 1998]



                Subpart H--Where Family Can Live and Move

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.351  Overview.

    This subpart describes what kind of housing is eligible for leasing, 
and the

[[Page 554]]

areas where a family can live with tenant-based assistance. The subpart 
covers:
    (a) Assistance for a family that rents a dwelling unit in the 
jurisdiction of the HA that originally selected the family for tenant-
based assistance.
    (b) ``Portability'' assistance for a family that rents a unit 
outside the jurisdiction of the initial HA.



Sec. 982.352  Eligible housing.

    (a) Ineligible housing. The following types of housing may not be 
assisted by an HA in the tenant-based programs:
    (1) A public housing or Indian housing unit;
    (2) A unit receiving project-based assistance under section 8 of the 
1937 Act (42 U.S.C. 1437f);
    (3) Nursing homes, board and care homes, or facilities providing 
continual psychiatric, medical, or nursing services;
    (4) College or other school dormitories;
    (5) Units on the grounds of penal, reformatory, medical, mental, and 
similar public or private institutions;
    (6) A unit occupied by its owner or by a person with any interest in 
the dwelling unit. (However, assistance may be provided for a family 
residing in a cooperative. Assistance may be provided to the owner of a 
manufactured home leasing a manufactured home space. In the case of 
shared housing, an owner unrelated to the assisted family may reside in 
the unit, but assistance may not be paid on behalf of the resident 
owner. For provisions on cooperative housing, manufactured home space 
rental, and shared housing, see part 982, subpart M.); and
    (7) For provisions on HA disapproval of an owner, see Sec. 982.306.
    (b) HA-owned housing. (1) A unit that is owned by the HA that 
administers the assistance under the consolidated ACC (including a unit 
owned by an entity substantially controlled by the HA) may only be 
assisted under the tenant-based program if:
    (i) The family has been informed by the HA, both orally and in 
writing, that the family has the right to select any eligible dwelling 
unit, and an HA-owned unit is freely selected by the family, without HA 
pressure or steering;
    (ii) The unit is not ineligible housing;
    (iii) During assisted occupancy, the family does not benefit from 
any form of housing subsidy prohibited under paragraph (c) of this 
section;
    (iv) The initial contract rent (for a certificate program unit) and 
the initial rent to owner (for a voucher program unit) has been approved 
by HUD before execution of the HAP contract and commencement of the 
assisted lease term; and
    (v) Any adjustment of the contract rent (for a certificate program 
unit) and any changes in the rent to owner (for a voucher program unit) 
is approved in advance by HUD.
    (2) The HA as owner is subject to the same program requirements that 
apply to other owners in the program.
    (c) Prohibition against other housing subsidy. A family may not 
receive the benefit of tenant-based assistance while receiving the 
benefit of any of the following forms of other housing subsidy, for the 
same unit or for a different unit:
    (1) Public or Indian housing assistance;
    (2) Other Section 8 assistance (including other tenant-based 
assistance);
    (3) Assistance under former Section 23 of the United States Housing 
Act of 1937 (before amendment by the Housing and Community Development 
Act of 1974);
    (4) Section 101 rent supplements;
    (5) Section 236 rental assistance payments;
    (6) Tenant-based assistance under the HOME Program;
    (7) Rental assistance payments under Section 521 of the Housing Act 
of 1949 (a program of the Rural Development Administration);
    (8) Any local or State rent subsidy;
    (9) Section 202 supportive housing for the elderly;
    (10) Section 811 supportive housing for persons with disabilities;
    (11) Section 202 projects for non-elderly persons with disabilities 
(Section 162 assistance); or
    (12) Any other duplicative federal, State, or local housing subsidy, 
as determined by HUD. For this purpose, ``housing subsidy'' does not 
include the

[[Page 555]]

housing component of a welfare payment, a social security payment 
received by the family, or a rent reduction because of a tax credit.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23860, Apr. 30, 1998; 64 FR 13057, Mar. 16, 1999]

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, Sec. 982.352 was 
amended by revising paragraph (a)(6), effective Apr. 15, 1999. For the 
convenience of the user, the superseded text is set forth as follows:

Sec. 982.352  Eligible housing.

    (a) * * *
    (6) A unit occupied by its owners or by a person with any interest 
in the dwelling unit. (However, assistance may be provided for a family 
residing in a cooperative, In the certificate program, assistance may be 
provided to the owner of a manufactured home leasing a manufactured home 
space. In the case of shared housing, an owner unrelated to the assisted 
family may reside in the unit, but assistance may not be paid on behalf 
of the resident owner.); and

                                * * * * *



Sec. 982.353  Where family can lease a unit with tenant-based assistance.

    (a) Assistance in the initial HA jurisdiction. The family may 
receive tenant-based assistance to lease a unit located anywhere in the 
jurisdiction (as determined by State and local law) of the initial HA. 
HUD may nevertheless restrict the family's right to lease such a unit 
anywhere in such jurisdiction if HUD determines that limitations on a 
family's opportunity to select among available units in that 
jurisdiction are appropriate to achieve desegregation goals in 
accordance with obligations generated by a court order or consent 
decree.
    (b) Portability: Assistance outside the initial HA jurisdiction. 
Except as provided in paragraph (c) or (d) of this section, the family 
may receive tenant-based assistance to lease a unit outside the initial 
HA jurisdiction:
    (1) In the same State as the initial HA;
    (2) In the same metropolitan statistical area (MSA) as the initial 
HA, but in a different State;
    (3) In an MSA that is next to the same MSA as the initial HA, but in 
a different State; or
    (4) In the jurisdiction of an HA anywhere in the United States that 
is administering a tenant-based program.
    (c) Nonresident applicants. (1) This paragraph (c) applies if 
neither the household head or spouse of an assisted family already had a 
``domicile'' (legal residence) in the jurisdiction of the initial HA at 
the time when the family first submitted an application for 
participation in the program to the initial HA.
    (2) During the 12 month period from the time when the family is 
admitted to the program, the family does not have any right to lease a 
unit outside the initial HA jurisdiction. During this period, the family 
may lease a unit located anywhere in the jurisdiction of the initial HA.
    (3) If both the initial HA and a receiving HA agree, the family may 
lease a unit outside the HA jurisdiction under portability procedures.
    (d) Income eligibility. (1) For admission to the certificate or 
voucher program, a family must be income eligible in the area where the 
family initially leases a unit with assistance in the certificate or 
voucher program.
    (2) A portable family transferring between the certificate and 
voucher programs must be income-eligible for the new program in the area 
where the family leases an assisted unit. This requirement applies if 
the family is either:
    (i) Transferring from the initial HA certificate program to the 
receiving HA voucher program; or
    (ii) Transferring from the initial HA voucher program to the 
receiving HA certificate program.
    (3) If a portable family was already a participant in the initial HA 
certificate or voucher program, income eligibility is not redetermined 
unless the family transfers between the programs.
    (e) Leasing in-place. If the dwelling unit is approvable, a family 
may select the dwelling unit occupied by the family before selection for 
participation in the program.
    (f) Freedom of choice. The HA may not directly or indirectly reduce 
the family's opportunity to select among

[[Page 556]]

available units except as provided in paragraph (a) of this section, or 
elsewhere in this part 982 (e.g. prohibition on use of ineligible 
housing, housing not meeting HQS, or housing for which the contract rent 
(certificate program) or rent to owner (voucher program) exceeds a 
reasonable rent).

[60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996; 61 
FR 42131, Aug. 13, 1996]



Sec. 982.354  Portability: Administration by initial HA outside the initial HA jurisdiction.

    (a) When a family moves under portability (in accordance with 
Sec. 982.353(b)) to an area outside the initial HA jurisdiction, the 
initial HA must administer assistance for the family if:
    (1) The unit is located within the same State as the initial HA, in 
the same metropolitan statistical area (MSA) as the initial HA (but in a 
different State), or in an MSA that is next to the same MSA as the 
initial HA (but in a different State); and
    (2) No other HA with a tenant-based program has jurisdiction in the 
area where the unit is located.
    (b) In these conditions, the family remains in the program of the 
initial HA. The initial HA has the same responsibilities for 
administration of assistance for the family living outside the HA 
jurisdiction as for other families assisted by the HA, within the HA 
jurisdiction. For the purpose of permitting HA administration of program 
assistance for the family in the area outside of the HA jurisdiction as 
defined by State and local law (and thereby to satisfy the family's 
right to portability under federal law), the federal law and this 
regulation preempt limits on the HA jurisdiction under State and local 
law.
    (c) The initial HA may choose to use another HA, a private 
management entity or other contractor or agent to help the initial HA 
administer assistance outside the HA jurisdiction as defined by State 
and local law.



Sec. 982.355  Portability: Administration by receiving HA.

    (a) When a family moves under portability (in accordance with 
Sec. 982.353(b)) to an area outside the initial HA jurisdiction, another 
HA (the ``receiving HA'') must administer assistance for the family if 
an HA with a tenant-based program has jurisdiction in the area where the 
unit is located.
    (b)(1) In these conditions, an HA with jurisdiction in the area 
where the family wants to lease a unit must issue the family a 
certificate or voucher. If there is more than one such HA, the initial 
HA may choose the receiving HA.
    (2) If the family was receiving assistance under the initial HA 
certificate program, but is ineligible for admission to the voucher 
program, a receiving HA must provide continued assistance under the 
certificate program. If the family was receiving assistance under the 
initial HA voucher program, but is ineligible for admission to the 
certificate program, a receiving HA must provide continued assistance 
under the voucher program.
    (3) If a receiving HA is absorbing the family into its own program 
(i.e., providing assistance without billing the initial HA), the 
receiving HA has the choice of assisting the family under either the 
certificate or voucher program. If a receiving HA is not absorbing the 
family into its own program, the receiving HA must assist the family 
under the same program (certificate program or voucher program) as the 
initial HA.
    (c) Portability procedures. (1) The initial HA must determine 
whether the family is income-eligible in the area where the family wants 
to lease a unit.
    (2) The initial HA must advise the family how to contact and request 
assistance from the receiving HA. The initial HA must promptly notify 
the receiving HA to expect the family.
    (3) The family must promptly contact the receiving HA, and comply 
with receiving HA procedures for incoming portable families.
    (4) The initial HA must give the receiving HA the most recent HUD 
Form 50058 (Family Report) for the family, and related verification 
information. If the receiving HA opts to conduct a new reexamination, 
the receiving HA may not delay issuing the family a voucher or 
certificate or otherwise delay approval of a unit unless the 
recertification is necessary to determine income eligibility.

[[Page 557]]

    (5) When the portable family requests assistance from the receiving 
HA, the receiving HA must promptly inform the initial HA whether the 
receiving HA will bill the initial HA for assistance on behalf of the 
portable family, or will absorb the family into its own program.
    (6) The receiving HA must issue a certificate or voucher to the 
family. The term of the receiving HA certificate or voucher may not 
expire before the expiration date of any initial HA certificate or 
voucher. The receiving HA must determine whether to extend the 
certificate or voucher term. The family must submit a request for lease 
approval to the receiving HA during the term of the receiving HA 
certificate or voucher.
    (7) The receiving HA must determine the family unit size for the 
portable family. The family unit size is determined in accordance with 
the subsidy standards of the receiving HA.
    (8) The receiving HA must promptly notify the initial HA if the 
family has leased an eligible unit under the program, or if the family 
fails to submit a request for lease approval for an eligible unit within 
the term of the certificate or voucher.
    (9) To provide tenant-based assistance for portable families, the 
receiving HA must perform all HA program functions, such as 
reexaminations of family income and composition. At any time, either the 
initial HA or the receiving HA may make a determination to deny or 
terminate assistance to the family in accordance with Sec. 982.552.
    (d) Absorption by the receiving HA. (1) If funding is available 
under the consolidated ACC for the receiving HA certificate or voucher 
program when the portable family is received, the receiving HA may 
absorb the family into the receiving HA certificate or voucher program. 
After absorption, the family is assisted with funds available under the 
consolidated ACC for the receiving HA tenant-based program.
    (2) HUD may require that the receiving HA absorb all or a portion of 
the portable families.
    (e) Portability Billing. (1) To cover assistance for a portable 
family, the receiving HA may bill the initial HA for housing assistance 
payments and administrative fees. This paragraph (e) describes the 
billing procedure.
    (2) The initial HA must promptly reimburse the receiving HA for the 
full amount of the housing assistance payments made by the receiving HA 
for the portable family. The amount of the housing assistance payment 
for a portable family in the receiving HA program is determined in the 
same manner as for other families in the receiving HA program.
    (3) The initial HA must promptly reimburse the receiving HA for 80 
percent of the initial HA on-going administrative fee for each unit 
month that the family receives assistance under the tenant-based 
programs from the receiving HA. If both HAs agree, the HAs may negotiate 
a different amount of reimbursement.
    (4) HUD may reduce the administrative fee to an initial or receiving 
HA if the HA does not comply with HUD portability requirements.
    (5) In administration of portability, the initial HA and the 
receiving HA must comply with financial procedures required by HUD, 
including the use of HUD-required billing forms. The initial and 
receiving HA must comply with billing and payment deadlines under the 
financial procedures.
    (6) An HA must manage the HA tenant-based programs in a manner that 
ensures that the HA has the financial ability to provide assistance for 
families that move out of the HA program under the portability 
procedures that have not been absorbed by the receiving HA, as well as 
for families that remain in the HA program.
    (7) When a portable family moves out of the tenant-based program of 
a receiving HA that has not absorbed the family, the HA in the new 
jurisdiction to which the family moves becomes the receiving HA, and the 
first receiving HA is no longer required to provide assistance for the 
family.
    (f) Portability funding. (1) HUD may transfer funds for assistance 
to portable families to the receiving HA from funds available under the 
initial HA ACC.
    (2) HUD may provide additional funding (e.g., funds for incremental 
units) to the initial HA for funds transferred

[[Page 558]]

to a receiving HA for portability purposes.
    (3) HUD may provide additional funding (e.g., funds for incremental 
units) to the receiving HA for absorption of portable families.
    (4) HUD may require the receiving HA to absorb portable families.

[60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996]



Subpart I--Dwelling Unit: Housing Quality Standards, Subsidy Standards, 
                       Inspection and Maintenance

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.401  Housing quality standards (HQS).

    (a) Performance and acceptability requirements. (1) This section 
states the housing quality standards (HQS) for housing assisted in the 
programs.
    (2)(i) The HQS consist of:
    (A) Performance requirements; and
    (B) Acceptability criteria or HUD approved variations in the 
acceptability criteria.
    (ii) This section states performance and acceptability criteria for 
these key aspects of housing quality:
    (A) Sanitary facilities;
    (B) Food preparation and refuse disposal;
    (C) Space and security;
    (D) Thermal environment;
    (E) Illumination and electricity;
    (F) Structure and materials;
    (G) Interior air quality;
    (H) Water supply;
    (I) Lead-based paint;
    (J) Access;
    (K) Site and neighborhood;
    (L) Sanitary condition; and
    (M) Smoke detectors.
    (3) All program housing must meet the HQS performance requirements 
both at commencement of assisted occupancy, and throughout the assisted 
tenancy.
    (4)(i) In addition to meeting HQS performance requirements, the 
housing must meet the acceptability criteria stated in this section, 
unless variations are approved by HUD.
    (ii) HUD may grant approval for the HA to use acceptability criteria 
variations that are based on local codes or national standards that 
satisfy the purposes of the HQS.
    (iii) HUD may approve acceptability criteria variations because of 
local climatic or geographic conditions.
    (iv) HUD will not approve acceptability criteria variations that 
will unduly limit the amount and types of available rental housing 
stock.
    (b) Sanitary facilities--(1) Performance requirements. The dwelling 
unit must include sanitary facilities located in the unit. The sanitary 
facilities must be in proper operating condition, and adequate for 
personal cleanliness and the disposal of human waste. The sanitary 
facilities must be usable in privacy.
    (2) Acceptability criteria. (i) The bathroom must be located in a 
separate private room and have a flush toilet in proper operating 
condition.
    (ii) The dwelling unit must have a fixed basin in proper operating 
condition, with a sink trap and hot and cold running water.
    (iii) The dwelling unit must have a shower or a tub in proper 
operating condition with hot and cold running water.
    (iv) The facilities must utilize an approvable public or private 
disposal system (including a locally approvable septic system).
    (c) Food preparation and refuse disposal--(1) Performance 
requirement. (i) The dwelling unit must have suitable space and 
equipment to store, prepare, and serve foods in a sanitary manner.
    (ii) There must be adequate facilities and services for the sanitary 
disposal of food wastes and refuse, including facilities for temporary 
storage where necessary (e.g, garbage cans).
    (2) Acceptability criteria. (i) The dwelling unit must have an oven, 
and a stove or range, and a refrigerator of appropriate size for the 
family. All of the equipment must be in proper operating condition. The 
equipment may be supplied by either the owner or the family. A microwave 
oven may be substituted for a tenant-supplied oven and stove or range. A 
microwave oven may be substituted for an owner-supplied oven and stove 
or range if the tenant agrees and

[[Page 559]]

microwave ovens are furnished instead of an oven and stove or range to 
both subsidized and unsubsidized tenants in the building or premises.
    (ii) The dwelling unit must have a kitchen sink in proper operating 
condition, with a sink trap and hot and cold running water. The sink 
must drain into an approvable public or private system.
    (iii) The dwelling unit must have space for the storage, 
preparation, and serving of food.
    (iv) There must be facilities and services for the sanitary disposal 
of food waste and refuse, including temporary storage facilities where 
necessary (e.g., garbage cans).
    (d) Space and security--(1) Performance requirement. The dwelling 
unit must provide adequate space and security for the family.
    (2) Acceptability criteria. (i) At a minimum, the dwelling unit must 
have a living room, a kitchen area, and a bathroom.
    (ii) The dwelling unit must have at least one bedroom or living/
sleeping room for each two persons. Children of opposite sex, other than 
very young children, may not be required to occupy the same bedroom or 
living/sleeping room.
    (iii) Dwelling unit windows that are accessible from the outside, 
such as basement, first floor, and fire escape windows, must be lockable 
(such as window units with sash pins or sash locks, and combination 
windows with latches). Windows that are nailed shut are acceptable only 
if these windows are not needed for ventilation or as an alternate exit 
in case of fire.
    (iv) The exterior doors of the dwelling unit must be lockable. 
Exterior doors are doors by which someone can enter or exit the dwelling 
unit.
    (e) Thermal environment--(1) Performance requirement. The dwelling 
unit must have and be capable of maintaining a thermal environment 
healthy for the human body.
    (2) Acceptability criteria. (i) There must be a safe system for 
heating the dwelling unit (and a safe cooling system, where present). 
The system must be in proper operating condition. The system must be 
able to provide adequate heat (and cooling, if applicable), either 
directly or indirectly, to each room, in order to assure a healthy 
living environment appropriate to the climate.
    (ii) The dwelling unit must not contain unvented room heaters that 
burn gas, oil, or kerosene. Electric heaters are acceptable.
    (f) Illumination and electricity--(1) Performance requirement. Each 
room must have adequate natural or artificial illumination to permit 
normal indoor activities and to support the health and safety of 
occupants. The dwelling unit must have sufficient electrical sources so 
occupants can use essential electrical appliances. The electrical 
fixtures and wiring must ensure safety from fire.
    (2) Acceptability criteria. (i) There must be at least one window in 
the living room and in each sleeping room.
    (ii) The kitchen area and the bathroom must have a permanent ceiling 
or wall light fixture in proper operating condition. The kitchen area 
must also have at least one electrical outlet in proper operating 
condition.
    (iii) The living room and each bedroom must have at least two 
electrical outlets in proper operating condition. Permanent overhead or 
wall-mounted light fixtures may count as one of the required electrical 
outlets.
    (g) Structure and materials--(1) Performance requirement. The 
dwelling unit must be structurally sound. The structure must not present 
any threat to the health and safety of the occupants and must protect 
the occupants from the environment.
    (2) Acceptability criteria. (i) Ceilings, walls, and floors must not 
have any serious defects such as severe bulging or leaning, large holes, 
loose surface materials, severe buckling, missing parts, or other 
serious damage.
    (ii) The roof must be structurally sound and weathertight.
    (iii) The exterior wall structure and surface must not have any 
serious defects such as serious leaning, buckling, sagging, large holes, 
or defects that may result in air infiltration or vermin infestation.
    (iv) The condition and equipment of interior and exterior stairs, 
halls, porches, walkways, etc., must not

[[Page 560]]

present a danger of tripping and falling. For example, broken or missing 
steps or loose boards are unacceptable.
    (v) Elevators must be working and safe.
    (h) Interior air quality--(1) Performance requirement. The dwelling 
unit must be free of pollutants in the air at levels that threaten the 
health of the occupants.
    (2) Acceptability criteria. (i) The dwelling unit must be free from 
dangerous levels of air pollution from carbon monoxide, sewer gas, fuel 
gas, dust, and other harmful pollutants.
    (ii) There must be adequate air circulation in the dwelling unit.
    (iii) Bathroom areas must have one openable window or other adequate 
exhaust ventilation.
    (iv) Any room used for sleeping must have at least one window. If 
the window is designed to be openable, the window must work.
    (i) Water supply--(1) Performance requirement. The water supply must 
be free from contamination.
    (2) Acceptability criteria. The dwelling unit must be served by an 
approvable public or private water supply that is sanitary and free from 
contamination.
    (j) Lead-based paint performance requirement--(1) Purpose and 
applicability. (i) The purpose of paragraph (j) of this section is to 
implement section 302 of the Lead-Based Paint Poisoning Prevention Act, 
42 U.S.C. 4822, by establishing procedures to eliminate as far as 
practicable the hazards of lead-based paint poisoning for units assisted 
under this part. Paragraph (j) of this section is issued under 24 CFR 
35.24 (b)(4) and supersedes, for all housing to which it applies, the 
requirements of subpart C of 24 CFR part 35.
    (ii) The requirements of paragraph (j) of this section do not apply 
to 0-bedroom units, units that are certified by a qualified inspector to 
be free of lead-based paint, or units designated exclusively for 
elderly. The requirements of subpart A of 24 CFR part 35 apply to all 
units constructed prior to 1978 covered by a HAP contract under part 
982.
    (2) Definitions.
    Chewable surface. Protruding painted surfaces up to five feet from 
the floor or ground that are readily accessible to children under six 
years of age; for example, protruding corners, window sills and frames, 
doors and frames, and other protruding woodwork.
    Component. An element of a residential structure identified by type 
and location, such as a bedroom wall, an exterior window sill, a 
baseboard in a living room, a kitchen floor, an interior window sill in 
a bathroom, a porch floor, stair treads in a common stairwell, or an 
exterior wall.
    Defective paint surface. A surface on which the paint is cracking, 
scaling, chipping, peeling, or loose.
    Elevated blood lead level (EBL). Excessive absorption of lead. 
Excessive absorption is a confirmed concentration of lead in whole blood 
of 20 ug/dl (micrograms of lead per deciliter) for a single test or of 
15-19 ug/dl in two consecutive tests 3-4 months apart.
    HEPA means a high efficiency particle accumulator as used in lead 
abatement vacuum cleaners.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1 milligram 
per centimeter squared (mg/cm2), or 0.5 percent by weight or 
5000 parts per million (PPM).
    (3) Requirements for pre-1978 units with children under 6. (i) If a 
dwelling unit constructed before 1978 is occupied by a family that 
includes a child under the age of six years, the initial and each 
periodic inspection (as required under this part), must include a visual 
inspection for defective paint surfaces. If defective paint surfaces are 
found, such surfaces must be treated in accordance with paragraph (j)(6) 
of this section.
    (ii) The HA may exempt from such treatment defective paint surfaces 
that are found in a report by a qualified lead-based paint inspector not 
to be lead-based paint, as defined in paragraph (j)(2) of this section. 
For purposes of this section, a qualified lead-based paint inspector is 
a State or local health or housing agency, a lead-based paint inspector 
certified or regulated by a State or local health or housing agency, or 
an organization recognized by HUD.
    (iii) Treatment of defective paint surfaces required under this 
section must be completed within 30 calendar days of HA notification to 
the owner. When weather conditions prevent treatment

[[Page 561]]

of the defective paint conditions on exterior surfaces within the 30 day 
period, treatment as required by paragraph (j)(6) of this section may be 
delayed for a reasonable time.
    (iv) The requirements in this paragraph (j)(3) apply to:
    (A) All painted interior surfaces within the unit (including 
ceilings but excluding furniture);
    (B) The entrance and hallway providing access to a unit in a multi-
unit building; and
    (C) Exterior surfaces up to five feet from the floor or ground that 
are readily accessible to children under six years of age (including 
walls, stairs, decks, porches, railings, windows and doors, but 
excluding outbuildings such as garages and sheds).
    (4) Additional requirements for pre-1978 units with children under 6 
with an EBL. (i) In addition to the requirements of paragraph (j)(3) of 
this section, for a dwelling unit constructed before 1978 that is 
occupied by a family with a child under the age of six years with an 
identified EBL condition, the initial and each periodic inspection (as 
required under this part) must include a test for lead-based paint on 
chewable surfaces. Testing is not required if previous testing of 
chewable surfaces is negative for lead-based paint or if the chewable 
surfaces have already been treated.
    (ii) Testing must be conducted by a State or local health or housing 
agency, an inspector certified or regulated by a State or local health 
or housing agency, or an organization recognized by HUD. Lead content 
must be tested by using an X-ray fluorescence analyzer (XRF) or by 
laboratory analysis of paint samples. Where lead-based paint on chewable 
surfaces is identified, treatment of the paint surface in accordance 
with paragraph (j)(6) of this section is required, and treatment shall 
be completed within the time limits in paragraph (j)(3) of this section.
    (iii) The requirements in paragraph (j)(4) of this section apply to 
all protruding painted surfaces up to five feet from the floor or ground 
that are readily accessible to children under six years of age:
    (A) Within the unit;
    (B) The entrance and hallway providing access to a unit in a multi-
unit building; and
    (C) Exterior surfaces (including walls, stairs, decks, porches, 
railings, windows and doors, but excluding outbuildings such as garages 
and sheds).
    (5) Treatment of chewable surfaces without testing. In lieu of the 
procedures set forth in paragraph (j)(4) of this section, the HA may, at 
its discretion, waive the testing requirement and require the owner to 
treat all interior and exterior chewable surfaces in accordance with the 
methods set out in paragraph (j)(6) of this section.
    (6) Treatment methods and requirements. Treatment of defective paint 
surfaces and chewable surfaces must consist of covering or removal of 
the paint in accordance with the following requirements:
    (i) A defective paint surface shall be treated if the total area of 
defective paint on a component is:
    (A) More than 10 square feet on an exterior wall;
    (B) More than 2 square feet on an interior or exterior component 
with a large surface area, excluding exterior walls and including, but 
not limited to, ceilings, floors, doors, and interior walls; or
    (C) More than 10 percent of the total surface area on an interior or 
exterior component with a small surface area, including, but not limited 
to, window sills, baseboards and trim.
    (ii) Acceptable methods of treatment are: removal by wet scraping, 
wet sanding, chemical stripping on or off site, replacing painted 
components, scraping with infra-red or coil type heat gun with 
temperatures below 1100 degrees, HEPA vacuum sanding, HEPA vacuum needle 
gun, contained hydroblasting or high pressure wash with HEPA vacuum, and 
abrasive sandblasting with HEPA vacuum. Surfaces must be covered with 
durable materials with joints and edges sealed and caulked as needed to 
prevent the escape of lead contaminated dust.
    (iii) Prohibited methods of removal are: open flame burning or 
torching; machine sanding or grinding without a HEPA exhaust; 
uncontained hydroblasting or high pressure wash;

[[Page 562]]

and dry scraping except around electrical outlets or except when 
treating defective paint spots no more than two square feet in any one 
interior room or space (hallway, pantry, etc.) or totalling no more than 
twenty square feet on exterior surfaces.
    (iv) During exterior treatment soil and playground equipment must be 
protected from contamination.
    (v) All treatment procedures must be concluded with a thorough 
cleaning of all surfaces in the room or area of treatment to remove fine 
dust particles. Cleanup must be accomplished by wet washing surfaces 
with a lead solubilizing detergent such as trisodium phosphate or an 
equivalent solution.
    (vi) Waste and debris must be disposed of in accordance with all 
applicable Federal, state and local laws.
    (7) Tenant protection. The owner must take appropriate action to 
protect residents and their belongings from hazards associated with 
treatment procedures. Residents must not enter spaces undergoing 
treatment until cleanup is completed. Personal belongings that are in 
work areas must be relocated or otherwise protected from contamination.
    (8) Owner information responsibilities. Prior to execution of the 
HAP contract, the owner must inform the HA and the family of any 
knowledge of the presence of lead-based paint on the surfaces of the 
residential unit.
    (9) HA data collection and recordkeeping responsibilities. (i) The 
HA must attempt to obtain annually from local health agencies the names 
and addresses of children with identified EBLs and must annually match 
this information with the names and addresses of participants under this 
part. If a match occurs, the HA must determine whether local health 
officials have tested the unit for lead-based paint. If the unit has 
lead-based paint the HA must require the owner to treat the lead-based 
paint. If the owner does not complete the corrective actions required by 
this section, the family must be issued a certificate or voucher to 
move.
    (ii) The HA must keep a copy of each inspection report for at least 
three years. If a dwelling unit requires testing, or if the dwelling 
unit requires treatment of chewable surfaces based on the testing, the 
HA must keep the test results indefinitely and, if applicable, the owner 
certification of treatment. The records must indicate which chewable 
surfaces in the dwelling units have been tested and which chewable 
surfaces in the units have been treated. If records establish that 
certain chewable surfaces were tested or tested and treated in 
accordance with the standards prescribed in this section, such chewable 
surfaces do not have to be tested or treated at any subsequent time.
    (k) Access performance requirement. The dwelling unit must be able 
to be used and maintained without unauthorized use of other private 
properties. The building must provide an alternate means of exit in case 
of fire (such as fire stairs or egress through windows).
    (l) Site and Neighborhood--(1) Performance requirement. The site and 
neighborhood must be reasonably free from disturbing noises and 
reverberations and other dangers to the health, safety, and general 
welfare of the occupants.
    (2) Acceptability criteria. The site and neighborhood may not be 
subject to serious adverse environmental conditions, natural or manmade, 
such as dangerous walks or steps; instability; flooding, poor drainage, 
septic tank back-ups or sewage hazards; mudslides; abnormal air 
pollution, smoke or dust; excessive noise, vibration or vehicular 
traffic; excessive accumulations of trash; vermin or rodent infestation; 
or fire hazards.
    (m) Sanitary condition--(1) Performance requirement. The dwelling 
unit and its equipment must be in sanitary condition.
    (2) Acceptability criteria. The dwelling unit and its equipment must 
be free of vermin and rodent infestation.
    (n) Smoke detectors performance requirement--(1) Except as provided 
in paragraph (n)(2) of this section, each dwelling unit must have at 
least one battery-operated or hard-wired smoke detector, in proper 
operating condition, on each level of the dwelling unit, including 
basements but excepting crawl spaces and unfinished attics. Smoke 
detectors must be installed in accordance with and meet the requirements

[[Page 563]]

of the National Fire Protection Association Standard (NFPA) 74 (or its 
successor standards). If the dwelling unit is occupied by any hearing-
impaired person, smoke detectors must have an alarm system, designed for 
hearing-impaired persons as specified in NFPA 74 (or successor 
standards).
    (2) For units assisted prior to April 24, 1993, owners who installed 
battery-operated or hard-wired smoke detectors prior to April 24, 1993 
in compliance with HUD's smoke detector requirements, including the 
regulations published on July 30, 1992, (57 FR 33846), will not be 
required subsequently to comply with any additional requirements 
mandated by NFPA 74 (i.e., the owner would not be required to install a 
smoke detector in a basement not used for living purposes, nor would the 
owner be required to change the location of the smoke detectors that 
have already been installed on the other floors of the unit).

[60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996; 63 
FR 23861, Apr. 30, 1998]



Sec. 982.402  Subsidy standards.

    (a) Purpose. (1) The HA must establish subsidy standards that 
determine the number of bedrooms needed for families of different sizes 
and compositions.
    (2) For each family, the HA determines the appropriate number of 
bedrooms under the HA subsidy standards (family unit size).
    (3) The family unit size number is entered on the certificate or 
voucher issued to the family. The HA issues the family a voucher or 
certificate for the family unit size when a family is selected for 
participation in the program.
    (b) Determining family unit size. The following requirements apply 
when the HA determines family unit size under the HA subsidy standards:
    (1) The subsidy standards must provide for the smallest number of 
bedrooms needed to house a family without overcrowding.
    (2) The subsidy standards must be consistent with space requirements 
under the housing quality standards (See Sec. 982.401(d)).
    (3) The subsidy standards must be applied consistently for all 
families of like size and composition.
    (4) A child who is temporarily away from the home because of 
placement in foster care is considered a member of the family in 
determining the family unit size.
    (5) A family that consists of a pregnant woman (with no other 
persons) must be treated as a two-person family.
    (6) Any live-in aide (approved by the HA to reside in the unit to 
care for a family member who is disabled or is at least 50 years of age) 
must be counted in determining the family unit size;
    (7) Unless a live-in-aide resides with the family, the family unit 
size for any family consisting of a single person must be either a zero 
or one-bedroom unit, as determined under the HA subsidy standards.
    (8) In determining family unit size for a particular family, the HA 
may grant an exception to its established subsidy standards if the HA 
determines that the exception is justified by the age, sex, health, 
handicap, or relationship of family members or other personal 
circumstances. (For a single person other than a disabled or elderly 
person or remaining family member, such HA exception may not override 
the limitation in paragraph (b)(7) of this section.)
    (c) Effect of family unit size--maximum subsidy. The family unit 
size, as determined for a family under the HA subsidy standards is used 
to determine the maximum rent subsidy for the family:
    (1) Certificate program: Regular tenancy. HUD establishes fair 
market rents by number of bedrooms. For a regular tenancy, the initial 
gross rent (sum of the initial rent to owner plus any utility allowance) 
may not exceed either:
    (i) The FMR/exception rent limit for the family unit size; or
    (ii) The FMR/exception rent limit for the unit size rented by the 
family.
    (2) Certificate program: Over-FMR tenancy. For an over-FMR tenancy, 
the HA establishes payment standards by number of bedrooms. The payment 
standard for the family must be the lower of:

[[Page 564]]

    (i) The payment standard for the family unit size; or
    (ii) The payment standard for the unit size rented by the family.
    (3) Voucher program. For a voucher tenancy, the HA establishes 
payment standards by number of bedrooms. The payment standards for the 
family must be the lower of:
    (i) The payment standards for the family unit size; or
    (ii) The payment standard for the unit size rented by the family.
    (d) Size of unit occupied by family. (1) The family may lease an 
otherwise acceptable dwelling unit with fewer bedrooms than the family 
unit size. However, the dwelling unit must meet the applicable HQS space 
requirements.
    (2) The family may lease an otherwise acceptable dwelling unit with 
more bedrooms than the family unit size.

[60 FR 34695, July 3, 1995, as amended at 63 FR 23861, Apr. 30, 1998]



Sec. 982.403  Terminating HAP contract: When unit is too big or too small.

    (a) Violation of HQS space standards. (1) Paragraph (a) of this 
section applies to the tenant-based certificate program and voucher 
program.
    (2) If the HA determines that a unit does not meet the HQS space 
standards because of an increase in family size or a change in family 
composition, the HA must issue the family a new certificate or voucher, 
and the family and HA must try to find an acceptable unit as soon as 
possible.
    (3) If an acceptable unit is available for rental by the family, the 
HA must terminate the HAP contract in accordance with its terms.
    (b) Certificate program only--Subsidy too big for family size. (1) 
Paragraph (b) of this section applies to the tenant-based certificate 
program.
    (2) The HA must issue the family a new certificate, and the family 
and HA must try to find an acceptable unit as soon as possible if:
    (i) The family is residing in a dwelling unit with a larger number 
of bedrooms than appropriate for the family unit size under the HA 
subsidy standards; and
    (ii) The gross rent for the unit (sum of the contract rent plus any 
utility allowance for the unit size leased) exceeds the FMR/exception 
rent limit for the family unit size under the HA subsidy standards.
    (3) The HA must notify the family that exceptions to the subsidy 
standards may be granted, and the circumstances in which the grant of an 
exception will be considered by the HA.
    (4) If an acceptable unit is available for rental by the family 
within the FMR/exception rent limit, the HA must terminate the HAP 
contract in accordance with its terms.
    (c) Termination. When the HA terminates the HAP contract (under 
paragraphs (a) or (b) of this section):
    (1) The HA must notify the family and the owner of the termination; 
and
    (2) The HAP contract terminates at the end of the calendar month 
that follows the calendar month in which the HA gives such notice to the 
owner.
    (3) The family may move to a new unit in accordance with 
Sec. 982.314.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.404  Maintenance: Owner and family responsibility; HA remedies.

    (a) Owner obligation. (1) The owner must maintain the unit in 
accordance with HQS.
    (2) If the owner fails to maintain the dwelling unit in accordance 
with HQS, the HA must take prompt and vigorous action to enforce the 
owner obligations. HA remedies for such breach of the HQS include 
termination, suspension or reduction of housing assistance payments and 
termination of the HAP contract.
    (3) The HA must not make any housing assistance payments for a 
dwelling unit that fails to meet the HQS, unless the owner corrects the 
defect within the period specified by the HA and the HA verifies the 
correction. If a defect is life threatening, the owner must correct the 
defect within no more than 24 hours. For other defects, the owner must 
correct the defect within no more than 30 calendar days (or any HA-
approved extension).
    (4) The owner is not responsible for a breach of the HQS that is not 
caused by the owner, and for which the family is

[[Page 565]]

responsible (as provided in Sec. 982.404(b) and Sec. 982.551(c)). 
(However, the HA may terminate assistance to a family because of HQS 
breach caused by the family.)
    (b) Family obligation. (1) The family is responsible for a breach of 
the HQS that is caused by any of the following:
    (i) The family fails to pay for any utilities that the owner is not 
required to pay for, but which are to be paid by the tenant;
    (ii) The family fails to provide and maintain any appliances that 
the owner is not required to provide, but which are to be provided by 
the tenant; or
    (iii) Any member of the household or guest damages the dwelling unit 
or premises (damages beyond ordinary wear and tear).
    (2) If an HQS breach caused by the family is life threatening, the 
family must correct the defect within no more than 24 hours. For other 
family-caused defects, the family must correct the defect within no more 
than 30 calendar days (or any HA-approved extension).
    (3) If the family has caused a breach of the HQS, the HA must take 
prompt and vigorous action to enforce the family obligations. The HA may 
terminate assistance for the family in accordance with Sec. 982.552.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.405  HA periodic unit inspection.

    (a) The HA must inspect the unit leased to a family at least 
annually, and at other times as needed, to determine if the unit meets 
HQS.
    (b) The HA must conduct supervisory quality control HQS inspections.
    (c) In scheduling inspections, the HA must consider complaints and 
any other information brought to the attention of the HA.
    (d) The HA must notify the owner of defects shown by the inspection.
    (e) The HA may not charge the family or owner for initial inspection 
or reinspection of the unit.



Sec. 982.406  Enforcement of HQS.

    Part 982 does not create any right of the family, or any party other 
than HUD or the HA, to require enforcement of the HQS requirements by 
HUD or the HA, or to assert any claim against HUD or the HA, for 
damages, injunction or other relief, for alleged failure to enforce the 
HQS.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Subpart J--Housing Assistance Payments Contract and Owner Responsibility

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.451  Housing assistance payments contract.

    (a)(1) The HAP contract must be in the form required by HUD.
    (2) The term of the HAP contract is the same as the term of the 
lease.
    (b)(1) The amount of the monthly housing assistance payment by the 
HA to the owner is determined by the HA in accordance with HUD 
regulations and other requirements. The amount of the housing assistance 
payment is subject to change during the HAP contract term.
    (2) The monthly housing assistance payment by the HA is credited 
toward the monthly rent to owner under the family's lease.
    (3) The total of rent paid by the tenant plus the HA housing 
assistance payment to the owner may not be more than the rent to owner. 
The owner must immediately return any excess payment to the HA.
    (4)(i) The part of the rent to owner which is paid by the tenant may 
not be more than:
    (A) The rent to owner; minus
    (B) The HA housing assistance payment to the owner.
    (ii) The owner may not demand or accept any rent payment from the 
tenant in excess of this maximum, and must immediately return any excess 
rent payment to the tenant.
    (iii) The family is not responsible for payment of the portion of 
rent to owner covered by the housing assistance payment under the HAP 
contract

[[Page 566]]

between the owner and the HA. See Sec. 982.310(b).
    (5) The HA must pay the housing assistance payment promptly when due 
to the owner in accordance with the HAP contract. If the HA fails to 
make timely payment, the HA may be obligated to pay a late payment fee 
in accordance with State or local law. However, unless another source is 
authorized by HUD the HA may only use the following sources for payment 
of any such late payment fee:
    (i) Administrative fee income; or
    (ii) The administrative fee reserve.

[60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996; 63 
FR 23861, Apr. 30, 1998]



Sec. 982.452  Owner responsibilities.

    (a) The owner is responsible for performing all of the owner's 
obligations under the HAP contract and the lease.
    (b) The owner is responsible for:
    (1) Performing all management and rental functions for the assisted 
unit, including selecting a certificate-holder or voucher-holder to 
lease the unit, and deciding if the family is suitable for tenancy of 
the unit.
    (2) Maintaining the unit in accordance with HQS, including 
performance of ordinary and extraordinary maintenance. For provisions on 
family maintenance responsibilities, see Sec. 982.404(a)(4).
    (3) Complying with equal opportunity requirements.
    (4) Preparing and furnishing to the HA information required under 
the HAP contract.
    (5) Collecting from the family:
    (i) Any security deposit.
    (ii) The tenant contribution
    (the part of rent to owner not covered by the housing assistance 
payment).
    (iii) Any charges for unit damage by the family.
    (6) Enforcing tenant obligations under the lease.
    (7) Paying for utilities and services (unless paid by the family 
under the lease).
    (c) For provisions on modifications to a dwelling unit occupied or 
to be occupied by a disabled person, see 24 CFR 100.203.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23861, Apr. 30, 1998]



Sec. 982.453  Owner breach of contract.

    (a) Any of the following actions by the owner (including a principal 
or other interested party) is a breach of the HAP contract by the owner:
    (1) If the owner has violated any obligation under the HAP contract 
for the dwelling unit, including the owner's obligation to maintain the 
unit in accordance with the HQS.
    (2) If the owner has violated any obligation under any other housing 
assistance payments contract under Section 8 of the 1937 Act (42 U.S.C. 
1437f).
    (3) If the owner has committed fraud, bribery or any other corrupt 
or criminal act in connection with any federal housing program.
    (4) For projects with mortgages insured by HUD or loans made by HUD, 
if the owner has failed to comply with the regulations for the 
applicable mortgage insurance or loan program, with the mortgage or 
mortgage note, or with the regulatory agreement; or if the owner has 
committed fraud, bribery or any other corrupt or criminal act in 
connection with the mortgage or loan.
    (5) If the owner has engaged in drug-trafficking.
    (b) The HA rights and remedies against the owner under the HAP 
contract include recovery of overpayments, abatement or other reduction 
of housing assistance payments, termination of housing assistance 
payments, and termination of the HAP contract.



Sec. 982.454  Termination of HAP contract: Insufficient funding.

    The HA may terminate the HAP contract if the HA determines, in 
accordance with HUD requirements, that funding under the consolidated 
ACC is insufficient to support continued assistance for families in the 
program. See Sec. 982.455 concerning owner notice of termination.

[[Page 567]]



Sec. 982.455  Termination of HAP contract: Expiration and opt-out.

    (a) Automatic. The HAP contract terminates automatically 180 
calendar days after the last housing assistance payment to the owner.
    (b) Owner termination notice. (1) Law. Paragraph (b) of this section 
implements Section 8(c) (9) and (10) of the 1937 Act (42 U.S.C. 1437f(c) 
(9) and (10)) for the tenant-based Section 8 programs.
    (2) Definitions. The following terms are defined for purposes of 
this section:
    (i) Termination. Termination of the HAP contract because of:
    (A) Owner opt-out; or
    (B) Expiration of the HAP contract.
    (ii) Opt-out. Owner's decision to terminate tenancy of an assisted 
family for ``other good cause'' that is a business or economic reason 
for termination of tenancy. See Sec. 982.310 (a)(3) and (d).
    (iii) Expiration. ``Expiration'' means the occurrence of either of 
the following events:
    (A) Automatic termination of the HAP contract when 180 calendar days 
have passed since the last housing assistance payment.
    (B) An HA determination, in accordance with HUD requirements, that 
the HAP contract must be terminated because there is insufficient 
funding under the consolidated ACC to support continued assistance for 
families in the program.
    (3) Owner termination notice. Not less than 90 calendar days before 
a termination of a tenant-based HAP contract because of an opt-out or 
expiration, the owner must provide written notice of the termination to 
the HUD field office, the HA and the family. The owner's notice must 
specify the reasons for the termination. The notice must contain 
sufficient detail to enable the HUD field office to evaluate whether the 
termination is lawful and whether there are additional actions that can 
be taken by HUD to avoid the termination. The owner's notice must state 
that the owner and the HA may agree to a renewal of the HAP contract, 
thus avoiding the termination.
    (4) HUD review of owner termination notice. (i) The HUD field office 
must review the owner's notice, and consider whether there are 
additional actions which should be taken to avoid the termination.
    (ii) For a unit assisted under the certificate program:
    (A) The HUD field office will determine whether the HA has properly 
adjusted the contract rent in accordance with the HAP contract and HUD 
regulations. If not the HUD field office will require the HA to make a 
proper adjustment of the contract rent in accordance with the HAP 
contract and the regulation.
    (B) In case of termination because of an opt-out, the owner must be 
offered the opportunity to enter into a new HAP contract (and assisted 
lease) at the maximum initial contract rent allowed (within the FMR/
exception rent limit). However, the rent to owner may not exceed the 
reasonable rent for a comparable unassisted unit.
    (iii) The HUD field office will issue a written finding of the 
legality of the HAP contract termination and the reasons for the 
termination as stated in the owner's notice, including any actions taken 
to avoid the termination. Within 30 calendar days of HUD's finding, the 
owner must provide written notice of HUD's decision to the tenant.
    (iv) The owner may proceed with eviction whether the HUD field 
office approves or disapproves, or fails to complete the required review 
of the owner notice, before expiration of the 90 calendar day review 
period.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 982.456  Third parties.

    (a) Even if the family continues to occupy the unit, the HA may 
exercise any rights and remedies against the owner under the HAP 
contract.
    (b) The family is not a party to or third party beneficiary of the 
HAP contract. The family may not exercise any right or remedy against 
the owner under the HAP contract. (However, the tenant may exercise any 
right or remedies against the owner under the lease between the tenant 
and the owner.)
    (c) The HAP contract shall not be construed as creating any right of 
the family or other third party (other than

[[Page 568]]

HUD) to enforce any provision of the HAP contract, or to assert any 
claim against HUD, the HA or the owner under the HAP contract.



Sec. 982.457  Owner refusal to lease.

    (a) Section 8(t) of the 1937 Act (42 U.S.C. 1437f(t)) provides that 
an owner who has entered into a HAP contract under Section 8 of the 1937 
Act on behalf of any tenant in a multifamily housing project shall not 
refuse:
    (1) To lease any available dwelling unit in any multifamily housing 
project of the owner that rents for an amount not greater than the fair 
market rent for a comparable unit to a holder of a rental certificate 
under Section 8 and to enter into a HAP contract respecting the unit, if 
a proximate cause of the refusal is the status of the prospective tenant 
as a holder of a certificate; or
    (2) To lease any available dwelling unit in any multifamily housing 
project of the owner to a voucher holder and to enter into a HAP 
contract respecting the unit, a proximate cause of which is the status 
of such prospective tenant as a holder of such voucher.
    (b) For the purposes of Section 8(t), the term multifamily housing 
project means a residential building containing more than four dwelling 
units.



             Subpart K--Rent and Housing Assistance Payment

    Source: 63 FR 23861, Apr. 30, 1998, unless otherwise noted.



Sec. 982.501  Overview.

    (a) There are three types of tenancy in the Section 8 tenant-based 
programs:
    (1) A regular tenancy under the certificate program;
    (2) An over-FMR tenancy under the certificate program; and
    (3) A tenancy under the voucher program.
    (b) Some requirements of this subpart are the same for all three 
types of tenancy. Some requirements only apply to a specific type of 
tenancy. Unless specifically stated, requirements of this subpart are 
the same for all tenancies in the tenant-based programs.



Sec. 982.502  Negotiating rent to owner.

    The owner and the family negotiate the rent to owner. At the 
family's request, the HA must help the family negotiate the rent to 
owner.



Sec. 982.503  Rent to owner: Reasonable rent.

    (a) HA determination. (1) The HA may not approve a lease until the 
HA determines that the initial rent to owner is a reasonable rent.
    (2) The HA must redetermine the reasonable rent:
    (i) Before any increase in the rent to owner;
    (ii) If there is a five percent decrease in the published FMR in 
effect 60 days before the contract anniversary (for the unit size rented 
by the family) as compared with the FMR in effect 1 year before the 
contract anniversary; or
    (iii) If directed by HUD.
    (3) The HA may also redetermine the reasonable rent at any other 
time.
    (4) At all times during the assisted tenancy, the rent to owner may 
not exceed the reasonable rent as most recently determined or 
redetermined by the HA.
    (b) Comparability. The HA must determine whether the rent to owner 
is a reasonable rent in comparison to rent for other comparable 
unassisted units. To make this determination, the HA must consider:
    (1) The location, quality, size, unit type, and age of the contract 
unit; and
    (2) Any amenities, housing services, maintenance and utilities to be 
provided by the owner in accordance with the lease.
    (c) Owner certification of rents charged for other units. By 
accepting each monthly housing assistance payment from the HA, the owner 
certifies that the rent to owner is not more than rent charged by the 
owner for comparable unassisted units in the premises. The owner must 
give the HA information requested by the HA on rents charged by the 
owner for other units in the premises or elsewhere.



Sec. 982.504  Maximum subsidy: FMR/exception rent limit.

    (a) Purpose. (1) Fair market rents (FMRs) are published by HUD. In 
the

[[Page 569]]

tenant-based programs, the FMR/exception rent limit is used to determine 
the maximum subsidy for a family.
    (2) For a regular tenancy under the certificate program, the FMR/
exception rent limit is the maximum initial gross rent under the 
assisted lease.
    (3) For the voucher program, the FMR/exception rent limit is the 
maximum ``payment standard'' (maximum subsidy) for a family.
    (4) For an over-FMR tenancy under the certificate program, the FMR/
exception rent limit is the ``payment standard'' (maximum subsidy) for a 
family.
    (b) Determining exception rent--(1) Area exception rent: HUD 
approval. (i) At HUD's sole discretion, HUD may approve an area 
exception rent for all units, or all units of a given size (number of 
bedrooms), leased by program families in a part of the fair market rent 
area that is designated as an ``exception rent area.'' A HUD-approved 
area exception rent applies to all HAs with jurisdiction of the 
exception rent area.
    (ii) An area exception rent may not exceed 120 percent of the FMR.
    (iii) HUD will determine the area exception rent by either of the 
two following methods:
    (A) Median rent method. In the median rent method, HUD determines 
the area exception rent by multiplying the FMR times a fraction of which 
the numerator is the median gross rent of the exception rent area and 
the denominator is the median gross rent of the entire FMR area. In this 
method, HUD uses median gross rent data from the most recent decennial 
United States census, and the exception rent area may be any geographic 
entity within the FMR area (or any combination of such entities) for 
which median gross rent data is provided in decennial census data 
products.
    (B) 40th percentile rent method. In this method, HUD determines that 
the area exception rent equals the 40th percentile of rents to lease 
standard quality rental housing in the exception rent area. HUD 
determines the 40th percentile rent in accordance with the methodology 
described in 24 CFR 888.113 for determining fair market rents. An HA 
that asks HUD to approve an area exception rent determined by the 40th 
percentile rent method must present statistically representative rental 
housing survey data that justify exception rent approval by HUD.
    (iv) An area exception rent will not be approved unless HUD 
determines that an exception rent is needed either:
    (A) To help families find housing outside areas of high poverty; or
    (B) Because certificate or voucher holders have trouble finding 
housing for lease under the program within the term of the certificate 
or voucher.
    (v) The total populations of exception rent areas in an FMR area may 
not include more than 50 percent of the population of the fair market 
rent area.
    (vi) At any time, HUD may withdraw or modify any approved area 
exception rent.
    (2) Regular certificate tenancy: Exception rent as reasonable 
accommodation for person with disabilities: HA approval. For a regular 
tenancy in the certificate program, on request from a family that 
includes a person with disabilities, the HA must approve an exception 
rent of up to 120 percent of the fair market rent if the exception rent 
is needed as a reasonable accommodation so that the program is readily 
accessible to and usable by persons with disabilities in accordance with 
24 CFR part 8.



Sec. 982.505  Voucher tenancy or over-FMR tenancy: How to calculate housing assistance payment.

    (a) Use of payment standard. For a voucher tenancy or for an over-
FMR tenancy under the certificate program, a ``payment standard'' is 
used to calculate the monthly housing assistance payment for a family. 
The ``payment standard'' is the maximum monthly subsidy payment for a 
family.
    (b) Voucher program: Amount of assistance--(1) Voucher payment 
standard: Maximum and minimum. (i) The HA must adopt a payment standard 
schedule that establishes payment standards for the HA voucher program. 
For each FMR area and for each exception rent area, the HA must 
establish voucher payment standard amounts by unit size (zero-bedroom, 
one-bedroom, and so on).

[[Page 570]]

    (ii) For a voucher tenancy, the payment standard for each unit size 
may not be:
    (A) More than the current FMR/exception rent limit; or
    (B) Less than 80 percent of the current FMR/exception rent limit, 
unless a lower percent is approved by HUD.
    (2) Voucher assistance formula. (i) For a voucher tenancy, the 
housing assistance payment for a family equals the lesser of:
    (A) The applicable payment standard minus 30 percent of monthly 
adjusted income; or
    (B) The monthly gross rent minus the minimum rent.
    (ii) The minimum rent is the higher of:
    (A) 10 percent of monthly income (gross income); or
    (B) A higher minimum rent as required by law.
    (3) Voucher payment standard schedule. (i) A voucher payment 
standard schedule is a list of the payment standard amounts used to 
calculate the voucher housing assistance payment for each unit size in 
an FMR area. The payment standard schedule for an FMR area includes 
payment standard amounts for any HUD-approved exception rent area in the 
FMR area.
    (ii) The voucher payment standard schedule establishes a single 
payment standard for each unit size in an FMR area and, if applicable, 
in a HUD-approved exception rent area within an FMR area.
    (iii) Payment standard amounts on the payment standard schedule must 
be within the maximum and minimum limits stated in paragraph (b)(1)(ii) 
of this section. Within these limits, payment standard amounts on the 
schedule may be adjusted annually, at the discretion of the HA, if 
necessary to assure continued affordability of units in the HA 
jurisdiction.
    (iv) To calculate the housing assistance payment for a family, the 
HA must use the applicable payment standard from the HA payment standard 
schedule for the fair market rent area (including the applicable payment 
standard for any HUD-approved exception rent area) where the unit rented 
by the family is located.
    (4) Payment standard for certain subsidized projects. For a voucher 
tenancy in an insured or noninsured Section 236 project, a Section 515 
project of the Rural Development Administration, or a Section 221(d)(3) 
below market interest rate project, the payment standard may not exceed 
the basic rental charge (as defined in 12 U.S.C. 1715z-1(f)(1)), 
including the cost for tenant-paid utilities.
    (c) Over-FMR tenancy: Determining amount of assistance--(1) Payment 
standard. For an over-FMR tenancy, the payment standard for the unit 
size is the FMR/exception rent limit.
    (2) Over-FMR tenancy assistance formula. For an over-FMR tenancy, 
the housing assistance payment for a family equals the lesser of:
    (i) The applicable payment standard minus the total tenant payment; 
or
    (ii) The monthly gross rent minus the minimum rent as required by 
law.
    (d) Payment standard for family. (1) This paragraph (d) applies to 
both a voucher tenancy and an over-FMR tenancy.
    (2) The payment standard for a family is the lower of:
    (i) The payment standard for the family unit size; or
    (ii) The payment standard for the unit size rented by the family.
    (3) If the unit rented by a family is located in an exception rent 
area, the HA must use the appropriate payment standard for the exception 
rent area.
    (4) During the HAP contract term for a unit, the amount of the 
payment standard for a family is the higher of:
    (i) The initial payment standard (at the beginning of the lease 
term) minus any amount by which the initial rent to owner exceeds the 
current rent to owner; or
    (ii) The payment standard as determined at the most recent regular 
reexamination of family income and composition effective after the 
beginning of the HAP contract term.
    (5) At the next regular reexamination following a change in family 
size or composition during the HAP contract term, and for any 
examination thereafter during the term:
    (i) Paragraph (d)(4)(i) does not apply, and

[[Page 571]]

    (ii) If there is a change in family unit size resulting from such 
change in family size or composition, the new family unit size must be 
used to compute the payment standard.

[63 FR 23861, Apr. 30, 1998, as amended at 64 FR 13057, Mar. 16, 1999]

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, Sec. 982.505 was 
amended by revising paragraph (d)(5), effective Apr. 15, 1999. For the 
convenience of the user, the superseded text is set forth as follows:

Sec. 982.505  Voucher tenancy or over-FMR tenancy: How to calculate 
          housing assistance payment.

                                * * * * *

    (d) * * *
    (5) If there is a change in family size or composition during the 
HAP contract term, paragraph (d)(4)(i) of this section does not apply at 
the next regular reexamination following such change, or thereafter 
during the term.



Sec. 982.506  Over-FMR tenancy: HA approval.

    (a) HA discretion to approve. (1) At the request of the family, the 
HA may approve an over-FMR tenancy in accordance with this section.
    (2) Generally, the HA is not required to approve any over-FMR 
tenancy. However, the HA must approve an over-FMR tenancy in accordance 
with this section, if needed as a reasonable accommodation so that the 
program is readily accessible to and usable by persons with disabilities 
in accordance with 24 CFR part 8.
    (b) Requirements--(1) Ten percent limit. The HA may not approve 
additional over-FMR tenancies if the number of such tenancies currently 
is ten percent or more of the number of incremental certificate units 
under the HUD-approved budget for the HA certificate program. 
``Incremental units'' means the number of budgeted certificate units 
minus any units for which HUD provided tenant-based program funding 
designated for families previously residing in housing with Section 8 
project-based assistance.
    (2) Affordability of family share. The HA may not approve an over-
FMR tenancy unless the HA determines that the initial family share is 
reasonable. In making this determination, the HA must take into account 
other family expenses, such as child care, unreimbursed medical 
expenses, and other appropriate family expenses as determined by the HA.
    (c) Amount of assistance. During an over-FMR tenancy, the amount of 
the housing assistance payment is determined in accordance with 
Sec. 982.505(c).
    (d) HA administrative plan. (1) The administrative plan must cover 
HA policies on approval and administration of over-FMR tenancies.
    (2) The plan must state how the HA decides whether to approve an 
over-FMR tenancy at the family's request (within the program limit 
stated in paragraph (b)(1) of this section). Such policy may be based on 
first-come, first-served; on an HA determined system of preferences; or 
on discretionary case-by-case consideration of individual requests.



Sec. 982.507  Regular tenancy: How to calculate housing assistance payment.

    The monthly housing assistance payment equals the gross rent, minus 
the higher of:
    (a) The total tenant payment; or
    (b) The minimum rent as required by law.



Sec. 982.508  Regular tenancy: Limit on initial rent to owner.

    (a) FMR/exception rent limit. (1) The initial gross rent for any 
unit may not exceed the FMR/exception rent limit on the date the HA 
approves the lease.
    (2) The FMR/exception rent limit for a family is the lower of:
    (i) The FMR/exception rent limit for the family unit size; or
    (ii) The FMR/exception rent limit for the unit size rented by the 
family.
    (b) Reasonable rent. The initial rent to owner may not exceed a 
reasonable rent as determined in accordance with Sec. 982.503.



Sec. 982.509  Regular tenancy: Annual adjustment of rent to owner.

    (a) When rent is adjusted. At each annual anniversary date of the 
HAP contract, the HA must adjust the rent to owner at the request of the 
owner in accordance with this section.

[[Page 572]]

    (b) Amount of annual adjustment. (1) The adjusted rent to owner 
equals the lesser of:
    (i) The pre-adjustment rent to owner multiplied by the applicable 
Section 8 annual adjustment factor, published by HUD in the Federal 
Register, that is in effect 60 days before the HAP contract anniversary;
    (ii) The reasonable rent (as most recently determined or 
redetermined by the HA in accordance with Sec. 982.503); or
    (iii) The amount requested by the owner.
    (2) In making the annual adjustment, the pre-adjustment rent to 
owner does not include any previously approved special adjustments.
    (3) The rent to owner may be adjusted up or down in accordance with 
this section.
    (4) Notwithstanding paragraph (b)(1) of this section, the rent to 
owner for a unit must not be increased at the annual anniversary date 
unless:
    (i) The owner requests the adjustment by giving notice to the HA; 
and
    (ii) During the year before the annual anniversary date, the owner 
has complied with all requirements of the HAP contract, including 
compliance with the HQS.
    (5) The rent to owner will only be increased for housing assistance 
payments covering months commencing on the later of:
    (i) The first day of the first month commencing on or after the 
contract anniversary date; or
    (ii) At least sixty days after the HA receives the owner's request.
    (6) To receive an increase resulting from the annual adjustment for 
an annual anniversary date, the owner must request the increase at least 
sixty days before the next annual anniversary date.

[63 FR 23861, Apr. 30, 1998, as amended at 64 FR 13057, Mar. 16, 1999]

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, Sec. 982.509 was 
amended by revising paragraph (b)(5)(i), effective Apr. 15, 1999. For 
the convenience of the user, the superseded text is set forth as 
follows:

Sec. 982.509  Regular tenancy: Annual adjustment of rent to owner.

                                * * * * *

    (b) * * *
    (5) * * *
    (i) The contract anniversary date; or

                                * * * * *



Sec. 982.510  Regular tenancy: Special adjustment of rent to owner.

    (a) Substantial and general cost increases. (1) At HUD's sole 
discretion, HUD may approve a special adjustment of the rent to owner to 
reflect increases in the actual and necessary costs of owning and 
maintaining the unit because of substantial and general increases in:
    (i) Real property taxes;
    (ii) Special governmental assessments;
    (iii) Utility rates; or
    (iv) Costs of utilities not covered by regulated rates.
    (2) An HA may make a special adjustment of the rent to owner only if 
the adjustment has been approved by HUD. The owner does not have any 
right to receive a special adjustment.
    (b) Reasonable rent. The adjusted rent may not exceed the reasonable 
rent. The owner may not receive a special adjustment if the adjusted 
rent would exceed the reasonable rent.
    (c) Term of special adjustment. (1) The HA may withdraw or limit the 
term of any special adjustment.
    (2) If a special adjustment is approved to cover temporary or one-
time costs, the special adjustment is only a temporary or one-time 
increase of the rent to owner.



Sec. 982.511  Rent to owner: Effect of rent control.

    In addition to the rent reasonableness limit under this subpart, the 
amount of rent to owner also may be subject to rent control limits under 
State or local law.



Sec. 982.512  Rent to owner in subsidized projects.

    (a) Subsidized rent. (1) The rent to owner in an insured or 
noninsured Section 236 project, a Section 515 project of the Rural 
Development Administration, a Section 202 project or a Section 221(d)(3) 
below market interest rate project is the subsidized rent.

[[Page 573]]

    (2) During the assisted tenancy, the rent to owner must be adjusted 
to follow the subsidized rent, and must not be adjusted by applying the 
published Section 8 annual adjustment factors. For such units, special 
adjustments may not be granted. The following sections do not apply to a 
tenancy in a subsidized project described in paragraph (a)(1) of this 
section: Sec. 982.509 (annual adjustment) and Sec. 982.510 (special 
adjustment).
    (b) HOME. For units assisted under the HOME program, rents are 
subject to requirements of the HOME program (24 CFR 92.252).
    (c) Other subsidy: HA discretion to reduce rent. In the case of a 
regular tenancy, the HA may require the owner to reduce the initial rent 
to owner because of other governmental subsidies, including tax credit 
or tax exemption, grants or other subsidized financing.



Sec. 982.513  Other fees and charges.

    (a) The cost of meals or supportive services may not be included in 
the rent to owner, and the value of meals or supportive services may not 
be included in the calculation of reasonable rent.
    (b) The lease may not require the tenant or family members to pay 
charges for meals or supportive services. Non-payment of such charges is 
not grounds for termination of tenancy.
    (c) The owner may not charge the tenant extra amounts for items 
customarily included in rent in the locality, or provided at no 
additional cost to unsubsidized tenants in the premises.



Sec. 982.514  Distribution of housing assistance payment.

    The monthly housing assistance payment is distributed as follows:
    (a) The HA pays the owner the lesser of the housing assistance 
payment or the rent to owner.
    (b) If the housing assistance payment exceeds the rent to owner, the 
HA may pay the balance of the housing assistance payment either to the 
family or directly to the utility supplier to pay the utility bill on 
behalf of the family.



Sec. 982.515  Family share: Family responsibility.

    (a) The family share is calculated by subtracting the amount of the 
housing assistance payment from the gross rent.
    (b) The HA may not use housing assistance payments or other program 
funds (including any administrative fee reserve) to pay any part of the 
family share. Payment of the family share is the responsibility of the 
family.



Sec. 982.516  Family income and composition: Regular and interim examinations.

    (a) HA responsibility for reexamination and verification. (1) The 
HA's responsibilities for reexamining family income and composition are 
specified in 24 CFR part 5, subpart F.
    (2) The HA must obtain and document in the tenant file third party 
verification of the following factors, or must document in the tenant 
file why third party verification was not available:
    (i) Reported family annual income;
    (ii) The value of assets;
    (iii) Expenses related to deductions from annual income; and
    (iv) Other factors that affect the determination of adjusted income.
    (b) When HA conducts interim reexamination. (1) At any time, the HA 
may conduct an interim reexamination of family income and composition.
    (2) At any time, the family may request an interim determination of 
family income or composition because of any changes since the last 
determination. The HA must make the interim determination within a 
reasonable time after the family request.
    (3) Interim examinations must be conducted in accordance with 
policies in the HA administrative plan.
    (c) Family reporting of change. The HA must adopt policies 
prescribing when and under what conditions the family must report a 
change in family income or composition.
    (d) Effective date of reexamination. (1) The HA must adopt policies 
prescribing how to determine the effective date of a change in the 
housing assistance payment resulting from an interim redetermination.

[[Page 574]]

    (2) At the effective date of a regular or interim reexamination, the 
HA must make appropriate adjustments in the housing assistance payment. 
(For a voucher tenancy or over-FMR tenancy, the housing assistance 
payment shall be calculated in accordance with Sec. 982.505. For a 
regular tenancy, the housing assistance payment shall be calculated in 
accordance with Sec. 982.507.)
    (e) Family member income. Family income must include income of all 
family members, including family members not related by blood or 
marriage. If any new family member is added, family income must include 
any income of the additional family member. The HA must conduct a 
reexamination to determine such additional income, and must make 
appropriate adjustments in the housing assistance payment.

(Information collection requirements contained in this section have been 
approved by the Office of Management and Budget under control number 
2577-0169.)

[63 FR 23861, Apr. 30, 1998, as amended at 64 FR 13057, Mar. 16, 1999]

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, Sec. 982.516 was 
amended by revising paragraph (d)(2), and by removing the phrase `` and 
family unit size'' from the last sentence of paragraph (e), effective 
Apr. 15, 1999. For the convenience of the user, the superseded text is 
set forth as follows:

Sec. 982.516  Family income and composition: Regular and interim 
          examinations.

    (d) * * *
    (2) At the effective date of a regular or interim reexamination, the 
HA must make appropriate adjustments in the housing assistance payment 
and family unit size.

                                * * * * *



Sec. 982.517  Utility allowance schedule.

    (a) Maintaining schedule. (1) The HA must maintain a utility 
allowance schedule for all tenant-paid utilities (except telephone), for 
cost of tenant-supplied refrigerators and ranges, and for other tenant-
paid housing services (e.g., trash collection (disposal of waste and 
refuse)).
    (2) The HA must give HUD a copy of the utility allowance schedule. 
At HUD's request, the HA also must provide any information or procedures 
used in preparation of the schedule.
    (b) How allowances are determined. (1) The utility allowance 
schedule must be determined based on the typical cost of utilities and 
services paid by energy-conservative households that occupy housing of 
similar size and type in the same locality. In developing the schedule, 
the HA must use normal patterns of consumption for the community as a 
whole and current utility rates.
    (2)(i) An HA's utility allowance schedule, and the utility allowance 
for an individual family, must include the utilities and services that 
are necessary in the locality to provide housing that complies with the 
housing quality standards. However, the HA may not provide any allowance 
for non-essential utility costs, such as costs of cable or satellite 
television.
    (ii) In the utility allowance schedule, the HA must classify 
utilities and other housing services according to the following general 
categories: space heating; air conditioning; cooking; water heating; 
water; sewer; trash collection (disposal of waste and refuse); other 
electric; refrigerator (cost of tenant-supplied refrigerator); range 
(cost of tenant-supplied range); and other specified housing services. 
The HA must provide a utility allowance for tenant-paid air-conditioning 
costs if the majority of housing units in the market provide centrally 
air-conditioned units or there is appropriate wiring for tenant-
installed air conditioners.
    (3) The cost of each utility and housing service category must be 
stated separately. For each of these categories, the utility allowance 
schedule must take into consideration unit size (by number of bedrooms), 
and unit types (e.g., apartment, row-house, town house, single-family 
detached, and manufactured housing) that are typical in the community.
    (4) The utility allowance schedule must be prepared and submitted in 
accordance with HUD requirements on the form prescribed by HUD.
    (c) Revisions of utility allowance schedule. (1) An HA must review 
its schedule of utility allowances each year, and must revise its 
allowance for a utility category if there has been a change of 10 
percent or more in the utility rate

[[Page 575]]

since the last time the utility allowance schedule was revised. The HA 
must maintain information supporting its annual review of utility 
allowances and any revisions made in its utility allowance schedule.
    (2) At HUD's direction, the HA must revise the utility allowance 
schedule to correct any errors, or as necessary to update the schedule.
    (d) Use of utility allowance schedule. (1) The HA must use the 
appropriate utility allowance for the size of dwelling unit actually 
leased by the family (rather than the family unit size as determined 
under the HA subsidy standards).
    (2) At reexamination, the HA must use the HA current utility 
allowance schedule.
    (e) Higher utility allowance as reasonable accommodation for a 
person with disabilities. On request from a family that includes a 
person with disabilities, the HA must approve a utility allowance which 
is higher than the applicable amount on the utility allowance schedule 
if a higher utility allowance is needed as a reasonable accommodation in 
accordance with 24 CFR part 8 to make the program accessible to and 
usable by the family member with a disability.

(Information collection requirements contained in this section have been 
approved by the Office of Management and Budget under control number 
2577-0169.)



   Subpart L--Family Obligations; Denial and Termination of Assistance

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec. 982.551  Obligations of participant.

    (a) Purpose. This section states the obligations of a participant 
family under the program.
    (b) Supplying required information--(1) The family must supply any 
information that the HA or HUD determines is necessary in the 
administration of the program, including submission of required evidence 
of citizenship or eligible immigration status (as provided by 24 CFR 
part 5). ``Information'' includes any requested certification, release 
or other documentation.
    (2) The family must supply any information requested by the HA or 
HUD for use in a regularly scheduled reexamination or interim 
reexamination of family income and composition in accordance with HUD 
requirements. For provisions on reexamination and computation of family 
income, see 24 CFR part 813.
    (3) The family must disclose and verify social security numbers (as 
provided by part 5, subpart B, of this title) and must sign and submit 
consent forms for obtaining information in accordance with part 5, 
subpart B, of this title and 24 CFR part 813.
    (4) Any information supplied by the family must be true and 
complete.
    (c) HQS breach caused by family. The family is responsible for an 
HQS breach caused by the family as described in Sec. 982.404(b).
    (d) Allowing HA inspection. The family must allow the HA to inspect 
the unit at reasonable times and after reasonable notice.
    (e) Violation of lease. The family may not commit any serious or 
repeated violation of the lease.
    (f) Family notice of move or lease termination. The family must 
notify the HA and the owner before the family moves out of the unit, or 
terminates the lease on notice to the owner. See Sec. 982.314(d).
    (g) Owner eviction notice. The family must promptly give the HA a 
copy of any owner eviction notice.
    (h) Use and occupancy of unit.--(1) The family must use the assisted 
unit for residence by the family. The unit must be the family's only 
residence.
    (2) The composition of the assisted family residing in the unit must 
be approved by the HA. The family must promptly inform the HA of the 
birth, adoption or court-awarded custody of a child. The family must 
request HA approval to add any other family member as an occupant of the 
unit. No other person [i.e., nobody but members of the assisted family] 
may reside in the unit (except for a foster child or live-in aide as 
provided in paragraph (h)(4) of this section).
    (3) The family must promptly notify the HA if any family member no 
longer resides in the unit.

[[Page 576]]

    (4) If the HA has given approval, a foster child or a live-in-aide 
may reside in the unit. The HA has the discretion to adopt reasonable 
policies concerning residence by a foster child or a live-in-aide, and 
defining when HA consent may be given or denied.
    (5) Members of the household may engage in legal profitmaking 
activities in the unit, but only if such activities are incidental to 
primary use of the unit for residence by members of the family.
    (6) The family must not sublease or let the unit.
    (7) The family must not assign the lease or transfer the unit.
    (i) Absence from unit. The family must supply any information or 
certification requested by the HA to verify that the family is living in 
the unit, or relating to family absence from the unit, including any HA-
requested information or certification on the purposes of family 
absences. The family must cooperate with the HA for this purpose. The 
family must promptly notify the HA of absence from the unit.
    (j) Interest in unit. The family must not own or have any interest 
in the unit.
    (k) Fraud and other program violation. The members of the family 
must not commit fraud, bribery or any other corrupt or criminal act in 
connection with the programs.
    (l) Crime by family members. The members of the family may not 
engage in drug-related criminal activity, or violent criminal activity 
(see Sec. 982.553).
    (m) Other housing assistance. An assisted family, or members of the 
family, may not receive Section 8 tenant-based assistance while 
receiving another housing subsidy, for the same unit or for a different 
unit, under any duplicative (as determined by HUD or in accordance with 
HUD requirements) federal, State or local housing assistance program.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 11119, Mar. 18, 1996; 61 FR 13627, Mar. 27, 1996; 61 FR 27163, May 
30, 1996]



Sec. 982.552  HA denial or termination of assistance for family.

    (a) Action or inaction by family. (1) An HA may deny assistance for 
an applicant or terminate assistance for a participant under the 
programs because of the family's action or failure to act as described 
in this section or Sec. 982.553. The provisions of this section do not 
affect denial or termination of assistance for grounds other than action 
or failure to act by the family.
    (2) Denial of assistance for an applicant may include any or all of 
the following: denying listing on the HA waiting list, denying or 
withdrawing a certificate or voucher, refusing to enter into a HAP 
contract or approve a lease, and refusing to process or provide 
assistance under portability procedures.
    (3) Termination of assistance for a participant may include any or 
all of the following: refusing to enter into a HAP contract or approve a 
lease, terminating housing assistance payments under an outstanding HAP 
contract, and refusing to process or provide assistance under 
portability procedures.
    (4) This section does not limit or affect exercise of the HA rights 
and remedies against the owner under the HAP contract, including 
termination, suspension or reduction of housing assistance payments, or 
termination of the HAP contract.
    (b) Grounds for denial or termination of assistance. The HA may at 
any time deny program assistance for an applicant, or terminate program 
assistance for a participant, for any of the following grounds:
    (1) If the family violates any family obligations under the program 
(see Sec. 982.551).
    (2) If any member of the family has ever been evicted from public 
housing.
    (3) If an HA has ever terminated assistance under the certificate or 
voucher program for any member of the family.
    (4) If any member of the family commits drug-related criminal 
activity, or violent criminal activity (see Sec. 982.553).
    (5) If any member of the family commits fraud, bribery or any other 
corrupt or criminal act in connection with any federal housing program.

[[Page 577]]

    (6) If the family currently owes rent or other amounts to the HA or 
to another HA in connection with Section 8 or public housing assistance 
under the 1937 Act.
    (7) If the family has not reimbursed any HA for amounts paid to an 
owner under a HAP contract for rent, damages to the unit, or other 
amounts owed by the family under the lease.
    (8) If the family breaches an agreement with the HA to pay amounts 
owed to an HA, or amounts paid to an owner by an HA. (The HA, at its 
discretion, may offer a family the opportunity to enter an agreement to 
pay amounts owed to an HA or amounts paid to an owner by an HA. The HA 
may prescribe the terms of the agreement.)
    (9) If a family participating in the FSS program fails to comply, 
without good cause, with the family's FSS contract of participation.
    (10) If the family has engaged in or threatened abusive or violent 
behavior toward HA personnel.
    (c) HA discretion to consider circumstances.--(1) In deciding 
whether to deny or terminate assistance because of action or failure to 
act by members of the family, the HA has discretion to consider all of 
the circumstances in each case, including the seriousness of the case, 
the extent of participation or culpability of individual family members, 
and the effects of denial or termination of assistance on other family 
members who were not involved in the action or failure.
    (2) The HA may impose, as a condition of continued assistance for 
other family members, a requirement that family members who participated 
in or were culpable for the action or failure will not reside in the 
unit. The HA may permit the other members of a participant family to 
continue receiving assistance.
    (d) Requirement to sign consent forms. The HA must deny or terminate 
assistance if any member of the family fails to sign and submit consent 
forms for obtaining information in accordance with 24 CFR part 760 and 
24 CFR part 813.
    (e) Restrictions on assistance to noncitizens. The family must 
submit required evidence of citizenship or eligible immigration status. 
See 24 CFR part 5 for a statement of circumstances in which the HA must 
deny or terminate assistance because a family member does not establish 
citizenship or eligible immigration status, and the applicable informal 
hearing procedures. See 24 CFR part 5 for provisions on assistance for 
mixed families (families whose members include those with eligible 
immigration status, and those without eligible immigration status) 
instead of denial or termination of assistance, and for provisions on 
deferral of termination of assistance.
    (f) Information for family. The HA must give the family a written 
description of:
    (1) Family obligations under the program.
    (2) The grounds on which the HA may deny or terminate assistance 
because of family action or failure to act.
    (3) The HA informal hearing procedures.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 13627, Mar. 27, 1996; 63 FR 23865, Apr. 30, 1998]



Sec. 982.553  Crime by family members.

    (a) At any time, the HA may deny assistance to an applicant, or 
terminate assistance to a participant family if any member of the family 
commits:
    (1) Drug-related criminal activity; or
    (2) Violent criminal activity.
    (b) If the HA seeks to deny or terminate assistance because of 
illegal use, or possession for personal use, of a controlled substance, 
such use or possession must have occurred within one year before the 
date that the HA provides notice to the family of the HA determination 
to deny or terminate assistance. The HA may not deny or terminate 
assistance for such use or possession by a family member, if the family 
member can demonstrate that he or she:
    (1) Has an addiction to a controlled substance, has a record of such 
an impairment, or is regarded as having such an impairment; and
    (2) Is recovering, or has recovered from, such addiction and does 
not currently use or possess controlled substances. The HA may require a 
family

[[Page 578]]

member who has engaged in the illegal use of drugs to submit evidence of 
participation in, or successful completion of, a treatment program as a 
condition to being allowed to reside in the unit.
    (c) Evidence of criminal activity. In determining whether to deny or 
terminate assistance based on drug-related criminal activity or violent 
criminal activity, the HA may deny or terminate assistance if the 
preponderance of evidence indicates that a family member has engaged in 
such activity, regardless of whether the family member has been arrested 
or convicted.



Sec. 982.554  Informal review for applicant.

    (a) Notice to applicant. The HA must give an applicant for 
participation prompt notice of a decision denying assistance to the 
applicant. The notice must contain a brief statement of the reasons for 
the HA decision. The notice must also state that the applicant may 
request an informal review of the decision and must describe how to 
obtain the informal review.
    (b) Informal review process. The HA must give an applicant an 
opportunity for an informal review of the HA decision denying assistance 
to the applicant. The administrative plan must state the HA procedures 
for conducting an informal review. The HA review procedures must comply 
with the following:
    (1) The review may be conducted by any person or persons designated 
by the HA, other than a person who made or approved the decision under 
review or a subordinate of this person.
    (2) The applicant must be given an opportunity to present written or 
oral objections to the HA decision.
    (3) The HA must notify the applicant of the HA final decision after 
the informal review, including a brief statement of the reasons for the 
final decision.
    (c) When informal review is not required. The HA is not required to 
provide the applicant an opportunity for an informal review for any of 
the following:
    (1) Discretionary administrative determinations by the HA.
    (2) General policy issues or class grievances.
    (3) A determination of the family unit size under the HA subsidy 
standards.
    (4) An HA determination not to approve an extension or suspension of 
a certificate or voucher term.
    (5) An HA determination not to grant approval to lease a unit under 
the program or to approve a proposed lease.
    (6) An HA determination that a unit selected by the applicant is not 
in compliance with HQS.
    (7) An HA determination that the unit is not in accordance with HQS 
because of the family size or composition.
    (d) Restrictions on assistance for noncitizens. The informal hearing 
provisions for the denial of assistance on the basis of ineligible 
immigration status are contained in 24 CFR part 5.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 13627, Mar. 27, 1996]



Sec. 982.555  Informal hearing for participant.

    (a) When hearing is required.--(1) An HA must give a participant 
family an opportunity for an informal hearing to consider whether the 
following HA decisions relating to the individual circumstances of a 
participant family are in accordance with the law, HUD regulations and 
HA policies:
    (i) A determination of the family's annual or adjusted income, and 
the use of such income to compute the housing assistance payment.
    (ii) A determination of the appropriate utility allowance (if any) 
for tenant-paid utilities from the HA utility allowance schedule.
    (iii) A determination of the family unit size under the HA subsidy 
standards.
    (iv) A determination that a certificate program family is residing 
in a unit with a larger number of bedrooms than appropriate for the 
family unit size under the HA subsidy standards, or the HA determination 
to deny the family's request for an exception from the standards.

[[Page 579]]

    (v) A determination to terminate assistance for a participant family 
because of the family's action or failure to act (see Sec. 982.552).
    (vi) A determination to terminate assistance because the participant 
family has been absent from the assisted unit for longer than the 
maximum period permitted under HA policy and HUD rules.
    (2) In the cases described in paragraphs (a)(1) (iv), (v) and (vi) 
of this section, the HA must give the opportunity for an informal 
hearing before the HA terminates housing assistance payments for the 
family under an outstanding HAP contract.
    (b) When hearing is not required. The HA is not required to provide 
a participant family an opportunity for an informal hearing for any of 
the following:
    (1) Discretionary administrative determinations by the HA.
    (2) General policy issues or class grievances.
    (3) Establishment of the HA schedule of utility allowances for 
families in the program.
    (4) An HA determination not to approve an extension or suspension of 
a certificate or voucher term.
    (5) An HA determination not to approve a unit or lease.
    (6) An HA determination that an assisted unit is not in compliance 
with HQS. (However, the HA must provide the opportunity for an informal 
hearing for a decision to terminate assistance for a breach of the HQS 
caused by the family as described in Sec. 982.551(c).)
    (7) An HA determination that the unit is not in accordance with HQS 
because of the family size.
    (8) A determination by the HA to exercise or not to exercise any 
right or remedy against the owner under a HAP contract.
    (c) Notice to family. (1) In the cases described in paragraphs 
(a)(1) (i), (ii) and (iii) of this section, the HA must notify the 
family that the family may ask for an explanation of the basis of the HA 
determination, and that if the family does not agree with the 
determination, the family may request an informal hearing on the 
decision.
    (2) In the cases described in paragraphs (a)(1) (iv), (v) and (vi) 
of this section, the HA must give the family prompt written notice that 
the family may request a hearing. The notice must:
    (i) Contain a brief statement of reasons for the decision,
    (ii) State that if the family does not agree with the decision, the 
family may request an informal hearing on the decision, and
    (iii) State the deadline for the family to request an informal 
hearing.
    (d) Expeditious hearing process. Where a hearing for a participant 
family is required under this section, the HA must proceed with the 
hearing in a reasonably expeditious manner upon the request of the 
family.
    (e) Hearing procedures--(1) Administrative plan. The administrative 
plan must state the HA procedures for conducting informal hearings for 
participants.
    (2) Discover--(i) By family. The family must be given the 
opportunity to examine before the HA hearing any HA documents that are 
directly relevant to the hearing. The family must be allowed to copy any 
such document at the family's expense. If the HA does not make the 
document available for examination on request of the family, the HA may 
not rely on the document at the hearing.
    (ii) By HA. The HA hearing procedures may provide that the HA must 
be given the opportunity to examine at HA offices before the HA hearing 
any family documents that are directly relevant to the hearing. The HA 
must be allowed to copy any such document at the HA's expense. If the 
family does not make the document available for examination on request 
of the HA, the family may not rely on the document at the hearing.
    (iii) Documents. The term ``documents'' includes records and 
regulations.
    (3) Representation of family. At its own expense, the family may be 
represented by a lawyer or other representative.
    (4) Hearing officer: Appointment and authority. (i) The hearing may 
be conducted by any person or persons designated by the HA, other than a 
person who made or approved the decision under review or a subordinate 
of this person.
    (ii) The person who conducts the hearing may regulate the conduct of

[[Page 580]]

the hearing in accordance with the HA hearing procedures.
    (5) Evidence. The HA and the family must be given the opportunity to 
present evidence, and may question any witnesses. Evidence may be 
considered without regard to admissibility under the rules of evidence 
applicable to judicial proceedings.
    (6) Issuance of decision. The person who conducts the hearing must 
issue a written decision, stating briefly the reasons for the decision. 
Factual determinations relating to the individual circumstances of the 
family shall be based on a preponderance of the evidence presented at 
the hearing. A copy of the hearing decision shall be furnished promptly 
to the family.
    (f) Effect of decision. The HA is not bound by a hearing decision:
    (1) Concerning a matter for which the HA is not required to provide 
an opportunity for an informal hearing under this section, or that 
otherwise exceeds the authority of the person conducting the hearing 
under the HA hearing procedures.
    (2) Contrary to HUD regulations or requirements, or otherwise 
contrary to federal, State, or local law.
    (3) If the HA determines that it is not bound by a hearing decision, 
the HA must promptly notify the family of the determination, and of the 
reasons for the determination.
    (g) Restrictions on assistance to noncitizens. The informal hearing 
provisions for the denial of assistance on the basis of ineligible 
immigration status are contained in 24 CFR part 5.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34695, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 13627, Mar. 27, 1996]



                    Subpart M--Special Housing Types

    Source: 63 FR 23865, Apr. 30, 1998, unless otherwise noted.



Sec. 982.601  Overview.

    (a) Special housing types. This subpart describes program 
requirements for special housing types. The following are the special 
housing types:
    (1) Single room occupancy (SRO) housing;
    (2) Congregate housing;
    (3) Group home;
    (4) Shared housing;
    (5) Cooperative (including mutual housing);
    (6) Manufactured home.
    (b) HA choice to offer special housing type. (1) The HA may permit a 
family to use any of the following special housing types in accordance 
with requirements of the program: single room occupancy housing, 
congregate housing, group home, shared housing or cooperative housing.
    (2) In general, the HA is not required to permit use of any of these 
special housing types in its program.
    (3) The HA must permit use of any special housing type if needed as 
a reasonable accommodation so that the program is readily accessible to 
and usable by persons with disabilities in accordance with 24 CFR part 
8.
    (4) For occupancy of a manufactured home, see Sec. 982.620(a).
    (c) Family choice of housing and housing type. The HA may not set 
aside program funding for special housing types, or for a specific 
special housing type. The family chooses whether to rent housing that 
qualifies as a special housing type under this subpart, or as any 
specific special housing type, or to rent other eligible housing in 
accordance with requirements of the program. The HA may not restrict the 
family's freedom to choose among available units in accordance with 
Sec. 982.353.
    (d) Applicability of requirements. Except as modified by this 
subpart, requirements in the other subparts of this part apply to the 
special housing types. Provisions in this subpart only apply to a 
specific special housing type. The housing type is noted in the title of 
each section.

                       Single Room Occupancy (SRO)



Sec. 982.602  SRO: General.

    (a) Who may reside in an SRO? A single person may reside in an SRO 
housing unit.
    (b) When may a person rent an SRO housing unit? A single person may 
rent a unit in SRO housing only if:

[[Page 581]]

    (1) HUD determines there is significant demand for SRO units in the 
area;
    (2) The HA and the unit of general local government approve 
providing assistance for SRO housing under the program; and
    (3) The unit of general local government and the HA certify to HUD 
that the property meets applicable local health and safety standards for 
SRO housing.



Sec. 982.603  SRO: Lease and HAP contract.

    For SRO housing, there is a separate lease and HAP contract for each 
assisted person.



Sec. 982.604  SRO: Rent and housing assistance payment.

    (a) SRO FMR/exception rent limit. The FMR/exception rent limit for 
SRO housing is 75 percent of the zero-bedroom FMR/exception rent limit.
    (b) Regular tenancy: Limit on initial gross rent. For a regular 
tenancy in the certificate program, the initial gross rent may not 
exceed the FMR/exception rent limit for SRO housing.
    (c) Voucher program: Payment standard. The HA must adopt a payment 
standard for persons who occupy SRO housing with assistance under the 
voucher program. The SRO payment standard may not exceed the FMR/
exception rent limit for SRO housing. While an assisted person resides 
in SRO housing, the SRO payment standard must be used to calculate the 
housing assistance payment.
    (d) Over-FMR tenancy: Payment standard. While the assisted person 
resides in SRO housing with assistance under an over-FMR tenancy in the 
certificate program, the payment standard for the person is the SRO FMR/
exception rent limit.
    (e) Utility allowance. The utility allowance for an assisted person 
residing in SRO housing is 75 percent of the zero bedroom utility 
allowance.



Sec. 982.605  SRO: Housing quality standards.

    (a) HQS standards for SRO. The HQS in Sec. 982.401 apply to SRO 
housing. However, the standards in this section apply in place of 
Sec. 982.401(b) (sanitary facilities), Sec. 982.401(c) (food preparation 
and refuse disposal), and Sec. 982.401(d) (space and security). Since 
the SRO units will not house children, the housing quality standards in 
Sec. 982.401(j), concerning lead-based paint, do not apply to SRO 
housing.
    (b) Performance requirements. (1) SRO housing is subject to the 
additional performance requirements in this paragraph (b).
    (2) Sanitary facilities, and space and security characteristics must 
meet local code standards for SRO housing. In the absence of applicable 
local code standards for SRO housing, the following standards apply:
    (i) Sanitary facilities. (A) At least one flush toilet that can be 
used in privacy, lavatory basin, and bathtub or shower, in proper 
operating condition, must be supplied for each six persons or fewer 
residing in the SRO housing.
    (B) If SRO units are leased only to males, flush urinals may be 
substituted for not more than one-half the required number of flush 
toilets. However, there must be at least one flush toilet in the 
building.
    (C) Every lavatory basin and bathtub or shower must be supplied at 
all times with an adequate quantity of hot and cold running water.
    (D) All of these facilities must be in proper operating condition, 
and must be adequate for personal cleanliness and the disposal of human 
waste. The facilities must utilize an approvable public or private 
disposal system.
    (E) Sanitary facilities must be reasonably accessible from a common 
hall or passageway to all persons sharing them. These facilities may not 
be located more than one floor above or below the SRO unit. Sanitary 
facilities may not be located below grade unless the SRO units are 
located on that level.
    (ii) Space and security. (A) No more than one person may reside in 
an SRO unit.
    (B) An SRO unit must contain at least one hundred ten square feet of 
floor space.
    (C) An SRO unit must contain at least four square feet of closet 
space for each resident (with an unobstructed height of at least five 
feet). If there is less closet space, space equal to the

[[Page 582]]

amount of the deficiency must be subtracted from the area of the 
habitable room space when determining the amount of floor space in the 
SRO unit. The SRO unit must contain at least one hundred ten square feet 
of remaining floor space after subtracting the amount of the deficiency 
in minimum closet space.
    (D) Exterior doors and windows accessible from outside an SRO unit 
must be lockable.
    (3) Access. (i) Access doors to an SRO unit must have locks for 
privacy in proper operating condition.
    (ii) An SRO unit must have immediate access to two or more approved 
means of exit, appropriately marked, leading to safe and open space at 
ground level, and any means of exit required by State and local law.
    (iii) The resident must be able to access an SRO unit without 
passing through any other unit.
    (4) Sprinkler system. A sprinkler system that protects all major 
spaces, hard wired smoke detectors, and such other fire and safety 
improvements as State or local law may require must be installed in each 
building. The term ``major spaces'' means hallways, large common areas, 
and other areas specified in local fire, building, or safety codes.

                           Congregate Housing



Sec. 982.606  Congregate housing: Who may reside in congregate housing.

    (a) An elderly person or a person with disabilities may reside in a 
congregate housing unit.
    (b)(1) If approved by the HA, a family member or live-in aide may 
reside with the elderly person or person with disabilities.
    (2) The HA must approve a live-in aide if needed as a reasonable 
accommodation so that the program is readily accessible to and usable by 
persons with disabilities in accordance with 24 CFR part 8. See 
Sec. 982.316 concerning occupancy by a live-in aide.



Sec. 982.607  Congregate housing: Lease and HAP contract.

    For congregate housing, there is a separate lease and HAP contract 
for each assisted family.



Sec. 982.608  Congregate housing: Rent and housing assistance payment; FMR/exception rent limit.

    (a) Unless there is a live-in aide:
    (1) The FMR/exception rent limit for a family that resides in a 
congregate housing unit is the zero-bedroom FMR/exception rent limit.
    (2) However, if there are two or more rooms in the unit (not 
including kitchen or sanitary facilities), the FMR/exception rent limit 
for a family that resides in a congregate housing unit is the one-
bedroom FMR/exception rent limit.
    (b) If there is a live-in aide, the live-in aide must be counted in 
determining the family unit size.



Sec. 982.609  Congregate housing: Housing quality standards.

    (a) HQS standards for congregate housing. The HQS in Sec. 982.401 
apply to congregate housing. However, the standards in this section 
apply in place of Sec. 982.401(c) (food preparation and refuse 
disposal). Congregate housing is not subject to the HQS acceptability 
requirement in Sec. 982.401(d)(2)(i) that the dwelling unit must have a 
kitchen area.
    (b) Food preparation and refuse disposal: Additional performance 
requirements. The following additional performance requirements apply to 
congregate housing:
    (1) The unit must contain a refrigerator of appropriate size.
    (2) There must be central kitchen and dining facilities on the 
premises. These facilities:
    (i) Must be located within the premises, and accessible to the 
residents;
    (ii) Must contain suitable space and equipment to store, prepare, 
and serve food in a sanitary manner;
    (iii) Must be used to provide a food service that is provided for 
the residents, and that is not provided by the residents; and
    (iv) Must be for the primary use of residents of the congregate 
units and be sufficient in size to accommodate the residents.
    (3) There must be adequate facilities and services for the sanitary 
disposal of food waste and refuse, including facilities for temporary 
storage where necessary.

[[Page 583]]

                               Group Home



Sec. 982.610  Group home: Who may reside in a group home.

    (a) An elderly person or a person with disabilities may reside in a 
State-approved group home.
    (b)(1) If approved by the HA, a live-in aide may reside with a 
person with disabilities.
    (2) The HA must approve a live-in aide if needed as a reasonable 
accommodation so that the program is readily accessible to and usable by 
persons with disabilities in accordance with 24 CFR part 8. See 
Sec. 982.316 concerning occupancy by a live-in aide.
    (c) Except for a live-in aide, all residents of a group home, 
whether assisted or unassisted, must be elderly persons or persons with 
disabilities.
    (d) Persons residing in a group home must not require continual 
medical or nursing care.
    (e) Persons who are not assisted under the tenant-based program may 
reside in a group home.
    (f) No more than 12 persons may reside in a group home. This limit 
covers all persons who reside in the unit, including assisted and 
unassisted residents and any live-in aide.



Sec. 982.611  Group home: Lease and HAP contract.

    For assistance in a group home, there is a separate HAP contract and 
lease for each assisted person.



Sec. 982.612  Group home: State approval of group home.

    A group home must be licensed, certified, or otherwise approved in 
writing by the State (e.g., Department of Human Resources, Mental 
Health, Retardation, or Social Services) as a group home for elderly 
persons or persons with disabilities.



Sec. 982.613  Group home: Rent and housing assistance payment.

    (a) Meaning of pro-rata portion. For a group home, the term ``pro-
rata portion'' means the ratio derived by dividing the number of persons 
in the assisted household by the total number of residents (assisted and 
unassisted) residing in the group home. The number of persons in the 
assisted household equals one assisted person plus any HA-approved live-
in aide.
    (b) Rent to owner: Reasonable rent limit. (1) The rent to owner for 
an assisted person may not exceed the pro-rata portion of the reasonable 
rent for the group home.
    (2) The reasonable rent for a group home is determined in accordance 
with Sec. 982.503. In determining reasonable rent for the group home, 
the HA must consider whether sanitary facilities, and facilities for 
food preparation and service, are common facilities or private 
facilities.
    (c) Maximum subsidy--(1) Family unit size. (i) Unless there is a 
live-in aide, the family unit size is zero or one bedroom.
    (ii) If there is a live-in aide, the live-in aide must be counted in 
determining the family unit size.
    (2) Regular tenancy: Limit on initial gross rent. For a person who 
resides in a group home under a regular tenancy in the certificate 
program, the initial gross rent may not exceed either:
    (i) The FMR/exception rent limit for the family unit size; or
    (ii) The pro-rata portion of the FMR/exception rent limit for the 
group home size.
    (3) Voucher tenancy: Payment standard. For a voucher tenancy, the 
payment standard for a person who resides in a group home is the lower 
of:
    (i) The payment standard for the family unit size; or
    (ii) The pro-rata portion of the payment standard for the group home 
size.
    (4) Over-FMR tenancy: Payment standard. For an over-FMR tenancy, the 
payment standard for a person who resides in a group home is the lower 
of:
    (i) The FMR/exception rent limit for the family unit size; or
    (ii) The pro-rata portion of the FMR/exception rent limit for the 
group home size.
    (d) Utility allowance. The utility allowance for each assisted 
person residing in a group home is the pro-rata portion of the utility 
allowance for the group home unit size.



Sec. 982.614  Group home: Housing quality standards.

    (a) Compliance with HQS. The HA may not give approval to reside in a 
group

[[Page 584]]

home unless the unit, including the portion of the unit available for 
use by the assisted person under the lease, meets the housing quality 
standards.
    (b) Applicable HQS standards. (1) The HQS in Sec. 982.401 apply to 
assistance in a group home. However, the standards in this section apply 
in place of Sec. 982.401(b) (sanitary facilities), Sec. 982.401(c) (food 
preparation and refuse disposal), Sec. 982.401(d) (space and security), 
Sec. 982.401(g) (structure and materials) and Sec. 982.401(l) (site and 
neighborhood).
    (2) The entire unit must comply with the HQS.
    (c) Additional performance requirements. The following additional 
performance requirements apply to a group home:
    (1) Sanitary facilities. (i) There must be a bathroom in the unit. 
The unit must contain, and an assisted resident must have ready access 
to:
    (A) A flush toilet that can be used in privacy;
    (B) A fixed basin with hot and cold running water; and
    (C) A shower or bathtub with hot and cold running water.
    (ii) All of these facilities must be in proper operating condition, 
and must be adequate for personal cleanliness and the disposal of human 
waste. The facilities must utilize an approvable public or private 
disposal system.
    (iii) The unit may contain private or common sanitary facilities. 
However, the facilities must be sufficient in number so that they need 
not be shared by more than four residents of the group home.
    (iv) Sanitary facilities in the group home must be readily 
accessible to and usable by residents, including persons with 
disabilities.
    (2) Food preparation and service. (i) The unit must contain a 
kitchen and a dining area. There must be adequate space to store, 
prepare, and serve foods in a sanitary manner.
    (ii) Food preparation and service equipment must be in proper 
operating condition. The equipment must be adequate for the number of 
residents in the group home. The unit must contain the following 
equipment:
    (A) A stove or range, and oven;
    (B) A refrigerator; and
    (C) A kitchen sink with hot and cold running water. The sink must 
drain into an approvable public or private disposal system.
    (iii) There must be adequate facilities and services for the 
sanitary disposal of food waste and refuse, including facilities for 
temporary storage where necessary.
    (iv) The unit may contain private or common facilities for food 
preparation and service.
    (3) Space and security. (i) The unit must provide adequate space and 
security for the assisted person.
    (ii) The unit must contain a living room, kitchen, dining area, 
bathroom, and other appropriate social, recreational or community space. 
The unit must contain at least one bedroom of appropriate size for each 
two persons.
    (iii) Doors and windows that are accessible from outside the unit 
must be lockable.
    (4) Structure and material. (i) The unit must be structurally sound 
to avoid any threat to the health and safety of the residents, and to 
protect the residents from the environment.
    (ii) Ceilings, walls, and floors must not have any serious defects 
such as severe bulging or leaning, loose surface materials, severe 
buckling or noticeable movement under walking stress, missing parts or 
other significant damage. The roof structure must be firm, and the roof 
must be weathertight. The exterior or wall structure and exterior wall 
surface may not have any serious defects such as serious leaning, 
buckling, sagging, cracks or large holes, loose siding, or other serious 
damage. The condition and equipment of interior and exterior stairways, 
halls, porches, walkways, etc., must not present a danger of tripping or 
falling. Elevators must be maintained in safe operating condition.
    (iii) The group home must be accessible to and usable by a resident 
with disabilities.
    (5) Site and neighborhood. The site and neighborhood must be 
reasonably free from disturbing noises and reverberations and other 
hazards to the health, safety, and general welfare of the residents. The 
site and neighborhood may

[[Page 585]]

not be subject to serious adverse environmental conditions, natural or 
manmade, such as dangerous walks or steps, instability, flooding, poor 
drainage, septic tank back-ups, sewage hazards or mud slides, abnormal 
air pollution, smoke or dust, excessive noise, vibrations or vehicular 
traffic, excessive accumulations of trash, vermin or rodent infestation, 
or fire hazards. The unit must be located in a residential setting.

