[Title 24 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2024 Edition]
[From the U.S. Government Publishing Office]



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                                    Title 24

                              Housing and Urban Development


                            ________________________

                             Parts 700 to 1699

                         Revised as of April 1, 2024

          Containing a codification of documents of general 
          applicability and future effect

          As of April 1, 2024
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

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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                                              241
  Finding Aids:
      Table of CFR Titles and Chapters........................     855
      Alphabetical List of Agencies Appearing in the CFR......     875
      List of CFR Sections Affected...........................     885

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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.

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

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                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
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    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 
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LEGAL STATUS

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[[Page vi]]

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    Director,
    Office of the Federal Register
    April 1, 2024.







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                               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 Board of Directors of 
the Hope for Homeowners Program, and the Neighborhood Reinvestment 
Corporation. The contents of these volumes represent all current 
regulations codified under this title of the CFR as of April 1, 2024.

    For this volume, Susannah C. Hurley was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of John 
Hyrum Martinez, assisted by Stephen J. Frattini.

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                 TITLE 24--HOUSING AND URBAN DEVELOPMENT




                 (This book contains parts 700 to 1699)

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

   SUBTITLE B--Regulations Relating to Housing and Urban Development 
                                (Continued)

                                                                    Part

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

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   Subtitle B--Regulations Relating to Housing and Urban Development 
                               (Continued)

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




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


  Editorial Note: Nomenclature changes to chapter VII appear at 59 FR 
14090, Mar. 25, 1994.
Part                                                                Page
700             Congregate Housing Services Program.........           7
701-760

[Reserved]

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

[Reserved]

791             Allocations of housing assistance funds.....          30
792             Public housing agency Section 8 fraud 
                    recoveries..............................          34
793-799

[Reserved]

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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, unless otherwise noted.



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 2 CFR part 200, subpart E.
    (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.
    (2) Examples of nonallowable costs under the program are:

[[Page 10]]

    (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 2 CFR part 200, subpart E.
    (c) Administrative cost limitation. Grantees are subject to the 
limitation in section 802(j)(4).

[61 FR 42943, 42949, Aug. 19, 1996, as amended at 80 FR 75940, Dec. 7, 
2015]



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) Uniform administrative requirements, cost principles, and audit 
requirements for Federal awards. The policies, guidelines, and 
requirements in 2 CFR part 200, including the audit requirements 
described in subpart F, apply to the acceptance and use of assistance 
under this program.
    (b) Conflict of interest. In addition to the conflict of interest 
requirements in 2 CFR 200.112 (for all recipients and subrecipients); 
200.317 (for recipients and subrecipients that are States); and 
200.318(c) and 200.319(a)(5) (for recipients and subrecipients that are 
not States), 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.

[61 FR 42943, 42949, Aug. 19, 1996, as amended at 80 FR 75940, Dec. 7, 
2015]

                        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 housing; encouragement of resident participation.
761.10 Definitions.

                         Subpart B_Grant Funding

761.13 Amount of funding.
761.15 Qualifying for funding.
761.17 Eligible and ineligible activities for funding.

                   Subpart C_Application and Selection

761.20 Selection requirements.
761.21 Plan requirement.
761.23 Grantee performance 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.

    Editorial Note: Nomenclature changes to part 761 appear at 64 FR 
49917, Sept. 14, 1999.

    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 (AHDEP) and the Public Housing Drug 
Elimination Program (PHDEP). The purposes of these programs are to:
    (a) Eliminate drug-related and violent 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 and violent 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.

[61 FR 13987, Mar. 28, 1996, as amended at 64 FR 49917, Sept. 14, 1999]



Sec.  761.5  Public housing; encouragement of resident participation.

    For the purposes of the Public Housing Drug Elimination Program, the 
elimination of drug-related and violent crime within public housing 
developments requires the active involvement and commitment of public 
housing residents and their organizations. To enhance the ability of 
PHAs to combat drug-related and violent crime 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 part 964 of this title.

[64 FR 49917, Sept. 14, 1999]



Sec.  761.10  Definitions.

    The definitions Department, HUD, and Public Housing Agency (PHA) are 
defined in part 5 of this title.
    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 and violent 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

[[Page 18]]

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 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 and violent crime means the 
negative physical, social, educational, and economic impact of drug-
related and violent 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 and 
violent 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.
    Recipient of assistance under the Native American Housing Assistance 
and Self-Determination Act of 1996 (NAHASDA recipient) shall have the 
same meaning as recipient provided in section 4 of the Native American 
Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101 et 
seq.).
    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 part 964 of this 
title in accordance with the requirements of that part.
    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.

[61 FR 13987, Mar. 28, 1996, as amended at 64 FR 49918, Sept. 14, 1999]

[[Page 19]]



                         Subpart B_Grant Funding



Sec.  761.13  Amount of funding.

    (a) PHDEP formula funding--(1) Funding share formula--(i) Per unit 
amount. Subject to the availability of funding, the amount of funding 
made available each FFY to an applicant that qualifies for funding in 
accordance with Sec.  761.15(a) is based upon the applicant's share of 
the total number of units of all applicants that qualify for funding, 
with a maximum award of $35 million and a minimum award of $25,000, 
except that qualified applicants with less than 50 units will not 
receive more than $500 per unit.
    (ii) Calculation of number of units. For purposes of determining the 
number of units counted for purposes of the PHDEP formula, HUD shall 
count as one unit each existing rental and Section 23 bond-financed unit 
under the ACC. Units that are added to a PHA's inventory will be added 
to the overall unit count so long as the units are under ACC amendment 
and have reached DOFA by the date HUD establishes for the Federal Fiscal 
Year in which the PHDEP formula is being run (hereafter called the 
``reporting date''). Any such increase in units shall result in an 
adjustment upwards in the number of units under the PHDEP formula. New 
units reaching DOFA after this date will be counted for PHDEP formula 
purposes as of the following Federal Fiscal Year. Federalized units that 
are eligible for operating subsidy will be counted for PHDEP formula 
purposes based on the unit count reflected on the PHA's most recently 
approved Operating Budget (Form HUD-52564) and/or subsidy calculation 
(Form HUD-52723), or successor form submitted for that program. Units 
approved for demolition/disposition continue to be counted for PHDEP 
formula funding purposes until actual demolition/disposition of the 
unit.
    (2) Consortium funding. The amount of funding made available to a 
consortium will be the total of the amounts that each individual member 
would otherwise qualify to receive under the PHDEP funding formula in 
accordance with paragraph (a)(1) of this section.
    (3) Adjustments to funding. The amount of funding made available 
each FFY to an applicant in accordance with paragraphs (a)(1) and (a)(2) 
of this section may be adjusted as follows:
    (i) An applicant must submit a PHDEP plan that meets the 
requirements of Sec.  761.21, as required by Sec.  761.15(a)(5), each 
FFY year to receive that FFY's funding. An applicant that does not 
submit a PHDEP plan for a FFY as required will not receive that FFY's 
funding.
    (ii) Ineligible activities, described at Sec.  761.17(b), are not 
eligible for funding. Activities proposed for funding in an applicant's 
PHDEP plan that are determined to be ineligible will not be funded, and 
the applicant's funding for that FFY may be reduced accordingly.
    (iii) In accordance with Sec.  761.15(a)(6), an applicant that does 
not meet the performance requirements of Sec.  761.23 will be subject to 
the sanctions listed in Sec.  761.30(f)(2).
    (iv) Both the amount of and continuing eligibility for funding is 
subject to the sanctions in Sec.  761.30(f).
    (v) Any amounts that become available because of adjustments to an 
applicant's funding will be distributed to every other applicant that 
qualifies for funding in accordance with paragraphs (a)(1) and (a)(2) of 
this section.
    (b) AHDEP funding. Information concerning funding made available 
under AHDEP for a given FFY will be contained in Notices of Funding 
Availability (NOFAs) published in the Federal Register.

[64 FR 49918, Sept. 14, 1999]



Sec.  761.15  Qualifying for funding.

    (a) Qualifications for PHDEP funding--(1) Eligible applicants. The 
following are eligible applicants for PHDEP funding:
    (i) A PHA;
    (ii) An RMC; and
    (iii) A consortium of PHAs.
    (2) Preference PHAs. A PHA that successfully competed for PHDEP 
funding under at least one of the PHDEP NOFAs for FFY 1996, FFY 1997 or 
FFY 1998 qualifies to receive PHDEP funding.
    (3) Needs qualification for funding. An eligible applicant that does 
not qualify to receive PHDEP funding under paragraph (a)(2) of this 
section must be in one of the following needs categories to qualify for 
funding:

[[Page 20]]

    (i) The eligible applicant must be in the top 50% of the unit-
weighted distribution of an index of a rolling average rate of violent 
crimes of the community, as computed for each Federal Fiscal Year (FFY). 
The crime rate used in this needs determination formula is the rate, 
from the most recent years feasible, of FBI violent crimes per 10,000 
residents of the community (or communities). If this information is not 
available for a particular applicant's community, HUD will use the 
average of data from recipients of a comparable State and size category 
of PHA (less than 500 units, 500 to 1249 units, and more than 1250 
units). If fewer than five PHAs have data for a given size category 
within a State, then the average of PHAs for a given size category 
within the census region will be used; or
    (ii) The eligible applicant must have qualified for PHDEP funding, 
by receiving an application score of 70 or more points under any one of 
the PHDEP NOFAs for FFY 1996, FFY 1997 or FFY 1998, but not have 
received an award because of the unavailability of funds.
    (4) Consortium of eligible applicants. Eligible applicants may join 
together and form a consortium to apply for funding, whether or not each 
member would individually qualify for PHDEP funding under paragraphs 
(a)(2) or (a)(3) of this section. The act of two or more eligible 
applicants joining together to form a consortium, and identifying 
related crime problems and eligible activities to address those problems 
pursuant to a consortium PHDEP plan, qualifies the consortium for PHDEP 
funding of an amount as determined under Sec.  761.13(a)(2).
    (5) PHDEP plan requirement. (i) PHAs. Except as provided in 
paragraph (a)(5)(ii), below, of this section, to receive PHDEP funding, 
a PHA that qualifies to receive PHDEP funding for Federal Fiscal Year 
2000 and beyond must include a PHDEP plan that meets the requirements of 
Sec.  761.21 with its PHA Plan submitted pursuant to part 903 of this 
title for each Federal Fiscal Year for which it qualifies for funding.
    (ii) To receive PHDEP funding, a PHA that qualifies to receive PHDEP 
funding and is operating under an executed Moving To Work (MTW) 
agreement with HUD must submit a PHDEP plan that meets the requirements 
of Sec.  761.21 with its required MTW plan for each Federal Fiscal Year 
for which it qualifies for funding.
    (iii) RMCs. To receive PHDEP funding, an RMC operating in an PHA 
that qualifies to receive PHDEP funding must submit a PHDEP plan for the 
units managed by the RMC that meets the requirements of Sec.  761.21 to 
its PHA. Upon agreement between the RMC and PHA, the PHA must submit to 
HUD, with its PHA Plan submitted pursuant to part 903 of this title, the 
RMC's PHDEP plan. The RMC will implement its plan as a subrecipient of 
the PHA.
    (iv) Consortia. To receive PHDEP funding, the consortium members 
must prepare and submit a consortium PHDEP plan that meets the 
requirements of Sec.  761.21, including the additional requirements that 
apply to consortia. Each member must submit the consortium plan with its 
PHA plan, submitted pursuant to part 903 of this title, or IHP, 
submitted pursuant to subpart C of part 1000 of this title, as 
appropriate.
    (6) An otherwise qualified recipient PHA, RMC or consortium may not 
be funded if HUD determines, on a case-by-case basis, that it does not 
meet the performance requirements of Sec.  761.23.
    (b) Qualifications for AHDEP funding. Under 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. 
Notices of Funding Availability (NOFAs) published in the Federal 
Register will contain specific information concerning funding 
requirements and eligible and ineligible applicants and activities.

[64 FR 49918, Sept. 14, 1999]



Sec.  761.17  Eligible and ineligible activities for funding.

    (a) Eligible activities. One or more of the eligible activities 
described in 42 U.S.C. 11903 and in this Sec.  761.17(a) are eligible 
for funding under PHDEP or AHDEP, as further explained or limited in 
paragraph (b) of this section and, for AHDEP, in separate annual Notices 
of

[[Page 21]]

Funding Availability (NOFAs). 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), with the following additional requirements:
    (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. The applicant must identify the 
baseline services provided by the local law enforcement agency.
    (B) The applicant, the provider (contractor) of the security 
personnel and, only if the local law enforcement agency is receiving any 
PHDEP funds from the applicant, the local law enforcement agency, 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 undertake and retain 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 demonstrate that the funded activity will represent 
an increase over this baseline.
    (C) If the local law enforcement agency is receiving any PHDEP funds 
from the applicant, the applicant and the 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), 
with the following additional requirements:
    (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 that 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 or 
violent 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

[[Page 22]]

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 PHDEP, the following provisions in 
paragraphs (a)(3)(i) through (a)(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 PHDEP, the following provisions in 
paragraphs (a)(4)(i) and (a)(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 undertake and retain 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 investigator(s) and, only if the local law 
enforcement agency is receiving any PHDEP funds from the applicant, the 
local law enforcement agency, 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 PHDEP, the following provisions in paragraphs (a)(5)(i) 
through (a)(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 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 members of the tenant patrol and, only if 
the local law enforcement agency is receiving any PHDEP funds from the 
applicant, the local law enforcement agency, 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 PHAs that receive 
grants to contract

[[Page 23]]

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) Youth sports. Sports programs and sports activities that serve 
primarily youths from public or other federally assisted low-income 
housing projects and are operated in conjunction with, or in furtherance 
of, an organized program or plan designed to reduce or eliminate drugs 
and drug-related problems in and around such projects, as provided in 42 
U.S.C. 11903(a)(8).
    (9) Eliminating drug-related and violent crime in PHA-owned housing, 
under the Public Housing Program, as provided in 42 U.S.C. 11903(b).
    (b) Ineligible activities. For purposes of PHDEP, funding is not 
permitted:
    (1) For activities not included under paragraph (a) of this section;
    (2) For costs incurred before the effective date of the grant 
agreement;
    (3) 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;
    (4) For previously funded activities determined by HUD on a case-by-
case basis to be unworthy of continuation.

[64 FR 49919, Sept. 14, 1999]



                   Subpart C_Application and Selection



Sec.  761.20  Selection requirements.

    (a) PHDEP selection. Every PHA, RMC and consortium that meets the 
requirements of Sec.  761.15 in a FFY will be selected for funding in 
that FFY and, subject to meeting the performance requirements of Sec.  
761.23, for four additional FFYs.
    (b) AHDEP selection. HUD will publish specific Notices of Funding 
Availability (NOFAs) in the Federal Register to inform the public of the 
availability of AHDEP grant amounts under this part 761. The NOFAs will 
provide specific guidance with respect to the grant process, including 
identifying the eligible applicants; 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 and violent crime 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 AHDEP under this 
part 761.

[64 FR 49920, Sept. 14, 1999]



Sec.  761.21  Plan requirement.

    (a) General requirement. To receive funding under this part, each 
PHDEP qualified recipient or AHDEP applicant must submit to HUD, for 
Federal Fiscal Year (FFY) 2000 and each following FFY, a plan for 
addressing the problem of drug-related and violent crime in and around 
the housing covered by the plan. If the plan covers more than one 
development, it 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. The plan must include a 
description of the planned activity or activities, a description of the 
role of plan partners and their contributions to carrying out the plan, 
a budget and timetable for implementation of the activities, and the 
funding source for each activity, identifying in particular all 
activities to be funded under this part. In addition, the plan must set 
measurable performance goals and interim milestones for the PHDEP-
supported activities and describe the system for monitoring and 
evaluating these activities. Measurable goals must be established for 
each category of funded activities, including drug prevention, drug 
intervention, drug treatment, tenant patrols, and physical improvements. 
The plan under this section serves as the application for PHDEP funding, 
and an otherwise qualified recipient that does not

[[Page 24]]

submit a PHDEP plan as required will not be funded. For AHDEP funding, 
NOFAs published in the Federal Register may provide additional 
information on plan requirements for purposes of this section. Plans 
must meet the requirements of this section before grant funds are 
distributed. HUD will review the submitted plans for a determination of 
whether they meet the requirements of this section.
    (b) Additional requirements for consortia. In addition to meeting 
the requirements of paragraph (a) of this section, to receive funding 
under this part, a consortium's plan must include a copy of the 
consortium agreement between the PHAs which are participating in the 
consortium, and a copy of the payment agreement between the consortium 
and HUD.

[64 FR 49920, Sept. 14, 1999]



Sec.  761.23  Grantee performance requirements.

    (a) Basic grantee requirements--(1) Compliance with civil rights 
requirements. Grantees must be in compliance with all fair housing and 
civil rights laws, statutes, regulations, and executive orders as 
enumerated in 24 CFR 5.105(a). Federally recognized Indian tribes must 
comply with the Age Discrimination Act of 1975 and the Indian Civil 
Rights Act.
    (2) Adherence to the grant agreement. The grant agreement between 
HUD and the grantee incorporates the grantee's application and plan for 
the implementation of grant-funded activities.
    (3) Compliance with ``baseline'' funding requirement. Grantees may 
not use grant funds to reimburse law enforcement agencies for 
``baseline'' community safety services. Grantees must adhere to Sec.  
761.17(a)(2)(i), reimbursement of local law enforcement agencies for 
additional security and protective services. In addition, grantees must 
provide to HUD a description of the baseline of services for the unit of 
general local government in which the jurisdiction of the agency is 
located.
    (4) Partnerships. Grantees must provide HUD with evidence of 
partnerships--in particular, firm commitments by organizations providing 
funding, services, or other in-kind resources for PHDEP-funded 
activities (e.g., memorandum of agreement, letter of firm commitment). 
The partnership agreement must cover the applicable funding period.
    (5) MTCS reporting. Grantees must maintain a level of compliance 
with MTCS reporting requirements that is satisfactory to HUD.
    (b) Planning and reporting requirements--(1) Planning consistency. 
PHDEP funded activities must be consistent with the most recent HUD-
approved PHA Plan or Indian Housing Plan, as appropriate. AHDEP funded 
activities must be consistent with the most recent Consolidated Plan 
under part 91 of this title for the community.
    (2) Demonstration of coordination with other law enforcement 
efforts. Each grantee must consult with local law enforcement 
authorities and other local entities in the preparation of its plan for 
addressing the problem of drug-related and violent crime under Sec.  
761.21 and must maintain documentation of such consultation. 
Furthermore, a grantee must coordinate its grant-funded activities with 
other anti-crime and anti-drug programs, such as Operation Safe Home, 
Operation Weed and Seed, and the Safe Neighborhoods Action Program 
operating in the community, if applicable and maintain documentation of 
such coordination.
    (3) Compliance with reporting requirements. Grantees must provide 
periodic reports consistent with this part at such times and in such 
form as is required by HUD.
    (4) Reporting on drug-related and violent crime. Grantees must 
report any change or lack of change in crime statistics--especially 
drug-related crime and violent crime--or other relevant indicators drawn 
from the applicant's or grantee's evaluation and monitoring plan, IHP or 
PHA Plan. The grantee must also indicate, if applicable, how it is 
adequately addressing any recommendations emanating from other anti-
crime and anti-drug programs, such as Operation Safe Home, Operation 
Weed and Seed, and the Safe Neighborhoods Action Program, operating in 
the community and is taking appropriate actions, in view of available 
resources, such as post-enforcement measures, to take full advantage of 
these programs.

[[Page 25]]

    (c) Funding and evaluation requirements--(1) Timely obligation and 
expenditure of grant funds. The HA must obligate and expend funds in 
compliance with all funding notifications, regulations, notices, and 
grant agreements. In addition, the HA must obligate at least 50 percent 
of funds under a particular grant within 12 months of the execution of 
the grant agreement, and must expend at least 25 percent of funds under 
a particular grant within 12 months of the execution of the grant 
agreement.
    (2) Operational monitoring and evaluation system. The grantee must 
demonstrate that it has a fully operational system for monitoring and 
evaluating its grant-funded activities. A monitoring and evaluation 
system must collect quantitative evidence of the number of persons and 
units served, including youth served as a separate category, types of 
services provided, and the impact of such services on the persons 
served. Also, the monitoring and evaluation system must collect 
quantitative and qualitative evidence of the impact of grant-funded 
activities on the public housing or other housing, the community and the 
surrounding neighborhood.
    (3) Reduction of violent crime and drug use. The grantee must 
demonstrate that it has established, and is attaining, measurable goals 
including the overall reduction of violent crime and drug use.
    (d) Other requirements. HUD reserves the right to add additional 
performance factors consistent with this rule and other related statutes 
and regulations on a case-by-case basis.
    (e) Sanctions. A grantee that fails to satisfy the performance 
requirements of this section will be subject to the sanctions listed in 
Sec.  761.30(f)(2).

[64 FR 49921, Sept. 14, 1999]



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, 2 CFR part 200, 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 Native American Programs with jurisdiction over the grantee.
    (4) Term. The maximum extension allowable for any program period is 
6 months.

[[Page 26]]

    (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
    (viii) Files a false certification.
    (2) HUD may impose the following sanctions:

[[Page 27]]

    (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.

[61 FR 13987, Mar. 28, 1996, as amended at 80 FR 75941, Dec. 7, 2015]



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 2 CFR 200.328, 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:
    (1) Forms. The grantee shall provide a semi-annual financial status 
report. For purposes of the Public Housing

[[Page 28]]

Program, this report shall be in accordance with 2 CFR 200.327. 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.

[61 FR 13987, Mar. 28, 1996, as amended at 80 FR 75941, Dec. 7, 2015]



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 equipment and 
materials rendered unsatisfactory because of normal wear

[[Page 29]]

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 Lead-Based Paint Poisoning Prevention Act 
(42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction 
Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 
35, subparts A, B, H, and R of this title.
    (d) Conflicts of interest. In addition to the conflict of interest 
requirements in 2 CFR 200.112 (for all recipients and subrecipients), 
200.317 (for recipients and subrecipients that are States), and 
200.318(c) and 200.319(a)(5) (for recipients and subrecipients that are 
not States) 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 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) Intergovernmental Review. The requirements of Executive Order 
12372 (3 CFR, 1982 Comp., p. 197) and the regulations issued under the 
Order in part 52 of this title, to the extent provided by Federal 
Register notice in accordance with 24 CFR 52.3, apply to these programs.
    (g) Environmental review. Certain eligible activities under this 
part 761 are categorically excluded from review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321) and are not subject to 
review under related laws, in accordance with 24 CFR 50.19(b)(4), 
(b)(12), or (b)(13). If the PHDEP plan proposes the use of grant

[[Page 30]]

funds to assist any non-exempt activities, HUD will perform an 
environmental review to the extent required by 24 CFR part 50, prior to 
grant award.

[61 FR 13987, Mar. 28, 1996, as amended at 64 FR 49921, Sept. 14, 1999; 
64 FR 50227, Sept. 15, 1999, 80 FR 75941, Dec. 7, 2015]

                        PARTS 762	790 [RESERVED]



PART 791_ALLOCATIONS OF HOUSING ASSISTANCE FUNDS--Table of Contents



                      Subpart A_General Provisions

Sec.
791.101 Applicability and scope.
791.102 Definitions.

Subparts B-C [Reserved]

     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 role and responsibility of HUD in allocation 
of budget authority (pursuant to section 213 of the Housing and 
Community Development Act of 1974 (42 U.S.C. 1439)) for housing 
assistance under the United States Housing Act of 1937 (Section 8 and 
public housing) and under section 101 of the Housing and Urban 
Development Act of 1965 (12 U.S.C. 1701s), and of budget authority for 
housing assistance under section 202 of the Housing Act of 1959 (12 
U.S.C. 1710q). This part does not apply to budget authority for the 
public housing operating fund or capital fund.

[64 FR 26639, May 14, 1999]



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 identified by the HUD field office for the purpose of 
allocating 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.
    Fiscal year. The official operating period of the Federal 
government, beginning on October 1 and ending on September 30.
    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 (PHA). (1) Any State, county, municipality, or 
other governmental entity or public body which is authorized to 
administer a program under the 1937 Act (or an agency or instrumentality 
of such an entity).
    (2) In addition, for purposes of the program of Section 8 tenant-
based assistance under part 982 of this title, the term PHA also 
includes any of the following:
    (i) A consortia of housing agencies, each of which meets the 
qualifications in paragraph (1) of this definition, that HUD determines 
has the capacity and capability to efficiently administer the program 
(in which case, HUD may enter into a consolidated ACC with any legal 
entity authorized to act as the legal representative of the consortia 
members);

[[Page 31]]

    (ii) Any other public or private non-profit entity that was 
administering a Section 8 tenant-based assistance program pursuant to a 
contract with the contract administrator of such program (HUD or a PHA) 
in effect on October 21, 1998; or
    (iii) For any area outside the jurisdiction of a PHA that is 
administering a tenant-based program, or where HUD determines that such 
PHA is not administering the program effectively, a private non-profit 
entity or a governmental entity or public body that would otherwise lack 
jurisdiction to administer the program in such area.

[61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26639, May 14, 1999]

Subparts B-C [Reserved]



     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. 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.

[61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26639, May 14, 1999]



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.
    (c) 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.
    (d) Based on the criteria in paragraphs (b) and (c) 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 for such 
jurisdiction. The field office total for each 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 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) of this section are weighted equally.
    (e) The Assistant Secretary for Policy Development and Research 
shall

[[Page 32]]

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.

[61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26639, May 14, 1999]



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.
    (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 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 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).

[61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26640, May 14, 1999]



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

[[Page 33]]

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 field office jurisdiction. 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.

[61 FR 10849, Mar. 15, 1996, as amended at 64 FR 26640, May 14, 1999]



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.
    (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 
Sec. Sec.  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:

[[Page 34]]

    (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_PUBLIC 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.
792.202 PHA 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.

    Editorial Note: Nomenclature changes to part 792 appear at 64 FR 
26640, May 14, 1999.



                      Subpart A_General Provisions



Sec.  792.101  Purpose.

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

[64 FR 26640, May 14, 1999]



Sec.  792.102  Applicability.

    (a) This part applies to a PHA 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 PHA 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 PHA (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 a PHA administrative grievance procedure pursuant to, or 
incorporating the requirements of, Sec.  982.555 of this title. This 
part does not apply to cases of owner fraud in PHA-

[[Page 35]]

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 PHA (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.

[59 FR 9409, Feb. 28, 1994, as amended at 64 FR 26640, May 14, 1999]



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.
    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 PHA 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.
    Public housing agency (PHA). A public housing agency as defined in 
Sec.  791.102.
    Repayment agreement. Repayment agreement means a formal document 
signed by a tenant or owner and provided to a PHA in which a tenant or 
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; 64 
FR 26640, May 14, 1999]



                  Subpart B_Recovery of Section 8 Funds



Sec.  792.201  Conduct of litigation.

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



Sec.  792.202  PHA retention of proceeds.

    (a) Where the PHA 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 PHA 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.  982.555 of this title; or
    (2) Reasonable and necessary costs that the PHA 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.  982.555 of this title. 
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 PHA in obtaining the 
judgment,

[[Page 36]]

these costs must be deducted from the amount to be retained by the PHA.

[59 FR 9409, Feb. 28, 1994, as amended at 64 FR 26640, May 14, 1999]



Sec.  792.203  Application of amounts recovered.

    (a) The PHA 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 PHA 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 PHA 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	799 [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)




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


  Editorial Note: Nomenclature changes to chapter VIII appear at 59 FR 
14090, Mar. 25, 1994.
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.........         106
884             Section 8 housing assistance payments 
                    program, new construction set-aside for 
                    Section 515 rural rental housing 
                    projects................................         118
886             Section 8 housing assistance payments 
                    program--Special allocations............         138

[[Page 38]]

887             Section 8 housing assistance payments 
                    programs--Family self-sufficiency 
                    program.................................         175
888             Section 8 housing assistance payments 
                    program--Fair market rents and contract 
                    rent annual adjustment factors..........         177
891             Supportive housing for the elderly and 
                    persons with disabilities...............         187
892-899

[Reserved]

[[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.

[[Page 40]]

    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 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 commercial 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

[[Page 41]]

field office may accept as satisfactory evidence:
    (i) Identification of any previous HUD approval of the applicant as 
a PHA pursuant to this section;
    (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

[[Page 42]]

least bennially thereafter; and provisions requiring the parent entity 
PHA to perform an annual review of the applicant's performance and to 
provide 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.

[[Page 43]]

    (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.
    (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

[[Page 44]]

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.
    (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

[[Page 45]]

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 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

[[Page 46]]

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 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

[[Page 47]]

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 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-

[[Page 48]]

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) (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.
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.
880.212 Broadband infrastructure.

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 Management and occupancy reviews.
880.612a Preference for occupancy by elderly families.

[[Page 49]]

880.613 Emergency transfers for victims of domestic violence, dating 
          violence, sexual assault, and stalking.

    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 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.

    (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 all families.
    (d) Notwithstanding the provisions of paragraph (b) of this section, 
the provisions of 24 CFR part 5 apply to all projects, regardless of 
when an Agreement was executed.

[61 FR 13587, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000]



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.

    Annual Contributions Contract (ACC). As defined in part 5 of this 
title.
    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 5 of this title.
    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.

[[Page 50]]

    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 to the owner for a unit.
    Covered housing provider. For the Section 8 Housing Assistance 
Payment Program for New Construction, ``covered housing provider,'' as 
such term is used in HUD's regulations in 24 CFR part 5, subpart L 
(Protection for Victims of Domestic Violence, Dating Violence, Sexual 
Assault, or Stalking), refers to the owner.
    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 part 5 of this title.
    Fair Market Rent (FMR). As defined in part 5 of this title.
    Family. As defined in part 5 of this title.
    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.)
    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. 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.
    HUD. Department of Housing and Urban Development.
    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 5 of this title.
    NOFA. As defined in part 5 of this title.
    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 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

[[Page 51]]

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.
    Public Housing Agency (PHA). As defined in part 5 of this title.
    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. As defined in part 5 of this title.
    Total tenant payment. As defined in part 5 of this title.
    Utility allowance. As defined in part 5 of this title.
    Utility reimbursement. As defined in part 5 of this title.
    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 5 of this title.

[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; 65 FR 16722, Mar. 29, 2000; 81 FR 80811, Nov. 16, 2016]



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.
    (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

[[Page 52]]

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.
    (h) HUD may permit increased distributions of surplus cash, in 
excess of the amounts otherwise permitted, to profit-motivated owners 
who participate in a HUD-approved initiative or program to preserve 
below-market housing stock. The increased distributions will be limited 
to a maximum amount based on market rents and calculated according to 
HUD instructions. Funds that the owner is authorized to retain under 
section 236(g)(2) of the National Housing Act are not considered 
distributions to the owner.
    (i) Any State or local law or regulation that restricts 
distributions to an amount lower than permitted by this section or 
permitted by the Commissioner under this paragraph (i) is preempted to 
the extent provided by section 524(f) of the Multifamily Assisted 
Housing Reform and Affordability Act of 1997.

[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; 65 FR 61074, Oct. 
13, 2000]



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 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:

[[Page 53]]

    (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.

    Where a non-Federal entity (as defined in 2 CFR 200.69) 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 2 CFR part 200, subpart F, shall apply.

[80 FR 75941, Dec. 7, 2015]



Sec.  880.212  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and that is subject to a Housing Assistance Payments 
contract executed or renewed after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the owner determines and documents the 
determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92637, Dec. 20, 2016]

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

[[Page 54]]

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.  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 owner 
will pay a utility reimbursement in accordance with Sec.  5.632 of this 
title. HUD will provide funds for the utility reimbursement to the owner 
in trust solely for the purpose of paying the utility reimbursement.

[44 FR 59410, Oct. 15, 1979, as amended at 49 FR 19943, May 10, 1984; 61 
FR 13587, Mar. 27, 1996; 65 FR 16722, Mar. 29, 2000]



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

[[Page 55]]

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.
    (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

[[Page 56]]

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:
    (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.
    (f) Protections for victims of domestic violence, dating violence, 
sexual assault, or stalking. The regulations of 24 CFR part 5, subpart L 
(Protection for Victims of Domestic Violence, Dating Violence, Sexual 
Assault, or Stalking), apply to this section.

[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; 73 FR 72342, Nov. 28, 2008; 75 FR 66260, Oct. 27, 
2010; 81 FR 80811, Nov. 16, 2016]



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

[[Page 57]]

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 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:

[[Page 58]]

(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]



                          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, 
selection of tenants, reexamination and verification of family income 
and composition, determination of family rent (total tenant payment, 
tenant rent and utility reimbursement), collection of rent, termination 
of tenancy and eviction, and performance of all repair and maintenance 
functions (including ordinary and extraordinary maintenance), and 
replacement of capital items. (See part 5 of this title.) All functions 
must be performed in accordance 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

[[Page 59]]

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.
    (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; 65 FR 16722, Mar. 29, 2000]



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

[[Page 60]]

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.
    (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 
eligibility in accordance with 24 CFR part 5, subpart F, and evidence 
related to citizenship and eligible immigration status in accordance 
with 24 CFR part 5, subpart E, to determine whether the applicant is 
eligible for assistance in accordance with the requirements of 24 CFR 
part 5, 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,

[[Page 61]]

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 
part 5 of this title 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 
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 contract rent plus any utility allowance. 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.
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

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

[61 FR 13589, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000; 
70 FR 77744, Dec. 30, 2005; 81 FR 12371, Mar. 8, 2016]

[[Page 62]]



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 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.

[[Page 63]]

    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]



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) Criminal activity by a covered person in accordance with 
sections 5.858 and 5.859, or alcohol abuse by a covered person in 
accordance with section 5.860. If necessary, criminal records can be 
obtained for lease enforcement purposes under section 5.903(d)(3).
    (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

[[Page 64]]

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.
    (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.
    (5) In actions or potential actions to terminate tenancy, the owner 
shall follow 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking).
    (6) In the case of failure to pay rent, if the Secretary determines 
that tenants must be provided with adequate notice to secure Federal 
funding that is available due to a Presidential declaration of a 
national emergency:
    (i) The termination notice must provide such information as required 
by the Secretary; and
    (ii) The notice must provide the tenant with at least 30 days before 
termination.
    (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; 66 FR 28797, May 24, 
2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66260, Oct. 27, 2010; 81 FR 
80811, Nov. 16, 2016; 86 FR 55701, Oct. 7, 2021]



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

[[Page 65]]

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 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

[[Page 66]]

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.
    (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  Management and occupancy reviews.

    (a) The contract administrator will conduct management and occupancy 
reviews to determine whether the owner is in compliance with the 
Contract. Such reviews will be conducted in accordance with a schedule 
set out by the Secretary and published in the Federal Register, 
following notice and the opportunity to comment. Where a change in 
ownership or management occurs, a management and occupancy review must 
be conducted within six months following the change in ownership or 
management.
    (b) HUD or the Contract Administrator may inspect project operations 
and units at any time.

[[Page 67]]

    (c) Equal Opportunity reviews may be conducted by HUD at any time.

[87 FR 37997, June 27, 2022]



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 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

[[Page 68]]

    (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.
    (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

[[Page 69]]

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.  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) 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; 65 
FR 16722, Mar. 29, 2000]



Sec.  880.613  Emergency transfers for victims of domestic violence, 
dating violence, sexual assault, and stalking.

    (a) Covered housing providers must develop and implement an 
emergency transfer plan that meets the requirements in 24 CFR 5.2005(e).
    (b) In order to facilitate emergency transfers for victims of 
domestic violence, dating violence, sexual assault, and stalking, 
covered housing providers have discretion to adopt new, and modify any 
existing, admission preferences or transfer waitlist priorities.
    (c) In addition to following requirements in 24 CFR 5.2005(e), when 
a safe unit is not immediately available for a victim of domestic 
violence, dating violence, sexual assault, or stalking who qualifies for 
an emergency transfer, covered housing providers must:
    (1) Review the covered housing provider's existing inventory of 
units and determine when the next vacant unit may be available; and
    (2) Provide a listing of nearby HUD subsidized rental properties, 
with or without preference for persons of domestic violence, dating 
violence, sexual assault, or stalking, and contact information for the 
local HUD field office.
    (d) Each year, covered housing providers must submit to HUD data on 
all emergency transfers requested under 24 CFR 5.2005(e), including data 
on the outcomes of such requests.

[81 FR 80811, Nov. 16, 2016]



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

[[Page 70]]

              Subpart B_Definitions and Other Requirements

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

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.

    (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 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 881.607 (Termination of tenancy and modification of 
leases) applies to all families.
    (d) Notwithstanding the provisions of paragraph (b) of this section, 
the provisions of 24 CFR part 5 apply to all projects, regardless of 
when an Agreement was executed.

[61 FR 13591, Mar. 27, 1996, as amended at 65 FR 16722, Mar. 29, 2000]



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.

    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.

[[Page 71]]

    Annual Contributions Contract (ACC). As defined in part 5 of this 
title.
    Annual income. As defined in part 5 of this title.
    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 to the owner for a unit.
    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 part 5 of this title.
    Fair Market Rent (FMR). As defined in part 5 of this title.
    Family. As defined in part 5 of this title.
    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.
    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. 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.
    HUD. Department of Housing and Urban Development.
    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 5 of this title.
    NOFA. As defined in part 5 of this title.
    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

[[Page 72]]

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.
    Public Housing Agency (PHA). As defined in part 5 of this title.
    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 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. As defined in part 5 of this title.
    Total tenant payment. As defined in part 5 of this title.
    Utility allowance. As defined in part 5 of this title.
    Utility reimbursement. As defined in part 5 of this title.
    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 5 of this title.

[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; 65 FR 
16722, Mar. 29, 2000]



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

[[Page 73]]

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), 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.
    (h) HUD may permit increased distributions of surplus cash, in 
excess of the amounts otherwise permitted, to profit-motivated owners 
who participate in a HUD-approved initiative or program to preserve 
below-market housing stock. The increased distributions will be limited 
to a maximum amount based on market rents and calculated according to 
HUD instructions. Funds that the owner is authorized to retain under 
section 236(g)(2) of the National Housing Act are not considered 
distributions to the owner.
    (i) Any State or local law or regulation that restricts 
distributions to an amount lower than permitted by this section or 
permitted by the Commissioner under this paragraph (i) is preempted to 
the extent provided by section 524(f) of the Multifamily Assisted 
Housing Reform and Affordability Act of 1997.

[45 FR 7085, Jan. 31, 1980, as amended at 65 FR 61074, Oct. 13, 2000]



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), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 
U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, 
B, H, and R of this title; 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; 64 FR 50227, Sept. 
15, 1999]



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

[[Page 74]]

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 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 non-Federal entity (as defined in 2 CFR 200.69) 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 2 CFR part 200, subpart F, shall apply.

[80 FR 75941, Dec. 7, 2015]



Sec.  881.212  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and that is subject to a Housing Assistance Payments 
contract executed or renewed after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the owner determines and documents the 
determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;

[[Page 75]]

    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92637, Dec. 20, 2016]

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 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

[[Page 76]]

    (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 Sec. Sec.  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]



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



            Subpart A_Applicability, Scope and Basic Policies

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

Subparts 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.
882.518 Denial of admission and termination of assistance for criminals 
          and alcohol abusers.

[[Page 77]]

Subparts F-G [Reserved]

   Subpart H_Section 8 Moderate Rehabilitation Single Room Occupancy 
                    Program for Homeless Individuals

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) Terms found elsewhere. The following terms are defined in part 
5, subpart A of this title: 1937 Act, covered person, drug, drug-related 
criminal activity, federally assisted housing, guest, household, HUD, 
MSA, other person under the tenant's control, public housing agency 
(PHA), Section 8, and violent criminal activity.
    (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 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.
    Covered housing provider. For the Section 8 Moderate Rehabilitation 
Programs, as provided in subparts A, D, and E of this part, ``covered 
housing provider,'' as such term is used in HUD's regulations in 24 CFR 
part 5, subpart L (Protection for Victims of Domestic Violence, Dating 
Violence, Sexual Assault, or Stalking), refers to the PHA or owner, as 
applicable given the responsibilities of the covered housing provider as 
set forth in 24 CFR part 5, subpart L. For example, the PHA is the 
covered housing provider responsible for providing the notice of 
occupancy rights under VAWA and certification form described at 24 CFR 
5.2005(a), though the PHA may provide this notice and form to owners, 
and charge owners with distributing the notice and form to tenants. In 
addition, the owner is the covered housing provider that may choose to 
bifurcate

[[Page 78]]

a lease as described at 24 CFR 5.2009(a), while both the PHA and owner 
are both responsible for ensuring that an emergency transfer plan is in 
place in accordance with 24 CFR 5.2005(e), and the owner is responsible 
for implementing the emergency transfer plan when an emergency occurs.
    Decent, safe, and sanitary. Housing is decent, safe, and sanitary if 
it meets the physical condition standards in 24 CFR part 5, subpart G.
    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.

[63 FR 23853, Apr. 30, 1998, as amended at 63 FR 46578, Sept. 1, 1998; 
66 FR 28797, May 24, 2001; 81 FR 80812, Nov. 16, 2016]



Sec. Sec.  882.103-882.122  [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

[[Page 79]]

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.
    (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 2 CFR part 200, subpart F.

[50 FR 39091, Sept. 27, 1985; 51 FR 30480, Aug. 27, 1986; 80 FR 75941, 
Dec. 7, 2015]

Subparts 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.

[[Page 80]]

    (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.
    (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. (1) The initial lease between the family and the 
Owner must be for at least one year or the term of the HAP contract, 
whichever is shorter. In cases where there is less than one year 
remaining on the HAP contract, the owner and the PHA may mutually agree 
to terminate the unit from the HAP contract instead of leasing the unit 
to an eligible family.
    (2) Any renewal or extension of the lease term for any unit must in 
no case extend beyond the remaining term of the HAP contract.

[47 FR 34379, Aug. 9, 1982, as amended at 64 FR 53869, Oct. 4, 1999]



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:

[[Page 81]]

    (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).

[63 FR 46579, Sept. 1, 1998; 64 FR 50227, Sept. 15, 1999; 88 FR 30499, 
May 11, 2023]



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.

    (a) The moderate rehabilitation program is subject to applicable 
Federal requirements in 24 CFR 5.105 and to the requirements for 
protection for victims of domestic violence, dating violence, sexual 
assault, or stalking in 24 CFR part 5, subpart L (Protection for Victims 
of Domestic Violence, Dating Violence, Sexual Assault, or Stalking).
    (b) In order to facilitate emergency transfers for victims of 
domestic violence, dating violence, sexual assault, or stalking, covered 
housing providers have discretion to adopt and modify any existing 
admission preferences or transfer waitlist priorities for victims of 
domestic violence, dating violence, sexual assault, or stalking.
    (c) Covered housing providers must develop and implement an 
emergency transfer plan that meets the requirements in 24 CFR 5.2005(e), 
and when a safe unit is not immediately available for a victim of 
domestic violence, dating violence, sexual assault, and stalking who 
qualifies for an emergency transfer, covered housing providers must, at 
a minimum:
    (1) Review the covered housing provider's existing inventory of 
units and determine when the next vacant unit may be available; and
    (2) Provide a listing of nearby HUD subsidized rental properties, 
with or without preference for persons of domestic violence, dating 
violence, sexual assault, or stalking, and contact information for the 
local HUD field office.
    (d) Each year, the covered housing provider must submit to HUD data 
on all emergency transfers requested under 24 CFR 5.2005(e), pertaining 
to victims of domestic violence, dating violence, sexual assault, or 
stalking, including data on the outcomes of such requests.

[81 FR 80812, Nov. 16, 2016]



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

[[Page 82]]

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 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

[[Page 83]]

(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 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

[[Page 84]]

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 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 Sec. Sec.  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]

[[Page 85]]



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.
    (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

[[Page 86]]

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]



    Subpart E_Special Procedures for Moderate Rehabilitation_Program 
                        Development and Operation

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



Sec. 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) The unit(s) are in compliance with part 35, subparts A, B, H, 
and R of this title.
    (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

[[Page 87]]

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).
    (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; 64 
FR 50227, Sept. 15, 1999]



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. (1) The lease must include all provisions required by 
HUD, and must not include any provisions prohibited by HUD.
    (2) The lease must provide that drug-related criminal activity 
engaged in on or near the premises by any tenant, household member, or 
guest, and any such activity engaged in on the premises by any other 
person under the tenant's control is grounds for the owner to terminate 
tenancy. In addition, the lease must provide that the owner may 
terminate the tenancy of a family when the owner determines that a 
household member is illegally using a drug or when the owner determines 
that a pattern of illegal use of a drug interferes with the health, 
safety, or right to peaceful enjoyment of the premises by other 
residents.
    (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.

[[Page 88]]

    (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; or, if the Secretary determines that tenants must 
be provided with adequate notice to secure Federal funding that is 
available due to a Presidential declaration of a national emergency, the 
date of termination must be not less than 30 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.
    (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.
    (iv) Include such information to tenants during a national 
emergency, as required by the Secretary.
    (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 paragraphs (d)(1) and (2) of this section 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.
    (g) In actions or potential actions to terminate tenancy, the owner 
shall follow 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking).

[47 FR 34383, Aug. 9, 1982, as amended at 63 FR 23855, Apr. 30, 1998; 66 
FR 28797, May 24, 2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66261, Oct. 
27, 2010; 81 FR 80812, Nov. 16, 2016; 86 FR 55701, Oct. 7, 2021]



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.

[[Page 89]]

    (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 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) 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. However, the 
owner must not deny program assistance or admission to an applicant 
based on the fact

[[Page 90]]

that the applicant is or has been a victim of domestic violence, dating 
violence, sexual assault, or stalking, if the applicant otherwise 
qualifies for assistance or admission. 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 6 years of age and HUD's lead-based paint 
requirements in part 35, subparts A, B, H, and R of this title.
    (2) For all Families to be temporarily relocated, the briefing must 
include a discussion of the relocation policies.
    (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

[[Page 91]]

the basis of ineligible immigration status are contained in 24 CFR part 
5.

(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; 64 FR 50227, Sept. 15, 1999; 66 FR 
28797, May 24, 2001; 73 FR 72342, Nov. 28, 2008; 75 FR 66261, Oct. 27, 
2010; 81 FR 80812, Nov. 16, 2016]



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 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. For a family with net family assets (as 
the term is defined in Sec.  5.603 of this title) equal to or less than 
$50,000, which amount will be adjusted annually by HUD in accordance 
with the Consumer Price Index for Urban Wage Earners and Clerical 
Workers, a PHA may accept, for purposes of recertification of income, a 
family's declaration under Sec.  5.618(b) of this title, except that the 
PHA must obtain third-party verification of all family assets every 3 
years.
    (b) Interim reexaminations. (1) A family may request an interim 
determination of family income or composition because of any changes 
since the last determination. The PHA must conduct any interim 
reexamination within a reasonable period of time after the family 
request or when the PHA becomes aware of an increase in family adjusted 
income under paragraph (b)(3) of this section. What qualifies as a 
``reasonable time'' may vary based on the amount of time it takes to 
verify information, but generally should not be longer than 30 days 
after changes in income are reported.
    (2) The PHA may decline to conduct an interim reexamination of 
family income if the PHA estimates the family's adjusted income will 
decrease by an amount that is less than ten percent of the family's 
annual adjusted income (or a lower amount established by HUD through 
notice), or a lower threshold established by the PHA.
    (3) The PHA must conduct an interim reexamination of family income 
when the PHA becomes aware that the family's adjusted income (Sec.  
5.611 of this title) has changed by an amount that the PHA estimates 
will result in an increase of ten percent or more in annual adjusted 
income or such other amount established by HUD through notice, except:
    (i) The PHA may not consider any increase in the earned income of 
the family when estimating or calculating whether the family's adjusted 
income has increased, unless the family has previously received an 
interim reduction under paragraph (c)(1) of this section during the 
certification period; and
    (ii) The PHA may choose not to conduct an interim reexamination in 
the last three months of a certification period.
    (4)(i) If the family has reported a change in family income or 
composition in a timely manner according to

[[Page 92]]

the PHA's policies, the PHA must provide the family with 30 days advance 
notice of any increase in the Total Tenant Payment and Tenant Rent, and 
such increases will be effective the first day of the month beginning 
after the end of that 30-day period. Total Tenant Payment and Tenant 
Rent decreases will be effective on the first day of the first month 
after the date of the actual change leading to the interim reexamination 
of family income.
    (ii) If the family has failed to report a change in family income or 
composition in a timely manner according to the PHA's policies, PHAs 
must implement any resulting Total Tenant Payment and Tenant Rent 
increases retroactively to the first of the month following the date of 
the change leading to the interim reexamination of family income. Any 
resulting Total Tenant Payment and Tenant Rent decrease must be 
implemented no later than the first rent period following completion of 
the reexamination. However, a PHA may apply a Total Tenant Payment and 
Tenant Rent decrease retroactively at the discretion of the PHA, in 
accordance with the conditions established by the PHA in the 
administrative plan and subject to paragraph (c)(4)(iii) of this 
section.
    (iii) A retroactive Total Tenant Payment and Tenant Rent decrease 
may not be applied prior to the later of the first of the month 
following:
    (A) The date of the change leading to the interim reexamination of 
family income; or
    (B) The effective date of the family's most recent previous interim 
or annual reexamination (or initial examination if that was the family's 
last examination).
    (5) The PHA must adopt policies consistent with this section 
prescribing how to determine the effective date of a change in the 
housing assistance payment resulting from an interim redetermination.
    (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, 
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, or because of the 
restrictions on net assets and property ownership as provided by Sec.  
5.618 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.
    (e) Family reporting of change. The PHA must adopt policies 
consistent with this section prescribing when and under what conditions 
the family must report a change in family income or composition.
    (f) Accuracy of family income data. The PHA must establish 
procedures that are appropriate and necessary to assure that income data 
provided by applicant

[[Page 93]]

or participant families is complete and accurate. The PHA will not be 
considered out of compliance with the requirements in this section 
solely due to de minimis errors in calculating family income but is 
still obligated to correct errors once the PHA becomes aware of the 
errors. A de minimis error is an error where the PHA determination of 
family income deviates from the correct income determination by no more 
than $30 per month in monthly adjusted income ($360 in annual adjusted 
income).
    (1) The PHA must take any corrective action necessary to credit or 
repay a family if the family has been overcharged for their Tenant Rent 
or Total Tenant Payment as a result of an error (including a de minimis 
error) in the income determination. Families will not be required to 
repay the PHA in instances where the PHA has miscalculated income 
resulting in a family being undercharged for Tenant Rent or Total Tenant 
Payment.
    (2) HUD may revise the amount of de minimis error in this paragraph 
(f) through a notice published in the Federal Register for public 
comment.

[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; 88 FR 9667, Feb. 14, 2023]



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 the contract units in accordance with the physical inspection 
requirements under 24 CFR part 5, subpart G, at least annually, and at 
such other times as may be necessary to assure that the Owner is meeting 
the obligations to maintain the units so they are compliant with 24 CFR 
part 5, subpart G, 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 with health and safety hazards. If the PHA notifies the 
Owner that the unit(s) under Contract are not being maintained in 
compliance with the standards under 24 CFR part 5, subpart G, 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) or 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 reviews. Periodic PHA audits must be conducted as 
required by HUD, in accordance with 2 CFR part 200, subpart F.

[47 FR 34383, Aug. 9, 1982, as amended at 53 FR 8065, Mar. 11, 1988; 80 
FR 75941, Dec. 7, 2015; 88 FR 30499, May 11, 2023]



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

[[Page 94]]

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]



Sec.  882.518  Denial of admission and termination of assistance 
for criminals and alcohol abusers.

    (a) Requirement to deny admission--(1) Prohibiting admission of drug 
criminals. (i) The PHA must prohibit admission to the program of an 
applicant for three years from the date of termination of tenancy if any 
household member's federally assisted housing tenancy has been 
terminated for drug-related criminal activity. However, the PHA may 
admit the household if the PHA determines:
    (A) The household member who engaged in drug-related criminal 
activity and whose tenancy was terminated has successfully completed an 
approved supervised drug rehabilitation program, or
    (B) The circumstances leading to the termination of tenancy no 
longer exist (for example, the criminal household member has died or is 
imprisoned).
    (ii) The PHA must establish standards that permanently prohibit 
admission to the program if any household member has ever been convicted 
of drug-related criminal activity for manufacture or production of 
methamphetamine on the premises of federally assisted housing.
    (iii) The PHA must establish standards that prohibit admission of a 
household to the program if the PHA determines that any household member 
is currently engaging in illegal use of a drug or that it has reasonable 
cause to believe that a household member's pattern of illegal use of a 
drug, as defined in Sec.  5.100 of this title, may threaten the health, 
safety, or right to peaceful enjoyment of the premises by other 
residents.
    (2) Prohibiting admission of sex offenders. The PHA must establish 
standards that prohibit admission to the program if any member of the 
household is subject to a lifetime registration requirement under a 
State sex offender registration program. In this screening of 
applicants, the PHA must perform criminal history background checks 
necessary to determine whether any household member is subject to a 
lifetime sex offender registration requirement in the State where the 
housing is located and in other States where household members are known 
to have resided.
    (b) Authority to deny admission--(1) Prohibiting admission of other 
criminals. The PHA may prohibit admission of a household to the program 
under standards established by the PHA if the PHA determines that any 
household member is currently engaged in or has engaged in during a 
reasonable time before the admission decision:
    (i) Drug-related criminal activity;
    (ii) Violent criminal activity;
    (iii) Other criminal activity which may threaten the health, safety, 
or right to peaceful enjoyment of the premises by other residents;
    (iv) Other criminal activity which may threaten the health or safety 
of the owner or any employee, contractor, subcontractor or agent of the 
owner who is involved in the owner's housing operations.
    (2) Reasonable time. The PHA may establish a period before the 
admission decision during which an applicant must not have engaged in 
the activities specified in paragraph (b)(1) of this section 
``reasonable time''.
    (3) Sufficient evidence. If the PHA has denied admission to an 
applicant because a member of the household engaged in criminal activity 
in accordance with paragraph (b)(1) of this section, the PHA may 
reconsider the applicant if the PHA has sufficient evidence that the 
members of the household are not currently engaged in, and have not 
engaged in criminal activity during a reasonable period, as determined 
by the PHA, before the admission decision.
    (i) The PHA would have ``sufficient evidence'' if the household 
member submitted a certification that she or he is not currently engaged 
in and has not engaged in such criminal activity during the specified 
period and provided supporting information from such sources as a 
probation officer, a landlord, neighbors, social service agency workers 
and criminal records, which the PHA verified.

[[Page 95]]

    (ii) For purposes of this section, a household member is ``currently 
engaged in'' criminal activity if the person has engaged in the behavior 
recently enough to justify a reasonable belief that the behavior is 
current.
    (4) Prohibiting admission of alcohol abusers. The PHA must establish 
standards that prohibit admission to the program if the PHA determines 
that it has reasonable cause to believe that a household member's abuse 
or pattern of abuse of alcohol may threaten the health, safety, or right 
to peaceful enjoyment of the premises by other residents.
    (c) Terminating assistance--(1) Terminating assistance for drug 
criminals. (i) The PHA may terminate assistance for drug-related 
criminal activity engaged in on or near the premises by any tenant, 
household member, or guest, and any such activity engaged in on the 
premises by any other person under the tenant's control. In addition, 
the PHA may terminate assistance if the PHA determines that a household 
member is illegally using a drug or when the PHA determines that a 
pattern of illegal use of a drug interferes with the health, safety, or 
right to peaceful enjoyment of the premises by other residents.
    (ii) The PHA must immediately terminate assistance for a family 
under the program if the PHA determines that any member of the household 
has ever been convicted of drug-related criminal activity for 
manufacture or production of methamphetamine on the premises of 
federally assisted housing.
    (2) Terminating assistance for other criminals. (i) The PHA must 
establish standards that allow the PHA to terminate assistance for a 
family if the PHA determines that any household member is engaged in 
criminal activity that threatens the health, safety, or right of 
peaceful enjoyment of the premises by other residents or by persons 
residing in the immediate vicinity of the premises.
    (ii) The PHA may terminate assistance for a family if the PHA 
determines that a member of the household is:
    (A) Fleeing to avoid prosecution, or custody or confinement after 
conviction, for a crime, or attempt to commit a crime, that is a felony 
under the laws of the place from which the individual flees, or that, in 
the case of the State of New Jersey, is a high misdemeanor; or
    (B) Violating a condition of probation or parole imposed under 
Federal or State law.
    (3) Evidence of criminal activity. (i) The PHA may terminate 
assistance for criminal activity in accordance with this section if the 
PHA determines, based on a preponderance of the evidence, that a covered 
person has engaged in the criminal activity, regardless of whether the 
covered person has been arrested or convicted for such activity.
    (ii) See part 5, subpart J, of this title for provisions concerning 
access to criminal records.
    (4) Terminating assistance for alcohol abusers. The PHA must 
establish standards that allow termination of assistance for a family if 
the PHA determines that a household member's abuse or pattern of abuse 
of alcohol threatens the health, safety, or right to peaceful enjoyment 
of the premises by other residents.

[66 FR 28797, May 24, 2001]

Subparts 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.).

[[Page 96]]



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 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.
    Covered housing provider. For the Section 8 Moderate Rehabilitation 
Single Room Occupancy Program for Homeless Individuals, ``covered 
housing provider,'' as such term is used in HUD's regulations in 24 CFR 
part 5, subpart L (Protection for Victims of Domestic Violence, Dating 
Violence, Sexual Assault, or Stalking), refers to the owner.
    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; 
81 FR 80812, Nov. 16, 2016]



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

[[Page 97]]

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.
    (2) Site standards. (i) The site must 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 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; 
64 FR 50227, Sept. 15, 1999]



Sec.  882.804  Other Federal requirements.

    (a) Participation in this program requires compliance with the 
Federal requirements set forth in 24 CFR 5.105, with the Americans with 
Disabilities Act (42 U.S.C. 12101 et seq.), and with the regulations in 
24 CFR part 5, subpart L (Protection for Victims of Domestic Violence, 
Dating Violence, Sexual Assault, or Stalking).
    (b) In order to facilitate emergency transfers for victims of 
domestic violence, dating violence, sexual assault, or stalking, covered 
housing providers have discretion to adopt and modify any existing 
admission preferences or transfer waitlist priorities for victims of 
domestic violence, dating violence, sexual assault, or stalking.
    (c) Covered housing providers must develop and implement an 
emergency transfer plan that meets the requirements in 24 CFR 5.2005(e), 
and when a safe unit is not immediately available for a victim of 
domestic violence, dating violence, sexual assault, and stalking who 
qualifies for an emergency transfer, covered housing providers must, at 
a minimum:
    (1) Review the covered housing provider's existing inventory of 
units and determine when the next vacant unit may be available; and
    (2) Provide a listing of nearby HUD subsidized rental properties, 
with or without preference for persons of domestic violence, dating 
violence, sexual assault, or stalking, and contact information for the 
local HUD field office.
    (d) Each year, the covered housing provider must submit to HUD data 
on all emergency transfers requested under 24 CFR 5.2005(e), pertaining 
to victims of domestic violence, dating violence, sexual assault, or 
stalking, including data on the outcomes of such requests.
    (e) For agreements covering nine or more assisted units, the 
following requirements for labor standards apply:

[[Page 98]]

    (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.
    (f) 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.

[61 FR 48057, Sept. 11, 1996, as amended at 81 FR 80812, Nov. 16, 2016]



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.
    (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

[[Page 99]]

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 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

[[Page 100]]

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 
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

[[Page 101]]

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 
Sec. Sec.  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).
    (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,

[[Page 102]]

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.
    (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. For an 
individual with net family assets (as the term is defined in Sec.  5.603 
of this title) equal to or less than $50,000, which amount will be 
adjusted annually by HUD in accordance with the Consumer Price Index for 
Urban Wage Earners and Clerical Workers, a PHA may accept, for purposes 
of recertification of income, an individual's declaration under Sec.  
5.618(b) of this title, except that the PHA must obtain third-party 
verification of all family assets every 3 years.
    (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.

[[Page 103]]

    (3) Continuation of Housing Assistance Payments. Section 882.515(d) 
applies to this program.
    (4) Individual reporting of change. The PHA must adopt policies 
consistent with this section prescribing when and under what conditions 
the individual must report a change in family income or composition.
    (5) Accuracy of family income data. The PHA must establish 
procedures that are appropriate and necessary to assure that income data 
provided by applicant or participant individuals is complete and 
accurate. The PHA will not be considered out of compliance with the 
requirements in this section solely due to de minimis errors in 
calculating family income but is still obligated to correct errors once 
the PHA becomes aware of the errors. A de minimis error is an error 
where the PHA determination of family income deviates from the correct 
income determination by no more than $30 per month in monthly adjusted 
income ($360 in annual adjusted income).
    (A) The PHA must take any corrective action necessary to credit or 
repay an individual if the individual has been overcharged for their 
Tenant Rent or Total Tenant Payment as a result of an error (including a 
de minimis error) in the income determination. Individuals will not be 
required to repay the PHA in instances where the PHA has miscalculated 
income resulting in an individual being undercharged for Tenant Rent or 
Total Tenant Payment.
    (B) HUD may revise the amount of de minimis error in this paragraph 
(i)(5) through a rulemaking published in the Federal Register for public 
comment.
    (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; 
88 FR 9668, Feb. 14, 2023]



Sec.  882.809  Waivers.

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

[[Page 104]]



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.
    (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.

[[Page 105]]

    (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;
    (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

[[Page 106]]

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 the 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.
883.314 Broadband infrastructure.

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 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

[[Page 107]]

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 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.

[[Page 108]]

    Annual Income. As defined in part 5 of this title.
    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.
    Covered housing provider. For the Section 8 Housing Assistance 
Payments Programs--State Housing Agencies, ``covered housing provider,'' 
as such term is used in HUD's regulations in 24 CFR part 5, subpart L 
(Protection for Victims of Domestic Violence, Dating Violence, Sexual 
Assault, or Stalking), refers to the HFA or owner, as applicable given 
the responsibilities of the covered housing provider as set forth in 24 
CFR part 5, subpart L. For example, the PHA is the covered housing 
provider responsible for providing the notice of occupancy rights under 
VAWA and certification form described at 24 CFR 5.2005(a), though the 
PHA may provide this notice and form to owners, and charge owners with 
distributing the notice and form to tenants. In addition, the owner is 
the covered housing provider that may choose to bifurcate a lease as 
described at 24 CFR 5.2009(a), while both the PHA and owner are both 
responsible for ensuring that an emergency transfer plan is in place in 
accordance with 24 CFR 5.2005(e), and the owner is responsible for 
implementing the emergency transfer plan when an emergency occurs.
    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.)
    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.

[[Page 109]]

    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 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.
    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

[[Page 110]]

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.
    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; 70 FR 77744, Dec. 30, 2005; 81 FR 80813, Nov. 16, 
2016]



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,

[[Page 111]]

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 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.
    (g) HUD may permit increased distributions of surplus, in excess of 
the amounts otherwise permitted, to profit-motivated owners who 
participate in a HUD-approved initiative or program to preserve below-
market housing stock. The increased distributions will be limited to a 
maximum amount based on market rents and calculated according to HUD 
instructions. Funds that the owner is authorized to retain under section 
236(g)(2) of the National Housing Act are not considered distributions 
to the owner.
    (h) Any State or local law or regulation that restricts 
distributions to an amount lower than permitted by this section or 
permitted by the Commissioner under this paragraph (h) is preempted as 
provided by section 524(f) of the Multifamily Assisted Housing Reform 
and Affordability Act of 1997.

[45 FR 6889, Jan. 30, 1980, as amended at 65 FR 61075, Oct. 13, 2000; 65 
FR 68891, Nov. 15, 2000]



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

[[Page 112]]

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.
    (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,

[[Page 113]]

    (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 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.

[[Page 114]]

    (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.
    (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) The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-
4846), the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 
U.S.C. 4851-4856), and implementing regulations at part 35, subparts A, 
B, H, and R of this title.
    (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; 64 FR 50227, Sept. 
15, 1999]



Sec.  883.313  Audit.

    Where housing assistance under the Section 8 Program is provided for 
projects developed or owned by non-Federal entities (as defined in 2 CFR 
200.69), the audit requirements in 2 CFR part 200, subpart F, shall 
apply.

[80 FR 75941, Dec. 7, 2015]



Sec.  883.314  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and that is subject to a Housing Assistance Payments 
contract executed or renewed after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the owner determines and documents the 
determination that:
    (a) The location of the new construction or substantial 
rehabilitation

[[Page 115]]

makes installation of broadband infrastructure infeasible;
    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92638, Dec. 20, 2016]

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 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

[[Page 116]]

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 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

[[Page 117]]

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 24 CFR 880.504 apply to this section, including 
reference at 24 CFR 880.504(f) to the requirements of 24 CFR part 5, 
subpart L (Protection for Victims of Domestic Violence, Dating Violence, 
Sexual Assault, or Stalking), subject to the requirements of Sec.  
883.105.

[81 FR 80813, Nov. 16, 2016]



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 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.

[[Page 118]]



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.
884.125 Broadband infrastructure.

               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.
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 Management and occupancy reviews.
884.225 PHA reporting requirements. [Reserved]
884.226 Emergency transfers for victims of domestic violence, dating 
          violence, sexual assault, and stalking.

    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

[[Page 119]]

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 5 of this title.
    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.
    Covered housing provider. For the Section 8 Housing Assistance 
Payments Programs, New Construction Set-Aside for Section 515 Rural 
Rental Housing, ``covered housing provider,'' as such term is used in 
HUD's regulations at 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers 
to the owner.
    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. As defined in part 5 of this title.
    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 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.

[[Page 120]]

    Income. Income from all sources of each member of the household as 
determined in accordance with criteria established by HUD and as defined 
in 24 CFR part 5, subpart F.
    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 5 of this title.
    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. As defined in part 5 of this title.
    Total tenant payment. As defined in part 5 of this title.
    Utility allowance. As defined in part 5 of this title.
    Utility reimbursement. As defined in part 5 of this title.
    Very low-income family. As defined in part 5 of this title.

[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; 65 FR 
16723, Mar. 29, 2000; 70 FR 77744, Dec. 30, 2005; 81 FR 80813, Nov. 16, 
2016]



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

[[Page 121]]

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 Contract Rents plus any utility allowances 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; 
65 FR 16723, Mar. 29, 2000]



Sec.  884.106  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 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

[[Page 122]]

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 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

[[Page 123]]

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 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

[[Page 124]]

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 Sec. Sec.  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 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,

[[Page 125]]

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 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 part 5 of this title.

[41 FR 47168, Oct. 27, 1976. Redesignated at 45 FR 6909, Jan. 30, 1980, 
and amended at 49 FR 19947, May 10, 1984; 65 FR 16723, Mar. 29, 2000]



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

[[Page 126]]

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 
part 5 of this title; 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 part 5 of this title; 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 5 of this title 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-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; 65 FR 16723, Mar. 29, 
2000]



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

[[Page 127]]

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.



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.

[[Page 128]]



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.

    Where a non-Federal entity (as defined in 2 CFR 200.69) 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 2 CFR part 200, subpart F, shall apply.

[80 FR 75941, Dec. 7, 2015]



Sec.  884.125  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and that is subject to a Housing Assistance Payments 
contract executed or renewed after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the owner determines and documents the 
determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92638, Dec. 20, 2016]



               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, 
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.

[[Page 129]]



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.

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 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

[[Page 130]]

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 part 5 of this title 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; 65 FR 16723, Mar. 29, 2000]



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 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.

[[Page 131]]

    (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) Termination of tenancy for criminal activity by a covered person 
is subject to 24 CFR 5.858 and 5.859, and termination of tenancy for 
alcohol abuse by a covered person is subject to 24 CFR 5.860.
    (c) In actions or potential actions to terminate tenancy, the owner 
shall follow 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking).
    (d) In the case of failure to pay rent, if the Secretary determines 
that tenants must be provided with adequate notice to secure Federal 
funding that is available due to a Presidential declaration of a 
national emergency:
    (1) The owner must provide the tenant with written termination 
notification that includes such information as required by the 
Secretary; and
    (2) The written termination notification described in paragraph 
(d)(1) of this section must be provided to the tenant at least 30 days 
before termination.

[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; 66 FR 28798, May 
24, 2001; 73 FR 72343, Nov. 28, 2008; 75 FR 66261, Oct. 27, 2010; 81 FR 
80813, Nov. 16, 2016; 86 FR 55701, Oct. 7, 2021]



Sec.  884.217  Maintenance, operation, and inspections.

    (a) Maintenance and operation. The Owner shall maintain and operate 
the project consistent with 24 CFR part 5, subpart G, and shall provide 
all the services, maintenance, and utilities

[[Page 132]]

which the Owner agrees to provide under the Contract, subject to 
abatement of housing assistance payments or other applicable remedies if 
the Owner 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. On forms 
prescribed by HUD, the Owner and Family shall certify, that they have 
inspected the unit and the owner shall certify that the unit is 
compliant with 24 CFR part 5, subpart G, and the criteria provided in 
the prescribed forms. Copies of these reports shall be kept on file by 
the Owner for at least 3 years, and may be required to be electronically 
submitted to HUD.
    (c) Periodic inspections. HUD (or the PHA, as appropriate) will 
inspect or cause to be inspected the contract units and related 
facilities in accordance with the physical inspection requirements in 24 
CFR part 5, subpart G, and at such other times (including prior to 
initial occupancy and renting of any unit) as HUD (or the PHA) may 
determine to be necessary to assure that the Owner is meeting the 
obligation to maintain the units in accordance with 24 CFR part 5, 
subpart G, and to provide the agreed upon utilities and other services.
    (d) Units with health and safety hazards. If HUD (or the PHA, as 
appropriate) notifies the Owner that the Owner has failed to maintain a 
unit that in accordance with 24 CFR part 5, subpart G, and the Owner 
fails to take corrective action within the time prescribed by 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 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 unit. Where this is done, the Owner 
shall be notified that the Owner will be entitled to resumption of 
housing assistance payments for the vacated unit if:
    (1) The unit is restored to in accordance with 24 CFR part 5, 
subpart G;
    (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.

[88 FR 30499, May 11, 2023]



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 5 of this title 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 
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

[[Page 133]]

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 Contract Rent plus any utility allowance, 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.
    (d) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

[56 FR 7541, Feb. 22, 1991, as amended at 60 FR 14845, Mar. 20, 1995; 61 
FR 13594, Mar. 27, 1996; 65 FR 16723, Mar. 29, 2000; 81 FR 12371, Mar. 
8, 2016]



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, 
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]

[[Page 134]]



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 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

[[Page 135]]

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.
    (f) The regulations in 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking) apply to this section.

[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; 73 FR 72343, Nov. 28, 2008; 75 FR 
66261, Oct. 27, 2010; 81 FR 80813, Nov. 16, 2016]



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.
    (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)

[[Page 136]]

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 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.

[[Page 137]]

    (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) 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; 65 
FR 16723, Mar. 29, 2000]



Sec.  884.224  Management and occupancy reviews.

    (a) The contract administrator will conduct management and occupancy 
reviews to determine whether the owner is in compliance with the 
Contract. Such reviews will be conducted in accordance with a schedule 
set out by the Secretary and published in the Federal Register, 
following notice and the opportunity to comment. Where a change in 
ownership or management occurs, a management and occupancy review must 
be conducted within six months.
    (b) HUD or the Contract Administrator may inspect project operations 
and units at any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

[87 FR 37997, June 27, 2022]



Sec.  884.225  PHA reporting requirements. [Reserved]



Sec.  884.226  Emergency transfers for victims of domestic violence, 
dating violence, sexual assault, and stalking.

    (a) Covered housing providers must develop and implement an 
emergency

[[Page 138]]

transfer plan that meets the requirements in 24 CFR 5.2005(e).
    (b) In order to facilitate emergency transfers for victims of 
domestic violence, dating violence, sexual assault, and stalking, 
covered housing providers have discretion to adopt new, and modify any 
existing, admission preferences or transfer waitlist priorities.
    (c) In addition to following requirements in 24 CFR 5.2005(e), when 
a safe unit is not immediately available for a victim of domestic 
violence, dating violence, sexual assault, or stalking who qualifies for 
an emergency transfer, covered housing providers must:
    (1) Review the covered housing provider's existing inventory of 
units and determine when the next vacant unit may be available; and
    (2) Provide a listing of nearby HUD subsidized rental properties, 
with or without preference for persons of domestic violence, dating 
violence, sexual assault, or stalking, and contact information for the 
local HUD field office.
    (d) Each year, covered housing providers must submit to HUD data on 
all emergency transfers requested under 24 CFR 5.2005(e), including data 
on the outcomes of such requests.

[81 FR 80813, Nov. 16, 2016]



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 Management and occupancy reviews.
886.131 Audit.
886.132 Tenant selection.
886.138 Displacement, relocation, and acquisition.
886.139 Emergency transfers for victims of domestic violence, dating 
          violence, sexual assault, and stalking.
886.140 Broadband infrastructure.

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.

[[Page 139]]

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 Management and occupancy reviews.
886.336 Audit.
886.337 Selection preferences.
886.338 Displacement, relocation, and acquisition.
886.339 Emergency transfers for victims of domestic violence, dating 
          violence, sexual assault, and stalking.
886.340 Broadband infrastructure.

    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.



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 5 of this title.
    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.
    Covered housing provider. For the Section 8 Housing Assistance 
Payments Programs--Special Allocations, subpart A of this part, 
``covered housing provider,'' as such term is used in HUD's regulations 
at 24 CFR part 5, subpart L (Protection for Victims of Domestic 
Violence, Dating Violence, Sexual Assault, or Stalking) refers to the 
owner.
    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

[[Page 140]]

projects receiving assistance under 24 CFR part 885).
    Family. As defined in part 5 of this title.
    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 and as defined 
in part 5 of this title.
    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 5 of this title.
    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 project, based on the particular 
circumstances of any assisted tenant in the absence of any Housing 
Assistance Payment.
    Tenant rent. As defined in part 5 of this title.
    Total tenant payment. As defined in part 5 of this title.
    Utility allowance. As defined in part 5 of this title.
    Utility reimbursement. As defined in part 5 of this title.
    Very low-income family. As defined in part 5 of this title.

[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; 65 FR 16723, 
Mar. 29, 2000; 70 FR 77744, Dec. 30, 2005; 81 FR 80813, Nov. 16, 2016]



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

[[Page 141]]

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.
    (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.

[[Page 142]]

    (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 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

[[Page 143]]

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:
    (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

[[Page 144]]

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: (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

[[Page 145]]

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)-(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; 64 FR 50227, Sept. 15, 1999; 88 FR 
30500, May 11, 2023]



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.

[[Page 146]]

    (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 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 
part 5 of this title; selection of families, including verification of 
income, in accordance with part 5 of this title, 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 5 of this title; 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 5 of this title 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; 65 FR 16723, Mar. 
29, 2000]

[[Page 147]]



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 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 part 5 of this title 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 part 5, subpart E, of this title 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; 65 FR 16723, Mar. 29, 
2000]



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 housing that is compliant with 24 CFR part 
5, subpart G, and the Owner shall provide all the services, maintenance, 
and utilities which the Owner agrees to provide under the Contract, 
subject to abatement of housing assistance payments or other applicable 
remedies if the Owner 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. On forms 
prescribed by HUD, the Owner and Family shall certify that they have 
inspected the unit, and the owner shall certify that the unit is 
compliant with 24 CFR part 5, subpart G, and 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 
the contract units in accordance with the requirements in 24 CFR part 5, 
subpart G, and at such other times as may be necessary to assure that 
the owner is meeting contractual obligations.
    (d) Units not free of health and safety hazards. If HUD notifies the 
Owner that the Owner has failed to maintain a unit that is compliant 
with the requirements in 24 CFR part 5, subpart G, and the Owner fails 
to take corrective action within the time prescribed by 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.

[88 FR 30500, May 11, 2023]



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 5 of this title and 
determine whether the family's unit size is still

[[Page 148]]

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 requirements of part 5, subpart E, of this title 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 5, subpart E, of this 
title 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 part 5, subpart E, of this title 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 part 5, subpart E, of 
this title 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) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

[56 FR 7542, Feb. 22, 1991, as amended at 60 FR 14846, Mar. 20, 1995; 61 
FR 11119, Mar. 18, 1996; 65 FR 16723, Mar. 29, 2000; 81 FR 12371, Mar. 
8, 2016]



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

[[Page 149]]

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 
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 (24 CFR part 247) 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

[[Page 150]]

24 CFR parts 247 and 5 shall apply. The provisions of 24 CFR part 5, 
subpart L (Protection for Victims of Domestic Violence, Dating Violence, 
Sexual Assault, or Stalking), apply to this section. The provisions of 
24 CFR part 5, subpart E, of this title 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.

[81 FR 80813, Nov. 16, 2016]



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 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 part 5, subpart E, of this 
title 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 part 5, subpart E, of this 
title, the owner shall comply with the provisions of part 5, subpart E, 
of this title 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; 65 FR 16724, Mar. 29, 
2000]



Sec.  886.130  Management and occupancy reviews.

    (a) The contract administrator will conduct management and occupancy 
reviews to determine whether the owner is in compliance with the 
Contract. Such reviews will be conducted in accordance with a schedule 
set out by the Secretary and published in the Federal Register, 
following notice and the opportunity to comment.

[[Page 151]]

Where a change in ownership or management occurs, a management and 
occupancy review must be conducted within six months.
    (b) HUD or the Contract Administrator may inspect project operations 
and units at any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

[87 FR 37997, June 27, 2022]



Sec.  886.131  Audit.

    Where a non-Federal entity (as defined in 2 CFR 200.69) 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 2 CFR part 200, subpart F, shall apply.

[80 FR 75941, Dec. 7, 2015]



Sec.  886.132  Tenant selection.

    Subpart F of 24 CFR part 5 governs selection of tenants and 
occupancy requirements applicable under this subpart A of part 886. 
Subpart L of 24 CFR part 5 (Protection for Victims of Domestic Violence, 
Dating Violence, Sexual Assault, or Stalking) applies to this section.

[81 FR 80814, Nov. 16, 2016]



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.

[[Page 152]]

    (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 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 part 5 of this 
title, 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

[[Page 153]]

    (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, 
as amended at 65 FR 16724, Mar. 29, 2000]



Sec.  886.139  Emergency transfers for victims of domestic violence,
dating violence, sexual assault, and stalking.

    (a) Covered housing providers must develop and implement an 
emergency transfer plan that meets the requirements in 24 CFR 5.2005(e).
    (b) In order to facilitate emergency transfers for victims of 
domestic violence, dating violence, sexual assault, and stalking, 
covered housing providers have discretion to adopt new, and modify any 
existing, admission preferences or transfer waitlist priorities.
    (c) In addition to following requirements in 24 CFR 5.2005(e), when 
a safe unit is not immediately available for a victim of domestic 
violence, dating violence, sexual assault, or stalking who qualifies for 
an emergency transfer, covered housing providers must: (1) Review the 
covered housing provider's existing inventory of units and determine 
when the next vacant unit may be available; and
    (2) Provide a listing of nearby HUD subsidized rental properties, 
with or without preference for persons of domestic violence, dating 
violence, sexual assault, or stalking, and contact information for the 
local HUD field office.
    (d) Each year, covered housing providers must submit to HUD data on 
all emergency transfers requested under 24 CFR 5.2005(e), including data 
on the outcomes of such requests.

[81 FR 80814, Nov. 16, 2016]



Sec.  886.140  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and that is subject to a Housing Assistance Payments 
contract executed or renewed after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the owner determines and documents the 
determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92638, Dec. 20, 2016]

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.



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]

[[Page 154]]



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 5 of this title.
    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.
    Covered housing provider. For the Section 8 Housing Assistance 
Program for the Disposition of HUD-Owned Projects, under subpart C of 
this part, ``covered housing provider,'' as such term is used in HUD's 
regulations at 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking), refers 
to the owner.
    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. As defined in part 5 of this title.
    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 5 of this title.
    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. As defined in part 5 of this title.
    Total tenant payment. As defined in part 5 of this title.
    Utility allowance. As defined in part 5 of this title.
    Utility reimbursement. As defined in part 5 of this title.
    Very low-income family. As defined in part 5 of this title.

[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; 65 FR 16724, Mar. 29, 2000; 81 
FR 80814, Nov. 16, 2016]

[[Page 155]]



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)-(m) [Reserved]
    (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; 64 FR 50227, Sept. 15, 1999; 88 FR 
30500, May 11, 2023]



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

[[Page 156]]

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:
    (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

[[Page 157]]

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 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.  886.328 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

[[Page 158]]

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; 87 FR 37997, June 27, 
2022]



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 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

[[Page 159]]

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 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,

[[Page 160]]

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);
    (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.



Sec. Sec.  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:

[[Page 161]]

    (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 part 5 of this title; selection of families, including 
verification of income, 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) 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 5 of this title; 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 5 of this title 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, Sept. 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; 65 FR 16724, Mar. 29, 2000]



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

[[Page 162]]

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 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 of assistance of families 
in occupancy before sales closing. After the sale, the owner shall be 
responsible for taking applications, selecting families, and all related 
determinations, in accordance with part 5 of this title. (See 
especially, 24 CFR part 5, subpart F).
    (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, 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. 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.
    (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 part 5 of this title for provisions concerning 
certain assistance for mixed

[[Page 163]]

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; 65 FR 16724, Mar. 29, 2000; 70 FR 77744, Dec. 30, 2005]



Sec.  886.322  [Reserved]



Sec.  886.323  Maintenance, operation, and inspections.

    (a) Maintain housing free of health and safety hazards. The Owner 
shall maintain and operate the project so as to be compliant with 24 CFR 
part 5, subpart G, and the Owner shall provide all the services, 
maintenance, and utilities which the Owner 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 comply with the requirements at 
24 CFR part 5, subpart G.
    (c) Owner and family inspection. Prior to occupancy of any vacant 
unit by a Family, the Owner and the Family shall inspect the unit. The 
Owner shall certify that they have inspected the unit, and the owner 
shall certify that the unit is compliant with 24 CFR part 5, subpart G. 
Copies of these reports shall be kept on file by the owner for at least 
3 years.
    (d) Periodic inspections. HUD will inspect the project (or cause it 
to be inspected) in accordance with the requirements in 24 CFR part 5, 
subpart G, and at such other times as HUD may determine to be necessary 
to assure that the owner is meeting the Owner's obligation to maintain 
the units and the related facilities in accordance with 24 CFR part 5, 
subpart G, and to provide the agreed-upon utilities and other services.
    (e) Failure to maintain housing. If HUD notifies the Owner that he/
she has failed to maintain a unit that is compliant with 24 CFR part 5, 
subpart G, 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 the Family wishes to be 
rehoused in another unit, HUD shall provide assistance in finding such a 
unit for the Family.

[88 FR 30500, May 11, 2023]



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 5 of this title 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

[[Page 164]]

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 part 5 of this title 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 5 of this title 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 part 5 of this title 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 Contact Rent plus any applicable Utility 
Allowance. 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 for 
failure to establish citizenship or eligible immigration status, see 
part 5, subpart E, of this title 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) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

[56 FR 7543, Feb. 22, 1991, as amended at 60 FR 14847, Mar. 20, 1995; 61 
FR 11119, Mar. 18, 1996; 65 FR 16724, Mar. 29, 2000; 81 FR 12371, Mar. 
8, 2016]



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

[[Page 165]]

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 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.

[[Page 166]]

    (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 (24 CFR part 247) 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 
part 247 and 24 CFR part 5 shall apply. The provisions of 24 CFR part 5, 
subpart L (Protection for Victims of Domestic Violence, Dating Violence, 
Sexual Assault, or Stalking) apply to this section. The provisions of 24 
CFR part 5, subpart E, 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.

[81 FR 80814, Nov. 16, 2016]



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:
    (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 part 5, subpart E, of

[[Page 167]]

this title 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 part 5, subpart E, of this 
title, the owner shall comply with the provisions of part 5, subpart E, 
of this title concerning assistance to mixed families, and deferral of 
termination of assistance.
    (f) The regulations of 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking) apply to this section.

[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; 65 FR 16724, Mar. 29, 2000; 73 FR 
72343, Nov. 28, 2008; 75 FR 66261, Oct. 27, 2010; 81 FR 80814, Nov. 16, 
2016]



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.
    (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

[[Page 168]]

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.
    (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.

[[Page 169]]

    (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) 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, as amended at 65 FR 16724, Mar. 29, 2000]



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]

[[Page 170]]



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 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:

[[Page 171]]

    (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 in compliance with applicable HUD lead-based 
paint regulations at part 35, subparts A, B, H, and R of this title.
    (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) 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

[[Page 172]]

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; 64 FR 50227, Sept. 15, 1999]



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 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 Contract Rents plus an applicable Utility Allowances 
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; 65 FR 16427, Mar. 29, 2000]

[[Page 173]]



Sec.  886.335  Management and occupancy reviews.

    (a) The contract administrator will conduct management and occupancy 
reviews to determine whether the owner is in compliance with the 
Contract. Such reviews will be conducted in accordance with a schedule 
set out by the Secretary and published in the Federal Register, 
following notice and the opportunity to comment. Where a change in 
ownership or management occurs, a management and occupancy review must 
be conducted within six months.
    (b) HUD or the Contract Administrator may inspect project operations 
and units at any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

[87 FR 37997, June 27, 2022]



Sec.  886.336  Audit.

    Where a non-Federal entity (as defined in 2 CFR 200.69) is the 
eligible owner of a project receiving financial assistance under this 
part, the audit requirements in 2 CFR part 200, subpart F, shall apply.

[80 FR 75941, Dec. 7, 2015]



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 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

[[Page 174]]

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 part 5 of this 
title, 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 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

[[Page 175]]

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 the Office of Management and Budget under OMB Control 
Number 2506-0121)

[58 FR 43723, Aug. 17, 1993, amended at 65 FR 16724, Mar. 29, 2000]



Sec.  886.339  Emergency transfers for victims of domestic violence, 
dating violence, sexual assault, and stalking.

    (a) Covered housing providers must develop and implement an 
emergency transfer plan that meets the requirements in 24 CFR 5.2005(e).
    (b) In order to facilitate emergency transfers for victims of 
domestic violence, dating violence, sexual assault, and stalking, 
covered housing providers have discretion to adopt new, and modify any 
existing, admission preferences or transfer waitlist priorities.
    (c) In addition to following requirements in 24 CFR 5.2005(e), when 
a safe unit is not immediately available for a victim of domestic 
violence, dating violence, sexual assault, or stalking who qualifies for 
an emergency transfer, covered housing providers must:
    (1) Review the covered housing provider's existing inventory of 
units and determine when the next vacant unit may be available; and
    (2) Provide a listing of nearby HUD subsidized rental properties, 
with or without preference for persons of domestic violence, dating 
violence, sexual assault, or stalking, and contact information for the 
local HUD field office.
    (d) Each year, covered housing providers must submit to HUD data on 
all emergency transfers requested under 24 CFR 5.2005(e), including data 
on the outcomes of such requests.

[81 FR 80814, Nov. 16, 2016]



Sec.  886.340  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and that is subject to a Housing Assistance Payments 
contract executed or renewed after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the owner determines and documents the 
determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92638, Dec. 20, 2016]



PART 887_SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAMS_FAMILY
SELF-SUFFICIENCY PROGRAM--Table of Contents



Sec.
887.101 Purpose, scope, and applicability.
887.103 Definitions.
887.105 Basic requirements of FSS programs.
887.107 Cooperative Agreements.
887.109 Housing assistance and total tenant payments and increases in 
          family income.
887.111 FSS award funds formula.
887.113 FSS funds.

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

    Source: 87 FR 30046, May 17, 2022, unless otherwise noted.

[[Page 176]]



Sec.  887.101  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 Department of Housing and Urban Development (HUD) assistance 
with public and private resources, to enable families eligible to 
receive HUD assistance to achieve economic independence and self-
sufficiency.
    (2) The purpose of this part is to implement the policies and 
procedures applicable to operation of an FSS program under HUD's Section 
8 Housing assistance payments programs, as established under section 23 
of the 1937 Act (42 U.S.C. 1437u).
    (b) Scope. Each owner may implement an FSS program independently or 
by way of a Cooperative Agreement with a Public Housing Agency (PHA) or 
another owner. Each owner that administers an FSS program must do so in 
accordance with the requirements of this part.
    (c) Applicability. This part applies to owners of multifamily rental 
housing properties assisted by Section 8 Housing assistance payments 
programs. See part 984 of this title for program regulations applicable 
to PHAs.
    (d) Non-participation. Tenant participation in an FSS program is 
voluntary. Assistance under Section 8 Housing assistance payments 
programs for a family that elects not to participate in an FSS program 
shall not be refused, delayed or terminated by reason of such election.



Sec.  887.103  Definitions.

    The definitions in Sec.  984.103 of this title apply to this part, 
except that eligible families means tenant families living in 
multifamily assisted housing.



Sec.  887.105  Basic requirements of FSS programs.

    (a) An FSS program that is voluntarily established under this part 
by an owner must comply with the following requirements:
    (1) Shall be operated in conformity with the regulations of this 
part and other Section 8 regulations, codified in 24 CFR parts 5, 402, 
880, 881, 883, and 884, respectively, and with FSS program objectives, 
as described in Sec.  984.102 of this title;
    (2) Shall coordinate supportive services as defined in Sec.  984.103 
of this title;
    (3) Shall have an Action Plan approved by HUD, as described in Sec.  
984.201 of this title, before operating an FSS program;
    (4) When a Program Coordinating Committee (PCC), as described in 
Sec.  984.202 of this title, is available, owners shall work with that 
PCC or shall create their own PCC, either by themselves, or in 
conjunction with other owners;
    (5) Shall comply with the family selection procedures in Sec.  
984.203 of this title;
    (6) May make available and utilize onsite facilities, as described 
in Sec.  984.204 of this title;
    (7) Shall comply with the FSS funds provision, as described in Sec.  
984.302(c) of this title;
    (8) Shall enter into Contracts of Participation with eligible 
families, as described in Sec.  984.303 of this title;
    (9) Shall establish and manage FSS escrow accounts as described in 
Sec.  984.305 of this title;
    (10) Shall report information to HUD as described in Sec.  984.401 
of this title; and
    (11) Shall be operated in compliance with applicable 
nondiscrimination and equal opportunity requirements including, but not 
limited to, those set forth in 24 CFR part 5.
    (b) An owner may employ appropriate staff, including an FSS Program 
Coordinator, to administer its FSS program, and may contract with an 
appropriate organization to establish and administer parts of the FSS 
program.



Sec.  887.107  Cooperative Agreements.

    (a) An owner may enter into a Cooperative Agreement with:
    (1) A local PHA that operates an FSS program, pursuant to Sec.  
984.106 of this title; or
    (2) Another owner that operates an FSS program, pursuant to this 
section.
    (b) Owners that enter into a Cooperative Agreement pursuant to this 
part, must:

[[Page 177]]

    (1) Open any FSS waiting lists to all eligible families residing in 
the properties covered by the Cooperative Agreement.
    (2) Provide periodic escrow amounts to the FSS Program Coordinator 
for FSS families covered by the Cooperative Agreement under this part. 
The Cooperative Agreement must provide that each owner is responsible 
for managing the escrow accounts of their participating families, 
including calculating and tracking of escrow in accordance with Sec.  
984.305 of this title, and set forth the procedures for the sharing of 
escrow information between the PHA and the owner.
    (3) The Cooperative Agreement must clearly specify the terms and 
conditions of such agreement, including the requirements of this 
section, and it must include a process for PHAs and owners to 
communicate with each other about changes in their Action Plan.



Sec.  887.109  Housing assistance and total tenant payments
and increases in family income.

    (a) Housing assistance payment. The housing assistance payment for 
an eligible family participating in the FSS program under this part is 
determined in accordance with the regulations set forth in Sec.  
5.661(e) of this title.
    (b) Total tenant payment. The total tenant payment for an FSS family 
participating in the FSS program is determined in accordance with Sec.  
5.628 of this title.
    (c) 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 an asset 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.



Sec.  887.111  FSS award funds formula.

    The Secretary may establish a formula by which funds for 
administration of the FSS program are awarded consistent with 42 U.S.C. 
1437u(i).



Sec.  887.113  FSS funds.

    Owners may access funding from any residual receipt accounts for the 
property to cover reasonable costs associated with operation of an FSS 
program, including hiring an FSS Program Coordinator or coordinators for 
their FSS program.



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.

            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. 1437f and 3535d.

[[Page 178]]


    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 the printed volume and at www.govinfo.gov.



                       Subpart A_Fair Market Rents



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

    (a) The fair market rents (FMRs) for existing housing are determined 
by HUD and are used in the Section 8 Housing Choice Voucher program (HCV 
program) (part 982 of this title), Section 8 project-based assistance 
programs and other programs requiring their use. In the HCV program, the 
FMRs are used to determine payment standard schedules. In the Section 8 
project-based assistance programs, the FMRs are used to determine the 
maximum initial rent (at the beginning of the term of a housing 
assistance payments contract).
    (b) Fair market rent means the rent, including the cost of utilities 
(except telephone), as established by HUD, pursuant to this subpart, for 
units of varying sizes (by number of bedrooms), that must be paid in the 
market area to rent privately owned, existing, decent, safe and sanitary 
rental housing of modest (non-luxury) nature with suitable amenities.

[64 FR 56911, Oct. 21, 1999, as amended at 81 FR 80580, Nov. 16, 2017]



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. FMRs 
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 the rent for 40 
percent of standard quality rental housing units fall within the FMR 
area. The 40th percentile rent is drawn from the distribution of rents 
of all units within the FMR area that are occupied by recent movers. 
Adjustments are made to exclude public housing units, newly built units 
and substandard units.
    (b) Setting FMRs at the 40th percentile rent. Generally, HUD will 
set the FMRs at the 40th percentile rent, but no lower than 90 percent 
of the previous year's FMR for the FMR area.
    (c) Setting Small Area FMRs. (1) HUD will set Small Area FMRs for 
certain metropolitan FMR areas for use in the administration of tenant-
based assistance under the HCV program. HUD will establish the selection 
values used to determine those metropolitan areas through a Federal 
Register notice on November 16, 2016 and may update the selection values 
through a Federal Register notice, subject to public comment. The 
selection criteria used to determine those metropolitan areas are:
    (i) The number of vouchers under lease in the metropolitan FMR area;
    (ii) The percentage of the standard quality rental stock, within the 
metropolitan FMR area is in small areas (ZIP codes) where the Small Area 
FMR is more than 110 percent of the metropolitan FMR area;
    (iii) The percentage of voucher families living in concentrated low 
income areas;
    (iv) The percentage of voucher families living in concentrated low 
income areas relative to the percentage of all renters within these 
areas over the entire metropolitan area; and
    (v) The vacancy rate for the metropolitan area.
    (2) For purposes of determining applicability of Small Area FMRs to 
a metropolitan area, the term ``concentrated low-income areas'' means:
    (i) Those census tracts in the metropolitan FMR area with a poverty 
rate of 25 percent or more; or
    (ii) Any tract in the metropolitan FMR area where at least 50 
percent of the households earn less than 60 percent of the area median 
income and are designated by HUD as Qualified Census Tracts in 
accordance with section 42 of

[[Page 179]]

the Internal Revenue Code (26 U.S.C. 42).
    (3) If a metropolitan area meets the criteria of paragraph (c)(1) of 
this section, Small Area FMRs will apply to the metropolitan area and 
all PHAs administering HCV programs in that area will be required to use 
Small Area FMRs. A PHA administering an HCV program in a metropolitan 
area not subject to the application of Small Area FMRs may opt to use 
Small Area FMRs by seeking approval from HUD's Office of Public and 
Indian Housing (PIH) through written request to PIH.
    (4) HUD will designate Small Area FMR areas at the beginning of a 
Federal fiscal year, such designations will be permanent, and will make 
new area designations every 5 years thereafter as new data becomes 
available. HUD may suspend a Small Area FMR designation from a 
metropolitan area, or may temporarily exempt a PHA in a Small Area FMR 
metropolitan area from use of the Small Area FMRs, when HUD by notice 
makes a documented determination that such action is warranted. Actions 
that may serve as the basis of a suspension of Small Area FMRs are:
    (i) A Presidentially declared disaster area that results in the loss 
of a substantial number of housing units;
    (ii) A sudden influx of displaced households needing permanent 
housing; or
    (iii) Other events as determined by the Secretary.
    (5) Small Area FMRs only apply to tenant-based assistance under the 
HCV program. However, a PHA may elect to apply Small Area FMRs to 
project-based voucher (PBV) units at 24 CFR part 983 as provided in 
paragraph (h) of this section.
    (d) FMR areas. FMR areas comprise metropolitan areas and 
nonmetropolitan counties and Small Area FMR areas as follows:
    (1) Generally, FMR areas are metropolitan areas and nonmetropolitan 
counties. With several exceptions, the most current Office of Management 
and Budget (OMB) metropolitan area definitions of Metropolitan 
Statistical Areas (MSAs) are used because of their generally close 
correspondence with housing market area definitions. HUD may make 
exceptions to OMB definitions if the MSAs 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, and the Insular Areas of the 
United States.
    (2) Small Area FMR areas are the U.S. Postal Service ZIP code areas 
within a designated metropolitan area.
    (e) 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 American Community Survey conducted by the U.S. 
Census Bureau, which provides statistically reliable rent data.
    (ii) Locally collected survey data acquired through Address-Based 
Mail surveys or Random Digit Dialing (RDD) telephone survey data, based 
on a sampling procedure that uses computers to select statistically 
random samples of rental housing.
    (iii) Statistically valid information, as determined by HUD, 
presented to HUD during the public comment and review period.
    (2) Base-year recent mover adjusted 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.
    (f) Unit size adjustments. (1) For most areas the ratios developed 
incorporating the most recent American Community Survey data 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.

[[Page 180]]

    (g) Manufactured home space rental. The FMR for a manufactured home 
space rental (for the HCV program under 24 CFR part 982) is 40 percent 
of the FMR for a two-bedroom unit for the metropolitan area or non-
metropolitan county, as applicable. Small Area FMRs under paragraph (c) 
of this section do not apply to manufactured home space rentals.
    (h) Small Area FMRs and Project-based vouchers. Small Area FMRs do 
not apply to Project-based vouchers regardless of whether HUD designates 
the metropolitan area or approves the PHA for Small Area FMRs under 
paragraph (c)(3) of this section. The following exceptions apply:
    (1) Where the PHA notice of owner selection under 24 CFR 983.51(d) 
was made on or before the effective dates of both the Small Area FMR 
designation and the PHA administrative policy, the PHA and owner may 
mutually agree to apply the Small Area FMR. The application of the Small 
Area FMRs must be prospective and consistent with the PHA administrative 
plan. The owner and PHA may not subsequently choose to revert back to 
the use of the metropolitan-wide FMRs for the PBV project. If the rent 
to owner will increase as a result of the mutual agreement to apply the 
Small Area FMRs to the PBV project, the rent increase shall not be 
effective until the first annual anniversary of the HAP contract in 
accordance with 24 CFR 983.302(b).
    (2) Where the PHA notice of owner selection under 24 CFR 983.51(d) 
was made after the effective dates of both the Small Area FMR 
designation and the PHA administrative policy, the Small Area FMRs shall 
apply to the PBV project if the PHA administrative plan provides that 
Small Area FMRs are used for all future PBV projects. If the PHA chooses 
to implement this administrative policy, the policy must apply to all 
future PBV projects and the PHA's entire jurisdiction. An owner and the 
PHA may not subsequently choose to apply the metropolitan area FMR to 
the project, regardless of whether the PHA subsequently changes its 
administrative plan to revert to the use of metropolitan-wide FMR for 
future PBV projects.
    (3) For purposes of this section, the term ``effective date of the 
Small Area FMR designation'' means:
    (i) The date that HUD designated a metropolitan area as a Small Area 
FMR area; or
    (ii) The date that HUD approved a PHA request to voluntarily opt to 
use Small Area FMRs for its HCV program, as applicable.
    (4) For purposes of this section, the term ``effective date of the 
PHA administrative policy'' means the date the administrative policy was 
formally adopted as part of the PHA administrative plan by the PHA Board 
of Commissioners or other authorized PHA officials in accordance with 
Sec.  982.54(a).
    (i) Transition of metropolitan areas previously subject to 50th 
percentile FMRs. (1) A metropolitan area designated as 50th percentile 
FMR areas for which the 3-year period has not expired prior to January 
17, 2017 shall transition out of 50th percentile FMRs as follows:
    (i) A 50th percentile FMR area that is designated for Small Area 
FMRs in accordance with paragraph (c) of this section will transition to 
the Small Area FMRs upon the effective date of the Small Area FMR 
designation;
    (ii) A 50th percentile metropolitan FMR area not designated as a 
Small Area FMRs in accordance with paragraph (c) of this section, will 
remain a 50th percentile FMR until the expiration of the three-year 
period, at which time the metropolitan area will revert to the standard 
FMR based on the 40th percentile rent for the metropolitan area.
    (2) A PHA with jurisdiction in a 50th percentile FMR area that 
reverts to the standard 40th percentile FMR may request HUD approval of 
payment standard amounts based on the 50th percentile rent in accordance 
with 24 CFR 982.503(f).
    (3) HUD will calculate the 50th percentile rents for certain 
metropolitan areas for purposes of this transition and to approve 
success rate payment standard amounts in accordance with 24 CFR 
982.503(e). As is the case for determining 40th percentile rent, the 
50th percentile rent is drawn from the distribution of rents of all 
units that are

[[Page 181]]

occupied by recent movers and adjustments are made to exclude public 
housing units, newly built units and substandard units.

[81 FR 80580, Nov. 16, 2016]



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

    (a) Publication of FMRs. FMRs will be published at least annually by 
HUD on the World Wide Web, or in any other manner specified by the 
Secretary. HUD will publish a notice announcing the publication of the 
FMRs in the Federal Register, to be effective October 1 of each year, 
and provide for a minimum of 30 days of public comments and requested 
for reevaluation of the FMRs in a jurisdiction. The FMRs will become 
effective no earlier than 30 days after the date the notice publishes in 
the Federal Register (e.g., if HUD fails to publish FMRs 30 days before 
October 1, the effective date will be 30 days after publication), except 
for areas where HUD receives comments during the minimum 30-day comment 
period requesting reevaluation of the FMRs in a jurisdiction. After HUD 
reviews a request for reevaluation, HUD will post on the World Wide Web 
the final FMRs for the areas that have been reevaluated and publish a 
notice in the Federal Register announcing the publication and the 
effective date.
    (b) Changes in methodology. HUD will publish for comment in the 
Federal Register a document proposing material changes in the method for 
estimating FMRs and shall respond to public comment on the proposed 
material changes in the subsequent Federal Register document announcing 
the availability of new FMRs based on the revised method for estimating 
FMRs.

[81 FR 80581, Nov. 16, 2016]



            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 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]

[[Page 182]]



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 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,

[[Page 183]]

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 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,

[[Page 184]]

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 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

[[Page 185]]

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:
    (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

[[Page 186]]

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 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.

[[Page 187]]

    (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 determination 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 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 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)



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.
891.190 Emergency transfers for victims of domestic violence, dating 
          violence, sexual assault, and stalking.

        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.

 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 Denial of admission, termination of tenancy, and modification of 
          lease.
891.435 Security deposits.

[[Page 188]]

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 Persons with 
                              Disabilities

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 Broadband infrastructure.
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.
891.582 Management and occupancy reviews.
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 Denial of admission, 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.
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 Denial of admission, 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.

Subpart F_For-Profit Limited Partnerships and Mixed-Finance Development 
   for Supportive Housing for the Elderly or Persons with Disabilities

891.800 Purpose.
891.802 Applicability of other provisions.
891.805 Definitions.
891.808 Capital advance funds.
891.809 Limitations on capital advance funds.
891.810 Project rental assistance.
891.813 Eligible uses for assistance provided under this subpart.
891.815 Mixed-finance developer's fee.
891.818 Firm commitment application.
891.820 Civil rights requirements.
891.823 HUD review and approval.
891.825 Mixed-finance closing documents.
891.830 Drawdown.
891.832 Prohibited relationships.
891.833 Monitoring and review.
891.835 Eligible uses of project rental assistance.
891.840 Site and neighborhood standards.
891.848 Project design and cost standards.
891.853 Development cost limits.
891.855 Replacement reserves.
891.860 Operating reserves.
891.863 Maintenance as supportive housing units for elderly persons and 
          persons with disabilities.
891.865 Sanctions.

    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.

[[Page 189]]



                 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 Sec. Sec.  891.205, 891.305, 891.505, and 891.805, as 
applicable.
    Acquisition with or without repair means the purchase of existing 
housing and related facilities.
    Adjusted income as defined in part 5, subpart F of subtitle A of 
this title.
    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 as defined in part 5, subpart F of subtitle A of this 
title. 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 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.
    Covered housing provider. For the Supportive Housing for the Elderly 
and Persons with Disabilities Program, ``covered housing provider,'' as 
such term is used in HUD's regulations at 24 CFR part 5, subpart L 
(Protection for Victims of Domestic Violence, Dating Violence, Sexual 
Assault, or Stalking), refers to the owner (as defined in Sec. Sec.  
891.205 and 891.305).
    Family is defined in 24 CFR 5.403.
    Gross rent means contract rent plus any utility allowance.
    Household (eligible household) means an elderly or disabled 
household (as defined in Sec. Sec.  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, rehabilitated, or acquired as permanent residences for use 
by elderly or disabled households, as applicable. The term includes 
necessary community

[[Page 190]]

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.
    Net family assets is defined in Sec.  5.603 of this title.
    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 requires 15 
percent or more of the estimated development cost to rehabilitate the 
project for a useful life of 40 years. The useful life period commences 
upon execution of a capital advance agreement.
    Replacement reserve account means a project account into which funds 
are deposited, which may be used only with the approval of the Secretary 
for repairs, replacement, capital improvements to the section 202 or 
section 811 units, and retrofitting to reduce the number of units as 
provided by 24 CFR 891.405(d).
    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.
    Single-asset entity, for the purpose of this subpart, means an 
entity in which the mortgaged property is the only asset of the owner, 
and the entity is the only owner of the property.
    Start-up expenses mean necessary costs (to plan a Section 202 or 
Section 811 project, as applicable) incurred by

[[Page 191]]

the Sponsor or Owner prior to initial closing.
    Tenant rent equals total tenant payment less utility allowance, if 
any.
    Total tenant payment means the monthly amount defined in, and 
determined in accordance with part 5, subpart F of subtitle A of this 
title.
    Utility allowance is defined in part 5, subpart F of this subtitle A 
of this title 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).

[61 FR 11956, Mar. 22, 1996, as amended at 66 FR 6225, Jan. 19, 2001; 66 
FR 8175, Jan. 30, 2001; 68 FR 67320, Dec. 1, 2003; 70 FR 54209, Sept. 
13, 2005; 77 FR 5675, Feb. 3, 2012; 78 FR 37112, June 20, 2013; 81 FR 
80814, Nov. 16, 2016; 88 FR 9668, Feb. 14, 2023]



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 Sec. Sec.  
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 as set forth in 24 CFR part 200, subpart 
S.
    (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 atriums, bowling alleys, 
swimming pools, saunas, and jacuzzis. 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. Smoke detectors and alarm devices must be 
installed in accordance with standards and criteria acceptable to HUD 
for the protection of occupants in any dwelling or facility bedroom or 
other primary sleeping area.
    (e) Projects under this part may have on their sites commercial 
facilities for the benefit of residents of the project and of the 
community in which the project is located, so long as the commercial 
facilities are not subsidized with funding under the supportive housing 
programs for the elderly or persons with disabilities. Such commercial 
facilities are considered public accommodations under Title III of the 
Americans with Disabilities Act and must be accessible under the 
requirements of that Act.
    (f) Broadband infrastructure. Any new construction or substantial 
rehabilitation, as substantial rehabilitation is defined by 24 CFR 
5.100, of a building with more than 4 rental units and funded by a grant 
awarded after January 19,

[[Page 192]]

2017 must include installation of broadband infrastructure, as this term 
is also defined in 24 CFR 5.100, except where the owner determines and 
documents the determination that:
    (1) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (2) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (3) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67320, Dec. 1, 2003; 73 
FR 29985, May 23, 2008; 78 FR 37112, June 20, 2013; 81 FR 92638, Dec. 
20, 2016; 82 FR 3623, Jan. 12, 2017]



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 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 Sec. Sec.  
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 Sec. Sec.  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

[[Page 193]]

households, as applicable (or low-income minority families, for projects 
funded under Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 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 
Sec. Sec.  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:

[[Page 194]]

    (i) Management contracts (including associated management fees);
    (ii) Supportive services contracts (including service fees) under 
the Supportive Housing for the Elderly Program;
    (iii) Developer (consultant) contracts; and
    (iv) Contracts for the sale of land.
    (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.

[61 FR 11956, Mar. 22, 1996, as amended at 70 FR 54209, Sept. 13, 2005; 
78 FR 37112, June 20, 2013]



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.



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 Sec. Sec.  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 Sec. Sec.  
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.

[[Page 195]]

    (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 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. The requirements of the Lead-Based Paint 
Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-
Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and 
implementing regulations at part 35, subparts A, B, H, J, and R of this 
title apply to these programs.

[61 FR 11956, Mar. 22, 1996, as amended at 64 FR 50227, Sept. 15, 1999; 
69 FR 34275, June 21, 2004]



Sec.  891.160  Audit requirements.

    Nonprofit organizations receiving assistance under this part are 
subject to the audit requirements of 2 CFR part 200, subpart F.

[78 FR 37112, June 20, 2013, as amended at 80 FR 75941, Dec. 7, 2015]



Sec.  891.165  Duration of capital advance.

    (a) The duration of the fund reservation for a capital advance with 
construction advances is 24 months from the date of issuance of the 
award letter to the date of initial closing. This duration can be up to 
36 months, as approved by HUD on a case-by-case basis.
    (b) The duration of the fund reservation for projects that elect not 
to receive any capital advance before construction completion is 24 
months from the date of issuance of the award letter to the start of 
construction. This duration can be up to 36 months, as approved by HUD 
on a case-by-case basis.

[78 FR 37112, June 20, 2013, as amended at 78 FR 49681, Aug. 15, 2013]

[[Page 196]]



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) Transfer of assets. 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, 
consumer cooperative (under the Section 202 Program), a private 
nonprofit organization (under the Section 811 Program), or an 
organization meeting the definition of ``mixed-finance owner'' in Sec.  
891.805, is part of a transaction that will ensure the continued 
operation of the capital advance units 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.

[61 FR 11956, Mar. 22, 1996, as amended at 70 FR 54209, Sept. 13, 2005; 
78 FR 37113, June 20, 2013]



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, 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]



Sec.  891.190  Emergency transfers for victims of domestic violence,
dating violence, sexual assault, and stalking.

    (a) Covered housing providers must develop and implement an 
emergency transfer plan that meets the requirements in 24 CFR 5.2005(e).
    (b) In order to facilitate emergency transfers for victims of 
domestic violence, dating violence, sexual assault, and stalking, 
covered housing providers have discretion to adopt new, and modify any 
existing, admission preferences or transfer waitlist priorities.
    (c) In addition to following requirements in 24 CFR 5.2005(e), when 
a safe unit is not immediately available for a victim of domestic 
violence, dating violence, sexual assault, or stalking who qualifies for 
an emergency transfer, covered housing providers must:
    (1) Review the covered housing provider's existing inventory of 
units and determine when the next vacant unit may be available; and

[[Page 197]]

    (2) Provide a listing of nearby HUD subsidized rental properties, 
with or without preference for persons of domestic violence, dating 
violence, sexual assault, or stalking, and contact information for the 
local HUD field office.
    (d) Each year, covered housing providers must submit to HUD data on 
all emergency transfers requested under 24 CFR 5.2005(e), including data 
on the outcomes of such requests.

[81 FR 80814, Nov. 16, 2016]



        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 to be used as supportive housing 
for the elderly.
    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-asset 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 includes an 
instrumentality of a 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 be 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) No part of the net earnings of which inures to the benefit of 
any member, founder, contributor, or individual;
    (2) 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) Which is responsible for the operation of the housing assisted 
under this section, except that, in the case of a nonprofit organization 
that is the sponsoring organization of multiple housing projects 
assisted under this

[[Page 198]]

section, HUD may determine the criteria or conditions under which 
financial, compliance, and other administrative responsibilities 
exercised by a single-entity private nonprofit organization that is the 
owner corporation of an individual housing project may be shared or 
transferred to the governing board of such sponsoring organization; and
    (3) Which is approved by HUD as to 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 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 includes an 
instrumentality of a public body.

[61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003; 70 
FR 54209, Sept. 13, 2005; 78 FR 37113, June 20, 2013]



Sec.  891.210  Special project standards.

    (a) In general. 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, except as specified under paragraph 
(b) of this section. If a resident manager is proposed for a project, up 
to two bedrooms could be provided for the resident manager unit.
    (b) Exception. Resident units in Section 202 projects may be two-
bedroom units if a portion of the units are financed by other sources. 
Resident units may be two-bedroom units provided that the square footage 
in excess of the one-bedroom size limits are treated as excess amenities 
as specified in Sec.  891.120.

[78 FR 37113, June 20, 2013]



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.

[[Page 199]]



 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 housing and related facilities to be used as supportive housing 
for persons with disabilities.
    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.
    Owner means a single-asset private 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.

[[Page 200]]

    Private 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.
    Sponsor means any nonprofit entity:
    (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.

[61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003; 70 
FR 54210, Sept. 13, 2005; 78 FR 37113, June 20, 2013]



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 Sec. Sec.  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 Sec. Sec.  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

[[Page 201]]

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 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.

    The requirements of the Lead-Based Paint Poisoning Prevention Act 
(42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction 
Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 
35, subparts A, B, H, J, and R of this title apply to the section 811 
program and to projects funded under Sec. Sec.  891.655 through 891.790.

[69 FR 34276, June 21, 2004]



                      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.

[[Page 202]]

    (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 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.

[[Page 203]]

    (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. With HUD 
approval, reserves may be used to reduce the number of dwelling units, 
provided that the purpose for the reduction is the retrofitting of 
obsolete or unmarketable units.

[61 FR 11956, Mar. 22, 1996, as amended at 68 FR 67321, Dec. 1, 2003]



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 Sec. Sec.  891.205 and 
891.305, respectively); must meet the disclosure and verification 
requirements for Social Security Numbers, as provided by 24 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

[[Page 204]]

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 Sec.  5.657 of this title and 
must adjust the tenant rent. The Owner must also request an appropriate 
adjustment to the project rental assistance payment. Further, the Owner 
must determine whether the household's unit size is still appropriate 
and must carry out any unit transfer in accordance with HUD standards. 
At the time of reexamination, 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 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 Sec.  5.657 of this title 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 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 obtaining 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 rent, or 
project rental assistance payment must be verified.
    (3) Continuation of project rental assistance payment. (i) A 
household shall remain eligible for subsidy 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, nor will the 
unit or residential space be removed from the PRAC. Project rental 
assistance payments 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 Sec.  5.657 of 
this title (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

[[Page 205]]

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).
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

[61 FR 11956, Mar. 22, 1996, as amended at 65 FR 16724, Mar. 29, 2000; 
81 FR 12371, Mar. 8, 2016; 88 FR 9668, Feb. 14, 2023]



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; 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; and any certification of family net assets, 
as provided by 24 CFR 5.659(e);
    (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)

[61 FR 11956, Mar. 22, 1996, as amended at 82 FR 58340, Dec. 12, 2017]



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, 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.

[[Page 206]]

    (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  Denial of admission, termination of tenancy, and 
modification of lease.

    (a) The provisions of part 5, subpart I, of this title apply to 
Section 202 and Section 811 capital advance projects.
    (b) 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).

[66 FR 28798, May 24, 2001]



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 rent or $50, whichever is greater. 
The household (or family) is expected to pay the security deposit from 
its own resources or 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 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

[[Page 207]]

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 rent due under the lease. No 
reimbursement may be claimed for any unpaid tenant 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 Sec. Sec.  891.650 or 891.790, as 
applicable).

[61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023]



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 must 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 rent 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)

[61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023]



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 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

[[Page 208]]

(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 rent, 
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.

[61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023]



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 Persons with 
                              Disabilities



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:
    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

[[Page 209]]

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 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

[[Page 210]]

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 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

[[Page 211]]

    (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 5.628, 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;
    (3) The Sponsor/Borrower may request, at any time, a HUD 
determination of whether a displacement is or would be covered by this 
section.

[61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023]



Sec.  891.515  Audit requirements.

    Nonprofits receiving assistance under this part are subject to the 
audit requirements in 2 CFR part 200, subpart F.

[61 FR 11956, Mar. 22, 1996, as amended at 80 FR 75941, Dec. 7, 2015]

     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):
    Adjusted income as defined in part 5, subpart F of subtitle A of 
this title.
    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

[[Page 212]]

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 24 
CFR 5.403.
    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 5, subpart F of subtitle A of this title.
    Total tenant payment means the monthly amount defined in, and 
determined in accordance with part 5, subpart F of subtitle A of this 
title.
    Utility allowance is defined in part 5, subpart F of subtitle A of 
this title and is determined or approved by HUD.
    Utility reimbursement is defined in part 5, subpart F of subtitle A 
of this title.
    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 and is less after 
the first 60 days of any vacancy.

[61 FR 11956, Mar. 22, 1996, as amended at 66 FR 6225, Jan. 19, 2001; 66 
FR 8174, Jan. 30, 2001; 88 FR 9669, Feb. 14, 2023; 88 FR 75233, Nov. 2, 
2023]



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.

[[Page 213]]

    (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 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

[[Page 214]]

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.
    (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

[[Page 215]]

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;
    (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;

[[Page 216]]

    (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 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

[[Page 217]]

    (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 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

[[Page 218]]

(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  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and funded by a grant awarded after January 19, 2017 must 
include installation of broadband infrastructure, as this term is also 
defined in 24 CFR 5.100, except where the owner determines and documents 
the determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92638, Dec. 20, 2016]



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. 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

[[Page 219]]

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 24 CFR 5.653. 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:
    (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:

[[Page 220]]

    (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.
    (f) The regulations of 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking) apply to this section.

[61 FR 11956, Mar. 22, 1996, as amended at 73 FR 72343, Nov. 28, 2008; 
75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016; 88 FR 75233, 
Nov. 2, 2023]



Sec.  891.580  HAP contract administration.

    HUD is responsible for the administration of the HAP contract.



Sec.  891.582  Management and occupancy reviews.

    (a) The contract administrator will conduct management and occupancy 
reviews to determine whether the owner is in compliance with the HAP 
Contract. Such reviews will be conducted in accordance with a schedule 
set out by the Secretary and published in the Federal Register, 
following notice and the opportunity to comment. Where a change in 
ownership or management occurs, a management and occupancy review must 
be conducted within six months.
    (b) HUD or the Contract Administrator may inspect project operations 
and units at any time.
    (c) Equal Opportunity reviews may be conducted by HUD at any time.

[87 FR 37997, June 27, 2022]



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

[[Page 221]]

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:
    (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

[[Page 222]]

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 to the restrictions 
governing prohibited contractual relationships described in Sec. Sec.  
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 Sec. Sec.  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 Sec. Sec.  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

[[Page 223]]

with the approval of, or as directed by, HUD.



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 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 requirement for 
Social Security numbers and sign and submit consent forms for obtaining 
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 subpart F of 24 CFR 
part 5, which governs selection of tenants and occupancy requirements. 
The provisions of 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking) apply 
to this section.
    (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

[[Page 224]]

believes he or she is being discriminated against on a prohibited basis.
    (f) Records. Records on applicants and approved eligible families, 
which provide racial, ethnic, gender, handicap status, and place of 
previous residency 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 Sec.  5.657 of this title 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, 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 Sec.  5.657 of this title 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, or 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 Sec.  
5.657 of this title 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.
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

(Approved by the Office of Management and Budget under control number 
2502-0371)

[61 FR 11956, Mar. 22, 1996, as amended at 70 FR 77744, Dec. 30, 2005; 
73 FR 72343, Nov. 28, 2008; 75 FR 66262, Oct. 27, 2010; 81 FR 12371, 
Mar. 8, 2016; 81 FR 80815, Nov. 16, 2016; 88 FR 9669, Feb. 14, 2023]



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.

[[Page 225]]



Sec.  891.630  Denial of admission, termination of tenancy, and modification of lease.

    (a) The provisions of part 5, subpart I, of this title apply to 
Section 202 direct loan projects.
    (b) 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.
    (c) In actions or potential actions to terminate tenancy, the owner 
shall follow 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking).

[66 FR 28798, May 24, 2001, as amended at 73 FR 72343, Nov. 28, 2008; 75 
FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016]



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.

[[Page 226]]



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.
    (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 5, subpart F of this title. In the 
case of an individual residing in an intermediate care facility for 
individuals with a developmental disability 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 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.

[[Page 227]]

    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 family that includes a person with 
a disability (that meets the definition of a handicapped family 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 24 CFR 5.603, as modified by the definition of 
``annual income'' in this section.
    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 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.
    Tenant rent equals total tenant payment less utility allowance, if 
any.
    Total tenant payment means the monthly amount defined in, and 
determined in accordance with part 5, subpart F of this title.
    Utility allowance is defined in part 5, subpart F of this title and 
is determined or approved by HUD.
    Utility reimbursement is defined in part 5, subpart F of this title.
    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.

[61 FR 11956, Mar. 22, 1996, as amended at 88 FR 9669, Feb. 14, 2023; 88 
FR 75233, Nov. 2, 2023]



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

[[Page 228]]

projects are provided in Sec. Sec.  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 Sec. Sec.  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 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

[[Page 229]]

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 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 Sec. Sec.  891.125 and 891.320. In 
addition to the requirements in Sec. Sec.  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 
Sec. Sec.  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.

[[Page 230]]

    (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 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

[[Page 231]]

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.
    (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 5, subpart F of this title. 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 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.

[61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023]



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

[[Page 232]]

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, religion, sex 
(including actual or perceived sexual orientation and gender identity), 
disability, familial status, 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).
    (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).

[61 FR 11956, Mar. 22, 1996, as amended at 88 FR 75233, Nov. 2, 2023]



Sec.  891.745  Replacement reserve.

    The general requirements for the replacement reserve are provided in 
Sec.  891.605. For projects funded under Sec. Sec.  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.

[[Page 233]]

    (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 family that includes a person 
with a disability (that meets the definition of ``handicapped family'' 
in 24 CFR 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 part 5, subpart F of this title, as 
modified by 24 CFR 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 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, including filing a complaint with HUD's Office of Fair Housing 
and Equal Opportunity, if the applicant believes the applicant is being 
discriminated against on the basis of race, color, religion, sex 
(including actual or perceived sexual orientation and gender identity), 
disability, familial status, 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 Sec.  5.657 of this title and 
must adjust the rent. The Borrower must also request an appropriate 
adjustment to the project assistance payment. Further, the Borrower must 
determine whether the family's unit size is still appropriate and must 
carry out any unit transfer in accordance with HUD standards. At the 
time of reexamination, 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. For requirements regarding the 
signing and submitting of consent forms by families

[[Page 234]]

for obtaining wage and claim information from State Wage Information 
Collection Agencies, see 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 the 
provisions in Sec.  5.657 of this title 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. 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 obtaining wage and claim information from 
State Wage Information Collection agencies, see 24 CFR part 5, subpart 
B. Any change in the family's income or other circumstances that result 
in an adjustment in the total tenant payment, tenant rent, or 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 payments 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 
payments 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 Sec.  5.657 of this title 
(as modified in Sec.  891.105) 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.
    (4) Streamlined income determination. An owner may elect to follow 
the provisions of 24 CFR 5.657(d).

(Approved by the Office of Management and Budget under control number 
2502-0204 and 2505-0267)

[61 FR 11956, Mar. 22, 1996, as amended at 81 FR 12371, Mar. 8, 2016; 88 
FR 75234, Nov. 2, 2023]



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.



Sec.  891.770  Denial of admission, termination of tenancy, 
and modification of lease.

    (a) The provisions of part 5, subpart I, of this title apply to 
Section 202 direct loan projects with Section 162 assistance for 
disabled families.
    (b) 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).

[66 FR 28798, May 24, 2001]



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.

[[Page 235]]



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 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

[[Page 236]]

sources plus the vacancy payment exceed contract rent.



Subpart F_For-Profit Limited Partnerships and Mixed-Finance Development 
   for Supportive Housing for the Elderly or Persons with Disabilities

    Source: 70 FR 54210, Sept. 13, 2005, unless otherwise noted.



Sec.  891.800  Purpose.

    The purpose of this subpart is to establish rules allowing for, and 
regulating the participation of, for-profit limited partnerships, of 
which the sole general partner is a Nonprofit Organization meeting the 
requirements of 12 U.S.C. 1701q(k)(4) or 42 U.S.C. 8032(k)(6), in the 
development of housing for the elderly and persons with disabilities 
using mixed-finance development methods. These rules are intended to 
develop more supportive housing for the elderly and persons with 
disabilities by allowing the use of federal assistance, private capital 
and expertise, and low-income housing tax credits.



Sec.  891.802  Applicability of other provisions.

    The provisions of 24 CFR part 891, subparts A through D, apply to 
this subpart F unless otherwise stated.



Sec.  891.805  Definitions.

    In addition to the definitions at Sec. Sec.  891.105, 891.205, and 
891.305, the following definitions apply to this subpart:
    Mixed-finance owner, for the purpose of the mixed-finance 
development of housing under this part, means a single-asset, for-profit 
limited partnership of which a private nonprofit organization is the 
sole general partner. The purpose of the mixed-finance owner must 
include the promotion of the welfare of the elderly or persons with 
disabilities, as appropriate.
    Private nonprofit organization, for the purpose of this subpart, 
means:
    (1) In the case of supportive housing for the elderly:
    (i) An organization that meets the requirements of the definition of 
``private nonprofit organization'' in Sec.  891.205; and
    (ii) A for-profit limited partnership, the sole general partner of 
which owns at least one-hundredth of one percent of the partnership 
assets, whereby the sole general partner is either: an organization 
meeting the requirements of Sec.  891.205 or a for-profit corporation 
wholly owned and controlled by one or more organizations meeting the 
requirements of Sec.  891.205 or a limited liability company wholly 
owned and controlled by one or more organizations meeting the 
requirements of Sec.  891.205. If the project will include units 
financed with the use of federal Low-Income Housing Tax Credits and the 
organization is a limited partnership, the requirements of section 42 of 
the IRS code, including the requirements of section 42(h)(5), apply. The 
general partner may also be the sponsor, so long as it meets the 
requirements of this part for sponsors and general partners.
    (2) In the case of supportive housing for persons with disabilities:
    (i) An organization that meets the requirements of the definition of 
``private nonprofit organization'' in Sec.  891.305; and
    (ii) A for-profit limited partnership, the sole general partner of 
which owns at least one-hundredth of one percent of the partnership 
assets, whereby the sole general partner is either: an organization 
meeting the requirements of Sec.  891.305 or a corporation owned and 
controlled by an organization meeting the requirements of Sec.  891.305. 
If the project will include units financed with the use of federal Low-
Income Housing Tax Credits and the organization is a limited 
partnership, the requirements of section 42 of the IRS code, including 
the requirements of section 42(h)(5), apply. The general partner may 
also be the sponsor, so long as it meets the requirements of this part 
for sponsors and general partners.