                             Shared Housing



Sec. 982.615  Shared housing: Occupancy.

    (a) Sharing a unit. An assisted family may reside in shared housing. 
In shared housing, an assisted family shares a unit with the other 
resident or residents of the unit. The unit may be a house or an 
apartment.
    (b) Who may share a dwelling unit with assisted family? (1) If 
approved by the HA, a live-in aide may reside with the family to care 
for a person with disabilities. The HA must approve a live-in aide if 
needed as a reasonable accommodation so that the program is readily 
accessible to and usable by persons with disabilities in accordance with 
24 CFR part 8. See Sec. 982.316 concerning occupancy by a live-in aide.
    (2) Other persons who are assisted under the tenant-based program, 
or other persons who are not assisted under the tenant-based program, 
may reside in a shared housing unit.
    (3) The owner of a shared housing unit may reside in the unit. A 
resident owner may enter into a HAP contract with the HA. However, 
housing assistance may not be paid on behalf of an owner. An assisted 
person may not be related by blood or marriage to a resident owner.



Sec. 982.616  Shared housing: Lease and HAP contract.

    For assistance in a shared housing unit, there is a separate HAP 
contract and lease for each assisted family.



Sec. 982.617  Shared housing: Rent and housing assistance payment.

    (a) Meaning of pro-rata portion. For shared housing, the term ``pro-
rata portion'' means the ratio derived by dividing the number of 
bedrooms in the private space available for occupancy by a family by the 
total number of bedrooms in the unit. For example, for a family entitled 
to occupy three bedrooms in a five bedroom unit, the ratio would be 3/5.
    (b) Rent to owner: Reasonable rent. (1) The rent to owner for the 
family may not exceed the pro-rata portion of the reasonable rent for 
the shared housing dwelling unit.
    (2) The reasonable rent is determined in accordance with 
Sec. 982.503.
    (c) Maximum subsidy--(1) Regular tenancy: Limit on initial gross 
rent. For a regular tenancy under the certificate program, the initial 
gross rent may not exceed either:
    (i) The FMR/exception rent limit for the family unit size; or
    (ii) The pro-rata portion of the FMR/exception rent limit for the 
shared housing unit size.
    (2) Voucher or over-FMR tenancy: Payment standard. For a voucher 
tenancy or an over-FMR tenancy, the payment standard is the lower of:
    (i) The payment standard for the family unit size; or
    (ii) The pro-rata portion of the payment standard for the shared 
housing unit size.
    (3) Live-in aide. If there is a live-in aide, the live-in aide must 
be counted in determining the family unit size.
    (d) Utility allowance. The utility allowance for an assisted family 
residing in shared housing is the pro-rata portion of the utility 
allowance for the shared housing unit.



Sec. 982.618  Shared housing: Housing quality standards.

    (a) Compliance with HQS. The HA may not give approval to reside in 
shared housing unless the entire unit, including the portion of the unit 
available for use by the assisted family under its lease, meets the 
housing quality standards.
    (b) Applicable HQS standards. The HQS in Sec. 982.401 apply to 
assistance in shared housing. However, the HQS standards in this section 
apply in place of Sec. 982.401(d) (space and security).
    (c) Facilities available for family. The facilities available for 
the use of an assisted family in shared housing under

[[Page 586]]

the family's lease must include (whether in the family's private space 
or in the common space) a living room, sanitary facilities in accordance 
with Sec. 982.401(b), and food preparation and refuse disposal 
facilities in accordance with Sec. 982.401(c).
    (d) Space and security: Performance requirements. (1) The entire 
unit must provide adequate space and security for all its residents 
(whether assisted or unassisted).
    (2)(i) Each unit must contain private space for each assisted 
family, plus common space for shared use by the residents of the unit. 
Common space must be appropriate for shared use by the residents.
    (ii) The private space for each assisted family must contain at 
least one bedroom for each two persons in the family. The number of 
bedrooms in the private space of an assisted family may not be less than 
the family unit size.
    (iii) A zero or one bedroom unit may not be used for shared housing.

                               Cooperative



Sec. 982.619  Cooperative housing.

    (a) When cooperative housing may be used. A family may reside in 
cooperative housing if the HA determines that:
    (1) Assistance under the program will help maintain affordability of 
the cooperative unit for low-income families; and
    (2) The cooperative has adopted requirements to maintain continued 
affordability for low-income families after transfer of a cooperative 
member's interest in a cooperative unit (such as a sale of the 
resident's share in a cooperative corporation).
    (b) Rent to owner. (1) The reasonable rent for a cooperative unit is 
determined in accordance with Sec. 982.503. For cooperative housing, the 
rent to owner is the monthly carrying charge under the occupancy 
agreement/lease between the member and the cooperative.
    (2) The carrying charge consists of the amount assessed to the 
member by the cooperative for occupancy of the housing. The carrying 
charge includes the member's share of the cooperative debt service, 
operating expenses, and necessary payments to cooperative reserve funds. 
However, the carrying charge does not include down-payments or other 
payments to purchase the cooperative unit, or to amortize a loan to the 
family for this purpose.
    (3) Gross rent is the carrying charge plus any utility allowance.
    (4) For a regular tenancy under the certificate program, rent to 
owner is adjusted in accordance with Sec. 982.509 (annual adjustment) 
and Sec. 982.510 (special adjustments). For a cooperative, adjustments 
are applied to the carrying charge as determined in accordance with this 
section.
    (5) The occupancy agreement/lease and other appropriate documents 
must provide that the monthly carrying charge is subject to Section 8 
limitations on rent to owner.
    (c) Housing assistance payment. The amount of the housing assistance 
payment is determined in accordance with subpart K of this part.
    (d) Live-in aide. (1) If approved by the HA, a live-in aide may 
reside with the family to care for a person with disabilities. The HA 
must approve a live-in aide if needed as a reasonable accommodation so 
that the program is readily accessible to and usable by persons with 
disabilities in accordance with 24 CFR part 8. See Sec. 982.316 
concerning occupancy by a live-in aide.
    (2) If there is a live-in aide, the live-in aide must be counted in 
determining the family unit size.

                            Manufactured Home



Sec. 982.620  Manufactured home: Applicability of requirements.

    (a) Assistance for resident of manufactured home. (1) A family may 
reside in a manufactured home with assistance under the program.
    (2) The HA must permit a family to lease a manufactured home and 
space with assistance under the program.
    (3) The HA may provide assistance for a family that owns the 
manufactured home and leases only the space. The HA is not required to 
provide such assistance under the program.
    (b) Applicability. (1) The HQS in Sec. 982.621 always apply when 
assistance is provided to a family occupying a manufactured home (under 
paragraph (a)(2) or (a)(3) of this section).
    (2) Sections 982.622 to 982.624 only apply when assistance is 
provided to a

[[Page 587]]

manufactured home owner to lease a manufactured home space.
    (c) Live-in aide. (1) If approved by the HA, a live-in aide may 
reside with the family to care for a person with disabilities. The HA 
must approve a live-in aide if needed as a reasonable accommodation so 
that the program is readily accessible to and usable by persons with 
disabilities in accordance with 24 CFR part 8. See Sec. 982.316 
concerning occupancy by a live-in aide.
    (2) If there is a live-in aide, the live-in aide must be counted in 
determining the family unit size.



Sec. 982.621  Manufactured home: Housing quality standards.

    A manufactured home must meet all the HQS performance requirements 
and acceptability criteria in Sec. 982.401. A manufactured home also 
must meet the following requirements:
    (a) Performance requirement. A manufactured home must be placed on 
the site in a stable manner, and must be free from hazards such as 
sliding or wind damage.
    (b) Acceptability criteria. A manufactured home must be securely 
anchored by a tie-down device that distributes and transfers the loads 
imposed by the unit to appropriate ground anchors to resist wind 
overturning and sliding.

                     Manufactured Home Space Rental



Sec. 982.622  Manufactured home space rental: Rent to owner.

    (a) What is included. (1) Rent to owner for rental of a manufactured 
home space includes payment for maintenance and services that the owner 
must provide to the tenant under the lease for the space.
    (2) Rent to owner does not include the costs of utilities and trash 
collection for the manufactured home. However, the owner may charge the 
family a separate fee for the cost of utilities or trash collection 
provided by the owner.
    (b) Reasonable rent. (1) During the assisted tenancy, the rent to 
owner for the manufactured home space may not exceed a reasonable rent 
as determined in accordance with this section. Section 982.503 is not 
applicable.
    (2) The HA may not approve a lease for a manufactured home space 
until the HA determines that the initial rent to owner for the space is 
a reasonable rent. At least annually during the assisted tenancy, the HA 
must redetermine that the current rent to owner is a reasonable rent.
    (3) The HA must determine whether the rent to owner for the 
manufactured home space is a reasonable rent in comparison to rent for 
other comparable manufactured home spaces. To make this determination, 
the HA must consider the location and size of the space, and any 
services and maintenance to be provided by the owner in accordance with 
the lease (without a fee in addition to the rent).
    (4) By accepting each monthly housing assistance payment from the 
HA, the owner of the manufactured home space certifies that the rent to 
owner for the space is not more than rent charged by the owner for 
unassisted rental of comparable spaces in the same manufactured home 
park or elsewhere. The owner must give the HA information, as requested 
by the HA, on rents charged by the owner for other manufactured home 
spaces.



Sec. 982.623  Manufactured home space rental: Housing assistance payment.

    (a) Fair market rent. The FMR for a manufactured home space is 
determined in accordance with 24 CFR 888.113(e). Exception rents do not 
apply to rental of a manufactured home space.
    (b) Housing assistance payment: For regular certificate tenancy. (1) 
Limit on initial rent. For a regular tenancy, the initial rent to owner 
for leasing a manufactured home space may not exceed the published FMR 
for a manufactured home space.
    (2) Formula. (i) During the term of a regular tenancy, the amount of 
the monthly housing assistance payment equals the lesser of paragraphs 
(b)(2)(i)(A) or (b)(2)(i)(B) of this section:
    (A) Manufactured home space cost minus the higher of:
    (1) The total tenant payment; or
    (2) The minimum rent as required by law.
    (B) The rent to owner for the manufactured home space.

[[Page 588]]

    (ii) ``Manufactured home space cost'' means the sum of:
    (A) The amortization cost;
    (B) The utility allowance; and
    (C) The rent to owner for the manufactured home space.
    (c) Housing assistance payment: For voucher tenancy or over-FMR 
tenancy. (1) Payment standard. For a voucher tenancy or an over-FMR 
tenancy, the payment standard is used to calculate the monthly housing 
assistance payment for a family. The payment standard for a family 
renting a manufactured home space is the published FMR for rental of a 
manufactured home space. The amount of the payment standard is 
determined in accordance with Sec. 982.505(d)(4) and (d)(5).
    (2) Subsidy calculation for voucher tenancy. During the term of a 
voucher tenancy, the amount of the monthly housing assistance payment 
for a family equals the lesser of paragraphs (c)(2)(i) or (c)(2)(ii) of 
this section:
    (i) An amount obtained by subtracting 30 percent of the family's 
monthly adjusted gross income from the sum of:
    (A) The amortization cost;
    (B) The utility allowance; and
    (C) The payment standard.
    (ii) The rent to owner for the manufactured home space minus the 
minimum rent. For a voucher tenancy, the minimum rent is the higher of:
    (A) 10 percent of monthly income (gross income); or
    (B) A higher minimum rent as required by law.
    (3) Subsidy calculation for over-FMR tenancy. During the term of an 
over-FMR tenancy, the amount of the monthly housing assistance payment 
for a family equals the lesser of paragraphs (c)(3)(i) or (c)(3)(ii) of 
this section:
    (i) An amount obtained by subtracting the family's total tenant 
payment from the sum of:
    (A) The amortization cost;
    (B) The utility allowance; and
    (C) The payment standard.
    (ii) The rent to owner for the manufactured home space minus the 
minimum rent as required by law.
    (d) Amortization cost. (1) In calculating the subsidy payment for a 
voucher tenancy, an over-FMR tenancy, or a regular tenancy under the 
certificate program, the amortization cost may include debt service to 
amortize costs (other than furniture costs) included in the purchase 
price of the manufactured home. The debt service includes the payment 
for principal and interest on the loan. The debt service amount must be 
reduced by 15 percent to exclude debt service to amortize the cost of 
furniture, unless the HA determines that furniture was not included in 
the purchase price.
    (2) The amount of the amortization cost is the debt service 
established at time of application to a lender for financing purchase of 
the manufactured home if monthly payments are still being made. Any 
increase in debt service due to refinancing after purchase of the home 
is not included in the amortization cost.
    (3) Debt service for set-up charges incurred by a family that 
relocates its home may be included in the monthly amortization payment 
made by the family. In addition, set-up charges incurred before the 
family became an assisted family may be included in the amortization 
cost if monthly payments are still being made to amortize such charges.
    (e) Annual income. In determining a family's annual income, the 
value of equity in the manufactured home owned by the assisted family, 
and in which the family resides, is not counted as a family asset.

[63 FR 23865, Apr. 30, 1998; 63 FR 31625, June 10, 1998, as amended at 
64 FR 13057, Mar. 16, 1999]

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, Sec. 982.623 was 
amended in paragarphs (c)(2)(ii) and (c)(3)(ii) by removing the phrase 
``monthly gross rent'' and inserting in its place the phrase ``rent to 
owner'', effective Apr. 15, 1999.



Sec. 982.624  Manufactured home space rental: Utility allowance schedule.

    The HA must establish utility allowances for manufactured home space 
rental. For the first twelve months of the initial lease term only, the 
allowances must include a reasonable amount for utility hook-up charges 
payable by the family if the family actually incurs the expenses because 
of a move. Allowances for utility hook-up

[[Page 589]]

charges do not apply to a family that leases a manufactured home space 
in place. Utility allowances for manufactured home space must not cover 
costs payable by a family to cover the digging of a well or installation 
of a septic system.



PART 983--SECTION 8 PROJECT-BASED CERTIFICATE PROGRAM--Table of Contents




                     Subpart A--General Information

Sec.
983.1  Purpose and applicability.
983.2  Additional definitions.
983.3  Information to be submitted to HUD by the HA concerning its plan 
          to attach assistance to units.
983.4  HUD review of HA plans to attach assistance to units.
983.5  Physical condition standards; physical inspection requirements.
983.6  Site and neighborhood standards.
983.7  Eligible and ineligible properties and HA-owned units.
983.8  Rehabilitation: Minimum expenditure requirement.
983.9  Prohibition against new construction or rehabilitation with U.S. 
          Housing Act of 1937 assistance and use of flexible subsidy; 
          pledge of Agreement or HAP contract.
983.10  Displacement, relocation, and acquisition.
983.11  Other Federal requirements.
983.12  Program accounts and records.
983.13  Special housing types.

          Subpart B--Owner Application Submission to Agreement

983.51  HA unit selection policy, advertising, and owner application 
          requirements.
983.52  Rehabilitation: Initial inspection and determination of unit 
          eligibility.
983.53  Rehabilitation: HUD field office review of applications.
983.54  Rehabilitation: Work write-ups.
983.55  New construction: HA evaluation and technical processing.
983.56  New construction: HUD field office review of applications.
983.57  New construction: Working drawings and specifications.

   Subpart C--Agreement and New Construction or Rehabilitation Period

983.101  Agreement to enter into HAP contract, and contract rents in 
          Agreement.
983.102  Owner selection of contractor.
983.103  New construction or rehabilitation period.
983.104  New construction or rehabilitation completion.

             Subpart D--Housing Assistance Payments Contract

983.151  Housing assistance payments contract (HAP contract).
983.152  Reduction of number of units covered by HAP contract.

                          Subpart E--Management

983.201  Responsibilities of the HA.
983.202  Responsibilities of the owner.
983.203  Family participation.
983.204  Maintenance, operation and inspections.
983.205  Overcrowded and underoccupied units.
983.206  Assisted tenancy and termination of tenancy.
983.207  Informal review or hearing.

             Subpart F--Rent and Housing Assistance Payment

983.251  Applicability.
983.252  Limits on initial rent to owner.
983.253  Initial rent: Who approves.
983.254  Annual adjustment of rent to owner.
983.255  Special adjustment of rent to owner.
983.256  Reasonable rent.
983.257  Other subsidy: Effect on rent to owner.
983.258  Rent to owner: Effect of rent control.
983.259  Correction of rent.
983.260  Housing assistance payment: Amount and distribution.
983.261  Family share: Family responsibility to pay.
983.262  Other fees and charges.

    Authority: 42 U.S.C. 1437f and 3535(d).

    Source: 60 FR 34717, July 3, 1995, unless otherwise noted.



                     Subpart A--General Information



Sec. 983.1  Purpose and applicability.

    (a) This part 983 applies to the Section 8 Project-based Certificate 
(PBC) program, authorized under section 8(d)(2) of the 1937 Act (42 
U.S.C. 1437f(d)(2)).
    (b)(1) Except as otherwise expressly modified or excluded by this 
part 983, provisions of 24 CFR part 982 apply to the PBC program.
    (2) The following provisions of 24 CFR part 982 do not apply to the 
PBC program:
    (i) Provisions on tenant-based assistance, on issuance or use of a 
voucher or certificate; and on portability;

[[Page 590]]

    (ii) Provisions on voucher tenancy or over-FMR tenancy;
    (iii) In subpart D, Sec. 982.158(e) (retention of lease, HAP 
contract and family application);
    (iv) In subpart E, Sec. 982.202(b)(3) (where family will live); 
Sec. 982.204(d) (family size); Sec. 982.205(a) (waiting lists);
    (v) Subpart G, except that the following provisions of subpart G are 
applicable to the PBC Program: Sec. 982.308 (lease); Sec. 982.311(a), 
(b), (c) and (d)(1) (when assistance is paid); Sec. 982.312 (absence 
from unit); and Sec. 982.313 (security deposit);
    (vi) Subpart H (where family can live and move);
    (vii) In subpart I, Sec. 982.402(a)(3), Sec. 982.402(c) and (d) 
(effect of family unit size--subsidy and size of unit); and Sec. 982.403 
(termination of HAP contract when unit is too big or too small);
    (viii) In subpart J, Sec. 982.451(a), Sec. 982.451(b)(2) (term of 
HAP contract same as lease); Sec. 982.454 (termination of HAP contract 
because of insufficient funding); Sec. 982.455 (termination of HAP 
contract; termination notice);
    (ix) Subpart K, except that the following provisions of Subpart K 
are applicable to the PBC Program: Sec. 982.504 (for determination of 
the FMR/exception rent limit); Sec. 982.516 (family income and 
composition; regular and interim examinations), Sec. 982.517 (utility 
allowance schedule);
    (x) In subpart M, all provisions authorizing assistance for shared 
housing (including Sec. 982.615 through Sec. 982.618); or assistance for 
a family occupying a manufactured home (including Sec. 982.620 through 
Sec. 982.624).
    (3) This part does not apply to the voucher program, or to an over-
FMR tenancy under the certificate program. Every tenancy assisted in the 
PBC program is a regular tenancy under the certificate program.

[63 FR 23870, Apr. 30, 1998]



Sec. 983.2  Additional definitions.

    The following definitions apply to assistance subject to this part 
983, in addition to the definitions in 24 CFR 982.4:
    Agreement to enter into housing assistance payments contract 
(``Agreement''). A written agreement between the owner and the HA that, 
upon satisfactory completion of the new construction or the 
rehabilitation in accordance with requirements specified in the 
Agreement, the HA will enter into a HAP contract with the owner.
    15-percent limit. Fifteen percent of the total number of budgeted 
units for an HA's Section 8 certificate program.
    Funding source. The ACC funding authority from which the HAP 
contract is to be funded. Each funding increment identified in the ACC 
is a separate, potential funding source.
    Percent limit. The applicable maximum number of budgeted units for 
an HA's certificate program that may be project-based. (The applicable 
percent limit is either the 15-percent limit or the 30-percent limit.)
    Project-based Certificate (PBC) program. A Section 8 program 
administered by an HA pursuant to 24 CFR part 983.
    Repair or replacement of a major building system or component. The 
complete electrical rewiring of a unit; the installation of new plumbing 
supply or waste pipes in a unit; the installation of a new heating 
distribution system, including piping and ductwork, or the installation 
of a new boiler or furnace; the installation of a new roof; or the 
replacement or major repair of exterior structural elements which are 
essential to achieve a stable general condition with no threat of 
further deterioration.
    State certified appraiser. Any individual who satisfies the 
requirements for certification as a certified general appraiser in a 
State that has adopted criteria that currently meet or exceed the 
minimum certification criteria issued by the Appraiser Qualifications 
Board of the Appraisal Foundation. The State criteria must include a 
requirement that the individual have achieved a satisfactory grade upon 
a State-administered examination consistent with and equivalent to the 
Uniform State Certification Examination issued or endorsed by the 
Appraiser Qualifications Board of the Appraisal Foundation. Furthermore, 
if the Appraisal Foundation has issued a finding that the policies, 
practices, or procedures of the state are inconsistent with the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989, an 
individual must comply with any

[[Page 591]]

additional standards for state certified appraisers imposed by HUD under 
24 CFR 267.11(c)(1).
    30-Percent limit. Thirty percent of the total number of budgeted 
units for a HA's Section 8 certificate program.

[60 FR 34717, July 3, 1995, as amended at 63 FR 23870, Apr. 30, 1998]



Sec. 983.3  Information to be submitted to HUD by the HA concerning its plan to attach assistance to units.

    (a) Requirements. An HA may attach certificate assistance to units 
in accordance with this part 983 if:
    (1) The number of units to be project-based does not exceed the 
applicable percent limit.
    (2) The number of units to be project-based are not under a tenant-
based or project-based HAP contract or otherwise committed (e.g., 
certificates issued to families searching for housing or units under an 
Agreement).
    (b) Percent limit. The applicable percent limit is either the 15-
percent limit or the 30-percent limit. The 30-percent limit is only 
applicable if:
    (1) There are no project-based new construction units in the HA's 
certificate program;
    (2) The additional 15 percent of project-based units (in excess of 
the 15-percent limit) is for the rehabilitation of units in projects 
assisted under a State program that permits owners to prepay State-
assisted or subsidized mortgages; and
    (3) The additional 15 percent of project-based units is necessary to 
provide incentives for project owners to preserve the projects for 
occupancy by low and moderate income families for the term of the HAP 
contract, and assist low-income tenants to afford any rent increases.
    (c) HA notification to HUD of intent to attach assistance to units. 
Before implementing a PBC program, the HA must submit the following 
information to the HUD field office for review:
    (1) The total number of units for which the HA is requesting 
approval to attach assistance;
    (2) The number of budgeted certificate units;
    (3) The number of certificate units available to be project-based; 
i.e., the number of budgeted certificate units that are not under a 
tenant-based or project-based HAP contract or otherwise committed (e.g., 
certificates issued to families searching for housing or units under an 
Agreement).
    (d) Amount of assistance. The HA must ensure that the amount of 
assistance that is attached to units is within the amounts available 
under the ACC.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23870, Apr. 30, 1998]



Sec. 983.4  HUD review of HA plans to attach assistance to units.

    (a) Notice to HA. (1) If the requirements of Sec. 983.3 are 
satisfied, the field office must authorize the HA to proceed in 
accordance with this part 983.
    (2) If the submission is approved, the field office must notify the 
HA that the HA may implement a PBC program subject to the requirements 
of this part 983, including the requirements for approval by the HUD 
field office of the HA unit selection policy and advertisement, and 
competitive selection of eligible units. The approval letter must 
specify the maximum number of units for which the HA may execute 
Agreements.
    (3) If any of the requirements of Sec. 983.3 are not satisfied, the 
field office must not approve the HA submission. The field office must 
notify the HA of the reasons for disapproval.
    (b) [Reserved]



Sec. 983.5  Physical condition standards; physical inspection requirements.

    (a) General. Housing used in this program must be maintained and 
inspected in accordance with the requirements in 24 CFR part 5, subpart 
G.
    (b) Space and security. In addition to the standards in 24 CFR part 
5, subpart G, the dwelling unit must have a living room, a kitchen area, 
and a bathroom. The dwelling unit must have at least one bedroom or 
living/sleeping room for each two persons.
    (c) Lead-based paint. 24 CFR 982.401(j) applies to assistance under 
this part.

[63 FR 46580, Sept. 1, 1998]

[[Page 592]]



Sec. 983.6  Site and neighborhood standards.

    (a) Rehabilitation site and neighborhood standards. In addition to 
meeting the standards required in Sec. 982.401(l) of this chapter, the 
proposed sites for rehabilitation units must meet the following site and 
neighborhood standards:
    (1) Be adequate in size, exposure and contour to accommodate the 
number and type of units proposed; adequate utilities and streets must 
be available to service the site. (The existence of a private disposal 
system and private sanitary water supply for the site, approved in 
accordance with law, may be considered adequate utilities.)
    (2) Be suitable from the standpoint of facilitating and furthering 
full compliance with the applicable provisions of Title VI of the Civil 
Rights Act of 1964, Title VIII of the Civil Rights Act of 1968, E.O. 
11063, and HUD regulations issued pursuant thereto.
    (3) Promote greater choice of housing opportunities and avoid undue 
concentration of assisted persons in areas containing a high proportion 
of low-income persons.
    (4) Be accessible to social, recreational, educational, commercial, 
and health facilities and services, and other municipal facilities and 
services that are at least equivalent to those typically found in 
neighborhoods consisting largely of unassisted, standard housing of 
similar market rents.
    (5) Be so located that travel time and cost via public 
transportation or private automobile from the neighborhood to places of 
employment providing a range of jobs for lower-income workers is not 
excessive. (While it is important that housing for the elderly not be 
totally isolated from employment opportunities, this requirement need 
not be adhered to rigidly for such projects.)
    (b) New construction site and neighborhood standards. The proposed 
sites for new construction units must be approved by the HUD field 
office as meeting the following site and neighborhood standards:
    (1) The site must be adequate in size, exposure, and contour to 
accommodate the number and type of units proposed, and adequate 
utilities (water, sewer, gas, and electricity) and streets must be 
available to service the site.
    (2) The site and neighborhood must be suitable from the standpoint 
of facilitating and furthering full compliance with the applicable 
provisions of title VI of the Civil Rights Act of 1964, the Fair Housing 
Act, Executive Order 11063, and implementing HUD regulations.
    (3)(i) The site must not be located in an area of minority 
concentration, except as permitted under paragraph (b)(3)(ii) of this 
section, and must not be located in a racially mixed area if the project 
will cause a significant increase in the proportion of minority to non-
minority residents in the area.
    (ii) A project may be located in an area of minority concentration 
only if:
    (A) Sufficient, comparable opportunities exist for housing for 
minority families, in the income range to be served by the proposed 
project, outside areas of minority concentration (see paragraph 
(b)(3)(iii) of this section for further guidance on this criterion); or
    (B) The project is necessary to meet overriding housing needs that 
cannot be met in that housing market area (see paragraph (b)(3)(iv) of 
this section for further guidance on this criterion).
    (iii)(A) ``Sufficient'' does not require that in every locality 
there be an equal number of assisted units within and outside of areas 
of minority concentration. Rather, application of this standard should 
produce a reasonable distribution of assisted units each year, that, 
over a period of several years, will approach an appropriate balance of 
housing choices within and outside areas of minority concentration. An 
appropriate balance in any jurisdiction must be determined in light of 
local conditions affecting the range of housing choices available for 
low-income minority families and in relation to the racial mix of the 
locality's population.
    (B) Units may be considered ``comparable opportunities'' if they 
have the same household type (elderly, disabled, family, large family) 
and tenure type (owner/renter); require approximately the same tenant 
contribution towards rent; serve the same income group; are located in 
the same housing market; and are in standard condition.

[[Page 593]]

    (C) Application of this sufficient, comparable opportunities 
standard involves assessing the overall impact of HUD-assisted housing 
on the availability of housing choices for low-income minority families 
in and outside areas of minority concentration, and must take into 
account the extent to which the following factors are present, along 
with other factors relevant to housing choice:
    (1) A significant number of assisted housing units are available 
outside areas of minority concentration.
    (2) There is significant integration of assisted housing projects 
constructed or rehabilitated in the past 10 years, relative to the 
racial mix of the eligible population.
    (3) There are racially integrated neighborhoods in the locality.
    (4) Programs are operated by the locality to assist minority 
families that wish to find housing outside areas of minority 
concentration.
    (5) Minority families have benefited from local activities (e.g., 
acquisition and write-down of sites, tax relief programs for homeowners, 
acquisitions of units for use as assisted housing units) undertaken to 
expand choice for minority families outside of areas of minority 
concentration.
    (6) A significant proportion of minority households has been 
successful in finding units in non-minority areas under the Section 8 
certificate and voucher programs.
    (7) Comparable housing opportunities have been made available 
outside areas of minority concentration through other programs.
    (iv) Application of the ``overriding housing needs'' criterion, for 
example, permits approval of sites that are an integral part of an 
overall local strategy for the preservation or restoration of the 
immediate neighborhood and of sites in a neighborhood experiencing 
significant private investment that is demonstrably changing the 
economic character of the area (a ``revitalizing area''). An 
``overriding housing need,'' however, may not serve as the basis for 
determining that a site is acceptable if the only reason the need cannot 
otherwise be feasibly met is that discrimination on the basis of race, 
color, religion, sex, national origin, age, familial status or 
disability renders sites outside areas of minority concentration 
unavailable or if the use of this standard in recent years has had the 
effect of circumventing the obligation to provide housing choice.
    (4) The site must promote greater choice of housing opportunities 
and avoid undue concentration of assisted persons in areas containing a 
high proportion of low-income persons.
    (5) The neighborhood must not be one which is seriously detrimental 
to family life or in which substandard dwellings or other undesirable 
conditions predominate, unless there is actively in progress a concerted 
program to remedy the undesirable conditions.
    (6) The housing must be accessible to social, recreational, 
educational, commercial, and health facilities and services, and other 
municipal facilities and services that are at least equivalent to those 
typically found in neighborhoods consisting largely of unassisted, 
standard housing of similar market rents.
    (7) Except for new construction housing designed for elderly 
persons, travel time and cost via public transportation or private 
automobile, from the neighborhood to places of employment providing a 
range of jobs for lower-income workers, must not be excessive.



Sec. 983.7  Eligible and ineligible properties and HA-owned units.

    (a) Section 982.352 of this chapter, Eligible Housing, does not 
apply. Newly constructed and existing structures of various types may be 
appropriate for attaching assistance to the units under this part 983, 
including single-family housing and multifamily structures.
    (b) An HA may not attach or pay PBC assistance to units in the 
following types of housing:
    (1) Housing for which the construction is started before Agreement 
execution;
    (2) Housing for which the rehabilitation is started before Agreement 
execution;
    (3) Shared housing; nursing homes; and facilities providing 
continual psychiatric, medical, nursing services, board and care or 
intermediate care;
    (4) Units within the grounds of penal, reformatory, medical, mental, 
and similar public or private institutions;

[[Page 594]]

    (5) Housing located in the Coastal Barrier Resources System 
designated under the Coastal Barrier Resources Act;
    (6) Housing located in an area that has been identified by the 
Federal Emergency Management Agency (FEMA) as having special flood 
hazards, unless:
    (i)(A) The community in which the area is situated is participating 
in the National Flood Insurance Program (see 44 CFR parts 59 through 
79); or
    (B) Less than a year has passed since FEMA notification regarding 
such hazards; and
    (ii) The HA will ensure that flood insurance on the structure is 
obtained in compliance with section 102(a) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4001 et seq.);
    (7) College or other school dormitories; or
    (8) A manufactured home.
    (c) An HA may not attach or pay PBC assistance to units in any of 
the following types of subsidized housing:
    (1) Public housing;
    (2) A unit subsidized by any other form of Section 8 assistance 
(tenant-based or project-based);
    (3) A unit subsidized with any local or State rent subsidy;
    (4) A Section 236 project (insured or noninsured); or a unit 
subsidized with Section 236 rental assistance payments;
    (5) A Rural Development Administration Section 515 project;
    (6) A unit subsidized with rental assistance payments under Section 
521 of the Housing Act of 1949 (a Rural Development Administration 
Program);
    (7) Housing assisted under former Section 23 of the United States 
Housing Act of 1937 (before amendment by the Housing and Community 
Development Act of 1974);
    (8) A Section 221(d)(3) project;
    (9) A project with a Section 202 loan;
    (10) A Section 202 project for non-elderly persons with disabilities 
(Section 162 assistance);
    (11) Section 202 supportive housing for the elderly;
    (12) Section 811 supportive housing for persons with disabilities;
    (13) A Section 101 rent supplement project;
    (14) A unit subsidized with tenant-based assistance under the HOME 
program; or
    (15) Any unit with any other duplicative Federal State, or local 
housing subsidy, as determined by HUD. For this purpose, ``housing 
subsidy'' does not include the housing component of a welfare payment, a 
social security payment received by the family, or a rent reduction 
because of a tax credit.
    (d) An HA may attach assistance under this part 983 to a highrise 
elevator project for families with children only if HUD determines there 
is no practical alternative. HUD may make this determination for an HA's 
project-based assistance, in whole or in part, and need not review each 
project on a case-by-case basis.
    (e) Assistance may not be attached to a unit that is occupied by an 
owner; however, cooperatives are considered to be rental housing for 
purposes of this part 983.
    (f)(1) HA-owned unit means a unit (other than public housing) that 
is owned by the HA which administers the assistance under this part 983 
pursuant to an ACC between HUD and the HA (including a unit owned by an 
entity substantially controlled by the HA).
    (2) An HA-owned unit may only be assisted under the project-based 
certificate program if:
    (i) The HA-owned unit is not ineligible housing under this section.
    (ii) The HUD field office selects the HA-owned unit pursuant to the 
competitive ranking and rating process specified in the HA's HUD-
approved unit selection policy (see Sec. 983.51).
    (iii) The HUD field office establishes the initial contract rents.
    (iv) The HUD field office has conducted all HA reviews required 
under this part before execution of the Agreement.
    (3) Any adjustment of the contract rent for an HA-owned unit must be 
approved in advance by the HUD field office.
    (4) As owner of an HA-owned unit, the HA is subject to all of the 
same program requirements that apply to other owners in the program.
    (5) HUD headquarters establishes the amount of the administrative 
fee for an HA-owned unit. The HA will earn a

[[Page 595]]

lower ongoing administrative fee for an HA-owned unit than for a unit 
not owned by the HA, and no fee for the cost to help a family 
experiencing difficulty in renting appropriate housing.
    (6) HA-owned units are subject to the same requirements as units 
that are not HA-owned, including the ineligibility of units that are 
currently public or Indian housing and units constructed or 
rehabilitated with other assistance under the U.S. Housing Act of 1937.

[60 FR 34717, July 3, 1995, as amended at 63 FR 23870, Apr. 30, 1998]



Sec. 983.8  Rehabilitation: Minimum expenditure requirement.

    (a) To qualify as rehabilitation under this part 983, existing 
structures must require a minimum expenditure of $1000 per assisted 
unit, including the unit's prorated share of work to be accomplished on 
common areas or systems, in order to:
    (1) Upgrade the property to decent, safe, and sanitary condition to 
comply with the housing quality standards or other standards approved by 
HUD, from a condition below those standards;
    (2) Repair or replace major building systems or components in danger 
of failure within two years from the date of the initial HA inspection;
    (3) Convert or merge units to provide housing for large families; or
    (4) For up to seven percent of the units to be assisted, make 
accessibility improvements to the property necessary to meet the 
requirements of Section 504 of the Rehabilitation Act of 1973 and the 
Fair Housing Amendments Act of 1988.
    (b) In determining the minimum expenditure of $1000 per assisted 
unit, the HA must include the prorated cost of common improvements in 
the costs of the individual units.



Sec. 983.9  Prohibition against new construction or rehabilitation with U.S. Housing Act of 1937 assistance and use of flexible subsidy; pledge of Agreement or HAP contract.

    (a) Assistance may not be attached to any unit which was in the five 
years before execution of the Agreement, or will be, constructed or 
rehabilitated with other assistance under the U.S. Housing Act of 1937 
(e.g., public housing (development or modernization), rental 
rehabilitation grants under 24 CFR part 511, housing development grants 
under 24 CFR part 850, or other Section 8 programs). In addition, a unit 
to which assistance is to be attached under this part 983 may not be 
rehabilitated with flexible subsidy assistance under part 219 of this 
title. HUD may approve attachment of assistance to a unit that was 
rehabilitated with public housing modernization funds before conveyance 
to a resident management corporation under section 21 of the U.S. 
Housing Act of 1937 (42 U.S.C. 1437s) if attachment of project-based 
assistance would further the purposes of the sale of the public housing 
project to the corporation.
    (b) If an owner is proposing to pledge the Agreement or HAP contract 
as security for financing, the owner must submit the financing documents 
to the HA. In determining the approvability of a pledge arrangement, the 
HA must review the documents submitted by the owner to ensure that the 
financing documents do not modify the Agreement or HAP contract, and do 
not contain any requirements inconsistent with the Agreement or HAP 
contract. Any pledge of the Agreement or HAP contract must be limited to 
amounts payable under the HAP contract in accordance with the terms of 
the HAP contract.



Sec. 983.10  Displacement, relocation, and acquisition.

    (a) Minimizing displacement. (1) Consistent with the other goals and 
objectives of this part, an owner must assure that it has taken all 
reasonable steps to minimize the displacement of persons (households, 
businesses, nonprofit organizations, and farms) as a result of a 
rehabilitation project assisted under this part.
    (2) Whenever a building or complex is rehabilitated and some, but 
not all, of the rehabilitated units will be assisted upon completion of 
the rehabilitation, the relocation requirements described in this 
section cover the occupants of each rehabilitated unit, whether or not 
Section 8 assistance will be provided for the unit.

[[Page 596]]

    (b) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporary housing and any increase in monthly 
rent/utility costs;
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms under which the tenant may lease and occupy a 
suitable, decent, safe, and sanitary dwelling in the project upon 
completion of the project; and
    (iv) The assistance required under paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A ``displaced 
person'' (defined in paragraph (g) of this section) must be provided 
relocation assistance at the levels described in, and in accordance with 
the requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4201-4655) 
and implementing regulations at 49 CFR part 24. A ``displaced person'' 
must be advised of his/her rights under the Fair Housing Act (42 U.S.C. 
3600-3620), and, if the representative comparable replacement dwelling 
used to establish the amount of the replacement housing payment to be 
provided to a minority is located in an area of minority concentration, 
such person must also be given, if possible, referrals to comparable and 
suitable, decent, safe, and sanitary replacement dwellings not located 
in such areas.
    (d) Real property acquisition requirements. The acquisition of real 
property for a project is subject to the URA and the requirements of 49 
CFR part 24, subpart B.
    (e) Appeals. A person who disagrees with the HA's determination 
concerning whether the person qualifies as a ``displaced person,'' or 
the amount of relocation assistance for which the person is eligible, 
may file a written appeal of that determination with the HA. A person 
who is dissatisfied with the HA's determination on the appeal may submit 
a written request for review of that determination to the HUD field 
office responsible for administering the URA requirements in the 
jurisdiction.
    (f) Responsibility of HA. (1) The HA must provide assurance of 
compliance as required by 49 CFR part 24 that it will comply with the 
URA, the regulations at 49 CFR part 24, and the requirements of this 
section, and must ensure such compliance notwithstanding any third 
party's contractual obligation to the HA to comply with these 
provisions.
    (2) The cost of required relocation assistance may be paid for with 
funds provided by the owner, or with local public funds, or with funds 
available from other sources. The cost of HA advisory services for 
temporary relocation of tenants may be paid from preliminary fees or 
ongoing administrative fees.
    (3) The HA must maintain records in sufficient detail to demonstrate 
compliance with the provisions of this section. The HA must maintain 
data on the race, ethnicity, gender, and disability of displaced 
persons.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means a person (household, business, 
nonprofit organization, or farm) that moves from real property, or moves 
personal property from real property, permanently, as a direct result of 
acquisition, rehabilitation, or demolition for a project assisted under 
this part. The term ``displaced person'' includes, but may not be 
limited to:
    (i) A person who moves permanently from the real property after 
receiving a notice from the owner requiring such move, if the move 
occurs on or after the date of the submission of the owner application 
to the HA;
    (ii) A person who moves permanently before the submission of the 
owner application to the HA, if the HA or HUD

[[Page 597]]

determines that the displacement resulted directly from acquisition, 
rehabilitation, or demolition for the assisted project; or
    (iii) A tenant-occupant of a dwelling unit who moves from the 
building or complex, permanently, after execution of the Agreement 
between the owner and the HA, if the move occurs before the tenant is 
provided written notice offering the opportunity to lease and occupy a 
suitable, decent, safe, and sanitary dwelling in the same building or 
complex under reasonable terms and conditions, upon completion of the 
project. Such reasonable terms and conditions include a monthly rent and 
estimated average monthly utility costs that do not exceed the greater 
of:
    (A) The tenant's monthly rent before execution of the Agreement and 
estimated average monthly utility costs; or
    (B) The total tenant payment, as determined under 24 CFR 5.613, if 
the tenant is low-income, or 30 percent of gross household income, if 
the tenant is not low-income; or
    (iv) A tenant-occupant of a dwelling who is required to relocate 
temporarily, but does not return to the building or complex, if either:
    (A) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, 
including the cost of moving to and from the temporarily occupied unit 
and any increased housing costs; or
    (B) Other conditions of the temporary relocation are not reasonable; 
or
    (v) A tenant-occupant of a dwelling who moves from the building or 
complex permanently after he or she has been required to move to another 
dwelling unit in the same building or complex in order to carry out the 
rehabilitation or construction, if either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) Other conditions of the move are not reasonable; or
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person has been evicted for serious or repeated violation of 
the terms and conditions of the lease or occupancy agreement, violation 
of applicable Federal, State or local law, or other good cause, and the 
HA determines that the eviction was not undertaken for the purpose of 
evading the obligation to provide relocation assistance;
    (ii) The person moved into the property after the submission of the 
owner application to the HA and, before signing a lease and commencing 
occupancy, was provided written notice of the owner application, its 
possible impact on the person (e.g., the person may be displaced, 
temporarily relocated, or suffer a rent increase) and the fact that the 
person would not qualify as a ``displaced person'' (or for any 
assistance provided under this section) if the owner application is 
approved;
    (iii) The person is ineligible under 49 CFR 24.2(g)(2); or
    (iv) HUD determines that the person was not displaced as a direct 
result of acquisition, rehabilitation, or demolition for the project.
    (3) The HA may request, at any time, HUD's determination of whether 
a displacement is or would be covered by this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing a replacement housing payment to 
be provided to a residential tenant displaced as a direct result of 
privately undertaken rehabilitation or demolition of the real property, 
the term ``initiation of negotiations'' means the execution of the 
Agreement between the owner and the HA.

[60 FR 34717, July 3, 1995, as amended at 63 FR 23871, Apr. 30, 1998]



Sec. 983.11  Other Federal requirements.

    (a) Equal Opportunity and related requirements. Participation in 
this program requires compliance with the Equal Opportunity requirements 
specified in Sec. 982.53 of this chapter including Section 504 of the 
Rehabilitation Act of 1973 (24 CFR part 8) and the Fair Housing 
Amendments Act of 1988 (24 CFR part 100).

[[Page 598]]

    (b) Environmental requirements. Activities under this part 983 are 
subject to HUD environmental regulations at 24 CFR part 58. An HA may 
not attach assistance to a unit unless, before the HA enters into an 
Agreement to provide project-based assistance for the unit:
    (1) The unit of general local government within which the project is 
located that exercises land use responsibility or, as determined by HUD, 
the county or State has completed the environmental review required by 
24 CFR part 58 and provided to the HA for submission to HUD the 
completed request for release of funds and certification; and
    (2) HUD has approved the request for release of funds.
    (c) Other Federal requirements. The following requirements must be 
met, if applicable:
    (1) Clean Air Act and Federal Water Pollution Control Act;
    (2) Flood Disaster Protection Act of 1973;
    (3) Section 3 of the Housing and Urban Development Act of 1968 (12 
U.S.C. 1701u) and the regulations in 24 CFR part 135;
    (4) Executive Order 11246, Equal Employment Opportunity (for all 
construction contracts of over $10,000);
    (5) Executive Order 11625, Prescribing Additional Arrangements for 
Developing and Coordinating a National Program for Minority Business 
Enterprises;
    (6) Executive Orders 12432, Minority Business Enterprise 
Development, and 12138, Creating a National Women's Business Enterprise 
Policy; and
    (7) Payment of not less than the wages prevailing in the locality, 
as predetermined by the Secretary of Labor pursuant to the Davis-Bacon 
Act, to all laborers and mechanics employed in the construction or 
rehabilitation of the project under an Agreement covering nine or more 
assisted units, and compliance with the Contract Work Hours and Safety 
Standards Act, Department of Labor regulations in 29 CFR part 5, and 
other Federal laws and regulations pertaining to labor standards 
applicable to such an Agreement.
    (8) The provisions of part 24 of this title relating to the 
employment, engagement of services, awarding contracts, or funding of 
any contractors or subcontractors during any period of debarment, 
suspension, or placement in ineligibility status.



Sec. 983.12  Program accounts and records.

    (a) During the term of each assisted lease, and for at least three 
years thereafter, the HA must keep:
    (1) A copy of the executed lease; and
    (2) The application from the family.
    (b) During the HAP contract term, and for at least three years 
thereafter, the HA must keep a copy of:
    (1) The HAP contract; and
    (2) Records to document the basis for determination of the initial 
rent to owner, and for the HA determination that rent to owner is a 
reasonable rent (initially and during the term of the HAP contract).

[63 FR 23871, Apr. 30, 1998]



Sec. 983.13  Special housing types.

    (a) Applicability. For applicability of rules on special housing 
types at 24 CFR part 982, subpart M, see Sec. 983.1(b)(2)(x). In the PBC 
program, the HA may not provide assistance for shared housing or for 
manufactured homes.
    (b) Group homes. A group home may include one or more group home 
units. There must be a single PBC HAP contract for units in the group 
home. A separate lease is executed for each elderly person or person 
with disabilities who resides in a group home.

[63 FR 23871, Apr. 30, 1998]



          Subpart B--Owner Application Submission to Agreement



Sec. 983.51  HA unit selection policy, advertising, and owner application requirements.

    (a) General. The HA must adopt a written policy establishing 
competitive procedures for owner submission of applications and for HA 
selection of units to which assistance is to be attached and must submit 
the policy to the HUD field office for review and approval. The HA must 
select units in accordance with its approved selection policy. The HA's 
written selection policy must

[[Page 599]]

comply with the requirements of paragraph (b) of this section.
    (b) Advertising requirements. The HA must advertise in a newspaper 
of general circulation that the HA will accept applications for 
assistance under this part 983 for specific projects. The advertisement 
must be approved by the HUD field office and may not be published until 
after the later of HUD authorization to implement a project-based 
program or ACC execution. The advertisement must: be published once a 
week for three consecutive weeks; specify an application deadline of at 
least 30 days after the date the advertisement is last published; 
specify the number of units the HA estimates it will be able to assist 
under the funding the HA is making available for this purpose; and state 
that only applications submitted in response to the advertisement will 
be considered.
    (c) Selection policy requirements. The HA's written selection policy 
must identify, and specify the weight to be given to, the factors the HA 
will use to rank and select applications. These factors must include 
consideration of: site; design; previous experience of the owner and 
other participants in development, marketing, and management; and 
feasibility of the project as a whole (including likelihood of financing 
and marketability). The HA may add other factors, such as responsiveness 
to local objectives specified by the HA.
    (d) Owner application. The owner's application submitted to the HA 
must contain the following:
    (1) A description of the housing to be constructed or rehabilitated, 
including the number of units by size (square footage), bedroom count, 
bathroom count, sketches of the proposed new construction or 
rehabilitation, unit plans, listing of amenities and services, and 
estimated date of completion. For rehabilitation, the description must 
describe the property as is, and must also describe the proposed 
rehabilitation;
    (2) Evidence of site control, and for new construction 
identification and description of the proposed site, site plan and 
neighborhood;
    (3) Evidence that the proposed new construction or rehabilitation is 
permitted by current zoning ordinances or regulations or evidence to 
indicate that the needed rezoning is likely and will not delay the 
project;
    (4) The proposed contract rent per unit, including an indication of 
which utilities, services, and equipment are included in the rent and 
which are not included. For those utilities that are not included in the 
rent, an estimate of the average monthly cost for each unit type for the 
first year of occupancy;
    (5) A statement identifying:
    (i) The number of persons (families, individuals, businesses and 
nonprofit organizations) occupying the property on the date of the 
submission of the application;
    (ii) The number of persons to be displaced, temporarily relocated or 
moved permanently within the building or complex;
    (iii) The estimated cost of relocation payments and services, and 
the sources of funding; and
    (iv) The organization(s) that will carry out the relocation 
activities;
    (v) The identity of the owner and other project principals and the 
names of officers and principal members, shareholders, investors, and 
other parties having a substantial interest; certification showing that 
the above-mentioned parties are not on the U.S. General Services 
Administration list of parties excluded from Federal procurement and 
nonprocurement programs; a disclosure of any possible conflict of 
interest by any of these parties that would be a violation of the 
Agreement or the HAP contract; and information on the qualifications and 
experience of the principal participants. Information concerning any 
participant who is not known at the time of the owner's submission must 
be provided to the HA as soon as the participant is known;
    (vi) The owner's plan for managing and maintaining the units;
    (vii) Evidence of financing or lender interest and the proposed 
terms of financing;
    (viii) The proposed term of the HAP contract; and
    (ix) Such other information as the HA believes necessary.
    (e) Resident management corporation competitive selection exception. 
An HA may select units to which assistance is to be attached, without 
advertising

[[Page 600]]

under paragraph (b) of this section and without applying the selection 
factors otherwise required by paragraph (c) of this section, if 
attachment of project-based assistance would further the purposes of the 
sale of a public housing project to a resident management corporation 
under section 21 of the U.S. Housing Act of 1937 (42 U.S.C. 1437s).

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23871, Apr. 30, 1998]



Sec. 983.52  Rehabilitation: Initial inspection and determination of unit eligibility.

    (a) Before selecting a unit or executing an Agreement, the HA must 
determine that the application is responsive to and in compliance with 
the HA's written selection criteria and procedures, and is otherwise in 
conformity with HUD program regulations and requirements. The HA must 
inspect the property to determine that rehabilitation has not begun and 
that the property meets the $1000 per assisted unit rehabilitation 
requirement under Sec. 983.8 of this chapter. If the property meets this 
rehabilitation requirement, the HA must determine the specific work 
items that are needed to bring each unit to be assisted up to the 
housing quality standards specified in Sec. 983.5 (or other standards as 
approved in the HA's application), to complete any other repairs needed 
to meet the $1000 per assisted unit rehabilitation requirement and, in 
the case of projects of five or more units, any work items necessary to 
meet the accessibility requirements of Section 504 of the Rehabilitation 
Act of 1973.
    (b) Before selecting a unit or executing an Agreement, the HA must 
also consider whether the property is eligible housing under Sec. 983.7; 
meets the other Federal requirements in Sec. 983.11 and the site and 
neighborhood standards cross-referenced in Sec. 983.6; and will be 
rehabilitated with other than assistance under the U.S. Housing Act of 
1937 in accordance with Sec. 983.9. The HA must also determine the 
number of current tenants that are low-income families. An HA may not 
select a unit, or enter into an Agreement with respect to a unit, if the 
unit is occupied by persons who are not eligible for participation in 
the program.
    (c) Before executing an Agreement, the HA must contract with a State 
certified general appraiser and establish the rents in accordance with 
Sec. 983.202, or seek and obtain the HUD-determined initial contract 
rents for any HA owned or controlled units or projects financed with a 
HUD insured or coinsured multifamily mortgage; obtain subsidy layering 
contract rent reviews from HUD or a Housing Credit Agency; obtain 
environmental clearance in accordance with Sec. 983.11; submit a 
certification to the HUD field office stating that the unit or units 
were selected in accordance with the HA's approved unit selection 
policy; and receive approval from the HUD field office to execute an 
Agreement pursuant to the reviews required in Sec. 983.53.
    (d) When the HA administering the ACC or an entity substantially 
controlled by the HA administering the ACC has submitted an application, 
the HUD field office will select the owner applications. The HA must 
submit to the HUD field office all owner applications in response to the 
advertisement.
    (e) The HUD field office may terminate the Agreement or HAP contract 
upon at least 30 days written notice to the owner by the HUD field 
office if the HUD field office determines at any time that the units 
were not selected in accordance with the HA's approved written selection 
policy or that the units did not initially meet the HUD eligibility 
requirements.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23871, Apr. 30, 1998]



Sec. 983.53  Rehabilitation: HUD field office review of applications.

    (a) The HUD field office must establish initial contract rents for 
any HA owned units or projects financed with a HUD insured or coinsured 
multifamily mortgage. HUD (or a Housing Credit Agency) must also conduct 
subsidy layering contract rent reviews.
    (b) When the HA administering the ACC or an entity substantially 
controlled by the HA administering the

[[Page 601]]

ACC has submitted an application, the HA must submit to the HUD field 
office all owner applications in response to the advertisement. The HUD 
field office must review the owner applications and make the final 
selections based on the criteria in the HA selection policy approved by 
the HUD field office.



Sec. 983.54  Rehabilitation: Work write-ups.

    The owner must prepare work write-ups and, where determined 
necessary by the HA, specifications and plans. The HA has flexibility to 
determine the appropriate documentation to be submitted by the owner 
based on the nature of the identified rehabilitation. The work write-ups 
must address the specific work items identified by the HA under 
Sec. 983.52.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



Sec. 983.55  New construction: HA evaluation and technical processing.

    (a) Before selecting a unit or executing an Agreement, the HA must 
determine that the application is responsive to and in compliance with 
the HA's written selection criteria and procedures, and is otherwise in 
conformity with HUD program regulations and requirements. For example, 
the owner must submit with the application evidence of site control and 
the certification required by Sec. 983.51(d)(5)(v). The HA must 
determine that construction (foundation work) has not begun. The HA must 
determine that the proposed initial gross rents are within the fair 
market rent limitation under Sec. 983.202. The HA must also consider 
whether the property is eligible housing within the meaning of 
Sec. 983.7; meets the other Federal requirements in Sec. 983.11 and the 
site and neighborhood standards in Sec. 983.6; will be constructed with 
other than assistance under the U.S. Housing Act of 1937 in accordance 
with Sec. 983.9; and, in the case of projects of four or more units, 
whether any work items necessary to meet the accessibility requirements 
of Section 504 of the Rehabilitation Act of 1973 and the Fair Housing 
Amendments Act of 1988 will be completed.
    (b) Before executing an Agreement, the HA must contract with a State 
certified general appraiser and establish the rents in accordance with 
Sec. 983.202 or seek and obtain the HUD-determined initial contract 
rents for any HA owned or controlled units or projects financed with a 
HUD insured or coinsured multifamily mortgage; seek and obtain subsidy 
layering contract rent reviews from HUD or a Housing Credit Agency; seek 
and obtain environmental clearance in accordance with Sec. 983.11; and 
receive approval from the HUD field office to execute an Agreement 
pursuant to the reviews required in Sec. 983.56.
    (c) If the HA administering the ACC or an entity substantially 
controlled by the HA administering the ACC has submitted an application, 
the HA must submit to the HUD field office all owner applications in 
response to the advertisement. The HUD field office will select the 
owner applications to be funded from the applications received in 
response to the HA advertisement.
    (d) If there are no HA-owned or controlled applicants, the HA must 
submit to the HUD field office for the site and neighborhood review only 
those applications determined by the HA to be eligible for further 
processing pursuant to paragraph (a) of this section, and must submit a 
certification to the HUD field office stating that the unit or units 
were selected in accordance with the HA's approved unit selection 
policy. The HA's submission must not exceed the number of uncommitted 
units for which the HA is authorized to project-base assistance in 
connection with new construction. If the number of units contained in 
applications the HA has determined to be eligible for further processing 
exceeds the number for which the HA is authorized to project-base 
assistance, the HA may submit only the top-ranked applications.
    (e) The HUD field office may terminate the Agreement or HAP contract 
upon at least 30 days written notice to the owner by HUD if the HUD 
field office determines that the units were not selected in accordance 
with the HA's approved written selection policy or

[[Page 602]]

that the units did not initially meet the HUD eligibility requirements.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23871, Apr. 30, 1998]



Sec. 983.56  New construction: HUD field office review of applications.

    (a) The HUD field office must review the owner applications 
submitted by an HA to determine compliance with requirements concerning 
the site and neighborhood standards in Sec. 983.6.
    (b) The HUD field office must establish initial contract rents for 
any HA owned units or projects financed with a HUD insured or coinsured 
multifamily mortgage. HUD (or a Housing Credit Agency) must also conduct 
subsidy layering contract rent reviews.
    (c) When the HA administering the ACC or an entity substantially 
controlled by the HA administering the ACC has submitted an application, 
the HA must submit to the HUD field office all owner applications in 
response to the advertisement. The HUD field office must review the 
owner applications and make the final selections based on the criteria 
in the HA selection policy approved by the HUD field office.



Sec. 983.57  New construction: Working drawings and specifications.

    Before an Agreement is executed for new construction units, the 
owner must submit the design architect's certification that the proposed 
new construction reflected in the working drawings and specifications 
complies with housing quality standards, local codes and ordinances, and 
zoning requirements.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



   Subpart C--Agreement and New Construction or Rehabilitation Period



Sec. 983.101  Agreement to enter into HAP contract, and contract rents in Agreement.

    (a) Agreement. The HA must enter into an Agreement with the owner in 
the form prescribed by HUD for assistance provided under this part 983. 
The Agreement must be executed before the start of any new construction 
or rehabilitation. Under the Agreement, the owner agrees to construct 
the units in accordance with the HA-approved working drawings and 
specifications or to rehabilitate the units in accordance with the HA-
approved work write-ups.
    (b) Contract rents in Agreement. The Agreement must list the initial 
contract rents that will apply to the units after they are constructed 
or rehabilitated. The amounts of the contract rents that are listed in 
the Agreement or, if applicable, as lowered under Sec. 983.103(c), must 
be the initial contract rents upon execution of the HAP contract. These 
initial contract rents may only be increased if:
    (1) The project is financed with a HUD insured or coinsured 
multifamily mortgage;
    (2) The initial contract rents listed in the Agreement were based on 
the amount determined by HUD to be necessary to amortize the insured or 
coinsured mortgage; and
    (3) The HUD field office approves a cost increase prior to closing. 
In such a case, the HUD field office may redetermine the initial 
contract rents in accordance with Sec. 983.202 except that the field 
office may use the comparable rents originally used in processing the 
insured or coinsured mortgage in lieu of the amount determined in 
accordance with Sec. 983.202.

[60 FR 34717, July 3, 1995, as amended at 63 FR 23871, Apr. 30, 1998]

[[Page 603]]



Sec. 983.102  Owner selection of contractor.

    The owner is responsible for selecting a competent contractor to 
undertake the new construction or rehabilitation work under the 
Agreement. The owner may not award contracts to, otherwise engage the 
services of, or fund any contractor or subcontractor, to perform such 
work, that fails to provide a certification that neither it nor its 
principals is presently debarred, suspended, or placed in ineligibility 
status under 24 CFR part 24, or is on the list of ineligible contractors 
or subcontractors established and maintained by the Comptroller General 
under 29 CFR part 5. The HA must promote opportunities for minority 
contractors to participate in the program.



Sec. 983.103  New construction or rehabilitation period.

    (a) Timely performance of work. After the Agreement has been 
executed, the owner must promptly proceed with the construction or 
rehabilitation work as provided in the Agreement. In the event the work 
is not so commenced, diligently continued, or completed, the HA may 
terminate the Agreement or take other appropriate action.
    (b) Inspections. The HA must inspect during construction or 
rehabilitation to ensure that work is proceeding on schedule and is 
being accomplished in accordance with the terms of the Agreement. The 
inspection must be carried out to ensure that the work meets the types 
of materials specified in the work write-ups or working drawings and 
specifications, and meets typical levels of workmanship in the area.
    (c) Changes. The owner must obtain prior HA approval for any changes 
from the work specified in the Agreement that would alter the design or 
the quality of the required new construction or rehabilitation. The HA 
may disapprove any changes requested by the owner. HA approval of 
changes may be conditioned on establishing lower initial contract rents 
in the amount determined by the HA (or the HUD field office for HA owned 
units or projects financed with a HUD insured or coinsured multifamily 
mortgage). If the owner makes any changes without prior HA approval, the 
HA may lower the initial contract rents in the amount determined by the 
HA (or the HUD field office for HA owned units or projects financed with 
a HUD insured or coinsured multifamily mortgage), and may require the 
owner to remedy any deficiencies, prior to, and as a condition for, 
acceptance of the units. Initial contract rents, however, must not be 
increased because of any change from the work specified in the Agreement 
as originally executed. When a HUD insured or a HUD coinsured 
multifamily mortgage is used to finance new construction or 
rehabilitation of the units to which assistance is to be attached under 
this part 983, the HUD field office may lower the initial contract rents 
to reflect any reduction in the amount necessary to amortize the insured 
or coinsured mortgage.
    (d) Notification of vacancies. At least 60 days before the scheduled 
completion of the new construction or rehabilitation, the owner must 
notify the HA of any units expected to be vacant on the anticipated 
effective date of the HAP contract. The HA must refer to the owner 
appropriate-sized families from the HA waiting list. When the HAP 
contract is executed, the owner must notify the HA which units are 
vacant. (See also Sec. 983.253).

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23871, Apr. 30, 1998]



Sec. 983.104  New construction or rehabilitation completion.

    (a) Notification of completion. The owner must notify the HA when 
the work is completed and submit to the HA the evidence of completion 
described in paragraph (b) of this section.
    (b) Evidence of completion. To demonstrate completion of the work 
the owner must furnish the HA with:
    (1) A certificate of occupancy or other official approvals as 
required by the locality.
    (2) A certification by the owner that:
    (i) The work has been completed in accordance with the requirements 
of the Agreement;
    (ii) There are no defects or deficiencies in the work except for 
items of delayed completion which are minor or

[[Page 604]]

which are incomplete because of weather conditions and, in any case, do 
not preclude or affect occupancy;
    (iii) The unit(s) has been constructed or rehabilitated in 
accordance with the applicable zoning, building, housing and other 
codes, ordinances or regulations, as modified by any waivers obtained 
from the appropriate officials;
    (iv) Unit(s) built before 1978 is in compliance with Sec. 982.401(j) 
(Lead-based paint); and
    (v) The owner has complied with any applicable labor standards 
requirements in the Agreement.
    (3) For projects where a HUD field office construction inspection is 
not required during construction, a certification from the inspecting 
architect stating that the units have been constructed in accordance 
with the certified working drawings and specifications, housing quality 
standards, local codes and ordinances, and zoning requirements.
    (c) Review and inspections. The HA must review the evidence of 
completion for compliance with paragraph (b) of this section. The HA 
also must inspect the unit(s) to be assisted to determine that the 
unit(s) has been completed in accordance with the Agreement, including 
meeting the housing quality standards or other standards approved by the 
HUD field office for the program. If the inspection discloses defects or 
deficiencies, the inspector must report these in detail.
    (d) Acceptance. (1) If the HA determines from the review and 
inspection that the unit(s) has been completed in accordance with the 
Agreement, the HA must accept the unit(s).
    (2) If there are any items of delayed completion that are minor 
items or that are incomplete because of weather conditions, and in any 
case that do not preclude or affect occupancy, and all other 
requirements of the Agreement have been met, the HA may accept the 
unit(s). The HA must require the owner to deposit in escrow with the HA 
funds in an amount the HA determines to be sufficient to ensure 
completion of the delayed items. The HA and owner must also execute a 
written agreement, specifying the schedule for completion of these 
items. If the items are not completed within the agreed time period, the 
HA may terminate the HAP contract or exercise other rights under the HAP 
contract.
    (3) If other deficiencies exist, the HA must determine whether and 
to what extent the deficiencies are correctable and whether a time 
extension is warranted, and HUD must determine whether the contract 
rents should be reduced.
    (4) Otherwise, the unit(s) may not be accepted, and the owner must 
be notified with a statement of the reasons for nonacceptance.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995]



             Subpart D--Housing Assistance Payments Contract



Sec. 983.151  Housing assistance payments contract (HAP contract).

    (a) Required form. The HA must enter into a HAP contract with the 
owner in the form prescribed by HUD for assistance provided under this 
part 983.
    (b) Term of HAP contract. (1) The initial HAP contract term may not 
be less than one year nor more than five years, and may not extend 
beyond the ACC expiration date for the funding source from which the HAP 
contract is to be funded.
    (2) The contract authority for the funding source must exceed the 
estimated annual housing assistance payments for all tenant-based and 
project-based HAP contracts funded from the funding source.
    (3) Within these limitations, the HA has the sole discretion to 
determine the HAP contract term.
    (c) Renewal of HAP contracts. With HUD field office approval and at 
the sole option of the HA, HAs may renew expiring HAP contracts for such 
period or periods as the HUD field office determines appropriate to 
achieve long-term affordability of the assisted housing, provided that 
the term does not extend beyond the ACC expiration date for the funding 
source. HAs must identify the funding source for renewals; different 
funding sources may be used for the initial term and renewal terms of 
the HAP contract. In addition to assessing

[[Page 605]]

whether the HAP contract should be renewed to achieve long term 
affordability, HUD will review an HA's renewal request to determine that 
the requirements listed in Sec. 983.3(a) will be satisfied, and to 
determine if a rent reduction is warranted pursuant to 24 CFR part 12. 
The owner and owner's successors in interest must accept all HAP 
contract renewals agreed to by the HA and approved by HUD.
    (d) Time of execution. The HA must execute the HAP contract if the 
HA accepts the unit(s) under Sec. 983.104. The effective date of the HAP 
contract may not be earlier than the date of HA inspection and 
acceptance of the unit(s).
    (e) Units under lease. After commencement of the HAP contract term, 
the HA must make the monthly housing assistance payments in accordance 
with the HAP contract for each unit occupied under lease by a family.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23871, Apr. 30, 1998]



Sec. 983.152  Reduction of number of units covered by HAP contract.

    (a) Limitation on leasing to ineligible families. Owners must lease 
all assisted units under HAP contract to eligible families. Leasing of 
vacant, assisted units to ineligible tenants is a violation of the HAP 
contract and grounds for all available legal remedies, including 
suspension or debarment from HUD programs and reduction of the number of 
units under the HAP contract, as set forth in paragraph (b) of this 
section. Once the HA has determined that a violation exists, the HA must 
notify the HUD field office of its determination and the suggested 
remedies. At the direction of the HUD field office, the HA must take the 
appropriate action.
    (b) Reduction for failure to lease to eligible families. If, at any 
time beginning 180 calendar days after the effective date of the HAP 
contract, the owner fails for a period of 180 continuous calendar days 
to have the assisted units leased to families receiving housing 
assistance or to families who were eligible when they initially leased 
the unit but are no longer receiving housing assistance, the HA may, on 
at least 30 calendar days notice, reduce the number of units covered by 
the HAP contract. The HA may reduce the number of units to the number of 
units actually leased or available for leasing by eligible families plus 
10 percent (rounded up). If the owner has only one unit under HAP 
contract and if one year has elapsed since the date of the last housing 
assistance payment, the HAP contract may be terminated with the consent 
of the owner.
    (c) Restoration. The HA will agree to an amendment of the HAP 
contract to provide for subsequent restoration of any reduction made 
pursuant to paragraph (b) of this section if:
    (1) The HA determines that the restoration is justified by demand,
    (2) The owner otherwise has a record of compliance with obligations 
under the HAP contract; and
    (3) Contract authority is available.



                          Subpart E--Management



Sec. 983.201  Responsibilities of the HA.

    The HA must:
    (a) Inspect the project before, during and upon completion of new 
construction or rehabilitation; and
    (b) Ensure that the amount of assistance that is attached to units 
is within the amounts available under the ACC.

[63 FR 23871, Apr. 30, 1998]



Sec. 983.202  Responsibilities of the owner.

    Section 982.452 of this chapter, Owner responsibilities, applies. 
The owner is also responsible for performing all of the owner 
responsibilities under the Agreement and the HAP contract, providing the 
HA with a copy of any termination of tenancy notification, and offering 
vacant, accessible units to a Family with one or more members with a 
disability requiring accessibility features of the vacant unit and 
occupying an assisted unit not having such features.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 63 
FR 23871, Apr. 30, 1998]

[[Page 606]]



Sec. 983.203  Family participation.

    Subpart E of part 982 of this chapter, Selection for Tenant-based 
Program, does not apply, except as it is expressly made applicable by 
this section.
    (a) HA selection for participation. (1) The following provisions 
apply to this part: Secs. 982.201, 982.202 except paragraph (b)(3), 
982.203, 982.204 except paragraph (a) and (d), 982.205 except paragraph 
(a), 982.206, 982.207.
    (2) For purposes of this part, a family becomes a participant when 
the family and owner execute a lease for a unit with project-based 
assistance.
    (3) An HA may use the tenant-based waiting list, a merged waiting 
list, or a separate PBC waiting list for admission to the PBC program. 
If the HA opts to have a separate PBC waiting list, the HA may use a 
single waiting list for all PBC projects, or may use a separate PBC 
waiting list for an area not smaller than a county or municipality.
    (4) Except for special admissions and admissions pursuant to 
paragraph (c)(3) of this section, participants must be selected from the 
HA waiting list. The HA must select participants from the waiting list 
in accordance with admission policies in the HA administrative plan.
    (5) HAs authorized to use the 30-percent limit to prevent 
prepayments under State mortgage programs must not count families 
selected to occupy units in these State-assisted or subsidized projects 
against the local preference limit.
    (6) The selection of eligible in-place families does not count 
against the local preference limit.
    (b) HA determination of eligibility of in-place families. Before an 
HA selects a specific unit to which assistance is to be attached, the HA 
must determine whether the unit is occupied, and if occupied, whether 
the unit's occupants are eligible for assistance. If the unit is 
occupied by an eligible family (including a single person) and the HA 
selects the unit, the family must be afforded the opportunity to lease 
that unit or another appropriately sized, project-based assisted unit in 
the project without requiring the family to be placed on the waiting 
list. An HA may not select a unit, or enter into an Agreement with 
respect to a unit, if the unit is occupied by persons who are not 
eligible for participation in the program.
    (c) Filling vacant units. (1) When the owner notifies the HA of 
vacancies in the units to which assistance is attached, the HA will 
refer to the owner one or more families of the appropriate size on its 
waiting list. A family that refuses the offer of a unit assisted under 
this part 983 keeps its place on the waiting list.
    (2) The owner must rent all vacant units to eligible families 
referred by the HA from its waiting list. The HA must determine 
eligibility for participation in accordance with HUD requirements.
    (3) If the HA does not refer a sufficient number of interested 
applicants on the HA waiting list to the owner within 30 days of the 
owner's notification to the HA of a vacancy, the owner may advertise for 
or solicit applications from eligible very low-income families, or, if 
authorized by the HA in accordance with HUD requirements, low-income 
families. The owner must refer these families to the HA to determine 
eligibility.
    (4)(i) The owner is responsible for screening and selection of 
tenants. The owner must adopt written tenant selection procedures that 
are consistent with the purpose of improving housing opportunities for 
very low-income families, and reasonably related to program eligibility 
and an applicant's ability to perform the lease obligations.
    (ii)(A) An owner must promptly notify in writing any rejected 
applicant of the grounds for any rejection.
    (B) If the owner rejects an applicant family who believes that the 
rejection was the result of unlawful discrimination, the family may 
request the assistance of the HA in resolving the issue. The family may 
also file a discrimination complaint with the HUD field office or 
exercise other rights provided by law.
    (d) Briefing of families. When a family is selected to occupy a 
project-based unit, the HA must provide the family with information 
concerning the tenant rent and any applicable utility allowance and a 
copy of the HUD-prescribed lead-based paint brochure. The

[[Page 607]]

family must also, either in group or individual sessions, be provided 
with a full explanation of the following:
    (1) Family and owner responsibilities under the lease and HAP 
contract;
    (2) Information on Federal, State, and local equal opportunity laws;
    (3) The fact that the subsidy is tied to the unit, that the family 
must occupy a unit constructed or rehabilitated under the program, and 
that a family that moves from the unit does not have any right to 
continued assistance;
    (4) The likelihood of the family receiving a certificate after the 
HAP contract expires;
    (5) The family's options under the program, if the family is 
required to move because of a change in family size or composition;
    (6) Information on the HA's procedures for conducting informal 
hearings for participants, including a description of the circumstances 
in which the HA is required to provide the opportunity for an informal 
hearing (under Sec. 983.207), and of the procedures for requesting a 
hearing.
    (e) Continued assistance for a family when the HAP contract is 
terminated. If the HAP contract for the unit expires or if the HA 
terminates the HAP contract for the unit:
    (1) The HA must issue the assisted family in occupancy of a unit a 
certificate of family participation for assistance under the HA's 
certificate program unless the HA has determined that it does not have 
sufficient funding for continued assistance for the family, or unless 
the HA denies issuance of a certificate in accordance with Sec. 982.552 
of this chapter.
    (2) If the unit is not occupied by an assisted family, then the 
available funds under the ACC that were previously committed for support 
of the project-based assistance for the unit must be used for the HA's 
certificate program.
    (f) Amount of rent payable by family to owner. The amount of rent 
payable by the Family to the owner must be the Tenant Rent.
    (g) Lease requirements. (1) The lease between the family and the 
owner must be in accordance with Sec. 983.206 and any other applicable 
HUD regulations and requirements. The lease must include all provisions 
required by HUD and must not include any of the provisions prohibited by 
HUD.
    (2) When offering an accessible unit to an applicant not having 
disabilities requiring the accessibility features of the unit, the owner 
may require the applicant to agree (and may incorporate this agreement 
in the Lease) to move to a non-accessible unit when available.

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995; 61 
FR 9048, Mar. 6, 1996; 61 FR 27163, May 30, 1996; 63 FR 23871, Apr. 30, 
1998]



Sec. 983.204  Maintenance, operation and inspections.

    (a) Section 982.404 of this chapter, Maintenance: Owner and family 
responsibility; HA remedies, pertaining to owner responsibilities and HA 
remedies, does not apply. Section 982.405 of this chapter, HA periodic 
unit inspection, and Sec. 982.406 of this chapter, Enforcement of HQS, 
do not apply.
    (b) Maintenance and operation. The owner must provide all the 
services, maintenance and utilities as agreed under the HAP contract, 
subject to abatement of housing assistance payments or other applicable 
remedies if the owner fails to meet these obligations.
    (c) Periodic inspection. In addition to the inspections required 
prior to execution of the HAP contract, the HA must inspect or cause to 
be inspected each dwelling unit under HAP contract at least annually and 
at such other times as may be necessary to assure that the owner is 
meeting the obligations to maintain the unit in decent, safe and 
sanitary condition and to provide the agreed upon utilities and other 
services. The HA must take into account complaints and any other 
information coming to its attention in scheduling inspections.
    (d) Units not decent, safe and sanitary. If the HA notifies the 
owner that the unit(s) under HAP contract are not being maintained in 
decent, safe and sanitary condition and the owner fails to take 
corrective action within the time prescribed in the notice, the HA

[[Page 608]]

may exercise any of its rights or remedies under the HAP contract, 
including abatement of housing assistance payments (even if the family 
continues in occupancy), termination of the HAP contract on the affected 
unit(s) and termination of assistance to the family in accordance with 
Sec. 982.552 of this chapter.
    (e) Enforcement of HQS. 24 CFR part 982 and this part 983 do not 
create any right of the family, or any party other than HUD or the HA, 
to require enforcement of the HQS requirement by HUD or the HA, or to 
assert any claim against HUD or the HA, for damages, injunction or other 
relief, for alleged failure to enforce the HQS.

[60 FR 34717, July 3, 1995, as amended at 63 FR 23871, Apr. 30, 1998]



Sec. 983.205  Overcrowded and underoccupied units.

    (a) 24 CFR 982.403, Terminating HAP contract: When unit is too big 
or too small, does not apply.
    (b) If the HA determines that a contract unit is not decent, safe, 
and sanitary because of an increase in family size that causes the unit 
to be overcrowded or that a contract unit is larger than appropriate for 
the size of the family in occupancy under the HA's subsidy standards, 
housing assistance payments with respect to the unit may not be 
terminated for this reason. The owner, however, must offer the family a 
suitable alternative unit if one is available and the family shall be 
required to move. If the owner does not have available a suitable unit 
within the family's ability to pay the rent, the HA (if it has 
sufficient funding) must offer Section 8 assistance to the family or 
otherwise assist the family in locating other standard housing in the 
HA's jurisdiction within the family's ability to pay, and require the 
family to move to such a unit as soon as possible. The family must not 
be forced to move, nor shall housing assistance payments under the HAP 
contract be terminated for the reasons specified in this paragraph, 
unless the family rejects, without good reason, the offer of a unit that 
the HA judges to be acceptable.

[60 FR 34717, July 3, 1995. Redesignated and amended at 63 FR 23871, 
Apr. 30, 1998]



Sec. 983.206  Assisted tenancy and termination of tenancy.

    (a) Section 982.309 of this chapter, Term of assisted tenancy, and 
Sec. 982.310 of this chapter, Owner termination of tenancy, do not 
apply.
    (b) Term of lease. The term of a lease, including a new lease or a 
lease amendment, executed by the owner and the family must be for at 
least one year, or the remaining term of the HAP contract if the 
remaining term of the HAP contract is less than one year.
    (c) Move from unit. The family must notify the HA and the owner 
before the family moves out of the unit.
    (d) Termination of tenancy. (1) Subpart A of part 247 of this title, 
Eviction from Certain Subsidized and HUD-Owned Projects, applies, except 
Sec. 247.4(d) of this title.
    (2) The lease may contain a provision permitting the family to 
terminate the lease on not more than 60 days advance written notice to 
the owner. In the case of a lease term for more than one year, the lease 
must contain a provision permitting the family to terminate the lease on 
such notice after the first year of the term.
    (3) The owner may offer the family a new lease for execution by the 
family for a term beginning at any time after the first year of the term 
of the lease. The owner must give the family written notice of the offer 
at least 60 days before the proposed commencement date of the new lease 
term. The offer may specify a reasonable time for acceptance by the 
family. Failure by the family to accept the offer of a new lease in 
accordance with this paragraph shall be ``other good cause'' for 
termination of tenancy (under Sec. 247.3(a)(3) of this title).

(Approved by the Office of Management and Budget under control number 
2577-0169)

[60 FR 34717, July 3, 1995, as amended at 60 FR 45661, Sept. 1, 1995. 
Redesignated at 63 FR 23871, Apr. 30, 1998]



Sec. 983.207  Informal review or hearing.

    24 CFR 982.554 (Informal review for applicants) and 24 CFR 982.555 
(Informal hearing for participants) are applicable.

[63 FR 23871, Apr. 30, 1998]

[[Page 609]]



             Subpart F--Rent and Housing Assistance Payment

    Source: 63 FR 23871, Apr. 30, 1998, unless otherwise noted.



Sec. 983.251  Applicability.

    (a) This subpart describes how to determine the amount of the rent 
to owner and the housing assistance payment in the PBC program.
    (b) In subpart K of 24 CFR part 982 (rent and housing assistance 
payment for tenant-based program), the following are the only sections 
that apply to the PBC program under this Part: Sec. 982.504 (for 
determination of the FMR/exception rent limit); Sec. 982.516 (regular 
and interim examinations of family income and composition); and 
Sec. 982.517 (utility allowance schedule).



Sec. 983.252  Limits on initial rent to owner.

    (a) Reasonable rent. The initial rent to owner for a unit may not 
exceed the reasonable rent as determined by the HA in accordance with 
Sec. 983.256.
    (b) FMR/exception rent limit. The initial gross rent for a unit 
(rent to owner plus utility allowance) may not exceed the FMR/exception 
rent limit on the date the Agreement is executed. The FMR/exception rent 
limit is determined by the HA in accordance with 24 CFR 982.504.



Sec. 983.253  Initial rent: Who approves.

    (a) For units that are not HUD-insured or HA-owned. The HA approves 
the initial rent to owners for PBC units that are not financed with a 
HUD-insured multifamily mortgage, and are not owned by the HA.
    (b) For units that are insured or HA-owned. For HA-owned PBC units 
or PBC units financed with a HUD insured multifamily mortgage, the 
initial rents must be approved by HUD.



Sec. 983.254  Annual adjustment of rent to owner.

    (a) Owner request for adjustment and compliance with contract. At 
each annual anniversary date of the HAP contract, the HA must adjust the 
rent to owner in accordance with the following requirements:
    (1) The owner must request a rent increase (including a 
comparability study to determine the amount of such increase) by written 
notice to the HA at least 120 days before the HAP contract anniversary. 
The request must be submitted in the form and manner required by the HA.
    (2) The HA may not increase the rent at the annual anniversary 
unless:
    (i) The owner requested the increase by the 120 day deadline; and
    (ii) During the year before the contract anniversary, the owner 
complied with all requirements of the HAP contract, including compliance 
with the HQS for all contract units.
    (b) Amount of annual adjustment. (1) The adjusted rent to owner 
equals the lesser of:
    (i) The pre-adjustment rent to owner multiplied by the applicable 
Section 8 annual adjustment factor published by HUD in the Federal 
Register;
    (ii) The reasonable rent as determined by the HA in accordance with 
Sec. 983.256; or
    (iii) The rent requested by owner.
    (2) For a HAP contract under an Agreement executed on or after June 
1, 1998, the applicable factor is the published annual adjustment factor 
in effect 60 days before the HAP contract anniversary. For a HAP 
contract under an Agreement executed before June 1, 1998, the applicable 
factor is the published annual adjustment factor in effect on the 
contract anniversary date.
    (3) In making the annual adjustment, the pre-adjustment rent to 
owner does not include any previously approved special adjustments.
    (4) The rent to owner may be adjusted up or down in accordance with 
this section.
    (c) Rent adjustments for HA-owned units. For HA-owned PBC units, the 
HA must request HUD approval of the annual adjustment. The HA may not 
increase the rent at the annual anniversary until and unless HUD has 
reviewed the HA comparability study, and has approved the adjustment.

[[Page 610]]

    (d) Initial rent. Except as necessary to correct errors in 
establishing the initial rent in accordance with HUD requirements, the 
adjusted rent to owner must not be less than the initial rent.

(Information collection requirements in this section have been approved 
by the Office of Management and Budget under control number 2577-0169.)



Sec. 983.255  Special adjustment of rent to owner.

    (a) HUD discretion. (1) At HUD's sole discretion, HUD may approve a 
special adjustment of the rent to owner. An HA may only make a special 
adjustment of the rent to owner if the adjustment has been approved by 
HUD.
    (2) The owner does not have any right to receive a special 
adjustment.
    (b) Purpose of special adjustment. A special adjustment may only be 
approved to reflect increases in the actual and necessary costs of 
owning and maintaining the contract units because of substantial and 
general increases in:
    (1) Real property taxes;
    (2) Special governmental assessments;
    (3) Utility rates; or
    (4) Costs of utilities not covered by regulated rates.
    (c) Limits on special adjustment. (1) A special adjustment may only 
be approved if and to the extent the owner demonstrates that cost 
increases are not adequately compensated by application of the published 
annual adjustment factor at the contract anniversary (see Sec. 983.254). 
The owner must demonstrate that the rent to owner is not sufficient for 
proper operation of the housing.
    (2) The adjusted rent may not exceed the reasonable rent as 
determined by a comparability study in accordance with Sec. 983.256.
    (d) Financial information. The owner must submit financial 
information, as requested by the HA, that supports the grant or 
continuance of a special adjustment. For HAP contracts of more than 
twenty units, such financial information must be audited.
    (e) Term of special adjustment. (1) The HA may withdraw or limit the 
term of any special adjustment.
    (2) If a special adjustment is approved to cover temporary or one-
time costs, the special adjustment is only a temporary or one-time 
increase of the rent to owner.

(Information collection requirements in this section have been approved 
by the Office of Management and Budget under control number 2577-0169.)



Sec. 983.256  Reasonable rent.

    (a) Requirement. (1) The HA may not enter an agreement to enter into 
housing assistance payments contract until the HA determines that the 
initial rent to owner under the HAP contract is a reasonable rent.
    (2) During the term of a HAP contract, the rent to owner may not 
exceed the reasonable rent as determined by the HA.
    (3) At least annually during the HAP contract term, the HA must 
redetermine that the current rent to owner does not exceed a reasonable 
rent.
    (b) Comparability. The HA must determine whether the rent to owner 
is a reasonable rent in comparison to rent for other comparable 
unassisted units. To make this determination, the HA must consider:
    (1) The location, quality, size, unit type, and age of the contract 
unit; and
    (2) Any amenities, housing services, maintenance and utilities to be 
provided by the owner in accordance with the lease.
    (c) Appraisal--(1) Determining initial rent. (i) To determine that 
the initial rent to owner is reasonable, the HA must use a qualified 
State-certified appraiser who has no direct or indirect interest in the 
property or otherwise.
    (ii) For each unit type, the appraiser must submit a completed 
comparability analysis on Form HUD-92273 (Estimates of Market Rent by 
Comparison--the form is available at the Department of Housing and Urban 
Development, HUD Custom Service Center, 451 7th Street, SW, Room B-100, 
Washington, DC 20410) for HA review and approval. The appraisal must use 
at least three comparable units in the private unassisted market.
    (iii) The HA must certify to HUD that the initial rent to owner for 
a unit does not exceed the reasonable rent.

[[Page 611]]

    (2) Annual Adjustment: Comparability study. (i) In determining the 
annual adjustment of rent to owner (in accordance with Sec. 983.254), 
the adjusted rent to owner must not exceed a reasonable rent as 
determined by an HA ``comparability study.''
    (ii) The comparability study is an analysis of rents charged for 
comparable units. The HA comparability study must determine the 
reasonable rent for the contract units as compared with rents for 
comparable unassisted units. The adjusted rent for a contract unit may 
not exceed the reasonable rent as shown by the comparability study.
    (iii) The comparability study must include a completed comparability 
analysis for each unit type on Form HUD-92273 (Estimates of Market Rent 
by Comparison). The comparability study may be prepared by HA staff or 
by another qualified appraiser. The appraiser may not have any direct or 
indirect interest in the property or otherwise.
    (iv) The comparability study must show how the reasonable rent was 
determined, including major differences between the contract units and 
comparable unassisted units.
    (v) If the owner requests a rent increase by the 120 day deadline 
(in accordance with Sec. 983.254(a)), the HA must submit a comparability 
study to the owner at least 60 days before the HAP contract anniversary. 
If the HA does not submit the comparability study to the owner by this 
deadline, an increase of rent by application of the annual adjustment 
factor (in accordance with Sec. 983.254(b)) is not subject to the 
reasonable rent limit.
    (d) Owner certification of rents charged for other units. By 
accepting each monthly housing assistance payment from the HA, the owner 
certifies that the rent to owner is not more than rent charged by the 
owner for comparable unassisted units in the premises. The owner must 
give the HA information requested by the HA on rents charged by the 
owner for other units in the premises or elsewhere.

(Information collection requirements in this section have been approved 
by the Office of Management and Budget under control number 2577-0169.)



Sec. 983.257  Other subsidy: Effect on rent to owner.

    (a) HOME. For units assisted under the HOME program, rents are 
subject to requirements of the HOME program (24 CFR 92.252).
    (b) Combining subsidy. The HA may only approve or assist a project 
in accordance with HUD regulations and guidelines designed to ensure 
that participants do not receive excessive compensation by combining HUD 
program assistance with assistance from other Federal, State or local 
agencies, or with low income housing tax credits. (See 42 U.S.C. 3545(d) 
and section 3545 note.)
    (c) Other subsidy: HA discretion to reduce rent. The HA may reduce 
the initial rent to owner because of other governmental subsidies, 
including tax credit or tax exemption, grants or other subsidized 
financing.
    (d) Prohibition of other subsidy. For provisions prohibiting PBC 
assistance to units in certain types of subsidized housing, see 
Sec. 983.7(c).



Sec. 983.258  Rent to owner: Effect of rent control.

    In addition to the rent reasonableness limit, and other rent limits 
under this rule, the amount of rent to owner also may be subject to rent 
control limits under State or local law.



Sec. 983.259  Correction of rent.

    At any time during the life of the HAP contract, the HA may revise 
the rent to owner to correct any errors in establishing or adjusting 
rent to owner in accordance with HUD requirements. The HA may recover 
any excess payment from the owner.



Sec. 983.260  Housing assistance payment: Amount and distribution.

    (a) Amount. The monthly housing assistance payment equals the gross 
rent, minus the higher of:
    (1) The total tenant payment; or
    (2) The minimum rent as required by law.
    (b) Distribution. The monthly housing assistance payment is 
distributed as follows:
    (1) The HA pays the owner the lesser of the housing assistance 
payment or the rent to owner.

[[Page 612]]

    (2) If the housing assistance payment exceeds the rent to owner, the 
HA may pay the balance of the housing assistance payment either to the 
family or directly to the utility supplier to pay the utility bill.



Sec. 983.261  Family share: Family responsibility to pay.

    (a) The family share is calculated by subtracting the amount of the 
housing assistance payment from the gross rent.
    (b) The HA may not use housing assistance payments or other program 
funds (including any administrative fee reserve) to pay any part of the 
family share. Payment of the family share is the responsibility of the 
family.



Sec. 983.262  Other fees and charges.

    (a) The cost of meals or supportive services may not be included in 
the rent to owner, and the value of meals or supportive services may not 
be included in the calculation of reasonable rent.
    (b) The lease may not require the tenant or family members to pay 
charges for meals or supportive services. Non-payment of such charges is 
not grounds for termination of tenancy.
    (c) The owner may not charge the tenant extra amounts for items 
customarily included in rent in the locality or provided at no 
additional cost to the unsubsidized tenants in the premises.



PART 984--SECTION 8 AND PUBLIC HOUSING FAMILY SELF-SUFFICIENCY PROGRAM--Table of Contents




                           Subpart A--General

Sec.
984.101  Purpose, scope, and applicability.
984.102  Program objectives.
984.103  Definitions.
984.104  Basic requirements of the FSS program.
984.105  Minimum program size.

         Subpart B--Program Development and Approval Procedures

984.201  Action Plan.
984.202  Program Coordinating Committee (PCC).
984.203  FSS family selection procedures.
984.204  On-site facilities.

                      Subpart C--Program Operation

984.301  Program implementation.
984.302  Administrative fees.
984.303  Contract of participation.
984.304  Total tenant payment, family rent, and increases in family 
          income.
984.305  FSS account.
984.306  Section 8 residency and portability requirements.

                          Subpart D--Reporting

984.401  Reporting.

    Authority: 42 U.S.C. 1437f, 1437u, and 3535(d).

    Source: 61 FR 8815, Mar. 5, 1996, unless otherwise noted.



                           Subpart A--General



Sec. 984.101  Purpose, scope, and applicability.

    (a) Purpose. (1) The purpose of the Family Self-Sufficiency (FSS) 
program is to promote the development of local strategies to coordinate 
the use of public and Indian housing assistance and housing assistance 
under the Section 8 rental certificate and rental voucher programs with 
public and private resources, to enable families eligible to receive 
assistance under these programs to achieve economic independence and 
self-sufficiency.
    (2) The purpose of this part is to implement the policies and 
procedures applicable to operation of a local FSS program, as 
established under section 23 of the 1937 Act (42 U.S.C. 1437u), under 
HUD's rental voucher, rental certificate, and public housing programs.
    (b) Scope. (1) Each PHA that received funding for public housing 
units under the FY 1991 and FY 1992 FSS incentive award competitions 
must operate a public housing FSS program.
    (2) Each HA that received funding for Section 8 rental certificates 
or rental vouchers under the combined FY 1991/1992 FSS incentive award 
competition must operate a Section 8 FSS program.
    (3) Unless the HA receives an exception from the program as provided 
in Sec. 984.105, each HA that, in FY 1993 or any subsequent FY, received 
or receives funding for additional rental certificates or rental 
vouchers must

[[Page 613]]

operate a Section 8 FSS program or for additional public housing units 
must operate a public housing FSS program.
    (c) Applicability--(1) Public housing. This part applies to public 
housing assisted under the 1937 Act.
    (2) Indian Housing Authorities. This part does not apply to Indian 
housing. The regulations governing Indian housing FSS programs are set 
forth in 24 CFR part 950, subpart R. The operation of a Section 8 FSS 
program is optional for Indian Housing Authorities (IHAs) that operate a 
certificate or voucher program. IHAs that elect to operate a Section 8 
FSS program are subject to the requirements of this part, except that 
Sec. 984.105(c) of this subpart A governing minimum program size does 
not apply to IHAs. Additionally, IHAs that received section 8 units 
under the FSS incentive award competitions and are operating a section 8 
FSS program are not subject to the minimum program size requirements.
    (3) Section 8. This part also applies to the Section 8 rental 
certificate program and the Section 8 rental voucher program authorized 
by Section 8 of the 1937 Act and implemented at 24 CFR parts 882, 887, 
and 982.



Sec. 984.102  Program objectives.

    The objective of the FSS program is to reduce the dependency of low-
income families on welfare assistance and on Section 8, public or Indian 
housing assistance, or any Federal, State, or local rent or 
homeownership subsidies. Under the FSS program, low-income families are 
provided opportunities for education, job training, counseling, and 
other forms of social service assistance, while living in assisted 
housing, so that they may obtain the education, employment, and business 
and social skills necessary to achieve self-sufficiency, as defined in 
Sec. 984.103 of this subpart A. The Department will measure the success 
of a local FSS program not only by the number of families who achieve 
self-sufficiency, but also by the number of FSS families who, as a 
result of participation in the program, have family members who obtain 
their first job, or who obtain higher paying jobs; no longer need 
benefits received under one or more welfare programs; obtain a high 
school diploma or higher education degree; or accomplish similar goals 
that will assist the family in obtaining economic independence.



Sec. 984.103  Definitions.

    (a) The terms 1937 Act, Fair Market Rent, HUD, Indian Housing 
Authority (IHA), Public Housing Agency (PHA), Secretary, and Section 8, 
as used in this part, are defined in 24 CFR 5.100.
    (b) As used in this part:
    Certification means a written assertion based on supporting 
evidence, provided by the FSS family or the HA, as may be required under 
this part, and which:
    (1) Shall be maintained by the HA in the case of the family's 
certification, or by HUD in the case of the HA's certification;
    (2) Shall be made available for inspection by HUD, the HA, and the 
public, as appropriate; and
    (3) Shall be deemed to be accurate for purposes of this part, unless 
the Secretary or the HA, as applicable, determines otherwise after 
inspecting the evidence and providing due notice and opportunity for 
comment.
    Chief executive officer (CEO). The CEO of a unit of general local 
government means the elected official or the legally designated 
official, who has the primary responsibility for the conduct of that 
entity's governmental affairs. The CEO for an Indian tribe is the tribal 
governing official.
    Contract of participation means a contract in a form approved by 
HUD, entered into between a participating family and an HA operating an 
FSS program that sets forth the terms and conditions governing 
participation in the FSS program. The contract of participation includes 
all individual training and services plans entered into between the HA 
and all members of the family who will participate in the FSS program, 
and which plans are attached to the contract of participation as 
exhibits. For additional detail, see Sec. 984.303 of this subpart A.
    Earned income means income or earnings included in annual income 
from wages, tips, salaries, other employee compensation, and self-
employment. (See 24 CFR 813.106(b)(1), (2) and (8) and 913.106(b)(1), 
(2) and (8).) Earned income

[[Page 614]]

does not include any pension or annuity, transfer payments, any cash or 
in-kind benefits, or funds deposited in or accrued interest on the FSS 
escrow account established by an HA on behalf of a participating family.
    Effective date of contract of participation means the first day of 
the month following the month in which the FSS family and the HA entered 
into the contract of participation.
    Eligible families means:
    (1) For the public housing FSS program, current residents of public 
housing. Eligible families also include current residents of public 
housing who are participants in local public housing self-sufficiency 
programs; and
    (2) For Section 8 FSS program, current Section 8 rental certificate 
or rental voucher program participants, including participants in the 
Project Self-Sufficiency or Operation Bootstrap or other local self-
sufficiency programs.
    Enrollment means the date that the FSS family entered into the 
contract of participation with the HA.
    Family Self-Sufficiency program or FSS program means the program 
established by an HA within its jurisdiction to promote self-sufficiency 
among participating families, including the provision of supportive 
services to these families, as authorized by section 23 of the 1937 Act.
    FSS account means the FSS escrow account authorized by section 23 of 
the 1937 Act, and as provided by Sec. 984.305 of this subpart A.
    FSS credit means the amount credited by the HA to the participating 
family's FSS account.
    FSS family or participating family means a family that resides in 
public housing or receives assistance under the rental certificate or 
rental voucher programs, and that elects to participate in the FSS 
program, and whose designated head of the family has signed the contract 
of participation.
    FSS related service program means any program, publicly or privately 
sponsored, that offers the kinds of supportive services described in the 
definition of ``supportive services'' set forth in this Sec. 984.103.
    FSS slots refer to the total number of public housing units or the 
total number of rental certificates or rental vouchers that comprise the 
minimum size of an HA's respective public housing FSS program or Section 
8 FSS program.
    FY means Federal Fiscal Year (starting with October 1, and ending 
September 30, and designated by the calendar year in which it ends).
    HA means a Housing Authority--either a Public Housing Agency (PHA) 
or an Indian Housing Authority (IHA).
    Head of FSS family means the adult member of the FSS family who is 
the head of the household for purposes of determining income eligibility 
and rent.
    Housing subsidies means assistance to meet the costs and expenses of 
temporary shelter, rental housing or homeownership, including rent, 
mortgage or utility payments.
    Individual training and services plan means a written plan that is 
prepared for the head of the FSS family, and each adult member of the 
FSS family who elects to participate in the FSS program, by the HA in 
consultation with the family member, and which sets forth:
    (1) The supportive services to be provided to the family member;
    (2) The activities to be completed by that family member; and
    (3) The agreed upon completion dates for the services and 
activities. Each individual training and services plan must be signed by 
the HA and the participating family member, and is attached to, and 
incorporated as part of the contract of participation. An individual 
training and services plan must be prepared for the head of the FSS 
family.
    JOBS Program means the Job Opportunities and Basic Skills Training 
Program authorized under part F of title IV of the Social Security Act 
(42 U.S.C. 402(a)(19)).
    JTPA means the Job Training Partnership Act (29 U.S.C. 1579(a)).
    Low-income family. See definitions in 24 CFR 813.102 and 913.102.
    Participating family. See definition for ``FSS family'' in this 
section.
    Program Coordinating Committee or PCC is the committee described in 
Sec. 984.202 of this part.

[[Page 615]]

    Public housing means housing assisted under the 1937 Act, excluding 
housing assisted under Section 8 of the 1937 Act.
    Self-sufficiency means that an FSS family is no longer receiving 
Section 8, public or Indian housing assistance, or any Federal, State, 
or local rent or homeownership subsidies or welfare assistance. 
Achievement of self-sufficiency, although an FSS program objective, is 
not a condition for receipt of the FSS account funds. (See Sec. 984.305 
of this part.)
    Supportive services means those appropriate services that an HA will 
make available, or cause to be made available to an FSS family under a 
contract of participation, and may include:
    (1) Child care--child care of a type that provides sufficient hours 
of operation and serves an appropriate range of ages;
    (2) Transportation--transportation necessary to enable a 
participating family to receive available services, or to commute to 
their places of employment;
    (3) Education-- remedial education; education for completion of 
secondary or post secondary schooling;
    (4) Employment--job training, preparation, and counseling; job 
development and placement; and follow-up assistance after job placement 
and completion of the contract of participation;
    (5) Personal welfare--substance/alcohol abuse treatment and 
counseling;
    (6) Household skills and management--training in homemaking and 
parenting skills; household management; and money management;
    (7) Counseling--counseling in the areas of:
    (i) The responsibilities of homeownership;
    (ii) Opportunities available for affordable rental and homeownership 
in the private housing market, including information on an individual's 
rights under the Fair Housing Act; and
    (iii) Money management; and
    (8) Other services--any other services and resources, including case 
management, reasonable accommodations for individuals with disabilities, 
that the HA may determine to be appropriate in assisting FSS families to 
achieve economic independence and self-sufficiency.
    Unit size or size of unit refers to the number of bedrooms in a 
dwelling unit.
    Very low-income family. See definitions in 24 CFR 813.102 and 
913.102.
    Welfare assistance means income assistance from Federal or State 
welfare programs, and includes assistance provided under the Aid to 
Families with Dependent Children (AFDC) Program, Supplemental Security 
Income (SSI) that is subject to an income eligibility test; Medicaid, 
food stamps, general assistance, or other assistance provided under a 
Federal or State program directed to meeting general living expenses, 
such as food, health care, child care, but does not include assistance 
solely directed to meeting housing expenses, and does not include 
transitional welfare assistance provided to JOBS participants.



Sec. 984.104  Basic requirements of the FSS program.

    An FSS program established under this part shall be operated in 
conformity with:
    (a) The regulations of this part, and for a Section 8 FSS program, 
the rental certificate and rental voucher regulations, codified in 24 
CFR parts 882, 887, and 982 respectively, and for a public housing FSS 
program, the applicable public housing regulations, including the 
regulations in 24 CFR parts 913, 960, and 966;
    (b) An Action Plan, as described in Sec. 984.201, and provide 
comprehensive supportive services as defined in Sec. 984.103; and
    (c) An FSS program established under this part shall be operated in 
compliance with the nondiscrimination and equal opportunity requirements 
set forth in 24 CFR part 5, with the exception of Executive Orders 
11246, 11625, 12432, and 12138.



Sec. 984.105  Minimum program size.

    (a) General. Unless otherwise excepted from operation of an FSS 
program as provided in paragraph (c) of this section, or from operation 
of an FSS program of the minimum size as

[[Page 616]]

provided in paragraph (d) of this section, an HA shall operate an FSS 
program of the minimum size as determined in this section.
    (1) Determining minimum program size. The minimum size of a FSS 
program:
    (i) For a public housing FSS program, is equal to:
    (A) The total number of public housing units reserved in FY 1993, 
and each subsequent FY; plus (if applicable)
    (B) The number of public housing units reserved in FY 1991 and FY 
1992 under the FSS incentive award competitions;
    (ii) For a Section 8 FSS program, is equal to:
    (A) The total number of rental certificates and rental vouchers 
reserved in FY 1993, and each subsequent FY; plus (if applicable)
    (B) The number of rental certificates and rental vouchers reserved 
under the combined FY 1991/1992 FSS incentive award competition.
    (2) Applicable units and certificates and vouchers. In determining 
minimum program size, for a public housing FSS program, all new public 
housing rental units reserved will be counted and, for a Section 8 FSS 
program, all rental certificates and rental vouchers reserved will be 
counted, except those used to replace rental certificates or rental 
vouchers (renewals).
    (b) Maintaining minimum program size. As the contracts of 
participation for FSS families are completed or terminated, replacement 
FSS families must be selected to maintain the minimum program size. A 
replacement family must be selected in accordance with the FSS family 
selection procedures set forth in Sec. 984.203.
    (c) Exception to program operation. (1) Upon approval by HUD, an HA 
will not be required to establish and carry out a public housing or a 
Section 8 FSS program if the HA provides to HUD a certification, as 
defined in Sec. 984.103, that the establishment and operation of such an 
FSS program is not feasible because of local circumstances, which may 
include, but are not limited to:
    (i) Lack of accessible supportive services funding, including lack 
of the availability of programs under JTPA or JOBS;
    (ii) Lack of funding for reasonable administrative costs;
    (iii) Lack of cooperation by other units of State or local 
government; or
    (iv) Lack of interest in participating in the FSS program on the 
part of eligible families.
    (2) An exception will not be granted if HUD determines that local 
circumstances do not preclude the HA from effectively operating an FSS 
program that is smaller than the minimum program size.
    (d) Reduction in program size. Upon approval by HUD, an HA may be 
permitted to operate a public housing or a Section 8 FSS program that is 
smaller than the minimum program size if the HA provides to HUD a 
certification, as defined in Sec. 984.103, that the operation of an FSS 
program of the minimum program size is not feasible because of local 
circumstances, which may include, but are not limited to:
    (1) Decrease in or lack of accessible supportive services, including 
decrease in the availability of programs under JTPA or JOBS;
    (2) Decrease in or lack of funding for reasonable administrative 
costs;
    (3) Decrease in or lack of cooperation by other units of State or 
local government;
    (4) Decrease in or lack of interest in participating in the FSS 
program on the part of eligible families.
    (e) Review of certification records. HUD reserves the right to 
examine, during its management review of the HA, or at any time, the 
documentation and data that an HA relied on in certifying to the 
unfeasibility of its establishing and operating an FSS program, or of 
operating an FSS program of less than minimum program size.



         Subpart B--Program Development and Approval Procedures



Sec. 984.201  Action Plan.

    (a) Requirement for Action Plan--(1) General. To participate in the 
FSS program, an HA must have a HUD-approved Action Plan that complies 
with the requirements of this section.
    (2) [Reserved]
    (b) Development of Action Plan. The Action Plan shall be developed 
by the

[[Page 617]]

HA in consultation with the chief executive officer of the applicable 
unit of general local government, and the Program Coordinating 
Committee.
    (c) Initial submission and revisions--(1) Initial submission. Unless 
the dates set forth in this paragraph (c) are extended by HUD for good 
cause, an HA that is establishing its first FSS program must submit an 
Action Plan to HUD for approval within 90 days of notification by HUD of 
approval of:
    (i) The HA's application for incentive award units; or
    (ii) If the HA did not apply for FSS incentive award units, other 
funding that establishes the obligation to operate an FSS program.
    (2) Revision. Following initial approval of the Action Plan by HUD, 
no further approval of the Action Plan is required unless the HA 
proposes to make policy changes to the Action Plan, or changes are 
required by HUD. Any changes to the Action Plan must be submitted to, 
and approved by, HUD.
    (d) Contents of Plan. The Action Plan shall describe the policies 
and procedures of the HA for operation of a local FSS program, and shall 
contain, at a minimum, the following information:
    (1) Family demographics. A description of the number, size, 
characteristics, and other demographics (including racial and ethnic 
data), and the supportive service needs of the families expected to 
participate in the FSS program;
    (2) Estimate of participating families. A description of the number 
of eligible FSS families who can reasonably be expected to receive 
supportive services under the FSS program, based on available and 
anticipated Federal, tribal, State, local, and private resources;
    (3) Eligible families from other self-sufficiency program. If 
applicable, the number of families, by program type, who are 
participating in Operation Bootstrap, Project Self-Sufficiency, or any 
other local self-sufficiency program who are expected to agree to 
execute an FSS contract of participation.
    (4) FSS family selection procedures. A statement indicating the 
procedures to be utilized to select families for participation in the 
FSS program, subject to the requirements governing the selection of FSS 
families, set forth in Sec. 984.203. This statement must include a 
description of how the HA's selection procedures ensure that families 
will be selected without regard to race, color, religion, sex, handicap, 
familial status, or national origin.
    (5) Incentives to encourage participation--a description of the 
incentives that the HA intends to offer eligible families to encourage 
their participation in the FSS program (incentives plan). The incentives 
plan shall provide for the establishment of the FSS account in 
accordance with the requirements set forth in Sec. 984.305, and other 
incentives, if any, designed by the HA. The incentives plan shall be 
part of the Action Plan.
    (6) Outreach efforts. A description of:
    (i) The HA's efforts, including notification and outreach efforts, 
to recruit FSS participants from among eligible families; and
    (ii) The HA's actions to be taken to assure that both minority and 
non-minority groups are informed about the FSS program, and how the HA 
will make this information known.
    (7) FSS activities and supportive services. A description of the 
activities and supportive services to be provided by both public and 
private resources to FSS families, and identification of the public and 
private resources which are expected to provide the supportive services.
    (8) Method for identification of family support needs. A description 
of how the FSS program will identify the needs and deliver the services 
and activities according to the needs of the FSS families;
    (9) Program termination; withholding of services; and available 
grievance procedures. A description of the HA's policies concerning: 
terminating participation in the FSS program, withholding of supportive 
services, or terminating or withholding Section 8 assistance, on the 
basis of a family's failure to comply with the requirements of the 
contract of participation; and the grievance and hearing procedures 
available for FSS families.
    (10) Assurances of non-interference with rights of non-participating 
families. An assurance that a family's election not to participate in 
the FSS program will not affect the family's admission to

[[Page 618]]

public housing or to the Section 8 program or the family's right to 
occupancy in accordance with its lease.
    (11) Timetable for program implementation. A timetable for 
implementation of the FSS program, as provided in Sec. 984.301(a)(1), 
including the schedule for filling FSS slots with eligible FSS families, 
as provided in Sec. 984.301;
    (12) Certification of coordination. A certification that development 
of the services and activities under the FSS program has been 
coordinated with the JOBS Program; the programs provided under the JTPA; 
and any other relevant employment, child care, transportation, training, 
and education programs (e.g., Job Training for the Homeless 
Demonstration program) in the applicable area, and that implementation 
will continue to be coordinated, in order to avoid duplication of 
services and activities; and
    (13) Optional additional information. Such other information that 
would help HUD determine the soundness of the HA's proposed FSS program.
    (e) Eligibility of a combined program. An HA that wishes to operate 
a joint FSS program with other HAs may combine its resources with one or 
more HAs to deliver supportive services under a joint Action Plan that 
will provide for the establishment and operation of a combined FSS 
program that meets the requirements of this part.
    (f) Single action plan. HAs implementing both a Section 8 FSS 
program and a public or Indian housing FSS program may submit one Action 
Plan.



Sec. 984.202  Program Coordinating Committee (PCC).

    (a) General. Each participating HA must establish a PCC whose 
functions will be to assist the HA in securing commitments of public and 
private resources for the operation of the FSS program within the HA's 
jurisdiction, including assistance in developing the Action Plan and in 
implementing the program.
    (b) Membership--(1) Required membership. The PCC must: (i) For a 
public housing FSS program, consist of representatives of the PHA, and 
the residents of public housing. The public housing resident 
representatives shall be solicited from one or more of the following 
groups:
    (A) An area-wide or city-wide resident council, if one exists;
    (B) If the PHA will be transferring FSS participants to vacant units 
in a specific public housing development, the resident council or 
resident management corporation, if one exists, of the public housing 
development where the public housing FSS program is to be carried out;
    (C) Any other public housing resident group, which the PHA believes 
is interested in the FSS program, and would contribute to the 
development and implementation of the FSS program; and
    (ii) For a Section 8 FSS program, consist of representatives of the 
HA, and of residents assisted under the section 8 rental certificate or 
rental voucher program or under HUD's public or Indian housing programs.
    (2) Recommended membership. Membership on the PCC also may include 
representatives of the unit of general local government served by the 
HA, local agencies (if any) responsible for carrying out JOBS training 
programs, or programs under the JTPA, and other organizations, such as 
other State, local or tribal welfare and employment agencies, public and 
private education or training institutions, child care providers, 
nonprofit service providers, private business, and any other public and 
private service providers with resources to assist the FSS program.
    (c) Alternative committee. The HA may, in consultation with the 
chief executive officer of the unit of general local government served 
by the HA, utilize an existing entity as the PCC if the membership of 
the existing entity consists or will consist of the individuals 
identified in paragraph (b)(1) of this section, and also includes 
individuals from the same or similar organizations identified in 
paragraph (b)(2) of this section.



Sec. 984.203  FSS family selection procedures.

    (a) Preference in the FSS selection process. An HA has the option of 
giving a selection preference for up to 50 percent of its public housing 
FSS slots and of its Section 8 FSS slots respectively to eligible 
families, as defined in

[[Page 619]]

Sec. 984.103, who have one or more family members currently enrolled in 
an FSS related service program or on the waiting list for such a 
program. The HA may limit the selection preference given to participants 
in and applicants for FSS related service programs to one or more 
eligible FSS related service programs. An HA that chooses to exercise 
the selection preference option must include the following information 
in its Action Plan:
    (1) The percentage of FSS slots, not to exceed 50 percent of the 
total number of FSS slots for each of its FSS programs, for which it 
will give a selection preference;
    (2) The FSS related service programs to which it will give a 
selection preference to the programs' participants and applicants; and
    (3) The method of outreach to, and selection of, families with one 
or more members participating in the identified programs.
    (b) FSS selection without preference. For those FSS slots for which 
the HA chooses not to exercise the selection preference provided in 
paragraph (a) of this section, the FSS slots must be filled with 
eligible families in accordance with an objective selection system, such 
as a lottery, the length of time living in subsidized housing, or the 
date the family expressed an interest in participating in the FSS 
program. The objective system to be used by the HA must be described in 
the HA's Action Plan.
    (c) Motivation as a selection factor--(1) General. An HA may screen 
families for interest, and motivation to participate in the FSS program, 
provided that the factors utilized by the HA are those which solely 
measure the family's interest, and motivation to participate in the FSS 
program.
    (2) Permissible motivational screening factors. Permitted 
motivational factors include requiring attendance at FSS orientation 
sessions or preselection interviews, and assigning certain tasks which 
indicate the family's willingness to undertake the obligations which may 
be imposed by the FSS contract of participation. However, any tasks 
assigned shall be those which may be readily accomplishable by the 
family, based on the family members' educational level, and 
disabilities, if any. Reasonable accommodations must be made for 
individuals with mobility, manual, sensory, speech impairments, mental 
or developmental disabilities.
    (3) Prohibited motivational screening factors. Prohibited 
motivational screening factors include the family's educational level, 
educational or standardized motivational test results, previous job 
history or job performance, credit rating, marital status, number of 
children, or other factors, such as sensory or manual skills, and any 
factors which may result in discriminatory practices or treatment toward 
individuals with disabilities or minority or non-minority groups.



Sec. 984.204  On-site facilities.

    Each HA may, subject to the approval of HUD, make available and 
utilize common areas or unoccupied dwelling units in public housing 
projects (or for IHAs, in Indian housing projects) to provide supportive 
services under an FSS program, including a Section 8 FSS program.



                      Subpart C--Program Operation



Sec. 984.301  Program implementation.

    (a) Program implementation deadline--(1) Program start-up. Except as 
provided in paragraph (a)(3) of this section, operation of a local FSS 
program must begin within 12 months of the earlier of notification to 
the HA of HUD's approval of the incentive award units or of other 
funding that establishes the obligation to operate an FSS program. 
Operation means that activities such as outreach, participant selection, 
and enrollment have begun. Full delivery of the supportive services to 
be provided to the total number of families required to be served under 
the program need not occur within 12 months, but must occur by the 
deadline set forth in paragraph (a)(2) of this section.
    (2) Full enrollment and delivery of service. Except as provided in 
paragraph (a)(3) of this section, the HA must have completed enrollment 
of the total number of families required to be served under the FSS 
program (based on the minimum program size), and must have begun 
delivery of the supportive services within two years from

[[Page 620]]

the date of notification of approval of the application for new public 
housing units for a public housing FSS program or for new rental 
certificates or rental vouchers for a Section 8 FSS program.
    (3) Extension of program deadlines for good cause. HUD may extend 
the deadline set forth in either paragraph (a)(1) or paragraph (a)(2) of 
this section if the HA requests an extension, and HUD determines that, 
despite best efforts on the part of the HA, the development of new 
public housing units will not occur within the deadlines set forth in 
this paragraph (a), the commitment by public or private resources to 
deliver supportive services has been withdrawn, the delivery of such 
services has been delayed, or other local circumstances warrant an 
extension of the deadlines set forth in this paragraph (a).
    (b) Program administration. An HA may employ appropriate staff, 
including a service coordinator or program coordinator to administer its 
FSS program, and may contract with an appropriate organization to 
establish and administer the FSS program, including the FSS account, as 
provided by Sec. 984.305.



Sec. 984.302  Administrative fees.

    (a) Public housing FSS program. The performance funding system 
(PFS), provided under section 9(a) of the 1937 Act, shall provide for 
the inclusion of reasonable and eligible administrative costs incurred 
by PHAs in carrying out the minimum program size of the public housing 
FSS programs. These costs are subject to appropriations by the Congress. 
However, a PHA may use other resources for this purpose.
    (b) Section 8 FSS program. The administrative fees paid to HAs for 
HUD-approved costs associated with operation of an FSS program are 
established by the Congress and subject to appropriations.



Sec. 984.303  Contract of participation.

    (a) General. Each family that is selected to participate in an FSS 
program must enter into a contract of participation with the HA that 
operates the FSS program in which the family will participate. The 
contract of participation shall be signed by the head of the FSS family.
    (b) Form and content of contract--(1) General. The contract of 
participation, which incorporates the individual training and services 
plan(s), shall be in the form prescribed by HUD, and shall set forth the 
principal terms and conditions governing participation in the FSS 
program, including the rights and responsibilities of the FSS family and 
of the HA, the services to be provided to, and the activities to be 
completed by, the head of the FSS family and each adult member of the 
family who elects to participate in the program.
    (2) Interim goals. The individual training and services plan, 
incorporated in the contract of participation, shall establish specific 
interim and final goals by which the HA, and the family, may measure the 
family's progress toward fulfilling its obligations under the contract 
of participation, and becoming self-sufficient. For each participating 
FSS family that is a recipient of welfare assistance, the HA must 
establish as an interim goal that the family become independent from 
welfare assistance and remain independent from welfare assistance at 
least one year before the expiration of the term of the contract of 
participation, including any extension thereof.
    (3) Compliance with lease terms. The contract of participation shall 
provide that one of the obligations of the FSS family is to comply with 
the terms and conditions of the respective public housing lease or 
Section 8-assisted lease.
    (4) Employment obligation--(i) Head of family's obligation. The head 
of the FSS family shall be required under the contract of participation 
to seek and maintain suitable employment during the term of the contract 
and any extension thereof. Although other members of the FSS family may 
seek and maintain employment during the term of the contract, only the 
head of the FSS family is required to seek and maintain suitable 
employment.
    (ii) Seek employment. The obligation to seek employment means that 
the head of the FSS family has applied for employment, attended job 
interviews, and has otherwise followed through on employment 
opportunities.

[[Page 621]]

    (iii) Determination of suitable employment. A determination of 
suitable employment shall be made by the HA based on the skills, 
education, and job training of the individual that has been designated 
the head of the FSS family, and based on the available job opportunities 
within the jurisdiction served by the HA.
    (5) Consequences of noncompliance with the contract. The contract of 
participation shall specify that if the FSS family fails to comply, 
without good cause, with the terms and conditions of the contract of 
participation, which includes compliance with the public housing lease 
or the Section 8-assisted lease, the HA may:
    (i) Withhold the supportive services;
    (ii) Terminate the family's participation in the FSS program; or
    (iii) For the Section 8 FSS program, terminate or withhold the 
family's Section 8 assistance, except in the case where the only basis 
for noncompliance with the contract of participation is noncompliance 
with the lease, or failure to become independent from welfare 
assistance. However, failure to become independent from welfare 
assistance because of failure of the head of household to meet the 
employment obligation described in paragraph (a)(4) of this section, or 
failure of the FSS family to meet any other obligation under the 
contract of participation, except the interim goal concerning welfare 
assistance, is grounds for the HA to terminate or withhold Section 8 
assistance.
    (c) Contract term. The contract of participation shall provide that 
each FSS family will be required to fulfill those obligations to which 
the participating family has committed itself under the contract of 
participation no later than 5 years after the effective date of the 
contract.
    (d) Contract extension. The HA shall, in writing, extend the term of 
the contract of participation for a period not to exceed two years for 
any FSS family that requests, in writing, an extension of the contract, 
provided that the HA finds that good cause exists for granting the 
extension. The family's written request for an extension must include a 
description of the need for the extension. As used in this paragraph 
(d), ``good cause'' means circumstances beyond the control of the FSS 
family, as determined by the HA, such as a serious illness or 
involuntary loss of employment. Extension of the contract of 
participation will entitle the FSS family to continue to have amounts 
credited to the family's FSS account in accordance with Sec. 984.304.
    (e) Unavailability of supportive services--(1) Good faith effort to 
replace unavailable services. If a social service agency fails to 
deliver the supportive services pledged under an FSS family member's 
individual training and services plan, the HA shall make a good faith 
effort to obtain these services from another agency.
    (2) Assessment of necessity of services. If the HA is unable to 
obtain the services from another agency, the HA shall reassess the 
family member's needs, and determine whether other available services 
would achieve the same purpose. If other available services would not 
achieve the same purpose, the HA shall determine whether the unavailable 
services are integral to the FSS family's advancement or progress toward 
self-sufficiency. If the unavailable services are:
    (i) Determined not to be integral to the FSS family's advancement 
toward self-sufficiency, the HA shall revise the individual training and 
services plan to delete these services, and modify the contract of 
participation to remove any obligation on the part of the FSS family to 
accept the unavailable services, in accordance with paragraph (f) of 
this section; or
    (ii) Determined to be integral to the FSS family's advancement 
toward self-sufficiency (which may be the case if the affected family 
member is the head of the FSS family), the HA shall declare the contract 
of participation null and void. Nullification of the contract of 
participation on the basis of unavailability of supportive services 
shall not be grounds for termination of Section 8 assistance.
    (f) Modification. The HA and the FSS family may mutually agree to 
modify the contract of participation. The contract of participation may 
be modified in writing with respect to the individual training and 
services plans, the

[[Page 622]]

contract term in accordance with paragraph (d) of this section, and 
designation of the head of the family.
    (g) Completion of the contract. The contract of participation is 
considered to be completed, and a family's participation in the FSS 
program is considered to be concluded when one of the following occurs:
    (1) The FSS family has fulfilled all of its obligations under the 
contract of participation on or before the expiration of the contract 
term, including any extension thereof; or
    (2) 30 percent of the monthly adjusted income of the FSS family 
equals or exceeds the published existing housing fair market rent for 
the size of the unit for which the FSS family qualifies based on the 
HA's occupancy standards. The contract of participation will be 
considered completed and the family's participation in the FSS program 
concluded on this basis even though the contract term, including any 
extension thereof, has not expired, and the family members who have 
individual training and services plans have not completed all the 
activities set forth in their plans.
    (h) Termination of the contract. The contract of participation is 
automatically terminated if the family's Section 8 assistance is 
terminated in accordance with HUD requirements. The contract of 
participation may be terminated before the expiration of the contract 
term, and any extension thereof, by:
    (1) Mutual consent of the parties;
    (2) The failure of the FSS family to meet its obligations under the 
contract of participation without good cause, including in the Section 8 
FSS program the failure to comply with the contract requirements because 
the family has moved outside the jurisdiction of the HA;
    (3) The family's withdrawal from the FSS program;
    (4) Such other act as is deemed inconsistent with the purpose of the 
FSS program; or
    (5) Operation of law.
    (i) Option to terminate Section 8 housing and supportive service 
assistance. The HA may terminate or withhold Section 8 housing 
assistance, the supportive services, and the FSS family's participation 
in the FSS program, if the HA determines, in accordance with the hearing 
procedures provided in 24 CFR 982.555 that the FSS family has failed to 
comply without good cause with the requirements of the contract of 
participation as provided in paragraph (b)(5) of this section.
    (j) Transitional supportive service assistance. An HA may continue 
to offer to a former FSS family who has completed its contract of 
participation and whose head of family is employed, appropriate FSS 
supportive services in becoming self-sufficient (if the family still 
resides in public housing, or Section 8-assisted housing), or in 
remaining self-sufficient (if the family no longer resides in public, 
Section 8-assisted housing, or other assisted housing).



Sec. 984.304  Total tenant payment, family rent, and increases in family income.

    (a)(1) Public housing FSS program: Calculation of total tenant 
payment. Total tenant payment for a family participating in the public 
housing FSS program is determined in accordance with the regulations set 
forth in 24 CFR part 913.
    (2) Section 8 FSS program: Calculation of family rent. For the 
rental certificate program, total tenant payment for a family 
participating in the Section 8 FSS program and the amount of the housing 
assistance payment is determined in accordance with the regulations set 
forth in subpart F of 24 CFR part 5, and subpart K of 24 CFR part 982. 
For the rental voucher program, the housing assistance payment for a 
family participating in the FSS program is determined in accordance with 
the regulations set forth in 24 CFR Sec. 982.505.
    (b) Increases in FSS family income. Any increase in the earned 
income of an FSS family during its participation in an FSS program may 
not be considered as income or a resource for purposes of eligibility of 
the FSS family for other benefits, or amount of benefits payable to the 
FSS family, under any other program administered by HUD, unless the 
income of the FSS family equals or exceeds 80 percent of the median 
income of the area (as determined by

[[Page 623]]

HUD, with adjustments for smaller and larger families).

[61 FR 8815, Mar. 5, 1996, as amended at 64 FR 13057, Mar. 16, 1999]

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, in Sec. 984.304 
paragraph (a)(2) was amended in the first sentence by removing the 
phrase ``in accordance with regulations set forth in 24 CFR parts 813 
and 882.'' and inserting in its place the phrase ``in accordance with 
the regulations set forth in subpart F of 24 CFR part 5, and subpart K 
of 24 CFR part 982.''; and in the second sentence by removing the phrase 
``in accordance with the regulations set forth in 24 CFR part 887.'' and 
inseting in its place the phrase ``in accordance with the regulations 
set forth in 24 CFR Sec. 982.505.''effective Apr. 15, 1999.



Sec. 984.305  FSS account.

    (a) Establishment of FSS account--(1) General. The HA shall deposit 
the FSS account funds of all families participating in the HA's FSS 
program into a single depository account. The HA must deposit the FSS 
account funds in one or more of the HUD-approved investments.
    (2) Accounting for FSS account funds--(i) Accounting records. The 
total of the combined FSS account funds will be supported in the HA 
accounting records by a subsidiary ledger showing the balance applicable 
to each FSS family. During the term of the contract of participation, 
the HA shall credit periodically, but not less than annually, to each 
family's FSS account, the amount of the FSS credit determined in 
accordance with paragraph (b) of this section.
    (ii) Proration of investment income. The investment income for funds 
in the FSS account will be prorated and credited to each family's FSS 
account based on the balance in each family's FSS account at the end of 
the period for which the investment income is credited.
    (iii) Reduction of amounts due by FSS family. If the FSS family has 
not paid the family contribution towards rent, or other amounts, if any, 
due under the public housing or section 8-assisted lease, the balance in 
the family's FSS account shall be reduced by that amount (as reported by 
the owner to the HA in the Section 8 FSS program) before prorating the 
interest income. If the FSS family has fraudulently under-reported 
income, the amount credited to the FSS account will be based on the 
income amounts originally reported by the FSS family.
    (3) Reporting on FSS account. Each HA will be required to make a 
report, at least once annually, to each FSS family on the status of the 
family's FSS account. At a minimum, the report will include:
    (i) The balance at the beginning of the reporting period;
    (ii) The amount of the family's rent payment that was credited to 
the FSS account, during the reporting period;
    (iii) Any deductions made from the account for amounts due the HA 
before interest is distributed;
    (iv) The amount of interest earned on the account during the year; 
and
    (v) The total in the account at the end of the reporting period.
    (b) FSS credit--(1) Computation of amount. For purposes of 
determining the FSS credit, ``family rent'' is: for the public housing 
program, the total tenant payment as defined in 24 CFR subpart F of 24 
CFR part 5; for the rental certificate program, the total tenant payment 
as defined in 24 CFR subpart F of 24 CFR part 5; and for the rental 
voucher program, 30 percent of adjusted monthly income. The FSS credit 
shall be computed as follows:
    (i) For FSS families who are very low-income families, the FSS 
credit shall be the amount which is the lesser of:
    (A) Thirty percent of current monthly adjusted income less the 
family rent, which is obtained by disregarding any increases in earned 
income (as defined in Sec. 984.103) from the effective date of the 
contract of participation; or
    (B) The current family rent less the family rent at the time of the 
effective date of the contract of participation.
    (ii) For FSS families who are low-income families but not very low-
income families, the FSS credit shall be the amount determined according 
to paragraph (b)(1)(i) of this section, but which shall not exceed the 
amount computed for 50 percent of median income.
    (2) Ineligibility for FSS credit. FSS families who are not low-
income families shall not be entitled to any FSS credit.

[[Page 624]]

    (3) Cessation of FSS credit. The HA shall not make any additional 
credits to the FSS family's FSS account when the FSS family has 
completed the contract of participation, as defined in Sec. 984.303(g), 
or when the contract of participation is terminated or otherwise 
nullified.
    (c) Disbursement of FSS account funds--(1) General. The amount in an 
FSS account, in excess of any amount owed to the HA by the FSS family, 
as provided in paragraph (a)(3)(iii) of this section, shall be paid to 
the head of the FSS family when the contract of participation has been 
completed as provided in Sec. 984.303(g), and if, at the time of 
contract completion, the head of the FSS family submits to the HA a 
certification, as defined in Sec. 984.103, that, to the best of his or 
her knowledge and belief, no member of the FSS family is a recipient of 
welfare assistance.
    (2) Disbursement before expiration of contract term. (i) If the HA 
determines that the FSS family has fulfilled its obligations under the 
contract of participation before the expiration of the contract term, 
and the head of the FSS family submits a certification that, to the best 
of his or her knowledge, no member of the FSS family is a recipient of 
welfare assistance, the amount in the family's FSS account, in excess of 
any amount owed to the HA by the FSS family, as provided in paragraph 
(a)(3)(iii) of this section, shall be paid to the head of the FSS 
family.
    (ii) If the HA determines that the FSS family has fulfilled certain 
interim goals established in the contract of participation and needs a 
portion of the FSS account funds for purposes consistent with the 
contract of participation, such as completion of higher education (i.e., 
college, graduate school), or job training, or to meet start-up expenses 
involved in creation of a small business, the HA may, at the HA's sole 
option, disburse a portion of the funds from the family's FSS account to 
assist the family meet those expenses.
    (3) Verification of family certification. Before disbursement of the 
FSS account funds to the family, the HA may verify that the FSS family 
is no longer a recipient of welfare assistance by requesting copies of 
any documents which may indicate whether the family is receiving any 
welfare assistance, and contacting welfare agencies.
    (d) Succession to FSS account. If the head of the FSS family ceases 
to reside with other family members in the public housing or the Section 
8-assisted unit, the remaining members of the FSS family, after 
consultation with the HA, shall have the right to designate another 
family member to receive the funds in accordance with paragraph (c) (1) 
or (2) of this section.
    (e) Use of FSS account funds for homeownership. A public housing FSS 
family may use its FSS account funds for the purchase of a home, 
including the purchase of a home under one of HUD's homeownership 
programs, or other Federal, State, or local homeownership programs 
unless such use is prohibited by the statute or regulations governing 
the particular homeownership program.
    (f) Forfeiture of FSS account funds--(1) Conditions for forfeiture. 
Amounts in the FSS account shall be forfeited upon the occurrence of the 
following:
    (i) The contract of participation is terminated, as provided in 
Sec. 984.303(e) or Sec. 984.303(h); or
    (ii) The contract of participation is completed by the family, as 
provided in Sec. 984.303(g), but the FSS family is receiving welfare 
assistance at the time of expiration of the term of the contract of 
participation, including any extension thereof.
    (2) Treatment of forfeited FSS account funds--(i) Public housing FSS 
program. FSS account funds forfeited by the FSS family will be credited 
to the PHA's operating reserves and counted as other income in the 
calculation of the PFS operating subsidy eligibility for the next budget 
year.
    (ii) Section 8 FSS program. FSS account funds forfeited by the FSS 
family will be treated as program receipts for payment of program 
expenses under the HA budget for the applicable Section 8 program, and 
shall be used in accordance with HUD requirements governing the use of 
program receipts.

[61 FR 8815, Mar. 5, 1996, as amended at 64 FR 13057, Mar. 16, 1999]

    Effective Date Note: At 64 FR 13057, Mar. 16, 1999, in Sec. 984.305, 
paragraph (b)(1) was amended by removing the phrases ``part 913''

[[Page 625]]

and ``part 813'', and inserting in their place the phrase ``subpart F of 
24 CFR part 5'', effective Apr. 15, 1999.



Sec. 984.306  Section 8 residency and portability requirements.

    (a) Relocating FSS family. For purposes of this section, the term 
``relocating FSS family'' refers to an FSS family that moves from the 
jurisdiction of an HA at least 12 months after signing its contract of 
participation.
    (b) Initial occupancy. A family participating in the Section 8 FSS 
program must lease an assisted unit, for a minimum period of 12 months 
after the effective date of the contract of participation, in the 
jurisdiction of the HA which selected the family for the FSS program. 
Thereafter, the FSS family may move outside the jurisdiction of the 
initial HA consistent with the regulations of 24 CFR part 982.
    (c) Portability: relocation but continued participation in the FSS 
program of the initial HA--(1) General. A relocating FSS family may 
continue in the FSS program of the initial HA if the family demonstrates 
to the satisfaction of the initial HA that, notwithstanding the move, 
the relocating FSS family will be able to fulfill its responsibilities 
under the initial or modified contract of participation at its new place 
of residence. (For example, the FSS family may be able to commute to the 
supportive services specified in the contract of participation, or the 
family may move to obtain employment as specified in the contract.)
    (2) Single contract of participation. If the relocating family 
remains in the FSS program of the initial HA, there will only be one 
contract of participation, which shall be the contract executed by the 
initial HA.
    (d) Portability: relocation and participation in the FSS program of 
the receiving HA--(1) General. A relocating FSS family may participate 
in the FSS program of the receiving HA, if the receiving HA allows the 
family to participate in its program. An HA is not obligated to enroll a 
relocating FSS family in its FSS program.
    (2) Two contracts of participation. If the receiving HA allows the 
relocating FSS family to participate in its FSS program, the receiving 
HA will enter into a new contract of participation with the FSS family 
for the term on the remaining contract with the initial HA. The initial 
HA will terminate its contract of participation with the family.
    (e) Single FSS account. Regardless of whether the relocating FSS 
family remains in the FSS program of the initial HA or is enrolled in 
the FSS program of the receiving HA, there will be a single FSS account 
which will be maintained by the initial HA. When an FSS family will be 
absorbed by the receiving HA, the initial HA will transfer the family's 
FSS account to the receiving HA.
    (f) FSS program termination; loss of FSS account; and termination of 
Section 8 assistance. (1) If an FSS family that relocates to another 
jurisdiction, as provided under this section, is unable to fulfill its 
obligations under the contract of participation, or any modifications 
thereto, the HA, which is party to the contract of participation, may:
    (i) Terminate the FSS family from the FSS program and the family's 
FSS account will be forfeited; and
    (ii) Terminate the FSS family's Section 8 assistance on the ground 
that the family failed to meet its obligations under the contract of 
participation.
    (2) In the event of forfeiture of the family's FSS account, the 
funds in the family's FSS account will revert to the HA maintaining the 
FSS account for the family.



                          Subpart D--Reporting



Sec. 984.401  Reporting.

    Each HA that carries out an FSS program under this part shall submit 
to HUD, in the form prescribed by HUD, a report regarding its FSS 
program. The report shall include the following information:
    (a) A description of the activities carried out under the program;
    (b) A description of the effectiveness of the program in assisting 
families to achieve economic independence and self-sufficiency;
    (c) A description of the effectiveness of the program in 
coordinating resources of communities to assist families to achieve 
economic independence and self-sufficiency; and

[[Page 626]]

    (d) Any recommendations by the HA or the appropriate local program 
coordinating committee for legislative or administrative action that 
would improve the FSS program and ensure the effectiveness of the 
program.



PART 985--SECTION 8 MANAGEMENT ASSESSMENT PROGRAM (SEMAP)--Table of Contents






                           Subpart A--General

Sec.
985.1  Purpose and applicability.
985.2  Definitions.
985.3  Indicators, HUD verification methods and ratings.

                      Subpart B--Program Operation

985.101  SEMAP certification.
985.102  SEMAP profile.
985.103  SEMAP score and overall performance rating.
985.104  HA right of appeal of overall rating.
985.105  HUD SEMAP responsibilities.
985.106  Required actions for SEMAP deficiencies.
985.107  Required actions for HA with troubled performance rating.
985.108  SEMAP records.
985.109  Default under the Annual Contributions Contract (ACC).

           Subpart C--Physical Assessment Component [Reserved]

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, and 3535(d).

    Source: 63 FR 48555, Sept. 10, 1998, unless otherwise noted.



                           Subpart A--General



Sec. 985.1  Purpose and applicability.

    (a) Purpose. The Section 8 Management Assessment Program (SEMAP) is 
designed to assess whether the Section 8 tenant-based assistance 
programs operate to help eligible families afford decent rental units at 
the correct subsidy cost. SEMAP also establishes an objective system for 
HUD to measure HA performance in key Section 8 program areas to enable 
the Department to ensure program integrity and accountability. SEMAP 
provides procedures for HUD to identify HA management capabilities and 
deficiencies in order to target monitoring and program assistance more 
effectively. HAs can use the SEMAP performance analysis to assess and 
improve their own program operations.
    (b) Applicability. This rule applies to HA administration of the 
tenant-based Section 8 rental voucher and rental certificate programs 
(24 CFR part 982), the project-based component (PBC) of the certificate 
program (24 CFR part 983) to the extent that PBC family and unit data 
are reported and measured under the stated HUD verification method, and 
enrollment levels and contributions to escrow accounts for Section 8 
participants under the family self-sufficiency program (FSS) (24 CFR 
part 984).



Sec. 985.2  Definitions.

    (a) The terms Department, Fair Market Rent, HUD, Secretary, and 
Section 8, as used in this part, are defined in 24 CFR 5.100.
    (b) The definitions in 24 CFR 982.4 apply to this part. As used in 
this part:
    Corrective action plan means a HUD-required written plan that 
addresses HA program management deficiencies or findings identified by 
HUD through remote monitoring or on-site review, and that will bring the 
HA to an acceptable level of performance.
    HA means a Housing Agency.
    MTCS means Multifamily Tenant Characteristics System. MTCS is the 
Department's national database on participants and rental units in the 
Section 8 rental certificate, rental voucher, and moderate 
rehabilitation programs and in the Public and Indian Housing programs.
    Performance indicator means a standard set for a key area of Section 
8 program management against which the HA's performance is measured to 
show whether the HA administers the program properly and effectively. 
(See Sec. 985.3.)
    SEMAP certification means the HA's annual certification to HUD, on 
the form prescribed by HUD, concerning its performance in key Section 8 
program areas.
    SEMAP deficiency means any rating of 0 points on a SEMAP performance 
indicator.
    SEMAP profile means a summary prepared by HUD of an HA's ratings on

[[Page 627]]

each SEMAP indicator, its overall SEMAP score, and its overall 
performance rating (high performer, standard, troubled).



Sec. 985.3  Indicators, HUD verification methods and ratings.

    This section states the performance indicators that are used to 
assess HA Section 8 management. HUD will use the verification method 
identified for each indicator in reviewing the accuracy of an HA's 
annual SEMAP certification. HUD will prepare a SEMAP profile for each HA 
and will assign a rating for each indicator as shown. If the HUD 
verification method for the indicator relies on data in MTCS and HUD 
determines those data are insufficient to verify the HA's certification 
on the indicator due to the HA's failure to adequately report family 
data, HUD will assign a zero rating for the indicator. Similarly, if the 
HUD verification method for the indicator relies on the HA's annual 
audit report and HUD does not receive the audit report within the nine 
month reporting period, HUD may assign a zero rating for the indicator.
    An HA that expends less than $300,000 in Federal awards and whose 
Section 8 programs are not audited by an independent auditor (IA), will 
not be rated under the SEMAP indicators in paragraphs (a) through (g) of 
this section for which the annual IA audit report is the HUD 
verification method. For those HAs, the SEMAP score and overall 
performance rating will be determined based only on the remaining 
indicators in paragraphs (i) through (o) of this section as applicable. 
Although the SEMAP performance rating will not be determined using the 
indicators in paragraphs (a) through (g) of this section, HAs not 
subject to Federal audit requirements must still complete the SEMAP 
certification for these indicators and performance under the indicators 
is subject to HUD confirmatory reviews.
    (a) Selection from the waiting list. (1) This indicator shows 
whether the HA has written policies in its administrative plan for 
selecting applicants from the waiting list and whether the HA follows 
these policies when selecting applicants for admission from the waiting 
list. (24 CFR 982.54(d)(1) and 982.204(a))
    (2) HUD verification method: The latest independent auditor (IA) 
annual audit report.
    (3) Rating:
    (i) The latest IA audit report states that:
    (A) The HA has written waiting list selection policies in its 
administrative plan and,
    (B) Based on randomly selected samples of applicants and admissions, 
documentation shows that at least 98 percent of the families in the 
samples of applicants and admissions were selected from the waiting list 
for admission in accordance with these policies and met the selection 
criteria that determined their places on the waiting list and their 
order of selection. 15 points.
    (ii) The latest IA audit report does not support the statement in 
paragraph (a)(3)(i) of this section. 0 points.
    (b) Reasonable rent. (1) This indicator shows whether the HA has and 
implements a reasonable written method to determine and document for 
each unit leased that the rent to owner is reasonable based on current 
rents for comparable unassisted units: at the time of initial leasing; 
if there is any increase in the rent to owner; and at the HAP contract 
anniversary if there is a 5 percent decrease in the published fair 
market rent (FMR) in effect 60 days before the HAP contract anniversary. 
The HA's method must take into consideration the location, size, type, 
quality and age of the units, and the amenities, housing services, and 
maintenance and utilities provided by the owners in determining 
comparability and the reasonable rent. (24 CFR 982.4, 24 CFR 
982.54(d)(15), 982.158(f)(7) and 982.503)
    (2) HUD verification method: The latest IA annual audit report.
    (3) Rating:
    (i) The latest IA audit report states that:
    (A) The HA has a reasonable written method to determine reasonable 
rent which considers location, size, type, quality and age of the units 
and the amenities, housing services, and maintenance and utilities 
provided by the owners; and

[[Page 628]]

    (B) Based on a randomly selected sample of tenant files, the HA 
follows its written method to determine reasonable rent and has 
documented its determination that the rent to owner is reasonable in 
accordance with Sec. 982.503 for at least 98 percent of units sampled at 
the time of initial leasing, if there is any increase in the rent to 
owner and, at the HAP contract anniversary if there is a 5 percent 
decrease in the published FMR in effect 60 days before the HAP contract 
anniversary. 20 points.
    (ii) The latest IA audit report includes the statements in paragraph 
(b)(3)(i) of this section, except that the HA documents its 
determination of reasonable rent for only 80 to 97 percent of units 
sampled at initial leasing, if there is any increase in the rent to 
owner, and at the HAP contract anniversary if there is a 5 percent 
decrease in the published FMR in effect 60 days before the HAP contract 
anniversary. 15 points.
    (iii) The latest IA audit report does not support the statements in 
either paragraph (b)(3)(i) or (b)(3)(ii) of this section. 0 points.
    (c) Determination of adjusted income. (1) This indicator shows 
whether, at the time of admission and annual reexamination, the HA 
verifies and correctly determines adjusted annual income for each 
assisted family and, where the family is responsible for utilities under 
the lease, the HA uses the appropriate utility allowances for the unit 
leased in determining the gross rent. (24 CFR part 5, subpart F and 24 
CFR 982.516)
    (2) HUD verification method: The latest IA annual audit report.
    (3) Rating:
    (i) The latest IA audit report states that, based on a randomly 
selected sample of tenant files, for at least 90 percent of families:
    (A) The HA obtains third party verification of reported family 
annual income, the value of assets totalling more than $5,000, expenses 
related to deductions from annual income, and other factors that affect 
the determination of adjusted income, and uses the verified information 
in determining adjusted income, and/or documents tenant files to show 
why third party verification was not available;
    (B) The HA properly attributes and calculates allowances for any 
medical, child care, and/or disability assistance expenses; and
    (C) The HA uses the appropriate utility allowances to determine 
gross rent for the unit leased. 20 points.
    (ii) The latest IA audit report includes the statements in paragraph 
(c)(3)(i) of this section, except that the HA obtains and uses 
independent verification of income, properly attributes allowances, and 
uses the appropriate utility allowances for only 80 to 89 percent of 
families. 15 points.
    (iii) The latest IA audit report does not support the statements in 
either paragraph (c)(3)(i) or (c)(3)(ii) of this section. 0 points.
    (d) Utility Allowance Schedule. (1) This indicator shows whether the 
HA maintains an up-to-date utility allowance schedule. (24 CFR 982.517)
    (2) HUD verification method: The latest IA annual audit report.
    (3) Rating:
    (i) The latest IA audit report states that the auditor has 
determined that the HA reviewed utility rate data within the last 12 
months, and adjusted its utility allowance schedule if there has been a 
change of 10 percent or more in a utility rate since the last time the 
utility allowance schedule was revised. 5 points.
    (ii) The latest IA audit report does not support the statement in 
paragraph (d)(3)(i) of this section. 0 points.
    (e) HQS quality control inspections. (1) This indicator shows 
whether an HA supervisor or other qualified person reinspects a sample 
of units under contract during the HA fiscal year, numbering at least 5 
percent of the number of units under contract during the last completed 
HA fiscal year (as determined by taking unit months under HAP contract 
as shown on the HA's latest approved year end operating statement 
divided by 12), for quality control of HQS inspections. The HA 
supervisor's reinspected sample is to be drawn from recently completed 
HQS inspections (i.e., performed during the 3 months preceding 
reinspection) and is to be drawn to represent a cross section of 
neighborhoods and the work of

[[Page 629]]

a cross section of inspectors. (24 CFR 982.405(b))
    (2) HUD verification method: The latest IA annual audit report.
    (3) Rating:
    (i) The latest IA audit report states that the auditor has 
determined that an HA supervisor or other qualified person performed 
quality control HQS reinspections during the HA fiscal year for a sample 
of units under contract numbering at least 5 percent of the number of 
units under contract during the last HA fiscal year. The audit report 
also states that the reinspected sample was drawn from recently 
completed HQS inspections (i.e., performed during the 3 months preceding 
the quality control reinspection) and was drawn to represent a cross 
section of neighborhoods and the work of a cross section of inspectors. 
5 points.
    (ii) The latest IA audit report does not support the statements in 
paragraph (e)(3)(i) of this section. 0 points.
    (f) HQS enforcement. (1) This indicator shows whether, following 
each HQS inspection of a unit under contract where the unit fails to 
meet HQS, any cited life-threatening HQS deficiencies are corrected 
within 24 hours from the inspection and all other cited HQS deficiencies 
are corrected within no more than 30 calendar days from the inspection 
or any HA-approved extension. In addition, if HQS deficiencies are not 
corrected timely, the indicator shows whether the HA stops (abates) 
housing assistance payments beginning no later than the first of the 
month following the specified correction period or terminates the HAP 
contract or, for family-caused defects, takes prompt and vigorous action 
to enforce the family obligations. (24 CFR 982.404)
    (2) HUD verification method: The latest IA annual audit report.
    (3) Rating:
    (i) The latest IA audit report states that the review of a randomly 
selected sample of case files with failed HQS inspections shows that, 
for all cases sampled, any cited life-threatening HQS deficiencies were 
corrected within 24 hours from the inspection and, for at least 98 
percent of cases sampled, all other cited HQS deficiencies were 
corrected within no more than 30 calendar days from the inspection or 
any HA-approved extension, or, if any life-threatening HQS deficiencies 
were not corrected within 24 hours and all other HQS deficiencies were 
not corrected within 30 calendar days or any HA-approved extension, the 
HA stopped (abated) housing assistance payments beginning no later than 
the first of the month following the correction period, or took prompt 
and vigorous action to enforce family obligations. 10 points.
    (ii) The latest IA audit report does not support the statement in 
paragraph (f)(3)(i) of this section. 0 points.
    (g) Expanding housing opportunities. (1) This indicator applies only 
to HAs with jurisdiction in metropolitan FMR areas. The indicator shows 
whether the HA has adopted and implemented a written policy to encourage 
participation by owners of units located outside areas of poverty or 
minority concentration; informs rental voucher and certificate holders 
of the full range of areas where they may lease units both inside and 
outside the HA's jurisdiction; and supplies a list of landlords or other 
parties who are willing to lease units or help families find units, 
including units outside areas of poverty or minority concentration. (24 
CFR 982.54(d)(5), 982.301(a) and 982.301(b)(5) and 982.301(b)(13))
    (2) HUD verification method: The latest IA annual audit report.
    (3) Rating:
    (i) The latest IA audit report states that:
    (A) The HA has a written policy in its administrative plan which 
includes actions the HA will take to encourage participation by owners 
of units located outside areas of poverty or minority concentration, and 
which clearly delineates areas in its jurisdiction that the HA considers 
areas of poverty or minority concentration;
    (B) HA documentation shows that the HA has taken actions indicated 
in its written policy to encourage participation by owners of units 
located outside areas of poverty or minority concentration;
    (C) The HA has prepared maps that show various areas with housing 
opportunities outside areas of poverty or minority concentration both 
within its jurisdiction and neighboring its jurisdiction; has assembled 
information

[[Page 630]]

about the characteristics of those areas which may include information 
about job opportunities, schools, transportation and other services in 
these areas; and can demonstrate that it uses the maps and area 
characteristics information when briefing rental voucher and certificate 
holders about the full range of areas where they may look for housing;
    (D) The HA's information packet for rental voucher and certificate 
holders contains either a list of owners who are willing to lease (or 
properties available for lease) under the rental voucher or certificate 
programs; or a current list of other organizations that will help 
families find units and the HA can demonstrate that the list(s) includes 
properties or organizations that operate outside areas of poverty or 
minority concentration;
    (E) The HA's information packet includes an explanation of how 
portability works and includes a list of portability contact persons for 
neighboring housing agencies, with the name, address and telephone 
number of each, for use by families who move under portability; and
    (F) HA documentation shows that the HA has analyzed whether rental 
voucher and certificate holders have experienced difficulties in finding 
housing outside areas of poverty or minority concentration and, if such 
difficulties have been found, HA documentation shows that the HA has 
analyzed whether it is appropriate to seek approval of area exception 
rents in any part of its jurisdiction and has sought HUD approval of 
exception rents when necessary. 5 points.
    (ii) The latest audit report does not support the statement in 
paragraph (g)(3)(i) of this section. 0 points.
    (h) Deconcentration bonus. (1) Additional SEMAP points are available 
to HAs that have jurisdiction in metropolitan FMR areas and that choose 
to submit with their SEMAP certifications certain data, in a HUD-
prescribed format, on the percent of their tenant-based Section 8 
families with children who live in, and who have moved during the HA 
fiscal year to, low poverty census tracts in the HA's principal 
operating area. For purposes of this indicator, the HA's principal 
operating area is the geographic entity for which the Census tabulates 
data that most closely matches the HA's geographic jurisdiction under 
State or local law (e.g., city, county, metropolitan statistical area) 
as determined by the HA, subject to HUD review. A low poverty census 
tract is defined as a census tract where the poverty rate of the tract 
is at or below 10 percent, or at or below the overall poverty rate for 
the principal operating area of the HA, whichever is greater. The HA 
determines the overall poverty rate for its principal operating area 
using the most recent available decennial Census data. Family data used 
for the HA's analysis must be the same information as reported to MTCS 
for the HA's tenant-based Section 8 families with children. If HUD 
determines that the quantity of MTCS data is insufficient for adequate 
analysis, HUD will not award points under this bonus indicator. Bonus 
points will be awarded if:
    (i) Half or more of all Section 8 families with children assisted by 
the HA in its principal operating area at the end of the last completed 
HA fiscal year reside in low poverty census tracts;
    (ii) The percent of Section 8 mover families with children who moved 
to low poverty census tracts in the HA's principal operating area during 
the last completed HA fiscal year is at least 2 percentage points higher 
than the percent of all Section 8 families with children who reside in 
low poverty census tracts at the end of the last completed HA fiscal 
year; or
    (iii) The percent of Section 8 families with children who moved to 
low-poverty census tracts in the HA's principal operating area over the 
last two completed HA fiscal years is at least 2 percentage points 
higher than the percent of all Section 8 families with children who 
resided in low poverty census tracts at the end of the second to last 
completed HA fiscal year.
    (iv) State and regional HAs that provide Section 8 rental assistance 
in more than one metropolitan area within a State or region make these 
determinations separately for each metropolitan area or portion of a 
metropolitan area where the HA has assisted at

[[Page 631]]

least 20 Section 8 families with children in the last completed HA 
fiscal year.
    (2) HUD verification method: HA data submitted for the 
deconcentration bonus and latest IA annual audit report.
    (3) Rating:
    (i) The data submitted by the HA for the deconcentration bonus shows 
that the HA met the requirements for bonus points in paragraph 
(h)(1)(i), (ii) or (iii) of this section, and the latest IA audit report 
states that the auditor has determined that the HA has on file 
documentation of its analysis of data which supports its submission to 
HUD for bonus points under this indicator. 5 points.
    (ii) The data submitted by the HA for the deconcentration bonus does 
not show that the HA met the requirements for bonus points in paragraph 
(h)(1)(i), (ii) or (iii) of this section, or the latest IA audit report 
does not state that the auditor has determined that the HA has on file 
documentation of its analysis of data which supports its submission to 
HUD for bonus points under this indicator. 0 points.
    (iii) HUD will rate metropolitan areas within State or regional HA 
jurisdictions separately and the separate metropolitan area ratings will 
then be weighted by the number of assisted families with children in 
each area and averaged to determine bonus points to be awarded to the 
State or regional HA.
    (i) Fair market rent (FMR) limit and payment standards. (1) This 
indicator shows whether: at least 98 percent of the units newly leased 
under the rental certificate program, other than over-FMR tenancies, 
have initial gross rents at or below the applicable FMR or approved 
exception rent limit; and whether the HA has adopted current payment 
standards for the rental voucher program by unit size for each FMR area 
in the HA jurisdiction, and, if applicable, for each HUD-approved 
exception rent area within an FMR area, which payment standards do not 
exceed the current applicable FMR or HUD-approved exception rent limits 
and which are not less than 80 percent of the current FMR/exception rent 
limit (unless a lower percent is approved by HUD). If the HA administers 
either the rental certificate program or the rental voucher program but 
not both, only the standard for the program which the HA administers 
applies. (24 CFR 982.508(a) and 982.505(b)(3)).
    (2) HUD verification method: HA data submitted on the SEMAP 
certification form concerning payment standards and MTCS report--Shows 
newly leased certificate units' gross rents (excluding over-FMR 
tenancies) compared to the FMR or approved exception rent.
    (3) Rating:
    (i) Excluding over-FMR tenancies, at least 98 percent of the units 
newly leased under the rental certificate program have initial gross 
rents at or below the applicable FMR or approved exception rent limits, 
and the HA's current rental voucher program payment standards do not 
exceed the current applicable FMR or HUD-approved exception rent limits 
and are not less than 80 percent of the current FMR/exception rent limit 
(unless a lower percent is approved by HUD). 5 points.
    (ii) Excluding over-FMR tenancies, more than 2 percent of rental 
certificate program units have been newly leased at initial gross rents 
that exceed the applicable FMR/exception rent limits, or the HA's rental 
voucher program payment standards exceed the FMR/exception rent limits 
or are less than 80 percent of the current FMR/exception rent limit 
(unless a lower percent is approved by HUD). 0 points.
    (j) Annual reexaminations. (1) This indicator shows whether the HA 
completes a reexamination for each participating family at least every 
12 months. (24 CFR 5.617).
    (2) HUD verification method: MTCS report--Shows percent of 
reexaminations that are more than 2 months overdue. The 2-month 
allowance is provided only to accommodate a possible lag in the HA's 
electronic reporting of the annual reexamination on Form HUD-50058 and 
to allow the processing of the data into MTCS. The 2-month allowance 
provided here for rating purposes does not mean that any delay in 
completing annual reexaminations is permitted.
    (3) Rating:

[[Page 632]]

    (i) Fewer than 5 percent of all HA reexaminations are more than 2 
months overdue. 10 points.
    (ii) 5 to 10 percent of all HA reexaminations are more than 2 months 
overdue. 5 points.
    (iii) More than 10 percent of all HA reexaminations are more than 2 
months overdue. 0 points.
    (k) Correct tenant rent calculations. (1) This indicator shows 
whether the HA correctly calculates tenant rent in the rental 
certificate program and the family's share of the rent to owner in the 
rental voucher program. (24 CFR 982 subpart K).
    (2) HUD verification method: MTCS report--Shows percent of tenant 
rent and family's share of the rent to owner calculations that are 
incorrect based on data sent to HUD by the HA on Forms HUD-50058. The 
MTCS data used for verification cover only regular certificate and 
voucher program tenancies and do not include rent calculation 
discrepancies for over-FMR tenancies in the rental certificate program, 
for manufactured home owner rentals of manufactured home spaces, or for 
proration of assistance under the noncitizen rule.
    (3) Ratings:
    (i) 2 percent or fewer of HA tenant rent and family's share of the 
rent to owner calculations are incorrect. 5 points.
    (ii) More than 2 percent of HA tenant rent and family's share of the 
rent to owner calculations are incorrect. 0 points.
    (l) Pre-contract housing quality standards (HQS) inspections. (1) 
This indicator shows whether newly leased units pass HQS inspection on 
or before the beginning date of the assisted lease and HAP contract. (24 
CFR 982.305).
    (2) HUD verification method: MTCS report--Shows percent of newly 
leased units where the beginning date of the assistance contract is 
before the date the unit passed HQS inspection.
    (3) Rating:
    (i) 98 to 99 percent of newly leased units passed HQS inspection 
before the beginning date of the assisted lease and HAP contract. 5 
points.
    (ii) Fewer than 98 percent of newly leased units passed HQS 
inspection before the beginning date of the assisted lease and HAP 
contract. 0 points.
    (m) Annual HQS inspections. (1) This indicator shows whether the HA 
inspects each unit under contract at least annually. (24 CFR 982.405(a))
    (2) HUD verification method: MTCS report--Shows percent of HQS 
inspections that are more than 2 months overdue. The 2-month allowance 
is provided only to accommodate a possible lag in the HA's electronic 
reporting of the annual HQS inspection on Form HUD-50058, and to allow 
the processing of the data into MTCS. The 2-month allowance provided 
here for rating purposes does not mean that any delay in completing 
annual HQS inspections is permitted.
    (3) Rating:
    (i) Fewer than 5 percent of annual HQS inspections of units under 
contract are more than 2 months overdue. 10 points.
    (ii) 5 to 10 percent of all annual HQS inspections of units under 
contract are more than 2 months overdue. 5 points.
    (iii) More than 10 percent of all annual HQS inspections of units 
under contract are more than 2 months overdue. 0 points.
    (n) Lease-up. (1) This indicator shows whether the HA enters HAP 
contracts for the number of units under budget for at least one year.
    (2) HUD verification method: Percent of units leased during the last 
completed HA fiscal year as determined by taking unit months under HAP 
contract as shown on HA's latest approved year-end operating statement 
divided by 12, and dividing by the number of units budgeted as shown on 
the HA's approved budget for the same HA fiscal year.
    (3) Rating:
    (i) The percent of units leased during the last HA fiscal year was 
98 percent or more. 20 points.
    (ii) The percent of units leased during the last HA fiscal year was 
95 to 97 percent. 15 points.
    (iii) The percent of units leased during the last HA fiscal year was 
less than 95 percent. 0 points.

[[Page 633]]

    (o) Family self-sufficiency (FSS) enrollment and escrow accounts. 
(1) This indicator applies only to HAs with mandatory FSS programs. The 
indicator consists of 2 components which show whether the HA has 
enrolled families in the FSS program as required, and the extent of the 
HA's progress in supporting FSS by measuring the percent of current FSS 
participants with FSS progress reports entered in MTCS that have had 
increases in earned income which resulted in escrow account balances. 
(24 CFR 984.105 and 984.305)
    (2) HUD verification method: MTCS report--Shows number of families 
currently enrolled in FSS. This number is divided by the number of 
mandatory FSS slots based on funding reserved for the HA through the 
second to last completed Federal fiscal year or based on a reduced 
number of mandatory slots under a HUD-approved exception. An MTCS report 
also shows the percent of FSS families with FSS progress reports who 
have escrow account balances. HUD also uses information reported on the 
SEMAP certification by initial HAs concerning FSS families enrolled in 
their FSS programs but who have moved under portability to the 
jurisdiction of another HA.
    (3) Rating:
    (i) The HA has filled 80 percent or more of its mandatory FSS slots 
and 30 percent or more of FSS families have escrow account balances. 10 
points.
    (ii) The HA has filled 60 to 79 percent of its mandatory FSS slots 
and 30 percent or more of FSS families have escrow account balances. 8 
points.
    (iii) The HA has filled 80 percent or more of its mandatory FSS 
slots, but fewer than 30 percent of FSS families have escrow account 
balances. 5 points.
    (iv) 30 percent or more of FSS families have escrow account 
balances, but fewer than 60 percent of the HA's mandatory FSS slots are 
filled. 5 points.
    (v) The HA has filled 60 to 70 percent of its mandatory FSS slots, 
but fewer than 30 percent of FSS families have escrow account balances. 
3 points.
    (vi) The HA has filled fewer than 60 percent of its mandatory FSS 
slots and less than 30 percent of FSS families have escrow account 
balances. 0 points.



                      Subpart B--Program Operation



Sec. 985.101  SEMAP certification.

    (a) An HA must submit the HUD-required SEMAP certification form 
within 60 calendar days after the end of its fiscal year.
    (1) The certification must be approved by HA board resolution and be 
signed by the board of commissioners chairperson and by the HA executive 
director. If the HA is a unit of local government or a state, a 
resolution approving the certification is not required, and the 
certification must be executed by the Section 8 program director and by 
the chief executive officer of the unit of government or his or her 
designee.
    (2) An HA that subcontracts administration of its program to one or 
more subcontractors shall require each subcontractor to submit the 
subcontractor's own SEMAP certification on the HUD-prescribed form to 
the HA in support of the HA's SEMAP certification to HUD. The HA shall 
retain subcontractor certifications for 3 years.
    (3) An HA may include with its SEMAP certification any information 
bearing on the accuracy or completeness of the information used by the 
HA in providing its certification.
    (b) Failure of an HA to submit its SEMAP certification within 60 
calendar days after the end of its fiscal year will result in an overall 
performance rating of troubled and the HA will be subject to the 
requirements at Sec. 985.107.
    (c) An HA's SEMAP certification is subject to HUD verification by an 
on-site confirmatory review at any time. (Information collection 
requirements in this section have been approved by the Office of 
Management and Budget under control number 2577-0215)



Sec. 985.102  SEMAP profile.

    Upon receipt of the HA's SEMAP certification, HUD will rate the HA's 
performance under each SEMAP indicator in accordance with Sec. 985.3. 
HUD will then prepare a SEMAP profile for each HA which shows the rating 
for each indicator, sums the indicator ratings, and divides by the total 
possible points to arrive at an HA's overall SEMAP

[[Page 634]]

score. SEMAP scores shall be rounded off to the nearest whole percent.

    Effective Date Note: At 63 FR 48560, Sept. 10, 1998, Sec. 985.102 
was stayed indefinitely.



Sec. 985.103  SEMAP score and overall performance rating.

    (a) High performer rating. HAs with SEMAP scores of at least 90 
percent shall be rated high performers under SEMAP. HAs that achieve an 
overall performance rating of high performer may receive national 
recognition by the Department and may be given competitive advantage 
under notices of fund availability.
    (b) Standard rating. HAs with SEMAP scores of 60 to 89 percent shall 
be rated standard.
    (c) Troubled rating. HAs with SEMAP scores of less than 60 percent 
shall be rated troubled.
    (d) Modified or withheld rating. (1) Notwithstanding an HA's SEMAP 
score, HUD may modify or withhold an HA's overall performance rating 
when warranted by circumstances which have bearing on the SEMAP 
indicators such as an HA's appeal of its overall rating, adverse 
litigation, a conciliation agreement under Title VI of the Civil Rights 
Act of 1964, fair housing and equal opportunity monitoring and 
compliance review findings, fraud or misconduct, audit findings or 
substantial noncompliance with program requirements.
    (2) Notwithstanding an HA's SEMAP score, if the latest IA report 
submitted for the HA under the Single Audit Act indicates that the 
auditor is unable to provide an opinion as to whether the HA's financial 
statements are presented fairly in all material respects in conformity 
with generally accepted accounting principals, or an opinion that the 
schedule of expenditures of Federal awards is presented fairly in all 
material respects in relation to the financial statements taken as a 
whole, the HA will automatically be given an overall performance rating 
of troubled and the HA will be subject to the requirements at 
Sec. 985.107.
    (3) When HUD modifies or withholds an overall performance rating for 
any reason it shall explain in writing to the HA the reasons for the 
modification or for withholding the rating.

    Effective Date Note: At 63 FR 48560, Sept. 10, 1998, Sec. 985.103 
was stayed indefinitely.



Sec. 985.104  HA right of appeal of overall rating.

    An HA may appeal its overall performance rating to HUD by providing 
justification of the reasons for its appeal. An appeal made to a HUD hub 
or program center or to the HUD Troubled Agency Recovery Center and 
denied may be further appealed to the Assistant Secretary.



Sec. 985.105  HUD SEMAP responsibilities.

    (a) Annual review. HUD shall assess each HA's performance under 
SEMAP annually and shall assign each HA a SEMAP score and overall 
performance rating.
    (b) Notification to HA. No later than 120 calendar days after the 
HA's fiscal year end, HUD shall notify each HA in writing of its rating 
on each SEMAP indicator, of its overall SEMAP score and of its overall 
performance rating (high performer, standard, troubled). The HUD 
notification letter shall identify and require correction of any SEMAP 
deficiencies (indicator rating of zero) within 45 calendar days from 
date of HUD notice.
    (c) On-site confirmatory review. HUD may conduct an on-site 
confirmatory review to verify the HA certification and the HUD rating 
under any indicator.
    (d) Changing rating from troubled. HUD must conduct an on-site 
confirmatory review of an HA's performance before changing any annual 
overall performance rating from troubled to standard or high performer.
    (e) Appeals. HUD must review, consider and provide a final written 
determination to an HA on its appeal of its overall performance rating.
    (f) Corrective action plans. HUD must review the adequacy and 
monitor implementation of HA corrective action plans submitted under 
Sec. 985.106(c) or Sec. 985.107(c) and provide technical assistance to 
help the HA improve program management. If an HA is assigned an overall 
performance rating of troubled,

[[Page 635]]

the HA's corrective action plan must be approved in writing by HUD.

    Effective Date Note: At 63 FR 48560, Sept. 10, 1998, in 
Sec. 985.105, paragraphs (a), (b), (d), and (e) were stayed 
indefinitely.



Sec. 985.106  Required actions for SEMAP deficiencies.

    (a) When the HA receives the HUD notification of its SEMAP rating, 
an HA must correct any SEMAP deficiency (indicator rating of zero) 
within 45 calendar days from date of HUD notice.
    (b) The HA must send a written report to HUD describing its 
correction of any identified SEMAP deficiency.
    (c) If an HA fails to correct a SEMAP deficiency within 45 calendar 
days as required, HUD may then require the HA to prepare and submit a 
corrective action plan for the deficiency within 30 calendar days from 
the date of HUD notice.

(Information collection requirements in this section have been approved 
by the Office of Management and Budget under control number 2577-0215)



Sec. 985.107  Required actions for HA with troubled performance rating.

    (a) Required on-site review. Upon assigning an overall performance 
rating of troubled, HUD must conduct an on-site review of HA program 
management to assess the magnitude and seriousness of the HA's 
noncompliance with performance requirements.
    (b) HUD written report. HUD must provide the HA a written report of 
its on-site review containing HUD findings of program management 
deficiencies, the apparent reasons for the deficiencies, and 
recommendations for improvement.
    (c) HA corrective action plan. Upon receipt of the HUD written 
report on its on-site review, the HA must write a corrective action plan 
and submit it to HUD for approval. The corrective action plan must:
    (1) Specify goals to be achieved;
    (2) Identify obstacles to goal achievement and ways to eliminate or 
avoid them;
    (3) Identify resources that will be used or sought to achieve goals;
    (4) Identify an HA staff person with lead responsibility for 
completing each goal;
    (5) Identify key tasks to reach each goal;
    (6) Specify time frames for achievement of each goal, including 
intermediate time frames to complete each key task; and
    (7) Provide for regular evaluation of progress toward improvement.
    (8) Be signed by the HA board of commissioners chairperson and by 
the HA executive director. If the HA is a unit of local government or a 
state, the corrective action plan must be signed by the Section 8 
program director and by the chief executive officer of the unit of 
government or his or her designee.
    (d) Monitoring. The HA and HUD must monitor the HA's implementation 
of its corrective action plan to ensure performance targets are met.
    (e) Use of administrative fee reserve prohibited. Any HA assigned an 
overall performance rating of troubled may not use any part of the 
administrative fee reserve for other housing purposes (see 24 CFR 
982.155(b)).
    (f) Upgrading poor performance rating. HUD shall change an HA's 
overall performance rating from troubled to standard or high performer 
if HUD determines that a change in the rating is warranted because of 
improved HA performance and an improved SEMAP score.

(Information collection requirements in this section have been approved 
by the Office of Management and Budget under control number 2577-0215)

    Effective Date Note: At 63 FR 48560, Sept. 10, 1998, Sec. 985.107 
was stayed indefinitely.



Sec. 985.108  SEMAP records.

    HUD shall maintain SEMAP files, including certifications, 
notifications, appeals, corrective action plans, and related 
correspondence for at least 3 years.

(Information collection requirements in this section have been approved 
by the Office of Management and Budget under control number 2577-0215)

[[Page 636]]



Sec. 985.109  Default under the Annual Contributions Contract (ACC).

    HUD may determine that an HA's failure to correct identified SEMAP 
deficiencies or to prepare and implement a corrective action plan 
required by HUD constitutes a default under the ACC.

Subpart C--Physical Assessment Component [Reserved]



PART 990--ANNUAL CONTRIBUTIONS FOR OPERATING SUBSIDY--Table of Contents




                  Subpart A--Performance Funding System

Sec.
990.101  Purpose.
990.102  Definitions.
990.103  Applicability of PFS.
990.104  Determination of amount of operating subsidy under PFS.
990.105  Computation of allowable expense level.
990.106  Transition funding for excessively high-cost PHAs.
990.107  Computation of utilities expense level.
990.108  Other costs.
990.109  Projected operating income level.
990.110  Adjustments.
990.111  Submission and approval of operating subsidy calculations and 
          budgets.
990.112  Payments procedure for operating subsidy under PFS.
990.113  Payments of operating subsidy conditioned upon reexamination of 
          income of families in occupancy.
990.114  Phase-down of subsidy for units approved for demolition.
990.116  Three-year incentive adjustments.
990.117  Determining actual and requested budget year occupancy 
          percentages.
990.118  [Reserved]
990.119  Transition provisions.
990.120  Audit.
990.121  Effect of rescission.

    Subpart B--Financial Management Systems, Monitoring and Reporting

990.201  Purpose--General policy on financial management, monitoring and 
          reporting.
990.202  Applicability.

                   Subpart C--Project-Based Accounting

990.301  Applicability.
990.305  Definitions.
990.310  Project-based accounting.
990.315  Records and reports.
990.320  Certifications.
990.325  Compliance dates.

      Subpart D--Resident Management Corporations Operating Subsidy

990.401  Calculation of operating subsidy.
990.402  Calculation of total income and preparation of operating 
          budget.
990.403  Adjustments to total income.
990.404  Retention of excess revenues.
990.405  Use of retained revenues.

    Authority: 42 U.S.C. 1437(g) and 3535(d).

    Source: 41 FR 55676, Dec. 21, 1976, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.

    Editorial Note: Nomenclature changes affecting this part appear at 
49 FR 6714, Feb. 23, 1984.

    Note: It is hereby certified that the economic and inflationary 
impacts of this regulation has been carefully evaluated in accordance 
with OMB Circular A-107.



                  Subpart A--Performance Funding System



Sec. 990.101  Purpose.

    Implementation of Section 9(a). The purpose of this subpart is to 
establish standards and policies for the determination of operating 
subsidy eligibility in accordance with section 9(a) of the U.S. Housing 
Act of 1937, 42 U.S.C. 1437g. Section 9(a) authorizes the Secretary of 
Housing and Urban Development (HUD) to make annual contributions for the 
operation of PHA-owned rental housing (operating subsidy).

[61 FR 17539, Apr. 19, 1996]



Sec. 990.102  Definitions.

    Allowable Expense Level (AEL). The per unit per month dollar amount 
of expenses (excluding Utilities and expenses allowed under 
Sec. 990.108) computed in accordance with Sec. 990.105, which is used to 
compute the amount of operating subsidy.
    Allowable Utilities Consumption Level (AUCL). The amount of 
Utilities expected to be consumed per unit per month by the PHA during 
the Requested Budget Year, which is equal to the average amount consumed 
per unit per month during the Rolling Base Period.
    Base Year. The PHA's fiscal year immediately preceding its first 
fiscal year under PFS.

[[Page 637]]

    Base Year Expense Level. The expense level (excluding Utilities, 
audits and certain other items) for the Base Year, computed as provided 
in Sec. 990.105.
    Current Budget Year. The fiscal year in which the PHA is currently 
operating.
    Formula. The revised formula derived from the actual expenses of the 
PFS sample group of PHAs, which is used in PFS, as provided in 
Sec. 990.105, to determine the Formula Expense Level and the Range of 
each PHA.
    Formula Expense Level. The per unit per month dollar amount of 
expenses (excluding Utilities and audits) computed under the Formula, in 
accordance with Sec. 990.105.
    HUD Field Office. The HUD Field Office that has been delegated 
authority under the U.S. Housing Act of 1937 to perform functions 
pertaining to this subpart for the area in which the PHA is located.
    Local Inflation Factor. The HUD-supplied weighted average percentage 
increase in local government wages and salaries for the area in which 
the PHA is located and non-wage expenses;
    Long-term vacancy. This term means the same as it is used in the 
definition of ``Unit Months Available'' in this section.
    Operating budget. The PHA's operating budget and all related 
documents, as required by HUD, approved by the PHA Board of 
Commissioners;
    Other income. Income other than dwelling rental income and income 
from investments, except the following items are excluded: grants and 
gifts for operations, other than for utility expenses, received from 
Federal, State and local governments, individuals, or private 
organizations; amounts charged to tenants for repairs for which the PHA 
incurs an offsetting expense; and legal fees in connection with eviction 
proceedings, when those fees are lawfully charged to tenants.
    Project. Each project under an Annual Contributions Contract to 
which PFS is applicable, as provided in Sec. 990.103.
    Project Units. All dwelling units of a PHA's Projects.
    Projected Operating Income Level. The per unit per month dollar 
amount of dwelling rental income plus nondwelling income, computed as 
provided in Sec. 990.109.
    Requested Budget Year. The budget year (fiscal year) of a PHA 
following the Current Budget Year.
    Rolling Base Period. The 36-month period that ends 12 months before 
the beginning of the PHA Requested Budget Year, which is used to 
determine the Allowable Utilities Consumption Level used to compute the 
Utilities Expense Level.
    Top of Range. Formula Expense Level multiplied by 1.15.
    Transition funding. Funding for excessively high-cost PHAs, as 
provided in Sec. 990.106.
    Unit Approved for Deprogramming. (a) A dwelling unit for which HUD 
has approved the PHA's formal request to remove the dwelling unit from 
the PHA's inventory and the Annual Contributions Contract but for which 
removal, i.e., deprogramming, has not yet been completed, or (b) a 
nondwelling structure or a dwelling unit used for nondwelling purposes 
which the PHA has determined will no longer be used for PHA purposes and 
which HUD has approved for removal from the PHA's inventory and Annual 
Contributions Contract.
    Unit months available. Project Units multiplied by the number of 
months the Project Units are available for occupancy during a given PHA 
fiscal year. For purposes of this part, a unit is considered available 
for occupancy from the date established as the End of the Initial 
Operating Period for the Project until the time the unit is approved by 
HUD for deprogramming and is vacated or is approved for nondwelling use. 
In the case of a PHA development involving the acquisition of scattered 
site housing, see also Sec. 990.104(b). A unit will be considered a 
long-term vacancy and will not be considered available for occupancy in 
any given PHA Requested Budget Year if the PHA determines that:
    (1) The unit has been vacant for more than 12 months at the time the 
PHA determines its Actual Occupancy Percentage;
    (2) The unit is not either: (i) A vacant unit undergoing 
modernization; or (ii) A unit vacant for circumstances and actions 
beyond the PHA's control, as

[[Page 638]]

these terms are defined in this section; and
    (3) The PHA determines that it will have a vacancy percentage of 
more than 3 percent and will have more than five vacant units, for its 
Requested Budget Year, even after adjusting for vacant units undergoing 
modernization and units that are vacant for circumstances and actions 
beyond the PHA's control, as defined in this section. (Reference in this 
part to ``more than five units'' or ``fewer than five units'' shall 
refer to a circumstance in which five units equals or exceeds 3 percent 
of the number of units to which the 3 percent threshold is applicable.)
    Units vacant due to circumstances and actions beyond the PHA's 
control. Dwelling units that are vacant due to circumstances and actions 
that prohibit the PHA from occupying, selling, demolishing, 
rehabilitating, reconstructing, consolidating or modernizing vacant 
units and are beyond the PHA's control. For purposes of this definition, 
circumstances and actions beyond the PHA's control are limited to:
    (1) Litigation. The effect of court litigation such as a court order 
or settlement agreement that is legally enforceable. An example would be 
units that are being held vacant as part of a court-ordered or HUD-
approved desegregation plan.
    (2) Laws. Federal or State laws of general applicability, or their 
implementing regulations. Units vacant only because they do not meet 
minimum standards pertaining to construction or habitability under 
Federal, State, or local laws or regulations will not be considered 
vacant due to circumstances and actions beyond the PHA's control.
    (3) Changing market conditions. For example, small PHAs that are 
located in areas experiencing population loss or economic dislocations 
may face a lack of demand in the foreseeable future, even after the PHA 
has taken aggressive marketing and outreach measures.
    (4) Natural disasters.
    (5) Insufficient funding for otherwise approvable applications made 
for Comprehensive Improvement Assistance Program (CIAP) funds.
    (6) RMC Funding. The failure of a PHA to fund an otherwise 
approvable RMC request for Federal modernization funding;
    (7) Casualty Losses. Delays in repairing damage to vacant units due 
to the time needed for settlement of insurance claims.
    Utilities. Electricity, gas, heating fuel, water and sewerage 
service.
    Utilities expense level. The per unit per month dollar amount of 
Utilities expense, computed as provided in Sec. 990.107.
    Vacant unit undergoing modernization. Except as provided in 
Sec. 990.119(a), a vacant unit in a project not considered to be 
obsolete (as determined using the indicia in Sec. 970.6 of this 
chapter), when the project is undergoing modernization that includes 
work that is necessary to reoccupy the vacant unit, and in which one of 
the following conditions is met:
    (1) The unit is under construction (i.e., the construction contract 
has been awarded or force account work has started); or
    (2) The treatment of the vacant unit is included in a HUD-approved 
modernization budget (e.g., the Annual Statement for the Comprehensive 
Grant Program (CGP) (Form HUD-52837 or its successor), or the 
Comprehensive Improvement Assistance Program (CIAP) Budget (Form HUD-
52825 or its successor)), but the time period for placing the vacant 
unit under construction has not yet expired. The PHA must place the 
vacant unit under construction within two Federal Fiscal Years (FFYs) 
after the FFY in which the modernization funds are approved.

[50 FR 52280, Dec. 23, 1985, as amended at 51 FR 16839, May 7, 1986; 57 
FR 4289, Feb. 4, 1992; 59 FR 51854, Oct. 13, 1994; 60 FR 57305, Nov. 14, 
1995; 61 FR 7590, Feb. 28, 1996; 61 FR 17539, Apr. 19, 1996]



Sec. 990.103  Applicability of PFS.

    (a) PFS has been and will be utilized in determining the amounts of 
operating subsidy payable to PHAs. PFS is applicable to all PHA-owned 
rental units under Annual Contributions Contracts. PFS applies to PHAs 
that have not received operating subsidy payments previously, but are 
eligible for such payments under PFS. PFS, as described in this part, is 
not applicable to

[[Page 639]]

Indian Housing, the Section 23 Leased Housing Program, the Section 23 
Housing Assistance Payments Program, the Section 8 Housing Assistance 
Payments Program, or the Turnkey III or Turnkey IV Homeownership 
Opportunity Programs. PFS is not applicable to housing owned by the PHAs 
of the Virgin Islands, Puerto Rico, Guam, and Alaska. Operating subsidy 
payments to these PHAs are made in accordance with subpart B of this 
part. PFS for Indian Housing is described in 24 CFR part 950.
    (b) Financial management, monitoring and reporting. The financial 
management system, monitoring and reporting on program performance and 
financial reporting will be in compliance with 24 CFR 85.20, 85.40 and 
85.41 except to the extent that HUD requirements provide for additional 
specialized procedures which are determined by HUD to be necessary for 
the proper management of the program in accordance with the requirements 
of the U.S. Housing Act of 1937 and the Annual Contributions Contracts 
between the PHAs and HUD.

[41 FR 55676, Dec. 21, 1976. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 53 FR 8067, Mar. 11, 1988; 56 FR 923, Jan. 9, 1991; 61 FR 
17539, Apr. 19, 1996]



Sec. 990.104  Determination of amount of operating subsidy under PFS.

    (a) The amount of operating subsidy for which each PHA is eligible 
shall be determined as follows: The Projected Operating Income Level is 
subtracted from the total expense level (Allowable Expense Level plus 
Utilities Expense Level). These amounts are per unit per month dollar 
amounts, and must be multiplied by the Unit Months Available. Transition 
Funding, if applicable, and other costs as specified in Sec. 990.108 are 
then added to this total in order to determine the total amount of 
operating subsidy for the Requested Budget Year, exclusive of 
consideration of the cost of an independent audit. As an independent 
operating subsidy eligibility factor, a PHA may receive operating 
subsidy in an amount, approved by HUD, equal to the actual or estimated 
cost of an independent audit to be prorated to operations of the PHA-
owned rental housing. See Sec. 990.110 regarding adjustments.
    (b) In the case of a PHA development involving the acquisition of 
scattered site housing, the PHA may submit, and HUD shall review and can 
approve, a revised Development Cost Budget reflecting the number of 
units that were occupied during the previous six months, and the Unit 
Months Available used in the calculation of operating subsidy 
eligibility shall be revised to include the number of months the new/
acquired units are actually occupied.
    (c) A special phase-down of subsidy to HAs is applicable when 
demolition of units is approved by HUD in Federal Fiscal Year 1995 and 
later. See Sec. 990.114.

[41 FR 55676, Dec. 21, 1976; 42 FR 18064, Apr. 5, 1977; 48 FR 42812, 
Sept. 20, 1983. Redesignated at 49 FR 6714, Feb. 23, 1984, and amended 
at 50 FR 39092, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986; 52 FR 29361, 
Aug. 6, 1987; 60 FR 57305, Nov. 14, 1995; 61 FR 7591, Feb. 28, 1996; 61 
FR 51183, Sept. 30, 1996]



Sec. 990.105  Computation of allowable expense level.

    The PHA shall compute its Allowable Expense Level using forms 
prescribed by HUD, as follows:
    (a) Computation of Base Year Expense Level. The Base Year Expense 
Level includes Payments in Lieu of Taxes (PILOT) required by a 
Cooperation Agreement even if PILOT is not included in the Operating 
Budget for the Base Year because of a waiver of the requirements by the 
local taxing jurisdiction(s). The Base Year Expense Level includes all 
other operating expenditures as reflected in the PHA's Operating Budget 
for the Base Year except the following:
    (1) Utilities expense;
    (2) Cost of an independent audit;
    (3) Adjustments applicable to budget years before the Base Year;
    (4) Expenditures supported by supplemental subsidy payments 
applicable to budget years before the Base Year;
    (5) All other expenditures which are not normal fiscal year 
expenditures as to amount or as to the purpose for which expended; and
    (6) Expenditures which were funded from a nonrecurring source of 
income.
    (b) Adjustment. In compliance with the above six exclusions, the PHA 
shall adjust the Allowable Expense Level by excluding any of these items 
from the Base Year Expense Level if this has not

[[Page 640]]

already been accomplished. If such adjustment is made in the second or 
some subsequent fiscal year of the PFS, the Allowable Expense Level 
shall be adjusted in the year in which the adjustment is made, but the 
adjustment shall not be applied retroactively. If the PHA does not make 
these adjustments, the HUD Field Office shall compute the adjustments.
    (c) Computation of Formula Expense Level. The PHA shall compute its 
Formula Expense Level in accordance with a HUD-prescribed formula that 
estimates the cost of operating an average unit in a particular PHA's 
inventory. It uses weights and a Local Inflation Factor assigned each 
year to derive a Formula Expense Level for the current year and the 
requested budget year. The formula is the sum of the following six 
numbers and the weights of the formula and the formula are subject to 
updating by HUD:
    (1) The number of pre-1940 rental units occupied by poor households 
in 1980 as a percentage of the 1980 population of the community 
multiplied by a weight of 7.954. This Census-based statistic applies to 
the county of the PHA, except that, if the PHA has 80 percent or more of 
its units in an incorporated city of more than 10,000 persons, it uses 
city-specific data. County data will exclude data for any incorporated 
cities of more than 10,000 persons within its boundaries.
    (2) The Local Government Wage Rate multiplied by a weight of 
116.496. The wage rate used is a figure determined by the Bureau of 
Labor Statistics. It is a county-based statistic, calibrated to a unit-
weighted PHA standard of 1.0. For multi-county PHAs, the local 
government wage is unit-weighted. For this formula, the local government 
wage index for a specific county cannot be less than 85 percent or more 
than 115 percent of the average local government wage for counties of 
comparable population and metro/non-metro status, on a state-by-state 
basis. In addition, for counties of more than 150,000 population in 
1980, the local government wage cannot be less than 85 percent or more 
than 115 percent of the wage index of private employment determined by 
the Bureau of Labor Statistics and the rehabilitation cost index of 
labor and materials determined by the R.S. Means Company.
    (3) The lesser of the current number of the PHA's two or more 
bedroom units available for occupancy, or 15,000 units, multiplied by a 
weight of .002896.
    (4) The current ratio of the number of the PHA's two or more bedroom 
units available for occupancy in high-rise family projects to the number 
of all the PHA's units available for occupancy multiplied by a weight of 
37.294. For this indicator, a high-rise family project is defined as 
averaging 1.5 or more bedrooms per unit available for occupancy and 
averaging 35 or more units available for occupancy per building and 
containing at least one building with units available for occupancy that 
is 5 or more stories high.
    (5) The current ratio of the number of the PHA's three or more 
bedroom units available for occupancy to the number of all the PHA's 
units available for occupancy multiplied by a weight of 22.303.
    (6) An equation calibration constant of -.2344.
    (d) Computation of Allowable Expense Level. The PHA shall compute 
its Allowable Expense Level as follows:
    (1) Allowable Expense Level for first budget year under PFS where 
Base Year Expense Level does not exceed the top of the range. Every PHA 
whose Base Year Expense Level is less than the top of the range shall 
compute its Allowable Expense Level for the first budget year under the 
PFS by adding the following to its Base Year Expense Level (before 
adjustments under Sec. 990.110):
    (i) Any increase approved by HUD in accordance with Sec. 990.110;
    (ii) The increase (decrease) between the Formula Expense Level for 
the Base Year and the Formula Expense Level for the first budget year 
under PFS; and
    (iii) The sum of the Base Year Expense Level, and any amounts 
described in paragraphs (d)(1) (i) and (ii) of this section multiplied 
by the Local Inflation Factor.
    (2) Allowable Expense Level for first budget year under PFS where 
Base Year Expense Level exceeds the top of the range. Every PHA whose 
Base Year Expense Level exceeds the top of the

[[Page 641]]

range shall compute its Allowable Expense Level for the first budget 
year under PFS by adding the following to the top of the range (not to 
its Base Year Expense Level, as in paragraph (d)(1) of this section):
    (i) The increase (decrease) between the Formual Expense Level for 
the Base Year and the Formula Expense Level or the first budget year 
under PFS;
    (ii) The sum of the figure equal to the top of the range and the 
increase (decrease) described in paragraph (d)(2)(i) of this section, 
multiplied by the Local Inflation Factor. (If the Base Year Expense 
Level is above the Allowable Expense Level, computed as provided above, 
the PHA may be eligible for Transition Funding under Sec. 990.106.)
    (3) Allowable Expense Level for first budget year under PFS for a 
new project. A new project of a new PHA or a new project of an existing 
PHA that the PHA decides to place under a separate ACC, which did not 
have a sufficient number of units available for occupancy in the Base 
Year to have a level of operations representative of a full fiscal year 
of operation is considered to be a ``new project''. The AEL for the 
first budget year under PFS for a ``new project'' will be based on the 
AEL for a comparable project, as determined by the HUD field office. The 
PHA may suggest a project or projects it believes to be comparable.
    (4) Allowable Expense Level for budget years after the first budget 
year under PFS. For each budget year after the first budget year under 
PFS, the AEL shall be computed as follows:
    (i) The Allowable Expense Level shall be increased by any increase 
to the AEL approved by HUD under Sec. 990.108(c);
    (ii) The AEL for the Current Budget Year also shall be adjusted as 
follows:
    (A) Increased by one-half of one percent (.5 percent); and
    (B) If the PHA has experienced a change in the number of units in 
excess of 5 percent or 1,000 units, whichever is less, since the last 
adjustment to the AEL based on this paragraph, it shall use the increase 
(decrease) between the Formula Expense Level calculated using the PHA's 
characteristics that applied to the Requested Year when the last 
adjustment to the AEL was made based on this paragraph and the Formula 
Expense Level calculated using the PHA's characteristics for the 
Requested Budget Year.
    (iii) The amount computed in accordance with paragraphs (d)(4) (i) 
and (ii) of this section shall be multiplied by the Local Inflation 
Factor.
    (5) Adjustment of Allowable Expense Level for budget years after the 
first budget year under PFS. HUD may adjust the Allowable Expense Level 
of budget years after the first year under PFS under the provisions of 
Sec. 990.105(b) or Sec. 990.108(c).
    (6) Allowable Expense Level for budget years after the first budget 
year under PFS that begin on or after April 1, 1992. For each budget 
year after the first budget year under PFS that begins on or after April 
1, 1992, the AEL shall be computed as follows:
    (i) The Allowable Expense Level shall be increased by any increase 
to the AEL approved by HUD under Sec. 990.108(c);
    (ii) The AEL for the Current Budget Year also shall be adjusted as 
follows:
    (A) Increased by one-half of one percent (.5 percent); and
    (B) If the PHA has experienced a change in the number of units in 
excess of 5 percent or 1,000 units, whichever is less, since the last 
adjustment to the AEL based on paragraph (d)(4) or (d)(5)(ii)(B) of this 
section or this paragraph, it shall use the increase (decrease) between 
the Formula Expense Level calculated using the PHA's characteristics 
that applied to the Requested Year when the last adjustment to the AEL 
was made based on paragraph (d)(5)(ii)(B) or this paragraph 
(d)(6)(ii)(B) and the Formula Expense Level calculated using the PHA's 
characteristics for the Requested Budget Year.
    (iii) The amount computed in accordance with paragraphs (d)(6) (i) 
and (ii) of this section shall be multiplied by the Local Inflation 
Factor.
    (7) Adjustment of Allowable Expense Level for budget years after the 
first budget year under PFS. HUD may adjust the Allowable Expense Level 
of budget years after the first year under PFS under the provisions of 
Sec. 990.105(b) or Sec. 990.108(c).

[[Page 642]]

    (e) Retrospective adjustment. A PHA may apply a one-time 
retrospective adjustment to its Allowable Expense Level to compensate 
for the inadequacy of the inflation factors used in the PFS in the 
Federal fiscal years 1977 through 1981. This adjustment has the effect 
of increasing the non-utility portion of the Allowable Expense Level to 
a level that would have resulted if the proper percentages derived from 
the combined inflation factor had been used in those years. This 
adjustment is to be applied to the HUD approved Allowable Expense Level 
Per Unit Month (PUM) amount for PHA fiscal years beginning January 1, 
1981, April 1, 1981, July 1, 1981, or October 1, 1981. Even though the 
adjustment is termed retrospective, it does not provide additional 
operating subsidy eligibility for PHA fiscal years before those 
beginning January 1, 1982. This adjustment shall be applied as follows:
    (1) A PHA: (i) In operation during the PHA fiscal year beginning 
January 1, 1977, April 1, 1977, July 1, 1977, or October 1, 1977; or 
(ii) that started operation after these fiscal years but before the PHA 
fiscal year of January 1, 1982, April 1, 1982, July 1, 1982, or October 
1, 1982; and (iii) that used a comparable PHA's Allowable Expense Level, 
shall apply the retrospective adjustment percentage provided by HUD.
    (2) A PHA that entered operation during the PHA fiscal year 
beginning January 1, 1978, April 1, 1978, July 1, 1978, or October 1, 
1978 but before the PHA fiscal year beginning January 1, 1982, April 1, 
1982, July 1, 1982, or October 1, 1982, and that computed its own 
Allowable Expense Level for purposes of the PFS calculation, shall 
request the appropriate adjustment percentage from HUD, which will 
reflect the number of years the PHA has been in operation. This 
adjustment percentage shall be applied in accordance with this 
regulation.
    (3) A PHA that starts operation during the PHA fiscal year beginning 
January 1, 1982, April 1, 1982, July 1, 1982, or October 1, 1982, or 
thereafter, shall not apply an adjustment since its beginning Allowable 
Expense Level will properly reflect the Local Inflation Factor.
    (f) Adjustment for FY 1989. To reflect the increased costs incurred 
by PHAs to obtain required risk protection coverage (through private 
insurance, PHA sponsored insurance entities, or through self-insurance, 
as approved in accordance with the ACC), the calculation of AEL for the 
PHA's fiscal year beginning in 1989 will include an additional step 
following the determination made in accordance with paragraphs (a) 
through (e) of this section: the AEL per unit month derived in 
accordance with those paragraphs is to be adjusted by adding $8.45. This 
adjustment is a one-time permanent adjustment made only in fiscal year 
1989.

[49 FR 3176, Jan. 26, 1984. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 50 FR 39092, Sept. 27, 1985; 50 FR 47374, Nov. 18, 1985; 
50 FR 52281, Dec. 23, 1985; 52 FR 29361, Aug. 6, 1987; 53 FR 25155, July 
5, 1988; 56 FR 923, Jan. 9, 1991; 57 FR 4289, Feb. 4, 1992; 61 FR 17539, 
Apr. 19, 1996]



Sec. 990.106  Transition funding for excessively high-cost PHAs.

    If a PHA's Base Year Expense Level exceeds its Allowable Expense 
Level, computed as provided in Sec. 990.105, for any budget year under 
PFS, the PHA may be eligible for Transition Funding. Transition Funding 
shall be an amount not to exceed the difference between the Base Year 
Expense Level and the Allowable Expense Level for the Requested Budget 
Year, multiplied by the number of Unit Months Available. HUD shall have 
the right to discontinue payment of all or part of the Transition 
Funding in the event HUD at any time determines that the PHA has not 
achieved a satisfactory level of management efficiency, or is not making 
efforts satisfactory to HUD to improve its management performance.



Sec. 990.107  Computation of utilities expense level.

    (a) The PHA's Utilities Expense Level for the requested Budget Year 
shall be computed by multiplying the AUCL per unit per month for each 
utility, determined as provided in paragraph (c) of this section, by the 
projected utility rate determined as provided in paragraph (b) of this 
section.
    (b) Utilities rates. (1) The current applicable rates, with 
consideration of

[[Page 643]]

adjustments and pass-throughs, in effect at the time the Operating 
Budget is submitted to HUD will be used as the utilities rates for the 
Requested Budget Year, except that, when the appropriate utility 
commission has, prior to the date of submission of the Operating Budget 
to HUD, approved and published rate changes to be applicable during the 
Requested Budget Year, the future approved rates may be used as the 
utilities rates for the entire Requested Budget Year.
    (2) If a PHA takes action, such as wellhead purchase of natural gas, 
or administrative appeals or legal action beyond normal public 
participation in rate-making proceedings to reduce the rate it pays for 
utilities (including water, fuel oil, electricity, and gas), then the 
PHA will be permitted to retain one-half of the cost savings during the 
first 12 months attributable to its actions. Upon determination that the 
action was cost-effective in the first year, the PHA may be permitted to 
retain one-half the annual cost savings, if the actions continue to be 
cost-effective. See also paragraph (e) of this section and 
Sec. 990.110(c).
    (c) Computation of Allowable Utilities Consumption Level. The 
Allowable Utilities Consumption Level (AUCL) used to compute the 
Utilities Expense Level of PHA for the Requested Budget Year generally 
will be based on the availability of consumption data. For project 
utilities where consumption data are available for the entire Rolling 
Base Period, the computation will be in accordance with paragraph (c)(1) 
of this section. Where data are not available for the entire period, the 
computation will be in accordance with paragraph (c)(2) of this section, 
unless the project is a new project, in which case the computation will 
be in accordance with paragraph (c)(3) of this section. For a project 
where the PHA has taken special energy conservation measures that 
qualify for special treatment in accordance with paragraph (f)(1) of 
this section, the computation of the Allowable Utilities Consumption 
Level may be made in accordance with paragraph (c)(4) of this section. 
The AUCL for all of a PHA's projects is the sum of the amounts 
determined using all of these subparagraphs, as appropriate.
    (1) Rolling Base Period System. For project utilities with 
consumption data for the entire Rolling Base Period, the AUCL is the 
average amount consumed per unit per month during the Rolling Base 
Period adjusted in accordance with paragraph (d) of this section. The 
PHA shall determine the average amount of each of the utilities consumed 
during the Rolling Base period (i.e., the 36-month period ending 12 
months prior to the first day of the Requested Budget Year). An example 
of a rolling base is as follows:
    (i) PHA fiscal years affected. The Rolling Base Period shall be used 
to compute the AUCL submitted with the Operating Budgets for PHA Fiscal 
Years beginning January 1, 1983, April 1, 1983, July 1, 1983, October 1, 
1983 and thereafter.
    (ii) An example of a rolling base is as follows:

------------------------------------------------------------------------
      PHA Fiscal Year (affected fiscal year)         Rolling base period
------------------------------------------------------------------------
       Beginning                  Ending              Begins      Ends
------------------------------------------------------------------------
1-1-83................  12-31-83 (1st year).......     1-1-79   12-31-81
1-1-84................  12-31-84 (2nd year).......     1-1-80   12-31-82
------------------------------------------------------------------------

    (2) Alternative method where data is not available for the entire 
Rolling Base Period:
    (i) If the PHA has not maintained or cannot recapture consumption 
data regarding a particular utility from its records for the whole 
Rolling Base Period mentioned in paragraph (c)(1) of this section, it 
shall submit consumption data for that utility for the last 24 months of 
its Rolling Base Period to the HUD Field Office for approval. If this is 
not possible, it shall submit consumption data for the last 12 months of 
its Rolling Base Period. The PHA also shall submit a written explanation 
of the reasons that data for the whole Rolling Base Period is 
unavailable.
    (ii) In those cases where a PHA has not maintained or cannot 
recapture consumption data for a utility for the entire Rolling Base 
Period, comparable consumption for the greatest of either 36, 24, or 12 
months, as needed, shall be used for the utility for which the data is 
lacking. The comparable consumption shall be estimated based upon the

[[Page 644]]

consumption experienced during the Rolling Base Period of comparable 
project(s) with comparable utility delivery systems and occupancy. The 
use of actual and comparable consumption by each PHA, other than those 
PHAs defined as New Projects in paragraph (c)(3) of this section, will 
be determined by the availability of complete data for the entire 36-
month Rolling Base Period. Appropriate utility consumption records, 
satisfactory to HUD, shall be developed and maintained by all PHAs so 
that a 36-month rolling average utility consumption per unit per month 
under paragraph (c)(1) of this section can be determined.
    (iii) If a PHA cannot develop the consumption data for the Rolling 
Base Period or for 12 or 24 months of the Rolling Base Period, either 
from its own project(s) data, or by using comparable consumption data 
the actual per unit per month (PUM) utility expenses stated in paragraph 
(d) of this section shall be used as the Utilities Expense Level.
    (3) Computation of Allowable Utilities Consumption Levels for New 
Projects. (i) A New Project, for the purpose of establishing the Rolling 
Base Period and the Utilities Expense Level, is defined as either: (A) A 
project which had not been in operation during at least 12 months of the 
Rolling Base Period, or a project which enters management after the 
Rolling Base Period and prior to the end of the Requested Budget Year, 
or (B) a project which during or after the Rolling Base Period, has 
experienced conversion from one energy source to another; interruptable 
service; deprogrammed units; a switch from tenant-purchased to PHA-
supplied utilities; or a switch from PHA-supplied to tenant-purchased 
utilities.
    (ii) The actual consumption for New Projects shall be determined so 
as not to distort the Rolling Base Period in accordance with a method 
prescribed by HUD.
    (4) Freezing the Allowable Utilities Consumption Level. (i) 
Notwithstanding the provisions of paragraphs (c)(1) and (c)(2) of this 
section, if a PHA undertakes energy conservation measures that are 
approved by HUD under paragraph (f) of this section, the Allowable 
Utilities Consumption Level for the project and the utilities involved 
may be frozen during the contract period. Before the AUCL is frozen, it 
must be adjusted to reflect any energy savings resulting from the use of 
any HUD funding. The AUCL is then frozen at the level calculated for the 
year during which the conservation measures initially will be 
implemented, as determined in accordance with paragraph (f) of this 
section.
    (ii) If the AUCL is frozen during the contract period, the annual 
three-year rolling base procedures for computing the AUCL shall be 
reactivated after the PHA satisfies the conditions of the contract. The 
three years of consumption data to be used in calculating the AUCL after 
the end of the contract period will be as follows:
    (A) First year: The energy consumption during the year before the 
year in which the contract ended and the energy consumption for each of 
the two years before installation of the energy conservation 
improvements;
    (B) Second year: The energy consumption during the year the contract 
ended, energy consumption during the year before the contract ended, and 
energy consumption during the year before installation of the energy 
conservation improvements;
    (C) Third year: The energy consumption during the year after the 
contract ended, energy consumption during the year the contract ended, 
and energy consumption during the year before the contract ended.
    (d) Utilities expense level where consumption data for the full 
Rolling Base Period is unavailable. If a PHA does not obtain the 
consumption data for the entire Rolling Base Period, or for 12 or 24 
months of the Rolling Base Period, either for its own project(s) or by 
using comparable consumption data as required in paragraph (c)(2) of 
this section, it shall request HUD Field Office approval to use actual 
PUM utility expenses. These expenses shall exclude Utilities Labor and 
Other Utilities Expenses. The actual PUM utility expenses shall be taken 
from the year-end Statement of Operating Receipts and Expenditures, Form 
HUD-52599, (Office of Management and Budget approval number 2505-0240) 
prepared for the PHA fiscal year which ended 12 months prior to the 
beginning of the

[[Page 645]]

PHA Requested Budget Year (e.g., for a PHA fiscal year beginning January 
1, 1983, the PHA would use data from the fiscal year ended December 31, 
1981). Subsequent adjustments will not be approved for a budget year for 
which the utility expense level is established based upon actual PUM 
utility expenses.
    (e) Adjustments. PHAs shall request adjustments of Utilities Expense 
Levels in accordance with Sec. 990.110(c), which requires an adjustment 
based upon a comparison between actual experience and estimates of 
consumption and of utility rates.
    (f) Incentives for energy conservation improvements. If a PHA 
undertakes energy conservation measures (including those covering water, 
fuel oil, electricity, and gas) that are financed by an entity other 
than the Secretary, such as physical improvements financed by a loan 
from a utility or governmental entity, management of costs under a 
performance contract, or a shared savings agreement with a private 
energy service company, the PHA may qualify for one of the two possible 
incentives under this part. For a PHA to qualify for these incentives, 
HUD approval must be obtained. Approval will be based upon a 
determination that payments under the contract can be funded from the 
reasonably anticipated energy cost savings, and the contract period does 
not exceed 12 years.
    (1) If the contract allows the PHA's payments to be dependent on the 
cost savings it realizes, the PHA must use at least 50 percent of the 
cost savings to pay the contractor. With this type of contract, the PHA 
may take advantage of a frozen AUCL under paragraph (c)(4) of this 
section, and it may use the full amount of the cost savings, as 
described in Sec. 990.110(c)(2)(ii).
    (2) If the contract does not allow the PHA's payments to be 
dependent on the cost savings it realizes, then the AUCL will continue 
to be calculated in accordance with paragraphs (c)(1) through (c)(3) of 
this section, as appropriate; the PHA will be able to retain part of the 
cost savings, in accordance with Sec. 990.110(c)(2)(i); and the PHA will 
qualify for additional operating subsidy eligibility (above the amount 
based on the allowable expense level) to cover the cost of amortizing 
the improvement loan during the term of the contract, in accordance with 
Sec. 990.110(e).