[78 FR 37113, June 20, 2013]



Sec.  891.808  Capital advance funds.

    (a) HUD is authorized to provide capital advance funds to expand the 
supply of supportive housing for the elderly and persons with 
disabilities in accordance with the rules and regulations of

[[Page 237]]

the Section 202 and Section 811 supportive housing programs. For mixed-
finance projects, HUD provides a capital advance funds reservation to 
the sponsor, which transfers the fund reservation to the mixed-finance 
owner meeting the requirements of this subpart. The sponsor may transfer 
the fund reservation directly to the owner or to the general partner of 
the owner, or the sponsor may be the general partner of the mixed-
finance owner if the sponsor meets the applicable statutory and 
regulatory requirements.
    (b) Developments built with mixed-finance funds may combine Section 
202 or Section 811 units with other units, which may or may not benefit 
from federal assistance. The number of Section 202 or Section 811 
supportive housing units must not be less than the number specified in 
the agreement letter for a capital advance. In the case of a Section 811 
mixed-finance project, the additional units cannot cause the project to 
exceed the applicable Section 811 project size limit if they will also 
house persons with disabilities.



Sec.  891.809  Limitations on capital advance funds.

    Capital advances are not available in connection with:
    (a) Acquisition of facilities currently owned and operated by the 
sponsor as housing for the elderly, except with rehabilitation as 
defined in 24 CFR 891.105;
    (b) The financing or refinancing of federally assisted or insured 
projects;
    (c) Facilities currently owned and operated by the sponsor as 
housing for persons with disabilities, except with rehabilitation as 
defined in 24 CFR 891.105; or
    (d) Units in Section 202 direct loan projects previously refinanced 
under the provisions of section 811 of the American Homeownership and 
Economic Opportunity Act of 2000, 12 U.S.C. 1701q note.



Sec.  891.810  Project rental assistance.

    Project Rental Assistance is defined in Sec.  891.105. Project 
Rental Assistance is provided for operating costs, not covered by tenant 
contributions, attributable to the number of units funded by capital 
advances under the Section 202 and Section 811 supportive housing 
programs, subject to the provisions of 24 CFR 891.445. The sponsor of a 
mixed-finance development must obtain the necessary funds from a source 
other than project rental assistance funds for operating costs related 
to non-202 or -811 units.



Sec.  891.813  Eligible uses for assistance provided under this subpart.

    (a) Assistance under this subpart may be used to finance the 
construction, reconstruction, or rehabilitation of a structure or a 
portion of a structure; or the acquisition of a structure to be used as 
supportive housing for the elderly; or the acquisition of housing to be 
used as supportive housing for persons with disabilities. Such 
assistance may also cover the cost of real property acquisition, site 
improvement, conversion, demolition, relocation, and other expenses that 
the Secretary determines are necessary to expand the supply of 
supportive housing for the elderly and persons with disabilities.
    (b) Assistance under this subpart may not be used for excess 
amenities, as stated in Sec.  891.120(c), or for Section 202 
``prohibited facilities,'' as stated in Sec.  891.220. Such amenities or 
Section 202 prohibited facilities may be included in a mixed-finance 
development only if:
    (1) The amenities or prohibited facilities are not financed, 
maintained, or operated with funds provided under the Section 202 or 
Section 811 program;
    (2) The amenities or prohibited facilities are designed with 
appropriate safeguards for the residents' health and safety; and
    (3) The assisted residents are not required to use, participate in, 
or pay a fee for the use or maintenance of the amenities or prohibited 
facilities, although they are permitted to do so voluntarily. Any fee 
charged for the use, maintenance, or access to amenities or prohibited 
facilities by residents must be reasonable and affordable for all 
residents of the development.
    (c) Notwithstanding any other provision of this section, Sec.  
891.315 on ``prohibited facilities'' shall apply to mixed-

[[Page 238]]

finance developments containing units assisted under Section 811.

[70 FR 54210, Sept. 13, 2005, as amended at 78 FR 37114, June 20, 2013]



Sec.  891.815  Mixed-finance developer's fee.

    (a) Mixed-finance developer's fee. A mixed-finance developer may 
include, on an up-front or deferral basis, or a combination of both, a 
fee to cover reasonable profit and overhead costs.
    (b) Mixed-finance developer's fee cap. No mixed-finance developer's 
fee may be a greater percentage of the total project replacement costs 
than the percentage allowed by the state housing finance agency or other 
tax credit allocating agency in the state in which the mixed-finance 
development is sited. In no event may the mixed-finance developer's fee 
exceed 15 percent of the total project replacement cost.
    (c) Sources of mixed-finance developer's fee. The mixed-finance 
developer's fee may be paid from project income or project sources of 
funding other than Section 202 or 811 capital advances, project rental 
assistance, or tenant rents.



Sec.  891.818  Firm commitment application.

    The sponsor will submit the firm commitment application including 
the mixed-finance proposal in a form described by HUD.



Sec.  891.820  Civil rights requirements.

    The mixed-finance development must comply with the following: all 
fair housing and accessibility requirements, including the design and 
construction requirements of the Fair Housing Act; the requirements of 
section 504 of the Rehabilitation Act of 1973; accessibility 
requirements, project standards, and site and neighborhood standards 
under 24 CFR 891.120, 891.125, 891.210, 891.310, and 891.320, as 
applicable; and 24 CFR 8.4(b)(5), which prohibits the selection of a 
site or location which has the purpose or effect of excluding persons 
with disabilities from federally assisted programs or activities.



Sec.  891.823  HUD review and approval.

    HUD will review and may approve or disapprove the firm commitment 
application and mixed finance proposal.



Sec.  891.825  Mixed-finance closing documents.

    The mixed-finance owner must submit the mixed-finance closing 
documents in the form prescribed by HUD. The materials shall be 
submitted after the firm commitment has been issued and prior to capital 
advance closing.



Sec.  891.830  Drawdown.

    (a) Upon its approval of the executed mixed-finance closing 
documents and other documents submitted and upon determining that such 
documents are satisfactory, and after the capital advance closing, HUD 
may approve the drawdown of capital advance funds in accordance with the 
HUD-approved drawdown schedule.
    (b) Non-capital advance funds may be disbursed before capital 
advance proceeds or the capital advance funds may be drawn down in an 
approved ratio to other funds, in accordance with a drawdown schedule 
approved by HUD.
    (c) Each drawdown of funds constitutes a certification by the mixed-
finance owner that:
    (1) All the representations and warranties submitted in accordance 
with this subpart continue to be valid, true, and in full force and 
effect;
    (2) All parties are in compliance with their obligations pursuant to 
this subpart, which, by their terms, are applicable at the time of the 
drawdown of funds;
    (3) All conditions precedent to the drawdown of the funds by the 
mixed-finance owner have been satisfied;
    (4) The capital advance funds drawn down will be used only for 
eligible costs actually incurred in accordance with the provisions of 
this subpart and the approved mixed-finance project, which include costs 
stated in 12 U.S.C. 1701q(h) and 42 U.S.C. 8013(h). Capital advance 
funds may be used for paying off bridge or construction financing, or 
repaying or collateralizing bonds, but only for the portion of such 
financing or bonds that was used for capital advance units; and

[[Page 239]]

    (5) The amount of the drawdown is consistent with the ratio of 202 
or 811 supportive housing units to other units.

[70 FR 54210, Sept. 13, 2005, as amended at 78 FR 37114, June 20, 2013]



Sec.  891.832  Prohibited relationships.

    (a) Paragraph (a) of Sec.  891.130, describing conflicts of 
interest, applies to mixed finance developments.
    (b) Paragraph (b) of Sec.  891.130, describing identity of interest, 
does not apply to mixed-finance developments.

[78 FR 37114, June 20, 2013]



Sec.  891.833  Monitoring and review.

    HUD shall monitor and review the development during the construction 
and operational phases in accordance with the requirements that HUD 
prescribes. In order for units assisted under the 202 and 811 programs 
to continue to receive project rental assistance, they must be operated 
in accordance with all contractual agreements among the parties and 
other HUD regulations and requirements. It is the responsibility of the 
mixed-finance owner and Nonprofit Organization to ensure compliance with 
the preceding sentence.



Sec.  891.835  Eligible uses of project rental assistance.

    (a) Section 202 or 811 project rental assistance may be used to pay 
the necessary and reasonable operating costs, as defined in 24 CFR 
891.105 and approved by HUD, not met from project income and attributed 
to Section 202 or 811 supportive housing units. Operating cost standards 
under 24 CFR 891.150 apply to developments under this part.
    (b) Section 202 or 811 project rental assistance may not be used to 
pay for:
    (1) Debt service on construction or permanent financing, or any 
refinancing thereof, for any units in the development, including the 202 
or 811 supportive housing units;
    (2) Cash flow distributions to owners; or
    (3) Creation of reserves for non-202 or -811 units.
    (c) HUD-approved operating costs attributable to common areas or to 
the development as a whole, such as groundskeeping costs and general 
administrative costs, may be paid from project rental assistance on a 
pro-rata basis according to the percentage of 202 or 811 supportive 
housing units as compared to the total number of units.



Sec.  891.840  Site and neighborhood standards.

    For section 202 or 811 mixed-finance developments, the site and 
neighborhood standards described at Sec.  891.125 and Sec.  891.320 
apply to the entire mixed-finance development.



Sec.  891.848  Project design and cost standards.

    (a) The project design and cost standards at Sec.  891.120 apply to 
mixed-finance developments under this subpart, with the exception of 
Sec.  891.120(c), subject to the provisions of Sec.  891.813(b).
    (b) For Section 202 mixed-finance developments, the prohibited 
facilities requirements described at Sec.  891.220 shall apply to only 
the capital advance-funded portion of the Section 202 mixed-finance 
developments under this subpart, subject to the provisions of Sec.  
891.813(b).
    (c) For Section 811 mixed-finance developments, the prohibited 
facilities requirements described at Sec.  891.315 shall apply to the 
entire mixed-finance development.

[78 FR 37114, June 20, 2013]



Sec.  891.853  Development cost limits.

    The Development Cost Limits for development activities, as 
established at Sec.  891.140, apply to Section 202 or 811 supportive 
housing units in mixed-finance developments under this subpart.



Sec.  891.855  Replacement reserves.

    (a) The mixed-finance owner shall establish and maintain a 
replacement reserve account for Section 202 or 811 supportive housing 
units. This account must meet all the requirements of 24 CFR 891.405.
    (b) The mixed-finance owner may obtain a disbursement from the 
reserve only if the funds will be used to pay for capital replacement 
costs for the Section 202 or 811 supportive housing units in the mixed-
finance development and in accordance with the terms of the regulatory 
and operating agreement. In

[[Page 240]]

the case of repairs to common elements, the Section 202/811 replacement 
reserve can be used on a pro rata basis based on the percentage of 
Section 202 or 811 units in the building whose common elements are being 
repaired. In the event of a disposition of the mixed-finance 
development, or the dissolution of the owner, any Section 202 or 811 
funds remaining in the replacement reserve account must remain dedicated 
to the Section 202 or 811 supportive housing units to ensure their long-
term viability, or as otherwise agreed by HUD.
    (c) Subject to HUD's approval, reserves may be used to reduce the 
number of Section 202 or 811 dwelling units in the development for the 
purpose of retrofitting units that are obsolete or unmarketable.



Sec.  891.860  Operating reserves.

    (a) The mixed-finance owner shall maintain an operating reserve 
account in an amount sufficient to cover the operating expenses of the 
development for at least a three-month period.
    (b) Project income, project rental assistance, tenant rents, and tax 
credit equity may be used to fund the operating reserve account.
    (c) Amounts derived from Section 202 or 811 (e.g., project income, 
project rental assistance, and tenant rents) in operating reserve 
accounts may only be used for the operating expenses of the 202 or 811 
units.



Sec.  891.863  Maintenance as supportive housing units for elderly
persons and persons with disabilities.

    (a) The mixed-finance owner must develop and continue to operate the 
same number of supportive housing units for elderly persons or persons 
with disabilities, as stated in the use agreement or other document 
establishing the number of assisted units, for a 40-year period.
    (b) If a mixed-finance development proposal provides that the 
Section 202 or 811 supportive housing units will be floating units, the 
mixed-finance owner must operate the HUD-approved percentage of Section 
202 or 811 supportive housing units, and maintain the percentage 
distribution of bedroom sizes of Section 202 or 811 supportive housing 
units for the entire term of the very low-income use restrictions on the 
development. Any foreclosure, sale, or other transfer of the development 
must be subject to a covenant running with the land requiring the 
continued adherence to the very low-income use restrictions for the 
Section 202 or 811 supportive housing units.
    (c) The owner must ensure that Section 202 or 811 supportive housing 
units in the development are and continue to be comparable to unassisted 
units in terms of location, size, appearance, and amenities. If due to a 
change in the partnership structure it becomes necessary to establish a 
new owner partnership or to transfer the supportive housing project, the 
new or revised owner must be a single-purpose entity and the use 
restrictions must remain in effect as provided above.



Sec.  891.865  Sanctions.

    In the event that Section 202 or 811 supportive housing units are 
not developed and operated in accordance with all applicable federal 
requirements, HUD may impose sanctions on the participating parties and 
seek legal or equitable relief in enforcing all requirements under 
Section 202, the Housing Act of 1959, or Section 811 of the National 
Affordable Housing Act, all implementing regulations and requirements 
and contractual obligations under the mixed-finance documents.

                        PARTS 892	899 [RESERVED]

[[Page 241]]



CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, 
               DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT




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


  Editorial Note: Nomenclature changes to chapter IX appear at 59 FR 
14090, Mar. 25, 1994.
Part                                                                Page
900-901

[Reserved]

902             Public Housing Assessment System............         243
903             Public housing agency plans.................         263
904             Low rent housing homeownership opportunities         278
905             The Public Housing Capital Fund Program.....         323
906             Public housing homeownership programs.......         371
907             Substantial default by a public housing 
                    agency..................................         382
908             Electronic transmission of required family 
                    data for public housing, Indian housing, 
                    and the Section 8 rental certificate, 
                    rental voucher, and moderate 
                    rehabilitation programs.................         384
943             Public housing agency consortia and joint 
                    ventures................................         386
945             Designated housing--Public housing 
                    designated for occupancy by disabled, 
                    elderly, or disabled and elderly 
                    families................................         390
960             Admission to, and occupancy of, public 
                    housing.................................         399
963             Public Housing--Contracting with resident-
                    owned businesses........................         426
964             Tenant participation and tenant 
                    opportunities in public housing.........         429
965             PHA-owned or leased projects--General 
                    provisions..............................         446
966             Public housing lease and grievance procedure         458
970             Public housing program--Demolition or 
                    disposition of public housing projects..         470
971             Assessment of the reasonable revitalization 
                    potential of certain public housing 
                    required by law.........................         483
972             Conversion of public housing to tenant-based 
                    assistance..............................         489

[[Page 242]]

982             Section 8 tenant-based assistance: housing 
                    choice voucher program..................         506
983             Project-based voucher (PBV) program.........         591
984             Section 8 and public housing family self-
                    sufficiency program.....................         626
985             Section 8 management assessment program 
                    (SEMAP) and small rural PHA assessments.         643
990             The public housing operating fund program...         657
1000            Native American housing activities..........         678
1001-1002

 [Reserved]

1003            Community development block grants for 
                    Indian tribes and Alaska native villages         737
1004

[Reserved]

1005            Loan guarantees for Indian housing (Eff. 
                    until June 18, 2024)....................         773
1005            Loan guarantees for Indian housing (Eff. 
                    June 18, 2024)..........................         777
1006            Native Hawaiian Housing Block Grant Program.         825
1007            Section 184A loan guarantees for Native 
                    Hawaiian housing........................         845
1008-1699

 [Reserved]

[[Page 243]]

                        PARTS 900	901 [RESERVED]



PART 902_PUBLIC HOUSING ASSESSMENT SYSTEM--Table of Contents



                      Subpart A_General Provisions

Sec.
902.1 Purpose, scope, and general matters.
902.3 Definitions.
902.5 Applicability.
902.9 PHAS scoring.
902.11 PHAS performance designation.
902.13 Frequency of PHAS assessments.

                 Subpart B_Physical Condition Indicator

902.20 [Reserved]
902.21 Physical condition standards for public housing.
902.22 Inspection of PHA projects.
902.24 [Reserved]
902.25 Physical condition scoring and thresholds.
902.26 [Reserved]

                 Subpart C_Financial Condition Indicator

902.30 Financial condition assessment.
902.33 Financial reporting requirements.
902.35 Financial condition scoring and thresholds.

                Subpart D_Management Operations Indicator

902.40 Management operations assessment.
902.43 Management operations performance standards.
902.44 Adjustment for physical condition and neighborhood environment.
902.45 Management operations scoring and thresholds.

                Subpart E_Capital Fund Program Indicator

902.50 Capital Fund program assessment.
902.53 Capital Fund program scoring and thresholds.

                         Subpart F_PHAS Scoring

902.60 Data collection.
902.62 Failure to submit data.
902.64 PHAS scoring and audit reviews.
902.66 Withholding, denying, and rescinding designation.
902.68 [Reserved]
902.69 PHA right of petition and appeal.

                 Subpart G_PHAS Incentives and Remedies

902.71 Incentives for high performers.
902.73 PHAs with deficiencies.
902.75 Troubled performers.
902.79 Verification and records.
902.81 Resident petitions for remedial action.
902.83 Sanctions for troubled performer PHAs.

       Subpart H_Assessment of Small Rural Public Housing Agencies

Sec.
902.101 Definitions of small rural PHAs.
902.103 Public housing assessment of small rural PHAs
902.105 Troubled small rural PHAs
902.107 Withholding, denying, and rescinding troubled designation.
902.109 Right to petition and appeal troubled designation.
902.111 Sanctions for troubled small rural PHAs.
902.113 Incentives for small rural PHAs high-performers.

    Authority: 42 U.S.C. 1437d(j), 42 U.S.C. 3535(d), 1437z-10.

    Source: 76 FR 10149, Feb. 23, 2011, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  902.1  Purpose, scope, and general matters.

    (a) Purpose. The purpose of the Public Housing Assessment System 
(PHAS) is to improve the delivery of services in public housing and 
enhance trust in the public housing system among public housing agencies 
(PHAs), public housing residents, and the general public, by providing a 
management tool for effectively and fairly measuring the performance of 
a PHA in essential housing operations of projects, on a program-wide 
basis and individual project basis, and providing rewards for high 
performers and remedial requirements for poor performers.
    (b) Scope. PHAS is a strategic measure of the essential housing 
operations of projects and PHAs. PHAS does not evaluate the compliance 
of a project or PHA with every HUD-wide or program-specific requirement 
or objective. Although not specifically evaluated through PHAS, PHAs are 
responsible for complying with nondiscrimination and equal opportunity 
requirements, including but not limited to those specified in 24 CFR 
5.105, for affirmatively furthering fair housing, requirements under 
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and 
requirements of other federal programs under

[[Page 244]]

which the PHA is receiving assistance. A PHA's adherence to these 
requirements will be monitored in accordance with the applicable program 
regulations and the PHA's Annual Contributions Contract (ACC).
    (c) PHAS indicators. HUD will assess and score the performance of 
projects and PHAs based on the indicators, which are more fully 
addressed in Sec.  902.9: Physical condition, financial condition, 
management operations, and the Capital Fund program.
    (d) Assessment tools. HUD will make use of uniform and objective 
criteria for the physical inspection of projects and PHAs and the 
financial assessment of projects and PHAs, and will use data from 
appropriate agency data systems to assess management operations. For the 
Capital Fund program indicator, HUD will use information provided in the 
electronic Line of Credit Control System (eLOCCS), the Public Housing 
Information Center (PIC), or their successor systems. On the basis of 
this data, HUD will assess and score the results, advise PHAs of their 
scores, and identify low-scoring and poor-performing projects and PHAs 
so that these projects and PHAs will receive the appropriate attention 
and assistance.
    (e) Small PHAs. A PHA with fewer than 250 units that does not 
convert to asset management will be considered as one project by HUD.
    (f) HUD's scoring procedures will be published from time to time in 
the Federal Register for public comment.



Sec.  902.3  Definitions.

    As used in this part:
    Act means the U.S. Housing Act of 1937 (42 U.S.C. 1437 et seq.)
    Alternative management entity (AME) is a receiver, private 
contractor, private manager, or any other entity that is under contract 
with a PHA, under a management agreement 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.
    Assessed fiscal year is the PHA fiscal year that has been/is being 
assessed under PHAS.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing.
    Capital Fund-troubled refers to a PHA that does not meet the minimum 
passing score of 5 points or 50 percent under the Capital Fund 
indicator.
    Corrective Action Plan means a plan, as provided in Sec.  902.73(a), 
that is developed by a PHA that specifies the actions to be taken, 
including timetables, that shall be required to correct deficiencies 
identified under any of the PHAS indicators and subindicators, and 
identified as a result of a PHAS assessment, when a memorandum of 
agreement (MOA) is not required.
    Days mean calendar days, unless otherwise specified.
    Decent, safe, sanitary housing and in good repair (DSS/GR) is HUD's 
standard for acceptable basic housing conditions and the level to which 
a PHA is required to maintain its public housing.
    Deficiency means any finding or determination that requires 
corrective action, or any score below 60 percent of the available points 
for the physical condition, financial condition, or management 
operations indicators, and any score below 50 percent for the Capital 
Fund indicator. In the context of physical condition and physical 
inspection in subpart B of this part, ``deficiency'' means a specific 
problem, as described in the Dictionary of Deficiency Definitions, such 
as a hole in a wall or a damaged refrigerator in the kitchen that can be 
recorded for inspectable items.
    Dictionary of Deficiency Definitions means the documents published 
in the Federal Register that contain the inspection standards and 
scoring values pursuant to 24 CFR part 5, subpart G.
    Direct Funded RMC (DF-RMC) means a Resident Management Corporation 
to which HUD directly provides operating and capital assistance under 
the provisions of 24 CFR 964.225(h).
    Inspectable areas (or area) mean any of the three major components 
of public housing that are inspected, which are: inside, outside, and 
unit.
    Inspectable item means the individual parts, such as walls, 
kitchens, bathrooms, and other things, to be inspected in an inspectable 
area.
    Memorandum of Agreement (MOA) is defined in Sec.  902.75(b).

[[Page 245]]

    Resident Management Corporation (RMC) is defined in 24 CFR 964.7.
    Unit-weighted average means the average of the PHA's individual 
indicator scores, weighted by the number of units in each project, 
divided by the total number of units in all of the projects of the PHA. 
In order to compute a unit-weighted average, an individual project score 
for a particular indicator is multiplied by the number of units in each 
project to determine a ``weighted value.'' For example, for a PHA with 
two projects, one with 200 units and a score of 90, and the other with 
100 units and a score of 60, the unit-weighted average score for the 
indicator would be (200 x 90 + 100 x 60)/300 = 80.

[76 FR 10149, Feb. 23, 2011, as amended at 88 FR 30500, May 11, 2023]



Sec.  902.5  Applicability.

    (a) PHAs, RMCs, AMEs. This part applies to PHAs, Resident Management 
Corporations (RMCs), and AMEs. This part is also applicable to RMCs that 
receive direct funding from HUD in accordance with section 20 of the 
1937 Act (DF-RMCs).
    (1) Scoring of RMCs and AMEs. (i) RMCs and DF-RMCs will be assessed 
and issued their own numeric scores under PHAS based on the public 
housing or portions of public housing that they manage and the 
responsibilities they assume that can be scored under PHAS. References 
in this part to PHAs include RMCs, unless stated otherwise. References 
in this part to RMCs include DF-RMCs, unless stated otherwise.
    (ii) AMEs are not issued PHAS scores. The performance of the AME 
contributes to the PHAS score of the project(s)/PHA(s) for which they 
assumed management responsibilities.
    (2) ACC. The ACC makes a PHA legally responsible for all public 
housing operations, except where DF-RMC assumes management operations.
    (i) Because the PHA and not the RMC or AME is ultimately responsible 
to HUD under the ACC, the PHAS score of a PHA will be based on all of 
the projects covered by the ACC, including those with management 
operations assumed by an RMC or AME (including a court-ordered or 
administrative receivership agreement, if applicable).
    (ii) A PHA's PHAS score will not be based on projects managed by a 
DF-RMC.
    (3) This part does not apply to Moving-to-Work (MTW) agencies that 
are specifically exempted in their grant agreement.
    (b) Implementation of PHAS. The regulations in this part are 
applicable to PHAs beginning with the first fiscal year end date after 
the effective date of this rule, and thereafter.



Sec.  902.9  PHAS scoring.

    (a) Indicators and subindicators. Each PHA will receive an overall 
PHAS score, rounded to the nearest whole number, based on the four 
indicators: Physical condition, financial condition, management 
operations, and the Capital Fund program. Each of these indicators 
contains subindicators, and the scores for the subindicators are used to 
determine a single score for each of these PHAS indicators. Individual 
project scores are used to determine a single score for the physical 
condition, financial condition, and management operations indicators. 
The Capital Fund program indicator score is entity-wide.
    (b) Overall PHAS score and indicators. The overall PHAS score is 
derived from a weighted average of score values for the four indicators, 
as follows:
    (1) The physical condition indicator is weighted 40 percent (40 
points) of the overall PHAS score. The score for this indicator is 
obtained as indicated in subpart B of this part.
    (2) The financial condition indicator is weighted 25 percent (25 
points) of the overall PHAS score. The score for this indicator is 
obtained as indicated in subpart C of this part.
    (3) The management operations indicator is weighted 25 percent (25 
points) of the overall PHAS score. The score for this indicator is 
obtained as indicated in subpart D of this part.
    (4) The Capital Fund program indicator is weighted 10 percent (10 
points) of the overall PHAS score for all Capital Fund program grants 
for which

[[Page 246]]

fund balances remain during the assessed fiscal year. The score for this 
indicator is obtained as indicated in subpart E of this part.



Sec.  902.11  PHAS performance designation.

    All PHAs that receive a PHAS assessment shall receive a performance 
designation. The performance designation is based on the overall PHAS 
score and the four indicator scores, as set forth below.
    (a) High performer. (1) A PHA that achieves a score of at least 60 
percent of the points available under the financial condition, physical 
condition, and management operations indicators and at least 50 percent 
of the points available under the Capital Fund indicator, and achieves 
an overall PHAS score of 90 percent or greater of the total available 
points under PHAS 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.
    (2) High performers will be afforded incentives that include relief 
from reporting and other requirements, as described in Sec.  902.71.
    (b) Standard performer. (1) A PHA that is not a high performer shall 
be designated a standard performer if the PHA achieves an overall PHAS 
score of at least 60 percent, and at least 60 percent of the available 
points for the physical condition, financial condition, and management 
operations indicators, and at least 50 percent of the available points 
for the Capital Fund indicator.
    (2) At HUD's discretion, a standard performer may be required by the 
field office to submit and operate under a Corrective Action Plan.
    (c) Substandard performer. A PHA shall be designated a substandard 
performer if the PHA achieves a total PHAS score of at least 60 percent 
and achieves a score of less than 60 percent under one or more of the 
physical condition, financial condition, or management operations 
indicators. The PHA shall be designated as substandard physical, 
substandard financial, or substandard management, respectively. The HUD 
office with jurisdiction over the PHA shall require a Corrective Action 
Plan if the deficiencies have not already been addressed in a current 
Corrective Action Plan.
    (d) Troubled performer. (1) A PHA that achieves an overall PHAS 
score of less than 60 percent shall be designated as a troubled 
performer.
    (2) In accordance with section 6(j)(2)(A)(i) of the Act (42 U.S.C. 
1437d(j)(2)(A)(i)), a PHA that receives less than 50 percent under the 
Capital Fund program indicator under subpart E of this part will be 
designated as a troubled performer and subject to the sanctions provided 
in section 6(j)(4) of the Act (42 U.S.C. 1437(d)(j)(4)).



Sec.  902.13  Frequency of PHAS assessments.

    The frequency of a PHA's PHAS assessments is determined by the size 
of the PHA's Low-Rent program and its PHAS designation. HUD may, due to 
unforeseen circumstances or other cause as determined by HUD, extend the 
time between assessments by direct notice to the PHA and relevant 
resident organization or resident management entity, and any other 
general notice that HUD deems appropriate.
    (a) Small PHAs. HUD will assess and score the performance of a PHA 
with fewer than 250 public housing units, as follows:
    (1) A small PHA that is a high performer may receive a PHAS 
assessment every 3 years;
    (2) A small PHA that is a standard or substandard performer may 
receive a PHAS assessment every other year; and
    (3) All other small PHAs may receive a PHAS assessment every year, 
including a PHA that is designated as troubled or Capital Fund-troubled 
in accordance with Sec.  902.75.
    (b) Frequency of scoring for PHAs with 250 units or more. (1) All 
PHAs, other than stated in paragraph (a) of this section, may be 
assessed on an annual basis.
    (2) The physical condition score for each project will determine the 
frequency of inspections of each project in accordance with the 
inspection cycle laid out in 24 CFR 5.705(c). The PHAS physical 
condition indicator score for an assessment period shall be calculated 
by taking the unit-weighted average of the most recent physical

[[Page 247]]

condition score for each project, except that, starting July 1, 2023, no 
new physical condition indicator will be issued for a PHA until every 
project under the PHA has been inspected on or after July 1, 2023.
    (3) If a PHA is designated as a troubled performer, all projects 
will receive a physical condition inspection regardless of the 
individual project physical condition score.
    (4) In the baseline year, every PHA will receive an overall PHAS 
score and in all four of the PHAS indicators: Physical condition; 
financial condition; management operations; and Capital Fund program. 
This will allow a baseline for the physical condition inspections and 
the 3-2-1 inspection schedule, as well as a baseline year for the small 
deregulated PHAs.
    (c) Financial submissions. HUD shall not issue a PHAS score for the 
unaudited and audited financial information in the years that a PHA is 
not being assessed under PHAS. Although HUD shall not issue a PHAS score 
under such circumstances, a PHA shall comply with the requirements for 
submission of annual unaudited and audited financial statements in 
accordance with subpart C of this part and 24 CFR 5.801.

[76 FR 10149, Feb. 23, 2011, as amended at 88 FR 30500, May 11, 2023]



                 Subpart B_Physical Condition Indicator



Sec.  902.20  [Reserved]



Sec.  902.21  Physical condition standards for public housing.

    Public housing must be maintained in a manner that meets the 
physical condition standards set forth in 24 CFR part 5, subpart G.

[88 FR 30500, May 11, 2023]



Sec.  902.22  Inspection of PHA projects.

    The PHA's score for the physical condition indicator is based on an 
independent inspection of a PHA's project(s) provided by HUD and using 
the requirements and timelines laid out in 24 CFR part 5, subpart G, to 
ensure projects meet acceptable basic housing conditions. Mixed-finance 
projects will be subject to the physical condition inspections.

[88 FR 30501, May 11, 2023]



Sec.  902.24  [Reserved]



Sec.  902.25  Physical condition scoring and thresholds.

    (a) Scoring. Under the physical condition indicator, a score will be 
calculated for individual projects, as well as for the overall condition 
of a PHA's public housing portfolio.
    (b) Overall PHA physical condition indicator score. The overall 
physical condition indicator score is a unit-weighted average of project 
scores. The sum of the unit-weighted values is divided by the total 
number of units in the PHA's portfolio to derive the overall physical 
condition indicator score.
    (c) Thresholds. (1) The project or projects' 100-point physical 
condition score is converted to a 40-point basis for the overall 
physical condition indicator score. The project scores on the 100-point 
basis are multiplied by .40 in order to derive a 40-point equivalent 
score to compute the overall physical condition score and overall PHAS 
score.
    (2) In order to receive a passing score under the physical condition 
indicator, the PHA must achieve a score of at least 24 points, or 60 
percent.
    (3) A PHA that receives fewer than 24 points will be categorized as 
a substandard physical condition agency.



Sec.  902.26  [Reserved]



                 Subpart C_Financial Condition Indicator



Sec.  902.30  Financial condition assessment.

    (a) Objective. The objective of the financial condition indicator is 
to measure the financial condition of each public housing project within 
a PHA's public housing portfolio for the purpose of evaluating whether 
there are sufficient financial resources to support the provision of 
housing that is DSS/GR. Individual project scores for financial 
condition, as well as overall financial condition scores, will be 
issued.

[[Page 248]]

    (b) Financial reporting standards. A PHA's financial condition will 
be assessed under this indicator by measuring the combined performance 
of all public housing projects in each of the subindicators listed in 
Sec.  902.35, on the basis of the annual financial report provided in 
accordance with Sec.  902.33.
    (c) Exclusions. Mixed-finance projects are excluded from the 
financial condition indicator.



Sec.  902.33  Financial reporting requirements.

    (a) Annual financial report. All PHAs must submit their unaudited 
and audited financial data to HUD on an annual basis. The financial 
information must be:
    (1) Prepared in accordance with Generally Accepted Accounting 
Principles (GAAP), as further defined by HUD in supplementary guidance; 
and
    (2) Submitted electronically in the format prescribed by HUD using 
the Financial Data Schedule (FDS).
    (b) Annual unaudited financial information report filing dates. The 
unaudited financial information to be submitted to HUD in accordance 
with paragraph (a) of this section must be submitted to HUD annually, no 
later than 2 months after the PHA's fiscal year end, with no penalty 
applying until the 16th day of the 3rd month after the PHA's fiscal year 
end, in accordance with Sec.  902.62.
    (c) Annual audited financial information compliance dates. Audited 
financial statements will be required no later than 9 months after the 
PHA's fiscal year end, in accordance with the Single Audit Act and 2 CFR 
part 200, subpart F.
    (d) Year-end audited financial information. All PHAs that meet the 
federal assistance threshold stated in the Single Audit Act and 2 CFR 
part 200, subpart F, must also submit year-end audited financial 
information.
    (e) Submission of information. In addition to the submission of 
information required by paragraph (a) of this section, a PHA shall 
provide one copy of the completed audit report package and the 
Management Letter issued by the Independent Auditor to the local HUD 
field office having jurisdiction over the PHA.

[76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75941, Dec. 7, 2015]



Sec.  902.35  Financial condition scoring and thresholds.

    (a) Scoring. (1) Under the financial condition indicator, a score 
will be calculated for each project based on the values of financial 
condition subindicators and an overall financial condition score, as 
well as audit and internal control flags. Each financial condition 
subindicator has several levels of performance, with different point 
values for each level.
    (2) The financial condition score for projects will be based on the 
annual financial condition information submitted to HUD for each project 
under 24 CFR 990.280 and 990.285. The financial condition score for PHAs 
will be based on a unit-weighted average of project scores.
    (b) Subindicators of the financial condition indicator. The 
subindicators of financial condition indicator are:
    (1) Quick Ratio (QR). The QR compares quick assets to current 
liabilities. Quick assets are cash and assets that are easily 
convertible to cash and do not include inventory. Current liabilities 
are those liabilities that are due within the next 12 months. A QR of 
less than one indicates that the project's ability to make payments on a 
timely basis may be at risk.
    (2) Months Expendable Net Assets Ratio (MENAR). The MENAR measures a 
project's ability to operate using its net available, unrestricted 
resources without relying on additional funding. This ratio compares the 
adjusted net available unrestricted resources to the average monthly 
operating expenses. The result of this calculation shows how many months 
of operating expenses can be covered with currently available, 
unrestricted resources.
    (3) Debt Service Coverage Ratio (DSCR). The DSCR is the ratio of net 
operating income available to make debt payments, to the amount of the 
debt payments. This subindicator is used if the PHA has taken on long-
term obligations. A DSCR of less than one would indicate that the 
project would have difficulty generating sufficient cash

[[Page 249]]

flow to cover both its expenses and its debt obligations.
    (c) Overall PHA financial condition indicator score. The overall 
financial condition indicator score is a unit-weighted average of 
project scores. The sum of the weighted values is then divided by the 
total number of units in the PHA's portfolio to derive the overall 
financial condition indicator score.
    (d) Thresholds. (1) The PHA's financial condition score is based on 
a maximum of 25 points.
    (2) In order for a PHA to receive a passing score under the 
financial condition indicator, the PHA must achieve a score of at least 
15 points, or 60 percent of the available points under this indicator.
    (3) A PHA that receives fewer than 15 points available under this 
indicator will be categorized as a substandard financial condition 
agency.



                Subpart D_Management Operations Indicator



Sec.  902.40  Management operations assessment.

    (a) Objective. The objective of the management operations indicator 
is to measure the PHA's performance of management operations through the 
management performance of each project.
    (b) Exclusions. Mixed-finance projects are excluded from the 
management operations indicator.



Sec.  902.43  Management operations performance standards.

    (a) Management operations subindicators. The following subindicators 
listed in this section will be used to assess the management operations 
of projects and PHAs, consistent with section 6(j)(1) of the Act (42 
U.S.C. 1437d(j)(1)). Individual project scores for management 
operations, as well as overall PHA management operations scores, will be 
issued.
    (1) Occupancy. This subindicator measures the occupancy for the 
project's fiscal year, adjusted for allowable vacancies.
    (2) Tenant accounts receivable. This subindicator measures the 
tenant accounts receivable of a project against the tenant charges for 
the project's fiscal year.
    (3) Accounts payable. This subindicator measures the money that a 
project owes to vendors at the end of the project's fiscal year for 
products and services purchased on credit against total operating 
expenses.
    (b) Assessment under the Management Operations Indicator. Projects 
will be assessed under this indicator through information that is 
electronically submitted to HUD through the FDS.



Sec.  902.44  Adjustment for physical condition and neighborhood environment.

    (a) General. In accordance with section 6(j)(1)(I)(2) of the Act (42 
U.S.C. 1437d(j)(1)(I)(2)), the overall management operations score for a 
project will be adjusted upward to the extent that negative conditions 
are caused by situations outside the control of the project. These 
situations are related to the poor physical condition of the project or 
the overall depressed condition of the major census tract in which a 
project is located. The intent of this adjustment is to avoid penalizing 
such projects, through appropriate application of the adjustment.
    (b) Definitions. Definitions and application of physical condition 
and neighborhood environment factors are:
    (1) Physical condition adjustment applies to projects at least 28 
years old, based on the unit-weighted average Date of Full Availability 
(DOFA) date.
    (2) Neighborhood environment adjustment applies to projects located 
in census tracts where at least 40 percent of the families have an 
income below the poverty rate, as documented by the most recent census 
data. If a project is located in more than one census tract, the census 
data for the census tract where the majority of the project's units are 
located shall be used.
    (c) Adjustment for physical condition and neighborhood environment. 
HUD will adjust the management operations score of a project, subject to 
one or both of the physical condition and neighborhood environment 
conditions. The adjustments will be made to the overall management 
operations score for each project so as to reflect the difficulty in 
managing the projects. In

[[Page 250]]

each instance where the actual management operations score is rated 
below the maximum score of 25 points, one point each will be added for 
physical condition and neighborhood environment, but not to exceed the 
maximum number of 25 points available for the management operations 
indicator.
    (d) Application of adjustment. The adjustment for physical condition 
and neighborhood environment will be calculated by HUD and applied to 
all eligible projects.



Sec.  902.45  Management operations scoring and thresholds.

    (a) Scoring. Under the management operations indicator, HUD will 
calculate a score for each project, as well as for the overall 
management operations of a PHA, that reflects weights based on the 
relative importance of the individual management subindicators.
    (b) Overall PHA management operations indicator score. The overall 
management operations indicator score is a unit-weighted average of 
project scores. The sum of the weighted values is divided by the total 
number of units in the PHA's portfolio to derive the overall management 
operations indicator score.
    (c) Thresholds. (1) The PHA's management operations score is based 
on a maximum of 25 points.
    (2) In order to receive a passing score under the management 
operations indicator, a PHA must achieve a score of at least 15 points 
or 60 percent.
    (3) A PHA that receives fewer than 15 points will be categorized as 
a substandard management operations agency.



                Subpart E_Capital Fund Program Indicator



Sec.  902.50  Capital Fund program assessment.

    (a) Objective. The Capital Fund program indicator examines the 
period of time taken by a PHA to obligate funds and occupy units in 
relation to statutory deadlines for obligation for all Capital Fund 
program grants for which fund balances remain during the assessed fiscal 
year. Funds from the Capital Fund program under section 9(d) of the Act 
(42 U.S.C. 1437g(d)) do not include HOPE VI program funds.
    (b) Applicability. This indicator is applicable on a PHA-wide basis, 
and not to individual projects. This indicator is not applicable to PHAs 
that choose not to participate in the Capital Fund program under section 
9(d) of the Act.
    (c) Capital Fund subindicators. The subindicators pursuant to 
section 9(d) of the Act are:
    (1) Timeliness of fund obligation. This subindicator examines the 
period of time it takes for a PHA to obligate funds from the Capital 
Fund program under section 9(j)(1) of the 1937 Act (42 U.S.C. 
1437g(9)(j)).
    (2) Occupancy rate. This subindicator measures the PHA's occupancy 
rate as of the end of the PHA's fiscal year.
    (d) Method of assessment. The assessment required under the Capital 
Fund program indicator will be performed through analysis of obligated 
amounts in HUD's eLOCCS (or its successor) for all Capital Fund program 
grants that were open during the assessed fiscal year. This subindicator 
measures a statutory requirement for the Capital Fund program. Other 
aspects of the Capital Fund program will be monitored by HUD through 
other types of reviews, and in this indicator through considering 
occupancy rates.
    (1) PHAs are responsible to ensure that their Capital Fund program 
information is submitted to eLOCCS by the submission due date.
    (2) A PHA may not appeal its PHAS score, Capital Fund program score, 
or both, based on the fact that it did not submit its Capital Fund 
program information to eLOCCS and/or the PIC systems by the submission 
due date.



Sec.  902.53  Capital Fund program scoring and thresholds.

    (a) Scoring. The Capital Fund program indicator score provides an 
assessment of a PHA's ability to obligate Capital Fund program grants in 
a timely manner on capital and modernization needs.
    (b) Thresholds. (1) The PHA's Capital Fund program score is based on 
a maximum of 10 points.

[[Page 251]]

    (2) In order to receive a passing score under the Capital Fund 
program indicator, a PHA must achieve a score of at least 5 points, or 
50 percent.



                         Subpart F_PHAS Scoring



Sec.  902.60  Data collection.

    (a) Fiscal year reporting period--limitation on changes after PHAS 
effective date. To allow for a period of consistent assessments to 
refine and make necessary adjustments to PHAS, a PHA is not permitted to 
change its fiscal year for the first 3 full fiscal years following the 
effective date of this regulation, unless such change is approved by HUD 
for good cause.
    (b) Request for extension of time to submit unaudited financial 
information. In the event of extenuating circumstances, a PHA may 
request extensions of time to submit its unaudited financial 
information. To receive an extension, a PHA must ensure that HUD 
receives the extension request electronically 15 days before the 
submission due date. The PHA's electronic extension request must include 
an objectively verifiable justification as to why the PHA cannot submit 
the information by the submission due date. PHAs shall submit their 
requests for extensions of time for the submission of unaudited 
financial information through the FASS-PH Secure Systems Web site. HUD 
shall forward its determination electronically to the requesting PHA.
    (c) Request for waiver of due date for PHA submission of audited 
financial information. (1) HUD, for good cause, may grant PHAs a waiver 
of the due date of the submission of audited financial information to 
HUD. HUD shall consider written requests from PHAs for a waiver of the 
report submission due date (established by the Single Audit Act and 2 
CFR part 200, subpart F, as no later than 9 months after the end of the 
fiscal year). The PHA's written request for a waiver of the due date of 
the submission of audited financial information must include an 
objectively verifiable justification as to why the PHA cannot submit the 
information by the submission due date. A PHA shall submit its written 
request for such a waiver, 30 days prior to the submission due date, to 
its local field office. HUD shall forward its written determination of 
the waiver request to the PHA and, if appropriate, establish a new 
submission due date for the audited financial information.
    (2) A waiver of the due date for the submission of audited financial 
information to HUD does not relieve a PHA of its responsibility to 
submit its audited information to OMB's Federal Audit Clearinghouse no 
later than 9 months after the end of its fiscal year.
    (d) Rejected unaudited financial submissions. When HUD rejects a 
PHA's year-end unaudited financial information after the due date, a PHA 
shall have 15 days from the date of the rejection to resubmit the 
information without a penalty being applied, in accordance with Sec.  
902.62.
    (e) Late points and late presumptive failure. Late points and late 
presumptive failure will only be applied to the financial condition 
indicator since the management operations information is derived from 
the financial condition submission.
    (f) Score change. A management operations score can change as a 
result of the audited submission since the management operations 
information is derived from the financial condition submission.

[76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75941, Dec. 7, 2015]



Sec.  902.62  Failure to submit data.

    (a) Failure to submit data by due date. (1) If a PHA without a 
finding of good cause by HUD does not submit its year-end financial 
information, required by this part, or submits its unaudited year-end 
financial information more than 15 days past the due date, appropriate 
sanctions may be imposed, including a reduction of one point in the 
total PHAS score for each 15-day period past the due date.
    (2) If the unaudited year-end financial information is not received 
within 3 months past the due date, or extended due date, the PHA will 
receive a presumptive rating of failure for its unaudited information 
and shall receive zero points for its unaudited financial information 
and the final financial condition indicator score. The

[[Page 252]]

subsequent timely submission of audited information does not negate the 
score of zero received for the unaudited year-end financial information 
submission.
    (3) The PHA's audited financial statement must be received no later 
than 9 months after the PHA's fiscal year-end, in accordance with the 
Single Audit Act and 2 CFR part 200, subpart F. If the audited financial 
statement is not received by that date, the PHA will receive a 
presumptive rating of failure for the financial condition indicator.
    (b) Verification of information submitted. (1) A PHA's year-end 
financial information and any supporting documentation are subject to 
review by an independent auditor, as authorized by section 6(j)(6) of 
the Act (42 U.S.C. 1437(d)(j)(6)). 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 the financial condition indicator, and 
a lower overall PHAS score.
    (2) A PHA that cannot provide justifying documentation to HUD for 
the assessment under any indicator(s) or subindicator(s) shall receive a 
score of zero for the relevant indicator(s) or subindicator(s) and its 
overall PHAS score shall be lowered accordingly.
    (c) Failure to submit. If a PHA does not submit its unaudited or 
audited information, it will receive a zero for management operations.

[76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75941, Dec. 7, 2015]



Sec.  902.64  PHAS scoring and audit reviews.

    (a) Adjustments to PHAS score. (1) Adjustments to the score may be 
made after a PHA's audit report for the fiscal year being assessed is 
transmitted to HUD. If significant differences are noted between 
unaudited and audited results, a PHA's PHAS score will be adjusted in 
accordance with the audited results.
    (2) A PHA's PHAS score under individual indicators or subindicators, 
or its overall PHAS score, may be changed by HUD in accordance with data 
included in the audit report or obtained through such sources as HUD 
project management and other reviews, investigations by HUD's Office of 
Fair Housing and Equal Opportunity, investigations or audits by HUD's 
Office of Inspector General, or reinspection by HUD, as applicable.
    (b) Issuance of a score by HUD. (1) An overall PHAS score will be 
issued for each PHA after the later of one month after the submission 
due date for financial data or one month after submission by the PHA of 
its financial data. The overall PHAS score becomes the PHA's final PHAS 
score after any adjustments requested by the PHA and determined 
necessary under the processes provided in Sec. Sec.  902.25(d), 
902.35(a), and 902.68; any adjustments resulting from the appeal process 
provided in Sec.  902.69; and any adjustments determined necessary as a 
result of the independent public accountant (IPA) audit.
    (2) Each PHA (or RMC) shall post a notice of its final PHAS score 
and designation in appropriate conspicuous and accessible locations in 
its offices within 2 weeks of receipt of its final PHAS score and 
designation. In addition, HUD will post every PHA's PHAS score and 
designation on HUD's Internet site.
    (c) Review of audit. (1) Quality control review. HUD may undertake a 
quality control review of the audit work papers or as part of the 
Department's ongoing quality assurance process.
    (2) Determination of deficiency. If HUD determines that the PHA's 
financial statements, electronic financial submission, or audit are 
deficient, it shall notify the PHA of such determination in writing. The 
PHA will have 30 days in which to respond to the notice of deficiency 
and to establish that the determination is erroneous. Following 
consideration of any PHA response, HUD will issue a final determination 
in writing to the PHA.
    (i) Deficient financial statements. Deficient financial statements 
are statements that are not presented, in some material respect, in 
accordance with accounting principles generally accepted in the United 
States, as set forth by the Government Accounting Standards Board, or if 
applicable, the Financial Accounting Standards Board.

[[Page 253]]

    (ii) Deficient electronic submission. A deficient electronic 
financial submission is a filing that was not made, in some material 
respect, in accordance with HUD requirements or attested to in 
accordance with the Standards for Attestation Engagements issued by the 
American Institute of Certified Public Accountants or Generally Accepted 
Government Auditing Standards.
    (iii) Deficient audit. A deficient audit is one that was not 
performed, in some material respect, in compliance with Generally 
Accepted Government Auditing Standards; Generally Accepted Auditing 
Standards; the Single Audit Act and 2 CFR part 200, subpart F, when 
applicable; or HUD requirements.
    (3) HUD actions. If HUD determines that the financial statements, 
electronic financial submission, or audit are deficient, HUD may adjust 
the financial indicator score to zero and/or reduce the overall PHAS 
score in accordance with the provisions of this section. Additionally, 
if HUD determines that the audit is deficient, HUD may, at its 
discretion, elect to serve as the audit committee for the PHA for the 
next fiscal year and select the audit firm that will perform the audit 
in question.

[76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  902.66  Withholding, denying, and rescinding designation.

    (a) Withholding designation. In exceptional circumstances, even 
though a PHA has satisfied all of the PHAS indicators for high performer 
or standard performer designation, HUD may conduct any review as it may 
determine necessary, and may deny or rescind incentives or high 
performer designation or standard performer designation, in the case of 
a PHA that:
    (1) Is operating under a special agreement with HUD (e.g., a civil 
rights compliance agreement);
    (2) Is involved in litigation that bears directly upon the physical, 
financial, or management performance of a PHA;
    (3) Is operating under a court order;
    (4) Demonstrates substantial evidence of fraud or misconduct, 
including evidence that the PHA's certifications, submitted in 
accordance with this part, are not supported by the facts, as evidenced 
by such sources as a HUD review, routine reports, 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 of a 
PHA's required compliance with applicable laws and regulations, 
including areas not assessed under PHAS. Areas of substantial 
noncompliance include, but are not limited to, noncompliance with civil 
rights, nondiscrimination and fair housing laws and regulations, or the 
ACC. Substantial noncompliance casts doubt on the capacity of a PHA to 
preserve and protect its public housing projects and operate them 
consistent with federal laws and regulations.
    (b) High performer and standard designations. If a high performer 
designation is denied or rescinded, the PHA shall be designated either a 
standard performer, substandard performer, or troubled performer, 
depending on the nature and seriousness of the matter or matters 
constituting the basis for HUD's action. If a standard performer 
designation is denied or rescinded, the PHA shall be designated as a 
substandard performer or troubled performer.
    (c) Effect on score. The denial or rescission of a designation of 
high performer or standard performer shall not affect the PHA's 
numerical PHAS score, except where the denial or rescission is under 
paragraph (a)(4) of this section.



Sec.  902.68  [Reserved]



Sec.  902.69  PHA right of petition and appeal.

    (a) Appeal of troubled performer designation and petition for 
removal of troubled performer designation. A PHA may take any of the 
following actions:
    (1) Appeal its troubled performer designation (including Capital 
Fund program troubled performer designation);
    (2) Appeal its final overall PHAS score;
    (3) Petition for removal of troubled performer designation;

[[Page 254]]

    (4) Appeal any refusal of a petition to remove troubled performer 
designation; and
    (5) Appeal actions under Sec.  902.66.
    (b) Appeal of PHAS score. (1) If a PHA believes that an objectively 
verifiable and material error(s) exists in any of the scores for its 
PHAS indicators, which, if corrected, will result in a significant 
change in the PHA's PHAS score and its designation (i.e., as troubled 
performer, substandard performer, standard performer, or high 
performer), the PHA may appeal its PHAS score in accordance with the 
procedures of paragraphs (c), (d), and (e) of this section. A 
significant change in a PHAS score is a change that would cause the 
PHA's PHAS score to increase, resulting in a higher PHAS designation for 
the PHA (i.e., from troubled performer to substandard performer or 
standard performer, or from standard performer to high performer).
    (2) A PHA may not appeal its PHAS score, physical condition score, 
or both, based on the subsequent correction of deficiencies identified 
as a result of a project's physical inspection or the denial of a 
technical review request.
    (3) A PHA may not appeal its PHAS score, Capital Fund program score, 
or both, based on the fact that it did not submit its Capital Fund 
program information to eLOCCS by the submission due date.
    (c) Appeal and petition procedures. (1) To appeal a troubled 
performer designation or a final overall PHAS score, a PHA must submit a 
request in writing to the Deputy Assistant Secretary of the Real Estate 
Assessment Center, which must be received by HUD no later than 30 days 
following the issuance of the overall PHAS score to the PHA. To petition 
the removal of a troubled performer designation, a PHA must submit its 
request in writing to the Deputy Assistant Secretary of the Real Estate 
Assessment Center.
    (2) To appeal the denial of a petition to remove a troubled 
performer designation, a PHA must submit a written request to the Deputy 
Assistant Secretary of the Real Estate Assessment Center, which must be 
received by HUD no later than 30 days after HUD's decision to refuse to 
remove the PHA's troubled performer designation.
    (3) To appeal the petition for the removal of a troubled performer 
designation, or appeal the denial of a petition to remove a troubled 
performer designation, a PHA shall submit its request in writing to the 
Deputy Assistant Secretary of the Real Estate Assessment Center.
    (4) An appeal of a troubled performer designation, the petition for 
removal of a troubled performer designation, or the appeal of a refusal 
of a petition to remove a troubled performer designation must include 
the PHA's supporting documentation and reasons for the appeal or 
petition. An appeal of a PHAS score must be accompanied by the PHA's 
evidence that a material error occurred. An appeal or petition submitted 
to HUD without supporting documentation will not be considered and will 
be returned to the PHA.
    (d) Denial, withholding, or rescission. A PHA that disagrees with 
the basis for denial, withholding, or rescission of its designation 
under Sec.  902.66 may make a written request for reinstatement within 
30 days of notification by HUD of the denial or rescission of the 
designation to the Assistant Secretary, and the request shall include 
reasons for the reinstatement.
    (e) Consideration of petitions and appeals. (1) Consideration of a 
petition or the appeal of a final overall PHAS score, of a troubled 
performer designation, or of a petition to remove troubled performer 
designation. Upon receipt of such an appeal or a petition from a PHA, 
HUD will evaluate the appeal and its merits for purposes of determining 
whether a reassessment of the PHA is warranted. HUD will review the 
PHA's file and the evidence submitted by the PHA to determine whether an 
error occurred.
    (2) Consideration of an appeal of refusal to remove a troubled 
performer designation. Upon receipt of an appeal of refusal to remove a 
troubled performer designation, HUD will evaluate the appeal and its 
merits for the purposes of determining whether a reassessment of the PHA 
is warranted. The HUD staff initially evaluating an appeal of refusal to 
remove a troubled performer designation will not be the

[[Page 255]]

same HUD staff who evaluated the PHA's petition to remove the troubled 
performer designation. The Assistant Secretary will render the final 
determination of such an appeal.
    (f) Notice and finality of decisions. (1) If HUD determines that one 
or more objectively verifiable and material error has occurred, HUD will 
undertake a new inspection of the project, arrange for audit services, 
adjust the PHA's score, or perform other reexamination of the financial, 
management, or Capital Fund program information, as appropriate in light 
of the nature of the error that occurred. A new score will be issued and 
an appropriate performance designation made by HUD. HUD's decision on 
appeal of a PHAS score, issuance of a troubled performer designation, or 
refusal to remove a troubled performer designation will be final agency 
action. No reconsideration will be given by HUD of such decisions.
    (2) HUD will issue a written decision on all appeals and petitions 
made under this section.



                 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, and such 
other incentives that HUD may determine appropriate and permissible 
under program statutes or regulations.
    (1) Relief from specific HUD requirements. A PHA that is designated 
a high performer will be relieved of specific HUD requirements (e.g., 
will receive fewer reviews and less monitoring), effective upon 
notification of a high performer designation.
    (2) Public recognition. High performer PHAs and RMCs that receive a 
score of at least 60 percent of the points available for the physical 
condition, financial condition, and management operations indicators, 
and at least 50 percent of the points available for the Capital Fund 
indicator, and achieve an overall PHAS score of 90 percent or greater of 
the total available points under PHAS shall be designated a high 
performer and will receive a Certificate of Commendation from HUD, as 
well as special public recognition, as provided by the field office.
    (3) Bonus points in funding competitions. A high performer PHA may 
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 and are provided in the relevant notice of funding 
availability.
    (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 2 CFR 
200.319, as applicable).
    (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 audits;
    (2) Office of Inspector General audits or investigations as 
circumstances may warrant; and
    (3) Reviews identified by the regional or field office in its 
current Risk Assessment of PHAs and projects.

[76 FR 10149, Feb. 23, 2011, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  902.73  PHAs with deficiencies.

    (a) Oversight and action. Standard and substandard performers will 
be referred to the field office for appropriate oversight and action.
    (1) A standard performer that receives a total score of at least 60 
percent shall be required to correct the deficiencies in performance 
within the time period for correction, as stated in Sec.  902.73(c). If 
the PHA fails to correct the deficiencies, HUD may either require the 
PHA to enter into a Corrective Action Plan, or HUD may take other 
action, as appropriate.

[[Page 256]]

    (2) A substandard performer, i.e., a PHA that achieves a PHAS score 
of at least 60 percent and achieves a score of less than 60 percent of 
the total points available under one or more of the physical condition, 
management operations, or financial condition PHAS indicators, shall be 
required to correct the deficiencies in performance within the time 
period for correction. If the PHA fails to correct the deficiencies, HUD 
may require the PHA to enter into a Corrective Action Plan, or take 
other action, as appropriate.
    (3) A PHA with a project(s) that receives less than 60 percent of 
the points available for the physical condition, management operations, 
or financial condition PHAS indicators, or less than 50 percent of the 
points available for the capital fund indicator, shall be required to 
correct the deficiencies in performance within the time period for 
correction, as stated in Sec.  902.73(b). If the PHA fails to correct 
the deficiencies within the time period allowed, HUD may either require 
the PHA to enter into a Corrective Action Plan, or take other action, as 
appropriate.
    (b) Correction of deficiencies. (1) Time period for correction. 
After a PHA's (or DF-RMC's) receipt of its final overall PHAS score and 
designation as: A standard performer, within the range described in 
Sec.  902.73(a)(1); or substandard performer, within the range described 
in Sec.  902.73(a)(2), or, in the case of an RMC, after 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-executed Corrective Action Plan, if required.
    (2) Notification and report to regional or field office. A PHA shall 
notify the regional or field office of its action to correct a 
deficiency. A PHA shall also forward to the regional or field office an 
RMC's report of its action to correct a deficiency. A DF-RMC shall 
forward directly to the regional or field office its report of its 
action to correct a deficiency.
    (c) Failure to correct deficiencies. (1) If a PHA (or DF-RMC or RMC) 
fails to correct deficiencies within the time period noted in paragraph 
(b) of this section, or to correct deficiencies within the time 
specified in a Corrective Action Plan, or within such extensions as may 
be granted by HUD, the field office will notify the PHA of its 
noncompliance.
    (2) The PHA (or DF-RMC or RMC) will provide the field office with 
its reasons for lack of progress in negotiating, executing, or carrying 
out the Corrective Action Plan, within 30 days of the PHA's receipt of 
the noncompliance notification. HUD will advise the PHA as to the 
acceptability of its reasons for lack of progress.
    (3) If HUD finds the PHA's (or DF-RMC or RMC's) reasons for lack of 
progress unacceptable, HUD will notify the PHA (or DF-RMC or RMC) that 
it will take such actions as it may determine appropriate in accordance 
with the provisions of the 1937 Act and other statutes, the ACC, this 
part, and other HUD regulations, including, but not limited to, the 
remedies available for substantial default.



Sec.  902.75  Troubled performers.

    (a) General. Upon a PHA's designation as a troubled performer, in 
accordance with the requirements of section 6(j)(2)(B) of the Act (42 
U.S.C. 1437d(j)(2)(B)) and in accordance with this part, HUD must notify 
the PHA and shall refer each troubled performer PHA to the PHA's field 
office, or other designated office(s) at HUD, for remedial action, 
oversight, and monitoring. The actions to be taken by HUD and the PHA 
will include statutorily required actions, and such other actions as may 
be determined appropriate by HUD.
    (b) Memorandum of agreement (MOA). Within 30 days of notification of 
a PHA's designation as a troubled performer, HUD will initiate 
activities to negotiate and develop an MOA. An MOA is required for a 
troubled performer. 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. It shall include, but not be 
limited to:
    (1) Baseline data, which should be data without adjustments or 
weighting but may be the PHA's score in each of

[[Page 257]]

the PHAS indicators or subindicators identified as a deficiency;
    (2) Performance targets for such periods specified by HUD (e.g., 
annual, semiannual, quarterly, monthly), which may be the attainment of 
a higher score within an indicator or subindicator 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, including the identification 
of the party responsible for the completion of each task and for 
reporting progress;
    (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 a 
troubled performer designation or troubled with respect to the program 
for assistance from the Capital Fund program under section 9(d) of the 
Act (42 U.S.C. 1437g(d)) and HUD recognition for the most-improved PHAs;
    (7) The consequences of failing to meet the targets, which include, 
but are not limited to, the interventions stated in 24 CFR part 907 and 
in section 6(j)(3) of the Act (42 U.S.C. 1437d(j)(3)); 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 
commitments of support, financial or otherwise.
    (c) PHA review of MOA. The PHA will have 10 days to review the MOA. 
During this 10-day period, the PHA shall resolve any claimed 
discrepancies in the MOA with HUD, and discuss any recommended changes 
and target dates for improvement to be incorporated in the final MOA. 
Unless the time period is extended by HUD, the MOA is to be executed 15 
days following issuance of the draft MOA.
    (d) Maximum recovery period. (1) Expiration of the first-year 
improvement period. Upon the expiration of the one-year period that 
started on the date on which the PHA receives initial notice of a 
troubled performer designation, the PHA shall, by the next PHAS 
assessment that is at least 12 months after the initial notice of the 
troubled performer designation, improve its performance by at least 50 
percent of the difference between the initial PHAS assessment score that 
led to the troubled performer status and the score necessary to remove 
the PHA's designation as a troubled performer.
    (2) Expiration of 2-year recovery period. Upon the expiration of the 
2-year period that started on the date on which the PHA received the 
initial notice of a troubled performer designation, the PHA shall, by 
the next PHAS assessment that is at least 24 months after the initial 
notice of the troubled performer designation, improve its performance 
and achieve an overall PHAS score of at least 60 percent of the total 
points available.
    (e) Parties to the MOA. An MOA shall be executed by:
    (1) The PHA Board Chairperson (supported 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; and
    (3) The field office
    (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 performer PHA fails or refuses to execute an MOA 
within the period provided in paragraph (c) of this

[[Page 258]]

section, or a troubled performer PHA operating under an executed MOA 
does not show a substantial improvement, as provided in paragraph (d) of 
this section, toward a passing PHAS score following the issuance of the 
failing PHAS score by HUD, the field office shall refer the PHA to the 
Assistant Secretary to determine such remedial actions, consistent with 
the provisions of the ACC and other HUD regulations, including, but not 
limited to, remedies available for substantial default.
    (2) For purposes of paragraph (g) of this section, substantial 
improvement is defined as the improvement required by paragraph (d) of 
this section. The maximum period of time for remaining in troubled 
performer status before being referred to the Assistant Secretary is 2 
years after the initial notification of the troubled performer 
designation. Therefore, the PHA must make substantial improvement in 
each year of this 2-year period.
    (3) The following example illustrates the provisions of paragraph 
(g)(1) of this section:

    Example: A PHA receives a score of 50 points on the physical 
condition, management operations, or financial condition PHAS 
indicators; 60 points is a passing score. Upon the expiration of the 
one-year period that started on the date on which the PHA received the 
initial notification of the troubled performer designation, the PHA must 
achieve at least 55 points (50 percent of the 10 points necessary to 
achieve a passing score of 60 points) to continue recovery efforts. In 
the second year, the PHA must achieve a minimum score of 60 points (a 
passing score). If, in the first year that started on the date on which 
the PHA received the initial notification of the troubled designation, 
the PHA fails to achieve the 5-point increase, or if the PHA achieves 
the 5 point increase within the first year that started on the date on 
which the PHA received the initial notification of the troubled 
designation, but fails to achieve the minimum passing score of 60 points 
after the second year after the initial notification, HUD will notify 
the PHA that it will take such actions as it may determine appropriate 
in accordance with the provisions of the ACC and other HUD regulations, 
including, but not limited to, the remedies available for substantial 
default.

    (h) Audit review. For a PHA designated as a troubled performer, HUD 
may perform an audit review and may, at its discretion, select the audit 
firm that will perform the audit of the PHA; and HUD may, at its 
discretion, serve as the audit committee for the audit in question.
    (i) Continuation of services to residents. To the extent feasible, 
while a PHA is in a troubled performer status, all services to residents 
will continue uninterrupted.



Sec.  902.79  Verification and records.

    All project and PHA certifications, year-end financial information, 
and supporting documentation are subject to HUD verification at any 
time, including review by an independent auditor. All PHAs must retain 
supporting documents for any certifications and for asset management 
reviews for at least 3 years. Failure to maintain and provide supporting 
documentation for a period of 3 years for any indicator(s), 
subindicator(s), or other methods used to assess performance shall 
result in a score of zero for the indicator(s) or subindicator(s), and a 
lower overall PHAS score for the applicable assessment period.



Sec.  902.81  Resident petitions for remedial action.

    Residents of a PHA designated as troubled pursuant to section 
6(j)(2)(A) of the Act (42 U.S.C. 1437d(j)(2)(A)) may petition HUD in 
writing to take one or more of the actions referred to in section 
6(j)(3)(A) of the Act (42 U.S.C. 1437d(j)(3)(A)). HUD will consider any 
petition from a group of residents totaling at least 20 percent of the 
PHA's residents, or from an organization or organizations of residents 
whose membership equals at least 20 percent of the PHA's residents. HUD 
shall respond to such petitions in a timely manner with a written 
description of the actions, if any, HUD plans to take and, where 
applicable, the reasons why such actions differ from the course proposed 
by the residents. Nothing in this section shall limit HUD's discretion 
to determine whether a substantial default has occurred or to select the 
appropriate intervention upon such determination.

[[Page 259]]



Sec.  902.83  Sanctions for troubled performer PHAs.

    (a) If a troubled performer PHA fails to make substantial 
improvement, as set forth in Sec.  902.75(d), HUD shall:
    (1) In the case of a troubled performer PHA with 1,250 or more 
units, declare substantial default in accordance with Sec.  907.3(b)(3) 
of this chapter and petition for the appointment of a receiver pursuant 
to section 6(j)(3)(A)(ii) of the Act (42 U.S.C. 1437d(j)(3)(A)(ii)); or
    (2) In the case of a troubled performer PHA with fewer than 1,250 
units, declare substantial default in accordance with Sec.  907.3(b)(3) 
of this chapter and either petition for the appointment of a receiver 
pursuant to section 6(j)(3)(A)(ii) of the Act (42 U.S.C. 
1437d(j)(3)(A)(ii)), or take possession of the PHA (including all or 
part of any project or program of the PHA) pursuant to section 
6(j)(3)(A)(iv) of the Act (42 U.S.C. 1437d(j)(3)(A)(iv)), and appoint, 
on a competitive or noncompetitive basis, an individual or entity as an 
administrative receiver to assume the responsibilities of HUD for the 
administration of all or part of the PHA (including all or part of any 
project or program of the PHA).
    (3) In the case of substantial default by a troubled performer PHA, 
nothing in this section shall be construed to limit the courses of 
action available to HUD under this part, 24 CFR part 907, or section 
6(j)(3)(A) of the Act (42 U.S.C. 1437d(j)(3)(A)) for any other 
substantial default by a PHA.
    (b) If a troubled performer PHA fails to execute or meet the 
requirements of an MOA in accordance with Sec.  902.75, other than as 
specified in paragraph (a) of this section, the PHA may be deemed to be 
in substantial default by HUD and any remedy available therefore may be 
invoked in the discretion of HUD.



       Subpart H_Assessment of Small Rural Public Housing Agencies

    Source: 88 FR 30501, May 11, 2023, unless otherwise noted.



Sec.  902.101  Definition of small rural PHAs.

    (a) Definition. A PHA is a small rural PHA if it administers 550 or 
fewer combined public housing units and vouchers under section 8(o), and 
either:
    (1) Has a primary administrative building as determined with a 
physical address in a rural area as described in 12 CFR 
1026.35(b)(2)(iv)(A); or
    (2) More than 50 percent of its combined public housing units and 
voucher units under section 8(o) are in rural areas as described in 12 
CFR 1026.35(b)(2)(iv)(A).
    (b) Determination. (1) HUD will make the initial determination of 
PHAs that qualify as small rural as defined in this section no later 
than October 30, 2023.
    (2) HUD will determine if a PHA qualifies as a small rural PHA under 
paragraph (a) of this section every 3 years.
    (c) Appeals. A PHA may challenge HUD's determination concerning 
whether the PHA qualifies as small rural PHA by presenting an 
objectively verifiable material error which resulted in the incorrect 
determination, or by presenting information showing that the status of 
the PHA has changed to justify a redetermination.



Sec.  902.103  Public housing assessment of small rural PHAs.

    (a) Small rural public housing assessment. The public housing 
program of small rural PHAs as defined in Sec.  902.101 shall be 
assessed and scored based only on the physical condition of their public 
housing properties in accordance with 24 CFR part 5, subpart G, except 
that properties that meet the definition specified in Sec.  902.44(b) of 
physical condition and neighborhood environment shall receive one 
additional point for physical condition and neighborhood environment. 
Such agencies shall not be subject to PHAS except as noted below.
    (b) Triennial assessment. Public housing programs operated by small 
rural PHAs will be assessed no more than once every three years, except 
that a small rural PHA shall be subject to annual inspection if it is 
designated by the Secretary as troubled as defined in Sec.  902.105.

[[Page 260]]

    (c) Initial public housing assessment. (1) For PHAs subject to small 
PHA deregulation, the first assessment and inspections will be 
determined based on the PHA's next scheduled PHAS assessment (e.g., a 
higher performing PHA would receive the first inspection 3 years after 
the most recent PHAS assessment).
    (2) For PHAs not subject to small PHA deregulation, the first 
inspection is based on the PHA's overall weighted project physical 
condition indicator score (e.g., a PHA with a physical condition 
indicator score of 90 or greater would receive the first inspection 
three years after most recent PHAS assessment).



Sec.  902.105  Troubled small rural PHAs.

    (a) Definition of troubled small rural PHA. A small rural PHA will 
be determined to be troubled under the public housing program if the 
weighted average score of all property inspections is below 70 percent 
of the total available points, or if a small rural PHA has a weighted 
average score of between 70 and 80 percent of the total available points 
and has at least one property that receives fewer than 70 percent of the 
total available points.
    (b) Referral to the local field office. Upon a PHA's designation as 
a troubled performer HUD must notify the PHA and shall refer the 
troubled performer PHA to the PHA's field office, or other designated 
office(s) at HUD, for remedial action, oversight, and monitoring. The 
actions to be taken by HUD and the PHA will include statutorily required 
actions, and such other actions as may be determined appropriate by HUD.
    (c) Corrective Action Agreement (CAA). Within 30 days of 
notification of a PHA's designation as a troubled performer, HUD will 
initiate activities to negotiate and develop a CAA. A CAA is required 
for a troubled performer. The final CAA is a binding contractual 
agreement between HUD and a PHA. The scope of the CAA may vary depending 
upon the extent of the problems present in the PHA. The term of the CAA 
will not exceed one year and is subject to renewal at the discretion of 
HUD if HUD determines that the circumstances requiring the CAA still 
exist at the expiration of the term of the CAA based on the annual 
assessment frequency as included in Sec.  902.103. It shall include, but 
not be limited to:
    (1) Baseline data, which should be data without adjustments or 
weighting but may be the PHA's score identified as a deficiency;
    (2) Performance targets for such periods specified by HUD (e.g., 
annual, semiannual, quarterly, monthly), which may be the attainment of 
a higher score or the description of a goal to be achieved; however, 
safety, health, and environmental performance targets and deadlines 
otherwise specified by regulation, including the lead safety regulations 
at 24 CFR part 35, are not superseded by the CAA performance targets;
    (3) Strategies to be used by the PHA in achieving the performance 
targets within the time period of the CAA, including the identification 
of the party responsible for the completion of each task and for 
reporting progress;
    (4) Technical assistance to the PHA provided or facilitated by HUD;
    (5) The PHA's commitment to take all actions within its control to 
achieve the targets;
    (6) The consequences of failing to meet the targets; and
    (7) 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 
commitments of support, financial or otherwise.
    (d) PHA review of the CAA. The PHA will have 10 days to review the 
CAA. During this 10-day period, the PHA shall resolve any claimed 
discrepancies in the CAA with HUD and discuss any recommended changes 
and target dates for improvement to be incorporated in the final CAA. 
Unless the time period

[[Page 261]]

is extended by HUD, the CAA is to be executed 30 days following issuance 
of the draft CAA.
    (e) Maximum recovery period. Upon the expiration of the one-year 
period that started on the date on which the PHA receives initial notice 
of a troubled performer designation, the PHA shall improve its 
performance in order to no longer be considered troubled under the 
assessment.
    (f) Parties to the CAA. A CAA shall be executed by:
    (1) The PHA Board Chairperson (supported 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; and
    (3) The field office.
    (g) Involvement of resident leadership in the CAA. HUD encourages 
the inclusion of the resident leadership in the execution of the CAA.
    (h) Failure to execute CAA or make substantial improvement under 
CAA. If a troubled performer PHA fails or refuses to execute an CAA 
within the period provided in paragraph (d) of this section, or a 
troubled performer PHA operating under an executed CAA does not achieve 
a passing physical inspection score, as provided in paragraph (e) of 
this section, the field office shall refer the PHA to the Assistant 
Secretary to determine such remedial actions, consistent with the 
provisions of the ACC and other HUD regulations, including, but not 
limited to, remedies available for substantial default.
    (i) Continuation of services to residents. To the extent feasible, 
while a PHA is in a troubled performer status, all services to residents 
will continue uninterrupted.



Sec.  902.107  Withholding, denying, and rescinding troubled designation.

    (a) Withholding designation. In exceptional circumstances, even 
though a PHA has satisfied the requirements for high performer or non-
troubled designations, HUD may conduct any review as it may determine 
necessary, and may deny or rescind incentives or high performer 
designation or non-troubled performer designation, in the case of a PHA 
that:
    (1) Is operating under a special agreement with HUD (e.g., a civil 
rights Conciliation or Voluntary Compliance Agreement);
    (2) Is involved in litigation that bears directly upon the physical 
performance of a PHA;
    (3) Is operating under a court order;
    (4) Demonstrates substantial evidence of fraud or misconduct, 
including evidence that the PHA's certifications, submitted in 
accordance with this part, are not supported by the facts, as evidenced 
by such sources as a HUD review, routine reports, 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 of a 
PHA's required compliance with applicable laws and regulations, 
including areas not assessed under the small rural assessment. Areas of 
substantial noncompliance include, but are not limited to, noncompliance 
with civil rights, nondiscrimination and fair housing laws and 
regulations, or the ACC. Substantial noncompliance casts doubt on the 
capacity of a PHA to preserve and protect its public housing projects 
and operate them consistent with Federal laws and regulations.
    (b) High performer and standard designations. If a high performer 
designation is denied or rescinded, the PHA shall be designated either a 
non-troubled performer, or troubled performer, depending on the nature 
and seriousness of the matter or matters constituting the basis for 
HUD's action. If a non-troubled performer designation is denied or 
rescinded, the PHA shall be designated as a troubled performer.
    (c) Effect on score. The denial or rescission of a designation of 
high performer or non-troubled performer shall not affect the PHA's 
numerical small rural assessment score, except where the denial or 
rescission is under paragraph (a)(4) of this section.

[[Page 262]]



Sec.  902.109  Right to petition and appeal troubled designation.

    (a) Appeal of troubled performer designation and petition for 
removal of troubled performer designation. A PHA may take any of the 
following actions:
    (1) Appeal its troubled performer designation;
    (2) Petition for removal of troubled performer designation; and
    (3) Appeal any refusal of a petition to remove troubled performer 
designation.
    (b) Appeal of small rural Assessment score. (1) If a PHA believes 
that an objectively verifiable and material error(s) exists in its small 
rural assessment score, which, if corrected, will result in a 
significant change in the PHA's score and its designation, the PHA may 
appeal its score in accordance with the procedures of paragraphs (c) 
through (e) of this section. A significant change in a score is a change 
that would cause the PHA's score to increase, resulting in a higher 
designation for the PHA (i.e., from troubled performer to non-troubled 
performer, or from non-troubled to high performer).
    (2) A PHA may not appeal its score or designation based on the 
subsequent correction of deficiencies identified as a result of a 
project's physical inspection.
    (c) Appeal and petition procedures. (1) To appeal a troubled 
performer designation or petition for the removal of a troubled 
performer designation, a PHA must submit a request in writing to the 
Deputy Assistant Secretary of the Real Estate Assessment Center, which 
must be received by HUD no later than 30 days following the issuance of 
the score to the PHA.
    (2) To appeal the denial of a petition to remove a troubled 
performer designation, a PHA must submit a written request to the Deputy 
Assistant Secretary of the Real Estate Assessment Center, which must be 
received by HUD no later than 30 days after HUD's decision to refuse to 
remove the PHA's troubled performer designation.
    (3) An appeal of a troubled performer designation or an appeal of 
the denial of a petition for removal of a troubled performer designation 
must include the PHA's supporting documentation and reasons for the 
appeal or petition. An appeal of an assessment score must be accompanied 
by the PHA's evidence that a material error occurred. An appeal or 
petition submitted to HUD without supporting documentation will not be 
considered and will be returned to the PHA.
    (d) Denial, withholding, or rescission. A PHA that disagrees with 
the basis for denial, withholding, or rescission of its designation 
under Sec.  902.66 may make a written request for reinstatement within 
30 days of notification by HUD of the denial or rescission of the 
designation to the Assistant Secretary, and the request shall include 
reasons for the reinstatement.
    (e) Consideration of petitions and appeals. (1) Consideration of a 
petition or the appeal of a final overall assessment score, of a 
troubled performer designation, or of a petition to remove troubled 
performer designation. Upon receipt of such an appeal or a petition from 
a PHA, HUD will evaluate the appeal and its merits for purposes of 
determining whether a reassessment of the PHA is warranted. HUD will 
review the PHA's file and the evidence submitted by the PHA to determine 
whether an error occurred.
    (2) Consideration of an appeal of refusal to remove a troubled 
performer designation. Upon receipt of an appeal of refusal to remove a 
troubled performer designation, HUD will evaluate the appeal and its 
merits for the purposes of determining whether a reassessment of the PHA 
is warranted. The HUD staff initially evaluating an appeal of refusal to 
remove a troubled performer designation will not be the same HUD staff 
who evaluated the PHA's petition to remove the troubled performer 
designation. The Assistant Secretary will render the final determination 
of such an appeal.
    (f) Notice and finality of decisions. (1) If HUD determines that one 
or more objectively verifiable and material error has occurred, HUD will 
undertake a new inspection of the project, adjust the PHA's score, or 
perform another reexamination of information, as appropriate in light of 
the nature of the error that occurred. A new score will be issued and an 
appropriate performance designation made by HUD. HUD's

[[Page 263]]

decision on appeal of an assessment score, issuance of a troubled 
performer designation, or refusal to remove a troubled performer 
designation will be final agency action. No reconsideration will be 
given by HUD of such decisions.
    (2) HUD will issue a written decision on all appeals and petitions 
made under this section.



Sec.  902.111  Sanctions for troubled small rural PHAs.

    The sanctions for small rural PHAs with troubled public housing 
programs that remain troubled as required by Sec.  902.108 will be the 
same as those sanctions for PHAs assessed under PHAS as described in 
Sec.  902.83.



Sec.  902.113  Incentives for small rural PHAs high-performers.

    (a) High performer. PHAs with a weighted average score for all 
inspections of at least 90 percent of all available points will be 
considered high performers and will be eligible for benefits as 
described in Sec.  902.113(b) and Sec.  905.400(l) of this chapter.
    (b) Incentives. High performer small rural PHAs under the public 
housing program will be eligible for the same incentives as high 
performer PHAs under PHAS as described in Sec.  902.71.



PART 903_PUBLIC HOUSING AGENCY PLANS--Table of Contents



Sec.

                  Subpart A_Deconcentration of Poverty

903.1 What is the purpose of this subpart?
903.2 With respect to admissions, what must a PHA do to deconcentrate 
          poverty in its developments?

            Subpart B_PHA Plans and Fair Housing Requirements

903.3 What is the purpose of this subpart?
903.4 What are the public housing agency plans?
903.5 When must a PHA submit the plans to HUD?
903.6 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 May HUD request additional information in the Annual Plan of a 
          troubled PHA?
903.11 Are certain PHAs eligible to submit a streamlined Annual Plan?
903.12 What are the streamlined Annual Plan requirements for small PHAs?
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 and a PHA's Fair Housing Requirements?
903.17 What is the process for obtaining public comment on 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. 1437c-1; Pub. L. 110-289; 42 
U.S.C. 3535d.

    Source: 65 FR 81222, Dec. 22, 2000, unless otherwise noted.



                  Subpart A_Deconcentration of Poverty



Sec.  903.1  What is the purpose of this subpart?

    The purpose of this subpart is to specify the process which a Public 
Housing Agency, as part of its annual planning process and development 
of an admissions policy, must follow in order to develop and apply a 
policy that provides for deconcentration of poverty and income mixing in 
certain public housing developments.

[80 FR 42368, July 16, 2015]



Sec.  903.2  With respect to admissions, what must a PHA do to 
deconcentrate poverty in its developments?

    (a) General. The PHA's admission policy includes the PHA's policy 
designed to promote deconcentration of poverty and income mixing in 
accordance with section 16(a)(3)(B) of the 1937 Act (42 U.S.C. 1437n), 
which is submitted to HUD as part of the PHA Annual Plan process. 
Deconcentration of poverty and income mixing is promoted by a policy 
that provides for bringing higher income tenants into lower income 
developments and lower income tenants into higher income developments.

[[Page 264]]

    (1) The provisions of this section apply to applicants to and 
residents seeking voluntary transfers within covered public housing 
developments (``covered developments'' as specified in paragraph (b) of 
this section).
    (2) The statutory requirement to design a policy to provide for 
deconcentration and income mixing is not to be construed to impose or 
require any specific income or racial quotas for any development or 
developments.
    (b) Applicability of deconcentration of poverty and income mixing 
requirements--(1) Developments subject to deconcentration of poverty and 
income mixing requirements. The deconcentration requirements of this 
subpart apply to general occupancy, family public housing developments, 
excluding those developments listed in paragraph (b)(2) of this section. 
Developments to which this subpart is applicable are referred to as 
``covered developments''.
    (2) Developments not subject to deconcentration of poverty and 
income mixing requirements. This subpart does not apply to the following 
public housing developments:
    (i) Public housing developments operated by a PHA with fewer than 
100 public housing units;
    (ii) Public housing developments operated by a PHA which house only 
elderly persons or persons with disabilities, or both;
    (iii) Public housing developments operated by a PHA which consist of 
only one general occupancy, family public housing development;
    (iv) Public housing developments approved for demolition or for 
conversion to tenant-based assistance; and
    (v) Public housing developments which include public housing units 
operated in accordance with a HUD-approved mixed-finance plan using HOPE 
VI or public housing funds awarded before the effective date of this 
rule, provided that the PHA certifies (and includes reasons for the 
certification) as part of its PHA Plan (which may be accomplished either 
in the annual Plan submission or as a significant amendment to its PHA 
Plan) that exemption from the regulation is necessary to honor an 
existing contractual agreement or be consistent with a mixed finance 
plan, including provisions regarding the incomes of public housing 
residents to be admitted to that development, which has been developed 
in consultation with residents with rights to live at the affected 
development and other interested persons.
    (c) Deconcentration of poverty and income mixing--(1) Steps for 
implementation. To implement the statutory requirement to deconcentrate 
poverty and provide for income mixing in covered public housing 
developments, a PHA must comply with the following steps:
    (i) Step 1. A PHA shall determine the average income of all families 
residing in all the PHA's covered developments. A PHA may use median 
income, instead of average income, provided that the PHA includes a 
written explanation in its PHA Annual Plan justifying use of median 
income in the PHA's Annual Plan.
    (ii) Step 2. A PHA shall determine the average income of all 
families residing in each covered development. In determining average 
income for each development, a PHA has the option of adjusting its 
income analysis for unit size in accordance with procedures prescribed 
by HUD.
    (iii) Step 3. A PHA shall determine whether each of its covered 
developments falls above, within or below the Established Income Range. 
The Established Income Range is from 85 to 115 percent (inclusive) of 
the average family income (the PHA-wide average income for covered 
developments as defined in Step 1), except that the upper limit shall 
never be less than the income at which a family would be defined as an 
extremely low income family under 24 CFR 5.603(b).
    (iv) Step 4. A PHA with covered developments having average incomes 
outside the Established Income Range may explain or justify the income 
profile for these developments as being consistent with and furthering 
two sets of goals: the goals of deconcentration of poverty and income 
mixing as specified by the statute (bringing higher income tenants into 
lower income developments and vice versa); and the local goals and 
strategies contained in the

[[Page 265]]

PHA Annual Plan. Elements of explanations or justifications that may 
satisfy these requirements may include, but shall not be limited to the 
following:
    (A) The covered development or developments are subject to consent 
decrees or other resident selection and admission plans mandated by 
court action;
    (B) The covered development or developments are part of PHA's 
programs, strategies or activities specifically authorized by statute, 
such as mixed-income or mixed-finance developments, homeownership 
programs, self-sufficiency strategies, or other strategies designed to 
deconcentrate poverty, promote income mixing in public housing, increase 
the incomes of public housing residents, or the income mix is otherwise 
subject to individual review and approval by HUD;
    (C) The covered development's or developments' size, location, and/
or configuration promote income deconcentration, such as scattered site 
or small developments;
    (D) The income characteristics of the covered development or 
developments are sufficiently explained by other circumstances.
    (v) Step 5. Where the income profile for a covered development is 
not explained or justified in the PHA Annual Plan submission, the PHA 
shall include in its admission policy its specific policy to provide for 
deconcentration of poverty and income mixing in applicable covered 
developments. Depending on local circumstances, a PHA's deconcentration 
policy (which may be undertaken in conjunction with other efforts such 
as efforts to increase self-sufficiency or current residents) may 
include but is not limited to providing for one or more of the following 
actions:
    (A) Providing incentives designed to encourage families with incomes 
below the Established Income Range to accept units in developments with 
incomes above the Established Income Range, or vice versa, including 
rent incentives, affirmative marketing plans, or added amenities;
    (B) Targeting investment and capital improvements toward 
developments with an average income below the Established Income Range 
to encourage applicant families whose income is above the Established 
Income Range to accept units in those developments;
    (C) Establishing a preference for admission of working families in 
developments below the Established Income Range;
    (D) Skipping a family on the waiting list to reach another family in 
an effort to further the goals of the PHA's deconcentration policy;
    (E) Providing such other strategies as permitted by statute and 
determined by the PHA in consultation with the residents and the 
community, through the PHA Annual Plan process, to be responsive to the 
local context and the PHA's strategic objectives.
    (2) Determination of compliance with deconcentration requirement. 
HUD shall consider a PHA to be in compliance with this subpart if:
    (i) The PHA's income analysis shows that the PHA has no general 
occupancy family developments to which the deconcentration requirements 
apply; that is, the average incomes of all covered developments are 
within the Established Income Range;
    (ii) The PHA has covered developments with average incomes above or 
below the Established Income Range and the PHA provides a sufficient 
explanation in its Annual Plan that supports that the income mix of such 
development or developments is consistent with and furthers the goal of 
deconcentration of poverty and income mixing and also the locally 
determined goals of the PHA's Annual and Five Year Plans, and the PHA 
therefore need not take further action to deconcentrate poverty and mix 
incomes; or
    (iii) The PHA's deconcentration policy provides specific strategies 
the PHA will take that can be expected to promote deconcentration of 
poverty and income mixing in developments with average incomes outside 
of the Established Income Range.
    (3) Right of return. If a PHA has provided that a family that 
resided in a covered public housing development has a right to admission 
to a public housing unit in that development after revitalization, the 
requirements of

[[Page 266]]

paragraph (c) of this section do not preclude fulfilling that commitment 
or a PHA's commitment to return a family to another development after 
revitalization.
    (4) Family's discretion to refuse a unit. A family has the sole 
discretion whether to accept an offer of a unit made under a PHA's 
deconcentration policy. The PHA may not take any adverse action toward 
any eligible family for choosing not to accept an offer of a unit under 
the PHA's deconcentration policy. In accordance with the PHA's 
established policies, the PHA may uniformly limit the number of offers 
received by applicants.
    (5) Relationship to income targeting requirement. Nothing in this 
section relieves a PHA of the obligation to meet the requirement to 
admit annually at least 40 percent families whose incomes are below 30 
percent of area median income as provided by section 16(a)(2) of the 
1937 Act, 42 U.S.C. 1437n(a)(2).
    (d) Relationship between poverty deconcentration and fair housing. 
The requirements for poverty deconcentration in paragraph (c) of this 
section and for fair housing in 24 CFR 903.15(d) arise under separate 
statutory authorities.

[65 FR 81222, Dec. 22, 2000, as amended at 67 FR 51033, Aug. 6, 2002; 80 
FR 42368, July 16, 2015]



            Subpart B_PHA Plans and Fair Housing Requirements



Sec.  903.3  What is the purpose of this subpart?

    (a) This subpart specifies the requirements for PHA plans, required 
by section 5A of the United States Housing Act of 1937 (42 U.S.C. 1437c-
1) (the Act), as amended.
    (b) The purpose of the plans is to provide a strategic planning 
framework for PHA management operations and capital planning:
    (1) Local accountability; and
    (2) 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 the PHA's operations, programs and services.
    (c) Title VII of the Housing and Economic Reform Act, Public Law 
110-289, section 2702, amends 42 U.S.C. 1437c-1(b) to provide qualified 
PHAs an exemption from the requirement of section 5A of the Act to 
submit an annual PHA Plan. The term ``qualified PHA'' means a public 
housing agency that meets the following requirements:
    (1) The sum of the number of public housing dwelling units 
administered by the agency, and the number of vouchers under section 
8(o) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)) 
administered by the agency, is 550 or fewer; and
    (2) The agency is not designated under section 42 U.S.C. 1437d(j)(2) 
as a troubled public housing agency, and does not have a failing score 
under SEMAP during the prior 12 months.

[78 FR 63770, Oct. 24, 2013]



Sec.  903.4  What are the public housing agency plans?

    (a) Types of plans. 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 five PHA fiscal years. The 5-Year 
Plan covers the five PHA fiscal years immediately following the date on 
which the 5-Year Plan is due to HUD; and
    (2) The Annual Plan (Annual Plan) that the PHA must submit to HUD 
for each fiscal year immediately following the date on which the Annual 
Plan is due to HUD and for which the PHA receives:
    (i) Section 8 tenant-based assistance (under section 8(o) of the 
U.S. Housing Act of 1937, 42 U.S.C. 1437f(o)) (tenant-based assistance); 
or
    (ii) Amounts from the public housing operating fund or capital fund 
(under section 9 of the U.S. Housing Act of 1937 (42 U.S.C. 1437g) 
(public housing)).
    (b) Format. HUD may prescribe the format of submission (including 
electronic format submission) of the plans. HUD also may prescribe the 
format of attachments to the plans and documents related to the plan 
that the PHA does not submit but may be required to make available 
locally. PHAs will receive appropriate notice of any prescribed format.

[[Page 267]]

    (c) Applicability. The requirements of this subpart only apply to a 
PHA that receives the type of assistance described in paragraph (a) of 
this section.
    (d) Authority for waivers. In addition to the waiver authority 
provided in Sec.  5.110 of this title, 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.  903.5  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 as amended on December 22, 2000, is the 
PHA fiscal year that begins October 2001. This 5-Year Plan submitted by 
a PHA must be submitted for the 5-year period beginning October 1, 2001.
    (2) For all PHAs, the first 5-Year Plans are due 75 days before the 
commencement of their fiscal year.
    (3) 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. 
However, HUD may require that half of all PHAs with less than 250 public 
housing units submit their 5-Year Plan one fiscal year in advance (in 
the fourth PHA fiscal year rather than the fifth PHA fiscal year).
    (4) PHAs may choose to update their 5-Year Plans every year as good 
management practice and must update their 5-Year Plans that were 
submitted for PHA fiscal years beginning before October 1, 2001, to 
comply with the requirements of this part as amended on December 22, 
2000, at the time they submit their next Annual Plan for fiscal years 
beginning on or after October 1, 2001. PHAs must explain any substantial 
deviation from their 5-Year Plans in their Annual Plans. (Substantial 
deviation is determined by the PHA in accordance with criteria provided 
by the PHA in its Annual Plan in accordance with Sec.  903.7(r).)
    (b) The Annual Plan. (1) The first PHA fiscal year that is covered 
by the requirements of this part as amended on December 22, 2000 is the 
PHA fiscal year that begins October 1, 2001.
    (2) For all PHAs, the first Annual Plans are due 75 days before the 
commencement of their fiscal year.
    (3) For all PHAs, after submission of the first Annual Plan, all 
subsequent Annual Plans will be due no later than 75 days before the 
commencement of their fiscal year.

[64 FR 56862, Oct. 21, 1999, as amended at 66 FR 8898, Mar. 7, 2001; 68 
FR 37671, June 24, 2003]



Sec.  903.6  What information must a PHA provide in the 5-Year Plan?

    (a) A PHA must include in its 5-Year Plan 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, the PHA must adopt quantifiable goals and 
objectives for serving those needs wherever possible.
    (3) A statement about goals, activities, objectives, policies, or 
programs that will enable a PHA to serve the needs of child and adult 
victims of domestic violence, dating violence, sexual assault, or 
stalking.
    (b) After submitting its first 5-Year Plan, a PHA in its succeeding 
5-Year Plans, must address:
    (1) The PHA's mission, goals and objectives for the next 5 years; 
and
    (2) The progress the PHA has made in meeting the goals and 
objectives described in the PHA's previous 5-Year Plan.

[65 FR 81222, Dec. 22, 2000, as amended at 73 FR 72344, Nov. 28, 2008; 
75 FR 66262, Oct. 27, 2010]



Sec.  903.7  What information must a PHA provide in the Annual Plan?

    With the exception of the first Annual Plan submitted by a PHA, the 
Annual Plan must include the information provided in this section. HUD 
will

[[Page 268]]

advise PHAs by separate notice, sufficiently in advance of the first 
Annual Plan due date, of the information, described in this section that 
must be part of the first Annual Plan submission, and any additional 
instructions or directions that may be necessary to prepare and submit 
the first Annual Plan. The information described in this section applies 
to both public housing and tenant-based assistance, except where 
specifically stated otherwise. The information that the PHA must submit 
for HUD approval under the Annual Plan includes the discretionary 
policies of the various plan components or elements (for example, rent 
policies) and not the statutory or regulatory requirements that govern 
these plan components and that provide no discretion on the part of the 
PHA in implementation of the requirements. The PHA's Annual Plan must be 
consistent with the goals and objectives of the PHA's 5-Year Plan.
    (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 jurisdiction served by the PHA, and other families who are 
on the public housing and Section 8 tenant-based assistance waiting 
lists, including:
    (i) Families meeting the definition of extremely low-income families 
in 24 CFR 5.603.
    (ii) Elderly families;
    (iii) Households with individuals with disabilities and households 
of various races and ethnic groups residing in the jurisdiction or on 
the waiting list.
    (2) A PHA must make reasonable efforts to identify the housing needs 
of each of the groups listed in paragraph (a)(1) of this section based 
on information provided by the applicable consolidated plan, information 
provided by HUD, and other generally available data.
    (i) The identification of housing needs must address issues of 
affordability, supply, quality, accessibility, size of units, and 
location.
    (ii) 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 the PHA's deconcentration and other policies that 
govern eligibility, selection, and admissions. This statement must 
describe the PHA's policies that govern resident or tenant eligibility, 
selection and admission. This statement also must describe any PHA 
admission preferences, and any occupancy policies that pertain to public 
housing units and housing units assisted under section 8(o) of the 1937 
Act, as well as any unit assignment policies for public housing. This 
statement must include the following information:
    (1) Deconcentration Policy. The PHA's deconcentration policy 
applicable to public housing, as described in Sec.  903.2(a).
    (2) Waiting List Procedures. The PHA's procedures for maintaining 
waiting lists for admission to the PHA's public housing developments. 
The statement must address any site-based waiting lists, as authorized 
by section 6(s) of the 1937 Act (42 U.S.C. 1437d(s)), for public 
housing. Section 6(s) of the 1937 Act permits PHAs to establish a system 
of site-based waiting lists for public housing that is 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;

[[Page 269]]

    (iv) The PHA includes reasonable measures to assure that adoption of 
site-based waiting lists is consistent with affirmatively furthering 
fair housing, such as reasonable marketing activities to attract 
applicants regardless of race or ethnicity;
    (v) The PHA provides for review of its site-based waiting list 
policy to determine if the policy 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) or is 
otherwise satisfactory to HUD;
    (B) At least every three years the PHA uses 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;
    (C) Taking any steps necessary to remedy the problems surfaced 
during the review; and
    (D) Taking the steps necessary to affirmatively further fair 
housing.
    (3) Other admissions policies. The PHA's admission policies that 
include any other PHA policies that govern eligibility, selection and 
admissions for the public housing (see part 960 of this title) and 
tenant-based assistance programs (see part 982, subpart E of this 
title). (The information requested on site-based waiting lists and 
deconcentration is applicable only to public housing.)
    (c) 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, 
by general categories, of the PHA's anticipated resources, such as PHA 
operating, capital and other anticipated Federal resources 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, and state the planned uses for the resources.
    (d) A statement of the PHA's rent determination policies. This 
statement must describe the PHA's basic discretionary policies that 
govern rents charged for public housing units, applicable flat rents, 
and the rental contributions of families receiving tenant-based 
assistance. For tenant-based assistance, this statement also 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 list the PHA's rules, standards, and policies that govern 
maintenance and management of housing owned, assisted, or operated by 
the PHA.
    (2) The policies listed in this statement must include a description 
of any measures necessary for the prevention or eradication of pest 
infestation. Pest infestation includes cockroach infestation.
    (3) This statement must include a description of PHA management 
organization, and a listing of the programs administered by the PHA.
    (4) The information requested on a PHA's rules, standards and 
policies regarding management and maintenance of housing applies only to 
public housing. The information requested on PHA program management and 
listing of administered programs 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. These 
procedures include 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, this statement describes the capital improvements 
necessary to ensure long-term physical and social viability

[[Page 270]]

of the PHA's public housing developments, including the capital 
improvements to be undertaken in the year in question and their 
estimated costs, and any other information required for participation in 
the Capital Fund. PHAs also are required to include 5-Year Plans 
covering large capital items.
    (h) A statement of any demolition and/or disposition--(1) Plan for 
Demolition/Disposition. With respect to public housing only, a 
description of any public housing development, or portion of a public 
housing development, owned by the PHA for which the PHA has applied or 
will apply for demolition and/or disposition approval under section 18 
of the 1937 Act (42 U.S.C. 1437p), and the timetable for demolition and/
or disposition. The application and approval process for demolition and/
or disposition is a separate process. Approval of the PHA Plan does not 
constitute approval of these activities.
    (2) Interim Plan for Demolition/Disposition. (i) Before submission 
of the first Annual Plan, a PHA may submit an interim PHA Annual Plan 
solely for demolition/disposition. The interim plan must provide:
    (A) The required description of the action to be taken;
    (B) A certification of consistency with the Consolidated Plan;
    (C) A description of how the plan is consistent with the 
Consolidated Plan;
    (D) A relocation plan that includes the availability of units in the 
area and adequate funding; and
    (E) Confirmation that a public hearing was held on the proposed 
action and that the resident advisory board was consulted.
    (ii) Interim plans for demolition/disposition are subject to PHA 
Plan procedural requirements in this part (see Sec. Sec.  903.13, 
903.15, 903.17, 903.19, 903.21, 903.23, 903.25), with the following 
exception. If a resident advisory board has not yet been formed, the PHA 
may seek a waiver of the requirement to consult with the resident 
advisory board on the grounds that organizations that adequately 
represent residents for this purpose were consulted.
    (iii) The actual application for demolition or disposition may be 
submitted at the same time as submission of the interim plan or at a 
later date.
    (i) A statement of the public housing developments designated as 
housing for elderly families or families with disabilities or elderly 
families and families with disabilities. (1) With respect to public 
housing only, this statement identifies any public housing developments 
owned, assisted, or operated by the PHA, or any portion of these 
developments, that:
    (i) The PHA has designated for occupancy by:
    (A) Only elderly families;
    (B) Only families with disabilities; or
    (C) Elderly families and families with disabilities; and
    (ii) The PHA will apply for designation for occupancy by:
    (A) Only elderly families;
    (B) Only families with disabilities; or
    (C) Elderly families and families with disabilities as provided by 
section 7 of the 1937 Act (42 U.S.C. 1437e).
    (2) The designated housing application and approval process is a 
separate process. Approval of the PHA Plan does not constitute approval 
of these activities.
    (j) A statement of the conversion of public housing to tenant-based 
assistance. (1) This statement describes:
    (i) Any building or buildings that the PHA is required to convert to 
tenant-based assistance under section 33 of the 1937 Act (42 U.S.C. 
1437z-5);
    (ii) The status of any building or buildings that the PHA may be 
required to convert to tenant-based assistance under section 202 of the 
Fiscal Year 1996 HUD Appropriations Act (42 U.S.C. 14371 note); or
    (iii) The PHA's plans to voluntarily convert under section 22 of the 
1937 Act (42 U.S.C. 1437t).
    (2) The statement also must include an analysis of the developments 
or buildings required to be converted under section 33.
    (3) For both voluntary and required conversions, the statement must 
include the amount of assistance received commencing in Federal Fiscal 
Year 1999 to be used for rental assistance or other housing assistance 
in connection with such conversion.
    (4) The application and approval processes for required or voluntary 
conversions are separate approval processes. Approval of the PHA Plan 
does

[[Page 271]]

not constitute approval of these activities.
    (5) 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. 
(1) This statement describes:
    (i) Any homeownership programs administered by the PHA under section 
8(y) of the 1937 Act (42 U.S.C. 1437f(y));
    (ii) Any homeownership programs administered by the PHA under an 
approved section 5(h) homeownership program (42 U.S.C. 1437c(h));
    (iii) An approved HOPE I program (42 U.S.C. 1437aaa); or
    (iv) 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 1937 Act (42 U.S.C. 1437z-4).
    (2) The application and approval process for homeownership under the 
programs described in paragraph (k) of this section, with the exception 
of the section 8(y) homeownership program, are separate processes. 
Approval of the PHA Plan does not constitute approval of these 
activities.
    (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 1937 Act (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. PHAs 
must address any cooperation agreements, as described in section 
12(d)(7) of the 1937 Act (42 U.S.C. 1437j(d)(7)), that the PHA has 
entered into or plans to enter into.
    (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. 
(1) 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. The plan also must provide, on a development-by-development 
or jurisdiction wide-basis, the measures necessary to ensure the safety 
of public housing residents.
    (2) 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; and
    (iii) A description of the coordination between the PHA and the 
appropriate police precincts for carrying out crime prevention measures 
and activities.
    (3) If the PHA expects to receive drug elimination program grant 
funds, the PHA must submit, in addition to the information required by 
paragraph (m)(1) of this section, the plan required by HUD's Public 
Housing Drug Elimination Program regulations (see part 761 of this 
title).

[[Page 272]]

    (4) If HUD determines at any time that the security needs of a 
public housing development 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.
    (5) A statement of any domestic violence, dating violence, sexual 
assault, and stalking prevention programs:
    (i) A description of any activities, services, or programs provided 
or offered by an agency, either directly or in partnership with other 
service providers, to child or adult victims of domestic violence, 
dating violence, sexual assault, or stalking;
    (ii) Any activities, services, or programs provided or offered by a 
PHA that help child and adult victims of domestic violence, dating 
violence, sexual assault, or stalking to obtain or maintain housing; and
    (iii) Any activities, services, or programs provided or offered by a 
PHA to prevent domestic violence, dating violence, sexual assault, or 
stalking, or to enhance victim safety in assisted families.
    (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. 
The policies must be in accordance with section 31 of the 1937 Act (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. 20000d-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 other applicable Federal civil rights laws. The PHA 
must also certify that it will affirmatively further fair housing 
pursuant to Sec. Sec.  5.151 and 5.152 of this title.
    (2) The certification is applicable to the 5-Year Plan and the 
Annual Plan.
    (p) Recent results of PHA's fiscal year audit. This statement 
provides the results of the most recent fiscal year audit of the PHA 
conducted under section 5(h)(2) of the 1937 Act (42 U.S.C. 1437c(h)).
    (q) A statement of asset management. To the extent not covered by 
other components of the PHA Annual Plan, 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. (1) For all Annual Plans 
following submission of the first Annual Plan, a PHA must include a 
brief statement of the PHA's progress in meeting the mission and goals 
described in the 5-Year Plan;
    (2) A PHA must identify the basic criteria the PHA will use for 
determining:
    (i) A substantial deviation from its 5-Year Plan; and
    (ii) A significant amendment or modification to its 5-Year Plan and 
Annual Plan.
    (3) A PHA must include such other information as HUD may request of 
PHAs, either on an individual or across-the-board basis. HUD will advise 
the PHA or PHAs of this additional information through advance notice.

[65 FR 81222, Dec. 22, 2000, as amended at 73 FR 72344, Nov. 28, 2008; 
75 FR 66262, Oct. 27, 2010; 80 FR 42368, July 16, 2015; 81 FR 12372, 
Mar. 8, 2016; 85 FR 47911, Aug. 7, 2020; 86 FR 30792, June 10, 2021]



Sec.  903.9  May HUD request additional information in the Annual
Plan of a troubled PHA?

    HUD may request that a PHA that is at risk of being designated as 
troubled or is designated as troubled in accordance with section 6(j)(2) 
of the 1937 Act (42 U.S.C. 1437d(j)(2)), the Public Housing Management 
Assessment Program (part 901 of this title) or the Public Housing 
Assessment System (part 902 of this chapter) include its operating 
budget. The PHA also must include or reference any applicable memorandum 
of agreement with HUD or any plan to improve performance, and such other 
material as HUD may prescribe.

[[Page 273]]



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 as of the 
last annual or interim assessment of the PHA before the submission of 
the 5-Year or Annual Plan;
    (2) PHAs with less than 250 public housing units (small PHAs) and 
that have not been designated as troubled in accordance with section 
6(j)(2) of the 1937 Act; and
    (3) PHAs that only administer tenant-based assistance and 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.
    (c) A streamlined plan must include the information provided in this 
paragraph (c). The Secretary may reduce the information requirements of 
streamlined Plans further, with adequate notice.
    (1) For high performing PHAs, 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(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. The information required by Sec.  903.7(k) must be 
included only to the extent that the PHA participates in homeownership 
programs under section 8(y).
    (2) For small PHAs that are not designated as troubled (see Sec.  
902.67(c)) or that are not at risk of being designated as troubled (see 
Sec.  902.67(b)(4) of this chapter) under section 6(j)(2) of the 1937 
Act, the requirements for streamlined Annual Plans are described in 
Sec.  903.12.
    (3) For PHAs that administer only tenant-based assistance, the 
streamlined Annual Plan must include the information required by Sec.  
903.7(a), (b), (c), (d), (e), (f), (k), (l), (o), (p) and (r).

[65 FR 49484, Aug. 14, 2000, as amended at 65 FR 55161, Sept. 12, 2000; 
68 FR 37671, June 24, 2003]



Sec.  903.12  What are the streamlined Annual Plan requirements
for small PHAs?

    (a) General. PHAs with less than 250 public housing units (small 
PHAs) and that have not been designated as troubled (see Sec.  902.67(c) 
of this chapter) or that are not at risk of being designated as troubled 
(see Sec.  902.67(b)(4)) under section 6(j) of the 1937 Act may submit 
streamlined Annual Plans in accordance with this section.
    (b) Streamlined Annual Plan requirements for fiscal years in which 
its 5-Year Plan is also due. For the fiscal year in which its 5-Year 
Plan is also due, the streamlined Annual Plan of the small PHA shall 
consist of the information required by Sec.  903.7(a), (b), (c), (d), 
(g), (h), (k), (o) and (r). If the PHA wishes to use the project-based 
voucher program, the streamlined Annual Plan of the small PHA must also 
include a statement of the projected number of project-based units and 
general locations and how project basing would be consistent with its 
PHA Plan. The information required by Sec.  903.7(a) must be included 
only to the extent it pertains to the housing needs of families that are 
on the PHA's public housing and Section 8 tenant-based assistance 
waiting lists. The information required by Sec.  903.7(k) must be 
included only to the extent that the PHA participates in homeownership 
programs under section 8(y) of the 1937 Act.
    (c) Streamlined Annual Plan requirements for all other fiscal years. 
For all other fiscal years, the streamlined Annual Plan must include:
    (1) The information required by Sec.  903.7(g) and (o) and, if 
applicable, Sec.  903.7(b)(2) with respect to site-based waiting lists 
and Sec.  903.7(k)(1)(i) with respect to homeownership programs under 
section 8(y) of the 1937 Act;
    (2) If the PHA wishes to use the project-based voucher program, a 
statement of the projected number of project-based units and general 
locations and how project basing would be consistent with its PHA Plan; 
and

[[Page 274]]

    (3) A certification from the PHA that lists the policies and 
programs covered by Sec.  903.7(a), (b), (c), (d), (h), (k), and (r) 
that the PHA has revised since submission of its last Annual Plan and 
provides assurance by the PHA that:
    (i) The Resident Advisory Board had an opportunity to review and 
comment on the changes to the policies and programs before 
implementation by the PHA;
    (ii) The changes were duly approved by the PHA board of directors 
(or similar governing body); and
    (iii) The revised policies and programs are available for review and 
inspection at the principal office of the PHA during normal business 
hours.

[68 FR 37671, June 24, 2003]



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 refers to a board or boards, as 
provided in paragraph (b) of this section, whose membership consists of 
individuals who adequately reflect and represent the residents assisted 
by the PHA.
    (1) The role of the Resident Advisory Board (or Resident Advisory 
Boards) is to assist and make recommendations regarding the development 
of the PHA plan, and any significant amendment or modification to the 
PHA plan.
    (2) The PHA shall allocate reasonable resources to assure the 
effective functioning of Resident Advisory Boards. Reasonable resources 
for the Resident Advisory Boards must provide reasonable means for them 
to become informed on programs covered by the PHA Plan, to communicate 
in writing and by telephone with assisted families and hold meetings 
with those families, and to access information regarding covered 
programs on the internet, taking into account the size and resources of 
the PHA.
    (b) Each PHA must establish one or more Resident Advisory Boards, as 
provided in paragraph (b) of this section.
    (1) If a jurisdiction-wide resident council exists that complies 
with the tenant participation regulations in part 964 of this title, the 
PHA shall appoint the jurisdiction-wide resident council or the 
council's representatives as the Resident Advisory Board. If the PHA 
makes such appointment, the members of the jurisdiction-wide resident 
council or the council's representatives shall be added or another 
Resident Advisory Board formed to provide for reasonable representation 
of families receiving tenant-based assistance where such representation 
is required under paragraph (b)(2) of this section.
    (2) 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 one or more Resident Advisory Boards. If the 
PHA makes such appointment, the PHA may require that the resident 
councils choose a limited number of representatives.
    (3) Where the PHA has a tenant-based assistance program of 
significant size (where tenant-based assistance is 20% or more of 
assisted households), 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.
    (4) Where or to the extent that resident councils that comply with 
the tenant participation regulations do not exist, the PHA shall appoint 
Resident Advisory Boards or Board members as needed to adequately 
reflect and represent the interests of residents of such developments; 
provided that the PHA shall provide reasonable notice to such residents 
and urge that they form resident councils 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, and any 
significant amendment or modification to the Annual Plan, as provided in 
Sec.  903.21 of this title.
    (1) In submitting the final plan to HUD for approval, or any 
significant amendment or modification to the 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.

[[Page 275]]

    (2) 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 and a PHA's Fair Housing Requirements?

    (a) The PHA must ensure that the Annual Plan is consistent with any 
applicable Consolidated Plan for the jurisdiction in which the PHA is 
located.
    (1) 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.
    (2) For State agencies that are PHAs, the applicable Consolidated 
Plan is the State Consolidated Plan.
    (b) A PHA may request to change its fiscal year to better coordinate 
its planning with the planning done under the Consolidated Plan process, 
by the State or local officials, as applicable.
    (c) Fair housing requirements. A PHA is obligated to affirmatively 
further fair housing in its operating policies, procedures, and capital 
activities. All admission and occupancy policies for public housing and 
Section 8 tenant-based housing programs must comply with Fair Housing 
Act requirements and other civil rights laws and regulations and with a 
PHA's plans to affirmatively further fair housing. The PHA may not 
impose any specific income or racial quotas for any development or 
developments.
    (1) Nondiscrimination. A PHA must carry out its PHA Plan in 
conformity with the nondiscrimination requirements in Federal civil 
rights laws, including title VI of the Civil Rights Act of 1964, section 
504 of the Rehabilitation Act of 1973, the Americans with Disabilities 
Act, and the Fair Housing Act. A PHA may not assign housing to persons 
in a particular section of a community or to a development or building 
based on race, color, religion, sex, disability, familial status, or 
national origin for purposes of segregating populations.
    (2) Affirmatively furthering fair housing. A PHA's policies should 
be designed to reduce the concentration of tenants and other assisted 
persons by race, national origin, and disability. Any affirmative steps 
or incentives a PHA plans to take must be stated in the admission 
policy.
    (i) HUD regulations provide that PHAs must take steps to 
affirmatively further fair housing. PHA policies should include 
affirmative steps to overcome the effects of discrimination and the 
effects of conditions that resulted in limiting participation of persons 
because of their race, national origin, disability, or other protected 
class.
    (ii) Such affirmative steps may include, but are not limited to, 
marketing efforts, use of nondiscriminatory tenant selection and 
assignment policies that lead to desegregation, additional applicant 
consultation and information, provision of additional supportive 
services and amenities to a development (such as supportive services 
that enable an individual with a disability to transfer from an 
institutional setting into the community), and engagement in ongoing 
coordination with state and local disability agencies to provide 
additional community-based housing opportunities for individuals with 
disabilities and to connect such individuals with supportive services to 
enable an individual with a disability to transfer from an institutional 
setting into the community.
    (3) Validity of certification. (i) A PHA's certification under Sec.  
903.7(o) will be subject to challenge by HUD where it appears that a 
PHA:
    (A) Fails to meet the affirmatively furthering fair housing 
requirements at 24 CFR 5.150 through 5.152
    (B) Takes action that is materially inconsistent with its obligation 
to affirmatively further fair housing; or
    (C) Fails to meet the fair housing, civil rights, and affirmatively 
furthering fair housing requirements in 24 CFR 903.7(o).

[[Page 276]]

    (ii) If HUD challenges the validity of a PHA's certification, HUD 
will do so in writing specifying the deficiencies, and will give the PHA 
an opportunity to respond to the particular challenge in writing. In 
responding to the specified deficiencies, a PHA must establish, as 
applicable, that it has complied with fair housing and civil rights laws 
and regulations, or has remedied violations of fair housing and civil 
rights laws and regulations, and has adopted policies and undertaken 
actions to affirmatively further fair housing, including, but not 
limited to, providing a full range of housing opportunities to 
applicants and tenants in a nondiscriminatory manner. In responding to 
the PHA, HUD may accept the PHA's explanation and withdraw the 
challenge, undertake further investigation, or pursue other remedies 
available under law. HUD will seek to obtain voluntary corrective action 
consistent with the specified deficiencies. In determining whether a PHA 
has complied with its certification, HUD will review the PHA's 
circumstances relevant to the specified deficiencies, including 
characteristics of the population served by the PHA; characteristics of 
the PHA's existing housing stock; and decisions, plans, goals, 
priorities, strategies, and actions of the PHA, including those designed 
to affirmatively further fair housing.

[85 FR 47911, Aug. 7, 2020, as amended at 86 FR 30793, June 10, 2021]



Sec.  903.17  What is the process for obtaining public comment 
on the plans?

    (a) 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 
and/or Annual Plan, 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), the required attachments and 
documents related to the plans, 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.
    (c) PHAs shall conduct reasonable outreach activities to encourage 
broad public participation in the PHA plans.



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) 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, as defined in Sec.  903.7(r)(2), the PHA:
    (1) 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
    (2) 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.
    (b) Each significant amendment or modification to a plan submitted 
to HUD is subject to the requirements of Sec. Sec.  903.13, 903.15, and 
903.17.

[[Page 277]]



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 significant amendment or modification to the plan, HUD 
reviews the plan to determine whether:
    (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;
    (3) The plan is consistent with any applicable Consolidated Plan for 
the jurisdiction in which the PHA is located; and
    (4) The plan is not prohibited or inconsistent with the 1937 Act or 
any other applicable Federal law.
    (b) Scope of HUD review. HUD's review of the Annual Plan (and any 
significant amendments or modifications to the plan) will be limited to 
the information required by Sec.  903.7(b), (g), (h), and (o), and any 
other element of the PHA's Annual Plan that is challenged.
    (c) Disapproval of the plan. (1) HUD may disapprove a PHA plan, in 
its entirety or with respect to any part, or disapprove any significant 
amendment or modification to the plan, only if HUD determines that the 
plan, or one of its components or elements, or any significant 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;
    (iii) Is not consistent with any applicable Consolidated Plan for 
the jurisdiction in which the PHA is located; or
    (iv) Is not consistent with applicable Federal laws and regulations.
    (2) Not later than 75 days after the date on which the PHA submits 
its plan or significant amendment or modification to the plan, HUD will 
issue written notice to the PHA if the plan or a significant amendment 
or modification 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 date on which the PHA submits its plan or significant 
amendment or modification to 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 to be reviewed by HUD were in 
compliance with applicable requirements and the plan has been approved.
    (4) The provisions of paragraph (b)(3) of this section do not apply 
to troubled PHAs. The plan of a troubled PHA must be approved or 
disapproved by HUD through written notice.
    (d) Designation of due date as submission date for first plan 
submissions. For purposes of the 75-day period described in paragraph 
(b) of this section, the first 5-year and Annual Plans submitted by a 
PHA will be considered to have been submitted no earlier than the due 
date as provided in Sec.  903.5.
    (e) Public availability of the approved plan. Once a PHA's plan has 
been approved, a PHA must make the approved plan and the required 
attachments and documents related to the plan, available for review and 
inspection, at the principal office of the PHA during normal business 
hours.
    (f) Recordkeeping. PHAs must maintain records reflecting actions to 
affirmatively further fair housing pursuant to Sec. Sec.  5.151, 5.152, 
and 903.7(o) of this title.

[65 FR 81222, Dec. 22, 2000, as amended at 68 FR 37671, June 24, 2003; 
80 FR 42371, July 16, 2015; 85 FR 47911, Aug. 7, 2020; 86 FR 30793, June 
10, 2021]



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, as 
it deems appropriate, respond to any complaint concerning PHA 
noncompliance with its plan. If HUD should determine that a PHA is not 
in compliance with its plan, HUD will take whatever action it deems 
necessary and appropriate.

[[Page 278]]



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 to Subpart B of Part 904--Annual Contributions Contract
Appendix II to Subpart B of Part 904--Homebuyers Ownership Opportunity 
          Agreement (Turnkey III)
Appendix III to Subpart B of Part 904--Certification of Homebuyer Status
Appendix IV to Subpart B of Part 904--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 to Subpart C of Part 904--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 to Subpart D of Part 904--Articles of Incorporation and By-
          Laws of Homebuyers Association
Appendix II to Subpart D of Part 904--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 further redesignated at 
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

[[Page 279]]

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 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.

[[Page 280]]

    (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 
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

[[Page 281]]

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, 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

[[Page 282]]

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 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

[[Page 283]]

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 (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, as 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

[[Page 284]]

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 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

[[Page 285]]

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 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

[[Page 286]]

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,
    (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

[[Page 287]]

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, as 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 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;

[[Page 288]]

    (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 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

[[Page 289]]

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 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

[[Page 290]]

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 (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

[[Page 291]]

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 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

[[Page 292]]

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 Sec. Sec.  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) 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 
Sec. Sec.  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

[[Page 293]]

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 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.

[[Page 294]]



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 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

[[Page 295]]

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.
    (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

[[Page 296]]

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 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

[[Page 297]]

LHA can limit homeownership admission to eligible homeownership 
candidates.

[59 FR 36651, July 18, 1994, as amended at 61 FR 9048, Mar. 6, 1996]



              Sec. Appendixes I-IV to Subpart B of Part 904

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.



 Sec. Appendix I to Subpart B of Part 904--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 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.

[[Page 298]]

    (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.



    Sec. Appendix II to Subpart B of Part 904--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 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:_______________________________________
________________________________________________________________________
 First Name Initial Last Name
________________________________________________________________________
 Relationship

[[Page 299]]

    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 
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

[[Page 300]]

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 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

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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 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:

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    (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 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.

[[Page 303]]

    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. 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

[[Page 304]]

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 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

[[Page 305]]

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 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

[[Page 306]]

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 
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

[[Page 307]]

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 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.

[[Page 308]]

    (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:
    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

[[Page 309]]

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 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

[[Page 310]]

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 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]



 Sec. Appendix III to Subpart B of Part 904--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

[[Page 311]]

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) ____________________



 Sec. Appendix IV to Subpart B of Part 904--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.
    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;

[[Page 312]]

    (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 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

[[Page 313]]

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, 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

[[Page 314]]

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:

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.



 Sec. Appendix I to Subpart C of Part 904--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

[[Page 315]]

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.



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

[[Page 316]]

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 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,

[[Page 317]]

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.



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 Sec. Sec.  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.



Sec. Appendix I to Subpart D of Part 904--Articles of Incorporation and 
            By-Laws of ______________ Homebuyers Association

                               (Subpart D)

Part I--Articles of Incorporation

In compliance with the requirements of__________________________________
________________________________________________________________________
(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

[[Page 318]]

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;
    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

[[Page 319]]

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 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

[[Page 320]]

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 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

[[Page 321]]

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 
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

[[Page 322]]

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 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.



Sec. Appendix II to Subpart D of Part 904--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;

[[Page 323]]

    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_THE PUBLIC HOUSING CAPITAL FUND PROGRAM--Table of Contents



                            Subpart A_General

Sec.
905.100 Purpose, general description, and other requirements.
905.102 Applicability.
905.104 HUD approvals.
905.106 Compliance.
905.108 Definitions.
905.110 Incorporation by reference.

                      Subpart B_Eligible Activities

905.200 Eligible activities.
905.202 Ineligible activities and costs.
905.204 Emergencies and natural disasters.

                 Subpart C_General Program Requirements

905.300 Capital fund submission requirements.
905.302 Timely submission of the CF ACC amendment by the PHA.
905.304 CF ACC term and covenant to operate.
905.306 Obligation and expenditure of Capital Fund grants.
905.308 Federal requirements applicable to all Capital Fund activities.
905.310 Disbursements from HUD.
905.312 Design and construction.
905.314 Cost and other limitations.
905.316 Procurement and contract requirements.
905.318 Title and deed.
905.320 Contract administration and acceptance of work.
905.322 Fiscal closeout.
905.324 Data reporting requirements.
905.326 Records.

                     Subpart D_Capital Fund Formula

905.400 Capital Fund formula (CF formula).

              Subpart E_Use of Capital Funds for Financing

905.500 Purpose and description.
905.505 Program requirements.
905.507 Streamlined application requirements for standard and high-
          performing PHAs.
905.510 Submission requirements.
905.515 HUD review and approval.

                   Subpart F_Development Requirements

905.600 General.
905.602 Program requirements.
905.604 Mixed-finance development.
905.606 Development proposal.
905.608 Site acquisition proposal.
905.610 Technical processing.
905.612 Disbursement of Capital Funds--predevelopment costs.

                   Subpart G_Other Security Interests

905.700 Other security interests.

       Subpart H_Compliance, HUD Review, Penalties, and Sanctions

905.800 Compliance.
905.802 HUD review of PHA performance.
905.804 Sanctions.

    Authority: 42 U.S.C. 1437g, 42 U.S.C. 1437z-2, 42 U.S.C. 1437z-7, 
and 3535(d).

    Source: 65 FR 14426, Mar. 16, 2000, unless otherwise noted.



                            Subpart A_General

    Source: 78 FR 63770, Oct. 24, 2013, unless otherwise noted.



Sec.  905.100  Purpose, general description, and other requirements.