(Approved by the Office of Management and Budget under control number 
2577-0125)

[47 FR 57272, Dec. 23, 1982, and 48 FR 38229, Aug. 23, 1983. 
Redesignated at 49 FR 6714, Feb. 23, 1984, and amended at 56 FR 46362, 
Sept. 11, 1991; 57 FR 2679, Jan. 23, 1992; 59 FR 33655, June 30, 1994; 
59 FR 51854, Oct. 13, 1994; 61 FR 17540, Apr. 19, 1996; 61 FR 51183, 
Sept. 30, 1996]



Sec. 990.108  Other costs.

    (a) Cost of independent audits. (1) Eligibility to receive operating 
subsidy for independent audits is considered separately from the PFS. 
However, the PHA shall not request, nor will HUD approve, an operating 
subsidy for the cost of an independent audit if the audit has already 
been funded by subsidy in a prior year. The PHA's estimate of cost of 
the independent audit is subject to adjustment by HUD. If the PHA 
requires assistance in determining the amount of cost to be estimated, 
the HUD Field Office should be contacted.
    (2) A PHA that is required by the Single Audit Act (see 24 CFR part 
44) to conduct a regular independent audit may receive operating subsidy 
to cover the cost of the audit. The estimated cost of an independent 
audit, applicable to the operations of PHA-owned rental housing, is not 
included in the Allowable Expense Level, but it is allowed in full in 
computing the amount of operating subsidy under Sec. 990.104, above.
    (3) A PHA that is exempt from the audit requirements under the 
Single Audit Act (24 CFR part 44) may receive operating subsidy to 
offset the cost of an independent audit chargeable to operations (after 
the End of the Initial Operating Period) if the PHA chooses to have an 
audit.
    (b)(1) Costs attributable to units approved for deprogramming and 
vacant may be eligible for inclusion, but must be limited to the minimum 
services and protection necessary to protect and preserve the units 
until the units are deprogrammed. Costs attributable to units 
temporarily unavailable for

[[Page 646]]

occupancy because the units are utilized for PHA-related activities are 
not eligible for inclusion. In determining the PFS operating subsidy, 
these units shall not be included in the calculation of Unit Months 
Available. Units approved for deprogramming shall be listed by the PHA, 
and supporting documentation regarding direct costs attributable to such 
units shall be included as a part of the Performance Funding System 
calculation in which the PHA requests operating subsidy for these units. 
If the PHA requires assistance in this matter, the PHA should contact 
the HUD Field Office.
    (2) Units approved for nondwelling use to promote economic self-
sufficiency services and anti-drug activities are eligible for operating 
subsidy under the conditions provided in this paragraph (b)(2), and the 
costs attributable to these units are to be included in the operating 
budget. If a unit satisfies the conditions stated below, it will be 
eligible for subsidy at the rate of the AEL for the number of months the 
unit is devoted to such use. Approval will be given for a period of no 
more than 3 years. HUD may renew the approval to allow payments after 
that period only if the PHA can demonstrate that no other sources for 
paying the non-utility operating costs of the unit are available. The 
conditions the unit must satisfy are:
    (i) The unit must be used for either economic self-sufficiency 
activities directly related to maximizing the number of employed 
residents or for anti-drug programs directly related to ridding the 
development of illegal drugs and drug-related crime. The activities must 
be directed toward and for the benefit of residents of the development.
    (ii) The PHA must demonstrate that space for the service or program 
is not available elsewhere in the locality and that the space used is 
safe and suitable for its intended use or that the resources are 
committed to make the space safe and suitable.
    (iii) The PHA must demonstrate satisfactorily that other funding is 
not available to pay for the non-utility operating costs. All rental 
income generated as a result of the activity must be reported as income 
in the operating subsidy calculation.
    (iv) Operating subsidy may be approved for only one site (involving 
one or more contiguous units) per public housing development for 
economic self-sufficiency services or anti-drug programs, and the number 
of units involved should be the minimum necessary to support the service 
or program. Operating subsidy for any additional sites per development 
can only be approved by HUD Headquarters.
    (v) The PHA must submit a certification with its Performance Funding 
System Calculation that the units are being used for the purpose for 
which they were approved and that any rental income generated as a 
result of the activity is reported as income in the operating subsidy 
calculation. The PHA must maintain specific documentation of the units 
covered. Such documentation should include a listing of the units, the 
street addresses, and project/management control numbers.
    (3) Long-term vacant units that are not included in the calculation 
of Unit Months Available are eligible for operating subsidy in the 
Requested Budget Year at the rate of 20 percent of the AEL. Allowable 
utility costs for long term vacant units will continue to be funded in 
accordance with Sec. 990.107.
    (c) Costs attributable to changes in Federal law or regulation. In 
the event that HUD determines that enactment of a Federal law or 
revision in HUD or other Federal regulation has caused or will cause a 
significant increase in expenditures of a continuing nature above the 
Allowable Expense Level and Utilities Expense Level, HUD may in HUD's 
sole discretion decide to prescribe a procedure under which the PHA may 
apply for or may receive an increase in operating subsidy.
    (d)(1) Costs resulting from combination of two or more units. When a 
PHA redesigns or rehabilitates a project and combines two or more units 
into one larger unit and the combination of units results in a unit that 
houses at least the same number of people as were previously served, the 
AEL for the requested year shall be multiplied by the number of unit 
months not included in the requested year's unit months available as a 
result of these combinations that have occurred since the Base Year. The 
number of people

[[Page 647]]

served in a unit will be based on the formula ((2 x No. of Bedrooms) 
minus 1), which yields the average number of people that would be 
served. An efficiency unit will be counted as a one bedroom unit for 
purposes of this calculation.
    (2) An exception to paragraph (d)(1) of this section is made when an 
HA combines two efficiency units into a one-bedroom unit. In these 
cases, the AEL for the requested year shall be multiplied by the number 
of unit months not included in the requested year's unit months 
available as a result of these combinations that have occurred since the 
Base Year.
    (e) Funding for Resident Council expenses. In accordance with the 
provisions of 24 CFR part 964 and procedures determined by HUD, each HA 
shall include in the operating subsidy eligibility calculation, $25 per 
unit per year (subject to appropriations) for each unit represented by a 
duly elected resident council in support of the duly elected resident 
council's activities. Of this amount, $15 per unit per year shall fund 
resident participation activities of the duly elected resident council 
and/or jurisdiction-wide councils, including but not limited to 
stipends. Ten dollars per unit per year shall fund HA costs incurred in 
carrying out resident participation activities.
    (f) Funding for Resident Council office space. If there is no 
community or rental space available, and HUD has approved the use of a 
vacant rental unit for Resident Council office space, the unit will be 
eligible for operating subsidy (subject to appropriations) at the rate 
of the AEL for the number of months the unit is devoted to such use.

(Approved by the Office of Management and Budget under control number 
2577-0125)

[41 FR 55676, Dec. 21, 1976; 42 FR 18064, Apr. 5, 1977. Redesignated at 
49 FR 6714, Feb. 23, 1984, and amended at 50 FR 25958, June 24, 1985; 52 
FR 29361, Aug. 6, 1987; 56 FR 46362, Sept. 11, 1991; 57 FR 2679, Jan. 
23, 1992; 59 FR 33655, June 30, 1994; 59 FR 43644, Aug. 24, 1994; 61 FR 
7591, Feb. 28, 1996; 61 FR 17540, Apr. 19, 1996; 61 FR 51183, Sept. 30, 
1996]



Sec. 990.109  Projected operating income level.

    (a) Policy. PFS determines the amount of operating subsidy for a 
particular PHA based in part upon a projection of the actual dwelling 
rental income and other income for the particular PHA. The projection of 
dwelling rental income is obtained by computing the average monthly 
dwelling rental charge per unit for the PHA, and projecting this amount 
for the Requested Budget Year by applying an upward trend factor 
(subject to updating) of 3 percent, and multiplying this amount by the 
Projected Occupancy Percentage for the Requested Budget Year. 
Nondwelling income is projected by the PHA subject to adjustment by HUD. 
There are special provisions for projection of dwelling rental income 
for new projects.
    (b) Computation of projected average monthly dwelling rental income. 
The projected average monthly dwelling rental income per unit for the 
PHA is computed as follows:
    (1)(i) Average monthly dwelling rental charge per unit. The dollar 
amount of the average monthly dwelling rental charge per unit shall be 
computed on the basis of the total dwelling rental charges (total of the 
adjusted rent roll amounts) for all Project Units, as shown on the 
Tenant Rent Rolls which the PHA is required to maintain, for the first 
day of the month which is six months prior to the first day of the 
Requested Budget Year, except that if a change in the total of the Rent 
Rolls has occurred in a subsequent month which is prior to the beginning 
of the Requested Budget Year and prior to the submission of the 
Requested Budget Year calculation of operating subsidy eligibility, the 
PHA shall use the latest changed Rent Roll for the purpose of the 
computation. This aggregate dollar amount shall be divided by the number 
of occupied dwelling units as of the same date.
    (ii) The Rent Roll used for calculating the projected operating 
income level will not reflect decreases resulting from the HA's 
implementation of an optional earned income exclusion authorized by the 
definition of ``annual income'' in 24 CFR 913.106(d). But see 
Sec. 990.116 for the earned income incentive adjustment.
    (2) Three percent increase. The average monthly dwelling rental 
charge per unit, computed under paragraph (b)(1)

[[Page 648]]

of this section, is increased by 3 percent to obtain the projected 
average monthly dwelling rental charge per unit of the HA for the 
Requested Budget Year, except that for the shorter of Federal Fiscal 
Years 1996 through 1998 or the period during which HUD has an operating 
subsidy shortfall, no increase factor will be used.
    (3) Projected Occupancy Percentage. The PHA shall determine its 
projected percentage of occupancy for all Project Units (Projected 
Occupancy Percentage), as follows:
    (i) General. Using actual occupancy data collected before the start 
of the budget year as a beginning point, the PHA will develop estimates 
for its Requested Budget Year (RBY) of: how many units the PHA will have 
available for occupancy; how many of the available units will be 
occupied and how many will be vacant, and what the average occupancy 
percentage will be for the RBY. The conditions under which the RBY 
occupancy percentage will be used as the projected occupancy percentage 
for purposes of determining operating subsidy eligibility are described 
below.
    (ii) High Occupancy PHA--No Adjustments Necessary. If the PHA's RBY 
Occupancy Percentage, calculated in accordance with Sec. 990.117, is 
equal to or greater than 97%, the PHA's Projected Occupancy Percentage 
is 97%. If the PHA's RBY Occupancy Percentage is less than 97%, but the 
PHA demonstrates that it will have an average of five or fewer vacant 
units in the requested budget year, the PHA will use its RBY Occupancy 
Percentage as its projected occupancy percentage.
    (iii) Adjustments in Determining Occupancy. If the PHA's RBY 
Occupancy Percentage is less than 97% and the PHA has more than 5 vacant 
units, the PHA will adjust its estimate of vacant units to exclude 
vacant units undergoing modernization and units that are vacant due to 
circumstances and actions beyond the PHA's control. After making this 
adjustment, the PHA will recalculate its estimated vacancy percentage 
for the RBY.
    (A) High Occupancy PHA after adjustment. If the recalculated vacancy 
percentage is 3% or less (or the PHA would have five or fewer vacant 
units), the PHA will use its RBY Occupancy Percentage as its projected 
occupancy percentage.
    (B) Low Occupancy PHA--adjustment for long-term vacancies. If the 
recalculated vacancy percentage is greater than 3% (or more than 5 
vacant units), the PHA will then further adjust its RBY Occupancy 
Percentage by excluding from its calculation of Unit Months Available 
(UMAs), all units that have been vacant for longer than 12 months that 
are not vacant units undergoing modernization or are not units vacant 
due to circumstances and actions beyond the PHA's control.
    (iv) Low Occupancy PHA after all adjustments. A PHA that has 
determined its RBY Occupancy Percentage in accordance with paragraph 
(b)(iii)(B) of this section will be eligible for operating subsidy as 
follows:
    (A) Long-term vacancies removed from the calculation of UMAs will be 
eligible to receive a reduced operating subsidy calculated at 20% of the 
PHA's AEL.
    (B) If the recalculated RBY Occupancy Percentage is 97% or higher, 
the PHA will use 97%.
    (C) If the recalculated RBY Occupancy Percentage is less than 97%, 
but the vacancy rate after adjusting for vacant units undergoing 
modernization and units that are vacant due to circumstances and actions 
beyond the PHA's control is 3% or less (or the PHA has five or fewer 
vacant units), the PHA may use its recalculated RBY Occupancy Percentage 
as its projected occupancy percentage.
    (D) If the recalculated RBY Occupancy Percentage is less than 97% 
and the vacancy percentage is greater than 3% (or the PHA has more than 
five vacant units) after adjusting for vacant units undergoing 
modernization and units that are vacant due to circumstances and actions 
beyond the PHA's control, the PHA will use 97% as its projected 
occupancy percentage, but will be allowed to adjust the 97% by the 
number of vacant units undergoing modernization and units that are 
vacant due to circumstances and actions beyond the PHA's control. For a 
small PHA using five vacant units as its occupancy objective for the 
RBY,

[[Page 649]]

the PHA will determine what percentage five units represents as a 
portion of its units available for occupancy and subtract that 
percentage from 100%. The result will be used as the PHA's projected 
occupancy percentage, but the PHA will be allowed to adjust the 
projected occupancy percentage by vacant units undergoing modernization 
and units that are vacant for circumstances and actions beyond the PHA's 
control.
    (4) Projected average monthly dwelling rental income. The projected 
occupancy percentage under paragraph (b)(3) of this section shall be 
multiplied by the projected average monthly dwelling rental charge under 
paragraph (b)(2) of this section to obtain the projected monthly 
dwelling rental income per unit.
    (c) Projected average monthly dwelling rental charge per unit for 
new Projects. The projected average monthly dwelling rental charge for 
new Projects which were not available for occupancy during the budget 
year prior to the Requested Budget Year and which will reach the End of 
the Initial Operating Period (EIOP) within the first nine months of the 
Requested Budget Year, shall be calculated as follows:
    (1) If the PHA has another Project or Projects under management 
which are comparable in terms of elderly and nonelderly tenant 
composition, the PHA shall use the projected average monthly dwelling 
rental charge for such Project or Projects.
    (2) If the PHA has no other Projects which are comparable in terms 
of elderly and nonelderly tenant composition, the HUD Field Office will 
provide the projected average monthly dwelling rental charge for such 
Project or Projects, based on comparable Projects located in the area.
    (d) Estimate of additional dwelling rental income. After 
implementation of the provisions of any legislation enacted or any HUD 
administrative action taken subsequent to the effective date of these 
regulations, which affects rents paid by tenants of Projects, each PHA 
shall submit a revision of its calculation of operating subsidy 
eligibility showing an estimate of any change in rental income which it 
anticipates as the result of the implementation of said provisions. HUD 
shall have complete discretion to adjust the projected average monthly 
dwelling rental charge per unit to reflect such change or in the absence 
of this submission, if HUD has knowledge of such change. HUD also shall 
have complete discretion to reduce or increase the operating subsidy 
approved for the PHA current fiscal year in an amount equivalent to the 
change in the rental income.
    (e) PHA's estimate of income other than dwelling rental income--(1) 
Investment income. PHAs with an estimated average cash balance of less 
than $20,000, excluding investment income earned from a funded 
replacement reserve under Sec. 968.310(g), shall make a reasonable 
estimate of investment income for the Requested Budget Year. PHAs with 
an estimated average cash balance of $20,000 or more, excluding 
investment income earned from a funded replacement reserve under 
Sec. 968.310(g), shall estimate interest on general fund investments 
based on the estimated average yield for 91-day Treasury bills for the 
PHA's Requested Budget Year (yield information will be provided by HUD). 
The determination of average cash balance will allow a deduction of 
$10,000, plus $10 per unit for each unit over 1,000, subject to a total 
maximum deduction of $250,000. In all cases, the estimated investment 
income amount shall be subject to HUD approval. See Sec. 990.110(b).
    (2) Other Income. All PHAs shall estimate Other Income based on past 
experience and a reasonable projection for the Requested Budget Year, 
which estimate shall be subject to HUD approval.
    (3) Total. The estimated total amount of income for investments and 
Other Income, as approved, shall be divided by the number of Unit Months 
Available to obtain a per unit per month amount. This amount shall be 
added to the projected average dwelling rental income per unit to obtain 
the Projected Operating Income Level. This amount shall not be subject 
to the provisions regarding program income in 24 CFR 85.25.
    (f) Required adjustments to estimates. The PHA shall submit year-end 
adjustments of projected operating income

[[Page 650]]

levels in accordance with Sec. 990.110(b), which covers investment 
income.

(Approved by the Office of Management and Budget under control number 
2577-0066. Paragraphs (e) and (f) have been approved by the Office of 
Management and Budget under control number 2577-007)

[41 FR 55676, Dec. 21, 1976. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 50 FR 25958, June 24, 1985; 50 FR 47375, Nov. 18, 1985; 
51 FR 16840, May 7, 1986; 52 FR 29361, Aug. 6, 1987; 53 FR 8067, Mar. 
11, 1988; 57 FR 5588, Feb. 14, 1992; 61 FR 7591, Feb. 28, 1996; 61 FR 
17541, Apr. 19, 1996; 61 FR 51183, Sept. 30, 1996]

    Effective Date Note: At 61 FR 51183, Sept. 30, 1996, Sec. 990.109(b) 
was amended. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



Sec. 990.110  Adjustments.

    Adjustment information submitted to HUD under this section must be 
accompanied by an original or revised calculation of operating subsidy 
eligibility.
    (a) Adjustment of base year expense level--(1) Eligibility. A PHA 
with projects that have been in management for at least one full fiscal 
year, for which operating subsidy is being requested under the formula 
for the first time, may, during its first budget year under PFS, request 
HUD to increase its Base Year Expense Level. Included in this category 
are existing PHAs requesting subsidy for a project or projects in 
operation at least one full fiscal year under separate ACC, for which 
operating subsidy has never been paid, except for independent audit 
costs. This request may be granted by HUD, in its discretion, only where 
the PHA establishes to HUD's satisfaction that the Base Year Expense 
Level computed under Sec. 990.105(a) will result in operating subsidy at 
a level insufficient to support a reasonable level of essential 
services. The approved increase cannot exceed the lesser of the per unit 
per month amount by which the top of the Range exceeds the Base Year 
Expense Level.
    (2) Procedure. A PHA that is eligible for an adjustment under 
paragraph (a)(1) of this section may only make a request for such 
adjustment once for projects under a particular ACC, at the time it 
submits the calculation of operating subsidy eligibility for the first 
budget year under PFS. Such request shall be submitted to the HUD Field 
Office, which will review, modify as necessary, and approve or 
disapprove the request. A request under this paragraph must include a 
calculation of the amount per unit per month of requested increase in 
the Base Year Expense Level, and must show the requested increase as a 
percentage of the Base Year Expense Level.
    (b) Adjustments to estimated investment income. A PHA that had an 
estimated average cash balance of at least $20,000 must submit a year-
end adjustment to the estimated amount of investment income that was 
used to determine subsidy eligibility at the beginning of the PHA's 
fiscal year. The amount of the adjustment will be the difference between 
the estimate and a Target Investment Income amount based on the actual 
average yield on 91-day Treasury bills for the PHA's fiscal year being 
adjusted and the actual average cash balance available for investment 
during the PHA's fiscal year, computed in accordance with HUD 
requirements. HUD will provide the PHA with the actual average yield on 
91-day Treasury bills for the PHA's fiscal year. Failure of a PHA to 
submit the required adjustment of investment income by the date due may, 
in the discretion of HUD, result in the withholding of approval of 
future obligation of operating subsidies until the adjustment is 
received.
    (c) Adjustments to Utilities Expense Level. A PHA receiving 
operating subsidy under Sec. 990.104, excluding those PHAs that receive 
operating subsidy solely for independent audit (Sec. 990.108(a)), must 
submit a year-end adjustment regarding the Utility Expense Level 
approved for operating subsidy eligibility purposes. This adjustment, 
which will compare the actual utility expense and consumption for the 
PHA fiscal year to the estimates used for subsidy eligibility purposes, 
shall be submitted on forms prescribed by HUD. This request shall be 
submitted to the HUD Field Office by a deadline established by HUD, 
which

[[Page 651]]

will be during the PHA fiscal year following the PHA fiscal year for 
which an operating subsidy was received by the PHA, exclusive of a 
subsidy solely for independent audit costs. Failure to submit the 
required adjustment of the Utilities Expense Level by the due date may, 
in the discretion of HUD, result in the withholding of approval of 
future obligation of operating subsidies until it is received. 
Adjustments under this subsection normally will be made in the PHA 
fiscal year following the year for which the adjustment is applicable, 
except as provided in paragraph (c)(5) of this section or unless a 
repayment plan is necessary as noted in paragraph (d) of this section.
    (1) Rates. A change in the Utilities Expense Level because of 
changes in utility rates-to the extent funded by the operating subsidy-
will result in an adjustment of future operating subsidy payments. 
However, where the rate reduction covering utilities, such as water, 
fuel oil, electricity, and gas, is directly attributable to action by 
the PHA, such as wellhead purchase of natural gas, or administrative 
appeals or legal action beyond normal public participation in rate-
making proceedings, then the PHA will be permitted to retain one-half of 
the cost savings attributable to its actions for the first year and, 
upon determination that the action was cost-effective in the first year, 
for as long as the actions continue to be cost-effective, and the other 
one-half of the cost savings will be deducted from operating subsidy 
otherwise payable.
    (2) Consumption. (i) Generally, 50 percent of any decrease in the 
Utilities Expense Level attributable to decreased consumption after 
adjustment for any utility rate change, will be retained by the PHA; 50 
percent will be offset by HUD against subsequent payment of operating 
subsidy.
    (ii) However, in the case of a PHA whose energy conservation 
measures have been approved by HUD as satisfying the requirements of 
Sec. 990.107(f)(1), the PHA may retain 100 percent of the savings from 
decreased consumption after payment of the amount due the contractor 
until the term of the financing agreement is completed. The decreased 
consumption is to be determined by adjusting for any utility rate 
changes and may be adjusted, subject to HUD approval, using a heating 
degree day adjustment for space heating utilities. The savings realized 
must be applied in the following order:
    (A) Retention of up to 50 percent of the total savings from 
decreased consumption to cover training of PHA employees, counseling of 
tenants, PHA management of the cost reduction program and any other 
eligible costs; and
    (B) Prepayment of the amount due the contractor under the contract.
    (iii) An increase in the Utilities Expense Level attributable to 
increased consumption will be fully funded by residual receipts after 
provision for reserves, if available. If residual receipts are not 
available and the increase would result in a reduction of the operating 
reserve below the authorized maximum, fifty percent of an increase in 
the Utilities Expense Level attributable to increased consumption, after 
adjustment for any utility rate change, will be funded by HUD by 
adjusting future operating subsidy payments.
    (3) Emergency adjustments. In emergency cases, where a PHA 
establishes to HUD's satisfaction that a severe financial crisis would 
result from a utility rate increase, an adjustment covering only the 
rate increase may be submitted to HUD at any time during the PHA's 
Current Budget Year. Unlike the adjustments mentioned in paragraphs 
(c)(1) and (c)(2) of this section, this adjustment shall be submitted to 
the HUD Field Office by revision of the original submission of the 
estimated Utility Expense Level for the fiscal year to be adjusted.
    (4) Documentation. Supporting documentation substantiating the 
requested adjustments shall be retained by the PHA pending HUD audit.
    (d) Requests for adjustments to projected average monthly dwelling 
rental income. Requests for adjustments to projected average monthly 
dwelling rental income may be made as follows:
    (1) Criteria for granting request. A PHA may request an adjustment 
to projected average monthly dwelling rental income under PFS if the PHA 
can establish to HUD's satisfaction that the projected amount computed 
under Sec. 990.109 was not attained because of

[[Page 652]]

circumstances beyond the control of the PHA. The PHA must also 
demonstrate to HUD's satisfaction that it has established and is 
effectively implementing tenant selection criteria in compliance with 
HUD requirements. HUD shall have complete discretion to approve 
completely, approve in part or deny any requested adjustment to 
projected average monthly dwelling rental income.
    (2) Procedure. A request for an adjustment under this subsection 
shall be submitted to the HUD Field Office by a deadline established by 
HUD, which will be within twelve months following the PHA's fiscal year 
being adjusted. In emergency cases, however, where a PHA establishes to 
HUD's satisfaction that decreased rental income would result in a severe 
financial crisis, a request for adjustments may be submitted to HUD at 
an earlier time.
    (e) Energy conservation financing. If HUD has approved an energy 
conservation contract under Sec. 990.107(f)(2), then the PHA is eligible 
for additional operating subsidy each year of the contract to amortize 
the cost of the energy conservation measures under the contract, subject 
to a maximum annual limit equal to the cost savings for that year (and a 
maximum contract period of 12 years).
    (1) Each year, the energy cost savings would be determined as 
follows:
    (i) The consumption level that would have been expected if the 
energy conservation measure had not been undertaken would be adjusted 
for any change in utility rate and may be adjusted, subject to HUD 
approval, using a heating degree day adjustment for space heating 
utilities;
    (ii) The actual cost of energy (of the type affected by the energy 
conservation measure) after implementation of the energy conservation 
measure would be subtracted from the expected energy cost, to produce 
the energy cost savings for the year. (See also paragraph (c)(2)(i) of 
this section for retention of consumption savings.)
    (2) If the cost savings for any year during the contract period is 
less than the amount of operating subsidy to be made available under 
this paragraph (e) to pay for the energy conservation measure in that 
year, the deficiency will be offset against the PHA's operating subsidy 
eligibility for the PHA's next fiscal year.
    (3) If energy cost savings are less than the amount necessary to 
meet amortization payments specified in a contract, the contract term 
may be extended (up to the 12-year limit) if HUD determines that the 
shortfall is the result of changed circumstances rather than a 
miscalculation or misrepresentation of projected energy savings by the 
contractor or PHA. The contract term may only be extended to accommodate 
payment to the contractor and associated direct costs.
    (f) Additional HUD-initiated adjustments. Notwithstanding any other 
provisions of this subpart, HUD may at any time make an upward or 
downward adjustment in the amount of the PHA's operating subsidy as a 
result of data subsequently available to HUD which alters projections 
upon which the approved operating subsidy was based. Normally 
adjustments shall be made in total in the PHA fiscal year in which the 
needed adjustment is determined; however, if a downward adjustment would 
cause a severe financial hardship on the PHA, the HUD Field Office may 
establish a recovery schedule which represents the minimum number of 
years needed for repayment.

(Approved by the Office of Management and Budget under control numbers 
2577-0026, 2577-0029, 2577-0071, and 2577-0125)

[50 FR 47375, Nov. 18, 1985, as amended at 56 FR 46362, Sept. 11, 1991; 
57 FR 2679, Jan. 23, 1992; 57 FR 4290, Feb. 4, 1992; 59 FR 33656, June 
30, 1994; 59 FR 51854, Oct. 13, 1994; 61 FR 17541, Apr. 19, 1996; 61 FR 
51183, Sept. 30, 1996]



Sec. 990.111  Submission and approval of operating subsidy calculations and budgets.

    (a) Required documentation. (1) Prior to the beginning of its fiscal 
year, the PHA shall prepare an operating budget in a manner prescribed 
by HUD. The Board of Commissioners shall review and approve the budget 
by resolution. Each fiscal year, the PHA shall submit to the HUD Field 
Office, in a time and manner prescribed by HUD, the approved board 
resolution and the required operating subsidy eligibility calculation 
forms. The PHA shall submit revised calculations in support of

[[Page 653]]

mandatory or other adjustments based on procedures prescribed by HUD.
    (2) HUD may direct the PHA to submit its complete operating budget 
if the PHA has failed to achieve certain specified operating standards, 
or for other reasons which in HUD's determination threaten the PHA's 
future serviceability, efficiency, economy, or stability.
    (b) HUD operating budget review. (1) The HUD Field Office will 
perform a detailed review on operating budgets that are subject to HUD 
review and approval. If the HUD Field Office finds that an operating 
budget is incomplete, includes illegal or ineligible expenditures, 
mathematical errors, errors in the application of accounting procedures, 
or is otherwise unacceptable, the HUD Field Office may at any time 
require the submission by the PHA of further information regarding an 
operating budget or operating budget revision.
    (2) When the PHA no longer is operating in a manner that threatens 
the future serviceability, efficiency, economy, or stability of the 
housing it operates, HUD will notify the PHA that it no longer is 
required to submit an operating budget to HUD for review and approval.

[61 FR 17541, Apr. 19, 1996]



Sec. 990.112  Payments procedure for operating subsidy under PFS.

    (a) General. Subject to the availability of funds, payments of 
operating subsidy under PFS shall be made generally by electronic funds 
transfers, based on a schedule submitted by the PHA and approved by HUD, 
reflecting the PHA's projected cash needs. The schedule may provide for 
several payments per month. If a PHA has an unanticipated, immediate 
need for disbursement of approved operating subsidy, it may make a 
informal request to HUD to revise the approved schedule. (Requests by 
telephone are acceptable.)
    (b) Payments procedure. In the event that the amount of operating 
subsidy has not been determined by HUD as of the beginning of a PHA's 
budget year under these PFS regulations, annual or monthly or quarterly 
payments of operating subsidy shall be made, as provided in paragraph 
(a) of this section, based upon the amount of the PHA's operating 
subsidy for the previous budget year or such other amount as HUD may 
determine to be appropriate.
    (c) Availability of funds. In the event that insufficient funds are 
available to make payments approvable under PFS for operating subsidy 
payable by HUD, HUD shall have complete discretion to revise, on a pro 
rata basis or other basis established by HUD, the amounts of operating 
subsidy to be paid to PHAs.

[41 FR 55676, Dec. 21, 1976. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 50 FR 47376, Nov. 18, 1985. Redesignated at 61 FR 17542, 
Apr. 19, 1996]



Sec. 990.113  Payments of operating subsidy conditioned upon reexamination of income of families in occupancy.

    (a) Policy. The income of each family must be reexamined at least 
annually. PHAs must be in compliance with this reexamination requirement 
to be eligible to receive full operating subsidy payments.
    (b) PHAs in compliance with requirements. Each submission of the 
original calculation of operating subsidy eligibility for a fiscal year 
shall be accompanied by a certification by the PHA that it is in 
compliance with the annual income reexamination requirements and that 
rents have been or will be adjusted in accordance with current HUD 
requirements.
    (c) PHAs not is compliance with requirements. Any PHA not in 
compliance with annual income reexamination requirement at the time of 
Operating Budget submission shall furnish to the HUD Field Office a copy 
of the procedure it is using to attain compliance and a statement of the 
number of families that have undergone reexamination during the twelve 
months proceding the date of the Operating Budget submission, or the 
revision thereof. If, on the basis of such submission, or any other 
information, the Field Office Director determines that the PHA is not 
substantially in compliance with the annual income reexamination 
requirement, he or she shall withhold payments to which the PHA might 
otherwise be entitled under this

[[Page 654]]

part, equal to his or her estimate of the loss of rental income to the 
PHA resulting from its failure to comply with those requirements.

(Approved by the Office of Management and Budget under control number 
2577-0026)

[50 FR 47377, Nov. 18, 1985. Redesignated and amended at 61 FR 17542, 
Apr. 19, 1996]



Sec. 990.114  Phase-down of subsidy for units approved for demolition.

    (a) General. Units that have both been approved by HUD for 
demolition and been vacated in FFY 1995 and after will be excluded from 
an HA's determination of Unit Months Available when vacated, but they 
will remain eligible for subsidy in the following way:
    (1) For the first twelve months beginning with the month that a unit 
meets both conditions of being approved for demolition and vacant, the 
full AEL will be allowed for the unit.
    (2) During the second twelve-month period after meeting both 
conditions, 66 percent of the AEL will be allowed for the unit.
    (3) During the third twelve-month period after meeting both 
conditions, 33 percent of the AEL will be allowed for the unit.
    (b) Special case for long-term vacant units. Units that have been 
vacant for longer than 12 months when they are approved for demolition 
are eligible for funding equal to 20% of the AEL for a 12-month period.
    (c) Treatment of units replaced with Section 8 Certificates or 
Vouchers. Units that are replaced with Section 8 Certificates or 
Vouchers are not subject to the provisions of this section.
    (d) Treatment of units replaced with public housing units. When 
replacement conventional public housing units become eligible for 
operating subsidy, the demolished unit is no longer eligible for any 
funding under this section.
    (e) Determination of what units are ``replaced.'' For purposes of 
this section, replacements are applied first against units that 
otherwise would fall in paragraph (a) of this section; any remaining 
replacements should be used to reduce the number of units qualifying 
under paragraph (b) of this section.
    (f) Treatment of units combined with other units. Units that are 
removed from the inventory as a result of being combined with other 
units are not considered to be demolished units for this purpose.
    (g) Retroactive effect. This section is to be applied retroactively 
for units approved for demolition during Federal Fiscal Years 1995 and 
1996. HAs affected by this provision may submit a revised calculation of 
operating subsidy eligibility for the subject fiscal year(s).

[61 FR 51183, Sept. 30, 1996]

    Effective Date Note: At 61 FR 51183, Sept. 30, 1996, Sec. 990.114 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



Sec. 990.116  Three-year incentive adjustments.

    (a) Applicability. For the period of Federal Fiscal Year 1996 
through Federal Fiscal Year 1998, the provisions of this section apply 
to permit HAs to retain certain sources of income that would otherwise 
be offset by a reduction of subsidy. The combined amount retained in 
accordance with the provisions of this section may not exceed the amount 
of the PFS subsidy shortfall applicable to an HA in the subject fiscal 
year.
    (b) Increases in earned income. HAs are permitted to retain any 
increase in dwelling rental income realized after April 1, 1996 as a 
result of increased resident earned income, where the Board of 
Commissioners of the HA has certified that the HA is making significant 
efforts to increase the earned income of existing residents by adopting 
the optional earned income exclusion and not just taking actions 
regarding new admissions. To implement this paragraph (b), the HA will 
compare the rental income per occupied unit resulting from earned income 
from April 1, 1996 to the rental income per occupied unit resulting from 
earned income on the date of the rent roll used for PFS calculation. If 
an HA does not have the April 1, 1996 data available, HUD may approve 
the use of data from a later month.
    (c) Increases in other income. HAs are permitted to retain any 
increase in

[[Page 655]]

``other income'' based on using the definition provided in this section, 
as compared with using the definition found in Sec. 990.102. For 
purposes of this section, the amount of ``other income'' is limited to 
the following three sources:
    (1) Excess Utilities: charges to tenants for excess utility 
consumption for HA supplied utilities.
    (2) Nondwelling Rental Income: rent billed to lessees of dwelling 
units rented for nondwelling purposes. Rent billed to lessees of 
nondwelling facilities will not be included except for rent billed to 
other HUD programs (e.g.; Section 8, congregate housing, family 
investment centers).
    (3) Other Income: Only charges to other HUD programs (e.g.; Section 
8, congregate housing, family investment centers) for use of community 
space, central office management and maintenance space will be taken 
into consideration. HAs will calculate the amount of ``other income'' to 
be retained in a manner prescribed by HUD.

[61 FR 51183, Sept. 30, 1996]

    Effective Date Note: At 61 FR 51183, Sept. 30, 1996, Sec. 990.116 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget. When approval is 
obtained, HUD will publish notice of the effective date in the Federal 
Register.



Sec. 990.117  Determining actual and requested budget year occupancy percentages.

    (a) Actual Occupancy Percentage. When submitting Performance Funding 
System Calculations for Requested Budget Years beginning on or after 
July 1, 1996, the PHA shall determine an Actual Occupancy Percentage for 
all Project Units included in the Unit Months Available. The PHA shall 
have the option of basing this option on either:
    (1) The number of units occupied on the last day of the month that 
ends 6 months before the beginning of the Requested Budget Year; or
    (2) The average occupancy during the month ending 6 months before 
the beginning of the Requested Budget Year. If the PHA elects to use an 
average occupancy under this paragraph (a)(2), the PHA shall maintain a 
record of its computation of its Actual Occupancy Percentage.
    (b) Requested Budget Year Occupancy Percentage. The PHA will develop 
a Requested Budget Year Occupancy Percentage by taking the Actual 
Occupancy Percentage and adjusting it to reflect changes up or down in 
occupancy during the Requested Budget Year due to HUD-approved 
activities such as units undergoing modernization, new development, 
demolition, or disposition. If after the submission and approval of the 
Performance Funding System Calculations for the Requested Budget Year, 
there are changes up or down in occupancy because of modernization, new 
development, demolition or disposition that are not reflected in the 
Requested Budget Year Occupancy Percentage, the PHA may submit a 
revision to reflect the actual change in occupancy due to these 
activities.
    (c) Documentation Required to be Maintained. The PHA must maintain, 
and upon HUD's request, make available to HUD specific documentation of 
the occupancy status of all units, including long-term vacancies, vacant 
units undergoing modernization, and units vacant due to circumstances 
and actions beyond the PHA's control. This documentation shall include a 
listing of the units, street addresses, and project/management control 
numbers.

(Approved by the Office of Management and Budget under control number 
2577-0066.)

[61 FR 7592, Feb. 28, 1996]



Sec. 990.118  [Reserved]



Sec. 990.119  Transition Provisions.

    (a) Treatment of units already under an approved modernization 
budget. Vacant units to be rehabilitated under modernization budgets 
approved in FY 1995 or prior are subject to the modernization 
implementation schedule, without extension, previously approved by HUD. 
It is the intent of HUD not to penalize PHAs that have longer 
construction schedules in an approved modernization budget.

[[Page 656]]

    (b) Treatment of Existing COPs. (1) A PHA that is operating under a 
Comprehensive Occupancy Plan (COP) approved by HUD under Sec. 990.118, 
as that section existed immediately before April 1, 1996, may, until the 
expiration of its COP, continue to determine its PFS eligibility under 
the provisions of part 990 as that part existed immediately before April 
1, 1996. If the PHA does not elect to continue to determine its PFS 
eligibility using its COP, the PHA's PFS eligibility will be calculated 
in accordance with this part.
    (2) HUD will not approve any extensions of COPs.

[61 FR 7592, Feb. 28, 1996]



Sec. 990.120  Audit.

    PHAs that receive financial assistance under this part shall comply 
with the audit requirements in 24 CFR part 44. If a PHA has failed to 
submit an acceptable audit on a timely basis in accordance with that 
part, HUD may arrange for, and pay the costs of, the audit. In such 
circumstances, HUD may withhold, from assistance otherwise payable to 
the PHA under this part, amounts sufficient to pay for the reasonable 
costs of conducting an acceptable audit, including, when appropriate, 
the reasonable costs of accounting services necessary to place the PHA's 
books and records into auditable condition. The costs to place the PHA's 
books and records into auditable condition do not generate additional 
subsidy eligibility under this part.

[56 FR 46363, Sept. 11, 1991]



Sec. 990.121  Effect of rescission.

    If there is a rescission of appropriated funds that reduces the 
level of Comprehensive Grant Program funding in an approved Annual 
Statement under the CGP, to the extent that the PHA can document that it 
is not possible to complete all the vacant unit rehabilitation in the 
PHA's approved Annual Statement, the PHA may seek and HUD may grant a 
waiver for 1 fiscal year to permit full PFS eligibility for those units 
approved but not funded.

[61 FR 7592, Feb. 28, 1996]



    Subpart B--Financial Management Systems, Monitoring and Reporting

    Source: 53 FR 8067, Mar. 11, 1988, unless otherwise noted.



Sec. 990.201  Purpose--General policy on financial management, monitoring and reporting.

    The financial management systems, reporting and monitoring on 
program performance and financial reporting will be in compliance with 
the requirements of 24 CFR 85.20, 85.40 and 85.41 except to the extent 
that HUD requirements provide for additional specialized procedures 
necessary to permit the Secretary to make the determinations regarding 
the payment of operating subsidy specified in section 9(a)(1) of the 
United States Housing Act of 1937.



Sec. 990.202  Applicability.

    The provisions of this subpart B are applicable to the development, 
modernization, and operation of the Turnkey III and Turnkey IV 
Homeownership Opportunity Programs and the housing owned by the PHAs of 
the Virgin Islands, Guam, Puerto Rico and Alaska.

[57 FR 5588, Feb. 14, 1992]



                   Subpart C--Project-Based Accounting

    Source: 57 FR 61231, Dec. 23, 1992, unless otherwise noted.



Sec. 990.301  Applicability.

    (a) The provisions of this subpart C are applicable to all PHAs that 
receive operating subsidies pursuant to section 9 of the U.S. Housing 
Act of 1937 (the Act), both PFS-eligible PHAs and PHAs outside the 48 
adjacent states for which operating subsidy eligibility is not 
calculated in accordance with the PFS.
    (b) PHAs that own and operate 250 or more dwelling rental units 
under title I of the Act, exclusive of section 8 units, are required to 
develop and maintain project-based accounting systems consistent with 
Sec. 990.310. Where a portion

[[Page 657]]

of a PHA's rental inventory is separately managed (by a resident 
management corporation, for example), the 250-unit threshold shall apply 
to the total number of PHA-owned dwelling rental units, including those 
separately managed.
    (c) PHAs that do not receive operating subsidies or that have fewer 
than 250 rental units may, but are not required to, develop and use 
project-based accounting systems consistent with the specifications of 
this subpart.



Sec. 990.305  Definitions.

    Cost Center. A set of units, activities, programs, or staff that are 
grouped by a PHA for purposes of management, financial monitoring, and 
analysis. Cost centers can be delineated by administrative departments 
or divisions within a PHA, by office locations, by individual projects 
or clusters or communities of projects that consist of one or more 
contiguous buildings, an area of contiguous row houses, or scattered-
site buildings.
    Project. A building or set of buildings identifiable as a 
development project under a HUD-assigned project number.



Sec. 990.310  Project-based accounting.

    (a) PHAs identified in Sec. 990.301(b) shall develop and maintain a 
system of accounting for operating income and operating costs for each 
project or operating cost center in a manner capable of generating 
information to meet HUD consolidated reporting requirements.
    (b) Operating income and cost information to be accounted for at a 
project or cost center level shall include at least rental income and 
the administrative costs, utilities costs, maintenance costs, repair 
costs, and such other income and costs identified by the PHA as project-
specific for management purposes. The minimum income and expense 
distribution requirements for project-based accounting information 
include:
    (1) Project-specific operating income credited to a specific project 
or cost center which shall include, at a minimum, rental income and 
excess utilities income; and
    (2) Project-specific operating expense to be charged to a specific 
project or cost center level which shall include, at a minimum, 
utilities expense and direct maintenance (material and labor) expense, 
in addition to any other operating expenses in the 4000 series of 
accounts which are identified by the PHA as project-specific for 
management purposes (for example, tenant services or protective services 
personnel assigned to a specific project).
    (c) Indirect operating income and indirect operating expenses that 
are not project-specific are not required to be accounted for at, or 
allocated to, a project or cost center level. Indirect income and 
expense that is not required to be allocated to the project or cost 
center level includes non-project-specific income and expense, including 
PHA central office overhead expense, which is not identifiable with, or 
readily assignable to, a specific project or cost center.
    (d) PHAs may establish operating cost centers on any reasonable 
basis that reflects the PHA management structure and that meets the 
financial information needs at the lowest level of line authority within 
that management structure. A PHA's determination of appropriate cost 
centers and method of income and cost distribution shall be controlling 
unless HUD determines there is good cause for requiring some other frame 
of reference for aggregating financial information.



Sec. 990.315  Records and reports.

    (a) Each PHA shall maintain fiscal year-end income and expense 
statements, which reflect the PBA information required by Sec. 990.310, 
for each project or other cost center and shall make these available for 
review upon request by interested members of the public.
    (b) Each PHA shall distribute such year-end financial statements to 
the Chairman and to each member of the Housing Authority Board of 
Commissioners, and to such other State and local public officials as the 
Secretary may specify. Project-based income and expense statements shall 
be made available to Board chairmen as soon as is practicable after the 
close of the fiscal period.

[[Page 658]]



Sec. 990.320  Certifications.

    (a) The PHA shall certify, by the effective date specified in 
Sec. 990.325, in a form acceptable to HUD, that the PHA is aware of and 
is taking steps to implement project-based accounting and will produce 
the fiscal year-end reports required under Sec. 990.315. The 
certification shall identify each project or other cost center, the 
basis upon which each project or other cost center has been established 
and determined to be in compliance with the definitions of Sec. 990.305, 
above, and where a cost center consists of units in two or more projects 
(as identified by HUD-assigned development project number) the PHA shall 
identify the individual development project numbers, the number of 
units, and a characterization (i.e., high-rise family, mid-rise family, 
scattered-site, etc.) of each numbered project included in the cost 
center.
    (b) A certification made in accordance with this section shall be 
updated if the PHA deletes units, adds additional units or projects (as 
identified by HUD-assigned development project numbers) to its 
inventory, or otherwise elects to reconfigure its system of cost 
centers.

(Approved by the Office of Management and Budget under control number 
2577-0159)



Sec. 990.325  Compliance dates.

    (a) The provisions of this subpart shall apply for PHA fiscal years 
beginning on or after January 1, 1993, for PHAs operating 500 or more 
public housing rentals units.
    (b) The provisions of this subpart shall apply for PHA fiscal years 
beginning on or after January 1, 1994, for PHAs operating fewer than 500 
public housing rental units. In the case of PHAs whose housing programs 
expand to the point at which their inventory of rental units exceeds the 
threshold stated in Sec. 990.301(b), the provisions of Sec. 990.310 
shall apply at the beginning of the PHA's first fiscal year after the 
date on which its inventory of rental units reaches that threshold.



      Subpart D--Resident Management Corporations Operating Subsidy

    Source: 59 FR 43644, Aug. 24, 1994, unless otherwise noted.



Sec. 990.401  Calculation of operating subsidy.

    Operating subsidy will be calculated separately for any project 
managed by a resident management corporation. This subsidy computation 
will be the same as the separate computation made for the balance of the 
projects in the PHA in accordance with this part, with the following 
exceptions:
    (a) The project managed by a resident management corporation will 
have an Allowable Expense Level based on the actual expenses for the 
project in the fiscal year immediately preceding management under this 
subpart. These expenditures will include the project's share of any 
expenses which are overhead or centralized HA expenditures. The expenses 
must represent a normal year's expenditures for the project, and must 
exclude all expenditures which are not normal fiscal year expenditures 
as to amount or as to the purpose for which expended. Documentation of 
this expense level must be presented with the project budget and 
approved by HUD. Any project expenditures funded from a source of income 
other than operating subsidies or income generated by the locally owned 
public housing program will be excluded from the subsidy calculation. 
For budget years after the first budget year under management by the 
resident management corporation, the Allowable Expense Level will be 
calculated as it is for all other projects in accordance with 
Sec. 990.105(e)(4).
    (b) The resident management corporation project will estimate 
dwelling rental income based on the rent roll of the project immediately 
preceding the assumption of management responsibility under this 
subpart, increased by the estimate of inflation of tenant income used in 
calculating PFS subsidy.
    (c) The resident management corporation will exclude, from its 
estimate of other income, any increased

[[Page 659]]

income directly generated by activities by the corporation or facilities 
operated by the corporation.
    (d) Any reduction in the subsidy of a HA that occurs as a result of 
fraud, waste, or mismanagement by the HA shall not affect the subsidy 
calculation for the resident management corporation project.

[59 FR 43644, Aug. 24, 1994, as amended at 61 FR 17542, Apr. 19, 1996]



Sec. 990.402  Calculation of total income and preparation of operating budget.

    (a) Subject to Sec. 990.403, the amount of funds provided by a HA to 
a project managed by a resident management corporation under this 
subpart may not be reduced during the three-year period beginning on 
February 5, 1988 or on such later date as a resident management 
corporation first assumes management responsibility for the project.
    (b) For purposes of determining the amount of funds provided to a 
project under Sec. 990.402(a) of this section, the provision of 
technical assistance by the HA to the resident management corporation 
will not be included.
    (c) The resident management corporation and the HA must submit a 
separate operating budget, including the calculation of operating 
subsidy eligibility in accordance with Sec. 990.401, for the project 
managed by a resident management corporation to HUD for approval. This 
budget will reflect all project expenditures and will identify which 
expenditures are related to the responsibilities of the resident 
management corporation and which are related to the functions which will 
continue to be performed by the HA.
    (d) Each project or part of a project that is operating in 
accordance with the ACC amendment relating to this subpart and in 
accordance with a contract vesting maintenance responsibilities in the 
resident management corporation will have transferred, into a sub-
account of the operating reserve of the host HA, an operating reserve. 
Where all maintenance responsibilities for the resident-managed project 
are the responsibility of the corporation, the amount of the reserve 
made available to projects under this subpart will be the per unit cost 
amount available to the HA operating reserve, exclusive of all 
inventories, prepaids and receivables (at the end of the HA fiscal year 
preceding implementation), multiplied by the number of units in the 
project operated in accordance with the provisions of this subpart. 
Where some, but not all, maintenance responsibilities are vested in the 
resident management corporation, the contract may provide for an 
appropriately reduced portion of the operating reserve to be transferred 
into the corporation's sub-account.
    (e) The use of the reserve will be subject to all administrative 
procedures applicable to the conventionally owned public housing 
program. Any expenditure of funds from the reserve will be for eligible 
expenditures which are incorporated into an operating budget subject to 
approval by HUD.
    (f) Investment of funds held in the reserve will be in accordance 
with the provisions of Chapter 4 of the Financial Management Handbook, 
7476.1 REV.1 and interest generated will be included in the calculation 
of operating subsidy in accordance with this part.



Sec. 990.403  Adjustments to total income.

    (a) Operating subsidy calculated in accordance with Sec. 964.401 of 
this chapter will reflect changes in inflation, utility rates and 
consumption, and changes in the number of units in the resident 
management project.
    (b) In addition to the amount of income derived from the project 
(from sources such as rents and charges) and the operating subsidy 
calculated in accordance with Sec. 990.401 of this subpart, the contract 
may specify that income be provided to the project from other sources of 
income of the HA.
    (c) The following conditions may not affect the amounts to be 
provided to a project managed by a resident management corporation under 
this subpart:
    (1) Any reduction in the total income of a HA that occurs as a 
result of fraud, waste, or mismanagement by the HA.
    (2) Any change in the total income of a HA that occurs as a result 
of project-specific characteristics that are not shared by the project 
managed by the corporation under this subpart.

[[Page 660]]



Sec. 990.404  Retention of excess revenues.

    (a) Any income generated by a resident management corporation that 
exceeds the income estimated for the income category involved as 
specified in the RMC's management contract must be excluded in 
subsequent years in calculating:
    (1) The operating subsidy provided to a HA under part 990, subpart 
A.
    (2) The funds provided by the HA to the resident management 
corporation.
    (b) The management contract must specify the amount of income 
expected to be derived from the project (from sources such as rents and 
charges) and the amount of income to be provided to the project from the 
other sources of income of the HA (such as operating subsidy under part 
990, subpart A, interest income, administrative fees, and rents). These 
income estimates must be calculated consistent with HUD's administrative 
instructions. Income estimates may provide for proration of anticipated 
project income between the corporation and the PHA, based upon the 
management and other project-associated responsibilities (if any) that 
are to be retained by the PHA under the contract.



Sec. 990.405  Use of retained revenues.

    Any revenues retained by a resident management corporation under 
Sec. 990.404 of this subpart may only be used for purposes of improving 
the maintenance and operation of the project, establishing businesses 
enterprises that employ residents of public housing, or acquiring 
additional dwelling units for lower income families. Units acquired by 
the resident management corporation will not be eligible for payment of 
operating subsidy.



PART 1000--NATIVE AMERICAN HOUSING ACTIVITIES--Table of Contents






                           Subpart A--General

Sec.
1000.1  What is the applicability and scope of these regulations?
1000.2  What are the guiding principles in the implementation of 
          NAHASDA?
1000.4  What are the objectives of NAHASDA?
1000.6  What is the nature of the IHBG program?
1000.8  May provisions of these regulations be waived?
1000.10  What definitions apply in these regulations?
1000.12  What nondiscrimination requirements are applicable?
1000.14  What relocation and real property acquisition policies are 
          applicable?
1000.16  What labor standards are applicable?
1000.18  What environmental review requirements apply?
1000.20  Is an Indian tribe required to assume environmental review 
          responsibilities?
1000.22  Are the costs of the environmental review an eligible cost?
1000.24  If an Indian tribe assumes environmental review responsibility, 
          how will HUD assist the Indian tribe in performing the 
          environmental review?
1000.26  What are the administrative requirements under NAHASDA?
1000.28  May a self-governance Indian tribe be exempted from the 
          applicability of Sec. 1000.26?
1000.30  What prohibitions regarding conflict of interest are 
          applicable?
1000.32  May exceptions be made to the conflict of interest provisions?
1000.34  What factors must be considered in making an exception to the 
          conflict of interest provisions?
1000.36  How long must a recipient retain records regarding exceptions 
          made to the conflict of interest provisions?
1000.38  What flood insurance requirements are applicable?
1000.40  Do lead-based paint poisoning prevention requirements apply to 
          affordable housing activities under NAHASDA?
1000.42  Are the requirements of section 3 of the Housing and Urban 
          Development Act of 1968 applicable?
1000.44  What prohibitions on the use of debarred, suspended or 
          ineligible contractors apply?
1000.46  Do drug-free workplace requirements apply?
1000.48  Are Indian preference requirements applicable to IHBG 
          activities?
1000.50  What Indian preference requirements apply to IHBG 
          administration activities?
1000.52  What Indian preference requirements apply to IHBG procurement?
1000.54  What procedures apply to complaints arising out of any of the 
          methods of providing for Indian preference?
1000.56  How are NAHASDA funds paid by HUD to recipients?
1000.58  Are there limitations on the investment of IHBG funds?
1000.60  Can HUD prevent improper expenditure of funds already disbursed 
          to a recipient?

[[Page 661]]

1000.62  What is considered program income and what restrictions are 
          there on its use?

                Subpart B--Affordable Housing Activities

1000.101  What is affordable housing?
1000.102  What are eligible affordable housing activities?
1000.104  What families are eligible for affordable housing activities?
1000.106  What families receiving assistance under title II of NAHASDA 
          require HUD approval?
1000.108  How is HUD approval obtained by a recipient for housing for 
          non low-income Indian families and model activities?
1000.110  Under what conditions may non low-income Indian families 
          participate in the program?
1000.112  How will HUD determine whether to approve model housing 
          activities?
1000.114  How long does HUD have to review and act on a proposal to 
          provide assistance to non low-income Indian families or a 
          model housing activity?
1000.116  What should HUD do before declining a proposal to provide 
          assistance to non low-income Indian families or a model 
          housing activity?
1000.118  What recourse does a recipient have if HUD disapproves a 
          proposal to provide assistance to non low-income Indian 
          families or a model housing activity?
1000.120  May a recipient use Indian preference or tribal preference in 
          selecting families for housing assistance?
1000.122  May NAHASDA grant funds be used as matching funds to obtain 
          and leverage funding, including any Federal or state program 
          and still be considered an affordable housing activity?
1000.124  What maximum and minimum rent or homebuyer payment can a 
          recipient charge a low-income rental tenant or homebuyer 
          residing in housing units assisted with NAHASDA grant amounts?
1000.126  May a recipient charge flat or income-adjusted rents?
1000.128  Is income verification required for assistance under NAHASDA?
1000.130  May a recipient charge a non low-income family rents or 
          homebuyer payments which are more than 30 percent of the 
          family's adjusted income?
1000.132  Are utilities considered a part of rent or homebuyer payments?
1000.134  When may a recipient (or entity funded by a recipient) 
          demolish or dispose of current assisted stock?
1000.136  What insurance requirements apply to housing units assisted 
          with NAHASDA grants?
1000.138  What constitutes adequate insurance?
1000.140  May a recipient use grant funds to purchase insurance for 
          privately owned housing to protect NAHASDA grant amounts spent 
          on that housing?
1000.142  What is the ``useful life'' during which low-income rental 
          housing and low-income homebuyer housing must remain 
          affordable as required in sections 205(a)(2) and 209 of 
          NAHASDA?
1000.144  Are Mutual Help homes developed under the 1937 Act subject to 
          the useful life provisions of section 205(a)(2)?
1000.146  Are homebuyers required to remain low-income throughout the 
          term of their participation in a housing program funded under 
          NAHASDA?
1000.150  How may Indian tribes and TDHEs receive criminal conviction 
          information on adult applicants or tenants?
1000.152  How is the recipient to use criminal conviction information?
1000.154  How is the recipient to keep criminal conviction information 
          confidential?
1000.156  Is there a per unit limit on the amount of IHBG funds that may 
          be used for dwelling construction and dwelling equipment?

                  Subpart C--Indian Housing Plan (IHP)

1000.201  How are funds made available under NAHASDA?
1000.202  Who are eligible recipients?
1000.204  How does an Indian tribe designate itself as recipient of the 
          grant?
1000.206  How is a TDHE designated?
1000.208  What happens if an Indian tribe had two IHAs as of September 
          30, 1996?
1000.210  What happens to existing 1937 Act units in those jurisdictions 
          for which Indian tribes do not or cannot submit an IHP?
1000.212  Is submission of an IHP required?
1000.214  What is the deadline for submission of an IHP?
1000.216  What happens if the recipient does not submit the IHP to the 
          Area ONAP by July 1?
1000.218  Who prepares an submits an IHP?
1000.220  What are the minimum requirements for the IHP?
1000.222  Are there separate IHP requirements for small Indian tribes 
          and small TDHEs?
1000.224  Can any part of the IHP be waived?
1000.226  Can the certification requirements of section 102(c)(5) of 
          NAHASDA be waived by HUD?
1000.228  If HUD changes its IHP format will Indian tribes be involved?
1000.230  What is the process for HUD review of IHPs and IHP amendments?
1000.232  Can an Indian tribe or TDHE amend its IHP?
1000.234  Can HUD's determination regarding the non-compliance of an IHP 
          or a modification to an IHP be appealed?
1000.236  What are eligible administrative and planning expenses?

[[Page 662]]

1000.238  What percentage of the IHBG funds can be used for 
          administrative and planning expenses?
1000.240  When is a local cooperation agreement required for affordable 
          housing activities?
1000.242  When does the requirement for exemption from taxation apply to 
          affordable housing activities?

                      Subpart D--Allocation Formula

1000.301  What is the purpose of the IHBG formula?
1000.302  What are the definitions applicable for the IHBG formula?
1000.304  May the IHBG formula be modified?
1000.306  How can the IHBG formula be modified?
1000.308  Who can make modifications to the IHBG formula?
1000.310  What are the components of the IHBG formula?
1000.312  What is current assisted stock?
1000.314  What is formula current assisted stock?
1000.316  How is the Formula Current Assisted Stock (FCAS) Component 
          developed?
1000.317  Who is the recipient for funds for current assisted stock 
          which is owned by state-created Regional Native Housing 
          Authorities in Alaska?
1000.318  When do units under Formula Current Assisted Stock cease to be 
          counted or expire from the inventory used for the formula?
1000.320  How is Formula Current Assisted Stock adjusted for local area 
          costs?
1000.322  Are IHA financed units included in the determination of 
          Formula Current Assisted Stock?
1000.324  How is the need component developed?
1000.325  How is the need component adjusted for local area costs?
1000.326  What if a formula area is served by more than one Indian 
          tribe?
1000.327  What is the order of preference for allocating the IHBG 
          formula needs data for Indian tribes in Alaska not located on 
          reservations due to the unique circumstances in Alaska?
1000.328  What is the minimum amount an Indian tribe can receive under 
          the need component of the formula?
1000.330  What are data sources for the need variables?
1000.332  Will data used by HUD to determine an Indian tribe's or TDHE's 
          formula allocation be provided to the Indian tribe or TDHE 
          before the allocation?
1000.334  May Indian tribes, TDHEs, or HUD challenge the data from the 
          U.S. Decennial Census or provide an alternative source of 
          data?
1000.336  How may an Indian tribe, TDHE, or HUD challenge data?
1000.340  What if an Indian tribe is allocated less funding under the 
          block grant formula than it received in Fiscal Year 1996 for 
          operating subsidy and modernization?

Subpart E--Federal Guarantees for Financing of Tribal Housing Activities

1000.401  What terms are used throughout this subpart?
1000.402  Are State recognized Indian tribes eligible for guarantees 
          under title VI of NAHASDA?
1000.404  What lenders are eligible for participation?
1000.406  What constitutes tribal approval to issue notes or other 
          obligations under title VI of NAHASDA?
1000.408  How does an Indian tribe or TDHE show that it has made efforts 
          to obtain financing without a guarantee and cannot complete 
          such financing in a timely manner?
1000.410  What conditions shall HUD prescribe when providing a guarantee 
          for notes or other obligations issued by an Indian tribe?
1000.412  Can an issuer obtain a guarantee for more than one note or 
          other obligation at a time?
1000.414  How is an issuer's financial capacity demonstrated?
1000.416  What is a repayment contract in a form acceptable to HUD?
1000.418  Can grant funds be used to pay costs incurred when issuing 
          notes or other obligations?
1000.420  May grants made by HUD under section 603 of NAHASDA be used to 
          pay net interest costs incurred when issuing notes or other 
          obligations?
1000.422  What are the procedures for applying for loan guarantees under 
          title VI of NAHASDA?
1000.424  What are the application requirements for guarantee assistance 
          under title VI of NAHASDA?
1000.426  How does HUD review a guarantee application?
1000.428  For what reasons may HUD disapprove an application or approve 
          an application for an amount less than that requested?
1000.430  When will HUD issue notice to the applicant if the application 
          is approved at the requested or reduced amount?
1000.432  Can an amendment to an approved guarantee be made?
1000.434  How will HUD allocate the availability of loan guarantee 
          assistance?
1000.436  How will HUD monitor the use of funds guaranteed under this 
          subpart?

[[Page 663]]

      Subpart F--Recipient Monitoring, Oversight and Accountability

1000.501  Who is involved in monitoring activities under NAHASDA?
1000.502  What are the monitoring responsibilities of the recipient, the 
          grant beneficiary and HUD under NAHASDA?
1000.504  What are the recipient performance objectives?
1000.506  If the TDHE is the recipient, must it submit its monitoring 
          evaluation/results to the Indian tribe?
1000.508  If the recipient monitoring identifies programmatic concerns, 
          what happens?
1000.510  What happens if tribal monitoring identifies compliance 
          concerns?
1000.512  Are performance reports required?
1000.514  When must the annual performance report be submitted?
1000.516  What reporting period is covered by the annual performance 
          report?
1000.518  When must a recipient obtain public comment on its annual 
          performance report?
1000.520  What are the purposes of HUD review?
1000.521  After the receipt of the recipient's performance report, how 
          long does HUD have to make recommendations under section 
          404(c) of NAHASDA?
1000.522  How will HUD give notice of on-site reviews?
1000.524  What are HUD's performance measures for the review?
1000.526  What information will HUD use for its review?
1000.528  What are the procedures for the recipient to comment on the 
          result of HUD's review when HUD issues a report under section 
          405(b) of NAHASDA?
1000.530  What corrective and remedial actions will HUD request or 
          recommend to address performance problems prior to taking 
          action under Secs. 1000.532 or 1000.538?
1000.532  What are the adjustments HUD makes to a recipient's future 
          year's grant amount under section 405 of NAHASDA?
1000.534  What constitutes substantial noncompliance?
1000.536  What happens to NAHASDA grant funds adjusted, reduced, 
          withdrawn, or terminated under Sec. 1000.532 or Sec. 1000.538?
1000.538  What remedies are available for substantial noncompliance?
1000.540  What hearing procedures will be used under NAHASDA?
1000.542  When may HUD require replacement of a recipient?
1000.544  What audits are required?
1000.546  Are audit costs eligible program or administrative expenses?
1000.548  Must a copy of the recipient's audit pursuant to the Single 
          Audit Act relating to NAHASDA activities be submitted to HUD?
1000.550  If the TDHE is the recipient, does it have to submit a copy of 
          its audit to the Indian tribe?
1000.552  How long must the recipient maintain program records?
1000.554  Which agencies have right of access to the recipient's records 
          relating to activities carried out under NAHASDA?
1000.556  Does the Freedom of Information Act (FOIA) apply to recipient 
          records?
1000.558  Does the Federal Privacy Act apply to recipient records?

Appendix A to Part 1000--Indian Housing Block Grant Formula Mechanics
Appendix B to Part 1000--IHBG Block Grant Formula Mechanisms

    Authority: 25 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d).

    Source: 63 FR 12349, Mar. 12, 1998, unless otherwise noted.



                           Subpart A--General



Sec. 1000.1  What is the applicability and scope of these regulations?

    Under the Native American Housing Assistance and Self-Determination 
Act of 1996 (25 U.S.C. 4101 et seq.) (NAHASDA) the Department of Housing 
and Urban Development (HUD) provides grants, loan guarantees, and 
technical assistance to Indian tribes and Alaska Native villages for the 
development and operation of low-income housing in Indian areas. The 
policies and procedures described in this part apply to grants to 
eligible recipients under the Indian Housing Block Grant (IHBG) program 
for Indian tribes and Alaska Native villages. This part also applies to 
loan guarantee assistance under title VI of NAHASDA. The regulations in 
this part supplement the statutory requirements set forth in NAHASDA. 
This part, as much as practicable, does not repeat statutory language.



Sec. 1000.2  What are the guiding principles in the implementation of NAHASDA?

    (a) The Secretary shall use the following Congressional findings set 
forth in section 2 of NAHASDA as the guiding principles in the 
implementation of NAHASDA:
    (1) The Federal government has a responsibility to promote the 
general welfare of the Nation:

[[Page 664]]

    (i) By using Federal resources to aid families and individuals 
seeking affordable homes in safe and healthy environments and, in 
particular, assisting responsible, deserving citizens who cannot provide 
fully for themselves because of temporary circumstances or factors 
beyond their control;
    (ii) By working to ensure a thriving national economy and a strong 
private housing market; and
    (iii) By developing effective partnerships among the Federal 
government, state, tribal, and local governments, and private entities 
that allow government to accept responsibility for fostering the 
development of a healthy marketplace and allow families to prosper 
without government involvement in their day-to-day activities.
    (2) There exists a unique relationship between the Government of the 
United States and the governments of Indian tribes and a unique Federal 
responsibility to Indian people.
    (3) The Constitution of the United States invests the Congress with 
plenary power over the field of Indian affairs, and through treaties, 
statutes, and historical relations with Indian tribes, the United States 
has undertaken a unique trust responsibility to protect and support 
Indian tribes and Indian people.
    (4) The Congress, through treaties, statutes, and the general course 
of dealing with Indian tribes, has assumed a trust responsibility for 
the protection and preservation of Indian tribes and for working with 
Indian tribes and their members to improve their housing conditions and 
socioeconomic status so that they are able to take greater 
responsibility for their own economic condition.
    (5) Providing affordable homes in safe and healthy environments is 
an essential element in the special role of the United States in helping 
Indian tribes and their members to improve their housing conditions and 
socioeconomic status.
    (6) The need for affordable homes in safe and healthy environments 
on Indian reservations, in Indian communities, and in Native Alaskan 
villages is acute and the Federal government should work not only to 
provide housing assistance, but also, to the extent practicable, to 
assist in the development of private housing finance mechanisms on 
Indian lands to achieve the goals of economic self-sufficiency and self-
determination for Indian tribes and their members.
    (7) Federal assistance to meet these responsibilities should be 
provided in a manner that recognizes the right of Indian self-
determination and tribal self-governance by making such assistance 
available directly to the Indian tribes or tribally designated entities 
under authorities similar to those accorded Indian tribes in Public Law 
93-638 (25 U.S.C. 450 et seq.).
    (b) Nothing in this section shall be construed as releasing the 
United States government from any responsibility arising under its trust 
responsibilities towards Indians or any treaty or treaties with an 
Indian tribe or nation.



Sec. 1000.4  What are the objectives of NAHASDA?

    The primary objectives of NAHASDA are:
    (a) To assist and promote affordable housing activities to develop, 
maintain and operate affordable housing in safe and healthy environments 
on Indian reservations and in other Indian areas for occupancy by low-
income Indian families;
    (b) To ensure better access to private mortgage markets for Indian 
tribes and their members and to promote self-sufficiency of Indian 
tribes and their members;
    (c) To coordinate activities to provide housing for Indian tribes 
and their members and to promote self-sufficiency of Indian tribes and 
their members;
    (d) To plan for and integrate infrastructure resources for Indian 
tribes with housing development for Indian tribes; and
    (e) To promote the development of private capital markets in Indian 
country and to allow such markets to operate and grow, thereby 
benefiting Indian communities.



Sec. 1000.6  What is the nature of the IHBG program?

    The IHBG program is formula driven whereby eligible recipients of 
funding

[[Page 665]]

receive an equitable share of appropriations made by the Congress, based 
upon formula components specified under subpart D of this part. IHBG 
recipients must have the administrative capacity to undertake the 
affordable housing activities proposed, including the systems of 
internal control necessary to administer these activities effectively 
without fraud, waste, or mismanagement.



Sec. 1000.8  May provisions of these regulations be waived?

    Yes. Upon determination of good cause, the Secretary may, subject to 
statutory limitations, waive any provision of this part and delegate 
this authority in accordance with section 106 of the Department of 
Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3535(q)).



Sec. 1000.10  What definitions apply in these regulations?

    Except as noted in a particular subpart, the following definitions 
apply in this part:
    (a) The terms ``Adjusted income,'' ``Affordable housing,'' ``Drug-
related criminal activity,'' ``Elderly families and near-elderly 
families,'' ``Elderly person,'' ``Grant beneficiary,'' ``Indian,'' 
``Indian housing plan (IHP),'' ``Indian tribe,'' ``Low-income family,'' 
``Near-elderly persons,'' ``Nonprofit,'' ``Recipient,'' Secretary,'' 
``State,'' and ``Tribally designated housing entity (TDHE)'' are defined 
in section 4 of NAHASDA.
    (b) In addition to the definitions set forth in paragraph (a) of 
this section, the following definitions apply to this part:
    Affordable housing activities are those activities identified in 
section 202 of NAHASDA.
    Annual Contributions Contract (ACC) means a contract under the 1937 
Act between HUD and an IHA containing the terms and conditions under 
which HUD assists the IHA in providing decent, safe, and sanitary 
housing for low-income families.
    Annual income has one of the following meanings, as determined by 
the Indian tribe:
    (1) ``Annual income'' as defined for HUD's Section 8 programs in 24 
CFR part 5, subpart F (except when determining the income of a homebuyer 
for an owner-occupied rehabilitation project, the value of the 
homeowner's principal residence may be excluded from the calculation of 
Net Family assets); or
    (2) Annual income as reported under the Census long-form for the 
most recent available decennial Census. This definition includes:
    (i) Wages, salaries, tips, commissions, etc.;
    (ii) Self-employment income;
    (iii) Farm self-employment income;
    (iv) Interest, dividends, net rental income, or income from estates 
or trusts;
    (v) Social security or railroad retirement;
    (vi) Supplemental Security Income, Aid to Families with Dependent 
Children, or other public assistance or public welfare programs;
    (vii) Retirement, survivor, or disability pensions; and
    (viii) Any other sources of income received regularly, including 
Veterans' (VA) payments, unemployment compensation, and alimony; or
    (3) Adjusted gross income as defined for purposes of reporting under 
Internal Revenue Service (IRS) Form 1040 series for individual Federal 
annual income tax purposes.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing.
    Department or HUD means the Department of Housing and Urban 
Development.
    Family includes, but is not limited to, a family with or without 
children, an elderly family, a near-elderly family, a disabled family, a 
single person, as determined by the Indian tribe.
    Homebuyer payment means the payment of a family purchasing a home 
pursuant to a lease purchase agreement.
    Homeless family means a family who is without safe, sanitary and 
affordable housing even though it may have temporary shelter provided by 
the community, or a family who is homeless as determined by the Indian 
tribe.
    IHBG means Indian Housing Block Grant.
    Income means annual income as defined in this subpart.

[[Page 666]]

    Indian Area means the area within which an Indian tribe operates 
affordable housing programs or the area in which a TDHE is authorized by 
one or more Indian tribes to operate affordable housing programs. 
Whenever the term ``jurisdiction'' is used in NAHASDA it shall mean 
``Indian Area'' except where specific reference is made to the 
jurisdiction of a court.
    Indian Housing Authority (IHA) means an entity that:
    (1) Is authorized to engage or assist in the development or 
operation of low-income housing for Indians under the 1937 Act; and
    (2) Is established:
    (i) By exercise of the power of self government of an Indian tribe 
independent of state law; or
    (ii) By operation of state law providing specifically for housing 
authorities for Indians, including regional housing authorities in the 
State of Alaska.
    Median income for an Indian area is the greater of:
    (1) The median income for the counties, previous counties, or their 
equivalent in which the Indian area is located; or
    (2) The median income for the United States.
    NAHASDA means the Native American Housing Assistance and Self-
Determination Act of 1996 (25 U.S.C. 4101 et seq.).
    1937 Act means the United States Housing Act of 1937 (42 U.S.C. 1437 
et seq.).
    Office of Native American Programs (ONAP) means the office of HUD 
which has been delegated authority to administer programs under this 
part. An ``Area ONAP'' is an ONAP field office.
    Person with Disabilities means a person who --
    (1) Has a disability as defined in section 223 of the Social 
Security Act;
    (2) Has a developmental disability as defined in section 102 of the 
Developmental Disabilities Assistance and Bill of Rights Act;
    (3) Has a physical, mental, or emotional impairment which-
    (i) Is expected to be of long-continued and indefinite duration;
    (ii) Substantially impedes his or her ability to live independently; 
and
    (iii) Is of such a nature that such ability could be improved by 
more suitable housing conditions.
    (4) The term ``person with disabilities'' includes persons who have 
the disease of acquired immunodeficiency syndrome or any condition 
arising from the etiologic agent for acquired immunodeficiency syndrome.
    (5) Notwithstanding any other provision of law, no individual shall 
be considered a person with disabilities, for purposes of eligibility 
for housing assisted under this part, solely on the basis of any drug or 
alcohol dependence. The Secretary shall consult with Indian tribes and 
appropriate Federal agencies to implement this paragraph.
    (6) For purposes of this definition, the term ``physical, mental or 
emotional impairment'' includes, but is not limited to:
    (i) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one or more of the following body systems: 
Neurological, musculoskeletal, special sense organs, respiratory, 
including speech organs; cardiovascular; reproductive; digestive; 
genito-urinary; hemic and lymphatic; skin; and endocrine; or
    (ii) Any mental or psychological condition, such as mental 
retardation, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities.
    (iii) The term ``physical, mental, or emotional impairment'' 
includes, but is not limited to, such diseases and conditions as 
orthopedic, visual, speech, and hearing impairments, cerebral palsy, 
autism, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart 
disease, diabetes, Human Immunodeficiency Virus infection, mental 
retardation, and emotional illness.



Sec. 1000.12  What nondiscrimination requirements are applicable?

    (a) The requirements of the Age Discrimination Act of 1975 (42 
U.S.C. 6101-6107) and HUD's implementing regulations in 24 CFR part 146.
    (b) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and HUD's regulations at 24 CFR part 8 apply.
    (c) The Indian Civil Rights Act (Title II of the Civil Rights Act of 
1968; 25 U.S.C. 1301-1303), applies to Federally

[[Page 667]]

recognized Indian tribes that exercise powers of self-government.
    (d) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and 
title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601 et seq.) 
apply to Indian tribes that are not covered by the Indian Civil Rights 
Act. However, the Title VI and Title VIII requirements do not apply to 
actions by Indian tribes under section 201(b) of NAHASDA.



Sec. 1000.14  What relocation and real property acquisition policies are applicable?

    The following relocation and real property acquisition policies are 
applicable to programs developed or operated under NAHASDA:
    (a) Real Property acquisition requirements. The acquisition of real 
property for an assisted activity is subject to 49 CFR part 24, subpart 
B. Whenever the recipient does not have the authority to acquire the 
real property through condemnation, it shall:
    (1) Before discussing the purchase price, inform the owner:
    (i) Of the amount it believes to be the fair market value of the 
property. Such amount shall be based upon one or more appraisals 
prepared by a qualified appraiser. However, this provision does not 
prevent the recipient from accepting a donation or purchasing the real 
property at less than its fair market value.
    (ii) That it will be unable to acquire the property if negotiations 
fail to result in an amicable agreement.
    (2) Request HUD approval of the proposed acquisition price before 
executing a firm commitment to purchase the property if the proposed 
acquisition payment exceeds the fair market value. The recipient shall 
include with its request a copy of the appraisal(s) and a justification 
for the proposed acquisition payment. HUD will promptly review the 
proposal and inform the recipient of its approval or disapproval.
    (b) Minimize displacement. Consistent with the other goals and 
objectives of this part, recipients shall assure that they have taken 
all reasonable steps to minimize the displacement of persons 
(households, businesses, nonprofit organizations, and farms) as a result 
of a project assisted under this part.
    (c) Temporary relocation. The following policies cover residential 
tenants and homebuyers who will not be required to move permanently but 
who must relocate temporarily for the project. Such residential tenants 
and homebuyers shall be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporarily occupied housing and any increase in 
monthly housing costs (e.g., rent/utility costs).
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may occupy a 
suitable, decent, safe, and sanitary dwelling in the building/complex 
following completion of the repairs; and
    (iv) The provisions of paragraph (c)(1) of this section.
    (d) Relocation assistance for displaced persons. A displaced person 
(defined in paragraph (g) of this section) must be provided relocation 
assistance at the levels described in, and in accordance with the 
requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 4601-4655) 
and implementing regulations at 49 CFR part 24.
    (e) Appeals to the recipient. A person who disagrees with the 
recipient's determination concerning whether the person qualifies as a 
``displaced person,'' or the amount of relocation assistance for which 
the person is eligible, may file a written appeal of that determination 
with the recipient.
    (f) Responsibility of recipient. (1) The recipient shall certify 
that it will comply with the URA, the regulations at 49 CFR part 24, and 
the requirements of this section. The recipient shall ensure such 
compliance notwithstanding any third party's contractual obligation to 
the recipient to comply with the provisions in this section.

[[Page 668]]

    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. However, such assistance may also be paid for with funds 
available to the recipient from any other source.
    (3) The recipient shall maintain records in sufficient detail to 
demonstrate compliance with this section.
    (g) Definition of displaced person. (1) For purposes of this 
section, the term ``displaced person'' means any person (household, 
business, nonprofit organization, or farm) that moves from real 
property, or moves his or her personal property from real property, 
permanently, as a direct result of rehabilitation, demolition, or 
acquisition for a project assisted under this part. The term ``displaced 
person'' includes, but is not limited to:
    (i) A tenant-occupant of a dwelling unit who moves from the 
building/complex permanently after the submission to HUD of an IHP that 
is later approved.
    (ii) Any person, including a person who moves before the date 
described in paragraph (g)(1)(i) of this section, that the recipient 
determines was displaced as a direct result of acquisition, 
rehabilitation, or demolition for the assisted project.
    (iii) A tenant-occupant of a dwelling unit who moves from the 
building/complex permanently after the execution of the agreement 
between the recipient and HUD, if the move occurs before the tenant is 
provided written notice offering him or her the opportunity to lease and 
occupy a suitable, decent, safe and sanitary dwelling in the same 
building/complex, under reasonable terms and conditions, upon completion 
of the project. Such reasonable terms and conditions include a monthly 
rent and estimated average monthly utility costs that do not exceed the 
greater of:
    (A) The tenant-occupant's monthly rent and estimated average monthly 
utility costs before the agreement; or
    (B) 30 percent of gross household income.
    (iv) A tenant-occupant of a dwelling who is required to relocate 
temporarily, but does not return to the building/complex, if either:
    (A) The tenant-occupant is not offered payment for all reasonable 
out-of-pocket expenses incurred in connection with the temporary 
relocation, including the cost of moving to and from the temporarily 
occupied unit, any increased housing costs and incidental expenses; or
    (B) Other conditions of the temporary relocation are not reasonable.
    (v) A tenant-occupant of a dwelling who moves from the building/
complex after he or she has been required to move to another dwelling 
unit in the same building/complex in order to carry out the project, if 
either:
    (A) The tenant-occupant is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move; 
or
    (B) Other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (g)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person moved into the property after the submission of the 
IHP to HUD, but, before signing a lease or commencing occupancy, was 
provided written notice of the project, its possible impact on the 
person (e.g., the person may be displaced, temporarily relocated or 
suffer a rent increase) and the fact that the person would not qualify 
as a ``displaced person'' or for any assistance provided under this 
section as a result of the project.
    (ii) The person is ineligible under 49 CFR 24.2(g)(2).
    (iii) The recipient determines the person is not displaced as a 
direct result of acquisition, rehabilitation, or demolition for an 
assisted project. To exclude a person on this basis, HUD must concur in 
that determination.
    (3) A recipient may at any time ask HUD to determine whether a 
specific displacement is or would be covered under this section.
    (h) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a person displaced as a direct result of 
rehabilitation or demolition of the real

[[Page 669]]

property, the term ``initiation of negotiations'' means the execution of 
the agreement covering the rehabilitation or demolition (See 49 CFR part 
24).



Sec. 1000.16  What labor standards are applicable?

    (a) Davis-Bacon wage rates. (1) As described in section 104(b) of 
NAHASDA, contracts and agreements for assistance, sale or lease under 
NAHASDA must require prevailing wage rates determined by the Secretary 
of Labor under the Davis-Bacon Act (40 U.S.C. 276a-276a-5) to be paid to 
laborers and mechanics employed in the development of affordable 
housing.
    (2) When NAHASDA assistance is only used to assist homebuyers to 
acquire single family housing, the Davis-Bacon wage rates apply to the 
construction of the housing if there is a written agreement with the 
owner or developer of the housing that NAHASDA assistance will be used 
to assist homebuyers to buy the housing.
    (3) Prime contracts not in excess of $2000 are exempt from Davis-
Bacon wage rates.
    (b) HUD-determined wage rates. Section 104(b) also mandates that 
contracts and agreements for assistance, sale or lease under NAHASDA 
require that prevailing wages determined or adopted (subsequent to a 
determination under applicable state, tribal or local law) by HUD shall 
be paid to maintenance laborers and mechanics employed in the operation, 
and to architects, technical engineers, draftsmen and technicians 
employed in the development, of affordable housing.
    (c) Contract Work Hours and Safety Standards Act. Contracts in 
excess of $100,000 to which Davis-Bacon or HUD-determined wage rates 
apply are subject by law to the overtime provisions of the Contract Work 
Hours and Safety Standards Act (40 U.S.C. 327).
    (d) Volunteers. The requirements in 24 CFR part 70 concerning 
exemptions for the use of volunteers on projects subject to Davis-Bacon 
and HUD-determined wage rates are applicable.
    (e) Other laws and issuances. Recipients, contractors, 
subcontractors, and other participants must comply with regulations 
issued under the labor standards provisions cited in this section, other 
applicable Federal laws and regulations pertaining to labor standards, 
and HUD Handbook 1344.1 (Federal Labor Standards Compliance in Housing 
and Community Development Programs).



Sec. 1000.18  What environmental review requirements apply?

    The environmental effects of each activity carried out with 
assistance under this part must be evaluated in accordance with the 
provisions of the National Environmental Policy Act of 1969 (NEPA) (42 
U.S.C. 4321) and the related authorities listed in HUD's implementing 
regulations at 24 CFR parts 50 and 58. An environmental review does not 
have to be completed prior to HUD approval of an IHP.



Sec. 1000.20  Is an Indian tribe required to assume environmental review responsibilities?

    (a) No. It is an option an Indian tribe may choose. If an Indian 
tribe declines to assume the environmental review responsibilities, HUD 
will perform the environmental review in accordance with 24 CFR part 50. 
The timing of HUD undertaking the environmental review will be subject 
to the availability of resources. A HUD environmental review must be 
completed for any NAHASDA assisted activities not excluded from review 
under 24 CFR 50.19(b) before a recipient may acquire, rehabilitate, 
convert, lease, repair or construct property, or commit HUD or local 
funds used in conjunction with such NAHASDA assisted activities with 
respect to the property.
    (b) If an Indian tribe assumes environmental review 
responsibilities:
    (1) Its certifying officer must certify that he/she is authorized 
and consents on behalf of the Indian tribe and such officer to accept 
the jurisdiction of the Federal courts for the purpose of enforcement of 
the responsibilities of the certifying officer as set forth in section 
105(c) of NAHASDA; and
    (2) The Indian tribe must follow the requirements of 24 CFR part 58.
    (3) No funds may be committed to a grant activity or project before 
the completion of the environmental review and approval of the request 
for release of funds and related certification

[[Page 670]]

required by sections 105(b) and 105(c) of NAHASDA, except as authorized 
by 24 CFR part 58 such as for the costs of environmental reviews and 
other planning and administrative expenses.
    (c) Where an environmental assessment (EA) is appropriate under 24 
CFR part 50, instead of an Indian tribe assuming environmental review 
responsibilities under paragraph (b) of this section or HUD preparing 
the EA itself under paragraph (a) of this section, an Indian tribe or 
TDHE may prepare an EA for HUD review. In addition to complying with the 
requirements of 40 CFR 1506.5(a), HUD shall make its own evaluation of 
the environmental issues and take responsibility for the scope and 
content of the EA in accordance with 40 CFR 1506.5(b).



Sec. 1000.22  Are the costs of the environmental review an eligible cost?

    Yes, costs of completing the environmental review are eligible.



Sec. 1000.24  If an Indian tribe assumes environmental review responsibility, how will HUD assist the Indian tribe in performing the environmental review?

    As set forth in section 105(a)(2)(B) of NAHASDA and 24 CFR 58.77, 
HUD will provide for monitoring of environmental reviews and will also 
facilitate training for the performance for such reviews by Indian 
tribes.



Sec. 1000.26  What are the administrative requirements under NAHASDA?

    (a) Except as addressed in Sec. 1000.28, recipients shall comply 
with the requirements and standards of OMB Circular No. A-87, 
``Principles for Determining Costs Applicable to Grants and Contracts 
with State, Local and Federally recognized Indian Tribal Governments,'' 
and with the following sections of 24 CFR part 85 ``Uniform 
Administrative Requirements for Grants and Cooperative Agreements to 
State and Local Governments.'' For purposes of this part, ``grantee'' as 
defined in 24 CFR part 85 has the same meaning as ``recipient.''
    (1) Section 85.3, ``Definitions.''
    (2) Section 85.6, ``Exceptions.''
    (3) Section 85.12, ``Special grant or subgrant conditions for `high 
risk' grantees.''
    (4) Section 85.20, ``Standards for financial management systems,'' 
except paragraph (a).
    (5) Section 85.21, ``Payment.''
    (6) Section 85.22, ``Allowable costs.''
    (7) Section 85.26, ``Non-federal audits.''
    (8) Section 85.32, ``Equipment,'' except in all cases in which the 
equipment is sold, the proceeds shall be program income.
    (9) Section 85.33, ``Supplies.''
    (10) Section 85.35, ``Subawards to debarred and suspended parties.''
    (11) Section 85.36, ``Procurement,'' except paragraph (a). There may 
be circumstances under which the bonding requirements of Sec. 85.36(h) 
are inconsistent with other responsibilities and obligations of the 
recipient. In such circumstances, acceptable methods to provide 
performance and payment assurance may include:
    (i) Deposit with the recipient of a cash escrow of not less than 20 
percent of the total contract price, subject to reduction during the 
warranty period, commensurate with potential risk;
    (ii) Letter of credit for 25 percent of the total contract price, 
unconditionally payable upon demand of the recipient, subject to 
reduction during any warranty period commensurate with potential risk; 
or
    (iii) Letter of credit for 10 percent of the total contract price 
unconditionally payable upon demand of the recipient subject to 
reduction during any warranty period commensurate with potential risk, 
and compliance with the procedures for monitoring of disbursements by 
the contractor.
    (12) Section 85.37, ``Subgrants.''
    (13) Section 85.40, ``Monitoring and reporting program 
performance,'' except paragraphs (b) through (d) and paragraph (f).
    (14) Section 85.41, ``Financial reporting,'' except paragraphs (a), 
(b), and (e).
    (15) Section 85.44, ``Termination for convenience.''
    (16) Section 85.51 ``Later disallowances and adjustments.''
    (17) Section 85.52, ``Collection of amounts due.''
    (b)(1) With respect to the applicability of cost principles, all 
items of cost listed in Attachment B of OMB

[[Page 671]]

Circular A-87 which require prior Federal agency approval are allowable 
without the prior approval of HUD to the extent that they comply with 
the general policies and principles stated in Attachment A of this 
circular and are otherwise eligible under this part, except for the 
following:
    (i) Depreciation methods for fixed assets shall not be changed 
without specific approval of HUD or, if charged through a cost 
allocation plan, the Federal cognizant agency.
    (ii) Fines and penalties are unallowable costs to the IHBG program.
    (2) In addition, no person providing consultant services in an 
employer-employee type of relationship shall receive more than a 
reasonable rate of compensation for personal services paid with IHBG 
funds. In no event, however, shall such compensation exceed the 
equivalent of the daily rate paid for Level IV of the Executive 
Schedule.



Sec. 1000.28  May a self-governance Indian tribe be exempted from the applicability of Sec. 1000.26?

    Yes. A self-governance Indian tribe shall certify that its 
administrative requirements, standards and systems meet or exceed the 
comparable requirements of Sec. 1000.26. For purposes of this section, a 
self-governance Indian tribe is an Indian tribe that participates in 
tribal self-governance as authorized under Public Law 93-638, as amended 
(25 U.S.C. 450 et seq.).



Sec. 1000.30  What prohibitions regarding conflict of interest are applicable?

    (a) Applicability. In the procurement of supplies, equipment, other 
property, construction and services by recipients and subrecipients, the 
conflict of interest provisions of 24 CFR 85.36 shall apply. In all 
cases not governed by 24 CFR 85.36, the following provisions of this 
section shall apply.
    (b) Conflicts prohibited. No person who participates in the 
decision-making process or who gains inside information with regard to 
NAHASDA assisted activities may obtain a personal or financial interest 
or benefit from such activities, except for the use of NAHASDA funds to 
pay salaries or other related administrative costs. Such persons include 
anyone with an interest in any contract, subcontract or agreement or 
proceeds thereunder, either for themselves or others with whom they have 
business or immediate family ties. Immediate family ties are determined 
by the Indian tribe or TDHE in its operating policies.
    (c) The conflict of interest provision does not apply in instances 
where a person who might otherwise be included under the conflict 
provision is low-income and is selected for assistance in accordance 
with the recipient's written policies for eligibility, admission and 
occupancy of families for housing assistance with IHBG funds, provided 
that there is no conflict of interest under applicable tribal or state 
law. The recipient must make a public disclosure of the nature of 
assistance to be provided and the specific basis for the selection of 
the person. The recipient shall provide the appropriate Area ONAP with a 
copy of the disclosure before the assistance is provided to the person.



Sec. 1000.32  May exceptions be made to the conflict of interest provisions?

    (a) Yes. HUD may make exceptions to the conflict of interest 
provisions set forth in Sec. 1000.30(b) on a case-by-case basis when it 
determines that such an exception would further the primary objective of 
NAHASDA and the effective and efficient implementation of the 
recipient's program, activity, or project.
    (b) A public disclosure of the conflict must be made and a 
determination that the exception would not violate tribal laws on 
conflict of interest (or any applicable state laws) must also be made.



Sec. 1000.34  What factors must be considered in making an exception to the conflict of interest provisions?

    In determining whether or not to make an exception to the conflict 
of interest provisions, HUD must consider whether undue hardship will 
result, either to the recipient or to the person affected, when weighed 
against the public interest served by avoiding the prohibited conflict.

[[Page 672]]



Sec. 1000.36  How long must a recipient retain records regarding exceptions made to the conflict of interest provisions?

    A recipient must maintain all such records for a period of at least 
3 years after an exception is made.



Sec. 1000.38  What flood insurance requirements are applicable?

    Under the Flood Disaster Protection Act of 1973, as amended (42 
U.S.C. 4001-4128), a recipient may not permit the use of Federal 
financial assistance for acquisition and construction purposes 
(including rehabilitation) in an area identified by the Federal 
Emergency Management Agency (FEMA) as having special flood hazards, 
unless the following conditions are met:
    (a) The community in which the area is situated is participating in 
the National Flood Insurance Program in accord with section 202(a) of 
the Flood Disaster Protection Act of 1973 (42 U.S.C. 4106(a)), or less 
than a year has passed since FEMA notification regarding such flood 
hazards. For this purpose, the ``community'' is the governmental entity, 
such as an Indian tribe or authorized tribal organization, an Alaska 
Native village, or authorized Native organization, or a municipality or 
county, that has authority to adopt and enforce flood plain management 
regulations for the area; and
    (b) Where the community is participating in the National Flood 
Insurance Program, flood insurance on the building is obtained in 
compliance with section 102(a) of the Flood Disaster Protection Act of 
1973 (42 U.S.C. 4012(a)); provided, that if the financial assistance is 
in the form of a loan or an insurance or guaranty of a loan, the amount 
of flood insurance required need not exceed the outstanding principal 
balance of the loan and need not be required beyond the term of the 
loan.



Sec. 1000.40  Do lead-based paint poisoning prevention requirements apply to affordable housing activities under NAHASDA?

    Yes, lead-based paint requirements apply to housing activities 
assisted under NAHASDA. The applicable requirements for NAHASDA are:
    (a) Purpose and applicability. (1) The purpose of this section is to 
implement section 302 of the Lead-Based Paint Poisoning Prevention Act 
(42 U.S.C. 4822) by establishing procedures to eliminate as far as 
practicable the hazards of lead-based paint poisoning for rental and 
homeownership units owned or operated by a recipient. This section is 
issued under 24 CFR 35.24(b)(4). The requirements of subpart C of 24 CFR 
part 35 do not apply to the housing covered under this section. Other 
provisions of part 35 apply, including subpart H, Disclosure of Known 
Lead-Based Paint and/or Lead-Based Paint Hazards Upon Sale or Lease of 
Residential Property.
    (2) The requirements of this section do not apply to housing built 
after 1977, 0-bedroom units, units that are certified by a qualified 
inspector to be free of lead-based paint, or units designated 
exclusively for the elderly or the handicapped unless a child of less 
than six years of age resides or is expected to reside in the unit.
    (3) Further information on identifying and reducing lead-based paint 
hazards can be found in the HUD publication, ``Guidelines for the 
Evaluation and Control of Lead-Based Paint Hazards in Housing.''
    (b) Definitions.
    Chewable surface. Protruding painted surfaces that are readily 
accessible to children under six years of age; for example, protruding 
corners, window sills and frames, doors and frames, and other protruding 
woodwork. Hard metal surfaces are not considered chewable surfaces.
    Component. An element of a residential structure identified by type 
and location, such as a bedroom wall, an exterior window sill, a 
baseboard in a living room, a kitchen floor, an interior window sill in 
a bathroom, a porch floor, stair treads in a common stairwell, or an 
exterior wall.
    Defective paint surface. A surface on which the paint is cracking, 
scaling, chipping, peeling, or loose.
    Elevated blood lead level (EBL). Excessive absorption of lead. 
Excessive absorption is a confirmed concentration of lead in whole blood 
of 20 g/dl (micrograms of lead per deciliter) or more for a 
single test or of 15-19 g/dl

[[Page 673]]

in two consecutive tests 3-4 months apart.
    HEPA means a high efficiency particle accumulator as used in lead 
abatement vacuum cleaners.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1 milligram 
per centimeter squared (mg/cmSUP>2), or 0.5 percent by weight or 5000 
parts per million by weight (PPM).
    (c) Requirements for pre-1978 units. (1) If a dwelling unit was 
constructed before 1978, it must be visually inspected for defective 
paint surfaces. If defective paint surfaces are found, such surfaces 
must be treated in accordance with this section.
    (2) Defective paint surfaces that are found in a report by a 
qualified lead-based paint inspector not to be lead-based paint, as 
defined in this section, may be exempted from treatment. For purposes of 
this section, a qualified lead-based paint inspector is a lead-based 
paint inspector certified, licensed or regulated by a State or Tribal 
government, the U.S. Environmental Protection Agency, a local health or 
housing agency, or an organization recognized by HUD.
    (3) Treatment of defective paint surfaces required under this 
section must be completed within 30 calendar days of the visual 
evaluation. When weather conditions prevent treatment of the defective 
paint conditions on exterior surfaces within the 30 day period, 
treatment as required by this section may be delayed for a reasonable 
time.
    (4) The requirements in this paragraph apply to:
    (i) All painted interior surfaces within the unit (including 
ceilings but excluding furniture that is not built in or attached to the 
property);
    (ii) The entrance and hallway providing ingress or egress to a unit 
in a multi-unit building, and other common areas that are readily 
accessible to children less than six years of age; and
    (iii) Exterior surfaces that are readily accessible to children 
under six years of age (including walls, stairs, decks, porches, 
railings, windows and doors, and outbuildings such as garages and sheds 
that are readily accessible to children of less than six years of age).
    (d) Additional requirements for pre-1978 units with children under 
six with an EBL. (1) In addition to the requirements of this section, 
for a dwelling unit constructed before 1978 that is occupied by a family 
with a child under the age of six years with an identified EBL 
condition, chewable surfaces must be tested for lead-based paint. 
Testing is not required if previous testing of chewable surfaces is 
negative for lead-based paint or if the chewable surfaces have already 
been treated.
    (2) Testing must be conducted by a qualified lead-based paint 
inspector, as explained in paragraph (c)(2) of this section. Lead 
content must be tested by using an X-ray fluorescence analyzer (XRF) or 
by laboratory analysis of paint samples. Where lead-based paint on 
chewable surfaces is identified, treatment of the paint surface in 
accordance with this section is required, and treatment shall be 
completed within 30 days of the paint testing report.
    (3) The requirements of paragraph (d) in this section apply to 
chewable surfaces:
    (i) Within the unit;
    (ii) The entrance and hallway providing access to a unit in a multi-
unit building; and
    (iii) Exterior surfaces (including walls, stairs, decks, porches, 
railings, windows and doors, and outbuildings such as garages and sheds 
that are accessible to children of less than six years of age).
    (e) Treatment of chewable surfaces without testing. The recipient 
may, at its discretion, waive the testing requirement and require the 
owner to treat all interior and exterior chewable surfaces in accordance 
with the methods set out in this section.
    (f) Treatment methods and requirements. Treatment of defective paint 
surfaces and chewable surfaces must consist of covering or removal of 
the paint in accordance with the following requirements:
    (1) Surfaces must be covered with durable materials with joints and 
edges sealed and caulked as needed to prevent the escape of lead 
contaminated dust. The following are acceptable methods of treatment:

[[Page 674]]

    (i) Removal by wet scraping, wet sanding, chemical stripping on or 
off site;
    (ii) Replacing painted components;
    (iii) Scraping with infra-red or coil type heat gun with 
temperatures below 1100 degrees;
    (iv) HEPA vacuum sanding;
    (v) HEPA vacuum needle gun;
    (vi) Contained hydroblasting or high pressure wash with HEPA vacuum; 
and
    (vii) Abrasive sandblasting with HEPA vacuum.
    (2) Prohibited methods of removal are: open flame burning or 
torching; machine sanding or grinding without a HEPA exhaust; 
uncontained hydroblasting or high pressure wash; and dry scraping except 
around electrical outlets or except when treating defective paint spots 
no more than two square feet in any one interior room or space (hallway, 
pantry, etc.) or totaling no more than 20 square feet on exterior 
surfaces.
    (3) During exterior treatment soil and playground equipment must be 
protected from contamination.
    (4) All treatment procedures must be concluded with a thorough 
cleaning of all surfaces in the room or area of treatment to remove fine 
dust particles. Cleanup must be accomplished by wet washing surfaces 
with a lead solubilizing detergent such as trisodium phosphate or an 
equivalent solution. Dust clearance testing by a qualified inspector may 
be done at the discretion of the recipient to ensure that the unit has 
been cleaned adequately.
    (5) Waste and debris must be disposed of in accordance with all 
applicable Federal, tribal, state and local laws.
    (g) Tenant protection. The owner must take appropriate action to 
protect residents and their belongings from hazards associated with 
treatment procedures. Residents must not enter spaces undergoing 
treatment until cleanup is completed. Personal belongings that are in 
work areas must be relocated or otherwise protected from contamination.



Sec. 1000.42  Are the requirements of section 3 of the Housing and Urban Development Act of 1968 applicable?

    (a) General. Yes. Recipients shall comply with section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u) and HUD's 
implementing regulations in 24 CFR part 135, to the maximum extent 
feasible and consistent with, but not in derogation of, compliance with 
section 7(b) of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450e(b)). Section 3 provides job training, employment, 
and contracting opportunities for low-income individuals.
    (b) Threshold requirement. The requirements of section 3 apply only 
to those section 3 covered projects or activities for which the amount 
of assistance exceeds $200,000.



Sec. 1000.44  What prohibitions on the use of debarred, suspended or ineligible contractors apply?

    In addition to any tribal requirements, the prohibitions in 24 CFR 
part 24 on the use of debarred, suspended or ineligible contractors 
apply.



Sec. 1000.46  Do drug-free workplace requirements apply?

    Yes. In addition to any tribal requirements, the Drug-Free Workplace 
Act of 1988 (41 U.S.C. 701 et seq.) and HUD's implementing regulations 
in 24 CFR part 24 apply.



Sec. 1000.48  Are Indian preference requirements applicable to IHBG activities?

    (a) Applicability. Grants under this part are subject to section 
7(b) of the Indian Self-Determination and Education Assistance Act (25 
U.S.C. 450e(b). Section 7(b) provides that any contract, subcontract, 
grant or subgrant pursuant to an act authorizing grants to Indian 
organizations or for the benefit of Indians shall require that, to the 
greatest extent feasible:
    (1) Preference and opportunities for training and employment shall 
be given to Indians, and
    (2) Preference in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-

[[Page 675]]

owned economic enterprises as defined in section 3 of the Indian 
Financing Act of 1974 (25 U.S.C. 1452).
    (b) Definitions.
    (1) The Indian Self-Determination and Education Assistance Act 
defines ``Indian'' to mean a person who is a member of an Indian tribe 
and defines ``Indian tribe'' to mean any Indian tribe, band, nation, or 
other organized group or community including any Alaska Native village 
or regional or village corporation as defined or established pursuant to 
the Alaska Native Claims Settlement Act, which is recognized as eligible 
for the special programs and services provided by the United States to 
Indians because of their status as Indians.
    (2) In section 3 of the Indian Financing Act of 1974 ``economic 
enterprise'' is defined as any Indian-owned commercial, industrial, or 
business activity established or organized for the purpose of profit, 
except that Indian ownership must constitute not less than 51 percent of 
the enterprise. This act defines ``Indian organization'' to mean the 
governing body of any Indian tribe or entity established or recognized 
by such governing body.



Sec. 1000.50  What Indian preference requirements apply to IHBG administration activities?

    To the greatest extent feasible, preference and opportunities for 
training and employment in connection with the administration of grants 
awarded under this part shall be given to Indians.



Sec. 1000.52  What Indian preference requirements apply to IHBG procurement?

    To the greatest extent feasible, recipients shall give preference in 
the award of contracts for projects funded under this part to Indian 
organizations and Indian-owned economic enterprises.
    (a) Each recipient shall:
    (1) Certify to HUD that the polices and procedures adopted by the 
recipient will provide preference in procurement activities consistent 
with the requirements of section 7(b) of the Indian Self-Determination 
and Education Assistance Act (25 U.S.C.450e(b)) (An Indian preference 
policy which was previously approved by HUD for a recipient will meet 
the requirements of this section); or
    (2) Advertise for bids or proposals limited to qualified Indian 
organizations and Indian-owned enterprises; or
    (3) Use a two-stage preference procedure, as follows:
    (i) Stage 1. Invite or otherwise solicit Indian-owned economic 
enterprises to submit a statement of intent to respond to a bid 
announcement or request for proposals limited to Indian-owned firms.
    (ii) Stage 2. If responses are received from more than one Indian 
enterprise found to be qualified, advertise for bids or proposals 
limited to Indian organizations and Indian-owned economic enterprises.
    (b) If the recipient selects a method of providing preference that 
results in fewer than two responsible qualified organizations or 
enterprises submitting a statement of intent, a bid or a proposal to 
perform the contract at a reasonable cost, then the recipient shall:
    (1) Re-advertise the contract, using any of the methods described in 
paragraph (a) of this section; or
    (2) Re-advertise the contract without limiting the advertisement for 
bids or proposals to Indian organizations and Indian-owned economic 
enterprises; or
    (3) If one approvable bid or proposal is received, request Area ONAP 
review and approval of the proposed contract and related procurement 
documents, in accordance with 24 CFR 85.36, in order to award the 
contract to the single bidder or offeror.
    (c) Procurements that are within the dollar limitations established 
for small purchases under 24 CFR 85.36 need not follow the formal bid or 
proposal procedures of paragraph (a) of this section, since these 
procurements are governed by the small purchase procedures of 24 CFR 
85.36. However, a recipient's small purchase procurement shall, to the 
greatest extent feasible, provide Indian preference in the award of 
contracts.
    (d) All preferences shall be publicly announced in the advertisement 
and bidding or proposal solicitation documents and the bidding and 
proposal documents.

[[Page 676]]

    (e) A recipient, at its discretion, may require information of 
prospective contractors seeking to qualify as Indian organizations or 
Indian-owned economic enterprises. Recipients may require prospective 
contractors to provide the following information before submitting a bid 
or proposal, or at the time of submission:
    (1) Evidence showing fully the extent of Indian ownership and 
interest;
    (2) Evidence of structure, management and financing affecting the 
Indian character of the enterprise, including major subcontracts and 
purchase agreements; materials or equipment supply arrangements; and 
management salary or profit-sharing arrangements; and evidence showing 
the effect of these on the extent of Indian ownership and interest; and
    (3) Evidence sufficient to demonstrate to the satisfaction of the 
recipient that the prospective contractor has the technical, 
administrative, and financial capability to perform contract work of the 
size and type involved.
    (f) The recipient shall incorporate the following clause (referred 
to as the section 7(b) clause) in each contract awarded in connection 
with a project funded under this part:
    (1) The work to be performed under this contract is on a project 
subject to section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450e(b)) (the Indian Act). Section 7(b) 
requires that to the greatest extent feasible:
    (i) Preferences and opportunities for training and employment shall 
be given to Indians; and
    (ii) Preferences in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises.
    (2) The parties to this contract shall comply with the provisions of 
section 7(b) of the Indian Act.
    (3) In connection with this contract, the contractor shall, to the 
greatest extent feasible, give preference in the award of any 
subcontracts to Indian organizations and Indian-owned economic 
enterprises, and preferences and opportunities for training and 
employment to Indians.
    (4) The contractor shall include this section 7(b) clause in every 
subcontract in connection with the project, and shall, at the direction 
of the recipient, take appropriate action pursuant to the subcontract 
upon a finding by the recipient or HUD that the subcontractor has 
violated the section 7(b) clause of the Indian Act.



Sec. 1000.54  What procedures apply to complaints arising out of any of the methods of providing for Indian preference?

    The following procedures are applicable to complaints arising out of 
any of the methods of providing for Indian preference contained in this 
part, including alternate methods. Tribal policies that meet or exceed 
the requirements of this section shall apply.
    (a) Each complaint shall be in writing, signed, and filed with the 
recipient.
    (b) A complaint must be filed with the recipient no later than 20 
calendar days from the date of the action (or omission) upon which the 
complaint is based.
    (c) Upon receipt of a complaint, the recipient shall promptly stamp 
the date and time of receipt upon the complaint, and immediately 
acknowledge its receipt.
    (d) Within 20 calendar days of receipt of a complaint, the recipient 
shall either meet, or communicate by mail or telephone, with the 
complainant in an effort to resolve the matter. The recipient shall make 
a determination on a complaint and notify the complainant, in writing, 
within 30 calendar days of the submittal of the complaint to the 
recipient. The decision of the recipient shall constitute final 
administrative action on the complaint.



Sec. 1000.56  How are NAHASDA funds paid by HUD to recipients?

    (a) Each year funds shall be paid directly to a recipient in a 
manner that recognizes the right of Indian self-determination and tribal 
self-governance and the trust responsibility of the Federal government 
to Indian tribes consistent with NAHASDA.
    (b) Payments shall be made as expeditiously as practicable.

[[Page 677]]



Sec. 1000.58  Are there limitations on the investment of IHBG funds?

    (a) A recipient may invest IHBG funds for the purposes of carrying 
out affordable housing activities in investment securities and other 
obligations as provided in this section.
    (b) The recipient may invest IHBG funds so long as it demonstrates 
to HUD:
    (1) That there are no unresolved significant and material audit 
findings or exceptions in the most recent annual audit completed under 
the Single Audit Act or in an independent financial audit prepared in 
accordance with generally accepted auditing principles; and
    (2) That it is a self-governance Indian tribe or that it has the 
administrative capacity and controls to responsibly manage the 
investment. For purposes of this section, a self-governance Indian tribe 
is an Indian tribe that participates in tribal self-governance as 
authorized under Public Law 93-638, as amended (25 U.S.C. 450 et seq.).
    (c) Recipients shall invest IHBG funds only in:
    (1) Obligations of the United States; obligations issued by 
Government sponsored agencies; securities that are guaranteed or insured 
by the United States; mutual (or other) funds registered with the 
Securities and Exchange Commission and which invest only in obligations 
of the United States or securities that are guaranteed or insured by the 
United States; or
    (2) Accounts that are insured by an agency or instrumentality of the 
United States or fully collateralized to ensure protection of the funds, 
even in the event of bank failure.
    (d) IHBG funds shall be held in one or more accounts separate from 
other funds of the recipient. Each of these accounts shall be subject to 
an agreement in a form prescribed by HUD sufficient to implement the 
regulations in this part and permit HUD to exercise its rights under 
Sec. 1000.60.
    (e) Expenditure of funds for affordable housing activities under 
section 204(a) of NAHASDA shall not be considered investment.
    (f) A recipient may invest its IHBG annual grant in an amount equal 
to the annual formula grant amount less any formula grant amounts 
allocated for the operating subsidy element of the Formula Current 
Assisted Housing Stock (FCAS) component of the formula (see 
Secs. 1000.316(a) and 1000.320) multiplied by the following percentages, 
as appropriate:
    (1) 50% in Fiscal Years 1998 and 1999;
    (2) 75% in Fiscal Year 2000; and
    (3) 100% in Fiscal Years 2001 and thereafter.
    (g) Investments under this section may be for a period no longer 
than two years.



Sec. 1000.60  Can HUD prevent improper expenditure of funds already disbursed to a recipient?

    Yes. In accordance with the standards and remedies contained in 
Sec. 1000.538 relating to substantial noncompliance, HUD will use its 
powers under a depository agreement and take such other actions as may 
be legally necessary to suspend funds disbursed to the recipient until 
the substantial noncompliance has been remedied. In taking this action, 
HUD shall comply with all appropriate procedures, appeals and hearing 
rights prescribed elsewhere in this part.



Sec. 1000.62  What is considered program income and what restrictions are there on its use?

    (a) Program income is defined as any income that is realized from 
the disbursement of grant amounts. Program income does not include any 
amounts generated from the operation of 1937 Act units unless the units 
are assisted with grant amounts and the income is attributable to such 
assistance. Program income includes income from fees for services 
performed from the use of real or rental of real or personal property 
acquired with grant funds, from the sale of commodities or items 
developed, acquired, etc. with grant funds, and from payments of 
principal and interest earned on grant funds prior to disbursement.
    (b) Any program income can be retained by a recipient provided it is 
used for affordable housing activities in accordance with section 202 of 
NAHASDA. If the amount of income received in a single year by a 
recipient and all its subrecipients, which would

[[Page 678]]

otherwise be considered program income, does not exceed $25,000, such 
funds may be retained but will not be considered to be or treated as 
program income.
    (c) If program income is realized from an eligible activity funded 
with both grant funds as well as other funds (i.e., funds that are not 
grant funds), then the amount of program income realized will be based 
on a percentage calculation that represents the proportional share of 
funds provided for the activity generating the program income.
    (d) Costs incident to the generation of program income shall be 
deducted from gross income to determine program income.



                Subpart B--Affordable Housing Activities



Sec. 1000.101  What is affordable housing?

    Eligible affordable housing is defined in section 4(2) of NAHASDA 
and is described in title II of NAHASDA.



Sec. 1000.102  What are eligible affordable housing activities?

    Eligible affordable housing activities are those described in 
section 202 of NAHASDA.



Sec. 1000.104  What families are eligible for affordable housing activities?

    The following families are eligible for affordable housing 
activities:
    (a) Low income Indian families on a reservation or Indian area.
    (b) A non-low income Indian family may receive housing assistance in 
accordance with Sec. 1000.110, except that non low-income Indian 
families residing in housing assisted under the 1937 Act do not have to 
meet the requirements of Sec. 1000.110 for continued occupancy.
    (c) A non-Indian family may receive housing assistance on a 
reservation or Indian area if the non-Indian family's housing needs 
cannot be reasonably met without such assistance and the recipient 
determines that the presence of that family on the reservation or Indian 
area is essential to the well-being of Indian families, except that non-
Indian families residing in housing assisted under the 1937 Act do not 
have to meet these requirements for continued occupancy.



Sec. 1000.106  What families receiving assistance under title II of NAHASDA require HUD approval?

    (a) Housing assistance for non low-income Indian families requires 
HUD approval only as required in Secs. 1000.108 and 1000.110.
    (b) Assistance under section 201(b)(3) of NAHASDA for non-Indian 
families does not require HUD approval but only requires that the 
recipient determine that the presence of that family on the reservation 
or Indian area is essential to the well-being of Indian families and the 
non-Indian family's housing needs cannot be reasonably met without such 
assistance.



Sec. 1000.108  How is HUD approval obtained by a recipient for housing for non low-income Indian families and model activities?

    Recipients are required to submit proposals to operate model housing 
activities as defined in section 202(6) of NAHASDA and to provide 
assistance to non low-income Indian families in accordance with section 
201(b)(2) of NAHASDA. Assistance to non low-income Indian families must 
be in accordance with Sec. 1000.110. Proposals may be submitted in the 
recipient's IHP or at any time by amendment of the IHP, or by special 
request to HUD at any time. HUD may approve the remainder of an IHP 
notwithstanding disapproval of a model activity or assistance to non 
low-income Indian families.



Sec. 1000.110  Under what conditions may non low-income Indian families participate in the program?

    (a) A family who is purchasing housing under a lease purchase 
agreement and who was low income at the time the lease was signed is 
eligible without further conditions.
    (b) A recipient may provide the following types of assistance to non 
low-income Indian families under the conditions specified in paragraphs 
(c), (d) and (e) of this section:
    (1) Homeownership activities under section 202(2) of NAHASDA, which 
may include assistance in conjunction with loan guarantees under the 
Section 184 program (see 24 CFR part 1005);

[[Page 679]]

    (2) Model activities under section 202(6) of NAHASDA; and
    (3) Loan guarantee activities under title VI of NAHASDA.
    (c) A recipient must determine and document that there is a need for 
housing for each family which cannot reasonably be met without such 
assistance.
    (d) A recipient may use up to 10 percent of its annual grant amount 
for families whose income falls within 80 to 100 percent of the median 
income without HUD approval. HUD approval is required if a recipient 
plans to use more than 10 percent of its annual grant amount for such 
assistance or to provide housing for families with income over 100 
percent of median income.
    (e) Non low-income Indian families cannot receive the same benefits 
provided low-income Indian families. The amount of assistance non low-
income Indian families may receive will be determined as follows:
    (1) The rent (including homebuyer payments under a lease purchase 
agreement) to be paid by a non low-income Indian family cannot be less 
than: (Income of non low-income family/Income of family at 80 percent of 
median income)  x  (Rental payment of family at 80 percent of median 
income), but need not exceed the fair market rent or value of the unit.
    (2) Other assistance, including down payment assistance, to non low-
income Indian families, cannot exceed: (Income of family at 80 percent 
of median income/Income of non low-income family)  x  (Present value of 
the assistance provided to family at 80 percent of median income).
    (f) The requirements set forth in paragraph (e) of this section do 
not apply to non low-income Indian families which the recipient has 
determined to be essential to the well-being of the Indian families 
residing in the housing area.



Sec. 1000.112  How will HUD determine whether to approve model housing activities?

    HUD will review all proposals with the goal of approving the 
activities and encouraging the flexibility, discretion, and self-
determination granted to Indian tribes under NAHASDA to formulate and 
operate innovative housing programs that meet the intent of NAHASDA.



Sec. 1000.114  How long does HUD have to review and act on a proposal to provide assistance to non low-income Indian families or a model housing activity?

    Whether submitted in the IHP or at any other time, HUD will have 
sixty calendar days after receiving the proposal to notify the recipient 
in writing that the proposal to provide assistance to non low-income 
Indian families or for model activities is approved or disapproved. If 
no decision is made by HUD within sixty calendar days of receiving the 
proposal, the proposal is deemed to have been approved by HUD.



Sec. 1000.116  What should HUD do before declining a proposal to provide assistance to non low-income Indian families or a model housing activity?

    HUD shall consult with a recipient regarding the recipient's 
proposal to provide assistance to non low-income Indian families or a 
model housing activity. To the extent resources are available, HUD shall 
provide technical assistance to the recipient in amending and modifying 
the proposal if necessary. In case of a denial, HUD shall give the 
specific reasons for the denial.



Sec. 1000.118  What recourse does a recipient have if HUD disapproves a proposal to provide assistance to non low-income Indian families or a model housing activity?

    (a) Within thirty calendar days of receiving HUD's denial of a 
proposal to provide assistance to non low-income Indian families or a 
model housing activity, the recipient may request reconsideration of the 
denial in writing. The request shall set forth justification for the 
reconsideration.
    (b) Within twenty calendar days of receiving the request, HUD shall 
reconsider the recipient's request and either affirm or reverse its 
initial decision in writing, setting forth its reasons for the decision. 
If the decision was made by the Assistant Secretary, the decision will 
constitute final agency action. If the decision was made at a

[[Page 680]]

lower level, then paragraphs (c) and (d) of this section will apply.
    (c) The recipient may appeal any denial of reconsideration by filing 
an appeal with the Assistant Secretary within twenty calendar days of 
receiving the denial. The appeal shall set forth the reasons why the 
recipient does not agree with HUD's decision and set forth justification 
for the reconsideration.
    (d) Within twenty calendar days of receipt of the appeal, the 
Assistant Secretary shall review the recipient's appeal and act on the 
appeal, setting forth the reasons for the decision.



Sec. 1000.120  May a recipient use Indian preference or tribal preference in selecting families for housing assistance?

    Yes. The IHP may set out a preference for the provision of housing 
assistance to Indian families who are members of the Indian tribe or to 
other Indian families if the recipient has adopted the preference in its 
admissions policy. The recipient shall ensure that housing activities 
funded under NAHASDA are subject to the preference.



Sec. 1000.122  May NAHASDA grant funds be used as matching funds to obtain and leverage funding, including any Federal or state program and still be considered an affordable housing activity?

    There is no prohibition in NAHASDA against using grant funds as 
matching funds.



Sec. 1000.124  What maximum and minimum rent or homebuyer payment can a recipient charge a low-income rental tenant or homebuyer residing in housing units assisted with NAHASDA grant amounts?

    A recipient can charge a low-income rental tenant or homebuyer rent 
or homebuyer payments not to exceed 30 percent of the adjusted income of 
the family. The recipient may also decide to compute its rental and 
homebuyer payments on any lesser percentage of adjusted income of the 
family. This requirement applies only to units assisted with NAHASDA 
grant amounts. NAHASDA does not set minimum rents or homebuyer payments; 
however, a recipient may do so.



Sec. 1000.126  May a recipient charge flat or income-adjusted rents?

    Yes, providing the rental or homebuyer payment of the low-income 
family does not exceed 30 percent of the family's adjusted income.



Sec. 1000.128  Is income verification required for assistance under NAHASDA?

    (a) Yes, the recipient must verify that the family is income 
eligible based on anticipated annual income. The family is required to 
provide documentation to verify this determination. The recipient is 
required to maintain the documentation on which the determination of 
eligibility is based.
    (b) The recipient may require a family to periodically verify its 
income in order to determine housing payments or continued occupancy 
consistent with locally adopted policies. When income verification is 
required, the family must provide documentation which verifies its 
income, and this documentation must be retained by the recipient.



Sec. 1000.130  May a recipient charge a non low-income family rents or homebuyer payments which are more than 30 percent of the family's adjusted income?

    Yes. A recipient may charge a non low-income family rents or 
homebuyer payments which are more than 30 percent of the family's 
adjusted income.



Sec. 1000.132  Are utilities considered a part of rent or homebuyer payments?

    Utilities may be considered a part of rent or homebuyer payments if 
a recipient decides to define rent or homebuyer payments to include 
utilities in its written policies on rents and homebuyer payments 
required by section 203(a)(1) of NAHASDA. A recipient may define rents 
and homebuyer payments to exclude utilities.

[[Page 681]]



Sec. 1000.134  When may a recipient (or entity funded by a recipient) demolish or dispose of current assisted stock?

    (a) A recipient (or entity funded by a recipient) may undertake a 
planned demolition or disposal of current assisted stock owned by the 
recipient or an entity funded by the recipient when:
    (1) A financial analysis demonstrates that it is more cost-effective 
or housing program-effective for the recipient to demolish or dispose of 
the unit than to continue to operate or own it; or
    (2) The housing unit has been condemned by the government which has 
authority over the unit; or
    (3) The housing unit is an imminent threat to the health and safety 
of housing residents; or
    (4) Continued habitation of a housing unit is inadvisable due to 
cultural or historical considerations.
    (b) No action to demolish or dispose of the property other than 
performing the analysis cited in paragraph (a) of this section can be 
taken until HUD has been notified in writing of the recipient's intent 
to demolish or dispose of the housing units consistent with section 
102(c)(4)(H) of NAHASDA. The written notification must set out the 
analysis used to arrive at the decision to demolish or dispose of the 
property and may be set out in a recipient's IHP or in a separate 
submission to HUD.
    (c) In any disposition sale of a housing unit, a sale process 
designed to maximize the sale price will be used. However, where the 
sale is to a low-income Indian family, the home may be disposed of 
without maximizing the sale price so long as such price is consistent 
with a recipient's IHP. The sale proceeds from the disposition of any 
housing unit are program income under NAHASDA and must be used in 
accordance with the requirements of NAHASDA and these regulations.



Sec. 1000.136  What insurance requirements apply to housing units assisted with NAHASDA grants?

    (a) The recipient shall provide adequate insurance either by 
purchasing insurance or by indemnification against casualty loss by 
providing insurance in adequate amounts to indemnify the recipient 
against loss from fire, weather, and liability claims for all housing 
units owned or operated by the recipient.
    (b) The recipients shall not require insurance on units assisted by 
grants to families for privately owned housing if there is no risk of 
loss or exposure to the recipient or if the assistance is in an amount 
less than $5000, but will require insurance when repayment of all or 
part of the assistance is part of the assistance agreement.
    (c) The recipient shall require contractors and subcontractors to 
either provide insurance covering their activities or negotiate adequate 
indemnification coverage to be provided by the recipient in the 
contract.
    (d) These requirements are in addition to applicable flood insurance 
requirements under Sec. 1000.38.



Sec. 1000.138  What constitutes adequate insurance?

    Insurance is adequate if it is a purchased insurance policy from an 
insurance provider or a plan of self-insurance in an amount that will 
protect the financial stability of the recipient's IHBG program. 
Recipients may purchase the required insurance without regard to 
competitive selection procedures from nonprofit insurance entities which 
are owned and controlled by recipients and which have been approved by 
HUD.



Sec. 1000.140  May a recipient use grant funds to purchase insurance for privately owned housing to protect NAHASDA grant amounts spent on that housing?

    Yes. All purchases of insurance must be in accordance with 
Secs. 1000.136 and 1000.138.



Sec. 1000.142  What is the ``useful life'' during which low-income rental housing and low-income homebuyer housing must remain affordable as required in sections 205(a)(2) and 209 of NAHASDA?

    Each recipient shall describe in its IHP its determination of the 
useful life of each assisted housing unit in each of its developments in 
accordance with the local conditions of the Indian area of the 
recipient. By approving the plan, HUD determines the useful life in 
accordance with section 205(a)(2) of

[[Page 682]]

NAHASDA and for purposes of section 209.



Sec. 1000.144  Are Mutual Help homes developed under the 1937 Act subject to the useful life provisions of section 205(a)(2)?

    No.



Sec. 1000.146  Are homebuyers required to remain low-income throughout the term of their participation in a housing program funded under NAHASDA?

    No. The low-income eligibility requirement applies only at the time 
of purchase. However, families purchasing housing under a lease purchase 
agreement who are not low-income at the time of purchase are eligible 
under Sec. 1000.110.



Sec. 1000.150  How may Indian tribes and TDHEs receive criminal conviction information on adult applicants or tenants?

    (a) As required by section 208 of NAHASDA, the National Crime 
Information Center, police departments, and other law enforcement 
agencies shall provide criminal conviction information to Indian tribes 
and TDHEs upon request. Information regarding juveniles shall only be 
released to the extent such release is authorized by the law of the 
applicable state, Indian tribe or locality.
    (b) For purposes of this section, the term ``tenants'' includes 
homebuyers who are purchasing a home pursuant to a lease purchase 
agreement.



Sec. 1000.152  How is the recipient to use criminal conviction information?

    The recipient shall use the criminal conviction information 
described in Sec. 1000.150 only for applicant screening, lease 
enforcement and eviction actions. The information may be disclosed only 
to any person who has a job related need for the information and who is 
an authorized officer, employee, or representative of the recipient or 
the owner of housing assisted under NAHASDA.



Sec. 1000.154  How is the recipient to keep criminal conviction information confidential?

    (a) The recipient will keep all the criminal conviction record 
information it receives from the official law enforcement agencies 
listed in Sec. 1000.150 in files separate from all other housing 
records.
    (b) These criminal conviction records will be kept under lock and 
key and be under the custody and control of the recipient's housing 
executive director/lead official and/or his designee for such records.
    (c) These criminal conviction records may only be accessed with the 
written permission of the Indian tribe's or TDHE's housing executive 
director/lead official and/or his designee and are only to be used for 
the purposes stated in section 208 of NAHASDA and these regulations.



Sec. 1000.156  Is there a per unit limit on the amount of IHBG funds that may be used for dwelling construction and dwelling equipment?

    (a) Yes. The per unit amount of IHBG funds that may be used for 
dwelling construction and dwelling equipment cannot exceed the limit 
established by HUD except as allowed in the definition below. Other 
costs associated with developing a project, including all undertakings 
necessary for administration, planning, site acquisition, water and 
sewer, demolition, and financing may be eligible NAHASDA costs but are 
not subject to this limit.
    (b) Dwelling construction and equipment (DC&E) costs include all 
construction costs of an individual dwelling within five feet of the 
foundation. Excluded from the DC&E are any administrative, planning, 
financing, site acquisition, site development more than five feet from 
the foundation, and utility development or connection costs. HUD will 
publish and update on a regular basis DC&E amounts for appropriate 
geographic areas.
    (c) DC&E amounts will be based on a moderately designed house or 
multi-family structure and will be determined by averaging the current 
construction costs, as listed in not less

[[Page 683]]

than two nationally recognized residential construction cost indices, 
for publicly bid construction of a good and sound quality. If a 
recipient determines that published DC&E amounts are not representative 
of construction costs in its area, it may request a re-evaluation of 
DC&E amounts and provide HUD with relevant information for this re-
evaluation.



                  Subpart C--Indian Housing Plan (IHP)



Sec. 1000.201  How are funds made available under NAHASDA?

    Every fiscal year HUD will make grants under the IHBG program to 
recipients who have submitted to HUD for that fiscal year an IHP in 
accordance with Sec. 1000.220 to carry out affordable housing 
activities.



Sec. 1000.202  Who are eligible recipients?

    Eligible recipients are Indian tribes, or TDHEs when authorized by 
one or more Indian tribes.



Sec. 1000.204  How does an Indian tribe designate itself as recipient of the grant?

    (a) By resolution of the Indian tribe; or
    (b) When such authority has been delegated by an Indian tribe's 
governing body to a tribal committee(s), by resolution or other written 
form used by such committee(s) to memorialize the decisions of that 
body, if applicable.



Sec. 1000.206  How is a TDHE designated?

    (a)(1) By resolution of the Indian tribe or Indian tribes to be 
served; or
    (2) When such authority has been delegated by an Indian tribe's 
governing body to a tribal committee(s), by resolution or other written 
form used by such committee(s) to memorialize the decisions of that 
body, if applicable.
    (b) In the absence of a designation by the Indian tribe, the default 
designation as provided in section 4(21) of NAHASDA shall apply.



Sec. 1000.208  What happens if an Indian tribe had two IHAs as of September 30, 1996?

    Indian tribes which had established and were operating two IHAs as 
of September 30, 1996, under the 1937 Act shall be allowed to form and 
operate two TDHEs under NAHASDA. Nothing in this section shall affect 
the allocation of funds otherwise due to an Indian tribe under the 
formula.



Sec. 1000.210  What happens to existing 1937 Act units in those jurisdictions for which Indian tribes do not or cannot submit an IHP?

    NAHASDA does not provide the statutory authority for HUD to grant 
NAHASDA grant funds to an Indian housing authority, Indian tribe or to a 
default TDHE which cannot obtain a tribal certification, if the 
requisite IHP is not submitted by an Indian tribe or is determined to be 
out of compliance by HUD. There may be circumstances where this may 
happen, and in those cases, other methods of tribal, Federal, or private 
market support may have to be sought to maintain and operate those 1937 
Act units.



Sec. 1000.212  Is submission of an IHP required?

    Yes. An Indian tribe or, with the consent of its Indian tribe(s), 
the TDHE, must submit an IHP to HUD to receive funding under NAHASDA, 
except as provided in section 101(b)(2) of NAHASDA. If a TDHE has been 
designated by more than one Indian tribe, the TDHE can submit a separate 
IHP for each Indian tribe or it may submit a single IHP based on the 
requirements of Sec. 1000.220 with the approval of the Indian tribes.



Sec. 1000.214  What is the deadline for submission of an IHP?

    IHPs must be initially sent by the recipient to the Area ONAP no 
later than July 1. Grant funds cannot be provided until the plan is 
submitted and determined to be in compliance with section 102 of NAHASDA 
and funds are available.



Sec. 1000.216  What happens if the recipient does not submit the IHP to the Area ONAP by July 1?

    If the IHP is not initially sent by July 1, the recipient will not 
be eligible for IHBG funds for that fiscal year. Any funds not obligated 
because an

[[Page 684]]

IHP was not received before the deadline has passed shall be distributed 
by formula in the following year.



Sec. 1000.218  Who prepares and submits an IHP?

    An Indian tribe, or with the authorization of a Indian tribe, in 
accordance with section 102(d) of NAHASDA a TDHE may prepare and submit 
a plan to HUD.



Sec. 1000.220  What are the minimum requirements for the IHP?

    The minimum IHP requirements are set forth in sections 102(b) and 
102(c) of NAHASDA. In addition, Secs. 1000.56, 1000.108, 1000.120, 
1000.134, 1000.142, 1000.238, 1000.328, and 1000.504 require or permit 
additional items to be set forth in the IHP for HUD determinations 
required by those sections. Recipients are only required to provide IHPs 
that contain these minimum elements in a form prescribed by HUD. If a 
TDHE is submitting a single IHP that covers two or more Indian tribes, 
the IHP must contain a separate certification in accordance with section 
102(d) of NAHASDA and IHP Tables for each Indian tribe when requested by 
such Indian tribes. However, Indian tribes are encouraged to perform 
comprehensive housing needs assessments and develop comprehensive IHPs 
and not limit their planning process to only those housing efforts 
funded by NAHASDA. An IHP should be locally driven.



Sec. 1000.222  Are there separate IHP requirements for small Indian tribes and small TDHEs?

    No. HUD requirements for IHPs are reasonable.



Sec. 1000.224  Can any part of the IHP be waived?

    Yes. HUD has general authority under section 101(b)(2) of NAHASDA to 
waive any IHP requirements when an Indian tribe cannot comply with IHP 
requirements due to circumstances beyond its control. The waiver 
authority under section 101(b)(2) of NAHASDA provides flexibility to 
address the needs of every Indian tribe, including small Indian tribes. 
The waiver may be requested by the Indian tribe or its TDHE (if such 
authority is delegated by the Indian tribe).



Sec. 1000.226  Can the certification requirements of section 102(c)(5) of NAHASDA be waived by HUD?

    Yes. HUD may waive these certification requirements as provided in 
section 101(b)(2) of NAHASDA.



Sec. 1000.228  If HUD changes its IHP format will Indian tribes be involved?

    Yes. HUD will first consult with Indian tribes before making any 
substantial changes to HUD's IHP format.



Sec. 1000.230  What is the process for HUD review of IHPs and IHP amendments?

    HUD will conduct the IHP review in the following manner:
    (a) HUD will conduct a limited review of the IHP to ensure that its 
contents:
    (1) Comply with the requirements of section 102 of NAHASDA which 
outlines the IHP submission requirements;
    (2) Are consistent with information and data available to HUD;
    (3) Are not prohibited by or inconsistent with any provision of 
NAHASDA or other applicable law; and
    (4) Include the appropriate certifications.
    (b) If the IHP complies with the provisions of paragraphs (a)(1), 
(a)(2), and (a)(3) of this section, HUD will notify the recipient of IHP 
compliance within 60 days after receiving the IHP. If HUD fails to 
notify the recipient, the IHP shall be considered to be in compliance 
with the requirements of section 102 of NAHASDA and the IHP is approved.
    (c) If the submitted IHP does not comply with the provisions of 
paragraphs (a)(1), and (a)(3) of this section, HUD will notify the 
recipient of the determination of non-compliance. HUD will provide this 
notice no later than 60 days after receiving the IHP. This notice will 
set forth:
    (1) The reasons for noncompliance;
    (2) The modifications necessary for the IHP to meet the submission 
requirements; and
    (3) The date by which the revised IHP must be submitted.
    (d) If the recipient does not submit a revised IHP by the date 
indicated in the notice provided under paragraph (c)

[[Page 685]]

of this section, the IHP will be determined by HUD to be in non-
compliance unless a waiver is requested and approved under section 
101(b)(2) of NAHASDA. If the IHP is determined by HUD to be in non-
compliance and no waiver is granted, the recipient may appeal this 
determination following the appeal process in Sec. 1000.234.
    (e)(1) If the IHP does not contain the certifications identified in 
paragraph (a)(4) of this section, the recipient will be notified within 
60 days of submission of the IHP that the plan is incomplete. The 
notification will include a date by which the certification must be 
submitted.
    (2) If the recipient has not complied or cannot comply with the 
certification requirements due to circumstances beyond the control of 
the Indian tribe(s), within the timeframe established, the recipient can 
request a waiver in accordance with section 101(b)(2) of NAHASDA. If the 
waiver is approved, the recipient is eligible to receive its grant in 
accordance with any conditions of the waiver.



Sec. 1000.232  Can an Indian tribe or TDHE amend its IHP?

    Yes. Section 103(c) of NAHASDA specifically provides that a 
recipient may submit modifications or revisions of its IHP to HUD. 
Unless the initial IHP certification provided by an Indian tribe allowed 
for the submission of IHP amendments without further tribal 
certifications, a tribal certification must accompany submission of IHP 
amendments by a TDHE to HUD. HUD's review of an amendment and 
determination of compliance will be limited to modifications of an IHP 
which adds new activities or involve a decrease in the amount of funds 
provided to protect and maintain the viability of housing assisted under 
the 1937 Act. HUD will consider these modifications to the IHP in 
accordance with Sec. 1000.230. HUD will act on amended IHPs within 30 
days.



Sec. 1000.234  Can HUD's determination regarding the non-compliance of an IHP or a modification to an IHP be appealed?

    (a) Yes. Within 30 days of receiving HUD's disapproval of an IHP or 
of a modification to an IHP, the recipient may submit a written request 
for reconsideration of the determination. The request shall include the 
justification for the reconsideration.
    (b) Within 21 days of receiving the request, HUD shall reconsider 
its initial determination and provide the recipient with written notice 
of its decision to affirm, modify, or reverse its initial determination. 
This notice will also contain the reasons for HUD's decision.
    (c) The recipient may appeal any denial of reconsideration by filing 
an appeal with the Assistant Secretary within 21 days of receiving the 
denial. The appeal shall set forth the reasons why the recipient does 
not agree with HUD's decision and include justification for the 
reconsideration.
    (d) Within 21 days of receipt of the appeal, the Assistant Secretary 
shall review the recipient's appeal and act on the appeal. The Assistant 
Secretary will provide written notice to the recipient setting forth the 
reasons for the decision. The Assistant Secretary's decision constitutes 
final agency action.



Sec. 1000.236  What are eligible administrative and planning expenses?

    (a) Eligible administrative and planning expenses of the IHBG 
program include, but are not limited to:
    (1) Costs of overall program and/or administrative management;
    (2) Coordination monitoring and evaluation;
    (3) Preparation of the IHP including data collection and transition 
costs;
    (4) Preparation of the annual performance report; and
    (5) Challenge to and collection of data for purposes of challenging 
the formula.
    (b) Staff and overhead costs directly related to carrying out 
affordable housing activities can be determined to be

[[Page 686]]

eligible costs of the affordable housing activity or considered 
administration or planning at the discretion of the recipient.



Sec. 1000.238  What percentage of the IHBG funds can be used for administrative and planning expenses?

    The recipient can use up to 20 percent of its annual grant amount 
for administration and planning. The recipient shall identify the 
percentage of grant funds which will be used in the IHP. HUD approval is 
required if a higher percentage is requested by the recipient. When HUD 
approval is required, HUD must take into consideration any cost of 
preparing the IHP, challenges to and collection of data, the recipient's 
grant amount, approved cost allocation plans, and any other relevant 
information with special consideration given to the circumstances of 
recipients receiving minimal funding.



Sec. 1000.240  When is a local cooperation agreement required for affordable housing activities?

    The requirement for a local cooperation agreement applies only to 
rental and lease-purchase homeownership units assisted with IHBG funds 
which are owned by the Indian tribe or TDHE.



Sec. 1000.242  When does the requirement for exemption from taxation apply to affordable housing activities?

    The requirement for exemption from taxation applies only to rental 
and lease-purchase homeownership units assisted with IHBG funds which 
are owned by the Indian tribe or TDHE.



                      Subpart D--Allocation Formula



Sec. 1000.301  What is the purpose of the IHBG formula?

    The IHBG formula is used to allocate equitably and fairly funds made 
available through NAHASDA among eligible Indian tribes. A TDHE may be a 
recipient on behalf of an Indian tribe.



Sec. 1000.302  What are the definitions applicable for the IHBG formula?

    Allowable Expense Level (AEL) factor. In rental projects, AEL is the 
per-unit per-month dollar amount of expenses which was used to compute 
the amount of operating subsidy used prior to October 1, 1997 for the 
Low Rent units developed under the 1937 Act. The ``AEL factor'' is the 
relative difference between a local area AEL and the national weighted 
average for AEL.
    Date of Full Availability (DOFA) means the last day of the month in 
which substantially all the units in a housing development are available 
for occupancy.
    Fair Market Rent (FMR) factors are gross rent estimates; they 
include shelter rent plus the cost of all utilities, except telephones. 
HUD estimates FMRs on an annual basis for 354 metropolitan FMR areas and 
2,355 non-metropolitan county FMR areas. The ``FMR factor'' is the 
relative difference between a local area FMR and the national weighted 
average for FMR.
    Formula Annual Income. For purposes of the IHBG formula, annual 
income is a household's total income as currently defined by the U.S. 
Census Bureau.
    Formula area. (1) Formula area is the geographic area over which an 
Indian tribe could exercise court jurisdiction or is providing 
substantial housing services and, where applicable, the Indian tribe or 
TDHE has agreed to provide housing services pursuant to a Memorandum of 
Agreement with the governing entity or entities (including Indian 
tribes) of the area, including but not limited to:
    (i) A reservation;
    (ii) Trust land;
    (iii) Alaska Native Village Statistical Area;
    (iv) Alaska Native Claims Settlement Act Corporation Service Area;
    (v) Department of the Interior Near-Reservation Service Area;
    (vi) Former Indian Reservation Areas in Oklahoma as defined by the 
Census as Tribal Jurisdictional Statistical Area;
    (vii) Congressionally Mandated Service Area; and
    (viii) State legislatively defined Tribal Areas as defined by the 
Census as Tribal Designated Statistical Areas.
    (2) For additional areas beyond those identified in the above list 
of eight, the Indian tribe must submit on the Formula Response Form the 
area that it wishes to include in its Formula Area

[[Page 687]]

and what previous and planned investment it has made in the area. HUD 
will review this submission and determine whether or not to include this 
area. HUD will make its judgment using as its guide whether this 
addition is fair and equitable for all Indian tribes in the formula.
    (3) In some cases the population data for an Indian tribe within its 
formula area is greater than its tribal enrollment. In general, for 
those cases to maintain fairness for all Indian tribes, the population 
data will not be allowed to exceed twice an Indian tribe's enrolled 
population. However, an Indian tribe subject to this cap may receive an 
allocation based on more than twice its total enrollment if it can show 
that it is providing housing assistance to substantially more non-member 
Indians and Alaska Natives who are members of another Federally 
recognized Indian tribe than it is to members.
    (4) In cases where an Indian tribe is seeking to receive an 
allocation more than twice its total enrollment, the tribal enrollment 
multiplier will be determined by the total number of Indians and Alaska 
Natives the Indian tribe is providing housing assistance (on July 30 of 
the year before funding is sought) divided by the number of members the 
Indian tribe is providing housing assistance. For example, an Indian 
tribe which provides housing to 300 Indians and Alaska Natives, of which 
100 are members, would then be able to receive an allocation for up to 
three times its tribal enrollment if the Indian and Alaska Native 
population in the area is three or more times the tribal enrollment.
    Formula Median Income. For purposes of the formula median income is 
determined in accordance with section 567 of the Housing and Community 
Development Act of 1987 (42 U.S.C. 1437a note).
    Formula Response Form is the form recipients use to report changes 
to their Formula Current Assisted stock, formula area, and other formula 
related information before each year's formula allocation.
    Indian Housing Authority (IHA) financed means a homeownership 
program where title rests with the homebuyer and a security interest 
rests with the IHA.
    Mutual Help Occupancy Agreement (MHOA) means a lease with option to 
purchase contract between an IHA and a homebuyer under the 1937 Act.
    Overcrowded means households with more than 1.01 persons per room as 
defined by the U.S. Decennial Census.
    Section 8 means the making of housing assistance payments to 
eligible families leasing existing housing pursuant to the provisions of 
the 1937 Act.
    Section 8 unit means the contract annualized housing assistance 
payments (certificates, vouchers, and project based) under the Section 8 
program.
    Total Development Cost (TDC) is the sum of all costs for a project 
including all undertakings necessary for administration, planning, site 
acquisition, demolition, construction or equipment and financing 
(including payment of carrying charges) and for otherwise carrying out 
the development of the project, excluding off site water and sewer. 
Total Development Cost amounts will be based on a moderately designed 
house and will be determined by averaging the current construction costs 
as listed in not less than two nationally recognized residential 
construction cost indices.
    Without kitchen or plumbing means, as defined by the U.S. Decennial 
Census, an occupied house without one or more of the following items:
    (1) Hot and cold piped water;
    (2) A flush toilet;
    (3) A bathtub or shower;
    (4) A sink with piped water;
    (5) A range or cookstove; or
    (6) A refrigerator.



Sec. 1000.304  May the IHBG formula be modified?

    Yes, as long as any modification does not conflict with the 
requirements of NAHASDA.



Sec. 1000.306  How can the IHBG formula be modified?

    (a) The IHBG formula can be modified upon development of a set of 
measurable and verifiable data directly related to Indian and Alaska 
Native housing need. Any data set developed shall be compiled with the 
consultation and involvement of Indian tribes and examined and/or 
implemented not later

[[Page 688]]

than 5 years from the date of issuance of these regulations and 
periodically thereafter.
    (b) Furthermore, the IHBG formula shall be reviewed within five 
years to determine if subsidy is needed to operate and maintain NAHASDA 
units or any other changes are needed in respect to funding under the 
Formula Current Assisted Stock component of the formula.
    (c) During the five year review of housing stock for formula 
purposes, the Section 8 units shall be reduced by the same percentage as 
the current assisted rental stock has diminished since September 30, 
1999.



Sec. 1000.308  Who can make modifications to the IHBG formula?

    HUD can make modifications in accordance with Sec. 1000.304 and 
Sec. 1000.306 provided that any changes proposed by HUD are published 
and made available for public comment in accordance with applicable law 
before their implementation.



Sec. 1000.310  What are the components of the IHBG formula?

    The IHBG formula consists of two components:
    (a) Formula Current Assisted Housing Stock (FCAS); and
    (b) Need.



Sec. 1000.312  What is current assisted stock?

    Current assisted stock consists of housing units owned or operated 
pursuant to an ACC. This includes all low rent, Mutual Help, and Turnkey 
III housing units under management as of September 30, 1997, as 
indicated in the Formula Response Form.



Sec. 1000.314  What is formula current assisted stock?

    Formula current assisted stock is current assisted stock as 
described in Sec. 1000.312 plus 1937 Act units in the development 
pipeline when they become owned or operated by the recipient and are 
under management as indicated in the Formula Response Form. Formula 
current assisted stock also includes Section 8 units when their current 
contract expires and the Indian tribe continues to manage the assistance 
in a manner similar to the Section 8 program, as reported on the Formula 
Response Form.



Sec. 1000.316  How is the Formula Current Assisted Stock (FCAS) Component developed?

    The Formula Current Assisted Stock component consists of two 
elements. They are:
    (a) Operating subsidy. The operating subsidy consists of three 
variables which are:
    (1) The number of low-rent FCAS units multiplied by the FY 1996 
national per unit subsidy (adjusted to full funding level) multiplied by 
an adjustment factor for inflation;
    (2) The number of Section 8 units whose contract has expired but had 
been under contract on September 30, 1997, multiplied by the FY 1996 
national per unit subsidy adjusted for inflation; and
    (3) The number of Mutual Help and Turnkey III FCAS units multiplied 
by the FY 1996 national per unit subsidy (adjusted to full funding 
level) multiplied by an adjustment factor for inflation.
    (b) Modernization allocation. Modernization allocation consists of 
the number of Low Rent, Mutual Help, and Turnkey III FCAS units 
multiplied by the national per unit amount of allocation for FY 1996 
modernization multiplied by an adjustment factor for inflation.



Sec. 1000.317  Who is the recipient for funds for current assisted stock which is owned by state-created Regional Native Housing Authorities in Alaska?

    If housing units developed under the 1937 Act are owned by a state-
created Regional Native Housing Authority in Alaska, and are not located 
on an Indian reservation, then the recipient for funds allocated for the 
current assisted stock portion of NAHASDA funds for the units is the 
regional Indian tribe.



Sec. 1000.318  When do units under Formula Current Assisted Stock cease to be counted or expire from the inventory used for the formula?

    (a) Mutual Help and Turnkey III units shall no longer be considered 
Formula Current Assisted Stock when the

[[Page 689]]

Indian tribe, TDHE, or IHA no longer has the legal right to own, 
operate, or maintain the unit, whether such right is lost by conveyance, 
demolition, or otherwise, provided that:
    (1) Conveyance of each Mutual Help or Turnkey III unit occurs as 
soon as practicable after a unit becomes eligible for conveyance by the 
terms of the MHOA; and
    (2) The Indian tribe, TDHE, or IHA actively enforce strict 
compliance by the homebuyer with the terms and conditions of the MHOA, 
including the requirements for full and timely payment.
    (b) Rental units shall continue to be included for formula purposes 
as long as they continue to be operated as low income rental units by 
the Indian tribe, TDHE, or IHA.
    (c) Expired contract Section 8 units shall continue as rental units 
and be included in the formula as long as they are operated as low 
income rental units as included in the Indian tribe's or TDHE's Formula 
Response Form.



Sec. 1000.320  How is Formula Current Assisted Stock adjusted for local area costs?

    There are two adjustment factors that are used to adjust the 
allocation of funds for the Current Assisted Stock portion of the 
formula. They are:
    (a) Operating Subsidy as adjusted by the greater of the AEL factor 
or FMR factor (AELFMR); and
    (b) Modernization as adjusted by TDC.



Sec. 1000.322  Are IHA financed units included in the determination of Formula Current Assisted Stock?

    No. If these units are not owned or operated at the time (September 
30, 1997) pursuant to an ACC then they are not included in the 
determination of Formula Current Assisted Stock.



Sec. 1000.324  How is the need component developed?

    After determining the FCAS allocation, remaining funds are allocated 
by need component. The need component consists of seven criteria. They 
are:
    (a) American Indian and Alaskan Native (AIAN) Households with 
housing cost burden greater than 50 percent of formula annual income 
weighted at 22 percent;
    (b) AIAN Households which are overcrowded or without kitchen or 
plumbing weighted at 25 percent;
    (c) Housing Shortage which is the number of AIAN households with an 
annual income less than or equal to 80 percent of formula median income 
reduced by the combination of current assisted stock and units developed 
under NAHASDA weighted at 15 percent;
    (d) AIAN households with annual income less than or equal to 30 
percent of formula median income weighted at 13 percent;
    (e) AIAN households with annual income between 30 percent and 50 
percent of formula median income weighted at 7 percent;
    (f) AIAN households with annual income between 50 percent and 80 
percent of formula median income weighted at 7 percent;
    (g) AIAN persons weighted at 11 percent.



Sec. 1000.325  How is the need component adjusted for local area costs?

    The need component is adjusted by the TDC.



Sec. 1000.326  What if a formula area is served by more than one Indian tribe?

    (a) If an Indian tribe's formula area overlaps with the formula area 
of one or more other Indian tribes, the funds allocated to that Indian 
tribe for the geographic area in which the formula areas overlap will be 
divided based on:
    (1) The Indian tribe's proportional share of the population in the 
overlapping geographic area; and
    (2) The Indian tribe's commitment to serve that proportional share 
of the population in such geographic area.
    (3) In cases where a State recognized Indian tribe's formula area 
overlaps with a Federally recognized Indian tribe, the Federally 
recognized Indian tribe receives the allocation for the overlapping 
area.
    (b) Tribal membership in the geographic area (not to include dually 
enrolled tribal members) will be based on data that all Indian tribes 
involved agree to use. Suggested data sources

[[Page 690]]

include tribal enrollment lists, Indian Health Service User Data, and 
Bureau of Indian Affairs data.
    (c) If the Indian tribes involved cannot agree on what data source 
to use, HUD will make the decision on what data will be used to divide 
the funds between the Indian tribes by August 1.



Sec. 1000.327  What is the order of preference for allocating the IHBG formula needs data for Indian tribes in Alaska not located on reservations due to the unique circumstances in Alaska?

    (a) Data in areas without reservations. The data on population and 
housing within an Alaska Native Village is credited to the Alaska Native 
Village. Accordingly, the village corporation for the Alaska Native 
Village has no needs data and no formula allocation. The data on 
population and housing outside the Alaska Native Village is credited to 
the regional Indian tribe, and if there is no regional Indian tribe, the 
data will be credited to the regional corporation.
    (b) Deadline for notification on whether an IHP will be submitted. 
By September 15 of each year, each Indian tribe in Alaska not located on 
a reservation, including each Alaska Native village, regional Indian 
tribe, and regional corporation, or its TDHE must notify HUD in writing 
whether it or its TDHE intends to submit an IHP. If an Alaska Native 
village notifies HUD that it does not intend either to submit an IHP or 
to designate a TDHE to do so, or if HUD receives no response from the 
Alaska Native village or its TDHE, the formula data which would have 
been credited to the Alaska Native village will be credited to the 
regional Indian tribe, or if there is no regional Indian tribe, to the 
regional corporation.



Sec. 1000.328  What is the minimum amount an Indian tribe can receive under the need component of the formula?

    In the first year of NAHASDA participation, an Indian tribe whose 
allocation is less than $50,000 under the need component of the formula 
shall have its need component of the grant adjusted to $50,000. An 
Indian tribe's IHP shall contain a certification of the need for the 
$50,000 funding. In subsequent years, but not to extend beyond Federal 
Fiscal Year 2002, an Indian tribe whose allocation is less than $25,000 
under the need component of the formula shall have its need component of 
the grant adjusted to $25,000. The need for Sec. 1000.328 will be 
reviewed in accordance with Sec. 1000.306.



Sec. 1000.330  What are data sources for the need variables?

    The sources of data for the need variables shall be data available 
that is collected in a uniform manner that can be confirmed and verified 
for all AIAN households and persons living in an identified area. 
Initially, the data used are U.S. Decennial Census data.



Sec. 1000.332  Will data used by HUD to determine an Indian tribe's or TDHE's formula allocation be provided to the Indian tribe or TDHE before the allocation?

    Yes. HUD shall provide notice to the Indian tribe or TDHE of the 
data to be used for the formula and projected allocation amount by 
August 1.



Sec. 1000.334  May Indian tribes, TDHEs, or HUD challenge the data from the U.S. Decennial Census or provide an alternative source of data?

    Yes. Provided that the data are gathered, evaluated, and presented 
in a manner acceptable to HUD and that the standards for acceptability 
are consistently applied throughout the Country.



Sec. 1000.336  How may an Indian tribe, TDHE, or HUD challenge data?

    (a) An Indian tribe, TDHE, or HUD may challenge data used in the 
IHBG formula. The challenge and collection of data for this purpose is 
an allowable cost for IHBG funds.
    (b) An Indian tribe or TDHE that has data in its possession that it 
contends are more accurate than data contained in the U.S. Decennial 
Census, and the data were collected in a manner acceptable to HUD, may 
submit the data and proper documentation to HUD. Beginning with the 
Fiscal Year 1999 allocation, in order for the challenge to be considered 
for the upcoming Fiscal Year allocation, documentation must be submitted 
by June 15. HUD shall respond to such data submittal not later

[[Page 691]]

than 45 days after receipt of the data and either approve or challenge 
the validity of such data. Pursuant to HUD's action, the following shall 
apply:
    (1) In the event HUD challenges the validity of the submitted data, 
the Indian tribe or TDHE and HUD shall attempt in good faith to resolve 
any discrepancies so that such data may be included in formula 
allocation. Should the Indian tribe or TDHE and HUD be unable to resolve 
any discrepancy by the date of formula allocation, the dispute shall be 
carried forward to the next funding year and resolved in accordance with 
the dispute resolution procedures set forth in this part for model 
housing activities (Sec. 1000.118).
    (2) Pursuant to resolution of the dispute:
    (i) If the Indian tribe or TDHE prevails, an adjustment to the 
Indian tribe's or TDHE's subsequent allocation for the subsequent year 
shall be made retroactive to include only the disputed Fiscal Year(s); 
or
    (ii) If HUD prevails, no further action shall be required.
    (c) In the event HUD questions that the data contained in the 
formula does not accurately represent the Indian tribe's need, HUD shall 
request the Indian tribe to submit supporting documentation to justify 
the data and provide a commitment to serve the population indicated in 
the geographic area.



Sec. 1000.340  What if an Indian tribe is allocated less funding under the block grant formula than it received in Fiscal Year 1996 for operating subsidy and modernization?

    If an Indian tribe is allocated less funding under the formula than 
an IHA received on its behalf in Fiscal Year 1996 for operating subsidy 
and modernization, its grant is increased to the amount received in 
Fiscal Year 1996 for operating subsidy and modernization. The remaining 
grants are adjusted to keep the allocation within available 
appropriations.



Subpart E--Federal Guarantees for Financing of Tribal Housing Activities



Sec. 1000.401  What terms are used throughout this subpart?

    As used throughout title VI of NAHASDA and in this subpart:
    Applicant means the entity that requests a HUD guarantee under the 
provisions of this subpart.
    Borrower means an Indian tribe or TDHE that receives funds in the 
form of a loan with the obligation to repay in full, with interest, and 
has executed notes or other obligations that evidence that transaction.
    Issuer means an Indian tribe or TDHE that issues or executes notes 
or other obligations. An issuer can also be a borrower.



Sec. 1000.402  Are State recognized Indian tribes eligible for guarantees under title VI of NAHASDA?

    Those State recognized Indian tribes that meet the definition set 
forth in section 4(12)(C) of NAHASDA are eligible for guarantees under 
title VI of NAHASDA.



Sec. 1000.404  What lenders are eligible for participation?

    Eligible lenders are those approved under and meeting the 
qualifications established in this subpart, except that loans otherwise 
insured or guaranteed by an agency of the United States, or made by an 
organization of Indians from amounts borrowed from the United States, 
shall not be eligible for guarantee under this part. The following 
lenders are deemed to be eligible under this subpart:
    (a) Any mortgagee approved by HUD for participation in the single 
family mortgage insurance program under title II of the National Housing 
Act;
    (b) Any lender whose housing loans under chapter 37 of title 38, 
United States Code, are automatically guaranteed pursuant to section 
1802(d) of such title;

[[Page 692]]

    (c) Any lender approved by the Department of Agriculture to make 
guaranteed loans for single family housing under the Housing Act of 
1949;
    (d) Any other lender that is supervised, approved, regulated, or 
insured by any agency of the United States; and
    (e) Any other lender approved by the Secretary.



Sec. 1000.406  What constitutes tribal approval to issue notes or other obligations under title VI of NAHASDA?

    Tribal approval is evidenced by a written tribal resolution that 
authorizes the issuance of notes or obligations by the Indian tribe or a 
TDHE on behalf of the Indian tribe.



Sec. 1000.408  How does an Indian tribe or TDHE show that it has made efforts to obtain financing without a guarantee and cannot complete such financing in a timely manner?

    The Indian tribe or TDHE shall submit a certification that states 
that the Indian tribe has attempted to obtain financing and cannot 
complete such financing consistent with the timely execution of the 
program plans without such guarantee. Written documentation shall be 
maintained by the Indian tribe or TDHE to support the certification.



Sec. 1000.410  What conditions shall HUD prescribe when providing a guarantee for notes or other obligations issued by an Indian tribe?

    HUD shall provide that:
    (a) Any loan, note or other obligation guaranteed under title VI of 
NAHASDA may be sold or assigned by the lender to any financial 
institution that is subject to examination and supervision by an agency 
of the Federal government, any State, or the District of Columbia 
without destroying or otherwise negatively affecting the guarantee; and
    (b) Indian tribes and housing entities are encouraged to explore 
creative financing mechanisms and in so doing shall not be limited in 
obtaining a guarantee. These creative financing mechanisms include but 
are not limited to:
    (1) Borrowing from private or public sources or partnerships;
    (2) Issuing tax exempt and taxable bonds where permitted; and
    (3) Establishing consortiums or trusts for borrowing or lending, or 
for pooling loans.
    (c) The repayment period may exceed twenty years and the length of 
the repayment period cannot be the sole basis for HUD disapproval; and
    (d) Lender and issuer/borrower must certify that they acknowledge 
and agree to comply with all applicable tribal laws.



Sec. 1000.412  Can an issuer obtain a guarantee for more than one note or other obligation at a time?

    Yes. To obtain multiple guarantees, the issuer shall demonstrate 
that:
    (a) The issuer will not exceed a total for all notes or other 
obligations in an amount equal to five times its grant amount, excluding 
any amount no longer owed on existing notes or other obligations; and
    (b) Issuance of additional notes or other obligations is within the 
financial capacity of the issuer.



Sec. 1000.414  How is an issuer's financial capacity demonstrated?

    An issuer must demonstrate its financial capacity to:
    (a) Meet its obligations; and
    (b) Protect and maintain the viability of housing developed or 
operated pursuant to the 1937 Act.



Sec. 1000.416  What is a repayment contract in a form acceptable to HUD?

    (a) The Secretary's signature on a contract shall signify HUD's 
acceptance of the form, terms and conditions of the contract.
    (b) In loans under title VI of NAHASDA, involving a contract between 
an issuer and a lender other than HUD, HUD's approval of the loan 
documents and guarantee of the loan shall be deemed to be HUD's 
acceptance of the sufficiency of the security furnished. No other 
security can or will be required by HUD at a later date.



Sec. 1000.418  Can grant funds be used to pay costs incurred when issuing notes or other obligations?

    Yes. Other costs that can be paid using grant funds include but are 
not limited to the costs of servicing and

[[Page 693]]

trust administration, and other costs associated with financing of debt 
obligations.



Sec. 1000.420  May grants made by HUD under section 603 of NAHASDA be used to pay net interest costs incurred when issuing notes or other obligations?

    Yes. Other costs that can be paid using grant funds include but are 
not limited to the costs of servicing and trust administration, and 
other costs associated with financing of debt obligations, not to exceed 
30 percent of the net interest cost.



Sec. 1000.422  What are the procedures for applying for loan guarantees under title VI of NAHASDA?

    (a) The borrower applies to the lender for a loan using a guarantee 
application form prescribed by HUD.
    (b) The lender provides the loan application to HUD to determine if 
funds are available for the guarantee. HUD will reserve these funds for 
a period of 90 days if the funds are available and the applicant is 
otherwise eligible under this subpart. HUD may extend this reservation 
period for an extra 90 days if additional documentation is necessary.
    (c) The borrower and lender negotiate the terms and conditions of 
the loan in consultation with HUD.
    (d) The borrower and lender execute documents.
    (e) The lender formally applies for the guarantee.
    (f) HUD reviews and provides a written decision on the guarantee.



Sec. 1000.424  What are the application requirements for guarantee assistance under title VI of NAHASDA?

    The application for a guarantee must include the following:
    (a) An identification of each of the activities to be carried out 
with the guaranteed funds and a description of how each activity 
qualifies as an affordable housing activity as defined in section 202 of 
NAHASDA.
    (b) A schedule for the repayment of the notes or other obligations 
to be guaranteed that identifies the sources of repayment, together with 
a statement identifying the entity that will act as the borrower.
    (c) A copy of the executed loan documents, if applicable, including, 
but not limited to, any contract or agreement between the borrower and 
the lender.
    (d) Certifications by the borrower that:
    (1) The borrower possesses the legal authority to pledge and that it 
will, if approved, make the pledge of grants required by section 
602(a)(2) of NAHASDA.
    (2) The borrower has made efforts to obtain financing for the 
activities described in the application without use of the guarantee; 
the borrower will maintain documentation of such efforts for the term of 
the guarantee; and the borrower cannot complete such financing 
consistent with the timely execution of the program plans without such 
guarantee.
    (3) It possesses the legal authority to borrow or issue obligations 
and to use the guaranteed funds in accordance with the requirements of 
this subpart.
    (4) Its governing body has duly adopted or passed as an official act 
a resolution, motion, or similar official action that:
    (i) Identifies the official representative of the borrower, and 
directs and authorizes that person to provide such additional 
information as may be required; and
    (ii) Authorizes such official representative to issue the obligation 
or to execute the loan or other documents, as applicable.
    (5) The borrower has complied with section 602(a) of NAHASDA.
    (6) The borrower will comply with the requirements described in 
subpart A of this part and other applicable laws.



Sec. 1000.426  How does HUD review a guarantee application?

    The procedure for review of a guarantee application includes the 
following steps:
    (a) HUD will review the application for compliance with title VI of 
NAHASDA and these implementing regulations.
    (b) HUD will accept the certifications submitted with the 
application. HUD

[[Page 694]]

may, however, consider relevant information that challenges the 
certifications and require additional information or assurances from the 
applicant as warranted by such information.



Sec. 1000.428  For what reasons may HUD disapprove an application or approve an application for an amount less than that requested?

    HUD may disapprove an application or approve a lesser amount for any 
of the following reasons:
    (a) HUD determines that the guarantee constitutes an unacceptable 
risk. Factors that will be considered in assessing financial risk shall 
include, but not be limited to, the following:
    (1) The ratio of the expected annual debt service requirements to 
the expected available annual grant amount, taking into consideration 
the obligations of the borrower under the provisions of section 203(b) 
of NAHASDA;
    (2) Evidence that the borrower will not continue to receive grant 
assistance under this part during the proposed repayment period;
    (3) The borrower's inability to furnish adequate security pursuant 
to section 602(a) of NAHASDA; and
    (4) The amount of program income the proposed activities are 
reasonably estimated to contribute toward repayment of the guaranteed 
loan or other obligations.
    (b) The loan or other obligation for which the guarantee is 
requested exceeds any of the limitations specified in sections 601(d) or 
section 605(d) of NAHASDA.
    (c) Funds are not available in the amount requested.
    (d) Evidence that the performance of the borrower under this part 
has been determined to be unacceptable pursuant to the requirements of 
subpart F of this part, and that the borrower has failed to take 
reasonable steps to correct performance.
    (e) The activities to be undertaken are not eligible under section 
202 of NAHASDA.
    (f) The loan or other obligation documents for which a guarantee is 
requested do not meet the requirements of this subpart.



Sec. 1000.430  When will HUD issue notice to the applicant if the application is approved at the requested or reduced amount?

    (a) HUD shall make every effort to approve a guarantee within 30 
days of receipt of a completed application including executed documents 
and, if unable to do so, will notify the applicant within the 30 day 
timeframe of the need for additional time and/or if additional 
information is required.
    (b) HUD shall notify the applicant in writing that the guarantee has 
either been approved, reduced, or disapproved. If the request is reduced 
or disapproved, the applicant will be informed of the specific reasons 
for reduction or disapproval.
    (c) HUD shall issue a certificate to guarantee the debt obligation 
of the issuer subject to compliance with NAHASDA including but not 
limited to sections 105, 601(a), and 602(c) of NAHASDA, and such other 
reasonable conditions as HUD may specify in the commitment documents in 
a particular case.



Sec. 1000.432  Can an amendment to an approved guarantee be made?

    (a) Yes. An amendment to an approved guarantee can occur if an 
applicant wishes to allow a borrower/issuer to carry out an activity not 
described in the loan or other obligation documents, or substantially to 
change the purpose, scope, location, or beneficiaries of an activity.
    (b) Any changes to an approved guarantee must be approved by HUD.



Sec. 1000.434  How will HUD allocate the availability of loan guarantee assistance?

    (a) Each fiscal year HUD may allocate a percentage of the total 
available loan guarantee assistance to each Area ONAP equal to the 
percentage of the total NAHASDA grant funds allocated to the Indian 
tribes in the geographic area of operation of that office.
    (b) These allocated amounts shall remain exclusively available for 
loan guarantee assistance for Indian tribes or TDHEs in the area of 
operation of that office until committed by HUD for loan guarantees or 
until the end of the second quarter of the fiscal year. At

[[Page 695]]

the beginning of the third quarter of the fiscal year, any residual loan 
guarantee commitment amount shall be made available to guarantee loans 
for Indian tribes or TDHEs regardless of their location. Applications 
for residual loan guarantee money must be submitted on or after April 1.
    (c) In approving applications for loan guarantee assistance, HUD 
shall seek to maximize the availability of such assistance to all 
interested Indian tribes or TDHEs. HUD may limit the proportional share 
approved to any one Indian tribe or TDHE to its proportional share of 
the block grant allocation based upon the annual plan submitted by the 
Indian tribe or TDHE indicating intent to participate in the loan 
guarantee allocation process.



Sec. 1000.436  How will HUD monitor the use of funds guaranteed under this subpart?

    HUD will monitor the use of funds guaranteed under this subpart as 
set forth in section 403 of NAHASDA, and the lender is responsible for 
monitoring performance with the documents.



      Subpart F--Recipient Monitoring, Oversight and Accountability



Sec. 1000.501  Who is involved in monitoring activities under NAHASDA?

    The recipient, the grant beneficiary and HUD are involved in 
monitoring activities under NAHASDA.



Sec. 1000.502  What are the monitoring responsibilities of the recipient, the grant beneficiary and HUD under NAHASDA?

    (a) The recipient is responsible for monitoring grant activities, 
ensuring compliance with applicable Federal requirements and monitoring 
performance goals under the IHP. The recipient is responsible for 
preparing at least annually: a compliance assessment in accordance with 
section 403(b) of NAHASDA; a performance report covering the assessment 
of program progress and goal attainment under the IHP; and an audit in 
accordance with the Single Audit Act, as applicable. The recipient's 
monitoring should also include an evaluation of the recipient's 
performance in accordance with performance objectives and measures. At 
the request of a recipient, other Indian tribes and/or TDHEs may provide 
assistance to aid the recipient in meeting its performance goals or 
compliance requirements under NAHASDA.
    (b) Where the recipient is a TDHE, the grant beneficiary (Indian 
tribe) is responsible for monitoring programmatic and compliance 
requirements of the IHP and NAHASDA by requiring the TDHE to prepare 
periodic progress reports including the annual compliance assessment, 
performance and audit reports.
    (c) HUD is responsible for reviewing the recipient as set forth in 
Sec. 1000.520.
    (d) HUD monitoring will consist of on-site as well as off-site 
review of records, reports and audits. To the extent funding is 
available, HUD or its designee will provide technical assistance and 
training, or funds to the recipient to obtain technical assistance and 
training. In the absence of funds, HUD shall make best efforts to 
provide technical assistance and training.



Sec. 1000.504  What are the recipient performance objectives?

    Performance objectives are developed by each recipient. Performance 
objectives are criteria by which the recipient will monitor and evaluate 
its performance. For example, if in the IHP the recipient indicates it 
will build new houses, the performance objective may be the completion 
of the homes within a certain time period and within a certain budgeted 
amount.



Sec. 1000.506  If the TDHE is the recipient, must it submit its monitoring evaluation/results to the Indian tribe?

    Yes. The Indian tribe as the grant beneficiary must receive a copy 
of the monitoring evaluation/results so that it can fully carry out its 
oversight responsibilities under NAHASDA.



Sec. 1000.508  If the recipient monitoring identifies programmatic concerns, what happens?

    If the recipient's monitoring activities identify areas of concerns, 
the recipient will take corrective actions which may include but are not 
limited to one or more of the following actions:

[[Page 696]]

    (a) Depending upon the nature of the concern, the recipient may 
obtain additional training or technical assistance from HUD, other 
Indian tribes or TDHEs, or other entities.
    (b) The recipient may develop and/or revise policies, or ensure that 
existing policies are better enforced.
    (c) The recipient may take appropriate administrative action to 
remedy the situation.
    (d) The recipient may refer the concern to an auditor or to HUD for 
additional corrective action.



Sec. 1000.510  What happens if tribal monitoring identifies compliance concerns?

    The Indian tribe shall have the responsibility to ensure that 
appropriate corrective action is taken.



Sec. 1000.512  Are performance reports required?

    Yes. An annual report shall be submitted by the recipient to HUD and 
the Indian tribe being served in a format acceptable by HUD. Annual 
performance reports shall contain:
    (a) The information required by sections 403(b) and 404(b) of 
NAHASDA;
    (b) Brief information on the following:
    (1) A comparison of actual accomplishments to the objectives 
established for the period;
    (2) The reasons for slippage if established objectives were not met; 
and
    (3) Analysis and explanation of cost overruns or high unit costs; 
and
    (c) Any information regarding the recipient's performance in 
accordance with HUD's performance measures, as set forth in section 
Sec. 1000.524.



Sec. 1000.514  When must the annual performance report be submitted?

    The annual performance report must be submitted within 60 days of 
the end of the recipient's program year. If a justified request is 
submitted by the recipient, the Area ONAP may extend the due date for 
submission of the performance report.



Sec. 1000.516  What reporting period is covered by the annual performance report?

    For the first annual performance report to be submitted under 
NAHASDA, the period to be covered is October 1, 1997, through September 
30, 1998. This first report must be submitted by January 31, 1999. 
Subsequent annual performance reports must cover the period that 
coincides with the recipient's program year.

[64 FR 3015, Jan. 20, 1999]



Sec. 1000.518  When must a recipient obtain public comment on its annual performance report?

    The recipient must make its report publicly available to tribal 
members, non-Indians served under NAHASDA, and other citizens in the 
Indian area, in sufficient time to permit comment before submission of 
the report to HUD. The recipient determines the manner and times for 
making the report available.
    The recipient shall include a summary of any comments received by 
the grant beneficiary or recipient from tribal members, non-Indians 
served under NAHASDA, and other citizens in the Indian area.



Sec. 1000.520  What are the purposes of HUD review?

    At least annually, HUD will review each recipient's performance to 
determine whether the recipient:
    (a) Has carried out its eligible activities in a timely manner, has 
carried out its eligible activities and certifications in accordance 
with the requirements and the primary objective of NAHASDA and with 
other applicable laws and has a continuing capacity to carry out those 
activities in a timely manner;
    (b) Has complied with the IHP of the grant beneficiary; and
    (c) Whether the performance reports of the recipient are accurate.



Sec. 1000.521  After the receipt of the recipient's performance report, how long does HUD have to make recommendations under section 404(c) of NAHASDA?

    60 days.



Sec. 1000.522  How will HUD give notice of on-site reviews?

    HUD shall generally provide a 30 day written notice of an impending 
on-site review to the Indian tribe and TDHE.

[[Page 697]]

Prior written notice will not be required in emergency situations. All 
notices shall state the general nature of the review.



Sec. 1000.524  What are HUD's performance measures for the review?

    HUD has the authority to develop performance measures which the 
recipient must meet as a condition for compliance under NAHASDA. The 
performance measures are:
    (a) Within 2 years of grant award under NAHASDA, no less than 90 
percent of the grant must be obligated.
    (b) The recipient has complied with the required certifications in 
its IHP and all policies and the IHP have been made available to the 
public.
    (c) Fiscal audits have been conducted on a timely basis and in 
accordance with the requirements of the Single Audit Act, as applicable. 
Any deficiencies identified in audit reports have been addressed within 
the prescribed time period.
    (d) Accurate annual performance reports were submitted to HUD within 
60 days after the completion of the recipient's program year.
    (e) The recipient has met the IHP goals and objectives in the 1-year 
plan and demonstrated progress on the 5-year plan goals and objectives.
    (f) The recipient has substantially complied with the requirements 
of 24 CFR part 1000 and all other applicable Federal statutes and 
regulations.



Sec. 1000.526  What information will HUD use for its review?

    In reviewing each recipient's performance, HUD may consider the 
following:
    (a) The approved IHP and any amendments thereto;
    (b) Reports prepared by the recipient;
    (c) Records maintained by the recipient;
    (d) Results of HUD's monitoring of the recipient's performance, 
including on-site evaluation of the quality of the work performed;
    (e) Audit reports;
    (f) Records of drawdown(s) of grant funds;
    (g) Records of comments and complaints by citizens and organizations 
within the Indian area;
    (h) Litigation; and
    (i) Any other reliable relevant information which relates to the 
performance measures under Sec. 1000.524.



Sec. 1000.528  What are the procedures for the recipient to comment on the result of HUD's review when HUD issues a report under section 405(b) of NAHASDA?

    HUD will issue a draft report to the recipient and Indian tribe 
within thirty (30) days of the completion of HUD's review. The recipient 
will have at least thirty (30) days to review and comment on the draft 
report as well as provide any additional information relating to the 
draft report. HUD shall consider the comments and any additional 
information provided by the recipient. HUD may also revise the draft 
report based on the comments and any additional information provided by 
the recipient. HUD shall make the recipient's comments and a final 
report readily available to the recipient, grant beneficiary, and the 
public not later than thirty (30) days after receipt of the recipient's 
comments and additional information.



Sec. 1000.530  What corrective and remedial actions will HUD request or recommend to address performance problems prior to taking action under Secs. 1000.532 or 1000.538?

    (a) The following actions are designed, first, to prevent the 
continuance of the performance problem(s); second, to mitigate any 
adverse effects or consequences of the performance problem(s); and 
third, to prevent a recurrence of the same or similar performance 
problem. The following actions, at least one of which must be taken 
prior to a sanction under paragraph (b), may be taken by HUD singly or 
in combination, as appropriate for the circumstances:
    (1) Issue a letter of warning advising the recipient of the 
performance problem(s), describing the corrective actions that HUD 
believes should be taken, establishing a completion date for corrective 
actions, and notifying the recipient that more serious actions may be 
taken if the performance problem(s) is not corrected or is repeated;

[[Page 698]]

    (2) Request the recipient to submit progress schedules for 
completing activities or complying with the requirements of this part;
    (3) Recommend that the recipient suspend, discontinue, or not incur 
costs for the affected activity;
    (4) Recommend that the recipient redirect funds from affected 
activities to other eligible activities;
    (5) Recommend that the recipient reimburse the recipient's program 
account in the amount improperly expended; and
    (6) Recommend that the recipient obtain appropriate technical 
assistance using existing grant funds or other available resources to 
overcome the performance problem(s).
    (b) Failure of a recipient to address performance problems specified 
in paragraph (a) above may result in the imposition of sanctions as 
prescribed in Sec. 1000.532 (providing for adjustment, reduction, or 
withdrawal of future grant funds, or other appropriate actions), or 
Sec. 1000.538 (providing for termination, reduction, or limited 
availability of payments, or replacement of the TDHE).



Sec. 1000.532  What are the adjustments HUD makes to a recipient's future year's grant amount under section 405 of NAHASDA?

    (a) HUD may, subject to the procedures in paragraph (b) below, make 
appropriate adjustments in the amount of the annual grants under NAHASDA 
in accordance with the findings of HUD pursuant to reviews and audits 
under section 405 of NAHASDA. HUD may adjust, reduce, or withdraw grant 
amounts, or take other action as appropriate in accordance with the 
reviews and audits, except that grant amounts already expended on 
affordable housing activities may not be recaptured or deducted from 
future assistance provided on behalf of an Indian tribe.
    (b) Before undertaking any action in accordance with paragraphs (a) 
and (c) of this section, HUD will notify the recipient in writing of the 
actions it intends to take and provide the recipient an opportunity for 
an informal meeting to resolve the deficiency. In the event the 
deficiency is not resolved, HUD may take any of the actions available 
under paragraphs (a) and (c) of this section. However, the recipient may 
request, within 30 days of notice of the action, a hearing in accordance 
with Sec. 1000.540. The amount in question shall not be reallocated 
under the provisions of Sec. 1000.536, until 15 days after the hearing 
has been held and HUD has rendered a final decision.
    (c) Absent circumstances beyond the recipient's control, when a 
recipient is not complying significantly with a major activity of its 
IHP, HUD shall make appropriate adjustment, reduction, or withdrawal of 
some or all of the recipient's subsequent year grant in accordance with 
this section.



Sec. 1000.534  What constitutes substantial noncompliance?

    HUD will review the circumstances of each noncompliance with NAHASDA 
and the regulations on a case-by-case basis to determine if the 
noncompliance is substantial. This review is a two step process. First, 
there must be a noncompliance with NAHASDA or these regulations. Second, 
the noncompliance must be substantial. A noncompliance is substantial 
if:
    (a) The noncompliance has a material effect on the recipient meeting 
its major goals and objectives as described in its Indian Housing Plan;
    (b) The noncompliance represents a material pattern or practice of 
activities constituting willful noncompliance with a particular 
provision of NAHASDA or the regulations, even if a single instance of 
noncompliance would not be substantial;
    (c) The noncompliance involves the obligation or expenditure of a 
material amount of the NAHASDA funds budgeted by the recipient for a 
material activity; or
    (d) The noncompliance places the housing program at substantial risk 
of fraud, waste or abuse.



Sec. 1000.536  What happens to NAHASDA grant funds adjusted, reduced, withdrawn, or terminated under Sec. 1000.532 or Sec. 1000.538?

    Such NAHASDA grant funds shall be distributed by HUD in accordance 
with the next NAHASDA formula allocation.

[[Page 699]]



Sec. 1000.538  What remedies are available for substantial noncompliance?

    (a) If HUD finds after reasonable notice and opportunity for hearing 
that a recipient has failed to comply substantially with any provisions 
of NAHASDA, HUD shall:
    (1) Terminate payments under NAHASDA to the recipient;
    (2) Reduce payments under NAHASDA to the recipient by an amount 
equal to the amount of such payments that were not expended in 
accordance with NAHASDA;
    (3) Limit the availability of payments under NAHASDA to programs, 
projects, or activities not affected by the failure to comply; or
    (4) In the case of noncompliance described in Sec. 1000.542, provide 
a replacement TDHE for the recipient.
    (b) HUD may, upon due notice, suspend payments at any time after the 
issuance of the opportunity for hearing pending such hearing and final 
decision, to the extent HUD determines such action necessary to preclude 
the further expenditure of funds for activities affected by such failure 
to comply.
    (c) If HUD determines that the failure to comply substantially with 
the provisions of NAHASDA is not a pattern or practice of activities 
constituting willful noncompliance, and is a result of the limited 
capability or capacity of the recipient, HUD may provide technical 
assistance for the recipient (directly or indirectly) that is designed 
to increase the capability or capacity of the recipient to administer 
assistance under NAHASDA in compliance with the requirements under 
NAHASDA.
    (d) In lieu of, or in addition to, any action described in this 
section, if HUD has reason to believe that the recipient has failed to 
comply substantially with any provisions of NAHASDA, HUD may refer the 
matter to the Attorney General of the United States, with a 
recommendation that appropriate civil action be instituted.



Sec. 1000.540  What hearing procedures will be used under NAHASDA?

    The hearing procedures in 24 CFR part 26 shall be used.



Sec. 1000.542  When may HUD require replacement of a recipient?

    (a) In accordance with section 402 of NAHASDA, as a condition of HUD 
making a grant on behalf of an Indian tribe, the Indian tribe shall 
agree that, notwithstanding any other provisions of law, HUD may, only 
in the circumstances discussed below, require that a replacement TDHE 
serve as the recipient for the Indian tribe.
    (b) HUD may require a replacement TDHE for an Indian tribe only upon 
a determination by HUD on the record after opportunity for hearing that 
the recipient for the Indian tribe has engaged in a pattern or practice 
of activities that constitute substantial or willful noncompliance with 
the requirements of NAHASDA.



Sec. 1000.544  What audits are required?

    The recipient must comply with the requirements of the Single Audit 
Act and OMB Circular A-133 which require annual audits of recipients 
that expend Federal funds equal to or in excess of an amount specified 
by the U.S. Office of Management and Budget, which is currently set at 
$300,000.



Sec. 1000.546  Are audit costs eligible program or administrative expenses?

    Yes, audit costs are an eligible program or administrative expense. 
If the Indian tribe is the recipient then program funds can be used to 
pay a prorated share of the tribal audit or financial review cost that 
is attributable to NAHASDA funded activities. For a recipient not 
covered by the Single Audit Act, but which chooses to obtain a periodic 
financial review, the cost of such a review would be an eligible program 
expense.



Sec. 1000.548  Must a copy of the recipient's audit pursuant to the Single Audit Act relating to NAHASDA activities be submitted to HUD?

    Yes. A copy of the latest recipient audit under the Single Audit Act 
relating to NAHASDA activities must be submitted with the Annual 
Performance Report.

[[Page 700]]



Sec. 1000.550  If the TDHE is the recipient, does it have to submit a copy of its audit to the Indian tribe?

    Yes. The Indian tribe as the grant beneficiary must receive a copy 
of the audit report so that it can fully carry out its oversight 
responsibilities with NAHASDA.



Sec. 1000.552  How long must the recipient maintain program records?

    (a) This section applies to all financial and programmatic records, 
supporting documents, and statistical records of the recipient which are 
required to be maintained by the statute, regulation, or grant 
agreement.
    (b) Except as otherwise provided herein, records must be retained 
for three years from the date the recipient submits to HUD the annual 
performance report that covers the last expenditure of grant funds under 
a particular grant.
    (c) If any litigation, claim, negotiation, audit or other action 
involving the records has been started before the expiration of the 3-
year period, the records must be retained until completion of the action 
and resolution of all issues which arise from it, or until the end of 
the regular 3-year period, whichever is later.



Sec. 1000.554  Which agencies have right of access to the recipient's records relating to activities carried out under NAHASDA?

    (a) HUD and the Comptroller General of the United States, and any of 
their authorized representatives, shall have the right of access to any 
pertinent books, documents, papers, or other records of recipients which 
are pertinent to NAHASDA assistance, in order to make audits, 
examinations, excerpts, and transcripts.
    (b) The right of access in this section lasts as long as the records 
are maintained.



Sec. 1000.556  Does the Freedom of Information Act (FOIA) apply to recipient records?

    FOIA does not apply to recipient records. However, there may be 
other applicable State and tribal access laws or recipient policies 
which may apply.



Sec. 1000.558  Does the Federal Privacy Act apply to recipient records?

    The Federal Privacy Act does not apply to recipient records. 
However, there may be other applicable State and tribal access laws or 
recipient policies which may apply.

  Appendix A to Part 1000--Indian Housing Block Grant Formula Mechanics

    This appendix shows the different components of the IHBG formula. 
The following text explains how each component of the IHBG formula 
works.
    1. The Indian Housing Block Grant (IHBG) formula is calculated by 
initially determining the amount a tribe receives for Formula Current 
Assisted Stock (FCAS) (See Secs. 1000.310 and 1000.312. FCAS funding is 
comprised of two components, operating subsidy (Sec. 1000.316(a)) and 
modernization (Sec. 1000.316(b)). The operating subsidy component is 
calculated based on the national per unit subsidy provided in FY 1996 
(adjusted to a 100 percent funding level) for each of the following 
types of programs--Low Rent, Homeownership (Mutual Help and Turnkey 
III), and Section 8. A tribe's total units in each of the above 
categories is multiplied times the relevant national per unit subsidy 
amount. That amount is summed and multiplied times a local area cost 
adjustment factor for management.
    2. The local area cost adjustment factor for management is called 
AELFMR. AELFMR is the greater of a tribe's Allowable Expense Level (AEL) 
or Fair Market Rent (FMR) factor, where the AEL and FMR factors are 
determined by dividing each tribe's AEL and FMR by their respective 
national weighted average (weighted on the unadjusted allocation under 
FCAS operating subsidy). The adjustment made to the FCAS component of 
the IHBG formula is then the new AELFMR factor divided by the national 
weighted average of the AELFMR (See Sec. 1000.320).
    3. The modernization component of FCAS is based on the national per 
unit modernization funding provided in FY 1996 to Indian Housing 
Authorities (IHAs). The per unit amount is determined by dividing the 
modernization funds by the total Low Rent, Mutual Help, and Turnkey III 
units operated by IHAs in 1996. A tribe's total Low Rent, Mutual Help, 
and Turnkey III units are multiplied times the per unit modernization 
amount. That amount is then multiplied times a local area cost 
adjustment factor for construction (e.g. the Total Development Cost) 
(See Sec. 1000.320).
    4. The construction adjustment factor is Total Development Cost 
(TDC) for the area divided by the weighted national average for

[[Page 701]]

TDC (weighted on the unadjusted allocation for modernization) (See 
Sec. 1000.320).
    5. After determining the total amount allocated under FCAS for each 
tribe, it is summed for every tribe. The national total amount for FCAS 
is subtracted from the Fiscal Year appropriation to determine the total 
amount to be allocated under the Need component of the IHBG formula.
    6. The Need component of the IHBG formula is calculated using seven 
factors weighted as set forth in Sec. 1000.324 as follows: 22 percent of 
the allocated funds will be allocated by a tribe's share of the total 
Native American households paying more than 50 percent of their income 
for housing living in the Indian tribe's formula area, 25 percent of the 
funds allocated under Need will be allocated by a tribe's share of the 
total Native American households overcrowded and or without kitchen or 
plumbing living in their formula area, and so on. The current national 
totals for each of the need variables will be distributed annually by 
HUD with the Formula Response Form (See Sec. 1000.332). The national 
totals will change as tribes update information about their formula area 
and data for individual areas are challenged (See Secs. 1000.334 and 
1000.336). The Need component is then calculated by multiplying a 
tribe's share of housing need by a local area cost adjustment factor for 
construction (the Total Development Cost) (See Sec. 1000.338).
    7. No tribe in its first year of funding will receive less than 
$50,000 under the Need component of the formula. In subsequent 
allocations to a tribe, it will receive no less than $25,000 under the 
Need component of the formula. This increase in funding for the tribes 
receiving the minimum Need allocation is funded by a reallocation from 
all tribes receiving more than $50,000 under their Need component. This 
is necessary in order to keep the total allocation within the 
appropriation level. Such minimum Need allocations will only continue 
through FY 2002 (See Sec. 1000.328).
    8. A tribe's total grant is calculated by summing the FCAS and Need 
allocations. This preliminary grant is compared to how much a tribe 
received in FY 1996 for operating subsidy and modernization. If a tribe 
received more in FY 1996 for operating subsidy and modernization than 
they do under the IHBG formula, their grant is adjusted up to the FY 
1996 level (See Sec. 1000.340). Indian tribes receiving more under the 
IHBG formula than in FY 1996 ``pay'' for the upward adjustment for the 
other tribes by having their grants adjusted downward. Because many more 
Indian tribes have grant amounts above the FY 1996 level than those with 
grants below the FY 1996 level, each tribe contributes very little 
relative to their total grant to fund the adjustment.

[63 FR 12373, Mar. 12, 1998; 63 FR 13105, Mar. 17, 1998]

      Appendix B to Part 1000--IHBG Block Grant Formula Mechanisms

    1. The Indian Housing Block Grant Formula consists of two 
components, the Formula Current Assisted Stock (FCAS) and Need. 
Therefore, the formula allocation before adjusting for the statutory 
requirement that a tribe's minimum grant will not be less than the 
tribe's FY 1996 Operating Subsidy and Modernization funding, can be 
represented by:

unadjGRANT = FCAS + NEED.

    2. NAHASDA requires the current assisted stock be provided for 
before allocating funds based on need. Therefore, FCAS must be 
calculated first. FCAS consists to two components, Operating Subsidy 
(OPSUB) and Modernization (MOD) such that:

FCAS = OPSUB + MOD.

    3. OPSUB consists of three main parts: Number of Low-Rent units; 
Number of Section 8 units; and Number of Mutual Help and Turnkey III 
units. Each of these main parts are adjusted by the FY 1996 national per 
unit subsidy, an inflation factor, and local area costs as reflected by 
the greater of the AEL factor or FMR factor. The AEL factor as defined 
in Sec. 1000.302 as the difference between a local area Allowable 
Expense Level (AEL) and the national weighted average for AEL. The FMR 
factor is also defined in Sec. 1000.302 as the difference between a 
local area Fair Market Rent (FMR) and the national weighted average for 
FMR. So, expanding OPSUB gives:

OPSUB = [LR * LRSUB + (MH+TK) * HOSUB + S8 * S8SUB] * INF * AELFMR

    Where:
LR = number of Low-Rent units.
LRSUB = FY 1996 national per unit average subsidy for Low-Rent units = 
          $2,440.
MH+TK = number of Mutual Help and Turnkey III units.
HOSUB = FY 1996 national per unit average subsidy for Homeownership 
          units = $528.
S8 = number of Section 8 units.
S8SUB = FY 1996 national per unit average subsidy for Section 8 units = 
          $3,625.
INF = inflation adjustment determined by the Consumer Price Index for 
          housing.
AELFMR = greater of AEL Factor or FMR Factor weighted by national 
          average of AEL Factor and FRM Factor.
AEL FACTOR = AEL/NAAEL.
AEL = local Allowable Expense Level.
NAAEL = national weighted average for AEL.
FMR FACTOR = FMR/NAFMR.
FMR = local Fair Market Rent.

[[Page 702]]

NAFMR = national weighted average for FMR.
NAAELFMR = national weighted average for greater of AEL Factor or FMR 
          factor.

    For estimating FY 1998 allocations:

    NAAEL = 240.224.
    NAFMR = 459.437.
    NAAELFMR = 1.144.
    4. MOD considers only the number of Low-Rent, and Mutual Help and 
Turnkey III units. Each of these are adjusted by the FY 1996 national 
per unit subsidy for modernization, an inflation factor and the local 
Total Development Costs relative to the weighted national average for 
TDC. So, expanding MOD gives us:

MOD = [LR + (MH+TK)] * SUB * INF * TDC/NATDC.

    Where:

LR = number of Low-Rent units.
MH+TK = number of Mutual Help and Turnkey III units.
SUB = FY 1996 national per unit average subsidy for modernization.
INF = inflation adjustment determined by the Consumer Price Index for 
          housing.
TDC = Local Total Development Costs defined in Sec. 1000.302.
NATDC = weighted national average for TDC.

    For estimating FY 1998 allocations:

SUB = $1,974.
NATDC = $103,828.

    5. Now that calculation for FCAS is complete, we can determine how 
many funds will be available to allocate over the NEED component of the 
formula by calculating:

NEED FUNDS = APPROPRIATION--NATCAS.
    Where:
APPROPRIATION = dollars provided by Congress for distribution by the 
          IHBG formula.
NATCAS = summation of CAS allocations for all tribes.

    For estimating FY 1998 allocations:

APPROPRIATION = $590 million.
NATCAS = $236,147,110.
    6. Two iterations are necessary to compute the final Need 
allocation. The first iteration consists of seven weighted criteria that 
allocate need funds based on a tribe's population and housing data. This 
allocation is then adjusted for local area cost differences based on TDC 
relative to the national weighted average. This can be represented by:

NEED1 = [(0.11 * PER / NPER) + (0.13 * HHLE30 / NHHLE30)
 + (0.07 * HH30T50 / NHH30T50) + (0.07 * HH50T80 / NHH50T80)
 + (0.25 * OCRPR / NOCRPR) + (0.22 * SCBTOT / NSCBTOT)
 + (0.15 * HOUSHOR / NHOUSHOR)] * NEED FUNDS * (TDC/NATDC).

    Where:

PER = American Indian and Alaskan Native (AIAN) persons.
NPER = national total of PER.
HHLE30 = AIAN households less than 30% of median income.
NHHLE30 = national total of HHLE30.
HH30T50 = AIAN households 30% to 50% of median income.
NHH30T50 = national total of HH30T50.
HH50T80 = AIAN households 50% to 80% of median income.
NHH50TO80 = national total of HH50T80.
OCRPR = AIAN households crowded or without complete kitchen or plumbing.
NOCRPR = national total of OCRPR.
SCBTOT = AIAN households paying more than 50% of their income for 
          housing.
NSCBTOT = national total SCBTOT.
HOUSHOR = AIAN households with an annual income less than or equal to 
          80% of formula median income reduced by the combination of 
          current assisted stock and units developed under NAHASDA.
NHOUSHOR = national total of HOUSHOR.
TDC = Local Total Development Costs defined in Sec. 1000.302.
NATDC = weighted national average for TDC.

    For estimating FY 1998 allocations:

NPER = 953,254.
NHHLE30 = 78,496.
NHH30T50 = 52,514.
NHH50T80 = 59,793.
NOCPR = 80,581.
NSCBTOT = 34,080.
NHOUSHOR = 23,840.
NEEDFUNDS = $353,852,890.
NATDC = $104,956.

    7. The second iteration in computing Need allocation consists of 
adjusting the Need allocation computed above to take into account the 
$50,000 baseline funding for the first year only and then $25,000 per 
year for each year thereafter through FY 2002. So, if in the first Need 
computation you have less than the minimum Needs funding level, your 
Need allocation will go up. But, if you have more than the minimum Needs 
funding level, your Need allocation will go down to adjust for the other 
Need allocations going up. We can represent this by:
If NEED1 is less than MINFUNDING, then NEED = MINFUNDING.
If NEED1 is greater than or equal to MINFUNDING, then NEED = NEED1--
          {UNDERMIN$ * [(NEED1--MINFUNDING) / OVERMIN$]}.

    Where:

MINFUNDING = minimum needs funding level.
UNDERMIN$ = for all tribes with NEED1 less than MINFUNDING, sum of the 
          differences between MINFUNDING and NEED1.

[[Page 703]]

OVERMIN$ = for all tribes with NEED1 greater than or equal to
MINFUNDING, sum of the difference between NEED1 and MINFUNDING.

    For estimating FY 1998 allocations:

MINFUNDING = $50,000.
UNDERMIN$ = $4,919,224.
OVERMIN$ = $335,022,114.

    8. Now we have computed values for FCAS and NEED. This final step in 
computing the grant allocation is to adjust the sum of FCAS and NEED to 
reflect the statutory requirement that a tribe's minimum grant will not 
be less than that tribe's FY 1996 Operating Subsidy and Modernization 
funding. So, before adjusting for the minimum grant compute:

unadjGRANT = FCAS + NEED

    where both FCAS and NEED are calculated above.
    9. Now, apply test to determine if the GRANT (unadjusted for FY 
1996) levels is greater than or equal to FY 1996 Operating Subsidy and 
Modernization funding.

Let TEST = unadjGRANT--OPMOD96 .
If TEST is less than 0, then GRANT = OPMOD96.
If TEST is greater than or equal to 0, then GRANT = unadjGRANT--
          [UNDER1996 * (TEST / OVER1996)].

Where:

OPMOD96 = funding received by tribe in FY 1996 for Operating Subsidy and 
          Modernization
UNDER1996 = for all tribes with TEST less than 0, sum of the absolute 
          value of TEST.
OVER1996 = for all tribes with TEST greater than or equal to 0, sum of 
          TEST.

    For estimating FY 1998 allocations:

UNDER1996 = $5,378,558.
OVER1996 = $326,095,837.
GRANT is the approximate grant amount in any given year for any given 
          tribe.

[63 FR 12373, Mar. 12, 1998; 63 FR 13105, Mar. 17, 1998]

                       PARTS 1001-1002  [RESERVED]



PART 1003--COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND ALASKA NATIVE VILLAGES--Table of Contents




                      Subpart A--General Provisions

Sec.
1003.1  Applicability and scope.
1003.2  Program objective.
1003.3  Nature of program.
1003.4  Definitions.
1003.5  Eligible applicants.
1003.6  Waivers.

                     Subpart B--Allocation of Funds

1003.100  General.
1003.101  Area ONAP allocation of funds.
1003.102  Use of recaptured and unawarded funds.

                     Subpart C--Eligible Activities

1003.200  General policies.
1003.201  Basic eligible activities.
1003.202  Eligible rehabilitation and preservation activities.
1003.203  Special economic development activities.
1003.204  Special activities by Community-Based Development 
          Organizations (CBDOs).
1003.205  Eligible planning, urban environmental design and policy-
          planning-management-capacity building activities.
1003.206  Program administration costs.
1003.207  Ineligible activities.
1003.208  Criteria for compliance with the primary objective.