    (a) Purpose. The Public Housing Capital Fund Program (Capital Fund 
Program or CFP) provides financial assistance to public housing agencies 
(PHAs) and resident management corporations (RMC) (pursuant to 24 CFR 
964.225) to

[[Page 324]]

make improvements to existing public housing. The CFP also provides 
financial assistance to develop public housing, including mixed-finance 
developments that contain public housing units.
    (b) General description. Congress appropriates amounts for the 
Capital Fund in HUD's annual appropriations. In order to receive a 
Capital Fund grant, the PHA must:
    (1) Validate project-level information in HUD's data systems, as 
prescribed by HUD;
    (2) Have an approved CFP 5-Year Action Plan;
    (3) Enter into a Capital Fund Annual Contributions Contract (CF ACC) 
Amendment to the PHA's Annual Contributions Contract (as defined in 24 
CFR 5.403) with HUD; and
    (4) Provide a written certification and counsel's opinion that all 
property receiving Capital Fund assistance is under a currently 
effective Declaration of Trust (DOT) and is in compliance with the CF 
ACC and the Act.
    (c) Informational requirements. Section 905.300 of this part 
describes the information to be submitted to HUD for the CFP. HUD uses 
the CF formula set forth in Sec.  905.400 of this part, along with data 
provided by the PHA and other information, including, but not limited 
to, the high-performance information from the Real Estate Assessment 
Center (REAC) and location cost indices, to determine each PHA's annual 
grant amount. HUD notifies each PHA of the amount of the grant and 
provides a CF ACC Amendment that must be signed by the PHA and executed 
by HUD in order for the PHA to access the grant. After HUD executes the 
CF ACC Amendment, the PHA may draw down funds for eligible costs that 
have been described in its CFP Annual Statement/Performance and 
Evaluation Report or CFP 5-Year Action Plan.
    (d) Eligible activities. Eligible Capital Fund costs and activities 
as further described in subpart B of this part include, but are not 
limited to, making physical improvements to the public housing stock and 
developing public housing units to be added to the existing inventory. 
With HUD approval, a PHA may also leverage its public housing inventory 
by borrowing additional capital on the private market and pledging a 
portion of its annual Capital Funds for debt service, in accordance with 
Sec.  905.500 of this part.
    (e) Obligation and expenditure requirements. A PHA must obligate and 
expend its Capital Funds in accordance with Sec.  905.306 of this part. 
The PHA will directly employ labor, either temporarily or permanently, 
to perform work (force account) or contract for the required work in 
accordance with 2 CFR part 200''. Upon completion of the work, the PHA 
must submit an Actual Modernization Cost Certificate (AMCC) or Actual 
Development Cost Certificate (ADCC) and a final Performance and 
Evaluation Report (in accordance with Sec.  905.322 of this part) to HUD 
to close out each Capital Fund grant.
    (f) Financing and development. Section 905.500 of this part 
regulates financing activities using Capital Funds and Operating Funds. 
Section 905.600 of this part contains the development requirements, 
including those related to mixed-finance development, formerly found in 
24 CFR part 941. Section 905.700 of this part describes the criteria for 
the use of Capital Funds for other security interests. Section 905.800 
of this part addresses PHA compliance with Capital Fund requirements and 
HUD capability for review and sanction for noncompliance.
    (g) Protections for Victims of Domestic Violence, Dating Violence, 
Sexual Assault and Stalking. Public housing agencies must apply the 
Violence Against Women Act (VAWA) requirements set forth in 24 CFR part 
5, subpart L, to mixed finance developments covered under Sec.  905.604.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015; 81 
FR 80815, Nov. 16, 2016]



Sec.  905.102  Applicability.

    All PHAs that have public housing units under an Annual 
Contributions Contract (ACC), as described in 24 CFR 5.403, are eligible 
to receive Capital Funds.



Sec.  905.104  HUD approvals.

    All HUD approvals required in this part must be in writing and from 
an official designated to grant such approval.

[[Page 325]]



Sec.  905.106  Compliance.

    PHAs or owner/management entities or their partners are required to 
comply with all applicable provisions of this part. Execution of the CF 
ACC Amendment, submissions required by this part, and disbursement of 
Capital Fund grants from HUD are individually and collectively deemed to 
be the PHA's certification that it is in compliance with the provisions 
of this part and all other Public Housing Program Requirements. 
Noncompliance with any provision of this part or other applicable 
requirements may subject the PHA and/or its partners to sanctions 
contained in Sec.  905.804 of this part.



Sec.  905.108  Definitions.

    The following definitions apply to this part:
    1937 Act. The term ``1937 Act'' is defined in 24 CFR 5.100.
    Accessible. As defined in 24 CFR 8.3.
    ACC. The Annual Contributions Contract between HUD and a PHA 
covering a public housing project or multiple public housing projects.
    ACC Amendment. An Amendment to the ACC to reflect specific changes 
made to a PHA's public housing inventory or funding. An ACC Amendment 
may be a Capital Fund ACC Amendment, a Mixed-Finance ACC Amendment, a 
Capital Fund Financing ACC Amendment, or other form of amendment 
specified by HUD.
    Additional Project Costs. The sum of the following HUD-approved 
costs related to the development of a public housing project, which are 
not included in the calculation of the Total Development Cost (TDC) 
limit, but are included in the maximum project cost as stated in Sec.  
905.314(b). Additional project costs include the following:
    (1) Costs for the demolition or remediation of environmental hazards 
associated with public housing units that will not be rebuilt on the 
original site; and
    (2) Extraordinary site costs that have been verified by an 
independent state-registered, licensed engineer (e.g., removal of 
underground utility systems; replacement of off-site underground utility 
systems; extensive rock and/or soil removal and replacement; and 
amelioration of unusual site conditions, such as unusual slopes, 
terraces, water catchments, lakes, etc.); and
    (3) Cost effective energy-efficiency measures in excess of standard 
building codes.
    Capital Fund (CF). The fund established under section 9(d) of the 
1937 Act (42 U.S.C.) 1437g(d).
    Capital Fund Annual Contributions Contract Amendment (CF ACC). An 
amendment to the Annual Contributions Contract (ACC) under the 1937 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 CF 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 1937 Act and the PHA agrees to modernize and operate the project in 
compliance with all Public Housing Requirements.
    Capital Fund Program Fee. A fee that may be charged to a Capital 
Fund grant by the PHA to cover costs associated with oversight and 
management of the CFP by the PHA Central Office Cost Center (COCC). 
These costs include duties related to general capital planning, 
preparation of the Annual Plan, processing of the Line of Credit Control 
System (LOCCS), preparation of reports, drawing of funds, budgeting, 
accounting, and procurement of construction and other miscellaneous 
contracts. The CFP fee is the administrative cost for managing a Capital 
Fund grant for a PHA subject to asset management.
    Community Renewal Costs. Community Renewal Costs consist of the sum 
of the following HUD-approved costs related to the development of a 
public housing project: planning (including proposal preparation); 
administration; site acquisition; relocation; demolition of--and site 
remediation of environmental hazards associated with--public housing 
units that will be replaced on the project site; interest and carrying 
charges; off-site facilities; community buildings and nondwelling 
facilities; contingency allowance; insurance premiums; any initial 
operating deficit; on-site streets; on site utilities; and

[[Page 326]]

other costs necessary to develop the project that are not covered under 
the Housing Construction Cost (HCC). Public housing capital assistance 
may be used to pay for Community Renewal Costs in an amount equivalent 
to the difference between the HCC paid for with public housing capital 
assistance and the TDC limit.
    Cooperation agreement. An agreement, in a form prescribed by HUD, 
between a PHA and the applicable local governing body or bodies that 
assures exemption from real and personal property taxes, provides for 
local support and services for the development and operation of public 
housing, and provides for PHA payments in lieu of taxes (PILOT).
    Date of Full Availability (DOFA). The last day of the month in which 
substantially all (95 percent or more) of the units in a public housing 
project are available for occupancy.
    Declaration of Restrictive Covenant. The Declaration of Restrictive 
Covenant is a legal instrument that binds the PHA and the Owner Entity 
to develop mixed-finance projects in compliance with Public Housing 
Requirements and restricts disposition of the property, including 
transferring, conveying, assigning, leasing, mortgaging, pledging or 
otherwise encumbering the property.
    Declaration of Trust (DOT). A legal instrument that grants HUD an 
interest in public housing property. It provides public notice that the 
property must be operated in accordance with all public housing federal 
requirements, including the requirement not to convey or otherwise 
encumber the property unless expressly authorized by federal law and/or 
HUD.
    Development. Any or all undertakings necessary for planning, land 
acquisition, demolition, construction, or equipment in connection with a 
public housing project.
    Emergency work. Capital Fund related physical work items that if not 
done pose an immediate threat to the health or safety of residents, and 
which must be completed within one year of funding. Management 
Improvements are not eligible as emergency work and therefore must be 
covered by the CFP 5-Year Action Plan before the PHA may carry them out.
    Energy audit. A systematic review of the energy requirements and 
consumption for property with the intent to identify potential 
opportunities for energy and water savings through improved operational 
efficiency or more efficient components.
    Expenditure. Capital Funds disbursed by the PHA to pay for 
obligations incurred in connection with work included in a CFP 5-Year 
Action Plan that has been approved by the PHA Board of Commissioners and 
HUD. Total funds expended means cash actually disbursed and does not 
include retainage.
    Federal Fiscal Year (FFY). The Federal Fiscal Year begins each year 
on October 1 and ends on September 30 of the following year.
    Force account labor. Labor employed directly by the PHA on either a 
permanent or a temporary basis.
    Fungibility. As it relates to the Capital Fund Program, fungibility 
allows the PHA to substitute work items between any of the years within 
the latest approved CFP 5-Year Action Plan, without prior HUD approval.
    HCC. The sum of the following HUD-approved costs related to the 
development of a public housing project: dwelling unit hard costs 
(including construction and equipment), builder's overhead and profit, 
the cost of extending utilities from the street to the public housing 
project, finish landscaping, and the payment of Davis-Bacon wage rates.
    Line of Credit Control System (LOCCS). LOCCS is a HUD grant 
disbursement system. LOCCS currently provides disbursement controls for 
over 100 HUD grant programs. LOCCS-Web is an intranet version of LOCCS 
for HUD personnel. eLOCCS is the Internet link to LOCCS data for HUD 
business partners.
    Mixed-finance modernization. Use of the mixed-finance method of 
development to modernize public housing projects described in Sec.  
905.604.
    Modernization. Modernization means the activities and items listed 
in Sec.  905.200(b)(4-18).
    Natural disaster. An extraordinary event, such as an earthquake, 
flood, or

[[Page 327]]

hurricane, affecting only one or few PHAs, but excluding presidentially 
declared emergencies and major disasters under the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq).
    Obligation. A binding agreement for work or financing that will 
result in outlays, immediately or in the future. All obligations must be 
incorporated within the CFP 5-Year Action Plan that has been approved by 
the PHA Board of Commissioners and HUD. This includes funds obligated by 
the PHA for work to be performed by contract labor (i.e., contract 
award), or by force account labor (i.e., work actually started by PHA 
employees). Capital Funds identified in the PHA's CFP 5-Year Action Plan 
to be transferred to operations are obligated by the PHA once the funds 
have been budgeted and drawn down by the PHA. Once these funds are drawn 
down they are subject to the requirements of 24 CFR part 990.
    Open grant. Any grant for which a cost certificate has not been 
submitted and which has not reached fiscal closeout as described in 
Sec.  905.322 of this part.
    Operating fund. Assistance provided under 24 CFR part 990 pursuant 
to section 9(e) of the 1937 Act (42 U.S.C. 1437g(e)) for the purpose of 
operation and management of public housing.
    Owner entity. An entity that owns public housing units. In mixed-
finance development, the Owner Entity may be the PHA, or may be an 
entity in which the PHA owns a partial interest, or may be an entity in 
which the PHA has no ownership interest. The Owner Entity is subject to 
the applicable requirements of this subpart.
    Partner. A third-party entity with which 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. 
The partner has primary responsibility with the PHA for the development 
and/or operation of the public housing units and is subject to the 
applicable requirements of subpart F of this part.
    Physical Needs Assessment (PNA). A systematic review of all the 
major physical components of property to result in a long-term schedule 
for replacement of each component and estimated capital costs required 
to meet the replacement need.
    PIH Information Center (PIC). PIH's current system for recording 
data concerning: the public housing inventory, the characteristics of 
public housing and Housing Choice Voucher --assisted families, the 
characteristics of PHAs, and performance measurement of PHAs receiving 
Housing Choice Voucher funding.
    Public Housing Agency (PHA). Any state, county, municipality, or 
other governmental entity or public body or agency or instrumentality of 
these entities that is authorized to engage or assist in the development 
or operation of public housing under this part.
    Public Housing Assessment System (PHAS). The assessment system under 
24 CFR part 902 for measuring the properties and PHA management 
performance in essential housing operations, including rewards for high 
performers and consequences for poor performers.
    Public housing capital assistance. Assistance provided by HUD under 
the Act in connection with the development of public housing under this 
part, including Capital Fund assistance provided under section 9(d) of 
the Act, public housing development assistance provided under section 5 
of the Act, Operating Fund assistance used for capital purposes under 
section 9(g)(2) or 9(e)(1)(I) (with HUD's approval of such financing of 
rehabilitation and development of public housing units) of the Act, and 
HOPE VI grant assistance.
    Public housing funds. Any funds provided through the Capital Fund or 
Other Public Housing Development Sources, such as HOPE VI, Choice 
Neighborhoods, Development Funds, disposition proceeds that a PHA may 
realize under section 18 of the 1937 Act (42 U.S.C. 1437p), or any other 
funds appropriated by Congress for public housing.
    Public housing project. The term ``public housing'' means low-income 
housing, and all necessary appurtenances thereto, assisted under the 
1937 Act, other than assistance under 42 U.S.C. 1437f of the 1937 Act 
(section 8). The term ``public housing'' includes dwelling units in a 
mixed-finance project that are assisted by a public housing agency with 
public housing

[[Page 328]]

capital assistance or Operating Fund assistance. When used in reference 
to public housing, the term ``project'' means housing developed, 
acquired, or assisted by a PHA under the 1937 Act, and the improvement 
of any such housing.
    Public housing requirements. All requirements applicable to public 
housing including, but not limited to, the 1937 Act; HUD regulations; 
the Consolidated Annual Contributions Contract, including amendments; 
HUD notices; and all applicable federal statutes, executive orders, and 
regulatory requirements, as these requirements may be amended from time 
to time.
    Reasonable cost. An amount to rehabilitate or modernize an existing 
structure that is not greater than 90 percent of the TDC for a new 
development of the same structure type, number, and size of units in the 
same market area. Reasonable costs are also determined with 
consideration of HUD regulations including 2 CFR part 200.
    Reconfiguration. The altering of the interior space of buildings 
(e.g., moving or removing interior walls to change the design, sizes, or 
number of units).
    Uniform Federal Accessibility Standards (UFAS). As defined in 24 CFR 
8.32; see also 24 CFR part 40.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  905.110  Incorporation by reference.

    (a) Certain material is incorporated by reference into this part, 
with the approval of the Director of the Federal Register, under 5 
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that 
specified in this section, HUD must publish notice of change in the 
Federal Register and the material must be available to the public. 
Incorporated material is available from the sources listed below and is 
available for inspection at HUD's Office of Policy Development and 
Research, Affordable Housing Research and Technology Division, 
Department of Housing and Urban Development, telephone number 202-408-
4370 (this is not a toll-free number). This material is also available 
for inspection at the National Archives and Records Administration 
(NARA). For information on the availability of this material at NARA, 
call 202-741-6030 (this is not a toll-free number) or go to http://
www.archives.gov/federal_register/code_of_federal_regulations/
ibr_locations.html.
    (b) American Society of Heating, Refrigerating, and Air-Conditioning 
Engineers, Inc., 1791 Tulle Circle NE., Atlanta, GA 30329 (http://
www.ashrae.org/standards-research-technology/standards-guidelines).
    (1) ASHRAE 90.1-2010, ``Energy Standard for Buildings Except Low-
Rise Residential Buildings,'' copyright 2010, IBR approved for 
Sec. Sec.  905.200(b) and 905.312(b) of this part.
    (2) [Reserved]
    (c) International Code Council, 500 New Jersey Avenue NW., 6th 
Floor, Washington, DC 20001.
    (1) International Energy Conservation Code (IECC), January 2009, IBR 
approved for Sec. Sec.  905.200(b) and 905.312(b).
    (2) [Reserved]



                      Subpart B_Eligible Activities

    Source: 78 FR 63773, Oct. 24, 2013, unless otherwise noted.



Sec.  905.200  Eligible activities.

    (a) General. Activities that are eligible to be funded with Capital 
Funds as identified in this section include only items specified in an 
approved CFP 5-Year Action Plan as identified in Sec.  905.300, or 
approved by HUD for emergency and natural disaster assistance, other 
than presidentially declared natural disasters and emergencies.
    (b) Eligible activities. Eligible activities include the 
development, financing, and modernization of public housing projects, 
including the redesign, reconstruction, and reconfiguration of public 
housing sites and buildings (including compliance with the accessible 
design and construction requirements contained in 24 CFR 8.32, 24 CFR 
part 40, 24 CFR part 100, 28 CFR 35.151, and 28 CFR part 36, as 
applicable) and the development of mixed-finance projects, including the 
following:
    (1) Modernization. Modernization is defined in Sec.  905.108 of this 
part;
    (2) Development. Development refers to activities and related costs 
to add

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units to a PHA's public housing inventory under Sec.  905.600 of this 
part, including: construction and acquisition with or without 
rehabilitation; any and all undertakings necessary for planning, design, 
financing, land acquisition, demolition, construction, or equipment, 
including development of public housing units, and buildings, 
facilities, and/or related appurtenances (i.e., nondwelling facilities/
spaces). Development of mixed-finance projects include the provision of 
public housing through a regulatory and operating agreement, master 
contract, individual lease, condominium or cooperative agreement, or 
equity interest.
    (3) Financing. Debt and financing costs (e.g., origination fees, 
interest) incurred by PHAs for development or modernization of PHA 
projects that involves the use of Capital Funds, including, but not 
limited to:
    (i) Mixed finance as described in Sec.  905.604 of this part;
    (ii) The Capital Fund Financing Program (CFFP) as described in Sec.  
905.500 of this part; and
    (iii) Any other use authorized by the Secretary under section 30 of 
the 1937 Act (42 U.S.C. 1437).
    (4) Vacancy reduction. Physical improvements to reduce the number of 
units that are vacant. Not included are costs for routine vacant unit 
turnaround, such as painting, cleaning, and minor repairs. Vacancy 
reduction activities must be remedies to a defined vacancy problem 
detailed in a vacancy reduction program included in the PHA's CFP 5-Year 
Action Plan.
    (5) Nonroutine maintenance. Work items that ordinarily would be 
performed on a regular basis in the course of maintenance of property, 
but have become substantial in scope because they have been postponed 
and involve expenditures that would otherwise materially distort the 
level trend of maintenance expenses. These activities also include the 
replacement of obsolete utility systems and dwelling equipment.
    (6) Planned code compliance. Building code compliance includes 
design and physical improvement costs associated with:
    (i) Correcting violations of local building code or the Uniform 
Physical Condition Standards (UPCS) under the Public Housing Assessment 
System (PHAS), and
    (ii) A national building code, such as those developed by the 
International Code Council or the National Fire Protection Association; 
and the IECC or ASHRAE 90.1-2010 (both incorporated by reference, see, 
Sec.  905.110 of this part), for multifamily high-rises (four stories or 
higher), or a successor energy code or standard that has been adopted by 
HUD for new construction pursuant to section 109 of the Cranston-
Gonzales National Affordable Housing Act, Public Law 101-625, codified 
at 42 U.S.C. 12709, or other relevant authority.
    (7) Management improvements. Noncapital activities that are project-
specific or PHA-wide improvements needed to upgrade or improve the 
operation or maintenance of the PHA's projects, to promote energy 
conservation, to sustain physical improvements at those projects, or 
correct management deficiencies. PHAs must be able to demonstrate the 
linkage between the management improvement and the correction of an 
identified management deficiency, including sustaining the physical 
improvements. HUD encourages PHAs, to the greatest extent feasible, to 
hire residents as trainees, apprentices, or employees to carry out 
activities under this part, and to contract with resident owned 
businesses as required by section 3 of the Housing and Community 
Development Act of 1968, 12 U.S.C. 1701u. Management improvement costs 
shall be fundable only for the implementation period of the physical 
improvements, unless a longer period, up to a maximum of 4 years, is 
clearly necessary to achieve performance targets. Eligible activities 
include the following costs:
    (i) Training for PHA personnel in operations and procedures, 
including resident selection, rent collection and eviction;
    (ii) Improvements to management, financial, and accounting control 
systems of the PHA;
    (iii) Improvement of resident and project security;
    (iv) Activities that assure or foster equal opportunity; and
    (v) Activities needed in conjunction with capital expenditures to 
facilitate

[[Page 330]]

programs to improve the empowerment and economic self-sufficiency of 
public housing residents, including the costs for resident job training 
and resident business development activities to enable residents and 
their businesses to carry out Capital Fund-assisted activities.
    (vi) Resident management costs not covered by the Operating Fund 
include:
    (A) The cost of technical assistance to a resident council or RMC to 
assess feasibility of carrying out management functions for a specific 
development or developments;
    (B) The cost to train residents in skills directly related to the 
operation and management of the development(s) for potential employment 
by the RMC;
    (C) The cost to train RMC board members in community organization, 
board development, and leadership;
    (D) The cost of the formation of an RMC; and
    (E) Resident participation costs that promote more effective 
resident participation in the operation of the PHA in its Capital Fund 
activities, including costs for staff support, outreach, training, 
meeting and office space, childcare, transportation, and access to 
computers that are modest and reasonable.
    (8) Economic self-sufficiency. Capital expenditures to facilitate 
programs to improve the empowerment and economic self-sufficiency of 
public housing residents.
    (9) Demolition and reconfiguration. (i) The costs to demolish 
dwelling units or nondwelling facilities subject to prior approval by 
HUD, where required, and other related costs for activities such as 
relocation, clearing, and grading the site after demolition, and 
subsequent site improvements to benefit the remaining portion of the 
existing public housing property, as applicable.
    (ii) The costs to develop dwelling units or nondwelling facilities 
approved by HUD, where required, and other related costs for activities 
such as relocation, clearing and grading the site prior to development.
    (iii) The costs to reconfigure existing dwelling units to units with 
different bedroom sizes or to a nondwelling use.
    (10) Resident relocation and mobility counseling. Relocation and 
other assistance (e.g., reimbursement to affected residents of 
reasonable out-of-pocket expenses incurred in connection with temporary 
relocation, including the cost of moving to and from temporary housing 
and any increase in monthly rent/utility costs) as may be required or 
permitted by applicable Public Housing Requirements for permanent or 
temporary relocation, as a direct result of modernization, development, 
rehabilitation, demolition, disposition, reconfiguration, acquisition, 
or an emergency or disaster.
    (11) Security and safety. Capital expenditures designed to improve 
the security and safety of residents.
    (12) Homeownership. Activities associated with public housing 
homeownership, as approved by HUD, such as:
    (i) The cost of a study to assess the feasibility of converting 
rental units to homeownership units and the preparation of an 
application for the conversion to homeownership or for the sale of 
units;
    (ii) Construction or acquisition of units;
    (iii) Downpayment assistance;
    (iv) Closing cost assistance;
    (v) Subordinate mortgage loans;
    (vi) Construction or permanent financing such as write downs for new 
construction, or acquisition with or without rehabilitation; and
    (vii) Other activities in support of the primary homeownership 
activities above, including but not limited to:
    (A) Demolition to make way for new construction;
    (B) Abatement of environmentally hazardous materials;
    (C) Relocation assistance and mobility counseling;
    (D) Homeownership counseling;
    (E) Site improvements; and
    (F) Administrative and marketing costs.
    (13) Capital Fund-related legal costs (e.g., legal costs related to 
preparing property descriptions for the DOT, zoning, permitting, 
environmental review, procurement, and contracting).
    (14) Energy efficiency. Allowed costs include:
    (i) Energy audit or updated energy audits to the extent Operating 
Funds are not available and the energy audit

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is included within a modernization program.
    (ii) Integrated utility management and capital planning to promote 
energy conservation and efficiency measures.
    (iii) Energy and water conservation measures identified in a PHA's 
most recently updated energy audit.
    (iv) Improvement of energy and water-use efficiency by installing 
fixtures and fittings that conform to the American Society of Mechanical 
Engineers/American National Standards Institute standards A112.19.2-1998 
and A112.18.1-2000, or any revision thereto, applicable at the time of 
installation, and by increasing energy efficiency and water conservation 
by such other means as the Secretary determines are appropriate.
    (v) The installation and use of Energy Star appliances whenever 
energy systems, devices, and appliances are replaced, unless it is not 
cost-effective to do so, in accordance with Section 152 of the Energy 
Policy Act of 2005, 42 U.S.C. 15841.
    (vi) Utility and energy management system automation, and metering 
activities, including changing mastermeter systems to individually 
metered systems if installed as a part of a modernization activity to 
upgrade utility systems; for example, electric, water, or gas systems of 
the PHA consistent with the requirements of 24 CFR part 965.
    (15) Administrative costs. Any administrative costs, including 
salaries and employee benefit contributions, other than the Capital Fund 
Program Fee, must be related to a specific public housing development or 
modernization project and detailed in the CFP 5-Year Action Plan.
    (16) Audit. Costs of the annual audit attributable to the portion of 
the audit covering the CFP in accordance with Sec.  905.322(c) of this 
part.
    (17) Capital Fund Program Fee. This fee covers costs associated with 
oversight and management of the CFP attributable to the HUD-accepted 
COCC as described in 24 CFR part 990 subpart H. These costs include 
duties related to capital planning, preparing the CFP Annual Statement/
Performance and Evaluation Report, preparing the CFP 5-Year Action Plan, 
the monitoring of LOCCS, preparing reports, drawing funds, budgeting, 
accounting, and procuring construction and other miscellaneous 
contracts. This fee is not intended to cover costs associated with 
construction supervisory and inspection functions that are considered a 
front-line cost of the project.
    (18) Emergency activities. Capital Fund related activities 
identified as emergency work, as defined in Sec.  905.108 of this part, 
whether or not the need is indicated in the CFP 5-Year Action Plan.



Sec.  905.202  Ineligible activities and costs.

    The following are ineligible activities and costs for the CFP:
    (a) Costs not associated with a public housing project or 
development, as defined in Sec.  905.604(b)(1);
    (b) Activities and costs not included in the PHA's CFP 5-Year Action 
Plan, with the exception that expenditures for emergencies and 
disasters, as defined in Sec.  905.204 of this subpart, that are not 
identified in the 5-year Action Plan because of their emergent nature 
are eligible costs;
    (c) Improvements or purchases that are not modest in design and cost 
because they include amenities, materials, and design in excess of what 
is customary for the locality. Air conditioning is an eligible modest 
amenity;
    (d) Any costs not authorized as outlined in 2 CFR part 200, subpart 
E, including, but not limited to, indirect administrative costs and 
indemnification;
    (e) Public housing operating assistance, except as provided in Sec.  
905.314(l) of this part;
    (f) Direct provision of social services through either force account 
or contract labor. Examples of ineligible direct social services 
include, but are not limited to, salaries for social workers or GED 
teachers;
    (g) Eligible costs that are in excess of the amount directly 
attributable to the public housing units when the physical or management 
improvements, including salaries and employee benefits and 
contributions, will benefit programs other than public housing, such as 
section 8 Housing Choice Voucher or local revitalization programs;

[[Page 332]]

    (h) Ineligible management improvements include:
    (1) Costs for security guards or ongoing security services (Capital 
Funds may only be used for the initial capital (e.g., fencing, lights, 
and cameras) or noncapital (e.g., training of in-house security staff) 
management improvements but may not be used for the ongoing costs, such 
as security guards after the end of the implementation period of the 
physical improvements);
    (2) General remedial education; and
    (3) Job counseling, job development and placement, supportive 
services during training, and the hiring of a resident coordinator. No 
continued Capital Funds will be provided after the end of the 
implementation period of the management improvements. The PHA shall be 
responsible for finding other funding sources, reducing its ongoing 
management costs, or terminating the management activities;
    (i) Eligible cost that is funded by another source and would result 
in duplicate funding; and
    (j) Any other activities and costs that HUD may determine on a case-
by-case basis.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  905.204  Emergencies and natural disasters.

    (a) General. PHAs are required by the CF ACC to carry various types 
of insurance to protect it from loss. In most cases, insurance coverage 
will be the primary source of funding to pay repair or replacement costs 
associated with emergencies and natural disasters. Where the 
Department's Annual Appropriations Act establishes a set-aside from the 
Capital Fund appropriation for emergencies and natural disasters, the 
procedures in this section apply.
    (b) Emergencies and natural disasters. An emergency is an unforeseen 
or unpreventable event or occurrence that poses an immediate threat to 
the health and safety of the residents that must be corrected within one 
year of funding. A natural disaster for purposes of the Capital Fund 
reserve, is a non-presidentially declared disaster. In the event an 
emergency or natural disaster arises, HUD may require a PHA to use any 
other source that may legally be available, including unobligated 
Capital Funds, prior to providing emergency or natural disaster funds 
from the set-aside. The Department will review, on a case-by-case basis, 
requests for emergency and natural disaster funding from PHAs.
    (c) Procedure to request emergency or natural disaster funds. To 
obtain emergency or natural disaster funds, a PHA shall submit a written 
request in the form and manner prescribed by HUD. In a natural disaster 
where the PHA requires immediate relief to preserve the property and 
safety of the residents, the PHA may submit a preliminary request 
outlined in paragraph (d) of this section. Subsequently, the PHA is 
required to complete and submit the remaining information outlined in 
paragraph (e) of this section, at a time prescribed by HUD. For 
emergency requests, PHAs are to follow the procedures outlined in 
paragraph (e) of this section.
    (d) Procedure to request preliminary natural disaster grant for 
immediate preservation. A PHA may request a preliminary grant only for 
costs necessary for immediate preservation of the property and safety of 
the residents. The application should include the reasonable 
identification of damage and preservation costs as determined by the 
PHA. An independent assessment will be required when the PHA submits the 
final request or when the PHA reconciles the preliminary application 
grant with the actual amounts received from the Federal Emergency 
Management Agency (FEMA), insurance carriers, and other natural disaster 
relief sources. Regardless of whether further funding from the set-aside 
is requested, at a time specified by HUD, the PHA will be expected to 
provide a reconciliation of all funds received, to ensure that the PHA 
does not receive duplicate funding.
    (e) Procedure for an emergency or a final request for natural 
disaster funds. In the request the PHA shall:
    (1) Identify the public housing project(s) with the emergency or 
natural disaster condition(s).
    (2) Identify and provide the date of the conditions that present an 
unforeseen or unpreventable threat to the health, life, or safety of 
residents, in

[[Page 333]]

the case of emergency; or Natural disaster (e.g., hurricane, tornado, 
etc.).
    (3) Describe the activities that will be undertaken to correct the 
emergency or the conditions caused by the natural disaster and the 
estimated cost.
    (4) Provide an independent assessment of the extent of and the cost 
to correct the condition. The assessment must be specific as to the 
damage and costs associated with the emergency or natural disaster. An 
independent estimate of damage and repair cost is required as a part of 
the final natural disaster application. For natural disasters, the 
assessment must identify damage specifically caused by the natural 
disaster. The set-aside can be used only to pay costs to repair or 
replace a public housing project damaged as a result of the natural 
disaster, not for nonroutine maintenance or other improvements.
    (5) Provide a copy of a currently effective DOT covering the 
property and an opinion of counsel that there are no preexisting liens 
or other encumbrances on the property.
    (6) Demonstrate that without the requested funds from the set-aside, 
the PHA does not have adequate funds available to correct the emergency 
condition(s).
    (7) Identify all other sources of available funds (e.g., insurance 
proceeds, FEMA).
    (8) Any other material required by HUD.
    (f) HUD Action. HUD shall review all requests for emergency or 
natural disaster funds. If HUD determines that a PHA's request meets the 
requirements of this section, HUD shall approve the request subject to 
the availability of funds in the set-aside, in the order in which 
requests are received and are determined approvable.
    (g) Submission of the CF ACC. Upon being provided with a CF ACC 
Amendment from HUD, the PHA must sign and date the CF ACC Amendment and 
return it to HUD by the date established by HUD. HUD will execute the 
signed and dated CF ACC Amendment submitted by the PHA.



                 Subpart C_General Program Requirements

    Source: 78 FR 63773, Oct. 24, 2013, unless otherwise noted.



Sec.  905.300  Capital fund submission requirements.

    (a) General. Unless otherwise stated, the requirements in this 
section apply to both qualified PHAs (as described in Sec.  903.3(c) of 
this chapter) and nonqualified PHAs. Each PHA must complete a 
comprehensive physical needs assessment (PNA).
    (1) Applicability. Small PHAs (PHAs that own or operate fewer than 
250 public housing units) must comply with the requirements of this 
section beginning 30 days after the end of the federal fiscal year 
quarter following HUD's publication of a notice in the Federal Register.
    (2) [Reserved]
    (b) Capital Fund program submission requirements. At the time that 
the PHA submits the ACC Amendment(s) for its Capital Fund Grants(s) to 
HUD, the PHA must also submit the following items:
    (1) CFP 5-Year Action Plan. (i) Content. The CFP 5-Year Action Plan 
must describe the capital improvements necessary to ensure long-term 
physical and social viability of the PHA's public housing developments, 
including the capital improvements to be undertaken within the 5-year 
period, their estimated costs, status of environmental review, and any 
other information required for participation in the CFP, as prescribed 
by HUD. In order to be entitled to fungibility, PHA's must have an 
approved 5-year Action Plan. Except in the case of emergency/disaster 
work, the PHA shall not spend Capital Funds on any work that is not 
included in an approved CFP 5-Year Action Plan and its amendments.
    (ii) Budget. The Capital Fund Budget for each of the 5 years shall 
be prepared by a PHA using the form(s) prescribed by HUD. Work items 
listed in the budget must include, but are not limited to, the 
following:
    (A) Where a PHA has an approved Capital Fund Financing Program 
(CFFP) loan, debt service payments for

[[Page 334]]

the grants from which the payments are scheduled;
    (B) Where a PHA has an approved CFFP loan, the PHA shall also 
include all work and costs, including debt service payments, in the CFP 
5-Year Action Plan. Work associated with the use of financing proceeds 
will be reported separately in a form and manner prescribed by HUD; or
    (C) Work affecting health and safety and compliance with regulatory 
requirements such as section 504 of the Rehabilitation Act of 1973 and 
HUD's implementing regulations at 24 CFR part 8, and the lead-based 
paint poisoning prevention standards at 24 CFR part 35, before major 
systems (e.g., heating, roof, etc.) and other costs of lower priority.
    (iii) PHA Criteria for Significant Amendment or Modification. The 
PHA must include in the basic criteria that the PHA will use for 
determining a significant amendment or modification to the CFP 5-Year 
Action Plan. In addition to the criteria established by the PHA, for the 
purpose of the CFP, a proposed demolition, disposition, homeownership, 
Capital Fund financing, development, or mixed-finance proposal are 
considered significant amendments to the CFP 5-Year Action Plan.
    (iv) Submission. The PHA must submit a Board-approved CFP 5-Year 
Action Plan at least once every 5 years. The PHA may choose to update 
its CFP 5-Year Action Plan every year. The PHA shall indicate whether 
its CFP 5-Year Action Plan is fixed or rolling. Prior to submission to 
HUD, the 5-Year Action Plan must have been approved by the PHA's Board 
of Commissioners. In any given year that a PHA does not have a CFP 5-
Year Action Plan that is approved by the PHA Board of Commissioners and 
HUD, the Capital Fund grant(s) for these PHAs will be reserved and 
obligated; however, the PHA will not have access to those funds until 
its CFP 5-Year Action Plan is approved by the PHA Board of Commissioners 
and HUD.
    (v) Significant amendments or modification to the CFP 5 Year Action 
Plan. PHAs making significant amendments or modifications to the CFP 5-
Year Action Plan, as defined in paragraph (b)(1)(iii) of this section, 
must follow the requirements of this section.
    (A) A PHA after submitting its 5-Year Action Plan may amend or 
modify the plan. If the amendment or modification is a significant 
amendment or modification, as defined in paragraph (b)(1)(iii) of this 
section, the PHA:
    (1) May not adopt the amendment or modification until the PHA has 
duly called a meeting of its Board of Commissioners (or similar 
governing body) and the meeting at which the amendment or modification 
is adopted, is open to the public; and
    (2) May not implement the amendment or modification until 
notification of the amendment or modifications are provided to HUD and 
approved by HUD in accordance with HUD's plan review procedures, as 
provided in paragraph (b)(6) of this section.
    (B) Each significant amendment or modification to a plan submitted 
to HUD is subject to the requirement of paragraph (b)(3) of this 
section.
    (2) Certifications required for receipt of Capital Fund grants. The 
PHA is also required to submit various certifications to HUD, in a form 
prescribed by HUD, including, but not limited to:
    (i) Certification of PIC Data;
    (ii) Standard Form--Disclosure of Lobbying Activities;
    (iii) Civil Rights Compliance, in a form prescribed by HUD; and
    (iv) Certification of Compliance with Public Hearing Requirements.
    (3) Conduct of public hearing and Resident Advisory Board 
Consultation. A PHA must annually conduct a public hearing and consult 
with the Resident Advisory Board (RAB) of the PHA to discuss the Capital 
Fund submission. The PHA may elect to conduct a separate annual public 
hearing in order to solicit public comments or to hold the annual public 
hearing at the same time as the hearing for the Annual PHA Plan, the 5-
Year Plan, or the required annual hearing for qualified public housing 
authorities. The hearing must be conducted at a location that is 
convenient to the residents served by the PHA.
    (i) Not later than 45 days before the public hearing is to take 
place, the PHA must:

[[Page 335]]

    (A) Make the Capital Fund submission along with the material 
required under this paragraph (b) available to the residents and the 
RAB; and
    (B) Publish a notice informing the public that the information is 
available for review and inspection; that a public hearing will take 
place on the plan; and of the date, time, and location of the hearing.
    (C) PHAs shall conduct reasonable outreach activities to encourage 
broad public participation in the review of the Capital Fund submission.
    (4) Public and RAB comments. The PHA must consider the comments from 
the residents, the public, and the RAB on the Capital Fund submission, 
or any significant modification thereto. In submitting the final CFP 5-
Year Action Plan to HUD for approval, or any significant amendment or 
modification to the 5-Year Action Plan to HUD for approval, the PHA must 
include a copy of the recommendations made by the RAB(s) and a 
description of the manner in which the PHA addressed these 
recommendations.
    (5) Consistency with Consolidated Plan. The Capital Fund submission 
must be consistent with any applicable Consolidated Plan.
    (6) HUD review and approval. The CFP submission requirements must 
meet the requirements of this part as well as the Public Housing Program 
Requirements as defined in Sec.  905.108 of this part. A PHA is required 
to revise or correct information that is not in compliance, and HUD has 
the authority to impose administrative sanctions until the appropriate 
revisions are made. HUD will review the CFP submission requirements to 
determine whether:
    (i) All of the information that is required to be submitted is 
included;
    (ii) The information is consistent with the needs identified in the 
PNA and data available to HUD; and
    (iii) There are any issues of compliance with applicable laws, 
regulations, or contract requirements that have not been addressed with 
the proposed use of the Capital Fund.
    (7) Time frame for submission of CFP requirements. The requirements 
identified in this paragraph (b) must be submitted to HUD, in a format 
prescribed by HUD, at the time that the PHA submits its signed CF ACC 
Amendment.
    (8) Performance and Evaluation Report. (i) All PHAs must prepare a 
CFP Annual Statement/Performance and Evaluation Report at a time and in 
a format prescribed by HUD. These reports shall be retained on file for 
all grants for which a final Actual Modernization Cost Certificate 
(AMCC) or an Actual Development Cost Certificate (ADCC) has not been 
submitted. A final Performance and Evaluation Report must be submitted 
in accordance with 24 CFR 905.322, at the time the PHA submits its AMCC 
or ADCC.
    (ii) PHAs that are designated as troubled performers under PHAS (24 
CFR part 902) or as troubled under the Section 8 Management Assessment 
Program (SEMAP) (24 CFR part 985), and/or were identified as 
noncompliant with section 9(j) obligation and expenditure requirements 
during the fiscal year, shall submit their CFP Annual Statement/
Performance and Evaluation Reports to HUD for review and approval.
    (iii) All other PHAs, that are not designated as troubled performers 
under PHAS and are not designated as troubled under SEMAP, and that were 
in compliance with section 9(j) obligation and expenditure requirements 
during the fiscal year, shall prepare a CFP Annual Statement/Performance 
and Evaluation report for all open grants and shall retain the report(s) 
on file at the PHA, to be available to HUD upon request.
    (9) Moving to Work (MTW) PHAs. MTW PHAs are to submit the Capital 
Fund submissions as part of the MTW Plan annually, as required by the 
MTW Agreement.
    (c)-(d) [Reserved]



Sec.  905.302  Timely submission of the CF ACC amendment by the PHA.

    Upon being provided with a CF ACC Amendment from HUD, the PHA must 
sign and date the CF ACC Amendment and return it to HUD by the date 
established. HUD will execute the signed and dated CF ACC Amendment 
submitted by the PHA. If HUD does not receive the signed and dated 
Amendment by the submission deadline, the PHA will receive the Capital 
Fund grant for that

[[Page 336]]

year; however, it will have less than 24 months to obligate 90 percent 
of the Capital Fund grant and less than 48 months to expend these funds 
because the PHA's obligation start date and disbursement end date for 
these grants will remain as previously established by HUD.



Sec.  905.304  CF ACC term and covenant to operate.

    (a) Period of obligation to operate as public housing. The PHA shall 
operate all public housing projects in accordance with the CF ACC, as 
amended, and applicable HUD regulations, for the statutorily prescribed 
period. These periods shall be evidenced by a recorded DOT on all public 
housing property. If the PHA uses Capital Funds to develop public 
housing or to modernize existing public housing, the CF ACC term and the 
covenant to operate those projects are as follows:
    (1) Development activities. Each public housing project developed 
using Capital Funds shall establish a restricted use covenant, either in 
the DOT or as a Declaration of Restrictive Covenants, to operate under 
the terms and conditions applicable to public housing for a 40-year 
period that begins on the date on which the project becomes available 
for occupancy, as determined by HUD.
    (2) Modernization activities. For PHAs that receive Capital Fund 
assistance, the execution of each new CF ACC Amendment establishes an 
additional 20-year period that begins on the latest date on which 
modernization is completed, except that the additional 20-year period 
does not apply to a project that receives Capital Fund assistance only 
for management improvements.
    (3) Operating Fund. Any public housing project developed that 
receives Operating Fund assistance shall have a covenant to operate 
under requirements applicable to public housing for a 10-year period 
beginning upon the conclusion of the fiscal year for which such amounts 
were provided, except for such shorter period as permitted by HUD by an 
exception.
    (b) Mortgage or security interests. The PHA shall not allow any 
mortgage or security interest in public housing assets, including under 
section 30 of the 1937 Act (42 U.S.C. 1437z-2), without prior written 
approval from HUD. PHAs that undertake financing unsecured by public 
housing assets shall include the following nonrecourse language in all 
financing documents as follows:

    ``This financing is non-recourse to any public housing property 
(real or personal property including all public housing assets or 
income), or disposition proceeds approved pursuant to Section 18 of the 
United States Housing Act of 1937 (unless explicitly permitted by HUD in 
the Section 18 approval letter).''

    (c) Applicability of latest expiration date. All public housing 
subject to this part or required by law shall be maintained and operated 
as public housing, as prescribed, until the latest expiration date 
provided in section 9(d)(3) of the 1937 Act (42 U.S.C. 1437g(d)(3)) or 
any other provision of law or regulation mandating the operation of the 
housing as public housing, or under terms and conditions applicable to 
public housing, for a specified period of time.



Sec.  905.306  Obligation and expenditure of Capital Fund grants.

    (a) Obligation. A PHA shall obligate each Capital Fund grant, 
including formula grants, Replacement Housing Factor (RHF) grants, 
Demolition and Disposition Transitional Funding (DDTF) grants, and 
natural disaster grants, no later than 24 months after, and emergency 
grants no later than 12 months after, the date on which the funds become 
available to the PHA for obligation, except as provided in paragraphs 
(c) and (d) of this section. However, a PHA with unobligated funds from 
a grant shall disregard this requirement for up to not more than 10 
percent of the originally allocated funds from that grant. The funds 
become available to the PHA when HUD executes the CF ACC Amendment. With 
HUD approval, and subject to the availability of appropriations, the PHA 
can accumulate RHF grants for up to 5 years or until it has adequate 
funds to undertake replacement housing. The PHA shall obligate 90 
percent of the RHF grant within 24 months from the date that the PHA 
accumulates adequate funds, except as provided in paragraph (c) of this 
section.

[[Page 337]]

    (b) Items and costs. For funds to be considered obligated, all items 
and costs must meet the definition of ``obligation'' in Sec.  905.108 of 
this part.
    (c) Extension to obligation requirement. The PHA may request an 
extension of the obligation deadline, and HUD may grant an extension for 
a period of up to 12 months, based on:
    (1) The size of the PHA;
    (2) The complexity of the CFP of the PHA;
    (3) Any limitation on the ability of the PHA to obligate the amounts 
allocated for the PHA from the Capital Fund in a timely manner as a 
result of state or local law; or
    (4) Any other factors that HUD determines to be relevant.
    (d) HUD extension for other reasons. HUD may extend the obligation 
deadline for a PHA for such a period as HUD determines to be necessary, 
if HUD determines that the failure of the PHA to obligate assistance in 
a timely manner is attributable to:
    (1) Litigation;
    (2) Delay in obtaining approvals from the Federal Government or a 
state or local government that is not the fault of the PHA;
    (3) Compliance with environmental assessment and abatement 
requirements;
    (4) Relocating residents;
    (5) An event beyond the control of the PHA; or
    (6) Any other reason established by HUD by notice in the Federal 
Register.
    (e) Failure to obligate. (1) For any month during the fiscal year, 
HUD shall withhold all new Capital Fund grants from any PHA that has 
unobligated funds in violation of paragraph (a) of this section. The 
penalty will be imposed once the violations of paragraph (a) are known. 
The PHA may cure the noncompliance by:
    (i) Requesting in writing that HUD recapture the unobligated balance 
of the grant; or
    (ii) Continuing to obligate funds for the grant in noncompliance 
until the noncompliance is cured.
    (2) After the PHA has cured the noncompliance, HUD will release the 
withheld Capital Fund grant(s) minus a penalty of one-twelfth of the 
grant for each month of noncompliance.
    (f) Expenditure. The PHA shall expend all grant funds within 48 
months after the date on which funds become available, as described in 
paragraph (a) of this section. The deadline to expend funds may be 
extended only by the period of time of a HUD-approved extension of the 
obligation deadline. No other extensions of the expenditure deadline 
will be granted. All funds not expended will be recaptured.



Sec.  905.308  Federal requirements applicable to all Capital Fund activities.

    (a) The PHA shall comply with the requirements of 24 CFR part 5 
(General HUD Program Requirements; Waivers), 2 CFR part 200, and this 
part.
    (b) The PHA shall also comply with the following program 
requirements.
    (1) Nondiscrimination and equal opportunity. The PHA shall comply 
with all applicable nondiscrimination and equal opportunity 
requirements, including, but not limited to, the Department's generally 
applicable nondiscrimination and equal opportunity requirements at 24 
CFR 5.105(a) and the Architectural Barriers Act of 1968 (42 U.S.C. 4151 
et seq.), and its implementing regulations at 24 CFR parts 40 and 41. 
The PHA shall affirmatively further fair housing in its use of funds 
under this part, which includes, but is not limited to, addressing 
modernization and development in the completion of requirements at 24 
CFR 903.7(o).
    (2) Environmental requirements. All activities under this part are 
subject to an environmental review by a responsible entity under HUD's 
environmental regulations at 24 CFR part 58 and must comply with the 
requirements of the National Environmental Policy Act of 1969 (NEPA)(42 
U.S.C. 4321 et seq.) and the related laws and authorities listed at 24 
CFR 58.5. HUD may make a finding in accordance with 24 CFR 58.11 and may 
perform the environmental review itself under the provisions of 24 CFR 
part 50. In those cases where HUD performs the environmental review 
under 24 CFR part 50, it will do so before approving a proposed project, 
and will comply with the requirements of NEPA and the related 
requirements at 24 CFR 50.4.

[[Page 338]]

    (3) Wage rates. (i) Davis-Bacon wage rates. For all work or 
contracts exceeding $2,000 in connection with development activities or 
modernization activities (except for nonroutine maintenance work, as 
defined in Sec.  905.200(b)(5) of this part), all laborers and mechanics 
employed on the construction, alteration, or repair shall be paid not 
less than the wages prevailing in the locality, as determined by the 
Secretary of Labor pursuant to the Davis-Bacon Act (40 U.S.C. 3142).
    (ii) HUD-determined wage rates. For all operations work and 
contracts, including routine and nonroutine maintenance work (as defined 
in Sec.  905.200(b)(5) of this part), all laborers and mechanics 
employed shall be paid not less than the wages prevailing in the 
locality, as determined or adopted by HUD pursuant to section 12(a) of 
the 1937 Act, 42 U.S.C. 1437j(a).
    (iii) State wage rates. Preemption of state prevailing wage rates as 
provided at 24 CFR 965.101.
    (iv) Volunteers. The prevailing wage requirements of this section do 
not apply to volunteers performing development, modernization, or 
nonroutine maintenance work under the conditions set out in 24 CFR part 
70.
    (4) Technical wage rates. All architects, technical engineers, 
draftsmen, and technicians (other than volunteers under the conditions 
set out in 24 CFR part 70) employed in a development or modernization 
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.
    (5) Lead-based paint poisoning prevention. The PHA shall comply with 
the Lead-Based Paint Poisoning Prevention Act (LPPPA) (42 U.S.C. 4821 et 
seq.), the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. 
4851 et seq.), and the Lead Safe Housing Rule and the Lead Disclosure 
Rule at 24 CFR part 35.
    (6) Fire safety. A PHA shall comply with the requirements of section 
31 of the Federal Fire Prevention and Control Act of 1974 (15 U.S.C. 
2227).
    (7) Flood insurance and floodplain requirements. The PHA will not 
engage in the acquisition, construction, or improvement of a public 
housing project located in an area that has been identified by the FEMA 
as having special flood hazards, unless:
    (i) The requirements of 24 CFR part 55, Floodplain Management, have 
been met, including a determination by a responsible entity under 24 CFR 
part 58 or by HUD under 24 CFR part 50 that there is no practicable 
alternative to locating in an area of special flood hazards and the 
minimization of unavoidable adverse impacts;
    (ii) Flood insurance on the building is obtained in compliance with 
the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001 et seq.); and
    (iii) 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 less than one year has passed since FEMA notification 
regarding flood hazards.
    (8) Coastal barriers. In accordance with the Coastal Barriers 
Resources Act (16 U.S.C. 3501 et seq.), no financial assistance under 
this part may be made available within the Coastal Barrier Resources 
System.
    (9) Displacement, relocation, and real property acquisition. All 
acquisition or rehabilitation activities carried out under the Capital 
Fund, including acquisition of any property for development, shall 
comply with the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970 (URA) (42 U.S.C. 4601-4655) and with 
implementing regulations at 49 CFR part 24. Demolition or disposition 
under section 18 of the 1937 Act, 42 U.S.C. 1437p, is covered by the 
relocation provisions at 24 CFR 970.21.
    (10) Procurement and contract requirement. PHAs and their 
contractors shall comply with section 3 of the Housing and Community 
Development Act of 1968 (12 U.S.C. 1701u) and HUD's implementing rules 
at 24 CFR part 75.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015; 85 
FR 61568, Sept. 29, 2020]



Sec.  905.310  Disbursements from HUD.

    (a) The PHA shall initiate a fund requisition from HUD only when 
funds are due and payable, unless HUD approves another payment schedule 
as authorized by 2 CFR 200.305.

[[Page 339]]

    (b) The PHA shall maintain detailed disbursement records to document 
eligible expenditures (e.g., contracts or other applicable documents), 
in a form and manner prescribed by HUD.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  905.312  Design and construction.

    The PHA shall meet the following design and construction standards, 
as applicable, for all development and modernization.
    (a) Physical structures shall be designed, constructed, and equipped 
to be consistent with the neighborhoods they occupy; meet contemporary 
standards of modest design, comfort, and livability (see also Sec.  
905.202(c) of this part); promote security; promote energy conservation; 
and be attractive so as to harmonize with the community.
    (b) All development projects shall be designed and constructed in 
compliance with:
    (1) A national building code, such as those developed by the 
International Code Council or the National Fire Protection Association; 
and the IECC or ASHRAE 90.1-2010 (both incorporated by reference, see 
Sec.  905.110 of this part), for multifamily high-rises (four stories or 
higher), or a successor energy code or standard that has been adopted by 
HUD pursuant to 42 U.S.C. 12709 or other relevant authority;
    (2) Applicable state and local laws, codes, ordinances, and 
regulations;
    (3) Other federal requirements, including fire protection and safety 
standards implemented under section 31 of the Fire Administration 
Authorization Act of 1992, 15 U.S.C. 2227 and HUD minimum property 
standards (e.g., 24 CFR part 200, subpart S);
    (4) Accessibility Requirements as required by section 504 of the 
Rehabilitation Act (29 U.S.C. 794) and implementing regulations at 24 
CFR part 8; title II of the Americans with Disabilities Act (42 U.S.C. 
12101 et seq.) and implementing regulations at 28 CFR part 35; and, if 
applicable, the Fair Housing Act (42 U.S.C. 3601-3619) and implementing 
regulations at 24 CFR part 100; and
    (5) Occupancy of high-rise elevator structures by families with 
children. Pursuant to 42 U.S.C. 1437d(a), a high-rise elevator structure 
shall not be provided for families with children regardless of density, 
unless the PHA demonstrates and HUD determines that there is no 
practical alternative.
    (c) All modernization projects shall be designed and constructed in 
compliance with:
    (1) The modernization standards as prescribed by HUD;
    (2) Accessibility requirements as required by section 504 of the 
Rehabilitation Act (29 U.S.C. 794) and implementing regulations at 24 
CFR part 8; title II of the Americans with Disabilities Act (42 U.S.C. 
12101 et seq.) and implementing regulations at 28 CFR part 35; and, if 
applicable, the Fair Housing Act (42 U.S.C. 3601-3619) and implementing 
regulations at 24 CFR part 100; and
    (3) Cost-effective energy conservation measures, identified in the 
PHA's most recently updated energy audit.
    (d) Pursuant to the Energy Policy Act of 2005, in purchasing 
appliances, PHAs shall purchase appliances that are Energy Star products 
or Federal Energy Management Program designed products, unless the PHA 
determines that the purchase of these appliances is not cost effective.
    (e) Broadband infrastructure. Any new construction or substantial 
rehabilitation, as substantial rehabilitation is defined in 24 CFR 
5.100, of a building with more than 4 rental units and funded by a grant 
awarded or Capital Funds allocated after January 19, 2017 must include 
installation of broadband infrastructure, as this term is also defined 
in 24 CFR 5.100, except where the PHA determines and, in accordance with 
Sec.  905.326, documents the determination that:
    (1) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;
    (2) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (3) The structure of the housing to be rehabilitated makes 
installation of broadband infrastructure infeasible.

[78 FR 63773, Oct. 24, 2013, as amended at 81 FR 92639, Dec. 20, 2016]

[[Page 340]]



Sec.  905.314  Cost and other limitations.

    (a) Eligible administrative costs. Where the physical or management 
improvement costs will benefit programs other than Public Housing, such 
as the Housing Choice Voucher program or local revitalization programs, 
eligible administrative costs are limited to the amount directly 
attributable to the public housing program.
    (b) Maximum project cost. The maximum project cost represents the 
total amount of public housing capital assistance used in connection 
with the development of a public housing project, and includes:
    (1) Project costs that are subject to the TDC limit (i.e., HCC and 
Community Renewal Costs); and
    (2) Project costs that are not subject to the TDC limit (i.e., 
Additional Project Costs). The total project cost to be funded with 
public housing capital assistance, as set forth in the proposal and as 
approved by HUD, becomes the maximum project cost stated in the ACC 
Amendment. Upon completion of the project, the actual project cost is 
determined based upon the amount of public housing capital assistance 
expended for the project, and this becomes the maximum project cost for 
purposes of the ACC Amendment.
    (c) TDC limit. (1) Public housing funds, including Capital Funds, 
may not be used to pay for HCC and Community Renewal Costs in excess of 
the TDC limit, as determined under paragraph (b)(2) of this section. 
However, HOPE VI grantees will be eligible to request a TDC exception 
for public housing and HOPE VI funds awarded in FFY 1996 and prior 
years. PHAs may also request a TDC exception for integrated utility 
management, capital planning, and other capital and management 
activities that promote energy conservation and efficiency. HUD will 
examine the request for TDC exceptions to ensure that they would be 
cost-effective, so as to ensure that up-front expenditures subject to 
the exceptions would be justified by future cost savings.
    (2) Determination of TDC limit. HUD will determine the TDC limit for 
a public housing project as follows:
    (i) Step 1: Unit construction cost guideline. HUD will first 
determine the applicable ``construction cost guideline'' by averaging 
the current construction costs as listed in two nationally recognized 
residential construction cost indices for publicly bid construction of a 
good and sound quality for specific bedroom sizes and structure types. 
The two indices HUD will use for this purpose are the R.S. Means cost 
index for construction of ``average'' quality and the Marshall & Swift 
cost index for construction of ``good'' quality. HUD has the discretion 
to change the cost indices to other such indices that reflect comparable 
housing construction quality through a notice published in the Federal 
Register.
    (ii) Step 2: Bedroom size and structure types. The construction cost 
guideline is then multiplied by the number of units for each bedroom 
size and structure type.
    (iii) Step 3: Elevator and nonelevator type structures. HUD will 
then multiply the resulting amounts from step 2 by 1.6 for elevator type 
structures and by 1.75 for nonelevator type structures.
    (iv) Step 4: TDC limit. The TDC limit for a project is calculated by 
adding the resulting amounts from step 3 for all the public housing 
units in the project.
    (3) Costs not subject to the TDC limit. Additional project costs are 
not subject to the TDC limit.
    (4) Funds not subject to the TDC limit. A PHA may use funding 
sources not subject to the TDC limit (e.g., Community Development Block 
Grant (CDBG) funds, low-income housing tax credits, private donations, 
private financing, etc.) to cover project costs that exceed the TDC 
limit or the HCC limit described in this paragraph (c). Such funds, 
however, may not be used for items that would result in substantially 
increased operating, maintenance, or replacement costs, and must meet 
the requirements of section 102 of the Department of Housing and Urban 
Development Reform Act of 1989 (Pub. L. 101-235, approved December 15, 
1989) (42 U.S.C. 3545). These funds must be included in the project 
development cost budget.
    (d) Housing Construction Costs (HCC). (1) General. A PHA may not use 
Capital Funds to pay for HCC in excess of the

[[Page 341]]

amount determined under paragraph (d)(2) of this section.
    (2) Determination of HCC limit. HUD will determine the HCC limit as 
listed in at least two nationally recognized residential construction 
cost indices for publicly bid construction of a good and sound quality 
for specific bedroom sizes and structure types. The two indices HUD will 
use for this purpose are the R.S. Means cost index for construction of 
``average'' quality and the Marshal & Swift cost index for construction 
of ``good'' quality. HUD has the discretion to change the cost indices 
to other such indices that reflect comparable housing construction 
quality through a notice published in the Federal Register. The 
resulting construction cost guideline is then multiplied by the number 
of public housing units in the project, based upon bedroom size and 
structure type. The HCC limit for a project is calculated by adding the 
resulting amounts for all public housing units in the project.
    (3) The HCC limit is not applicable to the acquisition of existing 
housing, whether or not such housing will be rehabilitated. The TDC 
limit is applicable to such acquisition.
    (e) Community Renewal Costs. Capital Funds may be used to pay for 
Community Renewal Costs in an amount equivalent to the difference 
between the HCC paid for with public housing capital assistance and the 
TDC limit.
    (f) Rehabilitation of existing public housing projects. The HCC 
limit is not applicable to the rehabilitation of existing public housing 
projects. The TDC limit for modernization of existing public housing is 
90 percent of the TDC limit as determined under paragraph (c) of this 
section. This limitation does not apply to the rehabilitation of any 
property acquired pursuant to Sec.  905.600 of this part.
    (g) Modernization cost limits. If the modernization costs are more 
than 90 percent of the TDC, then the project shall not be modernized. 
Capital Funds shall not be expended to modernize an existing public 
housing development that fails to meet the HUD definition of reasonable 
cost found in Sec.  905.108 of this part, except for:
    (1) Emergency work;
    (2) Essential maintenance necessary to keep a public housing project 
habitable until the demolition or disposition application is approved; 
or
    (3) The costs of maintaining the safety and security of a site that 
is undergoing demolition.
    (h) Administrative cost limits and Capital Fund Program Fee. (1) 
Administrative cost limits (for non-asset-management PHAs). The PHA 
shall not budget or expend more than 10 percent of its annual Capital 
Fund grant on administrative costs, in accordance with the CFP 5-Year 
Action Plan.
    (2) Capital Fund Program Fee (for asset-management PHAs). For a PHA 
that is under asset management, the Capital Fund Program Fee and 
administrative cost limits are the same. For the Capital Fund Program 
Fee, a PHA may charge a management fee of up to 10 percent of the annual 
CFP formula grant(s) amount, excluding emergency and disaster grants and 
also excluding any costs related to lead-based paint or asbestos 
testing, in-house architectural and engineering work, or other special 
administrative costs required by state or local law.
    (i) Modernization. The PHA shall not budget or expend more than 10 
percent of its annual Capital Fund grant on administrative costs, in 
accordance with its CFP 5-Year Action Plan. The 10 percent limit 
excludes any costs related to lead-based paint or asbestos testing, in-
house Architectural and Engineering work, or other special 
administrative costs required by state or local law.
    (ii) Development. For development work with Capital Fund and RHF 
grants, the administrative cost limit is 3 percent of the total project 
budget, or, with HUD's approval, up to 6 percent of the total project 
budget.
    (i) Management improvement cost limits. In Fiscal Year (FY) 2014, a 
PHA shall not use more than 18 percent of its annual Capital Fund grant 
for eligible management improvement costs identified in its CFP 5-Year 
Action Plan. In FY 2015, a PHA shall not use more than 16 percent of its 
annual Capital Fund grant for eligible management improvement costs 
identified in its CFP 5-Year Action Plan. In FY 2016, a PHA shall not 
use more than 14 percent of its annual Capital Fund grant

[[Page 342]]

for eligible management improvement costs identified in its CFP 5-Year 
Action Plan. In FY 2017, a PHA shall not use more than 12 percent of its 
annual Capital Fund grant for eligible management improvement costs 
identified in its CFP 5-Year Action Plan. In FY 2018 and thereafter, a 
PHA shall not use more than 10 percent of its annual Capital Fund grant 
for eligible management improvement costs identified in its CFP 5-Year 
Action Plan. Management improvements are an eligible expense for PHAs 
participating in asset management.
    (j) Types of labor. A PHA may use force account labor for 
development and modernization activities if included in a CFP 5-Year 
Action Plan that is approved by the PHA Board of Commissioners and HUD. 
HUD approval to use force account labor is not required when the PHA is 
designated as a high performer under PHAS.
    (k) RMC activities. When the entire development, financing, or 
modernization activity, including the planning and architectural design, 
is administered by an RMC, the PHA shall not retain any portion of the 
Capital Funds for any administrative or other reason, unless the PHA and 
the RMC provide otherwise by contract.
    (l) Capital Funds for operating costs. A PHA may use Capital Funds 
for operating costs only if it is included in the CFP 5-Year Action Plan 
that is approved by the PHA Board of Commissioners and HUD, and limited 
as described in paragraphs (l)(1) and (2) of this section. Capital Funds 
identified in the CFP 5-Year Action Plan to be transferred to operations 
are obligated once the funds have been budgeted and drawn down by the 
PHA. Once such transfer of funds occurs, the PHA must follow the 
requirements of 24 CFR part 990 with respect to those funds.
    (1) Large PHAs. A PHA with 250 or more units may use no more than 20 
percent of its annual Capital Fund grant for activities that are 
eligible under the Operating Fund at 24 CFR part 990.
    (2) Small PHAs. A PHA with less than 250 units, that is not 
designated as troubled under PHAS, may use up to 100 percent of its 
annual Capital Fund grant for activities that are eligible under the 
Operating Fund at 24 CFR part 990, except that the PHA must have 
determined that there are no debt service payments, significant Capital 
Fund needs, or emergency needs that must be met prior to transferring 
100 percent of its funds to operating expenses.



Sec.  905.316  Procurement and contract requirements.

    (a) General. PHAs shall comply with 2 CFR part 200, and HUD 
implementing instructions, for all capital activities including 
modernization and development, except as provided in paragraph (c) in 
this section.
    (b) Contracts. The PHA shall use all contract forms prescribed by 
HUD. If a form is not prescribed, the PHA may use any Office of 
Management and Budget (OMB) approved form that contains all applicable 
federal requirements and contract clauses.
    (c) Mixed-finance development projects. Mixed-finance development 
partners may be selected in accordance with 24 CFR 905.604(h). Contracts 
and other agreements with mixed-finance development partners must 
specify that they comply with the requirements of Sec. Sec.  905.602 and 
905.604 of this part.
    (d) Assurances of completion. Notwithstanding 24 CFR 85.36 (as 
revised April 1, 2013), for each construction contract over $100,000, 
the contractor shall furnish the PHA with the following:
    (1) A bid guarantee from each bidder, equivalent to 5 percent of the 
bid price; and
    (2) One of the following:
    (i) A performance bond and payment bond for 100 percent of the 
contract price;
    (ii) A performance bond and a payment bond, each for 50 percent or 
more of the contract price;
    (iii) A 20 percent cash escrow;
    (iv) A 10 percent irrevocable letter of credit with terms acceptable 
to HUD, or
    (v) Any other payment method acceptable to HUD.
    (e) Procurement of recovered materials. PHAs that are state agencies 
and agencies of a political subdivision of a state that are using 
assistance under this part for procurement, and any person

[[Page 343]]

contracting with such PHAs with respect to work performed under an 
assisted contract, must comply with the requirements of section 6002 of 
the Solid Waste Disposal Act, as amended by the Resource Conservation 
and Recovery Act. In accordance with section 6002, these agencies and 
persons must procure items designated in guidelines of the Environmental 
Protection Agency (EPA) at 40 CFR part 247 that contain the highest 
percentage of recovered material practicable, consistent with 
maintaining a satisfactory level of competition, where the purchase 
price of the item exceeds $10,000 or the value of the quantity acquired 
in the preceding fiscal year exceeded $10,000; must procure solid waste 
management services in a manner that promotes energy and resource 
recovery; and must have established an affirmative procurement program 
for procurement of recovered materials identified in the EPA guidelines.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  905.318  Title and deed.

    The PHA, or, in the case of mixed-finance, the Owner Entity, shall 
obtain title insurance that guarantees the title is good and marketable 
before taking title to any and all sites and properties acquired with 
public housing funds. Immediately upon taking title to a property, the 
PHA or Owner Entity shall record the deed and a Declaration of Trust or, 
in the case of mixed finance, a Declaration of Restrictive Covenants, in 
the form and in the manner and order prescribed by HUD. The PHA shall at 
all times maintain a recorded Declaration of Trust or Declaration of 
Restrictive Covenants in the form and in the manner and order prescribed 
by HUD on all public housing projects covering the term required by this 
part.



Sec.  905.320  Contract administration and acceptance of work.

    (a) Contract administration. The PHA is responsible, in accordance 
with 2 CFR part 200, subpart D, for all contractual and administrative 
issues arising out of their procurements. The PHA shall maintain full 
and complete records on the history of each procurement transaction.
    (b) Inspection and acceptance. The PHA, or, in the case of mixed 
finance, the Owner Entity shall carry out inspections of work in 
progress and goods delivered, as necessary, to ensure compliance with 
existing contracts. If, upon inspection, the PHA determines that the 
work and/or goods are complete, satisfactory and, as applicable, 
otherwise undamaged, except for any work that is appropriate for delayed 
completion, the PHA shall accept the work. The PHA shall determine any 
holdback 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 shall be paid for items only after the PHA inspects 
and accepts that work.
    (c) Guarantees and warranties. The PHA or, in the case of mixed 
finance, the Owner Entity, shall specify the guaranty period and amounts 
to be withheld, as applicable, and shall provide that all contractor, 
manufacturer, and supplier warranties required by the construction and 
modernization documents shall be assigned to the PHA. The PHA shall 
inspect each dwelling unit and the overall project approximately 3 
months after the beginning of the project guaranty period, 3 months 
before its expiration, and at other times as may be necessary to 
exercise its rights before expiration of any warranties. The PHA shall 
require repair or replacement of all defective items prior to the 
expiration of the guaranty or warranty periods.
    (d) Notification of completion. The PHA, or in the case of mixed 
finance, the Owner Entity, shall require that all contractors and 
developers notify the PHA in writing when the contract work, including 
any approved off-site work, will be completed and ready for inspection.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  905.322  Fiscal closeout.

    (a) General. Each Capital Fund grant and/or development project is 
subject

[[Page 344]]

to fiscal closeout. Fiscal closeout includes the submission of a cost 
certificate; an audit, if applicable; a final Performance and Evaluation 
Report; and HUD approval of the cost certificate.
    (b) Submission of cost certificate. (1) When an approved development 
or modernization activity is completed or when HUD terminates the 
activity, the PHA must submit to HUD the:
    (i) Actual Development Cost Certificate (ADCC) within 12 months. For 
purposes of the CF ACC, costs incurred between the completion of the 
development and the date of full availability (DOFA) becomes the actual 
development cost; and
    (ii) Actual Modernization Cost Certificate (AMCC) for each grant, no 
later than 12 months after the expenditure deadline but no earlier than 
the obligation end date. A PHA with under 250 units with an approved CFP 
5-Year Action Plan for use of 100 percent of the Capital Fund grant in 
operations may submit the cost certificate any time after the funds have 
been budgeted to operations and withdrawn, as described in Sec.  
905.314(l) of this part.
    (2) If the PHA does not submit the cost certificate and the final 
CFP Annual Statement/Performance and Evaluation Report within the period 
prescribed in this section, HUD may impose restrictions on open Capital 
Fund grants; e.g., establish review thresholds, set the grant to ``auto 
review'' (HUD automatically reviews it on a periodic basis), or suspend 
grants, until the cost certificate for the affected grant is submitted. 
These restrictions may be imposed by HUD after notification of the PHA.
    (c) Audit. The cost certificate is a financial statement subject to 
audit pursuant to 2 CFR part 200, subpart F. After submission of the 
cost certificate to HUD, the PHA shall provide the cost certificate to 
its independent public auditor (IPA) as part of its annual audit. After 
audit, the PHA will notify HUD of the grants included in the audit, any 
exceptions noted by the PHA auditor, and the schedule to complete 
corrective actions recommended by the auditor.
    (d) Review and approval. For PHAs exempt from the audit 
requirements, HUD will review and approve the cost certificate based on 
available information regarding the Capital Fund grant. For PHAs subject 
to an audit, HUD will review the information from the annual audit 
provided by the PHA and approve the certificate after all exceptions, if 
any, have been resolved.
    (e) Recapture. All Capital Funds in excess of the actual cost 
incurred for the grant are subject to recapture. Any funds awarded to 
the PHA that are returned or any funds taken back from the PHA in a 
fiscal year after the grant was awarded are subject to recapture.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  905.324  Data reporting requirements.

    The PHA shall provide, at minimum, the following data reports, at a 
time and in a form prescribed by HUD:
    (a) The Performance and Evaluation Report as described in Sec.  
905.300(b)(8) of this part;
    (b) Updates on the PHA's building and unit data as required by HUD;
    (c) Reports of obligation and expenditure; and
    (d) Any other information required for participation in the Capital 
Fund Program.



Sec.  905.326  Records.

    (a) The PHA will maintain full and complete records of the history 
of each Capital Fund grant, including, but not limited to, CFP 5-Year 
Action Plans, procurement, contracts, obligations, and expenditures.
    (b) The PHA shall retain for 5 years after HUD approves either the 
actual development or modernization cost certificate all documents 
related to the activities for which the Capital Fund grant was received, 
unless a longer period is required by applicable law.
    (c) HUD and its duly authorized representatives shall have full and 
free access to all PHA offices, facilities, books, documents, and 
records, including the right to audit and make copies.



                     Subpart D_Capital Fund Formula

    Source: 78 FR 63773, Oct. 24, 2013, unless otherwise noted.

[[Page 345]]



Sec.  905.400  Capital Fund formula (CF formula).

    (a) General. This section describes the formula for allocating 
Capital Funds to PHAs.
    (b) Formula allocation based on relative needs. HUD shall allocate 
Capital Funds to the PHAs in accordance with the CF formula. The CF 
formula measures the existing modernization needs and accrual needs of 
PHAs.
    (c) Allocation for existing modernization needs under the CF 
formula. HUD shall allocate one-half of the available Capital Fund 
amount based on the relative existing modernization needs of PHAs, 
determined in accordance with paragraph (d) of this section.
    (d) PHAs with 250 or more units in FFY 1999, except the New York 
City and Chicago Housing Authorities. The estimates of the existing 
modernization needs for these PHAs shall be based on the following:
    (1) Objective measurable data concerning the following PHA, 
community, and project characteristics applied to each project:
    (i) The average number of bedrooms in the units in a project 
(Equation coefficient 4604.7);
    (ii) The total number of units in a project (Equation coefficient: 
10.17);
    (iii) The proportion of units in a project in buildings completed in 
1978 or earlier. In the case of acquired projects, HUD will use the DOFA 
unless the PHA provides HUD with the actual date of construction 
completion. When the PHA provides the actual date of construction 
completion, HUD will use that date (or, for scattered sites, the average 
dates of construction of all the buildings), subject to a 50-year cap. 
(Equation coefficient: 4965.4);
    (iv) The cost index of rehabilitating property in the area (Equation 
coefficient: -10608);
    (v) The extent to which the units of a project were in a 
nonmetropolitan area as defined by the United States Bureau of the 
Census (Census Bureau) during FFY 1996 (Equation coefficient: 2703.9);
    (vi) The PHA is located in the Southern census region, as defined by 
the Census Bureau (Equation coefficient: -269.4);
    (vii) The PHA is located in the Western census region, as defined by 
the Census Bureau (Equation coefficient: -1709.5);
    (viii) The PHA is located in the Midwest census region as defined by 
the Census Bureau (Equation coefficient: 246.2); and
    (2) An equation constant of 13851.
    (i) Newly constructed units. Units with a DOFA date of October 1, 
1991, or after, shall be considered to have a zero existing 
modernization need.
    (ii) Acquired projects. Projects acquired by a PHA with a DOFA date 
of October 1, 1991, or after, shall be considered to have a zero 
existing modernization need.
    (3) For New York City and Chicago Housing Authorities, based on a 
large sample of direct inspections. Prior to the cost calibration in 
paragraph (d)(5) of this section, the number used for the existing 
modernization need of family projects shall be $16,680 in New York City 
and $24,286 in Chicago, and the number for elderly projects shall be 
$14,622 in New York City and $16,912 in Chicago.
    (i) Newly constructed units. Units with a DOFA date of October 1, 
1991, or after, shall be considered to have a zero existing 
modernization need.
    (ii) Acquired projects. Projects acquired by a PHA with a DOFA date 
of October 1, 1991, or after, shall be considered to have a zero 
existing modernization need.
    (4) PHAs with fewer than 250 units in FFY 1999. The estimates of the 
existing modernization need shall be based on the following:
    (i) Objective measurable data concerning the PHA, community, and 
project characteristics applied to each project:
    (A) The average number of bedrooms in the units in a project. 
(Equation coefficient: 1427.1);
    (B) The total number of units in a project. (Equation coefficient: 
24.3);
    (C) The proportion of units in a project in buildings completed in 
1978 or earlier. In the case of acquired projects, HUD shall use the 
DOFA date unless the PHA provides HUD with the actual date of 
construction completion, in which case HUD shall use the actual date of 
construction completion

[[Page 346]]

(or, for scattered sites, the average dates of construction of all the 
buildings), subject to a 50-year cap. (Equation coefficient: -1389.7);
    (D) The cost index of rehabilitating property in the area, as of FFY 
1999. (Equation coefficient: -20163);
    (E) The extent to which the units of a project were in a 
nonmetropolitan area as defined by the Census Bureau during FFY 1996. 
(Equation coefficient: 6157.7);
    (F) The PHA is located in the Southern census region, as defined by 
the Census Bureau. (Equation coefficient: 4379.2);
    (G) The PHA is located in the Western census region, as defined by 
the Census Bureau. (Equation coefficient: 3747.7);
    (H) The PHA is located in the Midwest census region as defined by 
the Census Bureau. (Equation coefficient: -2073.5); and
    (ii) An equation constant of 24762.
    (A) Newly constructed units. Units with a DOFA date of October 1, 
1991, or after, shall be considered to have a zero existing 
modernization need.
    (B) Acquired projects. Projects acquired by a PHA with a DOFA date 
of October 1, 1991, or after, shall be considered by HUD to have a zero 
existing modernization need.
    (5) Calibration of existing modernization need for cost index of 
rehabilitating property in the area. The estimated existing 
modernization need determined under paragraphs (d)(1), (2), or (3) of 
this section shall be adjusted by the values of the cost index of 
rehabilitating property in the area.
    (6) Freezing of the determination of existing modernization need. 
FFY 2008 is the last fiscal year that HUD will calculate the existing 
modernization need. The existing modernization need will be frozen for 
all developments at the calculation as of FFY 2008 and will be adjusted 
for changes in the inventory and paragraph (d)(4) of this section.
    (e) Allocation for accrual needs under the CF formula. HUD shall 
allocate the other half of the remaining Capital Fund amount based on 
the relative accrual needs of PHAs, determined in accordance with this 
paragraph of this section.
    (1) PHAs with 250 or more units, except the New York City and 
Chicago Housing Authorities. The estimates of the accrual need shall be 
based on the following:
    (i) Objective measurable data concerning the following PHA, 
community, and project characteristics applied to each project:
    (A) The average number of bedrooms in the units in a project. 
(Equation coefficient: 324.0);
    (B) The extent to which the buildings in a project average fewer 
than 5 units. (Equation coefficient: 93.3);
    (C) The age of a project, as determined by the DOFA date. In the 
case of acquired projects, HUD shall use the DOFA date unless the PHA 
provides HUD with the actual date of construction completion, in which 
case HUD shall 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. (Equation coefficient: -7.8);
    (D) Whether the development is a family project. (Equation 
coefficient: 184.5);
    (E) The cost index of rehabilitating property in the area. (Equation 
coefficient: -252.8);
    (F) The extent to which the units of a project were in a 
nonmetropolitan area as defined by the Census Bureau during FFY 1996. 
(Equation coefficient: -121.3);
    (G) PHA size of 6,600 or more units in FFY 1999. (Equation 
coefficient: -150.7);
    (H) The PHA is located in the Southern census region, as defined by 
the Census Bureau. (Equation coefficient: 28.4);
    (I) The PHA is located in the Western census region, as defined by 
the Census Bureau. (Equation coefficient: -116.9);
    (J) The PHA is located in the Midwest census region as defined by 
the Census Bureau. (Equation coefficient: 60.7); and
    (ii) An equation constant of 1371.9.
    (2) For the New York City and Chicago Housing Authorities, based on 
a large sample of direct inspections. Prior to the cost calibration in 
paragraph (e)(4) of this section the number used for the accrual need of 
family developments is $1,395 in New York City,

[[Page 347]]

and $1,251 in Chicago, and the number for elderly developments is $734 
in New York City and $864 in Chicago.
    (3) PHAs with fewer than 250 units. The estimates of the accrual 
need shall be based on the following:
    (i) Objective measurable data concerning the following PHA, 
community, and project characteristics applied to each project:
    (A) The average number of bedrooms in the units in a project. 
(Equation coefficient: 325.5);
    (B) The extent to which the buildings in a project average fewer 
than 5 units. (Equation coefficient: 179.8);
    (C) The age of a project, as determined by the DOFA date. In the 
case of acquired projects, HUD shall use the DOFA date unless the PHA 
provides HUD with the actual date of construction completion. When 
provided with the actual date of construction completion, HUD shall use 
this date (or, for scattered sites, the average dates of construction of 
all the buildings), subject to a 50-year cap. (Equation coefficient: -
9.0);
    (D) Whether the project is a family development. (Equation 
coefficient: 59.3);
    (E) The cost index of rehabilitating property in the area. (Equation 
coefficient: -1570.5);
    (F) The extent to which the units of a project were in a 
nonmetropolitan area as defined by the Census Bureau during FFY 1996. 
(Equation coefficient: -122.9);
    (G) The PHA is located in the Southern census region, as defined by 
the Census Bureau. (Equation coefficient: -564.0);
    (H) The PHA is located in the Western census region, as defined by 
the Census Bureau. (Equation coefficient: -29.6);
    (I) The PHA is located in the Midwest census region as defined by 
the Census Bureau. (Equation coefficient: -418.3); and
    (ii) An equation constant of 3193.6.
    (4) Calibration of accrual need for the cost index of rehabilitating 
property in the area. The estimated accrual need determined under either 
paragraph (e)(2) or (3) of this section shall be adjusted by the values 
of the cost index of rehabilitation.
    (f) Calculation of number of units. (1) General. For purposes of 
determining the number of a PHA's public housing units and the relative 
modernization needs of PHAs:
    (i) HUD shall count as one unit:
    (A) Each public housing and section 23 bond-financed CF unit, except 
that each existing unit under the Turnkey III program shall count as 
one-fourth of a unit. Units receiving operating subsidy only shall not 
be counted.
    (B) Each existing unit under the Mutual Help program.
    (ii) HUD shall add to the overall unit count any units that the PHA 
adds to its inventory when the units are under CF ACC amendment and have 
reached DOFA by the date that HUD establishes for the FFY in which the 
CF formula is being run (hereafter called the ``reporting date''). New 
CF units and those reaching DOFA after the reporting date shall be 
counted for CF formula purposes in the following FFY.
    (2) Replacement units. Replacement units newly constructed on or 
after October 1, 1998, that replace units in a project funded in FFY 
1999 by the Comprehensive Grant formula system or the Comprehensive 
Improvement Assistance Program (CIAP) formula system shall be given a 
new CF ACC number as a separate project and shall be treated as a newly 
constructed development as outlined in Sec.  905.600 of this part.
    (3) Reconfiguration of units. Reconfiguration of units may cause the 
need to be calculated by the new configuration based on the formula 
characteristics in the building and unit's PIC module (refer to the 
formula sections here). The unit counts will be determined by the CF 
units existing after the reconfiguration.
    (4) Reduction of units. For a project losing units as a result of 
demolition and disposition, the number of units on which the CF formula 
is based shall be the number of units reported as eligible for Capital 
Funds as of the reporting date. Units are eligible for funding until 
they are removed due to demolition and disposition in accordance with a 
schedule approved by HUD.
    (g) Computation of formula shares under the CF formula. (1) Total 
estimated existing modernization need. The total

[[Page 348]]

estimated existing modernization need of a PHA under the CF formula is 
the result of multiplying for each project the PHA's total number of 
formula units by its estimated existing modernization need per unit, as 
determined by paragraph (d) of this section, and calculating the sum of 
these estimated project needs.
    (2) Total accrual need. The total accrual need of a PHA under the CF 
formula is the result of multiplying for each project the PHA's total 
number of formula units by its estimated accrual need per unit, as 
determined by paragraph (e) of this section, and calculating the sum of 
these estimated accrual needs.
    (3) PHA's formula share of existing modernization need. A PHA's 
formula share of existing modernization need under the CF formula is the 
PHA's total estimated existing modernization need divided by the total 
existing modernization need of all PHAs.
    (4) PHA's formula share of accrual need. A PHA's formula share of 
accrual need under the CF formula is the PHA's total estimated accrual 
need divided by the total existing accrual need of all PHAs.
    (5) PHA's formula share of capital need. A PHA's formula share of 
capital need under the CF formula is the average of the PHA's share of 
existing modernization need and its share of accrual need (by which 
method each share is weighted 50 percent).
    (h) CF formula capping. (1) For units that are eligible for funding 
under the CF formula (including replacement housing units discussed 
below), a PHA's CF formula share shall be its share of capital need, as 
determined under the CF formula, subject to the condition that no PHA's 
CF formula share for units funded under the CF formula can be less than 
94 percent of its formula share had the FFY 1999 formula system been 
applied to these CF formula-eligible units. The FFY 1999 formula system 
is based upon the FFY 1999 Comprehensive Grant formula system for PHAs 
with 250 or more units in FFY 1999 and upon the FFY 1999 Comprehensive 
Improvement Assistance Program (CIAP) formula system for PHAs with fewer 
than 250 units in FFY 1999.
    (2) For a Moving to Work (MTW) PHA whose MTW agreement provides that 
its CF formula share is to be calculated in accordance with the 
previously existing formula, the PHA's CF formula share, during the term 
of the MTW agreement, may be approximately the formula share that the 
PHA would have received had the FFY 1999 formula funding system been 
applied to the CF formula eligible units.
    (i) Replacement Housing Factor to reflect formula need for 
developments with demolition or disposition occurring on or after 
October 1, 1998, and prior to September 30, 2013. (1) RHF generally. 
PHAs that have a reduction in the number of units attributable to 
demolition or disposition of units during the period (reflected in data 
maintained by HUD) that lowers the formula unit count for the CFF 
calculation qualify for application of an RHF, subject to satisfaction 
of criteria stated in paragraph (i)(5) of this section
    (2) When applied. The RHF will be added, where applicable:
    (i) For the first 5 years after the reduction of units described in 
paragraph (i)(1) of this section; and
    (ii) For an additional 5 years if the planning, leveraging, 
obligation, and expenditure requirements are met. As a prior condition 
of a PHA's receipt of additional funds for replacement housing provided 
for the second 5-year period or any portion thereof, a PHA must obtain a 
firm commitment of substantial additional funds, other than public 
housing funds, for replacement housing, as determined by HUD.
    (3) Computation of RHF. The RHF consists of the difference between 
the CFF share without the CFF share reduction of units attributable to 
demolition or disposition and the CFF share that resulted after the 
reduction of units attributable to demolition or disposition.
    (4) Replacement housing funding in FFYs 1998 and 1999. Units that 
received replacement housing funding in FFY 1998 will be treated as if 
they had received 2 years of replacement housing funding by FFY 2000. 
Units that received replacement housing funding in FFY 1999 will be 
treated as if they had received one year of replacement housing funding 
as of FFY 2000.

[[Page 349]]

    (5) PHA Eligibility for the RHF. A PHA is eligible for this factor 
only if the PHA satisfies the following criteria:
    (i) The PHA will use the funding in question only for replacement 
housing;
    (ii) The PHA will use the restored funding that results from the use 
of the replacement factor to provide replacement housing in accordance 
with the PHA's 5-Year Action Plan, as approved by HUD under part 903 of 
this chapter as well as the PHA's Board of Commissioners;
    (iii) The PHA has not received funding for public housing units that 
will replace the lost units under Public Housing Development, Major 
Reconstruction of Obsolete Public Housing, HOPE VI, Choice 
Neighborhoods, Rental Assistance Payment (RAP), or programs that 
otherwise provide for replacement with public housing units;
    (iv) The PHA, if designated as a troubled PHA by HUD, and not 
already under the direction of HUD or an appointed receiver, in 
accordance with part 902 of this chapter, uses an Alternative Management 
Entity, as defined in part 902 of this chapter, for development of 
replacement housing and complies with any applicable provisions of its 
Memorandum of Agreement executed with HUD under that part; and
    (v) The PHA undertakes any development of replacement housing in 
accordance with applicable HUD requirements and regulations.
    (6) Failure to provide replacement housing in a timely fashion. (i) 
A PHA will be subject to the actions described in paragraph (i)(7)(ii) 
of this section if the PHA does not:
    (A) Use the restored funding that results from the use of the RHF to 
provide replacement housing in a timely fashion, as provided in 
paragraph (i)(7)(i) of this section and in accordance with applicable 
HUD requirements and regulations, and
    (B) Make reasonable progress on such use of the funding, in 
accordance with applicable HUD requirements and regulations.
    (ii) If a PHA fails to act as described in paragraph (i)(6)(i) of 
this section, HUD will require appropriate corrective action under these 
regulations, may recapture and reallocate the funds, or may take other 
appropriate action.
    (7) Requirement to obligate and expend RHF funds within the 
specified period. (i) In addition to the requirements otherwise 
applicable to obligation and expenditure of funds, PHAs are required to 
obligate assistance received as a result of the RHF within:
    (A) 24 months from the date that funds become available to the PHA; 
or
    (B) With specific HUD approval, 24 months from the date that the PHA 
accumulates adequate funds to undertake replacement housing.
    (ii) To the extent the PHA has not obligated any funds provided as a 
result of the RHF within the time frames required by this paragraph, or 
has not expended such funds within a reasonable time, HUD shall 
recapture the unobligated amount of the grant.
    (j) Demolition and Disposition Transitional Funding (DDTF) to 
reflect formula need for developments with demolition or disposition on 
or after October 1, 2013. (1) DDTF generally. In FFY 2014 and 
thereafter, PHAs that have a reduction in the number of units occurring 
in FFY 2013 and attributable to demolition or disposition are 
automatically eligible to receive Demolition and Disposition 
Transitional Funding. The DDTF will be included in their annual Capital 
Fund grant for a 5-year period to offset the reduction in funding a PHA 
would receive from removing units from inventory. DDTF is subject to the 
criteria stated in paragraph (j)(4) of this section.
    (2) When applied. DDTF will be added to a PHA's annual CFP grant, 
where applicable, for 5 years after the reduction of units described in 
paragraph (j)(1) of this section.
    (3) Computation of DDTF. The DDTF consists of the difference between 
the CFF share without the CFF share reduction of units attributable to 
demolition or disposition and the CFF share that resulted after the 
reduction of units attributable to demolition or disposition.
    (4) PHA eligibility for the DDTF. A PHA is eligible for this factor 
only if the PHA satisfies the following criteria:
    (i) The PHA will automatically receive the DDTF for reduction of 
units

[[Page 350]]

in accordance with paragraph (j)(1) of this section, unless the PHA 
rejects the DDTF funding for that fiscal year in writing;
    (ii) The PHA will use the funding in question for eligible 
activities under the Capital Fund Program, found at 905.200--such as 
modernization and development--that are included in the PHA's HUD 
approved CFP 5-Year Action Plan.
    (iii) The PHA has not received funding for public housing units that 
will replace the lost units from disposition proceeds, or under Public 
Housing Development, Major Reconstruction of Obsolete Public Housing, 
HOPE VI, Choice Neighborhoods, RAP, or programs that otherwise provide 
for replacement with public housing units;
    (iv) The PHA, if designated as a troubled PHA by HUD, and not 
already under the direction of HUD or an appointed receiver, in 
accordance with part 902 of this chapter, uses an Alternative Management 
Entity, as defined in part 902 of this chapter, and complies with any 
applicable provisions of its Memorandum of Agreement executed with HUD 
under that part; and
    (v) The PHA undertakes any eligible activities in accordance with 
applicable HUD requirements and regulations.
    (5) Requirement to obligate and expend DDTF funds within the 
specified period. (i) In addition to the requirements otherwise 
applicable to obligation and expenditure of Capital Funds, including 42 
U.S.C. 1437g(j) and the terms of the appropriation from Congress, PHAs 
are required to obligate funds received as a result of the DDTF within 
24 months from the date that funds become available to the PHA; or
    (ii) To the extent the PHA has not obligated any funds provided as a 
result of the DDTF within the time frames required by this paragraph, or 
expended such funds within a reasonable time frame, HUD shall reduce the 
amount of DDTF to be provided to the PHA.
    (k) RHF Transition. (1) PHAs that would be newly eligible for RHF in 
FFY 2014 will receive 5 years of DDTF.
    (2) PHAs that received a portion of a first increment RHF grant in 
FY 2013, for units removed from inventory prior to the reporting date of 
June 30, 2012, will receive up to 10 years of funding consisting of the 
remainder of first-increment RHF, subject to the requirements of Sec.  
905.400(i) of this part, and, if eligible, 5 years of DDTF, subject to 
the requirements of Sec.  905.400(j) of this part.
    (3) PHAs that received a portion of a second increment RHF grant in 
FY 2013, for units removed from inventory prior to the reporting date of 
June 30, 2012, will continue to receive the remaining portion of the 5-
year increment as a separate second increment RHF grant, as described in 
Sec.  905.400(i) of this part.
    (l) Performance reward factor. (1) High performer. A PHA that is 
designated a high performer under the PHA's most recent final PHAS score 
may receive a performance bonus that is:
    (i) Three (3) percent above its base formula amount in the first 5 
years these awards are given (for any year in this 5-year period in 
which the performance reward is earned); or
    (ii) Five (5) percent above its base formula amount in future years 
(for any year in which the performance reward is earned);
    (2) Condition. The performance bonus is subject only to the 
condition that no PHA will lose more than 5 percent of its base formula 
amount as a result of the redistribution of funding from nonhigh 
performers to high performers.
    (3) Redistribution. The total amount of Capital Funds that HUD has 
recaptured or not allocated to PHAs as a sanction for violation of 
expenditure and obligation requirements shall be allocated to the PHAs 
that are designated high performers under PHAS.



              Subpart E_Use of Capital Funds for Financing

    Source: 75 FR 65208, Oct. 21, 2010, unless otherwise noted.



Sec.  905.500  Purpose and description.

    (a) This subpart provides the requirements necessary for a PHA to 
participate in the Capital Fund Financing Program (CFFP), under which 
the PHA may obtain HUD approval to borrow private capital and pledge a 
portion of its annual Capital Fund grant or public

[[Page 351]]

housing assets and other public housing property of the public housing 
agency as security.
    (b) Under the CFFP, PHAs are permitted to borrow private capital to 
finance public housing development or modernization activities. A PHA 
may use a portion of its Capital Fund for debt service payments and 
usual and customary financing costs associated with public housing 
development or modernization (including public housing in mixed-finance 
developments). A PHA that undertakes such financing activities may, 
subject to HUD's written approval, grant a security interest in its 
future annual Capital Fund grants, which shall be subject to the 
appropriation of those funds by Congress. The PHA's financing activities 
are not obligations or liabilities of the Federal Government. The 
Federal Government does not assume any liability with respect to any 
such pledge of future appropriations, and the Federal Government neither 
guarantees nor provides any full faith and credit for these financing 
transactions.



Sec.  905.505  Program requirements.

    (a) Written approval. A PHA shall obtain written HUD approval for 
all Capital Fund financing transactions that pledge, encumber, or 
otherwise provide a security interest in public housing assets or other 
property, including Capital Funds, and use Capital Funds for the payment 
of debt service or other financing costs. HUD approval shall be based 
on:
    (1) The ability of the PHA to complete the financing transaction 
along with the associated improvements;
    (2) The reasonableness of the provisions in the Capital Fund 
Financing Proposal considering the other pledges or commitments of 
public housing assets, the PHA's capital needs, and the pledge being 
proposed; and
    (3) Whether the PHA meets the requirements of this subpart.
    (b) Antideficiency. Any pledge of future year Capital Fund grants 
under this section is subject to the availability of appropriations by 
Congress for that year. All financing documents related to future year 
Capital Fund amounts must include a statement that the pledging of funds 
is subject to the availability of appropriations.
    (c) Conditions on use--(1) Development. Any public housing that is 
developed using amounts under this part (including proceeds from 
financing authorized under this part) shall be operated under the terms 
and conditions applicable to public housing during the 40-year period 
that begins on the date on which the project becomes available for 
occupancy, except as otherwise provided in the 1937 Act.
    (2) Modernization. Any public housing or portion of public housing 
that is modernized using amounts under this part (including proceeds 
from financing authorized under this part) shall be maintained and 
operated during the 20-year period that begins on the latest date on 
which the modernization is completed, except as otherwise provided in 
the 1937 Act.
    (3) Applicability of latest expiration date. Public housing subject 
to the use conditions described in paragraph (c) of this section, or to 
any other provision of law mandating the operation of housing as public 
housing for a specific length of time, shall be maintained and operated 
as required until the latest such expiration date.
    (4) Declaration of Trust. All public housing rental projects must 
show evidence satisfactory to HUD of an effective Declaration of Trust 
being recorded in first position, meeting the requirements of paragraph 
(c) of this section and covering the term of the financing. If part of a 
mixed-finance project, this evidence will be with the mixed-finance 
evidentiary documents.
    (d) Public Housing Assessment System (PHAS) designation. Generally, 
a PHA shall be designated a standard performer or high performer under 
PHAS (24 CFR part 902), and must be a standard performer or higher on 
the management and financial condition indicators. HUD will consider 
requests from a PHA designated as troubled under PHAS when the PHA is 
able to show that it has developed appropriate management and financial 
capability and controls that demonstrate its ability to successfully 
undertake the Capital Fund Financing Proposal. The PHA must comply with 
all applicable fair housing and civil rights requirements

[[Page 352]]

in 24 CFR 5.105(a). If a PHA has received a letter of findings, charge, 
or lawsuit involving ongoing systemic noncompliance under Title VI of 
the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 
1973, the Fair Housing Act, or Section 109 of the Housing and Community 
Development Act of 1974, and the letter of findings, charge, or lawsuit 
has not been resolved to HUD's satisfaction, then unless the Capital 
Fund Financing Proposal is part of a plan to address such findings, 
charge, or lawsuit, the PHA will not be eligible for financing pursuant 
to the CFFP. HUD will determine if actions to resolve the charge, 
lawsuit, or letter of findings taken are sufficient to resolve the 
matter.
    (e) Management capacity. A PHA shall have the capacity to undertake 
and administer private financing and construction or modernization of 
the size and type contemplated. In order to determine capacity, HUD may 
require the PHA to submit a management assessment conducted by an 
independent third party, in a form and manner prescribed by HUD.
    (f) Existing financing. A PHA shall identify the nature and extent 
of any existing encumbrances, pledges, or other financing commitments of 
public housing funds undertaken by the PHA.
    (g) Need for financing. (1) A PHA must complete a physical needs 
assessment at the project level, in the form and manner prescribed by 
HUD that covers the PHA's entire public housing portfolio for the term 
of the financing and that takes into consideration existing needs and 
the lifecycle repair and replacement of major building components. The 
activity to be financed must be identified as a need in the physical 
needs assessment.
    (2) Based on the assessment under paragraph (g)(1) of this section, 
the PHA must demonstrate that the financing will not negatively impact 
the ability of the PHA to meet the ongoing needs of its public housing 
portfolio over the term of the financing. In making this demonstration, 
PHAs must reduce any projected future Capital Fund grants to account for 
planned or anticipated activities that would have the effect of reducing 
or otherwise limiting the availability of future Capital Fund grants. 
PHA projections must be detailed on the portfolio schedule form 
prescribed by HUD, and shall project a stabilized number of units 
(Stabilized Base Unit Count) to be reached in no more than 5 years after 
all planned or anticipated activities have been completed that would 
reduce future Capital Fund grants. PHAs must also take into 
consideration projected use of Capital Funds for other eligible 
activities under part 905, and may take into consideration alternative 
sources of financing that are available to help meet its needs.
    (3) For PHAs that are proposing to borrow more than $2 million on a 
cumulative basis, to the extent that:
    (i) Capital and other eligible Capital Fund needs exceed projected 
Capital Fund program funding amounts, and the PHA is not leveraging non-
public housing funds as part of its Capital Fund Financing Proposal 
transaction, then
    (ii) The PHA must demonstrate that it has considered leveraging non-
public housing funds, and state why the proposed financing is 
appropriate in light of alternative sources available.
    (iii) Notwithstanding paragraphs (g)(3)(i) and (ii) of this section, 
PHAs that size their financing by utilizing only replacement housing 
factor (RHF) funds, or PHAs that propose to use their Capital Fund 
Financing Proposal proceeds as part of a mixed-finance modernization 
transaction, are not required to comply with Sec.  905.505(g).
    (h) CFP Plan. (1) The use of the CFFP proceeds shall be included in 
a form and manner as required by HUD for CFP planning and budgeting and 
in a same manner as a Capital Fund grant. The CFFP proceeds shall be 
included as a separate Capital Fund grant to the same extent that PHAs 
are required to plan and budget Capital Fund grants. The use of Capital 
Funds for the payment of debt service and related costs shall be planned 
and budgeted as would other eligible uses of Capital Funds.
    (2) As part of its Capital Fund Financing Proposal, the PHA shall 
submit a Capital Fund financing budget, in the form and manner required 
by HUD, detailing the proposed use of the Capital Fund Financing 
Proposal proceeds. There shall be no requirement

[[Page 353]]

for PHAs to submit a Capital Fund financing budget as part of their 
Capital Fund financing proceeds where the sizing of the financing is 
based upon the use of RHF funds for debt service, or where the Capital 
Fund Financing Proposal proceeds are being used as part of a mixed-
finance transaction. Approval letters for mixed-finance and RHF-related 
Capital Fund financing transactions shall be conditioned upon the 
approval of the mixed-finance proposal, or, in the case of conventional 
development, upon the approval of the development proposal and the 
execution of an associated construction contract with which the Capital 
Fund financing proceeds would be used.
    (3) The work financed with Capital Funds and described in the 
Capital Fund financing budget will be based on the physical needs 
assessment. The Capital Fund financing budget shall list the work items 
(e.g., roof replacement, window replacement, accessibility 
modifications) by development. These work items will constitute 
performance measures upon which the PHA's performance will be evaluated. 
A general representation of the work (e.g., ``rehabilitation of the 
development'') is not sufficient.
    (4) The CFP Plan (submission (as described in paragraph (h) of this 
section) shall include a copy of the physical needs assessment described 
in Sec.  905.505(g).
    (5) Financing proceeds under this part may be used only for the 
modernization or development of public housing and related costs 
including the modernization or development of non-dwelling space. 
Financing proceeds may not be used for administration or central office 
cost center costs (except for mixed-finance projects), management 
improvements, or upon non-viable projects, such as those subject to 
required conversion. Financing proceeds may be used to reimburse 
predevelopment costs, but only to the extent they were incurred in 
conformance with applicable regulatory requirements.
    (i) Debt Coverage Percentage. (1) Except as stated in Sec.  
905.505(i)(2), a PHA shall not pledge more than 33 percent of its annual 
future Capital Fund grants for debt service payments, assuming level 
Capital Fund appropriations over the term of the debt obligation and any 
reduction attributable to activities projected by the PHA to occur 
during the term of the financing such as demolition, disposition, or 
conversion of public housing units or other occurrences that could limit 
the availability of Capital Funds, including a voluntary compliance 
agreement. This percentage of Capital Funds dedicated for debt service, 
taking into account adjustments for activities that would reduce the 
receipt of Capital Funds, is called the ``Debt Coverage Percentage.''
    (2) A PHA may pledge up to 100 percent of any projected replacement 
housing factor (RHF) grants for debt service payments, provided that the 
pledge extends to the formula fund portion of its Capital Fund grants 
also, but that not more than 50 percent of its overall projected Capital 
Fund grants (including formula funds and RHF funds) are pledged. RHF 
projections shall account for any projected reductions in RHF over the 
term of the financing. Unless otherwise approved by HUD, PHAs shall be 
limited to sizing their loans based upon increments of RHF currently 
being received by the PHA. CFFP transactions pledging RHF funds shall 
include accelerated amortization provisions, requiring all RHF funds 
received by the PHA to pay debt service as those RHF funds are received. 
A RHF grant shall be used only to develop or pay financing costs for the 
development of replacement public housing units in accordance with Sec.  
905.10.
    (3) Subject to the reasonableness test in Sec.  905.505(a)(2), PHAs 
may exceed 33 percent when pledging existing Capital Fund grants and RHF 
grants for the payment of debt service. Existing grants are grants that 
have been received by the PHA at the time of HUD's approval of the 
Capital Fund Financing Proposal.
    (j) Terms and conditions of financing. The terms and conditions of 
all financing shall be reasonable based on current market conditions. 
The financing documents shall include the following, as applicable:
    (1) Term. The term of the Capital Fund financing transaction shall 
not

[[Page 354]]

be more than 20 years. All Capital Fund financing transactions shall be 
fully amortizing. Bridge loans and other short-term loans are permitted; 
however, unless otherwise approved by HUD, the CFFP Financing 
transaction may not be structured in a manner that generates program 
income.
    (2) Acceleration. Unless otherwise approved by HUD, the financing 
documents shall provide that HUD approval is required before a lender 
may accelerate a PHA's debt obligation, for default or otherwise.
    (3) Public housing assets. A PHA may not pledge any public housing 
assets unless specifically approved in writing by HUD. PHAs seeking 
approval of a pledge of public housing assets must submit documentation 
to HUD that details the nature and priority of the pledge.
    (4) Variable interest rate. All variable-rate transactions shall 
include an interest-rate cap. The financing documents must specify that 
the PHA shall not be liable to pay debt service with public housing 
funds, and that there shall be no recourse to public housing assets, 
beyond the interest-rate cap. The limitation on the pledge of Capital 
Funds specified in Sec.  905.505(i) shall be calculated based on the 
interest-rate cap.
    (5) Other pledges or commitments. PHAs seeking approval of a pledge 
of public housing assets must describe the nature and extent of existing 
commitments or pledges of public housing assets, providing documentation 
of such other commitments or pledges to the extent required by HUD.
    (6) Terms and conditions. Financing documents must include any other 
terms and conditions as required by HUD.
    (k) Fairness opinion. The PHA shall provide an opinion, in a form 
and manner prescribed by HUD, from a qualified, independent, third-party 
financial advisor attesting that the terms and conditions of the 
proposed financing transaction are reasonable given current market 
conditions with respect to such matters as interest rate, fees, costs of 
issuance, call provisions, and reserve fund requirements.
    (l) Financial controls and construction management. (1) The PHA 
shall have a financial control and construction management plan 
describing how the PHA will ensure that:
    (i) Adequate controls are in place regarding the use of the Capital 
Fund financing proceeds; and
    (ii) The improvements will be developed and completed in a timely 
manner consistent with the contract documents.
    (2) This plan shall contain protocols and financial control 
mechanisms that address the design of the improvements, construction 
inspections, construction draws, and requisition approval checks and 
balances. A PHA that is designated troubled under PHAS, or other PHAs as 
determined by HUD, may be required to institute risk mitigation measures 
to ensure that the funds are used properly and for the purposes 
intended.
    (m) Work items. To the extent that any changes in work items 
financed by Capital Fund financing proceeds meet or exceed the following 
threshold requirements determined by HUD, PHAs must obtain written 
approval of amendments to their Capital Fund financing budget from HUD:
    (1) A change in the type of activity being financed (for example, if 
the approved Capital Fund financing budget contemplated the proceeds 
being used for modernization, but after the proposal is approved, the 
PHA decides instead to pursue development);
    (2) A change in the project being modernized or developed with the 
proceeds;
    (3) A reduction in 20 percent or more in the number of public 
housing units being modernized; or
    (4) An increase of 20 percent or more of the cost of non-dwelling 
space.
    (n) Applicability of other Federal requirements. The proceeds of the 
Capital Fund financing are subject to all laws, regulations, and other 
requirements applicable to the use of Capital Fund grants made under 24 
CFR part 905, unless otherwise approved by HUD in writing. PHAs 
undertaking CFFP transactions shall be subject to the following 
requirements, which shall be further enumerated in a Capital Fund 
Financing Amendment to the Annual Contributions Contract (CFF ACC 
Amendment):

[[Page 355]]

    (1) Amounts payable to the PHA by HUD pursuant to the CFFP and 
pledged to the payment of debt service by the PHA shall be used 
exclusively for debt service in accordance with the debt service 
schedule approved by HUD and shall not be available for any other 
purpose;
    (2) The financing does not constitute a debt or liability of HUD or 
the United States, the full faith and credit of the United States are 
not pledged to the payment of debt service, and debt service is not 
guaranteed by HUD or the United States;
    (3) Nothing in this CFF ACC Amendment or 24 CFR part 905 is intended 
to diminish HUD's authority to administer, monitor, and regulate the 
public housing program, including HUD's authority to exercise any 
administrative sanction or remedy provided by law; provided, however, 
that except as required by law, HUD will not assert any claim or right 
under the ACC, including the exercise of administrative sanctions and 
remedies, if and to the extent that the effect of such claim or right 
would be to reduce the payment of Capital Fund moneys to the PHA below 
the level necessary to pay debt service or delay the time for payment of 
such moneys such that required amounts would not be available to pay 
debt service when due;
    (4) The financing is subject to mandatory prepayment prior to the 
obligation end date and expenditure end date of the Capital Fund 
financing proceeds to the extent necessary for the Capital Fund 
Financing Proposal proceeds to comply with section 9(j) of the 1937 Act 
(42 U.S.C. 1437g(j)). Bond and loan documents shall include appropriate 
provisions such that prepayment shall be made by the lender, trustee, or 
appropriate third-party servicer approved by HUD, without any action by 
HUD post-approval;
    (5) HUD agrees, subject to the availability of appropriations, to 
approve immediately upon receipt from the PHA (subject to any legal 
requirements or constraints applicable at the time), a CFP Plan document 
(as described in 24 CFR 905.505(h)) and/or an annual CFF ACC Amendment, 
to the extent and in an amount sufficient to make the applicable debt 
service payment;
    (6) Prior to cumulatively reducing its inventory of public housing 
units by more than 5 percent of the Stabilized Base Unit Count, if, 
after the removal of units from inventory, the Debt Coverage Percentage 
under Sec.  905.505(i)(1) would constitute more than 33 percent of 
future Capital Funds, the PHA shall prepay the financing such that the 
reduction in inventory shall not cause the Debt Coverage Percentage to 
increase. If the reduction in inventory is required by law or public 
housing requirements, the prepayment is not required to be made prior to 
the reduction in inventory, but instead shall be made as soon as 
possible after the PHA becomes aware of the requirement of law or public 
housing requirements, but only to the extent that Capital Funds are not 
otherwise needed by the PHA to address the health and safety issues or 
other requirements of law in the PHA's public housing portfolio, all as 
determined by HUD. For PHAs that size their loans based upon the 
projected receipt of RHF funds, prior to undertaking an activity that 
will reduce its RHF units below the number of units projected in the 
Capital Fund Financing Proposal as required by Sec.  905.505(i)(3), the 
PHA shall prepay its loan such that debt service does not exceed 100 
percent of projected RHF after accounting for the reduction in RHF 
units, all as determined by HUD.
    (o) Performance measures. Pursuant to 24 CFR 905.505(h) a PHA is 
required to identify in its CFP Plan documents specific items of work 
that will be accomplished using the proceeds of the proposed financing. 
The identified items, which shall be quantifiable, shall be the basis on 
which HUD evaluates a PHA's performance. HUD may also utilize the 
Capital Fund financing budget, and Capital Fund Financing Proposal 
approval documents as the basis to evaluate a PHA's performance. Failure 
to meet performance measures may result in:
    (1) Failure to receive HUD approval for future financing 
transactions;
    (2) Failure to be considered for future competitive grant programs; 
and
    (3) Other sanctions HUD deems appropriate and authorized by law or 
regulation.

[[Page 356]]

    (p) Reporting requirements. (1) The use of the CFFP proceeds shall 
be reported in the same manner as a Capital Fund grant. The PHA shall 
submit a performance and evaluation report on a quarterly basis. PHAs 
that utilize their Capital Fund financing proceeds as part of a mixed-
finance transaction, and PHAs that size their financing based upon RHF 
in their Capital Fund financing transactions, are not required to submit 
quarterly reports.
    (2) Each CFFP transaction and/or development project is subject to 
fiscal closeout in the same manner of a Capital Fund grant. Fiscal 
closeout includes the submission of an Actual Modernization Cost 
Certificate (AMCC) or Actual Development Cost Certificate (ADCC), an 
audit, if applicable, a final quarterly report, and a final Performance 
and Evaluation report.



Sec.  905.507  Streamlined application requirements for standard and high-performing PHAs.

    (a) PHAs with cumulative CFFP borrowings of less than $2 million and 
that are standard or high performers under PHAS; PHAs that are high 
performers under PHAS with cumulative CFFP borrowings of less than $20 
million; PHAs that propose to use their CFFP proceeds in a mixed-finance 
transaction, or proposals where the sizing of the financing is based 
only upon the use of RHF funds for debt service, shall not be required 
to submit:
    (1) A third-party management assessment under Sec.  905.505(e);
    (2) A third-party fairness opinion under Sec.  905.505(k);
    (3) An assurance of financial controls and construction management 
under Sec.  905.505(l).
    (b) Notwithstanding Sec.  905.507(a), if HUD determines that 
interest or other costs do not appear to meet industry norms, or other 
aspects of the proposal present atypical risks, HUD retains the 
discretion to require assessments, opinions, or controls, or to return 
the proposal.



Sec.  905.510  Submission requirements.

    (a) All requests for HUD approval of CFFP transactions shall be 
submitted to the Office of Public and Indian Housing (PIH), Attention: 
Office of Capital Improvements, in such form and in such number of 
copies as designated by PIH through direct notice.
    (b) Each Capital Fund Financing Proposal shall be tabbed and 
presented with the following information in the order listed:
    (1) PHA transmittal letter. The PHA must submit a letter signed by 
the PHA Executive Director (or Chief Executive Officer, if applicable) 
briefly describing the proposed financing and use of proceeds, the 
percentage of Capital Funds being dedicated to debt service, the percent 
of the PHA's public housing units benefiting from the financing, and the 
impact of the financing upon the public housing portfolio, and transmit 
to HUD a request for approval of the CFFP transaction. The transmittal 
letter shall provide any additional information required pursuant to 
this subpart including, but not limited to:
    (i) Describing the transaction being proposed;
    (ii) Describing in detail any existing financing or similar 
commitments of public housing funds;
    (iii) Describing and providing justification for significant 
financial or legal provisions, such as variable interest or acceleration 
provisions;
    (iv) Describing construction management and financial controls.
    (2) Term sheet, table of contents, and contact information. The PHA 
must submit the HUD-prescribed term sheet that describes the basic terms 
of the transaction and financing structure, including the proposed 
amount of the financing, the term, interest rates, security, and reserve 
requirements. A table of contents must identify the materials submitted, 
as well as list the materials the PHA is not required to submit pursuant 
to this rule. Contact information for all of the participating parties 
is also required.
    (3) Financing schedules. The PHA must submit financing schedules 
that include a debt service schedule, sources and uses schedule, and a 
portfolio schedule (including projections for RHF, as appropriate), and 
an adequacy-of-Capital Funds schedule, all in a format prescribed by 
HUD.

[[Page 357]]

    (4) Other required submissions. The following submissions must be 
incorporated in the proposal to the extent required to be submitted by 
this part: Capital fund financing budget, management assessment, 
fairness opinion, and physical needs assessment.
    (5) Financing documents. The PHA must submit a complete set of the 
legal documents that the PHA will execute in connection with the CFFP 
transaction. The legal documents must identify the nature and extent of 
any security being provided, as well as the position of any security 
interest (e.g., first lien position, second lien position). The legal 
documents are to be submitted to HUD only after they have been 
negotiated and agreed upon by the parties to the transaction. HUD will 
not review preliminary documents that are still under negotiation.
    (6) Declaration of Trust requirements. The PHA must submit evidence 
that the PHA has conformed to the Declaration of Trust requirements in 
accordance with this subpart.
    (7) Board resolution and counsel's opinion. The PHA must submit 
evidence of a PHA Board resolution that authorizes the PHA to: Undertake 
the loan up to a specified amount, provide all security interests 
required by the loan, and repay the loan with Capital Funds (including 
RHF funds, when applicable) as required by the financing documents. The 
Board resolution must also provide authorization for the Executive 
Director or other executive staff to negotiate and enter into all legal 
documents required as part of the transaction. The PHA must submit PHA 
counsel's opinion, which opines that the PHA has the authority to enter 
into the transaction, and affirms that the transaction complies with the 
requirements of the 1937 Act, as amended; Federal regulations; and the 
ACC, as amended.
    (8) Depository Agreement and ACC. The PHA must submit a Depository 
Agreement (form HUD-51999) and a CFF ACC Amendment.
    (9) Other documents as required by HUD.



Sec.  905.515  HUD review and approval.

    (a) After receipt of a Capital Fund Financing Proposal, HUD shall 
review the proposal for completeness. HUD will return to the PHA all 
incomplete or unapprovable proposals, identifying the deficiencies, and 
will not take any further action. HUD will also return proposals 
submitted by entities other than the PHA (e.g., the PHA's consultants). 
HUD shall review all complete proposals for compliance with the 
requirements under this subpart. HUD may require the PHA to make 
modifications to any of the CFFP documents submitted and may require the 
PHA to resubmit all or any portion of the proposal. After HUD determines 
that a proposal complies with all applicable requirements, HUD shall 
notify the PHA in writing of its approval and any condition(s) of the 
approval.
    (b) (1) A copy or copies of the CFF ACC Amendment shall accompany 
the approval letter.
    (2) Within 60 days of the date of HUD's approval of the transaction 
or, if HUD sets conditions on its approval, within 60 days of the date 
that the PHA satisfies such conditions (as evidenced by documentation 
retained in the PHA's file and available to HUD upon request), but in no 
event longer than 120 days after the HUD approval, unless the time has 
otherwise been extended by HUD in writing, the PHA must submit:
    (i) Closing documents as directed by HUD; and
    (ii) All documents required by HUD to take certain actions such as 
initiating debt service payments through HUD's automated systems.
    (3) Failure to provide the required documents to HUD within the time 
frame required under Sec.  905.515(b)(2) may result in HUD rescinding 
its approval.



                   Subpart F_Development Requirements

    Source: 78 FR 63786, Oct. 24, 2013, unless otherwise noted.



Sec.  905.600  General.

    (a) Applicability. This subpart F applies to the development of 
public housing units to be included under an ACC and which will receive 
funding from public housing funds. PHAs must comply, or cause the Owner 
Entity and

[[Page 358]]

its contractors to comply, as applicable, with all of the applicable 
requirements in this subpart. Pursuant to Sec.  905.106 of this part, 
when a PHA, a PHA partner, and/or an Owner Entity submits a development 
proposal and, if applicable, a site acquisition proposal, and executes 
an ACC covering the public housing units being developed, it is deemed 
to have certified by those executed submissions its compliance with this 
subpart. Noncompliance with any provision of this subpart or other 
applicable statutes or regulations, or the ACC Amendment, and any 
amendment thereto may subject the PHA, the PHA's partner and/or the 
Owner Entity to sanctions contained in Sec.  905.804 of this part.
    (b) Description. A PHA may develop public housing through the 
construction of new units or the acquisition, with or without 
rehabilitation, of existing units. A PHA may use any generally accepted 
method of development including, but not limited to:
    (1) Conventional. The PHA designs a project on a property it owns. 
The PHA then competitively selects an entity to build or rehabilitate 
the project.
    (2) Turnkey. The PHA advertises for and competitively selects a 
developer who will develop public housing units on a site owned or to be 
owned by the developer. Following HUD approval of the development 
proposal, the PHA and the developer execute a contract of sale and the 
developer builds the project. Once the project is complete, the 
developer sells it to the PHA.
    (3) Acquisition with or without rehabilitation. The PHA acquires an 
existing property that requires substantial, moderate, or no repair. Any 
repair work is done by PHA staff or contracted out by the PHA. The PHA 
must certify that the property was not constructed with the intent of 
selling it to the PHA or, alternatively, the PHA must certify that HUD 
requirements were followed in the development of the property.
    (4) PHA use of force account labor. The PHA uses staff to carry out 
new construction or rehabilitation, as provided in Sec.  905.314(j) of 
this part.
    (5) Mixed finance. Development or modernization of public housing 
units where the public housing units are owned in whole or in part by an 
entity other than a PHA, pursuant to Section 905.604.
    (c) Development process. The general development process for public 
housing development, using any method and with any financing, is as 
follows:
    (1) The PHA will identify a site to be acquired or a public housing 
project to be developed or redeveloped. The PHA or its Partner and/or 
the Owner Entity will prepare a site acquisition proposal pursuant to 
Sec.  905.608 of this part and/or a development proposal pursuant to 
Sec.  905.606 of this part for submission to HUD or as otherwise 
directed by HUD. The PHA may request predevelopment funding necessary 
for preparation of the acquisition proposal and/or development proposal, 
as stated in Sec.  905.612(a) of this part.
    (2) The PHA must consult with affected residents prior to submission 
of an acquisition proposal, development proposal, or both to HUD to 
solicit resident input into development of the public housing project.
    (3) After HUD approval of the site acquisition proposal and/or 
development proposal, HUD and the PHA shall execute the applicable ACC 
Amendment for the public housing units and record a Declaration of Trust 
or Declaration of Restrictive Covenants on all property acquired and/or 
to be developed. The PHA may then commence development of the units.
    (4) Upon completion of the public housing project, the PHA will 
establish the DOFA. After the DOFA, the PHA will submit a cost 
certificate to HUD attesting to the actual cost of the project that will 
be subject to audit.
    (d) Funding sources. A PHA may engage in development activities 
using any one or a combination of the following sources of funding:
    (1) Capital Funds;
    (2) HOPE VI funds;
    (3) Choice Neighborhoods funds;
    (4) Proceeds from the sale of units under a homeownership program in 
accordance with 24 CFR part 906;
    (5) Proceeds resulting from the disposition of PHA-owned land or 
improvements;
    (6) Private financing used in accordance with Sec.  905.604 of this 
part, Mixed-finance development;

[[Page 359]]

    (7) Capital Fund Financing Program (CFFP) proceeds under Sec.  
905.500 of this part;
    (8) Proceeds resulting from an Operating Fund Financing Program 
(OFFP) approved by HUD pursuant to 24 CFR part 990; and
    (9) Funds available from any other eligible sources.



Sec.  905.602  Program requirements.

    (a) Local cooperation. Except as provided under Sec.  905.604(i) of 
this part for mixed-finance projects, the PHA must enter into a 
Cooperation Agreement with the applicable local governing body that 
includes sufficient authority to cover the public housing being 
developed under this subpart, or provide an opinion of counsel that the 
existing, amended, or supplementary Cooperation Agreement between the 
jurisdiction and the PHA includes the project or development.
    (b) New construction limitation. These requirements apply to the 
development (including new construction and acquisition) of public 
housing. All proposed new development projects must meet both of the 
following requirements:
    (1) Limitation on the number of units. A PHA may not use Capital 
Funds to pay for the development cost of public housing units if such 
development would result in a net increase in the number of public 
housing units that the PHA owned, assisted, or operated on October 1, 
1999. Subject to approval by the Secretary, a PHA may develop public 
housing units in excess of the limitation if:
    (i) The units are available and affordable to eligible low-income 
families and the CF formula does not provide additional funding for the 
specific purpose of constructing, modernizing, and operating such excess 
units; or
    (ii) The units are part of a mixed-finance project or otherwise 
leverage significant additional investment, and the cost of the useful 
life of the projects is less than the estimated cost of providing 
tenant-based assistance under section 8(o) of the 1937 Act.
    (2) Limitations on cost. A PHA may not construct public housing 
unless the cost of construction is less than the cost of acquisition or 
acquisition and rehabilitation of existing units, including the amount 
required to establish, as necessary, an upfront reserve for replacement 
accounts for major repairs. A PHA shall provide evidence of compliance 
with this subpart either by:
    (i) Demonstrating through a cost comparison that the cost of new 
construction in the neighborhood where the PHA proposes to construct the 
housing is less than the cost of acquisition of existing housing, with 
or without rehabilitation, in the same neighborhood; or
    (ii) Documenting that there is insufficient existing housing in the 
neighborhood to acquire.
    (c) Existing PHA-owned nonpublic housing properties. Nonpublic 
housing properties may be used in the development of public housing 
units provided all requirements of the 1937 Act and the development 
requirements of this part are met.
    (d) Site and neighborhood standards. Each proposed site to be newly 
acquired for a public housing project or for construction or 
rehabilitation of public housing must be reviewed and approved by the 
field office as meeting the following standards, as applicable:
    (1) The site must be adequate in size, exposure, and contour to 
accommodate the number and type of units proposed. Adequate utilities 
(e.g., water, sewer, gas, and electricity) and streets shall be 
available to service the site.
    (2) The site and neighborhood shall be suitable to 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, Executive Order 11063, and HUD regulations issued under these 
statutes.
    (3) The site for new construction shall not be located in an area of 
minority concentration unless:
    (i) There are already sufficient, comparable opportunities outside 
areas of minority concentration for housing minority families in the 
income range that is to be served by the proposed project; or
    (ii) The project is necessary to meet overriding housing needs that 
cannot feasibly be met otherwise in that housing market area. 
``Overriding housing needs'' shall not serve as the basis for 
determining that a site is acceptable if

[[Page 360]]

the only reason that these needs cannot otherwise feasibly be met is 
that, due to discrimination because of race, color, religion, creed, 
sex, disability, familial status, or national origin, sites outside 
areas of minority concentration are unavailable.
    (4) The site for new construction shall not be located in a racially 
mixed area if the project will cause a significant increase in the 
proportion of minority to nonminority residents in the area.
    (5) Notwithstanding the foregoing, after demolition of public 
housing units a PHA may construct public housing units on the original 
public housing site or in the same neighborhood if the number of 
replacement public housing units is significantly fewer than the number 
of public housing units demolished. One of the following criteria must 
be satisfied:
    (i) The number of public housing units being constructed is not more 
than 50 percent of the number of public housing units in the original 
development; or
    (ii) In the case of replacing an occupied development, the number of 
public housing units being constructed is the number needed to house 
current residents who want to remain at the site, so long as the number 
of public housing units being constructed is significantly fewer than 
the number being demolished; or
    (iii) The public housing units being constructed constitute no more 
than 25 units.
    (6) The site shall promote greater choice of housing opportunities 
and avoid undue concentration of assisted persons in areas containing a 
high proportion of low-income persons.
    (7) The site shall be free from adverse environmental conditions, 
natural or manmade, such as: Toxic or contaminated soils and substances; 
mudslide or other unstable soil conditions; flooding; septic tank 
backups or other sewage hazards; harmful air pollution or excessive 
smoke or dust; excessive noise or vibrations from vehicular traffic; 
insect, rodent, or vermin infestation; or fire hazards. The neighborhood 
shall not be seriously detrimental to family life. It shall not be 
filled with substandard dwellings nor shall other undesirable elements 
predominate, unless there is a concerted program in progress to remedy 
the undesirable conditions.
    (8) The site shall be accessible to social, recreational, 
educational, commercial, and health facilities; health 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. The availability of public transportation 
must be considered.
    (9) The site shall be accessible to a range of jobs for low-income 
workers and for other needs. The availability of public transportation 
must be considered, and travel time and cost via public transportation 
and private automobile must not be excessive. This requirement may be 
given less consideration for elderly housing.
    (10) The project may not be built on a site that has occupants 
unless the relocation requirements at Sec.  905.308(b)(9) of this part 
are met.
    (11) The site shall not be in an area that HUD has identified 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 development is covered by flood insurance required by the 
Flood Disaster Protection Act of 1973 and meets all applicable HUD 
standards and local requirements.
    (e) Relocation. All acquisition or rehabilitation activities carried 
out with public housing funds must comply with the provisions of Sec.  
905.308(b)(9).
    (f) Environmental requirements. All activities under this part are 
subject to an environmental review by a responsible entity under HUD's 
environmental regulations at 24 CFR Part 58 and must comply with the 
requirements of the National Environmental Policy Act of 1969 (NEPA) (42 
U.S.C. 4321 et seq.) and the related laws and authorities listed at 24 
CFR 58.5. HUD may make a finding in accordance with 24 CFR 58.11 and may 
perform the environmental review itself under the provisions of 24 CFR 
Part 50. In those cases where HUD performs the environmental review 
under 24 CFR Part 50, it will do so before approving a proposed

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project, and will comply with the requirements of NEPA and the related 
requirements at 24 CFR 50.4.



Sec.  905.604  Mixed-finance development.

    (a) General. Mixed-finance development refers to the development 
(through new construction or acquisition, with or without 
rehabilitation) or modernization of public housing, where the public 
housing units are owned in whole or in part by an entity other than a 
PHA. If the public housing units being developed are 100 percent owned 
by the PHA, the project is not a mixed-finance project and will be not 
be subject to mixed-finance development requirements. However, all other 
development requirements of part 905 are applicable, and, if the project 
includes both public housing funds and private funding for development, 
the project may be subject to other applicable program requirements; 
e.g., the Capital Fund Financing Program, Operating Fund Financing 
Program, Public Housing Mortgage Program, etc.
    (1) Ownership. There are various potential scenarios for the 
ownership structure of a mixed-finance project, such as: public housing 
units may be owned entirely by a private entity; a PHA may co-own with a 
private entity; or a PHA affiliate or instrumentality may own or co-own 
the units.
    (2) Partnerships. PHAs may choose to enter into a partnership or 
other contractual arrangement with a third party entity for the mixed-
finance development and/or ownership of public housing units.
    (3) Funding. Funding for mixed-finance developments may include one 
or a combination of funding sources, pursuant to Sec.  905.600(d) of 
this part.
    (4) Modernization. A mixed-finance project that involves 
modernization, rather than new construction, shall maintain the DOFA 
date that existed prior to modernization and shall be subject to the 
provisions of Sec.  905.304(a)(2) of this part regarding the applicable 
period of obligation to operate the public housing units.
    (b) Definitions applicable to this subpart. (1) Mixed-finance. The 
development (through new construction or acquisition, with or without 
rehabilitation) or modernization of public housing, using public 
housing, nonpublic housing, or a combination of public housing and 
nonpublic housing funds, where the public housing units are owned in 
whole or in part by an entity other than the PHA. A mixed-finance 
development may include 100 percent public housing (if there is an Owner 
Entity other than the PHA) or a mixture of public housing and nonpublic 
housing units.
    (2) Owner Entity. As defined in Sec.  905.108 of this part.
    (3) PHA instrumentality. An instrumentality is an entity related to 
the PHA whose assets, operations, and management are legally and 
effectively controlled by the PHA, and through which PHA functions or 
policies are implemented, and which utilizes public housing funds or 
public housing assets for the purpose of carrying out public housing 
development functions of the PHA. An instrumentality assumes the role of 
the PHA, and is the PHA under the Public Housing Requirements, for 
purposes of implementing public housing development activities and 
programs, and must abide by the Public Housing Requirements. 
Instrumentalities must be authorized to act for and to assume such 
responsibilities. For purposes of development, ownership of public 
housing units by an instrumentality would be considered mixed-finance 
development.
    (4) PHA affiliate. An affiliate is an entity, other than an 
instrumentality, formed by a PHA and in which a PHA has a financial or 
ownership interest or participates in its governance. The PHA has some 
measure of control over the assets, operations, or management of the 
affiliate, but such control does not rise to the level of control to 
qualify the entity as an instrumentality. For the purposes of 
development, ownership of public housing units by an affiliate would be 
considered mixed-finance development.
    (5) Public housing funds. As defined in Sec.  905.108 of this part.
    (c) Structure of projects. Each mixed-finance project must be 
structured to:
    (1) Ensure the continued operation of the public housing units in 
accordance with all Public Housing Requirements;
    (2) Ensure that public housing funds committed to a mixed-finance 
project

[[Page 362]]

are used only to pay for costs associated with the public housing units, 
including such costs as demolition, site work, infrastructure, and 
common area improvements.
    (3) To ensure that the amount of public housing funds committed to a 
project is proportionate to the number of public housing units contained 
in the project. To meet this ``pro rata test,'' the proportion of public 
housing funds compared to total project funds committed to a project 
must not exceed the proportion of public housing units compared to total 
number of units contained in the project. For example, if there are a 
total of 120 units in the project and 50 are public housing units, the 
public housing units are 42 percent of the total number of units in the 
project. Therefore the amount of public housing funds committed to the 
project cannot exceed 42 percent of the total project budget, unless 
otherwise approved by the Secretary. However, if public housing funds 
are to be used to pay for more than the pro rata cost of common area 
improvements, HUD will evaluate the proposal to ensure that common area 
improvements will benefit the residents in the development in a mixed-
income project; and
    (4) Ensure that the project is within the Total Development Cost 
(TDC) and Housing Construction Cost (HCC) limits pursuant to Sec.  
905.314(c) and (d) of this part.
    (d) Process. Except as provided in this section, development of a 
mixed-finance project under this subpart is subject to the same 
requirements as development of public housing by a PHA entirely with 
public housing funds, as stated in Sec.  905.600 of this part. PHAs must 
submit an acquisition proposal under Sec.  905.608 and/or a development 
proposal under Sec.  905.606 or as otherwise specified by HUD.
    (e) Conflicts. In the event of a conflict between the requirements 
for a mixed-finance project and other requirements of this subpart, the 
mixed-finance Public Housing Requirements shall apply, unless HUD 
determines otherwise.
    (f) HUD approval. For purposes of this section only, any action or 
approval that is required by HUD pursuant to the requirements set forth 
in this section shall be construed to mean HUD Headquarters, unless the 
field office is authorized in writing by Headquarters to carry out a 
specific function in this section.
    (g) Comparability. Public housing units built in a mixed-financed 
development must be comparable in size, location, external appearance, 
and distribution to nonpublic housing units within the development.
    (h) Mixed-finance procurement. The requirements of 2 CFR part 200 
and 24 CFR 905.316 are applicable to this subpart with the following 
exceptions:
    (1) PHAs may select a development partner using competitive 
proposals procedures for qualifications-based procurement, subject to 
negotiation of fair and reasonable compensation and compliance with TDC 
and other applicable cost limitations;
    (2) An Owner Entity (which, as a private entity, would normally not 
be subject to 2 CFR part 200) shall be required to comply with 2 CFR 
part 200 if HUD determines that the PHA or PHA instrumentality, or 
either of their members or employees, exercises significant decision 
making 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 2 CFR part 200 
if it determines that the Owner Entity has developed an acceptable 
alternative procurement plan.
    (i) Identity of interest. If the Owner Entity or partner (or any 
other entity with an identity of interest with the Owner Entity or 
partner) of a mixed-finance project wants to serve as the general 
contractor for the mixed-finance project, it may award itself the 
construction contract only if:
    (1) The identity of interest general contractor's bid is the lowest 
bid submitted in response to a request for bids; or
    (2) The PHA submits a written justification to HUD that includes an 
independent third-party cost estimate that demonstrates that the 
identity of interest general contractor's costs are less than or equal 
to the independent third-party cost estimate; and

[[Page 363]]

    (3) HUD approves the identity of interest general contractor in 
conjunction with HUD's approval of the development proposal for the 
mixed-finance project.
    (j) Operating Subsidy-Only and Capital Fund-Only Assistance. (1) 
General. This section refers to the mixed-finance development of public 
housing units that will be developed without public housing funds but 
will receive operating subsidy, or will be developed with public housing 
funds but will not receive operating subsidy.
    (2) Operating Subsidy-Only Development. Operating Subsidy-Only 
Development refers to mixed-finance projects where public housing units 
are developed without the use of public housing funds, but for which HUD 
agrees to provide operating subsidies under Section 9(e) of the 1937 
Act. These types of project are subject to the following provisions:
    (i) The newly developed public housing units will be included in the 
calculation of the Capital Fund formula in Sec.  905.400 of this part.
    (ii) An ACC Amendment will be executed to include the new public 
housing units. The term of the ACC Amendment will be determined based on 
the assistance as provided in Sec.  905.304, unless reduced by the 
Secretary.
    (iii) There shall be no disposition of the public housing units 
without the prior written approval of HUD, during, and for 10 years 
after the end of, the period in which the public housing units receive 
operating subsidy from the PHA, as required by 42 U.S.C. 1437g(3), as 
those requirements may be amended from time to time. However, if the PHA 
is no longer able to provide operating subsidies to the Owner Entity 
pursuant to Section 9(e) of the 1937 Act, the PHA may (on behalf of the 
Owner Entity) request that HUD terminate the Declaration of Trust or 
Declaration of Restrictive Covenants, as applicable. Termination under 
this section does not require disposition approval from HUD pursuant to 
Section 18 of the 1937 Act, 42 U.S.C. 1437p. However, the PHA must 
provide public housing residents with a decent, safe, sanitary, and 
affordable unit to which they can relocate, which may include a public 
housing unit in another development or a Housing Choice Voucher, and pay 
for the tenant's reasonable moving costs. The URA is not applicable in 
this situation.
    (iv) Where the PHA elects in the future to use public housing funds 
for modernization of these units, the PHA must execute an ACC Amendment 
with a 20-year use restriction and record a Declaration of Trust or 
Declaration of Restrictive Covenants, in accordance with Sec.  905.304. 
There may be no disposition of the public housing units without the 
prior written approval of HUD during the 20-year period, and the public 
housing units shall be maintained and operated in accordance with all 
applicable Public Housing Requirements (including the ACC), as those 
requirements may be amended from time to time.
    (3) Capital Fund-Only Development. Capital Fund-Only projects refers 
to mixed-finance projects where a PHA and its partners may develop 
public housing units using public housing funds for development of new 
units, but for which HUD will not be providing operating subsidy under 
Section 9(e) of the Act, 42 U.S.C. 1437g(e). These types of projects are 
subject to the following provisions:
    (i) The newly developed public housing units will not be included in 
the calculation of the Operating Fund formula.
    (ii) The PHA must sign an ACC Amendment, with a 40-year use 
restriction, for development of new units and record a Declaration of 
Trust or Declaration of Restrictive Covenants in accordance with Sec.  
905.304 of this part, unless the time period is reduced by the 
Secretary.
    (iii) There shall be no disposition of the public housing units, 
without the prior written approval of HUD, during a 40-year period, and 
the public housing units shall be maintained and operated in accordance 
with all applicable Public Housing Requirements (including the ACC), as 
required by section 9(d)(3) of the 1937 Act, 42 U.S.C. 1437g(d)(3), as 
those requirements may be amended from time to time.
    (4) Procedures. PHAs must follow the development approval process 
identified in Sec.  905.600.

[[Page 364]]

    (k) Mixed-finance operations: Deviation from HUD requirements 
pursuant to section 35(h) of the 1937 Act, 42 U.S.C. 1437z-7(h). (1) 
Deviation. If a PHA enters into a contract with an entity that owns or 
operates a mixed-finance project, and the terms of the contract obligate 
the entity to operate and maintain a specified number of units in the 
project as public housing units, the contract may include terms that 
allow the Owner Entity to deviate from otherwise applicable Public 
Housing Requirements regarding rents, income eligibility, and other 
areas of public housing management with respect to all or a portion of 
the public housing units, subject to the following conditions:
    (i) There are a significant number of units in the mixed-finance 
project that are not public housing units;
    (ii) There is a reduction in appropriations under Section 9(e) of 
the 1937 Act (see 42 U.S.C. 1437g(e)) or a change in applicable law that 
results in the PHA being unable to fulfill its contractual obligation to 
the Owner Entity with respect to the public housing units;
    (iii) Prior to implementation of the contractual terms related to 
deviation from the Public Housing Requirements, HUD approves an 
Alternative Management Plan for the mixed-finance project; and
    (iv) The deviation shall be to the extent necessary to preserve the 
viability of those units while maintaining the low-income character of 
the units to the maximum extent practicable.
    (2) Preparation of an Alternative Management Plan. Should the PHA 
and the Owner Entity determine a need to deviate from the Public Housing 
Requirements, the PHA, on behalf of the Owner Entity, must submit an 
Alternative Management Plan to HUD for review and approval prior to 
implementation of any changes. The Plan must include the following:
    (i) A statement describing the Owner Entity's reasons for deviating 
from the Public Housing Requirements;
    (ii) An explanation of the Owner Entity's proposed remedies, 
including, but not limited to:
    (A) How the Owner Entity will select the residents (including the 
number and income levels of the families proposed to be admitted to the 
public housing units) and units to be affected by the proposed change;
    (B) The Owner Entity's timetable for implementing the Alternative 
Management Plan;
    (C) The impact on existing residents. Note that for any resident who 
is unable to remain in the unit as a result of implementation of the 
Alternative Management Plan, the resident must be relocated to a public 
housing unit or given a Housing Choice Voucher by the PHA or by another 
entity as provided for in the contractual agreement between the PHA and 
the Owner Entity;
    (iii) An amendment to the existing contractual agreement between the 
PHA and the Owner Entity that includes provisions which ensure that:
    (A) An update on the Alternative Management Plan is submitted 
annually to HUD to ensure that implementation of the provisions of the 
Alternative Management Plan continue to be appropriate;
    (B) The Owner Entity complies with the requirements of this subpart 
in its management and operation of the public housing units in 
accordance with the Alternative Management Plan;
    (C) The Owner Entity provides the PHA any income that is generated 
by the public housing units in excess of the Owner Entity's expenses on 
behalf of those units, as a result of implementation of provisions in 
the Alternative Management Plan;
    (D) The Owner Entity reinstates all Public Housing Requirements 
(including rent and income eligibility requirements) with respect to the 
original number of public housing units and number of bedrooms in the 
mixed-finance development, following the PHA's reinstatement of 
operating subsidies at the level originally agreed to in its contract 
with the Owner Entity; and
    (iv) Additional evidence. The PHA must provide documentation that:
    (A) The Owner Entity has provided copies of the Alternative 
Management Plan to residents of the project and provided the opportunity 
for review and comment prior to submission to HUD. The Owner Entity must 
have provided written notice to each of the public housing residents in 
the mixed-finance development of its intention to

[[Page 365]]

implement the Alternative Management Plan. Such notice must comply with 
all relevant federal, state, and local substantive and procedural 
requirements and, at a minimum, provide public housing residents 90 days 
advance notice of any proposal to increase rents or to relocate public 
housing residents to alternative housing;
    (B) The revenues being generated by the public housing units (in 
combination with the reduced allocation of Operating Subsidy resulting 
primarily from a reduction in appropriations or changes in applicable 
law such that the PHA is unable to comply with its contractual 
obligations to the Owner Entity) are inadequate to cover the reasonable 
and necessary operating expenses of the public housing units. 
Documentation should include a financial statement showing actual 
operating expenses and revenues over the past 5 years and the projected 
expenses and revenues over the next 10 years;
    (C) A demonstration that the PHA cannot meet its contractual 
obligation, and;
    (D) The Owner Entity has attempted to offset with regard to the 
project, the impact of reduced operating subsidies or changes in 
applicable law by all available means; including the use of other public 
and private development resources, the use of cash flow from any 
nonpublic housing units, and funds from other operating deficient 
reserves.
    (3) HUD review. HUD will review the Alternative Management Plan to 
ensure that the plan meets the requirements of this subpart and that any 
proposed deviation from the Public Housing Requirements will be 
implemented only to the extent necessary to preserve the viability of 
the public housing units. Upon completion of HUD's review, HUD will 
either approve or disapprove the Alternative Management Plan. Reasons 
for HUD disapproval may include, but are not limited to, the following:
    (i) The justification for deviation from the Public Housing 
Requirements does not qualify in accordance with section 35(h) of the 
Act (42 U.S.C. 1437z-7(h)).
    (ii) The proposed deviation(s) from the Public Housing Requirements 
are not limited to preserving the viability of the public housing units.
    (iii) The information that HUD requires to be included in the 
Alternative Management Plan has not been included, is not accurate, or 
does not support the need for deviation from the Public Housing 
Requirements.
    (iv) HUD has evidence that the proposed Alternative Management Plan 
is not in compliance with other federal requirements, including civil 
rights laws.
    (4) HUD reevaluation and reapproval. The PHA, on behalf of the Owner 
Entity, must provide to HUD, for HUD approval, an annual update on the 
implementation of the Alternative Management Plan. The update must 
provide the status of the project and whether the circumstances 
originally triggering the need for the conditions contained in the 
Alternative Management Plan remain valid and appropriate. Any proposed 
changes in the Alternative Management Plan should also be identified. 
Once the annual update of the Alternative Management Plan is properly 
submitted, the existing Alternative Management Plan shall remain in 
effect until such time as HUD takes additional action to approve or 
disapprove the annual update.

[78 FR 63770, Oct. 24, 2013, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  905.606  Development proposal.

    (a) Development proposal. Prior to developing public housing, either 
through new construction or through acquisition, with or without 
rehabilitation, a PHA must submit a development proposal to HUD in the 
form prescribed by HUD, which will allow HUD to assess the viability and 
financial feasibility of the proposed development. A development 
proposal must be submitted for all types of public housing development, 
including mixed-finance. Failure to submit and obtain HUD approval of a 
development proposal may result in the public housing funds used in 
conjunction with the project being deemed ineligible expenses. In 
determining the amount of information to be submitted by the PHA, HUD 
shall consider whether the documentation is required for

[[Page 366]]

HUD to carry out mandatory statutory, regulatory, or Executive order 
reviews; the quality of the PHA's past performance in implementing 
development projects under this subpart; the PHA's demonstrated 
administrative capability; and other program requirements. The 
development proposal shall include some or all of the following 
documentation, as deemed necessary by HUD.
    (1) Project description. A description of the proposed project, 
including:
    (i) Proposed development method (e.g., mixed-finance, new 
construction, acquisition with or without rehabilitation, turnkey, 
etc.), including the extent to which the PHA will use force account 
labor and use procured contractors. For new construction projects, the 
PHA must meet the program requirements contained in Sec.  905.602. For 
projects involving acquisition of existing properties less than 2 years 
old, the PHA must include an attestation from the PHA and the owner of 
the property that the property was not constructed with the intent that 
it would be sold to the PHA or, if it was constructed with the intent 
that it be sold to the PHA, that it was constructed in compliance with 
all applicable requirements (e.g., Davis Bacon wage rates, 
accessibility, etc.);
    (ii) Type of residents to occupy the units (e.g., family, elderly, 
persons with disabilities, or families that include persons with 
disabilities);
    (iii) Number and type of unit (detached, semidetached, row house, 
walkup, elevator), with bedroom count, broken out by public housing vs. 
nonpublic housing, if applicable;
    (iv) The type and size of nondwelling space, if applicable; and
    (v) Schematic drawings of the proposed buildings, unit plans, and 
additional information regarding plans and specifications, as needed by 
HUD to review the project.
    (2) Site information. An identification and description of the 
proposed site and neighborhood, a site plan, and a map of the 
neighborhood.
    (3) Participant description. Identification of 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, as 
applicable.
    (4) Development project schedule. A schedule for the development 
project that includes each major stage of development, through and 
including the submission of an Actual Development Cost Certificate to 
HUD.
    (5) Accessibility. A PHA must provide sufficient information for HUD 
to determine that dwelling units and other public housing facilities 
meet accessibility requirements specified at Sec.  905.312 of this part, 
including, but not limited to, the number, location, and bedroom size 
distribution of accessible dwelling units (see 24 CFR 8.32 and 24 CFR 
part 40).
    (6) Project costs. (i) Budgets. To allow HUD to assess sources of 
funding and projected uses of funds, the PHA shall submit a project 
budget, in the form prescribed by HUD, reflecting the total permanent 
development budget for the project, including all sources and uses of 
funds, including hard and soft costs. The PHA shall also submit a budget 
for the construction period and a construction draw schedule showing the 
timing of construction financing contributions and disbursements. In 
addition, the PHA shall submit an independent construction cost estimate 
or actual construction contract that supports the permanent and 
construction budgets.
    (ii) TDC calculation. The PHA must submit a calculation of the TDC 
and HCC, subject to Sec.  905.314 of this part.
    (iii) Financing. A PHA must submit a detailed description of all 
financing necessary for the implementation of the project, specifying 
the sources and uses. In addition, HUD may require documents related to 
the financing (e.g., loan documents, partnership or operating agreement, 
regulatory and operating agreement, etc.) to be submitted in final draft 
form as part of the development proposal. Upon financial closing, HUD 
may also require final, executed copies of these documents to be 
submitted to HUD for final approval, per Sec.  905.612(b)(2) of this 
part.
    (A) Commitment of funds. Documents submitted pursuant to this 
section must irrevocably commit funds to the project. Irrevocability of 
funds means that binding legal documents--such as

[[Page 367]]

loan agreements, mortgages, deeds of trust, partnership agreements or 
operating agreements, or similar documents committing funds--have been 
executed by the applicable parties; though disbursement of such funds 
may be subject to meeting progress milestones, the absence of default, 
and/or other conditions generally consistent with similar non-public 
housing transactions. For projects involving revolving loan funds, the 
irrevocability of funds means that funds in an amount identified to HUD 
as the maximum revolving loan have been committed pursuant to legally 
binding documents; though disbursement of such funds may be subject to 
meeting progress milestones, the absence of default, and/or other 
conditions generally consistent with similar affordable housing 
transactions. The PHA must confirm the availability of each party's 
financing, the amount and source of financing committed to the proposal 
by the parties, and the irrevocability of those funds.
    (B) Irrevocability of funds. To ensure the irrevocable nature of the 
committed funds, the PHA shall review the legal documents committing 
such funds to ensure that the progress milestones and conditions 
precedent contained in such contracts are generally consistent with 
similar affordable housing transactions; that the PHA and/or its Owner 
Entity know of no impediments that would prevent the project from moving 
forward consistent with the project milestones and conditions precedent; 
and, after conducting sufficient due diligence, that such documents are 
properly executed by persons or entities legally authorized to bind the 
entity committing such funds.
    (C) Third-party documents. The PHA is not required to ensure the 
availability of funds by enforcing documents to which it is not a party.
    (D) Opinion of counsel. As part of the proposal, the PHA may certify 
as to the irrevocability of funds through the submission of an opinion 
of the PHA's counsel attesting that counsel has examined the 
availability of the participating parties' financing, and the amount and 
source of financing committed to the project by the participating 
parties, and has determined that such financing has been irrevocably 
committed, as defined in paragraph (a)(6)(iii)(A) of this section, and 
that such commitments are consistent with the project budget submitted 
under paragraph (a)(6)(i) of this section.
    (7) Operating pro-forma/Operating Fund methodology. To allow HUD to 
assess the financial feasibility of projects, PHAs shall submit a 10-
year operating pro-forma, including all assumptions, to assure that 
operating expenses do not exceed operating income. For mixed-finance 
development, the PHA must describe its methodology for providing and 
distributing operating subsidy to the Owner Entity for the public 
housing units.
    (8) Local Cooperation Agreement. A PHA may elect to exempt all 
public housing units in a mixed-finance project from the payment in lieu 
of taxes provisions under section 6(d) of the Act, 42 U.S.C. 1437d(d), 
and from the finding of need and cooperative agreement provisions under 
sections 5(e)(1)(ii) and (e)(2) of the Act, 42 U.S.C. 1437c(e)(1)(ii) 
and (e)(2), and instead subject units to local real estate taxes, but 
only if the PHA provides documentation from an authorized official of 
the local jurisdiction that development of the units is consistent with 
the jurisdiction's comprehensive housing affordability strategy. If the 
PHA does not elect this exemption, the Cooperation Agreement as provided 
in Sec.  905.602(a) is required and must be submitted.
    (9) Environmental requirements. The PHA must provide an approved 
Request for Release of Funds and environmental certification, submitted 
in accordance with 24 CFR part 58, or approval in accordance with 24 CFR 
part 50. HUD will not approve a development proposal without the 
appropriate environmental approval.
    (10) Market analysis. For a mixed-finance development that includes 
nonpublic housing units, the PHA must include an analysis of the 
projected market for the proposed project.
    (11) Program income and fees. The PHA must provide information 
identifying fees to be paid to the PHA, the PHA's partner(s), the Owner 
Entity, and/or

[[Page 368]]

other participating parties identified by HUD and on the receipt and use 
of program income.
    (b) Additional HUD-requested information. PHAs are required to 
provide any additional information that HUD may need to assess the 
development proposal.



Sec.  905.608  Site acquisition proposal.

    (a) Submission. When a PHA determines that it is necessary to 
acquire vacant land for development of public housing through new 
construction, using public housing funds, prior to submission and 
approval of a development proposal under Sec.  905.606 of this part, the 
PHA must submit an acquisition proposal to HUD for review and approval 
prior to acquisition. The acquisition proposal shall include the 
following:
    (b) Justification. A justification for acquiring property prior to 
development proposal submission and approval.
    (c) Description. A description of the property (i.e., the proposed 
site and/or project) to be acquired.
    (d) Project description; site and neighborhood standards. An 
identification and description of the proposed project, site plan, and 
neighborhood, together with information sufficient to enable HUD to 
determine that the proposed site meets the site and neighborhood 
standards at Sec.  905.602(d) of this part.
    (e) Zoning. Documentation that the proposed project is permitted by 
current zoning ordinances or regulations, or evidence to indicate that 
needed rezoning is likely and will not delay the project.
    (f) Appraisal. Documentation attesting that an appraisal of the 
proposed property by an independent, state certified appraiser has been 
conducted and that the acquisition is in compliance with Sec.  
905.308(b)(9) of this part. The purchase price of the site/property may 
not exceed the appraised value without HUD approval.
    (g) Schedule. A schedule of the activities to be carried out by the 
PHA.
    (h) Environmental assessment. An environmental review or request for 
HUD to perform the environmental review pursuant to Sec.  905.308(b)(2) 
of this part.



Sec.  905.610  Technical processing.

    (a) Review. HUD shall review all development proposals and site 
acquisition proposals for compliance with the statutory, Executive 
order, and regulatory requirements applicable to the development of 
public housing and the project. HUD's review will evaluate whether the 
proposed sources and uses of funds are eligible and reasonable, and 
whether the financing and other documentation establish to HUD's 
satisfaction that the development is financially viable and structured 
so as to adequately protect the federal investment of funds in the 
development. For this purpose, HUD will consider the PHA's proposed 
methodology for allocating operating subsidies on behalf of the public 
housing units, the projected revenue to be generated by any nonpublic 
housing units in a mixed-finance development, and the 10-year operating 
pro forma and other information contained in the development proposal.
    (b) Subsidy layering analysis. After the PHA submits the 
documentation required under paragraph (a) of this section, HUD or its 
designee (e.g., the State Housing Finance Agency) 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 that the amount of assistance being 
provided for the development is not more than necessary to make the 
assisted activity feasible after taking into account the other 
governmental assistance.
    (c) Safe harbor standards. For mixed-finance projects, in order to 
expedite the mixed-finance review process and control costs, HUD may 
make available safe harbor and maximum fee ranges for a number of costs. 
If a project is at or below a safe harbor standard, no further review 
will be required by HUD. If a project is above a safe harbor standard, 
additional review by HUD will be necessary. In order to approve terms 
above the safe harbor, the PHA must demonstrate to HUD in writing that 
the negotiated terms are appropriate for the level of risk involved in 
the project, the scope of work, any specific circumstances of the

[[Page 369]]

development, and the local or national market for the services provided.
    (d) Approval. If HUD determines that a site acquisition proposal or 
a development proposal is approvable, HUD shall notify the PHA in 
writing of its approval. The HUD approval of a development proposal will 
include the appropriate form of ACC for signature. The PHA must execute 
the ACC and return it to HUD for execution. Until HUD approves a 
development proposal, a PHA may only expend public housing funds for 
predevelopment costs, as provided in Sec.  905.612 of this part.
    (e) Amendments to approved development proposals. HUD must approve 
any material change to an approved development proposal. HUD defines 
material change as:
    (1) A change in the number of public housing units;
    (2) A change in the number of bedrooms by an increase/decrease of 
more than 10 percent;
    (3) A change in cost or financing by an increase/decrease of more 
than 10 percent; or
    (4) A change in the site.



Sec.  905.612  Disbursement of Capital Funds--predevelopment costs.

    (a) Predevelopment costs. After a new development project has been 
included in the CFP 5-Year Action Plan that has been approved by the PHA 
Board of Commissioners and HUD, a PHA may use funding for predevelopment 
expenses. Predevelopment funds may be expended in accordance with the 
following requirements:
    (1) Predevelopment assistance may be used to pay for materials and 
services related to proposal development and project soft costs. It may 
also be used to pay for costs related to the demolition of units on a 
proposed site. Absent HUD approval, predevelopment assistance may not be 
used to pay for site work, installation of infrastructure, construction, 
or other hard costs related to a development.
    (2) For non-mixed-finance projects, predevelopment funding up to 5 
percent of the total amount of the public housing funds committed to a 
project does not require HUD approval. HUD shall determine on a case-by-
case basis that an amount greater than 5 percent may be drawn down by a 
PHA to pay for necessary and reasonable predevelopment costs, based upon 
a consideration of the nature and scope of activities proposed to be 
carried out by the PHA. Before a request for predevelopment assistance 
in excess of 5 percent may be approved, the PHA must provide to HUD 
information and documentation specified in Sec. Sec.  905.606 and 
905.608 of this part, as HUD deems appropriate.
    (3) For mixed-finance projects, all funding for predevelopment costs 
must be reviewed and approved by HUD prior to expenditure.
    (4) The requirements in paragraph (b) of this section to disburse 
funds for mixed-financed projects in an approved ratio to other public 
and private funding do not apply to disbursement of predevelopment 
funds.
    (b) Standard drawdown requirements. (1) General. If HUD determines 
that the proposed development is approvable, it may execute with the PHA 
the applicable ACC Amendment to provide funds for the purposes and in 
the amounts approved by HUD. Upon approval of the development proposal 
and all necessary documentation evidencing and implementing the 
development plan, the PHA may disburse amounts as are necessary and 
consistent with the approved development proposal without further HUD 
approval, unless HUD determines that such approval is necessary. Once 
HUD approves the site acquisition proposal, the PHA may request funds 
for acquisition activities. Each Capital Fund disbursement from HUD is 
deemed to be an attestation of compliance by the PHA with the 
requirements of this part, as prescribed in Sec.  905.106 of this part. 
If HUD determines that the PHA is in noncompliance with any provision of 
this part, the PHA may be subject to the sanctions in Sec.  905.800, 
subpart H, of this part.
    (2) Mixed-finance projects. For mixed-finance projects, prior to PHA 
disbursement of public housing funds, except predevelopment funds 
identified in paragraph (a) of this section, HUD may require a PHA to 
submit to HUD, for review and approval, copies of final, fully executed, 
and, where appropriate, recorded documents, submitted as part

[[Page 370]]

of the development proposal process. Upon completion of the project, the 
ratio of public housing funds to non-public housing funds for the 
overall project must remain as reflected in the executed documents. The 
ratio does not apply during the construction period.



                   Subpart G_Other Security Interests

    Source: 78 FR 63786, Oct. 24, 2013, unless otherwise noted.



Sec.  905.700  Other security interests.

    (a) The PHA may not pledge, mortgage, enter into a transaction that 
provides recourse to public housing assets, or otherwise grant a 
security interest in any public housing project, portion thereof, or 
other property of the PHA without the written approval of HUD.
    (b) The PHA shall submit the request in the form and manner 
prescribed by HUD.
    (c) HUD shall consider:
    (1) The ability of the PHA to complete the financing, the 
improvements, and repay the financing;
    (2) The reasonableness of the provisions in the proposal; or
    (3) Any other factors HUD deems appropriate.



       Subpart H_Compliance, HUD Review, Penalties, and Sanctions

    Source: 78 FR 63786, Oct. 24, 2013, unless otherwise noted.



Sec.  905.800  Compliance.

    As provided in Sec.  905.106 of this part, PHAs or other owner/
management entities and their partners are required to comply with all 
applicable provisions of this part. Execution of the CF ACC Amendment 
received from the PHA, submissions required by this part, and 
disbursement of Capital Fund grants from HUD are individually and 
collectively deemed to be the PHA's certification that it is in 
compliance with the provisions of this part and all other Public Housing 
Program Requirements. Noncompliance with any provision of this part or 
other applicable requirements may subject the PHA and/or its partners to 
sanctions contained in Sec.  905.804 of this part.



Sec.  905.802  HUD review of PHA performance.

    (a) HUD determination. HUD shall review the PHA's performance in 
completing work in accordance with this part. HUD may make such other 
reviews when and as it determines necessary. When conducting such a 
review, HUD shall, at minimum, make the following determinations:
    (1) HUD shall determine whether the PHA has carried out its 
activities under this part in a timely manner and in accordance with its 
CFP 5-Year Action Plan and other applicable requirements.
    (2) HUD shall determine whether the PHA has a continuing capacity to 
carry out its Capital Fund activities in a timely manner.
    (3) HUD shall determine whether the PHA has accurately reported its 
obligation and expenditures in a timely manner.
    (4) HUD shall determine whether the PHA has accurately reported 
required building and unit data for the calculation of the formula.
    (5) HUD shall determine whether the PHA has obtained approval for 
any CFFP or OFFP proposal and any PHA development proposal.
    (b) [Reserved]



Sec.  905.804  Sanctions.

    (a) If at any time, HUD finds that a PHA has failed to comply 
substantially with any provision this part, HUD may impose one or a 
combination of sanctions, as it determines is necessary. Sanctions 
associated with failure to obligate or expend in a timely manner are 
specified at Sec.  905.306 of this part. Other possible sanctions that 
HUD may impose for noncompliance by the PHA include, but are not limited 
to, the following:
    (1) Issue a corrective action order, 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 this section 
must be taken. Any corrective action ordered by HUD shall become a 
condition of the CF ACC Amendment.

[[Page 371]]

    (2) Require reimbursement from non-HUD sources.
    (3) Limit, withhold, reduce, or terminate Capital Fund or Operating 
Fund assistance.
    (4) Issue a Limited Denial of Participation or Debar responsible PHA 
officials, pursuant to 2 CFR parts 180 and 2424.
    (5) Withhold assistance to the PHA under section 8 of the Act, 42 
U.S.C. 1437f.
    (6) Declare a breach of the CF ACC with respect to some or all of 
the PHA's functions.
    (7) Take any other available corrective action or sanction as HUD 
deems necessary.
    (b) Right to appeal. Before taking any action described in paragraph 
(a) of this section, HUD shall notify the PHA of its finding and 
proposed action and provide to the PHA an opportunity, within a 
prescribed period of time, to present any arguments or additional facts 
and data concerning the finding and proposed action to HUD's Assistant 
Secretary for Public and Indian Housing.



PART 906_PUBLIC HOUSING HOMEOWNERSHIP PROGRAMS--Table of Contents



                            Subpart A_General

Sec.
906.1 Purpose.
906.2 Definitions.
906.3 Requirements applicable to homeownership programs previously 
          approved by HUD.

                  Subpart B_Basic Program Requirements

906.5 Dwelling units and types of assistance that a PHA may make 
          available under a homeownership program under this part.
906.7 Physical requirements that a property offered for sale under this 
          part must meet.
906.9 Title restrictions and encumbrances on properties sold under a 
          homeownership program.

                    Subpart C_Purchaser Requirements

906.11 Eligible purchasers.
906.13 Right of first refusal.
906.15 Requirements applicable to a family purchasing a property under a 
          homeownership program.
906.17 PHA handling of homeownership applications.
906.19 Requirements applicable to a purchase and resale entity (PRE).

                    Subpart D_Program Administration

906.23 Protections available to non-purchasing public housing residents.
906.24 Protections available to non-purchasing residents of housing 
          other than public housing.
906.25 Ownership interests that may be conveyed to a purchaser.
906.27 Limitations applicable to net proceeds on the sale of a property 
          acquired through a homeownership program.
906.29 Below-Market sales and financing.
906.31 Requirements applicable to net proceeds resulting from sale.
906.33 Reporting and recordkeeping requirements.
906.35 Inapplicability of section 18 of the United States Housing Act of 
          1937.
906.37 Davis-Bacon and HUD wage rate requirements.

                Subpart E_Program Submission and Approval

906.38 Requirement of HUD approval to implement a homeownership program 
          under this part.
906.39 Contents of a homeownership program.
906.40 Supporting documentation.
906.41 Additional supporting documentation for acquisition of non-public 
          housing for homeownership.
906.43 Where a PHA is to submit a homeownership program for HUD 
          approval.
906.45 HUD criteria for reviewing a proposed homeownership program.
906.47 Environmental requirements.
906.49 HUD approval; implementing agreements.

    Authority: 42 U.S.C. 1437z-4 and 3535(d).

    Source: 68 FR 1172, Mar. 11, 2003, unless otherwise noted.



                            Subpart A_General



Sec.  906.1  Purpose.

    (a) This part states the requirements and procedures governing 
public housing homeownership programs involving sales of individual 
dwelling units to families or to purchase and resale entities (PREs) for 
resale to families carried out by public housing agencies (PHAs), as 
authorized by section 32 of the United States Housing Act of 1937 (42 
U.S.C. 1437z-4) (1937 Act). A PHA may only transfer public housing units 
for homeownership under a homeownership program approved by HUD under

[[Page 372]]

this part, except as provided under Sec.  906.3. This section does not 
govern new construction or substantial rehabilitation of units sold 
under this part. Such construction or rehabilitation is governed by the 
public housing development and modernization regulations.
    (b) Under a public housing homeownership program, a PHA makes 
available for purchase by low-income families for use as their principal 
residences public housing dwelling units, public housing developments, 
and other housing units or developments owned, assisted, or operated, or 
otherwise acquired by the PHA for sale under a homeownership program in 
connection with the use of assistance provided under the 1937 Act (1937 
Act funds). A PHA may sell all or a portion of a property for purposes 
of homeownership in accordance with a HUD-approved homeownership 
program, and in accordance with the PHA's annual plan under part 903 of 
this title.



Sec.  906.2  Definitions.

    Annual Contributions Contract (ACC) is defined in 24 CFR 5.403.
    Low-income family is defined in the 1937 Act, 42 U.S.C. 1437a(b)(2).
    Non-public housing unit means a housing unit that does not receive 
assistance under the 1937 Act (other than Section 8 assistance).
    PHA Plan means the 5-year or annual plan required under section 5A 
of the 1937 Act, 42 U.S.C. 1437c-1, and its implementing regulations at 
24 CFR part 903.
    Purchase and Resale Entity (PRE) means an entity that acquires units 
for resale to low-income families in accordance with this part.



Sec.  906.3  Requirements applicable to homeownership programs previously
approved by HUD.

    (a) Any existing section 5(h) or Turnkey III homeownership program 
continues to be governed by the requirements of part 906 or part 904 of 
this title, respectively, contained in the April 1, 2002, edition of 24 
CFR, parts 700 to 1699. The use of other program income for 
homeownership activities continues to be governed by agreements executed 
with HUD.
    (b) A PHA may convert an existing homeownership program, or a 
specific number of the units in such a program, to a homeownership 
program under this part with HUD approval.



                  Subpart B_Basic Program Requirements



Sec.  906.5  Dwelling units and types of assistance that a PHA may make 
available under a homeownership program under this part.

    (a) A homeownership program under this part may provide for sale of:
    (1) Units that are public housing units; and
    (2) Other units owned, operated, assisted, or acquired for 
homeownership sale and that have received the benefit of 1937 Act funds 
or are to be sold with the benefit of 1937 Act funds (non-public housing 
units). In selecting such units to be sold in a homeownership program 
under this part, the PHA shall not select units such that it could not 
comply with Sec.  906.7(a).
    (b) A homeownership program under this part may provide for 
financing to eligible families (see Sec.  905.15 of this title) 
purchasing dwelling units eligible under paragraph (a) of this section 
under the program, or for acquisition of housing units or developments 
by the PHA for sale under the program.
    (1) Under this part, a PHA may use assistance from amounts it 
receives under the Capital Fund under section 9(d) of the 1937 Act or 
from other income earned from its 1937 Act programs to provide 
assistance to public housing residents only to facilitate the purchase 
of homes (e.g., counseling, closing costs, that portion of the down 
payment not required to be supplied from the purchaser's funds under the 
provisions of Sec.  906.15(c), financing, and moving assistance). Public 
housing residents may use such assistance to purchase the unit in which 
they reside, another public housing unit, or a residence not located in 
a public housing development.
    (2) A PHA may provide financing assistance for other eligible 
purchasers from other income, i.e., funds not from 1937 Act programs, 
such as proceeds from selling public housing units, loan repayments, and 
public housing debt

[[Page 373]]

forgiveness funding not already committed to another purpose.
    (3) In accordance with the rules and regulations governing the 
Section 8(y) Homeownership Option, found in 24 CFR part 982 subpart M, a 
PHA may make its housing choice voucher funds available to provide 
assistance to a family purchasing a unit under this part. A family 
receiving assistance under the Section 8(y) program and participating in 
a homeownership program under this part must meet the requirements of 
both programs.
    (c) A PHA must not use 1937 Act funds to rehabilitate units that are 
not public housing units.



Sec.  906.7  Physical requirements that a property offered for 
sale under this part must meet.

    (a) Property standards. A property offered for sale under a 
homeownership program must meet local code requirements (or, if no local 
code exists, the housing quality standards established by HUD for the 
Section 8 Housing Choice Voucher Program, 24 CFR part 982) and the 
relevant requirements of the Lead-Based Paint Poisoning Prevention Act 
(42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction 
Act of 1992 (42 U.S.C. 4851-4856), and the implementing regulations at 
24 CFR part 35, subparts A, B, L, and R of this title. When a 
prospective purchaser who has known disabilities, or who has a family 
member with known disabilities requires accessible features, the 
features must be added as a reasonable accommodation to the disability, 
in accordance with the requirements of Sec.  8.29 of this title. 
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.
    (b) A unit in this program for which the purchasing family is 
receiving assistance under Section 8(y) must be an eligible unit for 
purposes of the Homeownership Option under 24 CFR part 982, subpart M.



Sec.  906.9  Title restrictions and encumbrances on properties sold
under a homeownership program.

    (a) If the property is subject to indebtedness under the Annual 
Contributions Contract (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.
    (b) Upon sale of a public housing unit to a public housing tenant or 
eligible family, or to a PRE operating the units as non-public housing, 
in accordance with the HUD-approved homeownership program, 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 public housing Operating Fund or Capital 
Fund payments.



                    Subpart C_Purchaser Requirements



Sec.  906.11  Eligible purchasers.

    Entities that purchase units from the PHA for resale to low-income 
families (purchase and resale entities or PREs) and low-income families 
are eligible to purchase properties made available for sale under a PHA 
homeownership program.



Sec.  906.13  Right of first refusal.

    (a) In selling a public housing unit under a homeownership program, 
the PHA or PRE must initially offer the unit to the resident occupying 
the unit, if any, notwithstanding the requirements of Sec. Sec.  
906.15(a) and 906.15(c).
    (b) This program does not require the PHA, when selling a unit that 
is a non-public housing unit, to offer the unit for sale first to the 
current resident of the unit.



Sec.  906.15  Requirements applicable to a family purchasing a property
under a homeownership program.

    (a) Low-income requirement. Except in the case of a PHA's offer of 
first refusal to a resident occupying the unit under Sec.  906.13, a 
family purchasing a property under a PHA homeownership program must be a 
low-income family, as defined in section 3 of the 1937 Act (42

[[Page 374]]

U.S.C. 1437a), at the time the contract to purchase the property is 
executed.
    (b) Principal residence requirement. The dwelling unit sold to an 
eligible family must be used as the principal residence of the family.
    (c) Financial capacity requirement. Eligibility must be limited to 
families 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 program may, however, take account of any available 
subsidy from other sources. Under this affordability standard, an 
applicant must meet the following requirements:
    (1) Cost/income ratio. 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) Down payment requirement. Each family purchasing housing under a 
homeownership program must provide a down payment in connection with any 
loan for acquisition of the housing, in an amount determined by the PHA 
or PRE, in accordance with an approved homeownership program. Except as 
provided in paragraph (c)(3) of this section, the PHA or PRE must permit 
the family to use grant amounts, gifts from relatives, contributions 
from private sources, and other similar amounts in making the down 
payment;
    (3) The family must use its own resources other than grants, gifts, 
contributions, or similar amounts, to contribute an amount of the down 
payment that is not less than one percent of the purchase price of the 
housing. The PHA or PRE must maintain records that are verifiable by HUD 
through audits regarding the source of this one percent contribution.
    (d) Other requirements established by the PHA. A PHA may establish 
requirements or limitations for families to purchase housing under a 
homeownership program, including but not limited to requirements or 
limitations regarding:
    (1) Employment or participation in employment counseling or training 
activities;
    (2) Criminal activity;
    (3) Participation in homeownership counseling programs; and
    (4) Evidence of regular income.



Sec.  906.17  PHA handling of homeownership applications.

    Families who are interested in purchasing a unit must submit 
applications to the PHA or PRE for that specific purpose, and those 
applications must be handled separately from applications for other PHA 
programs. Application for homeownership must not affect an applicant's 
place on any other PHA waiting list for rental units.



Sec.  906.19  Requirements applicable to a purchase and resale entity (PRE).

    (a) In general. In the case of a purchase of units for resale to 
low-income families by a PRE, the PHA must have an approved 
homeownership program that describes the use of a PRE to sell the units 
to low-income families within 5 years from the date of the PRE's 
acquisition of the units.
    (b) PRE requirements. The PHA must demonstrate in its homeownership 
program that the PRE has the necessary legal capacity and administrative 
capability to carry out its responsibilities under the program. The 
PHA's homeownership program also must contain a written agreement (not 
required to be submitted as part of the homeownership plan) that 
specifies the respective rights and obligations of the PHA and the PRE, 
and which includes:
    (1) Assurances that the PRE will comply with all provisions of the 
HUD-approved homeownership program;
    (2) Assurances that the PRE will be subject to a title restriction 
providing that the property must be resold or otherwise transferred only 
by conveyance of individual dwellings to eligible

[[Page 375]]

families, in accordance with the HUD-approved homeownership program, or 
by reconveyance to the PHA, and that the property will not be encumbered 
by the PRE without the written consent of the PHA;
    (3) Protection against fraud or misuse of funds or other property on 
the part of the PRE, its employees, and agents;
    (4) Assurances that the resale proceeds will be used only for the 
purposes specified by the HUD-approved homeownership program;
    (5) Limitation of the PRE's administrative and overhead costs, and 
of any compensation or profit that may be realized by the PRE, to 
amounts that are reasonable in relation to its responsibilities and 
risks;
    (6) Accountability to the PHA and residents for the recordkeeping, 
reporting, and audit requirements of Sec.  906.33;
    (7) Assurances that the PRE will administer its responsibilities 
under the plan on a nondiscriminatory basis, in accordance with the Fair 
Housing Act, its implementing regulations, and other applicable civil 
rights statutes and authorities, including the authorities cited in 
Sec.  5.105(a) of this title; and
    (8) Adequate legal remedies for the PHA and residents, in the event 
of the PRE's failure to perform in accordance with the agreement.
    (c) Sale to low-income families. The requirement for a PRE to sell 
units under a homeownership program only to low-income families must be 
recorded as a deed restriction at the time of purchase by the PRE.
    (d) Resale within five years. A PRE must agree that, with respect to 
any units it acquires under a homeownership program under this part, it 
will transfer ownership to the PHA if the PRE fails to resell the unit 
to a low-income family within 5 years of the PRE's acquisition of the 
unit.



                    Subpart D_Program Administration



Sec.  906.23  Protections available to non-purchasing public 
housing residents.

    (a) If a public housing resident does not exercise the right of 
first refusal under Sec.  906.13, and the PHA determines to move the 
tenant for the purpose of transferring possession of the unit, the PHA 
must provide the notice stated in this section 90 days before the date 
the resident is displaced, and may not displace the resident, except as 
stated in paragraph (a)(1) of this section, for the full 90-day period. 
The PHA:
    (1) Must notify the resident residing in the unit 90 days prior to 
the displacement date, except in cases of imminent threat to health or 
safety, that:
    (i) The public housing unit will be sold;
    (ii) The transfer of possession of the unit will not occur until the 
resident is relocated; and
    (iii) Each resident displaced by such action will be offered 
comparable housing (as defined in paragraph (b) of this section);
    (2) Must provide for the payment of the actual costs and reasonable 
relocation expenses of the resident to be displaced;
    (3) Must ensure that the resident is offered comparable housing 
under paragraph (a)(1)(iii) of this section;
    (4) Must provide counseling for displaced residents regarding their 
rights to comparable housing, including their rights under the Fair 
Housing Act to choice of a unit on a nondiscriminatory basis, without 
regard to race, color, religion, national origin, disability, age, sex, 
or familial status; and
    (5) Must not transfer possession of the unit until the resident is 
relocated.
    (b) For purposes of this section, the term ``comparable housing'' 
means housing:
    (1) That meets housing quality standards;
    (2) That is located in an area that is generally not less desirable 
than the displaced resident's original development; and
    (3) Which may include:
    (i) Tenant-based assistance (tenant-based assistance must only be 
provided upon the relocation of the resident to the comparable housing);
    (ii) Project-based assistance; or
    (iii) Occupancy in a unit owned, operated, or assisted by the PHA at 
a rental rate paid by the resident that is comparable to the rental rate 
applicable to the unit from which the resident is vacating.

[[Page 376]]



Sec.  906.24  Protections available to non-purchasing residents 
of housing other than public housing.

    Residents of non-public housing that would be displaced by a 
homeownership program are eligible for assistance under the Uniform 
Relocation Act and part 42 of this title. For purposes of this part, a 
family that was over-income (i.e., an individual or family that is not a 
low-income family) at the time of initial occupancy of public housing 
and was admitted in accordance with section 3(a)(5) of the 1937 Act, is 
treated as a non-purchasing resident of non-public housing.



Sec.  906.25  Ownership interests that may be conveyed to a purchaser.

    A homeownership program may provide for sale to the purchasing 
family of any ownership interest that the PHA considers appropriate 
under the homeownership program, including but not limited to:
    (a) Ownership in fee simple;
    (b) A condominium interest;
    (c) An interest in a limited dividend cooperative;
    (d) A shared appreciation interest with a PHA providing financing; 
or
    (e) A leasehold under a bona fide lease-purchase arrangement.



Sec.  906.27  Limitations applicable to net proceeds on the sale of
a property acquired through a homeownership program.

    (a) Where the family has owned a unit under this part, the following 
rules apply:
    (1) In this section, the term gain from appreciation means the 
financial gain on resale attributable solely to the home's appreciation 
in value over time, and not attributable to government-provided 
assistance or any below-market financing provided under Sec.  906.29.
    (2) In this section, the term net proceeds means the financial gain 
on resale received by the seller after satisfying all amounts owing 
under mortgages, paying closing costs, and receiving an amount equal to 
the down payment (made from the seller's own funds) and principal 
payments on the mortgage(s).
    (3) A PHA must have a policy that provides for the recapture of net 
proceeds in an amount that the PHA considers appropriate under the 
guidelines in this section.
    (4) A PHA must have a policy that provides the recapture of the 
following amounts, if a family resells a homeownership unit it purchased 
under this part during the 5-year period beginning upon purchase of the 
dwelling unit:
    (i) All or a portion of the gain from appreciation; and
    (ii) All or a portion of the assistance provided (which includes 
below-market financing, but which does not include Section 8(y) 
assistance used for mortgage payments under this part) under the 
homeownership program to the family to the extent there are net 
proceeds, considering the factors the PHA establishes under paragraphs 
(b)(1)-(7) of this section.
    (b) The PHA's program under this part may provide for consideration 
of any factors the PHA considers appropriate in determining how much of 
the gain from appreciation and assistance to recapture, including but 
not limited to the following:
    (1) The aggregate amount of assistance provided under the 
homeownership program to the family;
    (2) The contribution of equity by the purchasing family;
    (3) The period of time elapsed between purchase by the homebuyer 
under the homeownership program and resale by the homebuyer;
    (4) The reason for resale;
    (5) Any improvements made by the family purchasing under the 
homeownership program;
    (6) Any appreciation in the value of the property; and
    (7) Any other factors that the PHA considers appropriate in making 
the recapture determination under this section.
    (c) After the expiration of the 5-year period in paragraph (a)(4) of 
this section, the PHA must recapture all or a portion of the assistance 
provided under the homeownership program to the family to the extent 
there are net proceeds.
    (d) The PHA must enforce its recapture policy through an appropriate 
form of title restriction.

[[Page 377]]



Sec.  906.29  Below-Market sales and financing.

    A homeownership plan may provide for below-market purchase prices or 
below-market financing to enable below-market purchases, 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 potential purchases). Below-market financing may 
include any lawful type of public or private financing, including but 
not limited to purchase-money mortgages, non-cash second mortgages, 
promissory notes, guarantees of mortgage loans from other lenders, 
shared equity, or lease-purchase arrangements.



Sec.  906.31  Requirements applicable to net proceeds resulting
from sale.

    (a) PHA use of net proceeds. The PHA must use any net proceeds of 
any sales under a homeownership program remaining after payment of all 
costs of the sale for purposes relating to low-income housing and in 
accordance with its PHA plan.
    (b) PRE use of resale net proceeds. The PHA may require the PRE to 
return the net proceeds from the resale of the units to the PHA. If the 
PHA permits the PRE to retain the net proceeds, the PRE must use these 
proceeds for low-income housing purposes.
    (c) Transfer of unsold unit to PHA. In a situation where the PRE 
fails to sell a unit to an eligible family within 5 years, and the 
provision of Sec.  906.19(d) requiring that the unit be transferred to 
the PHA applies:
    (1) If the unit has not been operated by the PRE as a public housing 
unit at any time during the 5-year period, the PHA may resell the unit 
in accordance with this part or any successor homeownership program of 
the department, or apply to have the unit included in its public housing 
program, if it meets all statutory and regulatory requirements of the 
public housing program; or
    (2) If the unit has been operated by the PRE as a public housing 
unit within such a 5-year period, the PHA must return the unit to 
operation in its regular public housing program.
    (d) Transfer of unsold unit operated as public housing to PHA. Where 
the PRE operates the unit as public housing during the 5-year interim 
period under Sec.  960.40, and fails to sell the unit to an eligible 
family within such 5-year period and the provision of Sec.  906.19(d) 
applies, the PHA must return the unit to operation in its regular public 
housing program.



Sec.  906.33  Reporting and recordkeeping requirements.

    The PHA is responsible for the maintenance of records (including 
sale and financial records) for all activities incident to 
implementation of the HUD-approved homeownership program. Where a PRE is 
responsible for the sale of units, the PHA must ensure that the PRE's 
responsibilities include proper recordkeeping and accountability to the 
PHA, sufficient to enable the PHA to monitor compliance with the 
approved homeownership program and to meet its audit responsibilities. 
All books and records must be subject to inspection and audit by HUD and 
the General Accounting Office (GAO). The PHA must report annually to HUD 
on the progress of each program approved under this part. The PHA must 
report as part of the Annual Plan process under Sec.  903.7(k) of this 
title, except for those PHAs under Sec. Sec.  903.11(c)(1) and (2) of 
this title who are not required to include information on their public 
housing homeownership programs in their Annual Plan. Those PHAs must 
report by providing a description of the homeownership program to HUD, 
including the cumulative number of units sold.



Sec.  906.35  Inapplicability of section 18 of the United States 
Housing Act of 1937.

    The provisions of section 18 of the 1937 Act (42 U.S.C. 1437p) do 
not apply to disposition of public housing dwelling units under a 
homeownership program approved by HUD under this part, or to the sale of 
a unit to a PRE to operate as public housing and sell to a low-income 
family within 5 years, under the requirements of Sec.  906.19.

[[Page 378]]



Sec.  906.37  Davis-Bacon and HUD wage rate requirements.

    (a) Wage rates applicable to laborers and mechanics. Wage rate 
requirements in accordance with Sec.  968.110(e) of this title apply to 
the following activities:
    (1) Rehabilitation, repairs, and accessibility modifications 
performed under an agreement or contract with the PHA or by the PHA, 
pursuant to Sec.  906.7. Davis-Bacon or HUD-determined wage rates apply 
as follows:
    (i) Existing public housing units that will be sold under a 
homeownership program: Davis-Bacon rates apply, except that HUD rates 
apply to nonroutine maintenance as defined in Sec.  968.105 of this 
title;
    (ii) Non-public housing units acquired by a PHA using Capital Funds 
that will be sold under a homeownership program: Davis-Bacon rates 
apply; and
    (iii) Non-public housing units owned or acquired by a PHA with the 
intent to use 1937 Act funds to finance the sale of the units, or 
otherwise provide assistance to purchasers of the units: Davis-Bacon 
rates apply;
    (2) New construction of non-public housing units pursuant to a 
contract for acquisition by a PHA for the purpose of sale under a 
homeownership program: Davis-Bacon rates apply;
    (3) Operation, rehabilitation, and repair of units operated as 
public housing units by a PRE: HUD rates apply to nonroutine 
maintenance, as defined in Sec.  968.105 of this title, and routine 
maintenance. Davis-Bacon rates apply to rehabilitation and repair that 
does not qualify as nonroutine maintenance.
    (b) Technical wage rates. All architects, technical engineers, 
draftsmen, and technicians employed in the development of units under a 
homeownership program shall be paid not less than the HUD-determined 
wage rates in accordance with Sec.  968.100(f) of this title.



                Subpart E_Program Submission and Approval



Sec.  906.38  Requirement of HUD approval to implement a 
homeownership program under this part.

    A PHA must obtain HUD approval before implementing a homeownership 
program under this part. A homeownership program under this part must be 
carried out in accordance with the requirements of this part and the PHA 
Plan submitted under part 903 of this title.



Sec.  906.39  Contents of a homeownership program.

    A homeownership program must include the following matters, as 
applicable to the particular factual situation:
    (a) Method of Sale: The PHA should indicate how units will be sold, 
including a description of the exact method of sale, such as, for 
example, fee simple conveyance, lease-purchase, or sale of a cooperative 
share. PHAs may sell units directly to a tenant or eligible family 
directly or via a bona fide lease-purchase arrangement. The PHA must 
indicate whether it, or a PRE will sell units to families directly or 
via such lease-purchase method. If the PHA or PRE will use a lease-
purchase method the proposal should indicate the terms of the lease-
purchase arrangement. The terms of the lease-purchase arrangement shall 
include, but are not limited to the periodic documentation to be 
provided to the family regarding the amount they have accrued toward the 
down payment, and the length of the lease period (with regard to PREs 
the sales must be completed within the statutory 5-year period.);
    (b) Property description. (1) If the program involves only financing 
assistance to the family purchasing the unit, the PHA need not specify 
property addresses, but it must describe the area(s) in which the 
assistance is to be used;
    (2) If the PHA is selling existing public housing, it must describe 
the property, including identification of the property by project 
number, or street address if there is no project number, and the 
specific dwellings to be sold, with bedroom distribution by size and 
type broken down by development;
    (3) If the PHA is acquiring units with 1937 Act funds to sell under 
the program, it must comply with the provisions of Sec.  906.40 
concerning this element of the program;
    (c) Repair or rehabilitation. If applicable, a plan for any repair 
or rehabilitation needed to meet the requirements

[[Page 379]]

of Sec.  906.7, based on the assessment of the physical condition of the 
property that is included in the supporting documentation. The 
restriction in 906.5(c) of this part applies to such repair or 
rehabilitation;
    (d) 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.  
906.15. If the homeownership program allows application for purchase of 
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 program 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, including persons with disabilities;
    (e) Sale and financing. Terms and conditions of sale and financing, 
including any below-market financing under Sec.  906.29;
    (f) Consultation with residents and purchasers. A description of 
resident input obtained during the resident consultation process 
required by the PHA Plan under part 903 of this title. If the PHA is one 
whose Plan does not require information regarding homeownership under 
Sec.  903.11(b)(1) of this title, the PHA must consult with the Resident 
Advisory Board or Boards regarding the homeownership plan, and provide 
the information required in this paragraph;
    (g) Counseling. Counseling, training, and technical assistance to be 
provided to purchasers;
    (h) Sale via PRE. If the program contemplates sale to residents by 
an entity other than the PHA, a description of that entity's 
responsibilities and information demonstrating that the requirements of 
Sec.  906.19 have been met or will be met in a timely fashion;
    (i) Non-purchasing residents. If applicable, a plan for non-
purchasing residents, in accordance with Sec.  906.23;
    (j) Sale proceeds. An estimate of the sale proceeds and an 
explanation of how they will be used, in accordance with Sec.  906.31;
    (k) Records, accounts, and reports. A description of the 
recordkeeping, accounting, and reporting procedures to be used, 
including those required by Sec.  906.33;
    (l) Budget. A budget estimate, showing any rehabilitation or repair 
cost, any financing assistance, and the costs of implementing the 
program, and the sources of the funds that will be used;
    (m) Timetable. An estimated timetable for the major steps required 
to carry out the program;
    (n) Deed restrictions. A deed restriction or covenant running with 
the land that will assure to HUD's satisfaction that the requirements of 
Sec. Sec.  906.27 and 906.15(b) are met.



Sec.  906.40  Supporting documentation.

    The following supporting documentation must be submitted to HUD with 
the proposed homeownership program, as appropriate for the particular 
program:
    (a) Supporting documentation--PREs. In approving homeownership 
programs in which the PHA contemplates selling public housing units to a 
PRE for operation as public housing during the 5 year interim period the 
department will require evidentiary materials including but not limited 
to:
    (1) Organizational documents of the PRE;
    (2) Regulatory and operating agreement between the PHA and PRE 
regarding the provision of operating subsidy and the operation of the 
public housing units in accordance with all applicable public housing 
requirements;
    (3) Management agreement and plan;
    (4) Financing documents, if any;
    (5) A description of the use of operating subsidy during the PRE's 
period of ownership, in the form of an operating pro forma;
    (6) A mixed-finance ACC amendment governing these units;
    (7) A deed restriction or covenant running with the land that will 
assure to HUD's satisfaction that the PRE will operate the units in 
accordance with public housing laws and regulations, including Sec.  
906.19.

[[Page 380]]

    (8) A bond for repairs or proof of insurance to cover any damage to 
the property during the period of PRE ownership and operation;
    (9) Such other materials as may be required by HUD.
    (b) Physical assessment. An assessment of the physical condition of 
the properties, based on the standards specified in Sec.  906.7;
    (c) Feasibility. A statement demonstrating the practical feasibility 
of the program, based on analysis of data on such elements as purchase 
prices, costs of repair or rehabilitation, accessibility costs, if 
applicable, 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.  906.45(a));
    (d) PHA performance in homeownership. A statement of the commitment 
and capability of the PHA (and any other entity with substantial 
responsibility for implementing the homeownership program) to 
successfully carry out the homeownership program. The statement must 
describe the PHA's (and other entity's) past experience in carrying out 
homeownership programs for low-income families, and (if applicable) its 
reasons for considering such programs to have been successful. A PHA 
that has not previously implemented a homeownership program for low-
income families instead must submit a statement describing its 
experience in carrying out public housing modernization and development 
projects under part 905 of this title, respectively;
    (e) Nondiscrimination certification. The PHA's or PRE'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, other authorities cited in 
Sec.  5.105(a) of this title, and the implementing regulations, and will 
assure compliance with those requirements by any other entity that may 
assume substantial responsibilities for implementing the program;
    (f) Legal opinion. An opinion by legal counsel to the PHA, stating 
that counsel has reviewed the program and finds it consistent with all 
applicable requirements of federal, state, and local law, including 
regulations as well as statutes. At a minimum, the attorney must certify 
that the documents to be used will ensure sales only to eligible 
families under Sec.  906.15, compliance with the 5-year PRE sale 
guarantee in Sec.  906.19(d), and compliance with the restriction of use 
of resale proceeds of Sec.  906.27;
    (g) Board resolution. A resolution by the PHA's Board of 
Commissioners, evidencing its approval of the program;
    (h) Section 8(y). In any case where the PHA plans to provide 
families with assistance under the Section 8(y) homeownership option in 
connection with homeownership under this part, a certification that the 
PHA will comply with the requirements of the Section 8(y) statute and 
implementing regulations;
    (i) Other information. Any other information that may reasonably be 
required for HUD review of the program. Except for the PHA-HUD 
implementing agreement under Sec.  906.49 and the deed restriction 
required by Sec.  906.39(n), HUD approval is not required for documents 
to be prepared and used by the PHA in implementing the program (such as 
contracts, applications, deeds, mortgages, promissory notes, and 
cooperative or condominium documents), if their essential terms and 
conditions are described in the program. Consequently, those documents 
need not be submitted as part of the program or the supporting 
documentation.



Sec.  906.41  Additional supporting documentation for acquisition of
non-public housing for homeownership.

    (a) Proposal contents. The PHA must submit an acquisition proposal 
to the HUD field office for review and approval before its homeownership 
plan containing acquisition of non-public housing can be approved. This 
proposal must contain the following:
    (1) Property description. A description of the properties, including 
the number of housing units, unit types, and number of bedrooms, and any 
non-dwelling facilities on the properties to be acquired;
    (2) Certification. If the housing units were constructed under a 
contract or an agreement that they be sold to the

[[Page 381]]

PHA, a certification that the developer/owner complied with all Davis-
Bacon wage rate requirements under Sec.  906.37, including all required 
contractual provisions and compliance measures, and that the PHA 
received all applicable HUD environmental approvals and all applicable 
HUD releases of funds before executing the contract or agreement, in 
accordance with Sec.  906.47(d).
    (3) Site information. A description of the proposed general location 
of the properties to be acquired, or where specific properties have been 
identified, street addresses of the properties;
    (4) Property costs. The detailed budget of costs for acquiring the 
properties, including relocation and closing costs, and an 
identification of the sources of funding;
    (5) Appraisal. An appraisal of the proposed properties by an 
independent, state-certified appraiser (when the sites have been 
identified);
    (6) Property acquisition schedule. A copy of the PHA acquisition 
schedule;
    (7) Environmental information. (i) The environmental information 
required by Sec.  906.47(f), where HUD will perform the environmental 
review under 24 CFR part 50, or a statement identifying the responsible 
entity that has performed or will perform the review under 24 CFR part 
58. This paragraph (a)(7)(i) does not apply to a property where a 
contract or agreement for sale to the PHA has already been executed and 
HUD has already given prior approval of the property following 
environmental review under 24 CFR part 50.
    (ii) Where the PHA's homeownership program is submitted for approval 
to HUD and contemplates acquisition of properties not identified at the 
time of submission or approval, the procedures at Sec.  906.47(e) apply.
    (8) Market analysis. An analysis of the potential market of eligible 
purchasers for the homeownership units.
    (9) Additional HUD-requested information. Any additional information 
that may be needed for HUD to determine whether it can approve the 
proposal.
    (b) Cost limit. The acquisition cost of each property is limited by 
the housing cost cap limit, as determined by HUD.



Sec.  906.43  Where a PHA is to submit a homeownership program for HUD approval.

    A PHA must submit its proposed homeownership program together with 
supporting documentation, in a format prescribed by HUD, to the Special 
Applications Center with a copy to the appropriate HUD field office.



Sec.  906.45  HUD criteria for reviewing a proposed homeownership program.

    HUD will use the following criteria in reviewing a homeownership 
program:
    (a) Feasibility. The program must be practically feasible, 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. Counsel for the PHA shall certify that the 
homeownership program is consistent with applicable law, including the 
requirements of this part and any other applicable federal, state, and 
local statutes and regulations, including existing contracts, and HUD 
shall accept such certification unless HUD has information indicating 
that the certification is incorrect.
    (c) Documentation. The program must be clear and complete enough to 
serve as a working document for implementation, as well as a basis for 
HUD review.
    (d) PHA performance in homeownership. The PHA (and any other entity 
with substantial responsibility for implementing the homeownership 
program) must have demonstrated the commitment and capability to 
successfully implement the homeownership program based upon the criteria 
stated in Sec.  906.41(d).



Sec.  906.47  Environmental requirements.

    (a) General. HUD environmental regulations at 24 CFR part 58 apply 
to this part, unless, under Sec.  58.11 of this title, HUD itself 
performs the environmental review under 24 CFR part 50. The PHA 
conducting a homeownership program under this part must comply with this 
section and part 50 or 58, as applicable.

[[Page 382]]

    (b) Assistance to facilitate the purchase of homes. Where the PHA's 
homeownership program involves assistance provided under the 1937 Act 
solely to assist homebuyers to purchase existing dwelling units or 
dwelling units under construction, an environmental review is not 
required under part 58 or part 50 of this title. However, the 
requirements of Sec.  58.6 or Sec.  50.19(b)(15) of this title are still 
applicable.
    (c) Public housing units in the PHA's inventory. Before the PHA 
rehabilitates or repairs units in its inventory for use for 
homeownership, or expends or commits HUD or local funds for such 
activities, the responsible entity must comply with part 58 and the PHA, 
where required, must submit and receive HUD approval of its request for 
release of funds, or HUD must have completed any part 50 environmental 
review and notified the PHA of its approval of the property. HUD may not 
release funds under this part before the appropriate approval is 
obtained.
    (d) Units to be acquired with federal funds and used for public 
housing homeownership. A PHA may not enter into any contract for 
acquisition of real property to be used in a homeownership program 
unless the required environmental reviews have been performed and 
approvals have been obtained.
    (e) Specific units unidentified. Where the PHA's homeownership 
program contemplates acquisition of properties not identified at the 
time of submission, the PHA must certify that it will comply with this 
section, including paragraph (f) of this section, prior to such 
acquisition or construction. HUD may conditionally approve such a 
homeownership program; however, HUD will not give final approval of any 
site or unit until the required environmental review has been completed.
    (f) Information. The PHA shall supply all relevant information 
necessary for the responsible entity, or HUD, if applicable, to perform 
the environmental review for each property included in the homeownership 
program, and, if necessary, shall carry out mitigating measures or 
select alternate eligible properties. Where HUD performs the 
environmental review, the PHA shall comply with 24 CFR 50.3(h).
    (g) Non-exclusivity. Nothing in this section relieves the 
participating PHA, and its partners and contractors, from complying with 
all requirements of 24 CFR part 50 or part 58, as applicable.



Sec.  906.49  HUD approval; implementing agreement.

    HUD may approve a homeownership program as submitted, conditionally 
approve it under Sec.  906.47(e), or return it to the PHA for revision 
and resubmission. Where such conditional approval is given, the PHA, 
partners, and contractors remain subject to the restrictions in Sec.  
906.47. Upon HUD notification to the PHA that the homeownership program 
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 form prescribed by HUD, to evidence HUD approval and 
authorization for implementation. The program itself, as approved by 
HUD, must 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 is obligated to carry out the approved 
homeownership program and other provisions of the implementing agreement 
without modification, except with written approval by HUD.



PART 907_SUBSTANTIAL DEFAULT BY A PUBLIC HOUSING AGENCY--Table of Contents



Sec.
907.1 Purpose and scope.
907.3 Bases for substantial default.
907.5 Procedures for declaring substantial default.
907.7 Remedies for substantial default.

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

    Source: 76 FR 10162, Feb. 23, 2011, unless otherwise noted.



Sec.  907.1  Purpose and scope.

    This part provides the criteria and procedures for determining and 
declaring substantial default by a public housing agency (PHA) and the 
actions available to HUD to address and remedy substantial default by a 
PHA. Nothing in this part shall limit the discretion of HUD to take any 
action

[[Page 383]]

available under the provisions of section 6(j)(3)(A) of the 1937 Act (42 
U.S.C. 1437d(j)(3)(A)), any applicable annual contributions contract 
(ACC), or any other law or regulation that may authorize HUD to take 
actions against a PHA that is in substantial default.



Sec.  907.3  Bases for substantial default.

    (a) Violations of laws and agreements. A PHA may be declared in 
substantial default when the PHA:
    (1) Violates a federal statute;
    (2) Violates a federal regulation; or
    (3) Violates one or more terms of an ACC, or other covenants or 
conditions to which the PHA is subject.
    (b) Failure to act. In addition to the violations listed in 
paragraph (a) of this section, in the case where a PHA is designated as 
a troubled performer under PHAS, the PHA shall be in substantial default 
if the PHA:
    (1) Fails to execute an MOA;
    (2) Fails to comply with the terms of an MOA; or
    (3) Fails to show substantial improvement, as provided in Sec.  
902.75(d) of this chapter.



Sec.  907.5  Procedures for declaring substantial default.

    (a) Notification of finding of substantial default. If the PHA is 
found in substantial default, the PHA shall be notified of such 
determination in writing. Except in situations as described in paragraph 
(d) of this section, the PHA shall have an opportunity to respond to the 
written determination, and an opportunity to cure the default, if a cure 
of the default is determined appropriate by HUD. The determination of 
substantial default shall be transmitted to the Executive Director of 
the PHA, the Chairperson of the Board of the PHA, and the appointing 
authority(ies) of the PHA's Board of Commissioners, and shall:
    (1) Identify the specific statute, regulation, covenants, 
conditions, or agreements of which the PHA is determined to be in 
violation;
    (2) Identify the specific events, occurrences, or conditions that 
constitute the violation;
    (3) Specify the time period, which shall be a period of 10 but not 
more than 30 days, during which the PHA shall have an opportunity to 
demonstrate that the determination or finding is not substantively 
accurate, if required;
    (4) If determined by HUD to be appropriate, provide for an 
opportunity to cure and specify the time period for the cure; and
    (5) Notify the PHA that, absent a satisfactory response in 
accordance with paragraph (b) of this section, action shall be taken as 
determined by HUD to be appropriate.
    (b) Receipt of notification and response. Upon receipt of the 
notification described in paragraph (a) of this section, the PHA may 
submit a response, in writing and within the specified time period, 
demonstrating:
    (1) The description of events, occurrences, or conditions described 
in the written determination of substantial default is in error, or 
establish that the events, occurrences, or conditions described in the 
written determination of substantial default do not constitute 
noncompliance with the statute, regulation, covenants, conditions, or 
agreements that are cited in the notification under paragraph (a) of 
this section; or
    (2) If any opportunity to cure is provided, that the violations have 
been cured or will be cured in the time period specified by HUD.
    (c) Waiver of notification and the opportunity to respond. A PHA may 
waive, in writing, receipt of written notification from HUD of a finding 
of substantial default and the opportunity to respond to such finding. 
HUD may then immediately proceed with the remedies as provided in Sec.  
907.7.
    (d) Emergency situations. A PHA shall not be afforded the 
opportunity to respond to a written determination or to cure a 
substantial default in any case where:
    (1) HUD determines that conditions exist that pose an imminent 
threat to the life, health, or safety of public housing residents or 
residents of the surrounding neighborhood; or
    (2) The events or conditions precipitating the default are 
determined to be the result of criminal or fraudulent activity.

[[Page 384]]



Sec.  907.7  Remedies for substantial default.

    (a) Except as provided in Sec.  907.7(c), upon determining that 
events have occurred or conditions exist that constitute a substantial 
default, HUD may:
    (1) Take any action provided for in section 6(j)(3) of the Act (42 
U.S.C. 1437d(j)(3));
    (2) Provide technical assistance for existing PHA management staff; 
or
    (3) Provide assistance deemed necessary, in the discretion of HUD, 
to remedy emergency conditions.
    (b) HUD may take any of the actions described in paragraph (a) of 
this section sequentially or simultaneously in any combination.
    (c) In the case of a substantial default by a troubled PHA pursuant 
to Sec.  902.83(b):
    (1) For a PHA with 1,250 or more units, HUD shall petition for the 
appointment of a receiver pursuant to section 6(j)(3)(A)(ii) of the 1937 
Act (42 U.S.C. 1437d(j)(3)(A)(ii)); or
    (2) For a PHA with fewer than 1,250 units, HUD shall either petition 
for the appointment of a receiver pursuant to section 6(j)(3)(A)(ii) of 
the Act (42 U.S.C. 1437d(j)(3)(A)(ii)), or take possession of the PHA 
(including all or part of any project or program of the PHA) pursuant to 
section 6(j)(3)(A)(iv) of the 1937 Act (42 U.S.C. 1437d(j)(3)(A)(iv)), 
and appoint, on a competitive or noncompetitive basis, an individual or 
entity as an administrative receiver to assume the responsibilities of 
HUD for the administration of all or part of the PHA (including all or 
part of any project or program of the PHA).
    (d) To the extent feasible, while a PHA is operating under any of 
the actions that may have been taken by HUD, all services to residents 
will continue uninterrupted.
    (e) HUD may limit remedies under this part to one or more of a PHA's 
specific operational areas (e.g., maintenance, capital improvement, 
occupancy, or financial management), to a single program or group of 
programs, or to a single project or a group of projects. For example, 
HUD may select, or participate in the selection of, an AME to assume 
management responsibility for a specific project, a group of projects in 
a geographical area, or a specific operational area, while permitting 
the PHA to retain responsibility for all programs, operational areas, 
and projects not so designated.



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 Public Housing Agencies 
(PHAs), including Moving-to-Work (MTW) PHAs, that operate Public 
Housing, Indian Housing, or Section 8 Rental Certificate, Housing Choice 
Voucher (HCV), Rental Voucher, and Moderate Rehabilitation programs to 
electronically submit certain data to HUD for those programs. These 
electronically submitted data are required for HUD forms: HUD-50058, 
including the Family Self-Sufficiency (FSS) Addendum. Applicable program 
entities must retain at a minimum, the last three years of the form HUD-
50058, and supporting documentation, during the term of each assisted 
lease, and for a period of at least 3 years from the end of 
participation (EOP) date, to support billings to HUD and to permit an 
effective audit. Electronic retention of form HUD-50058 and HUD-50058-
FSS and supporting documentation fulfills the record retention 
requirement under this section.

[74 FR 68934, Dec. 29, 2009]



Sec.  908.104  Requirements.

    (a) Automated HAs. Housing agencies that currently use automated 
software

[[Page 385]]

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 386]]



PART 943_PUBLIC HOUSING AGENCY CONSORTIA AND JOINT VENTURES--Table of Contents



                            Subpart A_General

Sec.
943.100 What is the purpose of this part?

                           Subpart B_Consortia

943.115 What programs are covered under this subpart?
943.118 What is a consortium?
943.120 What programs of a PHA are included in a consortium's functions?
943.122 How is a consortium organized?
943.124 What elements must a consortium agreement contain?
943.126 What is the relationship between HUD and a consortium?
943.128 How does a consortium carry out planning and reporting 
          functions?
943.130 What are the responsibilities of participating PHAs?

  Subpart C_Subsidiaries, Affiliates, Joint Ventures in Public Housing

943.140 What programs and activities are covered by this subpart?
943.142 In what types of operating organizations may a PHA participate?
943.144 What financial impact do operations of a subsidiary, affiliate, 
          or joint venture have on a PHA?
943.146 What impact does the use of a subsidiary, affiliate, or joint 
          venture have on financial accountability to HUD and the 
          Federal government?
943.148 What procurement standards apply to PHAs selecting partners for 
          a joint venture?
943.150 What procurement standards apply to a PHA's joint venture 
          partner?
943.151 What procurement standards apply to a joint venture itself?

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

    Source: 65 FR 71207, Nov. 29, 2000, unless otherwise noted.



                            Subpart A_General



Sec.  943.100  What is the purpose of this part?

    This part authorizes public housing agencies (PHAs) to form 
consortia, joint ventures, affiliates, subsidiaries, partnerships, and 
other business arrangements under section 13 of the United States 
Housing Act of 1937 (42 U.S.C. 1437k). Under this authority, PHAs 
participating in a consortium enter into a consortium agreement, submit 
joint PHA Plans to HUD, and may combine all or part of their funding and 
program administration. This part does not preclude a PHA from entering 
cooperative arrangements to operate its programs under other authority, 
as long as they are consistent with other program regulations and 
requirements.



                           Subpart B_Consortia



Sec.  943.115  What programs are covered under this subpart?

    (a) Except as provided in paragraph (b) of this section, this 
subpart applies to the following:
    (1) PHA administration of public housing or Section 8 programs under 
an Annual Contributions Contract (ACC) with HUD; and
    (2) PHA administration of grants to the PHA in connection with its 
public housing or Section 8 programs.
    (b) This subpart does not apply to the following:
    (1) PHA administration of Section 8 projects assigned to a PHA for 
contract administration pursuant to an ACC entered under the Request for 
Proposals (RFP) published May 19, 1999 (64 FR 27358);
    (2) Section 8 contract administration of a restructured subsidized 
multifamily project by a Participating Administrative Entity in 
accordance with part 401 of this title; or
    (3) A PHA in its capacity as owner of a Section 8 project.



Sec.  943.118  What is a consortium?

    A consortium consists of two or more PHAs that join together to 
perform planning, reporting, and other administrative or management 
functions for participating PHAs, as specified in a consortium 
agreement. A consortium also submits a joint PHA Plan. The lead agency 
collects the assistance funds from HUD that would be paid to the 
participating PHAs for the elements of their operations that are 
administered by the consortium and allocates them according to the 
consortium agreement. The participating PHAs must adopt the same fiscal 
year so that the applicable periods for submission and review of the 
joint PHA

[[Page 387]]

Plan are the same. Notwithstanding any other regulation, PHAs proposing 
to form consortia may request and HUD may approve changes in PHA fiscal 
years to make this possible.



Sec.  943.120  What programs of a PHA are included in a consortium's functions?

    (a) A PHA may enter a consortium under this subpart for 
administration of any of the following program categories:
    (1) The PHA's public housing program (which may include either the 
operating fund or the capital fund, or both);
    (2) The PHA's Section 8 voucher and certificate program (including 
the project-based certificate and voucher programs and special housing 
types);
    (3) The PHA's Section 8 Moderate Rehabilitation program, including 
Single Room Occupancy program;
    (4) All other project-based Section 8 programs administered by the 
PHA under an ACC with HUD; and
    (5) Any grant programs of the PHA in connection with its Section 8 
or public housing programs, such as the Drug Elimination program or the 
Resident Opportunities and Self-Sufficiency program, to the extent not 
inconsistent with the terms of the governing documents for the grant 
program's funding source.
    (b) If a PHA elects to enter a consortium with respect to a category 
specified in paragraph (a) of this section, the consortium must cover 
the PHA's whole program under the ACC with HUD for that category, 
including all dwelling units and all funding for that program under the 
ACC with HUD.



Sec.  943.122  How is a consortium organized?

    (a) PHAs that elect to form a consortium enter into a consortium 
agreement among the participating PHAs, specifying a lead agency (see 
Sec.  943.124), and submit a joint PHA Plan (Sec.  943.118). HUD enters 
into any necessary payment agreements with the lead agency and the other 
participating PHAs (see Sec.  943.126) to provide that HUD funding to 
the participating PHAs for program categories covered by the consortium 
will be paid to the lead agency.
    (b) The lead agency must not be a PHA that is designated as a 
``troubled PHA'' by HUD, that has been determined by HUD to fail the 
civil rights compliance threshold for new funding, or that has had a 
PHAS designation withheld for civil rights or other reasons. The lead 
agency is designated to receive HUD program payments on behalf of 
participating PHAs, to administer HUD requirements for administration of 
the funds, and to apply the funds in accordance with the consortium 
agreement and HUD regulations and requirements.



Sec.  943.124  What elements must a consortium agreement contain?

    (a) The consortium agreement among the participating PHAs governs 
the formation and operation of the consortium. The consortium agreement 
must be consistent with any payment agreements between the participating 
PHAs and HUD and must specify the following:
    (1) The names of the participating PHAs and the program categories 
each PHA is including under the consortium agreement;
    (2) The name of the lead agency;
    (3) The functions to be performed by the lead agency and the other 
participating PHAs during the term of the consortium;
    (4) The allocation of funds among participating PHAs and 
responsibility for administration of funds paid to the consortium; and
    (5) The period of existence of the consortium and the terms under 
which a PHA may join or withdraw from the consortium before the end of 
that period. To provide for orderly transition, addition or withdrawal 
of a PHA and termination of the consortium must take effect on the 
anniversary of the consortium's fiscal year.
    (b) The agreement must acknowledge that the participating PHAs are 
subject to the joint PHA Plan submitted by the lead agency.
    (c) The agreement must be signed by an authorized representative of 
each participating PHA.

[[Page 388]]



Sec.  943.126  What is the relationship between HUD and 
a consortium?

    HUD has a direct relationship with the consortium through the PHA 
Plan process and through one or more payment agreements, executed in a 
form prescribed by HUD, under which HUD and the participating PHAs agree 
that program funds will be paid to the lead agency on behalf of the 
participating PHAs. Such funds must be used in accordance with the 
consortium agreement, the joint PHA Plan and HUD regulations and 
requirements.



Sec.  943.128  How does a consortium carry out planning 
and reporting functions?

    (a) During the term of the consortium agreement, the consortium must 
submit joint five-year Plans and joint Annual Plans for all 
participating PHAs, in accordance with part 903 of this chapter. HUD may 
prescribe methods of submission for consortia generally and where the 
consortium does not cover all program categories.
    (b) The consortium must maintain records and submit reports to HUD, 
in accordance with HUD regulations and requirements, for all of the 
participating PHAs. All PHAs will be bound by Plans and reports 
submitted to HUD by the consortium for programs covered by the 
consortium.
    (c) Each PHA must keep a copy of the consortium agreement on file 
for inspection. The consortium agreement must also be a supporting 
document to the joint PHA Plan.



Sec.  943.130  What are the responsibilities of participating PHAs?

    (a) Responsibilities, generally. Despite participation in a 
consortium, each participating PHA remains responsible for its own 
obligations under its ACC with HUD. This means that the PHA has an 
obligation to assure that all program funds, including funds paid to the 
lead agency for administration by the consortium, are used in accordance 
with HUD regulations and requirements, and that the PHA program is 
administered in accordance with HUD regulations and requirements. Any 
breach of program requirements with respect to a program covered by the 
consortium agreement is a breach of the ACC with each of the 
participating PHAs, so each PHA is responsible for the performance of 
the consortium.
    (b) Applicability of independent audit and performance assessment 
system requirements to consortia. Where the lead agency will manage 
substantially all program and activities of the consortium, HUD 
interprets financial accountability to rest with the consortium and thus 
HUD will apply independent audit and performance assessment requirements 
on a consortium-wide basis. Where the lead agency will not manage 
substantially all programs and activities of a consortium, the 
consortium shall indicate in its PHA Plan submission which PHAs have 
financial accountability for the programs. The determination of 
financial accountability shall be made in accordance with generally 
accepted accounting principles, as determined in consultation with an 
independent public accountant. In such situations, HUD will apply 
independent audit and performance assessment requirements consistent 
with that determination. With respect to any consortium, however, HUD 
may determine (based on a request from the consortium or other 
circumstances) to apply independent audit and performance requirements 
on a different basis where this would promote sound management.



  Subpart C_Subsidiaries, Affiliates, Joint Ventures in Public Housing



Sec.  943.140  What programs and activities are covered by this subpart?

    (a) This subpart applies to the provision of a PHA's public housing 
administrative and management functions, and to the provision (or 
arranging for the provision) of supportive and social services in 
connection with public housing. This subpart does not apply to 
activities of a PHA that are subject to the requirements of part 941, 
subpart F, of this title.
    (b) For purposes of this subpart, the term ``joint venture partner'' 
means a participant (other than a PHA) in a joint venture, partnership, 
or other business arrangement or contract for services with a PHA.
    (c) This part does not affect a PHA's authority to use joint 
ventures, as may

[[Page 389]]

be permitted under State law, when using non-1937 Act funds.



Sec.  943.142  In what types of operating organizations may 
a PHA participate?

    (a) A PHA may create and operate a wholly owned or controlled 
subsidiary or other affiliate; may enter into joint ventures, 
partnerships, or other business arrangements with individuals, 
organizations, entities, or governmental units. A subsidiary or 
affiliate may be a nonprofit corporation. A subsidiary or affiliate may 
be an organization controlled by the same persons who serve on the 
governing board of the PHA or who are employees of the PHA.
    (b) The purpose of any of these operating organizations would be to 
administer programs of the PHA.



Sec.  943.144  What financial impact do operations of a subsidiary,
affiliate, or joint venture have on a PHA?

    Income generated by subsidiaries, affiliates, or joint ventures 
formed under the authority of this subpart is to be used for low-income 
housing or to benefit the residents assisted by the PHA. This income 
will not cause a decrease in funding provided under the public housing 
program, except as otherwise provided under the Operating Fund and 
Capital Fund formulas.



Sec.  943.146  What impact does the use of a subsidiary, affiliate,
or joint venture have on financial accountability to HUD and the Federal government?

    None; the subsidiary, affiliate, or joint venture is subject to the 
same authority of HUD, HUD's Inspector General, and the Comptroller 
General to audit its conduct.



Sec.  943.148  What procurement standards apply to PHAs selecting
partners for a joint venture?

    (a) The requirements of part 85 of this title are applicable to this 
part, subject to paragraph (b) of this section, in connection with the 
PHA's public housing program.
    (b) A PHA may use competitive proposal procedures for 
qualifications-based procurement (request for qualifications or 
``RFQ''), or may solicit a proposal from only one source (``sole 
source'') to select a joint venture partner to perform an administrative 
or management function of its public housing program or to provide or 
arrange to provide supportive or social services covered under this 
part, under the following circumstances:
    (1) The proposed joint venture partner has under its control and 
will make available to the partnership substantial, unique and tangible 
resources or other benefits that would not otherwise be available to the 
PHA on the open market (e.g., planning expertise, program experience, or 
financial or other resources). In this case, the PHA must maintain 
documentation to substantiate both the cost reasonableness of its 
selection of the proposed partner and the unique qualifications of the 
partner: or
    (2) A resident group or a PHA subsidiary is willing and able to act 
as the PHA's partner in performing administrative and management 
functions or to provide supportive or social services. This entity must 
comply with the requirements of 2 CFR part 200 (if the entity is a 
nonprofit or a State or local government) with respect to its selection 
of the members of the team and the members must be paid on a cost-
reimbursement basis only. The PHA must maintain documentation that 
indicates both the cost reasonableness of its selection of a resident 
group or PHA subsidiary and the ability of that group or subsidiary to 
act as the PHA's partner under this provision.

[65 FR 71207, Nov. 29, 2000, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  943.150  What procurement standards apply to a PHA's joint
venture partner?

    (a) General. A joint venture partner is not a grantee or subgrantee 
and, accordingly, is not required to comply with 2 CFR part 200 in its 
procurement of goods and services under this part. The partner must 
comply with all applicable State and local procurement and conflict of 
interest requirements with respect to its selection of entities to 
assist in PHA program administration.
    (b) Exception. If the joint venture partner is a subsidiary, 
affiliate, or identity of interest party of the PHA,

[[Page 390]]

it is subject to the requirements of 2 CFR part 200 of this title. HUD 
may, on a case-by-case basis, exempt such a joint venture partner from 
the need to comply with requirements under 2 CFR part 200 of this title 
if HUD determines that the joint venture has developed an acceptable 
alternative procurement plan.
    (c) Contracting with identity-of-interest parties. A joint venture 
partner may contract with an identity-of-interest party for goods or 
services, or a party specified in the selected bidder's response to a 
RFP or RFQ (as applicable), without the need for further procurement if:
    (1) The PHA can demonstrate that its original competitive selection 
of the partner clearly anticipated the later provision of such goods or 
services;
    (2) Compensation of all identity-of-interest parties is structured 
to ensure there is no duplication of profit or expenses; and
    (3) The PHA can demonstrate that its selection is reasonable based 
upon prevailing market costs and standards, and that the quality and 
timeliness of the goods or services is comparable to that available in 
the open market. For purposes of this paragraph (c), an ``identity-of-
interest party'' means a party that is wholly owned or controlled by, or 
that is otherwise affiliated with, the partner or the PHA. The PHA may 
use an independent organization experienced in cost valuation to 
determine the cost reasonableness of the proposed contracts.

[65 FR 71207, Nov. 29, 2000, as amended at 80 FR 75942, Dec. 7, 2015]



Sec.  943.151  What procurement standards apply to a joint venture itself?

    (a) When the joint venture as a whole is controlled by the PHA or an 
identity of interest party of the PHA, the joint venture is subject to 
the requirements of 2 CFR part 200 of this title.
    (b) If a joint venture is not controlled by the PHA or an identity 
of interest party of the PHA, then the rules that apply to the other 
partners apply. See Sec.  943.150.

[65 FR 71207, Nov. 29, 2000, as amended at 80 FR 75942, Dec. 7, 2015]



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.

[[Page 391]]

    (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 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

[[Page 392]]

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.
    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

[[Page 393]]

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.
    (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.

[[Page 394]]

    (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.
    (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;

[[Page 395]]

    (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;
    (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-

[[Page 396]]

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:
    (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,

[[Page 397]]

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)



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

[[Page 398]]

    (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:
    (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,

[[Page 399]]

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 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 960_ADMISSION TO, AND OCCUPANCY OF, PUBLIC HOUSING--Table of Contents



  Subpart A_Applicability, Definitions, Equal Opportunity Requirements

Sec.
960.101 Applicability.
960.102 Definitions.
960.103 Equal opportunity requirements and protection for victims of 
          domestic violence, dating violence, sexual assault, or 
          stalking.

                           Subpart B_Admission

960.200 Purpose.
960.201 Eligibility.
960.202 Tenant selection policies.
960.203 Standards for PHA tenant selection criteria.
960.204 Denial of admission for criminal activity or drug abuse by 
          household members.
960.205 Drug use by applicants: Obtaining information from drug 
          treatment facility.
960.206 Waiting list: Local preferences in admission to public housing 
          program.
960.208 Notification to applicants.

[[Page 400]]

                    Subpart C_Rent and Reexamination

960.253 Choice of rent.
960.255 Self-sufficiency incentives--Disallowance of increase in annual 
          income.
960.257 Family income and composition: Annual and interim 
          reexaminations.
960.259 Family information and verification.

Subpart D_Preference for Elderly Families and Disabled Families in Mixed 
                           Population Projects

960.401 Purpose.
960.403 Applicability.
960.407 Selection preference for mixed population developments.

     Subpart E_Occupancy by Over-Income Families or Police Officers

960.503 Occupancy by over-income families.
960.505 Occupancy by police officers to provide security for public 
          housing residents.
960.507 Families exceeding the income limit.
960.509 Lease requirements for non-public housing over-income families.

  Subpart F_When Resident Must Perform Community Service Activities or 
                    Self-Sufficiency Work Activities

960.600 Implementation.
960.601 Definitions.
960.603 General requirements.
960.605 How PHA administers service requirements.
960.607 Assuring resident compliance.
960.609 Prohibition against replacement of PHA employees.

                Subpart G_Pet Ownership in Public Housing

960.701 Purpose.
960.703 Applicability.
960.705 Animals that assist, support, or provide service to persons with 
          disabilities.
960.707 Pet ownership.

    Authority: 42 U.S.C. 1437a, 1437c, 1437d, 1437n, 1437z-3, and 
3535(d).

    Source: 40 FR 33446, Aug. 8, 1975, unless otherwise noted. 
Redesignated at 49 FR 6714, Feb. 23, 1984.



  Subpart A_Applicability, Definitions, Equal Opportunity Requirements

    Source: 65 FR 16724, Mar. 29, 2000, unless otherwise noted.



Sec.  960.101  Applicability.

    This part is applicable to public housing.



Sec.  960.102  Definitions.

    (a) Definitions found elsewhere:
    (1) General definitions. The following terms are defined in 24 CFR 
part 5, subpart A: 1937 Act, drug, drug-related criminal activity, 
elderly person, federally assisted housing, guest, household, HUD, MSA, 
premises, public housing, public housing agency (PHA), Section 8, 
violent criminal activity.
    (2) Definitions under the 1937 Act. The following terms are defined 
in 24 CFR part 5, subpart D: annual contributions contract (ACC), 
applicant, elderly family, family, person with disabilities.
    (3) Definitions and explanations concerning income and rent. The 
following terms are defined or explained in 24 CFR part 5, subpart F 
(Sec.  5.603): Annual income, economic self-sufficiency program, 
extremely low-income family, low-income family, tenant rent, total 
tenant payment, utility allowance.
    (b) Additional definitions. In addition to the definitions in 
paragraph (a), the following definitions and cross-references apply:
    Alternative non-public housing rent. A monthly rent equal to the 
greater of--
    (i) The applicable fair market rent, as defined in 24 CFR part 888, 
subpart A, for the unit; or
    (ii) The amount of the monthly subsidy provided for the unit, which 
will be determined by adding the per unit assistance provided to a 
public housing property as calculated through the applicable formulas 
for the Public Housing Capital Fund and Public Housing Operating Fund.
    (A) For the Public Housing Capital Fund, the amount of Capital Funds 
provided to the unit will be calculated as the per unit Capital Fund 
assistance provided to a PHA for the development in which the family 
resides for the most recent funding year for which Capital Funds have 
been allocated;
    (B) For the Public Housing Operating Fund, the amount of Operating 
Funds provided to the unit will be calculated as the per unit amount 
provided to the public housing project where the unit is located for the 
most recent funding

[[Page 401]]

year for which a final funding obligation determination has been made;
    (C) HUD will publish such funding amounts no later than December 31 
each year.
    Ceiling rent. See Sec.  960.253(d).
    Covered housing provider. For HUD's public housing program, 
``covered housing provider,'' as such term is in used HUD's regulations 
at 24 CFR part 5, subpart L (Protection for Victims of Domestic 
Violence, Dating Violence, Sexual Assault, or Stalking), is the PHA.
    Covered person. For purposes of this part, covered person means a 
tenant, any member of the tenant's household, a guest or another person 
under the tenant's control.
    Designated housing. See part 945 of this chapter.
    Disabled families. See Sec.  5.403 of this title.
    Eligible families. Low income families who are eligible for 
admission to the public housing program.
    Flat rent. See Sec.  960.253(b).
    Income-based rent. See Sec.  960.253(c).
    Mixed population development. A public housing development, or 
portion of a development, that was reserved for elderly and disabled 
families at its inception (and has retained that character). If the 
development was not so reserved at its inception, the PHA has obtained 
HUD approval to give preference in tenant selection for all units in the 
development (or portion of development) to elderly families and disabled 
families. These developments were formerly known as elderly projects.
    Non-public housing over-income family. A family whose income exceeds 
the over-income limit for 24 consecutive months and is paying the 
alternative non-public housing rent. See subpart E of this part.
    Over-income family. A family whose income exceeds the over-income 
limit. See subpart E of this part.
    Over-income limit. The over-income limit is determined by 
multiplying the applicable income limit for a very low-income family, as 
defined in Sec.  5.603(b) of this title, by a factor of 2.4. See Sec.  
960.507(b).
    PHA plan. See part 903 of this chapter.
    Residency preference. A preference for admission of persons who 
reside in a specified geographic area.
    Tenant-based. See Sec.  982.1(b) of this chapter.

[65 FR 16724, Mar. 29, 2000, as amended at 66 FR 28799, May 24, 2001; 81 
FR 12372, Mar. 8, 2016; 81 FR 80815, Nov. 16, 2016; 88 FR 9669, Feb. 14, 
2023]



Sec.  960.103  Equal opportunity requirements and protection for
victims of domestic violence, dating violence, sexual assault,
or stalking.

    (a) Applicable requirements. The PHA must administer its public 
housing program in accordance with all applicable equal opportunity 
requirements imposed by contract or federal law, including the 
authorities cited in Sec.  5.105(a) of this title.
    (b) PHA duty to affirmatively further fair housing. The PHA must 
affirmatively further fair housing in the administration of its public 
housing program.
    (c) Equal opportunity certification. The PHA must submit signed 
equal opportunity certifications to HUD in accordance with Sec.  
903.7(o) of this title, including certification that the PHA will 
affirmatively further fair housing.
    (d) Protection for victims of domestic violence, dating violence, 
sexual assault, or stalking. The PHA must apply the requirements in 24 
CFR part 5, subpart L (Protection for Victims of Domestic Violence, 
Dating Violence, Sexual Assault, or Stalking).

[65 FR 16724, Mar. 29, 2000, as amended at 73 FR 72344, Nov. 28, 2008; 
75 FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016]



                           Subpart B_Admission

    Source: 66 FR 28799, May 24, 2001, unless otherwise noted.



Sec.  960.200  Purpose.

    (a) This subpart states HUD eligibility and selection requirements 
for admission to public housing.
    (b) See also related HUD regulations in this title concerning these 
subjects:
    (1) 1937 Act definitions: part 5, subpart D;
    (2) Restrictions on assistance to noncitizens: part 5, subpart E;

[[Page 402]]

    (3) Family income and family payment: part 5, subpart F;
    (4) Public housing agency plans: part 903;
    (5) Rent and reexamination: part 960, subpart C;
    (6) Mixed population developments: part 960, subpart D;
    (7) Occupancy by over-income families or police officers: part 960, 
subpart E.
    (8) Protection for victims of domestic violence, dating violence, 
sexual assault, or stalking, 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking).

[66 FR 28799, May 24, 2001, as amended at 73 FR 72344, Nov. 28, 2008; 75 
FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016]



Sec.  960.201  Eligibility.

    (a) Who is eligible? (1) Basic eligibility. An applicant must meet 
all eligibility requirements in order to receive housing assistance. At 
a minimum, the applicant must be a family, as defined in Sec.  5.403 of 
this title, must be income-eligible, as described in this section, and 
must meet the net asset and property ownership restriction requirements 
in Sec.  5.618 of this title. Such eligible applicants include single 
persons.
    (2) Low income limit. No family other than a low income family is 
eligible for admission to a PHA's public housing program.
    (b) Income used for eligibility and targeting. Family annual income 
(see Sec.  5.609) is used both for determination of income eligibility 
under paragraph (a) and for PHA income targeting under Sec.  960.202
    (c) Reporting. The PHA must comply with HUD-prescribed reporting 
requirements that will permit HUD to maintain the data, as determined by 
HUD, necessary to monitor compliance with income eligibility and 
targeting requirement.

[66 FR 28799, May 24, 2001, as amended at 88 FR 9670, Feb. 14, 2023]



Sec.  960.202  Tenant selection policies.

    (a) Selection policies, generally. (1) The PHA shall establish and 
adopt written policies for admission of tenants.
    (2) These policies shall provide for and include the following:
    (i) Targeting admissions to extremely low income families as 
provided in paragraph (b) of this section.
    (ii) Deconcentration of poverty and income-mixing in accordance with 
the PHA Plan regulations (see 24 CFR part 903).
    (iii) Precluding admission of applicants whose habits and practices 
reasonably may be expected to have a detrimental effect on the residents 
or the project environment;
    (iv) Objective and reasonable policies for selection by the PHA 
among otherwise eligible applicants, including requirements for 
applications and waiting lists (see 24 CFR 1.4), and 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
    (v) Policies of participant transfer between units, developments, 
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) Targeting admissions to extremely low income families--(1) 
Targeting requirement. (i) Not less than 40 percent of the families 
admitted to a PHA's public housing program during the PHA fiscal year 
from the PHA waiting list shall be extremely low income families. This 
is called the ``basic targeting requirement.''
    (ii) To the extent provided in paragraph (b)(2) of this section, 
admission of extremely low income families to the PHA's Section 8 
voucher program during the same PHA fiscal year is credited against the 
basic targeting requirement.
    (iii) A PHA must comply with both the targeting requirement found in 
this part and the deconcentration requirements found in part 903 of this 
chapter.
    (2) Credit for admissions to PHA voucher program. (i) If admissions 
of extremely low income families to the PHA's voucher program during a 
PHA fiscal year exceeds the 75 percent minimum targeting requirement for 
the PHA's voucher program (see 24 CFR

[[Page 403]]

982.201(b)(2)), such excess shall be credited (subject to the 
limitations in paragraph (b)(2)(ii) of this section) against the PHA's 
basic targeting requirement for the same fiscal year.
    (ii) The fiscal year credit for voucher program admissions that 
exceed the minimum voucher program targeting requirement shall not 
exceed the lower of:
    (A) Ten percent of public housing waiting list admissions during the 
PHA fiscal year;
    (B) Ten percent of waiting list admission to the PHA's Section 8 
tenant-based assistance program during the PHA fiscal year; or
    (C) The number of qualifying low income families who commence 
occupancy during the fiscal year of PHA public housing units located in 
census tracts with a poverty rate of 30 percent or more. For this 
purpose, qualifying low income family means a low income family other 
than an extremely low income family.
    (c) Adoption and availability of tenant selection policies. These 
selection policies shall:
    (1) Be duly adopted and implemented;
    (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; and
    (3) Be consistent with the fair housing and equal opportunity 
provisions of Sec.  5.105 of this title; and
    (4) Be submitted to the HUD field office upon request from that 
office.



Sec.  960.203  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 local preferences, as 
provided in Sec.  960.206.
    (b) Under the Public Housing Assessment System (PHAS), PHAs that 
have adopted policies, implemented procedures and can document that they 
successfully screen out and deny admission to certain applicants with 
unfavorable criminal histories receive points. (See 24 CFR 
902.43(a)(5).) This policy takes into account the importance of 
screening to public housing communities and program integrity, and the 
demand for assisted housing by families who will adhere to lease 
responsibilities.
    (c) In selection of families for admission to its public housing 
program, or to occupy a public housing development or unit, the PHA is 
responsible for screening family behavior and suitability for tenancy. 
The PHA may consider all relevant information, which may include, but is 
not limited to:
    (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. (See 
Sec.  960.204.) With respect to criminal activity described in Sec.  
960.204:
    (i) The PHA may require an applicant to exclude a household member 
in order to be admitted to the housing program where that household 
member has participated in or been culpable for actions described in 
Sec.  960.204 that warrants denial.
    (ii) The PHA may, where a statute requires that the PHA prohibit 
admission for a prescribed period of time after some disqualifying 
behavior or event, choose to continue that prohibition for a longer 
period of time.
    (4) PHA tenant selection criteria are subject to 24 CFR part 5, 
subpart L (Protection for Victims of Domestic Violence, Dating Violence, 
Sexual Assault, or Stalking). In cases of requests for emergency 
transfers under VAWA, with the written consent of the victim of domestic 
violence, dating violence, sexual assault, or stalking, the receiving 
PHA may accept and use the prior covered housing provider's 
determination of eligibility and tenant screening

[[Page 404]]

and all related verification information, including form HUD 50058 
(Family Report).
    (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 (including the seriousness 
of the offense).
    (1) In a manner consistent with the PHA's policies, procedures and 
practices referenced in paragraph (b) of this section, consideration may 
be given to factors which might indicate a reasonable probability of 
favorable future conduct. For example:
    (i) Evidence of rehabilitation; and
    (ii) 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;
    (2) Consideration of rehabilitation. (i) In determining whether to 
deny admission for illegal drug use or a pattern of illegal drug use by 
a household member who is no longer engaging in such use, or for abuse 
or a pattern of abuse of alcohol by a household member who is no longer 
engaging in such abuse, the PHA may consider whether such household 
member is participating in or has successfully completed a supervised 
drug or alcohol rehabilitation program, or has otherwise been 
rehabilitated successfully (42 U.S.C. 13661). For this purpose, the PHA 
may require the applicant to submit evidence of the household member's 
current participation in, or successful completion of, a supervised drug 
or alcohol rehabilitation program or evidence of otherwise having been 
rehabilitated successfully.
    (ii) If rehabilitation is not an element of the eligibility 
determination (see Sec.  960.204(a)(1)), the PHA may choose not to 
consider whether the person has been rehabilitated.

[66 FR 28799, May 24, 2001, as amended at 73 FR 72344, Nov. 28, 2008; 75 
FR 66262, Oct. 27, 2010; 81 FR 80815, Nov. 16, 2016]



Sec.  960.204  Denial of admission for criminal activity or drug 
abuse by household members.

    (a) Required denial of admission--(1) Persons evicted for drug-
related criminal activity. The PHA standards must prohibit admission of 
an applicant to the PHA's public housing program for three years from 
the date of the eviction if any household member has been evicted from 
federally assisted housing for drug-related criminal activity. However, 
the PHA may admit the household if the PHA determines:
    (i) The evicted household member who engaged in drug-related 
criminal activity has successfully completed a supervised drug 
rehabilitation program approved by the PHA; or
    (ii) The circumstances leading to the eviction no longer exist (for 
example, the criminal household member has died or is imprisoned).
    (2) Persons engaging in illegal use of a drug. The PHA must 
establish standards that prohibit admission of a household to the PHA's 
public housing program if:
    (i) The PHA determines that any household member is currently 
engaging in illegal use of a drug (For purposes of this section, a 
household member is ``currently engaged in'' the criminal activity if 
the person has engaged in the behavior recently enough to justify a 
reasonable belief that the behavior is current); or
    (ii) The PHA determines that it has reasonable cause to believe that 
a household member's illegal use or pattern of illegal use of a drug may 
threaten the health, safety, or right to peaceful enjoyment of the 
premises by other residents.
    (3) Persons convicted of methamphetamine production. The PHA must 
establish standards that permanently prohibit admission to the PHA's 
public housing program if any household member has ever been convicted 
of drug-related criminal activity for manufacture or production of 
methamphetamine on the premises of federally assisted housing.
    (4) Persons subject to sex offender registration requirement. The 
PHA must establish standards that prohibit admission to the PHA's public 
housing program if any member of the household is subject to a lifetime 
registration requirement under a State sex offender registration 
program. In the screening of applicants, the PHA must perform necessary 
criminal history background checks in the State where the housing

[[Page 405]]

is located and in other States where household members are known to have 
resided. (See part 5, subpart J of this title for provisions concerning 
access to sex offender registration records.)
    (b) Persons that abuse or show a pattern of abuse of alcohol. The 
PHA must establish standards that prohibit admission to the PHA's public 
housing program if the PHA determines that it has reasonable cause to 
believe that a household member's abuse or pattern of abuse of alcohol 
may threaten the health, safety, or right to peaceful enjoyment of the 
premises by other residents.
    (c) Use of criminal records. Before a PHA denies admission to the 
PHAs public housing program on the basis of a criminal record, the PHA 
must notify the household of the proposed action to be based on the 
information and must provide the subject of the record and the applicant 
with a copy of the criminal record and an opportunity to dispute the 
accuracy and relevance of that record. (See part 5, subpart J of this 
title for provisions concerning access to criminal records.)
    (d) Cost of obtaining criminal record. The PHA may not pass along to 
the applicant the costs of a criminal records check.



Sec.  960.205  Drug use by applicants: Obtaining information from 
drug treatment facility.

    (a) Purpose. This section addresses a PHA's authority to request and 
obtain information from drug abuse treatment facilities concerning 
applicants. This section does not apply to information requested or 
obtained from drug abuse treatment facilities other than under the 
authority of section 6(t).
    (b) Additional terms used in this section are as follows:
    (1) Currently engaging in illegal use of a drug. Illegal use of a 
drug occurred recently enough to justify a reasonable belief that there 
is continuing illegal drug use by a household member.
    (2) Drug abuse treatment facility. An entity:
    (i) That holds itself out as providing, and provides, diagnosis, 
treatment, or referral for treatment with respect to the illegal drug 
use; and
    (ii) That is either an identified unit within a general care 
facility; or an entity other than a general medical care facility.
    (c) Authorization by household member for PHA to receive information 
from a drug abuse treatment facility. (1) The PHA may require each 
applicant to submit for all household members who are at least 18 years 
of age, and for each family head or spouse regardless of age, one or 
more consent forms signed by such household member that:
    (i) Requests any drug abuse treatment facility to inform the PHA 
only whether the drug abuse treatment facility has reasonable cause to 
believe that the household member is currently engaging in illegal drug 
use;
    (ii) Complies with the form of written consent required by 42 CFR 
2.31; and
    (iii) Authorizes the PHA to receive such information from the drug 
abuse treatment facility, and to utilize such information in determining 
whether to prohibit admission of the household member to the PHA's 
public housing program in accordance with Sec.  960.203. (See the Public 
Health Service Act, 42 U.S.C. 290dd-2, and implementing regulations at 
42 CFR part 2, with respect to responsibilities of the drug abuse 
treatment facility.)
    (2) The consent form submitted for a proposed household member must 
expire automatically after the PHA has made a final decision to either 
approve or deny the admission of such person.
    (d) PHA request for information from drug use treatment facility. 
(1) The PHA may request that a drug abuse treatment facility disclose 
whether the drug abuse treatment facility has reasonable cause to 
believe that the proposed household member is currently engaging in the 
illegal use of a drug (as defined in Sec.  5.100 of this title).
    (2) The PHA's request to the drug abuse treatment facility must 
include a copy of the consent form signed by the proposed household 
member.
    (3) A drug abuse treatment facility is not liable for damages based 
on any information required to be disclosed under this section if such 
disclosure is consistent with section 543 of the Public Health Service 
Act (42 U.S.C. 290dd-2).

[[Page 406]]

    (4) The PHA is not obligated to request information from a drug 
treatment facility under this section, and is not liable for damages for 
failing to request or receive such information.
    (5) A drug abuse treatment facility may charge the PHA a reasonable 
fee for information provided under this section. The PHA may not pass 
along to the applicant or tenant the costs of obtaining this 
information.
    (e) Prohibition of discriminatory treatment of applicants. (1) A PHA 
may request information from a drug abuse treatment facility under 
paragraph (d) of this section only if the PHA has adopted and has 
consistently implemented either of the following policies, obtaining a 
signed consent form from the proposed household members:
    (i) Policy A--Request for all families. Under Policy A, the PHA must 
submit a request for information to a drug abuse treatment facility in 
accordance with paragraph (d) of this section before admitting any 
family to the PHA's public housing program. For each such family, the 
request must be submitted for each proposed household member described 
in paragraph (c)(1) of this section.
    (ii) Policy B--Request for certain household members. Under Policy 
B, the PHA must submit a request to a drug abuse treatment facility only 
with respect to each proposed household member:
    (A) Whose criminal record indicates prior arrest or conviction for 
any criminal activity that may be a basis for denial of admission under 
Sec.  960.205; or
    (B) Whose prior tenancy records indicate that the proposed household 
member:
    (1) Engaged in the destruction of property;
    (2) Engaged in violent activity against another person; or
    (3) Interfered with the right of peaceful enjoyment of the premises 
of other residents.
    (4) The policy adopted by the PHA must be included in the PHA 
administrative plan and the PHA plan.
    (f) Records management and confidentiality. Each PHA that receives 
information from a drug abuse treatment facility under this section must 
establish and implement a system of records management that ensures that 
any information which the PHA receives from the drug abuse treatment 
facility about a person:
    (1) Is maintained confidentially in accordance with section 543 of 
the Public Health Service Act (12 U.S.C. 290dd-2);
    (2) Is not misused or improperly disseminated; and
    (3) Is destroyed, as applicable:
    (i) Not later than 5 business days after the PHA makes a final 
decision to admit the person as a household member under the PHA's 
public housing program; or
    (ii) If the PHA denies the admission of such person as a household 
member, in a timely manner after the date on which the statute of 
limitations for the commencement of a civil action based upon that 
denial of admissions has expired without the filing of a civil action or 
until final disposition of any such litigation.



Sec.  960.206  Waiting list: Local preferences in admission to public 
housing program.

    (a) Establishment of PHA local preferences. (1) The PHA may adopt a 
system of local preferences for selection of families admitted to the 
PHA's public housing program. The PHA system of selection preferences 
must be based on local housing needs and priorities as determined by the 
PHA. In determining such needs and priorities, the PHA shall use 
generally accepted data sources. Such sources include public comment on 
the PHA plan (as received pursuant to Sec.  903.17 of this chapter), and 
on the consolidated plan for the relevant jurisdiction (as received 
pursuant to part 91 of this title).
    (2) The PHA may limit the number of applicants that qualify for any 
local preference.
    (3) PHA adoption and implementation of local preferences is subject 
to HUD requirements concerning income-targeting (Sec.  960.202(b)), 
deconcentration and income-mixing (Sec.  903.7), and selection 
preferences for developments designated exclusively for elderly or 
disabled families or for mixed population developments (Sec.  960.407).

[[Page 407]]

    (4) The PHA must inform all applicants about available preferences 
and must give applicants an opportunity to show that they qualify for 
available preferences.
    (b) Particular local preferences--(1) Residency requirements or 
preferences. (i) Residency requirements are prohibited. Although a PHA 
is not prohibited from adopting a residency preference, the PHA may only 
adopt or implement residency preferences in accordance with non-
discrimination and equal opportunity requirements listed at Sec.  
5.105(a) of this title.
    (ii) A residency preference is a preference for admission of persons 
who reside in a specified geographic area (``residency preference 
area''). A county or municipality may be used as a residency preference 
area. An area smaller than a county or municipality may not be used as a 
residency preference area.
    (iii) Any PHA residency preferences must be included in the 
statement of PHA policies that govern eligibility, selection and 
admission to the program, which is included in the PHA annual plan (or 
supporting documents) pursuant to part 903 of this chapter. Such 
policies must specify that use of a residency preference will not have 
the purpose or effect of delaying or otherwise denying admission to the 
program based on the race, color, ethnic origin, gender, religion, 
disability, or age of any member of an applicant family.
    (iv) A residency preference must not be based on how long an 
applicant has resided or worked in a residency preference area.
    (v) Applicants who are working or who have been notified that they 
are hired to work in a residency preference area must be treated as 
residents of the residency preference area. The PHA may treat graduates 
of, or active participants in, education and training programs in a 
residency preference area as residents of the residency preference area 
if the education or training program is designed to prepare individuals 
for the job market.
    (2) Preference for working families. The PHA may adopt a preference 
for admission of working families (families where the head, spouse, or 
sole member, is employed). However, an applicant must be given the 
benefit of the working family preference if the head and spouse, or sole 
member is age 62 or older, or is a person with disabilities.
    (3) Preference for person with disabilities. The PHA may adopt a 
preference for admission of families that include a person with 
disabilities. However, the PHA may not adopt a preference for persons 
with a specific disability.
    (4) Preference for victims of domestic violence, dating violence, 
sexual assault, or stalking. The PHA should consider whether to adopt a 
local preference for admission of families that include victims of 
domestic violence, dating violence, sexual assault, or stalking.
    (5) Preference for single persons who are elderly, displaced, 
homeless or a person with disabilities. The PHA may adopt a preference 
for admission of single persons who are age 62 or older, displaced, 
homeless, or persons with disabilities over other single persons.
    (6) Preference for non-public housing over-income families. The PHA 
may adopt a preference for admission of non-public housing over-income 
families paying the alternative non-public housing rent and are on a 
NPHOI lease who become an income-eligible low-income family as defined 
in Sec.  5.603(b) of this title and are eligible for admission to the 
public housing program.
    (c) Selection for particular unit. In selecting a family to occupy a 
particular unit, the PHA may match characteristics of the family with 
the type of unit available, for example, number of bedrooms. In 
selection of families to occupy units with special accessibility 
features for persons with disabilities, the PHA must first offer such 
units to families which include persons with disabilities who require 
such accessibility features (see Sec. Sec.  8.27 and 100.202 of this 
title).
    (d) Housing assistance limitation for single persons. A single 
person who is not an elderly or displaced person, or a person with 
disabilities, or the remaining member of a resident family may not be 
provided a housing unit with two or more bedrooms.
    (e) Selection method. (1) The PHA must use the following to select 
among applicants on the waiting list with the same priority for 
admission:

[[Page 408]]

    (i) Date and time of application; or
    (ii) A drawing or other random choice technique.
    (2) The method for selecting applicants 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 PHA plan.

[66 FR 28799, May 24, 2001, as amended at 81 FR 80815, Nov. 16, 2016; 88 
FR 9670, Feb. 14, 2023]



Sec.  960.208  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.



                    Subpart C_Rent and Reexamination

    Source: 65 FR 16726, Mar. 29, 2000, unless otherwise noted.



Sec.  960.253  Choice of rent.

    (a) Rent options--(1) Annual choice by family. Once a year, the PHA 
must give each family the opportunity to choose between the two methods 
for determining the amount of tenant rent payable monthly by the family. 
The family may choose to pay as tenant rent either a flat rent as 
determined in accordance with paragraph (b) of this section, or an 
income-based rent as determined in accordance with paragraph (c) of this 
section. Except for financial hardship cases as provided in paragraph 
(d) of this section, the family may not be offered this choice more than 
once a year.
    (2) Relation to minimum rent. Regardless of whether the family 
chooses to pay a flat rent or income-based rent, the family must pay at 
least the minimum rent as determined in accordance with Sec.  5.630 of 
this title.
    (3) Relation to non-public housing over-income families. Non-public 
housing over-income families must pay the alternative non-public housing 
rent, as applicable, as determined in accordance with Sec.  960.102.
    (b) Flat rent. The flat rent is determined annually, based on the 
market rental value of the unit as determined by this paragraph (b).
    (1) The PHA must establish a flat rent for each public housing unit 
that is no less than 80 percent of the applicable Fair Market Rent (FMR) 
as determined under 24 CFR part 888, subpart A; or
    (2) HUD may permit a flat rent of no less than 80 percent of an 
applicable small area FMR (SAFMR) or unadjusted rent, if applicable, as 
determined by HUD, or any successor determination, that more accurately 
reflects local market conditions and is based on an applicable market 
area that is geographically smaller than the applicable market area used 
in paragraph (b)(1) of this section. If HUD has not determined an 
applicable SAFMR or unadjusted rent, the PHA must rely on the applicable 
FMR under paragraph (b)(1) or may apply for an exception flat rent under 
paragraph (b)(3).
    (3) The PHA may request, and HUD may approve, on a case-by-case 
basis, a flat rent that is lower than the amounts in paragraphs (b)(1) 
and (2) of this section, subject to the following requirements:
    (i) The PHA must submit a market analysis of the applicable market.
    (ii) The PHA must demonstrate, based on the market analysis, that 
the proposed flat rent is a reasonable rent in comparison to rent for 
other comparable unassisted units, based on the location, quality, size, 
unit type, and age of the public housing unit and any amenities, housing 
services, maintenance, and utilities to be provided by the PHA in 
accordance with the lease.
    (iii) All requests for exception flat rents under this paragraph 
(b)(3) must be submitted to HUD.
    (4) For units where utilities are tenant-paid, the PHA must adjust 
the flat

[[Page 409]]

rent downward by the amount of a utility allowance for which the family 
might otherwise be eligible under 24 CFR part 965, subpart E.
    (5) The PHA must revise, if necessary, the flat rent amount for a 
unit no later than 90 days after HUD issues new FMRs.
    (6) If a new flat rent would cause a family's rent to increase by 
more than 35 percent, the family's rent increase must be phased in at 35 
percent annually until such time that the family chooses to pay the 
income-based rent or the family is paying the flat rent established 
pursuant to this paragraph.
    (c) Income-based rent. (1) An income-based rent is a tenant rent 
that is based on the family's income and the PHA's policies for 
determination of such rents.
    (2) The PHA rent policies may specify that the PHA will use 
percentage of family income or some other reasonable system to determine 
income-based rents. The PHA rent policies may provide for depositing a 
portion of tenant rent in an escrow or savings account, for imposing a 
ceiling on tenant rents, for adoption of permissive income deductions 
(see Sec.  5.611(b) of this title), or for another reasonable system to 
determining the amount of income-based tenant rent.
    (3) The income-based tenant rent must not exceed the total tenant 
payment (Sec.  5.628 of this title) for the family minus any applicable 
utility allowance for tenant-paid utilities. If the utility allowance 
exceeds the total tenant payment, the PHA shall pay such excess amount 
(the utility reimbursement) either to the family or directly to the 
utility supplier to pay the utility bill on behalf of the family.
    (4) The PHA may elect to establish policies regarding the frequency 
of utility reimbursement payments for payments made to the family.
    (i) The PHA will have the option of making utility reimbursement 
payments not less than once per calendar-year quarter, for 
reimbursements totaling $45 or less per quarter. In the event a family 
leaves the program in advance of its next quarterly reimbursement, the 
PHA must reimburse the family for a prorated share of the applicable 
reimbursement. PHAs exercising this option must have a hardship policy 
in place for tenants.
    (ii) If the PHA elects to pay the utility supplier, the PHA must 
notify the family of the amount of utility reimbursement paid to the 
utility supplier.
    (d) Ceiling rent. A PHA using ceiling rents authorized and 
established before October 1, 1999, may continue to use ceiling rents, 
provided such ceiling rents are set at the level required for flat rents 
under this section. PHAs must follow the requirements for calculating 
and adjusting flat rents in paragraph (b) of this section when 
calculating and adjusting ceiling rents.
    (e) Information for families. For the family to make an informed 
choice about its rent options, the PHA must provide sufficient 
information for an informed choice. Such information must include at 
least the following written information:
    (1) The PHA's policies on switching type of rent in circumstances of 
financial hardship, and
    (2) The dollar amounts of tenant rent for the family under each 
option, following the procedures in paragraph (f) of this section.
    (f) Choice between flat and income-based rents. Families must be 
offered the choice between a flat rental amount and a previously 
calculated income-based rent according to the following:
    (1) For a family that chooses the flat rent option, the PHA must 
conduct a reexamination of family income and composition at least once 
every three years, except for families a PHA determines exceed the over-
income limit described in Sec.  960.507(b). Once a PHA determines that a 
family has an income exceeding the over-income limit, the PHA must 
follow the income examination and notification requirements under Sec.  
960.507(c).
    (2) At initial occupancy, or in any year in which a participating 
family is paying the income-based rent, the PHA must:
    (i) Conduct a full examination of family income and composition, 
following the provisions in Sec.  960.257;
    (ii) Inform the family of the flat rental amount and the income-
based

[[Page 410]]

rental amount determined by the examination of family income and 
composition;
    (iii) Inform the family of the PHA's policies on switching rent 
types in circumstances of financial hardship; and
    (iv) Apply the family's rent decision at the next lease renewal.
    (3) In any year in which a family chooses the flat rent option but 
the PHA chooses not to conduct a full examination of family income and 
composition for the annual rent option under the authority of paragraph 
(f)(1) of this section, the PHA must:
    (i) Use income information from the examination of family income and 
composition from the first annual rent option;
    (ii) Inform the family of the updated flat rental amount and the 
rental amount determined by the most recent examination of family income 
and composition;
    (iii) Inform the family of the PHA's policies on switching rent 
types in circumstances of financial hardship; and
    (iv) Apply the family's rent decision at the next lease renewal.
    (g) Switch from flat rent to income-based rent because of hardship. 
(1) A family that is paying a flat rent may at any time request a switch 
to payment of income-based rent (before the next annual option to select 
the type of rent) if the family is unable to pay flat rent because of 
financial hardship. The PHA must adopt written policies for determining 
when payment of flat rent is a financial hardship for the family.
    (2) If the PHA determines that the family is unable to pay the flat 
rent because of financial hardship, the PHA must immediately allow the 
requested switch to income-based rent. The PHA shall make the 
determination within a reasonable time after the family request.
    (3) The PHA policies for determining when payment of flat rent is a 
financial hardship must provide that financial hardship include the 
following situations:
    (i) The family has experienced a decrease in income because of 
changed circumstances, including loss or reduction of employment, death 
in the family, or reduction in or loss of earnings or other assistance;
    (ii) The family has experienced an increase in expenses, because of 
changed circumstances, for medical costs, child care, transportation, 
education, or similar items; and
    (iii) Such other situations determined by the PHA to be appropriate.

[65 FR 16726, Mar. 29, 2000, as amended at 80 FR 53712, Sept. 8, 2015; 
81 FR 12372, Mar. 8, 2016; 88 FR 9670, Feb. 14, 2023]



Sec.  960.255  Self-sufficiency incentives--Disallowance of
increase in annual income.