    Subpart D--Single Purpose Grant Application and Selection Process

1003.300  Application requirements.
1003.301  Selection process.
1003.302  Project specific threshold requirements.
1003.303  Project rating categories.
1003.304  Funding process.
1003.305  Program amendments.

                    Subpart E--Imminent Threat Grants

1003.400  Criteria for funding.
1003.401  Application process.
1003.402  Availability of funds.

                     Subpart F--Grant Administration

1003.500  Responsibility for grant administration.
1003.501  Applicability of uniform administrative requirements and cost 
          principles.
1003.502  Agreements with subrecipients.
1003.503  Program income.
1003.504  Use of real property.
1003.505  Records to be maintained.
1003.506  Reports.
1003.507  Public access to program records.
1003.508  Grant closeout procedures.
1003.509  Force account construction.
1003.510  Indian preference requirements.
1003.511  Use of escrow accounts for rehabilitation of privately owned 
          residential property.

                  Subpart G--Other Program Requirements

1003.600  Constitutional prohibition.
1003.601  Nondiscrimination.

[[Page 704]]

1003.602  Relocation and real property acquisition.
1003.603  Labor standards.
1003.604  Citizen participation.
1003.605  Environment.
1003.606  Conflict of interest.
1003.607  Lead-based paint.
1003.608  Debarment and suspension.

                     Subpart H--Program Performance

1003.700  Review of grantee's performance.
1003.701  Corrective and remedial actions.
1003.702  Reduction or withdrawal of grant.
1003.703  Other remedies for noncompliance.

    Authority: 42 U.S.C. 3535(d) and 5301 et seq.

    Source: 61 FR 40090, July 31, 1996, unless otherwise noted. 
Redesignated at 62 FR 12349, Mar. 12, 1998.



                      Subpart A--General Provisions



Sec. 1003.1  Applicability and scope.

    The policies and procedures described in this part apply to grants 
to eligible applicants under the Community Development Block Grant 
(CDBG) program for Indian tribes and Alaska native villages.



Sec. 1003.2  Program objective.

    The primary objective of the Indian CDBG (ICDBG) Program and of the 
community development program of each grantee covered under the Act is 
the development of viable Indian and Alaska native communities, 
including decent housing, a suitable living environment, and economic 
opportunities, principally for persons of low and moderate income. The 
Federal assistance provided in this part is not to be used to reduce 
substantially the amount of tribal financial support for community 
development activities below the level of such support before the 
availability of this assistance.



Sec. 1003.3  Nature of program.

    The selection of single purpose grantees under subpart B of this 
part is competitive in nature. Therefore, selection of grantees for 
funds will reflect consideration of the relative adequacy of 
applications in addressing tribally determined need. The selection of 
grantees of imminent threat grants under the provisions of subpart B of 
this part is not competitive in nature. However, applicants for funding 
under either subpart must have the administrative capacity to undertake 
the community development activities proposed, including the systems of 
internal control necessary to administer these activities effectively 
without fraud, waste, or mismanagement.



Sec. 1003.4  Definitions.

    Act means Title I of the Housing and Community Development Act of 
1974, as amended (42 U.S.C. 5301 et seq.)
    Area ONAPs mean the HUD Offices of Native American Programs having 
field office responsibility for the ICDBG Program.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing.
    Buildings for the general conduct of government mean office 
buildings and other facilities in which the legislative, judicial or 
general administrative affairs of the government are conducted. This 
term does not include such facilities as neighborhood service centers or 
special purpose buildings located in low and moderate income areas that 
house various non-legislative functions or services provided by the 
government at decentralized locations.
    Chief executive officer means the elected official or legally 
designated official who has the prime responsibility for the conduct of 
the affairs of an Indian tribe or Alaska native village.
    Eligible Indian population means the most accurate and uniform 
population data available from data compiled and published by the United 
States Bureau of the Census available from the latest census referable 
to the same point or period of time for Indian tribes and Alaska native 
villages eligible under this part.
    Extent of overcrowded housing means the number of housing units with 
1.01 or more persons per room, based on data compiled and published by 
the United States Bureau of the Census available from the latest census 
referable to the same point or period of time.
    Extent of poverty means the number of persons whose incomes are 
below the poverty level, based on data compiled and published by the 
United States Bureau of the Census referable to the

[[Page 705]]

same point or period in time and the latest reports from the Office of 
Management and Budget.
    HUD means the Department of Housing and Urban Development.
    ICDBG Program means the Indian Community Development Block Grant 
Program.
    Identified service area means:
    (1) A geographic location within the jurisdiction of a tribe (but 
not the entire jurisdiction) designated in comprehensive plans, 
ordinances, or other tribal documents as a service area;
    (2) The Bureau of Indian Affairs (BIA) service area, including 
residents of areas outside the geographic jurisdiction of the tribe; or
    (3) The entire area under the jurisdiction of a tribe which has a 
population of members of under 10,000.
    Imminent threat means a problem which if unresolved or not addressed 
will have an immediate negative impact on public health or safety.
    Low and moderate income beneficiary means a family, household, or 
individual whose income does not exceed 80 percent of the median income 
for the area, as determined by HUD, with adjustments for smaller and 
larger households or families. However, HUD may establish income 
ceilings higher or lower than 80 percent of the median for the area on 
the basis of HUD's findings that such variations are necessary because 
of unusually high or low household or family incomes. In reporting 
income levels to HUD, the applicant must include and identify the 
distributions of tribal or village income to families, households, or 
individuals.
    Microenterprise means a business that has five or fewer employees, 
one or more of whom owns the enterprise.
    Secretary means the Secretary of HUD.
    Small business means a business that meets the criteria set forth in 
section 3(a) of the Small Business Act (15 U.S.C. 631, 636, and 637).
    Subrecipient means a public or private nonprofit agency, authority 
or organization, or a for-profit entity described in Sec. 1003.201(o), 
receiving ICDBG funds from the grantee or another subrecipient to 
undertake activities eligible for assistance under subpart C of this 
part. The term excludes a CBDO receiving ICDBG funds from the grantee 
under the authority of Sec. 1003.204, unless the grantee explicitly 
designates it as a subrecipient. The term does not include contractors 
providing supplies, equipment, construction or services subject to the 
procurement requirements in 24 CFR 85.36 or in 24 CFR Part 84, as 
applicable.
    Tribal government, Tribal governing body or Tribal council means the 
governing body of an Indian tribe or Alaska native village as recognized 
by the Bureau of Indian Affairs.
    Tribal resolution means the formal manner in which the tribal 
government expresses its legislative will in accordance with its organic 
documents. In the absence of such organic documents, a written 
expression adopted pursuant to tribal practices will be acceptable.
    URA means the Uniform Relocation and Real Property Acquisition 
Policies Act of 1970, as amended (42 U.S.C. 4601 et. seq.).



Sec. 1003.5  Eligible applicants.

    (a) Eligible applicants are any Indian tribe, band, group, or 
nation, including Alaska Indians, Aleuts, and Eskimos, and any Alaska 
native village of the United States which is considered an eligible 
recipient under Title I of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450) or which had been an eligible recipient 
under the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 
1221). Eligible recipients under the Indian Self-Determination and 
Education Assistance Act will be determined by the Bureau of Indian 
Affairs and eligible recipients under the State and Local Fiscal 
Assistance Act of 1972 are those that have been determined eligible by 
the Department of Treasury, Office of Revenue Sharing.
    (b) Tribal organizations which are eligible under Title I of the 
Indian Self-Determination and Education Assistance Act may apply on 
behalf of any Indian tribe, band, group, nation, or Alaska native 
village eligible under that act for funds under this part when one or 
more of these entities have authorized the tribal organization to do so 
through concurring resolutions. Such resolutions must accompany the 
application for funding. Eligible tribal

[[Page 706]]

organizations under Title I of the Indian Self-Determination and 
Education Assistance Act will be determined by the Bureau of Indian 
Affairs or the Indian Health Service, as appropriate.
    (c) To apply for funding in a given fiscal year, an applicant must 
be eligible as an Indian tribe or Alaska native village, as provided in 
paragraph (a) of this section, or as a Tribal organization, as provided 
in paragraph (b) of this section, by the application submission date.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.6  Waivers.

    Upon determination of good cause, HUD may waive any provision of 
this part not required by statute. Each waiver must be in writing and 
must be supported by documentation of the pertinent facts and grounds.



                     Subpart B--Allocation of Funds



Sec. 1003.100  General.

    (a) Types of grants. Two types of grants are available under the 
Indian CDBG Program.
    (1) Single purpose grants provide funds for one or more single 
purpose projects consisting of an activity or set of activities designed 
to meet a specific community development need. This type of grant is 
awarded through competition with other single purpose projects.
    (2) Imminent threat grants alleviate an imminent threat to public 
health or safety that requires immediate resolution. This type of grant 
is awarded only after an Area ONAP determines that such conditions exist 
and if funds are available for such grants.
    (b) Size of grants.--(1) Ceilings. Each Area ONAP may recommend 
grant ceilings for single purpose grant applications. Single purpose 
grant ceilings for each Area ONAP shall be established in the NOFA 
(Notice of Funding Availability).
    (2) Individual grant amounts. An Area ONAP may approve a grant 
amount less than the amount requested. In doing so, the Area ONAP may 
take into account the size of the applicant, the level of demand, the 
scale of the activity proposed relative to need and operational 
capacity, the number of persons to be served, the amount of funds 
required to achieve project objectives and the administrative capacity 
of the applicant to complete the activities in a timely manner.



Sec. 1003.101  Area ONAP allocation of funds.

    (a) Except as provided in paragraph (b) of this section, funds will 
be allocated to the Area ONAPs responsible for the program on the 
following basis:
    (1) Each Area ONAP will be allocated $1,000,000 as a base amount, to 
which will be added a formula share of the balance of the ICDBG Program 
funds, as provided in paragraph (a)(2) of this section.
    (2) The amount remaining after the base amount is allocated and any 
amount retained by the Headquarters ONAP to fund imminent threat grants 
pursuant to the provisions of Sec. 1003.402 is subtracted, will be 
allocated to each Area ONAP based on the most recent data complied and 
published by the United States Bureau of the Census referable to the 
same point or period in time, as follows:
    (i) Forty percent (40%) of the funds will be allocated based upon 
each Area ONAP's share of the total eligible Indian population;
    (ii) Forty percent (40%) of the funds will be allocated based upon 
each Area ONAP's share of the total extent of poverty among the eligible 
Indian population; and
    (iii) Twenty percent (20%) of the funds will be allocated based upon 
each Area ONAP's share of the total extent of overcrowded housing among 
the eligible Indian population.
    (b) HUD will use other criteria to determine an allocation formula 
for distributing funds to the Area ONAPs if funds are set aside by 
statute for a specific purpose in any fiscal year if it is determined 
that the formula in paragraph (a) of this section is inappropriate to 
accomplish the purpose. HUD will use other criteria if it is determined 
that, based on a limited appropriation of funds, the use of the formula 
in paragraph (a) of this section is inappropriate to obtain an equitable 
allocation of funds.

[[Page 707]]

    (c) Data used for the allocation of funds will be based upon the 
Indian population of those tribes and villages that are determined to be 
eligible ninety (90) days before the beginning of each fiscal year.



Sec. 1003.102  Use of recaptured and unawarded funds.

    (a) The Assistant Secretary will determine on a case-by-case basis 
the use of grant funds which are:
    (1) Recaptured by HUD under the provisions of Sec. 1003.703 or 
Sec. 1003.704;
    (2) Recaptured by HUD at the time of the closeout of a program; or
    (3) Unawarded after the completion by an Area ONAP of a funding 
competition.
    (b) The recaptured or unawarded funds will remain with the Area ONAP 
to which they were originally allocated unless the Assistant Secretary 
determines that there is an overriding reason to redistribute these 
funds outside of the Area ONAP's jurisdiction. The recaptured funds may 
be used to fund the highest ranking unfunded project from the most 
recent funding competition, an imminent threat, or other uses. Unawarded 
funds may be used to fund an imminent threat or other uses.



                     Subpart C--Eligible Activities



Sec. 1003.200  General policies.

    An activity may be assisted in whole or in part with ICDBG funds 
only if the activity meets the eligibility requirements of section 105 
of the Act as further defined in this subpart and if the criteria for 
compliance with the primary objective of the Act set forth under 
Sec. 1003.208 have been met. The requirements for compliance with the 
primary objective of the Act do not apply to imminent threat grants 
funded under subpart E of this part.



Sec. 1003.201  Basic eligible activities.

    ICDBG funds may be used for the following activities:
    (a) Acquisition. Acquisition in whole or in part by the grantee, or 
other public or private nonprofit entity, by purchase, long-term lease, 
donation, or otherwise, of real property (including air rights, water 
rights, rights-of-way, easements, and other interests therein) for any 
public purpose, subject to the limitations of Sec. 1003.207.
    (b) Disposition. Disposition, through sale, lease, donation, or 
otherwise, of any real property acquired with ICDBG funds or its 
retention for public purposes, including reasonable costs of temporarily 
managing such property or property acquired under urban renewal, 
provided that the proceeds from any such disposition shall be program 
income subject to the requirements set forth in Sec. 1003.503.
    (c) Public facilities and improvements. Acquisition, construction, 
reconstruction, rehabilitation or installation of public facilities and 
improvements, except as provided in Sec. 1003.207(a), carried out by the 
grantee or other public or private nonprofit entities. In undertaking 
such activities, design features and improvements which promote energy 
efficiency may be included. [However, activities under this paragraph 
may be directed to the removal of material and architectural barriers 
that restrict the mobility and accessibility of elderly or severely 
disabled persons to publicly owned and privately owned buildings, 
facilities, and improvements including those provided for in 
Sec. 1003.207(a)(1).] Such activities may also include the execution of 
architectural design features, and similar treatments intended to 
enhance the aesthetic quality of facilities and improvements receiving 
ICDBG assistance. Facilities designed for use in providing shelter for 
persons having special needs are considered public facilities and not 
subject to the prohibition of new housing construction described in 
Sec. 1003.207(b)(3). Such facilities include shelters for the homeless; 
convalescent homes; hospitals, nursing homes; battered spouse shelters; 
halfway houses for run-away children, drug offenders or parolees; group 
homes for mentally retarded persons and temporary housing for disaster 
victims. In certain cases, nonprofit entities and subrecipients 
including those specified in Sec. 1003.204 may acquire title to public 
facilities. When such facilities are owned by nonprofit entities or 
subrecipients, they shall be operated so as to be open for use by the 
general public during all normal hours of operation.

[[Page 708]]

Public facilities and improvements eligible for assistance under this 
paragraph (c) are subject to the following policies in paragraphs (c)(1) 
through (c)(3) of this section:
    (1) Special policies governing facilities. The following special 
policies apply to:
    (i) Facilities containing both eligible and ineligible uses. A 
public facility otherwise eligible for assistance under the ICDBG 
program may be provided with ICDBG funds even if it is part of a 
multiple use building containing ineligible uses, if:
    (A) The facility which is otherwise eligible and proposed for 
assistance will occupy a designated and discrete area within the larger 
facility; and
    (B) The grantee can determine the costs attributable to the facility 
proposed for assistance as separate and distinct from the overall costs 
of the multiple-use building and/or facility. Allowable costs are 
limited to those attributable to the eligible portion of the building or 
facility.
    (ii) Equipment purchase. As stated in Sec. 1003.207(b)(1), the 
purchase of equipment with ICDBG funds is generally ineligible. However, 
the purchase of construction equipment for use as part of a solid waste 
facility is eligible. In addition, the purchase of fire protection 
equipment is considered to be an integral part of a public facility, 
and, therefore, the purchase of such equipment is also eligible.
    (2) Fees for use of facilities. Reasonable fees may be charged for 
the use of the facilities assisted with ICDBG funds, but charges such as 
excessive membership fees, which will have the effect of precluding low 
and moderate income persons from using the facilities, are not 
permitted.
    (3) Special assessments under the ICDBG program. The following 
policies relate to special assessments under the ICDBG program:
    (i) Definition of special assessment. The term special assessment 
means the recovery of the capital costs of a public improvement, such as 
streets, water or sewer lines, curbs, and gutters, through a fee or 
charge levied or filed as a lien against a parcel of real estate as a 
direct result of benefit derived from the installation of a public 
improvement, or a one-time charge made as a condition of access to a 
public improvement. This term does not relate to taxes, or the 
establishment of the value of real estate for the purpose of levying 
real estate, property, or ad valorem taxes, and does not include 
periodic charges based on the use of a public improvement, such as water 
or sewer user charges, even if such charges include the recovery of all 
or some portion of the capital costs of the public improvement.
    (ii) Special assessments to recover capital costs. Where ICDBG funds 
are used to pay all or part of the cost of a public improvement, special 
assessments may be imposed as follows:
    (A) Special assessments to recover the ICDBG funds may be made only 
against properties owned and occupied by persons not of low and moderate 
income. Such assessments constitute program income.
    (B) Special assessments to recover the non-ICDBG portion may be made 
provided that ICDBG funds are used to pay the special assessment on 
behalf of all properties owned and occupied by low and moderate income 
persons; except that ICDBG funds need not be used to pay the special 
assessments on behalf of properties owned and occupied by moderate 
income persons if the grantee certifies that it does not have sufficient 
ICDBG funds to pay the assessments in behalf of all of the low and 
moderate income owner-occupant persons. Funds collected through such 
special assessments are not program income.
    (iii) Public improvements not initially assisted with ICDBG funds. 
The payment of special assessments with ICDBG funds constitutes ICDBG 
assistance to the public improvement. Therefore, ICDBG funds may be used 
to pay special assessments provided:
    (A) The installation of the public improvements was carried out in 
compliance with requirements applicable to activities assisted under 
this part including environmental and citizen participation 
requirements; and
    (B) The installation of the public improvement meets a criterion for 
the primary objective in Sec. 1003.208; and,
    (C) The requirements of Sec. 1003.201(c)(3)(ii))(B) are met.

[[Page 709]]

    (d) Clearance activities. Clearance, demolition, and removal of 
buildings and improvements, including movement of structures to other 
sites. Demolition of HUD-assisted housing units may be undertaken only 
with the prior approval of HUD.
    (e) Public services. Provision of public services (including labor, 
supplies, materials, and the purchase of personal property and 
furnishings) which are directed toward improving the community's public 
services and facilities, including but not limited to those concerned 
with employment, crime prevention, child care, health, drug abuse, 
education, fair housing counseling, energy conservation, welfare (but 
excluding the provision of income payments identified under 
Sec. 1003.207(b)(4)), homebuyer downpayment assistance or recreational 
needs. To be eligible for ICDBG assistance, a public service must be 
either a new service, or a quantifiable increase in the level of an 
existing service above that which has been provided by or on behalf of 
the grantee through funds raised by the grantee, or received by the 
grantee from the Federal government in the twelve calendar months before 
the submission of the application for ICDBG assistance. (An exception to 
this requirement may be made if HUD determines that any decrease in the 
level of a service was the result of events not within the control of 
the grantee.) The amount of ICDBG funds used for public services shall 
not exceed 15 percent of the grant. Such projects must therefore be 
submitted with one or more other projects, which must comprise at least 
85 percent of the total requested ICDBG grant amount.
    (f) Interim assistance. (1) The following activities may be 
undertaken on an interim basis in areas exhibiting objectively 
determinable signs of physical deterioration where the grantee has 
determined that immediate action is necessary to arrest the 
deterioration and that permanent improvements will be carried out as 
soon as practicable:
    (i) The repairing of streets, sidewalks, parks, playgrounds, 
publicly owned utilities, and public buildings; and
    (ii) The execution of special garbage, trash, and debris removal, 
including neighborhood cleanup campaigns, but not the regular curbside 
collection of garbage or trash in an area.
    (2) In order to alleviate emergency conditions threatening the 
public health and safety in areas where the chief executive officer of 
the grantee determines that such an emergency condition exists and 
requires immediate resolution, ICDBG funds may be used for:
    (i) The activities specified in paragraph (f)(1) of this section, 
except for the repair of parks and playgrounds;
    (ii) The clearance of streets, including snow removal and similar 
activities; and
    (iii) The improvement of private properties.
    (3) All activities authorized under paragraph (f)(2) of this section 
are limited to the extent necessary to alleviate emergency conditions.
    (g) Payment of non-Federal share. Payment of the non-Federal share 
required in connection with a Federal grant-in-aid program undertaken as 
part of ICDBG activities, provided, that such payment shall be limited 
to activities otherwise eligible and in compliance with applicable 
requirements under this subpart.
    (h) Relocation. Relocation payments and other assistance for 
permanently and temporarily relocated individuals families, businesses, 
nonprofit organizations, and farm operations where the assistance is:
    (1) Required under the provisions of Sec. 1003.602 (b) or (c); or
    (2) Determined by the grantee to be appropriate under the provisions 
of Sec. 1003.602(d).
    (i) Loss of rental income. Payments to housing owners for losses of 
rental income incurred in holding, for temporary periods, housing units 
to be used for the relocation of individuals and families displaced by 
program activities assisted under this part.
    (j) Housing services. Housing services, as provided in section 
105(a)(21) of the Housing and Community Development Act of 1974 [42 
U.S.C. 5305(a)(21)].

[[Page 710]]

    (k) Privately owned utilities. ICDBG funds may be used to acquire, 
construct, reconstruct, rehabilitate, or install the distribution lines 
and facilities of privately owned utilities, including the placing 
underground of new or existing distribution facilities and lines.
    (l) The provision of assistance to facilitate economic development. 
(1) The provision of assistance either through the grantee directly or 
through public and private organizations, agencies, and other 
subrecipients (including nonprofit and for-profit subrecipients) to 
facilitate economic development by:
    (i) Providing credit, including, but not limited to, grants, loans, 
loan guarantees, and other forms of financial support, for the 
establishment, stabilization, and expansion of microenterprises;
    (ii) Providing technical assistance, advice, and business support 
services to owners of microenterprises and persons developing 
microenterprises; and
    (iii) Providing general support, including, but not limited to, peer 
support programs, counseling, child care, transportation, and other 
similar services, to owners of microenterprises and persons developing 
microenterprises.
    (2) Services provided under paragraph (l)(1) of this section shall 
not be subject to the restrictions on public services contained in 
Sec. 1003.201(e).
    (3) For purposes of this paragraph (l), persons developing 
microenterprises means such persons who have expressed interest and who 
are, or after an initial screening process are expected to be, actively 
working toward developing businesses, each of which is expected to be a 
microenterprise at the time it is formed.
    (m) Technical assistance. Provision of technical assistance to 
public or nonprofit entities to increase the capacity of such entities 
to carry out eligible neighborhood revitalization or economic 
development activities. Capacity building for private or public entities 
(including grantees) for other purposes may be eligible as a planning 
cost under Sec. 1003.205.
    (n) Assistance to institutions of higher education. Provision of 
assistance by the grantee to institutions of higher education where the 
grantee determines that such an institution has demonstrated a capacity 
to carry out eligible activities under this subpart.
    (o) Homeownership assistance. ICDBG funds may be used to provide 
direct homeownership assistance to low- and moderate-income households 
to:
    (1) Subsidize interest rates and mortgage principal amounts for low-
and moderate-income homebuyers;
    (2) Finance the acquisition by low-and moderate-income homebuyers of 
housing that is occupied by the homebuyers;
    (3) Acquire guarantees for mortgage financing obtained by low-and 
moderate-income homebuyers form private lenders (except that ICDBG funds 
may not be used to guarantee such mortgage financing directly, and 
grantees may not provide such guarantees directly);
    (4) Provide up to 50 percent of any downpayment required from a low-
and moderate-income homebuyer; or
    (5) Pay reasonable closing costs (normally associated with the 
purchase of a home) incurred by a low-or moderate-income homebuyer.



Sec. 1003.202  Eligible rehabilitation and preservation activities.

    (a) Types of buildings and improvements eligible for rehabilitation 
or reconstruction assistance. ICDBG funds may be used to finance the 
rehabilitation of:
    (1) Privately owned buildings and improvements for residential 
purposes; improvements to a single-family residential property which is 
also used as a place of business, which are required in order to operate 
the business, need not be considered to be rehabilitation of a 
commercial or industrial building, if the improvements also provide 
general benefit to the residential occupants of the building;
    (2) Low-income public housing and other publicly owned residential 
buildings and improvements;
    (3) Publicly or privately owned commercial or industrial buildings, 
except that the rehabilitation of such buildings owned by a private for-
profit business is limited to improvements to the exterior of the 
building and the correction of code violations (further improvements to 
such buildings may be

[[Page 711]]

undertaken pursuant to Sec. 1003.203(b)); and
    (4) Nonprofit-owned nonresidential buildings and improvements not 
eligible under Sec. 1003.201(c);
    (5) Manufactured housing when such housing constitutes part of the 
community's permanent housing stock.
    (b) Types of assistance. ICDBG funds may be used to finance the 
following types of rehabilitation or reconstruction activities, and 
related costs, either singly, or in combination, through the use of 
grants, loans, loan guarantees, interest supplements, or other means for 
buildings and improvements described in paragraph (a) of this section, 
except that rehabilitation of commercial or industrial buildings is 
limited as described in paragraph (a)(3) of this section.
    (1) Assistance to private individuals and entities, including profit 
making and nonprofit organizations, to acquire for the purpose of 
rehabilitation, and to rehabilitate properties, for use or resale for 
residential purposes;
    (2) Labor, materials, and other costs of rehabilitation of 
properties, including repair directed toward an accumulation of deferred 
maintenance, replacement of principal fixtures and components of 
existing structures, installation of security devices, including smoke 
detectors and dead bolt locks, and renovation through alterations, 
additions to, or enhancement of existing structures, which may be 
undertaken singly, or in combination;
    (3) Loans for refinancing existing indebtedness secured by a 
property being rehabilitated with ICDBG funds if such financing is 
determined by the grantee to be necessary or appropriate to achieve the 
grantee's community development objectives;
    (4) Improvements to increase the efficient use of energy in 
structures through such means as installation of storm windows and 
doors, siding, wall and attic insulation, and conversion, modification, 
or replacement of heating and cooling equipment, including the use of 
solar energy equipment;
    (5) Improvements to increase the efficient use of water through such 
means as water saving faucets and shower heads and repair of water 
leaks;
    (6) Connection of residential structures to water distribution lines 
or local sewer collection lines;
    (7) For rehabilitation carried out with ICDBG funds, costs of:
    (i) Initial homeowner warranty premiums;
    (ii) Hazard insurance premiums, except where assistance is provided 
in the form of a grant; and
    (iii) Flood insurance premiums for properties covered by the Flood 
Disaster Protection Act of 1973, pursuant to 24 CFR 58.6(a).
    (iv) Procedures concerning inspection and testing for and treatment 
and abatement of defective paint surfaces and lead-based paint, pursuant 
to Sec. 1003.607.
    (8) Costs of acquiring tools to be lent to owners, tenants, and 
others who will use such tools to carry out rehabilitation;
    (9) Rehabilitation services, such as rehabilitation counseling, 
energy auditing, preparation of work specifications, loan processing, 
inspections, and other services related to assisting owners, tenants, 
contractors, and other entities, participating or seeking to participate 
in rehabilitation activities authorized under this section;
    (10) Improvements designed to remove material and architectural 
barriers that restrict the mobility and accessibility of elderly or 
severely disabled persons to buildings and improvements eligible for 
assistance under paragraph (a) of this section.
    (c) Code enforcement. Code enforcement in deteriorating or 
deteriorated areas where such enforcement together with public or 
private improvements, rehabilitation, or services to be provided, may be 
expected to arrest the decline of the area.
    (d) Historic preservation. ICDBG funds may be used for the 
rehabilitation, preservation or restoration of historic properties, 
whether publicly or privately owned. Historic properties are those sites 
or structures that are either listed in or eligible to be listed in the 
National Register of Historic Places, listed in a State or local 
inventory of historic places, or designated as a State or local landmark 
or historic district by appropriate law or ordinance. Historic 
preservation, however,

[[Page 712]]

is not authorized for buildings for the general conduct of government.
    (e) Renovation of closed buildings. ICDBG funds may be used to 
renovate closed buildings, such as closed school buildings, for use as 
an eligible public facility or to rehabilitate such buildings for 
housing.



Sec. 1003.203  Special economic development activities.

    A grantee may use ICDBG funds for special economic development 
activities in addition to other activities authorized in this subpart 
which may be carried out as part of an economic development project. 
Special activities authorized under this section do not include 
assistance for the construction of new housing. Special economic 
development activities include:
    (a) The acquisition, construction, reconstruction, rehabilitation or 
installation of commercial or industrial buildings, structures, and 
other real property equipment and improvements, including railroad spurs 
or similar extensions. Such activities may be carried out by the grantee 
or public or private nonprofit subrecipients.
    (b) The provision of assistance to a private for-profit business, 
including, but not limited to, grants, loans, loan guarantees, interest 
supplements, technical assistance, and other forms of support, for any 
activity where the assistance is necessary or appropriate to carry out 
an economic development project, excluding those described as ineligible 
in Sec. 1003.207(a). In order to ensure that any such assistance does 
not unduly enrich the for-profit business, the grantee shall conduct an 
analysis to determine that the amount of any financial assistance to be 
provided is not excessive, taking into account the actual needs of the 
business in making the project financially feasible and the extent of 
public benefit expected to be derived from the economic development 
project. The grantee shall document the analysis as well as any factors 
it considered in making its determination that the assistance is 
necessary or appropriate to carry out the project. The requirement for 
making such a determination applies whether the business is to receive 
assistance from the grantee or through a subrecipient.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.204  Special activities by Community-Based Development Organizations (CBDOs).

    (a) Eligible activities. The grantee may provide ICDBG funds as 
grants or loans to any CBDO qualified under this section to carry out a 
neighborhood revitalization, community economic development, or energy 
conservation project. The funded project activities may include those 
listed as eligible under this subpart, and, except as described in 
paragraph (b) of this section, activities not otherwise listed as 
eligible under this subpart. For purposes of qualifying as a project 
under paragraphs (a)(1), (a)(2), and (a)(3) of this section, the funded 
activity or activities may be considered either alone or in concert with 
other project activities either being carried out or for which funding 
has been committed. For purposes of this section:
    (1) Neighborhood revitalization project includes activities of 
sufficient size and scope to have an impact on the decline of a 
geographic location within the jurisdiction of a grantee (but not the 
entire jurisdiction) designated in comprehensive plans, ordinances, or 
other local documents as a neighborhood, village, or similar 
geographical designation; or the entire jurisdiction of a grantee which 
is under 25,000 population;
    (2) Community economic development project includes activities that 
increase economic opportunity, principally for persons of low- and 
moderate-income, or that stimulate or retain businesses or permanent 
jobs, including projects that include one or more such activities that 
are clearly needed to address a lack of affordable housing accessible to 
existing or planned jobs;
    (3) Energy conservation project includes activities that address 
energy conservation, principally for the benefit of the residents of the 
grantee's jurisdiction; and
    (4) To carry out a project means that the CBDO undertakes the funded 
activities directly or through contract

[[Page 713]]

with an entity other than the grantee, or through the provision of 
financial assistance for activities in which it retains a direct and 
controlling involvement and responsibilities.
    (b) Ineligible activities. Notwithstanding that CBDOs may carry out 
activities that are not otherwise eligible under this subpart, this 
section does not authorize:
    (1) Carrying out an activity described as ineligible in 
Sec. 1003.207(a);
    (2) Carrying out public services that do not meet the requirements 
of Sec. 1003.201(e), except services carried out under this section that 
are specifically designed to increase economic opportunities through job 
training and placement and other employment support services, including, 
but not limited to, peer support programs, counseling, child care, 
transportation, and other similar services;
    (3) Carrying out an activity that would otherwise be eligible under 
Sec. 1003.205 or Sec. 1003.206, but that would result in the grantee's 
exceeding the spending limitation in Sec. 1003.206.
    (c) Eligible CBDOs. (1) A CBDO qualifying under this section is an 
organization which has the following characteristics:
    (i) Is an association or corporation organized under State or local 
law to engage in community development activities (which may include 
housing and economic development activities) primarily within an 
identified geographic area of operation within the jurisdiction of the 
grantee; and
    (ii) Has as its primary purpose the improvement of the physical, 
economic or social environment of its geographic area of operation by 
addressing one or more critical problems of the area, with particular 
attention to the needs of persons of low and moderate income; and
    (iii) May be either non-profit or for-profit, provided any monetary 
profits to its shareholders or members must be only incidental to its 
operations; and
    (iv) Maintains at least 51 percent of its governing body's 
membership for low- and moderate-income residents of its geographic area 
of operation, owners or senior officers of private establishments and 
other institutions located in and serving its geographic area of 
operation, or representatives of low- and moderate-income neighborhood 
organizations located in its geographic area of operation; and
    (v) Is not an agency or instrumentality of the grantee and does not 
permit more than one-third of the membership of its governing body to be 
appointed by, or to consist of, elected or other public officials or 
employees or officials of an ineligible entity (even though such persons 
may be otherwise qualified under paragraph (c)(1)(iv) of this section); 
and
    (vi) Except as otherwise authorized in paragraph (c)(1)(v) of this 
section, requires the members of its governing body to be nominated and 
approved by the general membership of the organization, or by its 
permanent governing body; and
    (vii) Is not subject to requirements under which its assets revert 
to the grantee upon dissolution; and
    (viii) Is free to contract for goods and services from vendors of 
its own choosing.
    (2) A CBDO that does not meet the criteria in paragraph (c)(1) of 
this section may also qualify as an eligible entity under this section 
if it meets one of the following requirements:
    (i) Is an entity organized pursuant to section 301(d) of the Small 
Business Investment Act of 1958 (15 U.S.C. 681(d)), including those 
which are profit making; or
    (ii) Is an SBA-approved Section 501 State Development Company or 
Section 502 Local Development Company, or an SBA Certified Section 503 
Company under the Small Business Investment Act of 1958, as amended; or
    (iii) Is a Community Housing Development Organization (CHDO) under 
24 CFR 92.2, designated as a CHDO by the HOME Investment Partnerships 
program participating jurisdiction, with a geographic area of operation 
of no more than one neighborhood, and has received HOME funds under 24 
CFR 92.300 or is expected to receive HOME funds as described in and 
documented in accordance with 24 CFR 92.300(e); or
    (iv) Is a tribal-based nonprofit organization. Such organizations 
are associations or corporations duly organized to promote and undertake 
community development activities on a not-for-

[[Page 714]]

profit basis within an identified service area.
    (3) A CBDO that does not qualify under paragraphs (c)(1) or (2) of 
this section may also be determined to qualify as an eligible entity 
under this section if the grantee demonstrates to the satisfaction of 
HUD, through the provision of information regarding the organization's 
charter and by-laws, that the organization is sufficiently similar in 
purpose, function, and scope to those entities qualifying under 
paragraphs (c)(1) or (2) of this section.



Sec. 1003.205  Eligible planning, urban environmental design and policy-planning-management-capacity building activities.

    (a) Planning activities which consist of all costs of data 
gathering, studies, analysis, and preparation of plans and the 
identification of actions that will implement such plans, including, but 
not limited to comprehensive plans, community development plans and 
functional plans in areas such as housing and economic development. In 
addition, other plans and studies such as capital improvements programs, 
individual project plans, general environmental studies, and strategies 
and action programs to implement plans, including the development of 
codes and ordinances are also eligible activities. With respect to the 
costs of individual project plans, engineering and design costs related 
to a specific activity are eligible as part of the cost of such activity 
under Secs. 1003.201 through 1003.204 and are not considered planning 
costs. Also, costs necessary to comply with the requirements of 24 CFR 
part 58, including project specific environmental assessments and 
clearances for activities eligible under this part are eligible as part 
of the cost of such activities under Secs. 1003.201 through 1003.204.
    (b) Policy--planning--management--capacity building activities 
including those which will enable the grantee to determine its needs, 
set long term goals and short term objectives, devise programs to meet 
these goals and objectives, evaluate the progress being made in 
accomplishing the goals and objectives. In addition, actions necessary 
to carry out management, coordination and monitoring of activities 
necessary for effective planning implementation are eligible planning 
activities, however the costs necessary to implement the plans are not.



Sec. 1003.206  Program administration costs.

    ICDBG funds may be used for the payment of reasonable administrative 
costs and carrying charges related to the planning and execution of 
community development activities assisted in whole or in part with funds 
provided under this part. No more than 20 percent of the sum of any 
grant plus program income received shall be expended for activities 
described in this section and in Sec. 1003.205--Eligible planning, urban 
environmental design and policy-planning-management capacity building 
activities. This does not include staff and overhead costs directly 
related to carrying out activities eligible under Secs. 1003.201 through 
1003.204, since those costs are eligible as part of such activities. In 
addition, technical assistance costs associated with developing the 
capacity to undertake a specific funded activity are also not considered 
program administration costs. These costs must not, however, exceed 10% 
of the total grant award.
    (a) General management, oversight and coordination. Reasonable costs 
of overall program management, coordination, monitoring, and evaluation. 
Such costs include, but are not necessarily limited to, necessary 
expenditures for the following:
    (1) Salaries, wages, and related costs of the grantee's staff, the 
staff of local public agencies, or other staff engaged in program 
administration. In charging costs to this category the grantee may 
either include the entire salary, wages, and related costs allocable to 
the program of each person whose primary responsibilities with regard to 
the program involve program administration assignments, or the pro rata 
share of the salary, wages, and related costs of each person whose job 
includes any program administration assignments. The grantee may use 
only one of these methods during the grant period. Program 
administration includes the following types of assignments:

[[Page 715]]

    (i) Providing tribal officials and citizens with information about 
the program;
    (ii) Preparing program budgets and schedules, and amendments 
thereto;
    (iii) Developing systems for assuring compliance with program 
requirements;
    (iv) Developing interagency agreements and agreements with 
subrecipients and contractors to carry out program activities;
    (v) Monitoring program activities for progress and compliance with 
program requirements;
    (vi) Preparing reports and other documents related to the program 
for submission to HUD;
    (vii) Coordinating the resolution of audit and monitoring findings;
    (viii) Evaluating program results against stated objectives; and
    (ix) Managing or supervising persons whose primary responsibilities 
with regard to the program include such assignments as those described 
in paragraph (a)(1) (i) through (viii) of this section.
    (2) Travel costs incurred for official business in carrying out the 
program;
    (3) Administrative services performed under third party contracts or 
agreements, including such services as general legal services, 
accounting services, and audit services; and
    (4) Other costs for goods and services required for administration 
of the program, including such goods and services as rental or purchase 
of equipment, furnishings, or other personal property (or the payment of 
depreciation or use allowances for such items in accordance with OMB 
Circulars A-21, A-87 or A-122, as applicable), insurance, utilities, 
office supplies, and rental and maintenance (but not purchase) of office 
space. (OMB Circulars are available from the Executive Office of the 
President, Publication Service, 725 17th Street, N.W., Suite G-2200, 
Washington, DC 20503, Telephone, 202-395-7332.)
    (b) Public information. The provisions of information and other 
resources to residents and citizen organizations participating in the 
planning, implementation, or assessment of activities being assisted 
with ICDBG funds.
    (c) Indirect costs. Indirect costs may be charged to the ICDBG 
program under a cost allocation plan prepared in accordance with OMB 
Circular A-21, A-87, or A-122 as applicable.
    (d) Submission of applications for Federal programs. Preparation of 
documents required for submission to HUD to receive funds under the 
ICDBG program. In addition, ICDBG funds may be used to prepare 
applications for other Federal programs where the grantee determines 
that such activities are necessary or appropriate to achieve its 
community development objectives.



Sec. 1003.207  Ineligible activities.

    The general rule is that any activity that is not authorized under 
the provisions of Secs. 1003.201 through 1003.206 is ineligible to be 
assisted with ICDBG funds. This section identifies specific activities 
that are ineligible and provides guidance in determining the eligibility 
of other activities frequently associated with housing and community 
development.
    (a) The following activities may not be assisted with ICDBG funds:
    (1) Buildings or portions thereof used for the general conduct of 
government as defined at Sec. 1003.4 cannot be assisted with ICDBG 
funds. This does not include, however, the removal of architectural 
barriers under Sec. 1003.201(c) involving any such building. Also, where 
acquisition of real property includes an existing improvement which is 
to be used in the provision of a building for the general conduct of 
government, the portion of the acquisition cost attributable to the land 
is eligible, provided such acquisition meets the primary objective 
described in Sec. 1003.208.
    (2) General government expenses. Except as otherwise specifically 
authorized in this subpart or under OMB Circular A-87, expenses required 
to carry out the regular responsibilities of the grantee are not 
eligible for assistance under this part.
    (3) Political activities. ICDBG funds shall not be used to finance 
the use of facilities or equipment for political purposes or to engage 
in other partisan political activities, such as candidate forums, voter 
transportation, or voter registration. However, a facility originally 
assisted with ICDBG funds may

[[Page 716]]

be used on an incidental basis to hold political meetings, candidate 
forums, or voter registration campaigns, provided that all parties and 
organizations have access to the facility on an equal basis, and are 
assessed equal rent or use charges, if any.
    (b) The following activities may not be assisted with ICDBG funds 
unless authorized under provisions of Sec. 1003.203 or as otherwise 
specifically noted herein, or when carried out by a CBDO under the 
provisions of Sec. 1003.204.
    (1) Purchase of equipment. The purchase of equipment with ICDBG 
funds is generally ineligible.
    (i) Construction equipment. The purchase of construction equipment 
is ineligible, but compensation for the use of such equipment through 
leasing, depreciation, or use allowances pursuant to OMB Circular A-21, 
A-87 or A-122 as applicable for an otherwise eligible activity is an 
eligible use of ICDBG funds.
    (ii) Furnishings and personal property. The purchase of equipment, 
fixtures, motor vehicles, furnishings, or other personal property not an 
integral structural fixture is generally ineligible. Exceptions to this 
general prohibition are set forth in Sec. 1003.201(o).
    (2) Operating and maintenance expenses. The general rule is that any 
expense associated with repairing, operating or maintaining public 
facilities, improvements and services is ineligible. Specific exceptions 
to this general rule are operating and maintenance expenses associated 
with public service activities, interim assistance, and office space for 
program staff employed in carrying out the ICDBG program. For example, 
the use of ICDBG funds to pay the allocable costs of operating and 
maintaining a facility used in providing a public service would be 
eligible under Sec. 1003.201(e), even if no other costs of providing 
such a service are assisted with such funds. Examples of ineligible 
operating and maintenance expenses are:
    (i) Maintenance and repair of streets, parks, playgrounds, water and 
sewer facilities, neighborhood facilities, senior centers, centers for 
persons with a disability, parking and similar public facilities; and
    (ii) Payment of salaries for staff, utility costs and similar 
expenses necessary for the operation of public works and facilities.
    (3) New housing construction. ICDBG funds may not be used for the 
construction of new permanent residential structures or for any program 
to subsidize or assist such new construction, except:
    (i) As provided under the last resort housing provisions set forth 
in 24 CFR part 42; or
    (ii) When carried out by a CBDO pursuant to Sec. 1003.204(a);
    (4) Income payments. The general rule is that ICDBG funds may not be 
used for income payments. For purposes of the ICDBG program, income 
payments means a series of subsistence-type grant payments made to an 
individual or family for items such as food, clothing, housing (rent or 
mortgage) or utilities, but excludes emergency payments made over a 
period of up to three months to the provider of such items or services 
on behalf of an individual or family.



Sec. 1003.208  Criteria for compliance with the primary objective.

    The Act establishes as its primary objective the development of 
viable communities by providing decent housing and a suitable living 
environment and expanding economic opportunities, principally for 
persons of low and moderate income. Consistent with this objective, not 
less than 70 percent of the expenditures of each single purpose grant 
shall be for activities which meet the criteria set forth in paragraphs 
(a), (b), (c) and (d) of this section. Activities meeting these criteria 
as applicable will be considered to benefit low and moderate income 
persons unless there is substantial evidence to the contrary. In 
assessing any such evidence, the full range of direct effects of the 
assisted activity will be considered. (The grantee shall appropriately 
ensure that activities that meet these criteria do not benefit moderate 
income persons to the exclusion of low income persons.)
    (a) Area benefit activities. (1) An activity, the benefits of which 
are available to all the residents in a particular area, where at least 
51 percent of the

[[Page 717]]

residents are low and moderate income persons. Such an area need not be 
coterminous with census tracts or other officially recognized boundaries 
but must be the entire area served by the activity. An activity that 
serves an area that is not primarily residential in character shall not 
qualify under this criterion.
    (2) For purposes of determining qualification under this criterion, 
activities of the same type that serve different areas will be 
considered separately on the basis of their individual service area.
    (3) In determining whether there is a sufficiently large percentage 
of low and moderate income persons residing in the area served by an 
activity to qualify under paragraph (a) (1) or (2) of this section, the 
most recently available decennial census information shall be used to 
the fullest extent feasible, together with the Section 8 income limits 
that would have applied at the time the income information was collected 
by the Census Bureau. Grantees that believe that the census data does 
not reflect current relative income levels in an area, or where census 
boundaries do not coincide sufficiently well with the service area of an 
activity, may conduct (or have conducted) a current survey of the 
residents of the area to determine the percent of such persons that are 
low and moderate income. HUD will accept information obtained through 
such surveys, to be used in lieu of the decennial census data, where it 
determines that the survey was conducted in such a manner that the 
results meet standards of statistical reliability that are comparable to 
that of the decennial census data for areas of similar size. Where there 
is substantial evidence that provides a clear basis to believe that the 
use of the decennial census data would substantially overstate the 
proportion of persons residing there that are low and moderate income, 
HUD may require that the grantee rebut such evidence in order to 
demonstrate compliance with section 105(c)(2) of the Act.
    (b) Limited clientele activities. (1) An activity which benefits a 
limited clientele, at least 51 percent of whom are low or moderate 
income persons. (The following kinds of activities may not qualify under 
paragraph (b) of this section: Activities, the benefits of which are 
available to all the residents of an area; activities involving the 
acquisition, construction or rehabilitation of property for housing; or 
activities where the benefit to low and moderate income persons to be 
considered is the creation or retention of jobs except as provided in 
paragraph (b)(4) of this section.) To qualify under paragraph (b) of 
this section, the activity must meet one of the following tests:
    (i) Benefit a clientele who are generally presumed to be principally 
low and moderate income persons. Activities that exclusively serve a 
group of persons in any one of the following categories may be presumed 
to benefit persons, 51 percent of whom are low-and moderate-income: 
abused children, battered spouses, elderly persons, adults meeting the 
Bureau of the Census' current Population Reports definition of 
``severely disabled'', homeless persons, illiterate adults, persons 
living with AIDS, and migrant workers; or
    (ii) Require information on family size and income so that it is 
evident that at least 51 percent of the clientele are persons whose 
family income does not exceed the low and moderate income limit; or
    (iii) Have income eligibility requirements which limit the activity 
exclusively to low and moderate income persons; or
    (iv) Be of such nature and be in such location that it may be 
concluded that the activity's clientele will primarily be low and 
moderate income persons.
    (2) An activity that serves to remove material or architectural 
barriers to the mobility or accessibility of elderly persons or adults 
meeting the Bureau of the Census' Current Population Reports definition 
of ``severely disabled'' will be presumed to qualify under this 
criterion if it is restricted, to the extent practicable, to the removal 
of such barriers by assisting:
    (i) The reconstruction of a public facility or improvement, or 
portion thereof, that does not qualify under Sec. 1003.208(a); or

[[Page 718]]

    (ii) The rehabilitation of a privately-owned nonresidential building 
or improvement that does not qualify under Sec. 1003.208 (a) or (d); or
    (iii) The rehabilitation of the common areas of a residential 
structure that contains more than one dwelling unit.
    (3) A microenterprise assistance activity carried out in accordance 
with the provisions of Sec. 1003.201(l) with respect to those owners of 
microenterprises and persons developing microenterprises assisted under 
the activity during the grant period who are low and moderate income 
persons. For purposes of this paragraph, persons determined to be low 
and moderate income may be presumed to continue to qualify for up to a 
three year period.
    (4) An activity designed to provide job training and placement and/
or other employment support services, including but not limited to, peer 
support programs, counseling, child care, transportation, and other 
similar services, in which the percentage of low and moderate income 
persons assisted is less than 51 percent may qualify under this 
paragraph in the following limited circumstance:
    (i) In such cases where such training or provision of supportive 
services assists business(es), the only use of ICDBG assistance for the 
project is to provide the job training and/or supportive services; and
    (ii) The proportion of the total cost of the project borne by ICDBG 
funds is no greater than the proportion of the total number of persons 
assisted who are low or moderate income.
    (c) Housing activities. An eligible activity carried out for the 
purpose of providing or improving permanent residential structures 
which, upon completion, will be occupied by low and moderate income 
households. This would include, but not necessarily be limited to, the 
acquisition or rehabilitation of property, conversion of non-residential 
structures, and new housing construction. Funds expended for activities 
which qualify under the provisions of this paragraph shall be counted as 
benefiting low and moderate income persons but shall be limited to an 
amount determined by multiplying the total cost (including ICDBG and 
non-ICDBG costs) of the acquisition, construction or rehabilitation by 
the percent of units in such housing to be occupied by low and moderate 
income persons. If the structure assisted contains two dwelling units, 
at least one must be occupied by low and moderate income households, and 
if the structure contains more than two dwelling units, at least 51 
percent of the units must be so occupied. Where two or more rental 
buildings being assisted are or will be located on the same or 
contiguous properties, and the buildings will be under common ownership 
and management, the grouped buildings may be considered for this purpose 
as a single structure. For rental housing, occupancy by low and moderate 
income households must be at affordable rents to qualify under this 
criterion. The grantee shall adopt and make public its standards for 
determining ``affordable rents'' for this purpose. The following shall 
also qualify under this criterion:
    (1) When less than 51 percent of the units in a structure will be 
occupied by low and moderate income households, ICDBG assistance may be 
provided in the following limited circumstances:
    (i) The assistance is for an eligible activity to reduce the 
development cost of the new construction of a multifamily, non-elderly 
rental housing project;
    (ii) Not less than 20 percent of the units will be occupied by low 
and moderate income households at affordable rents; and
    (iii) The proportion of the total cost of developing the project to 
be borne by ICDBG funds is no greater than the proportion of units in 
the project that will be occupied by low and moderate income households.
    (2) When ICDBG funds are used for housing services eligible under 
Sec. 1003.201(j), such funds shall be considered to benefit low-and 
moderate-income persons if the housing for which the services are 
provided is to be occupied by low-and moderate-income households.
    (d) Job creation or retention activities. An activity designed to 
create or retain permanent jobs where at least 51 percent of the jobs, 
computed on a full time equivalent basis, involve the employment of low 
and moderate persons.

[[Page 719]]

For purposes of determining whether a job is held by or made available 
to a low or moderate income person, the person may be presumed to be a 
low or moderate income person if: he/she resides within a census tract 
(or block numbering area) where not less than 70 percent of the 
residents have incomes at or below 80 percent of the area median; or, if 
he/she resides in a census tract (or block numbering area) which meets 
the Federal Empowerment Zone or Enterprise Community eligibility 
criteria; or, if the assisted business is located in and the job under 
consideration is to be located in such a tract or area. As a general 
rule, each assisted business shall be considered to be a separate 
activity for purposes of determining whether the activity qualifies 
under this paragraph. However, in certain cases such as where ICDBG 
funds are used to acquire, develop or improve a real property (e.g., a 
business incubator or an industrial park) the requirement may be met by 
measuring jobs in the aggregate for all the businesses which locate on 
the property, provided such businesses are not otherwise assisted by 
ICDBG funds. Where ICDBG funds are used to pay for the staff and 
overhead costs of a CBDO under the provisions of Sec. 1003.204 making 
loans to businesses from non-ICDBG funds, this requirement may be met by 
aggregating the jobs created by all of the businesses receiving loans 
during any one year period. For an activity that creates jobs, the 
grantee must document that at least 51 percent of the jobs will be held 
by, or will be available to, low and moderate income persons. For an 
activity that retains jobs, the grantee must document that the jobs 
would actually be lost without the ICDBG assistance and that either or 
both of the following conditions apply with respect to at least 51 
percent of the jobs at the time the ICDBG assistance is provided: The 
job is known to be held by a low or moderate income person; or the job 
can reasonably be expected to turn over within the following two years 
and that steps will be taken to ensure that it will be filled by, or 
made available to, a low or moderate income person upon turnover. Jobs 
will be considered to be available to low and moderate income persons 
for these purposes only if:
    (1) Special skills that can only be acquired with substantial 
training or work experience or education beyond high school are not a 
prerequisite to fill such jobs, or the business agrees to hire 
unqualified persons and provide training; and
    (2) The grantee and the assisted business take actions to ensure 
that low and moderate income persons receive first consideration for 
filling such jobs.
    (e) Additional criteria. (1) Where the assisted activity is 
acquisition of real property, a preliminary determination of whether the 
activity addresses the primary objective may be based on the planned use 
of the property after acquisition. A final determination shall be based 
on the actual use of the property, excluding any short-term, temporary 
use.
    (2) Where the assisted activity is relocation assistance that the 
grantee is required to provide, such relocation assistance shall be 
considered to address the primary objective as addressed by the 
displacing activity.
    (3) In any case where the activity undertaken for the purpose of 
creating or retaining jobs is a public improvement and the area served 
is primarily residential, the activity must meet the requirements of 
paragraph (a) of this section as well as those of paragraph (d) of this 
section in order to qualify as benefiting low and moderate income 
persons.
    (4) Expenditures for activities meeting the criteria for benefiting 
low and moderate income persons shall be used in determining the extent 
to which the grantee's overall program benefits such persons. In 
determining the percentage of funds expended for such activities:
    (i) Costs of administration and planning, eligible under 
Sec. 1003.205 and Sec. 1003.206 respectively, will be assumed to benefit 
low and moderate income persons in the same proportion as the remainder 
of the ICDBG funds and, accordingly, shall be excluded from the 
calculation.
    (ii) Funds expended for the acquisition, new construction or 
rehabilitation of property for housing those qualified under 
Sec. 1003.208(c) shall be counted for this purpose, but shall be

[[Page 720]]

limited to an amount determined by multiplying the total cost (including 
ICDBG and non-ICDBG costs) of the acquisition, construction, or 
rehabilitation by the percent of units in such housing occupied by low 
and moderate income persons.
    (iii) Funds expended for any other activity which qualifies under 
Sec. 1003.208 shall be counted for this purpose in their entirety.



    Subpart D--Single Purpose Grant Application and Selection Process



Sec. 1003.300  Application requirements.

    (a) Application information. A Notice of Funding Availability (NOFA) 
shall be published in the Federal Register not less than 30 days before 
the deadline for application submission. The NOFA will provide 
information relating to the date and time for application submission, 
the form and content requirements of the application, specific 
information regarding the rating and ranking criteria to be used, and 
any other information pertinent to the application process.

    (b) Costs incurred by applicant. Costs incurred by an applicant 
prior to the submission of the single purpose grant application to HUD 
will not be recognized by HUD as eligible ICDBG expenses.

    (c) HUD will not normally reimburse or recognize costs incurred 
before HUD approval of the application for funding. However, under 
unusual circumstances, the Area ONAP may consider and approve written 
requests to recognize and reimburse costs incurred after submission of 
the application where failure to do so would impose undue hardship on 
the applicant. Such written authorization will be made only before the 
costs are incurred and where the requirements for reimbursement have 
been met in accordance with 24 CFR 58.22 and with the understanding that 
HUD has no obligation whatsoever to approve the application or to 
reimburse the applicant should the application be disapproved.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.301  Selection process.

    (a) Threshold requirements. In order for applications that have 
passed the initial screening tests listed in the NOFA to be rated and 
ranked, Area ONAPs must determine that the following requirements have 
been met:

    (1) Community development appropriateness. (i) The project costs are 
reasonable;

    (ii) The project is appropriate for the intended use; and

    (iii) The project is usable or achievable (generally within a two-
year period).

    If in the judgment of the Area ONAP, available data indicate that 
the proposed project does not meet these requirements, the Area ONAP 
shall reject the project from further consideration.

    (2) Capacity. The applicant possesses, or will acquire, the 
managerial, technical, or administrative staff necessary to carry out 
the proposed program. If the Area ONAP determines that the applicant 
does not have or cannot obtain the capacity to undertake the proposed 
program, the application will be rejected from further consideration.

    (3) Performance.--(i) Community development. Performance 
determinations are made through the Area ONAP's assessment process. 
Applicants that have been advised in writing of negative findings on 
previous grants, for which a schedule of corrective actions has been 
established, will not be considered for funding if they are behind 
schedule as of the deadline date for filing applications.

    (ii) Housing assistance. The applicant must not have been found 
taking actions to impede the provision or operation of assisted housing 
for the low- and moderate-income members of the tribe or village. If 
inadequate performance is found, and the applicant has been notified in 
writing, they may be rejected from further consideration. Performance 
determinations are made through the Area ONAP's assessment process.
    (iii) Audits. An applicant that has an outstanding ICDBG obligation 
to HUD that is in arrears, or one that has not agreed to a repayment 
schedule, will be

[[Page 721]]

disqualified from the current and subsequent competitions until the 
obligations are current. An applicant whose response to an audit finding 
is overdue or unsatisfactory will be disqualified from the current and 
subsequent competitions until the applicant has taken final action 
necessary to close the audit finding(s). The Area ONAP administrator may 
provide exceptions to this disqualification requirement in cases where 
the applicant has made a good faith effort to clear non-monetary audit 
findings. In no instance, however, shall an exception be provided when 
funds are due HUD, unless a satisfactory arrangement for repayment of 
the debt has been made, and payments are current.
    (b) Application rating system. Applications that meet the threshold 
requirements established in paragraph (a) of this section will be rated 
competitively within each Area ONAP's jurisdiction.
    (c) NOFAs will define and establish weights for the selection 
criteria for each rating category contained in this subpart, will 
specify the maximum points available, and will describe how point awards 
will be made. Each Area ONAP will rate applications on the basis of 
their responsiveness to the criteria contained in this subpart as 
defined in the periodic NOFAs.
    (d) Set-aside selection of projects. If funds have been set aside by 
statute for a specific purpose in any fiscal year, other criteria 
pertinent to the set-aside may be used to select projects for funding 
from the set-aside.



Sec. 1003.302  Project specific threshold requirements.

    (a) Housing rehabilitation projects. All applicants for housing 
rehabilitation projects shall adopt rehabilitation standards and 
rehabilitation policies before submitting an application. The applicant 
shall assure that it will use project funds to rehabilitate units only 
when the homeowner's payments are current or the homeowner is current in 
a repayment agreement that is subject to approval by the Area ONAP. The 
Area ONAP administrator may grant exceptions to this requirement on a 
case-by-case basis.
    (b) New housing construction projects. New housing construction can 
only be implemented through a nonprofit organization that is eligible 
under Sec. 1003.204 or is otherwise eligible under Sec. 1003.207(b)(3). 
All applicants for new housing construction projects shall adopt, by 
current tribal resolution, construction standards before submitting an 
application. All applications which include new housing construction 
projects must document that:
    (1) No other housing is available in the immediate reservation area 
that is suitable for the household(s) to be assisted; and
    (2) No other sources can meet the needs of the household(s) to be 
assisted; and
    (3) Rehabilitation of the unit occupied by the household(s) to be 
assisted is not economically feasible; or
    (4) The household(s) to be housed currently is in an overcrowded 
housing unit (sharing with another household); or
    (5) The household(s) to be assisted has no current residence.
    (c) Economic development projects. All applicants for economic 
development projects must provide an analysis which shows public benefit 
commensurate with the ICDBG assistance requested will result from the 
assisted project. This analysis should also establish that to the extent 
practicable: reasonable financial support will be committed from non-
Federal sources prior to disbursement of Federal funds; any grant amount 
provided will not substantially reduce the amount of non-Federal 
financial support for the activity; not more than a reasonable rate of 
return on investment is provided to the owner; and, that grant funds 
used for the project will be disbursed on a pro rata basis with amounts 
from other sources. In addition, it must be established that the project 
is financially feasible and that it has a reasonable chance of success.



Sec. 1003.303  Project rating categories.

    (a) There are three project rating categories: housing, community 
facilities, and economic development. The housing rating category 
consists of three components: Housing rehabilitation, land to support 
new housing, and new housing construction. The community facility 
category consists of two

[[Page 722]]

components: Infrastructure and buildings. The economic development 
category has only one component. With the exceptions indicated in 
paragraph (b) of this section, the following criteria will be used to 
rate projects.
    (1) Project need and design.
    (2) Planning and implementation.
    (3) Leverage.
    (b) Exceptions. (1) Projects for the acquisition of land to support 
new housing will not be rated under the leverage criterion.
    (2) Economic development projects will be not be rated under the 
project need and design and planning and implementation criteria. These 
projects will be rated under the leverage criterion and the following 
additional criteria.
    (i) Organization.
    (ii) Project success.
    (iii) Jobs.
    (iv) Additional considerations consisting of the following:
    (A) Use, improvement, or expansion of tribal members' special 
skills.
    (B) Provision of spin-off benefits.
    (C) Provision of special opportunities for residents of Indian 
housing.
    (D) Provision of benefits to other businesses owned by Indians or 
Alaska natives.
    (E) Commitment to loan repayment or reuse of ICDBG funds.



Sec. 1003.304  Funding process.

    (a) Notification. Area ONAPs will notify applicants of the approval 
or disapproval of their applications. Grant amounts offered may reflect 
adjustments made by the Area ONAPs in accordance with 
Sec. 1003.100(b)(2).
    (b) Grant award. (1) As soon as the Area ONAP determines that the 
applicant has complied with any pre-award requirements and absent 
information which would alter the threshold determinations under 
Sec. 1003.302, the grant will be awarded. The regulations become part of 
the grant agreement.
    (2) All grants shall be conditioned upon the completion of all 
environmental obligations and approval of release of funds by HUD in 
accordance with the requirements of part 58 of this title and, in 
particular, subpart J of part 58 of this title, except as otherwise 
provided in part 58 of this title.
    (3) HUD may impose other grant conditions where additional actions 
or approvals are required before the use of funds.

(Approved by the Office of Management and Budget under OMB Control No. 
2577-0191.)



Sec. 1003.305  Program amendments.

    (a) Grantees shall request prior HUD approval for program amendments 
which will significantly change the scope, location, objective, or class 
of beneficiaries of the approved activities, as originally described in 
the application.
    (b) Amendment requests of $100,000 or more shall include all 
application components required by the NOFA published for the last 
application cycle; those requests of less than $100,000 do not have to 
include the components which address the selection criteria.
    (c) Approval of an amendment request is subject to the following:
    (1) A rating equal to or greater than the lowest rating received by 
a funded project during the most recent funding competition must be 
attained by the amended project if the request is for $100,000 or more;
    (2) Demonstration by the grantee of the capacity to promptly 
complete the modified or new activities;
    (3) Demonstration by the grantee of compliance with the requirements 
of Sec. 1003.604 for citizen participation; and
    (4) The preparation of an amended or new environmental review in 
accordance with part 58 of this title, if there is a significant change 
in the scope or location of approved activities.
    (d) Amendments which address imminent threats to health and safety 
shall be reviewed and approved in accordance with the requirements of 
subpart E of this part.
    (e) If a program amendment fails to be approved and the original 
project is no longer feasible, the grant funds proposed for amendment 
shall be recaptured by HUD.

[[Page 723]]



                    Subpart E--Imminent Threat Grants



Sec. 1003.400  Criteria for funding.

    The following criteria apply to requests for assistance under this 
subpart:
    (a) In response to requests for assistance, HUD may make funds 
available under this subpart to applicants to alleviate or remove 
imminent threats to health or safety. The urgency and immediacy of the 
threat shall be independently verified before the approval of an 
application. Funds may only be used to deal with imminent threats that 
are not of a recurring nature and which represent a unique and unusual 
circumstance, and which impact on an entire service area.
    (b) Funds to alleviate imminent threats may be granted only if the 
applicant can demonstrate to the satisfaction of HUD that other tribal 
or Federal funding sources cannot be made available to alleviate the 
threat.
    (c) HUD will establish grant ceilings for imminent threat 
applications.



Sec. 1003.401  Application process.

    (a) Letter to proceed. The Area ONAP may issue the applicant a 
letter to proceed to incur costs to alleviate imminent threats to health 
and safety only if the assisted activities do not alter environmental 
conditions and are for temporary or permanent improvements limited to 
protection, repair, or restoration actions necessary only to control or 
arrest the effects of imminent threats or physical deterioration. 
Reimbursement of such costs is dependent upon HUD approval of the 
application.
    (b) Applications. Applications shall include the information 
specified in the Notice of Funding Availability (NOFA).
    (c) Application approval. Applications which meet the requirement of 
this section may be approved by the Area ONAP without competition in 
accordance with the applicable requirements of Sec. 1003.304.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.402  Availability of funds.

    Of the funds made available by the NOFA for the ICDBG program, an 
amount to be determined by the Assistant Secretary may be reserved by 
HUD for grants under this subpart. The amount of funds reserved for 
imminent threat funding during each funding cycle will be stated in the 
NOFA. If any of the reserved funds are not used to fund imminent threat 
grants during a fiscal year, they will be added to the allocation of 
ICDBG funds for the subsequent fiscal year and will be used as if they 
were a part of the new allocation.



                     Subpart F--Grant Administration



Sec. 1003.500  Responsibility for grant administration.

    (a) One or more tribal departments or authorities, including 
existing tribal public agencies, may be designated by the chief 
executive officer of the grantee to undertake activities assisted by 
this part. A public agency so designated shall be subject to the same 
requirements as are applicable to subrecipients.
    (b) The grantee is responsible for ensuring that ICDBG funds are 
used in accordance with all program requirements. The use of designated 
public agencies, subrecipients, or contractors does not relieve the 
grantee of this responsibility. The grantee is also responsible for 
determining the adequacy of performance under subrecipient agreements 
and procurement contracts, and for taking appropriate action when 
performance problems arise, such as the actions described in 
Sec. 1003.701.



Sec. 1003.501  Applicability of uniform administrative requirements and cost principles.

    (a) Grantees and subrecipients which are governmental entities 
(including public agencies) shall comply with the requirements and 
standards of OMB Circular No. A-87, ``Principles for Determining Costs 
Applicable to Grants and Contracts with State, Local and Federally 
recognized Indian Tribal Governments'', OMB Circular A-128, ``Audits of 
State and Local Governments'' (implemented at 24 CFR part 44) and with 
the following sections of 24 CFR part 85 ``Uniform Administrative

[[Page 724]]

Requirements for Grants and Cooperative Agreements to State and Local 
Governments''.
    (1) Section 85.3, ``Definitions''.
    (2) Section 85.6, ``Exceptions''.
    (3) Section 85.12, ``Special grant or subgrant conditions for `high-
risk' grantees''.
    (4) Section 85.20, ``Standards for financial management systems,'' 
except paragraph (a).
    (5) Section 85.21, ``Payment''.
    (6) Section 85.22, ``Allowable costs''.
    (7) Section 85.25, ``Program income,'' except as modified by 
Sec. 1003.503.
    (8) Section 85.26, ``Non-federal audits''.
    (9) Section 85.32, ``Equipment,'' except in all cases in which the 
equipment is sold, the proceeds shall be program income.
    (10) Section 85.33, ``Supplies''.
    (11) Section 85.34, ``Copyrights''.
    (12) Section 85.35, ``Subawards to debarred and suspended parties''.
    (13) Section 85.36, ``Procurement,'' except paragraphs (a) States, 
(i)(5) Compliance with the Davis Bacon Act (40 U.S.C. 276a to a-7) and 
(i)(6) Compliance with sections 103 and 107 of the Contract Work Hours 
and Safety Standards Act (40 U.S.C. 327-330). There may be circumstances 
under which the bonding requirements of Sec. 85.36(h) are inconsistent 
with other responsibilities and obligations of the grantee. In such 
circumstances, acceptable methods to provide performance and payment 
assurance may include:
    (i) Deposit with the grantee of a cash escrow of not less than 20 
percent of the total contract price, subject to reduction during the 
warranty period, commensurate with potential risk; or
    (ii) Letter of credit for 25 percent of the total contract price, 
unconditionally payable upon demand of the grantee, subject to reduction 
during the warranty period commensurate with potential risk.
    (14) Section 85.37, ``Subgrants''.
    (15) Section 85.40, ``Monitoring and reporting program 
performance,'' except paragraphs (b) through (d) and paragraph (f).
    (16) Section 85.41, ``Financial reporting,'' except paragraphs (a), 
(b), and (e).
    (17) Section 85.42, ``Retention and access requirements for 
records''. The retention period referenced in Sec. 85.42(b) pertaining 
to individual ICDBG activities starts from the date of the submission of 
the final status and evaluation report as prescribed in Sec. 1003.506(a) 
in which the specific activity is reported.
    (18) Section 85.43, ``Enforcement''.
    (19) Section 85.44, ``Termination for convenience''.
    (20) Section 85.51 ``Later disallowances and adjustments''.
    (21) Section 85.52, ``Collection of amounts due''.
    (b) Subrecipients, except subrecipients that are governmental 
entities, shall comply with the requirements and standards of OMB 
Circular No. A-122, ``Cost Principles for Nonprofit Organizations,'' or 
OMB Circular No. A-21, ``Cost Principles for Educational Institutions,'' 
as applicable, and OMB Circular A-133, ``Audits of Institutions of 
Higher Education and Other Nonprofit Institutions'' (implemented at 24 
CFR part 45). Audits shall be conducted annually. Such subrecipients 
shall also comply with the following provisions of 24 CFR part 84 
``Uniform Administrative Requirements for Grants and Agreements With 
Institutions of Higher Education, Hospitals and Other Non-Profit 
Organizations'').
    (1) Subpart A--``General''.
    (2) Subpart B--``Pre-Award Requirements,'' except for Sec. 84.12, 
``Forms for Applying for Federal Assistance''.
    (3) Subpart C--``Post-Award Requirements,'' except for Sec. 84.22, 
``Payment Requirements,'' grantees shall follow the standards of 
Secs. 85.20(7) and 85.21 in making payments to subrecipients.
    (4) Section 84.23, ``Cost Sharing and Matching''.
    (5) Section 84.24, ``Program Income'', as modified by Sec. 1003.503.
    (6) Section 84.25, ``Revision of Budget and Program Plans''.
    (7) Section 84.32, ``Real Property.'' In lieu of Sec. 84.32, ICDBG 
subrecipients shall follow Sec. 1003.504 of the ICDBG regulations.
    (8) Section 84.34(g) ``Equipment,'' except that in lieu of the 
disposition provisions of this paragraph:
    (i) In all cases in which equipment is sold during the grant period 
as defined in 24 CFR 85.25, the proceeds shall be program income; and

[[Page 725]]

    (ii) Equipment not needed by the subrecipient for ICDBG activities 
shall be transferred to the grantee for the ICDBG program or shall be 
retained after compensating the grantee.
    (9) Section 84.51, ``Monitoring and Reporting Program Performance.'' 
Only Sec. 84.51(a) applies to ICDBG subrecipients.
    (10) Section 84.52, ``Financial Reporting''.
    (11) Section 84.53(b), ``Retention and access requirements for 
records.'' The retention period referenced in Sec. 84.53(b) pertaining 
to individual ICDBG activities starts from the date of the submission of 
the final status and evaluation report as prescribed in 
Sec. 1003.506(a), in which the specific activity is reported.
    (12) Section 84.61, ``Termination.'' In lieu of the provisions of 
this section, ICDBG subrecipients shall comply with Sec. 1003.502 (b)(7) 
of the ICDBG regulations.
    (13) Subpart D--``After-the-Award Requirements,'' except for 
Sec. 84.71, ``Closeout Procedures''.
    (c) Cost principles. (1) All items of cost listed in Attachment B of 
OMB Circulars A-21, A-87, or A-123, as applicable, which require prior 
Federal agency approval are allowable without the prior approval of HUD 
to the extent that they comply with the general policies and principles 
stated in Attachment A of such circulars and are otherwise eligible 
under subpart C of this part, except for the following:
    (i) Depreciation methods for fixed assets shall not be changed 
without specific approval of HUD or, if charged through a cost 
allocation plan, the Federal cognizant agency.
    (ii) Fines and penalties are unallowable costs to the ICDBG program.
    (2) No person providing consultant services in an employer-employee 
type of relationship shall receive more than a reasonable rate of 
compensation for personal services paid with ICDBG funds. In no event, 
however, shall such compensation exceed the equivalent of the daily rate 
paid for Level IV of the Executive Schedule.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.502  Agreements with subrecipients.

    (a) Before disbursing any ICDBG funds to a subrecipient, the grantee 
shall sign a written agreement with the subrecipient. The agreement 
shall remain in effect during any period that the subrecipient has 
control over ICDBG funds, including program income.
    (b) At a minimum, the written agreement with the subrecipient shall 
include provisions concerning the following items:
    (1) Statement of work. The agreement shall include a description of 
the work to be performed, a schedule for completing the work, and a 
budget. These items shall be in sufficient detail to provide a sound 
basis for the grantee effectively to monitor performance under the 
agreement.
    (2) Records and reports. The grantee shall specify in the agreement 
the particular records the subrecipient must maintain and the particular 
reports the subrecipient must submit in order to assist the grantee in 
meeting its recordkeeping and reporting requirements.
    (3) Program income. The agreement shall include the program income 
requirements set forth in Sec. 85.25 as modified by Sec. 1003.503.
    (4) Uniform administrative requirements. The agreement shall require 
the subrecipient to comply with applicable administrative requirements, 
as described in Sec. 1003.501.
    (5) Other program requirements. The agreement shall require the 
subrecipient to carry out each activity in compliance with all Federal 
laws and regulations described in subpart G of this part, except that 
the subrecipient does not assume the grantee's environmental 
responsibilities described at Sec. 1003.605.
    (6) Conditions for religious organizations. Where applicable, the 
conditions prescribed by HUD for the use of ICDBG funds by religious 
organizations shall be included in the agreement.
    (7) Suspension and termination. The agreement shall specify that, in 
accordance with 24 CFR 85.43, suspension or termination may occur if the 
subrecipient materially fails to comply with any term of the award, and 
that

[[Page 726]]

the award may be terminated for convenience in accordance with 24 CFR 
85.44.
    (8) Reversion of assets. The agreement shall specify that upon its 
expiration the subrecipient shall transfer to the grantee any ICDBG 
funds on hand at the time of expiration and any accounts receivable 
attributable to the use of ICDBG funds. It shall also include provisions 
designed to ensure that any real property under the subrecipient's 
control that was acquired or improved in whole or in part with ICDBG 
funds (including ICDBG funds provided to the subrecipient in the form of 
a loan) in excess of $25,000 is either:
    (i) Used to meet the primary objective as stated in Sec. 1003.208 
until five years after expiration of the agreement, or for such longer 
period of time as determined to be appropriate by the grantee; or
    (ii) Not used in accordance with paragraph (b)(8)(i) of this 
section, in which event the subrecipient shall pay to the grantee an 
amount equal to the current market value of the property less any 
portion of the value attributable to expenditures of non-ICDBG funds for 
the acquisition of, or improvement to, the property. The payment is 
program income to the grantee if it is received during the grant period. 
(No payment is required after the period of time specified in paragraph 
(b)(8)(i) of this section.)

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.503  Program income.

    (a) Program income requirements for ICDBG grantees are set forth in 
24 CFR 85.25, as modified by this section.
    (b) Program income means gross income received by the grantee or a 
subrecipient directly generated from the use of ICDBG funds during the 
grant period, except as provided in paragraph (b)(4) of this section. 
When program income is generated by an activity that is only partially 
assisted with ICDBG funds, the income shall be prorated to reflect the 
percentage of ICDBG funds used.
    (1) Program income includes, but is not limited to, the following:
    (i) Proceeds from the disposition by sale or long-term lease of real 
property purchased or improved with ICDBG funds;
    (ii) Proceeds from the disposition of equipment purchased with ICDBG 
funds;
    (iii) Gross income from the use or rental of real or personal 
property acquired by the grantee or by a subrecipient with ICDBG funds, 
less costs incidental to generation of the income;
    (iv) Gross income from the use or rental of real property, owned by 
the grantee or by a subrecipient, that was constructed or improved with 
ICDBG funds, less costs incidental to generation of the income;
    (v) Payments of principal and interest on loans made using ICDBG 
funds, except as provided in paragraph (b)(3) of this section;
    (vi) Proceeds from the sale of loans made with ICDBG funds except as 
provided in paragraph (b)(4) of this section;
    (vii) Proceeds from sale of obligations secured by loans made with 
ICDBG funds;
    (viii) Interest earned on funds held in a revolving fund account;
    (ix) Interest earned on program income pending its disposition; and
    (x) Funds collected through special assessments made against 
properties owned and occupied by households not of low and moderate 
income, where the assessments are used to recover all or part of the 
ICDBG portion of a public improvement.
    (2) Program income does not include income earned on grant advances 
from the U.S. Treasury. The following items of income earned on grant 
advances must be remitted to HUD for transmittal to the U.S. Treasury 
and will not be reallocated:
    (i) Interest earned from the investment of the initial proceeds of a 
grant advance by the U.S. Treasury;
    (ii) Income (e.g., interest) earned on loans or other forms of 
assistance provided with ICDBG funds that are used for activities 
determined by HUD either to be ineligible or that fail substantially to 
meet any other requirement of this part.
    (3) The calculation of the amount of program income for the 
grantee's

[[Page 727]]

ICDBG program as a whole (i.e., comprising activities carried out by a 
grantee and its subrecipients) shall exclude payments made by 
subrecipients of principal and/or interest on loans received from 
grantees where such payments are made from program income received by 
the subrecipient. (By making such payments, the subrecipient shall be 
deemed to have transferred program income to the grantee.) The amount of 
program income derived from this calculation shall be used for reporting 
purposes and in determining limitations on planning and administration 
and public services activities to be paid for with ICDBG funds.
    (4) Program income does not include any income received in a single 
year by the grantee and all its subrecipients if the total amount of 
such income does not exceed $25,000.
    (5) Examples of other receipts that are not considered program 
income are proceeds from fundraising activities carried out by 
subrecipients receiving ICDBG assistance; funds collected through 
special assessments used to recover the non-ICDBG portion of a public 
improvement; and proceeds from the disposition of real property acquired 
or improved with ICDBG funds when the disposition occurs after the 
applicable time period specified in Sec. 1003.502(b)(8) for 
subrecipient-controlled property, or in Sec. 1003.504 for grantee-
controlled property.
    (6) For purposes of determining the applicability of the program 
income requirements included in this part and in 24 CFR 85.25, the grant 
period is the time between the effective date of the grant agreement and 
the close-out of the grant pursuant to the requirements of 
Sec. 1003.508.
    (7) As provided for in 24 CFR 85.25(g)(2), program income received 
will be added to the funds committed to the grant agreement and shall be 
used for purposes and under the conditions of the grant agreement.
    (8) Recording program income. The receipt and expenditure of program 
income as defined in Sec. 1003.503(b) shall be recorded as part of the 
financial transactions of the grant program.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.504  Use of real property.

    The standards described in this section apply to real property 
within the grantee's control which was acquired or improved in whole or 
in part using ICDBG funds in excess of $25,000. These standards shall 
apply from the date ICDBG funds are first spent for the property until 
five years after the closeout of the grant from which the assistance to 
the property was provided.
    (a) A grantee may not change the use or planned use of any such 
property (including the beneficiaries of such use) from that for which 
the acquisition or improvement was made unless the grantee provides 
affected citizens with reasonable notice of, and opportunity to comment 
on, any proposed change, and either:
    (1) The new use of such property qualifies as meeting the primary 
objective set forth in Sec. 1003.208 and is not a building for the 
general conduct of government; or
    (2) The requirements in paragraph (b) of this section are met.
    (b) If the grantee determines, after consultation with affected 
citizens, that it is appropriate to change the use of the property to a 
use which does not qualify under paragraph (a)(1) of this section, it 
may retain or dispose of the property for the changed use if the 
grantee's ICDBG program is reimbursed in the amount of the current fair 
market value of the property, less any portion of the value attributable 
to expenditures of non-ICDBG funds for acquisition of, and improvements 
to, the property.
    (c) If the change of use occurs after program closeout, the proceeds 
from the disposition of the real property shall be used for activities 
which meet the eligibility requirements set forth in subpart C of this 
part and the primary objective set forth in Sec. 1003.208.
    (d) Following the reimbursement of the ICDBG program in accordance 
with paragraph (b) of this section, the property no longer will be 
subject to any ICDBG requirements.



Sec. 1003.505  Records to be maintained.

    Each grantee shall establish and maintain sufficient records to 
enable the Secretary to determine whether

[[Page 728]]

the grantee has met the requirements of this part.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.506  Reports.

    (a) Status and evaluation report. Grantees shall submit a status and 
evaluation report on previously funded open grants 45 days after the end 
of the Federal fiscal year and at the time of grant close-out. The 
report shall be in a narrative form addressing these areas.
    (1) Progress. The progress made in completing approved activities 
should be described. This description should include a listing of work 
remaining together with a revised implementation schedule, if necessary.
    (2) Expenditure of funds. A breakdown of funds spent on each major 
project activity or category should be provided.
    (3) Grantee assessment. If the project has been completed, an 
evaluation of the effectiveness of the project in meeting the community 
development needs of the grantee should be provided.

    (b) Minority business enterprise reports. Grantees shall submit to 
HUD, by April 10, a report on contract and subcontract activity during 
the first half of the fiscal year and by October 10 a report on such 
activity during the second half of the year.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.507  Public access to program records.

    Notwithstanding the provisions of 24 CFR 85.42(f), grantees shall 
provide citizens with reasonable access to records regarding the past 
use of ICDBG funds, consistent with applicable State and tribal laws 
regarding privacy and obligations of confidentiality.



Sec. 1003.508  Grant closeout procedures.

    (a) Criteria for closeout. A grant will be closed out when the Area 
ONAP determines, in consultation with the grantee, that the following 
criteria have been met:
    (1) All costs to be paid with ICDBG funds have been incurred, with 
the exception of closeout costs (e.g., audit costs) and costs resulting 
from contingent liabilities described in the closeout agreement pursuant 
to paragraph (c) of this section. Contingent liabilities include, but 
are not limited to, third-party claims against the grantee, as well as 
related administrative costs.
    (2) With respect to activities which are financed by means of escrow 
accounts, loan guarantees, or similar mechanisms, the work to be 
assisted with ICDBG funds has actually been completed.
    (3) Other responsibilities of the grantee under the grant agreement 
and applicable laws and regulations appear to have been carried out 
satisfactorily or there is no further Federal interest in keeping the 
grant agreement open for the purpose of securing performance.
    (b) Closeout actions. (1) Within 90 days of the date it is 
determined that the criteria for closeout have been met, the grantee 
shall submit to the Area ONAP a copy of the final status and evaluation 
report described in Sec. 1003.506(a) and a completed Financial Status 
Report (SF-269). If acceptable reports are not submitted, an audit of 
the grantee's program activities may be conducted by HUD.
    (2) Based on the information provided in the status report and other 
relevant information, the grantee, in consultation with the Area ONAP, 
will prepare a closeout agreement in accordance with paragraph (c) of 
this section.
    (3) The Area ONAP will cancel any unused portion of the awarded 
grant, as shown in the signed grant closeout agreement. Any unused grant 
funds disbursed from the U.S. Treasury which are in the possession of 
the grantee shall be refunded to HUD.
    (4) Any costs paid with ICDBG funds which were not audited 
previously shall be subject to coverage in the grantee's next single 
audit performed in accordance with 24 CFR part 44. The grantee may be 
required to repay HUD any disallowed costs based on the results of the 
audit, or on additional HUD reviews provided for in the closeout 
agreement.
    (c) Closeout agreement. Any obligations remaining as of the date of 
the closeout shall be covered by the terms

[[Page 729]]

of a closeout agreement. The agreement shall be prepared by the grantee 
in consultation with the Area ONAP. The agreement shall identify the 
grant being closed out, and include provisions with respect to the 
following:
    (1) Identification of any closeout costs or contingent liabilities 
subject to payment with ICDBG funds after the closeout agreement is 
signed;
    (2) Identification of any unused grant funds to be canceled by HUD;
    (3) Identification of any program income on deposit in financial 
institutions at the time the closeout agreement is signed;
    (4) Description of the grantee's responsibility after closeout for:
    (i) Compliance with all program requirements, certifications and 
assurances in using program income on deposit at the time the closeout 
agreement is signed and in using any other remaining ICDBG funds 
available for closeout costs and contingent liabilities;
    (ii) Use of real property assisted with ICDBG funds in accordance 
with the principles described in Sec. 1003.504; and
    (iii) Ensuring that flood insurance coverage for affected property 
owners is maintained for the mandatory period;
    (5) Other provisions appropriate to any special circumstances of the 
grant closeout, in modification of or in addition to the obligations in 
paragraphs (c) (1) through (4) of this section. The agreement shall 
authorize monitoring by HUD, and shall provide that findings of 
noncompliance may be taken into account by HUD as unsatisfactory 
performance of the grantee in the consideration of any future grant 
award under this part.
    (d) Termination of grant for convenience. Grant assistance provided 
under this part may be terminated for convenience in whole or in part 
before the completion of the assisted activities, in accordance with the 
provisions of 24 CFR 85.44. The grantee shall not incur new obligations 
for the terminated portions after the effective date, and shall cancel 
as many outstanding obligations as possible. HUD shall allow full credit 
to the grantee for those portions of obligations which could not be 
canceled and which had been properly incurred by the grantee in carrying 
out the activities before the termination. The closeout policies 
contained in this section shall apply in such cases, except where the 
approved grant is terminated in its entirety. Responsibility for the 
environmental review to be performed under 24 CFR part 50 or 24 CFR part 
58, as applicable, shall be determined as part of the closeout process.
    (e) Termination for cause. In cases in which HUD terminates the 
grantee's grant under the authority of subpart H of this part, or under 
the terms of the grant agreement, the closeout policies contained in 
this section shall apply, except where the approved grant is canceled in 
its entirety. The provisions in 24 CFR 85.43(c) on the effects of 
termination shall also apply. HUD shall determine whether an 
environmental review is required, and if so, HUD shall perform it in 
accordance with 24 CFR part 50.



Sec. 1003.509  Force account construction.

    (a) The use of tribal work forces for construction or renovation 
activities performed as part of the activities funded under this part 
shall be approved by the Area ONAP before the start of project 
implementation. In reviewing requests for an approval of force account 
construction or renovation, the area ONAP may require that the grantee 
provide the following:
    (1) Documentation to indicate that it has carried out or can carry 
out successfully a project of the size and scope of the proposal;
    (2) Documentation to indicate that it has obtained or can obtain 
adequate supervision for the workers to be used;
    (3) Information showing that the workers to be used are, or will be, 
listed on the tribal payroll and are employed directly by a unit, 
department or other governmental instrumentality of the tribe or 
village.
    (b) Any and all excess funds derived from the force account 
construction or renovation activities shall accrue to the grantee and 
shall be reprogrammed for other activities eligible under this part in 
accordance with Sec. 1003.305 or returned to HUD promptly.
    (c) Insurance coverage for force account workers and activities 
shall, where applicable, include worker's

[[Page 730]]

compensation, public liability, property damage, builder's risk, and 
vehicular liability.
    (d) The grantee shall specify and apply reasonable labor 
performance, construction, or renovation standards to work performed 
under the force account.
    (e) The contracting and procurement standards set forth in 24 CFR 
85.36 apply to material, equipment, and supply procurement from outside 
vendors under this section.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.510  Indian preference requirements.

    (a) Applicability. HUD has determined that grants under this part 
are subject to Section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450b). Section 7(b) provides that 
any contract, subcontract, grant or subgrant pursuant to an act 
authorizing grants to Indian organizations or for the benefit of Indians 
shall require that, to the greatest extent feasible:
    (1) Preference and opportunities for training and employment shall 
be given to Indians; and
    (2) Preference in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises as 
defined in section 3 of the Indian Financing Act of 1974 (25 U.S.C. 
1452).
    (b) Definitions. (1) The Indian Self-Determination and Education 
Assistance Act [25 U.S.C. 450b] defines ``Indian'' to mean a person who 
is a member of an Indian tribe and defines ``Indian tribe'' to mean any 
Indian tribe, band, nation, or other organized group or community 
including any Alaska native village or regional or village corporation 
as defined or established pursuant to the Alaska Native Claims 
Settlement Act, which is recognized as eligible for the special programs 
and services provided by the United States to Indians because of their 
status as Indians.
    (2) In section 3 of the Indian Financing Act of 1974 (25 U.S.C. 
1452) economic enterprise is defined as any Indian--owned commercial, 
industrial, or business activity established or organized for the 
purpose of profit, except that Indian ownership must constitute not less 
than 51 percent of the enterprise. This act defines Indian organization 
to mean the governing body of any Indian tribe or entity established or 
recognized by such governing body.
    (c) Preference in administration of grant. To the greatest extent 
feasible, preference and opportunities for training and employment in 
connection with the administration of grants awarded under this part 
shall be given to Indians.
    (d) Preference in contracting. To the greatest extent feasible, 
grantees shall give preference in the award of contracts for projects 
funded under this part to Indian organizations and Indian-owned economic 
enterprises.
    (1) Each grantee shall:
    (i) Advertise for bids or proposals limited to qualified Indian 
organizations and Indian-owned enterprises; or
    (ii) Use a two-stage preference procedure, as follows:
    (A) Stage 1. Invite or otherwise solicit Indian-owned economic 
enterprises to submit a statement of intent to respond to a bid 
announcement or request for proposals limited to Indian-owned firms.
    (B) Stage 2. If responses are received from more than one Indian 
enterprise found to be qualified, advertise for bids or proposals 
limited to Indian organizations and Indian-owned economic enterprises; 
or
    (iii) Develop, subject to Area ONAP one-time approval, the grantee's 
own method of providing preference.
    (2) If the grantee selects a method of providing preference that 
results in fewer than two responsible qualified organizations or 
enterprises submitting a statement of intent, a bid or a proposal to 
perform the contract at a reasonable cost, then the grantee shall:
    (i) Re-advertise the contract, using any of the methods described in 
paragraph (d)(1) of this section; or
    (ii) Re-advertise the contract without limiting the advertisement 
for bids or proposals to Indian organizations and Indian-owned economic 
enterprises; or
    (iii) If one approvable bid or proposal is received, request Area 
ONAP review and approval of the proposed contract and related 
procurement documents, in accordance with 24 CFR 85.36, in order

[[Page 731]]

to award the contract to the single bidder or offeror.
    (3) Procurements that are within the dollar limitations established 
for small purchases under 24 CFR 85.36 need not follow the formal bid or 
proposal procedures of paragraph (d) of this section, since these 
procurements are governed by the small purchase procedures of 24 CFR 
85.36. However, a grantee's small purchase procurement shall, to the 
greatest extent feasible, provide Indian preference in the award of 
contracts.
    (4) All preferences shall be publicly announced in the advertisement 
and bidding or proposal solicitation documents and the bidding and 
proposal documents.
    (5) A grantee, at its discretion, may require information of 
prospective contractors seeking to qualify as Indian organizations or 
Indian-owned economic enterprises. Grantees may require prospective 
contractors to include the following information prior to submitting a 
bid or proposal, or at the time of submission:
    (i) Evidence showing fully the extent of Indian ownership and 
interest;
    (ii) Evidence of structure, management and financing affecting the 
Indian character of the enterprise, including major subcontracts and 
purchase agreements; materials or equipment supply arrangements; and 
management salary or profit-sharing arrangements; and evidence showing 
the effect of these on the extent of Indian ownership and interest; and
    (iii) Evidence sufficient to demonstrate to the satisfaction of the 
grantee that the prospective contractor has the technical, 
administrative, and financial capability to perform contract work of the 
size and type involved.
    (6) The grantee shall incorporate the following clause (referred to 
as the Section 7(b) clause) in each contract awarded in connection with 
a project funded under this part:
    (i) The work to be performed under this contract is on a project 
subject to Section 7(b) of the Indian Self-Determination and Education 
Assistance Act (25 U.S.C. 450b) (Indian Act). Section 7(b) requires that 
to the greatest extent feasible:
    (A) Preferences and opportunities for training and employment shall 
be given to Indians; and
    (B) Preferences in the award of contracts and subcontracts shall be 
given to Indian organizations and Indian-owned economic enterprises.
    (ii) The parties to this contract shall comply with the provisions 
of Section 7(b) of the Indian Act.
    (iii) In connection with this contract, the contractor shall, to the 
greatest extent feasible, give preference in the award of any 
subcontracts to Indian organizations and Indian-owned economic 
enterprises, and preferences and opportunities for training and 
employment to Indians.
    (iv) The contractor shall include this Section 7(b) clause in every 
subcontract in connection with the project, and shall, at the direction 
of the grantee, take appropriate action pursuant to the subcontract upon 
a finding by the grantee or HUD that the subcontractor has violated the 
Section 7(b) clause of the Indian Act.
    (e) Complaint procedures. The following complaint procedures are 
applicable to complaints arising out of any of the methods of providing 
for Indian preference contained in this part, including alternate 
methods enacted and approved in a manner described in this section:
    (1) Each complaint shall be in writing, signed, and filed with the 
grantee.
    (2) A complaint must be filed with the grantee no later than 20 
calendar days from the date of the action (or omission) upon which the 
complaint is based.
    (3) Upon receipt of a complaint, the grantee shall promptly stamp 
the date and time of receipt upon the complaint, and immediately 
acknowledge its receipt.
    (4) Within 20 calendar days of receipt of a complaint, the grantee 
shall either meet, or communicate by mail or telephone, with the 
complainant in an effort to resolve the matter. The grantee shall make a 
determination on a complaint and notify the complainant, in writing, 
within 30 calendar days of the submittal of the complaint to the 
grantee. The decision of the grantee

[[Page 732]]

shall constitute final administrative action on the complaint.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.511  Use of escrow accounts for rehabilitation of privately owned residential property.

    (a) Limitations. A grantee may withdraw funds from its line of 
credit for immediate deposit into an escrow account for use in funding 
loans and grants for the rehabilitation of privately owned residential 
property under Sec. 1003.202(a)(1). The following additional limitations 
apply to the use of escrow accounts for residential rehabilitation loans 
and grants closed after September 7, 1990:
    (1) The use of escrow accounts under this section is limited to 
loans and grants for the rehabilitation of primarily residential 
properties containing no more than four dwelling units (and accessory 
neighborhood-scale non-residential space within the same structure, if 
any, e.g., a store front below a dwelling unit).
    (2) An escrow account shall not be used unless the contract between 
the property owner and the contractor selected to do the rehabilitation 
work specifically provides that payment to the contractor shall be made 
through an escrow account maintained by the grantee, by a subrecipient 
as defined in Sec. 1003.4, by a public agency designated under 
Sec. 1003.500(a), or by an agent under a procurement contact governed by 
the requirements of 24 CFR 85.36. No deposit to the escrow account shall 
be made until after the contract has been executed between the property 
owner and the rehabilitation contractor.
    (3) All funds withdrawn under this section shall be deposited into 
one interest earning account with a financial institution. Separate bank 
accounts shall not be established for individual loans and grants.
    (4) The amount of funds deposited into an escrow account shall be 
limited to the amount expected to be disbursed within 10 working days 
from the date of deposit. If the escrow account, for whatever reason, at 
any time contains funds exceeding 10 days cash needs, the grantee 
immediately shall transfer the excess funds to its program account. In 
the program account, the excess funds shall be treated as funds 
erroneously drawn in accordance with the requirements of U.S. Treasury 
Financial Manual, paragraph 6-2075.30.
    (5) Funds deposited into an escrow account shall be used only to pay 
the actual costs of rehabilitation incurred by the owner under the 
contract with a private contractor. Other eligible costs related to the 
rehabilitation loan or grant, e.g., the grantee's administrative costs 
under Sec. 1003.206 or rehabilitation services costs under 
Sec. 1003.202(b)(9), are not permissible uses of escrowed funds. Such 
other eligible rehabilitation costs shall be paid under normal ICDBG 
payment procedures (e.g., from withdrawals of grant funds under the 
grantee's line of credit with the Treasury).
    (b) Interest. Interest earned on escrow accounts established in 
accordance with this section, less any service charges for the account, 
shall be remitted to HUD at least quarterly but not more frequently than 
monthly. Interest earned on escrow accounts is not required to be 
remitted to HUD to the extent the interest is attributable to the 
investment of program income.
    (c) Remedies for noncompliance. If HUD determines that a grantee has 
failed to use an escrow account in accordance with this section, HUD 
may, in addition to imposing any other sanctions provided for under this 
part, require the grantee to discontinue the use of escrow accounts, in 
whole or in part.



                  Subpart G--Other Program Requirements



Sec. 1003.600  Constitutional prohibition.

    In accordance with First Amendment Church/State Principles, as a 
general rule, ICDBG assistance may not be used for religious activities 
or provided to primarily religious entities for any activities, 
including secular activities. The following restrictions and limitations 
therefore apply to the use of ICDBG funds.
    (a) ICDBG funds may not be used for the acquisition of property or 
the construction or rehabilitation (including historic preservation and 
removal of architectural barriers) of structures to be used for 
religious purposes or which

[[Page 733]]

will otherwise promote religious interests. This limitation includes the 
acquisition of property for ownership by primarily religious entities 
and the construction or rehabilitation (including historic preservation 
and removal of architectural barriers) of structures owned by such 
entities (except as permitted under paragraph (b) of this section with 
respect to rehabilitation and under paragraph (d) of this section with 
respect to repairs undertaken in connection with public services) 
regardless of the use to be made of the property or structure. Property 
owned by primarily religious entities may be acquired with ICDBG funds 
at no more than fair market value for a non-religious use.
    (b) ICDBG funds may be used to rehabilitate buildings owned by 
primarily religious entities to be used for a wholly secular purpose 
under the following conditions:
    (1) The building (or portion thereof) that is to be improved with 
the ICDBG assistance has been leased to an existing or newly established 
wholly secular entity (which may be an entity established by the 
religious entity);
    (2) The ICDBG assistance is provided to the lessee (and not the 
lessor) to make the improvements;
    (3) The leased premises will be used exclusively for secular 
purposes available to persons regardless of religion;
    (4) The lease payments do not exceed the fair market rent of the 
premises as they were before the improvements are made;
    (5) The portion of the cost of any improvements that also serve a 
non-leased part of the building will be allocated to and paid for by the 
lessor;
    (6) The lessor enters into a binding agreement that unless the 
lessee, or a qualified successor lessee, retains the use of the leased 
premises for a wholly secular purpose for at least the useful life of 
the improvements, the lessor will pay to the lessee an amount equal to 
the residual value of the improvements;
    (7) The lessee must remit the amount received from the lessor under 
paragraph (b)(6) of this section to the grantee or subrecipient from 
which the ICDBG funds were derived.
    (8) The lessee can also enter into a management contract authorizing 
the lessor religious entity to use the building for its intended secular 
purpose, e.g., homeless shelter, provision of public services. In such 
case, the religious entity must agree in the management contract to 
carry out the secular purpose in a manner free from religious influences 
in accordance with the principles set forth in paragraph (c) of this 
section.
    (c) As a general rule, ICDBG funds may be used for eligible public 
services to be provided through a primarily religious entity, where the 
religious entity enters into an agreement with the grantee or 
subrecipient from which the ICDBG funds are derived that, in connection 
with the provision of such services:
    (1) It will not discriminate against any employee or applicant for 
employment on the basis of religion and will not limit employment or 
give preference in employment to persons on the basis of religion;
    (2) It will not discriminate against any person applying for such 
public services on the basis of religion and will not limit such 
services or give preference to persons on the basis of religion;
    (3) It will provide no religious instruction or counseling, conduct 
no religious worship or services, engage in no religious proselytizing, 
and exert no other religious influence in the provision of such public 
services;
    (d) Where the public services provided under paragraph (c) of this 
section are carried out on property owned by the primarily religious 
entity, ICDBG funds may also be used for minor repairs to such property 
which are directly related to carrying out the public services where the 
cost constitutes in dollar terms only an incidental portion of the ICDBG 
expenditure for the public services.



Sec. 1003.601  Nondiscrimination.

    (a) Under the authority of section 107(e)(2) of the Act, the 
Secretary waives the requirement that grantees comply with section 109 
of the Act except with respect to the prohibition of

[[Page 734]]

discrimination based on age, sex, religion, or against an otherwise 
qualified disabled individual.
    (b) A grantee shall comply with the provisions of title II of Pub. 
L. 90-284 (24 U.S.C. 1301--the Indian Civil Rights Act) in the 
administration of a program or activity funded in whole or in part with 
funds made available under this part. For purposes of this section, 
``program or activity'' is defined as any function conducted by an 
identifiable administrative unit of the grantee; and ``funded in whole 
or in part with funds made available under this part'' means that ICDBG 
funds in any amount have been transferred by the grantee to an 
identifiable administrative unit and disbursed in a program or activity.



Sec. 1003.602  Relocation and real property acquisition.