    (a) Definitions. The following definitions apply for purposes of 
this section.
    Baseline income. The annual income immediately prior to 
implementation of the disallowance described in paragraph (c)(1) of this 
section of a person who is a member of a qualified family.
    Disallowance. Exclusion from annual income.
    Previously unemployed includes a person who has earned, in the 
twelve months previous to employment, no more than would be received for 
10 hours of work per week for 50 weeks at the established minimum wage.
    Qualified family. A family residing in public housing:
    (i) Whose annual income increases as a result of employment of a 
family member who was unemployed for one or more years previous to 
employment;
    (ii) Whose annual income increases as a result of increased earnings 
by a family member during participation in any economic self-sufficiency 
or other job training program; or
    (iii) Whose annual income increases, as a result of new employment 
or increased earnings of a family member, during or within six months 
after receiving assistance, benefits or services under any state program 
for temporary assistance for needy families funded under Part A of Title 
IV of the Social Security Act, as determined by the PHA in consultation 
with the local agencies administering temporary assistance for needy 
families (TANF) and Welfare-to-Work (WTW) programs. The TANF program is 
not limited to monthly income maintenance, but also includes such 
benefits and services as one-time payments, wage subsidies and 
transportation assistance--provided

[[Page 411]]

that the total amount over a six-month period is at least $500.
    (b) Disallowance of earned income--(1) Initial 12-month exclusion. 
During the 12-month period beginning on the date on which a member of a 
qualified family is first employed or the family first experiences an 
increase in annual income attributable to employment, the PHA must 
exclude from the annual income (as defined in Sec.  5.609 of this title) 
of a qualified family any increase in the income of the family member as 
a result of employment over the baseline income of that family member.
    (2) Phase-in of rent increase. Upon the expiration of the 12-month 
period defined in paragraph (b)(1) of this section and for the 
subsequent 12-month period, the PHA must exclude from the annual income 
of a qualified family at least 50 percent of any increase in income of 
such family member as a result of employment over the family member's 
baseline income.
    (3) Maximum 2-year disallowance. The disallowance of increased 
income of an individual family member as provided in paragraph (b)(1) or 
(b)(2) of this section is limited to a lifetime 24-month period. It 
applies for a maximum of 12 months for disallowance under paragraph 
(b)(1) of this section and a maximum of 12 months for disallowance under 
paragraph (b)(2) of this section, during the 24-month period starting 
from the initial exclusion under paragraph (b)(1) of this section.
    (4) Effect of changes on currently participating families. Families 
eligible for and participating in the disallowance of earned income 
under this section prior to May 9, 2016 will continue to be governed by 
this section in effect as it existed immediately prior to that date.
    (c) Inapplicability to admission. The disallowance of increases in 
income as a result of employment under this section does not apply for 
purposes of admission to the program (including the determination of 
income eligibility and income targeting).
    (d) Individual Savings Accounts. As an alternative to the 
disallowance of increases in income as a result of employment described 
in paragraph (b) of this section, a PHA may choose to provide for 
individual savings accounts for public housing residents who pay an 
income-based rent, in accordance with a written policy, which must 
include the following provisions:
    (1) The PHA must advise the family that the savings account option 
is available;
    (2) At the option of the family, the PHA must deposit in the savings 
account the total amount that would have been included in tenant rent 
payable to the PHA as a result of increased income that is disallowed in 
accordance with paragraph (b) of this section;
    (3) Amounts deposited in a savings account may be withdrawn only for 
the purpose of:
    (i) Purchasing a home;
    (ii) Paying education costs of family members;
    (iii) Moving out of public or assisted housing; or
    (iv) Paying any other expense authorized by the PHA for the purpose 
of promoting the economic self-sufficiency of residents of public 
housing;
    (4) The PHA must maintain the account in an interest bearing 
investment and must credit the family with the net interest income, and 
the PHA may not charge a fee for maintaining the account;
    (5) At least annually the PHA must provide the family with a report 
on the status of the account; and
    (6) If the family moves out of public housing, the PHA shall pay the 
tenant any balance in the account, minus any amounts owed to the PHA.
    (e) Limitation. This section applies to a family that is:
    (1) Receiving the disallowance of earned income under this section 
on December 31, 2023 or
    (2) Eligible to receive the Jobs Plus program rent incentive 
pursuant to the Jobs Plus FY2023 notice of funding opportunity (NOFO) or 
earlier appropriations and distributed through prior Jobs Plus NOFOs.
    (f) Sunset. This section will lapse on January 1, 2030.

[65 FR 16726, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016; 88 
FR 9670, Feb. 14, 2023]

[[Page 412]]



Sec.  960.257  Family income and composition: Annual and interim
reexaminations.

    (a) When PHA is required to conduct reexamination. (1) For families 
who pay an income-based rent, the PHA must conduct a reexamination of 
family income and composition at least annually and must make 
appropriate adjustments in the rent after consultation with the family 
and upon verification of the information.
    (2) For families who choose flat rents, the PHA must conduct a 
reexamination of family composition at least annually, and must conduct 
a reexamination of family income at least once every three years in 
accordance with the procedures in Sec.  960.253(f).
    (3) For all families who include nonexempt individuals, as defined 
in Sec.  960.601, the PHA must determine compliance once each twelve 
months with community service and self-sufficiency requirements in 
subpart F of this part.
    (4) The PHA may use the results of these reexaminations to require 
the family to move to an appropriate size unit.
    (5) For all non-public housing over-income families, the PHA may not 
conduct an annual reexamination of family income.
    (b) Interim reexaminations. (1) A family may request an interim 
reexamination of family income or composition because of any changes 
since the last determination. The PHA must conduct any interim 
reexamination within a reasonable period of time after the family 
request or when the PHA becomes aware of an increase in family adjusted 
income under paragraph (3) of this section. What qualifies as a 
``reasonable time'' may vary based on the amount of time it takes to 
verify information, but generally should not be longer than 30 days 
after changes in income are reported.
    (2) The PHA may decline to conduct an interim reexamination of 
family income if the PHA estimates the family's adjusted income will 
decrease by an amount that is less than ten percent of the family's 
annual adjusted income (or a lower amount established by HUD by notice), 
or a lower threshold established by the PHA.
    (3) The PHA must conduct an interim reexamination of family income 
when the PHA becomes aware that the family's adjusted income (as defined 
in Sec.  5.611 of this title) has changed by an amount that the PHA 
estimates will result in an increase of ten percent or more in annual 
adjusted income or such other amount established by HUD through notice, 
except:
    (i) The PHA may not consider any increase in the earned income of 
the family when estimating or calculating whether the family's adjusted 
income has increased, except that, based on the PHA's established 
written policy, the PHA may consider increases in earned income if the 
PHA has processed an interim reexamination for a decrease in the 
family's income under paragraph (b)(1) of this section within the same 
annual or biennial reexamination cycle; and
    (ii) The PHA may choose not to conduct an interim reexamination in 
the last three months of a family's certification period, in accordance 
with the PHA's established written policy.
    (4) For over-income families in the period of up to six months 
before their tenancy termination pursuant to Sec.  960.507(d)(2), the 
PHA must conduct an interim reexamination of family income as otherwise 
required under this paragraph. However, the resulting income 
determination will not make the family eligible to remain in the public 
housing program beyond the period before termination as defined by PHA 
policy.
    (5) The PHA must adopt policies consistent with this section 
prescribing when and under what conditions the family must report a 
change in family income or composition.
    (6) Effective date of rent changes. (i) If the family has reported a 
change in family income or composition in a timely manner according to 
the PHA's policies, the PHA must provide the family with 30 days advance 
notice of any rent increases, and such rent increases will be effective 
the first day of the month beginning after the end of that 30-day 
period. Rent decreases will be effective on the first day of the first 
month after the date of the actual change leading to the interim 
reexamination of family income.

[[Page 413]]

    (ii) If the family has failed to report a change in family income or 
composition in a timely manner according to the PHA's policies, PHAs 
must implement any resulting rent increases retroactively to the first 
of the month following the date of the change leading to the interim 
reexamination of family income. Any resulting rent decrease must be 
implemented no later than the first rent period following completion of 
the reexamination. However, a PHA may apply rent decreases retroactively 
at the discretion of the PHA, in accordance with the conditions 
established by the PHA in written policy and subject to paragraph 
(b)(6)(iii) of this section.
    (iii) A retroactive rent decrease may not be applied by the PHA 
prior to the later of the first of the month following:
    (A) The date of the change leading to the interim reexamination of 
family income; or
    (B) The effective date of the family's most recent previous interim 
or annual reexamination (or initial examination if that was the family's 
last examination).
    (c) Streamlined income determination--(1) General. A PHA may elect 
to apply a streamlined income determination to families receiving fixed 
income, as described in paragraph (c)(3) of this section.
    (2) Definition of ``fixed income''. For purposes of this section, 
``fixed income'' means periodic payments at reasonably predictable 
levels from one or more of the following sources:
    (i) Social Security, Supplemental Security Income, Supplemental 
Disability Insurance.
    (ii) Federal, state, local, or private pension plans.
    (iii) Annuities or other retirement benefit programs, insurance 
policies, disability or death benefits, or other similar types of 
periodic receipts.
    (iv) Any other source of income subject to adjustment by a 
verifiable COLA or current rate of interest.
    (3) Method of streamlined income determination. A PHA using the 
streamlined income determination must adjust a family's income according 
to the percentage of a family's unadjusted income that is from fixed 
income.
    (i) When 90 percent or more of a family's unadjusted income consists 
of fixed income, PHAs using streamlined income determinations must apply 
a COLA or COLAs to the family's sources of fixed income, provided that 
the family certifies both that 90 percent or more of their unadjusted 
income is fixed income and that their sources of fixed income have not 
changed from the previous year. For non-fixed income, the PHA is not 
required to make adjustments pursuant to paragraph (a) of this section.
    (ii) When less than 90 percent of a family's unadjusted income 
consists of fixed income, PHAs using streamlined income determinations 
must apply a COLA to each of the family's sources of fixed income 
individually. The PHA must determine all other income pursuant to 
paragraph (a) of this section.
    (4) COLA rate applied by PHAs. PHAs using streamlined income 
determinations must adjust a family's fixed income using a COLA or 
current interest rate that applies to each specific source of fixed 
income and is available from a public source or through tenant-provided, 
third-party-generated documentation. If no public verification or 
tenant-provided documentation is available, then the owner must obtain 
third-party verification of the income amounts in order to calculate the 
change in income for the source.
    (5) Triennial verification. For any income determined pursuant to a 
streamlined income determination, a PHA must obtain third-party 
verification of all income amounts every 3 years.
    (d) PHA reexamination policies. The PHA must adopt admission and 
continued occupancy policies concerning conduct of annual and interim 
reexaminations in accordance with this section, and shall conduct 
reexaminations in accordance with such policies. The PHA reexamination 
policies must be in accordance with the PHA plan.
    (e) Reviews of family income under this section are subject to the 
provisions in section 904 of the Stewart B. McKinney Homeless Assistance 
Amendments Act of 1988, as amended (42 U.S.C. 3544).
    (f) De minimis errors. The PHA will not be considered out of 
compliance

[[Page 414]]

with the requirements in this section solely due to de minimis errors in 
calculating family income but is still obligated to correct errors once 
the PHA becomes aware of the errors. A de minimis error is an error 
where the PHA determination of family income varies from the correct 
income determination by no more than $30 per month in monthly adjusted 
income ($360 in annual adjusted income).
    (i) The PHA must take any corrective action necessary to credit or 
repay a family if the family has been overcharged for their rent as a 
result of an error (including a de minimis error) in the income 
determination. Families will not be required to repay the PHA in 
instances where the PHA has miscalculated income resulting in a family 
being undercharged for rent or family share.
    (ii) HUD may revise the amount of de minimis error in this paragraph 
(f) through a rulemaking published in the Federal Register for public 
comment.

[65 FR 16726, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016; 82 
FR 58340, Dec. 12, 2017; 85 FR 27139, May 7, 2020; 88 FR 9670, Feb. 14, 
2023; 88 FR 9670, Feb. 14, 2023]



Sec.  960.259  Family information and verification.

    (a) Family obligation to supply information. (1) The family must 
supply any information that the PHA or HUD determines is necessary in 
administration of the public housing program, including submission of 
required evidence of citizenship or eligible immigration status (as 
provided by part 5, subpart E of this title). ``Information'' includes 
any requested certification, release or other documentation.
    (2) The family must supply any information requested by the PHA or 
HUD for use in a regularly scheduled reexamination or an interim 
reexamination of family income and composition in accordance with HUD 
requirements.
    (3) For requirements concerning the following, see part 5, subpart B 
of this title:
    (i) Family verification and disclosure of social security numbers;
    (ii) Family execution and submission of consent forms for obtaining 
wage and claim information from State Wage Information Collection 
Agencies (SWICAs).
    (4) Any information supplied by the family must be true and 
complete.
    (b) Family release and consent. (1) As a condition of admission to 
or continued assistance under the program, the PHA shall require the 
family head, and such other family members as the PHA designates, to 
execute a consent form (including any release and consent as required 
under Sec.  5.230 of this title) authorizing any depository or private 
source of income, or any Federal, State or local agency, to furnish or 
release to the PHA or HUD such information as the PHA or HUD determines 
to be necessary.
    (2) The use or disclosure of information obtained from a family or 
from another source pursuant to this release and consent shall be 
limited to purposes directly connected with administration of the 
program.
    (c) PHA responsibility for reexamination and verification. (1) 
Except as provided in paragraph (c)(2) of this section, the PHA must 
obtain and document in the family file third-party verification of the 
following factors, or must document in the 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 
or income-based rent.
    (2) For a family with net family assets (as the term is defined in 
Sec.  5.603 of this title) equal to or less than $50,000, which amount 
will be adjusted annually by HUD in accordance with the Consumer Price 
Index for Urban Wage Earners and Clerical Workers, a PHA may accept, for 
purposes of recertification of income, a family's declaration under 
Sec.  5.618(b) of this title, except that the PHA must obtain third-
party verification of all family assets every 3 years.

[65 FR 16726, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016; 88 
FR 9671, Feb. 14, 2023]

[[Page 415]]



Subpart D_Preference for Elderly Families and Disabled Families in Mixed 
                           Population Projects

    Source: 59 FR 17667, Apr. 13, 1994, unless otherwise noted.



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.  960.407  Selection preference for mixed population developments.

    (a) The PHA must give preference to elderly families and disabled 
families equally in determining priority for admission to mixed 
population developments. The 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 development.
    (b) In selecting elderly families and disabled families to occupy 
units in mixed population developments, the PHA must first offer units 
that have special accessibility features for persons with disabilities 
to families who include persons with disabilities who require the 
accessibility features of such units (see Sec. Sec.  8.27 and 100.202 of 
this title).

[65 FR 16729, Mar. 29, 2000]



     Subpart E_Occupancy by Over-Income Families or Police Officers

    Source: 65 FR 16729, Mar. 29, 2000, unless otherwise noted.



Sec.  960.503  Occupancy by over-income families.

    A PHA that owns or operates fewer than two hundred fifty (250) 
public housing units, may lease a unit in a public housing development 
to an over-income family (a family whose annual income exceeds the limit 
for a low income family at the time of initial occupancy), in accordance 
with its PHA annual plan (or supporting documents), if all the following 
conditions are satisfied:
    (a) There are no eligible low income families on the PHA waiting 
list or applying for public housing assistance when the unit is leased 
to an over-income family;
    (b) The PHA has publicized availability of the unit for rental to 
eligible low income families, including publishing public notice of such 
availability in a newspaper of general circulation in the jurisdiction 
at least thirty days before offering the unit to an over-income family;
    (c) The over-income family rents the unit on a month-to-month basis 
for a rent that is not less than the PHA's cost to operate the unit;
    (d) The lease to the over-income family provides that the family 
agrees to vacate the unit when needed for rental to an eligible family; 
and
    (e) The PHA gives the over-income family at least thirty days notice 
to vacate the unit when the unit is needed for rental to an eligible 
family.



Sec.  960.505  Occupancy by police officers to provide security
for public housing residents.

    (a) Police officer. For purpose of this subpart E, ``police 
officer'' means a person determined by the PHA to be,

[[Page 416]]

during the period of residence of that person in public housing, 
employed on a full-time basis as a duly licensed professional police 
officer by a Federal, State or local government or by any agency of 
these governments. An officer of an accredited police force of a housing 
agency may qualify.
    (b) Occupancy in public housing. For the purpose of increasing 
security for residents of a public housing development, the PHA may 
allow police officers who would not otherwise be eligible for occupancy 
in public housing, to reside in a public housing dwelling unit. The PHA 
must include in the PHA annual plan or supporting documents the number 
and location of the units to be occupied by police officers, and the 
terms and conditions of their tenancies; and a statement that such 
occupancy is needed to increase security for public housing residents.



Sec.  960.507  Families exceeding the income limit.

    (a) In general. Families participating in the public housing program 
must not have incomes that exceed the over-income limit, as determined 
by paragraph (b) of this section, for more than 24 consecutive months.
    (1) This provision applies to all families in the public housing 
program, including FSS families and all families receiving EID.
    (i) Mixed families (as defined in Sec.  5.504 of this title) who are 
non-public housing over-income families pay the alternative non-public 
housing rent (as defined in Sec.  960.102), as applicable.
    (ii) All non-public housing over-income families are precluded from 
participating in a public housing resident council.
    (iii) Furthermore, non-public housing over-income families cannot 
participate in programs that are only for public housing or low-income 
families.
    (iv) PHAs cannot provide any Federal assistance, including a utility 
allowance, to non-public housing over-income families.
    (2) PHAs must implement the requirements of this section by amending 
all applicable admission and continued occupancy policies according to 
the provisions in 24 CFR part 903. All PHAs must have effective over-
income policies, consistent with the requirements of this section, no 
later than June 14, 2023.
    (b) Determination of over-income limit. The over-income limit is 
determined by multiplying the applicable income limit for a very low-
income family as defined in Sec.  5.603(b) of this title, by a factor of 
2.4.
    (c) Notifying over-income families. (1) If the PHA determines the 
family has exceeded the over-income limit pursuant to an income 
examination, the PHA must provide written notice to the family of the 
over-income determination no later than 30 days after the income 
examination. The notice must state that the family has exceeded the 
over-income limit and continuing to exceed the over-income limit for a 
total of 24 consecutive months will result in the PHA following its 
continued occupancy policy for over-income families in accordance with 
paragraph (d) of this section. Pursuant to 24 CFR part 966, subpart B, 
the PHA must afford the family an opportunity for a hearing if the 
family disputes within a reasonable time the PHA's determination that 
the family has exceeded the over-income limit.
    (2) The PHA must conduct an income examination 12 months after the 
initial over-income determination described in paragraph (c)(1) of this 
section, unless the PHA determined the family's income fell below the 
over-income limit since the initial over-income determination. If the 
PHA determines the family has exceeded the over-income limit for 12 
consecutive months, the PHA must provide written notification of this 
12-month over-income determination no later than 30 days after the 
income examination that led to the 12-month over-income determination. 
The notice must state that the family has exceeded the over-income limit 
for 12 consecutive months and continuing to exceed the over-income limit 
for a total of 24 consecutive months will result in the PHA following 
its continued occupancy policy for over-income families in accordance 
with paragraph (d) of this section. Additionally, if applicable under 
PHA policy, the notice must include an estimate (based on current data) 
of the alternative non-public

[[Page 417]]

housing rent for the family's unit. Pursuant to 24 CFR part 966, subpart 
B, the PHA must afford the family an opportunity for a hearing if the 
family disputes within a reasonable time the PHA's determination that 
the family has exceeded the over-income limit.
    (3) The PHA must conduct an income examination 24 months after the 
initial over-income determination described in paragraph (c)(1) of this 
section, unless the PHA determined the family's income fell below the 
over-income limit since the second over-income determination. If the PHA 
determines the family has exceeded the over-income limit for 24 
consecutive months, then the PHA must provide written notification of 
this 24-month over-income determination no later than 30 days after the 
income examination that led to the 24-month over-income determination. 
The notice must state:
    (i) That the family has exceeded the over-income limit for 24 
consecutive months.
    (ii) That the PHA must either terminate the family's tenancy or 
charge the family the alternative non-public housing rent, in accordance 
with it continued occupancy policy for over-income families in 
accordance with paragraph (d) of this section.
    (A) If the PHA determines that under its policy the family's tenancy 
must be terminated in accordance with paragraph (d)(2) of this section, 
then the notice must inform the family of this determination and state 
the period of time before tenancy termination.
    (B) If the PHA determines that under its policy the family must be 
charged the alternative non-public housing rent in accordance with 
paragraph (d)(1) of this section, then the notice must inform the family 
of this determination and state that the family be charged the 
alternative non-public housing rent in accordance with paragraph (d)(1) 
of this section. The PHA must also present the family with a new lease, 
in accordance with the requirements at Sec.  960.509, and inform the 
family that the lease must be executed no later than 60 days of the date 
of the notice or at the next lease renewal, whichever is sooner.
    (iii) Pursuant to 24 CFR part 966, subpart B, the PHA must afford 
the family an opportunity for a hearing if the family disputes within a 
reasonable time the PHA's determination that the family has exceeded the 
over-income limit.
    (4) If, at any time during the consecutive 24-month period following 
the initial over-income determination described in paragraph (c)(1) of 
this section, a PHA determines that the family's income is below the 
over-income limit, the family is entitled to a new 24 consecutive month 
period of being over-income and new notices under paragraphs (c)(1), 
(c)(2), and (c)(3) of this section if the PHA later determines that the 
family income exceeds the over-income limit.
    (d) End of the 24 consecutive month grace period. Once a family has 
exceeded the over-income limit for 24 consecutive months, the PHA must, 
as detailed in its admissions and continued occupancy policies--
    (1) Require the family to execute a new lease consistent with Sec.  
960.509 and charge the family the alternative non-public housing rent, 
as defined in Sec.  960.102, no later than 60-days after the notice is 
provided pursuant to paragraph (c)(3) of this section or at the next 
lease renewal, whichever is sooner; or
    (2) Terminate the tenancy of the family no more than 6 months after 
the notification under paragraph (c)(3) of this section as determined by 
the PHA's continued occupancy policy. PHAs must continue to charge these 
families the family's choice of income-based, flat rent, or prorated 
rent for mixed families during the period before termination. The PHA 
must give appropriate notice of lease tenancy termination (notice to 
vacate) in accordance with State and local laws.
    (e) Status of families. An over-income family will continue to be a 
public housing program participant until their tenancy is terminated by 
the PHA in accordance with paragraph (d)(2) of this section or the 
family executes a new non-public housing lease in accordance with 
paragraph (d)(1) of this section.

[[Page 418]]

    (f) Reporting. Each PHA must submit a report annually to HUD that 
specifies, as of the end of the year, the number of families residing in 
public housing with incomes exceeding the over-income limit and the 
number of families on the waiting lists for admission to public housing 
projects and provide any other information regarding over-income 
families requested by HUD. These reports must also be publicly 
available.

[88 FR 9671, Feb. 14, 2023]



Sec.  960.509  Lease requirements for non-public housing over-income families.

    (a) In general. If a family, when permitted by written PHA's 
continued occupancy policy, elects to remain in a public housing unit 
paying the alternative non-public housing rent, the PHA and each non-
public housing over-income (NPHOI) family (referred to as the ``tenant'' 
in this section) must enter into a lease. The tenant and the PHA must 
execute the lease, as presented by the PHA pursuant to Sec.  
960.507(c)(3)(ii)(B) no later than 60 days after the notice provided 
pursuant to Sec.  960.507(c)(3) or at the next lease renewal, whichever 
is sooner. If the tenant does not execute the lease within this time 
period, the PHA must terminate the tenancy of the tenant no more than 6 
months after the notification under Sec.  960.507(c)(3) in accordance 
with 960.507(d)(2). Notwithstanding, a PHA may permit, in accordance 
with its policies, an over-income family to execute the lease beyond 
this time period, but before termination of the tenancy, if the over-
income family pays the PHA the total difference between the alternative 
non-public housing rent and their public housing rent dating back to the 
point in time that the over-income family was required to execute the 
lease.
    (b) Lease provisions. The non-public housing over-income lease must 
contain at a minimum the following provisions.
    (1) Parties, dwelling unit, and term. The lease must state:
    (i) The name of the PHA and names of the tenants.
    (ii) The unit rented (address, apartment number, and any other 
information needed to identify the dwelling unit).
    (iii) The term of the lease (lease term and renewal in accordance 
with paragraph (b)(2) of this section).
    (iv) A statement of the utilities, services, and equipment to be 
supplied by the PHA without additional cost, and the utilities and 
appliances to be paid for by the tenant.
    (v) The composition of the household as approved by the PHA (family 
members, foster children and adults, and any PHA-approved live-in 
aides). The family must promptly inform the PHA of the birth, adoption, 
or court-awarded custody of a child. The family must request PHA 
approval to add any other family member as an occupant of the unit.
    (2) Lease term and renewal. (i) The lease must have a term as 
determined by the PHA and included in PHA policy.
    (ii) At any time, the PHA may terminate the tenancy in accordance 
with paragraph (b)(11) of this section.
    (3) Payments due under the lease. (i) Tenant rent. (A) The tenant 
must pay the amount of the monthly tenant rent determined by the PHA in 
accordance with Sec.  960.507(e)(1).
    (B) The lease must specify the initial amount of the tenant rent at 
the beginning of the initial lease term. The PHA must comply with State 
or local law in giving the tenant written notice stating any change in 
the amount of tenant rent.
    (ii) PHA charges. The lease must provide for charges to the tenant 
for repair beyond normal wear and tear and for consumption of excess 
utilities. The lease must state the basis for the determination of such 
charges (e.g., by a posted schedule of charges for repair, amounts 
charged for excess utility consumption, 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.
    (iii) Late payment penalties. The lease may provide for penalties 
for late payment of rent.
    (iv) When charges are due. The lease must provide that charges 
assessed

[[Page 419]]

under paragraphs (b)(3)(ii) and (b)(3)(iii) of this section are due in 
accordance with PHA policy.
    (v) Security deposits. The lease must provide that any previously 
paid security deposit will be applied to the tenancy upon signing a new 
lease. The lease must also inform the tenant of the circumstances under 
which a security deposit will be returned to the tenant or when the 
tenant will be charged for damage to the unit, consistent with State and 
local security deposit laws.
    (4) Tenant's right to use and occupancy. The lease must provide that 
the tenant has 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, as well as their guests. The term guest is 
defined in Sec.  5.100 of this title.
    (5) The PHA's obligations. The PHA's obligations under the lease 
must include the following:
    (i) To maintain the dwelling unit and the project in decent, safe, 
and sanitary condition.
    (ii) To comply with requirements of applicable State and local 
building codes, housing codes, and HUD regulations materially affecting 
health and safety.
    (iii) To make necessary repairs to the dwelling unit.
    (iv) To keep project buildings, facilities, and common areas, not 
otherwise assigned to the tenant for maintenance and upkeep, in a clean 
and safe condition.
    (v) 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.
    (vi) 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 (b)(6)(vii) 
of this section.
    (vii) To supply running water, including an adequate source of 
potable 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.
    (viii) To notify the tenant of the specific grounds for any proposed 
adverse action by the PHA as required by State and local law.
    (ix) To comply with Federal, State, and local nondiscrimination and 
fair housing requirements, including Federal accessibility requirements 
and providing reasonable accommodations for persons with disabilities.
    (x) To establish necessary and reasonable policies for the benefit 
and well-being of the housing project and the tenants, post the policies 
in the project office, and incorporate the regulations by reference in 
the lease.
    (6) Tenant's obligations. The lease must, at a minimum and 
consistent with State and local law, provide that the tenant must:
    (i) Not assign the lease or sublease the dwelling unit.
    (ii) Not provide accommodations for boarders or lodgers.
    (iii) Use the dwelling unit solely as a private dwelling for the 
tenant and the tenant's household as identified in the lease, and not 
use or permit its use for any other purpose.
    (iv) Abide by necessary and reasonable policies established by the 
PHA for the benefit and well-being of the housing project and the 
tenants, which must be posted in the project office and incorporated by 
reference in the lease.
    (v) Comply with all applicable State and local building and housing 
codes materially affecting health and safety.
    (vi) Keep the dwelling unit and such other areas as may be assigned 
to the tenant for the tenant's exclusive use in a clean and safe 
condition.
    (vii) Dispose of all waste from the dwelling unit in a sanitary and 
safe manner.
    (viii) Use in a reasonable manner all electrical, plumbing, 
sanitary, heating, ventilating, air-conditioning and other facilities, 
including elevators.
    (ix) Refrain from, and cause members of the household and guests to 
refrain

[[Page 420]]

from destroying, defacing, damaging, or removing any part of the 
dwelling unit or housing project.
    (x) Pay reasonable charges (other than for wear and tear) for the 
repair of damages to the dwelling unit, or to the housing project 
(including damages to buildings, facilities, or common areas) caused by 
the tenant, a member of the household or a guest.
    (xi) Act, and cause household members and 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.
    (xii) Assure that no tenant, member of the tenant's household, 
guest, or any other person under the tenant's control engages in:
    (A) Criminal activity. (1) Any criminal activity that threatens the 
health, safety or right to peaceful enjoyment of the premises by other 
residents.
    (2) Any drug-related criminal activity on or off the premises; or
    (B) Civil activity. For non-public housing over-income units that 
are not within mixed-finance projects, any smoking of prohibited tobacco 
products in the tenant's unit as well as restricted areas, as defined by 
Sec.  965.653(a) of this chapter, or in other outdoor areas that the PHA 
has designated as smoke-free.
    (xiii) To assure that no member of the household engages in an abuse 
or pattern of abuse of alcohol that affects the health, safety, or right 
to peaceful enjoyment of the premises by other residents.
    (7) Tenant maintenance. The lease may provide that the tenant must 
perform seasonal maintenance or other maintenance tasks, where 
performance of such tasks by tenants of dwellings units of a similar 
design and construction is customary, as long as such provisions are not 
for the purpose of evading the obligations of the PHA. In cases where a 
PHA adopts such lease provisions, the PHA must exempt tenants who are 
unable to perform such tasks because of age or disability.
    (8) Defects hazardous to life, health, or safety. The lease must set 
forth the rights and obligations of the tenant and the PHA if to the 
dwelling unit is damaged to the extent that conditions are created which 
are hazardous to life, health, or safety of the occupants. The lease 
must provide that:
    (i) The tenant must immediately notify project management of the 
damage.
    (ii) The PHA must repair the unit within a reasonable time. The PHA 
must charge the tenant the reasonable cost of the repairs if the damage 
was caused by the tenant, the tenant's household, or the tenant's 
guests.
    (iii) The PHA must offer standard alternative accommodations, if 
available, where necessary repairs cannot be made within a reasonable 
time, subject to paragraph (b)(5)(ix) of this section; and
    (iv) The lease must allow 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 (b)(8)(ii) of this section or 
alternative accommodations not provided in accordance with paragraph 
(b)(8)(iii) of this section, except that no abatement of rent may occur 
if the tenant rejects the alternative accommodation or if the damage was 
caused by the tenant, tenant's household or guests.
    (9) Entry of dwelling unit during tenancy. The lease must set forth 
the circumstances under which the PHA may enter the dwelling unit during 
the tenant's possession and must include the following requirements:
    (i) The PHA is, upon reasonable advance notification to the tenant, 
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 is reasonable 
advance notification.
    (ii) 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
    (iii) If the tenant and all adult members of the household are 
absent from the dwelling unit at the time of entry, the PHA must leave 
in the dwelling

[[Page 421]]

unit a written statement specifying the date, time, and purpose of entry 
prior to leaving the dwelling unit.
    (10) Notice procedures. The lease must provide procedures, in 
accordance with State and local laws, the PHA and tenant must follow 
when giving notices, which must include:
    (i) Except as provided in paragraph (b)(9) of this section, notice 
to a tenant must be provided in a form to allow meaningful access for 
persons who are limited English proficient and, in a form, to ensure 
effective communication with individuals with disabilities; and
    (ii) Notice to the PHA can be in writing, hand delivered, or sent by 
prepaid first-class mail to PHA address provided in the lease, orally, 
or submitted electronically through a communications system established 
by the PHA for that purpose.
    (11) Termination of tenancy and eviction. (i) Procedures. The lease 
must state the procedures to be followed by the PHA and the tenant to 
terminate the tenancy.
    (ii) Grounds for termination of tenancy. The PHA must terminate the 
tenancy for good cause, which includes, but is not limited to, the 
following:
    (A) Criminal activity or alcohol abuse as provided in paragraph 
(b)(11)(iv) of this section.
    (B) Failure to accept the PHA's offer of a lease revision to an 
existing lease: with written notice of the offer of the revision at 
least 60 calendar days before the lease revision is scheduled to take 
effect; and with the offer specifying a reasonable time limit within 
that period for acceptance by the family.
    (iii) Lease termination notice. The PHA must give notice of lease 
termination in accordance with State and local laws.
    (iv) PHA termination of tenancy for criminal activity or alcohol 
abuse. (A) Evicting drug criminals. (1) Methamphetamine conviction. The 
PHA must immediately terminate the tenancy if the PHA determines that 
any member of the household has been convicted of drug-related criminal 
activity for manufacture or production of methamphetamine on the 
premises of Federally assisted housing.
    (2) Drug crime on or off the premises. The lease must provide that 
drug-related criminal activity engaged in on or off the premises by any 
tenant, member of the tenant's household or guest, and any such activity 
engaged in on the premises by any other person under the tenant's 
control, is grounds for the PHA to terminate tenancy. In addition, the 
lease must provide that a PHA may evict a family when the PHA determines 
that a household member is illegally using a drug or when the PHA 
determines that a pattern of illegal use of a drug interferes with the 
health, safety, or right to peaceful enjoyment of the premises by other 
residents.
    (B) Evicting other criminals. (1) Threat to other residents. The 
lease must provide that any criminal activity by a covered person that 
threatens the health, safety, or right to peaceful enjoyment of the 
premises by other residents (including PHA management staff residing on 
the premises) or threatens the health, safety, or right to peaceful 
enjoyment of their residences by persons residing in the immediate 
vicinity of the premises is grounds for termination of tenancy.
    (2) Fugitive felon or parole violator. The PHA may terminate the 
tenancy if a tenant is fleeing to avoid prosecution, or custody or 
confinement after conviction, for a crime, or attempt to commit a crime, 
that is a felony under the laws of the place from which the individual 
flees, or that, in the case of the State of New Jersey, is a high 
misdemeanor; or violating a condition of probation or parole imposed 
under Federal or State law.
    (C) Eviction for criminal activity. (1) Evidence. The PHA may evict 
the tenant by judicial action for criminal activity in accordance with 
this section if the PHA determines that the covered person has engaged 
in the criminal activity, regardless of whether the covered person has 
been arrested or convicted for such activity and without satisfying the 
standard of proof used for a criminal conviction.
    (2) Notice to Post Office. When a PHA evicts an individual or family 
for criminal activity, the PHA must notify the local post office serving 
the dwelling unit that the individual or family is no longer residing in 
the unit.

[[Page 422]]

    (D) Use of criminal record. If the PHA seeks to terminate the 
tenancy for criminal activity as shown by a criminal record, the PHA 
must notify the household of the proposed action to be based on the 
information and must provide the subject of the record and the tenant 
with a copy of the criminal record before a PHA grievance hearing, as 
applicable, or court trial concerning the termination of tenancy or 
eviction. The tenant must be given an opportunity to dispute the 
accuracy and relevance of that record in the grievance hearing or court 
trial.
    (E) Cost of obtaining criminal record. The PHA may not pass along to 
the tenant the costs of a criminal records check.
    (F) Evicting alcohol abusers. The PHA must establish standards that 
allow termination of tenancy if the PHA determines that a household 
member has:
    (1) Engaged in abuse or pattern of abuse of alcohol that threatens 
the health, safety, or right to peaceful enjoyment of the premises by 
other residents; or
    (2) Furnished false or misleading information concerning illegal 
drug use, alcohol abuse, or rehabilitation of illegal drug users or 
alcohol abusers.
    (G) PHA action, generally. (1) Consideration of circumstances. In a 
manner consistent with policies, procedures and practices, the PHA may 
consider all circumstances relevant to a particular case such as the 
nature and severity of the offending action, the extent of participation 
by the leaseholder in the offending action, the effects that the 
eviction would have on family members not involved in the offending 
activity, the extent to which the leaseholder has taken steps to prevent 
or mitigate the offending action, the amount of time that has passed 
since the criminal conduct occurred, whether the crime or conviction was 
related to a disability, and whether the individual has engaged in 
rehabilitative or community services.
    (2) Exclusion of culpable household member. The PHA may require a 
tenant to exclude a household member to continue to reside in the 
dwelling unit, where that household member has participated in or been 
culpable for action or failure to act that warrants termination.
    (3) Consideration of rehabilitation. In determining whether to 
terminate tenancy for illegal drug use or a pattern of illegal drug use 
by a household member who is no longer engaging in such use, or for 
abuse or a pattern of abuse of alcohol by a household member who is no 
longer engaging in such abuse, the PHA may consider whether such 
household member is participating in or has successfully completed a 
supervised drug or alcohol rehabilitation program or has otherwise been 
rehabilitated successfully (42 U.S.C. 13662). For this purpose, the PHA 
may require the tenant to submit evidence of the household member's 
current participation in, or successful completion of, a supervised drug 
or alcohol rehabilitation program or evidence of otherwise having been 
rehabilitated successfully.
    (4) Nondiscrimination limitation. The PHA's eviction actions must be 
consistent with fair housing and equal opportunity provisions of Sec.  
5.105 of this title.
    (12) No automatic lease renewal. Upon expiration of the lease term, 
the lease shall not automatically renew.
    (13) Grievance procedures. The lease may include hearing or 
grievance procedures and may explain when the procedures are available 
to the family.
    (14) Provision for modifications. The lease may be modified at any 
time by written agreement of the tenant and the PHA. The lease must 
provide that modification of the lease must be evidenced by a written 
rider or amendment to the lease, executed by both parties, except as 
permitted under Sec.  966.5 of this chapter, which allows modifications 
of the lease by posting of policies, rules and regulations.
    (15) Signature clause. The lease must provide a signature clause 
attesting that the lease has been executed by the parties.

[88 FR 9671, Feb. 14, 2023; 88 FR 12560, Feb. 28, 2023]

[[Page 423]]



  Subpart F_When Resident Must Perform Community Service Activities or 
                    Self-Sufficiency Work Activities

    Source: 65 FR 16729, Mar. 29, 2000, unless otherwise noted.



Sec.  960.600  Implementation.

    PHAs and residents must comply with the requirements of this subpart 
beginning with PHA fiscal years that commence on or after October 1, 
2000. Unless otherwise provided by Sec.  903.11 of this chapter, Annual 
Plans submitted for those fiscal years are required to contain 
information regarding the PHA's compliance with the community service 
requirement, as described in Sec.  903.7 of this chapter. Non-public 
housing over-income families are not required to comply with the 
requirements of this subpart.

[88 FR 9675, Feb. 14, 2023]



Sec.  960.601  Definitions.

    (a) Definitions found elsewhere--(1) General definitions. The 
following terms are defined in part 5, subpart A of this title: public 
housing, public housing agency (PHA).
    (2) Definitions concerning income and rent. The following terms are 
defined in part 5, subpart F of this title: economic self-sufficiency 
program, work activities.
    (b) Other definitions. In addition to the definitions in paragraph 
(a) of this section, the following definitions apply:
    Community service. The performance of voluntary work or duties that 
are a public benefit, and that serve to improve the quality of life, 
enhance resident self-sufficiency, or increase resident self-
responsibility in the community. Community service is not employment and 
may not include political activities.
    Exempt individual. An adult who:
    (1) Is 62 years or older;
    (2)(i) Is a blind or disabled individual, as defined under Section 
216(i)(1) or Section 1614 of the Social Security Act (42 U.S.C. 
416(i)(1); 1382c), and who certifies that because of this disability she 
or he is unable to comply with the service provisions of this subpart, 
or
    (ii) Is a primary caretaker of such individual;
    (3) Is engaged in work activities;
    (4) Meets the requirements for being exempted from having to engage 
in a work activity under the State program funded under part A of title 
IV of the Social Security Act (42 U.S.C. 601 et seq.) or under any other 
welfare program of the State in which the PHA is located, including a 
State-administered welfare-to-work program;
    (5) Is a member of a family receiving assistance, benefits or 
services under a State program funded under part A of title IV of the 
Social Security Act (42 U.S.C. 601 et seq.) or under any other welfare 
program of the State in which the PHA is located, including a State-
administered welfare-to-work program, and has not been found by the 
State or other administering entity to be in noncompliance with such a 
program; or
    (6) is a member of a non-public housing over-income family.
    Service requirement. The obligation of each adult resident, other 
than an exempt individual, to perform community service or participate 
in an economic-self sufficiency program required in accordance with 
Sec.  960.603.

[65 FR 16729, Mar. 29, 2000, as amended at 88 FR 9675, Feb. 14, 2023]



Sec.  960.603  General requirements.

    (a) Service requirement. Except for any family member who is an 
exempt individual, each adult resident of public housing must:
    (1) Contribute 8 hours per month of community service (not including 
political activities); or
    (2) Participate in an economic self-sufficiency program for 8 hours 
per month; or
    (3) Perform 8 hours per month of combined activities as described in 
paragraphs (a)(1) and (a)(2) of this section.
    (b) Family violation of service requirement. The lease shall specify 
that it shall be renewed automatically for all purposes, unless the 
family fails to comply with the service requirement. Violation of the 
service requirement is grounds for nonrenewal of the lease at the end of 
the twelve month lease term, but not for termination of tenancy during 
the course of the twelve

[[Page 424]]

month lease term (see Sec.  966.4(l)(2)(i) of this chapter).



Sec.  960.605  How PHA administers service requirements.

    (a) PHA policy. Each PHA must develop a local policy for 
administration of the community service and economic self-sufficiency 
requirements for public housing residents.
    (b) Administration of qualifying community service or self-
sufficiency activities for residents. The PHA may administer qualifying 
community service or economic self-sufficiency activities directly, or 
may make such activities available through a contractor, or through 
partnerships with qualified organizations, including resident 
organizations, and community agencies or institutions.
    (c) PHA responsibilities. (1) The PHA policy must describe how the 
PHA determines which family members are subject to or exempt from the 
service requirement, and the process for determining any changes to 
exempt or non-exempt status of family members.
    (2) The PHA must give the family a written description of the 
service requirement, and of the process for claiming status as an exempt 
person and for PHA verification of such status. The PHA must also notify 
the family of its determination identifying the family members who are 
subject to the service requirement, and the family members who are 
exempt persons. The PHA must also notify the family that it will be 
validating a sample of self-certifications of completion of the service 
requirement accepted by the PHA under Sec.  960.607(a)(1)(ii).
    (3) The PHA must review family compliance with service requirements 
and must verify such compliance annually at least 30 days before the end 
of the 12-month lease term. If qualifying activities are administered by 
an organization other than the PHA, the PHA may obtain verification of 
family compliance from such third parties or may accept a signed 
certification from the family member that he or she has performed such 
qualifying activities.
    (4) The PHA must retain reasonable documentation of service 
requirement performance or exemption in a participant family's files.
    (5) The PHA must comply with non-discrimination and equal 
opportunity requirements listed at Sec.  5.105(a) of this title and 
affirmatively further fair housing in all their activities in accordance 
with the AFFH Certification as described in Sec.  903.7(o) of this 
chapter.

[65 FR 16729, Mar. 29, 2000, as amended at 81 FR 12373, Mar. 8, 2016]



Sec.  960.607  Assuring resident compliance.

    (a) Acceptable documentation demonstrating compliance. (1) If 
qualifying activities are administered by an organization other than the 
PHA, a family member who is required to fulfill a service requirement 
must provide one of the following:
    (i) A signed certification to the PHA by such other organization 
that the family member has performed such qualifying activities; or
    (ii) A signed self-certification to the PHA by the family member 
that he or she has performed such qualifying activities.
    (2) The signed self-certification must include the following:
    (i) A statement that the tenant contributed at least 8 hours per 
month of community service not including political activities within the 
community in which the adult resides; or participated in an economic 
self-sufficiency program (as that term is defined in 24 CFR 5.603(b)) 
for at least 8 hours per month;
    (ii) The name, address, and a contact person at the community 
service provider; or the name, address, and contact person for the 
economic self-sufficiency program;
    (iii) The date(s) during which the tenant completed the community 
service activity, or participated in the economic self-sufficiency 
program;
    (iv) A description of the activity completed; and
    (v) A certification that the tenant's statement is true.
    (3) If a PHA accepts self-certifications under paragraph (a)(1)(ii) 
of this section, the PHA must validate a sample of such self-
certifications using third-party certification described in paragraph 
(a)(1)(i) of this section.
    (b) PHA notice of noncompliance. (1) If the PHA determines that 
there is a

[[Page 425]]

family member who is required to fulfill a service requirement, but who 
has violated this family obligation (noncompliant resident), the PHA 
must notify the tenant of this determination.
    (2) The PHA notice to the tenant must:
    (i) Briefly describe the noncompliance;
    (ii) State that the PHA will not renew the lease at the end of the 
twelve month lease term unless:
    (A) The tenant, and any other noncompliant resident, enter into a 
written agreement with the PHA, in the form and manner required by the 
PHA, to cure such noncompliance, and in fact cure such noncompliance in 
accordance with such agreement; or
    (B) The family provides written assurance satisfactory to the PHA 
that the tenant or other noncompliant resident no longer resides in the 
unit.
    (iii) State that the tenant may request a grievance hearing on the 
PHA determination, in accordance with part 966, subpart B of this 
chapter, and that the tenant may exercise any available judicial remedy 
to seek timely redress for the PHA's nonrenewal of the lease because of 
such determination.
    (c) Tenant agreement to comply with service requirement. If the 
tenant or another family member has violated the service requirement, 
the PHA may not renew the lease upon expiration of the term unless:
    (1) The tenant, and any other noncompliant resident, enter into a 
written agreement with the PHA, in the form and manner required by the 
PHA, to cure such noncompliance by completing the additional hours of 
community service or economic self-sufficiency activity needed to make 
up the total number of hours required over the twelve-month term of the 
new lease, and
    (2) All other members of the family who are subject to the service 
requirement are currently complying with the service requirement or are 
no longer residing in the unit.

[65 FR 16729, Mar. 29, 2000, as amended at 81 FR 12374, Mar. 8, 2016]



Sec.  960.609  Prohibition against replacement of PHA employees.

    In implementing the service requirement under this subpart, the PHA 
may not substitute community service or self-sufficiency activities 
performed by residents for work ordinarily performed by PHA employees, 
or replace a job at any location where residents perform activities to 
satisfy the service requirement.



                Subpart G_Pet Ownership in Public Housing

    Source: 65 FR 42522, July 10, 2000, unless otherwise noted.



Sec.  960.701  Purpose.

    The purpose of this subpart is, in accordance with section 31 of the 
United States Housing Act of 1937 (42 U.S.C. 1437z-3), to permit pet 
ownership by residents of public housing, subject to compliance with 
reasonable requirements established by the public housing agency (PHA) 
for pet ownership.



Sec.  960.703  Applicability.

    This subpart applies to public housing as that term is defined in 
section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 
1437a(b)), except that such term does not include public housing 
developments for the elderly or persons with disabilities. Regulations 
that apply to pet ownership in such developments are located in part 5, 
subpart C, of this title.



Sec.  960.705  Animals that assist, support, or provide service to
persons with disabilities.

    (a) This subpart G does not apply to animals that assist, support or 
provide service to persons with disabilities. PHAs may not apply or 
enforce any policies established under this subpart against animals that 
are necessary as a reasonable accommodation to assist, support or 
provide service to persons with disabilities. This exclusion applies to 
such animals that reside in public housing, as that term is used in 
Sec.  960.703, and such animals that visit these developments.
    (b) Nothing in this subpart G:

[[Page 426]]

    (1) Limits or impairs the rights of persons with disabilities;
    (2) Authorizes PHAs to limit or impair the rights of persons with 
disabilities; or
    (3) Affects any authority that PHAs may have to regulate service 
animals that assist, support or provide service to persons with 
disabilities, under Federal, State, or local law.



Sec.  960.707  Pet ownership.

    (a) Ownership Conditions. A resident of a dwelling unit in public 
housing, as that term is used in Sec.  960.703, may own one or more 
common household pets or have one or more common household pets present 
in the dwelling unit of such resident, subject to the reasonable 
requirements of the PHA, if the resident maintains each pet:
    (1) Responsibly;
    (2) In accordance with applicable State and local public health, 
animal control, and animal anti-cruelty laws and regulations; and
    (3) In accordance with the policies established in the PHA Annual 
Plan for the agency as provided in part 903 of this chapter.
    (b) Reasonable requirements. Reasonable requirements may include but 
are not limited to:
    (1) Requiring payment of a non-refundable nominal fee to cover the 
reasonable operating costs to the development relating to the presence 
of pets, a refundable pet deposit to cover additional costs attributable 
to the pet and not otherwise covered, or both;
    (2) Limitations on the number of animals in a unit, based on unit 
size;
    (3) Prohibitions on types of animals that the PHA classifies as 
dangerous, provided that such classifications are consistent with 
applicable State and local law, and prohibitions on individual animals, 
based on certain factors, including the size and weight of animals;
    (4) Restrictions or prohibitions based on size and type of building 
or project, or other relevant conditions;
    (5) Registration of the pet with the PHA; and
    (6) Requiring pet owners to have their pets spayed or neutered.
    (c) Restriction. A PHA may not require pet owners to have any pet's 
vocal chords removed.
    (d) Pet deposit. A PHA that requires a resident to pay a pet deposit 
must place the deposit in an account of the type required under 
applicable State or local law for pet deposits or, if State or local law 
has no requirements regarding pet deposits, for rental security 
deposits, if applicable. The PHA shall comply with such applicable law 
as to retention of the deposit, interest, and return of the deposit or 
portion thereof to the resident, and any other applicable requirements.
    (e) PHA Plan. Unless otherwise provided by Sec.  903.11 of this 
chapter, Annual Plans are required to contain information regarding the 
PHA's pet policies, as described in Sec.  903.7(n) of this chapter, 
beginning with PHA fiscal years that commence on or after January 1, 
2001.



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 (as revised April 1,

[[Page 427]]

2013), 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.

[57 FR 20189, May 11, 1992, as amended at 80 FR 75942, Dec. 7, 2015]



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 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

[[Page 428]]

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 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) (as revised April 1, 2013) 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; 80 
FR 75942, Dec. 7, 2015]



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) (as revised April 1, 2013), 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) (as revised April 1, 2013).
    (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

[[Page 429]]

award exceeds the independent cost estimate required by 24 CFR 85.36(f) 
(as revised April 1, 2013), 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) (as revised April 1, 2013); the 
provisions of 24 CFR 85.36(h) (as revised April 1, 2013) or 24 CFR 
905.316(d) 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) (as revised April 
1, 2013), 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 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.

[57 FR 20189, May 11, 1992, as amended at 80 FR 75942, Dec. 7, 2015]



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.
964.115 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.

                    Subpart E_Resident Board Members

964.400 Purpose.
964.405 Applicability.
964.410 Additional definitions.
964.415 Resident board members.
964.420 Resident board member may be elected.
964.425 Small public housing agencies.
964.430 Nondiscrimination.

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

    Source: 59 FR 43636, Aug. 24, 1994, unless otherwise noted.

[[Page 430]]



                      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 
PHA that has a Public Housing Annual Contributions Contract (ACC) with 
HUD. This part, except for subpart E, 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.
    (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) Subpart E of this part implements section 2(b) of the United 
States Housing Act of 1937 (42 U.S.C. 1437), which provides for resident 
membership on the board of directors or similar governing body of a PHA. 
Subpart E applies to any public housing agency that has a public housing 
annual contributions contract with HUD or administers tenant-based 
rental under section 8 of the United States Housing Act of 1937 (42 
U.S.C. 1437f).
    (f) 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.

[57 FR 43636, Aug. 24, 1994, as amended at 64 FR 56879, Oct. 21, 1999]



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;

[[Page 431]]

    (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 
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

[[Page 432]]

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.



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

[[Page 433]]

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 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)

[[Page 434]]

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 jurisdiction-wide resident council to discuss problems, 
plan activities and review progress.



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.

[[Page 435]]



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 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, not including members 
of a non-public housing over-income family as defined in Sec.  960.102 
of this chapter, 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.

[59 FR 43636, Aug. 24, 1994, as amended at 88 FR 9675, Feb. 14, 2023]



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

[[Page 436]]

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, 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;

[[Page 437]]

    (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 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.

[[Page 438]]



                 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.
    (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

[[Page 439]]

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.



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

[[Page 440]]

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 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) Direct provision of operating and capital assistance to RMC--(1) 
Direct provision of assistance to RMC. The ACC shall provide for the 
direct provision of operating and capital assistance by HUD to an RMC 
if:
    (i) The RMC petitions HUD for the release of funds;
    (ii) The contract provides for the RMC to assume the primary 
management responsibilities of the PHA;
    (iii) The RMC has been designated as at least a ``standard 
performer'' under the Public Housing Assessment System (PHAS) (see 24 
CFR part 902); and
    (iv) The RMC is not in violation of any financial, accounting, 
procurement, civil rights, fair housing or other program requirements 
that HUD determines call into question the capability of the RMC to 
effectively discharge its responsibilities under the contract.
    (2) Use of assistance. Any direct capital or operating assistance 
provided to the RMC must be used for purposes of performing eligible 
activities with respect to public housing as may be provided under the 
contract.
    (3) Responsibilities of PHA. If HUD provides direct funding to a RMC 
under paragraph (h)(1) of this section, the PHA is not responsible for 
the actions of the RMC.
    (i) 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.

[[Page 441]]

    (j) Bonding, insurance, and licensing--(1) 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 PHA) to 
protect HUD and the PHA against loss, theft, embezzlement, or fraudulent 
acts on the part of the RMC or its employees.
    (2) Licensing and other local requirements. An RMC must be in 
compliance with any local licensing, or other local requirement, 
governing the qualifications or operations of a property manager.
    (k) 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.
    (l) 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.)

[59 FR 43636, Aug. 24, 1994, as amended at 65 FR 42515, July 10, 2000]



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 2 CFR part 
200, 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 2 
CFR part 200, 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.

[59 FR 43636, Aug. 24, 1994, as amended at 80 FR 75942, Dec. 7, 2015]



            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

[[Page 442]]

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, 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.

[[Page 443]]



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.



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 75, PHAs, 
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 75.3) and to give Section 3 business concerns the 
contracting opportunities generated by Section 3 covered assistance.

[85 FR 61568, Sept. 29, 2020]



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,

[[Page 444]]

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 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 2 CFR part 200 are 
applicable with respect to the acceptance and use of assistance by 
private nonprofit organizations.

[59 FR 43636, Aug. 24, 1994, as amended at 80 FR 75942, Dec. 7, 2015]



                    Subpart E_Resident Board Members

    Source: 64 FR 56879, Oct. 21, 1999, unless otherwise noted.



Sec.  964.400  Purpose.

    The purpose of this subpart is to implement section 2(b) of the 
United States Housing Act of 1937 (42 U.S.C. 1437).

[[Page 445]]



Sec.  964.405  Applicability.

    (a) General. Except as described in paragraph (b) of this section, 
this subpart applies to any public housing agency that has a public 
housing annual contributions contract with HUD or administers tenant-
based rental assistance under section 8 of the United States Housing Act 
of 1937 (42 U.S.C. 1437f).
    (b) Exceptions. The requirements of this subpart do not apply to a 
public housing agency that is:
    (1) Located in a State that requires the members of a governing 
board to be salaried and to serve on a full-time basis; or
    (2) Not governed by a governing board.



Sec.  964.410  Additional definitions.

    The following additional definitions apply to this subpart only:
    Directly assisted. Directly assisted means a public housing resident 
or a recipient of housing assistance in the tenant-based section 8 
program. Direct assistance does not include any State financed housing 
assistance or Section 8 project-based assistance.
    Eligible resident. An eligible resident is a person:
    (1) Who is directly assisted by a public housing agency;
    (2) Whose name appears on the lease; and
    (3) Is eighteen years of age or older.
    Governing board. Governing board means the board of directors or 
similar governing body of a public housing agency.
    Resident board member. A resident board member is a member of the 
governing board who is directly assisted by that public housing agency.



Sec.  964.415  Resident board members.

    (a) General. Except as provided in Sec. Sec.  964.405(b) and 
964.425, the membership of the governing board of each public housing 
agency must contain not less than one eligible resident board member.
    (b) Resident board member no longer directly assisted. (1) A 
resident board member who ceases to be directly assisted by the public 
housing agency is no longer an ``eligible resident'' as defined in Sec.  
964.410.
    (2) Such a board member may be removed from the PHA board for that 
cause, where such action is permitted under State or local law.
    (3) Alternatively, the board member may be allowed to complete his/
her current term as a member of the governing board. However, the board 
member may not be re-appointed (or re-elected) to the governing board 
for purposes of serving as the statutorily required resident board 
member.
    (c) Minimum qualifications for board membership. Any generally 
applicable qualifications for board membership also apply to residents, 
unless the application of the requirements would result in the governing 
board not containing at least one eligible resident as a member. 
Further, PHAs and localities may not establish eligibility requirements 
for board membership that are solely applicable to residents.



Sec.  964.420  Resident board member may be elected.

    (a) General. Residents directly assisted by a public housing agency 
may elect a resident board member if provided for in the public housing 
agency plan, adopted in accordance with 24 CFR part 903.
    (b) Notice to residents. The public housing agency must provide 
residents with at least 30 days advance notice for nominations and 
elections. The notice should include a description of the election 
procedures, eligibility requirements, and dates of nominations and 
elections. Any election procedures devised by the public housing agency 
must facilitate fair elections.



Sec.  964.425  Small public housing agencies.

    (a) General. The requirements of this subpart do not apply to any 
public housing agency that:
    (1) Has less than 300 public housing units (or has no public housing 
units):
    (2) Has provided reasonable notice to the resident advisory board of 
the opportunity for residents to serve on the governing board;
    (3) Has not been notified of the intention of any resident to 
participate on the governing board within a reasonable time (which shall 
not be less than 30 days) of the resident advisory board

[[Page 446]]

receiving the notice described in paragraph (a)(3) of this section; and
    (4) Repeats the requirements of paragraphs (a)(2) and (a)(3) of this 
section at least once every year.
    (b) Public housing agencies that only administer Section 8 
assistance. A public housing agency that has no public housing units, 
but administers Section 8 tenant-based assistance, is eligible for the 
exception described in paragraph (a) of this section, regardless of the 
number of Section 8 vouchers it administers.
    (c) Failure to meet requirements for exception. A public housing 
agency that is otherwise eligible for the exception described in 
paragraphs (a) and (b) of this section, but does not meet the three 
conditions described in paragraphs (a)(2) through (a)(4) of this 
section, must comply with the requirements of this subpart.



Sec.  964.430  Nondiscrimination.

    (a) Membership status--(1) General. A resident board member is a 
full member of the governing board.
    (2) Resident participation must include matters regarding Federal 
public housing and Section 8 tenant-based assistance. A resident board 
member must be allowed to take part in decisions related to the 
administration, operation, and management of Federal public housing 
programs and Section 8 tenant-based rental assistance programs. This 
rule does not extend to matters that:
    (i) Exclusively relate to other types of housing assistance (such as 
State financed housing assistance); or
    (ii) Do not involve housing assistance (as may occur where the city 
or county governing body also serves as the PHA board).
    (3) Public housing agency may expand scope of resident 
participation. A public housing agency may choose to expand the scope of 
resident member involvement to matters not required under paragraph 
(a)(2) of this section.
    (b) Residence status. A governing board may not prohibit any person 
from serving on the governing board because that person is a resident of 
a public housing project or is assisted under section 8 of the United 
States Housing Act of 1937 (42 U.S.C. 1437f).
    (c) Conflict of interest. A governing board may not exclude any 
resident board member from participating in any matter before the 
governing board on the grounds that the resident board member's lease 
with the public housing agency, or the resident board member's status as 
a public housing resident or recipient of Section 8 tenant-based 
assistance, either results or may result in a conflict of interest, 
unless the matter is clearly applicable to the resident board member 
only in a personal capacity and applies uniquely to that member and not 
generally to residents or to a subcategory of residents.



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.

[[Page 447]]

               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_Smoke-Free Public Housing

965.651 Applicability.
965.653 Smoke-free public housing.
965.655 Implementation.

             Subpart H_Lead-Based Paint Poisoning Prevention

965.701 Lead-based paint poisoning prevention.

Subpart I [Reserved]

    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 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

[[Page 448]]

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 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

[[Page 449]]

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 2 CFR 200.319 
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 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

[[Page 450]]

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 2 CFR part 200, subpart F), 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 
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; 80 FR 75942, Dec. 7, 2015]



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 lead-based paint activities 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 
activities are conducted in a responsible manner.
    (b) Insurance coverage requirements. When the PHA undertakes lead-
based paint activities, 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 must 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 obtain such insurance directly. Insurance must remain in effect 
during the entire period of lead-based paint activity and must

[[Page 451]]

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 contract 
pertaining to lead-based paint activities. 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 PHA's contract related 
to lead-based paint activities. (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.
    (c) Exception to requirements. Insurance already purchased by the 
PHA or contractor and enforced on the day this section is effective 
which provides coverage for lead-based paint activities shall be 
considered as meeting the requirements of this section until the 
expiration of the policy. This section is not applicable to architects, 
engineers or consultants who do not physically perform lead-based paint 
activities.
    (d) Insurance for the existence of lead-based paint hazards. A PHA 
may also purchase special liability insurance against the existence of 
lead-based paint hazards, 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 2 
CFR part 200 and Sec.  965.205 of this title.) 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, as amended at 64 FR 50228, Sept. 15, 1999; 
80 FR 75943, Dec. 7, 2015]



        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

[[Page 452]]

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 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 2 CFR 200.320(d)). In identifying the 
evaluation factors and their relative importance, as required by Sec.  2 
CFR 200.320(d) 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 2 CFR 200.320(f)).
    (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.

[61 FR 7969, Feb. 29, 1996, as amended at 80 FR 75943, Dec. 7, 2015]



   Subpart D_Individual Metering of Utilities for Existing PHA-Owned 
                                Projects

    Source: 61 FR 7970, Feb. 29, 1996, unless otherwise noted.

[[Page 453]]



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 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.

[[Page 454]]



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.



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

[[Page 455]]

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 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;

[[Page 456]]

    (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 
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

[[Page 457]]

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]



                   Subpart G_Smoke-Free Public Housing

    Source: 81 FR 87444, Dec. 5, 2016, unless otherwise noted.



Sec.  965.651  Applicability.

    This subpart applies to public housing units, except for dwelling 
units in a mixed-finance project. Public housing is defined as low-
income housing, and all necessary appurtenances (e.g., community 
facilities, public housing offices, day care centers, and laundry rooms) 
thereto, assisted under the U.S. Housing Act of 1937 (the 1937 Act), 
other than assistance under section 8 of the 1937 Act.



Sec.  965.653  Smoke-free public housing.

    (a) In general. PHAs must design and implement a policy prohibiting 
the use of prohibited tobacco products in all public housing living 
units and interior areas (including but not limited to hallways, rental 
and administrative offices, community centers, day care centers, laundry 
centers, and similar structures), as well as in outdoor areas within 25 
feet from public housing and administrative office buildings 
(collectively, ``restricted areas'') in which public housing is located.
    (b) Designated smoking areas. PHAs may limit smoking to designated 
smoking areas on the grounds of the public housing or administrative 
office buildings in order to accommodate residents who smoke. These 
areas must be outside of any restricted areas, as defined in paragraph 
(a) of this section, and may include partially enclosed structures. 
Alternatively, PHAs may choose to create additional smoke-free areas 
outside the restricted areas or to make their entire grounds smoke-free.
    (c) Prohibited tobacco products. A PHA's smoke-free policy must, at 
a minimum, ban the use of all prohibited tobacco products. Prohibited 
tobacco products are defined as:
    (1) Items that involve the ignition and burning of tobacco leaves, 
such as (but not limited to) cigarettes, cigars, and pipes.
    (2) To the extent not covered by paragraph (c)(1) of this section, 
waterpipes (hookahs).



Sec.  965.655  Implementation.

    (a) Amendments. PHAs are required to implement the requirements of 
this subpart by amending each of the following:

[[Page 458]]

    (1) All applicable PHA plans, according to the provisions in 24 CFR 
part 903.
    (2) Tenant leases, according to the provisions of 24 CFR 966.4.
    (b) Deadline. All PHAs must be in full compliance, with effective 
policy amendments, by July 30, 2018.



             Subpart H_Lead-Based Paint Poisoning Prevention



Sec.  965.701  Lead-based paint poisoning prevention.

    The requirements of the Lead-Based Paint Poisoning Prevention Act 
(42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction 
Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations at part 
35, subparts A, B, L, and R of this title apply to this program.

[64 FR 50229, Sept. 15, 1999]

Subpart I [Reserved]



PART 966_PUBLIC HOUSING LEASE AND GRIEVANCE PROCEDURE--Table of Contents



         Subpart A_Dwelling Leases, Procedures and Requirements

Sec.
966.1 Purpose and applicability.
966.2 Definitions.
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.
966.8 Providing opportunity to receive emergency rent relief.

             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.
966.56 Procedures governing the hearing.
966.57 Decision of the hearing officer.

    Authority: 42 U.S.C. 1437d 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 applicability.

    (a) This part is applicable to public housing.
    (b) Subpart A of this part prescribes the provisions that must be 
incorporated in leases for public housing dwelling units.
    (c) Subpart B of this part prescribes public housing grievance 
hearing requirements.

[66 FR 28802, May 24, 2001]



Sec.  966.2  Definitions.

    The following terms are defined in part 5, subpart A of this title: 
1937 Act, covered person, drug, drug-related criminal activity, 
federally assisted housing, guest, household, HUD, other person under 
the tenant's control, public housing, premises, public housing agency, 
Section 8, violent criminal activity.

[66 FR 28802, May 24, 2001]



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) Parties, dwelling unit and term. (1) The lease shall state:
    (i) The names of the PHA and the tenant;
    (ii) The unit rented (address, apartment number, and any other 
information needed to identify the dwelling unit);

[[Page 459]]

    (iii) The term of the lease (lease term and renewal in accordance 
with paragraph (a)(2) of this section);
    (iv) A statement of what utilities, services, and equipment are to 
be supplied by the PHA without additional cost, and what utilities and 
appliances are to be paid for by the tenant;
    (v) The composition of the household as approved by the PHA (family 
members and any PHA-approved live-in aide). The family must promptly 
inform the PHA of the birth, adoption, or court-awarded custody of a 
child. The family must request PHA approval to add any other family 
member as an occupant of the unit;
    (vi) HUD's regulations in 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking) apply.
    (2) Lease term and renewal. (i) The lease shall have a twelve month 
term. Except as provided in paragraph (a)(2)(ii) of this section, the 
lease term must be automatically renewed for the same period.
    (ii) The PHA may not renew the lease if the family has violated the 
requirement for resident performance of community service or 
participation in an economic self-sufficiency program in accordance with 
part 960, subpart F of this chapter.
    (iii) The lease shall convert to a month-to-month term for families 
determined to be over-income whose tenancy will be terminated in 
accordance with Sec.  960.507(d)(2) of this chapter as of the date of 
the notice provided under Sec.  960.507(c)(3) of this chapter. PHAs must 
charge these families, who continue to be public housing program 
participants, the family's choice of income-based, flat rent, or 
prorated rent for mixed families during the period before termination.
    (iv) At any time, the PHA may terminate the tenancy in accordance 
with paragraph (l) of this section.
    (3) Execution and modification. The lease must be executed by the 
tenant and the PHA, except for automatic renewals of a lease. The lease 
may modified at any time by written agreement of the tenant and the PHA.
    (b) Payments due under the lease--(1) Tenant rent. (i) The tenant 
shall pay the amount of the monthly tenant rent determined by the PHA in 
accordance with HUD regulations and other requirements. The amount of 
the tenant rent is subject to change in accordance with HUD 
requirements.
    (ii) The lease shall specify the initial amount of the tenant rent 
at the beginning of the initial lease term. The PHA shall give the 
tenant written notice stating any change in the amount of tenant rent, 
and when the change is effective.
    (2) PHA charges. 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) Late payment penalties. At the option of the PHA, the lease may 
provide for payment of penalties for late payment.
    (4) When charges are due. 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) Security deposits. 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:

[[Page 460]]

    (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. The term guest is defined in 24 CFR 
5.100.
    (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:
    (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

[[Page 461]]

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.
    (9) To consider lease bifurcation, as provided in 24 CFR 5.2009, in 
circumstances involving domestic violence, dating violence, sexual 
assault, or stalking addressed in 24 CFR part 5, subpart L (Protection 
for Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking), provided that, if a PHA chooses to bifurcate a lease, no 
assistance will be given for an individual who does not meet public 
housing eligibility and 24 CFR 5.508(h)(2) applies to submission of 
evidence of citizenship or eligible immigration status.
    (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 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 no tenant, member of the tenant's household, 
or guest engages in:
    (A) Criminal activity. (1) Any criminal activity that threatens the 
health, safety or right to peaceful enjoyment of the premises by other 
residents;
    (2) Any drug-related criminal activity on or off the premises; or
    (B) Civil activity. For any units covered by 24 CFR part 965, 
subpart G, any smoking of prohibited tobacco products in restricted 
areas, as defined by 24

[[Page 462]]

CFR 965.653(a), or in other outdoor areas that the PHA has designated as 
smoke-free.
    (ii) To assure that no other person under the tenant's control 
engages in:
    (A) Criminal activity. (1) Any criminal activity that threatens the 
health, safety or right to peaceful enjoyment of the premises by other 
residents;
    (2) Any drug-related criminal activity on the premises; or
    (B) Civil activity. For any units covered by 24 CFR part 965, 
subpart G, any smoking of prohibited tobacco products in restricted 
areas, as defined by 24 CFR 965.653(a), or in other outdoor areas that 
the PHA has designated as smoke-free.
    (iii) To assure that no member of the household engages in an abuse 
or pattern of abuse of alcohol that affects the health, safety, or right 
to peaceful enjoyment of the premises by other residents.
    (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 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;

[[Page 463]]

    (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 state the procedures to be followed by the PHA and by the tenant 
to terminate the tenancy.
    (2) Grounds for termination of tenancy. The PHA may terminate the 
tenancy only for:
    (i) Serious or repeated violation of material terms of the lease, 
such as the following:
    (A) Failure to make payments due under the lease;
    (B) Failure to fulfill household obligations, as described in 
paragraph (f) of this section;
    (ii) Being over the income limit for the program, as provided in 24 
CFR 960.507.
    (iii) No longer meeting the restrictions on net assets and property 
ownership as provided in Sec.  5.618 of this title.
    (iv) Other good cause. Other good cause includes, but is not limited 
to, the following:
    (A) Criminal activity or alcohol abuse as provided in paragraph 
(1)(5) of this section;
    (B) Discovery after admission of facts that made the tenant 
ineligible;
    (C) Discovery of material false statements or fraud by the tenant in 
connection with an application for assistance or with reexamination of 
income;
    (D) Failure of a family member to comply with service requirement 
provisions of part 960, subpart F, of this chapter--as grounds only for 
non-renewal of the lease and termination of tenancy at the end of the 
twelve-month lease term; and
    (E) Failure to accept the PHA's offer of a lease revision to an 
existing lease: that is on a form adopted by the PHA in accordance with 
Sec.  966.3; with written notice of the offer of the revision at least 
60 calendar days before the lease revision is scheduled to take effect; 
and with the offer specifying a reasonable time limit within that period 
for acceptance by the family.
    (3) Lease termination notice. (i) The PHA must give written notice 
of lease termination of:
    (A) 14 days in the case of failure to pay rent;
    (B) A reasonable period of time considering the seriousness of the 
situation (but not to exceed 30 days):
    (1) If the health or safety of other residents, PHA employees, or 
persons residing in the immediate vicinity of the premises is 
threatened; or
    (2) If any member of the household has engaged in any drug-related 
criminal activity or violent criminal activity; or
    (3) If any member of the household has been convicted of a felony;
    (C) 30 days in any other case, except that if a State or local law 
allows a shorter notice period, such shorter period shall apply.
    (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

[[Page 464]]

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.
    (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) PHA termination of tenancy for criminal activity or alcohol 
abuse--(i) Evicting drug criminals. (A) Methamphetamine conviction. The 
PHA must immediately terminate the tenancy if the PHA determines that 
any member of the household has ever been convicted of drug-related 
criminal activity for manufacture or production of methamphetamine on 
the premises of federally assisted housing.
    (B) Drug crime on or off the premises. The lease must provide that 
drug-related criminal activity engaged in on or off the premises by any 
tenant, member of the tenant's household or guest, and any such activity 
engaged in on the premises by any other person under the tenant's 
control, is grounds for the PHA to terminate tenancy. In addition, the 
lease must provide that a PHA may evict a family when the PHA determines 
that a household member is illegally using a drug or when the PHA 
determines that a pattern of illegal use of a drug interferes with the 
health, safety, or right to peaceful enjoyment of the premises by other 
residents.
    (ii) Evicting other criminals. (A) Threat to other residents. The 
lease must provide that any criminal activity by a covered person that 
threatens the health, safety, or right to peaceful enjoyment of the 
premises by other residents (including PHA management staff residing on 
the premises) or threatens the health, safety, or right to peaceful 
enjoyment of their residences by persons residing in the immediate 
vicinity of the premises is grounds for termination of tenancy.
    (B) Fugitive felon or parole violator. The PHA may terminate the 
tenancy if a tenant is fleeing to avoid prosecution, or custody or 
confinement after conviction, for a crime, or attempt to commit a crime, 
that is a felony under the laws of the place from which the individual 
flees, or that, in the case of the State of New Jersey, is a high 
misdemeanor; or violating a condition of probation or parole imposed 
under Federal or State law.

[[Page 465]]

    (iii) Eviction for criminal activity. (A) Evidence. The PHA may 
evict the tenant by judicial action for criminal activity in accordance 
with this section if the PHA determines that the covered person has 
engaged in the criminal activity, regardless of whether the covered 
person has been arrested or convicted for such activity and without 
satisfying the standard of proof used for a criminal conviction.
    (B) Notice to Post Office. When a PHA evicts an individual or family 
for criminal activity, the PHA must notify the local post office serving 
the dwelling unit that the individual or family is no longer residing in 
the unit.
    (iv) Use of criminal record. If the PHA seeks to terminate the 
tenancy for criminal activity as shown by a criminal record, the PHA 
must notify the household of the proposed action to be based on the 
information and must provide the subject of the record and the tenant 
with a copy of the criminal record before a PHA grievance hearing or 
court trial concerning the termination of tenancy or eviction. The 
tenant must be given an opportunity to dispute the accuracy and 
relevance of that record in the grievance hearing or court trial.
    (v) Cost of obtaining criminal record. The PHA may not pass along to 
the tenant the costs of a criminal records check.
    (vi) Evicting alcohol abusers. The PHA must establish standards that 
allow termination of tenancy if the PHA determines that a household 
member has:
    (A) Engaged in abuse or pattern of abuse of alcohol that threatens 
the health, safety, or right to peaceful enjoyment of the premises by 
other residents; or
    (B) Furnished false or misleading information concerning illegal 
drug use, alcohol abuse, or rehabilitation of illegal drug users or 
alcohol abusers.
    (vii) PHA action, generally. (A) Assessment under PHAS. Under the 
Public Housing Assessment System (PHAS), PHAs that have adopted 
policies, implemented procedures and can document that they 
appropriately evict any public housing residents who engage in certain 
activity detrimental to the public housing community receive points. 
(See 24 CFR 902.43(a)(5).) This policy takes into account the importance 
of eviction of such residents to public housing communities and program 
integrity, and the demand for assisted housing by families who will 
adhere to lease responsibilities.
    (B) Consideration of circumstances. In a manner consistent with such 
policies, procedures and practices, the PHA may consider all 
circumstances relevant to a particular case such as the seriousness of 
the offending action, the extent of participation by the leaseholder in 
the offending action, the effects that the eviction would have on family 
members not involved in the offending activity and the extent to which 
the leaseholder has shown personal responsibility and has taken all 
reasonable steps to prevent or mitigate the offending action.
    (C) Exclusion of culpable household member. The PHA may require a 
tenant to exclude a household member in order to continue to reside in 
the assisted unit, where that household member has participated in or 
been culpable for action or failure to act that warrants termination.
    (D) Consideration of rehabilitation. In determining whether to 
terminate tenancy for illegal drug use or a pattern of illegal drug use 
by a household member who is no longer engaging in such use, or for 
abuse or a pattern of abuse of alcohol by a household member who is no 
longer engaging in such abuse, the PHA may consider whether such 
household member is participating in or has successfully completed a 
supervised drug or alcohol rehabilitation program, or has otherwise been 
rehabilitated successfully (42 U.S.C. 13662). For this purpose, the PHA 
may require the tenant to submit evidence of the household member's 
current participation in, or successful completion of, a supervised drug 
or alcohol rehabilitation program or evidence of otherwise having been 
rehabilitated successfully.
    (E) Length of period of mandatory prohibition on admission. If a 
statute requires that the PHA prohibit admission of persons for a 
prescribed period of time after some disqualifying behavior or event, 
the PHA may apply that prohibition for a longer period of time.

[[Page 466]]

    (F) Nondiscrimination limitation. The PHA's eviction actions must be 
consistent with fair housing and equal opportunity provisions of Sec.  
5.105 of this title.
    (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. (1) The lease must provide that all 
disputes concerning the obligations of the tenant or the PHA must 
(except as provided in Sec.  966.51(a)(2)) be resolved in accordance 
with the PHA grievance procedures. The grievance procedures must comply 
with subpart B of this part.
    (2) The lease must include a description of the PHA's policies for 
selecting a hearing officer.
    (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; 
65 FR 16730, Mar. 29, 2000; 66 FR 28802, May 24, 2001; 66 FR 32875, June 
18, 2001; 66 FR 33134, June 20, 2001; 69 FR 68791, Nov. 26, 2004; 75 FR 
66262, Oct. 27, 2010; 81 FR 12374, Mar. 8, 2016; 81 FR 80815, Nov. 16, 
2016; 81 FR 87444, Dec. 5, 2016; 88 FR 9675, Feb. 14, 2023]



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.

[[Page 467]]

    (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 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]



Sec.  966.8  Providing opportunity to receive emergency rent relief.

    (a) If the Secretary determines that tenants must be provided with 
adequate notice to secure Federal funding that is available due to a 
Presidential declaration of a national emergency:
    (1) The notice of lease termination required in Sec.  966.4(l)(3) 
for failure to pay rent must provide such information as required by the 
Secretary; and
    (2) Notwithstanding Sec.  966.4(l)(3)(i)(A), the notice of lease 
termination for failure to pay rent must provide for at least 30 days 
from the date the tenant receives the notice.
    (b) Upon the Secretary's determination in paragraph (a) of this 
section, the PHA must provide notice to all tenants of the requirements 
in paragraph (a) taking effect.

[86 FR 55701, Oct. 7, 2021]



             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  Applicability.

    (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

[[Page 468]]

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;
    (B) Any violent or drug-related criminal activity on or off such 
premises; or
    (C) Any criminal activity that resulted in felony conviction of a 
household member.
    (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; 
66 FR 28804, May 24, 2001]



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. A PHA may establish an expedited grievance procedure as 
defined in Sec.  966.53.
    (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 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.
    (e) The PHA must not only meet the minimal procedural due process 
requirements contained in this subpart but also satisfy any additional 
requirements required by local, state, or federal law.

[56 FR 51579, Oct. 11, 1991, as amended at 81 FR 12374, Mar. 8, 2016]



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.
    (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;

[[Page 469]]

    (4) A decision on the merits.
    (d) Expedited grievance means a procedure established by the PHA for 
any grievance concerning a termination of tenancy or eviction that 
involves:
    (1) 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
    (2) Any drug-related or violent criminal activity on or off such 
premises.
    (e) Hearing officer means an impartial person or persons selected by 
the PHA, other than the person who made or approved the decision under 
review, or a subordinate of that person. Such individual or individuals 
do not need legal training. PHAs must describe their policies for 
selection of a hearing officer in their lease forms as required by Sec.  
966.4, changes to which are subject to a 30-day comment period as 
described in Sec.  966.3.
    (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; 81 FR 12374, Mar. 8, 2016]



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 may be 
obtained if the complainant is not satisfied.

[40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, 
as amended at 81 FR 12374, Mar. 8, 2016]



Sec.  966.56  Procedures governing the hearing.

    (a) The hearing must be scheduled promptly for a time and place 
reasonably convenient to both the complainant and the PHA and held 
before a hearing officer. A written notification specifying the time, 
place, and the procedures governing the hearing must be delivered to the 
complainant and the appropriate official.
    (b) The complainant shall be afforded a fair hearing, which shall 
include:
    (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) If the complainant or the PHA fails to appear at a scheduled 
hearing, the hearing officer may make a determination to postpone the 
hearing for no more than 5 business days or may make a determination 
that the party has waived his right to a hearing. Both

[[Page 470]]

the complainant and the PHA must be notified of the determination by the 
hearing officer. A determination that the complainant has waived the 
complainant's right to a hearing will 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.
    (d) 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.
    (e) 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.
    (f) 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.
    (g) Limited English Proficiency. PHAs must comply with HUD's ``Final 
Guidance to Federal Financial Assistance Recipients Regarding Title VI 
Prohibition Against National Origin Discrimination Affecting Limited 
English Proficient Persons'' issued on January 22, 2007 and available at 
http://portal.hud.gov/hudportal/HUD?src=/program_offices/
fair_housing_equal_opp/promotingfh/lep-faq.

[40 FR 33406, Aug. 7, 1975. Redesignated at 49 FR 6714, Feb. 23, 1984, 
and amended at 56 FR 51580, Oct. 11, 1991; 81 FR 12374, Mar. 8, 2016]



Sec.  966.57  Decision of the hearing officer.

    (a) The hearing officer must prepare a written decision, including 
the reasons for the PHA's decision within a reasonable time after the 
hearing. A copy of the decision must be sent to the complainant and the 
PHA. The PHA must retain a copy of the decision in the tenant's folder. 
The PHA must maintain a log of all hearing officer decisions and make 
that log available upon request of the hearing officer, a prospective 
complainant, or a prospective complainant's representative.
    (b) The decision of the hearing officer will be binding on the PHA 
unless the PHA Board of Commissioners determines 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 affects the complainant's rights, duties, welfare or 
status; or
    (2) The decision of the hearing officer 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 or Board of Commissioners in 
favor of the PHA or which denies the relief requested by the complainant 
in whole or in part will 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.

[81 FR 12375, Mar. 8, 2016]



PART 970_PUBLIC HOUSING PROGRAM_DEMOLITION OR DISPOSITION OF
PUBLIC HOUSING PROJECTS--Table of Contents



Sec.
970.1 Purpose.
970.3 Applicability.
970.5 Definitions.
970.7 General requirements for HUD approval of a PHA demolition/
          disposition application.
970.9 Resident participation--consultation and opportunity to purchase.
970.11 Procedures for the offer of sale to established eligible 
          organizations.
970.13 Environmental review requirements.
970.15 Specific criteria for HUD approval of demolition requests.
970.17 Specific criteria for HUD approval of disposition requests.
970.19 Disposition of property; use of proceeds.
970.21 Relocation of residents.
970.23 Costs of demolition and relocation of displaced tenants.
970.25 Required and permitted actions prior to approval.

[[Page 471]]

970.27 De minimis exception to demolition requirements.
970.29 Criteria for disapproval of demolition or disposition 
          applications.
970.31 Replacement units.
970.33 Effect on Operating Fund Program and Capital Fund Program.
970.35 Reports and records.

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

    Source: 71 FR 62362, Oct. 24, 2006, unless otherwise noted.



Sec.  970.1  Purpose.

    This part states requirements for HUD approval of a public housing 
agency's application for demolition or disposition (in whole or in part) 
of public housing developments assisted under Title I of the U.S. 
Housing Act of 1937 (Act). The regulations in 2 CFR part 200 are not 
applicable to this part.



Sec.  970.3  Applicability.

    (a) This part applies to public housing developments that are owned 
by public housing agencies (PHAs) and that are subject to annual 
contributions contracts (ACCs) under the Act.
    (b) This part does not apply to the following:
    (1) PHA-owned section 8 housing, or housing leased under former 
sections 10(c) or 23 of the Act;
    (2) Demolition or disposition before the date of full availability 
(DOFA) of property acquired incident to the development of a public 
housing project (however, this exception shall not apply to dwelling 
units under ACC);
    (3) The conveyance of public housing for the purpose of providing 
homeownership opportunities for lower-income families under sections 21 
and 32 of the Act (42 U.S.C. 1437s and 42 U.S.C. 1437z-4, respectively), 
the homeownership program under former section 5(h) of the Act (42 
U.S.C. 1437c(h)), or other predecessor homeownership programs;
    (4) The leasing of dwelling or non-dwelling space incidental to the 
normal operation of the project for public housing purposes, as 
permitted by the ACC;
    (5) Making available common areas and unoccupied dwelling units in 
public housing projects to provide HUD-approved economic self-
sufficiency services and activities to promote employment of public 
housing residents;
    (6) 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.  970.5. (This 
includes the conversion of bedroom size, occupancy type, changing the 
status of unit from dwelling to non-dwelling.);
    (7) 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;
    (8) A whole or partial taking by a public or quasi-public entity 
(taking agency) authorized to take real property by its use of police 
power or exercise of its power of eminent domain under state law. A 
taking does not qualify for the exception under this paragraph unless:
    (i) The taking agency has been authorized to acquire real property 
by use of its police power or power of eminent domain under its state 
law;
    (ii) The taking agency has taken at least the first step in formal 
proceedings under its state law; and
    (iii) If the taking is for a federally assisted project, the Uniform 
Relocation Act (URA) (42 U.S.C. 4601 et seq.) applies to any resulting 
displacement of residents and it is the responsibility of the taking 
agency to comply with applicable URA requirements.
    (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 Cranston-Gonzalez National Affordable Housing Act 
(HOPE I) (42 U.S.C. 1437aaa note);
    (10) Units or land leased for non-dwelling purposes for one year or 
less;
    (11) A public housing property that is conveyed by a PHA prior to 
DOFA to enable an owner entity to develop the property using the mixed-
finance development method;
    (12) Disposition of public housing property for development pursuant 
to the mixed-finance development method at 24 CFR part 941, subpart F;
    (13) Demolition under the de minimis exception in Sec.  970.27, 
except that the environmental review provisions apply, including the 
provisions at Sec. Sec.  970.7(a)(15) and (b)(13) of this part.

[[Page 472]]

    (14) Demolition (but not disposition) of severely distressed units 
as part of a revitalization plan under section 24 of the Act (42 U.S.C. 
1437v) (HOPE VI) approved after October 21, 1998;
    (15) Demolition (but not disposition) of public housing developments 
removed from a PHA's inventory under section 33 of the Act, 42 U.S.C. 
1437z-5.

[71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008]



Sec.  970.5  Definitions.

    ACC, or annual contributions contract, is defined in 24 CFR 5.403.
    Act means the United States Housing Act of 1937, 42 U.S.C. 1437 et 
seq.
    Appropriate government officials mean the Chief Executive Officer or 
officers of a unit of general local government.
    Assistant Secretary means the Assistant Secretary for Public and 
Indian Housing at HUD.
    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 removal by razing or other means, in whole or 
in part, of one or more permanent buildings of a public housing 
development. A demolition involves any four or more of the following:
    (1) Envelope removal (roof, windows, exterior walls);
    (2) Kitchen removal;
    (3) Bathroom removal;
    (4) Electrical system removal (unit service panels and distribution 
circuits); or
    (5) Plumbing system removal (e.g., either the hot water heater or 
distribution piping in the unit, or both).
    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 development, subject to the exceptions stated in Sec.  
970.3.
    DOFA, or date of full availability, means the last day of the month 
in which substantially all (95 percent or more) of the units in a 
housing development are available for occupancy.
    Firm financial commitment means a commitment that obligates a 
creditable source, lender, or equity provider, to the lending or equity 
investment of a specific sum of funds to be made on or before a specific 
date(s) and may contain contingencies or conditions that must be 
satisfied by the borrower (or entity receiving equity investments) 
before the closing of the transaction. The condition of a firm 
commitment must be that it is enforceable by the borrower (or entity 
receiving the equity investment) upon the satisfaction of all 
contingencies or conditions.
    PHA Plan--Means the PHA's initial, annual, and 5-year submissions 
under section 5A of the U.S. Housing Act of 1937, 42 U.S.C. 1437c-1.
    Resident Advisory Board (RAB) has the same meaning as in Sec.  
903.13(a) of this title.
    Resident Council means a resident organization, the role and 
requirements of which are as described in 24 CFR part 964.
    Total development cost has the same meaning as in 24 CFR 941.103.



Sec.  970.7  General requirements for HUD approval of a PHA demolition
/disposition application.

    (a) Application for HUD Approval. A PHA must obtain written approval 
from HUD before undertaking any transaction involving demolition or 
disposition of PHA-owned property under the ACC. Where a PHA demolishes 
or disposes of public housing property without HUD approval, no HUD 
funds may be used to fund the costs of demolition or disposition or 
reimburse the PHA for those costs. HUD will approve an application for 
demolition or disposition upon the PHA's submission of an application 
with the required certifications and the supporting information required 
by this section and Sec. Sec.  970.15 or 970.17. Section 970.29 
specifies criteria for disapproval

[[Page 473]]

of an application. Approval of the application under this part does not 
imply approval of a request for additional funding, which the PHA must 
make separately under a program that makes available funding for this 
purpose. The PHA shall submit the application for demolition or 
disposition and the timetable in a time and manner and in a form 
prescribed by HUD. The supporting information shall include:
    (1) A certification that the PHA has described the demolition or 
disposition in the PHA Annual Plan and timetable under 24 CFR part 903 
(except in the case of small or high-performing PHAs eligible for 
streamlined annual plan treatment), and that the description in the PHA 
Annual Plan is identical to the application submitted pursuant to this 
part and otherwise complies with section 18 of the Act (42 U.S.C. 1437p) 
and this part;
    (2) A description of all identifiable property, by development, 
including land, dwelling units, and other improvements, involved in the 
proposed demolition or disposition;
    (3) A description of the specific action proposed, such as:
    (i) Demolition, disposition, or demolition with disposition;
    (ii) If disposition is involved, the method of sale;
    (4) A general timetable for the proposed action(s), including the 
initial contract for demolition, the actual demolition, and, if 
applicable, the closing of sale or other form of disposition;
    (5) A statement justifying the proposed demolition or disposition 
under the applicable criteria of Sec. Sec.  970.15 or 970.17;
    (6) If applicable, a plan for the relocation of tenants who would be 
displaced by the proposed demolition or disposition (including persons 
with disabilities requiring reasonable accommodations and a relocation 
timetable as prescribed in Sec.  970.21);
    (7) A description with supporting evidence of the PHA's 
consultations with residents, any resident organizations, and the 
Resident Advisory Board, as required under Sec.  903.9 of this title;
    (8) In the case of disposition only, evidence of compliance with the 
offering to resident organizations, as required under Sec.  970.9;
    (9) In the case of disposition, an estimate of the fair market value 
of the property, established on the basis of one independent appraisal, 
unless otherwise determined by HUD, as described in Sec.  970.19(c);
    (10) 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.  970.19;
    (11) An estimate of costs for any required relocation housing, 
moving costs, and counseling.
    (12) Where the PHA is requesting a waiver of the requirement for the 
application of proceeds for repayment of outstanding debt, the PHA must 
request such a waiver in its application, along with a description of 
the proposed use of the proceeds;
    (13) A copy of a resolution by the PHA's Board of Commissioners 
approving the specific demolition or disposition application (or, in the 
case of the report required under Sec.  970.27(e) for ``de minimis'' 
demolitions, the Board of Commissioner's resolution approving the ``de 
minimis'' action) for that development or developments or portions 
thereof. The resolution must be signed and dated after all resident and 
local government consultation has been completed;
    (14) Evidence that the application was developed in consultation 
with appropriate government officials as defined in Sec.  970.5, 
including:
    (i) A description of the process of consultation with local 
government officials, which summarizes dates, meetings, and issues 
raised by the local government officials and the PHA's responses to 
those issues;
    (ii) A signed and dated letter in support of the application from 
the chief executive officer of the unit of local government that 
demonstrates that the PHA has consulted with the appropriate local 
government officials on the proposed demolition or disposition;
    (iii) Where the local government consistently fails to respond to 
the PHA's attempts at consultation, including letters, requests for 
meetings, public

[[Page 474]]

notices, and other reasonable efforts, documentation of those attempts;
    (iv) Where the PHA covers multiple jurisdictions (such as a regional 
housing authority), the PHA must meet these requirements for each of the 
jurisdictions where the PHA is proposing demolition or disposition of 
PHA property;
    (15) An approved environmental review of the proposed demolition or 
disposition in accordance with 24 CFR parts 50 or 58 for any demolition 
or disposition of public housing property covered under this part, as 
required under 24 CFR 970.13;
    (16) A certification that the demolition or disposition application 
does not violate any remedial civil rights order or agreement, voluntary 
compliance agreement, final judgment, consent decree, settlement 
agreement, or other court order or agreement;
    (17) Any additional information necessary to support the application 
and assist HUD in making determinations under this part.
    (b) Completion of demolition/disposition or rescissions of approval. 
(1) HUD will consider a PHA's request to rescind an earlier approval to 
demolish or dispose of public housing property, where a PHA submits a 
resolution from the Board of Commissioners and submits documentation 
that the conditions that originally led to the request for demolition or 
disposition have significantly changed or been removed.
    (2) The Assistant Secretary will not approve any request by the PHA 
to either substitute units or add units to those originally included in 
the approved demolition or disposition application, unless the PHA 
submits a new application for those units that meet the requirements of 
this part.



Sec.  970.9  Resident participation--consultation and opportunity to purchase.

    (a) Resident consultation. PHAs must consult with residents who will 
be affected by the proposed action with respect to all demolition or 
disposition applications. The PHA must provide with its application 
evidence that the application was developed in consultation with 
residents who will be affected by the proposed action, any resident 
organizations for the development, PHA-wide resident organizations that 
will be affected by the demolition or disposition, and the Resident 
Advisory Board (RAB). The PHA must also submit copies of any written 
comments submitted to the PHA and any evaluation that the PHA has made 
of the comments.
    (b) Resident organization offer to sell--applicability. In the 
situation where the PHA applies to dispose of a development or portion 
of a development:
    (1) The PHA shall, in appropriate circumstances as determined by the 
Assistant Secretary, initially offer the property proposed for 
disposition to any eligible resident organization, eligible resident 
management corporation as defined in 24 CFR part 964, or to a nonprofit 
organization acting on behalf of the residents at any development 
proposed for disposition, if the resident entity has expressed an 
interest in purchasing the property for continued use as low-income 
housing. The entity must make the request in writing to the PHA, no 
later than 30 days after the resident entity has received the 
notification of sale from the PHA;
    (2) If the resident entity has expressed an interest in purchasing 
the property for continued use as low-income housing, the entity, in 
order for its purchase offer to be considered, must:
    (i) In the case of a nonprofit organization, be acting on behalf of 
the residents of the development; and
    (ii) Demonstrate that it has obtained a firm commitment for the 
necessary financing within 60 days of serving its written notice of 
interest under paragraph (b)(1) of this section.
    (3) The requirements of this section do not apply to the following 
cases, which have been determined not to present an appropriate 
opportunity for purchase by a resident organization:
    (i) A unit of state or local government requests to acquire vacant 
land that is less than two acres in order to build or expand its public 
services (a local government wishes to use the land to build or 
establish a police substation); or
    (ii) A PHA seeks disposition outside the public housing program to 
privately finance or otherwise develop a

[[Page 475]]

facility to benefit low-income families (e.g., day care center, 
administrative building, mixed-finance housing under 24 CFR part 941 
subpart F, or other types of low-income housing);
    (iii) Units that have been legally vacated in accordance with the 
HOPE VI program, the regulations at 24 CFR part 971, or the mandatory 
conversion regulations at 24 CFR part 972, excluding developments where 
the PHA has consolidated vacancies;
    (iv) Distressed units required to be converted to tenant-based 
assistance under section 33 of the 1937 Act (42 U.S.C. 1437z-5); or
    (v) Disposition of non-dwelling properties, including administration 
and community buildings, and maintenance facilities.
    (4) If the requirements of this section are not applicable, as 
provided in paragraph (b)(3) of this section, the PHA may proceed to 
submit to HUD its application under this part to dispose of the 
property, or a portion of the property, without affording an opportunity 
for purchase by a resident organization. However, PHAs must consult with 
their residents in accordance with paragraph (a) of this section. The 
PHA must submit documentation with date and signatures to support the 
applicability of one of the exceptions in paragraph (b)(3) of this 
section. Examples of appropriate documentation include, but are not 
limited to: a letter from the public body that wants to acquire the 
land, copies of memoranda or letters approving the PHA's previous 
application under part 970 or mandatory conversion plan, and the HUD 
transmittal document approving the proposed revitalization plan.
    (c) Established eligible organizations. Where there are eligible 
resident organizations, eligible resident management corporations as 
defined in 24 CFR part 964, or nonprofit organizations acting on behalf 
of the residents as defined in 24 CFR part 964 (collectively, 
``established eligible organizations''), that have expressed an 
interest, in writing, to the PHA within 30 days of the date of 
notification of the proposed sale, in purchasing the property for 
continued use as low-income housing at the affected development, the PHA 
shall follow the procedures for making the offer described in Sec.  
970.11.

[71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008]



Sec.  970.11  Procedures for the offer of sale to established eligible 
organizations.

    In making an offer of sale to established eligible organizations as 
defined in Sec.  970.9(c) in the case of proposed disposition, the PHA 
shall proceed as follows:
    (a) Initial written notification of sale of property. The PHA shall 
send an initial written notification to each established eligible 
organization (for purposes of this section, an established eligible 
organization that has been so notified is a ``notified eligible 
organization'') of the proposed sale of the property. The notice of sale 
must include, at a minimum, the information listed in paragraph (d) of 
this section;
    (b) Initial expression of interest. All notified eligible 
organizations shall have 30 days to initially express an interest, in 
writing, in the offer (``initial expression of interest''). The initial 
expression of interest need not contain details regarding financing, 
acceptance of an offer of sale, or any other terms of sale.
    (c) Opportunity to obtain firm financial commitment by interested 
entity. If a notified eligible organization expresses interest in 
writing during the 30-day period referred to in paragraph (b) of this 
section, no disposition of the property shall occur during the 60-day 
period beginning on the date of the receipt of the written notice of 
interest. During this period, the PHA must give the entity expressing 
interest an opportunity to obtain a firm financial commitment as defined 
in Sec.  970.5 for the financing necessary to purchase the property;
    (d) Contents of initial written notification. The initial written 
notification to established eligible organizations under paragraph (a) 
of this section must include at a minimum the following:
    (1) An identification of the development, or portion of the 
development, involved in the proposed disposition, including the 
development number and

[[Page 476]]

location, the number of units and bedroom configuration, the amount and 
use of non-dwelling space, the current physical condition (fire damaged, 
friable asbestos, lead-based paint test results), and percent of 
occupancy;
    (2) A copy of the appraisal of the property and any terms of sale;
    (3) Disclosure and description of the PHA's plans for reuse of land, 
if any, after the proposed disposition;
    (4) An identification of available resources (including its own and 
HUD's) to provide technical assistance to the organization to help it to 
better understand its opportunity to purchase the development, the 
development's value, and potential use;
    (5) A statement that public housing developments sold to resident 
organizations will not continue to receive capital and operating subsidy 
after the completion of the sale;
    (6) Any and all terms of sale that the PHA will require, including a 
statement that the purchaser must use the property for low-income 
housing. If the PHA does not know all the terms of the offer of sale at 
the time of the notice of sale, the PHA shall include all the terms of 
sale of which it is aware. The PHA must supply the totality of all the 
terms of sale and all necessary material to the residents no later than 
3 business days from the day it receives the residents' initial 
expression of interest;
    (7) A date by which an established eligible organization must 
express its interest, in writing, in response to the PHA's offer to sell 
the property proposed for demolition or disposition, which shall be up 
to 30 days from the date of the official written offer of sale from the 
PHA;
    (8) A statement that the established eligible organization will be 
given 60 days from the date of the PHA's receipt of its letter 
expressing interest to develop and submit a proposal to the PHA to 
purchase the property and to obtain a firm financial commitment, as 
defined in Sec.  970.5. The statement shall explain that the PHA shall 
approve the proposal from an organization if the proposal meets the 
terms of sale and is supported by a firm commitment for financing. The 
statement shall also provide that the PHA can consider accepting an 
offer from the organization that differs from the terms of sale. The 
statement shall explain that if the PHA receives proposals from more 
than one organization, the PHA shall select the proposal that meets the 
terms of sale, if any. In the event that two proposals from the 
development to be sold meet the terms of sale, the PHA shall choose the 
best proposal. If no proposal meets the terms of sale, the PHA in its 
discretion may or may not select the best proposal.
    (e) Response to the notice of sale. The established eligible 
organization or organizations have up to 30 days to respond to the 
notice of sale from the PHA. The established eligible organization shall 
respond to the PHA's notice of sale by means of an initial expression of 
interest under paragraph (b) of this section.
    (f) Resident proposal. The established eligible organization has up 
to 60 days from the date the PHA receives its initial expression of 
interest and provides all necessary terms and information to prepare and 
submit a proposal to the PHA for the purchase of the property of which 
the PHA plans to dispose, and to obtain a firm commitment for financing. 
The resident's proposal shall provide all the information requested in 
paragraph (i) of this section.
    (g) PHA Review of Proposals. The PHA has up to 60 days from the date 
of receipt of the proposal or proposals to review the proposals and 
determine whether they meet the terms of sale described in the PHA's 
offer or offers. If the PHA determines that the proposal meets the terms 
of sale, within 14 days of the date of this determination, the PHA shall 
notify the organization of that fact and that the proposal has been 
accepted. If the PHA determines that the proposal differs from the terms 
of sale, the PHA may accept or reject the proposal at its discretion;
    (h) Appeals. The established eligible organization has the right to 
appeal the PHA's decision to the Assistant Secretary for Public and 
Indian Housing, or his designee, by sending a letter of appeal within 30 
days of the date of the PHA's decision to the field office director. The 
letter of appeal must include copies of the proposal and any related 
correspondence, along with a

[[Page 477]]

statement of reasons why the organization believes the PHA should have 
decided differently. HUD shall render a decision within 30 days, and 
notify the organization and the PHA by letter within 14 days of such 
decision. If HUD cannot render a decision within 30 days, HUD will so 
notify the PHA and the established eligible organization in writing, in 
which case HUD will have an additional 30 days in which to render a 
decision. HUD may continue to extend its time for decision in 30-day 
increments for a total of 120 days. Once HUD renders its decision, there 
is no further administrative appeal or remedy available.
    (i) Contents of the organization's proposal. The established 
eligible organization's proposal shall at a minimum include the 
following:
    (1) The length of time the organization has been in existence;
    (2) A description of current or past activities that demonstrate the 
organization's organizational and management capability, or the planned 
acquisition of such capability through a partner or other outside 
entities (in which case the proposal should state how the partner or 
outside entity meets this requirement);
    (3) To the extent not included in paragraph (i)(2) of this section, 
the organization's experience in the development of low-income housing, 
or planned arrangements with partners or outside entities with such 
experience (in which case the proposal should state how the partner or 
outside entity meets this requirement);
    (4) A statement of financial capability;
    (5) A description of involvement of any non-resident organization 
(such as non-profit, for-profit, governmental, or other entities), if 
any, the proposed division of responsibilities between the non-resident 
organization and the established eligible organization, and the non-
resident organization's financial capabilities;
    (6) A plan for financing the purchase of the property and a firm 
financial commitment as stated in paragraph (c) of this section for 
funding resources necessary to purchase the property and pay for any 
necessary repairs;
    (7) A plan for using the property for low-income housing;
    (8) The proposed purchase price in relation to the appraised value;
    (9) Justification for purchase at less than the fair market value in 
accordance with Sec.  970.19(a) of this part, if appropriate;
    (10) Estimated time schedule for completing the transaction;
    (11) Any additional items necessary to respond fully to the PHA's 
terms of sale;
    (12) A resolution from the resident organization approving the 
proposal; and
    (13) A proposed date of settlement, generally not to exceed 6 months 
from the date of PHA approval of the proposal, or such period as the PHA 
may determine to be reasonable.
    (j) PHA obligations. The PHA must:
    (1) Prepare and distribute the initial notice of sale pursuant to 24 
CFR 970.11(a), and, if any established eligible organization expresses 
an interest, any further documents necessary to enable the organization 
or organizations to make an offer to purchase;
    (2) Evaluate proposals received, make the selection based on the 
considerations set forth in paragraph (b) of this section, and issue 
letters of acceptance or rejection;
    (3) Prepare certifications, where appropriate, as provided in 
paragraph (k) of this section;
    (4) Comply with its obligations under Sec.  970.7(a) regarding 
tenant consultation and provide evidence to HUD that the PHA has met 
those obligations. The PHA shall not act in an arbitrary manner and 
shall give full and fair consideration to any offer from a qualified 
resident management corporation, resident council of the affected 
development, or a nonprofit organization acting on behalf of the 
residents, and shall accept the proposal if the proposal meets the terms 
of sale.
    (k) PHA post-offer requirements. After the resident offer, if any, 
is made, the PHA shall:
    (1) Submit its disposition application to HUD in accordance with 
section 18 of the Act and this part. The disposition application must 
include complete documentation that the resident offer

[[Page 478]]

provisions of this part have been met. This documentation shall include:
    (i) A copy of the signed and dated PHA notification letter(s) to 
each established eligible organization informing them of the PHA's 
intention to submit an application for disposition, the organization's 
right to purchase the property to be disposed of; and
    (ii) The responses from each organization.
    (2)(i) If the PHA accepts the proposal of an established eligible 
organization, the PHA shall submit revisions to its disposition 
application to HUD in accordance with section 18 of the Act and this 
part reflecting the arrangement with the resident organization, with 
appropriate justification for a negotiated sale and for sale at less 
than fair market value, if applicable.
    (ii) If the PHA rejects the proposal of the resident organization, 
the resident organization may appeal as provided in paragraph (h) of 
this section. Once the appeal is resolved, or, if there is no appeal, 
and the 30 days allowed for appeal has passed, HUD shall proceed to 
approve or disapprove the application.
    (3) HUD will not process an application for disposition unless the 
PHA provides HUD with one of the following:
    (i) An official board resolution or its equivalent from each 
established eligible organization stating that such organization has 
received the PHA offer, and that it understands the offer and waives its 
opportunity to purchase the project, or portion of the project, covered 
by the disposition application;
    (ii) A certification from the executive director or board of 
commissioners of the PHA that the 30-day time frame to express interest 
has expired and no response was received to its offer; or
    (iii) A certification from the executive director or board of 
commissioners of the PHA with supporting documentation that the offer 
was otherwise rejected.



Sec.  970.13  Environmental review requirements.

    (a) Activities under this part (including de minimis demolition 
pursuant to Sec.  970.27) are subject to HUD environmental regulations 
in 24 CFR part 58. However, HUD may make a finding in accordance with 24 
CFR 58.11(d) of this title and may itself perform the environmental 
review under the provisions of 24 CFR part 50 if a PHA objects in 
writing to the responsible entity performing the review under 24 CFR 
part 58.
    (b) The environmental review is limited to the demolition or 
disposition action and any known re-use, and is not required for any 
unknown future re-use. Factors that indicate that the future site reuse 
can reasonably be considered to be known include the following:
    (1) Private, Federal, state, or local funding for the site reuse has 
been committed;
    (2) A grant application involving the site has been filed with the 
Federal government or a state or local unit of government;
    (3) The Federal government or a state or unit of local government 
has made a commitment to take an action, including a physical action, 
that will facilitate a particular reuse of the site; and
    (4) Architectural, engineering, or design plans for the reuse exist 
that go beyond preliminary stages.
    (c) In the case of a demolition or disposition made necessary by a 
disaster that the President has declared under the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq., or 
a disaster that has been declared under state law by the officer or 
entity with legal authority to make such declaration, pursuant to 24 CFR 
50.43 and 24 CFR 58.33, the provisions of 40 CFR 1506.11 will apply.



Sec.  970.15  Specific criteria for HUD approval of demolition requests.

    (a) In addition to other applicable requirements of this part, HUD 
will approve an application for demolition upon the PHA's certification 
that it meets the following statutory criteria, unless the application 
meets the criteria for disapproval under 24 CFR 970.29. An application 
for the demolition of all or a portion of a public housing project must 
certify that the project:
    (1) Is obsolete as to physical condition, location, or other 
factors, making it unsuitable for housing purposes, and

[[Page 479]]

no reasonable program of modifications is cost-effective to return the 
public housing project or portion of the project to useful life; and
    (2) In the case of an application for demolition of a portion of a 
project, the demolition will help to ensure the viability of the 
remaining portion of the project.
    (b) As to paragraph (a)(1) of this section:
    (1) Major problems indicative of obsolescence are:
    (i) As to physical condition: Structural deficiencies that cannot be 
corrected in a cost-effective manner (settlement of earth below the 
building caused by inadequate structural fills, faulty structural 
design, or settlement of floors), or other design or site problems 
(severe erosion or flooding);
    (ii) 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 24 CFR part 50, which jeopardize the suitability of the site 
or a portion of the site and its housing structures for residential use; 
or
    (iii) There are other factors that have seriously affected the 
marketability, usefulness, or management of the property.
    (2) HUD generally shall not consider a program of modifications to 
be cost-effective if the costs of such program exceed 62.5 percent of 
total development cost (TDC) for elevator structures and 57.14 percent 
of TDC for all other types of structures in effect at the time the 
application is submitted to HUD.
    (c) As to paragraph (a)(2) of this section, a partial demolition 
will be considered to ensure the viability of the remaining portion if 
the application certifies that the demolition will reduce development 
density to permit better access by emergency, fire, or rescue services, 
or improve marketability by reducing the density to that of the 
neighborhood or other developments in the PHA's inventory.

[71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008]



Sec.  970.17  Specific criteria for HUD approval of disposition requests.

    In addition to other applicable requirements of this part, HUD will 
approve a request for disposition by sale or other transfer of a public 
housing project or other real property if the PHA certifies that the 
retention of the property is not in the best interests of the residents 
or the PHA for at least one of the following reasons, unless information 
available to HUD is inconsistent with the certification:
    (a) Conditions in the area surrounding the project (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;
    (b) Disposition allows the acquisition, development, or 
rehabilitation of other properties that will be more efficiently or 
effectively operated as low-income housing developments;
    (c) The PHA has otherwise determined the disposition to be 
appropriate for reasons that are consistent with the goals of the PHA 
and the PHA Plan and that are otherwise consistent with the Act;
    (d) In the case of disposition of property other than dwelling units 
(community facilities or vacant land), the PHA certifies that:
    (1) The non-dwelling facilities or land exceeds the needs of the 
development (after DOFA); or
    (2) The disposition of the property is incidental to, or does not 
interfere with, continued operation of the remaining portion of the 
development.



Sec.  970.19  Disposition of property; use of proceeds.

    (a) Where HUD approves the disposition of real property of a 
development, in whole or in part, the PHA shall dispose of the property 
promptly for not less than fair market value (in which case there is no 
showing of commensurate public benefit required), unless HUD authorizes 
negotiated sale for reasons found to be in the best interests of the PHA 
or the federal government; or dispose of the property for sale for less

[[Page 480]]

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. General public improvements, 
such as streets and bridges, do not qualify as commensurate public 
benefits.
    (b) A PHA may pay the reasonable costs of disposition, and of 
relocation of displaced tenants allowable under Sec.  970.21, out of the 
gross proceeds, as approved by HUD.
    (c) To obtain an estimate of the fair market value before the 
property is advertised for bid, the PHA shall have one independent 
appraisal performed on the property proposed for disposition, unless HUD 
determines that:
    (1) More than one appraisal is warranted; or
    (2) Another 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.
    (d) To obtain an estimate of the fair market value when a property 
is not publicly advertised for bid, HUD may accept a reasonable 
valuation of the property.
    (e) A PHA shall use 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), subject to HUD 
approval, as follows:
    (1) Unless waived by HUD, for the retirement of outstanding 
obligations, if any, issued to finance original development or 
modernization of the project; and
    (2) To the extent that any net proceeds remain, after the 
application of proceeds in accordance with paragraph (e)(1) of this 
section, for:
    (i) The provision of low-income housing or to benefit the residents 
of the PHA, through such measures as modernization of lower-income 
housing or the acquisition, development, or rehabilitation of other 
properties to operate as lower-income housing; or
    (ii) Leveraging amounts for securing commercial enterprises, on-site 
in public housing developments of the PHA, appropriate to serve the 
needs of the residents.
    (f) For dispositions for the purpose stated in Sec.  970.17(b), a 
PHA must demonstrate to the satisfaction of HUD that the replacement 
units are being provided in connection with the disposition of the 
property. A PHA may use sale proceeds in accordance with paragraph (e) 
to fund the replacement units.



Sec.  970.21  Relocation of residents.

    (a) Relocation of residents on a nondiscriminatory basis and 
relocation resources. A PHA must offer each family displaced by 
demolition or disposition comparable housing that meets housing quality 
standards (HQS) and is located in an area that is generally not less 
desirable than the location of the displaced persons. The housing must 
be offered on a nondiscriminatory basis, without regard to race, color, 
religion, creed, national origin, handicap, age, familial status, or 
gender, in compliance with applicable Federal and state laws. For 
persons with disabilities displaced from a unit with reasonable 
accommodations, comparable housing should include similar 
accommodations. Such housing may include:
    (1) Tenant-based assistance, such as assistance under the Housing 
Choice Voucher Program, 24 CFR part 982, except that such assistance 
will not be considered ``comparable housing'' until the family is 
actually relocated into such housing;
    (2) Project-based assistance; or
    (3) Occupancy in a unit operated or assisted by the PHA at a rental 
rate paid by the family that is comparable to the rental rate applicable 
to the unit from which the family is vacated.
    (b) In-place tenants. A PHA may not complete disposition of a 
building until all tenants residing in the building are relocated.
    (c) Financial resources. (1) Sources of funding for relocation costs 
related to demolition or disposition may include, but are not limited 
to, capital funds or other federal funds currently available for this 
purpose;
    (2) If Federal financial assistance under the Community Development 
Block Grant (CDBG) program, 42 U.S.C. 5301 et seq. (including loan 
guarantees under section 108 of the Housing and Community Development 
Act of 1974,

[[Page 481]]

42 U.S.C. 5308 et seq.); the Urban Development Action Grant (UDAG) 
program, 42 U.S.C. 5318 et seq.; or HOME program, 42 U.S.C. 12701 et 
seq. is used in connection with the demolition or disposition of public 
housing, the project is subject to section 104(d) of the Housing and 
Community Development Act of 1974, 42 U.S.C. 5304(d) (as amended)), 
including the relocation payment provisions and the anti-displacement 
provisions, which require that comparable replacement dwellings be 
provided within the community for the same number of occupants as could 
have been housed in the occupied and vacant, occupiable low- and 
moderate-income units demolished or converted to another use.
    (d) Relocation timetable. For the purpose of determining operating 
subsidy eligibility under 24 CFR part 990, a PHA must provide the 
following information in the application or immediately following 
application submission:
    (1) The number of occupied units at the time of demolition/
disposition application approval;
    (2) A schedule for the relocation of those residents on a month-by-
month basis.
    (e) The PHA is responsible for the following:
    (1) Notifying each family residing in the development of the 
proposed demolition or disposition 90 days prior to the displacement 
date, except in cases of imminent threat to health and safety. The 
notification must include a statement that:
    (i) The development or portion of the development will be demolished 
or disposed of;
    (ii) The demolition of the building in which the family resides will 
not commence until each resident of the building has been relocated;
    (iii) Each family displaced by such action will be provided 
comparable housing, which may include housing with reasonable 
accommodations for disability, if required under section 504 of the 
Rehabilitation Act of 1973 and HUD's regulations in 24 CFR part 8, as 
described in paragraph (a) of this section;
    (2) Providing for the payment of the actual and reasonable 
relocation expenses of each resident to be displaced, including 
residents requiring reasonable accommodations because of disabilities;
    (3) Ensuring that each displaced resident is offered comparable 
replacement housing as described in paragraph (b) of this section; and
    (4) Providing any necessary counseling for residents that are 
displaced.
    (f) In addition, the PHA's plan for the relocation of residents who 
would be displaced by the proposed demolition or disposition must 
indicate:
    (1) The number of individual residents to be displaced;
    (2) The type of counseling and advisory services the PHA plans to 
provide;
    (3) What housing resources are expected to be available to provide 
housing for displaced residents; and
    (4) An estimate of the costs for counseling and advisory services 
and resident moving expenses, and the expected source for payment of 
these costs.
    (g) The Uniform Relocation Act does not apply to demolitions and 
dispositions under this part.



Sec.  970.23  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 program under the Capital 
Fund Program (24 CFR part 905), the costs of demolition and of 
relocation of displaced residents may be included in the budget funded 
with capital funds pursuant to section 9(d) of the Act (42 U.S.C. 
1437g(d)) or awarded HOPE VI or other eligible HUD funds.



Sec.  970.25  Required and permitted actions prior to approval.

    (a) A PHA may not take any action to demolish or dispose of a public 
housing development or a portion of a public housing development without 
obtaining HUD approval under this part. HUD funds may not be used to pay 
for the cost to demolish or dispose of a public housing development or a 
portion of a public housing development, unless HUD approval has been 
obtained under this part. Until the PHA receives HUD approval, the PHA 
shall continue

[[Page 482]]

to meet its ACC obligations to maintain and operate the property as 
housing for low-income families. However, the PHA may engage in planning 
activities, analysis, or consultations without seeking HUD approval. 
Planning activities may include project viability studies, capital 
planning, or comprehensive occupancy planning. The PHA must continue to 
provide full housing services to all residents that remain in the 
development. A PHA should not re-rent these units at turnover while HUD 
is considering its application for demolition or disposition. However, 
the PHA's operating subsidy eligibility will continue to be calculated 
as stated in 24 CFR part 990.
    (b) A PHA may consolidate occupancy within or among buildings of a 
development, or among developments, or with other housing for the 
purposes of improving living conditions of, or providing more efficient 
services to residents, without submitting a demolition or disposition 
application.



Sec.  970.27  De minimis exception to demolition requirements.

    (a) A PHA may demolish units without submitting an application if 
the PHA is proposing to demolish not more than the lesser of:
    (1) five dwelling units; or
    (2) 5 percent of the total dwelling units owned by the PHA over any 
5-year period.
    (b) The 5-year period referred to in paragraph (a)(2) of this 
section is the 5 years counting backward from the date of the proposed 
de minimis demolition, except that any demolition performed prior to 
October 21, 1998, will not be counted against the five units or 5 
percent of the total, as applicable. For example, if a PHA that owns 
1,000 housing units wishes to demolish units under this de minimis 
provision on July 1, 2004, and previously demolished two units under 
this provision on September 1, 2000, and two more units on July 1, 2001, 
the PHA would be able to demolish one additional unit for a total of 
five in the preceding 5 years. As another example, if a PHA that owns 60 
housing units as of July 1, 2004, had demolished two units on September 
1, 2000, and one unit on July 1, 2001, that PHA would not be able to 
demolish any further units under this ``de minimis'' provision until 
after September 1, 2005, because it would have already demolished 5 
percent of its total.
    (c)(1) In order to qualify for this exemption, the space occupied by 
the demolished unit must be used for meeting the service or other needs 
of public housing residents (use of space to construct a laundry 
facility, community center, child care facility, office space for a 
general provider; or for use as open space or garden); or
    (2) The unit being demolished must be beyond repair.
    (d) PHAs utilizing this section will comply with environmental 
review requirements at 24 CFR 970.13 and, if applicable, the 
requirements of 24 CFR 8.23.
    (e) For recordkeeping purposes, PHAs that wish to demolish units 
under this section shall submit the information required in Sec.  
970.7(a)(1), (2), (12), (13), and (14). HUD will accept a certification 
from the PHA that one of the two conditions in paragraph (c) of this 
section apply unless HUD has independent information that requirements 
for ``de minimis'' demolition have not been met.

[71 FR 62362, Oct. 24, 2006, as amended at 73 FR 3868, Jan. 23, 2008]



Sec.  970.29  Criteria for disapproval of demolition or disposition
applications.

    HUD will disapprove an application if HUD determines that:
    (a) Any certification made by the PHA under this part is clearly 
inconsistent with:
    (1) The PHA Plan;
    (2) Any information and data available to HUD related to the 
requirements of this part, such as failure to meet the requirements for 
the justification for demolition or disposition as found in Sec. Sec.  
970.15 or 970.17; or
    (3) Information or data requested by HUD; or
    (b) The application was not developed in consultation with:
    (1) Residents who will be affected by the proposed demolition or 
disposition as required in Sec.  970.9; and
    (2) Each resident advisory board and resident council, if any, of 
the project

[[Page 483]]

(or portion thereof) that will be affected by the proposed demolition or 
disposition as required in Sec.  970.9, and appropriate government 
officials as required in Sec.  970.7.



Sec.  970.31  Replacement units.

    Notwithstanding any other provision of law, replacement public 
housing units may be built on the original public housing location or in 
the same neighborhood as the original public housing location if the 
number of the replacement public housing units is significantly fewer 
than the number of units demolished. Such development must comply with 
24 CFR part 905, Public Housing Capital Fund Program, as well as 24 CFR 
part 941.



Sec.  970.33  Effect on the Operating Fund Program and Capital Fund Program.

    The provisions of 24 CFR part 990, the Public Housing Operating Fund 
Program, and 24 CFR part 905, the Public Housing Capital Fund Program, 
apply.



Sec.  970.35  Reports and records.

    (a) After HUD approval of demolition or disposition of all or part 
of a project, the PHA shall provide information on the following:
    (1) Actual completion of each demolition contract by entering the 
appropriate information into HUD's applicable data system, or providing 
the information by another method HUD may require, within a week of 
making the final payment to the demolition contractor, or expending the 
last remaining funds if funded by force account;
    (2) Execution of sales or lease contracts by entering the 
appropriate information into HUD's applicable data system, or providing 
the information by another method HUD may require, within a week of 
execution;
    (3) The PHA's use of the proceeds of sale by providing a financial 
statement showing how the funds were expended by item and dollar amount;
    (4) Amounts expended for closing costs and relocation expenses, by 
providing a financial statement showing this information for each 
property sold; and
    (5) Such other information as HUD may from time to time require.
    (b) [Reserved]



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.



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

[[Page 484]]

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 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

[[Page 485]]

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 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

[[Page 486]]

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 Sec. Sec.  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.



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;

[[Page 487]]

    (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.



   Sec. 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 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

[[Page 488]]

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 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

[[Page 489]]

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:
    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 972_CONVERSION OF PUBLIC HOUSING TO TENANT-BASED ASSISTANCE--Table of Contents



      Subpart A_Required Conversion of Public Housing Developments

                  Purpose; Definition of ``Conversion''

Sec.
972.100 Purpose.
972.103 Definition of ``conversion.''

                       Required Conversion Process

972.106 Procedure for required conversion of public housing developments 
          to tenant-based assistance.
972.109 Conversion of developments.
972.112 Relationship between required conversion and demolition/
          disposition requirements.
972.115 Relationship between required conversions and HOPE VI 
          developments.
972.118 Applicability of Uniform Relocation Act.

         Identifying Developments Subject to Required Conversion

972.121 Developments subject to this subpart.

[[Page 490]]

972.124 Standards for identifying public housing developments subject to 
          required conversion.
972.127 Standards for determining whether a property is viable in the 
          long term.

                            Conversion Plans

972.130 Conversion plan components.
972.133 Public and resident consultation process for developing a 
          conversion plan.
972.136 Timing of submission of conversion plans to HUD.

            HUD Actions With Respect to Required Conversions

972.139 HUD actions with respect to required conversions.

      Subpart B_Voluntary Conversion of Public Housing Developments

                    Purpose; Definition of Conversion

972.200 Purpose.
972.203 Definition of ``conversion.''

                      Required Initial Assessments

972.206 Required initial assessments.

                     Voluntary Conversion Procedure

972.209 Procedure for voluntary conversion of public housing 
          developments to tenant-based assistance.
972.212 Timing of voluntary conversion.
972.215 Applicability of Uniform Relocation Act.

                         Conversion Assessments

972.218 Conversion assessment components.
972.221 Timing of submission of conversion assessments to HUD.
972.224 Necessary conditions for HUD approval of conversion.

                            Conversion Plans

972.227 Public and resident consultation process for developing a 
          conversion plan.
972.230 Conversion plan components.
972.233 Timing of submission of conversion plans to HUD.
972.236 HUD process for approving a conversion plan.
972.239 HUD actions with respect to a conversion plan.

Appendix to Part 972--Methodology of Comparing Cost of Public Housing 
          with the Cost of Tenant-Based Assistance

    Authority: 42 U.S.C. 1437t, 1437z-5, and 3535(d).

    Source: 66 FR 33618, June 22, 2001, unless otherwise noted.



      Subpart A_Required Conversion of Public Housing Developments

    Source: 68 FR 54608, Sept. 17, 2003, unless otherwise noted.

                    Purpose; Definition of Conversion



Sec.  972.100  Purpose.

    The purpose of this subpart is to implement section 33 of the United 
States Housing Act of 1937 (42 U.S.C. 1437z-5), which requires PHAs to 
annually review their public housing inventory and identify 
developments, or parts of developments, which must be removed from its 
stock of public housing operated under an Annual Contributions Contract 
(ACC) with HUD.
    This subpart provides the procedures a PHA must follow to develop 
and carry out a conversion plan to remove the units from the public 
housing inventory, including how to provide for the transition for 
residents of these developments to other affordable housing.



Sec.  972.103  Definition of ``conversion.''

    For purposes of this subpart, the term ``conversion'' means the 
removal of public housing units from the inventory of a PHA, and the 
provision of tenant-based or project-based assistance for the residents 
of the public housing units that are being removed. The term 
``conversion,'' as used in this subpart, does not necessarily mean the 
physical removal of the public housing development.

                       Required Conversion Process



Sec.  972.106  Procedure for required conversion of public housing 
developments to tenant-based assistance.

    (a) A PHA must annually review its public housing inventory and 
identify developments, or parts of developments, which must be converted 
to tenant-based assistance, in accordance with Sec. Sec.  972.121-
972.127.
    (b) With respect to any public housing development that is 
identified under paragraph (a) of this section, the PHA generally must 
develop a 5-year plan for removal of the affected public housing units 
from the inventory, in accordance with Sec. Sec.  972.130-972.136.

[[Page 491]]

    (c) The PHA may proceed to convert the development if HUD approves 
the conversion plan.



Sec.  972.109  Conversion of developments.

    (a)(1) The PHA may proceed to convert the development covered by a 
conversion plan after receiving written approval from HUD. This approval 
will be separate from the approval that the PHA receives for its Annual 
Plan.
    (2) HUD anticipates that its review of a conversion plan will 
ordinarily occur within 90 days following submission of a complete plan 
by the PHA. A longer process may be required where HUD's initial review 
of the plan raises questions that require further discussion with the 
PHA. In any event, HUD will provide all PHAs with a preliminary response 
within 90 days following submission of a conversion plan.
    (b) The PHA may not demolish or dispose of units or property until 
completion of the required environmental review under part 58 of this 
title (if a responsible entity has assumed environmental responsibility 
for the project) or part 50 of this title (if HUD is performing the 
environmental review). Further, HUD will not approve a conversion plan 
until completion of the required environmental review. However, before 
completion of the environmental review, HUD may approve the targeted 
units for removal from the PHA's inventory and may authorize the PHA to 
undertake other activities proposed in its conversion plan that do not 
require environmental review (such as certain activities related to the 
relocation of residents), as long as the buildings in question are 
adequately secured and maintained.
    (c) For purposes of determining operating subsidy eligibility, HUD 
will consider the conversion plan the PHA submits to be the equivalent 
of a formal request to remove dwelling units from the PHA's inventory 
and ACC. HUD will notify the PHA in writing whether it has approved the 
conversion plan. 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 title and also will be provided any 
phase-down of subsidy to which the PHA is entitled pursuant to Sec.  
990.114 of this title.
    (d) The PHA may apply for tenant-based assistance in accordance with 
Section 8 program requirements, and HUD will give the PHA a priority for 
receiving tenant-based assistance to replace the public housing units. 
It is HUD's policy to provide funds for one-for-one replacement housing 
with either public housing or tenant-based assistance, if funds are 
available. HUD may require that funding for the initial year be provided 
from the public housing Capital Fund, Operating Fund, or both.



Sec.  972.112  Relationship between required conversion and
demolition/disposition requirements.

    (a) Section 18 of the United States Housing Act of 1937 does not 
apply to demolition of developments removed from the inventory of the 
PHA under this subpart. Demolition of these developments is therefore 
not subject to section 18(g), which provides an exclusion from the 
applicability of the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970 (42 U.S.C. 4601) (URA). Accordingly, 
the URA will apply to the displacement of tenants as the direct result 
of the demolition of a development carried out pursuant to this subpart, 
in accordance with Sec.  972.118. With respect to any such demolition, 
the PHA must comply with the requirements for environmental review found 
at part 58 of this title.
    (b) Section 18 of the United States Housing Act of 1937 does apply 
to any disposition of developments removed from the inventory of the PHA 
under this subpart. Therefore, to dispose of property, the PHA must 
submit a disposition application under section 18. HUD's review of any 
such disposition application will take into account that the development 
has been required to be converted.



Sec.  972.115  Relationship between required conversions and HOPE VI developments.

    HUD actions to approve or deny proposed HOPE VI revitalization plans 
must be consistent with the requirements of this subpart. Developments 
with HOPE VI revitalization grants,

[[Page 492]]

but without approved HOPE VI revitalization plans, are fully subject to 
required conversion standards under this subpart.



Sec.  972.118  Applicability of Uniform Relocation Act.

    To the extent that tenants are displaced as a direct result of the 
demolition, acquisition, or rehabilitation of federally-assisted 
property converted pursuant to this subpart, the requirements of the 
Uniform Relocation Assistance and Real Property Acquisition Policies Act 
of 1970 (42 U.S.C. 4601) (URA), and the implementing regulations issued 
by the Department of Transportation at 49 CFR part 24, apply.

         Identifying Developments Subject to Required Conversion



Sec.  972.121  Developments subject to this subpart.

    (a) This subpart is applicable to any development not identified 
before October 21, 1998, for conversion, or for assessment of whether 
such conversion is required, in accordance with section 202 of the 
Omnibus Consolidated Rescissions and Appropriations Act of 1996 (Pub. L. 
104-134, approved April 26, 1996, 110 Stat. 1321-279--1321-281). 
Developments identified before October 21, 1998, continue to be subject 
to the requirements of section 202 and part 971 of this chapter until 
these requirements are satisfied. Thereafter, the provisions of this 
subpart apply to any remaining public housing on the sites of those 
developments.
    (b) The developments to which this subpart is applicable are subject 
to the requirements of section 33 of the United States Housing Act of 
1937 (42 U.S.C. 1437z-5).
    (c) The provisions of this subpart cease to apply when the units in 
a development that are subject to the requirements of this subpart have 
been demolished.



Sec.  972.124  Standards for identifying public housing developments subject to required conversion.

    The development, or portions thereof, must be converted if it is a 
general occupancy development of 250 or more dwelling units and it meets 
the following criteria:
    (a) The development is on the same or contiguous sites. This refers 
to the actual number and location of units, irrespective of HUD 
development project numbers.
    (b) The development has a vacancy rate of at least a specified 
percent for dwelling units not in funded, on-schedule modernization, for 
each of the last three years, and the vacancy rate has not significantly 
decreased in those three years. (1) For a conversion analysis performed 
on or before March 16, 2009, the specified vacancy rate is 15 percent. 
For a conversion analysis performed after that date, the specified 
vacancy rate is 12 percent.
    (2) For the determination of vacancy rates, the PHA must use the 
data it relied upon for the PHA's latest Public Housing Assessment 
System (PHAS) certification, as reported on the Form HUD-51234 (report 
on Occupancy). Units in the following categories must 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 of time stated in the law;
    (iii) Vacant units that have sustained casualty damage, but only 
until the insurance claim is adjusted;
    (iv) Units that are occupied by employees of the PHA and units that 
are used for resident services; and
    (v) Units that HUD determines, in its sole discretion, are 
intentionally vacant and do not indicate continued distress.
    (c) The development either is distressed housing for which the PHA 
cannot assure the long-term viability as public housing, or more 
expensive for the PHA to operate as public housing than providing 
tenant-based assistance. (1) The development is distressed housing for 
which 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. (See Sec.  972.127)
    (i) Properties meeting the standards set forth in paragraphs (a) and 
(b) of

[[Page 493]]

this section will be assumed to be ``distressed,'' unless HUD determines 
that the reasons a property meets such standards are temporary in 
duration and are unlikely to recur.
    (ii) A development satisfies the long-term viability test only if it 
is probable that, after reasonable investment, for at least 20 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 other similar 
rental (typically family) housing in the community; can achieve a 
broader range of family income; and has no other site impairments that 
clearly should disqualify the site from continuation as public housing.
    (2) The development is more expensive for the PHA to operate as 
public housing than to provide tenant-based assistance if it has an 
estimated cost, during the remaining useful life of the project, of 
continued operation and modernization of the development 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).
    (i) For purposes of this determination, the costs used for public 
housing must be those necessary to produce a revitalized development as 
described in paragraph (c)(1) 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) The cost methodology necessary to conduct the cost comparisons 
for required conversions has not yet been finalized. PHAs are not 
required to undertake conversions under this subpart until six months 
after the effective date of the cost methodology, which will be 
announced in the Federal Register. Once effective, the cost methodology 
will be codified as an appendix to this part.



Sec.  972.127  Standards for determining whether a property is 
viable in the long term.

    In order for a property to meet the standard of long-term viability, 
as discussed in Sec.  972.124, the following criteria must be met:
    (a) The investment to be made in the development is reasonable. (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 (TDC) 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 Annual 
Plan or 5-Year Plan is to be used for this purpose, unless the 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 available. In addition to other resources already 
available to the PHA, it may assume that future formula funds provided 
through the Capital Fund over five years are available for this purpose.
    (b) Appropriate density is achieved. The resulting public housing 
development must have a density which is comparable to that which 
prevails in or is appropriate for assisted rental housing or for other 
similar types of housing in the community (typically family).
    (c) A greater income mix can be achieved. (1) Measures generally 
will be required to broaden the range of resident incomes over time to 
include a significant mix of households with at least one full-time 
worker. Measures to

[[Page 494]]

achieve a broader range of household incomes must be realistic in view 
of the site's location. Appropriate evidence typically would include 
census or other recent statistical evidence demonstrating 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.

                            Conversion Plans



Sec.  972.130  Conversion plan components.

    (a) With respect to any development that is identified under 
Sec. Sec.  972.121 through 972.127, the PHA generally must develop a 5-
year plan for removal of the affected public housing units from the 
inventory. The plan must consider relocation alternatives for households 
in occupancy, including other public housing and Section 8 tenant-based 
assistance, and must provide for relocation from the units as soon as 
possible. For planning purposes, the PHA must assume that HUD will be 
able to provide in a timely fashion any necessary Section 8 rental 
assistance. The plan must include:
    (1) A listing of the public housing units to be removed from the 
inventory;
    (2) Identification and obligation status of any previously approved 
modernization, reconstruction, or other capital funds for the distressed 
development and the PHA's recommendations concerning transfer of these 
funds to Section 8 or alternative public housing uses;
    (3) 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.  972.133;
    (4) A description of the plans for demolition or disposition of the 
public housing units; and
    (5) A relocation plan, in accordance with paragraph (b) of this 
section.
    (b) Relocation plan. The relocation plan must incorporate all of the 
information identified in paragraphs (b)(1) through (b)(4) of this 
section. In addition, if the required conversion is subject to the URA, 
the relocation plan must also contain the information identified in 
paragraph (b)(5) of this section. The relocation plan must incorporate 
the following:
    (1) The number of households to be relocated, by bedroom size, and 
by the number of accessible units.
    (2) The relocation resources that will be necessary, including a 
request for any necessary Section 8 funding and a description of actual 
or potential public or other assisted housing vacancies that can be used 
as relocation housing and budget for carrying out relocation activities.
    (3) A schedule for relocation and removal of units from the public 
housing inventory (including the schedule for providing actual and 
reasonable relocation expenses, as determined by the PHA, for families 
displaced by the conversion).
    (4) Provide for issuance of a written notice to families residing in 
the development in accordance with the following requirements:
    (i) Timing of notice. If the required conversion is not subject to 
the URA, the notice shall be provided to families at least 90 days 
before displacement. If the required conversion is subject to the URA 
the written notice shall be provided to families no later than the date 
the conversion plan is submitted to HUD. For purposes of a required 
conversion subject to the URA, this written notice shall constitute the 
General Information Notice (GIN) required by the URA.
    (ii) Contents of notice. The written notice shall include all of the 
following:
    (A) The development must be removed from the public housing 
inventory and that the family may be displaced as a result of the 
conversion;
    (B) The family will be offered comparable housing, which may include

[[Page 495]]

tenant-based or project-based assistance, or occupancy in a unit 
operated or assisted by the PHA (if tenant-based assistance is used, the 
comparable housing requirement is fulfilled only upon the relocation of 
the family into such housing);
    (C) Any necessary counseling with respect to the relocation will be 
provided, including any appropriate mobility counseling (the PHA may 
finance the mobility counseling using Operating Fund, Capital Fund, or 
Section 8 administrative fee funding);
    (D) Such families will be relocated to other decent, safe, sanitary, 
and affordable housing that is, to the maximum extent possible, housing 
of their choice;
    (E) If the development is used as housing after conversion, the PHA 
must ensure that each resident may choose to remain in the housing, 
using tenant-based assistance towards rent; and
    (F) Where section 8 voucher assistance is being used for relocation, 
the family will be provided with the vouchers at least 90 days before 
displacement.
    (5) If the required conversion is subject to the URA, the written 
notice described in paragraph (b)(4) must also provide that:
    (i) The family will not be required to move without at least 90-days 
advance written notice of the earliest date by which the family may be 
required to move, and that the family will not be required to move 
permanently until the family is offered comparable housing, as provided 
in paragraph (b)(4)(ii)(B) of this section;
    (ii) Any person who is an alien not lawfully present in the United 
States is ineligible for relocation payments or assistance under the 
URA, unless such ineligibility would result in exceptional and extremely 
unusual hardship to a qualifying spouse, parent, or child, as provided 
in the URA regulations at 49 CFR 24.208;
    (iii) The family has a right to appeal the PHA's determination as to 
the family's application for relocation assistance for which the family 
may be eligible under this subpart and URA;
    (iv) Families residing in the development will be provided with the 
URA Notice of Relocation Eligibility or Notice of Non-displacement (as 
applicable) as of the date HUD approves the conversion plan (for 
purposes of this subpart, the date of HUD's approval of the conversion 
plan shall be the ``date of initiation of negotiations'' as that term is 
used in URA and the implementing regulations at 49 CFR part 24); and
    (v) Any family that moves into the development after submission of 
the conversion plan to HUD will also be eligible for relocation 
assistance, unless the PHA issues a written move-in notice to the family 
prior to leasing and occupancy of the unit advising the family of the 
development's possible conversion, the impact of the conversion on the 
family, and that the family will not be eligible for relocation 
assistance.
    (c) The conversion plan may not be more than a 5-year plan, unless 
the PHA applies for and receives approval from HUD for a longer period 
of time. HUD may allow the PHA up to 10 years to remove the units from 
the inventory, in exceptional circumstances where HUD determines that 
this is clearly the most cost effective and beneficial means of 
providing housing assistance over that same period. For example, HUD may 
allow a longer period of time to remove the units from the public 
housing inventory, where more than one development is being converted, 
and a larger number of families require relocation than can easily be 
absorbed into the rental market at one time, provided the housing has a 
remaining useful life of longer than five years and the longer time 
frame will assist in relocation.



Sec.  972.133  Public and resident consultation process for 
developing a conversion plan.

    (a) The PHA must consult with appropriate public officials and with 
the appropriate public housing residents in developing the conversion 
plan.
    (b) The PHA may satisfy the requirement for consultation with public 
officials by obtaining a certification from the appropriate government 
official that the conversion plan is consistent with the applicable 
Consolidated Plan. This may be the same certification as

[[Page 496]]

is required for the PHA Annual Plan that includes the conversion plan, 
so long as the certification specifically addresses the conversion plan.
    (c) To satisfy the requirement for consultation with the appropriate 
public housing residents, in addition to the public participation 
requirements for the PHA Annual Plan, the PHA must:
    (1) Hold at least one meeting with the residents of the affected 
sites (including the duly elected Resident Council, if any, that covers 
the development in question) at which the PHA must:
    (i) Explain the requirements of this section, especially as they 
apply to the residents of the affected developments; and
    (ii) Provide draft copies of the conversion plan to the residents;
    (2) Provide a reasonable comment period for residents; and
    (3) Summarize the resident comments for HUD, in the conversion plan, 
and consider these comments in developing the final conversion plan.



Sec.  972.136  Timing of submission of conversion plans to HUD.

    The requirements of this section are on-going requirements. If the 
PHA must submit a plan for conversion, it must submit the conversion 
plan as part of the PHA's Annual Plan, beginning with PHA fiscal years 
that commence six months after the effective date of HUD's final rule 
establishing the cost methodology for required conversions.

            HUD Actions With Respect to Required Conversions



Sec.  972.139  HUD actions with respect to required conversions.

    (a) HUD will take appropriate steps to ensure that distressed 
developments subject to this subpart are properly identified and 
converted. If a PHA fails to properly identify a development for 
required conversion, or does not submit a conversion plan for a 
development in the PHA Annual Plan following the Annual Plan in which 
the development was identified as subject to required conversion, HUD 
will take the actions described in paragraph (b) of this section, and 
may also take any or all of the actions described in paragraph (c) of 
this section.
    (b) If a PHA fails to take the conversion activities described in 
paragraph (a) of this section, HUD will:
    (1) Disqualify the PHA from HUD funding competitions; and
    (2) Direct the PHA to cease additional spending in connection with a 
development that meets, or is likely to meet the statutory criteria, 
except to the extent that failure to expend such amounts would endanger 
health or safety.
    (c) If a PHA fails to take the conversion activities described in 
paragraph (a) of this section, HUD may also take any or all of the 
following actions:
    (1) Identify developments that fall within the statutory criteria 
where the PHA has failed to do so properly;
    (2) Take appropriate actions to ensure the conversion of 
developments where the PHA has failed to adequately develop or implement 
a conversion plan;
    (3) Require the PHA to revise the conversion plan, or prohibit 
conversion, where HUD has determined that the PHA has erroneously 
identified a development as being subject to the requirements of this 
section;
    (4) Authorize or direct the transfer of capital or operating funds 
committed to or on behalf of the development (including comprehensive 
improvement assistance, comprehensive grant or Capital Fund 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; and
    (5) Any other action that HUD determines appropriate and has the 
authority to undertake.



      Subpart B_Voluntary Conversion of Public Housing Developments

    Source: 68 FR 54619, Sept. 17, 2003, unless otherwise noted.

                    Purpose; Definition of Conversion



Sec.  972.200  Purpose.

    This subpart implements section 22 of the United States Housing Act 
of

[[Page 497]]

1937 (42 U.S.C. 1437t). The purposes of this subpart are to:
    (a) Require PHAs to perform an assessment which considers 
developments for which conversion of public housing may be appropriate; 
and
    (b) Provide a basis for a PHA to take action for conversion on a 
voluntary basis.



Sec.  972.203  Definition of ``conversion.''

    For purposes of this subpart, the term ``conversion'' means the 
removal of public housing units from the inventory of a Public Housing 
Agency (PHA), and the provision of tenant-based, or project-based 
assistance for the residents of the public housing that is being 
removed. The term ``conversion,'' as used in this subpart, does not 
necessarily mean the physical removal of the public housing development 
from the site.

                      Required Initial Assessments



Sec.  972.206  Required initial assessments.

    (a) General. A PHA must conduct a required initial assessment (which 
consists of the certification described in paragraph (b) of this 
section), in accordance with this section, once for each of its 
developments, unless:
    (1) The development is subject to required conversion under 24 CFR 
part 971;
    (2) The development is the subject of an application for demolition 
or disposition that has not been disapproved by HUD;
    (3) A HOPE VI revitalization grant has been awarded for the 
development; or
    (4) The development is designated for occupancy by the elderly and/
or persons with disabilities (i.e., is not a general occupancy 
development).
    (b) Certification procedure. For each development, the PHA shall 
certify that it has:
    (1) Reviewed the development's operation as public housing;
    (2) Considered the implications of converting the public housing to 
tenant-based assistance; and
    (3) Concluded that conversion of the development may be:
    (i) Appropriate because removal of the development would meet the 
necessary conditions for voluntary conversion described in Sec.  
972.224; or
    (ii) Inappropriate because removal of the development would not meet 
the necessary conditions for voluntary conversion described Sec.  
972.224.
    (c) Documentation. A PHA must maintain documentation of the 
reasoning with respect to each required initial assessment.
    (d) Timing of submission. Consistent with statutory submission 
requirements, the results of each required initial assessment 
(consisting of the certification described in paragraph (b) of this 
section) must be submitted to HUD as part of the next PHA Annual Plan 
after its completion.

                     Voluntary Conversion Procedure



Sec.  972.209  Procedure for voluntary conversion of public housing
developments to tenant-based assistance.

    A PHA that wishes to convert a public housing development to tenant-
based assistance must comply with the following process:
    (a) The PHA must perform a conversion assessment, in accordance with 
Sec. Sec.  972.218-972.224 and submit it to HUD as part of the next PHA 
Annual Plan submission.
    (b) The PHA must prepare a conversion plan, in accordance with Sec.  
972.227-972.233, and submit it to HUD, as part of its PHA Annual Plan, 
within one year after submitting the conversion assessment. The PHA may 
submit the conversion plan in the same Annual Plan as the conversion 
assessment.
    (c) The PHA may proceed to convert the development if HUD approves 
the conversion plan.



Sec.  972.212  Timing of voluntary conversion.

    (a) A PHA may proceed to convert a development covered by a 
conversion plan only after receiving written approval of the conversion 
plan from HUD. This approval will be separate from the approval that the 
PHA receives for its PHA Annual Plan. A PHA may apply for tenant-based 
assistance in accordance with Section 8 program requirements and will be 
given priority for receiving tenant-based assistance to replace the 
public housing units.

[[Page 498]]

    (b) A PHA may not demolish or dispose of units or property until 
completion of the required environmental review under part 58 of this 
title (if a Responsible Entity has assumed environmental responsibility 
for the project) or part 50 of this title (if HUD is performing the 
environmental review). Further, HUD will not approve a conversion plan 
until completion of the required environmental review. However, before 
completion of the environmental review, HUD may approve the targeted 
units for deprogramming and may authorize the PHA to undertake other 
activities proposed in the conversion plan that do not require 
environmental review (such as certain activities related to the 
relocation of residents), as long as the buildings in question are 
adequately secured and maintained.
    (c) For purposes of determining operating subsidy eligibility, the 
submitted conversion plan will be considered the equivalent of a formal 
request to remove dwelling units from the PHA's inventory and Annual 
Contributions Contract (ACC). Units that are vacant or are vacated on or 
after the written notification date will be treated as approved for 
deprogramming under Sec.  990.108(b)(1) of this title, and will also be 
provided the phase down of subsidy pursuant to Sec.  990.114 of this 
title.
    (d) HUD may require that funding for the initial year of tenant-
based assistance be provided from the public housing Capital Fund, 
Operating Fund, or both.



Sec.  972.215  Applicability of the Uniform Relocation Act.

    To the extent that tenants are displaced as a direct result of the 
demolition, acquisition, or rehabilitation of federally-assisted 
property converted under this subpart, the requirements of the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 1970 
(42 U.S.C. 4601) (URA), and the implementing regulations issued by the 
Department of Transportation at 49 CFR part 24, apply.

                         Conversion Assessments



Sec.  972.218  Conversion assessment components.

    The conversion assessment contains five elements, as described 
below:
    (a) Cost analysis. A PHA must conduct a cost analysis comparing the 
cost of providing Section 8 tenant-based assistance with the cost of 
continuing to operate the development as public housing for the 
remainder of its useful life. The cost methodology necessary to conduct 
the cost comparisons for voluntary conversions has not yet been 
finalized. PHAs may not undertake conversions under this subpart until 
the effective date of the cost methodology, which will be announced in 
the Federal Register. Once effective, the cost methodology will be 
codified as an appendix to this part.
    (b) Analysis of the market value. (1) A PHA must have an independent 
appraisal conducted to compare the market value of the development 
before and after rehabilitation. In both cases, the market value must be 
based on the use of the development as public housing.
    (2) In addition, the appraisal must compare:
    (i) The market value of the development before rehabilitation, based 
on the use of the development as public housing, with the market value 
of the development after conversion; with
    (ii) The market value of the development after rehabilitation, based 
on the use of the development as public housing, with the market value 
of the development after conversion.
    (3) A copy of the appraisal findings and the analysis of market 
value of the development in the conversion assessment must be provided 
in the conversion assessment.
    (c) Analysis of rental market conditions. (1) A PHA must conduct an 
analysis of the likely success of using tenant-based assistance for the 
residents of the public housing development. This analysis must include 
an assessment of the availability of decent, safe, and sanitary dwelling 
units rented at or below the applicable Section 8 payment standard 
established for the jurisdiction or designated part of the FMR

[[Page 499]]

area in which the development is located.
    (2) In conducting this assessment, a PHA must take into account:
    (i) Its overall use of rental certificates or vouchers under lease 
and the success rates of using Section 8 tenant-based assistance in the 
community for the appropriate bedroom sizes, including recent success 
rates for units renting at or below the established payment standard; 
and
    (ii) Any particular characteristics of the specific residents of the 
public housing which may affect their ability to be housed (such as 
large household size or the presence of an elderly or disabled family 
member).
    (d) Impact analysis. A PHA must describe the likely impact of 
conversion of the public housing development on the neighborhood in 
which the public housing is located. This must include:
    (1) The impact on the availability of affordable housing in the 
neighborhood;
    (2) The impact on the concentration of poverty in the neighborhood; 
and
    (3) Other substantial impacts on the neighborhood.
    (e) Conversion implementation. If a PHA intends to convert the 
development (or a portion of it) to tenant-based assistance, the 
conversion assessment must include a description of any actions the PHA 
plans to take in converting the development. This must include a general 
description of the planned future uses of the development, and the means 
and timetable for accomplishing such uses.



Sec.  972.221  Timing of submission of conversion assessments to HUD.

    (a) Submission with PHA Plan. A PHA that wishes to convert a public 
housing development to tenant-based assistance must submit a conversion 
assessment to HUD with its next PHA Annual Plan.
    (b) Updated conversion assessment. Where a PHA proposes to convert a 
development to tenant-based assistance, it must submit an updated 
conversion assessment if the conversion assessment otherwise would be 
more than one year older than the conversion plan to be submitted to 
HUD. To update a conversion assessment, a PHA must ensure that the 
analysis of rental market conditions is based on the most recently 
available data, and must include any data that have changed since the 
initial conversion assessment. A PHA may submit the initial cost 
analysis and comparison of the market value of the public housing before 
and after rehabilitation and/or conversion if there is no reason to 
believe that such information has changed significantly.



Sec.  972.224  Necessary conditions for HUD approval of conversion.

    (a) Conditions. In order to convert a public housing development, 
the PHA must conduct a conversion assessment that demonstrates that the 
conversion of the development:
    (1) Will not be more expensive than continuing to operate the 
development (or portion of it) as public housing;
    (2) Will principally benefit the residents of the public housing 
development (or portion thereof) to be converted, the PHA, and the 
community; and
    (3) Will not adversely affect the availability of affordable housing 
in the community.
    (b) Evidence--(1) Relative expense. The relative expense of 
continuing operation as public housing or conversion to tenant-based 
assistance may be demonstrated by the cost analysis and market value 
analysis.
    (2) Benefit to residents, PHA, and the community. (i) The benefit to 
residents, the PHA, and the community may be demonstrated in the rental 
market analysis, the analysis of the impact on the neighborhood, the 
market value analysis, and the proposed future use of the development. 
In determining whether a conversion will principally benefit residents, 
the PHA, and the community, HUD will consider whether the conversion 
will conflict with any litigation settlement agreements, voluntary 
compliance agreements, or other remedial agreements signed by the PHA 
with HUD.
    (ii) In making the determination of whether a conversion would 
principally benefit residents, the PHA, and the community, the PHA must 
consider

[[Page 500]]

such factors as the availability of landlords providing tenant-based 
assistance, as well as access to schools, jobs, and transportation.
    (iii) To determine the benefit to residents, the PHA must hold at 
least one public meeting with residents of the affected site (including 
the duly elected Resident Council, if any, that covers the development 
in question). At the meeting, the PHA must:
    (A) Explain the requirements of section 22 of the United States 
Housing Act of 1937 and these regulations, especially as they apply to 
residents of affected developments;
    (B) Provide draft copies of the conversion assessment to the 
residents; and
    (C) Provide the residents with a reasonable period of time to submit 
comments on the draft conversion assessment.
    (iv) The conversion assessment submitted to HUD must contain a 
summary of the resident comments, and the PHA responses to any 
significant issues raised by the commenters.
    (3) Impact on affordable housing. The impact on affordable housing 
may be demonstrated in the rental market analysis and the analysis of 
the impact of conversion on the neighborhood.

                            Conversion Plans



Sec.  972.227  Public and resident consultation process for
developing a conversion plan.

    (a) A conversion plan must be developed in consultation with 
appropriate public officials and with significant participation by 
residents of the development.
    (b) The requirement for consultation with public officials may be 
satisfied by obtaining a certification from the appropriate state or 
local officials that the conversion plan is consistent with that 
jurisdiction's Consolidated Plan. This may be the same certification as 
is required for the PHA Annual Plan that includes the conversion plan, 
so long as the certification specifically addresses the conversion plan.
    (c) To satisfy the requirement for significant participation by 
residents of the development, in addition to the public participation 
requirements for the PHA Annual Plan, a PHA must:
    (1) Hold at least one meeting with the residents of the affected 
sites (including the duly elected Resident Council, if any, that covers 
the development in question) at which the PHA must:
    (i) Explain the requirements of section 22 of the United States 
Housing Act of 1937 and these regulations, especially as they apply to 
residents of affected developments; and
    (ii) Provide draft copies of the conversion plan to them.
    (2) Provide a reasonable comment period for residents; and
    (3) Summarize the resident comments (as well as the PHA responses to 
the significant issues raised by the commenters) for HUD, and consider 
these comments in developing the final conversion plan.



Sec.  972.230  Conversion plan components.

    A conversion plan must:
    (a) Describe the conversion and future use or disposition of the 
public housing development. If the future use of the development is 
demolition or disposition, the PHA is not required to submit a 
demolition or disposition application, so long as the PHA submits, and 
HUD approves, a conversion plan that includes a description of the 
future uses of the development.
    (b) Include an impact analysis of the conversion on the affected 
community. This may include the description that is required as part of 
the conversion assessment.
    (c) Include a description of how the conversion plan is consistent 
with the findings of the conversion assessment undertaken in accordance 
with Sec.  972.218.
    (d) Include a summary of the resident comments received when 
developing the conversion plan, and the PHA responses to the significant 
issues raised by the commenters (including a description of any actions 
taken by the PHA as a result of the comments).
    (e) Confirm that any proceeds received from the conversion are 
subject to the limitations under section 18(a)(5) of the United States 
Housing Act of 1937 (42 U.S.C. 1437p(a)(5)) applicable to proceeds 
resulting from demolition or disposition.

[[Page 501]]

    (f) Summarize why the conversion assessment for the public housing 
project supports the three conditions necessary for conversion described 
in Sec.  972.224.
    (g) Include a relocation plan that incorporates all of the 
information identified in paragraphs (g)(1) through (g)(4) of this 
section. In addition, if the required conversion is subject to the URA, 
the relocation plan must also contain the information identified in 
paragraph (g)(5) of this section. The relocation plan must incorporate 
the following:
    (1) The number of households to be relocated, by bedroom size, by 
the number of accessible units.
    (2) The relocation resources that will be necessary, including a 
request for any necessary Section 8 funding and a description of actual 
or potential public or other assisted housing vacancies that can be used 
as relocation housing and budget for carrying out relocation activities.
    (3) A schedule for relocation and removal of units from the public 
housing inventory (including the schedule for providing actual and 
reasonable relocation expenses, as determined by the PHA, for families 
displaced by the conversion).
    (4) Provide for issuance of a written notice to families residing in 
the development in accordance with the following requirements:
    (i) Timing of notice. If the voluntary conversion is not subject to 
the URA, the notice shall be provided to families at least 90 days 
before displacement. If the voluntary conversion is subject to the URA 
the written notice shall be provided to families no later than the date 
the conversion plan is submitted to HUD. For purposes of a voluntary 
conversion subject to the URA, this written notice shall constitute the 
General Information Notice (GIN) required by the URA.
    (ii) Contents of notice. The written notice shall include all of the 
following:
    (A) The development will no longer be used as public housing and 
that the family may be displaced as a result of the conversion;
    (B) The family will be offered comparable housing, which may include 
tenant-based or project-based assistance, or occupancy in a unit 
operated or assisted by the PHA (if tenant-based assistance is used, the 
comparable housing requirement is fulfilled only upon relocation of the 
family into such housing);
    (C) Any necessary counseling with respect to the relocation will be 
provided, including any appropriate mobility counseling (the PHA may 
finance the mobility counseling using Operating Fund, Capital Fund, or 
Section 8 administrative fee funding);
    (D) The family will be relocated to other decent, safe, sanitary, 
and affordable housing that is, to the maximum extent possible, housing 
of their choice;
    (E) If the development is used as housing after conversion, the PHA 
must ensure that each resident may choose to remain in the housing, 
using tenant-based assistance towards rent;
    (F) Where Section 8 voucher assistance is being used for relocation, 
the family will be provided with the vouchers at least 90 days before 
displacement;
    (5) Additional information required for conversions subject to the 
URA. If the voluntary conversion is subject to the URA, the written 
notice described in paragraph (g)(4) must also provide that:
    (i) The family will not be required to move without at least 90-days 
advance written notice of the earliest date by which the family may be 
required to move, and that the family will not be required to move 
permanently until the family is offered comparable housing as provided 
in paragraph (g)(4)(ii)(B) of this section;
    (ii) Any person who is an alien not lawfully present in the United 
States is ineligible for relocation payments or assistance under the 
URA, unless such ineligibility would result in exceptional and extremely 
unusual hardship to a qualifying spouse, parent, or child, as provided 
in the URA regulations at 49 CFR 24.208.
    (iii) The family has a right to appeal the PHA's determination as to 
the family's application for relocation assistance for which the family 
may be eligible under this subpart and URA.
    (iv) Families residing in the development will be provided with the 
URA

[[Page 502]]

Notice of Relocation Eligibility or Notice of Non-displacement (as 
applicable) as of the date HUD approves the conversion plan (for 
purposes of this subpart, the date of HUD's approval of the conversion 
plan shall be the ``date of initiation of negotiations'' as that term is 
used in URA and the implementing regulations at 49 CFR part 24).
    (v) Any family that moves into the development after submission of 
the conversion plan to HUD will also be eligible for relocation 
assistance, unless the PHA issues a written move-in notice to the family 
prior to leasing and occupancy of the unit advising the family of the 
development's possible conversion, the impact of the conversion on the 
family, and that the family will not be eligible for relocation 
assistance.



Sec.  972.233  Timing of submission of conversion plans to HUD.

    A PHA that wishes to convert a public housing project to tenant-
based assistance must submit a conversion plan to HUD. A PHA must 
prepare a conversion plan, in accordance with Sec.  972.230, and submit 
it to HUD, as part of the next PHA Annual Plan within one year after 
submitting the full conversion assessment, or as a significant amendment 
to that Annual Plan. The PHA may also submit the conversion plan in the 
same Annual Plan as the conversion assessment.



Sec.  972.236  HUD process for approving a conversion plan.

    Although a PHA will submit its conversion plan to HUD as part of the 
PHA Annual Plan, the conversion plan will be treated separately for 
purposes of HUD approval. A PHA needs a separate written approval from 
HUD in order to proceed with conversion. HUD anticipates that its review 
of a conversion plan will ordinarily occur within 90 days following 
submission of a complete plan by the PHA. A longer process may be 
required where HUD's initial review of the plan raises questions that 
require further discussion with the PHA. In any event, HUD will provide 
all PHAs with a preliminary response within 90 days following submission 
of a conversion plan. A lack of a HUD response within this time frame 
will constitute automatic HUD approval of the conversion plan.



Sec.  972.239  HUD actions with respect to a conversion plan.

    (a) When a PHA submits a conversion plan to HUD, HUD will review it 
to determine whether:
    (1) The conversion plan is complete and includes all of the 
information required under Sec.  972.230; and
    (2) The conversion plan is consistent with the conversion assessment 
the PHA submitted.
    (b) HUD will disapprove a conversion plan only if HUD determines 
that:
    (1) The conversion plan is plainly inconsistent with the conversion 
assessment;
    (2) There is reliable information and data available to the 
Secretary that contradicts the conversion assessment; or
    (3) The conversion plan is incomplete or otherwise fails to meet the 
requirements under Sec.  972.230.



   Sec. Appendix to Part 972--Methodology of Comparing Cost of Public 
            Housing With the Cost of Tenant-Based Assistance

                   I. Public Housing-Net Present Value

    The costs used for public housing shall be those necessary to 
produce a viable development for its projected useful life. The 
estimated cost for the continued operation of the development as public 
housing shall be calculated as the sum of total operating cost, 
modernization cost, and costs to address accrual needs. Costs will be 
calculated at the property level on an annual basis covering a period of 
30 years (with options for 20 or 40 years). All costs expected to occur 
in future years will be discounted, using an OMB-specified real discount 
rate provided on the OMB Web site at http://www.whitehouse.gov/OMB/
Budget, for each year after the initial year. The sum of the discounted 
values for each year (net present value) for public housing will then be 
compared to the net present value of the stream of costs associated with 
housing vouchers.
    Applicable information on discount rates may be found in Appendix C 
of OMB Circular A-94, ``Guidelines and Discount Rates for Benefit Cost 
Analysis of Federal Programs,'' which is updated annually, and may be 
found on OMB's Web site at http://www.whitehouse.gov/OMB. All cost 
adjustments conducted pursuant to this cost methodology must be 
performed using the real discount rates provided on the OMB Web site

[[Page 503]]

at http://www.whitehouse.gov/OMB/Budget. HUD will also provide 
information on current rates, along with guidance and instructions for 
completing the cost comparisons on the HUD Homepage (http://
www.hud.gov). The Homepage will also include a downloadable spreadsheet 
calculator that HUD has developed to assist PHAs in completing the 
assessments. The spreadsheet calculator is designed to walk housing 
agencies through the calculations and comparisons laid out in the 
appendix and allows housing agencies to enter relevant data for their 
PHA and the development being assessed. Results, including net present 
values, are generated based on these housing agency data.

                           A. Operating Costs

    1. Any proposed revitalization or modernization plan must indicate 
how unusually high current operating expenses (e.g., security, 
supportive services, maintenance, tenant, and PHA-paid 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 or modernized development, by relating those 
operating costs to the expected occupancy rate, tenant composition, 
physical configuration, and management structure of the revitalized or 
modernized 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 or 
modernized 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 
(P.I.L.O.T.) or some other comparable payment, and including utilities 
and utility allowances) shall be expressed as total operating costs per 
year. For example, if a development will have 375 units occupied by 
households and will have $112,500 monthly non-utility costs (including 
pro-rated overhead costs and appropriate P.I.L.O.T.) and $37,500 monthly 
utility costs paid by the PHA, and $18,750 in monthly utility allowances 
that are deducted from tenant rental payments to the PHA because tenants 
paid some utility bills directly to the utility company, then the 
development's monthly operating cost is $168,750 (or $450 per unit per 
month) and its annual operating cost would be $5,400 ($450 times 12). 
Operating costs are assumed to begin in the initial year of the 30-year 
(or alternative period) calculation and will be incurred in each year 
thereafter.
    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 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 or modernized 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 or modernized development are plausible, when the 
projected initial year per-unit operating cost of the renovated 
development is lower than the current per unit cost by more than 10 
percent, then the plan should detail how the revitalized development 
will achieve this 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 20 percent, then the development-based 
method will be used to determine projected costs. The current costs will 
be divided by the sum of all occupied units and vacant units fully 
funded under the Operating Fund Program plus 20 percent of all units not 
fully funded under the Operating Fund Program. For instance, if the 
total monthly operating costs of the current development are $168,750 
and it has 325 occupied units and 50 vacant units not fully funded under 
the Operating Fund Program (or a 13 percent overall vacancy rate), then 
the $2,250,000 is divided by 335--325 plus 20 percent of 50--to give a 
per unit figure of $504 per unit month. By this example, the current 
costs per occupied unit are at least 10 percent higher (12 percent in 
this example) 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 20 percent or higher, then the PHA-wide method will be 
used to determine projected costs. First, the current per unit cost of 
the entire PHA will be computed, with total costs divided by the sum of 
all occupied units and vacant units fully funded under the Operating 
Fund Program plus 20 percent of all vacant units not fully funded under 
the Operating Fund Program. For example, if the PHA's operating cost is 
$18 million, and the PHA has 4,000 units, of which 3,875 are occupied 
and 125 are vacant and not fully funded under the Operating Fund 
Program, then the PHA's vacancy adjusted operating cost is $385 per unit 
per month--$18,000,000 divided by the 3,825 (the sum of 3,800 occupied 
units and 20 percent of 125 vacant units) divided by

[[Page 504]]

12 months. Second, this amount will be multiplied by the ratio of the 
bedroom adjustment factor of the development to the bedroom adjustment 
factor of the PHA. 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, consider a 
development with 375 occupied units that had the following under an ACC 
contract: 200 two-bedroom units, 150 three-bedroom units, and 25 four-
bedroom units. In that example, the bedroom adjustment factor would be 
1.127--200 times 1.0, plus 150 times 1.25, plus 25 times 1.4 with the 
sum divided by 375. Where necessary, HUD field offices will arrange for 
assistance in the calculation of the bedroom adjustment factors of the 
PHA and its affected developments.
    c. As an example of estimating development operating costs from PHA-
wide operating costs, suppose that the PHA had a total monthly operating 
cost per unit of $385 and a bedroom adjustment factor of .928, and 
suppose that the development had a bedroom adjustment factor of 1.127. 
Then, the development's estimated current monthly operating cost per 
occupied unit would be $467--or $385 times 1.214 (the ratio of 1.127 to 
.928). By this example, the development's current operating costs of 
$467 per unit per month are not more than 10 percent higher (3.8 percent 
in this example) than the projected costs of $450 per unit per month and 
no additional justification of the cost reduction would be required.

                            B. Modernization

    Under both the required and voluntary conversion programs, PHAs 
prepare modernization or capital repair estimates in accordance with the 
physical needs of the specific properties proposed for conversion. There 
are three key assumptions that guide how PHAs prepare modernization 
estimates that affect remaining useful life and determine whether the 
20-, 30-, or discretionary 40-year remaining useful life evaluation 
period are used for the cost-test. When calculating public housing 
revitalization costs for a property, PHAs will use a 30-year period if 
the level of modernization addresses all accumulated backlog needs and 
the planned redesign ensures long-term viability. For modernization 
equivalent to new construction or when the renovations restore a 
property to as-new physical conditions, a 40-year remaining useful life 
test is used. When light or moderate rehabilitation that does not 
address all accumulated backlog is undertaken, but it is compliant with 
the International Existing Building Codes (ICC) or Public Housing 
Modernization Standards in the absence of a local rehabilitation code, 
the 20-year remaining useful life evaluation period must be used.
    Except for some voluntary conversion situations as explained in 
paragraph E below, the cost of modernization is, at a minimum, the 
initial revitalization cost to meet viability standards. In the absence 
of a local code, PHAs may refer to the Public Housing Modernization 
Standards Handbook (Handbook 7485.2) or the International Existing 
Building Codes (ICC) 2003 Edition. To justify a 40-year amortization 
cycle that increases the useful life period and time over which 
modernization costs are amortized, PHAs must demonstrate that the 
proposed modernization meets the applicable physical viability 
standards, but must also cover accumulated backlog and redesign that 
achieves as-new physical conditions to ensure long-term viability. To be 
a plausible estimate, modernization costs shall be justified by a newly 
created property-based needs assessment (a life-cycle physical needs 
assessments prepared in accordance with a PHA's Capital Fund annual or 
5-year action plan and shall be able to be reconciled with standardized 
measures, such as components of the PHAs physical inspection and chronic 
vacancy due to physical condition and design. Modernization costs may be 
assumed to occur during years one through four, consistent with the 
level of work proposed and the PHA's proposed modernization schedule. 
For example, if the initial modernization outlay (excluding demolition 
costs) to meet viability standards is $21,000,000 for 375 units, a PHA 
might incur costs in three equal increments of $7,000,000 in years two, 
three, and four (based on the PHA's phased modernization plan). In 
comparing the net present value of public housing to voucher costs for 
required conversion, a 30-year amortization period will normally be 
used, except when revitalization would bring the property to as-new 
condition and a 40-year amortization would be justified. On the other 
hand, when the modernization falls short of meeting accumulated backlog 
and long-term redesign needs, only a 20-year amortization period might 
be justified.

                               C. Accrual

    Accrual projections estimate the ongoing replacement repair needs 
for public housing properties and building structures and systems 
required to maintain the physical viability of a property throughout its 
useful life as the lifecycle of building structures and

[[Page 505]]

systems expire. The cost of accrual (i.e., replacement needs) will be 
estimated with an algorithm that meets all ongoing capital needs based 
on systems that have predictable lifecycles. The algorithm starts with 
the area index of housing construction costs (HCC) that HUD publishes as 
a component of its TDC index series. Subtracted from this HCC figure is 
half the estimated modernization per unit, with a coefficient of .025 
multiplied by the result to provide an annual accrual figure per unit. 
For example, suppose that the development after modernization will 
remain a walkup structure containing 200 two-bedroom, 150 three-bedroom, 
and 25 four-bedroom occupied units, and if HUD's HCC limit for the area 
is $66,700 for two-bedroom walkup structures, $93,000 for three-bedroom 
walkup structures, and $108,400 for four-bedroom walkup structures. Then 
the unit-weighted HCC cost is $80,000 per unit and .75 of that figure is 
$60,000 per unit. Then, if the per unit cost of the modernization is 
$56,000, the estimated annual cost of accrual per occupied unit is 
$1,300. This is the result of multiplying .025 times $52,000 (the 
weighted HCC of $80,000) minus $28,000 (half the per-unit modernization 
cost of $56,000). The first year of total accrual for the development is 
$487,500 ($1,300 times 375 units) and should be assumed to begin in the 
year after modernization is complete. Accrual--like operating cost--is 
an annual expense and will occur in each year over the amortized period. 
Because the method assumes full physical renewal each year, this accrual 
method when combined with a modernization that meets past backlog and 
redesign needs justifies a 30- or 40-year amortization period, because 
the property is refreshed each year to as-new or almost as-new 
condition.

              D. Residual Value (Voluntary Conversion Only)

    Under the voluntary conversion program, PHAs are required to prepare 
market appraisals based on the ``as-is'' and post-rehabilitation 
condition of properties, assuming the buildings are operated as public 
or assisted, unassisted, or market-rate housing. Section 972.218 
requires PHAs to describe the future use for a property proposed for 
conversion and to describe the means and timetable to complete these 
activities. HUD will permit a PHA to enter the appraised market value of 
a property into the cost-test in Years 1 through 5 when a PHA 
anticipates selling a property or receiving income generated from the 
sale or lease of a property.
    As a separate line item to be added to total public costs as a 
foregone opportunity cost, a PHA shall include in the voluntary cost-
test calculations the appraised market or residual value (or net sales 
proceeds) from the sale or lease of a property that is to be voluntarily 
converted to tenant-based voucher assistance. The PHA must hire an 
appraiser to estimate the market value of the property using the 
comparable sale, tax-assessment, or revenue-based appraisal methods. 
PHAs are advised to select one or more of these appraisal methods to 
accurately determine the actual or potential market value of a property, 
particularly the comparable sales or revenue-based methods. The market 
or residual value is to be determined by calculating the estimated 
market value for the property based on the appraisal, minus any costs 
required for demolition and remediation. The residual value must be 
incorporated into the cost-test instead of the actual market value only 
when any demolition, site remediation, and clearance costs that are 
necessary are covered by the selling PHA. However, if the sum of the 
estimated per unit cost of demolition and remediation exceeds 10 percent 
of the average Total Development Cost (TDC) for the units, the lower of 
the PHA estimate or a figure based on 10 percent of TDC must be used. 
Suppose the estimated remediation and demolition costs necessary for 
conversion sale are $7,000 per unit. Also, suppose the TDC limits are 
$115,000 for a two-bedroom unit, $161,000 for a three-bedroom unit, and 
$184,000 for a four-bedroom unit. Then the average TDC of a development 
with 200 two-bedroom units, 150 three-bedroom units, and 25 four-bedroom 
units is $138,000 (200 times $115,000, plus 150 times $161,000, plus 25 
times $184,000, the sum divided by 375) and 10 percent of TDC is 
$13,800. In this example, the estimated $7,000 per unit costs for 
demolition and remediation is less than 10 percent of TDC for the 
development, and the PHA estimate of $7,000 is used. If estimated 
expenses had exceeded 10 percent of TDC ($13,800 in this example), 
demolition and remediation expenses must be capped at the lower amount.

             E. Accumulated Discounted Cost: Public Housing

    The overall cost for continuing to operate the development as public 
housing is the sum of the discounted values of the yearly stream of 
costs up for the amortization period, which can range from 20 to 30 to 
40 years, depending on the extent of modernization relative to the 
current physical and redesign needs of the development. In calculating 
net present value for required conversion, the sum of all costs in each 
future year is discounted back to the current year using the OMB-
specified real discount rate. For voluntary conversion, the discount 
rate is applied forward as a direct inflation factor. To assist PHAs in 
completing the net present value comparison and to ensure consistency in 
the calculations, HUD has developed a spreadsheet calculator that is 
available for downloading from the HUD Internet site. Using PHA data and 
property specific

[[Page 506]]

inputs (to be entered by the housing agency), the spreadsheet will 
discount costs as described above and will generate net present values 
for amortization periods of 20, 30, and 40 years.

                       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 average of recent movers in the local area; plus the 
administrative fee for providing such vouchers; plus $1,000 per unit (or 
a higher amount allowed by HUD) for relocation assistance costs, 
including counseling. However, if the sum of the estimated per unit cost 
of demolition, remediation, and relocation exceeds 10 percent of the 
average Total Development Cost (TDC) for the units, the lower of the PHA 
estimate or a figure based on 10 percent of TDC must be used.
    For example, if the development has 200 occupied two-bedroom units, 
150 occupied three-bedroom units, and 25 occupied four-bedroom units, 
and if the monthly payment standard for voucher units occupied by recent 
movers is $550 for two-bedroom units, $650 for three-bedroom units, and 
$750 for four-bedroom units, the unit-weighted monthly payment standard 
is $603.33. If the administrative fee comes to $46 per unit, then the 
monthly per unit operating voucher costs are $649.33, which rounds to an 
annual total of $2,922,000 for 375 occupied units of the same bedroom 
size as those being demolished in public housing. To these operating 
voucher costs, a first-year relocation is added on the voucher side. For 
per-unit relocation costs of $1,000 per unit for relocation, then 
$375,000 for 375 units is placed on the voucher cost side of the first 
year.

                  Accumulated Discounted Cost: Vouchers

    The overall cost for vouchers is the sum of the discounted values of 
the yearly stream of costs up for the amortization period, which can 
range from 20 to 30 to 40 years, depending on the extent of 
modernization relative to the current physical and redesign needs of the 
development. The amortization period chosen is the one that was 
appropriate for discounting public housing costs. In calculating net 
present value for required conversion, the sum of all costs in each 
future year is discounted back to the current year using the OMB-
specified real discount rate. For voluntary conversion, the discount 
rate is applied forward as a direct inflation factor.
    To assist PHAs in completing the net present value comparison and to 
ensure consistency in the calculations, HUD has developed a spreadsheet 
calculator that will be available for downloading from the HUD Internet 
site.

                       III. Results of the Example

    With the hypothetical data used in the examples, under an 
amortization period of 30 years, the discounted public housing costs 
under required conversion sums to $69,633,225, and the discounted 
voucher cost under required conversions totals $60,438,698. The ratio is 
1.15, which means that public housing is 15 percent more costly than 
vouchers. With this amortization and this data, the PHA would be 
required to convert the development under the requirements of subpart A 
of this part, except in a situation where a PHA can demonstrate a 
distressed property that has failed the cost-test can be redeveloped by 
meeting each of the four factors that compose the long-term physical 
viability test to avoid removal from the inventory. With the same data, 
but a 40-year amortization period, public housing is still 11 percent 
costlier than vouchers, and with a 20-year amortization, public housing 
is 25 percent costlier than vouchers. In voluntary conversion, with the 
same hypothetical data, but a slightly different methodology (use of 
residual value as a public housing cost, inflating forward the discount 
numbers), the ratio of public housing costs to voucher costs would be 
1.16 for the 20-year amortization period, 1.03 for the 30-year 
amortization period, and .97 for the 20-year amortization period. Thus, 
in voluntary conversion, the appropriate amortization period would 
decide whether public housing is more costly or is slightly more costly, 
or less than vouchers. Under a 20-year amortization assumption and 
possibly under a 30-year amortization period, the PHA would have the 
option of preparing a conversion plan for the development under subpart 
B of this part. Different sets of data would yield different conclusions 
for required and voluntary conversion determinations.

[71 FR 14336, Mar. 21, 2006]



PART 982_SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM--Table of Contents



                      Subpart A_General Information

Sec.
982.1 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 PHA Plan for Administration of Program

982.51 PHA authority to administer program.
982.52 HUD requirements.

[[Page 507]]

982.53 Equal opportunity requirements and protection for victims of 
          domestic violence, dating violence, sexual assault, or 
          stalking.
982.54 Administrative plan.

            Subpart C_Funding and PHA Application for Funding

982.101 Allocation of funding.
982.102 Allocation of budget authority for renewal of expiring CACC 
          funding increments.
982.103 PHA application for funding.
982.104 HUD review of application.

   Subpart D_Annual Contributions Contract and PHA Administration of 
                                 Program

982.151 Annual contributions contract.
982.152 Administrative fee.
982.153 PHA 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 and targeting.
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: Local preferences in admission to program.

Subpart F [Reserved]

                        Subpart G_Leasing a Unit

982.301 Information when family is selected.
982.302 Issuance of certificate or voucher; Requesting PHA approval of 
          assisted tenancy.
982.303 Term of voucher.
982.304 Illegal discrimination: PHA assistance to family.
982.305 PHA approval of assisted tenancy.
982.306 PHA disapproval of owner.
982.307 Tenant screening.
982.308 Lease and tenancy.
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.
982.315 Family break-up.
982.316 Live-in aide.
982.317 Lease-purchase agreements.

                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 Move with continued tenant-based assistance.
982.355 Portability: Administration by initial and receiving PHA.

 Subpart I_Dwelling Unit: Housing Quality Standards, Subsidy Standards, 
                       Inspection and Maintenance

982.401 Housing quality standards.
982.402 Subsidy standards.
982.403 Terminating HAP contract when unit is too small.
982.404 Maintenance: Owner and family responsibility; PHA remedies.
982.405 PHA initial and periodic unit inspection.
982.406 Use of alternative inspections.
982.407 Enforcement of HQS.

 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 Automatic termination of HAP contract.
982.456 Third parties.

              Subpart K_Rent and Housing Assistance Payment

982.501 Overview.
982.503 Payment standard amount and schedule.
982.504 Payment standard for family in restructured subsidized 
          multifamily project.
982.505 How to calculate housing assistance payment.
982.506 Negotiating rent to owner.
982.507 Rent to owner: Reasonable rent.
982.508 Maximum family share at initial occupancy.
982.509 Rent to owner: Effect of rent control.
982.510 Other fees and charges.

[[Page 508]]

982.514 Distribution of housing assistance payment.
982.515 Family share: Family responsibility.
982.516 Family income and composition: Annual and interim examinations.
982.517 Utility allowance schedule.
982.521 Rent to owner in subsidized project.

   Subpart L_Family Obligations; Denial and Termination of Assistance

982.551 Obligations of participant.
982.552 PHA denial or termination of assistance for family.
982.553 Denial of admission and termination of assistance for criminals 
          and alcohol abusers.
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: Who may reside in an SRO?
982.603 SRO: Lease and HAP contract.
982.604 SRO: Voucher 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: Voucher housing assistance payment.
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 voucher 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 voucher 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.

                          Homeownership Option

982.625 Homeownership option: General.
982.626 Homeownership option: Initial requirements.
982.627 Homeownership option: Eligibility requirements for families.
982.628 Homeownership option: Eligible units.
982.629 Homeownership option: Additional PHA requirements for family 
          search and purchase.
982.630 Homeownership option: Homeownership counseling.
982.631 Homeownership option: Home inspections, contract of sale, and 
          PHA disapproval of seller.
982.632 Homeownership option: Financing purchase of home; affordability 
          of purchase.
982.633 Homeownership option: Continued assistance requirements; Family 
          obligations.
982.634 Homeownership option: Maximum term of homeownership assistance.
982.635 Homeownership option: Amount and distribution of monthly 
          homeownership assistance payment.
982.636 Homeownership option: Portability.
982.637 Homeownership option: Move with continued tenant-based 
          assistance.
982.638 Homeownership option: Denial or termination of assistance for 
          family.
982.639 Homeownership option: Administrative fees.
982.641 Homeownership option: Applicability of other requirements.
982.642 Homeownership option: Pilot program for homeownership assistance 
          for disabled families.
982.643 Homeownership option: Downpayment assistance grants.

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

    Source: 59 FR 36682, July 18, 1994, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 982 appear at 64 FR 
26640, May 14, 1999.

[[Page 509]]



                      Subpart A_General Information

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec.  982.1  Programs: purpose and structure.

    (a) General description. (1) In the HUD Housing Choice Voucher (HCV) 
program, HUD pays rental subsidies so eligible families can afford 
decent, safe, and sanitary housing. The HCV program is generally 
administered by State or local governmental entities called public 
housing agencies (PHAs). HUD provides housing assistance funds to the 
PHA. HUD also provides funds for PHA administration of the program.
    (2) Families select and rent units that meet program housing quality 
standards. If the PHA approves a family's unit and tenancy, the PHA 
contracts with the owner to make rent subsidy payments on behalf of the 
family. A PHA may not approve a tenancy unless the rent is reasonable.
    (3) Subsidy in the HCV program is based on a local ``payment 
standard'' that reflects the cost to lease a unit in the local housing 
market. If the rent is less than the payment standard, the family 
generally pays 30 percent of adjusted monthly income for rent. If the 
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 a PHA that runs a 
voucher program.
    (2) To receive tenant-based assistance, the family selects a 
suitable unit. After approving the tenancy, the PHA enters into a 
contract to make rental subsidy payments to the owner to subsidize 
occupancy by the family. The PHA contract with the owner only covers a 
single unit and a specific assisted family. If the family moves out of 
the leased unit, the contract with the owner terminates. The family may 
move to another unit with continued assistance so long as the family is 
complying with program requirements.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26640, May 14, 1999; 80 
FR 8245, Feb. 17, 2015]



Sec.  982.2  Applicability.

    Part 982 contains the program requirements for the tenant-based 
housing assistance program under Section 8 of the United States Housing 
Act of 1937 (42 U.S.C. 1437f). The tenant-based program is the HCV 
program.

[80 FR 8245, Feb. 17, 2015]



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) General definitions. The 
following terms are defined in part 5, subpart A of this title: 1937 
Act, covered person, drug, drug-related criminal activity, federally 
assisted housing, guest, household, HUD, MSA, other person under the 
tenant's control, public housing, Section 8, and violent criminal 
activity.
    (2) Definitions concerning family income and rent. The terms 
``adjusted income,'' ``annual income,'' ``extremely low income family,'' 
``tenant rent,'' ``total tenant payment,'' ``utility allowance,'' 
``utility reimbursement,'' and ``welfare assistance'' are defined in 
part 5, subpart F of this title. The definitions of ``tenant rent'' and 
``utility reimbursement'' in part 5, subpart F of this title do not 
apply to the HCV program under part 982.
    (b) In addition to the terms listed in paragraph (a) of this 
section, the following definitions apply:
    Absorption. For purposes of subpart H, the point at which a 
receiving PHA starts making assistance payments with funding under its 
consolidated ACC, rather than billing, the initial PHA.

[[Page 510]]

    Administrative fee. Fee paid by HUD to the PHA for administration of 
the program. See Sec.  982.152.
    Administrative fee reserve (formerly ``operating reserve''). Account 
established by PHA 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 PHA policies for 
administration of the HCV program. 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 the 
tenant-based program.
    Applicant (applicant family). A family that has applied for 
admission to the HCV program but is not yet a program participant.
    Budget authority. An amount authorized and appropriated by the 
Congress for payment to PHAs under the HCV program. For each funding 
increment in the program, budget authority is the maximum amount that 
may be paid by HUD to the PHA over the ACC term of the funding 
increment.
    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.
    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 HCV program.
    Cooperative. Housing owned by a corporation or association, and 
where a member of the corporation or association has the right to reside 
in a particular unit, and to participate in management of the housing.
    Cooperative member. A family of which one or more members owns 
membership shares in a cooperative.
    Domicile. The legal residence of the household head or spouse as 
determined in accordance with State and local law.
    Downpayment assistance grant. A form of homeownership assistance in 
the homeownership option: A single downpayment assistance grant for the 
family. If a family receives a downpayment assistance grant, a PHA may 
not make monthly homeownership assistance payments for the family. A 
downpayment assistance grant is applied to the downpayment for purchase 
of the home or reasonable and customary closing costs required in 
connection with purchase of the home.
    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 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. A person or group of persons, as determined by the PHA 
consistent with 24 CFR 5.403, approved to reside in a unit with 
assistance under the program. See ``family composition'' at Sec.  
982.201(c).
    Family rent to owner. In the voucher program, the portion of rent to 
owner paid by the family. For calculation of family rent to owner, see 
Sec.  982.515(b).
    Family self-sufficiency program (FSS program). The program 
established by a PHA 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 PHA under the PHA subsidy standards.
    First-time homeowner. In the homeownership option: A family of which 
no member owned any present ownership interest in a residence of any 
family member during the three years before commencement of 
homeownership assistance for the family. The term ``first-time 
homeowner'' includes a single parent or displaced homemaker (as those 
terms are defined in 12 U.S.C. 12713) who, while married, owned a

[[Page 511]]

home with his or her spouse, or resided in a home owned by his or her 
spouse.
    Funding increment. Each commitment of budget authority by HUD to a 
PHA under the consolidated annual contributions contract for the PHA 
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.
    Home. In the homeownership option: A dwelling unit for which the PHA 
pays homeownership assistance.
    Homeowner. In the homeownership option: A family of which one or 
more members owns title to the home.
    Homeownership assistance. Assistance for a family under the 
homeownership option. There are two alternative and mutually exclusive 
forms of homeownership assistance by a PHA for a family: monthly 
homeownership assistance payments, or a single downpayment assistance 
grant. Either form of homeownership assistance may be paid to the 
family, or to a mortgage lender on behalf of the family.
    Homeownership expenses. In the homeownership option: A family's 
allowable monthly expenses for the home, as determined by the PHA in 
accordance with HUD requirements (see Sec.  982.635).
    Homeownership option. Assistance for a homeowner or cooperative 
member under Sec.  982.625 to Sec.  982.641. A special housing type.
    Housing assistance payment. The monthly assistance payment by a PHA, 
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 minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for the HCV program or 
the HUD approved alternative standard for the PHA under 24 CFR 5.703(g).
    Initial PHA. In portability, the term refers to both:
    (1) a PHA that originally selected a family that later decides to 
move out of the jurisdiction of the selecting PHA; and
    (2) a PHA that absorbed a family that later decides to move out of 
the jurisdiction of the absorbing PHA.
    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.
    Interest in the home. In the homeownership option:
    (1) In the case of assistance for a homeowner, ``interest in the 
home'' includes title to the home, any lease or other right to occupy 
the home, or any other present interest in the home.
    (2) In the case of assistance for a cooperative member, ``interest 
in the home'' includes ownership of membership shares in the 
cooperative, any lease or other right to occupy the home, or any other 
present interest in the home.
    Jurisdiction. The area in which the PHA 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 PHA.
    (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 PHA. 
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.''
    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 512]]

    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.
    Membership shares. In the homeownership option: shares in a 
cooperative. By owning such cooperative shares, the share-owner has the 
right to reside in a particular unit in the cooperative, and the right 
to participate in management of the housing.
    Merger date. October 1, 1999, which is the effective date of the 
merger of the two tenant-based programs (the housing voucher and housing 
certificate programs) into the Housing Choice Voucher (HCV) program.
    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.
    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 PHA 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 PHA for the family (first day of initial lease term).
    Payment standard. The maximum monthly assistance payment for a 
family assisted in the voucher program (before deducting the total 
tenant payment by the family).
    PHA plan. The annual plan and the 5-year plan as adopted by the PHA 
and approved by HUD in accordance with part 903 of this chapter.
    Portability. Renting a dwelling unit with Section 8 tenant-based 
assistance outside the jurisdiction of the initial PHA.
    Premises. The building or complex in which the dwelling unit is 
located, including common areas and grounds.
    Present homeownership interest. In the homeownership option: 
``Present ownership interest'' in a residence includes title, in whole 
or in part, to a residence, or ownership, in whole or in part, of 
membership shares in a cooperative. ``Present ownership interest'' in a 
residence does not include the right to purchase title to the residence 
under a lease-purchase agreement.
    Private space. In shared housing: The portion of a contract unit 
that is for the exclusive use of an assisted family.
    Program. The Section 8 HCV program under this part.
    Program receipts. HUD payments to the PHA under the consolidated 
ACC, and any other amounts received by the PHA in connection with the 
program.
    Public housing agency (PHA). PHA includes both:
    (1) Any State, county, municipality, or other governmental entity or 
public body which is authorized to administer the program (or an agency 
or instrumentality of such an entity), and
    (2) Any of the following:
    (i) A consortium of housing agencies, each of which meets the 
qualifications in paragraph (1) of this definition, that HUD determines 
has the capacity and capability to efficiently administer the program 
(in which case, HUD may enter into a consolidated ACC with any legal 
entity authorized to act as the legal representative of the consortium 
members);
    (ii) Any other public or private non-profit entity that was 
administering a Section 8 tenant-based assistance program pursuant to a 
contract with the contract administrator of such program (HUD or a PHA) 
on October 21, 1998; or
    (iii) For any area outside the jurisdiction of a PHA that is 
administering a tenant-based program, or where HUD determines that such 
PHA is not administering the program effectively, a private non-profit 
entity or a governmental entity or public body that would otherwise lack 
jurisdiction to administer the program in such area.
    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 PHA. In portability: A PHA that receives a family selected 
for participation in the HCV program of another PHA. The receiving PHA 
issues a

[[Page 513]]

voucher and provides program assistance to the family.
    Renewal units. The number of units, as determined by HUD, for which 
funding is reserved on HUD books for a PHA's program. This number is 
used is calculating renewal budget authority in accordance with Sec.  
982.102.
    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.
    Residency preference. A PHA preference for admission of families 
that reside anywhere in a specified area, including families with a 
member who works or has been hired to work in the area (``residency 
preference area'').
    Residency preference area. The specified area where families must 
reside to qualify for a residency preference.
    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 PHA 
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 home, shared housing, manufactured home 
(including manufactured home space rental), cooperative housing (rental 
assistance for cooperative member) and homeownership option 
(homeownership assistance for cooperative member or first-time 
homeowner).
    Statement of homeowner obligations. In the homeownership option: The 
family's agreement to comply with program obligations.
    Subsidy standards. Standards established by a PHA to determine the 
appropriate number of bedrooms and amount of subsidy for families of 
different sizes and compositions.
    Suspension. The term on the family's voucher stops from the date 
that the family submits a request for PHA approval of the tenancy, until 
the date the PHA notifies the family in writing whether the request has 
been approved or denied.
    Tenant. The person or persons (other than a live-in aide) who 
executes the lease as lessee of the dwelling unit.
    Utility reimbursement. The portion of the housing assistance payment 
which exceeds the amount of the rent to owner. (See Sec.  982.514(b)).
    Voucher holder. A family holding a voucher with an unexpired term 
(search time).
    Voucher (rental voucher). A document issued by a PHA to a family 
selected for admission to the voucher program. This document describes 
the program and the procedures for PHA approval of a unit selected by 
the family. The voucher also states obligations of the family under the 
program.
    Waiting list admission. An admission from the PHA waiting list.
    Welfare-to-work (WTW) families. Families assisted by a PHA with 
voucher funding awarded to the PHA under the HUD welfare-to-work voucher 
program (including any renewal of such WTW funding for the same 
purpose).

[63 FR 23857, Apr. 30, 1998; 63 FR 31625, June 10, 1998, as amended at 
64 FR 26641, May 14, 1999; 64 FR 49658, Sept. 14, 1999; 64 FR 56887, 
56911, Oct. 21, 1999; 65 FR 16821, Mar. 30, 2000; 65 FR 55161, Sept. 12, 
2000; 66 FR 28804, May 24, 2001; 66 FR 33613, June 22, 2001; 67 FR 
64492, Oct. 18, 2002; 77 FR 5675, Feb. 3, 2012; 80 FR 8245, Feb. 17, 
2015; 80 FR 50572, Aug. 20, 2015; 88 FR 30503, May 11, 2023]



Sec.  982.5  Notices required by this part.

    Where part 982 requires any notice to be given by the PHA, the 
family or the owner, the notice must be in writing.



  Subpart B_HUD Requirements and PHA Plan for Administration of Program

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.

[[Page 514]]



Sec.  982.51  PHA authority to administer program.

    (a) The PHA must have authority to administer the program. The PHA 
must provide evidence, satisfactory to HUD, of its status as a PHA, of 
its authority to administer the program, and of the PHA jurisdiction.
    (b) The evidence submitted by the PHA to HUD must include enabling 
legislation and a supporting legal opinion satisfactory to HUD. The PHA 
must submit additional evidence when there is a change that affects its 
status as a PHA, its authority to administer the program, or its 
jurisdiction.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26641, May 14, 1999; 80 
FR 8245, Feb. 17, 2015]



Sec.  982.52  HUD requirements.

    (a) The PHA 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 PHA must comply with the consolidated ACC and the PHA'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 and protection for victims 
of domestic violence, dating violence, sexual assault, or stalking.

    (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) Civil rights certification. The PHA must submit a signed 
certification to HUD that:
    (1) The PHA will administer the program in conformity with the Fair 
Housing Act, Title VI of the Civil Rights Act of 1964, section 504 of 
the Rehabilitation Act of 1973, and Title II of the Americans with 
Disabilities Act.
    (2) The PHA will affirmatively further fair housing in the 
administration of the program.
    (c) Obligation to affirmatively further fair housing. The PHA shall 
affirmatively further fair housing as required by Sec.  903.7(o) of this 
title.
    (d) State and local law. Nothing in part 982 is intended to pre-empt 
operation of State and local laws that prohibit discrimination against a 
Section 8 voucher-holder because of status as a Section 8 voucher-
holder. However, such State and local laws shall not change or affect 
any requirement of this part, or any other HUD requirements for 
administration or operation of the program.
    (e) Protection for victims of domestic violence, dating violence, 
sexual assault, or stalking. The PHA must apply the requirements in 24 
CFR part 5, subpart L (Protection for Victims of Domestic Violence, 
Dating Violence, Sexual Assault, or Stalking). For purposes of 
compliance with HUD's regulations in 24 CFR part 5, subpart L, the 
covered housing provider is the PHA or owner, as applicable given the 
responsibilities of the covered housing provider as set forth in 24 CFR 
part 5, subpart L. For example, the PHA is the covered housing provider 
responsible for providing the Notice of occupancy rights under VAWA and 
certification form described at 24 CFR 5.2005(a). In addition, the owner 
is the covered housing provider that may choose to bifurcate a lease as 
described at 24 CFR 5.2009(a), while the PHA is the covered housing 
provider responsible for complying with emergency transfer plan 
provisions at 24 CFR 5.2005(e).

(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; 64 FR 26641, May 14, 1999; 64 FR 56911, Oct. 
21, 1999; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 80 FR 
8245, Feb. 17, 2015; 81 FR 80816, Nov. 16, 2016]



Sec.  982.54  Administrative plan.

    (a) The PHA 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

[[Page 515]]

formally adopted by the PHA Board of Commissioners or other authorized 
PHA officials. The administrative plan states PHA policy on matters for 
which the PHA has discretion to establish local policies.
    (b) The administrative plan must be in accordance with HUD 
regulations and requirements. The administrative plan is a supporting 
document to the PHA plan (part 903 of this title) and must be available 
for public review. The PHA must revise the administrative plan if needed 
to comply with HUD requirements.
    (c) The PHA must administer the program in accordance with the PHA 
administrative plan.
    (d) The PHA administrative plan must cover PHA policies on these 
subjects:
    (1) Selection and admission of applicants from the PHA waiting list, 
including any PHA admission preferences, procedures for removing 
applicant names from the waiting list, and procedures for closing and 
reopening the PHA waiting list;
    (2) Issuing or denying vouchers, including PHA policy governing the 
voucher term and any extensions of the voucher term. If the PHA decides 
to allow extensions of the voucher term, the PHA administrative plan 
must describe how the PHA determines whether to grant extensions, and 
how the PHA determines the length of any extension.
    (3) Any special rules for use of available funds when HUD provides 
funding to the PHA 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'';
    (iii) Standards for denying admission or terminating assistance 
based on criminal activity or alcohol abuse in accordance with Sec.  
982.553;
    (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) The process for establishing and revising payment standards, 
including policies on administering decreases in the payment standard 
during the HAP contract term (see Sec.  982.505(d)(3)).
    (15) The method of determining that rent to owner is a reasonable 
rent (initially and during the term of a HAP contract);
    (16) Special policies concerning special housing types in the 
program (e.g., use of shared housing);
    (17) Policies concerning payment by a family to the PHA of amounts 
the family owes the PHA;
    (18) Interim redeterminations of family income and composition;
    (19) Restrictions, if any, on the number of moves by a participant 
family (see Sec.  982.354(c));
    (20) Approval by the Board of Commissioners or other authorized 
officials to charge the administrative fee reserve;
    (21) Procedural guidelines and performance standards for conducting 
required HQS inspections; and
    (22) PHA screening of applicants for family behavior or suitability 
for tenancy.
    (23) Policies concerning application of Small Area FMRs to project-
based voucher units (see Sec.  888.113(h)).

(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; 64 FR 26641, May 14, 
1999; 64 FR 49658, Sept. 14, 1999; 64 FR 56911, Oct. 21, 1999; 66 FR 
28804, May 24, 2001; 80 FR 8245, Feb. 17, 2015; 80 FR 50572, Aug. 20, 
2015; 81 FR 80582, Nov. 16, 2016]

[[Page 516]]



            Subpart C_Funding and PHA Application for Funding

    Source: 60 FR 34695, July 3, 1995, unless otherwise noted.



Sec.  982.101  Allocation of funding.

    (a) Allocation of funding. HUD allocates available budget authority 
for the tenant-based assistance program 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;
    (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 PHAs by 
publishing one or more notices of funding availability (NOFAs) 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.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26642, May 14, 1999; 80 
FR 8246, Feb. 17, 2015]



Sec.  982.102  Allocation of budget authority for renewal of expiring consolidated ACC funding increments.

    (a) Applicability. This section applies to the renewal of 
consolidated ACC funding increments in the program (as described in 
Sec.  982.151(a)(2)) that expire after December 31, 1999 (including any 
assistance that the PHA has attached to units for project-based 
assistance under 24 CFR part 983). This section implements section 8(dd) 
of the 1937 Act (42 U.S.C. 1437f(dd)).
    (b) Renewal Methodology. HUD will use the following methodology to 
determine the amount of budget authority to be allocated to a PHA for 
the renewal of expiring consolidated ACC funding increments in the 
program, subject to the availability of appropriated funds. If the 
amount of appropriated funds is not sufficient to provide the full 
amount of renewal funding for PHAs, as calculated in accordance with 
this section, HUD may establish a procedure to adjust allocations for 
the shortfall in funding.
    (c) Determining the amount of budget authority allocated for renewal 
of an expiring funding increment. Subject to availability of 
appropriated funds, as determined by HUD, the amount of budget authority 
allocated by HUD to a PHA for renewal of each program funding increment 
that expires during a calendar year will be equal to:
    (1) Number of renewal units. The number of renewal units assigned to 
the funding increment (as determined by HUD pursuant to paragraph (d) of 
this section); multiplied by
    (2) Adjusted annual per unit cost. The adjusted annual per unit cost 
(as determined by HUD pursuant to paragraph (e) of this section).
    (d) Determining the number of renewal units--(1) Number of renewal 
units. HUD will determine the total number of renewal units for a PHA's 
program as of the last day of the calendar year previous to the calendar 
year for which renewal funding is calculated. The number of renewal 
units for a PHA's program will be determined as follows:
    (i) Step 1: Establishing the initial baseline. HUD will establish a 
baseline number of units (``baseline'') for each PHA program. The 
initial baseline equals the number of units reserved by HUD for the PHA 
program as of December 31, 1999.
    (ii) Step 2: Establishing the adjusted baseline. The adjusted 
baseline equals the initial baseline with the following

[[Page 517]]

adjustments from the initial baseline as of the last day of the calendar 
year previous to the calendar year for which renewal funding is 
calculated:
    (A) Additional units. HUD will add to the initial baseline any 
additional units reserved for the PHA after December 31, 1999.
    (B) Units removed. HUD will subtract from the initial baseline any 
units de-reserved by HUD from the PHA program after December 31, 1999.
    (iii) Step 3: Determining the number of renewal units. The number of 
renewal units equals the adjusted baseline minus the number of units 
supported by contract funding increments that expire after the end of 
the calendar year.
    (2) Funding increments. HUD will assign all units reserved for a PHA 
program to one or more funding increment(s).
    (3) Correction of errors. HUD may adjust the number of renewal units 
to correct errors.
    (e) Determining the adjusted per unit cost. HUD will determine the 
PHA's adjusted per unit cost when HUD processes the allocation of 
renewal funding for an expiring contract funding increment. The adjusted 
per unit cost calculated will be determined as follows:
    (1) Step 1: Determining monthly program expenditure--(i) Use of most 
recent HUD-approved year end statement. HUD will determine the PHA's 
monthly per unit program expenditure for the HCV program (including 
project-based assistance under such program) under the consolidated ACC 
with HUD using data from the PHA's most recent HUD-approved year end 
statement.
    (ii) Monthly program expenditure. The monthly program expenditure 
equals:
    (A) Total program expenditure. The PHA's total program expenditure 
(the total of housing assistance payments and administrative costs) for 
the PHA fiscal year covered by the approved year end statement; divided 
by
    (B) Total unit months leased. The total of unit months leased for 
the PHA fiscal year covered by the approved year end statement.
    (2) Step 2: Determining annual per unit cost. HUD will determine the 
PHA's annual per unit cost. The annual per unit cost equals the monthly 
program expenditures (as determined under paragraph (e)(1)(ii) of this 
section) multiplied by 12.
    (3) Step 3: Determining adjusted annual per unit cost. (i) HUD will 
determine the PHA's adjusted annual per unit cost. The adjusted annual 
per unit cost equals the annual per unit cost (as determined under 
paragraph (e)(2) of this section) multiplied cumulatively by the 
applicable published Section 8 housing assistance payments program 
annual adjustment factors in effect during the period from the end of 
the PHA fiscal year covered by the approved year end statement to the 
time when HUD processes the allocation of renewal funding.
    (ii) Use of annual adjustment factor applicable to PHA jurisdiction. 
For this purpose, HUD will use the annual adjustment factor from the 
notice published annually in the Federal Register pursuant to part 888 
that is applicable to the jurisdiction of the PHA. For a PHA whose 
jurisdiction spans multiple annual adjustment factor areas, HUD will use 
the highest applicable annual adjustment factor.
    (iii) Use of annual adjustment factors in effect subsequent to most 
recent Year End Statement. HUD will use the Annual Adjustment Factors in 
effect during the time period subsequent to the time covered by the most 
recent HUD approved Year End Statement and the time of the processing of 
the contract funding increment to be renewed.
    (iv) Special circumstances. At its discretion, HUD may modify the 
adjusted annual per unit cost based on receipt of a modification request 
from a PHA. The modification request must demonstrate that because of 
special circumstances application of the annual adjustment factor will 
not provide an accurate adjusted annual per unit cost.
    (4) Correction of errors. HUD may correct for errors in the adjusted 
per unit cost.
    (f) Consolidated ACC amendment to add renewal funding. HUD will 
reserve allocated renewal funding available to the PHA within a 
reasonable time prior to the expiration of the funding increment to be 
renewed and establish a new expiration date one-year from the date of 
such expiration.

[[Page 518]]

    (g) Modification of allocation of budget authority--(1) HUD 
authority to conform PHA program costs with PHA program finances through 
Federal Register notice. In the event that a PHA's costs incurred 
threaten to exceed budget authority and allowable reserves, HUD reserves 
the right, through Federal Register notice, to bring PHA program costs 
and the number of families served, in line with PHA program finances.
    (2) HUD authority to limit increases of per unit cost through 
Federal Register notice. HUD may, by Federal Register notice, limit the 
amount or percentage of increases in the adjusted annual per unit cost 
to be used in calculating the allocation of budget authority.
    (3) HUD authority to limit decreases to per unit costs through 
Federal Register notice. HUD may, by Federal Register notice, limit the 
amount or percentage of decreases in the adjusted annual per unit cost 
to be used in calculating the allocation of budget authority.
    (4) Contents of Federal Register notice. If HUD publishes a Federal 
Register notice pursuant to paragraphs (g)(1), (g)(2) or (g)(3) of this 
section, it will describe the rationale, circumstances and procedures 
under which such modifications are implemented. Such circumstances and 
procedures shall, be consistent with the objective of enabling PHAs and 
HUD to meet program goals and requirements including but not limited to:
    (i) Deconcentration of poverty and expanding housing opportunities;
    (ii) Reasonable rent burden;
    (iii) Income targeting;
    (iv) Consistency with applicable consolidated plan(s);
    (v) Rent reasonableness;
    (vi) Program efficiency and economy;
    (vii) Service to additional households within budgetary limitations; 
and
    (viii) Service to the adjusted baseline number of families.
    (5) Public consultation before issuance of Federal Register notice. 
HUD will design and undertake informal public consultation prior to 
issuing Federal Register notices pursuant to paragraphs (g)(1) or (g)(2) 
of this section.
    (h) Ability to prorate and synchronize contract funding increments. 
Notwithstanding paragraphs (c) through (g) of this section, HUD may 
prorate the amount of budget authority allocated for the renewal of 
funding increments that expire on different dates throughout the 
calendar year. HUD may use such proration to synchronize the expiration 
dates of funding increments under the PHA's consolidated ACC.
    (i) Reallocation of budget authority. If a PHA has performance 
deficiencies, such as a failure to adequately lease units, HUD may 
reallocate some of its budget authority to other PHAs. If HUD determines 
to reallocate budget authority, it will reduce the number of units 
reserved by HUD for the PHA program of the PHA whose budget authority is 
being reallocated and increase the number of units reserved by HUD for 
the PHAs whose programs are receiving the benefit of the reallocation, 
so that such PHAs can issue vouchers. HUD will publish a notice in the 
Federal Register that will describe the circumstances and procedures for 
reallocating budget authority pursuant to this paragraph.

[64 FR 56887, Oct. 21, 1999; 65 FR 16818, Mar. 30, 2000; 80 FR 8246, 
Feb. 17, 2015]



Sec.  982.103  PHA application for funding.

    (a) A PHA 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 a PHA 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. Redesignated at 64 FR 56887, Oct. 21, 1999; 80 
FR 8246, Feb. 17, 2015]



Sec.  982.104  HUD review of application.

    (a) Competitive funding under NOFA. For competitive funding under a 
NOFA, HUD must evaluate an application on the basis of the selection 
criteria stated in the NOFA, and must

[[Page 519]]

consider the PHA's capacity and capability to administer the program.
    (b) Approval or disapproval of PHA funding application. (1) HUD must 
notify the PHA of its approval or disapproval of the PHA funding 
application.
    (2) When HUD approves an application, HUD must notify the PHA of the 
amount of approved funding.
    (3) For budget authority that is distributed to PHAs 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).
    (c) PHA disqualification. HUD will not approve any PHA funding 
application (including an application for competitive funding under a 
NOFA) if HUD determines that the PHA is disbarred or otherwise 
disqualified from providing assistance under the program.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26642, May 14, 1999. 
Redesignated at 64 FR 56887, Oct. 21, 1999]



   Subpart D_Annual Contributions Contract and PHA 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 a PHA. Under the ACC, HUD agrees to 
make payments to the PHA, over a specified term, for housing assistance 
payments to owners and for the PHA administrative fee. The ACC specifies 
the maximum payment over the ACC term. The PHA 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 PHA program constitutes a separate ACC. However, commitments for all 
the funding increments in a PHA program are listed in one consolidated 
contractual document called the consolidated annual contributions 
contract (consolidated ACC). A single consolidated ACC covers funding 
for the PHA's HCV program.
    (b) Budget authority. (1) Budget authority is the maximum amount 
that may be paid by HUD to a PHA over the ACC term of a funding 
increment. Before adding a funding increment to the consolidated ACC for 
a PHA 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 term over 
which HUD will make payments for the PHA program, and the amount of 
available budget authority for each funding increment. The amount to be 
paid to the PHA during each PHA fiscal year (including payment from the 
ACC reserve account described in Sec.  982.154) must be approved 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; 64 
FR 26642, May 14, 1999; 80 FR 8246, Feb. 17, 2015]



Sec.  982.152  Administrative fee.

    (a) Purposes of administrative fee. (1) HUD may approve 
administrative fees to the PHA for any of the following purposes:
    (i) Ongoing administrative fee;
    (ii) Costs to help families who experience difficulty finding or 
renting appropriate housing under the program;
    (iii) The following types of extraordinary costs approved by HUD:
    (A) Costs to cover necessary additional expenses incurred by the PHA 
to provide reasonable accommodation for persons with disabilities in 
accordance with part 8 of this title (e.g., additional counselling 
costs), where the PHA is unable to cover such additional expenses from 
ongoing administrative fee income or the PHA administrative fee reserve;
    (B) Costs of audit by an independent public accountant;
    (C) Other extraordinary costs determined necessary by HUD 
Headquarters;
    (iv) Preliminary fee (in accordance with paragraph (c) of this 
section);
    (v) Costs to coordinate supportive services for families 
participating in the family self-sufficiency (FSS) program.

[[Page 520]]

    (2) For each PHA fiscal year, administrative fees are specified in 
the PHA 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) PHA administrative fees may only be used to cover costs incurred 
to perform PHA administrative responsibilities for the program in 
accordance with HUD regulations and requirements.
    (b) Ongoing administrative fee. (1) The PHA 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 determined by HUD in 
accordance with Section 8(q)(1) of the 1937 Act (42 U.S.C. 1437f(q)(1)).
    (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 PHA demonstrates that it is efficiently administering its HCV 
program, and that the higher ongoing administrative 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 PHA-owned 
units.
    (c) Preliminary fee. (1) If the PHA was not administering a program 
of Section 8 tenant-based assistance prior to the merger date, HUD will 
pay a one-time fee in the amount of $500 in the first year the PHA 
administers a program. The fee is paid for each new unit added to the 
PHA program by the initial funding increment under the consolidated ACC.
    (2) The preliminary fee is used to cover expenses the PHA incurs to 
help families who inquire about or apply for the program, and to lease 
up new program units.
    (d) Reducing PHA administrative fee. HUD may reduce or offset any 
administrative fee to the PHA, in the amount determined by HUD, if the 
PHA fails to perform PHA administrative responsibilities correctly or 
adequately under the program (for example, PHA failure to enforce HQS 
requirements; or to reimburse a receiving PHA promptly under portability 
procedures).

[60 FR 23695, July 3, 1995, as amended at 63 FR 23860, Apr. 30, 1998; 64 
FR 26642, May 14, 1999; 80 FR 8246, Feb. 17, 2015]



Sec.  982.153  PHA responsibilities.

    The PHA must comply with the consolidated ACC, the application, HUD 
regulations and other requirements, and the PHA 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) HUD may establish and maintain an unfunded reserve account for 
the PHA program from available budget authority under the consolidated 
ACC. This reserve is called the ``ACC reserve account'' (formerly 
``project reserve''). There is a single ACC reserve account for the PHA 
program.
    (b) The amount in the ACC reserve account is determined by HUD. HUD 
may approve payments for the PHA program, in accordance with the PHA's 
HUD-approved budget, from available amounts in the ACC reserve account.

[64 FR 26642, May 14, 1999]



Sec.  982.155  Administrative fee reserve.

    (a) The PHA must maintain an administrative fee reserve (formerly 
``operating reserve'') for the program. There is a single administrative 
fee reserve for the PHA program. The PHA must credit to the 
administrative fee reserve the total of:
    (1) The amount by which program administrative fees paid by HUD for 
a PHA fiscal year exceed the PHA program administrative expenses for the 
fiscal year; plus
    (2) Interest earned on the administrative fee reserve.
    (b)(1) The PHA must use funds in the administrative fee reserve to 
pay program administrative expenses in excess of administrative fees 
paid by HUD for a PHA fiscal year. If funds in the administrative fee 
reserve are not needed to cover PHA administrative expenses (to the end 
of the last expiring funding increment under the consolidated

[[Page 521]]

ACC), the PHA 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 PHA 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 PHA has not adequately administered any Section 8 
program, HUD may prohibit use of funds in the administrative fee 
reserve, and may direct the PHA to use funds in the reserve 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; 64 
FR 26642, May 14, 1999]



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 PHA in accordance with HUD requirements.
    (b) The PHA may only withdraw deposited program receipts for use in 
connection with the program in accordance with HUD requirements.
    (c) The PHA 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 PHA 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 PHA 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 PHA fiscal year, the PHA must submit its 
proposed budget for the program to HUD for approval at such time and in 
such form as required by HUD.
    (b) PHA use of program receipts. (1) Program receipts must be used 
in accordance with the PHA's HUD-approved budget. Such program receipts 
may only be used for:
    (i) Housing assistance payments; and
    (ii) PHA administrative fees.
    (2) The PHA must maintain a system to ensure that the PHA will be 
able to make housing assistance payments for all participants within the 
amounts contracted under the consolidated ACC.
    (c) Intellectual property rights. Program receipts may not be used 
to indemnify contractors or subcontractors of the PHA against costs 
associated with any judgment of infringement of intellectual property 
rights.

(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; 64 
FR 26642, May 14, 1999]



Sec.  982.158  Program accounts and records.

    (a) The PHA 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 PHA must comply with the 
financial reporting requirements in 24 CFR part 5, subpart H.
    (b) The PHA 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 PHA offices and facilities, and to all 
accounts and other records of the PHA that are pertinent to 
administration of the program, including the right to examine or audit

[[Page 522]]

the records, and to make copies. The PHA 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 PHA must prepare a unit inspection report.
    (e) During the term of each assisted lease, and for at least three 
years thereafter, the PHA must keep:
    (1) A copy of the executed lease;
    (2) The HAP contract; and
    (3) The application from the family.
    (f) The PHA 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;
    (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 records as required by part 35, subpart B of 
this title.
    (6) Accounts and other records supporting PHA budget and financial 
statements for the program;
    (7) Records to document the basis for PHA 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; 64 FR 50229, Sept. 15, 1999; 80 FR 8246, Feb. 17, 2015]



Sec.  982.159  Audit requirements.

    (a) The PHA must engage and pay an independent public accountant to 
conduct audits in accordance with HUD requirements.
    (b) The PHA is subject to the audit requirements in 2 CFR part 200, 
subpart F.

(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; 80 
FR 75943, Dec. 7, 2015]



Sec.  982.160  HUD determination to administer a local program.

    If the Assistant Secretary for Public and Indian Housing determines 
that there is no PHA organized, or that there is no PHA 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 PHAs 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 PHA nor any of its contractors or subcontractors may 
enter into any contract or arrangement in connection with the HCV 
program 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 PHA (except a 
participant commissioner);
    (2) Any employee of the PHA, or any contractor, subcontractor or 
agent of the PHA, 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 PHA 
and HUD.
    (c) The conflict of interest prohibition under this section may be 
waived by the HUD field office for good cause.

[60 FR 34695, July 3, 1995, as amended at 80 FR 8246, Feb. 17, 2015]



Sec.  982.162  Use of HUD-required contracts and other forms.

    (a) The PHA must use program contracts and other forms required by 
HUD headquarters, including:

[[Page 523]]

    (1) The consolidated ACC between HUD and the PHA;
    (2) The HAP contract between the PHA and the owner; and
    (3) The tenancy addendum required by HUD (which is included both in 
the HAP contract and 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.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26642, May 14, 1999]



Sec.  982.163  Fraud recoveries.

    Under 24 CFR part 792, the PHA may retain a portion of program fraud 
losses that the PHA 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]



               Subpart E_Admission to Tenant-Based Program



Sec.  982.201  Eligibility and targeting.

    (a) When applicant is eligible: General. The PHA may admit only 
eligible families to the program. To be eligible, an applicant must be a 
``family;'' must be income-eligible in accordance with paragraph (b) of 
this section and 24 CFR part 5, subpart F; and must be a citizen or a 
noncitizen who has eligible immigration status as determined in 
accordance with 24 CFR part 5, subpart E. If the applicant is a victim 
of domestic violence, dating violence, sexual assault, or stalking, 24 
CFR part 5, subpart L (Protection for Victims of Domestic Violence, 
Dating Violence, Sexual Assault, or Stalking) applies.
    (b) Income--(1) Income-eligibility. To be income-eligible, the 
applicant must be a family in any of the following categories:
    (i) A ``very low income'' family;
    (ii) A low-income family that is ``continuously assisted'' under the 
1937 Housing Act;
    (iii) A low-income family that meets additional eligibility criteria 
specified in the PHA administrative plan. Such additional PHA criteria 
must be consistent with the PHA plan and with the consolidated plans for 
local governments in the PHA jurisdiction;
    (iv) A low-income family that qualifies for voucher assistance as a 
non-purchasing family residing in a HOPE 1 (HOPE for public housing 
homeownership) or HOPE 2 (HOPE for homeownership of multifamily units) 
project. (Section 8(o)(4)(D) of the 1937 Act (42 U.S.C. 1437f(o)(4)(D));
    (v) A low-income or moderate-income family that is displaced as a 
result of the prepayment of the mortgage or voluntary termination of an 
insurance contract on eligible low-income housing as defined in Sec.  
248.101 of this title;
    (vi) A low-income family that qualifies for voucher assistance as a 
non-purchasing family residing in a project subject to a resident 
homeownership program under Sec.  248.173 of this title.
    (2) Income-targeting. (i) Not less than 75 percent of the families 
admitted to a PHA's HCV program during the PHA fiscal year from the PHA 
waiting list shall be extremely low income families. Annual income of 
such families shall be verified within the period described in paragraph 
(e) of this section.
    (ii) A PHA may admit a lower percent of extremely low income 
families during a PHA fiscal year (than otherwise required under 
paragraph (b)(2)(i) of this section) if HUD approves the use of such 
lower percent by the PHA, in accordance with the PHA plan, based on 
HUD's determination that the following circumstances necessitate use of 
such lower percent by the PHA:
    (A) The PHA has opened its waiting list for a reasonable time for 
admission of extremely low income families residing in the same 
metropolitan statistical area (MSA) or non-metropolitan county, both 
inside and outside the PHA jurisdiction;
    (B) The PHA has provided full public notice of such opening to such 
families, and has conducted outreach and marketing to such families, 
including outreach and marketing to extremely low income families on the 
Section 8 and public housing waiting lists of other PHAs with 
jurisdiction in the same MSA or non-metropolitan county;

[[Page 524]]

    (C) Notwithstanding such actions by the PHA (in accordance with 
paragraphs (b)(2)(ii)(A) and (B) of this section), there are not enough 
extremely low income families on the PHA's waiting list to fill 
available slots in the program during any fiscal year for which use of a 
lower percent is approved by HUD; and
    (D) Admission of the additional very low income families other than 
extremely low income families to the PHA's tenant-based voucher program 
will substantially address worst case housing needs as determined by 
HUD.
    (iii) If approved by HUD, the admission of a portion of very low 
income welfare-to-work (WTW) families that are not extremely low income 
families may be disregarded in determining compliance with the PHA's 
income-targeting obligations under paragraph (b)(2)(i) of this section. 
HUD will grant such approval only if and to the extent that the PHA has 
demonstrated to HUD's satisfaction that compliance with such targeting 
obligations with respect to such portion of WTW families would interfere 
with the objectives of the welfare-to-work voucher program. If HUD 
grants such approval, admission of that portion of WTW families is not 
counted in the base number of families admitted to a PHA's tenant-based 
voucher program during the fiscal year for purposes of income targeting.
    (iv) Admission of families as described in paragraphs (b)(1)(ii) or 
(b)(1)(v) of this section is not subject to targeting under paragraph 
(b)(2)(i) of this section.
    (v) If the jurisdictions of two or more PHAs that administer the HCV 
program cover an identical geographic area, such PHAs may elect to be 
treated as a single PHA for purposes of targeting under paragraph 
(b)(2)(i) of this section. In such a case, the PHAs shall cooperate to 
assure that aggregate admissions by such PHAs comply with the targeting 
requirement. If such PHAs do not have a single fiscal year, HUD will 
determine which PHA's fiscal year is used for this purpose.
    (vi) If a family initially leases a unit outside the PHA 
jurisdiction under portability procedures at admission to the HCV 
program, such admission shall be counted against the targeting 
obligation of the initial PHA (unless the receiving PHA absorbs the 
portable family into the receiving PHA's HCV program from the point of 
admission).
    (3) The annual income (gross income) of an applicant family is used 
both for determination of income-eligibility under paragraph (b)(1) of 
this section and for targeting under paragraph (b)(2)(i) of this 
section. In determining annual income of an applicant family that 
includes a person with disabilities, the determination must include the 
disallowance of increase in annual income as provided in 24 CFR 5.617, 
if applicable.
    (4) The applicable income limit for issuance of a voucher when a 
family is selected for the program is the highest income limit (for the 
family size) for areas in the PHA 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. At admission, the 
family may only use the voucher to rent a unit in an area where the 
family is income eligible.
    (c) Family composition. See definition of ``family'' in 24 CFR 
5.403.
    (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 
voucher program.
    (2) The PHA must establish policies concerning whether and to what 
extent a brief interruption between assistance under one of these 
programs and admission to the voucher program will be considered to 
break continuity of assistance under the 1937 Housing Act.
    (e) When PHA verifies that applicant is eligible. The PHA must 
receive information verifying that an applicant is eligible within the 
period of 60 days before the PHA issues a voucher to the applicant.
    (f) Decision to deny assistance--(1) Notice to applicant. The PHA 
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

[[Page 525]]

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.
    (2) For description of the grounds for denying assistance because of 
action or inaction by the applicant, see Sec.  982.552(b) and (c) 
(requirement and authority to deny admission) and Sec.  982.553(a) 
(crime by family members).

[59 FR 36682, July 18, 1994, as amended at 60 FR 34717, July 3, 1995; 61 
FR 13627, Mar. 27, 1996; 64 FR 26642, May 14, 1999; 64 FR 49658, Sept. 
14, 1999; 64 FR 56911, Oct. 21, 1999; 66 FR 6226, Jan. 19, 2001; 66 FR 
8174, Jan. 30, 2001; 67 FR 6820, Feb. 13, 2002; 70 FR 77744, Dec. 30, 
2005; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 77 FR 
5676, Feb. 3, 2012; 80 FR 8246, Feb. 17, 2015; 81 FR 80816, Nov. 16, 
2016]



Sec.  982.202  How applicants are selected: General requirements.

    (a) Waiting list admissions and special admissions. The PHA 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) Where family lives. Admission 
to the program may not be based on where the family lives before 
admission to the program. However, the PHA may target assistance for 
families who live in public housing or other federally assisted housing, 
or may adopt a residency preference (see Sec.  982.207).
    (2) Where family will live. Admission to the program may not be 
based on where the family will live with assistance under the program.
    (3) Family characteristics. The PHA preference system may provide a 
preference for admission of families with certain characteristics from 
the PHA waiting list. However, 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 PHA 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 PHA violation of 
a constitutional or statutory requirement.
    (d) Admission policy. The PHA must admit applicants for 
participation in accordance with HUD regulations and other requirements, 
including, but not limited to, 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking), and with PHA policies stated in the PHA administrative plan 
and the PHA plan. The PHA admission policy must state the system of 
admission preferences that the PHA uses to select applicants from the 
waiting list, including any residency preference or other local 
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; 64 FR 26643, May 14, 
1999; 65 FR 16821, Mar. 30, 2000; 73 FR 72344, Nov. 28, 2008; 75 FR 
66263, Oct. 27, 2010; 81 FR 80816, Nov. 16, 2016]



Sec.  982.203  Special admission (non-waiting list): Assistance targeted by HUD.

    (a) If HUD awards a PHA program funding that is targeted for 
families living in specified units:
    (1) The PHA must use the assistance for the families living in these 
units.
    (2) The PHA may admit a family that is not on the PHA waiting list, 
or without considering the family's waiting list position. The PHA 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:

[[Page 526]]

    (1) A family displaced because of demolition or disposition of a 
public 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.):
    (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.

[59 FR 36682, July 18, 1994, as amended at 64 FR 26643, May 14, 1999]



Sec.  982.204  Waiting list: Administration of waiting list.

    (a) Admission from waiting list. Except for special admissions, 
participants must be selected from the PHA waiting list. The PHA must 
select participants from the waiting list in accordance with admission 
policies in the PHA administrative plan.
    (b) Organization of waiting list. The PHA must maintain information 
that permits the PHA to select participants from the waiting list in 
accordance with the PHA 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 PHA occupancy standards);
    (3) Date and time of application;
    (4) Qualification for any local preference;
    (5) Racial or ethnic designation of the head of household.
    (c) Removing applicant names from the waiting list. (1) The PHA 
administrative plan must state PHA policy on when applicant names may be 
removed from the waiting list. The policy may provide that the PHA will 
remove names of applicants who do not respond to PHA requests for 
information or updates.
    (2) An PHA 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 PHA request for information or updates 
because of the family member's disability, the PHA 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 PHA occupancy policy.
    (2) If the PHA does not have sufficient funds to subsidize the 
family unit size of the family at the top of the waiting list, the PHA 
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 PHA program funding for a specified category of families 
on the waiting list, the PHA must select applicant families in the 
specified category.
    (f) Number of waiting lists. A PHA must use a single waiting list 
for admission to its Section 8 tenant-based assistance program. However, 
the PHA may use a separate single waiting list for such admissions for a 
county or municipality.

(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; 64 FR 26643, May 14, 1999; 65 FR 16821, Mar. 
30, 2000]



Sec.  982.205  Waiting list: Different programs.

    (a) Merger and cross-listing--(1) Merged waiting list. A PHA may 
merge the waiting list for tenant-based assistance with the PHA 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

[[Page 527]]

program is subject to federal regulations and requirements for the 
particular program.
    (2) Non-merged waiting list: Cross-listing. If the PHA decides not 
to merge the waiting list for tenant-based assistance with the waiting 
list for the PHA's public housing program, project-based voucher program 
or moderate rehabilitation program:
    (i) If the PHA's waiting list for tenant-based assistance is open 
when an applicant is placed on the waiting list for the PHA's public 
housing program, project-based voucher program or moderate 
rehabilitation program, the PHA must offer to place the applicant on its 
waiting list for tenant-based assistance.
    (ii) If the PHA's waiting list for its public housing program, 
project-based voucher 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 PHA must offer to place the applicant on its waiting list 
for the other program.
    (b) Other housing assistance: Effect of application for, receipt or 
refusal. (1) For purposes of this section, ``other housing subsidy'' 
means a housing subsidy other than assistance under the voucher program. 
Housing subsidy includes subsidy assistance under a federal housing 
program (including public housing), a State housing program, or a local 
housing program.
    (2) The PHA 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 PHA 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 PHA selection policy; or
    (iv) Remove the applicant from the waiting list.

[59 FR 36682, July 18, 1994, as amended at 61 FR 27163, May 30, 1996; 63 
FR 23860, Apr. 30, 1998; 64 FR 26643, May 14, 1999; 65 FR 16821, Mar. 
30, 2000; 80 FR 8246, Feb. 17, 2015]



Sec.  982.206  Waiting list: Opening and closing; public notice.

    (a) Public notice. (1) When the PHA opens a waiting list, the PHA 
must give public notice that families may apply for tenant-based 
assistance. The public notice must state where and when to apply.
    (2) The PHA 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 PHA may adopt 
criteria defining what families may apply for assistance under a public 
notice.
    (2) If the waiting list is open, the PHA must accept applications 
from families for whom the list is open unless there is good cause for 
not accepting the application (such as denial of assistance because of 
action or inaction by members of the family) for the grounds stated in 
Sec. Sec.  982.552 and 982.553.
    (c) Closing waiting list. If the PHA determines that the existing 
waiting list contains an adequate pool for use of available program 
funding, the PHA may stop accepting new applications, or may accept only 
applications meeting criteria adopted by the PHA.

(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; 64 FR 26643, May 
14, 1999]



Sec.  982.207  Waiting list: Local preferences in admission to program.

    (a) Establishment of PHA local preferences. (1) The PHA may 
establish a system of local preferences for selection of families 
admitted to the program. PHA selection preferences must be described in 
the PHA administrative plan.

[[Page 528]]

    (2) The PHA system of local preferences must be based on local 
housing needs and priorities, as determined by the PHA. In determining 
such needs and priorities, the PHA shall use generally accepted data 
sources. The PHA shall consider public comment on the proposed public 
housing agency plan (as received pursuant to Sec.  903.17 of this 
chapter) and on the consolidated plan for the relevant jurisdiction (as 
received pursuant to part 91 of this title).
    (3) The PHA may limit the number of applicants that may qualify for 
any local preference.
    (4) The PHA shall not deny a local preference, nor otherwise exclude 
or penalize a family in admission to the program, solely because the 
family resides in a public housing project. The PHA may establish a 
preference for families residing in public housing who are victims of a 
crime of violence (as defined in 18 U.S.C. 16).
    (b) Particular local preferences--(1) Residency requirements or 
preferences. (i) Residency requirements are prohibited. Although a PHA 
is not prohibited from adopting a residency preference, the PHA may only 
adopt or implement residency preferences in accordance with non-
discrimination and equal opportunity requirements listed at Sec.  
5.105(a) of this title.
    (ii) A residency preference is a preference for admission of persons 
who reside in a specified geographic area (``residency preference 
area''). A county or municipality may be used as a residency preference 
area. An area smaller than a county or municipality may not be used as a 
residency preference area.
    (iii) Any PHA residency preferences must be included in the 
statement of PHA policies that govern eligibility, selection and 
admission to the program, which is included in the PHA annual plan (or 
supporting documents) pursuant to part 903 of this title. Such policies 
must specify that use of a residency preference will not have the 
purpose or effect of delaying or otherwise denying admission to the 
program based on the race, color, ethnic origin, gender, religion, 
disability, or age of any member of an applicant family.
    (iv) A residency preference must not be based on how long an 
applicant has resided or worked in a residency preference area.
    (v) Applicants who are working or who have been notified that they 
are hired to work in a residency preference area must be treated as 
residents of the residency preference area. The PHA may treat graduates 
of, or active participants in, education and training programs in a 
residency preference area as residents of the residency preference area 
if the education or training program is designed to prepare individuals 
for the job market.
    (2) Preference for working families. The PHA may adopt a preference 
for admission of working families (families where the head, spouse or 
sole member is employed). However, an applicant shall be given the 
benefit of the working family preference if the head and spouse, or sole 
member is age 62 or older, or is a person with disabilities.
    (3) Preference for person with disabilities. The PHA may adopt a 
preference for admission of families that include a person with 
disabilities. However, the PHA may not adopt a preference for admission 
of persons with a specific disability.
    (4) Preference for victims of domestic violence, dating violence, 
sexual assault, or stalking. The PHA should consider whether to adopt a 
local preference for admission of families that include victims of 
domestic violence, dating violence, sexual assault, or stalking.
    (5) Preference for single persons who are elderly, displaced, 
homeless, or persons with disabilities. The PHA may adopt a preference 
for admission of single persons who are age 62 or older, displaced, 
homeless, or persons with disabilities over other single persons.
    (c) Selection among families with preference. The PHA system of 
preferences may use either of 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.
    (d) Preference for higher-income families. The PHA must not select 
families for admission to the program in an order different from the 
order on the waiting list for the purpose of selecting higher income 
families for admission to the program.

[[Page 529]]

    (e) Verification of selection method. The method for selecting 
applicants from a preference category 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.

[64 FR 26643, May 14, 1999, as amended at 64 FR 56912, Oct. 21, 1999; 65 
FR 16821, Mar. 30, 2000; 81 FR 80816, Nov. 16, 2016]

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) PHA briefing of family. (1) When the PHA selects a family to 
participate in a tenant-based program, the PHA 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 PHA jurisdiction, and any 
information on selecting a unit that HUD provides.
    (2) An explanation of how portability works. The PHA may not 
discourage the family from choosing to live anywhere in the PHA 
jurisdiction, or outside the PHA jurisdiction under portability 
procedures, unless otherwise expressly authorized by statute, 
regulation, PIH Notice, or court order. The family must be informed of 
how portability may affect the family's assistance through screening, 
subsidy standards, payment standards, and any other elements of the 
portability process which may affect the family's assistance.
    (3) The briefing must also explain the advantages of areas that do 
not have a high concentration of low-income families.
    (4) In briefing a family that includes any disabled person, the PHA 
must take appropriate steps to ensure effective communication in 
accordance with 24 CFR 8.6.
    (5) In briefing a welfare-to-work family, the PHA must include 
specification of any local obligations of a welfare-to-work family and 
an explanation that failure to meet these obligations is grounds for PHA 
denial of admission or termination of assistance.
    (b) Information packet. When a family is selected to participate in 
the program, the PHA must give the family a packet that includes 
information on the following subjects:
    (1) The term of the voucher, voucher suspensions, and PHA policy on 
any extensions of the term. If the PHA allows extensions, the packet 
must explain how the family can request an extension;
    (2) How the PHA determines the amount of the housing assistance 
payment for a family, including:
    (i) How the PHA determines the payment standard for a family; and
    (ii) How the PHA determines the total tenant payment for a family.
    (3) How the PHA determines the maximum rent for an assisted unit;
    (4) Where the family may lease a unit and an explanation of how 
portability works, including information on how portability may affect 
the family's assistance through screening, subsidy standards, payment 
standards, and any other elements of the portability process which may 
affect the family's assistance.
    (5) The HUD-required ``tenancy addendum'' that must be included in 
the lease;
    (6) The form that the family uses to request PHA approval of the 
assisted tenancy, and an explanation of how to request such approval;
    (7) A statement of the PHA policy on providing information about a 
family to prospective owners;
    (8) PHA subsidy standards, including when the PHA will consider 
granting exceptions to the standards;
    (9) Materials (e.g., brochures) on how to select a unit and any 
additional information on selecting a unit that HUD provides.
    (10) Information on federal, State and local equal opportunity laws, 
and a copy of the housing discrimination complaint form;

[[Page 530]]

    (11) A list of landlords known to the PHA who may be willing to 
lease a unit to the family or other resources (e.g., newspapers, 
organizations, online search tools) known to the PHA that may assist the 
family in locating a unit. PHAs must ensure that the list of landlords 
or other resources covers areas outside of poverty or minority 
concentration.
    (12) Notice that if the family includes a disabled person, the 
family may request a current listing of accessible units known to the 
PHA that may be available;
    (13) Family obligations under the program;
    (14) Family obligations under the program, including any obligations 
of a welfare-to-work family.
    (15) The advantages of areas that do not have a high concentration 
of low-income families.

(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; 64 FR 26644, May 14, 1999; 64 FR 50229, Sept. 
15, 1999; 64 FR 56912, Oct. 21, 1999; 80 FR 50572, Aug. 20, 2015; 80 FR 
52619, Sept. 1, 2015]



Sec.  982.302  Issuance of voucher; Requesting PHA approval of assisted tenancy.

    (a) When a family is selected, or when a participant family wants to 
move to another unit, the PHA issues a 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 PHA approval of the 
tenancy. The PHA has the discretion whether to permit the family to 
submit more than one request at a time.
    (c) The family must submit to the PHA a request for approval of the 
tenancy and a copy of the lease, including the HUD-prescribed tenancy 
addendum. The request must be submitted during the term of the voucher.
    (d) The PHA specifies the procedure for requesting approval of the 
tenancy. The family must submit the request for approval of the tenancy 
in the form and manner required by the PHA.

[64 FR 26644, May 14, 1999]



Sec.  982.303  Term of voucher.

    (a) Initial term. The initial term of a voucher must be at least 60 
calendar days. The initial term must be stated on the voucher.
    (b) Extensions of term. (1) At its discretion, the PHA may grant a 
family one or more extensions of the initial voucher term in accordance 
with PHA policy as described in the PHA administrative plan. Any 
extension of the term is granted by PHA notice to the family.
    (2) If the family needs and requests an extension of the initial 
voucher term as a reasonable accommodation, in accordance with part 8 of 
this title, to make the program accessible to a family member who is a 
person with disabilities, the PHA must extend the voucher term up to the 
term reasonably required for that purpose.
    (c) Suspension of term. The PHA must provide for suspension of the 
initial or any extended term of the voucher from the date that the 
family submits a request for PHA approval of the tenancy until the date 
the PHA notifies the family in writing whether the request has been 
approved or denied.
    (d) Progress report by family to the PHA. During the initial or any 
extended term of a voucher, the PHA 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 PHA.

(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 26644, May 14, 1999; 64 FR 56913, Oct. 
21, 1999; 80 FR 50573, Aug. 20, 2015]



Sec.  982.304  Illegal discrimination: PHA 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.

[[Page 531]]

The PHA 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  PHA approval of assisted tenancy.

    (a) Program requirements. The PHA may not give approval for the 
family of the assisted tenancy, or execute a HAP contract, until the PHA 
has determined that all the following meet program requirements:
    (1) The unit is eligible;
    (2) The unit has been inspected by the PHA and passes HQS;
    (3) The lease includes the tenancy addendum;
    (4) The rent to owner is reasonable; and
    (5) At the time a family initially receives tenant-based assistance 
for occupancy of a dwelling unit, and where the gross rent of the unit 
exceeds the applicable payment standard for the family, the family share 
does not exceed 40 percent of the family's monthly adjusted income.
    (b) Actions before lease term. (1) All of the following must always 
be completed before the beginning of the initial term of the lease for a 
unit:
    (i) The PHA has inspected the unit and has determined that the unit 
satisfies the HQS;
    (ii) The landlord and the tenant have executed the lease (including 
the HUD-prescribed tenancy addendum, and the lead-based paint disclosure 
information as required in Sec.  35.92(b) of this title); and
    (iii) The PHA has approved leasing of the unit in accordance with 
program requirements.
    (2)(i) The PHA must inspect the unit, determine whether the unit 
satisfies the HQS, and notify the family and owner of the determination:
    (A) In the case of a PHA with up to 1250 budgeted units in its 
tenant-based program, within fifteen days after the family and the owner 
submit a request for approval of the tenancy.
    (B) In the case of a PHA with more than 1250 budgeted units in its 
tenant-based program, within a reasonable time after the family submits 
a request for approval of the tenancy. To the extent practicable, such 
inspection and determination must be completed within fifteen days after 
the family and the owner submit a request for approval of the tenancy.
    (ii) The fifteen day clock (under paragraph (b)(2)(i)(A) or 
paragraph (b)(2)(i)(B) of this section) is suspended during any period 
when the unit is not available for inspection.
    (3) In the case of a unit subject to a lease-purchase agreement, the 
PHA must provide written notice to the family of the environmental 
requirements that must be met before commencing homeownership assistance 
for the family (see Sec.  982.626(c)).
    (c) When HAP contract is executed. (1) The PHA 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 PHA 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 PHA 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 PHA may not pay any housing assistance payment to the owner.
    (d) Notice to family and owner. After receiving the family's request 
for approval of the assisted tenancy, the PHA must promptly notify the 
family and owner whether the assisted tenancy is approved.
    (e) Procedure after PHA approval. If the PHA has given approval for 
the family of the assisted tenancy, the

[[Page 532]]

owner and the PHA 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; 64 
FR 26644, May 14, 1999; 64 FR 56913, Oct. 21, 1999; 64 FR 59622, Nov. 3, 
1999; 65 FR 16818, Mar. 30, 2000; 65 FR 55161, Sept. 12, 2000; 69 FR 
34276, June 21, 2004; 80 FR 8246, Feb. 17, 2015]



Sec.  982.306  PHA disapproval of owner.

    (a) The PHA must not approve an assisted tenancy if the PHA has been 
informed (by HUD or otherwise) that the owner is debarred, suspended, or 
subject to a limited denial of participation under 2 CFR part 2424.
    (b) When directed by HUD, the PHA must not approve an assisted 
tenancy if:
    (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 PHA may deny approval of 
an assisted tenancy for any of the following reasons:
    (1) The owner has violated obligations under a HAP 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 any drug-related criminal activity or 
any violent criminal activity;
    (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 failing to terminate 
tenancy of tenants of units assisted under Section 8 or any other 
federally assisted housing program for activity engaged in by the 
tenant, any member of the household, a guest or another person under the 
control of any member of the household that:
    (i) Threatens the right to peaceful enjoyment of the premises by 
other residents;
    (ii) Threatens the health or safety of other residents, of employees 
of the PHA, or of owner employees or other persons engaged in management 
of the housing;
    (iii) Threatens the health or safety of, or the right to peaceful 
enjoyment of their residences, by persons residing in the immediate 
vicinity of the premises; or
    (iv) Is drug-related criminal activity or violent criminal activity; 
or
    (6) The owner has a history or practice of renting units that fail 
to meet State or local housing codes; or
    (7) The owner has not paid State or local real estate taxes, fines 
or assessments.
    (d) The PHA 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 PHA determines that approving the unit would provide 
reasonable accommodation for a family member who is a person with 
disabilities. This restriction against PHA approval of a unit only 
applies at the time a family initially receives tenant-based assistance 
for occupancy of a particular unit, but does not apply to PHA approval 
of a new tenancy with continued tenant-based assistance in the same 
unit.
    (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; 64 
FR 26644, May 14, 1999; 64 FR 56913, Oct. 21, 1999; 65 FR 16821, Mar. 
30, 2000; 72 FR 73496, Dec. 27, 2007]



Sec.  982.307  Tenant screening.

    (a) PHA option and owner responsibility. (1) The PHA has no 
liability or responsibility to the owner or other persons for the 
family's behavior or suitability for tenancy. However, the PHA may opt 
to screen applicants for family behavior or suitability for tenancy. The 
PHA must conduct any such

[[Page 533]]

screening of applicants in accordance with policies stated in the PHA 
administrative plan.
    (2) The owner is responsible for screening and selection of the 
family to occupy the owner's unit. At or before PHA approval of the 
tenancy, the PHA must inform the owner that screening and selection for 
tenancy is the responsibility of the owner.
    (3) The owner is responsible for screening of 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 other residents to the peaceful 
enjoyment of their housing;
    (iv) Drug-related criminal activity or other criminal activity that 
is a threat to the health, safety or property of others; and
    (v) Compliance with other essential conditions of tenancy.
    (b) PHA information about tenant. (1) The PHA must give the owner:
    (i) The family's current and prior address (as shown in the PHA 
records); and
    (ii) The name and address (if known to the PHA) of the landlord at 
the family's current and prior address.
    (2) When a family wants to lease a dwelling unit, the PHA may offer 
the owner other information in the PHA possession, about the family, 
including information about the tenancy history of family members, or 
about drug-trafficking by family members.
    (3) The PHA must give the family a statement of the PHA 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 PHA policy must provide that the PHA will give the same 
types of information to all families and to all owners.
    (4) In cases involving a victim of domestic violence, dating 
violence, sexual assault, or stalking, 24 CFR part 5, subpart L 
(Protection for Victims of Domestic Violence, Dating Violence, Sexual 
Assault, or Stalking) applies.

(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; 64 FR 26645, May 14, 1999; 64 FR 49658, Sept. 
14, 1999; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 81 FR 
80816, Nov. 16, 2016]



Sec.  982.308  Lease and tenancy.

    (a) Tenant's legal capacity. The tenant must have legal capacity to 
enter a lease under State and local law. ``Legal capacity'' means that 
the tenant is bound by the terms of the lease and may enforce the terms 
of the lease against the owner.
    (b) Form of lease. (1) The tenant and the owner must enter a written 
lease for the unit. The lease must be executed by the owner and the 
tenant.
    (2) If the owner uses a standard lease form for rental to unassisted 
tenants in the locality or the premises, the lease must be in such 
standard form (plus the HUD-prescribed tenancy addendum). If the owner 
does not use a standard lease form for rental to unassisted tenants, the 
owner may use another form of lease, such as a PHA model lease 
(including the HUD-prescribed tenancy addendum). The HAP contract 
prescribed by HUD will contain the owner's certification that if the 
owner uses a standard lease form for rental to unassisted tenants, the 
lease is in such standard form.
    (c) State and local law. The PHA may review the lease to determine 
if the lease complies with State and local law. The PHA may decline to 
approve the tenancy if the PHA determines that the lease does not comply 
with State or local law.
    (d) Required information. The lease must specify all of the 
following:
    (1) The names of the owner and the tenant;
    (2) The unit rented (address, apartment number, and any other 
information needed to identify the contract unit);
    (3) The term of the lease (initial term and any provisions for 
renewal);
    (4) The amount of the monthly rent to owner; and
    (5) A specification of what utilities and appliances are to be 
supplied by

[[Page 534]]

the owner, and what utilities and appliances are to be supplied by the 
family.
    (e) Reasonable rent. The rent to owner must be reasonable (see Sec.  
982.507).
    (f) Tenancy addendum. (1) The HAP contract form required by HUD 
shall include an addendum (the ``tenancy addendum''), that sets forth:
    (i) The tenancy requirements for the program (in accordance with 
this section and Sec. Sec.  982.309 and 982.310); and
    (ii) The composition of the household as approved by the PHA (family 
members and any PHA-approved live-in aide).
    (2) All provisions in the HUD-required tenancy addendum must be 
added word-for-word to the owner's standard form lease that is used by 
the owner for unassisted tenants. The tenant shall have the right to 
enforce the tenancy addendum against the owner, and the terms of the 
tenancy addendum shall prevail over any other provisions of the lease.
    (g) Changes in lease or rent. (1) If the tenant and the owner agree 
to any changes in the lease, such changes must be in writing, and the 
owner must immediately give the PHA a copy of such changes. The lease, 
including any changes, must be in accordance with the requirements of 
this section.
    (2) In the following cases, tenant-based assistance shall not be 
continued unless the PHA has approved a new tenancy in accordance with 
program requirements and has executed a new HAP contract with the owner:
    (i) If there are any changes in lease requirements governing tenant 
or owner responsibilities for utilities or appliances;
    (ii) If there are any changes in lease provisions governing the term 
of the lease;
    (iii) If the family moves to a new unit, even if the unit is in the 
same building or complex.
    (3) PHA approval of the tenancy, and execution of a new HAP 
contract, are not required for changes in the lease other than as 
specified in paragraph (g)(2) of this section.
    (4) The owner must notify the PHA of any changes in the amount of 
the rent to owner at least sixty days before any such changes go into 
effect, and any such changes shall be subject to rent reasonableness 
requirements (see Sec.  982.503).

[64 FR 26645, May 14, 1999, as amended at 64 FR 56913, Oct. 21, 1999]



Sec.  982.309  Term of assisted tenancy.

    (a) Initial term of lease. (1) Except as provided in paragraph 
(a)(2) of this section, the initial lease term must be for at least one 
year.
    (2) The PHA may approve a shorter initial lease term if the PHA 
determines that:
    (i) Such shorter term would improve housing opportunities for the 
tenant; and
    (ii) Such shorter term is the prevailing local market practice.
    (3) During the initial term of the lease, the owner may not raise 
the rent to owner.
    (4) The PHA may execute the HAP contract even if there is less than 
one year remaining from the beginning of the initial lease term to the 
end of the last expiring funding increment under the consolidated ACC.
    (b) Term of HAP contract. (1) The term of the HAP contract begins on 
the first day of the lease term and ends on the last day of the lease 
term.
    (2) The HAP contract terminates if any of the following occurs:
    (i) The lease is terminated by the owner or the tenant;
    (ii) The PHA terminates the HAP contract; or
    (iii) The PHA terminates assistance for the family.
    (c) Family responsibility. (1) If the family terminates the lease on 
notice to the owner, the family must give the PHA a copy of the notice 
of termination at the same time. Failure to do this is a breach of 
family obligations under the program.
    (2) The family must notify the PHA and the owner before the family 
moves out of the unit. Failure to do this is a breach of family 
obligations under the program.

[64 FR 26645, May 14, 1999]



Sec.  982.310  Owner termination of tenancy.

    (a) Grounds. During the term of the lease, the owner may not 
terminate the

[[Page 535]]

tenancy except on the following grounds:
    (1) Serious violation (including but not limited to failure to pay 
rent or other amounts due under the lease) 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 PHA: 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 PHA.
    (2) The PHA 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 PHA housing assistance payment.
    (c) Criminal activity--(1) Evicting drug criminals due to drug crime 
on or near the premises. The lease must provide that drug-related 
criminal activity engaged in, on or near the premises by any tenant, 
household member, or guest, or such activity engaged in on the premises 
by any other person under the tenant's control, is grounds for the owner 
to terminate tenancy. In addition, the lease must provide that the owner 
may evict a family when the owner determines that a household member is 
illegally using a drug or when the owner determines that a pattern of 
illegal use of a drug interferes with the health, safety, or right to 
peaceful enjoyment of the premises by other residents.
    (2) Evicting other criminals. (i) Threat to other residents. The 
lease must provide that the owner may terminate tenancy for any of the 
following types of criminal activity by a covered person:
    (A) Any criminal activity that threatens the health, safety, or 
right to peaceful enjoyment of the premises by other residents 
(including property management staff residing on the premises);
    (B) 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
    (C) Any violent criminal activity on or near the premises by a 
tenant, household member, or guest, or any such activity on the premises 
by any other person under the tenant's control.
    (ii) Fugitive felon or parole violator. The lease must provide that 
the owner may terminate the tenancy if a tenant is:
    (A) Fleeing to avoid prosecution, or custody or confinement after 
conviction, for a crime, or attempt to commit a crime, that is a felony 
under the laws of the place from which the individual flees, or that, in 
the case of the State of New Jersey, is a high misdemeanor; or
    (B) Violating a condition of probation or parole imposed under 
Federal or State law.
    (3) Evidence of criminal activity. The owner may terminate tenancy 
and evict by judicial action a family for criminal activity by a covered 
person in accordance with this section if the owner determines that the 
covered person has engaged in the criminal activity, regardless of 
whether the covered person has been arrested or convicted for such 
activity and without satisfying the standard of proof used for a 
criminal conviction. (See part 5, subpart J, of this title for 
provisions concerning access to criminal records.)
    (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, or desire to 
lease the unit at a higher rental).

[[Page 536]]

    (2) During the initial 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 during the term of the lease. The tenancy does not terminate 
before the owner has given this notice, and the notice 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 PHA a copy of any owner eviction notice 
to the tenant.
    (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.
    (h) Termination of tenancy decisions--(1) General. If the law and 
regulation permit the owner to take an action but do not require action 
to be taken, the owner may take or not take the action in accordance 
with the owner's standards for eviction. The owner may consider all of 
the circumstances relevant to a particular eviction case, such as:
    (i) The seriousness of the offending action;
    (ii) The effect on the community of denial or termination or the 
failure of the owner to take such action;
    (iii) The extent of participation by the leaseholder in the 
offending action;
    (iv) The effect of denial of admission or termination of tenancy on 
household members not involved in the offending activity;
    (v) The demand for assisted housing by families who will adhere to 
lease responsibilities;
    (vi) The extent to which the leaseholder has shown personal 
responsibility and taken all reasonable steps to prevent or mitigate the 
offending action;
    (vii) The effect of the owner's action on the integrity of the 
program.
    (2) Exclusion of culpable household member. The owner may require a 
tenant to exclude a household member in order to continue to reside in 
the assisted unit, where that household member has participated in or 
been culpable for action or failure to act that warrants termination.
    (3) Consideration of rehabilitation. In determining whether to 
terminate tenancy for illegal use of drugs or alcohol abuse by a 
household member who is no longer engaged in such behavior, the owner 
may consider whether such household member is participating in or has 
successfully completed a supervised drug or alcohol rehabilitation 
program, or has otherwise been rehabilitated successfully (42 U.S.C. 
13661). For this purpose, the owner may require the tenant to submit 
evidence of the household member's current participation in, or 
successful completion of, a supervised drug or alcohol rehabilitation 
program or evidence of otherwise having been rehabilitated successfully.
    (4) Nondiscrimination limitation and protection for victims of 
domestic violence, dating violence, sexual assault, or stalking. The 
owner's termination of tenancy actions must be consistent with the fair 
housing and equal opportunity provisions of 24 CFR 5.105, and with the 
provisions for protection of victims of domestic violence, dating 
violence, sexual assault, or stalking in 24 CFR part 5, subpart L 
(Protection for Victims of

[[Page 537]]

Domestic Violence, Dating Violence, Sexual Assault, or Stalking).