    (a) Minimize displacement. Consistent with the other goals and 
objectives of this part, grantees shall assure that they have taken all 
reasonable steps to minimize the displacement of persons (households, 
businesses, nonprofit organizations, and farms) as a result of a project 
assisted under this part.
    (b) Temporary relocation. The following policies cover residential 
tenants who will not be required to move permanently but who must 
relocate temporarily for the project. Such tenants must be provided:
    (1) Reimbursement for all reasonable out-of-pocket expenses incurred 
in connection with the temporary relocation, including the cost of 
moving to and from the temporarily occupied housing and any increase in 
monthly housing costs (e.g., rent/utility costs).
    (2) Appropriate advisory services, including reasonable advance 
written notice of:
    (i) The date and approximate duration of the temporary relocation;
    (ii) The location of the suitable, decent, safe and sanitary 
dwelling to be made available for the temporary period;
    (iii) The terms and conditions under which the tenant may occupy a 
suitable, decent, safe, and sanitary dwelling in the building/complex 
following completion of the repairs; and
    (iv) The provisions of paragraph (b)(1) of this section.
    (c) Relocation assistance for displaced persons. A displaced person 
(defined in paragraph (g) of this section) must be provided relocation 
assistance at the levels described in, and in accordance with the 
requirements of, the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended (URA)(42 U.S.C. 4601-4655) 
and implementing regulations at 49 CFR part 24.
    (d) Optional relocation assistance. Under section 105(a)(11) of the 
Act, the grantee may provide relocation payments and other relocation 
assistance to persons displaced by a project that is not subject to 
paragraph (c) of this section. The grantee may also provide relocation 
assistance to persons receiving assistance under paragraph (c) of this 
section at levels in excess of those required. For assistance that is 
not required by State or tribal law, the grantee shall adopt a written 
policy available to the public that describes the relocation assistance 
that it has elected to furnish and provides for equal relocation 
assistance within each class of displaced persons.
    (e) Real Property acquisition requirements. The acquisition of real 
property for an assisted activity is subject to 49 CFR part 24, subpart 
B. Whenever the grantee does not have the authority to acquire the real 
property through condemnation, it shall:
    (1) Before discussing the purchase price, inform the owner:
    (i) Of the amount it believes to be the fair market value of the 
property. Such amount shall be based upon one or more appraisals 
prepared by a qualified appraiser. However, this provision does not 
prevent the grantee from accepting a donation or purchasing the real 
property at less than its fair market value.
    (ii) That it will be unable to acquire the property if negotiations 
fail to result in an amicable agreement.
    (2) Request HUD approval of the proposed acquisition price before 
executing a firm commitment to purchase the property. The grantee shall 
include with its request a copy of the appraisal(s) and, when 
applicable, a justification for any proposed acquisition payment that 
exceeds the fair market value of the property. HUD will

[[Page 735]]

promptly review the proposal and inform the grantee of its approval or 
disapproval.
    (f) Appeals. A person who disagrees with the grantee's determination 
concerning whether the person qualifies as a ``displaced person,'' or 
the amount of relocation assistance for which the person is eligible, 
may file a written appeal of that determination with the grantee. A 
person who is dissatisfied with the grantee's determination on his or 
her appeal may submit a written request for review of that determination 
to the HUD Area ONAP.
    (g) Responsibility of grantee. (1) The grantee shall certify that it 
will comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section, i.e., provide assurance of compliance as 
required by 49 CFR part 24. The grantee shall ensure such compliance 
notwithstanding any third party's contractual obligation to the grantee 
to comply with these provisions.
    (2) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. However, such assistance may also be paid for with funds 
available to the grantee from any other source.
    (3) The grantee shall maintain records in sufficient detail to 
demonstrate compliance with this section.
    (h) Definition of displaced person. (1) For purposes of this 
section, the term displaced person means any person (household, 
business, nonprofit organization, or farm) that moves from real 
property, or moves his or her personal property from real property, 
permanently, as a direct result of rehabilitation, demolition, or 
acquisition for a project assisted under this part. The term ``displaced 
person'' includes, but is not limited to:
    (i) A tenant-occupant of a dwelling unit who moves from the 
building/complex permanently after the submission to HUD of an 
application for financial assistance that is later approved.
    (ii) Any person, including a person who moves before the date 
described in paragraph (h)(1)(i) of this section, that either HUD or the 
grantee determines was displaced as a direct result of acquisition, 
rehabilitation, or demolition for the assisted project.
    (iii) A tenant-occupant of a dwelling who moves from the building/
complex permanently, after the execution of the agreement between the 
grantee and HUD, if the move occurs before the tenant is provided 
written notice offering him or her the opportunity to lease and occupy a 
suitable, decent, safe and sanitary dwelling in the same building/
complex, under reasonable terms and conditions, upon completion of the 
project. Such reasonable terms and conditions include a monthly rent and 
estimated average monthly utility costs that do not exceed the greater 
of:
    (A) The tenant's monthly rent and estimated average monthly utility 
costs before the agreement; or
    (B) 30 percent of gross household income.
    (iv) A tenant-occupant of a dwelling who is required to relocate 
temporarily, but does not return to the building/complex, if either:
    (A) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation, 
including the cost of moving to and from the temporarily occupied unit, 
any increased housing costs and incidental expenses; or
    (B) Other conditions of the temporary relocation are not reasonable.
    (v) A tenant-occupant of a dwelling who moves from the building/
complex after he or she has been required to move to another dwelling 
unit in the same building/complex in order to carry out the project, if 
either:
    (A) The tenant is not offered reimbursement for all reasonable out-
of-pocket expenses incurred in connection with the move; or
    (B) Other conditions of the move are not reasonable.
    (2) Notwithstanding the provisions of paragraph (h)(1) of this 
section, a person does not qualify as a ``displaced person'' (and is not 
eligible for relocation assistance under the URA or this section), if:
    (i) The person moved into the property after the submission of the 
application for financial assistance to HUD,

[[Page 736]]

but, before signing a lease or commencing occupancy, was provided 
written notice of the project, its possible impact on the person (e.g., 
the person may be displaced, temporarily relocated or suffer a rent 
increase) and the fact that the person would not qualify as a 
``displaced person'' or for any assistance provided under this section 
as a result of the project;
    (ii) The person is ineligible under 49 CFR 24.2(g)(2).
    (iii) The grantee determines the person is not displaced as a direct 
result of acquisition, rehabilitation, or demolition for an assisted 
project. To exclude a person on this basis, HUD must concur in that 
determination.
    (3) A grantee may at any time ask HUD to determine whether a 
specific displacement is or would be covered under this section.
    (i) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a person displaced as a direct result of 
rehabilitation or demolition of the real property, the term ``initiation 
of negotiations'' means the execution of the agreement covering the 
rehabilitation or demolition.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.603  Labor standards.

    In accordance with the authority under section 107(e)(2) of the Act, 
the Secretary waives the provisions of section 110 of the Act (Labor 
Standards) with respect to this part, including the requirement that 
laborers and mechanics employed by the contractor or subcontractor in 
the performance of construction work financed in whole or in part with 
assistance received under this part be paid wages at rates not less than 
those prevailing on similar construction in the locality, as determined 
by the Secretary of Labor in accordance with the Davis-Bacon Act (40 
U.S.C. 276 a to a-7).



Sec. 1003.604  Citizen participation.

    (a) In order to permit residents of Indian tribes and Alaska native 
villages to examine and appraise the applicant's application for funds 
under this part, the applicant shall follow traditional means of 
resident involvement which, at the least, include the following:
    (1) Furnishing residents with information concerning the amounts of 
funds available for proposed community development and housing 
activities and the range of activities that may be undertaken.
    (2) Holding one or more meetings to obtain the views of residents on 
community development and housing needs. Meetings shall be scheduled in 
ways and at times that will allow participation by residents.
    (3) Developing and publishing or posting a community development 
statement in such a manner as to afford affected residents an 
opportunity to examine its contents and to submit comments.
    (4) Affording residents an opportunity to review and comment on the 
applicant's performance under any active community development block 
grant.
    (b) Prior to submission of the application to HUD, the applicant 
shall certify by an official Tribal resolution that it has met the 
requirements of paragraph (a) of this section; and
    (1) Considered any comments and views expressed by residents and, if 
it deems it appropriate, modified the application accordingly; and
    (2) Made the modified application available to residents.
    (c) No part of the requirement under paragraph (a) of this section 
shall be construed to restrict the responsibility and authority of the 
applicant for the development of the application and the execution of 
the grant. Accordingly, the citizen participation requirements of this 
section do not include concurrence by any person or group in making 
final determinations on the contents of the application.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.605  Environment.

    (a) In order to assure that the policies of the National 
Environmental Policy Act of 1969 and other provisions of Federal law 
which further the purposes of that act (as specified in 24 CFR 58.5) are 
most effectively implemented in connection with the expenditure of

[[Page 737]]

ICDBG funds, the grantee shall comply with the Environment Review 
Procedures for Entities Assuming HUD Environmental Responsibilities (24 
CFR part 58). Upon completion of an environmental review, the grantee 
shall submit a certification and request for release of funds for 
particular projects in accordance with 24 CFR part 58. The grantee shall 
also be responsible for compliance with flood insurance, coastal barrier 
resource and airport clear zone requirements under 24 CFR 58.6.
    (b) In accordance with 24 CFR 58.34(a)(8), grants for imminent 
threats to health or safety approved under the provisions of subpart E 
of this part are exempt from some or all of the environmental review 
requirements of 24 CFR part 58, to the extent provided in that section.



Sec. 1003.606  Conflict of interest.

    (a) Applicability. (1) In the procurement of supplies, equipment, 
construction, and services by grantees and subgrantees, the conflict of 
interest provisions in 24 CFR 85.36 and 24 CFR 84.42 shall apply.
    (2) In all cases not governed by 24 CFR 85.36 and 24 CFR 84.42, the 
provisions of this section shall apply. Such cases include the provision 
of assistance by the grantee or by its subrecipients to businesses, 
individuals, and other private entities under eligible activities that 
authorize such assistance (e.g., rehabilitation, preservation, and other 
improvements of private properties or facilities under Sec. 1003.202; or 
grants, loans, and other assistance to businesses, individuals, and 
other private entities under Sec. 1003.203 or Sec. 1003.204.).
    (b) Conflicts prohibited. Except for the use of ICDBG funds to pay 
salaries and other related administrative or personnel costs, the 
general rule is that no persons described in paragraph (c) of this 
section who exercise or have exercised any functions or responsibilities 
with respect to ICDBG activities assisted under this part or who are in 
a position to participate in a decision-making process or gain inside 
information with regard to such activities, may obtain a personal or 
financial interest or benefit from an ICDBG assisted activity, or have 
an interest in any contract, subcontract or agreement with respect 
thereto, or the proceeds thereunder, either for themselves or those with 
whom they have family or business ties, during their tenure or for one 
year thereafter.
    (c) Persons covered. The conflict of interest provisions of 
paragraph (b) of this section apply to any person who is an employee, 
agent, consultant, officer, or elected or appointed official of the 
grantee, or of any designated public agencies, or CBDOs under 
Sec. 1003.204, receiving funds under this part.
    (d) Exceptions requiring HUD approval.--(1) Threshold requirements. 
Upon the written request of a grantee, HUD may grant an exception to the 
provisions of paragraph (b) of this section on a case-by-case basis, 
when it determines that such an exception will serve to further the 
purposes of the Act and the effective and efficient administration of 
the grantee's program or project. An exception may be considered only 
after the grantee has provided the following:
    (i) A disclosure of the nature of the possible conflict, accompanied 
by an assurance that there has been public disclosure of the conflict 
and a description of how the public disclosure was made; and
    (ii) An opinion of the grantee's attorney that the interest for 
which the exception is sought would not violate Tribal laws on conflict 
of interest, or applicable State laws.
    (2) Factors to be considered for exceptions: In determining whether 
to grant a requested exception after the grantee has satisfactorily met 
the requirements of paragraph (d)(1) of this section, HUD shall consider 
the cumulative effect of the following factors, where applicable:
    (i) Whether the exception would provide a significant cost benefit 
or essential expert knowledge to the program or project which would 
otherwise not be available;
    (ii) Whether an opportunity was provided for open competitive 
bidding or negotiation;
    (iii) Whether the affected person has withdrawn from his or her 
functions or responsibilities, or from the decision-

[[Page 738]]

making process, with reference to the specific assisted activity in 
question;
    (iv) Whether the interest or benefit was present before the affected 
person was in a position as described in paragraph (b) of this section;
    (v) Whether undue hardship will result, either to the grantee or to 
the person affected, when weighed against the public interest served by 
avoiding the prohibited conflict;
    (vi) Any other relevant considerations.
    (e) Circumstances under which the conflict prohibition does not 
apply. (1) In instances where a person who might otherwise be deemed to 
be included under the conflict prohibition is a member of a group or 
class of beneficiaries of the assisted activity and receives generally 
the same interest or benefits as are being made available or provided to 
the group or class, the prohibition does not apply, except that if, by 
not applying the prohibition against conflict of interest, a violation 
of Tribal or State laws on conflict of interest would result, the 
prohibition does apply. However, if the assistance to be provided is 
housing rehabilitation (or repair) or new housing, a public disclosure 
of the nature of the assistance to be provided and the specific basis 
for the selection of the proposed beneficiaries must be made prior to 
the submission of an application to HUD. Evidence of this disclosure 
must be provided as a component of the application.
    (f) Record retention. All records pertaining to the grantee's 
decision under this section shall be maintained for HUD review upon 
request.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.607  Lead-based paint.

    (a) Prohibition against the use of lead-based paint. Section 401(b) 
of the Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4831(b)) 
directs HUD to prohibit the use of lead-based paint in residential 
structures constructed or rehabilitated with Federal assistance. Such 
prohibitions are contained in 24 CFR part 35, subpart B, and are 
applicable to residential structures constructed or rehabilitated with 
assistance provided under this part.
    (b) Notification of hazards of lead-based paint poisoning. (1) The 
Secretary has promulgated requirements regarding notification to 
purchasers and tenants of HUD-associated housing constructed prior to 
1978 of the hazards of lead-based paint poisoning at 24 CFR part 35, 
subpart A. This paragraph is promulgated pursuant to the authorization 
granted in 24 CFR 35.5(c) and supersedes, with respect to all housing to 
which it applies, the notification requirements prescribed by subpart A 
of 24 CFR part 35.
    (2) For properties constructed prior to 1978, applicants for 
rehabilitation assistance provided under this part and tenants or 
purchasers of properties owned by the grantee or its subrecipient and 
acquired or rehabilitated with assistance under this part shall be 
notified:
    (i) That the property may contain lead-based paint;
    (ii) Of the hazards of lead-based paint;
    (iii) Of the symptoms and treatment of lead-based paint poisoning;
    (iv) Of the precautions to be taken to avoid lead-based paint 
poisoning (including maintenance and removal techniques for eliminating 
such hazards);
    (v) Of the advisability and availability of blood lead level 
screening for children under six years of age;
    (vi) That in the event lead-based paint is found on the property, 
appropriate treatment procedures may be undertaken.
    (c) Elimination of lead-based paint hazards. The purpose of this 
paragraph is to implement the provisions of section 302 of the Lead-
Based Paint Poisoning Prevention Act, 42 U.S.C. 4822, by establishing 
procedures to eliminate as far as practicable the hazards due to the 
presence of paint which may contain lead and to which children under six 
years of age may be exposed in existing housing which is rehabilitated 
with assistance provided under this part. HUD has promulgated 
requirements regarding the elimination of lead-based paint hazards in 
HUD-associated housing at 24 CFR part 35, subpart C. This paragraph is 
promulgated pursuant to the authorization granted in 24 CFR 35.24(b)(4) 
and supersedes, with respect to all housing to which it

[[Page 739]]

applies, the requirements prescribed by subpart C of 24 CFR part 35.
    (1) Applicability. This paragraph applies to the rehabilitation of 
applicable surfaces in existing housing which is assisted under this 
part. The following activities assisted under the Indian Community 
Development Block Grant program are not covered by this paragraph (c):
    (i) Emergency repairs (not including lead-based paint-related 
emergency repairs);
    (ii) Weatherization;
    (iii) Water or sewer hook-ups;
    (iv) Installation of security devices;
    (v) Facilitation of tax exempt bond issuances which provide funds 
for rehabilitation;
    (vi) Other similar types of single-purpose programs that do not 
include physical repairs or remodeling of applicable surfaces (as 
defined in 24 CFR 35.22) of residential structures; and
    (vii) Any non-single purpose rehabilitation that does not involve 
applicable surfaces (as defined in 24 CFR 35.22) that does not exceed 
$3,000 per unit.
    (2) Definitions.
    Applicable surface. All intact and non-intact interior and exterior 
painted surfaces of a residential structure.
    Chewable surface. All protruding painted surfaces up to five feet 
from the floor or ground, that are readily accessible to children under 
six years of age, e.g., protruding corners, windowsills and frames, 
doors and frames, and other protruding woodwork.
    Defective paint surface. A surface on which the paint is cracking, 
scaling, chipping, peeling or loose.
    Elevated blood lead level or EBL. Excessive absorption of lead, that 
is, confirmed concentration of lead in whole blood of 20 ug/dl 
(micrograms of lead per deciliter) for a single test or of 15-19 ug/dl 
in two consecutive tests 3-4 months apart.
    HEPA. A high efficiency particle accumulator as used in lead 
abatement vacuum cleaners.
    Lead-based paint. A paint surface, whether or not defective, 
identified as having a lead content greater than or equal to 1 mg/cm2 
(milligram per square centimeter) or .5 percent by weight or 5000 parts 
per million (PPM).
    (3) Inspection and Testing.--(i) Defective paint surfaces. The 
grantee shall inspect for defective paint surfaces in all units 
constructed prior to 1978 which are occupied by families with children 
under six years of age and which are proposed for rehabilitation 
assistance. The inspection shall occur at the same time the property is 
being inspected for rehabilitation. Defective paint conditions will be 
included in the work write-up for the remainder of the rehabilitation 
work.
    (ii) Chewable surfaces. The grantee shall be required to test 
chewable surfaces for lead-based paint if the family residing in a unit, 
constructed prior to 1978 and receiving rehabilitation assistance, 
includes a child under six years of age with an identified EBL 
condition. Testing must be conducted by an inspector certified or 
regulated by a State or local health or housing agency or an 
organization recognized by HUD. Lead content shall be tested by using an 
X-ray fluorescence analyzer (XRF) or by laboratory analysis of paint 
samples.
    (iii) Abatement without testing. In lieu of the procedures set forth 
in paragraph (c)(3)(ii) of this section, in the case of a residential 
structure constructed prior to 1978, the grantee may forgo testing and 
treat all applicable surfaces in accordance with the methods set out in 
paragraph (c)(5) of this section.
    (4) Treatment Actions. (i) For inspections performed under 
Sec. 1003.607(c)(3)(i) and where defective paint surfaces are found, 
treatment shall be provided to defective areas in accordance with 
paragraph (c)(5) of this section. Treatment shall be performed before 
final inspection and approval of the work.
    (ii) For testing performed under Sec. 1003.607(c)(3)(ii) and where 
interior chewable surfaces are found to contain lead-based paint, all 
interior chewable surfaces in any affected room shall be treated. Where 
exterior chewable surfaces are found to contain lead-based paint, the 
entire exterior chewable surface shall be treated. Treatment in 
accordance with paragraph (c)(5) of this section shall be performed 
before final inspection and approval of the work.

[[Page 740]]

    (iii) When weather prohibits repainting exterior surfaces before 
final inspection, the grantee may permit the owner to treat the 
defective paint or chewable lead-based paint as required by this section 
and agree to repaint by a specified date. A separate inspection is 
required.
    (5) Treatment methods. Treatment of defective paint surfaces and 
chewable surfaces must consist of covering or removal of the paint in 
accordance with the following requirements:
    (i) A defective paint surface shall be treated if the total area of 
defective paint on a component is:
    (A) More than 10 square feet on an exterior wall;
    (B) More than 2 square feet on an interior or exterior component 
with a large surface area, excluding exterior walls and including, but 
not limited to, ceilings, floors, doors, and interior walls; or
    (C) More than 10 percent of the total surface area on an interior or 
exterior component with a small surface area, including, but not limited 
to, window sills, baseboards and trim.
    (ii) Acceptable methods of treatment are: Removal by wet scraping, 
wet sanding, chemical stripping on or off site, replacing painted 
components, scraping with infra-red or coil type heat gun with 
temperatures below 1100 degrees, HEPA vacuum sanding, HEPA vacuum needle 
gun, contained hydroblasting or high pressure wash with HEPA vacuum, and 
abrasive sandblasting with HEPA vacuum. Surfaces must be covered with 
durable materials with joints and edges sealed and caulked as needed to 
prevent the escape of lead contaminated dust.
    (iii) Prohibited methods of removal are: Open flame burning or 
torching; machine sanding or grinding without a HEPA exhaust; 
uncontained hydroblasting or high pressure wash; and dry scraping except 
around electrical outlets or except when treating defective paint spots 
no more than two square feet in any one interior room or space (hallway, 
pantry, etc.) or totalling no more than twenty square feet on exterior 
surfaces.
    (iv) During exterior treatment, soil and playground equipment must 
be protected from contamination.
    (v) All treatment procedures must be concluded with a thorough 
cleaning of all surfaces in the room or area of treatment to remove fine 
dust particles. Cleanup must be accomplished by wet washing surfaces 
with a lead solubilizing detergent such as trisodium phosphate or an 
equivalent solution.
    (vi) Waste and debris must be disposed of in accordance with all 
applicable Federal, State and local laws.
    (6) Funding for inspection, testing and treatment. Program 
requirements and local program design will determine whether the cost of 
inspection, testing or treatment is to be borne by the owner/developer, 
the grantee or a combination of the owner/developer and the grantee.
    (7) Tenant protection. The owner/developer shall take appropriate 
action to protect residents and their belongings from hazards associated 
with treatment procedures. Residents must not enter spaces undergoing 
treatment until cleanup is completed. Personal belongings that are in 
work areas must be relocated or otherwise protected from contamination. 
Where necessary, these actions may include the temporary relocation of 
tenants during the treatment process. The owner/developer shall notify 
the grantee of all such actions taken.
    (8) Records. The grantee shall keep a copy of each inspection and/or 
test report for at least three years.
    (9) Monitoring and enforcement. Area ONAP monitoring of 
rehabilitation programs includes reviews for compliance with applicable 
program requirements for lead-based paint. In cases of noncompliance, 
HUD may impose conditions or sanctions on grantees to encourage prompt 
compliance.
    (10) Compliance with other program requirements, Federal, State and 
local laws.--(i) Other program requirements. To the extent that 
assistance from any of the programs covered by this section is used in 
conjunction with other HUD program assistance which have lead-based 
paint requirements which may have more or less stringent requirements, 
the more stringent requirements will prevail.

[[Page 741]]

    (ii) HUD responsibility. If HUD determines that a State or local 
law, ordinance, code or regulation provides for lead-based paint testing 
or hazard treatment in a manner which provides a level of protection 
from the hazards of lead-based paint poisoning at least comparable to 
that provided by the requirements of this section and that adherence to 
the requirements of this subpart would be duplicative or otherwise cause 
inefficiencies, HUD may modify or waive the requirements of this section 
in such manner as may be appropriate to promote efficiency while 
ensuring such comparable level of protection.
    (iii) Grantee responsibility. Nothing in this section is intended to 
relieve any grantee in the programs covered by this section of any 
responsibility for compliance with applicable State or local laws, 
ordinances, codes or regulations governing the inspection, testing or 
treatment of lead-based paint hazards.

(Approved by the Office of Management and Budget under control number 
2577-0191)



Sec. 1003.608  Debarment and suspension.

    As required by 24 CFR part 24, each grantee must require 
participants in lower tier covered transactions (e.g., contractors and 
sub-contractors) to include the certification in appendix B of part 24 
(that neither it nor its principals is presently debarred, suspended, 
proposed for debarment, declared ineligible, or voluntarily excluded 
from participation from the covered transaction) in any proposal 
submitted in connection with the lower tier transactions. A grantee may 
rely on the certification , unless it knows the certification is 
erroneous.



                     Subpart H--Program Performance



Sec. 1003.700  Review of grantee's performance.

    (a) Objective. HUD will review each grantee's performance to 
determine whether the grantee has:
    (1) Complied with the requirements of the Act, this part, the grant 
agreement and other applicable laws and regulations;
    (2) Carried out its activities substantially as described in its 
application;
    (3) Made substantial progress in carrying out its approved program;
    (4) A continuing capacity to carry out the approved activities in a 
timely manner; and
    (5) The capacity to undertake additional activities funded under 
this part.
    (b) Basis for review. In reviewing each grantee's performance, HUD 
will consider all available evidence which may include, but not be 
limited to, the following:
    (1) The approved application and any amendments thereto;
    (2) Reports prepared by the grantee;
    (3) Records maintained by the grantee;
    (4) Results of HUD's monitoring of the grantee's performance, 
including field evaluation of the quality of the work performed;
    (5) Audit reports;
    (6) Records of drawdowns on the line of credit;
    (7) Records of comments and complaints by citizens and 
organizations; and
    (8) Litigation.



Sec. 1003.701  Corrective and remedial action.

    (a) General. One or more corrective or remedial actions will be 
taken by HUD when, on the basis of the performance review, HUD 
determines that the grantee has not:
    (1) Complied with the requirements of the Act, this part, and other 
applicable laws and regulations, including the environmental 
responsibilities assumed under section 104(g) of title I of the Act;
    (2) Carried out its activities substantially as described in its 
applications;
    (3) Made substantial progress in carrying out its approved program; 
or
    (4) Shown the continuing capacity to carry out its approved 
activities in a timely manner.
    (b) Action. The action taken by HUD will be designed, first, to 
prevent the continuance of the deficiency; second, to mitigate any 
adverse effects or consequences of the deficiency; and third, to prevent 
a recurrence of the same or

[[Page 742]]

similar deficiencies. The following actions may be taken singly or in 
combination, as appropriate for the circumstances:
    (1) Request the grantee to submit progress schedules for completing 
approved activities or for complying with the requirements of this part;
    (2) Issue a letter of warning advising the grantee of the deficiency 
(including environmental review deficiencies and housing assistance 
deficiencies), describing the corrective actions to be taken, 
establishing a date for corrective actions, and putting the grantee on 
notice that more serious actions will be taken if the deficiency is not 
corrected or is repeated;
    (3) Advise the grantee to suspend, discontinue, or not incur costs 
for the affected activity;
    (4) Advise the grantee to reprogram funds from affected activities 
to other eligible activities, provided that such action shall not be 
taken in connection with any substantial violation of part 58 and 
provided that such reprogramming is subjected to the environmental 
review procedures of part 58 of this title;
    (5) Advise the grantee to reimburse the grantee's program account or 
line of credit in any amount improperly expended;
    (6) Change the method of payment from a line of credit basis to a 
reimbursement basis; and/or
    (7) Suspend the line of credit until corrective actions are taken.



Sec. 1003.702  Reduction or withdrawal of grant.

    (a) General. A reduction or withdrawal of a grant under paragraph 
(b) of this section will not be made until at least one of the 
corrective or remedial actions specified in Sec. 1003.701(b) has been 
taken and only then if the grantee has not made an appropriate and 
timely response. Before making such a grant reduction or withdrawal, the 
grantee also shall be notified and given an opportunity within a 
prescribed time for an informal consultation regarding the proposed 
action.
    (b) Reduction or withdrawal. When the Area ONAP determines, on the 
basis of a review of the grantee's performance, that the objectives set 
forth in Sec. 1003.700(a)(2) or (3) have not been met, the Area ONAP may 
reduce or withdraw the grant, except that funds already expended on 
eligible approved activities shall not be recaptured.



Sec. 1003.703  Other remedies for noncompliance.

    (a) Secretarial actions. If the Secretary finds a grantee has failed 
to comply with any provision of this part even after corrective actions 
authorized under Sec. 1003.701 have been applied, the following actions 
may be taken provided that reasonable notice and opportunity for hearing 
is made to the grantee. (The Administrative Procedure Act (5 U.S.C. 551 
et seq.), where applicable, shall be a guide in any situation involving 
adjudications where the Secretary desires to take actions requiring 
reasonable notice and opportunity for a hearing):
    (1) Terminate the grant to the grantee;
    (2) Reduce the grant to the grantee by an amount equal to the amount 
which was not expended in accordance with this part; or
    (3) Limit the availability of funds to projects or activities not 
affected by such failure to comply; provided, however, that the 
Secretary may on due notice revoke the grantee's line of credit in whole 
or in part at any time if the Secretary determines that such action is 
necessary to preclude the further expenditure of funds for activities 
affected by such failure to comply.
    (b) Secretarial referral to the Attorney General. If there is reason 
to believe that a grantee has failed to comply substantially with any 
provision of the Act, the Secretary may refer the matter to the Attorney 
General of the United States with a recommendation that an appropriate 
civil action be instituted. Upon such a referral, the Attorney General 
may bring a civil action in any United States district court having 
venue thereof for such relief as may be appropriate, including an action 
to recover the amount of the assistance furnished under this part which 
was not expended in accordance with this part or for mandatory or 
injunctive relief.

                          PART 1004  [RESERVED]

[[Page 743]]



PART 1005--LOAN GUARANTEES FOR INDIAN HOUSING--Table of Contents




Sec.
1005.101  What is the applicability and scope of these regulations?
1005.103  What definitions are applicable to this program?
1005.104  What lenders are eligible for participation?
1005.105  What are eligible loans?
1005.106  What is the Direct Guarantee procedure?
1005.107  What is eligible collateral?
1005.109  What is a guarantee fee?
1005.111  What safety and quality standards apply?
1005.112  How do eligible lenders and eligible borrowers demonstrate 
          compliance with applicable tribal laws?
1005.113  How does HUD enforce lender compliance with applicable tribal 
          laws?

    Authority: 42 U.S.C. 1715z-13a and 3535(d).

    Source: 61 FR 9054, Mar. 6, 1996, unless otherwise noted. 
Redesignated at 63 FR 12349, Mar. 12, 1998.



Sec. 1005.101  What is the applicability and scope of these regulations?

    Under the provisions of section 184 of the Housing and Community 
Development Act of 1992, as amended by Native American Housing 
Assistance and Self-Determination Act of 1996 (12 U.S.C. 1715z-13a), the 
Department of Housing and Urban Development (the Department or HUD) has 
the authority to guarantee loans for the construction, acquisition, or 
rehabilitation of 1- to 4-family homes that are standard housing located 
on trust or restricted land or land located in an Indian or Alaska 
Native area, and for which an Indian Housing Plan has been submitted and 
approved under 24 CFR part 1000. This part provides requirements that 
are in addition to those in section 184.

[63 FR 48990, Sept. 11, 1998]



Sec. 1005.103  What definitions are applicable to this program?

    In addition to the definitions that appear in Section 184 of the 
Housing and Community Development Act of 1992, the following definitions 
are applicable to loan guarantees under Section 184--
    Default means the failure by a borrower to make any payment or to 
perform any other obligation under the terms of a loan, and such failure 
continues for a period of more than 30 days.
    Holder means the holder of the guarantee certificate and in this 
program is variously referred to as the lender holder, the holder of the 
certificate, the holder of the guarantee, and the mortgagee.
    Indian means any person recognized as being Indian or Alaska Native 
by an Indian tribe, the Federal Government, or any State, and includes 
the term ``Native American''.
    Mortgage means:
    (1)(i) A first lien as is commonly given to secure advances on, or 
the unpaid purchase price of, real estate under the laws of the 
jurisdiction where the property is located and may refer to a security 
instrument creating a lien, whether called a mortgage, deed of trust, 
security deed, or another term used in a particular jurisdiction; or
    (ii) A loan secured by collateral as required by 24 CFR 1005.107; 
and
    (2) The credit instrument, or note, secured thereby.
    Mortgagee means the same as ``Holder.''
    Principal residence means the dwelling where the mortgagor maintains 
(or will maintain) his or her permanent place of abode, and typically 
spends (or will spend) the majority of the calendar year. A person may 
have only one principal residence at any one time.
    Property means the property constructed, acquired, or rehabilitated 
with the guaranteed loan, except when the context indicates that the 
term means other collateral for the loan.
    Section 184 means section 184 (entitled, ``Loan Guarantees for 
Indian Housing'') of the Housing and Community Development Act of 1992 
(12 U.S.C. 1515z-13a).
    Trust or restricted land has the meaning given to ``trust land'' in 
section 184(k)(9) of the Housing and Community Development Act of 1992.

[61 FR 9054, Mar. 6, 1996. Redesignated and amended at 63 FR 12349, 
12372, Mar. 12, 1998; 63 FR 48990, Sept. 11, 1998]



Sec. 1005.104  What lenders are eligible for participation?

    Eligible lenders are those approved under and meeting the 
qualifications established in this subpart, except that

[[Page 744]]

loans otherwise insured or guaranteed by an agency of the United States, 
or made by an organization of Indians from amounts borrowed from the 
United States, shall not be eligible for guarantee under this part. The 
following lenders are deemed to be eligible under this part:
    (a) Any mortgagee approved by HUD for participation in the single 
family mortgage insurance program under title II of the National Housing 
Act;
    (b) Any lender whose housing loans under chapter 37 of title 38, 
United States Code are automatically guaranteed pursuant to section 
1802(d) of such title;
    (c) Any lender approved by the Department of Agriculture to make 
guaranteed loans for single family housing under the Housing Act of 
1949;
    (d) Any other lender that is supervised, approved, regulated, or 
insured by any other agency of the United States; or
    (e) Any other lender approved by the Secretary under this part.

[63 FR 12372, Mar. 12, 1998, as amended at 63 FR 48990, Sept. 11, 1998]



Sec. 1005.105  What are eligible loans?

    (a) In general. Only fixed rate, fixed term loans with even monthly 
payments are eligible under the Section 184 program.
    (b) Eligible borrowers. A loan guarantee under section 184 may be 
made to:
    (1) An Indian family who will occupy the home as a principal 
residence and who is otherwise qualified under section 184;
    (2) An Indian Housing Authority or Tribally Designated Housing 
Entity; or
    (3) An Indian tribe.
    (c) Appraisal of labor value. The value of any improvements to the 
property made through the skilled or unskilled labor of the borrower, 
which may be used to make a payment on account of the balance of the 
purchase price, must be appraised in accordance with generally 
acceptable practices and procedures.
    (d) Construction advances. The Department may guarantee loans from 
which advances will be made during construction. The Department will 
provide guarantees for advances made by the mortgagee during 
construction if all of the following conditions are satisfied:
    (1) The mortgagor and the mortgagee execute a building loan 
agreement, approved by HUD, setting forth the terms and conditions under 
which advances will be made;
    (2) The advances may be made only as provided in the building loan 
agreement;
    (3) The principal amount of the mortgage is held by the mortgagee in 
an interest bearing account, trust, or escrow for the benefit of the 
mortgagor, pending advancement to the mortgagor or the mortgagor's 
creditors as provided in the loan agreement; and
    (4) The mortgage shall bear interest on the amount advanced to the 
mortgagor or the mortgagor's creditors and on the amount held in an 
account or trust for the benefit of the mortgagor.
    (e) Environmental compliance. Prior to the Department's issuance of 
a commitment to guarantee any loan or (if no commitment is issued) prior 
to guarantee of any loan, there must be compliance with environmental 
review procedures to the extent applicable under part 50 of this title. 
If the loan involves proposed or new construction, the Department will 
require compliance with procedures similar to those required by 
Sec. 203.12(c)(2) of this title for FHA mortgage insurance.
    (f) Lack of access to private financial markets. In order to be 
eligible for a loan guarantee if the property is not on trust or 
restricted land, the borrower must certify that the borrower lacks 
access to private financial markets. Borrower certification is the only 
certification required by HUD.

[61 FR 9054, Mar. 6, 1996. Redesignated and amended at 63 FR 12349, 
12372, Mar. 12, 1998; 63 FR 48990, Sept. 11, 1998]



Sec. 1005.106  What is the Direct Guarantee procedure?

    (a) General. A loan may be processed under a Direct Guarantee 
procedure approved by the Department, under which the Department does 
not issue commitments to guarantee or review applications for loan 
guarantees before mortgages are executed by lenders approved for Direct 
Guarantee processing. The Department will approve a loan before the loan 
is guaranteed.

[[Page 745]]

    (b) Mortgagee sanctions. Depending on the nature and extent of the 
noncompliance with the requirements applicable to the Direct Guarantee 
procedure, as determined by the Department, the Department may take such 
actions as are deemed appropriate and in accordance with published 
guidelines.

[63 FR 48990, Sept. 11, 1998]



Sec. 1005.107  What is eligible collateral?

    (a) In general. A loan guaranteed under section 184 may be secured 
by any collateral authorized under and not prohibited by Federal, state, 
or tribal law and determined by the lender and approved by the 
Department to be sufficient to cover the amount of the loan, and may 
include, but is not limited to, the following:
    (1) The property and/or improvements to be acquired, constructed, or 
rehabilitated, to the extent that an interest in such property is not 
subject to the restrictions against alienation applicable to trust or 
restricted land;
    (2) A first and/or second mortgage on property other than trust 
land;
    (3) Personal property; or
    (4) Cash, notes, an interest in securities, royalties, annuities, or 
any other property that is transferable and whose present value may be 
determined.
    (b) Leasehold of trust or restricted land as collateral. If a 
leasehold interest in trust or restricted land is used as collateral or 
security for the loan, the following additional provisions apply:
    (1) Approved Lease. Any land lease for a unit financed under Section 
184 must be on a form approved by both HUD and the Bureau of Indian 
Affairs, U.S. Department of Interior.
    (2) Assumption or sale of leasehold. The lease form must contain a 
provision requiring tribal consent before any assumption of an existing 
lease, except where title to the leasehold interest is obtained by the 
Department through foreclosure of the guaranteed mortgage or a deed in 
lieu of foreclosure. A mortgagee other than the Department must obtain 
tribal consent before obtaining title through a foreclosure sale. Tribal 
consent must be obtained on any subsequent transfer from the purchaser, 
including the Department, at foreclosure sale. The lease may not be 
terminated by the lessor without HUD's approval while the mortgage is 
guaranteed or held by the Department.
    (3) The mortgagee or HUD shall only pursue liquidation after 
offering to transfer the account to an eligible tribal member, the 
Indian tribe, or the Indian housing authority servicing the Indian tribe 
or the TDHE servicing the Indian tribe. The mortgagee or HUD shall not 
sell, transfer, or otherwise dispose of or alienate the property except 
to one of these three entities.
    (4) Priority of loan obligation. Any tribal government whose courts 
have jurisdiction to hear foreclosures must enact a law providing for 
the satisfaction of a loan guaranteed or held by the Department before 
other obligations (other than tribal leasehold taxes against the 
property assessed after the property is mortgaged) are satisfied.
    (5) Eviction procedures. Before HUD will guarantee a loan secured by 
trust land, the tribe having jurisdiction over such property must notify 
the Department that it has adopted and will enforce procedures for 
eviction of defaulted mortgagors where the guaranteed loan has been 
foreclosed.
    (i) Enforcement. If the Department determines that the tribe has 
failed to enforce adequately its eviction procedures, HUD will cease 
issuing guarantees for loans for tribal members except pursuant to 
existing commitments. Adequate enforcement is demonstrated where prior 
evictions have been completed within 60 days after the date of the 
notice by HUD that foreclosure was completed.
    (ii) Review. If the Department ceases issuing guarantees in 
accordance with the first sentence of paragraph (c)(1) of this section, 
HUD shall notify the tribe of the reasons for such action and that the 
tribe may, within 30 days after notification of HUD's action, file a 
written appeal with the Field Office of Native American Programs (FONAP) 
Administrator. Within 30 days after notification of an adverse decision 
of the appeal by the FONAP Administrator, the tribe may file a written 
request for review with the Deputy Assistant Secretary, Office of Native 
American Programs (ONAP). Upon notification of an

[[Page 746]]

adverse decision by the Deputy Assistant Secretary, the tribe has 30 
additional days to file an appeal with the Assistant Secretary for 
Public and Indian Housing. The determination of the Assistant Secretary 
shall be final, but the tribe may resubmit the issue to the Assistant 
Secretary for review at any subsequent time if new evidence or changed 
circumstances warrant reconsideration. (Any other administrative actions 
determined to be necessary to debar a tribe from participating in this 
program will be subject to the formal debarment procedures contained in 
24 CFR part 24.)

[61 FR 9054, Mar. 6, 1996. Redesignated and amended, respectively, at 63 
FR 12349, 12373, Mar. 12, 1998; 63 FR 48991, Sept. 11, 1998]



Sec. 1005.109  What is a guarantee fee?

    The lender shall pay to the Department, at the time of issuance of 
the guarantee, a fee for the guarantee of loans under Section 184, in an 
amount equal to 1 percent of the principal obligation of the loan. This 
amount is payable by the borrower at closing.



Sec. 1005.111  What safety and quality standards apply?

    Loans guaranteed under section 184 must be for dwelling units which 
meet the safety and quality standards set forth in section 184(j).

[63 FR 48991, Sept. 11, 1998]



Sec. 1005.112  How do eligible lenders and eligible borrowers demonstrate compliance with applicable tribal laws?

    The lender and the borrower will each certify that they acknowledge 
and agree to comply with all applicable tribal laws. An Indian tribe 
with jurisdiction over the dwelling unit does not have to be notified of 
individual section 184 loans unless required by applicable tribal law.

[63 FR 12373 Mar. 12, 1998, as amended at 63 FR 48991, Sept. 11, 1998]



Sec. 1005.113  How does HUD enforce lender compliance with applicable tribal laws?

    Failure of the lender to comply with applicable tribal law is 
considered to be a practice detrimental to the interest of the borrower 
and may be subject to enforcement action(s) under section 184(g) of the 
statute.

[63 FR 12373 Mar. 12, 1998]

                       PARTS 1006-1699  [RESERVED]

[[Page 747]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 749]]



                    Table of CFR Titles and Chapters




                     (Revised as of March 31, 1999)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                          Title 2--[Reserved]

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  General Accounting Office (Parts 1--99)
        II  Federal Claims Collection Standards (General 
                Accounting Office--Department of Justice) (Parts 
                100--299)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
        IV  Advisory Committee on Federal Pay (Parts 1400--1499)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
       VII  Advisory Commission on Intergovernmental Relations 
                (Parts 1700--1799)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Part 2100)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)

[[Page 750]]

      XXII  Federal Deposit Insurance Corporation (Part 3201)
     XXIII  Department of Energy (Part 3301)
      XXIV  Federal Energy Regulatory Commission (Part 3401)
       XXV  Department of the Interior (Part 3501)
      XXVI  Department of Defense (Part 3601)
    XXVIII  Department of Justice (Part 3801)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Part 4301)
      XXXV  Office of Personnel Management (Part 4501)
        XL  Interstate Commerce Commission (Part 5001)
       XLI  Commodity Futures Trading Commission (Part 5101)
      XLII  Department of Labor (Part 5201)
     XLIII  National Science Foundation (Part 5301)
       XLV  Department of Health and Human Services (Part 5501)
      XLVI  Postal Rate Commission (Part 5601)
     XLVII  Federal Trade Commission (Part 5701)
    XLVIII  Nuclear Regulatory Commission (Part 5801)
         L  Department of Transportation (Part 6001)
       LII  Export-Import Bank of the United States (Part 6201)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Part 6401)
      LVII  General Services Administration (Part 6701)
     LVIII  Board of Governors of the Federal Reserve System (Part 
                6801)
       LIX  National Aeronautics and Space Administration (Part 
                6901)
        LX  United States Postal Service (Part 7001)
       LXI  National Labor Relations Board (Part 7101)
      LXII  Equal Employment Opportunity Commission (Part 7201)
     LXIII  Inter-American Foundation (Part 7301)
       LXV  Department of Housing and Urban Development (Part 
                7501)
      LXVI  National Archives and Records Administration (Part 
                7601)
      LXIX  Tennessee Valley Authority (Part 7901)
      LXXI  Consumer Product Safety Commission (Part 8101)
     LXXIV  Federal Mine Safety and Health Review Commission (Part 
                8401)
     LXXVI  Federal Retirement Thrift Investment Board (Part 8601)
    LXXVII  Office of Management and Budget (Part 8701)

                          Title 6--[Reserved]

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture

[[Page 751]]

         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
      XIII  Northeast Dairy Compact Commission (Parts 1300--1399)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy, Department of Agriculture (Parts 
                2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)

[[Page 752]]

    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Immigration and Naturalization Service, Department of 
                Justice (Parts 1--499)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)

[[Page 753]]

        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Department of Commerce, Economic Development 
                Administration, (Parts 300--399)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Export Administration, Department of 
                Commerce (Parts 700--799)

[[Page 754]]

      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  United States Customs Service, Department of the 
                Treasury (Parts 1--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 755]]

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training, Department of Labor 
                (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  United States Information Agency (Parts 500--599)
       VII  Overseas Private Investment Corporation, International 
                Development Cooperation Agency (Parts 700--799)
        IX  Foreign Service Grievance Board Regulations (Parts 
                900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Board for International Broadcasting (Parts 1300--
                1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

[[Page 756]]

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Multifamily Housing Assistance 
                Restructuring, Department of Housing and Urban 
                Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--999)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

[[Page 757]]

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Part 1001)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Part 1200)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--799)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Bureau of Alcohol, Tobacco and Firearms, Department of 
                the Treasury (Parts 1--299)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--199)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)

[[Page 758]]

       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Pension and Welfare Benefits Administration, 
                Department of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
        VI  Bureau of Mines, Department of the Interior (Parts 
                600--699)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)

[[Page 759]]

       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)
      XXIX  Presidential Commission on the Assignment of Women in 
                the Armed Forces (Part 2900)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

[[Page 760]]

                        Title 35--Panama Canal

         I  Panama Canal Regulations (Parts 1--299)

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
       XIV  Assassination Records Review Board (Parts 1400--1499)

             Title 37--Patents, Trademarks, and Copyrights

         I  Patent and Trademark Office, Department of Commerce 
                (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Rate Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--799)
         V  Council on Environmental Quality (Parts 1500--1599)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)

[[Page 761]]

        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans 
                Employment and Training, Department of Labor 
                (Parts 61-1--61-999)
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System
       201  Federal Information Resources Management Regulation 
                (Parts 201-1--201-99) [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300.99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Parts 303-1--303-2)
       304  Payment from a Non-Federal Source for Travel Expenses 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Health Care Financing Administration, Department of 
                Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)

[[Page 762]]

       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10005)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
      XXII  Christopher Columbus Quincentenary Jubilee Commission 
                (Parts 2200--2299)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

[[Page 763]]

                          Title 46--Shipping

         I  Coast Guard, Department of Transportation (Parts 1--
                199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Transportation (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Department of Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  United States Agency for International Development 
                (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  United States Information Agency (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)

[[Page 764]]

        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        35  Panama Canal Commission (Parts 3500--3599)
        44  Federal Emergency Management Agency (Parts 4400--4499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399)
        54  Defense Logistics Agency, Department of Defense (Part 
                5452)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Research and Special Programs Administration, 
                Department of Transportation (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Highway Administration, Department of 
                Transportation (Parts 300--399)
        IV  Coast Guard, Department of Transportation (Parts 400--
                499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Bureau of Transportation Statistics, Department of 
                Transportation (Parts 1400--1499)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)

[[Page 765]]

        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR

[[Page 767]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of March 31, 1999)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Commission on Intergovernmental          5, VII
     Relations
Advisory Committee on Federal Pay                 5, IV
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Alcohol, Tobacco and Firearms, Bureau of          27, I
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX

[[Page 768]]

Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Assassination Records Review Board                36, XIV
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Board for International Broadcasting              22, XIII
Census Bureau                                     15, I
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Christopher Columbus Quincentenary Jubilee        45, XXII
     Commission
Civil Rights, Commission on                       45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I`
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Export Administration, Bureau of                15, VII
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office                     37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Corporation for National and Community Service    45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Customs Service, United States                    19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII

[[Page 769]]

  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 2
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Elementary and Secondary Education, Office of     34, II
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   5, LIV; 40, I
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                25, III, LXXVII; 48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export Administration, Bureau of                  15, VII
Export-Import Bank of the United States           5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1

[[Page 770]]

Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               4, II
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
  Federal Acquisition Regulation                  48, 44
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II; 49, III
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Pay, Advisory Committee on                5, IV
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Property Management Regulations System    41, Subtitle C
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Accounting Office                         4, I, II
General Services Administration                   5, LVII
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Property Management Regulations System  41, 101, 105
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302

[[Page 771]]

  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          5, XLV; 45, Subtitle A
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Health Care Financing Administration            42, IV
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Health Care Financing Administration              42, IV
Housing and Urban Development, Department of      5, LXV; 24, Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Inspector General, Office of                    24, XII
  Multifamily Housing Assistance Restructuring,   24, IV
       Office of
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Human Development Services, Office of             45, XIII
Immigration and Naturalization Service            8, I
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Information Agency, United States                 22, V
  Federal Acquisition Regulation                  48, 19
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Intergovernmental Relations, Advisory Commission  5, VII
     on
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  Mines, Bureau of                                30, VI

[[Page 772]]

  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, Agency for             22, II
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
  International Development, Agency for           22, II; 48, 7
  Overseas Private Investment Corporation         5, XXXIII; 22, VII
International Fishing and Related Activities      50, III
International Investment, Office of               31, VIII
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                5, XXVIII; 28, I
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             4, II
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration and Naturalization Service          8, I
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Pension and Welfare Benefits Administration     29, XXV
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training, Office of    41, 61; 20, IX
       the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
Management and Budget, Office of                  5, III, LXXVII; 48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II
Micronesian Status Negotiations, Office for       32, XXVII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Mines, Bureau of                                  30, VI

[[Page 773]]

Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Multifamily Housing Assistance Restructuring,     24, IV
     Office of
National Aeronautics and Space Administration     5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National Archives and Records Administration      5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Bureau of Standards                      15, II
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National and Community Service, Corporation for   45, XII, XXV
National Council on Disability                    34, XII
National Credit Union Administration              12, VII
National Drug Control Policy, Office of           21, III
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
National Weather Service                          15, IX
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Dairy Compact Commission                7, XIII
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Panama Canal Commission                           48, 35
Panama Canal Regulations                          35, I
Patent and Trademark Office                       37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension and Welfare Benefits Administration       29, XXV
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
     Acquisition Regulation
[[Page 774]]

  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Postal Rate Commission                            5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Commission on the Assignment of      32, XXIX
     Women in the Armed Forces
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Regional Action Planning Commissions              13, V
Relocation Allowances                             41, 302
Research and Special Programs Administration      49, I
Rural Business-Cooperative Service                7, XVIII, XLII
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     13, I
Smithsonian Institution                           36, V
Social Security Administration                    20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  22, I
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     5, L
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II; 49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Research and Special Programs Administration    49, I
  Saint Lawrence Seaway Development Corporation   33, IV

[[Page 775]]

  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Statistics Brureau                 49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV
  Alcohol, Tobacco and Firearms, Bureau of        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs Service, United States                  19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  International Investment, Office of             31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training, Office of the  41, 61; 20, IX
     Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 777]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations which were 
made by documents published in the Federal Register since January 1, 
1986, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 1986, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, and 1973-1985'' published in seven 
separate volumes.

                                  1986

24 CFR
                                                                   51 FR
                                                                    Page
Chapter VIII
800  Redesignated as Part 900; eff. 5-5-86..........................9787
812  Authority citation revised....................................11219
    Authority citation revised; section authority citations 
removed............................................................21307
812.1  Revised; eff. 7-30-86.......................................11219
    Effective date deferred..........................26876, 34570, 42088
812.2  Revised; eff. 7-30-86.......................................11219
    Amended (effective date pending)...............................21307
    Corrected...............................................25688, 29464
    Amended; effective date deferred........................26877, 34570
    Effective date deferred........................................42088
    Corrected......................................................42090
812.5  Added; eff. 7-30-86.........................................11220
    (a)(4)(i) correctly designated; (a)(4)(i)(A) and OMB number 
corrected..........................................................15611
    Effective date deferred.................................26876, 42088
812.6  Added; eff. 7-30-86.........................................11221
    Effective date deferred..........................26876, 34570, 42088
812.7  Added; eff. 7-30-86.........................................11221
    (a)(1)(ii)(B) corrected........................................15611
    Effective date deferred..........................26876, 34570, 42088
813  Heading revised; eff. 5-5-86...................................9787
813.101  Amended; eff. 5-5-86.......................................9787
813.102  Amended (effective date pending)..........................21308
813.106  (d)(3) redesignated as (d)(4); new (d)(3) added 
        (effective date pending)...................................21308
842  Added (effective date pending)................................43302
850.35  (d)(3) introductory text amended; eff. 5-1-86...............6913
850.73  Revision confirmed (effective date pending)................30480
    Eff. 10-8-86...................................................37567
880.209  (a), (b)(3)(i), and (4) amended; eff. 5-1-86...............6913
880.211  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
880.504  (e) added; eff. 7-30-86...................................11224
    Effective date deferred..........................26876, 34570, 42088
880.601  (b) revised; eff. 7-30-86.................................11224
    Effective date deferred..........................26876, 34570, 42088
880.603  (c) (1) and (3) amended; eff. 7-30-86.....................11224
    Effective date deferred.................................26876, 42088
880.607  (b)(3) revised; eff. 7-30-86..............................11225
    Effective date deferred..........................26876, 34570, 42088
881.209  (a), (b)(3)(i), and (4) amended; eff. 5-1-86...............6913
881.211  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
881.504  (e) added; eff. 7-30-86...................................11225
    (e) corrected..................................................15611
    Effective date deferred..........................26876, 34570, 42088

[[Page 778]]

881.601  (b) revised; eff. 7-30-86.................................11225
    Effective date deferred..........................26876, 34570, 42088
881.603  (c) (1) and (3) amended; eff. 7-30-86.....................11225
    Effective date deferred..........................26876, 34570, 42088
881.607  (b)(3) revised; eff. 7-30-86..............................11225
    Effective date deferred..........................26876, 34570, 42088
881.709  (a), (h), and (i) amended; eff. 5-1-86.....................6913
882.102  Amended (effective date pending)...................21308, 21309
882.103  (b) revised (effective date pending)......................21309
882.105  (a) revised; (b)(2) introductory text and (ii) and (3) 
        amended (effective date pending)...........................21309
882.106  (c) (2), (3), and (4) and (d) redesignated as (d) (1) and 
        (2), (c)(2), and (e); (d) heading and (3), (f) and (g) 
        added; (c) heading revised; new (c)(2) amended (effective 
        date pending)..............................................21309
882.109  (q) added (effective date pending)........................21309
    (q) correctly designated.......................................24324
882.110  (g) added.................................................21309
882.116  (c) revised and (m) amended; eff. 7-30-86.................11225
    (k) revised....................................................21309
    Effective date deferred..........................26876, 34570, 42088
882.118  (a)(1) revised; eff. 7-30-86..............................11225
    (a)(4) redesignated as (a)(5) and amended; new (a)(4) added....21309
    Effective date deferred..........................26876, 34570, 42088
882.124  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
882.207  Introductory text amended.................................21309
882.209  (a) (2), (7), and (m)(1) revised; new (k)(4) added; eff. 
        7-30-86....................................................11226
    (a)(7) corrected...............................................15612
    (b)(2) revised; (c)(9) added...................................21310
    (a)(7) correctly revised.......................................25689
    Effective date deferred..........................26876, 34570, 42088
882.210  (e) added; eff. 7-30-86...................................11226
    Effective date deferred..........................26876, 34570, 42088
882.212  (a) and (c) amended; eff. 7-30-86.........................11226
    Effective date deferred..........................26876, 34570, 42088
882.215  (c)(3) redesignated as (c)(4); new (c)(3) added...........16297
882.301--882.335 (Subpart C)  Added................................21310
882.320  (d) corrected.............................................29464
882.406  (a) amended; eff. 5-1-86...................................6913
882.514  (a)(1) revised; eff. 7-30-86..............................11226
    Effective date deferred..........................26876, 34570, 42088
882.515  (a) and (c) amended; eff. 7-30-86.........................11226
    Effective date deferred..........................26876, 34570, 42088
882.605  (a) amended...............................................21312
883.311  (a), (b)(3)(i), and (4) amended; eff. 5-1-86...............6913
883.313  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
883.408  (b) revised...............................................19061
883.605  (e) added; eff. 7-30-86...................................11226
    Effective date deferred..........................26876, 34570, 42088
883.702  (b) revised; eff. 7-30-86.................................11226
    Effective date deferred..........................26876, 34570, 42088
883.704  (c)(1) and (3) amended; eff. 7-30-86......................11226
    Effective date deferred..........................26876, 34570, 42088
883.708  (b)(3) revised; eff. 7-30-86..............................11227
    Effective date deferred..........................26876, 34570, 42088
884.118  (a)(3) and (7) revised; eff. 7-30-86......................11227
    Effective date deferred..........................26876, 34570, 42088
884.124  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
884.216  Amended; eff. 7-30-86.....................................11227
    Effective date deferred..........................26876, 34570, 42088
884.218  (a) and (c) amended; eff. 7-30-86.........................11227
    Effective date deferred..........................26876, 34570, 42088
884.223  (e) added; eff. 7-30-86...................................11227

[[Page 779]]

    Effective date deferred..........................26876, 34570, 42088
885  Interest rate.................................................42090
885.5  Amended; interim............................................12310
885.210  Introductory text and (a) redesignated as (a) and (b); 
        new (a), (b)(9), (13), and (23)(i) revised; OMB number; 
        interim....................................................12311
885.220  (d)(1) revised; OMB number; interim.......................12311
885.412  Added; interim............................................12311
885.416  (c) revised; interim......................................12312
886.119  (a)(3) and (7) revised; eff. 7-30-86......................11227
    Effective date deferred..........................26876, 34570, 42088
886.126  Revised...................................................21863
    Effective date deferred........................................26878
886.129  (e) added.................................................11227
    Effective date deferred..........................26876, 34570, 42088
886.131  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
886.326  Revised...................................................21864
    Effective date deferred........................................26878
886.328  (b)(3) revised; eff. 7-30-86..............................11228
    Effective date deferred..........................26876, 34570, 42088
886.329  (e) added; eff. 7-30-86...................................11228
    Effective date deferred..........................26876, 34570, 42088
886.336  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
888  Schedules B and D revised.....................................15120
    Schedule A revised.............................................28489
    Schedules B and D revised......................................31019
    Schedule C revised.............................................32910
    Schedule B corrected...........................................36689
892 Added (effective date pending).................................29635
    Eff. 10-8-86...................................................37567
Chapter IX
900  Redesignated from Part 800; eff. 5-5-86........................9787
900.102  Nomenclature change; eff. 5-5-86...........................9787
900.103  Nomenclature change; eff. 5-5-86...........................9787
900.202  Nomenclature change; eff. 5-5-86...........................9787
904.103  Policy statement..........................................33898
905  Authority citation revised; section authority citations 
        removed....................................................43737
905.106  (a) revised...............................................43738
905.107  (f) added.................................................27789
905.204  Revised...................................................43738
912  Authority citation revised.............................11228, 25689
912.1  Revised; eff. 7-30-86.......................................11228
    Effective date deferred..........................26876, 34570, 42088
912.2  Revised; eff. 7-30-86.......................................11228
    Corrected......................................................25689
    Amended; effective date deferred........................26877, 34570
    Effective date deferred........................................42088
912.5  Added; eff. 7-30-86.........................................11229
    (a)(6) amended; effective date deferred.................26877, 34570
    Effective date deferred........................................42088
912.6  Added; eff. 7-30-86.........................................11230
    Effective date deferred..........................26876, 34570, 42088
912.7  Added; eff. 7-30-86.........................................11230
    (a)(2)(ii) corrected...........................................15612
    Effective date deferred..........................26876, 34570, 42088
913.101  Amended; eff. 5-5-86.......................................9787
941.203  Policy statement..........................................33898
941.204  Policy statement..........................................33898
941.207  Heading, (a), (b)(1), and (c) revised; eff. 5-1-86.........6913
941.209  Addition confirmed (effective date pending)...............30480
    Eff. 10-8-86...................................................37567
941.406  Policy statement..........................................33898
941.502  Policy statement..........................................33898
942  Added (effective date pending)................................43302
964  Added (effective date pending)................................44061
965  Authority citation revised; Subpart authority citations 
        removed....................................................10197
    Authority citation revised; section authority citations 
removed............................................................27789
    Authority citation corrected...................................30635
965.601  (a) amended; eff. 5-7-86..................................10197
965.603  (c) revised; eff. 5-7-86..................................10197
965.701--965.707 (Subpart H)  Added................................27789
965.705  (c) corrected.............................................30635
968  Authority citation revised.............................27791, 44063
968.4  (h) and (i) added...........................................27791

[[Page 780]]

    (j) added......................................................44063
968.5  (d) and (h) revised; (g)(3) and (i)(6)(ix) added; OMB 
        number.....................................................27791
968.9  (e) revised; OMB number.....................................27791
    (j) addition confirmed (effective date pending)................30480
    (e)(2)(ii) corrected...........................................30635
    (j) addition eff. 10-8-86......................................37567
970  Revision eff. 3-1-86...........................................7439
990.101  (c)(4) amendment confirmed................................16839
990.102  (q) revision and (x) addition confirmed; amended..........16839
990.104  (a) amendment confirmed (effective date pending)..........30480
    Eff. 10-8-86...................................................37567
990.105  (a)(2) amendment confirmed (effective date pending).......30480
    Eff. 10-8-86...................................................37567
990.108  (b) revision confirmed....................................16839
    (a) amendment confirmed (effective date pending)...............30480
990.109  (a) and (b)(4) amendments confirmed.......................16839
    (b)(3) revised.................................................16840
990.117  Revised...................................................16840
    Addition confirmed (effective date pending)....................30480
    Eff. 10-8-86...................................................37567
990.118  Revised...................................................16840
990.119  Revised...................................................16841

                                  1987

24 CFR
                                                                   52 FR
                                                                    Page
Chapter VIII
813.102  Amended...................................................34113
813.106  (a) and (c) revised; (b)(8) amended; (d) removed; (e) 
        redesignated as (d)........................................34113
842  Eff. 3-2-87....................................................3795
    Heading correctly revised.......................................9161
    Authority citation corrected...................................17949
842.1  (a) corrected...............................................17949
881.207  (e) revised................................................1893
882.109  (i) revised................................................1893
    (i)(1) corrected; (i) (4) and (7) correctly revised.............9828
882.209  (b)(4)(iii) revised; (c)(9) added..........................1894
    (c)(10) correctly designated....................................9828
    (m)(1) revised.................................................34114
882.215  (a)(5) revised.............................................9478
882.404  (c) added..................................................1894
    (c)(1) corrected; (c)(4) correctly revised......................9828
882.408  (c)(1) revised............................................19725
882.507  (b)(2)(iv) revised.........................................1895
882.514  (d)(1)(vi) added...........................................1895
885  Interest rate.................................................41989
885.5  Amendment confirmed.........................................29011
885.210  Introductory text and (a) redesignation as (a) and (b) 
        and new (a). (b) (9), (13) and (23)(i) revision confirmed 
                                                                   29011
885.220  (d)(1) revision confirmed.................................29011
885.412  Addition confirmed........................................29011
885.416  (c) revision confirmed....................................29011
886.113  (i) revised................................................1895
    (i)(1) corrected................................................9828
886.307  (i)(1)(i) revised..........................................1896
886.333  (b)(2)(iv) revised.........................................1896
888  Schedule C revised.............................................9480
    Schedules B and D revised...............................15632, 48206
    Schedules B and D amended......................................24387
    Schedule A corrected...........................................24447
    Schedule C revised.............................................34120
    Schedule A amended......................................34905, 37290
Chapter IX
905  Policy statement...............................................4284
905.204  (c)(3) (ii) and (iii) correctly designated.................1415
905.311  (b) amended...............................................29361
912  Authority citations revised...................................34114
912.2  Revised.....................................................34114
913.102  Amended...................................................34114
913.106  (a) and (c) revised; (b)(8) amended; (d) removed; (e) 
        redesignated as (d)........................................34114
942  Eff. 3-2-87....................................................3795
    Heading correctly revised.......................................9161
    Authority citation corrected...................................17949
942.1  (a) corrected...............................................17949
942.4  Correctly revised............................................3795
942.20  (b)(2)(ii) corrected........................................9161
964  Eff. 3-2-87....................................................3795
964.3  (b) corrected................................................3795
968  Policy statement...............................................4284
968.4  (j) addition eff. 3-2-87.....................................3795
990.104  (a) amended...............................................29361
990.105  (a)(2) amended............................................29361
990.108  (a) revised...............................................29361
990.109  (e)(1) amended............................................29361
990.114  Removed...................................................29361

[[Page 781]]

                                  1988

24 CFR
                                                                   53 FR
                                                                    Page
Chapter VIII
812  Amendments at 51 FR 21307-21312 effective 3-28-88..............4388
    Effective date corrected........................................7734
812.1  (a) (1) and (2) revision at 51 FR 11219 confirmed and 
        amended; (a)(3) removed......................................846
    Amendments and removal at 53 FR 846 effective date corrected 
                                                                    6601
812.2  Revision at 51 FR 11219 removed...............................846
    Removal at 53 FR 846 effective date corrected...................6601
812.5  Removed.......................................................846
    Removal effective date corrected................................6601
812.6  Removed.......................................................846
    Removal effective date corrected................................6601
812.7  Removed.......................................................846
    Removal effective date corrected................................6601
813.101  Revised (effective date pending)..........................34412
    Eff. 10-6-88...................................................40221
813.102  Amended (effective date pending)..........................34412
    Amended; interim...............................................37499
    Amendment at 53 FR 34412 eff. 10-6-88..........................40221
813.105  (d) removed; (e) and (f) redesignated as (d) and (e); new 
        (e) (2) through (4) revised; OMB numbers (effective date 
        pending)...................................................34412
    Eff. 10-6-88...................................................40221
813.109  (a) revised (effective date pending)......................34412
    (a)(2) correctly revised.......................................36450
    (a) revision at 53 FR 34412 eff. 10-6-88.......................40221
840  Added.........................................................23904
841  Added.........................................................23915
850.33  (a) revised; eff. 10-1-88...................................8065
850.35  (g) revised; eff. 10-1-88...................................8065
850.69  Revised; eff. 10-1-88.......................................8065
880.504  (e) removed.................................................846
    Removal at 53 FR 846 effective date corrected...................6601
880.601  (b) revision at 51 FR 11225 confirmed and amended...........846
    (b) revised (effective date pending)............................1145
    Revision and amendment at 53 FR 846 effective date corrected; 
revision at 53 FR 1142 eff. 3-4-88..................................6601
880.603  (c) (1) and (3) amended.....................................846
    (b) introductory text, (2) and (3) revised (effective date 
pending)............................................................1145
    Amendments at 53 FR 846 effective date corrected; revisions at 
53 FR 1142 eff. 3-4-88..............................................6601
880.607  (b)(3) revision at 51 FR 11225 confirmed and amended........846
    Revision and amendment at 53 FR 846 effective date corrected 
                                                                    6601
880.613  Added (effective date pending).............................1146
    Addition eff. 3-4-88............................................6601
881.504  (e) removed.................................................846
    Removal at 53 FR 846 effective date corrected...................6601
881.601  (b) revision at 51 FR 11225 confirmed and amended...........846
    (b) revised (effective date pending)............................1148
    Revision and amendment at 53 FR 846 effective date corrected; 
revision at 53 FR 1148 eff. 3-4-88..................................6601
881.603  (c) (1) and (3) amended.....................................846
    (b) introductory text, (2) and (3) revised (effective date 
pending)............................................................1149
    Amendment at 53 FR 846 effective date corrected; revisions at 
53 FR 1149 eff. 3-4-88..............................................6601
881.607  (b)(3) revision at 51 FR 11225 confirmed and amended........846
    Revision and amendment at 53 FR 846 effective date corrected 
                                                                    6601
881.613  Added (effective date pending).............................1149
    Addition eff. 3-4-88............................................6601
882  Amendments at 51 FR 21307-21312 effective 3-28-88..............4388
    Effective date corrected........................................7734
    (c) revised (effective date pending)............................1152
    Revision and amendments at 53 FR 847 effective date corrected; 
revision at 53 FR 1152 eff. 3-4-88..................................6601

[[Page 782]]

882.109  (i)(2) amended; (i) (3) and (4) revised...................20801
882.116  (c) revision at 51 FR 11225 confirmed and amended; (m) 
        amended......................................................847
882.118  (a)(1) revision at 51 FR 11225 confirmed and amended........847
    Revision and amendment at 53 FR 847 effective date corrected 
                                                                    6601
882.204  (b) (1) and (3) revised (effective date pending)..........34412
    Eff. 10-6-88...................................................40221
882.207  (a) revised (effective date pending)......................34413
    Eff. 10-6-88...................................................40221
882.209  (a) (2) and (7) and (m)(1) revision at 51 FR 11226 
        confirmed; (a)(2)(ii) and (k)(4) removed; (a)(2)(iii) 
        redesignated as (a)(2)(ii); (a)(2)(i) amended................847
    (a) (2) and (7) revised (effective date pending)................1152
    Revision and amendments at 53 FR 847 effective date corrected; 
revisions at 53 FR 1152 eff. 3-4-88.................................6601
    (a) (9) through (11) redesignated as (a) (11) through (13); 
new (a) (9) and (10), (c)(11), and (d)(3) added (effective date 
pending)...........................................................34413
    Eff. 10-6-88...................................................40221
882.210  (e) removed.................................................847
    Removal at 53 FR 847 effective date corrected...................6601
    (b) revised (effective date pending)...........................34413
    Eff. 10-6-88...................................................40221
882.212  (a) and (c) amended.........................................847
    Amendments at 53 FR 847 effective date corrected................6601
882.216  (a)(4) added (effective date pending)......................1152
    Addition at 53 FR 1152 eff. 3-4-88..............................6601
882.219  Added (effective date pending).............................1152
    (b)(2)(ii) and (b)(4) revised (effective date pending).........34413
    Eff. 10-6-88...................................................40221
    Addition eff. 3-4-88............................................6601
882.315  (b)(1) revised.............................................4390
    Effective date corrected........................................7734
882.320  (d) removed; (b) revised...................................4390
    Effective date corrected........................................7734
882.404  (c)(2) amended; (c) (3) and (4) revised...................20801
882.514  (a)(1) revision at 51 FR 11226 confirmed and amended........847
    (a)(1), (b) and (f) revised (effective date pending)............1155
    Revision and amendment at 53 FR 847 effective date corrected; 
revisions at 53 FR 1155 eff. 3-4-88.................................6601
882.515  (a) and (c) amended.........................................847
882.516  (e) revised; eff. 10-1-88..................................8065
882.517  Added (effective date pending).............................1156
    Addition eff. 3-4-88............................................6601
883.605  (e) removed.................................................847
    Removal at 53 FR 847 effective date corrected...................6601
883.702  (b) revision at 51 FR 11226 confirmed and amended...........847
    (b) revised (effective date pending)............................1159
    Revision and amendment at 53 FR 847 effective date corrected; 
revision at 53 FR 1159 eff. 3-4-88..................................6601
883.704  (c) (1) and (3) amended.....................................847
    (b) introductory text, (2) and (3) revised (effective date 
pending)............................................................1159
    Amendments at 53 FR 847 effective date corrected; revisions at 
53 FR 1159 eff. 3-4-88..............................................6601
883.708  (b)(3) revision at 51 FR 11227 confirmed and amended........847
    Revision and amendment at 53 FR 847 effective date corrected 
                                                                    6601
883.714  Added (effective date pending).............................1159
    Addition eff. 3-4-88............................................6601
884.118  (a) (3) and (7) revision at 51 FR 11227 confirmed and 
        amended......................................................847
    (a)(3) revised (effective date pending).........................1162
    Revisions and amendment at 53 FR 847 effective date corrected; 
revision at 53 FR 1162 eff. 3-4-88..................................6601
884.214  (b) (1) and (2) revised; (b)(7) added (effective date 
        pending)....................................................1162

[[Page 783]]

    Revisions and addition at 53 FR 1162 eff. 3-4-88................6601
884.216  Amended.....................................................847
    Amendment at 53 FR 847 effective date corrected.................6601
884.218  (a) and (c) amended.........................................847
    Amendments at 53 FR 847 effective date corrected................6601
884.223  (e) removed.................................................847
    Removal at 53 FR 847 effective date corrected...................6601
884.226  Added (effective date pending).............................1163
    Addition eff. 3-4-88............................................6601
885  Authority citation revised..............................8888, 15820
    Interest rate..................................................49139
885.7  Added.......................................................15820
885.400  Introductory text, (a), (b), and (c) redesignated as (a), 
        (b), (c), and (e); new (c) amended; (d) added; interim.....19902
    Confirmed (effective date pending).............................45266
885.405  (a)(8) and (b)(4) added; interim..........................19902
    Confirmed (effective date pending).............................45266
885.410  (b), (c) and (f)(1) revised; eff. 4-27-88..................8888
    885.410  (g) and (h) revised; interim..........................19902
    Confirmed (effective date pending).............................45266
886.101  (a) revised; (b) removed; (c) redesignated as (b)..........3368
886.102  Amended....................................................3368
886.106  (c) removed................................................3368
886.113  (i)(2) amended; (i) (3) and (4) revised...................20802
886.119  (a) (3) and (7) revision at 51 FR 11227 confirmed and 
        amended......................................................847
    (a)(3) revised (effective date pending).........................1165
    (a)(5) removed..................................................3368
    Revisions and amendment at 53 FR 847 effective date corrected; 
revision at 53 FR 1165 eff. 3-4-88..................................6601
886.121  (b) revised (effective date pending).......................1166
    Revision at 53 FR 1166 eff. 3-4-88..............................6601
886.122  Removed....................................................3368
886.127  Revised....................................................3368
886.128  Revised....................................................3369
886.129  (e) removed.................................................847
    Removal at 53 FR 847 effective date corrected...................6601
886.132  Added (effective date pending).............................1166
    Addition eff. 3-4-88............................................6601
886.302  Amended....................................................3369
886.305  Removed....................................................3369
886.306  Revised....................................................3369
886.309  (e) amended................................................3369
886.318  (a)(3) revised (effective date pending)....................1169
    Revision at 53 FR 1169 eff. 3-4-88..............................6601
886.321  (b) (1), (2) and (6) revised (effective date pending)......1169
    Revisions at 53 FR 1169 eff. 3-4-88.............................6601
886.322  Removed....................................................3369
886.327  Revised....................................................3369
886.328  (b)(3) revision at 51 FR 11228 confirmed and amended........847
    Revised.........................................................3369
    Revision and amendment at 53 FR 847 effective date corrected 
                                                                    6601
886.329  (e) removed.................................................847
    Removal at 53 FR 847 effective date corrected...................6601
886.337  Added (effective date pending).............................1169
    Addition eff. 3-4-88............................................6601
887  Added (effective date pending)................................34388
    Eff. 10-6-88...................................................40221
887.7  Corrected...................................................36450
887.209  (c)(2)(v) corrected.......................................36450
887.351  (b)(2) corrected..........................................36450
887.403  (a) and (b)(5) corrected..................................36450
887.461  Heading corrected.........................................36450
887.467  (g) corrected.............................................36450
887.489  Corrected.................................................36450
887.491  (a) corrected.............................................36450
887.511  (a)(2) corrected..........................................36450
887.565  (e) corrected.............................................36450
888  Schedules B and D amended; eff. 4-27-88........................8892
    Schedule A amended......................................13407, 25327
    Schedule A revised.............................................14955
    Schedules B and D revised......................................36703
    Schedule C revised.............................................49830
888.111  Revised (effective date pending)..........................34413
    Corrected......................................................36450

[[Page 784]]

    Eff. 10-6-88...................................................40221
Chapter IX
904  Authority citation revised....................................33311
904.103  (b) revised (effective date pending)......................41598
904.104  (c), (f)(1), and (g)(2) revised (effective date pending) 
                                                                    1172
    Revisions at 53 FR 1172 eff. 3-4-88.............................6601
904.107  Heading, (l)(3), and (m)(1) revised; (p) added (effective 
        date pending)..............................................33311
    Eff. 11-7-88...................................................40221
    Effective date suspended.......................................44876
904.122  Added (effective date pending).............................1172
    Addition eff. 3-4-88............................................6601
905  Authority citation revised; section authority citations 
        removed....................................................33312
    Authority citation revised....................................37500,
37506
905.101  (a) revised; interim......................................37500
905.102  Amended; interim..........................................37500
905.103  (b) revised; interim......................................37500
905.105  (b) amended; interim......................................37500
905.106  (a) revised; OMB number...................................24684
905.107  (g) and (h) added; eff. 10-1-88............................8065
905.203  (d)(1) republished; (b), (c) and (d)(2) revised; eff. 10-
        1-88........................................................8065
905.204  (a)(1)(iii), (c)(1) (i) and (ii) introductory text and 
        (2) (i) and (ii), (f)(4), and (g)(1) revised...............24685
905.209  Revised; interim..........................................37500
905.210  Revised; interim..........................................37501
905.211  (b) revised; eff. 10-1-88..................................8066
    (d) added......................................................30215
905.212  (a) revised; interim......................................37501
905.213  Revised; interim..........................................37501
905.217  (b)(1) amended; interim...................................37501
905.302  (b)(2) (ii) and (iii) revised; (b)(2)(iv) added 
        (effective date pending)....................................1175
    Revisions and addition at 53 FR 1175 eff. 3-4-88................6601
    (a)(2) revised; (a)(3) added; OMB number; interim..............37501
905.303  Revised (effective date pending)..........................33312
    Eff. 11-7-88...................................................40221
    Effective date suspended.......................................44876
905.313  Added (effective date pending).............................1175
    Addition eff. 3-4-88............................................6601
905.314  Added.....................................................30216
905.406  (d) revised (effective date pending).......................1178
    Revision at 53 FR 1178 eff. 3-4-88..............................6601
    (a) revised; OMB number; interim...............................37501
905.407  (a) revised (effective date pending).......................1179
    Revision at 53 FR 1178 eff. 3-4-88..............................6601
905.408  (a), (b), (c)(1), and (d)(1) revised; OMB number; interim
                                                                   37502
905.417  Heading revised; (c), (d), and (e) redesignated as (d), 
        (e), and (f); new (c) added; interim.......................37502
905.419  (a) and (b) revised; interim..............................37502
905.422  (a) and (e)(1) revised; interim...........................37502
905.424  Heading, (a), and (f)(3) revised; (g) added (effective 
        date pending)..............................................33312
    Eff. 11-7-88...................................................40221
    Effective date suspended.......................................44876
905.425  (g) revised (effective date pending)......................33312
    Eff. 11-7-88...................................................40221
    Effective date suspended.......................................44876
905.501--905.540 (Subpart E)  Added; interim.......................37506
912  Authority citation revised......................................848
912.1  Revision at 51 FR 11228 confirmed; (a)(2) amended; (a)(3) 
        removed......................................................848
    Revision, amendment and removal at 53 FR 848 effective date 
corrected...........................................................6601
912.5  Removed.......................................................848
    Removal effective date corrected................................6601
912.6  Removed.......................................................848
    Removal effective date corrected................................6601
912.7  Removed.......................................................848
    Removal effective date corrected................................6601
913.102  Amended (effective date pending)..........................33311
    Amended; interim...............................................37503

[[Page 785]]

    Amendment at 53 FR 33311 eff. 11-7-88..........................40221
    Amendment at 53 FR 33311 effective date suspended..............44876
941.102  Introductory text republished; (a) revised; eff. 10-1-88 
                                                                    8066
941.203  (c) removed; (d), (e), (f), and (g) redesignated as (c), 
        (d), (e), and (f) (effective date pending).................41599
941.204  Revised (effective date pending)..........................41599
941.208  (g) added; eff. 10-1-88....................................8066
    (h) added......................................................20802
    (d) revised....................................................30216
941.406  (a) revised (effective date pending)......................41599
941.502  (b)(3) and (c)(4) revised (effective date pending)........41599
941.503  (d) added.................................................30216
942  Authority citation revised....................................37503
942.1  (a) revised; interim........................................37503
942.3  (b) removed; (c) and (d) redesignated as (b) and (c) and 
        revised; interim...........................................37503
960  Heading and authority citation revised (effective date 
        pending)...................................................33311
    Authority citation revised.....................................34413
    Heading and authority citation revision at 53 FR 33311 eff. 
11-7-88............................................................40221
    Effective date suspended.......................................44876
960.204  (b) revised (effective date pending).......................1179
    Revision at 53 FR 1179 eff. 3-4-88..............................6601
    (c) (3) and (4) redesignated as (c) (4) and (5); new (c)(3) 
added (effective date pending).....................................34414
    Eff. 10-6-88...................................................40221
960.206  (a) revised (effective date pending).......................1179
    Revision at 53 FR 1179 eff. 3-4-88..............................6601
960.207  Revised (effective date pending)...........................1179
    Revision eff. 3-4-88............................................6601
    (a) revised (effective date pending)...........................33311
    Eff. 11-7-88...................................................40221
    Effective date suspended.......................................44876
960.211  Added (effective date pending).............................1179
    Addition eff. 3-4-88............................................6601
964  Authority citation revised....................................34680
964.3  (b) revised; (c), (d), and (e) added (effective date 
        pending)...................................................34680
    Eff. 10-7-88 and (c)(2) and (d)(1) corrected...................40221
964.5  Revised (effective date pending)............................34680
    Eff. 10-7-88 and (b) corrected.................................40221
964.7  Amended (effective date pending)............................34681
    Eff. 10-7-88...................................................40221
964.9  Revised (effective date pending)............................34681
    Eff. 10-7-88...................................................40221
964.11  Added (effective date pending).............................34681
    Eff. 10-7-88...................................................40221
964.12  Added (effective date pending).............................34681
    Eff. 10-7-88...................................................40221
964.15  Removed (effective date pending)...........................34681
    Eff. 10-7-88...................................................40221
964.17  Introductory text revised (effective date pending).........34682
    Eff. 10-7-88...................................................40221
964.19  Introductory text, (b), and (c) revised (effective date 
        pending)...................................................34682
    Eff. 10-7-88...................................................40221
964.25--964.45 (Subpart C)  Revised (effective date pending).......34682
    Eff. 10-7-88...................................................40221
964.25  Corrected..................................................40221
964.33  (c) corrected..............................................40221
964.35  (b) corrected..............................................40221
965.101 (Subpart A)  Added.........................................30217
965.702  Amended...................................................20802
965.704  Revised...................................................20802
965.705  Revised...................................................20803
965.706  Redesignated as 965.710; new 965.706 added................20803
965.707  Redesignated as 965.711; new 965.707 added................20803
965.708  Added.....................................................20804
965.709  Added.....................................................20804
965.710  Redesignated from 965.706.................................20803
965.711  Redesignated from 965.707.................................20803
966  Revised (effective date pending)..............................33304
    Eff. 11-7-88...................................................40221
    Effective date suspended.......................................44876
968.3  Amended.....................................................20804

[[Page 786]]

968.4  (h) and (i) revised.........................................20804
968.5  (c)(3) added; (g) revised; OMB numbers......................15553
    (c) introductory text and (1), (e)(2), (h) (1) and (2), and 
(i)(7)(ii) revised.................................................20804
968.9  (j) revised; eff. 10-1-88....................................8066
    (e) revised; OMB number........................................20805
    (h)(4) added...................................................30218
968.10  (a) revised................................................20805
968.12  (b) through (g) revised; eff. 10-1-88.......................8066
968.13  Revised; eff. 10-1-88.......................................8067
968.17  Revised; eff. 10-1-88.......................................8067
968.19  Added......................................................30218
969  Policy statement..............................................31274
970  Authority citation revised....................................30987
970.1  Revised; eff. 10-1-88........................................8067
970.2  (c) revised; (g) added; interim (effective date pending)....30987
    Eff. 10-6-88 and (g) correctly added...........................40221
970.4  (b) removed; (c) through (e) redesignated as (b) through 
        (d); new (d) revised; new (e) added; interim (effective 
        date pending)..............................................30987
    Eff. 10-6-88...................................................40221
970.5  Revised; interim (effective date pending)...................30987
    Eff. 10-6-88...................................................40221
970.6  Revised; interim (effective date pending)...................30988
    Eff. 10-6-88...................................................40221
970.7  (a)(2) revised; interim (effective date pending)............30988
    Eff. 10-6-88...................................................40221
970.8  (f) revised; interim (effective date pending)...............30988
    Eff. 10-6-88...................................................40221
970.9  (b)(1) revised; interim (effective date pending)............30988
    Eff. 10-6-88...................................................40221
970.11  Redesignated as 970.13; new 970.11 added; interim 
        (effective date pending)...................................30988
    Eff. 10-6-88...................................................40221
970.12  Added; interim (effective date pending)....................30989
    Eff. 10-6-88...................................................40221
970.13  Redesignated from 970.11; interim (effective date pending)
                                                                   30988
    Eff. 10-6-88...................................................40221
990.103  (c) added; eff. 10-1-88....................................8067
990.105  (g) added.................................................25155
990.109  (e)(3) revised; eff. 10-1-88...............................8067
990.201--990.202 (Subpart B)  Added; eff. 10-1-88...................8067

                                  1989

24 CFR
                                                                   54 FR
                                                                    Page
Chapter VII
750  Added.........................................................39699
Chapter VIII
811  Policy statement..............................................39525
812.2  Amended.....................................................25979
812.3  (g) added (effective date pending)..........................46831
    Regulation at 54 FR 46831 effective 12-22-89...................52795
813  Authority citation revised....................................25979
813.101  Revised...................................................25979
813.102  Amended...................................................25980
813.109  (a) revised...............................................25980
    (a) revised; OMB number........................................39702
840  Removed (effective date pending)..............................47054
    Regulation at 54 FR 47054 effective 12-22-89...................52794
840  Program changes.................................................736
    Authority citation revised.....................................12433
840.5  Corrected....................................................8880
    Amended........................................................12433
840.100  Revised...................................................12433
840.105  (a) revised; (d), (e), and (f) added; OMB number..........12434
840.110  (b)(1)(i) revised; (d) added..............................12434
840.112  Added.....................................................12434
840.115  (b) redesignated as (c); new (b) added; OMB number........12434
840.117  Added.....................................................12434
840.120  Revised...................................................12435
840.125  (d) removed; (e), (f), and (g) redesignated as (d), (e), 
        and (f)....................................................12435
840.130  (a), (b) and (c)(1) revised; (h) added....................12435
840.210  (b)(3)(i), (ii)(B)(1), (iv) (B), (C), (D), and (b)(7) 
        revised....................................................12435
840.215  (b) (6) and (7) added.....................................12436
840.220  Added.....................................................12436
840.310  (b) (1) and (2) revised...................................12437
840.312  Revised...................................................12437
840.313  Revised...................................................12437
840.314  Added.....................................................12437
840.315  (a) revised...............................................12437

[[Page 787]]

840.330  (j) added.................................................12437
840.400  (a), (b), (c) (1) and (2) revised; (d) added..............12437
840.405  Added.....................................................12437
841  Program changes.................................................736
    Authority citation revised.....................................12438
    Removed (effective date pending)...............................47054
    Regulation at 54 FR 47054 effective 12-22-89...................52794
841.5  Amended.....................................................12438
841.100  Revised...................................................12438
841.105  (a) revised; (d), (e), and (f) added; OMB number..........12438
841.110  (b)(1) revised............................................12438
841.112  Added.....................................................12438
841.114  Added.....................................................12439
841.115  Revised...................................................12439
841.120  (d) removed; (e), (f), and (g) redesignated as (d), (e), 
        and (f)....................................................12439
841.125  Revised...................................................12439
841.205  (b) (5) and (7) revised; OMB number.......................12440
841.210  (b)(2) (i), (ii), (3), and (4)(v) amended; (b)(7) 
        removed; OMB number........................................12440
841.215  (b)(3) revised; (b)(6) added..............................12440
841.220  Added.....................................................12440
841.310  (b) (1) and (2) revised...................................12441
841.312  Revised...................................................12441
841.313  Revised...................................................12441
841.314  Added.....................................................12441
841.315  (a) revised...............................................12441
841.325  Revised...................................................12441
841.330  (j) added.................................................12441
841.400  (a), (b), (c) (1), and (2) revised; (d) added.............12441
841.405  Added.....................................................12442
880.305  Heading revised; (m) added; OMB number....................39702
880.601  (b) revised; OMB number...................................39702
880.603  (b) introductory text, (3), and (c) revised; OMB number 
                                                                   39702
880.607  (b)(3) revised, OMB number................................39703
881.312  Added.....................................................39703
881.601  (b) revised; OMB number...................................39703
881.603  (b) introductory text, (3), and (c) revised; OMB number 
                                                                   39703
881.607  (b)(3) revised; OMB number................................39704
882  Authority citation amended....................................46831
882.106  (a)(2) and (b)(2) revised; interim..........................237
882.116  (c) and (m) revised; OMB number...........................39704
882.118  (a)(1) revised; OMB number................................39704
882.209  (a)(2) revised; OMB number................................39705
882.212  (a), (b), and (c) revised; OMB number.....................39705
882.514  (a)(1) revised; OMB number................................39705
882.515  Revised...................................................39705
882.701--882.757 (Subpart G)  Added; interim.........................237
882.801--882.809 (Subpart H)  Added (effective date pending).......46832
    Regulation at 54 FR 46831 effective 12-22-89...................52795
883  Policy statement..............................................39525
883.412  Added.....................................................39705
883.702  (b) revised; OMB number...................................39706
883.704  (b) introductory text, (3), and (c) revised; OMB number 
                                                                   39706
883.708  (b)(3) revised; OMB number................................39706
884.117  Added.....................................................39707
884.118  (a) (3) and (7) revised; OMB number.......................39707
884.218  (a) and (b) revised; OMB number...........................39707
885  Authority citation revised....................................25980
    Interest rate..................................................48741
885.1  Revised.....................................................25980
885.5  Amended.....................................................25980
885.7  Removed.....................................................25981
885.200--885.230 (Subpart B)  Heading revised......................25981
885.200  (b) introductory text and (c) revised.....................25981
885.205  (b) revised; (c)(3) removed; (c) (4), (5), and (6) 
        redesignated as (c) (3), (4) and (5).......................25981
885.210  (b)(2) removed; (b) (23) and (24) redesignated as (b) 
        (22) and (23); (b)(13) undesignated text amended; (b) (5), 
        (6), (13)(i) and (19), new (b)(22) introductory text, 
        (iv), and (vii) revised....................................25982

[[Page 788]]

885.211  Added.....................................................39707
885.215  Introductory text revised.................................25982
885.220  (f) revised...............................................25982
885.225  (a)(1) revised............................................25982
885.230  Revised...................................................25982
885.400--885.425 (Subpart D)  Heading removed; (sections 
        transferred to Subpart B)..................................25982
885.400  Eff. 3-3-89................................................8321
885.405  Eff. 3-3-89................................................8321
885.410  Eff. 3-3-89................................................8321
    (b) (4) and (5) and (c) (4) and (5) removed....................25982
885.415  (m), (n), and (p) revised.................................25982
885.425  Heading and (a) revised...................................25982
885.427  Added.....................................................25982
885.700--885.985 (Subpart C)  Added................................25983
885.711  Added.....................................................39707
885.950  (a), (b) introductory text, and (c) (1), (2), and (3)(ii) 
        revised; OMB number........................................39707
885.955  (a)(2) revised; OMB number................................39708
885  Appendix A added..............................................26001
886.105  Heading revised; undesignated paragraph added; OMB number
                                                                   39708
886.119  (a) (3) and (7) revised; OMB number.......................39708
886.124  Revised...................................................39708
886.305  Added.....................................................39709
    Correctly designated...........................................11905
886.318  (a) (3) and (6) revised; OMB number.......................39709
886.324  Revised...................................................39709
887.101  (e)(2) correctly designated...............................31282
887.105  (b)(1) revised; OMB number................................39709
887.355  (a) revised; OMB number...................................39709
887.357  Revised...................................................39709
887.401  (a)(1) revised; OMB number................................39709
888.111  Revised; interim............................................244
888  Schedule A amended...............................1689, 12442, 43172
    Schedule A revised.............................................49866
    Schedules B and D revised......................................39866
    Schedule B corrected...........................................43291
    Schedule C revised.............................................48548
Chapter IX
900.103  (i) and (j) revised; OMB number...........................39710
900.202  (d)(3) and (f)(2)(iii) revised; OMB number................39710
904.103  Eff. 3-3-89................................................8321
904.104  (c) revised; OMB number...................................39710
904.107  Withdrawn..................................................6886
    (m)(1) revised; OMB number.....................................39710
905.302  (b)(2)(v) added; OMB number...............................39711
905.303  Withdrawn..................................................6886
905.315  Added.....................................................20760
    Effective date corrected.......................................25713
905.406  (a)(3) added; OMB number..................................39711
905.424  Withdrawn..................................................6886
905.425  Withdrawn..................................................6886
912.2  Amended.....................................................26001
913  Authority citation revised....................................26001
913.102  Withdrawn..................................................6886
    Amended........................................................26001
913.109  (a) revised; OMB number...................................39711
941  Policy statement..............................................39525
941.203  Eff. 3-3-89................................................8321
941.204  Eff. 3-3-89................................................8321
941.406  Eff. 3-3-89................................................8321
941.502  Eff. 3-3-89................................................8321
960  Withdrawn......................................................6886
    Authority citation revised.....................................20761
960.204  (c)(5) revised............................................39711
960.206  (a) revised; OMB number...................................39711
960.207  Withdrawn..................................................6886
960.209  Revised...................................................39711
960.401--960.409 (Subpart D)  Added................................20761
    Effective date corrected.......................................25713
965  Authority citation revised....................................22888
965.602  (f) removed; (g) and (h) redesignated as (f) and (g)......22888
965.604  Removed...................................................22888
965.605  (a) revised...............................................22888
966  Withdrawn......................................................6886
968  Revised.......................................................52689
968.3  Amended......................................................9042
968.4  (a) amended..................................................9043
968.5  (h)(2)(iii) and (3) amended; (c)(1) amended; (c)(1) and 
        (e)(2) revised; (h) added...................................9042
968.8  (b)(3) amended...............................................9043
968.9  (h)(4) amended...............................................9043
968.10  Redesignated as 968.11; new 968.10 added....................9043
968.11  Redesignated as 968.12; new 968.11 redesignated from 
        968.10......................................................9043

[[Page 789]]

968.12  Redesignated as 968.13; new 968.12 redesignated from 
        968.11......................................................9043
968.13  Redesignated as 968.14 and (b) amended; new 968.13 
        redesignated from 968.12....................................9043
968.14  Redesignated as 968.15; new 968.14 redesignated from 
        968.13 and (b) amended......................................9043
968.15  Redesignated as 968.16; new 968.15 redesignated from 
        968.14......................................................9043
968.16  Redesignated as 968.17; new 968.16 redesignated from 
        968.15......................................................9043
968.17  Redesignated as 968.18; new 968.17 redesignated from 
        968.16......................................................9043
968.18  Redesignated as 968.19; new 968.18 redesignated from 
        968.17......................................................9043
968.19  Redesignated as 968.20; new 968.19 redesignated from 
        968.18......................................................9043
968.20  Redesignated from 968.19....................................9043
990.105  Regulation at FR 25155 confirmed; eff. 5-1-89.............10660
    Effective date revised to 5-10-89..............................18889

                                  1990

24 CFR
                                                                   55 FR
                                                                    Page
Chapter VII
791  Authority citation revised.....................................9257
791.102  Amended; interim eff. 4-12-90..............................9257
Chapter VIII
812  Technical correction...........................................3211
813  Technical correction...........................................3211
813.109  Amended (OMB numbers).....................................11905
882  Authority citation revised.......................9257, 28546, 28608
882.106  (a)(2) amended; interim eff. 4-12-90.......................9257
882.118  (b)(4) added..............................................28546
882.210  (b) revised...............................................28546
882.216  (a)(2) and (b)(6)(v) revised; (c) added...................28546
882.413  Revised...................................................28546
882.514  (a)(2) redesignated as (a)(3); new (a)(2) and (g) added; 
        (f) revised................................................28547
882.701--882.759 (Subpart G)  Revised; interim eff. in part 4-12-
        90..........................................................9257
882.720  Amended (OMB number); (b)(2) regulation at 55 FR 9257 
        eff. 4-17-90...............................................14243
    (b)(1) revised.................................................28608
882.723  Amended (OMB number); (b) regulation at 55 FR 9257 eff. 
        4-17-90....................................................14243
882.725  Amended (OMB number); regulation at 55 FR 9257 eff. 4-17-
        90.........................................................14243
882.733  Amended (OMB number); (b) regulation at 55 FR 9257 eff. 
        4-17-90....................................................14243
885.5  Corrected....................................................3211
885.230  Revised; eff. in part 4-12-90..............................9119
    Amended (OMB number); (b) regulation at 55 FR 9257 eff. 4-17-
90.................................................................14244
885.416  (b) introductory text and (c) revised.....................27224
885.770  (a) revised; eff. 4-12-90..................................9120
887  Authority citation revised....................................28547
887.401  (b)(5) added..............................................28547
887.403  (b) revised; (d) added....................................28547
887.405  (a)(2) and (b)(6)(v) revised..............................28548
888  Schedule A amended..............................25301, 38985, 38986
    Schedules B and D revised......................................40044
    Schedule C revised.............................................51996
Chapter IX
905  Revised; interim..............................................24741
    Comment time extended; interim.................................31178
905.302  Amended (OMB numbers).....................................11905
905.406  Amended (OMB numbers).....................................11906
912  Technical correction...........................................3211
913  Technical correction...........................................3211
913.109  Amended (OMB numbers).....................................11906
961  Added.........................................................27608
    Authority citation corrected...................................28987

                                  1991

24 CFR
                                                                   56 FR
                                                                    Page
Chapter VII
750  Authority citation revised...............................921, 27077

[[Page 790]]

750.1  (a)(1) revised................................................921
750.3  (i) through (l) revised; (m) and (n) added; interim.........27077
    (i) through (l) revised; (m) added; interim....................27111
750.5  Amended.......................................................921
    Amended; interim........................................27077, 27111
760  Added..........................................................7532
760.3  (b)(1) through (13) correctly designated....................11510
791.101  Revised; eff. 4-8-91.......................................9826
791.102  Amended; eff. 4-8-91.......................................9826
791.202  (a)(4), (b)(2) and (5) revised; eff. 4-8-91................9827
791.203  (a) revised; eff. 4-8-91...................................9827
791.204  (a), (b) introductory text and (1) revised; OMB number; 
        eff. 4-8-91.................................................9827
791.205  (c) revised; eff. 4-8-91...................................9827
791.206  Removed; new 791.206 redesignated from 791.207; eff. 4-8-
        91..........................................................9828
791.207  Redesignated as 791.206; eff. 4-8-91.......................9826
791.303  (a)(3) introductory text revised; eff. 4-8-91..............9828
791.304  Revised; eff. 4-8-91.......................................9828
791.401--791.407 (Subpart D)  Revised; eff. 4-8-91..................9828
Chapter VIII
813.101  Amended.....................................................921
813.102  Amended...................................................57489
813.109  (b) revised................................................7535
880.204  (b)(1)(i)(B) revised......................................36002
880.601  (b) revised................................................7536
880.603  (b) introductory text, (3) and (c) revised.................7536
880.607  (b)(3) revised.............................................7537
880.613  (i)(4) amended..............................................921
881  Authority citation revised......................................921
881.204  (b)(1)(i)(B) revised......................................36002
881.601  (b) revised................................................7537
881.603  (b) introductory text, (3) and (c) revised.................7537
881.607  (b)(3) revised.............................................7538
881.613  (i)(4) amended..............................................921
882  Authority citation revised..................921, 7538, 49589, 56130
882.116  (c) and (m) revised........................................7538
882.118  (a)(1) revised.............................................7538
882.209  (a)(2) revised.............................................7538
882.210  (e) added..................................................7538
    (b)(7) and (d)(4) added; interim...............................49589
882.212  (a), (b) and (c) revised...................................7538
882.219  (i)(4) amended..............................................921
882.514  (a)(1) revised.............................................7539
882.515  Revised....................................................7539
882.517  (i)(4) amended..............................................921
882.714  (c)(4) added; eff. 4-15-91................................11051
882.715  (c) added; eff. 4-15-91...................................11051
882.720  (b)(3)(ix) amended; (b)(3)(x) redesignated as (xi); new 
        (b)(3)(x) added; eff. 4-15-91..............................11051
882.730  (b) revised; eff. 4-15-91.................................11052
882.732  (c) revised; eff. 4-15-91.................................11052
882.733  (b)(2)(iv) amended; (b)(2)(v) redesignated as (vi); new 
        (b)(2)(v) added; eff. 4-15-91..............................11052
882.751  Revised; eff. 4-15-91.....................................11052
882.805  (c)(7)(ii) removed; (c)(7)(i) amended and designation 
        removed....................................................56130
883  Authority citation revised......................................921
883.702  (b) revised................................................7539
883.704  (b) introductory text, (3) and (c) revised.................7539
883.708  (b)(3) revised.............................................7540
883.714  (i)(4) amended..............................................921
884  Authority citation revised......................................921
884.118  (a)(3) and (7) revised.....................................7540
884.216  Revised....................................................7541
884.218  Revised....................................................7541
884.226  (i)(4) amended..............................................921
885.1  (c) revised; interim........................................27111
885.5  Amended; interim............................................27111
885.9  Added; interim..............................................27111
885.740  (e) revised; interim......................................27112
885.780  (a)(4) revised; interim...................................27113
885.950  (a) and (c) revised........................................7541
885.955  (a)(2) revised.............................................7542
886  Authority citation revised......................................921
886.119  (a)(3) and (7) revised.....................................7542
886.124  Revised....................................................7542
886.132  (i)(4) amended..............................................921
886.318  (a)(3) and (6) revised.....................................7542
886.324  Revised....................................................7543
886.337  (i)(4) amended..............................................921
887  Authority citation revised...............................921, 49589
887.105  (b)(1) revised.............................................7543
    Correctly designated...........................................11510
887.157  (i)(4) amended..............................................921
887.355  (a) revised................................................7543
887.357  Revised....................................................7543
887.401  (a)(1) revised.............................................7543
887.403  (e) added..................................................7543
    (e) correctly designated.......................................11510
    (b)(7) and (c)(1)(iv) added....................................49589
888  Special interest rate applicability............................6558