(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; 64 
FR 26645, May 14, 1999; 64 FR 56913, Oct. 21, 1999; 66 FR 28804, May 24, 
2001; 73 FR 72344, Nov. 28, 2008; 75 FR 66263, Oct. 27, 2010; 81 FR 
80816, Nov. 16, 2016]



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 PHA 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 PHA 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 PHA terminates assistance for the family.
    (d) Family move-out. (1) If the family moves out of the unit, the 
PHA 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 new unit, is not considered to constitute a 
duplicative housing subsidy.

[60 FR 34695, July 3, 1995, as amended at 80 FR 8246, Feb. 17, 2015]



Sec.  982.312  Absence from unit.

    (a) The family may be absent from the unit for brief periods. For 
longer absences, the PHA administrative plan establishes the PHA 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 PHA may allow absence for a lesser period in accordance 
with PHA 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 PHA 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 PHA to verify that the family is residing in the unit, 
or relating to family absence from the unit. The family must cooperate 
with the PHA for this purpose. The family must promptly notify the PHA 
of absence from the unit, including any information requested on the 
purposes of family absences.
    (2) The PHA 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 PHA administrative plan must state the PHA policies on 
family absence from the dwelling unit. The PHA absence policy includes:
    (1) How the PHA determines whether or when the family may be absent, 
and for how long. For example, the PHA 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.

[[Page 538]]



Sec.  982.313  Security deposit: Amounts owed by tenant.

    (a) The owner may collect a security deposit from the tenant.
    (b) The PHA 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.  982.315  Family break-up.

    (a)(1) The PHA has discretion to determine which members of an 
assisted family continue to receive assistance in the program if the 
family breaks up. The PHA administrative plan must state PHA policies on 
how to decide who remains in the program if the family breaks up.
    (2) If the family break-up results from an occurrence of domestic 
violence, dating violence, sexual assault, or stalking as provided in 24 
CFR part 5, subpart L (Protection for Victims of Domestic Violence, 
Dating Violence, Sexual Assault, or Stalking), the PHA must ensure that 
the victim retains assistance.
    (b) The factors to be considered in making this decision under the 
PHA 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 
of actual or threatened domestic violence, dating violence, sexual 
assault, or stalking.
    (4) Whether any of the family members are receiving protection as 
victims of domestic violence, dating violence, sexual assault, or 
stalking, as provided in 24 CFR part 5, subpart L, and whether the 
abuser is still in the household.
    (5) Other factors specified by the PHA.
    (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 PHA is bound by the court's 
determination of which family members continue to receive assistance in 
the program.

[60 FR 34695, July 3, 1995, as amended at 75 FR 66264, Oct. 27, 2010; 80 
FR 8246, Feb. 17, 2015; 81 FR 80816, Nov. 16, 2016]



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 PHA 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 PHA 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 PHA 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 PHA or to 
another PHA 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]

[[Page 539]]



Sec.  982.317  Lease-purchase agreements.

    (a) A family leasing a unit with assistance under the program may 
enter into an agreement with an owner to purchase the unit. So long as 
the family is receiving such rental assistance, all requirements 
applicable to families otherwise leasing units under the tenant-based 
program apply. Any homeownership premium (e.g., increment of value 
attributable to the value of the lease-purchase right or agreement such 
as an extra monthly payment to accumulate a downpayment or reduce the 
purchase price) included in the rent to the owner that would result in a 
higher subsidy amount than would otherwise be paid by the PHA must be 
absorbed by the family.
    (b) In determining whether the rent to owner for a unit subject to a 
lease-purchase agreement is a reasonable amount in accordance with Sec.  
982.503, any homeownership premium paid by the family to the owner must 
be excluded when the PHA determines rent reasonableness.

[65 FR 55162, Sept. 12, 2000]



                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 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 PHA that originally selected the family for tenant-
based assistance.
    (b) ``Portability'' assistance for a family PHA rents a unit outside 
the jurisdiction of the initial PHA.



Sec.  982.352  Eligible housing.

    (a) Ineligible housing. The following types of housing may not be 
assisted by a PHA 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 unit.
    (7) For provisions on PHA disapproval of an owner, see Sec.  
982.306.
    (b) PHA-owned housing. (1) A unit that is owned by the PHA that 
administers the assistance under the consolidated ACC (including a unit 
owned by an entity substantially controlled by the PHA) may only be 
assisted under the tenant-based program if all the following conditions 
are satisfied:
    (i) The PHA must inform the family, both orally and in writing, that 
the family has the right to select any eligible unit available for 
lease, and a PHA-owned unit is freely selected by the family, without 
PHA pressure or steering.
    (ii) The unit is not ineligible housing.
    (iii) During assisted occupancy, the family may not benefit from any 
form of housing subsidy that is prohibited under paragraph (c) of this 
section.
    (iv)(A) The PHA must obtain the services of an independent entity to 
perform the following PHA functions as required under the program rule:
    (1) To determine rent reasonableness in accordance with Sec.  
982.507. The independent agency shall communicate the rent 
reasonableness determination to the family and the PHA.
    (2) To assist the family negotiate the rent to owner in accordance 
with Sec.  982.506.
    (3) To inspect the unit for compliance with the HQS in accordance 
with Sec. Sec.  982.305(a) and 982.405. The independent entity shall 
communicate the results of each such inspection to the family and the 
PHA.
    (B) The independent agency used to perform these functions must be 
approved by HUD. The independent agency may be the unit of general local 
government for the PHA jurisdiction

[[Page 540]]

(unless the PHA is itself the unit of general local government or an 
agency of such government), or may be another HUD-approved independent 
agency.
    (C) The PHA may compensate the independent agency from PHA ongoing 
administrative fee income for the services performed by the independent 
agency. The PHA may not use other program receipts to compensate the 
independent agency for such services. The PHA and the independent agency 
may not charge the family any fee or charge for the services provided by 
the independent agency.
    (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 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; 64 FR 26645, May 
14, 1999; 65 FR 55162, Sept. 12, 2000; 88 FR 30503, May 11, 2023]



Sec.  982.353  Where family can lease a unit with tenant-based assistance.

    (a) Assistance in the initial PHA 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 PHA. 
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 PHA jurisdiction. 
Subject to paragraph (c) of this section, and to Sec.  982.552 and Sec.  
982.553, a voucher-holder or participant family has the right to receive 
tenant-based voucher assistance, in accordance with requirements of this 
part, to lease a unit outside the initial PHA jurisdiction, anywhere in 
the United States, in the jurisdiction of a PHA with a tenant-based 
program under this part. The initial PHA must not provide such portable 
assistance for a participant if the family has moved out of the assisted 
unit in violation of the lease except as provided for in this 
subsection. If the family moves out in violation of the lease in order 
to protect the health or safety of a person who is or has been the 
victim of domestic violence, dating violence, sexual assault, or 
stalking and who reasonably believes him- or herself to be threatened 
with imminent harm from further violence by remaining in the dwelling 
unit (or any family member has been the victim of a sexual assault that 
occurred on the premises during the 90-calendar-day period preceding the 
family's move or request to move), and has otherwise complied with all 
other obligations under the Section 8 program,

[[Page 541]]

the family may receive a voucher from the initial PHA and move to 
another jurisdiction under the Housing Choice Voucher Program.
    (c) Nonresident applicants. (1) This paragraph (c) applies if 
neither the household head nor spouse of an assisted family already had 
a ``domicile'' (legal residence) in the jurisdiction of the initial PHA 
at the time when the family first submitted an application for 
participation in the program to the initial PHA.
    (2) The following apply during the 12 month period from the time 
when a family described in paragraph (c)(1) of this section is admitted 
to the program:
    (i) The family may lease a unit anywhere in the jurisdiction of the 
initial PHA;
    (ii) The family does not have any right to portability;
    (iii) The initial PHA may choose to allow portability during this 
period.
    (3) If the initial PHA approves, the family may lease a unit outside 
the PHA jurisdiction under portability procedures.
    (4) Paragraph (c) of this section does not apply when the family or 
a member of the family is or has been the victim of domestic violence, 
dating violence, sexual assault, or stalking, as provided in 24 CFR part 
5, subpart L (Protection for Victims of Domestic Violence, Dating 
Violence, Sexual Assault, or Stalking), and the move is needed to 
protect the health or safety of the family or family member, or any 
family member who has been the victim of a sexual assault that occurred 
on the premises during the 90-calendar-day period preceding the family's 
request to move.
    (d) Income eligibility. (1) For admission to the program, a family 
must be income eligible in the area where the family initially leases a 
unit with assistance under the program.
    (2) If a family is a participant in the initial PHA's voucher 
program, income eligibility is not redetermined when the family moves to 
the receiving PHA program under portability procedures.
    (e) Freedom of choice. The PHA may not directly or indirectly reduce 
the family's opportunity to select among available units, except as 
provided in paragraph (a) of this section, or elsewhere in this part 982 
(e.g., prohibition on the use of ineligible housing, housing not meeting 
HQS, or housing for which the rent to owner exceeds a reasonable rent). 
However, the PHA must provide families the information required in Sec.  
982.301 for both the oral briefing and the information packet to ensure 
that they have the information they need to make an informed decision on 
their housing choice.

[60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996; 61 
FR 42131, Aug. 13, 1996; 64 FR 26646, May 14, 1999; 73 FR 72344, Nov. 
28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 50573, Aug. 20, 2015; 81 FR 
80816, Nov. 16, 2016]



Sec.  982.354  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 PHA 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).
    (4) The family or a member of the family, is or has been the victim 
of domestic violence, dating violence, sexual assault, or stalking, as 
provided in 24 CFR part 5, subpart L (Protection for Victims of Domestic 
Violence, Dating Violence, Sexual Assault, or Stalking), and the move is 
needed to protect the health or safety of the family or family member, 
or if any family member has been the victim of a sexual assault that 
occurred on the premises during the 90-calendar-day period preceding the 
family's request to move. A PHA may not terminate assistance if

[[Page 542]]

the family, with or without prior notification to the PHA, moves out of 
a unit in violation of the lease, if such move occurs to protect the 
health or safety of a family member who is or has been the victim of 
domestic violence, dating violence, sexual assault, or stalking and who 
reasonably believed he or she was threatened with imminent harm from 
further violence if he or she remained in the dwelling unit. However, 
any family member that has been the victim of a sexual assault that 
occurred on the premises during the 90-calendar-day period preceding the 
family's move or request to move is not required to believe that he or 
she was threatened with imminent harm from further violence if he or she 
remained in the dwelling unit.
    (c) How many moves. (1) A participant family may move with continued 
assistance under the program, either inside the PHA jurisdiction, or 
under the portability procedures (See Sec.  982.353) in accordance with 
the PHA's policies.
    (2) Consistent with applicable civil rights laws and regulations, 
the PHA may establish policies that:
    (i) Prohibit any move by the family during the initial lease term;
    (ii) Prohibit more than one move by the family during any one-year 
period; and
    (iii) The above policies do not apply when the family or a member of 
the family is or has been the victim of domestic violence, dating 
violence, sexual assault, or stalking, as provided in 24 CFR part 5, 
subpart L, and the move is needed to protect the health or safety of the 
family or family member, or any family member has been the victim of a 
sexual assault that occurred on the premises during the 90-calendar-day 
period preceding the family's request to move.
    (d) Notice that family wants to move. If the family wants to move to 
a new unit, the family must notify the PHA 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 PHA jurisdiction, the notice to the initial 
PHA must specify the area where the family wants to move. See 
portability procedures in subpart H of this part.
    (e) When the PHA may deny permission to move. (1) The PHA may deny 
permission to move if the PHA does not have sufficient funding for 
continued assistance. The PHA must provide written notification to the 
local HUD Office within 10 business days of determining it is necessary 
to deny moves to a higher-cost unit based on insufficient funding.
    (2) At any time, the PHA may deny permission to move in accordance 
with Sec.  982.552 (grounds for denial or termination of assistance).

[60 FR 34695, July 3, 1995, as amended at 64 FR 56913, Oct. 21, 1999; 75 
FR 66263, Oct. 27, 2010. Redesignated and amended at 80 FR 50573, Aug. 
20, 2015; 81 FR 80817, Nov. 16, 2016]



Sec.  982.355  Portability: Administration by initial and receiving PHA.

    (a) General. When a family moves under portability (in accordance 
with Sec.  982.353(b)) to an area outside the initial PHA jurisdiction, 
the receiving PHA must administer assistance for the family if a PHA 
with a HCV program has jurisdiction in the area where the unit is 
located.
    (b) Requirement to administer assistance. A receiving PHA cannot 
refuse to assist incoming portable families or direct them to another 
neighboring PHA for assistance. If there is more than one such PHA, the 
initial PHA provides the family with the contact information for the 
receiving PHAs that serve the area, and the family selects the receiving 
PHA. The family must inform the initial PHA which PHA it has selected as 
the receiving PHA. In cases where the family prefers not to select the 
receiving PHA, the initial PHA selects the receiving PHA on behalf of 
the family. HUD may determine in certain instances that a PHA is not 
required to accept incoming portable families, such as a PHA in a 
declared disaster area. However, the PHA must have approval in writing 
from HUD before refusing any incoming portable families.
    (c) Portability procedures. The following portability procedures 
must be followed:
    (1) When the family decides to use the voucher outside of the PHA 
jurisdiction, the family must notify the initial PHA of its desire to 
relocate and

[[Page 543]]

must specify the location where it wants to live.
    (2) The initial PHA must determine the family's eligibility to move 
in accordance with Sec. Sec.  982.353 and 982.354.
    (3) Once the receiving PHA is determined in accordance with 
paragraph (b) of this section, the initial PHA must contact the 
receiving PHA, via email or other confirmed delivery method, prior to 
approving the family's request to move in order to determine whether the 
voucher will be absorbed or billed by the receiving PHA. The receiving 
PHA must advise the initial PHA in writing, via email or other confirmed 
delivery method, of its decision.
    (4) If the receiving PHA notifies the initial PHA that it will 
absorb the voucher, the receiving PHA cannot reverse its decision at a 
later date without consent of the initial PHA.
    (5) If the receiving PHA will bill the initial PHA for the 
portability voucher and the cost of the HAP will increase due to the 
move, the initial PHA may deny the move if it does not have sufficient 
funding for continued assistance in accordance with Sec.  982.354 
(e)(1).
    (6) If a billing arrangement is approved by the initial PHA or if 
the voucher is to be absorbed by the receiving PHA, the initial PHA must 
issue the family a voucher to move, if it has not already done so, and 
advise the family how to contact and request assistance from the 
receiving PHA.
    (7) The initial PHA must promptly notify the receiving PHA to expect 
the family. The initial PHA must give the receiving PHA the form HUD-
52665, the most recent form HUD 50058 (Family Report) for the family, 
and all related verification information.
    (8) The family must promptly contact the receiving PHA in order to 
be informed of the receiving PHA's procedures for incoming portable 
families and comply with these procedures. The family's failure to 
comply may result in denial or termination of the receiving PHA's 
voucher.
    (9) The receiving PHA does not redetermine eligibility for a 
participant family. However, for a family that was not already receiving 
assistance in the PHA's HCV program, the initial PHA must determine 
whether the family is eligible for admission to the receiving PHA's HCV 
program. In determining income eligibility, the receiving PHA's income 
limits are used by the initial PHA.
    (10) When a receiving PHA assists a family under portability, 
administration of the voucher must be in accordance with the receiving 
PHA's policies. This requirement also applies to policies of Moving to 
Work agencies. The receiving PHA procedures and preferences for 
selection among eligible applicants do not apply to the family, and the 
receiving PHA waiting list is not used.
    (11) If the receiving PHA opts to conduct a new reexamination for a 
current participant family, the receiving PHA may not delay issuing the 
family a voucher or otherwise delay approval of a unit.
    (12) The receiving PHA must determine the family unit size for the 
family, and base its determination on the subsidy standards of the 
receiving PHA.
    (13) The receiving PHA must issue a voucher to the family. The term 
of the receiving PHA voucher may not expire before 30 calendar days from 
the expiration date of the initial PHA voucher. If the voucher expires 
before the family arrives at the receiving PHA, the receiving PHA must 
contact the initial PHA to determine if it will extend the voucher.
    (14) Once the receiving PHA issues the portable family a voucher, 
the receiving PHA's policies on extensions of the voucher term apply. 
The receiving PHA must notify the initial PHA of any extensions granted 
to the term of the voucher.
    (15) The family must submit a request for tenancy approval to the 
receiving PHA during the term of the receiving PHA voucher. As required 
in Sec.  982.303, if the family submits a request for tenancy approval 
during the term of the voucher, the PHA must suspend the term of that 
voucher.
    (16) The receiving PHA must promptly notify the initial PHA if the 
family has leased an eligible unit under the program, or if the family 
fails to submit a request for tenancy approval for an eligible unit 
within the term of the voucher.

[[Page 544]]

    (17) At any time, either the initial PHA or the receiving PHA may 
make a determination to deny or terminate assistance to the family in 
accordance with Sec.  982.552 and 982.553.
    (d) Absorption by the receiving PHA. (1) If funding is available 
under the consolidated ACC for the receiving PHA's HCV program, the 
receiving PHA may absorb the family into the receiving PHA's HCV 
program. After absorption, the family is assisted with funds available 
under the consolidated ACC for the receiving PHA's HCV program.
    (2) HUD may require that the receiving PHA absorb all, or a portion 
of, incoming portable families. Under circumstances described in a 
notice published in the Federal Register, HUD may determine that 
receiving PHAs, or categories of receiving PHAs, should absorb all or a 
portion of incoming portable families. If HUD makes such a 
determination, HUD will provide an opportunity for public comment, for a 
period of no less than 60 calendar days, on such policy and procedures. 
After consideration of public comments, HUD will publish a final notice 
in the Federal Register advising PHAs and the public of HUD's final 
determination on the subject of mandatory absorption of incoming 
portable families.
    (3) HUD may provide financial or nonfinancial incentives (or both) 
to PHAs that absorb portability vouchers.
    (e) Portability billing. (1) To cover assistance for a portable 
family that was not absorbed in accordance with paragraph (d) of this 
section, the receiving PHA may bill the initial PHA for housing 
assistance payments and administrative fees.
    (2) The initial PHA must promptly reimburse the receiving PHA for 
the full amount of the housing assistance payments made by the receiving 
PHA for the portable family. The amount of the housing assistance 
payment for a portable family in the receiving PHA program is determined 
in the same manner as for other families in the receiving PHA program.
    (3) The initial PHA must promptly reimburse the receiving PHA for 
the lesser of 80 percent of the initial PHA ongoing administrative fee 
or 100 percent of the receiving PHA's ongoing administrative fee for 
each program unit under HAP contract on the first day of the month for 
which the receiving PHA is billing the initial PHA under this section. 
If administrative fees are prorated for the HCV program, the proration 
will apply to the amount of the administrative fee for which the 
receiving PHA may bill under this section (e.g., the receiving PHA may 
bill for the lesser of 80 percent of the initial PHA's prorated ongoing 
administrative fee or 100 percent of the receiving PHA's prorated 
ongoing administrative fee). If both PHAs agree, the PHAs may negotiate 
a different amount of reimbursement.
    (4) When a portable family moves out of the HCV program of a 
receiving PHA that has not absorbed the family, the PHA in the new 
jurisdiction to which the family moves becomes the receiving PHA, and 
the first receiving PHA is no longer required to provide assistance for 
the family.
    (5) In administration of portability, the initial PHA and the 
receiving PHA must comply with financial procedures required by HUD, 
including the use of HUD-required billing forms. The initial and 
receiving PHA must also comply with billing and payment deadlines under 
the financial procedures.
    (6) A PHA must manage the PHA HCV program in a manner that ensures 
that the PHA has the financial ability to provide assistance for 
families that move out of the PHA's program under the portability 
procedures, and that have not been absorbed by the receiving PHA, as 
well as for families that remain in the PHA's program.
    (7) HUD may reduce the administrative fee to an initial or receiving 
PHA if the PHA does not comply with HUD portability requirements.
    (f) Portability funding. (1) HUD may transfer units and funds for 
assistance to portable families to the receiving PHA from funds 
available under the initial PHA ACC.
    (2) HUD may provide additional funding (e.g., funds for incremental 
units) to the initial PHA for funds transferred to a receiving PHA for 
portability purposes.
    (3) HUD may provide additional funding (e.g., funds for incremental 
units) to the receiving PHA for absorption of portable families.

[[Page 545]]

    (4) HUD may require the receiving PHA to absorb portable families.
    (g) Special purpose vouchers. (1) The initial PHA must submit the 
codes used for special purpose vouchers on the form HUD-50058, Family 
Report, and the receiving PHA must maintain the codes on the Family 
Report, as long as the Receiving PHA chooses to bill the initial PHA.
    (2) Initial and receiving PHAs must administer special purpose 
vouchers, such as the HUD-Veterans Affairs Supportive Housing vouchers, 
in accordance with HUD-established policy in cases where HUD has 
established alternative program requirements of such special purpose 
vouchers.

[80 FR 50573, Aug. 20, 2015]



 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.

    As defined in Sec.  982.4, housing quality standards (HQS) refers to 
the minimum quality standards developed by HUD in accordance with 24 CFR 
5.703 for housing assisted under the HCV program or a HUD approved 
alternative standard for the PHA under 24 CFR 5.703(g).

[88 FR 30503, May 11, 2023]



Sec.  982.402  Subsidy standards.

    (a) Purpose. (1) The PHA must establish subsidy standards that 
determine the number of bedrooms needed for families of different sizes 
and compositions.
    (2) For each family, the PHA determines the appropriate number of 
bedrooms under the PHA subsidy standards (family unit size).
    (3) The family unit size number is entered on the voucher issued to 
the family. The PHA issues the family a voucher 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 PHA determines family unit size under the PHA 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).
    (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 PHA 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 PHA subsidy standards.
    (8) In determining family unit size for a particular family, the PHA 
may grant an exception to its established subsidy standards if the PHA 
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 PHA exception may not override 
the limitation in paragraph (b)(7) of this section.)
    (c) Effect of family unit size-maximum subsidy in voucher program. 
The family unit size as determined for a family under the PHA subsidy 
standard is used to determine the maximum rent subsidy for a family 
assisted in the voucher program. For a voucher tenancy, the PHA 
establishes payment standards by number of bedrooms. The payment 
standard for a family shall be the lower of:
    (1) The payment standard amount for the family unit size; or

[[Page 546]]

    (2) The payment standard amount for the unit size of the unit rented 
by the family.
    (3) Voucher program. For a voucher tenancy, the PHA 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. However, utility allowances 
must follow Sec.  982.517(d).

[60 FR 34695, July 3, 1995, as amended at 63 FR 23861, Apr. 30, 1998; 64 
FR 26646, May 14, 1999; 81 FR 12375, Mar. 8, 2016; 88 FR 30503, May 11, 
2023]



Sec.  982.403  Terminating HAP contract when unit is too small.

    (a) Violation of HQS space standards. (1) If the PHA 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 PHA must issue the 
family a new voucher, and the family and PHA must try to find an 
acceptable unit as soon as possible.
    (2) If an acceptable unit is available for rental by the family, the 
PHA must terminate the HAP contract in accordance with its terms.
    (b) Termination. When the PHA terminates the HAP contract under 
paragraph (a) of this section:
    (1) The PHA 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 PHA gives such notice to 
the owner.
    (3) The family may move to a new unit in accordance with Sec.  
982.354.

(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; 64 
FR 26647, May 14, 1999; 80 FR 8246, Feb. 17, 2015; 80 FR 50575, Aug. 20, 
2015]



Sec.  982.404  Maintenance: Owner and family responsibility; PHA 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 PHA must take prompt and vigorous action to enforce the 
owner obligations. PHA remedies for such breach of the HQS include 
termination, suspension or reduction of housing assistance payments and 
termination of the HAP contract.
    (3) The PHA 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 PHA and the PHA 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 PHA-
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 responsible (as 
provided in Sec.  982.404(b) and Sec.  982.551(c)). (However, the PHA 
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

[[Page 547]]

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 PHA-approved extension).
    (3) If the family has caused a breach of the HQS, the PHA must take 
prompt and vigorous action to enforce the family obligations. The PHA 
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  PHA initial and periodic unit inspection.

    (a)(1) General requirements. The PHA must inspect the unit leased to 
a family prior to the initial term of the lease, at least biennially 
during assisted occupancy, and at other times as needed, to determine if 
the unit meets the HQS. (See Sec.  982.305(b)(2) concerning timing of 
initial inspection by the PHA.)
    (2) Small rural PHAs. Instead of biennially, a small rural PHA as 
defined in Sec.  902.101 of this chapter must inspect a unit during 
occupancy at least once every three years.
    (b) The PHA must conduct supervisory quality control HQS 
inspections.
    (c) In scheduling inspections, the PHA must consider complaints and 
any other information brought to the attention of the PHA.
    (d) The PHA must notify the owner of defects shown by the 
inspection.
    (e) The PHA may not charge the family for an initial inspection or 
reinspection of the unit.
    (f) The PHA may not charge the owner for the inspection of the unit 
prior to the initial term of the lease or for a first inspection during 
assisted occupancy of the unit. The PHA may establish a reasonable fee 
to owners for a reinspection if an owner notifies the PHA that a repair 
has been made or the allotted time for repairs has elapsed and a 
reinspection reveals that any deficiency cited in the previous 
inspection that the owner is responsible for repairing pursuant to Sec.  
982.404(a) was not corrected. The owner may not pass this fee along to 
the family. Fees collected under this paragraph will be included in a 
PHA's administrative fee reserve and may be used only for activities 
related to the provision of Section 8 Tenant-Based Rental Assistance.
    (g) If a participant family or government official reports a 
condition that is life-threatening (i.e., the PHA would require the 
owner to make the repair within no more than 24 hours in accordance with 
Sec.  982.404(a)(3)), then the PHA must inspect the housing unit within 
24 hours of when the PHA received the notification. If the reported 
condition is not life-threatening (i.e., the PHA would require the owner 
to make the repair within no more than 30 calendar days in accordance 
with Sec.  982.404(a)(3)), then the PHA must inspect the unit within 15 
days of when the PHA received the notification. In the event of 
extraordinary circumstances, such as if a unit is within a 
Presidentially declared disaster area, HUD may waive the 24-hour or the 
15-day inspection requirement until such time as an inspection is 
feasible.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999; 64 
FR 56914, Oct. 21, 1999; 81 FR 12375, Mar. 8, 2016; 88 FR 30503, May 11, 
2023]



Sec.  982.406  Use of alternative inspections.

    (a) In general. (1) A PHA may comply with the inspection requirement 
in Sec.  982.405(a) by relying on an alternative inspection (i.e., an 
inspection conducted for another housing assistance program) only if the 
PHA is able to obtain the results of the alternative inspection.
    (2) If an alternative inspection method employs sampling, then a PHA 
may rely on such alternative inspection method to comply with the 
requirement in Sec.  982.405(a) only if HCV units are included in the 
population of units forming the basis of the sample.
    (3) Units in properties that are mixed-finance properties assisted 
with project-based vouchers may be inspected at least triennially 
pursuant to 24 CFR 983.103(g).

[[Page 548]]

    (b) Administrative plans. A PHA relying on an alternative inspection 
to fulfill the requirement in Sec.  982.405(a) must identify the 
alternative inspection method being used in the PHA's administrative 
plan. Such a change may be a significant amendment to the plan, in which 
case the PHA must follow its plan amendment and public notice 
requirements, in addition to meeting the requirements in Sec.  
982.406(c)(2), if applicable, before using the alternative inspection 
method.
    (c) Eligible inspection methods. (1) A PHA may rely upon inspections 
of housing assisted under the HOME Investment Partnerships (HOME) 
program or housing financed using Low-Income Housing Tax Credits 
(LIHTCs), or inspections performed by HUD, with no action other than 
amending its administrative plan.
    (2) If a PHA wishes to rely on an inspection method other than a 
method listed in paragraph (c)(1) of this section, then, prior to 
amending its administrative plan, the PHA must submit to the Real Estate 
Assessment Center (REAC) a copy of the inspection method it wishes to 
use, along with its analysis of the inspection method that shows that 
the method ``provides the same or greater protection to occupants of 
dwelling units'' as would HQS.
    (i) A PHA may rely upon such alternative inspection method only upon 
receiving approval from REAC to do so.
    (ii) A PHA that uses an alternative inspection method approved under 
this paragraph must monitor changes to the standards and requirements 
applicable to such method. If any change is made to the alternative 
inspection method, then the PHA must submit to REAC a copy of the 
revised standards and requirements, along with a revised comparison to 
HQS. If the PHA or REAC determines that the revision would cause the 
alternative inspection to no longer meet or exceed HQS, then the PHA may 
no longer rely upon the alternative inspection method to comply with the 
inspection requirement at Sec.  982.405(a).
    (d) Results of alternative inspection. (1) In order for a PHA to 
rely upon the results of an alternative inspection to comply with the 
requirement at Sec.  982.405(a), a property inspected pursuant to such 
method must meet the standards or requirements regarding housing quality 
or safety applicable to properties assisted under the program using the 
alternative inspection method. To make the determination of whether such 
standards or requirements are met, the PHA must adhere to the following 
procedures:
    (i) If a property is inspected under an alternative inspection 
method, and the property receives a ``pass'' score, then the PHA may 
rely on that inspection to demonstrate compliance with the inspection 
requirement at Sec.  982.405(a).
    (ii) If a property is inspected under an alternative inspection 
method, and the property receives a ``fail'' score, then the PHA may not 
rely on that inspection to demonstrate compliance with the inspection 
requirement at Sec.  982.405(a).
    (iii) If a property is inspected under an alternative inspection 
method that does not employ a pass/fail determination--for example, in 
the case of a program where deficiencies are simply identified--then the 
PHA must review the list of deficiencies to determine whether any cited 
deficiency would have resulted in a ``fail'' score under HQS. If no such 
deficiency exists, then the PHA may rely on the inspection to 
demonstrate compliance with the inspection requirement at Sec.  
982.405(a); if such a deficiency does exist, then the PHA may not rely 
on the inspection to demonstrate such compliance.
    (2) Under any circumstance described above in which a PHA is 
prohibited from relying on an alternative inspection method for a 
property, the PHA must, within a reasonable period of time, conduct an 
HQS inspection of any units in the property occupied by voucher program 
participants and follow HQS procedures to remedy any identified 
deficiencies.
    (e) Records retention. As with all other inspection reports, and as 
required by Sec.  982.158(f)(4), reports for inspections conducted 
pursuant to an alternative inspection method must be obtained by the 
PHA. Such reports must be available for HUD inspection for at least 
three years from the date of the latest inspection.

[81 FR 12375, Mar. 8, 2016]

[[Page 549]]



Sec.  982.407  Enforcement of HQS.

    Part 982 does not create any right of the family, or any party other 
than HUD or the PHA, to require enforcement of the HQS requirements by 
HUD or the PHA, or to assert any claim against HUD or the PHA, 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; 80 
FR 8246, Feb. 17, 2015. Redesignated at 81 FR 12375, Mar. 8, 2016]



 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 
PHA to the owner is determined by the PHA 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 PHA is credited 
toward the monthly rent to owner under the family's lease.
    (3) The total of rent paid by the tenant plus the PHA 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 PHA.
    (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 PHA 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 between the owner and the PHA. See Sec.  982.310(b).
    (5)(i) The PHA must pay the housing assistance payment promptly when 
due to the owner in accordance with the HAP contract.
    (ii)(A) The HAP contract shall provide for penalties against the PHA 
for late payment of housing assistance payments due to the owner if all 
the following circumstances apply:
    (1) Such penalties are in accordance with generally accepted 
practices and law, as applicable in the local housing market, governing 
penalties for late payment of rent by a tenant;
    (2) It is the owner's practice to charge such penalties for assisted 
and unassisted tenants; and
    (3) The owner also charges such penalties against the tenant for 
late payment of family rent to owner.
    (B) The PHA is not obligated to pay any late payment penalty if HUD 
determines that late payment by the PHA is due to factors beyond the 
PHA's control. The PHA may add HAP contract provisions which define when 
the housing assistance payment by the PHA is deemed received by the 
owner (e.g., upon mailing by the PHA or actual receipt by the owner).
    (iii) The PHA may only use the following sources to pay a late 
payment penalty from program receipts under the consolidated ACC: 
administrative fee income for the program; or the administrative fee 
reserve for the program. The PHA may not use other program receipts for 
this purpose.

[60 FR 34695, July 3, 1995, as amended at 61 FR 27163, May 30, 1996; 63 
FR 23861, Apr. 30, 1998; 64 FR 26647, May 14, 1999; 64 FR 56914, Oct. 
21, 1999]



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 voucher-holder to lease the unit, and 
deciding if the family is suitable for tenancy of the unit.

[[Page 550]]

The fact that an applicant is or has been a victim of domestic violence, 
dating violence, sexual assault, or stalking is not an appropriate basis 
for denial of tenancy if the applicant otherwise qualifies for tenancy.
    (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 PHA 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; 64 FR 26647, May 14, 1999; 73 FR 72345, Nov. 
28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 8246, Feb. 17, 2015; 81 FR 
80817, Nov. 16, 2016]



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 HAP 
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-related criminal activity.
    (6) If the owner has committed any violent criminal activity.
    (b) The PHA 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.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999; 64 
FR 56914, Oct. 21, 1999; 65 FR 16821, Mar. 30, 2000]



Sec.  982.454  Termination of HAP contract: Insufficient funding.

    The PHA may terminate the HAP contract if the PHA determines, in 
accordance with HUD requirements, that funding under the consolidated 
ACC is insufficient to support continued assistance for families in the 
program.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999]



Sec.  982.455  Automatic termination of HAP contract.

    The HAP contract terminates automatically 180 calendar days after 
the last housing assistance payment to the owner.

[64 FR 26647, May 14, 1999]



Sec.  982.456  Third parties.

    (a) Even if the family continues to occupy the unit, the PHA may 
exercise any rights and remedies against the owner under the HAP 
contract.
    (b)(1) The family is not a party to or third party beneficiary of 
the HAP contract. Except as provided in paragraph (b)(2) of this 
section, the family may not exercise any right or remedy against the 
owner under the HAP contract.

[[Page 551]]

    (2) The tenant may exercise any right or remedy against the owner 
under the lease between the tenant and the owner, including enforcement 
of the owner's obligations under the tenancy addendum (which is included 
both in the HAP contract between the PHA and the owner; and in 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 HUD) to enforce any 
provision of the HAP contract, or to assert any claim against HUD, the 
PHA or the owner under the HAP contract.

[60 FR 34695, July 3, 1995, as amended at 64 FR 26647, May 14, 1999]



              Subpart K_Rent and Housing Assistance Payment

    Source: 63 FR 23861, Apr. 30, 1998, unless otherwise noted.



Sec.  982.501  Overview.

    This subpart describes program requirements concerning the housing 
assistance payment and rent to owner under the HCV program.

[80 FR 8246, Feb. 17, 2015]



Sec.  982.503  Payment standard amount and schedule.

    (a) Payment standard schedule. (1) HUD publishes the fair market 
rents for each market area in the United States (see part 888 of this 
title). The PHA must adopt a payment standard schedule that establishes 
voucher payment standard amounts for each FMR area in the PHA 
jurisdiction. For each FMR area, the PHA must establish payment standard 
amounts for each ``unit size.'' Unit size is measured by number of 
bedrooms (zero-bedroom, one-bedroom, and so on).
    (2) The payment standard amounts on the PHA schedule are used to 
calculate the monthly housing assistance payment for a family (Sec.  
982.505).
    (3) The PHA voucher payment standard schedule shall establish a 
single payment standard amount for each unit size. For each unit size, 
the PHA may establish a single payment standard amount for the whole FMR 
area, or may establish a separate payment standard amount for each 
designated part of the FMR area.
    (b) Establishing payment standard amounts. (1)(i) The PHA may 
establish the payment standard amount for a unit size at any level 
between 90 percent and 110 percent of the published FMR for that unit 
size. HUD approval is not required to establish a payment standard 
amount in that range (``basic range''). The PHA must revise the payment 
standard amount no later than 3 months following the effective date of 
the published FMR if a change is necessary to stay within the basic 
range.
    (ii) The PHA may establish a separate payment standard amount within 
the basic range for a designated part of an FMR area.
    (iii) A PHA that is not in a designated Small Area FMR area or has 
not opted to voluntarily implement Small Area FMRs under 24 CFR 
888.113(c)(3) may establish exception payment standards for a ZIP code 
area above the basic range for the metropolitan FMR based on the HUD 
published Small Area FMRs. The PHA may establish an exception payment 
standard up to 110 percent of the HUD published Small Area FMR for that 
ZIP code area. The PHA must notify HUD if it establishes an exception 
payment standard based on the Small Area FMR. The exception payment 
standard must apply to the entire ZIP code area.
    (iv) At the request of a PHA administering the HCV program under 
Small Area FMRs under Sec.  888.113(c)(3), HUD may approve an exception 
payment standard for a Small Area FMR area above the 110 percent of the 
published FMR in accordance with conditions set forth by Notice in the 
Federal Register. The requirements of paragraph (c) of this section do 
not apply to these exception payment standard requests and approvals.
    (v) The PHA may establish an exception payment standard of not more 
than 120 percent of the published FMR if required as a reasonable 
accommodation in accordance with 24 CFR part 8 for a family that 
includes a person with a disability. Any unit approved under an 
exception payment standard must still meet the reasonable rent 
requirements found at Sec.  982.507.

[[Page 552]]

    (vi) The PHA may establish an exception payment standard of more 
than 120 percent of the published FMR if required as a reasonable 
accommodation in accordance with 24 CFR part 8 for a family that 
includes a person with a disability after approval from HUD. Any unit 
approved under an exception payment standard must still meet the 
reasonable rent requirements found at Sec.  982.507.
    (2) Except as described in paragraphs (b)(1)(iii) through (v) of 
this section, the PHA must request HUD approval to establish a payment 
standard amount that is higher or lower than the basic range. HUD has 
sole discretion to grant or deny approval of a higher or lower payment 
standard amount. Paragraphs (c) and (e) of this section describe the 
requirements for approval of a higher payment standard amount 
(``exception payment standard amount'').
    (c) HUD approval of exception payment standard amount--(1) HUD 
discretion. At HUD's sole discretion, HUD may approve a payment standard 
amount that is higher than the basic range for a designated part of the 
fair market rent area (called an ``exception area''). HUD may approve an 
exception payment standard amount in accordance with this paragraph (c) 
of this section for all units, or for all units of a given unit size, 
leased by program families in the exception area. Any PHA with 
jurisdiction in the exception area may use the HUD-approved exception 
payment standard amount.
    (2) Above 110 percent of FMR to 120 percent of published FMR. The 
HUD Field Office may approve an exception payment standard amount from 
above 110 percent of the published FMR to 120 percent of the published 
FMR (upper range) if the HUD Field Office determines that approval is 
justified by the median rent method or the 40th percentile rent or the 
Small Area FMR method as described in paragraph (c)(2)(ii) of this 
section (and that such approval is also supported by an appropriate 
program justification in accordance with paragraph (c)(4) of this 
section).
    (i) Median rent method. In the median rent method, HUD determines 
the exception payment standard amount by multiplying the FMR times a 
fraction of which the numerator is the median gross rent of the 
exception 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 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 products.
    (ii) 40th percentile rent or Small Area FMR method. In this method, 
HUD determines that the area exception payment standard amount equals 
application of the 40th percentile of rents for standard quality rental 
housing in the exception area or the Small Area FMR. HUD determines 
whether the 40th percentile rent or Small Area FMR applies in accordance 
with the methodology described in 24 CFR 888.113 for determining FMRs. A 
PHA must present statistically representative rental housing survey data 
to justify HUD approval.
    (3) Above 120 percent of FMR. (i) At the request of a PHA, the 
Assistant Secretary for Public and Indian Housing may approve an 
exception payment standard amount for the total area of a county, PHA 
jurisdiction, or place if the Assistant Secretary determines that:
    (A) Such approval is necessary to prevent financial hardship for 
families;
    (B) Such approval is supported by statistically representative 
rental housing survey data to justify HUD approval in accordance with 
the methodology described in Sec.  888.113 of this title; and
    (C) Such approval is also supported by an appropriate program 
justification in accordance with paragraph (c)(4) of this section.
    (ii) For purposes of paragraph (c)(3) of this section, the term 
``place'' is an incorporated place or a U.S. Census designated place. An 
incorporated place is established by State law and includes cities, 
boroughs, towns, and villages. A U.S. Census designated place is the 
statistical counterpart of an incorporated place.
    (4) Program justification. (i) HUD will only approve an exception 
payment

[[Page 553]]

standard amount (pursuant to paragraph (c)(2) or paragraph (c)(3) of 
this section) if HUD determines that approval of such higher amount is 
needed either:
    (A) To help families find housing outside areas of high poverty, or
    (B) Because voucher holders have trouble finding housing for lease 
under the program within the term of the voucher.
    (ii) HUD will only approve an exception payment standard amount 
(pursuant to paragraph (c)(3) of this section) after six months from the 
date of HUD approval of an exception payment standard pursuant to 
paragraph (c)(2) of this section for the area.
    (5) Population. The total population of HUD-approved exception areas 
in an FMR area may not include more than 50 percent of the population of 
the FMR area, except when applying Small Area FMR exception areas under 
paragraph (b)(1)(iii) of this section.
    (6) Withdrawal or modification. At any time, HUD may withdraw or 
modify approval to use an exception payment standard amount.
    (d) HUD approval of payment standard amount below the basic range. 
HUD may consider a PHA request for approval to establish a payment 
standard amount that is lower than the basic range. At HUD's sole 
discretion, HUD may approve PHA establishment of a payment standard 
lower than the basic range. In determining whether to approve the PHA 
request, HUD will consider appropriate factors, including rent burden of 
families assisted under the program. HUD will not approve a lower 
payment standard if the family share for more than 40 percent of 
participants in the PHA's voucher program exceeds 30 percent of adjusted 
monthly income. Such determination may be based on the most recent 
examinations of family income.
    (e) HUD approval of success rate payment standard amounts. In order 
to increase the number of voucher holders who become participants, HUD 
may approve requests from PHAs whose FMRs are computed at the 40th 
percentile rent to establish higher, success rate payment standard 
amounts. A success rate payment standard amount is defined as any amount 
between 90 percent and 110 percent of the 50th percentile rent, 
calculated in accordance with the methodology described in Sec.  888.113 
of this title.
    (1) A PHA may obtain HUD Field Office approval of success rate 
payment standard amounts provided the PHA demonstrates to HUD that it 
meets the following criteria:
    (i) Fewer than 75 percent of the families to whom the PHA issued 
rental vouchers during the most recent 6 month period for which there is 
success rate data available have become participants in the voucher 
program;
    (ii) The PHA has established payment standard amounts for all unit 
sizes in the entire PHA jurisdiction within the FMR area at 110 percent 
of the published FMR for at least the 6 month period referenced in 
paragraph (e)(1)(i) of this section and up to the time the request is 
made to HUD; and
    (iii) The PHA has a policy of granting automatic extensions of 
voucher terms to at least 90 days to provide a family who has made 
sustained efforts to locate suitable housing with additional search 
time.
    (2) In determining whether to approve the PHA request to establish 
success rate payment standard amounts, HUD will consider whether the PHA 
has a SEMAP overall performance rating of ``troubled''. If a PHA does 
not yet have a SEMAP rating, HUD will consider the PHA's SEMAP 
certification.
    (3) HUD approval of success rate payment standard amounts shall be 
for all unit sizes in the FMR area. A PHA may opt to establish a success 
rate payment standard amount for one or more unit sizes in all or a 
designated part of the PHA jurisdiction within the FMR area.
    (f) Payment standard protection for PHAs that meet deconcentration 
objectives. Paragraph (f) of this section applies only to a PHA with 
jurisdiction in an FMR area where the FMR had previously been set at the 
50th percentile rent to provide a broad range of housing opportunities 
throughout a metropolitan area, pursuant to Sec.  888.113(i)(3), but is 
now set at the 40th percentile rent.
    (1) Such a PHA may obtain HUD Field Office approval of a payment

[[Page 554]]

standard amount based on the 50th percentile rent if the PHA scored the 
maximum number of points on the deconcentration bonus indicator in Sec.  
985.3(h) in the prior year, or in two of the last three years.
    (2) HUD approval of payment standard amounts based on the 50th 
percentile rent shall be for all unit sizes in the FMR area that had 
previously been set at the 50th percentile rent pursuant to Sec.  
888.113(i)(3). A PHA may opt to establish a payment standard amount 
based on the 50th percentile rent for one or more unit sizes in all or a 
designated part of the PHA jurisdiction within the FMR area.
    (g) HUD review of PHA payment standard schedules. (1) HUD will 
monitor rent burdens of families assisted in a PHA's voucher program. 
HUD will review the PHA's payment standard for a particular unit size if 
HUD finds that 40 percent or more of such families occupying units of 
that unit size currently pay more than 30 percent of adjusted monthly 
income as the family share. Such determination may be based on the most 
recent examinations of family income.
    (2) After such review, HUD may, at its discretion, require the PHA 
to modify payment standard amounts for any unit size on the PHA payment 
standard schedule. HUD may require the PHA to establish an increased 
payment standard amount within the basic range.

[64 FR 26648, May 14, 1999; 64 FR 49658, Sept. 14, 1999, as amended at 
64 FR 56914, Oct. 21, 1999; 65 FR 16822, Mar. 30, 2000; 65 FR 58874, 
Oct. 2, 2000; 66 FR 30568, June 6, 2001; 67 FR 56688, Sept. 4, 2002; 80 
FR 8246, Feb. 17, 2015; 81 FR 12376, Mar. 8, 2016; 81 FR 80582, Nov. 16, 
2016]



Sec.  982.504  Payment standard for family in restructured subsidized 
multifamily project.

    (a) This section applies to HCV assistance if all the following 
conditions are applicable:
    (1) Such HCV assistance is provided to a family pursuant to 24 CFR 
401.421 when HUD has approved a restructuring plan, and the 
participating administrative entity has approved the use of tenant-based 
assistance to provide continued assistance for such families. Such 
tenant-based voucher assistance is provided for a family previously 
receiving project-based assistance in an eligible project (as defined in 
Sec.  401.2 of this title) at the time when the project-based assistance 
terminates.
    (2) The family chooses to remain in the restructured project with 
HCV assistance under the program and leases a unit that does not exceed 
the family unit size;
    (3) The lease for such assisted tenancy commences during the first 
year after the project-based assistance terminates.
    (b) The initial payment standard for the family under such initial 
lease is the sum of the reasonable rent to owner for the unit plus the 
utility allowance for tenant-paid utilities. (Determination of such 
initial payment standard for the family is not subject to paragraphs 
(c)(1) and (c)(2) of Sec.  982.505. Except for determination of the 
initial payment standard as specifically provided in paragraph (b) of 
this section, the payment standard and housing assistance payment for 
the family during the HAP contract term shall be determined in 
accordance with Sec.  982.505.)

[64 FR 26649, May 14, 1999, as amended at 80 FR 8247, Feb. 17, 2015]



Sec.  982.505  How to calculate housing assistance payment.

    (a) Use of payment standard. A payment standard is used to calculate 
the monthly housing assistance payment for a family. The ``payment 
standard'' is the maximum monthly subsidy payment.
    (b) Amount of monthly housing assistance payment. The PHA shall pay 
a monthly housing assistance payment on behalf of the family that is 
equal to the lower of:
    (1) The payment standard for the family minus the total tenant 
payment; or
    (2) The gross rent minus the total tenant payment.
    (c) Payment standard for family. (1) The payment standard for the 
family is the lower of:
    (i) The payment standard amount for the family unit size; or
    (ii) The payment standard amount for the size of the dwelling unit 
rented by the family.

[[Page 555]]

    (2) If the PHA has established a separate payment standard amount 
for a designated part of an FMR area in accordance with Sec.  982.503 
(including an exception payment standard amount as determined in 
accordance with Sec.  982.503(b)(2) and Sec.  982.503(c)), and the 
dwelling unit is located in such designated part, the PHA must use the 
appropriate payment standard amount for such designated part to 
calculate the payment standard for the family. The payment standard for 
the family shall be calculated in accordance with this paragraph and 
paragraph (c)(1) of this section.
    (3) Decrease in the payment standard amount during the HAP contract 
term. If the amount on the payment standard schedule is decreased during 
the term of the HAP contract, the PHA is not required to reduce the 
payment standard amount used to calculate the subsidy for the families 
under HAP contract for as long as the HAP contract remains in effect.
    (i) If the PHA chooses to reduce the payment standard for the 
families currently under HAP contract during the HAP contract term in 
accordance with their administrative plan, the initial reduction to the 
payment standard amount used to calculate the monthly housing assistance 
payment for the family may not be applied any earlier than the effective 
date of the family's second regular reexamination following the 
effective date of the decrease in the payment standard amount.
    (ii) The PHA may choose to reduce the payment standard amount for 
families that remain under HAP contract to the current payment standard 
amount in effect on the PHA voucher payment standard schedule, or may 
reduce the payment standard amount to an amount that is higher than the 
normally applicable payment standard amount on the PHA voucher payment 
standard schedule. The PHA may further reduce the payment standard 
amount for the families during the term of the HAP contract, provided 
the subsequent reductions continue to result in a payment standard 
amount that meets or exceeds the normally applicable payment standard 
amount on the PHA voucher payment standard schedule.
    (iii) The PHA must provide the family with at least 12 months' 
notice that the payment standard is being reduced during the term of the 
HAP contract before the effective date of the change.
    (iv) The PHA shall administer decreases in the payment standard 
amount during the term of the HAP contract in accordance with the PHA 
policy as described in the PHA administrative plan. The PHA may 
establish different policies for designated areas within their 
jurisdiction (e.g., for different zip code areas), but the PHA 
administrative policy on decreases to payment standards during the term 
of the HAP contract applies to all families under HAP contract at the 
time of the effective date of decrease in the payment standard within 
that designated area. The PHA may not limit or otherwise establish 
different protections or policies for certain families under HAP 
contract.
    (4) Increase in the payment standard amount during the HAP contract 
term. If the payment standard amount is increased during the term of the 
HAP contract, the increased payment standard amount shall be used to 
calculate the monthly housing assistance payment for the family 
beginning at the effective date of the family's first regular 
reexamination on or after the effective date of the increase in the 
payment standard amount.
    (5) Change in family unit size during the HAP contract term. 
Irrespective of any increase or decrease in the payment standard amount, 
if the family unit size increases or decreases during the HAP contract 
term, the new family unit size must be used to determine the payment 
standard amount for the family beginning at the family's first regular 
reexamination following the change in family unit size.
    (d) PHA approval of higher payment standard for the family as a 
reasonable accommodation. If the family includes a person with 
disabilities and requires a payment standard above the basic range, as a 
reasonable accommodation for such person, in accordance with part 8 of 
this title, the PHA may establish a payment standard for the family of 
not more than 120 percent of the

[[Page 556]]

FMR. A PHA may establish a payment standard greater than 120 percent of 
the FMR by submitting a request to HUD.

[64 FR 26649, May 14, 1999, as amended at 64 FR 56914, Oct. 21, 1999; 65 
FR 16822, Mar. 30, 2000; 65 FR 42509, July 10, 2000; 66 FR 30568, June 
6, 2001; 67 FR 56689, Sept. 4, 2002; 80 FR 8247, Feb. 17, 2014; 81 FR 
12376, Mar. 8, 2016; 81 FR 80582, Nov. 16, 2016]



Sec.  982.506  Negotiating rent to owner.

    The owner and the family negotiate the rent to owner. At the 
family's request, the PHA must help the family negotiate the rent to 
owner.

[63 FR 23861, Apr. 30, 1998. Redesignated at 64 FR 26648, May 14, 1999]



Sec.  982.507  Rent to owner: Reasonable rent.

    (a) PHA determination. (1) Except as provided in paragraph (c) of 
this section, the PHA may not approve a lease until the PHA determines 
that the initial rent to owner is a reasonable rent.
    (2) The PHA must redetermine the reasonable rent:
    (i) Before any increase in the rent to owner;
    (ii) If there is a 10 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.
    (iii) If directed by HUD.
    (3) The PHA 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 PHA.
    (b) Comparability. The PHA 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 PHA 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) Units assisted by low-income housing tax credits or assistance 
under HUD's HOME Investment Partnerships (HOME) program. (1) General. 
For a unit receiving low-income housing tax credits (LIHTCs) pursuant to 
section 42 of the Internal Revenue Code of 1986 or receiving assistance 
under HUD's HOME Program (for which the regulations are found in 24 CFR 
part 92), a rent comparison with unassisted units is not required if the 
voucher rent does not exceed the rent for other LIHTC- or HOME-assisted 
units in the project that are not occupied by families with tenant-based 
assistance.
    (2) LIHTC. If the rent requested by the owner exceeds the LIHTC 
rents for non-voucher families, the PHA must perform a rent 
comparability study in accordance with program regulations and the rent 
shall not exceed the lesser of the:
    (i) Reasonable rent as determined pursuant to a rent comparability 
study; and
    (ii) The payment standard established by the PHA for the unit size 
involved.
    (3) HOME Program. [Reserved]
    (d) Owner certification of rents charged for other units. By 
accepting each monthly housing assistance payment from the PHA, 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 PHA information requested by the PHA on rents charged by 
the owner for other units in the premises or elsewhere.

[63 FR 23861, Apr. 30, 1998. Redesignated at 64 FR 26648, May 14, 1999; 
79 FR 36164, June 25, 2014; 81 FR 80583, Nov. 16, 2016]



Sec.  982.508  Maximum family share at initial occupancy.

    At the time the PHA approves a tenancy for initial occupancy of a 
dwelling unit by a family with tenant-based assistance under the 
program, and where the gross rent of the unit exceeds the applicable 
payment standard for the family, the family share must not exceed 40 
percent of the family's adjusted monthly income. The determination of 
adjusted monthly income must be based on verification information 
received by the PHA no earlier than 60 days before the PHA issues a 
voucher to the family.

[64 FR 59622, Nov. 3, 1999]

[[Page 557]]



Sec.  982.509  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.

[63 FR 23861, Apr. 30, 1998. Redesignated and amended at 64 FR 26648, 
May 14, 1999]



Sec.  982.510  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.

[63 FR 23861, Apr. 30, 1998. Redesignated at 64 FR 26648, May 14, 1999]



Sec.  982.514  Distribution of housing assistance payment.

    The monthly housing assistance payment is distributed as follows:
    (a) The PHA 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 
PHA may pay the balance of the housing assistance payment (``utility 
reimbursement'') either to the family or directly to the utility 
supplier to pay the utility bill on behalf of the family. If the PHA 
elects to pay the utility supplier directly, the PHA must notify the 
family of the amount paid to the utility supplier.
    (c) The PHA may elect to establish policies regarding the frequency 
of utility reimbursement payments for payments made to the family.
    (1) The PHA will have the option of making utility reimbursement 
payments not less than once per calendar-year quarter, for 
reimbursements totaling $45 or less per quarter. In the event a family 
leaves the program in advance of its next quarterly reimbursement, the 
PHA would be required to reimburse the family for a prorated share of 
the applicable reimbursement. PHAs exercising this option must have a 
hardship policy in place for tenants.
    (2) If the PHA elects to pay the utility supplier directly, the PHA 
must notify the family of the amount paid to the utility supplier.

[63 FR 23861, Apr. 30, 1998, as amended at 64 FR 56914, Oct. 21, 1999; 
65 FR 16822, Mar. 30, 2000; 81 FR 12376, Mar. 8, 2016]



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 family rent to owner is calculated by subtracting the amount 
of the housing assistance payment to the owner from the rent to owner.
    (c) The PHA may not use housing assistance payments or other program 
funds (including any administrative fee reserve) to pay any part of the 
family share, including the family rent to owner. Payment of the whole 
family share is the responsibility of the family.

[63 FR 23861, Apr. 30, 1998, as amended at 64 FR 56915, Oct. 21, 1999]



Sec.  982.516  Family income and composition: Annual and interim examinations.

    (a) PHA responsibility for reexamination and verification. (1) The 
PHA must conduct a reexamination of family income and composition at 
least annually.
    (2) Except as provided in paragraph (a)(3) of this section, the PHA 
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.
    (3) For a family with net family assets (as the term is defined in 
Sec.  5.603 of

[[Page 558]]

this title) equal to or less than $50,000, which amount will be adjusted 
annually by HUD in accordance with the Consumer Price Index for Urban 
Wage Earners and Clerical Workers, a PHA may accept, for purposes of 
recertification of income, a family's declaration under Sec.  5.618(b) 
of this title, except that the PHA must obtain third-party verification 
of all family assets every 3 years.
    (b) Streamlined income determination--(1) General. A PHA may elect 
to apply a streamlined income determination to families receiving fixed 
income as described in paragraph (b)(3) of this section.
    (2) Definition of ``fixed income''. For purposes of this section, 
``fixed income'' means periodic payments at reasonably predictable 
levels from one or more of the following sources:
    (i) Social Security, Supplemental Security Income, Supplemental 
Disability Insurance.
    (ii) Federal, state, local, or private pension plans.
    (iii) Annuities or other retirement benefit programs, insurance 
policies, disability or death benefits, or other similar types of 
periodic receipts.
    (iv) Any other source of income subject to adjustment by a 
verifiable COLA or current rate of interest.
    (3) Method of streamlined income determination. A PHA using the 
streamlined income determination must adjust a family's income according 
to the percentage of a family's unadjusted income that is from fixed 
income.
    (i) When 90 percent or more of a family's unadjusted income consists 
of fixed income, PHAs using streamlined income determinations must apply 
a COLA or COLAs to the family's fixed-income sources, provided that the 
family certifies both that 90 percent or more of their unadjusted income 
is fixed income and that their sources of fixed income have not changed 
from the previous year. For non-fixed income, the PHA is not required to 
make adjustments pursuant to paragraph (a) of this section.
    (ii) When less than 90 percent of a family's unadjusted income 
consists of fixed income, PHAs using streamlined income determinations 
must apply a COLA to each of the family's sources of fixed income 
individually. The PHA must determine all other income pursuant to 
paragraph (a) of this section.
    (4) COLA rate applied by PHAs. PHAs using streamlined income 
determinations must adjust a family's fixed income using a COLA or 
current interest rate that applies to each specific source of fixed 
income and is available from a public source or through tenant-provided, 
third-party-generated documentation. If no public verification or 
tenant-provided documentation is available, then the owner must obtain 
third-party verification of the income amounts in order to calculate the 
change in income for the source.
    (5) Triennial verification. For any income determined pursuant to a 
streamlined income determination, a PHA must obtain third-party 
verification of all income amounts every 3 years.
    (c) Interim reexaminations. (1) A family may request an interim 
determination of family income or composition because of any changes 
since the last determination. The PHA must conduct any interim 
reexamination within a reasonable period of time after the family 
request or when the PHA becomes aware of an increase in family adjusted 
income under paragraph (c)(3) of this section. What qualifies as a 
``reasonable time'' may vary based on the amount of time it takes to 
verify information, but generally should not be longer than 30 days 
after changes in income are reported.
    (2) The PHA may decline to conduct an interim reexamination of 
family income if the PHA estimates the family's adjusted income will 
decrease by an amount that is less than ten percent of the family's 
annual adjusted income (or a lower amount established by HUD through 
notice), or a lower threshold established by the PHA.
    (3) The PHA must conduct an interim reexamination of family income 
when the PHA becomes aware that the family's adjusted income (as defined 
in Sec.  5.611 of this title) has changed by an amount that the PHA 
estimates will result in an increase of ten percent or more in annual 
adjusted income or such other amount established by HUD through notice, 
except:

[[Page 559]]

    (i) The PHA may not consider any increase in the earned income of 
the family when estimating or calculating whether the family's adjusted 
income has increased, unless the family has previously received an 
interim reduction under paragraph (c)(1) of this section during the 
certification period; and
    (ii) The PHA may choose not to conduct an interim reexamination in 
the last three months of a certification period.
    (4) Effective date of rent changes. (i) If the family has reported a 
change in family income or composition in a timely manner according to 
the PHA's policies, the PHA must provide the family with 30 days advance 
notice of any family share and family rent to owner increases, and such 
increases will be effective the first day of the month beginning after 
the end of that 30-day period. Family share and family rent to owner 
decreases will be effective on the first day of the first month after 
the date of the reported change leading to the interim reexamination of 
family income.
    (ii) If the family has failed to report a change in family income or 
composition in a timely manner according to the PHA's policies, PHAs 
must implement any resulting family share and family rent to owner 
increases retroactively to the first of the month following the date of 
the change leading to the interim reexamination of family income. Any 
resulting family share and family rent to owner decrease must be 
implemented no later than the first rent period following completion of 
the reexamination. However, a PHA may apply a family share and family 
rent to owner decrease retroactively at the discretion of the PHA, in 
accordance with the conditions established by the PHA in the 
administrative plan and subject to paragraph (c)(4)(iii) of this 
section.
    (iii) A retroactive family share and family rent to owner decrease 
may not be applied prior to the later of the first of the month 
following:
    (A) The date of the change leading to the interim reexamination of 
family income; or
    (B) The effective date of the family's most recent previous interim 
or annual reexamination (or initial examination if that was the family's 
last examination).
    (d) Family reporting of change. The PHA must adopt policies 
consistent with this section prescribing when and under what conditions 
the family must report a change in family income or composition.
    (e) Effective date of reexamination. (1) The PHA must adopt policies 
consistent with this section prescribing how to determine the effective 
date of a change in the housing assistance payment resulting from an 
interim redetermination.
    (2) At the effective date of a regular or interim reexamination, the 
PHA must make appropriate adjustments in the housing assistance payment 
in accordance with Sec.  982.505.
    (f) Accuracy of family income data. The PHA must establish 
procedures that are appropriate and necessary to assure that income data 
provided by applicant or participant families is complete and accurate. 
The PHA will not be considered out of compliance with the requirements 
in this section solely due to de minimis errors in calculating family 
income but is still obligated to correct errors once the PHA becomes 
aware of the errors. A de minimis error is an error where the PHA 
determination of family income deviates from the correct income 
determination by no more than $30 per month in monthly adjusted income 
($360 in annual adjusted income).
    (i) The PHA must take any corrective action necessary to credit or 
repay a family if the family has been overcharged for their rent or 
family share as a result of an error (including a de minimis error) in 
the income determination. Families will not be required to repay the PHA 
in instances where the PHA has miscalculated income resulting in a 
family being undercharged for rent or family share.
    (ii) HUD may revise the amount of de minimis error in this paragraph 
(f) through a rulemaking published in the Federal Register for public 
comment.
    (g) Execution of release and consent. (1) As a condition of 
admission to or continued assistance under the program, the PHA shall 
require the family head, and such other family members as the

[[Page 560]]

PHA designates, to execute a HUD-approved release and consent form 
(including any release and consent as required under Sec.  5.230 of this 
title) authorizing any depository or private source of income, or any 
Federal, State or local agency, to furnish or release to the PHA or HUD 
such information as the PHA or HUD determines to be necessary.
    (2) The PHA and HUD must limit the use or disclosure of information 
obtained from a family or from another source pursuant to this release 
and consent to purposes directly in connection with administration of 
the program.
    (h) Reviews of family income under this section are subject to the 
provisions in section 904 of the Stewart B. McKinney Homeless Assistance 
Amendments Act of 1988, as amended (42 U.S.C. 3544).

(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; 
64 FR 26649, May 14, 1999; 64 FR 56915, Oct. 21, 1999; 65 FR 16822, Mar. 
30, 2000; 80 FR 8247, Feb. 17, 2015; 81 FR 12376, Mar. 8, 2016; 82 FR 
58341, Dec. 12, 2017; 85 FR 27139, May 7, 2020; 88 FR 9675, Feb. 14, 
2023]

    Editorial Note: At 64 FR 26649, May 14, 1999, Sec.  982.516 was 
amended in paragraph (e) by removing the reference to ``and family unit 
size''; however paragraph (e) does not contain this phrase.



Sec.  982.517  Utility allowance schedule.

    (a) Maintaining schedule. (1) The PHA 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 PHA must give HUD a copy of the utility allowance schedule. 
At HUD's request, the PHA 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 PHA must use normal patterns of consumption for the community as a 
whole and current utility rates.
    (2)(i) A PHA'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 PHA 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 PHA 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 PHA 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) A PHA 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 since the last time the utility 
allowance schedule was revised. The PHA must maintain information 
supporting its annual review of utility allowances and any revisions 
made in its utility allowance schedule.

[[Page 561]]

    (2) At HUD's direction, the PHA must revise the utility allowance 
schedule to correct any errors, or as necessary to update the schedule.
    (d) Use of utility allowance schedule. The PHA must use the 
appropriate utility allowance for the lesser of the size of dwelling 
unit actually leased by the family or the family unit size as determined 
under the PHA subsidy standards. In cases where the unit size leased 
exceeds the family unit size as determined under the PHA subsidy 
standards as a result of a reasonable accommodation, the PHA must use 
the appropriate utility allowance for the size of the dwelling unit 
actually leased by the family.
    (e) Higher utility allowance as reasonable accommodation for a 
person with disabilities. On request from a family that includes a 
person with disabilities, the PHA 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.)

[63 FR 23861, Apr. 30, 1998, as amended at 80 FR 8247, Feb. 17, 2015; 81 
FR 12377, Mar. 8, 2016]



Sec.  982.521  Rent to owner in subsidized project.

    (a) Applicability to subsidized project. This section applies to a 
program tenancy in any of the following types of federally subsidized 
project:
    (1) An insured or non-insured Section 236 project;
    (2) A Section 202 project;
    (3) A Section 221(d)(3) below market interest rate (BMIR) project; 
or
    (4) A Section 515 project of the Rural Development Administration.
    (b) How rent to owner is determined. The rent to owner is the 
subsidized rent as determined in accordance with requirements for the 
applicable federal program listed in paragraph (a) of this section. This 
determination is not subject to the prohibition against increasing the 
rent to owner during the initial lease term (see Sec.  982.309).

[65 FR 16822, Mar. 30, 2000, as amended at 80 FR 8247, Feb. 17, 2015]



   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 PHA 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 PHA or 
HUD for use in a regularly scheduled reexamination or interim 
reexamination of family income and composition in accordance with HUD 
requirements.
    (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.
    (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 PHA inspection. The family must allow the PHA 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. Under 24 CFR 5.2005(c), an incident or 
incidents of actual or threatened domestic violence, dating violence, 
sexual assault, or stalking will not be construed as a serious or 
repeated lease violation by the

[[Page 562]]

victim, or threatened victim, of the domestic violence, dating violence, 
sexual assault, or stalking, or as good cause to terminate the tenancy, 
occupancy rights, or assistance of the victim.
    (f) Family notice of move or lease termination. The family must 
notify the PHA and the owner before the family moves out of the unit, or 
terminates the lease on notice to the owner. See Sec.  982.354(d).
    (g) Owner eviction notice. The family must promptly give the PHA 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 PHA. The family must promptly inform the PHA of the 
birth, adoption or court-awarded custody of a child. The family must 
request PHA 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 PHA if any family member no 
longer resides in the unit.
    (4) If the PHA has given approval, a foster child or a live-in-aide 
may reside in the unit. The PHA has the discretion to adopt reasonable 
policies concerning residence by a foster child or a live-in-aide, and 
defining when PHA 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 PHA to verify that the family is living 
in the unit, or relating to family absence from the unit, including any 
PHA-requested information or certification on the purposes of family 
absences. The family must cooperate with the PHA for this purpose. The 
family must promptly notify the PHA 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 household members. The members of the household may not 
engage in drug-related criminal activity or violent criminal activity or 
other criminal activity that threatens the health, safety, or right to 
peaceful enjoyment of other residents and persons residing in the 
immediate vicinity of the premises (see Sec.  982.553). Under 24 CFR 
5.2005(b)(2), criminal activity directly related to domestic violence, 
dating violence, sexual assault, or stalking, engaged in by a member of 
a tenant's household, or any guest or other person under the tenant's 
control, shall not be cause for termination of tenancy, occupancy 
rights, or assistance of the victim, if the tenant or an affiliated 
individual of the tenant, as defined in 24 CFR 5.2003, is the victim.
    (m) Alcohol abuse by household members. The members of the household 
must not abuse alcohol in a way that threatens the health, safety or 
right to peaceful enjoyment of other residents and persons residing in 
the immediate vicinity of the premises.
    (n) 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; 64 FR 26650, May 14, 1999; 66 FR 28805, May 24, 2001; 73 FR 
72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 50575, Aug. 20, 
2015; 81 FR 80817, Nov. 16, 2016]

[[Page 563]]



Sec.  982.552  PHA denial or termination of assistance for family.

    (a) Action or inaction by family. (1) A PHA 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 PHA waiting list, denying or 
withdrawing a 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 PHA 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) Requirement to deny admission or terminate assistance. (1) For 
provisions on denial of admission and termination of assistance for 
illegal drug use, other criminal activity, and alcohol abuse that would 
threaten other residents, see Sec.  982.553.
    (2) The PHA must terminate program assistance for a family evicted 
from housing assisted under the program for serious violation of the 
lease.
    (3) The PHA must deny admission to the program for an applicant, or 
terminate program assistance for a participant, if any member of the 
family fails to sign and submit consent forms for obtaining information 
in accordance with part 5, subparts B and F of this title.
    (4) The family must submit required evidence of citizenship or 
eligible immigration status. See part 5 of this title for a statement of 
circumstances in which the PHA must deny admission or terminate program 
assistance because a family member does not establish citizenship or 
eligible immigration status, and the applicable informal hearing 
procedures.
    (5) The PHA must deny or terminate assistance if any family member 
fails to meet the eligibility requirements concerning individuals 
enrolled at an institution of higher education as specified in 24 CFR 
5.612.
    (6) The PHA must deny or terminate assistance based on the 
restrictions on net assets and property ownership when required by Sec.  
5.618 of this title.
    (c) Authority to deny admission or terminate assistance--(1) Grounds 
for denial or termination of assistance. The PHA may at any time deny 
program assistance for an applicant, or terminate program assistance for 
a participant, for any of the following grounds:
    (i) If the family violates any family obligations under the program 
(see Sec.  982.551). See Sec.  982.553 concerning denial or termination 
of assistance for crime by family members.
    (ii) If any member of the family has been evicted from federally 
assisted housing in the last five years;
    (iii) If a PHA has ever terminated assistance under the program for 
any member of the family.
    (iv) If any member of the family has committed fraud, bribery, or 
any other corrupt or criminal act in connection with any Federal housing 
program (see also Sec.  982.553(a)(1));
    (v) If the family currently owes rent or other amounts to the PHA or 
to another PHA in connection with Section 8 or public housing assistance 
under the 1937 Act.
    (vi) If the family has not reimbursed any PHA 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.
    (vii) If the family breaches an agreement with the PHA to pay 
amounts owed to a PHA, or amounts paid to an owner by a PHA. (The PHA, 
at its discretion, may offer a family the opportunity to enter an 
agreement to pay amounts owed to a PHA or amounts paid to an owner by a 
PHA. The PHA may prescribe the terms of the agreement.)

[[Page 564]]

    (viii) If a family participating in the FSS program fails to comply, 
without good cause, with the family's FSS contract of participation.
    (ix) If the family has engaged in or threatened abusive or violent 
behavior toward PHA personnel.
    (x) If a welfare-to-work (WTW) family fails, willfully and 
persistently, to fulfill its obligations under the welfare-to-work 
voucher program.
    (xi) If the family has been engaged in criminal activity or alcohol 
abuse as described in Sec.  982.553.
    (2) Consideration of circumstances. In determining whether to deny 
or terminate assistance because of action or failure to act by members 
of the family:
    (i) The PHA may consider all relevant circumstances such as the 
seriousness of the case, the extent of participation or culpability of 
individual family members, mitigating circumstances related to the 
disability of a family member, and the effects of denial or termination 
of assistance on other family members who were not involved in the 
action or failure.
    (ii) The PHA may impose, as a condition of continued assistance for 
other family members, a requirement that other family members who 
participated in or were culpable for the action or failure will not 
reside in the unit. The PHA may permit the other members of a 
participant family to continue receiving assistance.
    (iii) In determining whether to deny admission or terminate 
assistance for illegal use of drugs or alcohol abuse by a household 
member who is no longer engaged in such behavior, the PHA may consider 
whether such household member is participating in or has successfully 
completed a supervised drug or alcohol rehabilitation program, or has 
otherwise been rehabilitated successfully (42 U.S.C. 13661). For this 
purpose, the PHA may require the applicant or tenant to submit evidence 
of the household member's current participation in, or successful 
completion of, a supervised drug or alcohol rehabilitation program or 
evidence of otherwise having been rehabilitated successfully.
    (iv) If the family includes a person with disabilities, the PHA 
decision concerning such action is subject to consideration of 
reasonable accommodation in accordance with part 8 of this title.
    (v) Nondiscrimination limitation and protection for victims of 
domestic violence, dating violence, sexual assault, or stalking. The 
PHA's admission and termination actions must be consistent with fair 
housing and equal opportunity provisions of 24 CFR 5.105, and with the 
requirements of 24 CFR part 5, subpart L (Protection for Victims of 
Domestic Violence, Dating Violence, Sexual Assault, or Stalking).
    (d) Information for family. The PHA must give the family a written 
description of:
    (1) Family obligations under the program.
    (2) The grounds on which the PHA may deny or terminate assistance 
because of family action or failure to act.
    (3) The PHA informal hearing procedures.
    (e) Applicant screening. The PHA may at any time deny program 
assistance for an applicant in accordance with the PHA policy, as stated 
in the PHA administrative plan, on screening of applicants for family 
behavior or suitability for tenancy.

(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; 64 FR 26650, May 
14, 1999; 64 FR 49659, Sept. 14, 1999; 64 FR 56915, Oct. 21, 1999; 65 FR 
16823, Mar. 30, 2000; 66 FR 28805, May 24, 2001; 70 FR 77744, Dec. 30, 
2005; 73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 27, 2010; 80 FR 
8247, Feb. 17, 2015; 81 FR 80817, Nov. 16, 2016; 88 FR 9676, Feb. 14, 
2023]



Sec.  982.553  Denial of admission and termination of assistance 
for criminals and alcohol abusers.

    (a) Denial of admission--(1) Prohibiting admission of drug 
criminals. (i) The PHA must prohibit admission to the program of an 
applicant for three years from the date of eviction if a household 
member has been evicted from federally assisted housing for drug-related 
criminal activity. However, the PHA may admit the household if the PHA 
determines:
    (A) That the evicted household member who engaged in drug-related 
criminal activity has successfully completed

[[Page 565]]

a supervised drug rehabilitation program approved by the PHA; or
    (B) That the circumstances leading to eviction no longer exist (for 
example, the criminal household member has died or is imprisoned).
    (ii) The PHA must establish standards that prohibit admission if:
    (A) The PHA determines that any household member is currently 
engaging in illegal use of a drug;
    (B) The PHA determines that it has reasonable cause to believe that 
a household member's illegal drug use or a pattern of illegal drug use 
may threaten the health, safety, or right to peaceful enjoyment of the 
premises by other residents; or
    (C) Any household member has ever been convicted of drug-related 
criminal activity for manufacture or production of methamphetamine on 
the premises of federally assisted housing.
    (2) Prohibiting admission of other criminals--(i) Mandatory 
prohibition. The PHA must establish standards that prohibit admission to 
the program if any member of the household is subject to a lifetime 
registration requirement under a State sex offender registration 
program. In this screening of applicants, the PHA must perform criminal 
history background checks necessary to determine whether any household 
member is subject to a lifetime sex offender registration requirement in 
the State where the housing is located and in other States where the 
household members are known to have resided.
    (ii) Permissive prohibitions. (A) The PHA may prohibit admission of 
a household to the program if the PHA determines that any household 
member is currently engaged in, or has engaged in during a reasonable 
time before the admission:
    (1) Drug-related criminal activity;
    (2) Violent criminal activity;
    (3) Other criminal activity which may threaten the health, safety, 
or right to peaceful enjoyment of the premises by other residents or 
persons residing in the immediate vicinity; or
    (4) Other criminal activity which may threaten the health or safety 
of the owner, property management staff, or persons performing a 
contract administration function or responsibility on behalf of the PHA 
(including a PHA employee or a PHA contractor, subcontractor or agent).
    (B) The PHA may establish a period before the admission decision 
during which an applicant must not have engaged in the activities 
specified in paragraph (a)(2)(i) of this section (``reasonable time'').
    (C) If the PHA previously denied admission to an applicant because a 
member of the household engaged in criminal activity, the PHA may 
reconsider the applicant if the PHA has sufficient evidence that the 
members of the household are not currently engaged in, and have not 
engaged in, such criminal activity during a reasonable period, as 
determined by the PHA, before the admission decision.
    (1) The PHA would have ``sufficient evidence'' if the household 
member submitted a certification that she or he is not currently engaged 
in and has not engaged in such criminal activity during the specified 
period and provided supporting information from such sources as a 
probation officer, a landlord, neighbors, social service agency workers 
and criminal records, which the PHA verified.
    (2) For purposes of this section, a household member is ``currently 
engaged in'' criminal activity if the person has engaged in the behavior 
recently enough to justify a reasonable belief that the behavior is 
current.
    (3) Prohibiting admission of alcohol abusers. The PHA must establish 
standards that prohibit admission to the program if the PHA determines 
that it has reasonable cause to believe that a household member's abuse 
or pattern of abuse of alcohol may threaten the health, safety, or right 
to peaceful enjoyment of the premises by other residents.
    (b) Terminating assistance--(1) Terminating assistance for drug 
criminals. (i) The PHA must establish standards that allow the PHA to 
terminate assistance for a family under the program if the PHA 
determines that:
    (A) Any household member is currently engaged in any illegal use of 
a drug; or
    (B) A pattern of illegal use of a drug by any household member 
interferes with the health, safety, or right to

[[Page 566]]

peaceful enjoyment of the premises by other residents.
    (ii) The PHA must immediately terminate assistance for a family 
under the program if the PHA determines that any member of the household 
has ever been convicted of drug-related criminal activity for 
manufacture or production of methamphetamine on the premises of 
federally assisted housing.
    (iii) The PHA must establish standards that allow the PHA to 
terminate assistance under the program for a family if the PHA 
determines that any family member has violated the family's obligation 
under Sec.  982.551 not to engage in any drug-related criminal activity.
    (2) Terminating assistance for other criminals. The PHA must 
establish standards that allow the PHA to terminate assistance under the 
program for a family if the PHA determines that any household member has 
violated the family's obligation under Sec.  982.551 not to engage in 
violent criminal activity.
    (3) Terminating assistance for alcohol abusers. The PHA must 
establish standards that allow termination of assistance for a family if 
the PHA determines that a household member's abuse or pattern of abuse 
of alcohol may threaten the health, safety, or right to peaceful 
enjoyment of the premises by other residents.
    (c) Evidence of criminal activity. The PHA may terminate assistance 
for criminal activity by a household member as authorized in this 
section if the PHA determines, based on a preponderance of the evidence, 
that the household member has engaged in the activity, regardless of 
whether the household member has been arrested or convicted for such 
activity.
    (d) Use of criminal record--(1) Denial. If a PHA proposes to deny 
admission for criminal activity as shown by a criminal record, the PHA 
must provide the subject of the record and the applicant with a copy of 
the criminal record. The PHA must give the family an opportunity to 
dispute the accuracy and relevance of that record, in the informal 
review process in accordance with Sec.  982.554. (See part 5, subpart J 
for provision concerning access to criminal records.)
    (2) Termination of assistance. If a PHA proposes to terminate 
assistance for criminal activity as shown by a criminal record, the PHA 
must notify the household of the proposed action to be based on the 
information and must provide the subject of the record and the tenant 
with a copy of the criminal record. The PHA must give the family an 
opportunity to dispute the accuracy and relevance of that record in 
accordance with Sec.  982.555.
    (3) Cost of obtaining criminal record. The PHA may not pass along to 
the tenant the costs of a criminal records check.
    (e) The requirements in 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking) apply to this section.

[66 FR 28805, May 24, 2001, as amended at 73 FR 72345, Nov. 28, 2008; 75 
FR 66264, Oct. 27, 2010; 80 FR 8247, Feb. 17, 2015; 81 FR 80817, Nov. 
16, 2016]



Sec.  982.554  Informal review for applicant.

    (a) Notice to applicant. The PHA 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 PHA 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 PHA must give an applicant an 
opportunity for an informal review of the PHA decision denying 
assistance to the applicant. The administrative plan must state the PHA 
procedures for conducting an informal review. The PHA review procedures 
must comply with the following:
    (1) The review may be conducted by any person or persons designated 
by the PHA, 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 PHA decision.
    (3) The PHA must notify the applicant of the PHA final decision 
after the informal review, including a brief

[[Page 567]]

statement of the reasons for the final decision.
    (c) When informal review is not required. The PHA is not required to 
provide the applicant an opportunity for an informal review for any of 
the following:
    (1) Discretionary administrative determinations by the PHA.
    (2) General policy issues or class grievances.
    (3) A determination of the family unit size under the PHA subsidy 
standards.
    (4) A PHA determination not to approve an extension of the voucher 
term.
    (5) A PHA determination not to grant approval of the tenancy.
    (6) An PHA determination that a unit selected by the applicant is 
not in compliance with HQS.
    (7) An PHA 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; 64 FR 26650, May 14, 1999; 80 FR 50575, Aug. 
20, 2015]



Sec.  982.555  Informal hearing for participant.

    (a) When hearing is required. (1) A PHA must give a participant 
family an opportunity for an informal hearing to consider whether the 
following PHA decisions relating to the individual circumstances of a 
participant family are in accordance with the law, HUD regulations and 
PHA 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 PHA utility allowance schedule.
    (iii) A determination of the family unit size under the PHA subsidy 
standards.
    (iv) A determination to terminate assistance for a participant 
family because of the family's action or failure to act (see Sec.  
982.552).
    (v) A determination to terminate assistance because the participant 
family has been absent from the assisted unit for longer than the 
maximum period permitted under PHA policy and HUD rules.
    (2) In the cases described in paragraphs (a)(1) (iv), (v) and (vi) 
of this section, the PHA must give the opportunity for an informal 
hearing before the PHA terminates housing assistance payments for the 
family under an outstanding HAP contract.
    (b) When hearing is not required. The PHA 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 PHA.
    (2) General policy issues or class grievances.
    (3) Establishment of the PHA schedule of utility allowances for 
families in the program.
    (4) A PHA determination not to approve an extension of the voucher 
term.
    (5) A PHA determination not to approve a unit or tenancy.
    (6) A PHA determination that an assisted unit is not in compliance 
with HQS. (However, the PHA 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) A PHA determination that the unit is not in accordance with HQS 
because of the family size.
    (8) A determination by the PHA 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 PHA must notify the 
family that the family may ask for an explanation of the basis of the 
PHA 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

[[Page 568]]

section, the PHA 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 PHA 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 PHA procedures for conducting informal hearings for 
participants.
    (2) Discovery--(i) By family. The family must be given the 
opportunity to examine before the PHA hearing any PHA 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 PHA does not make the 
document available for examination on request of the family, the PHA may 
not rely on the document at the hearing.
    (ii) By PHA. The PHA hearing procedures may provide that the PHA 
must be given the opportunity to examine at PHA offices before the PHA 
hearing any family documents that are directly relevant to the hearing. 
The PHA must be allowed to copy any such document at the PHA's expense. 
If the family does not make the document available for examination on 
request of the PHA, 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 PHA, 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 
the hearing in accordance with the PHA hearing procedures.
    (5) Evidence. The PHA 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 PHA is not bound by a hearing decision:
    (1) Concerning a matter for which the PHA 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 PHA hearing procedures.
    (2) Contrary to HUD regulations or requirements, or otherwise 
contrary to federal, State, or local law.
    (3) If the PHA determines that it is not bound by a hearing 
decision, the PHA 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; 64 FR 26650, May 14, 1999; 65 FR 16823, Mar. 
30, 2000; 80 FR 8247, Feb. 17, 2015; 80 FR 50575, Aug. 20, 2015]



                     Subpart M_Special Housing Types

    Source: 63 FR 23865, Apr. 30, 1998, unless otherwise noted.

[[Page 569]]



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) Manufactured home;
    (6) Cooperative housing (excluding families that are not cooperative 
members); and
    (7) Homeownership option.
    (b) PHA choice to offer special housing type. (1) The PHA may permit 
a family to use any of the following special housing types in accordance 
with requirements of the program: single room occupancy (SRO) housing, 
congregate housing, group home, shared housing, manufactured home when 
the family owns the home and leases the manufactured home space, 
cooperative housing or homeownership option.
    (2) In general, the PHA is not required to permit families 
(including families that move into the PHA program under portability 
procedures) to use any of these special housing types, and may limit the 
number of families using special housing types.
    (3) The PHA 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) Program funding for special housing types. (1) HUD does not 
provide any additional or designated funding for special housing types, 
or for a specific special housing type (e.g., the homeownership option). 
Assistance for special housing types is paid from program funding 
available for the PHA's tenant-based program under the consolidated 
annual contributions contract.
    (2) The PHA may not set aside program funding or program slots for 
special housing types or for a specific special housing type.
    (d) Family choice of housing and housing type. The family chooses 
whether to use housing that qualifies as a special housing type under 
this subpart, or as any specific special housing type, or to use other 
eligible housing in accordance with requirements of the program. The PHA 
may not restrict the family's freedom to choose among available units in 
accordance with Sec.  982.353.
    (e) Applicability of requirements. (1) Except as modified by this 
subpart, the requirements of other subparts of this part apply to the 
special housing types.
    (2) Provisions in this subpart only apply to a specific special 
housing type. The housing type is noted in the title of each section.
    (3) Housing must meet the requirements of this subpart for a single 
special housing type specified by the family. Such housing is not 
subject to requirements for other special housing types. A single unit 
cannot be designated as more than one special housing type.

[63 FR 23865, Apr. 30, 1998, as amended at 65 FR 55162, Sept. 12, 2000; 
67 FR 64493, Oct. 18, 2002; 80 FR 8247, Feb. 17, 2015]

                       Single Room Occupancy (SRO)



Sec.  982.602  SRO: Who may reside in an SRO?

    A single person may reside in an SRO housing unit.

[64 FR 26650, May 14, 1999]



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: Voucher housing assistance payment.

    (a) For a person residing in SRO housing, the payment standard is 75 
percent of the zero-bedroom payment standard amount on the PHA payment 
standard schedule. For a person residing in SRO housing in an exception 
area, the payment standard is 75 percent of the HUD-approved zero-
bedroom exception payment standard amount.
    (b) The utility allowance for an assisted person residing in SRO 
housing is 75 percent of the zero bedroom utility allowance.

[64 FR 26650, May 14, 1999]

[[Page 570]]



Sec.  982.605  SRO: Housing quality standards.

    (a) HQS standards for SRO. As defined in Sec.  982.4, housing 
quality standards (HQS) refers to the minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for housing assisted 
under the HCV program or a HUD approved alternative standard for the PHA 
under 24 CFR 5.703(g). However, the standards in this section apply in 
place of standards related to sanitary facilities, food preparation and 
refuse disposal, and space and security. Since the SRO units will not 
house children, the standards at 24 CFR part 35, subparts A, B, H, and 
R, applying to the PBC program, 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 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.

[63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30503, May 11, 2023]

                           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 PHA, a family member or live-in aide may 
reside

[[Page 571]]

with the elderly person or person with disabilities.
    (2) The PHA 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: Voucher housing assistance payment.

    (a) Unless there is a live-in aide:
    (1) For a family residing in congregate housing, the payment 
standard is the zero-bedroom payment standard amount on the PHA payment 
standard schedule. For a family residing in congregate housing in an 
exception area, the payment standard is the HUD-approved zero-bedroom 
exception payment standard amount.
    (2) However, if there are two or more rooms in the unit (not 
including kitchen or sanitary facilities), the payment standard for a 
family residing in congregate housing is the one-bedroom payment 
standard amount.
    (b) If there is a live-in aide, the live-in aide must be counted in 
determining the family unit size.

[63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26650, May 14, 1999]



Sec.  982.609  Congregate housing: Housing quality standards.

    (a) HQS standards for congregate housing. As defined in Sec.  982.4, 
housing quality standards (HQS) refers to the minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for housing assisted 
under the HCV program or a HUD approved alternative standard for the PHA 
under 24 CFR 5.703(g). However, the standards in this section apply in 
place of standards related to food preparation and refuse disposal. 
Congregate housing is not subject to the requirement 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.

[63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023]

                               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 PHA, a live-in aide may reside with a 
person with disabilities.
    (2) The PHA 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

[[Page 572]]

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 voucher 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 PHA-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.  982.507. In determining reasonable rent for the group home, 
the PHA must consider whether sanitary facilities, and facilities for 
food preparation and service, are common facilities or private 
facilities.
    (c) Payment standard--(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) The payment standard for a person who resides in a group home is 
the lower of:
    (i) The payment standard amount on the PHA payment standard schedule 
for the family unit size; or (ii) The pro-rata portion of the payment 
standard amount on the PHA payment standard schedule for the group home 
size.
    (iii) 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 each assisted 
person residing in a group home is the pro-rata portion of the utility 
allowance for the group home unit size.

[63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26651, May 14, 1999]



Sec.  982.614  Group home: Housing quality standards.

    (a) Compliance with HQS. The PHA may not give approval to reside in 
a group 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. As defined in Sec.  982.4, housing quality 
standards (HQS) refers to the minimum quality standards developed by HUD 
in accordance with 24 CFR 5.703 for housing assisted under the HCV 
program or a HUD approved alternative standard for the PHA under 24 CFR 
5.703(g).
    (b) Applicable HQS standards. (1) The standards in this section 
apply in place of standards in 24 CFR 5.703 that relate to sanitary 
facilities, food preparation and refuse disposal, space and security, 
structure and materials, and 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.

[[Page 573]]

    (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 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.

[63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023]

                             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 PHA, a live-in aide may reside with the family to care 
for a person with disabilities. The PHA 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

[[Page 574]]

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 PHA. 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.

[63 FR 23865, Apr. 30, 1998, as amended at 80 FR 8247, Feb. 17, 2015]



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 voucher 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.  
982.507.
    (c) Payment standard. The payment standard for a family that resides 
in a shared housing is the lower of:
    (1) The payment standard amount on the PHA payment standard schedule 
for the family unit size; or
    (2) The pro-rata portion of the payment standard amount on the PHA 
payment standard schedule for the size of the shared housing unit.
    (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.

[63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26651, May 14, 1999]



Sec.  982.618  Shared housing: Housing quality standards.

    (a) Compliance with HQS. The PHA 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. As defined in Sec.  982.4, housing 
quality standards (HQS) refers to the minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for housing assisted 
under the HCV program or a HUD approved alternative standard for the PHA 
under 24 CFR 5.703(g). However, the HQS standards in this section apply 
in place of standards related to space and security in 24 CFR 5.703.
    (c) Facilities available for family. The facilities available for 
the use of an 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 the 
standards set in 24 CFR 5.703, and food preparation and refuse disposal 
facilities in accordance with 24 CFR 5.703.
    (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.

[63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023]

                               Cooperative



Sec.  982.619  Cooperative housing.

    (a) Assistance in cooperative housing. This section applies to 
rental assistance for a cooperative member residing

[[Page 575]]

in cooperative housing. However, this section does not apply to:
    (1) Assistance for a cooperative member under the homeownership 
option pursuant to Sec. Sec.  982.625 through 982.641; or
    (2) Rental assistance for a family that leases a cooperative housing 
unit from a cooperative member (such rental assistance is not a special 
housing type, and is subject to requirements in other subparts of this 
part 982).
    (b) Rent to owner. (1) The reasonable rent for a cooperative unit is 
determined in accordance with Sec.  982.507. 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) 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) Maintenance. (1) During the term of the HAP contract between the 
PHA and the cooperative, the dwelling unit and premises must be 
maintained in accordance with the HQS. If the dwelling unit and premises 
are not maintained in accordance with the HQS, the PHA may exercise all 
available remedies, regardless of whether the family or the cooperative 
is responsible for such breach of the HQS. PHA remedies for breach of 
the HQS include recovery of overpayments, abatement or other reduction 
of housing assistance payments, termination of housing assistance 
payments and termination of the HAP contract.
    (2) The PHA may not make any housing assistance payments if the 
contract unit does not meet the HQS, unless any defect is corrected 
within the period specified by the PHA and the PHA verifies the 
correction. If a defect is life-threatening, the defect must be 
corrected within no more than 24 hours. For other defects, the defect 
must be corrected within the period specified by the PHA.
    (3) The family is responsible for a breach of the HQS that is caused 
by any of the following:
    (i) The family fails to perform any maintenance for which the family 
is responsible in accordance with the terms of the cooperative occupancy 
agreement between the cooperative member and the cooperative;
    (ii) The family fails to pay for any utilities that the cooperative 
is not required to pay for, but which are to be paid by the cooperative 
member;
    (iii) The family fails to provide and maintain any appliances that 
the cooperative is not required to provide, but which are to be provided 
by the cooperative member; or
    (iv) Any member of the household or guest damages the dwelling unit 
or premises (damages beyond ordinary wear and tear).
    (4) If the family has caused a breach of the HQS for which the 
family is responsible, the PHA must take prompt and vigorous action to 
enforce such family obligations. The PHA may terminate assistance for 
violation of family obligations in accordance with Sec.  982.552.
    (5) Section 982.404 does not apply to assistance for cooperative 
housing under this section.
    (e) Live-in aide. (1) If approved by the PHA, a live-in aide may 
reside with the family to care for a person with disabilities. The PHA 
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.

[[Page 576]]

    (2) If there is a live-in aide, the live-in aide must be counted in 
determining the family unit size.

[63 FR 23865, Apr. 30, 1998, as amended at 64 FR 26651, May 14, 1999; 65 
FR 55162, Sept. 12, 2000; 80 FR 8247, Feb. 17, 2015]

                            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 PHA must permit a family to lease a manufactured home and 
space with assistance under the program.
    (3) The PHA may provide assistance for a family that owns the 
manufactured home and leases only the space. The PHA 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 manufactured home owner to lease a manufactured home 
space.
    (c) Live-in aide. (1) If approved by the PHA, a live-in aide may 
reside with the family to care for a person with disabilities. The PHA 
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.

    As defined in Sec.  982.4, housing quality standards (HQS) refers to 
the minimum quality standards developed by HUD in accordance with 24 CFR 
5.703 for housing assisted under the HCV program or a HUD approved 
alternative standard for the PHA under 24 CFR 5.703(g). 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.

[63 FR 23865, Apr. 30, 1998, as amended at 88 FR 30504, May 11, 2023]

                     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 PHA may not approve a lease for a manufactured home space 
until the PHA determines that the initial rent to owner for the space is 
a reasonable rent. At least annually during the assisted tenancy, the 
PHA must redetermine that the current rent to owner is a reasonable 
rent.
    (3) The PHA 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 PHA 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 
PHA, the owner of the manufactured home space certifies that the rent to 
owner for the space is not more than rent

[[Page 577]]

charged by the owner for unassisted rental of comparable spaces in the 
same manufactured home park or elsewhere. The owner must give the PHA 
information, as requested by the PHA, on rents charged by the owner for 
other manufactured home spaces.



Sec.  982.623  Manufactured home space rental: Housing assistance payment.

    (a) There is a separate fair market rent for a manufactured home 
space. The FMR for a manufactured home space is determined in accordance 
with Sec.  888.113(e) of this title. The FMR for a manufactured home 
space is generally 40 percent of the published FMR for a two-bedroom 
unit.
    (b) The payment standard shall be determined in accordance with 
Sec.  982.505.
    (c) The PHA shall pay a monthly housing assistance payment on behalf 
of the family that is equal to the lower of:
    (1) The payment standard minus the total tenant payment; or
    (2) The rent paid for rental of the real property on which the 
manufactured home owned by the family is located (``space rent'') minus 
the total tenant payment.
    (d) The space rent is the sum of the following as determined by the 
PHA:
    (1) Rent to owner for the manufactured home space;
    (2) Owner maintenance and management charges for the space;
    (3) The utility allowance for tenant-paid utilities.

[64 FR 26651, May 14, 1999; 64 FR 49659, Sept. 14, 1999; 64 FR 56915, 
Oct. 21, 1999; 80 FR 8247, Feb. 17, 2015]



Sec.  982.624  Manufactured home space rental: Utility allowance schedule.

    The PHA 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 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.

                          Homeownership Option

    Source: 65 FR 55163, Sept. 12, 2000, unless otherwise noted.



Sec.  982.625  Homeownership option: General.

    (a) The homeownership option is used to assist a family residing in 
a home purchased and owned by one or more members of the family.
    (b) A family assisted under the homeownership option may be a newly 
admitted or existing participant in the program.
    (c) Forms of homeownership assistance. (1) A PHA may provide one of 
two forms of homeownership assistance for a family:
    (i) Monthly homeownership assistance payments; or
    (ii) A single downpayment assistance grant.
    (2) Prohibition against combining forms of homeownership assistance. 
A family may only receive one form of homeownership assistance. 
Accordingly, a family that includes a person who was an adult member of 
a family that previously received either of the two forms of 
homeownership assistance may not receive the other form of homeownership 
assistance from any PHA.
    (d) PHA choice to offer homeownership options. (1) The PHA may 
choose to offer either or both forms of homeownership assistance under 
this subpart, or choose not to offer either form of assistance. However, 
the PHA must offer either form of homeownership assistance if necessary 
as a reasonable accommodation for a person with disabilities in 
accordance with Sec.  982.601(b)(3).
    (2) It is the sole responsibility of the PHA to determine whether it 
is reasonable to implement a homeownership program as a reasonable 
accommodation. The PHA will determine what is reasonable based on the 
specific circumstances and individual needs of the person with a 
disability. The PHA may determine that it is not reasonable to offer 
homeownership assistance as a reasonable accommodation in cases where 
the PHA has otherwise opted not

[[Page 578]]

to implement a homeownership program.
    (e) Family choice. (1) The family chooses whether to participate in 
the homeownership option if offered by the PHA.
    (2) If the PHA offers both forms of homeownership assistance, the 
family chooses which form of homeownership assistance to receive.
    (f) The PHA must approve a live-in aide if needed as a reasonable 
accommodation so that the program is readily accessible to and useable 
by persons with disabilities in accordance with part 8 of this title. 
(See Sec.  982.316 concerning occupancy by a live-in aide.)
    (g) The PHA must have the capacity to operate a successful Section 8 
homeownership program. The PHA has the required capacity if it satisfies 
either paragraph (g)(1), (g)(2), or (g)(3) of this section.
    (1) The PHA establishes a minimum homeowner downpayment requirement 
of at least 3 percent of the purchase price for participation in its 
Section 8 homeownership program, and requires that at least one percent 
of the purchase price come from the family's personal resources;
    (2) The PHA requires that financing for purchase of a home under its 
Section 8 homeownership program:
    (i) Be provided, insured, or guaranteed by the state or Federal 
government;
    (ii) Comply with secondary mortgage market underwriting 
requirements; or
    (iii) Comply with generally accepted private sector underwriting 
standards; or
    (3) The PHA otherwise demonstrates in its Annual Plan that it has 
the capacity, or will acquire the capacity, to successfully operate a 
Section 8 homeownership program.
    (h) Recapture of homeownership assistance. A PHA shall not impose or 
enforce any requirement for the recapture of voucher homeownership 
assistance on the sale or refinancing of a home purchased with 
assistance under the homeownership option.
    (i) Applicable requirements. The following specify what regulatory 
provisions (under the heading ``homeownership option'') are applicable 
to either or both forms of homeownership assistance (except as otherwise 
specifically provided):
    (1) Common provisions. The following provisions apply to both forms 
of homeownership assistance:
    (i) Section 982.625 (General);
    (ii) Section 982.626 (Initial requirements);
    (iii) Section 982.627 (Eligibility requirements for families);
    (iv) Section 982.628 (Eligible units);
    (v) Section 982.629 (Additional PHA requirements for family search 
and purchase);
    (vi) Section 982.630 (Homeownership counseling);
    (vii) Section 982.631 (Home inspections, contract of sale, and PHA 
disapproval of seller);
    (viii) Section 982.632 (Financing purchase of home; affordability of 
purchase);
    (ix) Section 982.636 (Portability);
    (x) Section 982.638 (Denial or termination of assistance for 
family); and
    (xi) Section 982.641 (Applicability of other requirements).
    (2) Monthly homeownership assistance payments. The following 
provisions only apply to homeownership assistance in the form of monthly 
homeownership assistance payments:
    (i) Section 982.633 (Continued assistance requirements; family 
obligations);
    (ii) Section 982.634 (Maximum term of homeownership assistance);
    (iii) Section 982.635 (Amount and distribution of monthly 
homeownership assistance payment);
    (iv) Section 982.637 (Move with continued tenant-based assistance); 
and
    (v) Section 982.639 (Administrative fees).
    (3) Downpayment assistance grant. The following provision only 
applies to homeownership assistance in the form of a downpayment 
assistance grant: Section 982.643 (Downpayment assistance grants).

[65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64493, Oct. 18, 2002; 
80 FR 8247, Feb. 17, 2015]



Sec.  982.626  Homeownership option: Initial requirements.

    (a) List of initial requirements. Before commencing homeownership 
assistance for a family, the PHA must determine

[[Page 579]]

that all of the following initial requirements have been satisfied:
    (1) The family is qualified to receive homeownership assistance (see 
Sec.  982.627);
    (2) The unit is eligible (see Sec.  982.628); and
    (3) The family has satisfactorily completed the PHA program of 
required pre-assistance homeownership counseling (see Sec.  982.630).
    (b) Additional PHA requirements. Unless otherwise provided in this 
part, the PHA may limit homeownership assistance to families or purposes 
defined by the PHA, and may prescribe additional requirements for 
commencement of homeownership assistance for a family. Any such limits 
or additional requirements must be described in the PHA administrative 
plan.
    (c) Environmental requirements. The PHA is responsible for complying 
with the authorities listed in Sec.  58.6 of this title requiring the 
purchaser to obtain and maintain flood insurance for units in special 
flood hazard areas, prohibiting assistance for acquiring units in the 
coastal barrier resources system, and requiring notification to the 
purchaser of units in airport runway clear zones and airfield clear 
zones. In the case of units not yet under construction at the time the 
family enters into the contract for sale, the additional environmental 
review requirements referenced in Sec.  982.628(e) of this part also 
apply, and the PHA shall submit all relevant environmental information 
to the responsible entity or to HUD to assist in completion of those 
requirements.

[63 FR 23865, Apr. 30, 1998, as amended at 72 FR 59938, Oct. 22, 2007]



Sec.  982.627  Homeownership option: Eligibility requirements for families.

    (a) Determination whether family is qualified. The PHA may not 
provide homeownership assistance for a family unless the PHA determines 
that the family satisfies all of the following initial requirements at 
commencement of homeownership assistance for the family:
    (1) The family has been admitted to the Section 8 Housing Choice 
Voucher program, in accordance with subpart E of this part.
    (2) The family satisfies any first-time homeowner requirements 
(described in paragraph (b) of this section).
    (3) The family satisfies the minimum income requirement (described 
in paragraph (c) of this section).
    (4) The family satisfies the employment requirements (described in 
paragraph (d) of this section).
    (5) The family has not defaulted on a mortgage securing debt to 
purchase a home under the homeownership option (see paragraph (e) of 
this section).
    (6) Except for cooperative members who have acquired cooperative 
membership shares prior to commencement of homeownership assistance, no 
family member has a present ownership interest in a residence at the 
commencement of homeownership assistance for the purchase of any home.
    (7) Except for cooperative members who have acquired cooperative 
membership shares prior to the commencement of homeownership assistance, 
the family has entered a contract of sale in accordance with Sec.  
982.631(c).
    (8) The family also satisfies any other initial requirements 
established by the PHA (see Sec.  982.626(b)). Any such additional 
requirements must be described in the PHA administrative plan.
    (b) First-time homeowner requirements. At commencement of 
homeownership assistance for the family, the family must be any of the 
following:
    (1) A first-time homeowner (defined at Sec.  982.4);
    (2) A cooperative member (defined at Sec.  982.4); or
    (3) A family of which a family member is a person with disabilities, 
and use of the homeownership option is needed as a reasonable 
accommodation so that the program is readily accessible to and usable by 
such person, in accordance with part 8 of this title.
    (c) Minimum income requirements. (1) At commencement of monthly 
homeownership assistance payments for the family, or at the time of a 
downpayment assistance grant for the family, the family must demonstrate 
that the annual income, as determined by the PHA in accordance with 
Sec.  5.609 of this title, of the adult family members who will own the 
home at commencement

[[Page 580]]

of homeownership assistance is not less than:
    (i) In the case of a disabled family (as defined in Sec.  5.403(b) 
of this title), the monthly Federal Supplemental Security Income (SSI) 
benefit for an individual living alone (or paying his or her share of 
food and housing costs) multiplied by twelve; or
    (ii) In the case of other families, the Federal minimum wage 
multiplied by 2,000 hours.
    (2)(i) Except in the case of an elderly family or a disabled family 
(see the definitions of these terms at Sec.  5.403(b) of this title), 
the PHA shall not count any welfare assistance received by the family in 
determining annual income under this section.
    (ii) The disregard of welfare assistance income under paragraph 
(c)(2)(i) of this section only affects the determination of minimum 
annual income used to determine if a family initially qualifies for 
commencement of homeownership assistance in accordance with this 
section, but does not affect:
    (A) The determination of income-eligibility for admission to the 
voucher program;
    (B) Calculation of the amount of the family's total tenant payment 
(gross family contribution); or
    (C) Calculation of the amount of homeownership assistance payments 
on behalf of the family.
    (iii) In the case of an elderly or disabled family, the PHA shall 
include welfare assistance for the adult family members who will own the 
home in determining if the family meets the minimum income requirement.
    (3) A PHA may establish a minimum income standard that is higher 
than those described in paragraph (c)(1) of this section for either or 
both types of families. However, a family that meets the applicable HUD 
minimum income requirement described in paragraph (c)(1) of this 
section, but not the higher standard established by the PHA shall be 
considered to satisfy the minimum income requirement if:
    (i) The family demonstrates that it has been pre-qualified or pre-
approved for financing;
    (ii) The pre-qualified or pre-approved financing meets any PHA 
established requirements under Sec.  982.632 for financing the purchase 
of the home (including qualifications of lenders and terms of 
financing); and
    (iii) The pre-qualified or pre-approved financing amount is 
sufficient to purchase housing that meets HQS in the PHA's jurisdiction.
    (d) Employment requirements. (1) Except as provided in paragraph 
(d)(2) of this section, the family must demonstrate that one or more 
adult members of the family who will own the home at commencement of 
homeownership assistance:
    (i) Is currently employed on a full-time basis (the term ``full-time 
employment'' means not less than an average of 30 hours per week); and
    (ii) Has been continuously so employed during the year before 
commencement of homeownership assistance for the family.
    (2) The PHA shall have discretion to determine whether and to what 
extent interruptions are considered to break continuity of employment 
during the year. The PHA may count successive employment during the 
year. The PHA may count self-employment in a business.
    (3) The employment requirement does not apply to an elderly family 
or a disabled family (see the definitions of these terms at Sec.  
5.403(b) of this title). Furthermore, if a family, other than an elderly 
family or a disabled family, includes a person with disabilities, the 
PHA shall grant an exemption from the employment requirement if the PHA 
determines that an exemption is needed as a reasonable accommodation so 
that the program is readily accessible to and usable by persons with 
disabilities in accordance with part 8 of this title.
    (4) A PHA may not establish an employment requirement in addition to 
the employment standard established by this paragraph.
    (e) Prohibition against assistance to family that has defaulted. The 
PHA shall not commence homeownership assistance for a family that 
includes an individual who was an adult member of a family at the time 
when such family received homeownership assistance and

[[Page 581]]

defaulted on a mortgage securing debt incurred to purchase the home.

[65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64493, Oct. 18, 2002; 
80 FR 8247, Feb. 17, 2015]



Sec.  982.628  Homeownership option: Eligible units.

    (a) Initial requirements applicable to the unit. The PHA must 
determine that the unit satisfies all of the following requirements:
    (1) The unit is eligible. (See Sec.  982.352. Paragraphs (a)(6), 
(a)(7) and (b) of Sec.  982.352 do not apply.)
    (2) The unit is either a one-unit property (including a manufactured 
home) or a single dwelling unit in a cooperative or condominium.
    (3) The unit has been inspected by a PHA inspector and by an 
independent inspector designated by the family (see Sec.  982.631).
    (4) The unit satisfies the HQS (see 24 CFR 5.703 and Sec.  982.631).
    (b) Purchase of home where family will not own fee title to the real 
property. Homeownership assistance may be provided for the purchase of a 
home where the family will not own fee title to the real property on 
which the home is located, but only if:
    (1) The home is located on a permanent foundation; and
    (2) The family has the right to occupy the home site for at least 
forty years.
    (c) PHA disapproval of seller. The PHA may not commence 
homeownership assistance for occupancy of a home if the PHA has been 
informed (by HUD or otherwise) that the seller of the home is debarred, 
suspended, or subject to a limited denial of participation under 2 CFR 
part 2424.
    (d) PHA-owned units. Homeownership assistance may be provided for 
the purchase of a unit that is owned by the PHA that administers the 
assistance under the consolidated ACC (including a unit owned by an 
entity substantially controlled by the PHA), only if all of the 
following conditions are satisfied:
    (1) The PHA must inform the family, both orally and in writing, that 
the family has the right to purchase any eligible unit and a PHA-owned 
unit is freely selected by the family without PHA pressure or steering;
    (2) The unit is not ineligible housing;
    (3) The PHA must obtain the services of an independent agency, in 
accordance with Sec.  982.352(b)(1)(iv)(B) and (C), to perform the 
following PHA functions:
    (i) Inspection of the unit for compliance with the HQS, in 
accordance with Sec.  982.631(a);
    (ii) Review of the independent inspection report, in accordance with 
Sec.  982.631(b)(4);
    (iii) Review of the contract of sale, in accordance with Sec.  
982.631(c); and
    (iv) Determination of the reasonableness of the sales price and any 
PHA provided financing, in accordance with Sec.  982.632 and other 
supplementary guidance established by HUD.
    (e) Units not yet under construction. Families may enter into 
contracts of sale for units not yet under construction at the time the 
family enters into the contract for sale. However, the PHA shall not 
commence homeownership assistance for the family for that unit, unless 
and until:
    (1) Either:
    (i) The responsible entity completed the environmental review 
procedures required by 24 CFR part 58, and HUD approved the 
environmental certification and request for release of funds prior to 
commencement of construction; or
    (ii) HUD performed an environmental review under 24 CFR part 50 and 
notified the PHA in writing of environmental approval of the site prior 
to commencement of construction;
    (2) Construction of the unit has been completed; and
    (3) The unit has passed the required Housing Quality Standards (HQS) 
inspection (see Sec.  982.631(a)) and independent inspection (see Sec.  
982.631(b)).

[65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002; 
67 FR 65865, Oct. 28, 2002; 67 FR 67522, Nov. 6, 2002; 72 FR 59938, Oct. 
22, 2007; 72 FR 73496, Dec. 27, 2007; 88 FR 30504, May 11, 2023]

[[Page 582]]



Sec.  982.629  Homeownership option: Additional PHA requirements 
for family search and purchase.

    (a) The PHA may establish the maximum time for a family to locate a 
home, and to purchase the home.
    (b) The PHA may require periodic family reports on the family's 
progress in finding and purchasing a home.
    (c) If the family is unable to purchase a home within the maximum 
time established by the PHA, the PHA may issue the family a voucher to 
lease a unit or place the family's name on the waiting list for a 
voucher.



Sec.  982.630  Homeownership option: Homeownership counseling.

    (a) Before commencement of homeownership assistance for a family, 
the family must attend and satisfactorily complete the pre-assistance 
homeownership and housing counseling program required by the PHA (pre-
assistance counseling).
    (b) Suggested topics for the PHA-required pre-assistance counseling 
program include:
    (1) Home maintenance (including care of the grounds);
    (2) Budgeting and money management;
    (3) Credit counseling;
    (4) How to negotiate the purchase price of a home;
    (5) How to obtain homeownership financing and loan preapprovals, 
including a description of types of financing that may be available, and 
the pros and cons of different types of financing;
    (6) How to find a home, including information about homeownership 
opportunities, schools, and transportation in the PHA jurisdiction;
    (7) Advantages of purchasing a home in an area that does not have a 
high concentration of low-income families and how to locate homes in 
such areas;
    (8) Information on fair housing, including fair housing lending and 
local fair housing enforcement agencies; and
    (9) Information about the Real Estate Settlement Procedures Act (12 
U.S.C. 2601 et seq.) (RESPA), state and Federal truth-in-lending laws, 
and how to identify and avoid loans with oppressive terms and 
conditions.
    (c) The PHA may adapt the subjects covered in pre-assistance 
counseling (as listed in paragraph (b) of this section) to local 
circumstances and the needs of individual families.
    (d) The PHA may also offer additional counseling after commencement 
of homeownership assistance (ongoing counseling). If the PHA offers a 
program of ongoing counseling for participants in the homeownership 
option, the PHA shall have discretion to determine whether the family is 
required to participate in the ongoing counseling.
    (e) If the PHA is not using a HUD-approved housing counseling agency 
to provide the counseling for families participating in the 
homeownership option, the PHA should ensure that its counseling program 
is consistent with the homeownership counseling provided under HUD's 
Housing Counseling program.



Sec.  982.631  Homeownership option: Home inspections, contract
of sale, and PHA disapproval of seller.

    (a) HQS inspection by PHA. The PHA may not commence monthly 
homeownership assistance payments or provide a downpayment assistance 
grant for the family until the PHA has inspected the unit and has 
determined that the unit passes HQS.
    (b) Independent inspection. (1) The unit must also be inspected by 
an independent professional inspector selected by and paid by the 
family.
    (2) The independent inspection must cover major building systems and 
components, including foundation and structure, housing interior and 
exterior, and the roofing, plumbing, electrical, and heating systems. 
The independent inspector must be qualified to report on property 
conditions, including major building systems and components.
    (3) The PHA may not require the family to use an independent 
inspector selected by the PHA. The independent inspector may not be a 
PHA employee or contractor, or other person under control of the PHA. 
However, the PHA may establish standards for qualification of inspectors 
selected by families under the homeownership option.
    (4) The independent inspector must provide a copy of the inspection 
report both to the family and to the PHA. The PHA may not commence 
monthly

[[Page 583]]

homeownership assistance payments, or provide a downpayment assistance 
grant for the family, until the PHA has reviewed the inspection report 
of the independent inspector. Even if the unit otherwise complies with 
the HQS (and may qualify for assistance under the PHA's tenant-based 
rental voucher program), the PHA shall have discretion to disapprove the 
unit for assistance under the homeownership option because of 
information in the inspection report.
    (c) Contract of sale. (1) Before commencement of monthly 
homeownership assistance payments or receipt of a downpayment assistance 
grant, a member or members of the family must enter into a contract of 
sale with the seller of the unit to be acquired by the family. The 
family must give the PHA a copy of the contract of sale (see also Sec.  
982.627(a)(7)).
    (2) The contract of sale must:
    (i) Specify the price and other terms of sale by the seller to the 
purchaser.
    (ii) Provide that the purchaser will arrange for a pre-purchase 
inspection of the dwelling unit by an independent inspector selected by 
the purchaser.
    (iii) Provide that the purchaser is not obligated to purchase the 
unit unless the inspection is satisfactory to the purchaser.
    (iv) Provide that the purchaser is not obligated to pay for any 
necessary repairs.
    (3) In addition to the requirements contained in paragraph (c)(2) of 
this section, a contract for the sale of units not yet under 
construction at the time the family is to enter into the contract for 
sale must also provide that:
    (i) The purchaser is not obligated to purchase the unit unless an 
environmental review has been performed and the site has received 
environmental approval prior to commencement of construction in 
accordance with 24 CFR 982.628.
    (ii) The construction will not commence until the environmental 
review has been completed and the seller has received written notice 
from the PHA that environmental approval has been obtained. Conduct of 
the environmental review may not necessarily result in environmental 
approval, and environmental approval may be conditioned on the 
contracting parties' agreement to modifications to the unit design or to 
mitigation actions.
    (iii) Commencement of construction in violation of paragraph 
(c)(3)(ii) of this section voids the purchase contract and renders 
homeownership assistance under 24 CFR part 982 unavailable for purchase 
of the unit.
    (d) PHA disapproval of seller. In its administrative discretion, the 
PHA may deny approval of a seller for any reason provided for 
disapproval of an owner in Sec.  982.306(c).

[65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002; 
72 FR 59938, Oct. 22, 2007; 72 FR 73497, Dec. 27, 2007; 80 FR 8247, Feb. 
17, 2015]



Sec.  982.632  Homeownership option: Financing purchase of home; 
affordability of purchase.

    (a) The PHA may establish requirements for financing purchase of a 
home to be assisted under the homeownership option. Such PHA 
requirements may include requirements concerning qualification of 
lenders (for example, prohibition of seller financing or case-by-case 
approval of seller financing), or concerning terms of financing (for 
example, a prohibition of balloon payment mortgages, establishment of a 
minimum homeowner equity requirement from personal resources, or 
provisions required to protect borrowers against high cost loans or 
predatory loans). A PHA may not require that families acquire financing 
from one or more specified lenders, thereby restricting the family's 
ability to secure favorable financing terms.
    (b) If the purchase of the home is financed with FHA mortgage 
insurance, such financing is subject to FHA mortgage insurance 
requirements.
    (c) The PHA may establish requirements or other restrictions 
concerning debt secured by the home.
    (d) The PHA may review lender qualifications and the loan terms 
before authorizing homeownership assistance. The PHA may disapprove 
proposed financing, refinancing or other debt if the PHA determines that 
the debt is unaffordable, or if the PHA determines that the lender or 
the loan terms do not meet PHA qualifications. In making this 
determination, the PHA may

[[Page 584]]

take into account other family expenses, such as child care, 
unreimbursed medical expenses, homeownership expenses, and other family 
expenses as determined by the PHA.
    (e) All PHA financing or affordability requirements must be 
described in the PHA administrative plan.

[65 FR 55163, Sept. 12, 2000, as amended at 66 FR 33613, June 22, 2001]



Sec.  982.633  Homeownership option: Continued assistance requirements; Family obligations.

    (a) Occupancy of home. Homeownership assistance may only be paid 
while the family is residing in the home. If the family moves out of the 
home, the PHA may not continue homeownership assistance after the month 
when the family moves out. The family or lender is not required to 
refund to the PHA the homeownership assistance for the month when the 
family moves out.
    (b) Family obligations. The family must comply with the following 
obligations.
    (1) Ongoing counseling. To the extent required by the PHA, the 
family must attend and complete ongoing homeownership and housing 
counseling.
    (2) Compliance with mortgage. The family must comply with the terms 
of any mortgage securing debt incurred to purchase the home (or any 
refinancing of such debt).
    (3) Prohibition against conveyance or transfer of home. (i) So long 
as the family is receiving homeownership assistance, use and occupancy 
of the home is subject to Sec.  982.551(h) and (i).
    (ii) The family may grant a mortgage on the home for debt incurred 
to finance purchase of the home or any refinancing of such debt.
    (iii) Upon death of a family member who holds, in whole or in part, 
title to the home or ownership of cooperative membership shares for the 
home, homeownership assistance may continue pending settlement of the 
decedent's estate, notwithstanding transfer of title by operation of law 
to the decedent's executor or legal representative, so long as the home 
is solely occupied by remaining family members in accordance with Sec.  
982.551(h).
    (4) Supplying required information. (i) The family must supply 
required information to the PHA in accordance with Sec.  982.551(b).
    (ii) In addition to other required information, the family must 
supply any information as required by the PHA or HUD concerning:
    (A) Any mortgage or other debt incurred to purchase the home, and 
any refinancing of such debt (including information needed to determine 
whether the family has defaulted on the debt, and the nature of any such 
default), and information on any satisfaction or payment of the mortgage 
debt;
    (B) Any sale or other transfer of any interest in the home; or
    (C) The family's homeownership expenses.
    (5) Notice of move-out. The family must notify the PHA before the 
family moves out of the home.
    (6) Notice of mortgage default. The family must notify the PHA if 
the family defaults on a mortgage securing any debt incurred to purchase 
the home.
    (7) Prohibition on ownership interest on second residence. During 
the time the family receives homeownership assistance under this 
subpart, no family member may have any ownership interest in any other 
residential property.
    (8) Additional PHA requirements. The PHA may establish additional 
requirements for continuation of homeownership assistance for the family 
(for example, a requirement for post-purchase homeownership counseling 
or for periodic unit inspections while the family is receiving 
homeownership assistance). The family must comply with any such 
requirements.
    (9) Other family obligations. The family must comply with the 
obligations of a participant family described in Sec.  982.551. However, 
the following provisions do not apply to assistance under the 
homeownership option: Sec.  982.551(c), (d), (e), (f), (g) and (j).
    (c) Statement of homeowner obligations. Before commencement of 
homeownership assistance, the family must execute a statement of family 
obligations in the form prescribed by HUD. In the statement, the family 
agrees to comply with all family obligations under the homeownership 
option.

[[Page 585]]



Sec.  982.634  Homeownership option: Maximum term of homeownership assistance.

    (a) Maximum term of assistance. Except in the case of a family that 
qualifies as an elderly or disabled family (see paragraph (c) of this 
section), the family members described in paragraph (b) of this section 
shall not receive homeownership assistance for more than:
    (1) Fifteen years, if the initial mortgage incurred to finance 
purchase of the home has a term of 20 years or longer; or
    (2) Ten years, in all other cases.
    (b) Applicability of maximum term. The maximum term described in 
paragraph (a) of this section applies to any member of the family who:
    (1) Has an ownership interest in the unit during the time that 
homeownership payments are made; or
    (2) Is the spouse of any member of the household who has an 
ownership interest in the unit during the time homeownership payments 
are made.
    (c) Exception for elderly and disabled families. (1) As noted in 
paragraph (a) of this section, the maximum term of assistance does not 
apply to elderly and disabled families.
    (2) In the case of an elderly family, the exception only applies if 
the family qualifies as an elderly family at the start of homeownership 
assistance. In the case of a disabled family, the exception applies if 
at any time during receipt of homeownership assistance the family 
qualifies as a disabled family.
    (3) If, during the course of homeownership assistance, the family 
ceases to qualify as a disabled or elderly family, the maximum term 
becomes applicable from the date homeownership assistance commenced. 
However, such a family must be provided at least 6 months of 
homeownership assistance after the maximum term becomes applicable 
(provided the family is otherwise eligible to receive homeownership 
assistance in accordance with this part).
    (d) Assistance for different homes or PHAs. If the family has 
received such assistance for different homes, or from different PHAs, 
the total of such assistance terms is subject to the maximum term 
described in paragraph (a) of this section.



Sec.  982.635  Homeownership option: Amount and distribution of monthly homeownership assistance payment.

    (a) Amount of monthly homeownership assistance payment. While the 
family is residing in the home, the PHA shall pay a monthly 
homeownership assistance payment on behalf of the family that is equal 
to the lower of:
    (1) The payment standard minus the total tenant payment; or
    (2) The family's monthly homeownership expenses minus the total 
tenant payment.
    (b) Payment standard for family. (1) 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 size of the home.
    (2) If the home is located in an exception payment standard area, 
the PHA must use the appropriate payment standard for the exception 
payment standard area.
    (3) The payment standard for a family is the greater of:
    (i) The payment standard (as determined in accordance with 
paragraphs (b)(1) and (b)(2) of this section) at the commencement of 
homeownership assistance for occupancy of the home; or
    (ii) The payment standard (as determined in accordance with 
paragraphs (b)(1) and (b)(2) of this section) at the most recent regular 
reexamination of family income and composition since the commencement of 
homeownership assistance for occupancy of the home.
    (4) The PHA must use the same payment standard schedule, payment 
standard amounts, and subsidy standards pursuant to Sec. Sec.  982.402 
and 982.503 for the homeownership option as for the rental voucher 
program.
    (c) Determination of homeownership expenses. (1) The PHA shall adopt 
policies for determining the amount of homeownership expenses to be 
allowed by the PHA in accordance with HUD requirements.
    (2) Homeownership expenses for a homeowner (other than a cooperative 
member) may only include amounts allowed by the PHA to cover:
    (i) Principal and interest on initial mortgage debt, any refinancing 
of such

[[Page 586]]

debt, and any mortgage insurance premium incurred to finance purchase of 
the home;
    (ii) Real estate taxes and public assessments on the home;
    (iii) Home insurance;
    (iv) The PHA allowance for maintenance expenses;
    (v) The PHA allowance for costs of major repairs and replacements;
    (vi) The PHA utility allowance for the home;
    (vii) Principal and interest on mortgage debt incurred to finance 
costs for major repairs, replacements or improvements for the home. If a 
member of the family is a person with disabilities, such debt may 
include debt incurred by the family to finance costs needed to make the 
home accessible for such person, if the PHA determines that allowance of 
such costs as homeownership expenses is needed as a reasonable 
accommodation so that the homeownership option is readily accessible to 
and usable by such person, in accordance with part 8 of this title; and
    (viii) Land lease payments (where a family does not own fee title to 
the real property on which the home is located; see Sec.  982.628(b)).
    (3) Homeownership expenses for a cooperative member may only include 
amounts allowed by the PHA to cover:
    (i) The cooperative charge under the cooperative occupancy agreement 
including payment for real estate taxes and public assessments on the 
home;
    (ii) Principal and interest on initial debt incurred to finance 
purchase of cooperative membership shares and any refinancing of such 
debt;
    (iii) Home insurance;
    (iv) The PHA allowance for maintenance expenses;
    (v) The PHA allowance for costs of major repairs and replacements;
    (vi) The PHA utility allowance for the home; and
    (vii) Principal and interest on debt incurred to finance major 
repairs, replacements or improvements for the home. If a member of the 
family is a person with disabilities, such debt may include debt 
incurred by the family to finance costs needed to make the home 
accessible for such person, if the PHA determines that allowance of such 
costs as homeownership expenses is needed as a reasonable accommodation 
so that the homeownership option is readily accessible to and usable by 
such person, in accordance with part 8 of this title.
    (4) If the home is a cooperative or condominium unit, homeownership 
expenses may also include cooperative or condominium operating charges 
or maintenance fees assessed by the condominium or cooperative homeowner 
association.
    (d) Payment to lender or family. The PHA must pay homeownership 
assistance payments either:
    (1) Directly to the family or;
    (2) At the discretion of the PHA, to a lender on behalf of the 
family. If the assistance payment exceeds the amount due to the lender, 
the PHA must pay the excess directly to the family.
    (e) Automatic termination of homeownership assistance. Homeownership 
assistance for a family terminates automatically 180 calendar days after 
the last homeownership assistance payment on behalf of the family. 
However, a PHA has the discretion to grant relief from this requirement 
in those cases where automatic termination would result in extreme 
hardship for the family.

[65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002]



Sec.  982.636  Homeownership option: Portability.