[[Page 791]]

    Schedule A revised......................................18888, 37149
    Regulation at 56 FR 18888 effective date corrected.............19933
    Heading revised................................................20083
    Schedules B and D revised......................................49025
    Schedules B and D corrected....................................51834
    Schedule C amended.............................................59996
888.201--888.204 (Subpart B)  Heading revised......................20083
888.301--888.320 (Subpart C)  Added................................20084
888.401--888.420 (Subpart D)  Added................................20085
889  Added; interim................................................27113
889.215  (a) corrected.............................................36728
890  Added; interim................................................27077
890.245  (c) correctly designated..................................28589
Chapter IX
900.103  (i) and (j) revised........................................7544
900.202  (d)(3) and (f)(2)(iii) revised.............................7544
904  Authority citation revised......................................921
904.101  (b) introductory text revised...............................922
904.104  (c) revised................................................7544
904.107  (m)(1) revised.............................................7544
905.102  Amended; interim..........................................15172
905.120  (i) revised; (j) added; interim...........................15172
    (g) revised (effective date pending)...........................46359
905.220  (b)(3)(iii) and (iv) introductory text amended..............922
905.301  (a)(3) revised.............................................7545
    Correctly designated...........................................11510
905.416  (d) revised................................................7545
905.605  (h) and (i) added; interim................................15173
905.610  (c)(1), (2), (e)(2), (h)(1) through (3) revised; interim 
                                                                   15173
905.630  (a) revised; interim......................................15174
905.715  (b) redesignated as (b)(1); (c) introductory text and (f) 
        revised; (b)(2), (c)(4) and (g) added (effective date 
        pending)...................................................46359
905.720  (e) added (effective date pending)........................46360
905.730  (a)(1) amended; (c)(1) through (4) revised; (c)(5) and 
        (6) removed; (e) redesignated as (f); new (e) added 
        (effective date pending)...................................46360
905.825  Added (effective date pending)............................46361
905.827  Added (effective date pending)............................46361
905.1001--905.1021 (Subpart O)  Added; interim.....................47860
906  Added; interim................................................47866
912  Authority citation revised......................................922
912.1  (b)(1) amended................................................922
913  Heading revised.................................................922
    Authority citation revised......................................7545
913.101  Revised.....................................................922
913.102  Amended..............................................922, 57490
913.104  (b) amended.................................................922
913.105  (a) and (d) amended.........................................922
913.109  (b) amended.................................................922
    (b) revised.....................................................7545
941.101  (a) introductory text amended; eff. 5-1-91................13282
941.103  Amended; eff. 5-1-91......................................13282
941.208  (a) and (c) revised; (i) added; eff. 5-1-91...............13282
    (h) revised; interim...........................................15174
    (c) correctly revised..........................................23647
941.404  Introductory text revised; (m) and (n) added; eff. 5-1-91
                                                                   13282
941.405  (b) introductory text and (2) revised; (d) added; eff. 5-
        1-91.......................................................13283
941.406  (c) revised; eff. 5-1-91..................................13283
960.204  (c)(5) revised.............................................7545
960.206  (a) revised................................................7545
960.209  Revised....................................................7545
965  Authority citation revised....................................15174
965.307  Existing text designated as (a); (b) added (effective 
        date pending)..............................................46361
965.315  Added (effective date pending)............................46361
965.702  Amended; interim..........................................15174
965.703  (a) and (b) headings revised; (c) added; interim..........15174
965.705  Removed; interim..........................................15175
965.706  (c) and (d)(2) revised; interim...........................15175
965.707  Revised; interim..........................................15175
965.708  Amended; interim..........................................15175
965.709  Amended; interim..........................................15175
966  Authority citation revised...............................922, 51576
966.1  Amended.......................................................922
966.2  Removed.....................................................51576
966.3  Revised.....................................................51576
966.4  Revised.....................................................51576
966.7  Added.......................................................51579
966.50  Revised....................................................51579
966.51  (a) revised................................................51579
966.52  Revised....................................................51579

[[Page 792]]

966.53  (c)(2) removed; (c)(3), (4) and (5) redesignated as 
        (c)(2), (3) and (4); (f) revised; (g) added................51579
966.55  (a) introductory text and (b) revised; (g) added...........51579
966.56  (b) revised; (h) added.....................................51580
966.58  Removed....................................................51580
966.59  Removed....................................................51580
968  Authority citation revised......................................922
968.101  (a) and (b)(2) amended......................................922
968.105  Amended.....................................................922
968.110  (a) amended.................................................922
    (k) added; interim.............................................15175
968.203  Amended; interim..........................................15176
968.205  (h) and (i) added; interim................................15176
968.210  (c)(1), (2), (e)(2), (h)(1) through (3) revised; interim 
                                                                   15176
968.230  (a) revised; interim......................................15177
969  Authority citation revised......................................922
969.102  Revised.....................................................922
970.1  Amended.......................................................923
970.2  Introductory text and (a) revised.............................923
990  Authority citation revised......................................923
990.101  (c)(4) amended (effective date pending)...................46361
990.103  (b) revised.................................................923
990.105  (g) amended.................................................923
990.107  (b) redesignated as (b)(1); (c) introductory text and (f) 
        revised; (b)(2), (c)(4) and (g) added (effective date 
        pending)...................................................46362
990.108  (e) added (effective date pending)........................46362
990.110  (a)(1) amended; (c)(1) through (4) revised; (c)(5) and 
        (6) removed; (e) redesignated as (f); new (e) added 
        (effective date pending)...................................46362
990.120  Revised (effective date pending)..........................46363

                                  1992

24 CFR
                                                                   57 FR
                                                                    Page
Chapter VII
700  Added..................................................58044, 58055
750.3  Amendment at 56 FR 27111 removed............................11263
    Regulation at 56 FR 27111 corrected............................11263
750.5  Amendment at 56 FR 27111 removed............................11263
    Regulation at 56 FR 27111 corrected............................11263
Chapter VIII
880  Authority citation revised.............................33256, 33851
880.207  (g) added.................................................33851
880.210  (d) revised; interim......................................14759
880.211  Existing text designated as (a); (b) added................33256
881  Authority citation revised.............................33257, 33851
881.207  (g) added.................................................33851
881.210  (d) revised; interim......................................14759
881.211  Existing text designated as (a); (b) added................33257
882  Authority citation revised....................................33851
882.109  (r) added.................................................33851
882.407  (c)(6) revised; interim...................................14759
882.713  (c)(7) revised; interim...................................14759
882.804  (c)(1) revised; interim...................................14760
883  Authority citation revised.............................33257, 33851
883.310  (c) added.................................................33851
883.312  (d) revised; interim......................................14760
883.313  Existing text designated as (a); (b) added................33257
884  Authority citation revised.............................33257, 33852
884.110  (d) added.................................................33852
884.113  (d) revised; interim......................................14760
884.124  Existing text designated as (a); (b) added................33257
884.207  (b)(5) revised; interim...................................14760
885  Authority citation revised.............................33257, 33852
885.10  Added......................................................33257
885.429  Added.....................................................33852
885.717  (d) added.................................................33852
885.740  (d)(1)(i) and (ii) revised; interim.......................14760
886  Authority citation revised.............................33257, 33852
886.113  (m) redesignated as (n); new (m) added....................33852
886.131  Existing text designated as (a); (b) added................33257
886.307  (p) added.................................................33852
886.313  (c)(2) revised; interim...................................14760
886.336  Existing text designated as (a); (b) added................33257
887  Authority citation revised....................................33852
887.251  (m) added.................................................33852
888  Fair market rents..............................................4156
    Schedules B and D revised......................................45468
889  Authority citation revised.............................33853, 36339

[[Page 793]]

889.265  (d) revised; interim......................................14760
    (g) added......................................................33853
889.400--889.430 (Subpart D)  Revised; interim.....................36339
889.500--889.530 (Subpart E)  Added; interim.......................36342
890  Authority citation revised.............................33853, 36331
890.260  (d)(1) and (2) revised; interim...........................14761
    (h) added......................................................33853
890.400--890.430 (Subpart D)  Revised; interim.....................36331
890.500--890.530 (Subpart E)  Added; interim.......................36334
Chapter IX
901  Added..........................................................2188
    Regulation at 57 FR 2188 comment time extended.................23953
901.100  (b) table corrected........................................2951
    OMB number......................................................6676
905  Revised.......................................................28250
    Authority citation revised.....................................33853
905.102  Amended....................................................5547
905.120  Regulation at 56 FR 46359 eff. 1-1-92......................2678
    (k) added.......................................................5549
    (c)(1) and (2) revised; interim................................14761
    (e)(2) revised.................................................40114
905.135  (g)(2) revised............................................40114
905.160  (a)(2), (3)(ii) and (iii) introductory text revised; 
        (a)(3)(iv) added; (a)(4), (5) and (7) amended..............40115
905.165  (c)(2) amended............................................40115
905.170  (a) introductory text amended.............................40115
905.175  (f) removed; eff. 4-6-92...................................8073
    (b)(2) introductory text removed; (b)(2)(i)(A), (c) 
introductory text, (1), (d)(1) introductory text and (ii) amended 
                                                                   40115
905.180  (a)(1) introductory text amended..........................40115
905.210  (a) designation and (b) removed...........................40115
905.212  (a) and (b) amended.......................................40115
905.215  (a)(1), (2) and (3)(ii) revised...........................40115
905.225  (a)(1) amended............................................40116
905.245  (a) and (b) revised.......................................40116
905.250  (c) amended...............................................40116
905.255  (g) amended...............................................40116
905.260  (a) through (d) and (f) revised...........................40116
905.265  (b) amended...............................................40116
905.335  Amended...................................................40117
905.346  Added..............................................33853, 40117
905.350  Removed...................................................40117
905.407  (b)(3) revised............................................40117
905.413  (b) revised...............................................40117
905.416  (d) amended...............................................40117
905.427  (b) heading revised; (b)(1) and (e) amended...............40117
905.431  (a) amended...............................................40117
905.434  (b) introductory text amended.............................40117
905.440  (e)(1) correctly designated...............................37085
    (e)(5) amended.................................................40117
905.443  (a)(2), (b)(1) and (c)(3) amended; (g) added..............40117
905.602  (d) added.................................................28785
905.627  (b) revised...............................................28785
905.639  (c) revised; eff. 4-6-92...................................8073
    Regulation at 57 FR 8073 correctly designated..................15014
    (c) correctly revised..........................................15014
905.600--905.687 (Subpart I)  Revised...............................5549
905.710  (c), (d)(1), (2) introductory text, (ii) and (5) revised; 
        (d) introductory text republished; (d)(6) added.............4288
905.715  Regulation at 56 FR 46359 eff. 1-1-92 (OMB numbers)........2678
905.720  Regulation at 56 FR 46360 eff. 1-1-92 (OMB numbers)........2678
905.725  (e)(1) revised.............................................5570
905.730  Regulation at 56 FR 46360 eff. 1-1-92 (OMB numbers)........2678
    (f) redesignated as (g), new (f) added..........................4288
905.825  Regulation at 56 FR 46361 eff. 1-1-92......................2678
905.827  Regulation at 56 FR 46361 eff. 1-1-92......................2678
905.923  (b)(3) revised............................................40118
905.925  Removed...................................................40118
905.950  (a) revised................................................5570
905.963  Heading corrected.........................................37085
905.1001--905.1021 (Subpart O)  Regulation at 56 FR 47860 
        effective date extended through 1-20-93....................31962
906  Regulation at 56 FR 47866 effective date extended through 1-
        20-93......................................................31962
941.208  (d) revised; interim......................................14761

[[Page 794]]

961.40  (a)(2) introductory text revised; (a)(2)(iii) added; 
        interim....................................................14761
963  Added.........................................................20189
965  Authority citation revised....................................33853
965.101  (d) amended...............................................28358
965.302  Revised...................................................28358
965.307  Regulation at 56 FR 46361 eff. 1-1-92......................2678
965.315  Regulation at 56 FR 46361 eff. 1-1-92......................2678
965.401  Amended...................................................28358
965.471  Revised...................................................28358
965.472  Amended...................................................28358
965.601--965.605 (Subpart G)  Removed; eff. 4-6-92..................8073
965.701  Revised...................................................28358
965.800--965.805 (Subpart I)  Added................................33853
968.101  Revised....................................................5570
968.102  Redesignated from 968.230; (a) revised.....................5570
    (d) added......................................................28785
968.103  Added......................................................5571
968.105  Amended....................................................5572
968.110  (m) added..................................................5573
    (e)(1), (2) and (f) revised; interim...........................14761
968.115  (a) and (b) revised........................................5573
968.201--968.255 (Subpart B)  Heading revised.......................5573
968.201  Revised....................................................5573
968.203  Amended....................................................5573
968.205  (b)(1) introductory text, (i) and (f) revised; (b)(3) 
        added.......................................................5574
968.210  (e)(3) removed; (e)(4) redesignated as (e)(3); (f) and 
        (g) introductory text revised; (g)(2) amended...............5574
968.225  (b) revised...............................................28785
968.230  Redesignated as 968.102....................................5570
968.236  Revised....................................................5574
968.240  (c) revised; eff. 4-6-92...................................8073
968.301--968.345 (Subpart C)  Added.................................5575
990  Authority citation revised.....................................5588
    Authority citation revised.....................................61231
990.101  Regulation at 56 FR 46361 eff. 1-1-92......................2678
990.102  Amended....................................................4289
990.105  (d) removed; (e), (f) and (g) redesignated as (d), (e) 
        and (f); new (d)(6) redesignated as (d)(7); (c), new 
        (d)(1), (2) introductory text, (ii), (4)(iii), (5) 
        heading, (ii)(A), (B) and (iii) revised; (d) introductory 
        text republished; new (f) and (d)(5) introductory text 
        amended; (d)(6) added.......................................4289
990.107  Regulation at 56 FR 46362 eff. 1-1-92......................2678
    (g)(2) corrected (OMB number)...................................2679
990.108  Regulation at 56 FR 46362 eff. 1-1-92......................2678
    OMB number......................................................2679
990.109  (e)(1) amended.............................................5588
990.110  Regulation at 56 FR 46362 eff. 1-1-92......................2678
    OMB numbers.....................................................2679
    (f) redesiganted as (g); new (f) added..........................4290
990.120  Regulation at 56 FR 46363 eff. 1-1-92......................2678
990.202  Revised....................................................5588
990.301--990.325 (Subpart C)  Added................................61231

                                  1993

24 CFR
                                                                   58 FR
                                                                    Page
Chapter VII
700.225  OMB number................................................14510
700.330  OMB number................................................14510
700.420  OMB number................................................14510
700.425  OMB number................................................14510
770  Added; interim.................................................4268
    Regulation at 58 FR 4268 removed................................8186
    Correctly removed; CFR correction..............................61024
791  Authority citation revised....................................41428
791.403  (b)(1)(ii) revised; interim...............................41428
Chapter VIII
812  Authority citation revised....................................39659
812.1  (a)(2) revised..............................................39659
812.3  Revised.....................................................39659
812.4  Revised.....................................................39659
813  Authority citation revised....................................15775
    Technical correction...........................................21658
813.106  (c)(9) revised; (c)(10) redesignated as (c)(11); new 
        (c)(10) and (e) added; eff. 4-23-93........................15775

[[Page 795]]

882.404  (b)(3) revised; interim....................................4270
    Regulation at 58 FR 4270 removed................................8186
    (b)(3) correctly revised; CFR correction.......................61024
882.708  (d) revised; interim.......................................4270
    Regulation at 58 FR 4270 removed................................8186
    (d) correctly revised; CFR correction..........................61024
882.802  Amended; interim; eff. 4-14-93............................13831
882.803  (a)(2)(ii) removed; (a)(2)(iii) and (iv) redesignated as 
        (a)(2)(ii) and (iii); (e) added; interim; eff. 4-14-93.....13831
882.804  (d) revised; interim; eff. 4-14-93........................13831
882.805  (a) through (d), (f)(6), (10) and (g)(4) revised; 
        interim; eff. 4-14-93......................................13831
882.806  (a)(5) removed; interim; eff. 4-14-93.....................13833
882.808  (a)(1) and (b)(3) revised; (p) added; interim; eff. 4-14-
        93.........................................................13833
886  Authority citation revised....................................43720
886.133  Added.....................................................43721
886.301  Revised...................................................43722
886.302  Amended...................................................43722
886.304  (b) amended...............................................43722
886.307  Amended...................................................43722
886.309  (g) amended...............................................43722
886.310  Revised...................................................43722
886.311  Revised...................................................43722
886.318  (d) added (OMB number)....................................43722
886.321  (c)(1) amended............................................43722
886.329  (d) amended...............................................43722
886.330  (a) revised; (c) amended..................................43722
886.331  (a)(1) revised............................................43722
886.332  (c)(2) amended............................................43722
886.333  (d)(2) revised............................................43723
886.338  Added.....................................................43723
888  Schedule C revised......................................4272, 11526
    Fair market rent schedules.....................................51415
    Corrected......................................................57965
889.105  Amended; interim..........................................26838
889.205  Revised; interim..........................................26838
889.230  (f) added; interim.........................................4270
    Regulation at 58 FR 4270 removed................................8186
    (f) correctly removed; CFR correction..........................61024
889.235  (a) and (d) revised; interim..............................26838
889.245  (a)(3)(ii) amended; interim...............................26839
889.250  Existing text designated as (a); (a) heading and (b) 
        added; interim.............................................26839
889.265  (d) revised; interim......................................26839
889.270  Revised; interim..........................................26839
889.300  Revised; interim..........................................26841
889.305  (a) introductory text, (1) and (d) amended; interim.......26842
889.310  (a) introductory text, (1), (2), (3), (b)(1) introductory 
        text, (ii), (2), (3)(i) and (ii) amended; interim..........26842
889.800--889.805 (Subpart H)  Added; interim.......................26842
890.100  (b) revised; interim......................................26818
890.105  Amended; interim..........................................26818
890.205  Revised; interim..........................................26818
890.230  (h) added; interim.........................................4270
    Regulation at 58 FR 4270 removed................................8186
    (h) correctly removed; CFR correction..........................61024
890.235  (a) and (d) revised; interim..............................26818
890.245  (d)(i) and (ii) redesignated as (d)(1) and (2); new 
        (d)(2) amended; interim....................................26819
890.260  (d) revised; interim......................................26819
890.265  Revised; interim..........................................26819
890.300  Revised; interim..........................................26822
890.305  Nomenclature change; interim..............................26823
890.310  Nomenclature change; interim..............................26823
Chapter IX
905  Technical correction..........................................21658
    Authority citation revised.....................................30883
    Regulation at 58 FR 30883 confirmed............................30908
905.102  Amended; interim; eff. 4-14-93............................13922
    Amended........................................................17164
    Amended; interim; eff. 12-29-93 to 5-29-95.....................62523
905.117  Added; interim; eff. 4-14-93..............................13923
905.120  (e) removed; (f) through (i) redesignated as (e) through 
        (h); interim; eff. 4-14-93.................................13924
    Amended; eff. 4-23-93..........................................17165
905.190  Added.....................................................51956
905.255  (a)(2) revised; (j) added; interim; eff. 12-29-93 to 5-
        29-95......................................................62523

[[Page 796]]

905.301  (d) and (e)(4) revised....................................39659
905.320  Regulation at 58 FR 15775 correctly withdrawn.............17165
905.340  Revised...................................................19350
905.600  Revised; interim; eff. 4-14-93............................13924
905.601  (j) and (k)(1) revised; interim; eff. 4-14-93.............13925
905.602  (a), (b) introductory text, (b)(i), (2)(ii), (c) 
        introductory text and (d) revised; (f) added; interim; 
        eff. 4-14-93...............................................13925
905.609--905.618  Undesignated center heading revised; interim; 
        eff. 4-14-93...............................................13925
905.609  Revised; interim; eff. 4-14-93............................13925
905.615  Revised; interim; eff. 4-14-93............................13925
905.621  Removed; interim; eff. 4-14-93............................13928
905.624  Revised; interim; eff. 4-14-93............................13928
905.627  Removed; interim; eff. 4-14-93............................13929
905.635  Added; interim; eff. 4-14-93..............................13929
905.636  Removed; interim; eff. 4-14-93............................13929
905.639  Revised; interim; eff. 4-14-93............................13929
905.642  Revised; interim; eff. 4-14-93............................13929
905.645  Revised; interim; eff. 4-14-93............................13930
905.648  Revised; interim; eff. 4-14-93............................13930
905.651  Revised; interim; eff. 4-14-93............................13930
905.654  Revised; interim; eff. 4-14-93............................13930
905.657  Added; interim; eff. 4-14-93..............................13930
905.666  (d)(4) removed; (d)(5) redesignated as (d)(4); (c) 
        heading, (d) heading, (1) and new (d)(4) revised; interim; 
        eff. 4-14-93...............................................13930
905.921  (b) redesignated as (c) and revised.......................58786
    Regulation at 58 FR 58786 eff. date delayed to 2-4-94..........64141
905.923  (b)(3) revised; interim; eff. 4-14-93.....................13930
905.1001--905.1021 (Subpart O)  Regulation at 56 FR 47860 
        effective date extended.....................................6092
905.3001--905.3030 (Subpart R)  Added; interim.....................30883
    Regulation at 58 FR 30883 confirmed............................30908
906  Regulation at 56 FR 47860 effective date extended..............6092
912  Authority citation revised....................................39659
912.1  (a)(2) revised..............................................39660
912.3  Revised.....................................................39660
912.4  Revised.....................................................39660
913  Authority citation revised....................................15775
    Technical correction...........................................21658
913.106  (c)(10) redesignated as (c)(11); (c)(9) revised; new 
        (c)(10) and (e) added; eff. 4-23-93  15775
941  Authority citation revised....................................62524
941.103  Amended; interim; eff. 12-29-93 to 5-29-95................62524
941.202  (d) revised; interim.......................................4270
    Regulation at 58 FR 4270 removed................................8186
    (d) correctly revised; CFR correction..........................61024
941.204  (d) added; interim; eff. 12-29-93 to 5-29-95..............62524
941.406  (a)(1) and (2)(i) revised; interim; eff. 12-29-93 to 5-
        29-95......................................................62524
960  Authority citation revised....................................39660
960.409  (e) revised...............................................39660
961  Revised........................................................3163
962  Added; interim................................................30889
    Regulation at 58 FR 30889 confirmed............................30908
965.201--965.205 (Subpart B)  Added................................51957
968  Authority citation revised....................................13930
968.101  (b)(3), (4) and (5) added; (c) revised; interim; eff. 4-
        14-93......................................................13930
968.102  (a), (b) introductory text, (1), (2)(ii), (c) 
        introductory text and (d) revised; (e) added; interim; 
        eff. 4-14-93...............................................13931
968.105  Amended; interim; eff. 4-14-93............................13931
968.108  Added; interim; eff. 4-14-93..............................13931
968.110  (a) revised; (g) removed; interim; eff. 4-14-93...........13932
968.201  Revised; subpart B table of contents revised; interim; 
        eff. 4-14-93...............................................13933

[[Page 797]]

968.203  Removed; interim; eff. 4-14-93............................13933
968.205  Revised; interim; eff. 4-14-93............................13933
968.210  Revised; interim; eff. 4-14-93............................13933
968.215  Revised; interim; eff. 4-14-93............................13934
968.220  Revised; interim; eff. 4-14-93............................13936
968.225  Revised; interim; eff. 4-14-93............................13937
968.230  Added; interim; eff. 4-14-93..............................13937
968.235  Revised; interim; eff. 4-14-93............................13937
968.236  Removed; interim; eff. 4-14-93............................13938
968.240  Revised; interim; eff. 4-14-93............................13938
968.245  Revised; interim; eff. 4-14-93............................13938
968.246  Removed; interim; eff. 4-14-93............................13938
968.250  Revised; interim; eff. 4-14-93............................13938
968.251  Removed; interim; eff. 4-14-93............................13938
968.255  Revised; interim; eff. 4-14-93............................13938
968.260  Added; interim; eff. 4-14-93..............................13938
968.305  Amended; interim; eff. 4-14-93............................13931
968.310  (d)(3)(ii) and (l) revised; interim; eff. 4-14-93.........13938
970  Authority citation revised....................................58786
970.12  Revised....................................................58786
    Regulation at 58 FR 58786 eff. date delayed to 2-4-94..........64141
984  Added; interim................................................30896
    Regulation at 58 FR 30896 confirmed............................30908
990.301--990.325 (Subpart C)  Regulation at 57 FR 61231 comment 
        period extended (OMB number pending)........................4318

                                  1994

24 CFR
                                                                   59 FR
                                                                    Page
Chapter VII
700  Revised................................................22225, 22235
750.5  Amended; eff. 4-25-94.......................................14093
760.5  Amended; eff. 4-25-94.......................................14093
791.102  Amended; eff. 4-25-94.....................................14093
791.302  (a) amended; eff. 4-25-94.................................14093
791.402  Heading and (a) amended; eff. 4-25-94.....................14093
    (c)(2) revised.................................................50159
791.407  (a)(2) amended; eff. 4-25-94..............................14093
      (a) introductory text revised; interim.......................35255
792  Redesignated from 892 and revised..............................9409
Chapter VIII
811.102  (m) amended; eff. 4-25-94.................................14093
811.202  Amended; eff. 4-25-94.....................................14093
812.3  (b)(1)(i)  introductory text and (ii) amended; eff. 4-25-94
                                                                   14093
813  Authority citation revised....................................36681
813.102  Amended; eff. 4-25-94.....................................14093
813.103  Amended; eff. 4-25-94.....................................14093
813.104  (a) amended; eff. 4-25-94.................................14093
    (b)(2) removed; (b)(3) redesignated as (b)(2)..................36681
813.105  (a) introductory text, (b) introductory text, (1), (2), 
        (c)(1) and (2) amended; eff. 4-25-94.......................14093
    (a) introductory text amended; (c), (e)(2) and (4) removed; 
(e)(3) redesignated as (e)(2)......................................36681
813.106  (b)(9) removed............................................32649
813.110  (c) amended; eff. 4-25-94.................................14093
850  Authority citation revised....................................29333
850.1  Amended; eff. 4-25-94.......................................14093
850.3  Amended; eff. 4-25-94.......................................14093
850.13  (a)(2), (3), (b)(1) and (2) amended; eff. 4-25-94..........14093
850.15  (a), (d) introductory text, (1), (2), (4) and (6) amended; 
        eff. 4-25-94...............................................14094
850.17  (a) amended; eff. 4-25-94..................................14094
850.31  (f) amended; eff. 4-25-94..................................14094
850.33  (f)(4), (g)(3), (i), (j) and (r)(4) amended; eff. 4-25-94 
                                                                   14094
850.34  Added (OMB number).........................................29333
850.35  (d)(2)(iii)(B) and (iv) introductory text amended; eff. 4-
        25-94......................................................14094
    (d) removed....................................................29335
850.37  (f) amended; eff. 4-25-94..................................14094
850.39  (b)(1), (6), (10) and (c)(1) amended; eff. 4-25-94.........14094
850.61  (b) amended; eff. 4-25-94..................................14094

[[Page 798]]

850.151  (d), (e) heading, (1), (2), (4), (5), (f)(1), (2) 
        introductory text, (i) and (ii) amended; eff. 4-25-94......14094
880  Authority citation revised....................................13652
      Authority citation revised...................................22923
880.101  (a)(1) amended; eff. 4-25-94..............................14094
880.103  (c) amended; eff. 4-25-94.................................14094
880.104  (d) added.................................................59649
880.201  Amended; eff. 4-25-94.....................................14094
880.204  (a) and (e) amended; eff. 4-25-94.........................14094
880.206  (h) amended; eff. 4-25-94.................................14094
880.209  (c) amended; eff. 4-25-94.................................14094
    Revised (OMB number)...........................................29335
880.211  Regulation at 57 FR 33256 confirmed........................2738
880.504  (d) revised; eff. 4-22-94.................................13652
880.603  (b) introductory text amended; (b)(1) removed; (b)(2), 
        (3) and (4) redesignated as (b)(1), (2) and (3)............36624
880.609  (b) revised...............................................22755
880.612a  Added; interim; eff. 6-2-94 through 5-3-95...............22923
    Revised........................................................65850
880.613  Revised; OMB number.......................................36624
    (c)(1)(i) corrected............................................42159
880.614  Added; OMB number.........................................36625
880.615  Added.....................................................36626
880.616  Added.....................................................36627
880.617  Added.....................................................36627
881  Authority citation revised..............................2738, 13652
    Authority citation revised.....................................22924
881.101  (a)(1) amended; eff. 4-25-94..............................14094
881.103  (c) amended; eff. 4-25-94.................................14094
881.104  (d) added.................................................59649
881.201  Amended; eff. 4-25-94.....................................14094
881.204  (a) and (e) amended; eff. 4-25-94.........................14094
881.206  (g) amended; eff. 4-25-94.................................14094
881.209  (c) amended; eff. 4-25-94.................................14094
    Revised; OMB number............................................29336
881.211  Regulation at 57 FR 33257 confirmed; (b) revised...........2738
881.504  (d) revised; eff. 4-22-94.................................13652
881.603  (b) introductory text amended.............................36628
881.609  (b) revised...............................................22755
881.612a  Added; interim; eff. 6-2-94 through 5-3-95...............22924
    Revised........................................................65852
881.613  Revised; OMB number.......................................36628
    (c)(1)(i) corrected............................................42159
881.614  Added; OMB number.........................................36629
881.615  Added.....................................................36630
881.616  Added.....................................................36631
881.617  Added.....................................................36631
882  Authority citation revised......................24254, 33895, 36681
882.103  Introductory text removed; (b) revised....................36681
882.116  (a) amended; eff. 4-25-94.................................14094
    (c) revised....................................................36682
882.117  (c)(1)(i) amended; eff. 4-25-94...........................14094
882.123  (h) introductory text amended; eff. 4-25-94...............14094
882.204  (a)(2) amended; eff. 4-25-94..............................14094
882.207  Heading and introductory text amended; eff. 4-25-94.......14094
    Removed........................................................36682
882.209  (a) revised...............................................36682
882.216  (a)(4) removed............................................36682
882.219  Removed...................................................36682
882.335  (a)(2)(i) revised.........................................36682
882.401  (a) amended; eff. 4-25-94.................................14094
882.402  Amended; eff. 4-25-94.....................................14094
882.404  (b)(5)  amended; eff. 4-25-94.............................14094
882.406  Revised; OMB number.......................................29337
882.410  (a)(2) revised; OMB number................................47773
882.513  Heading and (a) heading amended; eff. 4-25-94.............14094
882.514  (c) amended; eff. 4-25-94.................................14094
882.517  Revised; OMB number.......................................36632
    (c)(1)(i) corrected............................................42159
882.518  Added; OMB number.........................................36633
882.519  Added.....................................................36633
882.520  Added.....................................................36634
882.521  Added.....................................................36635
882.601  Amended; eff. 4-25-94.....................................14094
882.602  Amended; eff. 4-25-94.....................................14094
882.701  (a) amended; eff. 4-25-94.................................14094
    (c) revised....................................................36682
882.708  (c)(3)(i),  (iii) introductory text, (d) and (g) amended; 
        eff. 4-25-94...............................................14094
882.712  Revised; OMB number.......................................29338
882.713  (c)(11) added.............................................33895
882.716  Amended; eff. 4-25-94.....................................14094
882.720  (b)(3)(v) revised.........................................29339

[[Page 799]]

882.721  (c) amended; eff. 4-25-94.................................14094
    (c) amended....................................................29340
882.753  (c)(3) amended; eff. 4-25-94..............................14094
    (a) revised....................................................36682
882.803  (d) introductory text revised.............................29340
882.805  (a) through (d) and (f)(10) revised; interim..............24254
882.810  Added; OMB number.........................................29340
883  Authority citation revised....................................13653
    Authority citation revised; eff. 6-2-94 through 5-3-95.........22926
883.101  (a)(1) amended; eff. 4-25-94..............................14094
883.103  (c) amended; eff. 4-25-94.................................14094
883.105  (d) added.................................................59650
883.302  Amended; eff. 4-25-94.....................................14094
883.305  (a) and (e) amended; eff. 4-25-94.........................14094
883.309  (a)(7) amended; eff. 4-25-94..............................14094
883.311  Revised; OMB number.......................................29341
883.313  Regulation at 57 FR 33257 confirmed........................2738
883.605  (d) revised; eff. 4-22-94.................................13653
883.704a  Added; interim; eff. 6-2-94 through 5-3-95...............22926
    Revised........................................................65854
883.710  (b) revised...............................................22755
883.714  Revised; OMB number.......................................36635
    (c)(1)(i) corrected............................................42159
883.715  Added; OMB number.........................................36636
883.716  Added.....................................................36637
883.717  Added.....................................................36638
883.718  Added.....................................................36638
884  Authority citation revised....................................13653
    Authority citation revised.....................................22927
884.102  Amended; eff. 4-25-94.....................................14094
884.110  (c) amended; eff. 4-25-94.................................14094
884.112  Revised; OMB number.......................................29342
884.116  (a) amended; eff. 4-25-94.................................14094
884.124  Regulation at 57 FR 33257 confirmed........................2738
884.223  (d) revised; eff. 4-22-94.................................13653
884.223a  Added; interim; eff. 6-2-94 through 5-3-95...............22927
    Revised........................................................65855
884.226  Revised; OMB number.......................................36639
    (c)(1)(i) corrected............................................42159
884.227  Added; OMB number.........................................36640
884.228  Added.....................................................36641
884.229  Added.....................................................36642
884.230  Added.....................................................36642
885.9  (d) and (f)(1)(iii)(A)(2) amended; eff. 4-25-94.............14094
885.10  Regulation at 57 FR 33257 confirmed.........................2738
885.427  Revised...................................................36643
885.700  Amended; eff. 4-25-94.....................................14094
885.725  (a) amended; eff. 4-25-94.................................14094
885.730  (c)(3)(i), (iii) introductory text and (g) amended; eff. 
        4-25-94....................................................14094
885.740  (e)(4) and (6)(i)(C)(1)(ii) amended; eff. 4-25-94.........14094
885.750  (c)(1)(ii) amended; eff. 4-25-94..........................14094
885.950  (b) introductory text amended; eff. 4-25-94...............14094
886  Authority  citation revised...................................13653
    Authority citation revised.....................................22929
886.102  Amended; eff. 4-25-94.....................................14094
886.131  Regulation at 57 FR 33257 confirmed........................2738
886.132  Revised; OMB number.......................................36643
    (c)(1)(i) corrected............................................42159
886.133  Redesignated as 886.138...................................36643
    Added; OMB number..............................................36644
886.134  Added.....................................................36645
886.135  Added.....................................................36646
886.136  Added.....................................................36647
886.138  Redesignated from 886.133.................................36643
886.302  Amended;  eff. 4-25-94....................................14094
886.329  (d)  revised; eff. 4-22-94................................13653
886.329a  Added; interim; eff. 6-2-94 through 5-3-95...............22929
    Revised........................................................65857
886.336  Regulation at 57 FR 33257 confirmed........................2738
886.337  Revised...................................................36647
887  Authority citation revised....................................36682
887.5  (c) removed.................................................36682
887.7  Amended; eff. 4-25-94.......................................14094
887.59  (c)(1) and (d) revised.....................................36682
887.105  (b)(1) amended; eff. 4-25-94..............................14094
    (b)(1) and (2) amended.........................................36682
887.107  Removed...................................................36682
887.109  Amended; eff. 4-25-94.....................................14094
887.151  (a)(2) and (b) amended; eff. 4-25-94......................14094
887.151--887.167 (Subpart D)  Heading revised......................36682
887.151  Revised...................................................36682
887.153  Removed...................................................36682
887.155  Removed...................................................36682
887.157  Removed...................................................36682
887.455  (b) and (c) amended; eff. 4-25-94.........................14094

[[Page 800]]

887.565  (c) revised...............................................36682
888  Fair market rent schedules......................16408, 26944, 49494
    Schedule C revised.............................................21835
    Technical correction...........................................25703
    Schedule C corrected....................................26944, 48392
888.203  (b) revised...............................................38564
889  Authority citation revised....................................36647
889.265  (a)(4) revised............................................33895
889.280  Added......................................................2738
889.611  Added; OMB number.........................................36647
    (c)(1)(i) corrected............................................42159
889.612  Added; OMB number.........................................36648
889.613  Added.....................................................36649
889.614  Added.....................................................36650
889.615  Added.....................................................36650
890.260  (a)(4) revised............................................33895
890.275  Added......................................................2739
892  Redesignated as 792............................................9409
Chapter IX
900  Authority citation revised....................................29343
900.105  Added; OMB number.........................................29343
904  Authority citation revised....................................36651
904.122  Revised...................................................36651
905  Authority citation revised.......33655, 33895, 36651, 39403, 43630, 
                                                                   51854
905.102  Amended;  eff. 4-25-94....................................14094
    Regulation  at 58 FR 62523 confirmed; eff. 4-25-94.............14096
    Amended..........................................43630, 44830, 51854
905.120  (j) added.................................................33895
905.160  (a)(3)(ii)(C) revised; interim............................31522
905.165  (c)(5) revised............................................33895
905.195  Added.....................................................31929
905.210  Removed...................................................25812
905.255  Regulation  at 58 FR 62523 confirmed; eff. 4-25-94........14096
905.301  (a) revised; (e)(1), (2) and (4) amended..................36651
905.303  Added; OMB number.........................................36652
905.304  Added.....................................................36653
905.305  Revised...................................................36653
905.306  Added.....................................................36654
905.307  Added.....................................................36654
905.308  Added.....................................................39403
905.416  (a)(3) revised; (d) and (f) amended.......................36655
905.434  (b)(7) added..............................................43630
905.585  Added.....................................................31930
905.601  (b), (k)(2)(i) and (3)(iii) revised; (h) and (j) amended 
                                                                   44830
905.602  Revised...................................................44830
905.642  (d)(4) removed; (g) revised; interim......................31522
905.666  (a)(1), (2), (3), (b), (c), (d)(1), (3)(i), (f)(1)(iii) 
        and (m) revised............................................44831
905.667  (a)(1) and (3) revised....................................44831
905.669  (a)(1) amended; (b) and (c) revised; (d) added; OMB 
        number.....................................................44832
905.672  (a), (b)(2)(i), (3), (4), (5), (c)(2), (d)(1), (2)(i)(E), 
        (4), (5)(i), (iii), (6)(i), (ii), (7)(v), (viii), (xv), 
        (e)(2), (3) and (4) revised; (d)(7)(xviii) added...........44832
905.675  (b)(1) amended; (c) revised; OMB number...................44834
905.678  Revised; OMB number.......................................44834
905.681  (c)(2) revised; interim...................................31523
    (a) introductory text and (b) revised..........................44836
905.684  (b)(3) removed; (b)(4) through (7) redesignated as (b)(3) 
        through (6); heading, (a), (b)(2), new (4) and new (6) 
        revised....................................................44836
905.687  (a)(1)(i), (2)(i)(A), (3)(ii), (e)(2) and (4) revised; 
        (e)(7) redesignated as (e)(8); (a)(3)(iii) and new (e)(7) 
        added......................................................44836
905.715  (b)(2) revised............................................33655
    (c)(4)(ii) and (d) removed; (c)(4)(iii), (e), (f) and (g) 
redesignated as (c)(4)(ii), (d), (e) and (f); (a), (b)(2), (c) 
introductory text, (2)(iii), (4)(i), new (d) and new (e) amended 
                                                                   51854
905.720  (f) added.................................................25812
    (b) existing text designated as (b)(1); (b)(2) added...........33655
    (g) added......................................................43630
905.730  (c)(1)(i) revised.........................................33655
    (c)(2)(i) and (ii) amended.....................................51854
905.745  (a)(1) amended; eff. 4-25-94..............................14094
905.921  Regulation  at 58 FR 58786 eff. date delayed to 4-5-94.....5321
    Regulation  at 58 FR 58786 withdrawn...........................14369
905.960--905.988 (Subpart O)  Revised..............................43630
905.1001--905.1021 (Subpart P)  Revised............................56359
905.1008  Introductory text revised; (a) amended...................36655
905.3020  (a)(1) corrected; (a)(2) correctly revised................7639
905.3021  Correctly revised.........................................7639

[[Page 801]]

905.3022  (b)(5) and (h)(2) correctly revised.......................7639
905.3024  (b) corrected.............................................7639
906  Authority citation revised....................................36655
    Revised........................................................56365
906.8  Introductory text revised; (a) amended......................36655
907  Added; interim; eff. to 1-24-95................................3627
912.3  (b)(1)(i)  introductory text and (ii) amended; eff. 4-25-94
                                                                   14094
913.102  Amended; eff. 4-25-94.....................................14095
913.104  (a) amended; eff. 4-25-94.................................14095
913.105  (a), (b) introductory text and (4) amended; eff. 4-25-94 
                                                                   14095
913.106  (b)(9) removed............................................32649
    (c)(8)(ii), (iii) and (10) amended; (c)(11) redesignated as 
(c)(12); (c)(8)(iv) and new (c)(11) added..........................43635
913.110  (c) amended; eff. 4-25-94.................................14095
941.101  (a) introductory text amended; eff. 4-25-94...............14095
941.103  Regulation  at 58 FR 62524 confirmed; eff. 4-25-94........14096
941.202  (h)  amended; eff. 4-25-94................................14095
941.204  Regulation  at 58 FR 62524 confirmed; eff. 4-25-94........14096
941.206  (c) revised...............................................18484
941.207  Revised (OMB number)......................................29344
941.209  Amended; eff. 4-25-94.....................................14095
941.302  (d)(2) amended; eff. 4-25-94..............................14095
941.404  (n) introductory text through (9) redesignated as (n)(1) 
        introductory text through (ix); (n) concluding text 
        designated as (n)(2); heading, new (n)(1) and new (2) 
        revised; (n)(1)(x) added...................................18484
941.406  Regulation  at 58 FR 62524 confirmed; eff. 4-25-94........14096
941.502  (a) revised; interim......................................31523
942.3  (c) amended; eff. 4-25-94...................................14095
945  Added.........................................................17662
953  Added; interim................................................38329
955  Added; interim................................................42734
960  Authority citation revised.............................36655, 39405
960.203  Revised...................................................36655
960.204  (b)(3) amended; eff. 4-25-94..............................14095
    Revised........................................................36655
960.205  (c)(1) and (5) amended; eff. 4-25-94......................14095
    (a) and (c) revised............................................36656
960.206  (a) amended...............................................36656
960.207  (a) and (b) introductory text amended; (b)(1) and (2) 
        removed....................................................36656
960.211  Revised (OMB number)......................................36656
960.212  Added (OMB number)........................................36657
960.213  Added.....................................................36658
960.214  Added.....................................................36658
960.215  Added.....................................................36659
960.401--960.409 (Subpart D)  Heading revised......................17667
960.401  Revised...................................................17667
960.403  Revised...................................................17667
960.405  Revised...................................................17667
960.407  Revised...................................................17667
960.409  Removed...................................................17667
960.501--960.511 (Subpart E)  Added................................39405
961  Authority citation revised....................................33895
961.5  Amended; eff. 4-25-94.......................................14095
961.29  (b)(4) revised.............................................33895
962.103  Corrected..................................................7639
962.302  Corrected..................................................7639
962.303  (b)(5) introductory text and (h)(2) correctly revised......7639
962.305  (b)(1)(i) introductory text and (c)(2) heading corrected; 
        (e) correctly revised.......................................7640
963  Authority citation revised....................................33895
963.3  Amended.....................................................33895
963.10  (d) revised................................................33895
964.39  (e) amended; eff. 4-25-94..................................14095
      Revised......................................................43636
965.101  (a)(1)(ii) amended; eff. 4-25-94..........................14095
965.215  Added.....................................................31930
965.472  Amended; eff. 4-25-94.....................................14095
965.705  Added.....................................................31930
968.101  (a) and (b)(2) amended; eff. 4-25-94......................14095
968.102  Revised...................................................44837
968.103  (c) revised...............................................30477
    (b), (k)(2)(i) and (3)(iii) revised; (j) amended...............44837
968.105  Amended; eff. 4-25-94.....................................14095
968.235  (d)(4) removed; (g) revised; interim......................31523
968.305  Amended...................................................44837
968.310  (a)(1), (2), (f)(1)(iii), (b), (c), (d)(1), (3)(i) and 
        (m) revised; (a)(3) amended; (d)(3)(iii) removed; (g)(4) 
        added......................................................44838
968.312  (a)(1) and (3) revised....................................44838

[[Page 802]]

968.315  Heading, (b), (c)(1) and (5) revised; (a)(1) amended; (d) 
        added; OMB number..........................................44839
968.320  Heading, (a), (b)(2)(i), (3), (4), (5), (c)(2), 
        (d)(1)(i), (ii), (2)(i)(E), (4), (5)(i), (iii), (6)(i), 
        (ii), (7)(v), (viii), (xv), (e)(2), (3) and (4) revised; 
        (d)(7)(xviii) added; OMB number............................44839
968.325  Heading and (c) revised; OMB number.......................44841
968.330  (a) through (d), (e) introductory text, (1), (2), (4), 
        (8), (f), (g)(1), (2) introductory text, (i), (h), (i) and 
        (j) revised; (k) added; OMB number.........................44841
968.335  (c)(2) revised; interim...................................31523
    (a) introductory text and (b) revised..........................44843
968.340  (b)(3) removed; (b)(4) through (7) redesignated as (b)(3) 
        through (6); (a), (b)(2), new (4) and new (6) revised; OMB 
        number.....................................................44843
968.345  (a)(1)(i), (ii), (2)(i)(A), (3)(ii), (e)(2) and (4) 
        revised; (e)(7) redesignated as (e)(8); (a)(3)(iii) and 
        new (e)(7) added; OMB number...............................44843
968.401--968.425 (Subpart D)  Added................................30478
968.407  OMB number................................................30478
968.422  OMB number................................................30480
968.428  OMB number................................................30480
969.102  Amended; eff. 4-25-94.....................................14095
970.2  (c) amended; eff. 4-25-94...................................14095
970.7  (a)(2) amended; eff. 4-25-94................................14095
970.9  (b)(2) amended; eff. 4-25-94................................14095
970.12  Regulation  at 58 FR 58786 eff. date delayed to 4-5-94......5321
    Amended;  eff. 4-25-94.........................................14095
    Regulation  at 58 FR 58786 withdrawn...........................14369
982  Added.........................................................36682
982.210  Regulation at 59 FR 36687 eff. date corrected to 1-18-95 
                                                                   47081
984.103  Corrected..................................................7640
984.303  (b)(5) introductory text, (i), and (i) correctly revised 
                                                                    7640
990  Authority citation revised....................................33655
990.102  Amended...................................................51854
990.107  (b)(2) revised............................................33655
    (c)(4)(ii) and (d) removed; (c)(4)(iii), (e), (f) and (g) 
redesignated as (c)(4)(ii), (d), (e) and (f); (a), (b)(2), (c) 
introductory text, (2)(iii), (4)(i), new (d) and new (e) amended 
                                                                   51854
990.108  (b) existing text designated as (b)(1); (b)(2) added......33655
    (f) and (g) added..............................................43644
990.110  (c)(1)(i) revised.........................................33656
    (c)(2)(i) and (ii) amended.....................................51854
990.401--990.405 (Subpart D)  Added................................43644

                                  1995

24 CFR
                                                                   60 FR
                                                                    Page
Chapter VII
760  Authority citation revised.............................11831, 14635
760.3  (b)(10) through (13) redesignated as (12) through (15); new 
        (b)(10) and new (11) added; interim; eff. in part 4-3-95 
        and in part 4-3-95 through 10-2-96.........................11831
    (a) amended; eff. 4-19-95......................................14635
760.5  Amended; eff. 4-19-95.......................................14635
760.10  (c) revised; eff. 4-19-95..................................14635
760.40  (c) added; interim; eff. 4-3-95............................11831
791  Authority citation revised....................................35126
791.401  Revised...................................................35126
791.403  Regulation at 58 FR 41428 effective date extended..........3344
    (a), (b)(1)(ii) and (2) revised................................35126
791.405  Revised...................................................35126
791.407  (a) introductory text revised.............................35126
Chapter VIII
811.201--811.211 (Subpart B)  Removed..............................47263
812  Authority citation revised....................................14834
812.1--812.4 (Subpart A)  Heading added; eff. 6-19-95..............14834
812.1  (a)(1) and (2) amended; (a)(3) added; eff. 6-19-95..........14834
812.2  Amended; eff. 6-19-95.......................................14834
812.5--812.15 (Subpart B)  Added; eff. 6-19-95.....................14834
813  Authority citation revised....................................17393
    Policy statement...............................................20356
813.1  Added; interim..............................................17393

[[Page 803]]

813.106  (b)(4), (5) and (c) revised; interim; eff. in part 5-5-95 
        through 5-6-96.............................................17393
813.109  Heading and (a) revised....................................2662
    (c) added; eff. 4-3-95.........................................11628
850.151  (c) and (f)(1) amended; (f)(3) added eff. 6-19-95.........14841
880.504  (e) added; eff. 6-19-95...................................14841
880.601  (b) revised; eff. 6-19-95.................................14841
880.603  (b) introductory text revised; (b)(2), (c)(1), (2) and 
        (3) amended; eff. 6-19-95..................................14841
880.607  (b)(3) introductory text, (i), (ii) and concluding text 
        redesignated as (b)(3)(i) introductory text, (A), (B) and 
        (ii); new (b)(3)(ii) revised; (c)(4) added; eff. 6-19-95 
                                                                   14842
881.504  (e) added; eff. 6-19-95...................................14842
881.601  (b) revised; eff. 6-19-95.................................14842
881.603  (b) introductory text revised; (b)(3), (c)(1), (2) and 
        (3) amended; eff. 6-19-95..................................14842
881.607  (b)(3)(ii) amended; (c)(4) added; eff. 6-19-95............14843
882  Heading revised (effective date pending)......................34694
    Authority citation revised.....................................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.101  (b) revised; (c) and (d) added (effective date pending) 
                                                                   34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.103  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.104  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.105  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.107  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.116  (c) revised; eff. 6-19-95.................................14843
    Removed (effective date pending)...............................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.117  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.118  (a)(1) revised; eff. 6-19-95..............................14843
882.119  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.121  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.123  (a) through (d), (f) and (i) removed (effective date 
        pending)...................................................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.201  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.202  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.203  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.204  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.205  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.206  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.207  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.208  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.209  (a)(2) revised; eff. 6-19-95..............................14843
    Removed (effective date pending)...............................34694

[[Page 804]]

    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.210  (f) added; eff. 6-19-95...................................14843
      Removed (effective date pending).............................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.211  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.212  (a), (b) and (c) amended; eff. 6-19-95....................14843
882.212--882.219 (Subpart B)  Appendix I removed (effective date 
        pending)...................................................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.213  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.215  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.216  (a)(5), (b)(1)(v) and (8) added; eff. 6-19-95.............14843
    Removed (effective date pending)...............................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.514  (f) amended; eff. 6-19-95.................................14844
882.515  (a), (b) and (c) amended; eff. 6-19-95....................14844
882.701  Revised (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.702  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.703  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.704  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.705  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.706  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.707  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.708  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.709  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.710  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.711  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.712  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.713  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.716  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.720  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.721  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.722  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.723  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.724  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661

[[Page 805]]

882.725  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.730  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.731  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.732  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.733  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.740  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.741  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.750  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.751  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.752  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.753  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.754  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.755  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.756  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.757  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.758  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.759  Removed (effective date pending)..........................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
882.805  (b)(2) revised............................................16380
882.808  (i)(1), (2) and (l) amended; eff. 6-19-95.................14844
883.101  (c) amended; eff. 6-19-95.................................14844
883.605  (e) added; eff. 6-19-95...................................14844
883.702  Heading and (b) revised; eff. 6-19-95.....................14844
883.704  (b)(3), (c)(1), (2) and (3) amended; eff. 6-19-95.........14844
883.708  (b)(3)(ii) amended; (c)(4) added; eff. 6-19-95............14845
884.118  (a)(3) revised; eff. 6-19-95..............................14845
884.214  (b)(1) revised; (b)(8) added; eff. 6-19-95................14845
884.216  Amended; eff. 6-19-95.....................................14845
884.218  (a), (b) and (c) amended; eff. 6-19-95....................14845
884.223  (e) added; eff. 6-19-95...................................14846
885.5  Amended......................................................2662
885.200  Redesignated as 885.203; new 885.200 added.................2662
885.203  Redesignated from 885.200..................................2662
885.210  (b)(5) revised.............................................2663
885.425  Heading revised; (b) removed; (c) through (f) 
        redesignated as (b) through (e).............................2663
885.500  Added......................................................2663
885.505  Added......................................................2663
885.510  Added......................................................2663
885.515  Added......................................................2664
885.520  Added......................................................2664
885.525  Added......................................................2664
885.530  Added (OMB number).........................................2664
885.535  Added......................................................2665
885.600  Added (OMB number).........................................2665
885.605  Added......................................................2665
885.610  Added (OMB number).........................................2666
885.615  Added (OMB number).........................................2667
885.620  Added......................................................2667
885.625  Added......................................................2667
885.630  Added......................................................2667
885.635  Added (OMB number).........................................2667

[[Page 806]]

885.640  Added (OMB number).........................................2668
885.645  Added (OMB number).........................................2668
885.650  Added (OMB number).........................................2668
886.119  Heading and (a)(3) revised; eff. 6-19-95..................14846
886.121  (b) revised; (c) added; eff. 6-19-95......................14846
886.124  (a), (b) and (c) amended; eff. 6-19-95....................14846
886.128  Revised; eff. 6-19-95.....................................14846
886.129  (e) added; eff. 6-19-95...................................14846
886.302  Amended; interim..........................................11859
886.310  Revised; interim..........................................11859
886.311  Revised; interim..........................................11859
886.318  (a)(3) revised; eff. 6-19-95..............................14846
886.319  Revised; interim..........................................11860
886.321  (b)(1) amended; (b)(7) added; eff. 6-19-95................14846
886.324  (a), (b) and (c) amended; eff. 6-19-95....................14847
886.328  Revised; eff. 6-19-95.....................................14847
886.329  (e) added; eff. 6-19-95...................................14847
887  Authority citation revised.............................14847, 34694
887.3  Revised (effective date pending)............................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
887.5  Removed (effective date pending)............................34694
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
887.51--887.65 (Subpart B)  Removed (effective date pending).......34695
    Regulation at 60 FR 34694 eff. 10-2-95.........................45661
887.101--887.111 (Subpart C)  Removed (effective date pending).....34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
887.105  (b)(5) revised; eff. 6-19-95..............................14847
887.151--887.167 (Subpart D)  Removed (effective date pending).....34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
887.201--887.215 (Subpart E)  Removed (effective date pending).....34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
887.251--887.261 (Subpart F)  Removed (effective date pending).....34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
887.301--887.305 (Subpart G)  Removed (effective date pending).....34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
887.355  (b) redesignated as (c); new (b) added; eff. 6-19-95......14847
887.357  Amended; eff. 6-19-95.....................................14847
887.401  (a) introductory text and (1) revised; eff. 6-19-95.......14847
887.401--887.405 (Subpart I)  Removed (effective date pending).....34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
887.403  (d) and (e) redesignated (e) and (f); new (d) added; eff. 
        6-19-95....................................................14848
887.405  (a)(4), (b)(1)(iv) and (8) added; eff. 6-19-95............14848
887.551--887.567 (Subpart L)  Removed (effective date pending).....34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
888  Fair market rent schedules....................................12594
    Authority citation revised.....................................42226
    Fair market rent schedules.......................42230, 48278, 55934
888.101  Removed...................................................42226
888.105  Removed...................................................42226
888.111  Revised...................................................42226
888.113  Revised...................................................42226
888.115  Revised...................................................42227
889.100  (d) added; interim; eff. 4-3-95...........................11831
889.270  (b)(3) revised............................................16380
889.600  Added; OMB number; interim; eff. 4-3-95 through 10-2-96 
                                                                   11831
889.605  Added; interim; eff. 4-3-95 through 10-2-96...............11832
889.610  Added; interim; eff. 4-3-95 through 10-2-96...............11832
889.620  Added; OMB number; interim; eff. 4-3-95 through 10-2-96 
                                                                   11833
889.625  Added; interim; eff. 4-3-95 through 10-2-96...............11833

[[Page 807]]

889.630  Added; interim; eff. 4-3-95 through 10-2-96...............11833
889.635  Added; interim; eff. 4-3-95 through 10-2-96...............11834
889.640  Added; interim; eff. 4-3-95 through 10-2-96...............11834
889.645  Added; interim; eff. 4-3-95 through 10-2-96...............11834
889.650  Added; interim; eff. 4-3-95 through 10-2-96...............11834
889.655  Added; interim; eff. 4-3-95 through 10-2-96...............11834
890.100  (d) added; interim; eff. 4-13-95..........................11839
    Regulation at 60 FR 11839 eff. date corrected to 4-3-95........13515
890.265  (b)(3) revised............................................16380
890.600--890.650 (Subpart F)  Added; interim; eff. 4-3-95 through 
        10-2-96....................................................11839
    Regulation at 60 FR 11839 eff. date corrected to 4-3-95........13515
890.600  OMB number................................................11839
890.635  OMB number................................................11842
Chapter IX
900.102  (g) revised; eff. 6-19-95.................................14848
900.202  (d)(3) amended; (g) and (h) redesignated as (h) and (i); 
        new (g) added; eff. 6-19-95................................14848
900  Removed.......................................................47263
904  Authority citation revised....................................14848
904.104  (b)(1) amended; (g)(2) revised; eff. 6-19-95..............14848
904.107  (j)(2) and (m)(1) revised; eff. 6-19-95...................14848
905  Removed.......................................................18186
905.102  Amended; eff. 6-19-95.....................................14849
    Amended; interim; eff. in part 5-5-95 through 5-6-96...........17393
905.103  Added; interim............................................17394
905.160  Regulation at 59 FR 31522 confirmed.......................35692
905.310  Added; eff. 6-19-95.......................................14849
905.315  (a)(2) and (3) redesignated as (b) and (c); (d) added; 
        eff. 4-3-95................................................11628
    (a)(i), (ii), (1) and (2) redesignated as (a)(1), (2), (b) and 
(c); (d) added; eff. 6-19-95.......................................14854
905.642  Regulation at 59 FR 31523 confirmed.......................35692
905.681  Regulation at 59 FR 31523 confirmed.......................35692
907  Regulation at 59 FR 3627 confirmed.............................4346
      Removed......................................................47263
907.1  (a) designation, heading and (b) removed.....................4346
907.5  (a) designation, heading and (b) removed.....................4346
907.6  (b) amended..................................................4346
907.8  (c) introductory text amended; (d) revised...................4346
    (d) corrected...................................................6400
908  Added; eff. 4-3-95............................................11628
908.104  OMB number................................................11628
912  Authority citation revised....................................14855
912.1--912.4 (Subpart A)  Heading added; eff. 6-19-95..............14855
912.1  (a)(2) amended; (a)(3) added; eff. 6-19-95..................14855
912.2  Amended; eff. 6-19-95.......................................14855
912.5--912.14 (Subpart B)  Added; eff. 6-19-95.....................14855
913  Policy statement..............................................20356
913.1  Added; interim..............................................17394
913.106  (b)(4), (5) and (c) revised; interim; eff. in part 5-5-95 
        through 5-6-96.............................................17394
913.109  (c) added; eff. 4-3-95....................................11629
941.502  Regulation at 59 FR 31523 confirmed.......................35692
950  Added.........................................................18186
    Policy statement...............................................20356
950.102  Corrected.................................................36667
    Amended........................................................57304
950.103  Correctly added...........................................36668
950.126  (d)(2) correctly revised..................................36668
950.175  (d)(1)(iii) correctly revised.............................36668
950.437  (c)(1) correctly redesignated as (c)......................36668
950.455  (c) corrected.............................................36668
950.458  (c) corrected.............................................36668
950.503  (c) corrected.............................................36668
950.553  (c) correctly revised.....................................36668
950.555  OMB number................................................18236
950.570  OMB number................................................18237
    (c) correctly revised..........................................36669
950.575  OMB number................................................18238
950.705  Existing text redesignated as (a); (b) added..............57305
950.1008  OMB number...............................................18281
950.1017  OMB number...............................................18285
950.1018  OMB number...............................................18285
950.1019  OMB number...............................................18285
950.1020  OMB number...............................................18285
950.1021  OMB number...............................................18285
955  Regulation at 59 FR 42734 eff. date extended..................37337
960  Authority citation revised....................................14861
960.204  (a) and (d)(4) revised; eff. 6-19-95......................14861

[[Page 808]]

960.206  (a) revised; eff. 6-19-95.................................14861
960.209  (a), (b) and (c) amended; eff. 6-19-95....................14861
965.501--965.504 (Subpart F)  Removed..............................47263
967  Removed.......................................................47263
968  Technical correction...........................................2813
968.235  Regulation at 59 FR 31523 confirmed.......................35692
968.320  (d), (e) and (f) redesignated as (e), (f) and (g); new 
        (d) added; (c) introductory text, new (e) introductory 
        text, (4)(i) and (6)(ii) amended............................1919
968.335  Regulation at 59 FR 31523 confirmed.......................35692
970.2  Regulation at 53 FR 30987 confirmed; revised.................3716
970.3  Amended......................................................3716
970.4  Regulation at 53 FR 30987 confirmed..........................3716
    (b) and (c) removed; (d) and (e) redesignated as (b) and (c); 
new (c) revised; new (d), new (e), (f) and (g) added................3717
970.5  Regulation at 53 FR 30987 confirmed..........................3716
    Revised.........................................................3717
970.6  Regulation at 53 FR 30988 confirmed..........................3716
    Revised.........................................................3719
970.7  Regulation at 53 FR 30988 confirmed..........................3716
    (a)(2) revised..................................................3719
970.8  Regulation at 53 FR 30988 confirmed..........................3716
    (f) and (g) revised; (h) through (m) redesignated as (k) 
through (p); new (h), new (i) and new (j) added.....................3719
970.9  Regulation at 53 FR 30988 confirmed..........................3716
    (b) introductory text and (1) revised; new (c) added............3719
970.11  Regulation at 53 FR 30988 confirmed.........................3716
    Revised (OMB number)............................................3719
970.12  Regulation at 53 FR 30989 confirmed.........................3716
970.13  Regulation at 53 FR 30988 confirmed.........................3716
    Redesignated as 970.14; new 970.13 added; OMB number............3721
970.14  Redesignated from 970.13....................................3721
982  Authority citation revised....................................34695
982.1--982.5 (Subpart A)  Revised (effective date pending).........34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.3  Amended (effective date pending)............................34717
    Regulation at 60 FR 34717 eff. 10-2-95.........................45661
982.51--982.54 (Subpart B)  Added (effective date pending).........34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.52  OMB number.................................................45661
982.53  OMB number.................................................45661
982.54  OMB number.................................................45661
982.101--982.103 (Subpart C)  Added (effective date pending).......34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.102  OMB number................................................45661
982.151--982.163 (Subpart D)  Added (effective date pending).......34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.151  OMB number................................................45661
982.153  OMB number................................................45661
982.155  OMB number................................................45661
982.156  OMB number................................................45661
982.157  OMB number................................................45661
982.158  OMB number................................................45661
982.159  OMB number................................................45661
982.160  OMB number................................................45661
982.163  Corrected.................................................43840
982.201  (f)(2) revised (effective date pending)...................34717
    Regulation at 60 FR 34717 eff. 10-2-95.........................45661
982.202  (b)(1) and (d) amended (effective date pending)...........34717
    Regulation at 60 FR 34717 eff. 10-2-95.........................45661
982.204  (a) amended (effective date pending)......................34717
    Regulation at 60 FR 34717 eff. 10-2-95.........................45661
982.206  (a)(2) and (b)(2) revised (effective date pending)........34717
    OMB number.....................................................45661
    Regulation at 60 FR 34717 eff. 10-2-95.........................45661
982.301--982.315 (Subpart G)  Added (effective date pending).......34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661

[[Page 809]]

982.301  OMB number................................................45661
982.302  OMB number................................................45661
982.303  OMB number................................................45661
982.304  OMB number................................................45661
982.305  OMB number................................................45661
982.307  OMB number................................................45661
982.310  OMB number................................................45661
982.351--982.355 (Subpart H)  Added (effective date pending).......34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.352  OMB number................................................45661
982.401--982.406 (Subpart I)  Added (effective date pending).......34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.403  OMB number................................................45661
982.404  OMB number................................................45661
982.406  OMB number................................................45661
982.451--982.457 (Subpart J)  Added (effective date pending).......34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.452  OMB number................................................45661
982.455  OMB number................................................45661
982.551--982.555 (Subpart L)  Added (effective date pending).......34695
    Regulation at 60 FR 34695 eff. 10-2-95.........................45661
982.551  OMB number................................................45661
982.552  OMB number................................................45661
982.554  OMB number................................................45661
982.555  OMB number................................................45661
983  Added (effective date pending)................................34717
    Regulation at 60 FR 34717 eff. 10-2-95.........................45661
983.3  OMB number..................................................45661
983.12  OMB number.................................................45661
983.51  OMB number.................................................45661
983.52  OMB number.................................................45661
983.54  OMB number.................................................45661
983.55  OMB number.................................................45661
983.57  OMB number.................................................45661
983.103  OMB number................................................45661
983.104  OMB number................................................45661
983.151  OMB number................................................45661
983.202  OMB number................................................45661
983.203  OMB number................................................45661
983.205  OMB number................................................45661
983.207  OMB number................................................45661
990.102  Amended...................................................57305
990.104  (b) revised...............................................57305

                                  1996

24 CFR
                                                                   61 FR
                                                                    Page
Chapter VII
Chapter VII Heading revised........................................13987
700  Authority citation revised.....................................5211
    Revised.................................................42943, 42949
700.105  Amended; introductory text revised.........................5211
750  Authority citation revised.....................................5211
    Removed........................................................11118
750.5  Amended; introductory text revised...........................5211
760  Removed.......................................................11118
760.5  Amended; introductory text revised...........................5211
761  Added.........................................................13987
791  Authority citation revised.....................................5211
    Revised........................................................10849
791.102  Amended; introductory text added...........................5211
792  Authority citation revised.....................................5212
792.103  Amended....................................................5212
799  Removed........................................................5212
Chapter VIII
811.101--811.118 (Subpart A)  Heading removed......................14460
811.101  Revised...................................................14460
811.102  Introductory text added; (l) and (q) removed; (m) through 
        (p) and (r) through (u) redesignated as (l) through (o) 
        and (q) through (t).........................................5212
    Amended........................................................14460
811.105  (b) amended...............................................14461
811.106  Heading revised; (a), (b), (c) and (d) designation 
        removed....................................................14461
811.107  Revised...................................................14461
811.108  Revised...................................................14461
811.109  Removed; new 811.109 redesignated from 811.114; (a), (b), 
        (c) and (d) designation removed............................14461
811.110  Removed; new 811.110 added................................14461
811.111  Removed...................................................14461
811.112  Removed...................................................14461
811.113  Removed...................................................14461
811.114  Redesignated as 811.109...................................14461
811.115  Removed...................................................14461
811.116  Removed...................................................14461
811.117  Removed...................................................14461
811.118  Removed...................................................14461
811.201--811.211 (Subpart B)  Removed..............................16046
812  Removed.......................................................13625

[[Page 810]]

812.1--812.4 (Subpart A)  Removed...................................5665
812.5  (a) and (b) redesignated as (b) and (c); new (a) added.......5665
813  Removed.......................................................54503
813.102  Amended; introductory text added...........................5212
813.106  Regulation at 60 FR 17393 eff. date extended..............16172
842  Removed........................................................9543
850.1  Revised......................................................7944
850.3  Amended; introductory text added.............................5212
    Removed.........................................................7944
850.11--850.17 (Subpart B)  Removed.................................7944
850.31--850.39 (Subpart C)  Removed.................................7944
850.35  Introductory text revised; (a), (b), (d) and (l) removed; 
        (c), (e) through (k) and (m) redesignated as (a), (b) 
        through (h) and (i).........................................5212
850.61--850.79 (Subpart D)  Removed.................................7944
850.101--850.107 (Subpart E)  Removed...............................7944
880  Authority citation revised.....................................5212
880.101  Revised...................................................13587
880.102  Removed...................................................13587
880.103  Removed...................................................13587
880.104  Revised...................................................13587
880.201--880.211 (Subpart B)  Heading revised......................13587
880.201  Amended...................................................47382
880.202 Amended; introductory text added............................5212
    Amended........................................................13587
880.202  Removed...................................................13587
880.203  Removed...................................................13587
880.204  Removed...................................................13587
880.206  Removed...................................................13587
880.209  Removed...................................................13587
880.210  Removed...................................................13587
880.301--880.311 (Subpart C)  Removed..............................13587
880.401--880.405 (Subpart D)  Removed..............................13587
880.501  (a) revised; (b) removed..................................13587
880.504  (b), (c) introductory text, (1) and (e) revised...........13587
880.601  (a)(4), (b), (c) and (e) revised..........................13588
880.602  Revised...................................................13588
880.603  (b) introductory text, (1) introductory text and (2) 
        amended.....................................................9046
    Revised (OMB number)...........................................13589
880.606  (b) revised...............................................13590
880.607  (b)(3)(ii) amended; (c)(4) and (d) revised................13590
    (b)(1)(ii), (2) and (c)(2) amended; (b)(1)(iii) redesignated 
as (b)(1)(iv); new (b)(1)(iii) added...............................47382
880.608  (f) introductory text amended.............................13591
880.609  (b) revised...............................................13591
880.611  (d)(3) introductory text revised..........................13591
880.612  (b) revised...............................................13591
880.612a  (g) amended...............................................9046
880.613  Removed....................................................9046
880.614  Removed....................................................9046
880.615  Removed....................................................9046
880.616  Removed....................................................9046
880.617  Removed....................................................9046
881.101  Revised...................................................13591
881.102  Removed...................................................13591
881.103  Removed...................................................13591
881.104  Revised...................................................13591
881.201--881.211 (Subpart B)  Heading revised......................13591
881.201  Amended; introductory text added...........................5212
    Amended........................................................13591
881.202  Removed...................................................13591
881.203  Removed...................................................13591
881.204  Removed...................................................13591
881.206  Removed...................................................13591
881.209  Removed...................................................13591
881.210  Removed...................................................13591
881.301--881.312 (Subpart C)  Removed..............................13591
881.401--881.405 (Subpart D)  Removed..............................13591
881.501  (a) revised; (b) removed..................................13591
881.503  Revised...................................................13592
881.504  Removed...................................................13592
881.505  Removed...................................................13592
881.506  Removed...................................................13592
881.507  Removed...................................................13592
881.508  Removed...................................................13592
881.601 (Subpart F)  Revised.......................................13592
881.603  (b) introductory text, (2) introductory text and (3) 
        amended.....................................................9046
881.612a  (g) amended...............................................9046
881.613  Removed....................................................9046
881.614  Removed....................................................9046

[[Page 811]]

881.615  Removed....................................................9046
881.616  Removed....................................................9046
881.617  Removed....................................................9046
881.701--881.709 (Subpart G)  Removed..............................13592
882  Authority citation revised.....................................9046
882.102  Amended; introductory text added...........................5212
882.118  (a)(1) amended............................................11118
    (a)(1) revised.................................................13625
882.212  (a), (b) and (c) amended...........................11118, 13625
882.406  Revised (OMB number)......................................48056
882.514  (a)(1) and (b) introductory text amended...................9046
    (f) amended....................................................13625
882.515  (a), (b) and (c) amended...........................11118, 13625
882.517  Removed....................................................9046
882.518  Removed....................................................9046
882.519  Removed....................................................9046
882.520  Removed....................................................9046
882.521  Removed....................................................9046
882.801--882.810 (Subpart H)  Revised..............................48057
882.802  Amended; interim...........................................5851
      Regulations at 58 FR 13831 and 61 FR 5851 confirmed..........48056
882.803  (a)(2) and (d) revised; interim............................5851
    Regulations at 58 FR 13831 and 61 FR 5851 confirmed............48056
882.804  (d) revised; interim.......................................5851
    Regulations at 58 FR 13831 and 61 FR 5851 confirmed............48056
882.805  (d) removed; (g)(1)(ii)(A) revised; interim................5851
    Regulations at 58 FR 13831, 59 FR 24255 and 61 FR 5851 
confirmed..........................................................48056
882.808  (a)(3), (b)(2) and (4) removed; (a)(4), (b)(3), (5), (6) 
        and (7) redesignated as (a)(3), (b)(2), (3), (4) and (5); 
        (a)(1) and new (3) revised; (q) added.......................5851
    (i)(1), (2) and (l) amended....................................13625
    Regulations at 58 FR 13833 and 61 FR 5852 confirmed............48056
883.101  Revised...................................................13592
883.102  Removed...................................................13592
883.103  Removed...................................................13592
883.104  Removed...................................................13592
883.105  Revised...................................................13592
883.106  Added.....................................................13592
883.201--883.207 (Subpart B)  Removed..............................13592
883.301--883.313 (Subpart C)  Heading revised......................13592
883.302  Amended; introductory text added...........................5213
    Amended........................................................13592
883.303  Removed...................................................13592
883.304  Removed...................................................13592
883.305  Removed...................................................13592
883.307  (a) revised...............................................13592
883.309  Removed...................................................13592
883.311  Removed...................................................13592
883.312  Removed...................................................13592
883.401--883.412 (Subpart D)  Removed..............................13593
883.501 (Subpart E)  Removed.......................................13593
883.602  (b) removed; (c), (d) and (e) redesignated as (b), (c) 
        and (d); new (b)(2), new (c)(2) and new (3) amended........13593
883.604  (b)(2) amended............................................13593
883.605  Revised...................................................13593
883.608  Revised...................................................13593
883.701--883.713 (Subpart G)  Revised..............................13593
883.704  (b) introductory text, (2) and (3) amended.................9047
883.704a  (g) amended...............................................9047
883.714  Removed....................................................9047
883.715  Removed....................................................9047
883.716  Removed....................................................9047
883.717  Removed....................................................9047
883.718  Removed....................................................9047
884.101  (a) revised...............................................13593
884.102  Amended; introductory text added...........................5213
    Amended.................................................13593, 47382
884.103  Removed...................................................13593
884.105  (b)(1) and (2) amended....................................13593
884.107  Removed...................................................13593
884.108  (a) amended...............................................13593
884.111  Removed...................................................13593
884.112  Removed...................................................13593
884.113  Removed...................................................13593
884.117  Amended...................................................13593
884.118  (a)(3) and (7) revised; (a)(9) amended....................13593
884.119  (b) amended...............................................13593
884.120  (b)(3) amended............................................13593
884.201  Removed...................................................13594
884.202  Removed...................................................13594
884.203  Removed...................................................13594
884.204  Removed...................................................13594
884.205  Removed...................................................13594
884.206  Removed...................................................13594
884.207  Removed...................................................13594
884.208  Removed...................................................13594

[[Page 812]]

884.209  Removed...................................................13594
884.210  Removed...................................................13594
884.211  Removed...................................................13594
884.214  (b)(1) and (2) amended; (b)(7) revised.....................9047
    (b)(1) amended.................................................13594
884.216  Amended...................................................13594
    Existing text designated as (a); (b) added.....................47382
884.218  (a), (b) and (c) amended..................................13594
884.223  (e) amended...............................................13594
884.223a  (g) amended...............................................9047
884.226  Removed....................................................9047
884.227  Removed....................................................9047
884.228  Removed....................................................9047
884.229  Removed....................................................9047
884.230  Removed....................................................9047
885  Removed.......................................................11956
885.427  Amended....................................................9047
885.740  Introductory text added; (a) revised.......................5213
886.102  Amended; introductory text added...........................5213
886.105  Undesignated paragraph following (f) amended..............11118
886.119  (a)(3) amended.............................................9047
    (a)(3) and (7) amended.........................................11119
886.124  (a), (b) and (c) amended..................................11119
886.132  (f)(1) revised.............................................5213
    Revised.........................................................9047
886.133  Removed....................................................9047
886.134  Removed....................................................9047
886.135  Removed....................................................9047
886.136  Removed....................................................9047
886.302  Amended; introductory text added...........................5213
    Regulation at 60 FR 11859 confirmed............................11685
886.305  Amended...................................................11119
886.310  Regulation at 60 FR 11859 confirmed.......................11685
886.311  Regulation at 60 FR 11859 confirmed.......................11685
886.318  (a)(3) and (6) amended....................................11119
886.319  Regulation at 60 FR 11860 confirmed.......................11685
886.324  (a), (b) and (c) amended..................................11119
886.337  Amended....................................................9047
887.7  Amended; introductory text added.............................5213
887.355  (a) amended...............................................11119
    (b) revised....................................................13625
887.357  Amended...................................................13626
888  Fair market rent schedules..............................6690, 7157,
49576, 66132
889  Authority citation revised.....................................9047
    Removed........................................................11956
889.105  Amended....................................................5213
889.265  Introductory text added; (a) revised.......................5213
889.610  (a) revised................................................9047
889.611  Removed....................................................9047
889.612  Removed....................................................9047
889.613  Removed....................................................9047
889.614  Removed....................................................9047
889.615  Removed....................................................9047
890  Removed.......................................................11956
890.105  Amended....................................................5214
890.260  Introductory text added; (a) revised.......................5214
891  Added.........................................................11956
899  Removed........................................................5214
Chapter IX
901  Authority citation revised.....................................5214
    Revised; interim...............................................68933
901.05  Introductory text added; (m) and (t) removed; (n) through 
        (s) and (u) through (y) redesignated as (m) through (r) 
        and (s) through (w).........................................5214
901.10  (b)(4) revised.............................................35634
904.102  (h) removed; (i) through (k) redesignated as (h) through 
        (j).........................................................5214
904.104  (b)(1) and (g)(2)(iii) amended............................13626
904.107  (j)(2) and (m)(1) revised.................................13626
904.122  Amended....................................................9048
905.102  Regulation at 60 FR 17393 eff. date extended..............16172
912  Removed.......................................................13626
912.1--912.4 (Subpart A)  Removed...................................5666
912.5  (a) and (b) redesignated (b) and (c); new (a) added..........5666
913  Removed.......................................................54503
913.102  Amended; introductory text added...........................5214
913.106  Regulation at 60 FR 17393 eff. date extended..............16172
    (d) and (e) redesignated as (e) and (f); new (d) added; 
interim............................................................46346
913.109  (a) and (b) amended.......................................11119
941  Comment period extension......................................35958
941.101  Revised (OMB number pending); interim.....................38016
941.102  Revised; interim..........................................38016
941.103  Amended; introductory text added...........................5214
    Amended; interim...............................................38017

[[Page 813]]

941.201  (a) amended; (c) redesignated as (d); new (c) added; 
        interim....................................................38017
941.202  (c) introductory text, (1) introductory text, (i), (ii) 
        and (2) redesignated as (c)(1) introductory text, (i) 
        introductory text, (A), (B) and (ii); new (c)(2) added; 
        (c)(3) removed; (f) amended; interim.......................38017
    (c)(3) added...................................................19714
941.203  Revised; interim..........................................38017
941.204  Removed; interim..........................................38018
941.205  Revised (OMB number pending); interim.....................38018
941.206  Removed; interim..........................................38018
941.208  Introductory text added; (a), (e) and (f) removed; (b), 
        (c), (d), (g), (h) and (i) redesignated as (a) through 
        (f); new (b) revised........................................5214
    (c) revised.....................................................8720
    Revised; interim...............................................38018
941.301--941.306 (Subpart C)  Revised; interim.....................38018
941.301  OMB number pending........................................38018
941.303  OMB number pending........................................38018
941.304  OMB number pending........................................38018
941.401--941.404 (Subpart D)  Revised; interim.....................38020
941.404  OMB number pending........................................38021
941.501 (Subpart E)  Revised; interim..............................38021
941.503  (d) revised................................................8720
941.600--941.616 (Subpart F)  Added................................19714
941.602  (a) revised; interim......................................38022
941.606  OMB number pending........................................19715
941.610  OMB number pending........................................19716
942  Authority citation revised.....................................5214
    Removed.........................................................9543
942.3  (c) revised..................................................5214
945  Authority citation revised.....................................5214
945.105  Amended; introductory text revised.........................5214
950  Authority citation revised....................................11119
950.102  Amended.................................5666, 7588, 8720, 54503
    Amended; interim...............................................46346
950.103  Removed...................................................54504
950.190  (e) amended...............................................50219
950.301  (d) revised; (g) added.....................................5666
    (a)(3)(v) and (vi) amended.....................................11119
950.303  (b)(1)(ii) revised.........................................5666
950.315  (b) amended...............................................11119
950.416  (d) amended...............................................11119
950.600--950.660 (Subpart I)  Revised...............................8720
950.705  (b) amended................................................7588
    (c) added; interim.............................................51182
950.715  (b)(2) amended; interim...................................51182
950.720  (b) revised................................................7588
    (e) redesignated as (e)(1); (e)(2) added; interim..............51182
950.725  (b)(3) revised; OMB number.................................7589
    (b)(1) redesignated as (b)(1)(i); (b)(1)(ii) added; (b)(2) 
revised (OMB number pending); interim..............................51182
950.730  (c)(1)(i) amended; interim................................51182
950.756  Added (OMB number pending); interim.......................51182
950.757  Added (OMB number pending); interim.......................51182
950.760  Revised (OMB number).......................................7589
950.770  Removed....................................................7590
950.775  Added......................................................7590
950.777  Added......................................................7590
953  Regulation at 59 FR 38329 eff. date extended...................7410
    Revised........................................................40090
953.1  Existing text designated in part as (a) and (b); new (b) 
        revised.....................................................7411
954  Added; interim................................................32223
955  Revised........................................................9054
960.203  Revised....................................................5215
    Removed.........................................................9048
960.204  (a) amended; (d) removed...................................9048
    (a) revised....................................................13626
960.205  (c) amended................................................9048
960.206  (a) amended................................................9048
    (a) revised....................................................13627
960.207  (a) amended................................................9048
960.208  Revised...................................................54504
960.209  (a) and (b) amended.......................................11119
    (a) and (b) amended; (c) revised...............................13627
960.211  Removed....................................................9048
960.212  Removed....................................................9048
960.213  Removed....................................................9048
960.214  Removed....................................................9048
960.215  Removed....................................................9048
960.503  Amended....................................................5215
961  Removed.......................................................13993
961.5  Amended; introductory text added.............................5215

[[Page 814]]

961.29  (b), (c), (g) and (h) removed; (d), (e), (f), (i), (j) and 
        (k) redesignated as (b) through (f); introductory text, 
        new (e) and new (f) revised.................................5215
962  Authority citation revised.....................................5215
    Removed.........................................................8815
962.103  Amended; introductory text revised.........................5215
963  Authority citation revised.....................................5215
963.5  Amended; introductory text added.............................5215
964.7  Amended......................................................5215
964.30  Revised.....................................................5215
965  Authority citation revised.....................................5216
    Heading revised.................................................8736
965.101 (Subpart A)  Heading revised................................8736
965.101  Heading, (a) introductory text, (2), (b)(1) introductory 
        text, (2) and (3) amended...................................8736
965.205  Amended....................................................7969
    (e) amended....................................................50219
965.301--965.308 (Subpart C)  Revised...............................7969
965.401--965.407 (Subpart D)  Revised...............................7970
965.472  Amended....................................................5216
965.501--965.504 (Subpart E)  Revised...............................7971
966  Authority citation revised....................................13273
966.4  (l)(3)(ii) amended; (l)(4) revised..........................13273
966.51  (a)(2)(ii) redesignated as (a)(2)(iv); new (a)(2)(ii) and 
        (iii) added................................................13273
968  Authority citation revised.....................................5216
968.101  (a), (b)(1) and (5) revised; (b)(2) amended; (d) added.....8737
968.102  (b) amended................................................8737
968.103  (a), (b), (c), (e)(1)(i), (ii) introductory text, (4) 
        heading, (f)(1), (2) introductory text, (i), (ii)(F), (g) 
        and (h) revised.............................................8737
968.104  Redesignated from 968.312; (a)(1), (3), (b)(1) and (3) 
        amended.....................................................8738
968.105  Amended; introductory text revised.........................5216
    Amended.........................................................8738
968.108  (f)(2) removed; (f)(3) redesignated as (f)(2)..............8738
968.110  Introductory text and (a) revised; (b) and (h) removed.....5216
    (e)(3) amended; (i), (j) and (l) removed........................8738
968.112  Added......................................................8738
968.115  Revised....................................................8740
968.120  Revised....................................................8740
968.125  Added......................................................8741
968.130  Added......................................................8741
968.135  Added......................................................8741
968.140  Redesignated from 968.240..................................8741
968.145  Added......................................................8741
968.205--968.240 (Subpart B)  Revised...............................8741
968.240  Redesignated as 968.140....................................8741
968.301--968.345 (Subpart C)  Heading revised.......................8744
968.301  Removed....................................................8744
968.305  Amended....................................................8744
968.310  Removed; new 968.310 redesignated from 968.315; new 
        heading revised; new (a)(1), (b)(1) and (c)(5) amended; 
        new (d) removed.............................................8744
968.312  Redesignated as 968.104....................................8738
968.315  Redesignated as 968.310; new 968.315 added.................8744
968.320  Removed; new 968.320 redesignated from 968.325; new 
        (a)(1)(i) and new (c) amended...............................8747
    (b)(2) revised..................................................8747
968.325  Redesignated as 968.320....................................8747
    Redesignated from 968.330; new heading and new (e)(4) revised; 
new (a), (d) introductory text, (e)(8), (f), (g)(2)(ii), (h), 
(i)(1) and (j) amended..............................................8748
968.330  Redesignated as 968.325; new 968.330 redesignated from 
        968.340; new (a) designated, heading and (b) removed........8748
968.335  Removed; new 968.335 redesignated from 968.345; new 
        (a)(1)(i), (ii), (2)(i), (ii), (3)(i), (ii) and (iii) 
        removed; new (d), (g), (j) and (k) amended..................8748
968.340  Redesignated as 968.330....................................8748
968.345  Redesignated as 968.335....................................8748
968.401  Removed....................................................8748
968.403  Removed....................................................8748
968.405  Amended; introductory text revised.........................5216
    Removed.........................................................8748
968.407  Removed....................................................8748
968.410  Removed....................................................8748
968.413  Removed....................................................8748
970.2  (a)(9) and (10) amended; (a)(11) and (12) added.............19719

[[Page 815]]

982  Authority citation revised....................................11119
982.3  Amended......................................................9048
982.54  (d)(1), (15) and (16) amended; (d)(17), (18) and (19) 
        added......................................................27163
982.153  (b)(9) revised............................................13627
982.158  (d) revised...............................................27163
982.201  (a) amended...............................................13627
982.202  (b)(4)(i) introductory text and (A) through (E) 
        redesignated as (b)(4) introductory text and (i) through 
        (v); (b)(4)(ii) removed.....................................9048
    (a) heading revised; (b)(2) amended............................27163
982.205  Heading and (a)(1) revised................................27163
982.207  (d) revised................................................5667
    Revised.........................................................9048
982.208  Removed....................................................9048
982.209  Removed....................................................9048
982.210  Removed....................................................9048
982.211  Removed....................................................9048
982.212  Removed....................................................9048
982.213  Removed....................................................9048
982.301  (b)(4) removed; (b)(5) through (17) redesignated as 
        (b)(4) through (16); new (b)(10) amended...................27163
982.307  (b)(1)(i) amended.........................................27163
982.353  (b) amended...............................................27163
    (a) and (f) revised............................................42131
982.355  (b)(2) and (e)(4) revised; (b)(3) added; (e)(3) and (5) 
        amended....................................................27163
982.401  (j)(3)(iv)(B) revised.....................................27163
982.451  (c)(5) amended............................................27163
982.551  (b)(3) amended............................................11119
    (b)(1) revised.................................................13627
    (h)(2) amended.................................................27163
982.552  (e) revised...............................................13627
982.554  (d) revised...............................................13627
982.555  (g) revised...............................................13627
983.203  (a)(1) amended; (a)(5) removed; (a)(6) and (7) 
        redesignated as (a)(5) and (6)..............................9048
    (a)(5) amended.................................................27163
983.205  (b)(3) amended............................................11119
984  Revised........................................................8815
990.101  Revised; eff. 5-20-96.....................................17539
990.102  Amended....................................................7590
    Amended; eff. 5-20-96..........................................17539
990.103  (a) revised; (b) removed; (c) redesignated as (b); eff. 
        5-20-96....................................................17539
990.104  (b) amended................................................7591
    (c) added; interim.............................................51183
990.105  Introductory text, (a) introductory text, (c), (d) 
        introductory text, (1), (2) introductory text, (4) and (5) 
        revised; eff. 5-20-96......................................17539
990.107  (a) and (c)(1) introductory text revised; eff. 5-20-96....17540
    (b)(2) amended; interim........................................51183
990.108  (b) revised................................................7591
    (a)(1), (2) and (c) revised; (d) removed; (e), (f) and (g) 
redesignated as (d), (e) and (f); eff. 5-20-96.....................17540
    (d) redesignated as (d)(1); (d)(2) added; interim..............51183
990.109  (b)(3) revised; OMB number.................................7591
    (b) introductory text, (1) and (d) revised; eff. 5-20-96.......17541
    (b)(1) redesignated as (b)(1)(i); (b)(1)(ii) added; (b)(2) 
revised (OMB number pending); interim..............................51183
990.110  (c)(1)(ii) and (f) removed; (c)(1)(i) and (g) 
        redesignated as (c)(1) and (f); introductory text, (a)(1), 
        (2), (c) introductory text, new (1), (2)(ii), (d)(1) and 
        (e) introductory text amended; eff. 5-20-96................17541
    (c)(1) amended; interim........................................51183
990.111  Revised; eff. 5-20-96.....................................17541
990.112  Removed; new 990.112 redesignated from 990.113; eff. 5-
        20-96......................................................17542
990.113  Redesignted as 990.112; new 990.113 redesignated from 
        990.115; (a) and (b) revised; eff. 5-20-96; eff. 5-20-96 
                                                                   17542
990.114  Added (OMB number pending); interim.......................51183
990.115  Redesignated as 990.113; eff. 5-20-96.....................17542
990.116  Removed; eff. 5-20-96.....................................17542
    Added (OMB number pending); interim............................51183
990.117  Revised (OMB number).......................................7592
990.118  Removed....................................................7592
990.119  Revised....................................................7592
990.121  Added......................................................7592
990.401  (a) amended; eff. 5-20-96.................................17542
999  Removed........................................................5216

[[Page 816]]

                                  1997

24 CFR
                                                                   62 FR
                                                                    Page
Chapter VIII
888  Fair market rent schedules.............................50724, 64521
Chapter IX
941.103  Amended...................................................27125
950  Authority citation revised....................................27126
950.102  Regulation at 61 FR 46346 confirmed.......................24337
950.660  (a)(3) revised............................................27126
954  Regulation at 61 FR 32295 confirmed...........................58906
968.102  (b) revised...............................................27126
968.112  (d)(3)(ii) amended........................................27126
968.335  (a)(3) revised............................................27126
971  Added; interim................................................49576

                                  1998

24 CFR
                                                                   63 FR
                                                                    Page
Chapter VIII
Heading revised....................................................64803
880.201  Amended...................................................46578
880.207  (a) removed...............................................46578
880.601  (d)(1) revised............................................46593
881.201  Amended...................................................46578
881.207  (a) removed...............................................46578
882  Heading and authority citation revised........................23853
882.101  Revised...................................................23853
882.102  Revised...................................................23853
    (b) amended....................................................46578
882.106  Removed...................................................23854
882.108  Removed...................................................23854
882.109  Removed...................................................23854
882.110  Removed...................................................23854
882.111  Removed...................................................23854
882.112  Redesignated as 882.414...................................23854
882.118  Removed...................................................23854
882.201--882.219 (Subpart B)  Removed..............................23854
882.217  Redesignated as 882.517...................................23854
882.301--882.335 (Subpart C)  Removed..............................23854
882.401  Revised...................................................23854
882.402  Removed...................................................23854
882.404  Revised............................................23854, 46579
882.406  Redesignated as 882.810...................................23857
882.407  Revised...................................................23855
882.411  (c) amended...............................................23855
882.413  (c) removed...............................................23855
882.414  Redesignated from 882.112.................................23854
882.501  Removed...................................................23855
882.502  Removed...................................................23855
882.503  Removed...................................................23855
882.504  Removed...................................................23855
882.505  Removed...................................................23855
882.506  Removed...................................................23855
882.508  Removed...................................................23855
882.511  Heading revised; (a) through (e) redesignated as (b) 
        through (f); new (a) added.................................23855
882.514  (a)(1), (d)(1) introductory text, (iv) and (v) amended; 
        (d)(2)(vi) redesignated as (d)(1)(vi); (e) revised.........23855
882.515  (b) amended; (c) redesignated as (d); new (c) added.......23855
882.517  Redesignated from 882.217.................................23854
882.601--882.606 (Subpart F)  Removed..............................23854
882.701--882.759 (Subpart G)  Removed..............................23854
882.802  Amended...................................................23855
882.803  (b) revised........................................23855, 46579
882.805  (d)(1)(i)(B) amended; (c) revised.........................23855
882.806  Heading, (a)(3) and (4) revised; (a)(2) amended; (a)(2) 
        undesignated text designated as (a)(2)(ii); (a)(2)(i) 
        added......................................................23856
882.807  (a) and (d) revised.......................................23856
882.808  (d), (i)(1), (3) and (o) amended; (b)(4), (c) and (i)(2) 
        revised....................................................23857
882.810  Removed; new 882.810 redesignated from 882.406; new 
        (g)(1)(iii)(C) amended.....................................23857
883.302  Amended...................................................46579
883.310  (a)(1) and (b)(1) removed.................................46579
884.102  Amended...................................................46579
884.110  (b) revised...............................................46579
886.102  Amended...................................................46579
886.113  Heading, (a), (b) and (n) introductory text revised; 
        introductory text, (c) through (h) and (j) through (m) 
        removed....................................................46579
886.302  Amended...................................................46580
886.307  Heading, (a), (b), (m) introductory text and (n) 
        introductory text revised; introductory text, (c) through 
        (h), (j) through (l), (o) and (p) removed..................46580
886.318  (d)(1) revised............................................46593

[[Page 817]]

888  Fair market rent schedules......................11956, 51224, 52858
891.180  Added.....................................................46580
891.185  Added.....................................................64803
Chapter IX
901.1  (c)(1) existing text designated as (c)(1)(ii); (c)(1)(i) 
        added......................................................46617
902  Added.........................................................46617
950  Removed; eff. 4-13-98.........................................12349
953  Redesignated as 1003; eff. 4-13-98............................12349
955  Redesignated as 1005; eff. 4-13-98............................12349
965.601 (Subpart F)  Added.........................................46580
968.103  (e)(3) and (4) redesignated as (e)(4) and (5); new (e)(3) 
        and (f)(4) added...........................................46107
968.112  (f)(4) amended............................................46108
982  Authority citation revised....................................23857
982.4  Revised.....................................................23857
    Corrected......................................................31625
982.53  (a) revised................................................23859
982.54  (d)(7) revised; (d)(15) through (19) redesignated as 
        (d)(18) through (22); new (d)(15), (16) and (17) added.....23859
982.102  (d) removed...............................................23895
982.152  (a)(3) added; (c)(1) revised..............................23860
982.153  (a) designation and (b) removed...........................23860
982.158  (f)(6) amended; (f)(7) redesignated as (f)(8); new (f)(7) 
        added......................................................23860
    (a) amended....................................................46593
982.204  (c) revised...............................................23860
982.205  Heading and (c) revised...................................23860
982.206  (b)(1) amended; (a)(2) revised............................23860
982.207  (c) redesignated as (d); new (c) added....................23860
982.302  (a) revised...............................................23860
982.303  (b)(1) amended; (b)(2) revised............................23860
982.306  (d) and (e) redesignated as (e) and (f); new (d) added....27437
982.316  Added.....................................................23860
    Corrected......................................................31625
982.352  (c)(7) revised; (c)(8) amended; (c)(9) redesignated as 
        (c)(12); new (c)(9), (10) and (11) added...................23860
982.401  (a)(1) amended............................................23861
982.402  (c) revised...............................................23861
982.451  (a) removed; (b) and (c) redesignated as (a) and (b)......23861
982.452  (b)(2) revised............................................23861
982.501--982.517 (Subpart K)  Added................................23861
982.552  (a)(1) revised............................................23865
982.601--982.624 (Subpart M)  Added................................23865
982.623  (b)(2)(i) corrected.......................................31625
983.1  Revised.....................................................23870
983.2  Introductory text amended...................................23870
983.3  (d) added...................................................23870
983.5  Revised..............................................23870, 46580
983.7  (b) introductory text and (7) revised; (b)(5) amended; (d) 
        and (f) removed; (b)(8) and (c) added; (c) and (g) 
        redesignated as (d) and (f)................................23870
983.10  (g)(1)(iii)(B) amended.....................................23871
983.12  Revised....................................................23871
983.13  Revised....................................................23871
983.14  Removed....................................................23871
983.51  (d) introductory text revised..............................23871
983.52  (a) and (c) amended........................................23871
983.55  (a) and (b) amended........................................23871
983.101  (b)(3) amended............................................23871
983.103  (d) amended...............................................23871
983.151  (b)(3) amended............................................23871
983.201  Revised...................................................23871
983.202  Amended...................................................23871
983.203  (a)(1), (b), (d)(6) and (g)(1) amended....................23871
983.204  (e) added.................................................23871
983.205  Removed; new 983.205 redesignated from 983.206............23871
983.206  Redesignated as 983.205; new 983.206 redesignated from 
        983.207....................................................23871
983.207  Redesignated as 983.206; new 983.207 redesignated from 
        983.208 and revised........................................23871
983.208  Redesignated as 983.207...................................23871
983.251--983.262 (Subpart F)  Added................................23871
985  Added.........................................................48555
985.102  Stayed....................................................48560
985.103  Stayed....................................................48560
985.105  (a), (b), (d) and (e) stayed..............................48560
985.107  Stayed....................................................48560
1000  Added; eff. 4-13-98..........................................12349
1000  Appendixes A and B corrected.................................13105

[[Page 818]]

1003  Redesignated from 953; eff. 4-13-98..........................12349
1005  Redesignated from 955; eff. 4-13-98..........................12349
1005.101  Revised; eff. 4-13-98....................................12372
    Corrected......................................................13105
    Revised; interim...............................................48990
1005.103  Amended; heading revised; eff. 4-13-98...................12372
    Amended; interim...............................................48990
1005.104  Added; eff. 4-13-98......................................12372
    (d) and (e) revised; interim...................................48990
1005.105  Heading, (b) and (d)(3) revised; (f) added; eff. 4-13-98
                                                                   12372
    (d)(2), (3), (4), (e) and (f) revised; interim.................48990
1005.106  Added; interim...........................................48990
1005.107  Heading, (a) introductory text, (2) and (b) introductory 
        text revised; (b)(3) and (4) redesignated as (b)(4) and 
        (5); new (b)(3) added; eff. 4-13-98........................12373
    (a)(1) and (b) introductory text revised; (b)(2) amended; 
interim............................................................48991
1005.109  Heading revised; eff. 4-13-98............................12373
1005.111  Heading revised; eff. 4-13-98............................12373
    Revised; interim...............................................48991
1005.112  Added; eff. 4-13-98......................................12373
    Amended; interim...............................................48991
1005.113  Added; eff. 4-13-98......................................12373

                                  1999

      (Regulations published January 1, 1999 through April 1, 1999)

24 CFR
                                                                   64 FR
                                                                    Page
Chapter VIII
882.401  (a) amended...............................................14832
887  Removed; eff. 4-15-99.........................................13057
Chapter IX
903  Added..........................................................8181
941.101  (c) table amended; eff. 4-19-99...........................13511
941.207  Amended; eff. 4-19-99.....................................13511
982.352  (a)(6) revised; eff. 4-15-99..............................13057
982.505  (d)(5) revised; eff. 4-15-99..............................13057
982.509  (b)(5)(i) revised; eff. 4-15-99...........................13057
982.516  (d)(2) revised; (e) amended; eff. 4-15-99.................13057
982.623  (c)(2)(ii) and (3)(ii) amended; eff. 4-15-99..............13057
984.304  (a)(2) amended; eff. 4-15-99..............................13057
984.305  (b)(1) amended; eff. 4-15-99..............................13057
1000.516  Revised...................................................3015