    (a) General. A family may qualify to move outside the initial PHA 
jurisdiction with continued homeownership assistance under the voucher 
program in accordance with this section.
    (b) Portability of homeownership assistance. Subject to Sec.  
982.353(b) and (c), Sec.  982.552, and Sec.  982.553, a family 
determined eligible for homeownership assistance by the initial PHA may 
purchase a unit outside of the initial PHA's jurisdiction, if the 
receiving PHA is administering a voucher homeownership program and is 
accepting new homeownership families.
    (c) Applicability of Housing Choice Voucher program portability 
procedures. In general, the portability procedures described in 
Sec. Sec.  982.353 and 982.355 apply to the homeownership option and the 
administrative responsibilities of the

[[Page 587]]

initial and receiving PHA are not altered except that some 
administrative functions (e.g., issuance of a voucher or execution of a 
tenancy addendum) do not apply to the homeownership option.
    (d) Family and PHA responsibilities. The family must attend the 
briefing and counseling sessions required by the receiving PHA. The 
receiving PHA will determine whether the financing for, and the physical 
condition of the unit, are acceptable. The receiving PHA must promptly 
notify the initial PHA if the family has purchased an eligible unit 
under the program, or if the family is unable to purchase a home within 
the maximum time established by the PHA.
    (e) Continued assistance under Sec.  982.637. Such continued 
assistance under portability procedures is subject to Sec.  982.637.

[65 FR 55163, Sept. 12, 2000, as amended at 80 FR 8247, Feb. 17, 2015]



Sec.  982.637  Homeownership option: Move with continued tenant-based assistance.

    (a) Move to new unit. (1) A family receiving homeownership 
assistance may move to a new unit with continued tenant-based assistance 
in accordance with this section. The family may move either with voucher 
rental assistance (in accordance with rental assistance program 
requirements) or with voucher homeownership assistance (in accordance 
with homeownership option program requirements).
    (2) The PHA may not commence continued tenant-based assistance for 
occupancy of the new unit so long as any family member owns any title or 
other interest in the prior home. However, when the family or a member 
of the family is or has been the victim of domestic violence, dating 
violence, sexual assault, or stalking, as provided in 24 CFR part 5, 
subpart L (Protection for Victims of Domestic Violence, Dating Violence, 
Sexual Assault, or Stalking), and the move is needed to protect the 
health or safety of the family or family member (or any family member 
has been the victim of a sexual assault that occurred on the premises 
during the 90-calendar-day period preceding the family's request to 
move), such family or family member may be assisted with continued 
tenant-based assistance even if such family or family member owns any 
title or other interest in the prior home.
    (3) The PHA may establish policies that prohibit more than one move 
by the family during any one-year period. However, these policies do not 
apply when the family or a member of the family is or has been the 
victim of domestic violence, dating violence, sexual assault, or 
stalking, as provided in 24 CFR part 5, subpart L, and the move is 
needed to protect the health or safety of the family or family member, 
or any family member has been the victim of a sexual assault that 
occurred on the premises during the 90-calendar-day period preceding the 
family's request to move.
    (b) Requirements for continuation of homeownership assistance. The 
PHA must determine that all initial requirements listed in Sec.  982.626 
(including the environmental requirements with respect to a unit not yet 
under construction) have been satisfied if a family that has received 
homeownership assistance wants to move to such a unit with continued 
homeownership assistance. However, the following requirements do not 
apply:
    (1) The requirement for pre-assistance counseling (Sec.  982.630) is 
not applicable. However, the PHA may require that the family complete 
additional counseling (before or after moving to a new unit with 
continued assistance under the homeownership option).
    (2) The requirement that a family must be a first-time homeowner 
(Sec.  982.627) is not applicable.
    (c) When PHA may deny permission to move with continued assistance. 
The PHA may deny permission to move to a new unit with continued voucher 
assistance as follows:
    (1) Lack of funding to provide continued assistance. The PHA may 
deny permission to move with continued rental or homeownership 
assistance if the PHA determines that it does not have sufficient 
funding to provide continued assistance. The PHA must provide written 
notification to the local HUD Office within 10 business days of 
determining it is necessary to deny moves based on insufficient funding.

[[Page 588]]

    (2) Termination or denial of assistance under Sec.  982.638. At any 
time, the PHA may deny permission to move with continued rental or 
homeownership assistance in accordance with Sec.  982.638.

[63 FR 23865, Apr. 30, 1998, as amended at 72 FR 59938, Oct. 22, 2007; 
80 FR 50575, Aug. 20, 2015; 81 FR 80817, Nov. 16, 2016]



Sec.  982.638  Homeownership option: Denial or termination of assistance 
for family.

    (a) General. The PHA shall terminate homeownership assistance for 
the family, and shall deny voucher rental assistance for the family, in 
accordance with this section.
    (b) Denial or termination of assistance under basic voucher program. 
At any time, the PHA may deny or terminate homeownership assistance in 
accordance with Sec.  982.552 (Grounds for denial or termination of 
assistance) or Sec.  982.553 (Crime by family members).
    (c) Failure to comply with family obligations. The PHA may deny or 
terminate assistance for violation of participant obligations described 
in Sec.  982.551 or Sec.  982.633.
    (d) Mortgage default. The PHA must terminate voucher homeownership 
assistance for any member of family receiving homeownership assistance 
that is dispossessed from the home pursuant to a judgment or order of 
foreclosure on any mortgage (whether FHA-insured or non-FHA) securing 
debt incurred to purchase the home, or any refinancing of such debt. The 
PHA, in its discretion, may permit the family to move to a new unit with 
continued voucher rental assistance. However, the PHA must deny such 
permission, if:
    (1) The family defaulted on an FHA-insured mortgage; and
    (2) The family fails to demonstrate that:
    (i) The family has conveyed, or will convey, title to the home, as 
required by HUD, to HUD or HUD's designee; and
    (ii) The family has moved, or will move, from the home within the 
period established or approved by HUD.

[65 FR 55163, Sept. 12, 2000, as amended at 66 FR 33613, June 22, 2001]



Sec.  982.639  Homeownership option: Administrative fees.

    The ongoing administrative fee described in Sec.  982.152(b) is paid 
to the PHA for each month that homeownership assistance is paid by the 
PHA on behalf of the family.



Sec.  982.641  Homeownership option: Applicability of other requirements.

    (a) General. The following types of provisions (located in other 
subparts of this part) do not apply to assistance under the 
homeownership option:
    (1) Any provisions concerning the Section 8 owner or the HAP 
contract between the PHA and owner;
    (2) Any provisions concerning the assisted tenancy or the lease 
between the family and the owner;
    (3) Any provisions concerning PHA approval of the assisted tenancy;
    (4) Any provisions concerning rent to owner or reasonable rent; and
    (5) Any provisions concerning the issuance or term of voucher.
    (b) Subpart G requirements. The following provisions of subpart G of 
this part do not apply to assistance under the homeownership option:
    (1) Section 982.302 (Issuance of voucher; Requesting PHA approval of 
assisted tenancy);
    (2) Section 982.303 (Term of voucher);
    (3) Section 982.305 (PHA approval of assisted tenancy);
    (4) Section 982.306 (PHA disapproval of owner) (except that a PHA 
may disapprove a seller for any reason described in paragraph (c), see 
Sec.  982.631(d)).
    (5) Section 982.307 (Tenant screening);
    (6) Section 982.308 (Lease and tenancy);
    (7) Section 982.309 (Term of assisted tenancy);
    (8) Section 982.310 (Owner termination of tenancy);
    (9) Section 982.311 (When assistance is paid) (except that Sec.  
982.311(c)(3) is applicable to assistance under the homeownership 
option);
    (10) Section 982.313 (Security deposit: Amounts owed by tenant); and
    (11) Section 982.354 (Move with continued tenant-based assistance).
    (c) Subpart H requirements. The following provisions of subpart H of 
this

[[Page 589]]

part do not apply to assistance under the homeownership option:
    (1) Section 982.352(a)(6) (Prohibition of owner-occupied assisted 
unit);
    (2) Section 982.352(b) (PHA-owned housing); and
    (3) Those provisions of Sec.  982.353 (Where family can lease a unit 
with tenant-based assistance) and Sec.  982.355 (Portability: 
Administration by receiving PHA) that are inapplicable per Sec.  
982.636;
    (d) Subpart I requirements. The following provisions of subpart I of 
this part do not apply to assistance under the homeownership option:
    (1) Section 982.403 (Terminating HAP contract when unit is too 
small);
    (2) Section 982.404 (Maintenance: Owner and family responsibility; 
PHA remedies); and
    (3) Section 982.405 (PHA initial and periodic unit inspection).
    (e) Subpart J requirements. The requirements of subpart J of this 
part (Housing Assistance Payments Contract and Owner Responsibility) 
(Sec. Sec.  982.451-456) do not apply to assistance under the 
homeownership option.
    (f) Subpart K requirements. Except for those sections listed below, 
the requirements of subpart K of this part (Rent and Housing Assistance 
Payment) (Sec. Sec.  982.501-521) do not apply to assistance under the 
homeownership option:
    (1) Section 982.503 (Voucher tenancy: Payment standard amount and 
schedule);
    (2) Section 982.516 (Family income and composition: Regular and 
interim reexaminations); and
    (3) Section 982.517 (Utility allowance schedule).
    (g) Subpart L requirements. The following provisions of subpart L of 
this part do not apply to assistance under the homeownership option:
    (1) Section 982.551(c) (HQS breach caused by family);
    (2) Section 982.551(d) (Allowing PHA inspection);
    (3) Section 982.551(e) (Violation of lease);
    (4) Section 982.551(g) (Owner eviction notice); and
    (5) Section 982.551(j) (Interest in unit).
    (h) Subpart M requirements. The following provisions of subpart M of 
this part do not apply to assistance under the homeownership option:
    (1) Sections 982.602-982.619; and
    (2) Sections 982.622-982.624.

[65 FR 55163, Sept. 12, 2000, as amended at 67 FR 64494, Oct. 18, 2002; 
80 FR 8247, Feb. 17, 2015; 80 FR 50575, Aug. 20, 2015]



Sec.  982.642  Homeownership option: Pilot program for homeownership 
assistance for disabled families.

    (a) General. This section implements the pilot program authorized by 
section 302 of the American Homeownership and Economic Opportunity Act 
of 2000. Under the pilot program, a PHA may provide homeownership 
assistance to a disabled family residing in a home purchased and owned 
by one or more members of the family. A PHA that administers tenant-
based assistance has the choice whether to offer homeownership 
assistance under the pilot program (whether or not the PHA has also 
decided to offer the homeownership option).
    (b) Applicability of homeownership option requirements. Except as 
provided in this section, all of the regulations applicable to the 
homeownership option (as described in Sec. Sec.  982.625 through 
982.641) are also applicable to the pilot program.
    (c) Initial eligibility requirements. Before commencing 
homeownership assistance under the pilot program for a family, the PHA 
must determine that all of the following initial requirements have been 
satisfied:
    (1) The family is a disabled family (as defined in Sec.  5.403 of 
this title);
    (2) The family annual income does not exceed 99 percent of the 
median income for the area;
    (3) The family is not a current homeowner;
    (4) The family must close on the purchase of the home during the 
period starting on July 23, 2001 and ending on July 23, 2004; and
    (5) The family meets the initial requirements described in Sec.  
982.626; however, the following initial requirements do not apply to a 
family seeking to participate in the pilot program:
    (i) The income eligibility requirements of Sec.  982.201(b)(1);

[[Page 590]]

    (ii) The first-time homeowner requirements of Sec.  982.627(b); and
    (iii) The mortgage default requirements of Sec.  982.627(e), if the 
PHA determines that the default is due to catastrophic medical reasons 
or due to the impact of a federally declared major disaster or 
emergency.
    (d) Amount and distribution of homeownership assistance payments. 
(1) While the family is residing in the home, the PHA shall calculate a 
monthly homeownership assistance payment on behalf of the family in 
accordance with Sec.  982.635 and this section.
    (2) A family that is a low income family (as defined at 24 CFR 
5.603(b)) as determined by HUD shall receive the full amount of the 
monthly homeownership assistance payment calculated under Sec.  982.635.
    (3) A family whose annual income is greater than the low income 
family ceiling but does not exceed 89 percent of the median income for 
the area as determined by HUD shall receive a monthly homeownership 
assistance payment equal to 66 percent of the amount calculated under 
Sec.  982.635.
    (4) A family whose annual income is greater than the 89 percent 
ceiling but does not exceed 99 percent of the median income for the area 
as determined by HUD shall receive a monthly homeownership assistance 
payment equal to 33 percent of the amount calculated under Sec.  
982.635.
    (5) A family whose annual income is greater than 99 percent of the 
median income for the area shall not receive homeownership assistance 
under the pilot program.
    (e) Assistance payments to lender. The PHA must make homeownership 
assistance payments to a lender on behalf of the disabled family. If the 
assistance payment exceeds the amount due to the lender, the PHA must 
pay the excess directly to the family. The provisions of Sec.  
982.635(d), which permit the PHA to make monthly homeownership 
assistance payments directly to the family, do not apply to the pilot 
program.
    (f) Mortgage defaults. The requirements of Sec.  982.638(d) 
regarding mortgage defaults are applicable to the pilot program. 
However, notwithstanding Sec.  982.638(d), the PHA may, in its 
discretion, permit a family that has defaulted on its mortgage to move 
to a new unit with continued voucher homeownership assistance if the PHA 
determines that the default is due to catastrophic medical reasons or 
due to the impact of a federally declared major disaster or emergency. 
The requirements of Sec. Sec.  982.627(a)(5) and 982.627(e) do not apply 
to such a family.

[66 FR 33613, June 22, 2001]



Sec.  982.643  Homeownership option: Downpayment assistance grants.

    (a) General. (1) A PHA may provide a single downpayment assistance 
grant for a participant that has received tenant-based or project-based 
rental assistance in the Housing Choice Voucher Program.
    (2) The downpayment assistance grant must be applied toward the 
downpayment required in connection with the purchase of the home and/or 
reasonable and customary closing costs in connection with the purchase 
of the home.
    (3) If the PHA permits the downpayment grant to be applied to 
closing costs, the PHA must define what fees and charges constitute 
reasonable and customary closing costs. However, if the purchase of a 
home is financed with FHA mortgage insurance, such financing is subject 
to FHA mortgage insurance requirements, including any requirements 
concerning closing costs (see Sec.  982.632(b) of this part regarding 
the applicability of FHA requirements to voucher homeownership 
assistance and Sec.  203.27 of this title regarding allowable fees, 
charges and discounts for FHA-insured mortgages).
    (b) Maximum downpayment grant. A downpayment assistance grant may 
not exceed twelve times the difference between the payment standard and 
the total tenant payment.
    (c) Payment of downpayment grant. The downpayment assistance grant 
shall be paid at the closing of the family's purchase of the home.
    (d) Administrative fee. For each downpayment assistance grant made 
by the PHA, HUD will pay the PHA a one-time administrative fee in 
accordance with Sec.  982.152(a)(1)(iii).

[[Page 591]]

    (e) Return to tenant-based assistance. A family that has received a 
downpayment assistance grant may apply for and receive tenant-based 
rental assistance, in accordance with program requirements and PHA 
policies. However, the PHA may not commence tenant-based rental 
assistance for occupancy of the new unit so long as any member of the 
family owns any title or other interest in the home purchased with 
homeownership assistance. Further, eighteen months must have passed 
since the family's receipt of the downpayment assistance grant.
    (f) Implementation of downpayment assistance grants. A PHA may not 
offer downpayment assistance under this paragraph until HUD publishes a 
notice in the Federal Register.

[67 FR 64494, Oct. 18, 2002]



PART 983_PROJECT-BASED VOUCHER (PBV) PROGRAM--Table of Contents



                            Subpart A_General

Sec.
983.1 When the PBV rule (24 CFR part 983) applies.
983.2 When the tenant-based voucher rule (24 CFR part 982) applies.
983.3 PBV definitions.
983.4 Cross-reference to other Federal requirements.
983.5 Description of the PBV program.
983.6 Maximum amount of PBV assistance.
983.7 Uniform Relocation Act.
983.8 Equal opportunity requirements.
983.9 Special housing types.
983.10 Project-based certificate (PBC) program.

               Subpart B_Selection of PBV Owner Proposals

983.51 Owner proposal selection procedures.
983.52 Housing type.
983.53 Prohibition of assistance for ineligible units.
983.54 Prohibition of assistance for units in subsidized housing.
983.55 Prohibition of excess public assistance.
983.56 Cap on number of PBV units in each project.
983.57 Site selection standards.
983.58 Environmental review.
983.59 PHA-owned units.

                        Subpart C_Dwelling Units

983.101 Housing quality standards.
983.102 Housing accessibility for persons with disabilities.
983.103 Inspecting units.

  Subpart D_Requirements for Rehabilitated and Newly Constructed Units

983.151 Applicability.
983.152 Purpose and content of the Agreement to enter into HAP contract.
983.153 When Agreement is executed.
983.154 Conduct of development work.
983.155 Completion of housing.
983.156 PHA acceptance of completed units.
983.157 Broadband infrastructure.

             Subpart E_Housing Assistance Payments Contract

983.201 Applicability.
983.202 Purpose of HAP contract.
983.203 HAP contract information.
983.204 When HAP contract is executed.
983.205 Term of HAP contract.
983.206 Statutory notice requirements: Contract termination or 
          expiration.
983.207 HAP contract amendments (to add or substitute contract units).
983.208 Condition of contract units.
983.209 Owner responsibilities.
983.210 Owner certification.
983.211 Removal of unit from HAP contract.

                           Subpart F_Occupancy

983.251 How participants are selected.
982.252 PHA information for accepted family.
983.253 Leasing of contract units.
983.254 Vacancies.
983.255 Tenant screening.
983.256 Lease.
983.257 Owner termination of tenancy and eviction.
983.258 Continuation of housing assistance payments.
983.259 Security deposit: amounts owed by tenant.
983.260 Overcrowded, under-occupied, and accessible units.
983.261 Family right to move.
983.262 When occupancy may exceed 25 percent cap on the number of PBV 
          units in each project.

                         Subpart G_Rent to owner

983.301 Determining the rent to owner.
983.302 Redetermination of rent to owner.
983.303 Reasonable rent.
983.304 Other subsidy: effect on rent to owner.
983.305 Rent to owner: effect of rent control and other rent limits.

[[Page 592]]

                       Subpart H_Payment to Owner

983.351 PHA payment to owner for occupied unit.
983.352 Vacancy payment.
983.353 Tenant rent; payment to owner.
983.354 Other fees and charges.

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

    Source: 70 FR 59913, Oct. 13, 2005, unless otherwise noted.



                            Subpart A_General



Sec.  983.1  When the PBV rule (24 CFR part 983) applies.

    Part 983 applies to the project-based voucher (PBV) program. The PBV 
program is authorized by section 8(o)(13) of the U.S. Housing Act of 
1937 (42 U.S.C. 1437f(o)(13)).



Sec.  983.2  When the tenant-based voucher rule (24 CFR part 982) applies.

    (a) 24 CFR Part 982. Part 982 is the basic regulation for the 
tenant-based voucher program. Paragraphs (b) and (c) of this section 
describe the provisions of part 982 that do not apply to the PBV 
program. The rest of part 982 applies to the PBV program. For use and 
applicability of voucher program definitions at Sec.  982.4, see Sec.  
983.3.
    (b) Types of 24 CFR part 982 provisions that do not apply to PBV. 
The following types of provisions in 24 CFR part 982 do not apply to PBV 
assistance under part 983.
    (1) Provisions on issuance or use of a voucher;
    (2) Provisions on portability;
    (3) Provisions on the following special housing types: Shared 
housing, manufactured home space rental, and the homeownership option.
    (c) Specific 24 CFR part 982 provisions that do not apply to PBV 
assistance. Except as specified in this paragraph, the following 
specific provisions in 24 CFR part 982 do not apply to PBV assistance 
under part 983.
    (1) In subpart E of part 982: paragraph (b)(2) of Sec.  982.202 and 
paragraph (d) of Sec.  982.204;
    (2) Subpart G of part 982 does not apply, with the following 
exceptions:
    (i) Section 982.310 (owner termination of tenancy) applies to the 
PBV program, but to the extent that those provisions differ from Sec.  
983.257, the provisions of Sec.  983.257 govern; and
    (ii) Section 982.312 (absence from unit) applies to the PBV Program, 
but to the extent that those provisions differ from Sec.  983.256(g), 
the provisions of Sec.  983.256(g) govern; and
    (iii) Section 982.316 (live-in aide) applies to the PBV Program;
    (3) Subpart H of part 982;
    (4) In subpart I of part 982: Sec.  982.401; paragraphs (a)(3), (c), 
and (d) of Sec.  982.402; Sec.  982.403; Sec.  982.405(a); and Sec.  
982.407;
    (5) In subpart J of part 982: Sec.  982.455;
    (6) Subpart K of Part 982: subpart K does not apply, except that the 
following provisions apply to the PBV Program:
    (i) Section 982.503 (for determination of the payment standard 
amount and schedule for a Fair Market Rent (FMR) area or for a 
designated part of an FMR area). However, provisions authorizing 
approval of a higher payment standard as a reasonable accommodation for 
a particular family that includes a person with disabilities do not 
apply (since the payment standard amount does not affect availability of 
a PBV unit for occupancy by a family or the amount paid by the family);
    (ii) Section 982.516 (family income and composition; regular and 
interim examinations);
    (iii) Section 982.517 (utility allowance schedule);
    (7) In subpart M of part 982:
    (i) Sections 982.603, 982.607, 982.611, 982.613(c)(2), 982.619(a), 
(b)(1), (b)(4), (c); and
    (ii) Provisions concerning shared housing (Sec.  982.615 through 
Sec.  982.618), manufactured home space rental (Sec.  982.622 through 
Sec.  982.624), and the homeownership option (Sec.  982.625 through 
Sec.  982.641).

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014; 
81 FR 12377, Mar. 8, 2016; 88 FR 30504, May 11, 2023]



Sec.  983.3  PBV definitions.

    (a) Use of PBV definitions--(1) PBV terms (defined in this section). 
This section defines PBV terms that are used in this part 983. For PBV 
assistance, the definitions in this section apply to use of the defined 
terms in part 983 and in applicable provisions of 24 CFR part

[[Page 593]]

982. (Section 983.2 specifies which provisions in part 982 apply to PBV 
assistance under part 983.)
    (2) Other voucher terms (terms defined in 24 CFR 982.4). (i) The 
definitions in this section apply instead of definitions of the same 
terms in 24 CFR 982.4.
    (ii) Other voucher terms are defined in Sec.  982.4, but are not 
defined in this section. Those Sec.  982.4 definitions apply to use of 
the defined terms in this part 983 and in provisions of part 982 that 
apply to part 983.
    (b) PBV definitions. 1937 Act. The United States Housing Act of 1937 
(42 U.S.C. 1437 et seq.).
    Activities of daily living. Eating, bathing, grooming, dressing, and 
home management activities.
    Admission. The point when the family becomes a participant in the 
PHA's tenant-based or project-based voucher program (initial receipt of 
tenant-based or project-based assistance). After admission, and so long 
as the family is continuously assisted with tenant-based or project-
based voucher assistance from the PHA, a shift from tenant-based or 
project-based assistance to the other form of voucher assistance is not 
a new admission.
    Agreement to enter into HAP contract (Agreement). The Agreement is a 
written contract between the PHA and the owner in the form prescribed by 
HUD. The Agreement defines requirements for development of housing to be 
assisted under this section. When development is completed by the owner 
in accordance with the Agreement, the PHA enters into a HAP contract 
with the owner. The Agreement is not used for existing housing assisted 
under this section. HUD will keep the public informed about changes to 
the Agreement and other forms and contracts related to this program 
through appropriate means.
    Assisted living facility. A residence facility (including a facility 
located in a larger multifamily property) that meets all the following 
criteria:
    (1) The facility is licensed and regulated as an assisted living 
facility by the state, municipality, or other political subdivision;
    (2) The facility makes available supportive services to assist 
residents in carrying out activities of daily living; and
    (3) The facility provides separate dwelling units for residents and 
includes common rooms and other facilities appropriate and actually 
available to provide supportive services for the residents.
    Comparable rental assistance. A subsidy or other means to enable a 
family to obtain decent housing in the PHA jurisdiction renting at a 
gross rent that is not more than 40 percent of the family's adjusted 
monthly gross income.
    Contract units. The housing units covered by a HAP contract.
    Covered housing provider. For Project-Based Voucher (PBV) program, 
``covered housing provider,'' as such term is used in HUD's regulations 
in 24 CFR part 5, subpart L (Protection for Victims of Domestic 
Violence, Dating Violence, Sexual Assault, or Stalking) refers to the 
PHA or owner (as defined in 24 CFR 982.4), as applicable given the 
responsibilities of the covered housing provider as set forth in 24 CFR 
part 5, subpart L. For example, the PHA is the covered housing provider 
responsible for providing the notice of occupancy rights under VAWA and 
certification form described at 24 CFR 5.2005(a). In addition, the owner 
is the covered housing provider that may choose to bifurcate a lease as 
described at 24 CFR 5.2009(a), while the PHA is the covered housing 
provider responsible for complying with emergency transfer plan 
provisions at 24 CFR 5.2005(e).
    Development. Construction or rehabilitation of PBV housing after the 
proposal selection date.
    Excepted units (units in a multifamily project not counted against 
the 25 percent per- project cap). See Sec.  983.56(b)(2)(i).
    Existing housing. Housing units that already exist on the proposal 
selection date and that substantially comply with the HQS on that date. 
(The units must fully comply with the HQS before execution of the HAP 
contract.)
    Household. The family and any PHA-approved live-in aide.
    Housing assistance payment. The monthly assistance payment for a PBV 
unit by a PHA, which includes:

[[Page 594]]

    (1) A payment to the owner for rent to owner under the family's 
lease minus the tenant rent; and
    (2) An additional payment to or on behalf of the family, if the 
utility allowance exceeds the total tenant payment, in the amount of 
such excess.
    Housing credit agency. For purposes of performing subsidy layering 
reviews for proposed PBV projects, a housing credit agency includes a 
State housing finance agency, a State participating jurisdiction under 
HUD's HOME program (see 24 CFR part 92), or other State housing agencies 
that meet the definition of ``housing credit agency'' as defined by 
section 42 of the Internal Revenue Code of 1986.
    Housing quality standards (HQS). The minimum quality standards 
developed by HUD in accordance with 24 CFR 5.703 for the PBV program or 
the HUD approved alternative standard for the PHA under 24 CFR 5.703(g).
    Lease. A written agreement between an owner and a tenant for the 
leasing of a PBV dwelling unit by the owner 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 PHA.
    Multifamily building. A building with five or more dwelling units 
(assisted or unassisted).
    Newly constructed housing. Housing units that do not exist on the 
proposal selection date and are developed after the date of selection 
pursuant to an Agreement between the PHA and owner for use under the PBV 
program.
    Partially assisted project. A project in which there are fewer 
contract units than residential units.
    PHA-owned unit. A dwelling unit owned by the PHA that administers 
the voucher program. PHA-owned means that the PHA or its officers, 
employees, or agents hold a direct or indirect interest in the building 
in which the unit is located, including an interest as titleholder or 
lessee, or as a stockholder, member or general or limited partner, or 
member of a limited liability corporation, or an entity that holds any 
such direct or indirect interest.
    Premises. The project in which the contract unit is located, 
including common areas and grounds.
    Program. The voucher program under section 8 of the 1937 Act, 
including tenant-based or project-based assistance.
    Project. A project is a single building, multiple contiguous 
buildings, or multiple buildings on contiguous parcels of land. 
Contiguous in this definition includes ``adjacent to'', as well as 
touching along a boundary or a point.
    Project-based certificate (PBC) program. The program in which 
project-based assistance is attached to units pursuant to an Agreement 
executed by a PHA and owner before January 16, 2001 (see Sec.  983.10).
    Proposal selection date. The date the PHA gives written notice of 
PBV proposal selection to an owner whose proposal is selected in 
accordance with the criteria established in the PHA's administrative 
plan.
    Qualifying families (for purpose of exception to 25 percent per-
project cap). See Sec.  983.56(b)(2)(ii).
    Rehabilitated housing. Housing units that exist on the proposal 
selection date, but do not substantially comply with the HQS on that 
date, and are developed, pursuant to an Agreement between the PHA and 
owner, for use under the PBV program.
    Release of funds (for purposes of environmental review). Release of 
funds in the case of the project-based voucher program, under 24 CFR 
58.1(b)(6)(iii) and Sec.  983.58, means that HUD approves the local 
PHA's Request for Release of Funds and Certification by issuing a Letter 
to Proceed (in lieu of using form HUD-7015.16) that authorizes the PHA 
to execute an ``agreement to enter into housing assistance payment 
contract'' (AHAP) or, for existing housing, to directly enter into a HAP 
with an owner of units selected under the PBV program.
    Rent to owner. The total monthly rent payable by the family and the 
PHA to the owner under the lease for a contract unit. Rent to owner 
includes payment for any housing services, maintenance, and utilities to 
be provided by the owner in accordance with the lease. (Rent to owner 
must not include charges for non-housing services including payment for 
food, furniture, or supportive services provided in accordance with the 
lease.)

[[Page 595]]

    Responsible entity (RE) (for environmental review). The unit of 
general local government within which the project is located that 
exercises land use responsibility or, if HUD determines this infeasible, 
the county or, if HUD determines that infeasible, the state.
    Single-family building. A building with no more than four dwelling 
units (assisted or unassisted).
    Site. The grounds where the contract units are located, or will be 
located after development pursuant to the Agreement.
    Special housing type. Subpart M of 24 CFR part 982 states the 
special regulatory requirements for single-room occupancy (SRO) housing, 
congregate housing, group homes, and manufactured homes. Subpart M 
provisions on shared housing, manufactured home space rental, and the 
homeownership option do not apply to PBV assistance under this part.
    Tenant-paid utilities. Utility service that is not included in the 
tenant rent (as defined in 24 CFR 982.4), and which is the 
responsibility of the assisted family.
    Total tenant payment. The amount described in 24 CFR 5.628.
    Utility allowance. See 24 CFR 5.603.
    Utility reimbursement. See 24 CFR 5.603.
    Wrong-size unit. A unit occupied by a family that does not conform 
to the PHA's subsidy guideline for family size, by being either too 
large or too small compared to the guideline.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014; 
81 FR 80818, Nov. 16, 2016; 88 FR 30504, May 11, 2023]



Sec.  983.4  Cross-reference to other Federal requirements.

    The following provisions apply to assistance under the PBV program.
    Civil money penalty. Penalty for owner breach of HAP contract. See 
24 CFR 30.68.
    Debarment. Prohibition on use of debarred, suspended, or ineligible 
contractors. See 24 CFR 5.105(c) and 2 CFR part 2424.
    Definitions. See 24 CFR part 5, subpart D.
    Disclosure and verification of income information. See 24 CFR part 
5, subpart B.
    Environmental review. See 24 CFR parts 50 and 58 (see also 
provisions on PBV environmental review at Sec.  983.58).
    Fair housing. Nondiscrimination and equal opportunity. See 24 CFR 
5.105(a) and section 504 of the Rehabilitation Act.
    Fair market rents. See 24 CFR part 888, subpart A.
    Fraud. See 24 CFR part 792. PHA retention of recovered funds.
    Funds. See 24 CFR part 791. HUD allocation of voucher funds.
    Income and family payment. See 24 CFR part 5, subpart F (especially 
Sec.  5.603 (definitions), Sec.  5.609 (annual income), Sec.  5.611 
(adjusted income), Sec.  5.628 (total tenant payment), Sec.  5.630 
(minimum rent), Sec.  5.603 (utility allowance), Sec.  5.603 (utility 
reimbursements), and Sec.  5.661 (section 8 project-based assistance 
programs: approval for police or other security personnel to live in 
project).
    Labor standards. Regulations implementing the Davis-Bacon Act, 
Contract Work Hours and Safety Standards Act (40 U.S.C. 3701-3708), 29 
CFR part 5, and other federal laws and regulations pertaining to labor 
standards applicable to development (including rehabilitation) of a 
project comprising nine or more assisted units.
    Lead-based paint. Regulations implementing the Lead-based Paint 
Poisoning Prevention Act (42 U.S.C. 4821-4846) and the Residential Lead-
based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856). See 24 
CFR part 35, subparts A, B, H, and R.
    Lobbying restriction. Restrictions on use of funds for lobbying. See 
24 CFR 5.105(b).
    Noncitizens. Restrictions on assistance. See 24 CFR part 5, subpart 
E.
    Program accessibility. Regulations implementing Section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794). See 24 CFR parts 8 and 9.
    Protection for victims of domestic violence, dating violence, or 
stalking. See 24 CFR part 5, subpart L.
    Protection for victims of domestic violence, dating violence, sexual 
assault, or stalking. See 24 CFR part 5, subpart L (Protection for 
Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking). For purposes of compliance with HUD's regulations in 24 CFR 
part 5, subpart L, the covered

[[Page 596]]

housing provider is the PHA or owner, as applicable given the 
responsibilities of the covered housing provider as set forth in 24 CFR 
part 5, subpart L.
    Relocation assistance. Regulations implementing the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 1970 
(URA) (42 U.S.C. 4201-4655). See 49 CFR part 24.
    Uniform financial reporting standards. See 24 CFR part 5, subpart H.
    Waiver of HUD rules. See 24 CFR 5.110.

[70 FR 59913, Oct. 13, 2005, as amended at 72 FR 73497, Dec. 27, 2007; 
73 FR 72345, Nov. 28, 2008; 75 FR 66264, Oct. 24, 2010; 79 FR 36165, 
June 25, 2014; 81 FR 80818, Nov. 16, 2016; 85 FR 61568, Sept. 29, 2020]



Sec.  983.5  Description of the PBV program.

    (a) How PBV works. (1) The PBV program is administered by a PHA that 
already administers the tenant-based voucher program under an annual 
contributions contract (ACC) with HUD. In the PBV program, the 
assistance is ``attached to the structure.'' (See description of the 
difference between ``project-based'' and ``tenant-based'' rental 
assistance at 24 CFR 982.1(b).)
    (2) The PHA enters into a HAP contract with an owner for units in 
existing housing or in newly constructed or rehabilitated housing.
    (3) In the case of newly constructed or rehabilitated housing, the 
housing is developed under an Agreement between the owner and the PHA. 
In the Agreement, the PHA agrees to execute a HAP contract after the 
owner completes the construction or rehabilitation of the units.
    (4) During the term of the HAP contract, the PHA makes housing 
assistance payments to the owner for units leased and occupied by 
eligible families.
    (b) How PBV is funded. (1) If a PHA decides to operate a PBV 
program, the PHA's PBV program is funded with a portion of appropriated 
funding (budget authority) available under the PHA's voucher ACC. This 
pool of funding is used to pay housing assistance for both tenant-based 
and project-based voucher units and to pay PHA administrative fees for 
administration of tenant-based and project-based voucher assistance.
    (2) There is no special or additional funding for project-based 
vouchers. HUD does not reserve additional units for project-based 
vouchers and does not provide any additional funding for this purpose.
    (c) PHA discretion to operate PBV program. A PHA has discretion 
whether to operate a PBV program. HUD approval is not required, except 
that the PHA must notify HUD of its intent to project-base its vouchers, 
in accordance with Sec.  983.6(d).

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014]



Sec.  983.6  Maximum amount of PBV assistance.

    (a) The PHA may select owner proposals to provide project-based 
assistance for up to 20 percent of the amount of budget authority 
allocated to the PHA by HUD in the PHA voucher program. PHAs are not 
required to reduce the number of PBV units selected under an Agreement 
or HAP contract if the amount of budget authority is subsequently 
reduced.
    (b) All PBC and project-based voucher units for which the PHA has 
issued a notice of proposal selection or which are under an Agreement or 
HAP contract for PBC or project-based voucher assistance count against 
the 20 percent maximum.
    (c) The PHA is responsible for determining the amount of budget 
authority that is available for project-based vouchers and for ensuring 
that the amount of assistance that is attached to units is within the 
amounts available under the ACC.
    (d) Before a PHA issues a Request for Proposals in accordance with 
Sec.  983.51(b)(1) or makes a selection in accordance with Sec.  
983.51(b)(2), the PHA must submit the following information to a HUD 
field office for review:
    (1) The total amount of annual budget authority;
    (2) The percentage of annual budget authority available to be 
project-based; and
    (3) The total amount of annual budget authority the PHA is planning 
to project-base pursuant to the selection

[[Page 597]]

and the number of units that such budget authority will support.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014]



Sec.  983.7  Uniform Relocation Act.

    (a) Relocation assistance for displaced person. (1) A displaced 
person 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 implementing regulations at 49 CFR part 24.
    (2) The cost of required relocation assistance may be paid with 
funds provided by the owner, or with local public funds, or with funds 
available from other sources. Relocation costs may not be paid from 
voucher program funds; however, provided payment of relocation benefits 
is consistent with state and local law, PHAs may use their 
administrative fee reserve to pay for relocation assistance after all 
other program administrative expenses are satisfied. Use of the 
administrative fee reserve in this manner must be consistent with legal 
and regulatory requirements, including the requirements of 24 CFR 
982.155 and other official HUD issuances.
    (b) Real property acquisition requirements. The acquisition of real 
property for a PBV project is subject to the URA and 49 CFR part 24, 
subpart B.
    (c) Responsibility of PHA. The PHA must require the owner to comply 
with the URA and 49 CFR part 24.
    (d) Definition of initiation of negotiations. In computing a 
replacement housing payment 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 PHA.



Sec.  983.8  Equal opportunity requirements.

    (a) The PBV program requires compliance with all equal opportunity 
requirements under federal law and regulation, including the authorities 
cited at 24 CFR 5.105(a).
    (b) The PHA must comply with the PHA Plan civil rights and 
affirmatively furthering fair housing certification submitted by the PHA 
in accordance with 24 CFR 903.7(o).



Sec.  983.9  Special housing types.

    (a) Applicability. (1) For applicability of rules on special housing 
types at 24 CFR part 982, subpart M, see Sec.  983.2.
    (2) In the PBV program, the PHA may not provide assistance for 
shared housing, manufactured home space rental, or the homeownership 
option.
    (b) Group homes. A group home may include one or more group home 
units. A separate lease is executed for each elderly person or person 
with disabilities who resides in a group home.
    (c) Cooperative housing. (1) Applicability of part 983. Except as 
provided in paragraph (c)(3) of this section, assistance under this 
housing type is subject to the regulations of part 983, except the 
following sections of part 983, subpart F: Sec. Sec.  983.256(b) and 
(c), 983.258 and 983.259 do not apply.
    (2) Applicability of part 982. (i) Cooperative housing under the PBV 
program is also subject to the requirements of 24 CFR 982.619(b)(2), 
(b)(3), (b)(5), (d), and (e).
    (ii) Cooperative housing under the PBV program is not subject to the 
requirements of 24 CFR 982.619(a), (b)(1), (b)(4), and (c).
    (3) Assistance in cooperative housing. Rental assistance for PBV 
cooperative housing where families lease cooperative housing units from 
cooperative members is not a special housing type and all requirements 
of 24 CFR 983 apply.
    (4) Rent to owner. The regulations of 24 CFR part 983, subpart G, 
apply to PBV housing under paragraph (c) of this section. The reasonable 
rent for a cooperative unit is determined in accordance with Sec.  
983.303. For cooperative housing, the rent to owner is the monthly 
carrying charge under the occupancy agreement/lease between the member 
and the cooperative.
    (5) Other fees and charges. Fees such as application fees, credit 
report fees, and transfer fees shall not be included in the rent to 
owner.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36165, June 25, 2014]

[[Page 598]]



Sec.  983.10  Project-based certificate (PBC) program.

    (a) What is it? ``PBC program'' means project-based assistance 
attached to units pursuant to an Agreement executed by a PHA and owner 
before January 16, 2001, and in accordance with:
    (1) The regulations for the PBC program at 24 CFR part 983, codified 
as of May 1, 2001 and contained in 24 CFR part 983 revised as of April 
1, 2002; and
    (2) Section 8(d)(2) of the 1937 Act, as in effect before October 21, 
1998 (the date of enactment of Title V of Public Law 105-276, the 
Quality Housing and Work Responsibility Act of 1998, codified at 42 
U.S.C. 1437 et seq.).
    (b) What rules apply? Units under the PBC program are subject to the 
provisions of 24 CFR part 983, codified as of May 1, 2001, with the 
following exceptions:
    (1) PBC renewals. (i) General. Consistent with the PBC HAP contract, 
at the sole option of the PHA, HAP contracts may be renewed for terms 
for an aggregate total (including the initial and any renewal terms) of 
15 years, subject to the availability of appropriated funds.
    (ii) Renewal of PBC as PBV. At the sole discretion of the PHA, upon 
the request of an owner, PHAs may renew a PBC HAP contract as a PBV HAP 
contract. All PBV regulations (including 24 CFR part 983, subpart G--
Rent to Owner) apply to a PBC HAP contract renewed as a PBV HAP contract 
with the exception of Sec. Sec.  983.51, 983.56, and 983.57(b)(1). In 
addition, the following conditions apply:
    (A) The term of the HAP contract for PBC contracts renewed as PBV 
contracts shall be consistent with Sec.  983.205.
    (B) A PHA must make the determination, within one year before 
expiration of a PBC HAP contract, that renewal of the contract under the 
PBV program is appropriate to continue providing affordable housing for 
low-income families.
    (C) The renewal of PBC assistance as PBV assistance is effectuated 
by the execution of a PBV HAP contract addendum as prescribed by HUD and 
a PBV HAP contract for existing housing.
    (2) Housing quality standards. The regulations in 24 CFR 982.401 
(housing quality standards) (HQS) apply to units assisted under the PBC 
program.
    (i) Special housing types. HQS requirements for eligible special 
housing types, under this program, apply (See 24 CFR 982.605. 982.609 
and 982.614).
    (ii) Lead-based paint requirements. The Lead-based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-based Paint 
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at 24 CFR part 35, subparts A, B, H, and R of this title, 
apply to the PBC program.
    (iii) HQS enforcement. The regulations in 24 CFR parts 982 and 983 
do not create any right of the family or any party, other than HUD or 
the PHA, to require enforcement of the HQS requirements or to assert any 
claim against HUD or the PHA for damages, injunction, or other relief 
for alleged failure to enforce the HQS.
    (c) Statutory notice requirements. In addition to provisions of 24 
CFR part 983 codified as of May 1, 2001, Sec.  983.206 applies to the 
PBC program.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014; 
88 FR 30504, May 11, 2023]



               Subpart B_Selection of PBV Owner Proposals



Sec.  983.51  Owner proposal selection procedures.

    (a) Procedures for selecting PBV proposals. The PHA administrative 
plan must describe the procedures for owner submission of PBV proposals 
and for PHA selection of PBV proposals. Before selecting a PBV proposal, 
the PHA must determine that the PBV proposal complies with HUD program 
regulations and requirements, including a determination that the 
property is eligible housing (Sec. Sec.  983.53 and 983.54), complies 
with the cap on the number of PBV units per project (Sec.  983.56), and 
meets the site selection standards (Sec.  983.57).
    (b) Selection of PBV proposals. The PHA must select PBV proposals in 
accordance with the selection procedures in the PHA administrative plan. 
The PHA must select PBV proposals by either of the following two 
methods.
    (1) PHA request for PBV Proposals. The PHA may not limit proposals 
to a

[[Page 599]]

single site or impose restrictions that explicitly or practically 
preclude owner submission of proposals for PBV housing on different 
sites.
    (2) Selection based on previous competition. The PHA may select, 
without competition, a proposal for housing assisted under a federal, 
State, or local government housing assistance, community development, or 
supportive services program that required competitive selection of 
proposals (e.g., HOME, and units for which competitively awarded low-
income housing tax credits (LIHTCs) have been provided), where the 
proposal has been selected in accordance with such program's competitive 
selection requirements within 3 years of the PBV proposal selection 
date, and the earlier competitively selected housing assistance proposal 
did not involve any consideration that the project would receive PBV 
assistance.
    (c) Public notice of PHA request for PBV proposals. If the PHA will 
be selecting proposals under paragraph (b)(1) of this section, PHA 
procedures for selecting PBV proposals must be designed and actually 
operated to provide broad public notice of the opportunity to offer PBV 
proposals for consideration by the PHA. The public notice procedures may 
include publication of the public notice in a local newspaper of general 
circulation and other means designed and actually operated to provide 
broad public notice. The public notice of the PHA request for PBV 
proposals must specify the submission deadline. Detailed application and 
selection information must be provided at the request of interested 
parties.
    (d) PHA notice of owner selection. The PHA must give prompt written 
notice to the party that submitted a selected proposal and must also 
give prompt public notice of such selection. Public notice procedures 
may include publication of public notice in a local newspaper of general 
circulation and other means designed and actually operated to provide 
broad public notice.
    (e) PHA-owned units. A PHA-owned unit may be assisted under the PBV 
program only if the HUD field office or HUD-approved independent entity 
reviews the selection process and determines that the PHA-owned units 
were appropriately selected based on the selection procedures specified 
in the PHA administrative plan. Under no circumstances may PBV 
assistance be used with a public housing unit.
    (f) Public review of PHA selection decision documentation. The PHA 
must make documentation available for public inspection regarding the 
basis for the PHA selection of a PBV proposal.
    (g) Owner proposal selection does not require submission of form 
HUD-2530 or other HUD previous participation clearance.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014]



Sec.  983.52  Housing type.

    The PHA may attach PBV assistance for units in existing housing or 
for newly constructed or rehabilitated housing developed under and in 
accordance with an Agreement.
    (a) Existing housing--A housing unit is considered an existing unit 
for purposes of the PBV program, if at the time of notice of PHA 
selection the units substantially comply with HQS.
    (1) Units for which rehabilitation or new construction began after 
owner's proposal submission but prior to execution of the AHAP do not 
subsequently qualify as existing housing.
    (2) Units that were newly constructed or rehabilitated in violation 
of program requirements also do not qualify as existing housing.
    (b) Subpart D of this part applies to newly constructed and 
rehabilitated housing.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014]



Sec.  983.53  Prohibition of assistance for ineligible units.

    (a) Ineligible unit. The PHA may not attach or pay PBV assistance 
for units in the following types of housing:
    (1) Shared housing;
    (2) Units on the grounds of a penal, reformatory, medical, mental, 
or similar public or private institution;
    (3) Nursing homes or facilities providing continuous psychiatric, 
medical, nursing services, board and care, or intermediate care. 
However, the PHA may attach PBV assistance for a dwelling unit in an 
assisted living facility

[[Page 600]]

that provides home health care services such as nursing and therapy for 
residents of the housing;
    (4) Units that are owned or controlled by an educational institution 
or its affiliate and are designated for occupancy by students of the 
institution;
    (5) Manufactured homes; and
    (6) Transitional Housing.
    (b) Prohibition against assistance for owner-occupied unit. The PHA 
may not attach or pay PBV assistance for a unit occupied by an owner of 
the housing. A member of a cooperative who owns shares in the project 
assisted under the PBV program shall not be considered an owner for 
purposes of participation in the PBV program.
    (c) Prohibition against selecting unit occupied by an ineligible 
family. Before a PHA selects a specific unit to which assistance is to 
be attached, the PHA must determine whether the unit is occupied and, if 
occupied, whether the unit's occupants are eligible for assistance. The 
PHA must not select or enter into an Agreement or HAP contract for a 
unit occupied by a family ineligible for participation in the PBV 
program.
    (d) Prohibition against assistance for units for which commencement 
of construction or rehabilitation occurred prior to AHAP. The PHA may 
not attach or pay PBV assistance for units for which construction or 
rehabilitation has commenced as defined in Sec.  983.152 after proposal 
submission and prior to execution of an AHAP.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014]



Sec.  983.54  Prohibition of assistance for units in subsidized housing.

    A PHA may not attach or pay PBV assistance to units in any of the 
following types of subsidized housing:
    (a) A public housing dwelling unit;
    (b) A unit subsidized with any other form of Section 8 assistance 
(tenant-based or project-based);
    (c) A unit subsidized with any governmental rent subsidy (a subsidy 
that pays all or any part of the rent);
    (d) A unit subsidized with any governmental subsidy that covers all 
or any part of the operating costs of the housing;
    (e) A unit subsidized with Section 236 rental assistance payments 
(12 U.S.C. 1715z-1). However, the PHA may attach assistance to a unit 
subsidized with Section 236 interest reduction payments;
    (f) A unit subsidized with rental assistance payments under Section 
521 of the Housing Act of 1949, 42 U.S.C. 1490a (a Rural Housing Service 
Program). However, the PHA may attach assistance for a unit subsidized 
with Section 515 interest reduction payments (42 U.S.C. 1485);
    (g) A Section 202 project for non-elderly persons with disabilities 
(assistance under Section 162 of the Housing and Community Development 
Act of 1987, 12 U.S.C. 1701q note);
    (h) Section 811 project-based supportive housing for persons with 
disabilities (42 U.S.C. 8013);
    (i) Section 202 supportive housing for the elderly (12 U.S.C. 
1701q);
    (j) A Section 101 rent supplement project (12 U.S.C. 1701s);
    (k) A unit subsidized with any form of tenant-based rental 
assistance (as defined at 24 CFR 982.1(b)(2)) (e.g., a unit subsidized 
with tenant-based rental assistance under the HOME program, 42 U.S.C. 
12701 et seq.);
    (l) A unit with any other duplicative federal, state, or local 
housing subsidy, as determined by HUD or by the PHA in accordance with 
HUD requirements. For this purpose, ``housing subsidy'' does not include 
the housing component of a welfare payment; a social security payment; 
or a federal, state, or local tax concession (such as relief from local 
real property taxes).



Sec.  983.55  Prohibition of excess public assistance.

    (a) Subsidy layering requirements. The PHA may provide PBV 
assistance only in accordance with HUD subsidy layering regulations (24 
CFR 4.13) and other requirements. The subsidy layering review is 
intended to prevent excessive public assistance for the housing by 
combining (layering) housing assistance payment subsidy under the PBV 
program with other governmental housing assistance from federal, state, 
or local agencies, including assistance such as tax concessions or tax 
credits. The subsidy layering requirements are not applicable to 
existing housing. A further subsidy layering

[[Page 601]]

review is not required for housing selected as new construction or 
rehabilitation of housing, if HUD's designee has conducted a review, 
which included a review of PBV assistance, in accordance with HUD's PBV 
subsidy layering review guidelines.
    (b) When subsidy layering review is conducted. The PHA may not enter 
into an Agreement or HAP contract until HUD or a housing credit agency 
approved by HUD has conducted any required subsidy layering review and 
determined that the PBV assistance is in accordance with HUD subsidy 
layering requirements.
    (c) Owner certification. The HAP contract must contain the owner's 
certification that the project has not received and will not receive 
(before or during the term of the HAP contract) any public assistance 
for acquisition, development, or operation of the housing other than 
assistance disclosed in the subsidy layering review in accordance with 
HUD requirements.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36166, June 25, 2014]



Sec.  983.56  Cap on number of PBV units in each project.

    (a) 25 percent per project cap. Except as provided in paragraph (b) 
of this section, the PHA may not select a proposal to provide PBV 
assistance for units in a project or enter into an Agreement or HAP 
contract to provide PBV assistance for units in a project, if the total 
number of dwelling units in the project that will receive PBV assistance 
during the term of the PBV HAP is more than 25 percent of the number of 
dwelling units (assisted or unassisted) in the project.
    (b) Exception to 25 percent per building cap--(1) When PBV units are 
not counted against cap. In the following cases, PBV units are not 
counted against the 25 percent per project cap:
    (i) Units in a single-family building;
    (ii) Excepted units in a multifamily project.
    (2) Terms (i) ``Excepted units'' means units in a multifamily 
project that are specifically made available for qualifying families.
    (ii) ``Qualifying families'' means:
    (A) Elderly and/or disabled families; and/or
    (B) Families receiving supportive services. PHAs must include in the 
PHA administrative plan the type of services offered to families for a 
project to qualify for the exception and the extent to which such 
services will be provided. It is not necessary that the services be 
provided at or by the project, if they are approved services. To 
qualify, a family must have at least one member receiving at least one 
qualifying supportive service. A PHA may not require participation in 
medical or disability-related services other than drug and alcohol 
treatment in the case of current abusers as a condition of living in an 
excepted unit, although such services may be offered. If a family at the 
time of initial tenancy is receiving, and while the resident of an 
excepted unit has received, FSS supportive services or any other 
supportive services as defined in the PHA administrative plan, and 
successfully completes the FSS contract of participation or the 
supportive services requirement, the unit continues to count as an 
excepted unit for as long as the family resides in the unit. If a family 
in an excepted unit fails without good cause to complete its FSS 
contract of participation or if the family fails to complete the 
supportive services requirement as outlined in the PHA administrative 
plan, the PHA will take the actions provided under Sec.  983.262(d), and 
the owner may terminate the lease in accordance with Sec.  983.257(c). 
Also, at the time of initial lease execution between the family and the 
owner, the family and the PHA must sign a statement of family 
responsibility. The statement of family responsibility must contain all 
family obligations including the family's participation in a service 
program under this section. Failure by the family without good cause to 
fulfill its service obligation will require the PHA to terminate 
assistance. If the unit at the time of such termination is an excepted 
unit, the exception continues to apply to the unit as long as the unit 
is made available to another qualifying family.
    (C) The PHA must monitor the excepted family's continued receipt of 
supportive services and take appropriate action regarding those families

[[Page 602]]

that fail without good cause to complete their supportive services 
requirement. The PHA administrative plan must state the form and 
frequency of such monitoring.
    (3) Combining exception categories. Exception categories in a 
multifamily housing project may be combined.
    (4) Set-aside for qualifying families. (i) In leasing units in a 
multifamily project pursuant to the PBV HAP, the owner must set aside 
the number of excepted units made available for occupancy by qualifying 
families.
    (ii) The PHA may refer only qualifying families for occupancy of 
excepted units.
    (c) Additional, local requirements promoting partially assisted 
projects. A PHA may establish local requirements designed to promote PBV 
assistance in partially assisted projects. For example, a PHA may:
    (1) Establish a per-project cap on the number of units that will 
receive PBV assistance or other project-based assistance in a 
multifamily project containing excepted units or in a single-family 
building,
    (2) Determine not to provide PBV assistance for excepted units, or
    (3) Establish a per-project cap of less than 25 percent.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014]



Sec.  983.57  Site selection standards.

    (a) Applicability. The site selection requirements in paragraph (d) 
of this section apply only to site selection for existing housing and 
rehabilitated PBV housing. The site selection requirements in paragraph 
(e) of this section apply only to site selection for newly constructed 
PBV housing. Other provisions of this section apply to selection of a 
site for any form of PBV housing, including existing housing, newly 
constructed housing, and rehabilitated housing.
    (b) Compliance with PBV goals, civil rights requirements, and HQS. 
The PHA may not select a proposal for existing, newly constructed, or 
rehabilitated PBV housing on a site or enter into an Agreement or HAP 
contract for units on the site, unless the PHA has determined that:
    (1) Project-based assistance for housing at the selected site is 
consistent with the goal of deconcentrating poverty and expanding 
housing and economic opportunities. The standard for deconcentrating 
poverty and expanding housing and economic opportunities must be 
consistent with the PHA Plan under 24 CFR part 903 and the PHA 
Administrative Plan. In developing the standards to apply in determining 
whether a proposed PBV development will be selected, a PHA must consider 
the following:
    (i) Whether the census tract in which the proposed PBV development 
will be located is in a HUD-designated Enterprise Zone, Economic 
Community, or Renewal Community;
    (ii) Whether a PBV development will be located in a census tract 
where the concentration of assisted units will be or has decreased as a 
result of public housing demolition;
    (iii) Whether the census tract in which the proposed PBV development 
will be located is undergoing significant revitalization;
    (iv) Whether state, local, or federal dollars have been invested in 
the area that has assisted in the achievement of the statutory 
requirement;
    (v) Whether new market rate units are being developed in the same 
census tract where the proposed PBV development will be located and the 
likelihood that such market rate units will positively impact the 
poverty rate in the area;
    (vi) If the poverty rate in the area where the proposed PBV 
development will be located is greater than 20 percent, the PHA should 
consider whether in the past five years there has been an overall 
decline in the poverty rate;
    (vii) Whether there are meaningful opportunities for educational and 
economic advancement in the census tract where the proposed PBV 
development will be located.
    (2) The site is 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)) and HUD's 
implementing regulations at 24 CFR part 1; Title VIII of the Civil 
Rights Act of 1968 (42 U.S.C. 3601-3629); and HUD's implementing

[[Page 603]]

regulations at 24 CFR parts 100 through 199; Executive Order 11063 (27 
FR 11527; 3 CFR, 1959-1963 Comp., p. 652) and HUD's implementing 
regulations at 24 CFR part 107. The site must meet the section 504 site 
selection requirements described in 24 CFR 8.4(b)(5).
    (3) The site meets the HQS site standards at 24 CFR 982.401(l).
    (c) PHA PBV site selection policy. (1) The PHA administrative plan 
must establish the PHA's policy for selection of PBV sites in accordance 
with this section.
    (2) The site selection policy must explain how the PHA's site 
selection procedures promote the PBV goals.
    (3) The PHA must select PBV sites in accordance with the PHA's site 
selection policy in the PHA administrative plan.
    (d) Existing and rehabilitated housing site and neighborhood 
standards. A site for existing or rehabilitated housing must meet the 
following site and neighborhood standards. The site must:
    (1) Be adequate in size, exposure, and contour to accommodate the 
number and type of units proposed, and 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) Promote greater choice of housing opportunities and avoid undue 
concentration of assisted persons in areas containing a high proportion 
of low-income persons.
    (3) 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.
    (4) 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.
    (e) New construction site and neighborhood standards. A site for 
newly constructed housing must meet 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 must not be located in an area of minority 
concentration, except as permitted under paragraph (e)(3) 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.
    (3) A project may be located in an area of minority concentration 
only if:
    (i) 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 
(e)(3)(iii), (iv), and (v) 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 (e) (3)(vi)) of 
this section for further guidance on this criterion).
    (iii) As used in paragraph (e)(3)(i) of this section, ``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.
    (iv) Units may be considered ``comparable opportunities,'' as used 
in paragraph (e)(3)(i) of this section, if they

[[Page 604]]

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.
    (v) 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:
    (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 10 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 
families that wish to find housing outside areas of minority 
concentration.
    (E) 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.
    (F) A significant proportion of minority households has been 
successful in finding units in non-minority areas under the tenant-based 
assistance programs.
    (G) Comparable housing opportunities have been made available 
outside areas of minority concentration through other programs.
    (vi) 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 improving 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 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.
    (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.  983.58  Environmental review.

    (a) HUD environmental regulations. Activities under the PBV program 
are subject to HUD environmental regulations in 24 CFR parts 50 and 58.
    (b) Who performs the environmental review? (1) Under 24 CFR part 58, 
a unit of general local government, a county or a state (the 
``responsible entity'' or ``RE'') is responsible for the federal 
environmental review under the National Environmental Policy Act of 1969 
(42 U.S.C. 4321 et seq.) and related applicable federal laws and 
authorities in accordance with 24 CFR 58.5 and 58.6.

[[Page 605]]

    (2) If a PHA objects in writing to having the RE perform the federal 
environmental review, or if the RE declines to perform it, then HUD may 
perform the review itself (24 CFR 58.11). 24 CFR part 50 governs HUD 
performance of the review.
    (c) Existing housing. In the case of existing housing under this 
part 983, the RE that is responsible for the environmental review under 
24 CFR part 58 must determine whether or not PBV assistance is 
categorically excluded from review under the National Environmental 
Policy Act and whether or not the assistance is subject to review under 
the laws and authorities listed in 24 CFR 58.5.
    (d) Limitations on actions before completion of the environmental 
review. (1) The PHA may not enter into an Agreement or HAP contract with 
an owner, and the PHA, the owner, and its contractors may not acquire, 
rehabilitate, convert, lease, repair, dispose of, demolish, or construct 
real property or commit or expend program or local funds for PBV 
activities under this part, until one of the following occurs:
    (i) The responsible entity has completed the environmental review 
procedures required by 24 CFR part 58, and HUD has approved the 
environmental certification and HUD has given a release of funds, as 
defined in Sec.  983.3(b);
    (ii) The responsible entity has determined that the project to be 
assisted is exempt under 24 CFR 58.34 or is categorically excluded and 
not subject to compliance with environmental laws under 24 CFR 58.35(b); 
or
    (iii) HUD has performed an environmental review under 24 CFR part 50 
and has notified the PHA in writing of environmental approval of the 
site.
    (2) HUD will not approve the release of funds for PBV assistance 
under this part if the PHA, the owner, or any other party commits funds 
(i.e., enters an Agreement or HAP contract or otherwise incurs any costs 
or expenditures to be paid or reimbursed with such funds) before the PHA 
submits and HUD approves its request for release of funds (where such 
submission is required).
    (e) PHA duty to supply information. The PHA must supply all 
available, relevant information necessary for the RE (or HUD, if 
applicable) to perform any required environmental review for any site.
    (f) Mitigating measures. The PHA must require the owner to carry out 
mitigating measures required by the RE (or HUD, if applicable) as a 
result of the environmental review.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014]



Sec.  983.59  PHA-owned units.

    (a) Selection of PHA-owned units. The selection of PHA-owned units 
must be done in accordance with Sec.  983.51(e).
    (b) Inspection and determination of reasonable rent by independent 
entity. In the case of PHA-owned units, the following program services 
may not be performed by the PHA, but must be performed instead by an 
independent entity approved by HUD.
    (1) Determination of rent to owner for the PHA-owned units. Rent to 
owner for PHA-owned units is determined pursuant to Sec. Sec.  983.301 
through 983.305 in accordance with the same requirements as for other 
units, except that the independent entity approved by HUD must establish 
the initial contract rents based on PBV program requirements;
    (2) Initial and renewal HAP contract term. The term of the HAP 
contract and any HAP contract renewal for PHA-owned units must be agreed 
upon by the PHA and the independent entity approved by HUD. Any costs 
associated with implementing this requirement must be paid for by the 
PHA; and
    (3) Inspection of PHA-owned units as required by Sec.  983.103(f).
    (c) Nature of independent entity. The independent entity that 
performs these program services may be the unit of general local 
government for the PHA jurisdiction (unless the PHA is itself the unit 
of general local government or an agency of such government) or another 
HUD-approved public or private independent entity.
    (d) Payment to independent entity. (1) The PHA may compensate the 
independent entity from PHA ongoing administrative fee income (including 
amounts credited to the administrative fee reserve). The PHA may not use 
other program receipts to compensate the independent entity for its 
services.

[[Page 606]]

    (2) The PHA, and the independent entity, may not charge the family 
any fee for the services provided by the independent entity.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014]



                        Subpart C_Dwelling Units



Sec.  983.101  Housing quality standards.

    (a) HQS applicability. As defined in Sec.  983.3, housing quality 
standards (HQS) refers to the minimum quality standards developed by HUD 
in accordance with 24 CFR 5.703 of this title for housing assisted under 
the PBV program or a HUD approved alternative standard for the PHA under 
24 CFR 5.703(g).
    (b) Requirements for special housing types. For special housing 
types assisted under the PBV program, HQS applies to the PBV program 
except as specified in 24 CFR part 982, subpart M. Provisions contained 
within 24 CFR part 982 that are inapplicable to the PBV program pursuant 
to Sec.  983.2 are also inapplicable to special housing types under the 
PBV program.
    (c) Lead-based paint requirements. The Lead-based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-based Paint 
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at 24 CFR part 35, subparts A, B, H, and R, apply to the PBV 
program.
    (d) HQS enforcement. Parts 982 and 983 of this chapter do not create 
any right of the family or any party, other than HUD or the PHA, to 
require enforcement of the HQS requirements or to assert any claim 
against HUD or the PHA for damages, injunction, or other relief for 
alleged failure to enforce the HQS.
    (e) Additional PHA quality and design requirements. This section 
establishes the minimum federal housing quality standards for PBV 
housing. However, the PHA may elect to establish additional requirements 
for quality, architecture, or design of PBV housing, and any such 
additional requirements must be specified in the Agreement.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014; 
88 FR 30504, May 11, 2023]



Sec.  983.102  Housing accessibility for persons with disabilities.

    (a) Program accessibility. The housing must comply with program 
accessibility requirements of section 504 of the Rehabilitation Act of 
1973 (29 U.S.C. 794) and implementing regulations at 24 CFR part 8. The 
PHA shall ensure that the percentage of accessible dwelling units 
complies with the requirements of section 504 of the Rehabilitation Act 
of 1973 (29 U.S.C. 794), as implemented by HUD's regulations at 24 CFR 
part 8, subpart C.
    (b) Design and construction. Housing first occupied after March 13, 
1991, must comply with design and construction requirements of the Fair 
Housing Amendments Act of 1988 and implementing regulations at 24 CFR 
100.205, as applicable.



Sec.  983.103  Inspecting units.

    (a) Pre-selection inspection--(1) Inspection of site. The PHA must 
examine the proposed site before the proposal selection date.
    (2) Inspection of existing units. If the units to be assisted 
already exist, the PHA must inspect all the units before the proposal 
selection date, and must determine whether the units substantially 
comply with the HQS. To qualify as existing housing, units must 
substantially comply with the HQS on the proposal selection date. 
However, the PHA may not execute the HAP contract until the units fully 
comply with the HQS.
    (b) Pre-HAP contract inspections. The PHA must inspect each contract 
unit before execution of the HAP contract. The PHA may not enter into a 
HAP contract covering a unit until the unit fully complies with the HQS.
    (c) Turnover inspections. Before providing assistance to a new 
family in a contract unit, the PHA must inspect the unit. The PHA may 
not provide assistance on behalf of the family until the unit fully 
complies with the HQS.
    (d) Periodic inspections. (1) At least biennially during the term of 
the HAP contract, the PHA must inspect a random sample, consisting of at 
least 20 percent of the contract units in each building, to determine if 
the contract units and the premises are maintained in accordance with 
the HQS. Turnover

[[Page 607]]

inspections pursuant to paragraph (c) of this section are not counted 
toward meeting this inspection requirement.
    (2) If more than 20 percent of the sample of inspected contract 
units in a building fail the initial inspection, then the PHA must 
reinspect 100 percent of the contract units in the building.
    (3) A PHA may also use the procedures applicable to HCV units in 24 
CFR 982.406.
    (4) Instead of at least biennially, a small rural PHA as defined in 
Sec.  902.101 of this chapter must inspect the random sample of units in 
accordance with paragraph (d)(1) of this section at least once every 
three years.
    (e) Other inspections. (1) The PHA must inspect contract units 
whenever needed to determine that the contract units comply with the HQS 
and that the owner is providing maintenance, utilities, and other 
services in accordance with the HAP contract. The PHA must take into 
account complaints and any other information coming to its attention in 
scheduling inspections.
    (2) The PHA must conduct follow-up inspections needed to determine 
if the owner (or, if applicable, the family) has corrected an HQS 
violation, and must conduct inspections to determine the basis for 
exercise of contractual and other remedies for owner or family violation 
of the HQS. (Family HQS obligations are specified in 24 CFR 982.404(b).)
    (3) In conducting PHA supervisory quality control HQS inspections, 
the PHA should include a representative sample of both tenant-based and 
project-based units.
    (f) Inspecting PHA-owned units. (1) In the case of PHA-owned units, 
the inspections required under this section must be performed by an 
independent agency designated in accordance with Sec.  983.59, rather 
than by the PHA.
    (2) The independent entity must furnish a copy of each inspection 
report to the PHA and to the HUD field office where the project is 
located.
    (3) The PHA must take all necessary actions in response to 
inspection reports from the independent agency, including exercise of 
contractual remedies for violation of the HAP contract by the PHA owner.
    (g) Mixed-finance properties. In the case of a property assisted 
with project-based vouchers (authorized at 42 U.S.C. 1437f(o)(13)) that 
is subject to an alternative inspection, the PHA may rely upon 
inspections conducted at least triennially to demonstrate compliance 
with the inspection requirement of 24 CFR 982.405(a).

[70 FR 59913, Oct. 13, 2005, as amended at 81 FR 12377, Mar. 8, 2016; 88 
FR 30504, May 11, 2023]



  Subpart D_Requirements for Rehabilitated and Newly Constructed Units



Sec.  983.151  Applicability.

    This Subpart D applies to PBV assistance for newly constructed or 
rehabilitated housing. This Subpart D does not apply to PBV assistance 
for existing housing. Housing selected under this subpart cannot be 
selected as existing housing, as defined in Sec.  983.52, at a later 
date.



Sec.  983.152  Purpose and content of the Agreement to enter into HAP contract.

    (a) Purpose of Agreement. In the Agreement the owner agrees to 
develop the contract units to comply with the HQS, and the PHA agrees 
that, upon timely completion of such development in accordance with the 
terms of the Agreement, the PHA will enter into a HAP contract with the 
owner for the contract units.
    (b) Requirement. The PHA must enter into an Agreement with the owner 
at such time as provided in Sec.  983.153. The Agreement must be in the 
form required by HUD headquarters (see 24 CFR 982.162).
    (c) Commencement of construction or rehabilitation. The PHA may not 
enter into an agreement if commencement of construction or 
rehabilitation has commenced after proposal submission.
    (1) Construction begins when excavation or site preparation 
(including clearing of the land) begins for the housing;
    (2) Rehabilitation begins with the physical commencement of 
rehabilitation activity on the housing.

[[Page 608]]

    (d) Description of housing. (1) At a minimum, the Agreement must 
describe the following features of the housing to be developed (newly 
constructed or rehabilitated) and assisted under the PBV program:
    (i) Site;
    (ii) Location of contract units on site;
    (iii) Number of contract units by area (size) and number of bedrooms 
and bathrooms;
    (iv) Services, maintenance, or equipment to be supplied by the owner 
without charges in addition to the rent to owner;
    (v) Utilities available to the contract units, including a 
specification of utility services to be paid by owner (without charges 
in addition to rent) and utility services to be paid by the tenant;
    (vi) Indication of whether or not the design and construction 
requirements of the Fair Housing Act and implementing regulations at 24 
CFR 100.205 and the accessibility requirements of section 504 of the 
Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations 
at 24 CFR 8.22 and 8.23 apply to units under the Agreement. If these 
requirements are applicable, any required work item resulting from these 
requirements must be included in the description of work to be performed 
under the Agreement, as specified in paragraph (c)(i)(viii) of this 
section.
    (vii) Estimated initial rents to owner for the contract units;
    (viii) Description of the work to be performed under the Agreement. 
If the Agreement is for rehabilitation of units, the work description 
must include the rehabilitation work write up and, where determined 
necessary by the PHA, specifications, and plans. If the Agreement is for 
new construction, the work description must include the working drawings 
and specifications.
    (2) At a minimum, the housing must comply with the HQS. The PHA may 
elect to establish additional requirements for quality, architecture, or 
design of PBV housing, over and above the HQS, and any such additional 
requirement must be specified in the Agreement.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014]



Sec.  983.153  When Agreement is executed.

    The agreement must be promptly executed, in accordance with the 
following conditions:
    (a) Prohibition of excess subsidy. The PHA may not enter the 
Agreement with the owner until the subsidy layering review is completed 
(see Sec.  983.55).
    (b) Environmental approval. The PHA may not enter the Agreement with 
the owner until the environmental review is completed and the PHA has 
received the environmental approval (see Sec.  983.58).
    (c) Prohibition on construction or rehabilitation. The PHA shall not 
enter into the Agreement with the owner if construction or 
rehabilitation has commenced after proposal submission.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014]



Sec.  983.154  Conduct of development work.

    (a) Development requirements. The owner must carry out development 
work in accordance with the Agreement and the requirements of this 
section.
    (b) Labor standards. (1) In the case of an Agreement for development 
of nine or more contract units (whether or not completed in stages), the 
owner and the owner's contractors and subcontractors must pay Davis-
Bacon wages to laborers and mechanics employed in development of the 
housing.
    (2) The HUD prescribed form of Agreement shall include the labor 
standards clauses required by HUD, such as those involving Davis-Bacon 
wage rates.
    (3) The owner and the owner's contractors and subcontractors must 
comply with the Contract Work Hours and Safety Standards Act, Department 
of Labor regulations in 29 CFR part 5, and other applicable federal 
labor relations laws and regulations. The PHA must monitor compliance 
with labor standards.
    (c) Equal employment opportunity. The owner must comply with federal 
equal employment opportunity requirements of Executive Orders 11246 as 
amended (3 CFR, 1964-1965 Comp., p. 339), 11625 (3 CFR, 1971-1975 Comp., 
p. 616), 12432 (3

[[Page 609]]

CFR, 1983 Comp., p. 198) and 12138 (3 CFR, 1977 Comp., p. 393).
    (d) Eligibility to participate in federal programs and activities. 
The Agreement and HAP contract shall include a certification by the 
owner that the owner and other project principals (including the 
officers and principal members, shareholders, investors, and other 
parties having a substantial interest in the project) are not on the 
U.S. General Services Administration list of parties excluded from 
federal procurement and nonprocurement programs.
    (e) Disclosure of conflict of interest. The owner must disclose any 
possible conflict of interest that would be a violation of the 
Agreement, the HAP contract, or HUD regulations.

[70 FR 59913, Oct. 13, 2005, as amended at 85 FR 61568, Sept. 29, 2020]



Sec.  983.155  Completion of housing.

    (a) Completion deadline. The owner must develop and complete the 
housing in accordance with the Agreement. The Agreement must specify the 
deadlines for completion of the housing and for submission by the owner 
of the required evidence of completion.
    (b) Required evidence of completion--(1) Minimum submission. At a 
minimum, the owner must submit the following evidence of completion to 
the PHA in the form and manner required by the PHA:
    (i) Owner certification that the work has been completed in 
accordance with the HQS and all requirements of the Agreement; and
    (ii) Owner certification that the owner has complied with labor 
standards and equal opportunity requirements in development of the 
housing.
    (2) Additional documentation. At the discretion of the PHA, the 
Agreement may specify additional documentation that must be submitted by 
the owner as evidence of housing completion. For example, such 
documentation may include:
    (i) A certificate of occupancy or other evidence that the units 
comply with local requirements (such as code and zoning requirements); 
and
    (ii) An architect's certification that the housing complies with:
    (A) HUD housing quality standards;
    (B) State, local, or other building codes;
    (C) Zoning;
    (D) The rehabilitation work write-up (for rehabilitated housing) or 
the work description (for newly constructed housing); or
    (E) Any additional design or quality requirements pursuant to the 
Agreement.



Sec.  983.156  PHA acceptance of completed units.

    (a) PHA determination of completion. When the PHA has received owner 
notice that the housing is completed:
    (1) The PHA must inspect to determine if the housing has been 
completed in accordance with the Agreement, including compliance with 
the HQS and any additional requirement imposed by the PHA under the 
Agreement.
    (2) The PHA must determine if the owner has submitted all required 
evidence of completion.
    (3) If the work has not been completed in accordance with the 
Agreement, the PHA must not enter into the HAP contract.
    (b) Execution of HAP contract. If the PHA determines that the 
housing has been completed in accordance with the Agreement and that the 
owner has submitted all required evidence of completion, the PHA must 
submit the HAP contract for execution by the owner and must then execute 
the HAP contract.



Sec.  983.157  Broadband infrastructure.

    Any new construction or substantial rehabilitation, as substantial 
rehabilitation is defined by 24 CFR 5.100, of a building with more than 
4 rental units and where the date of the notice of owner proposal 
selection or the start of the rehabilitation while under a HAP contract 
is after January 19, 2017 must include installation of broadband 
infrastructure, as this term is also defined in 24 CFR 5.100, except 
where the owner determines and documents the determination that:
    (a) The location of the new construction or substantial 
rehabilitation makes installation of broadband infrastructure 
infeasible;

[[Page 610]]

    (b) The cost of installing broadband infrastructure would result in 
a fundamental alteration in the nature of its program or activity or in 
an undue financial burden; or
    (c) The structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.

[81 FR 92639, Dec. 20, 2016]



             Subpart E_Housing Assistance Payments Contract



Sec.  983.201  Applicability.

    Subpart E applies to all PBV assistance under part 983 (including 
assistance for existing, newly constructed, or rehabilitated housing).



Sec.  983.202  Purpose of HAP contract.

    (a) Requirement. The PHA must enter into a HAP contract with the 
owner. With the exception of single family scattered site projects, a 
HAP contract shall cover a single project. If multiple projects exist, 
each project shall be covered by a separate HAP contract. The HAP 
contract must be in such form as may be prescribed by HUD.
    (b) Purpose of HAP contract. (1) The purpose of the HAP contract is 
to provide housing assistance payments for eligible families.
    (2) The PHA makes housing assistance payments to the owner in 
accordance with the HAP contract. Housing assistance is paid for 
contract units leased and occupied by eligible families during the HAP 
contract term.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014]



Sec.  983.203  HAP contract information.

    The HAP contract must specify:
    (a) The total number of contract units by number of bedrooms;
    (b) Information needed to identify the site and the building or 
buildings where the contract units are located. The information must 
include the project's name, street address, city or county, state and 
zip code, block and lot number (if known), and any other information 
necessary to clearly identify the site and the building;
    (c) Information needed to identity the specific contract units in 
each building. The information must include the number of contract units 
in the building, the location of each contract unit, the area of each 
contract unit, and the number of bedrooms and bathrooms in each contract 
unit;
    (d) Services, maintenance, and equipment to be supplied by the owner 
without charges in addition to the rent to owner;
    (e) Utilities available to the contract units, including a 
specification of utility services to be paid by the owner (without 
charges in addition to rent) and utility services to be paid by the 
tenant;
    (f) Features provided to comply with program accessibility 
requirements of Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 
794) and implementing regulations at 24 CFR part 8;
    (g) The HAP contract term;
    (h) The number of units in any project that will exceed the 25 
percent per-project cap (as described in Sec.  983.56), which will be 
set-aside for occupancy by qualifying families (elderly and/or disabled 
families and families receiving supportive services); and
    (i) The initial rent to owner (for the first 12 months of the HAP 
contract term).

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36167, June 25, 2014]



Sec.  983.204  When HAP contract is executed.

    (a) PHA inspection of housing. (1) Before execution of the HAP 
contract, the PHA must inspect each contract unit in accordance with 
Sec.  983.103(b).
    (2) The PHA may not enter into a HAP contract for any contract unit 
until the PHA has determined that the unit complies with the HQS.
    (b) Existing housing. In the case of existing housing, the HAP 
contract must be executed promptly after PHA selection of the owner 
proposal and PHA inspection of the housing.
    (c) Newly constructed or rehabilitated housing. (1) In the case of 
newly constructed or rehabilitated housing the HAP contract must be 
executed after the PHA has inspected the completed units and has 
determined that the units have been completed in accordance with the 
Agreement and the

[[Page 611]]

owner has furnished all required evidence of completion (see Sec. Sec.  
983.155 and 983.156).
    (2) In the HAP contract, the owner certifies that the units have 
been completed in accordance with the Agreement. Completion of the units 
by the owner and acceptance of units by the PHA is subject to the 
provisions of the Agreement.



Sec.  983.205  Term of HAP contract.

    (a) 15-year initial term. The PHA may enter into a HAP contract with 
an owner for an initial term of up to 15 years for each contract unit. 
The length of the term of the HAP contract for any contract unit may not 
be less than one year, nor more than 15 years. In the case of PHA-owned 
units, the term of the initial HAP contract shall be determined in 
accordance with Sec.  983.59.
    (b) Extension of term. A PHA may agree to enter into an extension at 
the time of the initial HAP contract term or any time before expiration 
of the contract, for an additional term of up to 15 years if the PHA 
determines an extension is appropriate to continue providing affordable 
housing for low-income families. A HAP contract extension may not exceed 
15 years. A PHA may provide for multiple extensions; however, in no 
circumstance may such extensions exceed 15 years, cumulatively. 
Extensions after the initial extension are allowed at the end of any 
extension term provided that not more than 24 months prior to the 
expiration of the previous extension contract, the PHA agrees to extend 
the term, and that such extension is appropriate to continue providing 
affordable housing for low-income families or to expand housing 
opportunities. Extensions after the initial extension term shall not 
begin prior to the expiration date of the previous extension term. 
Subsequent extensions are subject to the same limitations described in 
this paragraph. Any extension of the term must be on the form and 
subject to the conditions prescribed by HUD at the time of the 
extension. In the case of PHA-owned units, any extension of the initial 
term of the HAP contract shall be determined in accordance with Sec.  
983.59.
    (c) Termination by PHA--insufficient funding. (1) The HAP contract 
must provide that the term of the PHA's contractual commitment is 
subject to the availability of sufficient appropriated funding (budget 
authority) as determined by HUD or by the PHA in accordance with HUD 
instructions. For purposes of this section, ``sufficient funding'' means 
the availability of appropriations, and of funding under the ACC from 
such appropriations, to make full payment of housing assistance payments 
payable to the owner for any contract year in accordance with the terms 
of the HAP contract.
    (2) The availability of sufficient funding must be determined by HUD 
or by the PHA in accordance with HUD instructions. If it is determined 
that there may not be sufficient funding to continue housing assistance 
payments for all contract units and for the full term of the HAP 
contract, the PHA has the right to terminate the HAP contract by notice 
to the owner for all or any of the contract units. Such action by the 
PHA shall be implemented in accordance with HUD instructions.
    (d) Termination by owner--reduction below initial rent. The owner 
may terminate the HAP contract, upon notice to the PHA, if the amount of 
the rent to owner for any contract unit, as adjusted in accordance with 
Sec.  983.302, is reduced below the amount of the initial rent to owner 
(rent to owner at the beginning of the HAP contract term). In this case, 
the assisted families residing in the contract units will be offered 
tenant-based voucher assistance.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36168, June 25, 2014]



Sec.  983.206  Statutory notice requirements: Contract termination or expiration.

    (a) Notices required in accordance with this section must be 
provided in the form prescribed by HUD.
    (b) Not less than one year before termination of a PBV or PBC HAP 
contract, the owner must notify the PHA and assisted tenants of the 
termination.
    (c) For purposes of this section, the term ``termination'' means the 
expiration of the HAP contract or an owner's refusal to renew the HAP 
contract.

[[Page 612]]

    (d)(1) If an owner does not give timely notice of termination, the 
owner must permit the tenants in assisted units to remain in their units 
for the required notice period with no increase in the tenant portion of 
their rent, and with no eviction as a result of an owner's inability to 
collect an increased tenant portion of rent.
    (2) An owner may renew the terminating contract for a period of time 
sufficient to give tenants one-year advance notice under such terms as 
HUD may require.

[79 FR 36168, June 25, 2014]



Sec.  983.207  HAP contract amendments (to add or substitute contract units).

    (a) Amendment to substitute contract units. At the discretion of the 
PHA and subject to all PBV requirements, the HAP contract may be amended 
to substitute a different unit with the same number of bedrooms in the 
same building for a previously covered contract unit. Prior to such 
substitution, the PHA must inspect the proposed substitute unit and must 
determine the reasonable rent for such unit.
    (b) Amendment to add contract units. At the discretion of the PHA, 
and provided that the total number of units in a project that will 
receive PBV assistance will not exceed 25 percent of the total number of 
dwelling units in the project (assisted and unassisted), (unless units 
were initially identified in the HAP contract as excepted from the 25 
percent limitation in accordance with Sec.  983.56(b)), or the 20 
percent of authorized budget authority as provided in Sec.  983.6, a HAP 
contract may be amended during the three-year period immediately 
following the execution date of the HAP contract to add additional PBV 
contract units in the same project. An amendment to the HAP contract is 
subject to all PBV requirements (e.g., rents are reasonable), except 
that a new PBV request for proposals is not required. The anniversary 
and expiration dates of the HAP contract for the additional units must 
be the same as the anniversary and expiration dates of the HAP contract 
term for the PBV units originally placed under HAP contract.
    (c) Staged completion of contract units. Even if contract units are 
placed under the HAP contract in stages commencing on different dates, 
there is a single annual anniversary for all contract units under the 
HAP contract. The annual anniversary for all contract units is the 
annual anniversary date for the first contract units placed under the 
HAP contract. The expiration of the HAP contract for all the contract 
units completed in stages must be concurrent with the end of the HAP 
contract term for the units originally placed under HAP contract.

[70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36168, 
June 25, 2014]



Sec.  983.208  Condition of contract units.

    (a) Owner maintenance and operation. (1) The owner must maintain and 
operate the contract units and premises in accordance with the HQS, 
including performance of ordinary and extraordinary maintenance.
    (2) The owner must provide all the services, maintenance, equipment, 
and utilities specified in the HAP contract with the PHA and in the 
lease with each assisted family.
    (3) At the discretion of the PHA, the HAP contract may also require 
continuing owner compliance during the HAP term with additional housing 
quality requirements specified by the PHA (in addition to, but not in 
place of, compliance with the HUD-prescribed HQS). Such additional 
requirements may be designed to assure continued compliance with any 
design, architecture, or quality requirement specified in the Agreement.
    (b) Remedies for HQS violation. (1) The PHA must vigorously enforce 
the owner's obligation to maintain contract units in accordance with the 
HQS. The PHA may not make any HAP payment to the owner for a contract 
unit covering any period during which the contract unit does not comply 
with the HQS.
    (2) If the PHA determines that a contract unit is not in accordance 
with the housing quality standards (or other HAP contract requirement), 
the PHA may exercise any of its remedies under

[[Page 613]]

the HAP contract for all or any contract units. Such remedies include 
termination of housing assistance payments, abatement or reduction of 
housing assistance payments, reduction of contract units, and 
termination of the HAP contract.
    (c) Maintenance and replacement--Owner's standard practice. 
Maintenance and replacement (including redecoration) must be in 
accordance with the standard practice for the building concerned as 
established by the owner.

[70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36168, June 25, 2014]



Sec.  983.209  Owner responsibilities.

    The owner is responsible for performing all of the owner 
responsibilities under the Agreement and the HAP contract. 24 CFR 
982.452 (Owner responsibilities) applies.

[70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36168, June 25, 2014]



Sec.  983.210  Owner certification.

    By execution of the HAP contract, the owner certifies that at such 
execution and at all times during the term of the HAP contract:
    (a) All contract units are in good and tenantable condition. The 
owner is maintaining the premises and all contract units in accordance 
with the HQS.
    (b) The owner is providing all the services, maintenance, equipment, 
and utilities as agreed to under the HAP contract and the leases with 
assisted families.
    (c) Each contract unit for which the owner is receiving housing 
assistance payments is leased to an eligible family referred by the PHA, 
and the lease is in accordance with the HAP contract and HUD 
requirements.
    (d) To the best of the owner's knowledge, the members of the family 
reside in each contract unit for which the owner is receiving housing 
assistance payments, and the unit is the family's only residence.
    (e) The owner (including a principal or other interested party) is 
not the spouse, parent, child, grandparent, grandchild, sister, or 
brother of any member of a family residing in a contract unit.
    (f) The amount of the housing assistance payment is the correct 
amount due under the HAP contract.
    (g) The rent to owner for each contract unit does not exceed rents 
charged by the owner for other comparable unassisted units.
    (h) Except for the housing assistance payment and the tenant rent as 
provided under the HAP contract, the owner has not received and will not 
receive any payment or other consideration (from the family, the PHA, 
HUD, or any other public or private source) for rental of the contract 
unit.
    (i) The family does not own or have any interest in the contract 
unit. The certification required by this section does not apply in the 
case of an assisted family's membership in a cooperative.
    (j) Repair work on a project selected as an existing project that is 
performed after HAP execution within such post-execution period as 
specified by HUD may constitute development activity, and if determined 
to be development activity, the repair work undertaken shall be in 
compliance with Davis-Bacon wage requirements.

[70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36168, 
June 25, 2014]



Sec.  983.211  Removal of unit from HAP contract.

    (a) Units occupied by families whose income has increased during 
their tenancy resulting in the tenant rent equaling the rent to the 
owner, shall be removed from the HAP Contract 180 days following the 
last housing assistance payment on behalf of the family.
    (b) If the project is fully assisted, a PHA may reinstate the unit 
removed under paragraph (a) of this section to the HAP contract after 
the ineligible family vacates the property. If the project is partially 
assisted, a PHA may substitute a different unit for the unit removed 
under paragraph (a) of this section to the HAP contract when the first 
eligible substitute becomes available.
    (c) A reinstatement or substitution of units under the HAP contract, 
in accordance with paragraph (b) of this section, must be permissible 
under Sec.  983.207. The anniversary and expirations dates of the HAP 
contract for the

[[Page 614]]

unit must be the same as it was when it was originally placed under the 
HAP contract. The PHA must refer eligible families to the owner in 
accordance with the PHA's selection policies.

[79 FR 36168, June 25, 2014]



                           Subpart F_Occupancy



Sec.  983.251  How participants are selected.

    (a) Who may receive PBV assistance? (1) The PHA may select families 
who are participants in the PHA's tenant-based voucher program and 
families who have applied for admission to the voucher program.
    (2) Except for voucher participants (determined eligible at original 
admission to the voucher program), the PHA may only select families 
determined eligible for admission at commencement of PBV assistance.
    (3) The protections for victims of domestic violence, dating 
violence, sexual assault, or stalking in 24 CFR part 5, subpart L, apply 
to admission to the project-based program.
    (4) A PHA may not approve a tenancy if the owner (including a 
principal or other interested party) of a unit is the parent, child, 
grandparent, grandchild, sister, or brother of any member of the family, 
unless the PHA determines that approving the unit would provide 
reasonable accommodation for a family member who is a person with 
disabilities.
    (b) Protection of in-place families. (1) The term ``in-place 
family'' means an eligible family residing in a proposed contract unit 
on the proposal selection date.
    (2) In order to minimize displacement of in-place families, if a 
unit to be placed under contract that is either an existing unit or one 
requiring rehabilitation is occupied by an eligible family on the 
proposal selection date, the in-place family must be placed on the PHA's 
waiting list (if the family is not already on the list) and, once its 
continued eligibility is determined, given an absolute selection 
preference and referred to the project owner for an appropriately sized 
PBV unit in the project. (However, the PHA may deny assistance for the 
grounds specified in 24 CFR 982.552 and 982.553.) Admission of such 
families is not subject to income-targeting under 24 CFR 
982.201(b)(2)(i), and such families must be referred to the owner from 
the PHA's waiting list. A PHA shall give such families priority for 
admission to the PBV program. This protection does not apply to families 
that are not eligible to participate in the program on the proposal 
selection date.
    (c) Selection from PHA waiting list. (1) Applicants who will occupy 
PBV units must be selected by the PHA from the PHA waiting list. The PHA 
must select applicants from the waiting list in accordance with the 
policies in the PHA administrative plan.
    (2) The PHA may use a separate waiting list for admission to PBV 
units or may use the same waiting list for both tenant-based assistance 
and PBV assistance. If the PHA chooses to use a separate waiting list 
for admission to PBV units, the PHA must offer to place applicants who 
are listed on the waiting list for tenant-based assistance on the 
waiting list for PBV assistance.
    (3) The PHA may use separate waiting lists for PBV units in 
individual projects or buildings (or for sets of such units) or may use 
a single waiting list for the PHA's whole PBV program. In either case, 
the waiting list may establish criteria or preferences for occupancy of 
particular units.
    (4) The PHA may merge the waiting list for PBV assistance with the 
PHA waiting list for admission to another assisted housing program.
    (5) The PHA may place families referred by the PBV owner on its PBV 
waiting list.
    (6) Not less than 75 percent of the families admitted to a PHA's 
tenant-based and project-based voucher programs during the PHA fiscal 
year from the PHA waiting list shall be extremely low-income families. 
The income-targeting requirements at 24 CFR 982.201(b)(2) apply to the 
total of admissions to the PHA's project-based voucher program and 
tenant-based voucher program during the PHA fiscal year from the PHA 
waiting list for such programs.
    (7) In selecting families to occupy PBV units with special 
accessibility features for persons with disabilities, the PHA must first 
refer families who

[[Page 615]]

require such accessibility features to the owner (see 24 CFR 8.26 and 
100.202).
    (d) Preference for services offered. In selecting families, PHAs may 
give preference to disabled families who need services offered at a 
particular project in accordance with the limits under this paragraph. 
The prohibition on granting preferences to persons with a specific 
disability at 24 CFR 982.207(b)(3) continues to apply.
    (1) Preference limits. (i) The preference is limited to the 
population of families (including individuals) with disabilities that 
significantly interfere with their ability to obtain and maintain 
themselves in housing;
    (ii) Who, without appropriate supportive services, will not be able 
to obtain or maintain themselves in housing; and
    (iii) For whom such services cannot be provided in a nonsegregated 
setting.
    (2) Disabled residents shall not be required to accept the 
particular services offered at the project.
    (3) In advertising the project, the owner may advertise the project 
as offering services for a particular type of disability; however, the 
project must be open to all otherwise eligible persons with disabilities 
who may benefit from services provided in the project.
    (e) Offer of PBV assistance. (1) If a family refuses the PHA's offer 
of PBV assistance, such refusal does not affect the family's position on 
the PHA waiting list for tenant-based assistance.
    (2) If a PBV owner rejects a family for admission to the owner's PBV 
units, such rejection by the owner does not affect the family's position 
on the PHA waiting list for tenant-based assistance.
    (3) The PHA may not take any of the following actions against an 
applicant who has applied for, received, or refused an offer of PBV 
assistance:
    (i) Refuse to list the applicant on the PHA 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 PHA selection policy;
    (iv) Remove the applicant from the waiting list for tenant-based 
voucher assistance.

[70 FR 59913, Oct. 13, 2005, as amended at 73 FR 72345, Nov. 28, 2008; 
75 FR 66264, Oct. 27, 2010; 79 FR 36168, June 25, 2014; 81 FR 80818, 
Nov. 16, 2016]



Sec.  983.252  PHA information for accepted family.

    (a) Oral briefing. When a family accepts an offer of PBV assistance, 
the PHA must give the family an oral briefing. The briefing must include 
information on the following subjects:
    (1) A description of how the program works; and
    (2) Family and owner responsibilities.
    (b) Information packet. The PHA must give the family a packet that 
includes information on the following subjects:
    (1) How the PHA determines the total tenant payment for a family;
    (2) Family obligations under the program; and
    (3) Applicable fair housing information.
    (c) Providing information for persons with disabilities. (1) If the 
family head or spouse is a disabled person, the PHA must take 
appropriate steps to assure effective communication, in accordance with 
24 CFR 8.6, in conducting the oral briefing and in providing the written 
information packet, including in alternative formats.
    (2) The PHA shall have some mechanism for referring to accessible 
PBV units a family that includes a person with mobility impairment.
    (d) Providing information for persons with limited English 
proficiency. The PHA should take reasonable steps to assure meaningful 
access by persons with limited English proficiency in accordance with 
obligations contained in Title VI of the Civil Rights Act of 1964 and 
Executive Order 13166.



Sec.  983.253  Leasing of contract units.

    (a) Owner selection of tenants. (1) During the term of the HAP 
contract, the owner must lease contract units only to eligible families 
selected and referred by the PHA from the PHA waiting list.
    (2) The owner is responsible for adopting written tenant selection 
procedures that are consistent with the

[[Page 616]]

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.
    (3) An owner must promptly notify in writing any rejected applicant 
of the grounds for any rejection.
    (4) The owner must comply with 24 CFR part 5, subpart L (Protection 
for Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking).
    (b) Size of unit. The contract unit leased to each family must be 
appropriate for the size of the family under the PHA's subsidy 
standards.
    (c) The protections for victims of domestic violence, dating 
violence, sexual assault, or stalking in 24 CFR part 5, subpart L, apply 
to tenant screening.

[70 FR 59913, Oct. 13, 2005, as amended at 81 FR 80818, Nov. 16, 2016]



Sec.  983.254  Vacancies.

    (a) Filling vacant units. (1) The owner must promptly notify the PHA 
of any vacancy or expected vacancy in a contract unit. After receiving 
the owner notice, the PHA must make every reasonable effort to refer 
promptly a sufficient number of families for the owner to fill such 
vacancies.
    (2) The owner must lease vacant contract units only to eligible 
families on the PHA waiting list referred by the PHA.
    (3) The PHA and the owner must make reasonable good faith efforts to 
minimize the likelihood and length of any vacancy.
    (b) Reducing number of contract units. If any contract units have 
been vacant for a period of 120 or more days since owner notice of 
vacancy (and notwithstanding the reasonable good faith efforts of the 
PHA to fill such vacancies), the PHA may give notice to the owner 
amending the HAP contract to reduce the number of contract units by 
subtracting the number of contract units (by number of bedrooms) that 
have been vacant for such period.



Sec.  983.255  Tenant screening.

    (a) PHA option. (1) The PHA has no responsibility or liability to 
the owner or any other person for the family's behavior or suitability 
for tenancy. However, the PHA may opt to screen applicants for family 
behavior or suitability for tenancy and may deny admission to an 
applicant based on such screening.
    (2) The PHA must conduct any such screening of applicants in 
accordance with policies stated in the PHA administrative plan.
    (b) Owner responsibility. (1) The owner is responsible for screening 
and selection of the family to occupy the owner's unit.
    (2) The owner is responsible for screening of 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 other residents to the peaceful 
enjoyment of their housing;
    (iv) Drug-related criminal activity or other criminal activity that 
is a threat to the health, safety, or property of others; and
    (v) Compliance with other essential conditions of tenancy;
    (c) Providing tenant information to owner. (1) The PHA must give the 
owner:
    (i) The family's current and prior address (as shown in the PHA 
records); and
    (ii) The name and address (if known to the PHA) of the landlord at 
the family's current and any prior address.
    (2) When a family wants to lease a dwelling unit, the PHA may offer 
the owner other information in the PHA possession about the family, 
including information about the tenancy history of family members or 
about drug trafficking and criminal activity by family members.
    (3) The PHA must give the family a description of the PHA policy on 
providing information to owners.
    (4) The PHA policy must provide that the PHA will give the same 
types of information to all owners.
    (d) The protections for victims of domestic violence, dating 
violence, sexual assault, or stalking in 24 CFR part 5, subpart L, apply 
to tenant screening.

[70 FR 59913, Oct. 13, 2005, as amended at 73 FR 72345, Nov. 28, 2008; 
75 FR 66264, Oct. 27, 2010; 81 FR 80818, Nov. 16, 2016]

[[Page 617]]



Sec.  983.256  Lease.

    (a) Tenant's legal capacity. The tenant must have legal capacity to 
enter a lease under state and local law. ``Legal capacity'' means that 
the tenant is bound by the terms of the lease and may enforce the terms 
of the lease against the owner.
    (b) Form of lease. (1) The tenant and the owner must enter a written 
lease for the unit. The lease must be executed by the owner and the 
tenant.
    (2) If the owner uses a standard lease form for rental to unassisted 
tenants in the locality or the premises, the lease must be in such 
standard form, except as provided in paragraph (b)(4) of this section. 
If the owner does not use a standard lease form for rental to unassisted 
tenants, the owner may use another form of lease, such as a PHA model 
lease.
    (3) In all cases, the lease must include a HUD-required tenancy 
addendum. The tenancy addendum must include, word-for-word, all 
provisions required by HUD.
    (4) The PHA may review the owner's lease form to determine if the 
lease complies with state and local law. The PHA may decline to approve 
the tenancy if the PHA determines that the lease does not comply with 
state or local law.
    (c) Required information. The lease must specify all of the 
following:
    (1) The names of the owner and the tenant;
    (2) The unit rented (address, apartment number, if any, and any 
other information needed to identify the leased contract unit);
    (3) The term of the lease (initial term and any provision for 
renewal);
    (4) The amount of the tenant rent to owner. The tenant rent to owner 
is subject to change during the term of the lease in accordance with HUD 
requirements;
    (5) A specification of what services, maintenance, equipment, and 
utilities are to be provided by the owner; and
    (6) The amount of any charges for food, furniture, or supportive 
services.
    (d) Tenancy addendum. (1) The tenancy addendum in the lease shall 
state:
    (i) The program tenancy requirements (as specified in this part);
    (ii) The composition of the household as approved by the PHA (names 
of family members and any PHA-approved live-in aide).
    (2) All provisions in the HUD-required tenancy addendum must be 
included in the lease. The terms of the tenancy addendum shall prevail 
over other provisions of the lease.
    (e) Changes in lease. (1) If the tenant and the owner agree to any 
change in the lease, such change must be in writing, and the owner must 
immediately give the PHA a copy of all such changes.
    (2) The owner must notify the PHA in advance of any proposed change 
in lease requirements governing the allocation of tenant and owner 
responsibilities for utilities. Such changes may be made only if 
approved by the PHA and in accordance with the terms of the lease 
relating to its amendment. The PHA must redetermine reasonable rent, in 
accordance with Sec.  983.303(c), based on any change in the allocation 
of responsibility for utilities between the owner and the tenant, and 
the redetermined reasonable rent shall be used in calculation of rent to 
owner from the effective date of the change.
    (f) Term of lease. (1) The initial lease term 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 for good cause;
    (ii) The tenant terminates the lease;
    (iii) The owner and the tenant agree to terminate the lease;
    (iv) The PHA terminates the HAP contract; or
    (v) The PHA terminates assistance for the family.
    (g) Lease provisions governing absence from the unit. The lease may 
specify a maximum period of family absence from the unit that may be 
shorter than the maximum period permitted by PHA policy. (PHA 
termination-of-assistance

[[Page 618]]

actions due to family absence from the unit are subject to 24 CFR 
982.312, except that the unit is not terminated from the HAP contract if 
the family is absent for longer than the maximum period permitted.)

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36168, June 25, 2014]



Sec.  983.257  Owner termination of tenancy and eviction.

    (a) In general. 24 CFR 982.310 applies with the exception that Sec.  
982.310(d)(1)(iii) and (iv) do not apply to the PBV program. (In the PBV 
program, ``good cause'' does not include a business or economic reason 
or desire to use the unit for an individual, family, or non-residential 
rental purpose.) 24 CFR 5.858 through 5.861 on eviction for drug and 
alcohol abuse apply to this part. 24 CFR part 5, subpart L (Protection 
for Victims of Domestic Violence, Dating Violence, Sexual Assault, or 
Stalking) applies to this part.
    (b) If a family resides in a project-based unit excepted from the 25 
percent per-project cap on project-basing because of participation in an 
FSS or other supportive services program, and the family fails without 
good cause to complete its FSS contract of participation or supportive 
services requirement, such failure is grounds for lease termination by 
the owner.

[70 FR 59913, Oct. 13, 2005, as amended at 73 FR 72345, Nov. 28, 2008; 
75 FR 66265, Oct. 27, 2010; 79 FR 36169, June 25, 2014; 81 FR 80818, 
Nov. 16, 2016]



Sec.  983.258  Continuation of housing assistance payments.

    Housing assistance payments shall continue until the tenant rent 
equals the rent to owner. The cessation of housing assistance payments 
at such point will not affect the family's other rights under its lease, 
nor will such cessation preclude the resumption of payments as a result 
of later changes in income, rents, or other relevant circumstances if 
such changes occur within 180 days following the date of the last 
housing assistance payment by the PHA. After the 180-day period, the 
unit shall be removed from the HAP contract pursuant to Sec.  983.211.

[79 FR 36169, June 25, 2014]



Sec.  983.259  Security deposit: amounts owed by tenant.

    (a) The owner may collect a security deposit from the tenant.
    (b) The PHA 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 contract unit, the owner, 
subject to state and local law, may use the security deposit, including 
any interest on the deposit, in accordance with the lease, as 
reimbursement for any unpaid tenant rent, damages to the unit, or other 
amounts which 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 used to reimburse the owner, the owner must 
promptly refund the full amount of the 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. However, the PHA has no liability or responsibility for 
payment of any amount owed by the family to the owner.

[70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36169, June 25, 2014]



Sec.  983.260  Overcrowded, under-occupied, and accessible units.

    (a) Family occupancy of wrong-size or accessible unit. The PHA 
subsidy standards determine the appropriate unit size for the family 
size and composition. If the PHA determines that a family is occupying 
a:
    (1) Wrong-size unit, or
    (2) Unit with accessibility features that the family does not 
require, and the unit is needed by a family that requires the 
accessibility features, the PHA must promptly notify the family and the 
owner of this determination, and of the PHA's offer of continued 
assistance in another unit pursuant to paragraph (b) of this section.
    (b) PHA offer of continued assistance. (1) If a family is occupying 
a:
    (i) Wrong-size unit, or

[[Page 619]]

    (ii) Unit with accessibility features that the family does not 
require, and the unit is needed by a family that requires the 
accessibility features, the PHA must offer the family the opportunity to 
receive continued housing assistance in another unit.
    (2) The PHA policy on such continued housing assistance must be 
stated in the administrative plan and may be in the form of:
    (i) Project-based voucher assistance in an appropriate-size unit (in 
the same project or in another project);
    (ii) Other project-based housing assistance (e.g., by occupancy of a 
public housing unit);
    (iii) Tenant-based rental assistance under the voucher program; or
    (iv) Other comparable public or private tenant-based assistance 
(e.g., under the HOME program).
    (c) PHA termination of housing assistance payments. (1) If the PHA 
offers the family the opportunity to receive tenant-based rental 
assistance under the voucher program, the PHA must terminate the housing 
assistance payments for a wrong-sized or accessible unit at the earlier 
of the expiration of the term of the family's voucher (including any 
extension granted by the PHA) or the date upon which the family vacates 
the unit. If the family does not move out of the wrong-sized unit or 
accessible unit by the expiration date of the term of the family's 
voucher, the PHA must remove the unit from the HAP contract.
    (2) If the PHA offers the family the opportunity for another form of 
continued housing assistance in accordance with paragraph (b)(2) of this 
section (not in the tenant-based voucher program), and the family does 
not accept the offer, does not move out of the PBV unit within a 
reasonable time as determined by the PHA, or both, the PHA must 
terminate the housing assistance payments for the wrong-sized or 
accessible unit, at the expiration of a reasonable period as determined 
by the PHA, and remove the unit from the HAP contract.

[70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36169, 
June 25, 2014]



Sec.  983.261  Family right to move.

    (a) The family may terminate the assisted lease at any time after 
the first year of occupancy. The family must give the owner advance 
written notice of intent to vacate (with a copy to the PHA) in 
accordance with the lease.
    (b) If the family has elected to terminate the lease in this manner, 
the PHA must offer the family the opportunity for continued tenant-based 
rental assistance, in the form of either assistance under the voucher 
program or other comparable tenant-based rental assistance.
    (c) Before providing notice to terminate the lease under paragraph 
(a) of this section, a family must contact the PHA to request comparable 
tenant-based rental assistance if the family wishes to move with 
continued assistance. If voucher or other comparable tenant-based rental 
assistance is not immediately available upon termination of the family's 
lease of a PBV unit, the PHA must give the family priority to receive 
the next available opportunity for continued tenant-based rental 
assistance.
    (1) The above policies do not apply when the family or a member of 
the family is or has been the victim of domestic violence, dating 
violence, sexual assault, or stalking, as provided in 24 CFR part 5, 
subpart L, and the move is needed to protect the health or safety of the 
family or family member, or any family member has been the victim of a 
sexual assault that occurred on the premises during the 90-calendar-day 
period preceding the family's request to move. A PHA may not terminate 
assistance if the family, with or without prior notification to the PHA, 
moves out of a unit in violation of the lease, if such move occurs to 
protect the health or safety of a family member who is or has been the 
victim of domestic violence, dating violence, sexual assault, or 
stalking and who reasonably believed he or she was threatened with 
imminent harm from further violence if he or she remained in the 
dwelling unit, or any family member has been the victim of a sexual 
assault that occurred on the premises during the 90-calendar-day period 
preceding the family's request to move.

[[Page 620]]

    (2) If a family breaks up as a result of an occurrence of domestic 
violence, dating violence, sexual assault, or stalking, as provided in 
24 CFR part 5, subpart L, the PHA may offer the victim the opportunity 
for continued tenant-based rental assistance.
    (d) If the family terminates the assisted lease before the end of 
one year, the family relinquishes the opportunity for continued tenant-
based assistance.

[70 FR 59913, Oct. 13, 2005. Redesignated at 79 FR 36169, June 25, 2014; 
81 FR 80818, Nov. 16, 2016]



Sec.  983.262  When occupancy may exceed 25 percent cap on 
the number of PBV units in each project.

    (a) Except as provided in Sec.  983.56(b), the PHA may not pay 
housing assistance under the HAP contract for contract units in excess 
of the 25 percent cap pursuant to Sec.  983.56(a).
    (b) In referring families to the owner for admission to excepted 
units, the PHA must give preference to elderly and/or disabled families, 
or to families receiving supportive services.
    (c) If a family at the time of initial tenancy is receiving and 
while the resident of an excepted unit has received FSS supportive 
services or any other service as defined in the PHA administrative plan, 
and successfully completes the FSS contract of participation or the 
supportive services requirement, the unit continues to count as an 
excepted unit for as long as the family resides in the unit.
    (d) A family (or the remaining members of the family) residing in an 
excepted unit that no longer meets the criteria for a ``qualifying 
family'' in connection with the 25 percent per project cap exception 
(i.e., a family that does not successfully complete its FSS contract of 
participation or the supportive services requirement as defined in the 
PHA administrative plan or the remaining members of a family that no 
longer qualifies for elderly or disabled family status where the PHA 
does not exercise its discretion under paragraph (e) of this section) 
must vacate the unit within a reasonable period of time established by 
the PHA, and the PHA shall cease paying housing assistance payments on 
behalf of the non-qualifying family. If the family fails to vacate the 
unit within the established time, the unit must be removed from the HAP 
contract unless the project is partially assisted, and it is possible 
for the HAP contract to be amended to substitute a different unit in the 
project in accordance with Sec.  983.207(a); or the owner terminates the 
lease and evicts the family. The housing assistance payments for a 
family residing in an excepted unit that is not in compliance with its 
family obligations (e.g., a family fails, without good cause, to 
successfully complete its FSS contract of participation or supportive 
services requirement) shall be terminated by the PHA.
    (e) The PHA may allow a family that initially qualified for 
occupancy of an excepted unit based on elderly or disabled family status 
to continue to reside in a unit, where through circumstances beyond the 
control of the family (e.g., death of the elderly or disabled family 
member or long term or permanent hospitalization or nursing care), the 
elderly or disabled family member no longer resides in the unit. In this 
case, the unit may continue to count as an excepted unit for as long as 
the family resides in that unit. Once the family vacates the unit, in 
order to continue as an excepted unit under the HAP contact, the unit 
must be made available to and occupied by a qualifying family.

[70 FR 59913, Oct. 13, 2005. Redesignated and amended at 79 FR 36169, 
June 25, 2014]



                         Subpart G_Rent to Owner



Sec.  983.301  Determining the rent to owner.

    (a) Initial and redetermined rents. (1) The amount of the initial 
and redetermined rent to owner is determined in accordance with this 
section and Sec.  983.302.
    (2) The amount of the initial rent to owner is established at the 
beginning of the HAP contract term. For rehabilitated or newly 
constructed housing, the Agreement states the estimated amount of the 
initial rent to owner, but the actual amount of the initial rent to 
owner is established at the beginning of the HAP contract term.

[[Page 621]]

    (3) The rent to owner is also redetermined in accordance with Sec.  
983.302.
    (b) Amount of rent to owner. Except for certain tax credit units as 
provided in paragraph (c) of this section, the rent to owner must not 
exceed the lowest of:
    (1) An amount determined by the PHA, not to exceed 110 percent of 
the applicable fair market rent (or any exception payment standard 
approved by the Secretary) for the unit bedroom size minus any utility 
allowance;
    (2) The reasonable rent; or
    (3) The rent requested by the owner.
    (c) Rent to owner for certain tax credit units. (1) This paragraph 
(c) applies if:
    (i) A contract unit receives a low-income housing tax credit under 
the Internal Revenue Code of 1986 (see 26 U.S.C. 42);
    (ii) The contract unit is not located in a qualified census tract;
    (iii) In the same building, there are comparable tax credit units of 
the same unit bedroom size as the contract unit and the comparable tax 
credit units do not have any form of rental assistance other than the 
tax credit; and
    (iv) The tax credit rent exceeds the applicable fair market rental 
(or any exception payment standard) as determined in accordance with 
paragraph (b) of this section.
    (2) In the case of a contract unit described in paragraph (c)(1) of 
this section, the rent to owner must not exceed the lowest of:
    (i) The tax credit rent minus any utility allowance;
    (ii) The reasonable rent; or
    (iii) The rent requested by the owner.
    (3) The ``tax credit rent'' is the rent charged for comparable units 
of the same bedroom size in the building that also receive the low-
income housing tax credit but do not have any additional rental 
assistance (e.g., additional assistance such as tenant-based voucher 
assistance).
    (4) A ``qualified census tract'' is any census tract (or equivalent 
geographic area defined by the Bureau of the Census) in which:
    (i) At least 50 percent of households have an income of less than 60 
percent of Area Median Gross Income (AMGI); or
    (ii) Where the poverty rate is at least 25 percent and where the 
census tract is designated as a qualified census tract by HUD.
    (d) Rent to owner for other tax credit units. Except in the case of 
a tax-credit unit described in paragraph (c)(1) of this section, the 
rent to owner for all other tax credit units may be determined by the 
PHA pursuant to paragraph (b) of this section.
    (e) Reasonable rent. The PHA shall determine the reasonable rent in 
accordance with Sec.  983.303. The rent to the owner for each contract 
unit may at no time exceed the reasonable rent, except in cases where, 
the PHA has elected within the HAP contract not to reduce rents below 
the initial rent to owner and, upon redetermination of the rent to 
owner, the reasonable rent would result in a rent below the initial 
rent. If the PHA has not elected within the HAP contract to establish 
the initial rent to owner as the rent floor, the rent to owner shall not 
at any time exceed the reasonable rent.
    (f) Use of FMRs and utility allowance schedule in determining the 
amount of rent to owner--(1) Amounts used. (i) Determination of initial 
rent (at beginning of HAP contract term). When determining the initial 
rent to owner, the PHA shall use the most recently published FMR in 
effect and the utility allowance schedule in effect at execution of the 
HAP contract. At its discretion, the PHA may use the amounts in effect 
at any time during the 30-day period immediately before the beginning 
date of the HAP contract.
    (ii) Redetermination of rent to owner. When redetermining the rent 
to owner, the PHA shall use the most recently published FMR and the PHA 
utility allowance schedule in effect at the time of redetermination. At 
its discretion, the PHA may use the amounts in effect at any time during 
the 30-day period immediately before the redetermination date.
    (2) Exception payment standard and PHA utility allowance schedule. 
(i) Any HUD-approved exception payment standard amount under 24 CFR 
982.503(c) applies to both the tenant-

[[Page 622]]

based and project-based voucher programs. HUD will not approve a 
different exception payment standard amount for use in the PBV program.
    (ii) The PHA may not establish or apply different utility allowance 
amounts for the PBV program. The same PHA utility allowance schedule 
applies to both the tenant-based and PBV programs.
    (g) PHA-owned units. For PHA-owned PBV units, the initial rent to 
owner and the annual redetermination of rent at the annual anniversary 
of the HAP contract are determined by the independent entity approved by 
HUD in accordance with Sec.  983.59. The PHA must use the rent to owner 
established by the independent entity.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36169, June 25, 2014; 
81 FR 80583, Nov. 16, 2016]



Sec.  983.302  Redetermination of rent to owner.

    (a) The PHA must redetermine the rent to owner:
    (1) Upon the owner's request; or
    (2) When there is a 10 percent decrease in the published FMR.
    (b) Rent increase. (1) The PHA may not make any rent increase other 
than an increase in the rent to owner as determined pursuant to Sec.  
983.301. (Provisions for special adjustments of contract rent pursuant 
to 42 U.S.C. 1437f(b)(2)(B) do not apply to the voucher program.)
    (2) The owner must request an increase in the rent to owner at the 
annual anniversary of the HAP contract by written notice to the PHA. The 
length of the required notice period of the owner request for a rent 
increase at the annual anniversary may be established by the PHA. The 
request must be submitted in the form and manner required by the PHA.
    (3) The PHA may not approve and the owner may not receive any 
increase of rent to owner until and unless the owner has complied with 
all requirements of the HAP contract, including compliance with the HQS. 
The owner may not receive any retroactive increase of rent for any 
period of noncompliance.
    (c) Rent decrease. (1) If there is a decrease in the rent to owner, 
as established in accordance with Sec.  983.301, the rent to owner must 
be decreased, regardless of whether the owner requested a rent 
adjustment.
    (2) If the PHA has elected within the HAP contract to not reduce 
rents below the initial rent to owner, the rent to owner shall not be 
reduced below the initial rent to owner for dwelling units under the 
initial HAP contract, except:
    (i) To correct errors in calculations in accordance with HUD 
requirements;
    (ii) If additional housing assistance has been combined with PBV 
assistance after the execution of the initial HAP contract and a rent 
decrease is required pursuant to Sec.  983.55; or
    (iii) If a decrease in rent to owner is required based on changes in 
the allocation of responsibility for utilities between the owner and the 
tenant.
    (d) Notice of rent redetermination. Rent to owner is redetermined by 
written notice by the PHA to the owner specifying the amount of the 
redetermined rent (as determined in accordance with Sec. Sec.  983.301 
and 983.302). The PHA notice of the rent adjustment constitutes an 
amendment of the rent to owner specified in the HAP contract.
    (e) Contract year and annual anniversary of the HAP contract. (1) 
The contract year is the period of 12 calendar months preceding each 
annual anniversary of the HAP contract during the HAP contract term. The 
initial contract year is calculated from the first day of the first 
calendar month of the HAP contract term.
    (2) The annual anniversary of the HAP contract is the first day of 
the first calendar month after the end of the preceding contract year. 
The adjusted rent to owner amount applies for the period of 12 calendar 
months from the annual anniversary of the HAP contract.
    (3) See Sec.  983.207(c) for information on the annual anniversary 
of the HAP contract for contract units completed in stages.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36170, June 25, 2014; 
81 FR 80583, Nov. 16, 2016]

[[Page 623]]



Sec.  983.303  Reasonable rent.

    (a) Comparability requirement. At all times during the term of the 
HAP contract, the rent to the owner for a contract unit may not exceed 
the reasonable rent as determined by the PHA, except that where the PHA 
has elected in the HAP contract to not reduce rents below the initial 
rent under the initial HAP contract, the rent to owner shall not be 
reduced below the initial rent in accordance with Sec.  983.302(e)(2).
    (b) Redetermination. The PHA must redetermine the reasonable rent:
    (1) Whenever there is a 10 percent decrease in the published FMR in 
effect 60 days before the contract anniversary (for the unit sizes 
specified in the HAP contract) as compared with the FMR in effect 1 year 
before the contract anniversary.
    (2) Whenever the PHA approves a change in the allocation of 
responsibility for utilities between the owner and the tenant;
    (3) Whenever the HAP contract is amended to substitute a different 
contract unit in the same building or project; and
    (4) Whenever there is any other change that may substantially affect 
the reasonable rent.
    (c) How to determine reasonable rent. (1) The reasonable rent of a 
contract unit must be determined by comparison to rent for other 
comparable unassisted units.
    (2) In determining the reasonable rent, the PHA must consider 
factors that affect market rent, such as:
    (i) The location, quality, size, unit type, and age of the contract 
unit; and
    (ii) Amenities, housing services, maintenance, and utilities to be 
provided by the owner.
    (d) Comparability analysis. (1) For each unit, the PHA comparability 
analysis must use at least three comparable units in the private 
unassisted market, which may include comparable unassisted units in the 
premises or project.
    (2) The PHA must retain a comparability analysis that shows how the 
reasonable rent was determined, including major differences between the 
contract units and comparable unassisted units.
    (3) The comparability analysis may be performed by PHA staff or by 
another qualified person or entity. A person or entity that conducts the 
comparability analysis and any PHA staff or contractor engaged in 
determining the housing assistance payment based on the comparability 
analysis may not have any direct or indirect interest in the property.
    (e) Owner certification of comparability. By accepting each monthly 
housing assistance payment from the PHA, 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 PHA 
information requested by the PHA on rents charged by the owner for other 
units in the premises or elsewhere.
    (f) Determining reasonable rent for PHA-owned units. (1) For PHA-
owned units, the amount of the reasonable rent must be determined by an 
independent agency approved by HUD in accordance with Sec.  983.59, 
rather than by the PHA. The reasonable rent must be determined in 
accordance with this section.
    (2) The independent entity must furnish a copy of the independent 
entity determination of reasonable rent for PHA-owned units to the PHA 
and to the HUD field office where the project is located.

[70 FR 59913, Oct. 13, 2005, as amended at 79 FR 36170, June 25, 2014; 
81 FR 80583, Nov. 16, 2016]



Sec.  983.304  Other subsidy: effect on rent to owner.

    (a) General. In addition to the rent limits established in 
accordance with Sec.  983.301 and 24 CFR 982.302, the following 
restrictions apply to certain units.
    (b) HOME. For units assisted under the HOME program, rents may not 
exceed rent limits as required by the HOME program (24 CFR 92.252).
    (c) Subsidized projects. (1) This paragraph (c) applies to any 
contract units in any of the following types of federally subsidized 
project:
    (i) An insured or non-insured Section 236 project;
    (ii) A formerly insured or non-insured Section 236 project that 
continues to

[[Page 624]]

receive Interest Reduction Payment following a decoupling action;
    (iii) A Section 221(d)(3) below market interest rate (BMIR) project;
    (iv) A Section 515 project of the Rural Housing Service;
    (v) Any other type of federally subsidized project specified by HUD.
    (2) The rent to owner may not exceed the subsidized rent (basic 
rent) as determined in accordance with requirements for the applicable 
federal program listed in paragraph (c)(1) of this section.
    (d) Combining subsidy. Rent to owner may not exceed any limitation 
required to comply with HUD subsidy layering requirements. See Sec.  
983.55.
    (e) Other subsidy: rent reduction. To comply with HUD subsidy 
layering requirements, at the direction of HUD or its designee, a PHA 
shall reduce the rent to owner because of other governmental subsidies, 
including tax credits or tax exemptions, grants, or other subsidized 
financing.
    (f) Prohibition of other subsidy. For provisions that prohibit PBV 
assistance to units in certain types of subsidized housing, see Sec.  
983.54.

[70 FR 59913, Oct. 13, 2005, as amended at 72 FR 65207, Nov. 19, 2007; 
79 FR 36170, June 25, 2014]



Sec.  983.305  Rent to owner: effect of rent control and other rent limits.

    In addition to the limitation to 110 percent of the FMR in Sec.  
983.301(b)(1), the rent reasonableness limit under Sec. Sec.  
983.301(b)(2) and 983.303, the rental determination provisions of Sec.  
983.301(f), the special limitations for tax credit units under Sec.  
983.301(c), and other rent limits under this part, the amount of rent to 
owner also may be subject to rent control or other limits under local, 
state, or federal law.



                       Subpart H_Payment to Owner



Sec.  983.351  PHA payment to owner for occupied unit.

    (a) When payments are made. (1) During the term of the HAP contract, 
the PHA shall make housing assistance payments to the owner in 
accordance with the terms of the HAP contract. The payments shall be 
made for the months during which a contract unit is leased to and 
actually occupied by an eligible family.
    (2) Except for discretionary vacancy payments in accordance with 
Sec.  983.352, the PHA may not make any housing assistance payment to 
the owner for any month after the month when the family moves out of the 
unit (even if household goods or property are left in the unit).
    (b) Monthly payment. Each month, the PHA shall make a housing 
assistance payment to the owner for each contract unit that complies 
with the HQS and is leased to and occupied by an eligible family in 
accordance with the HAP contract.
    (c) Calculating amount of payment. The monthly housing assistance 
payment by the PHA to the owner for a contract unit leased to a family 
is the rent to owner minus the tenant rent (total tenant payment minus 
the utility allowance).
    (d) Prompt payment. The housing assistance payment by the PHA to the 
owner under the HAP contract must be paid to the owner on or about the 
first day of the month for which payment is due, unless the owner and 
the PHA agree on a later date.
    (e) Owner compliance with contract. To receive housing assistance 
payments in accordance with the HAP contract, the owner must comply with 
all the provisions of the HAP contract. Unless the owner complies with 
all the provisions of the HAP contract, the owner does not have a right 
to receive housing assistance payments.



Sec.  983.352  Vacancy payment.

    (a) Payment for move-out month. If an assisted family moves out of 
the unit, the owner may keep the housing assistance payment payable for 
the calendar month when the family moves out (``move-out month''). 
However, the owner may not keep the payment if the PHA determines that 
the vacancy is the owner's fault.
    (b) Vacancy payment at PHA discretion. (1) At the discretion of the 
PHA, the HAP contract may provide for vacancy payments to the owner (in 
the amounts determined in accordance with paragraph (b)(2) of this 
section) for a PHA-determined period of vacancy extending from the 
beginning of

[[Page 625]]

the first calendar month after the move-out month for a period not 
exceeding two full months following the move-out month.
    (2) The vacancy payment to the owner for each month of the maximum 
two-month period will be determined by the PHA, and cannot exceed the 
monthly rent to owner under the assisted lease, minus any portion of the 
rental payment received by the owner (including amounts available from 
the tenant's security deposit). Any vacancy payment may cover only the 
period the unit remains vacant.
    (3) The PHA may make vacancy payments to the owner only if:
    (i) The owner gives the PHA prompt, written notice certifying that 
the family has vacated the unit and containing the date when the family 
moved out (to the best of the owner's knowledge and belief);
    (ii) The owner certifies that the vacancy is not the fault of the 
owner and that the unit was vacant during the period for which payment 
is claimed;
    (iii) The owner certifies that it has taken every reasonable action 
to minimize the likelihood and length of vacancy; and
    (iv) The owner provides any additional information required and 
requested by the PHA to verify that the owner is entitled to the vacancy 
payment.
    (4) The owner must submit a request for vacancy payments in the form 
and manner required by the PHA and must provide any information or 
substantiation required by the PHA to determine the amount of any 
vacancy payment.



Sec.  983.353  Tenant rent; payment to owner.

    (a) PHA determination. (1) The tenant rent is the portion of the 
rent to owner paid by the family. The PHA determines the tenant rent in 
accordance with HUD requirements.
    (2) Any changes in the amount of the tenant rent will be effective 
on the date stated in a notice by the PHA to the family and the owner.
    (b) Tenant payment to owner. (1) The family is responsible for 
paying the tenant rent (total tenant payment minus the utility 
allowance).
    (2) The amount of the tenant rent as determined by the PHA is the 
maximum amount the owner may charge the family for rent of a contract 
unit. The tenant rent is payment for all housing services, maintenance, 
equipment, and utilities to be provided by the owner without additional 
charge to the tenant, in accordance with the HAP contract and lease.
    (3) The owner may not demand or accept any rent payment from the 
tenant in excess of the tenant rent as determined by the PHA. The owner 
must immediately return any excess payment to the tenant.
    (4) 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. The owner may not terminate the tenancy of an assisted family 
for nonpayment of the PHA housing assistance payment.
    (c) Limit of PHA responsibility. (1) The PHA is responsible only for 
making housing assistance payments to the owner on behalf of a family in 
accordance with the HAP contract. The PHA is not responsible for paying 
the tenant rent, or for paying any other claim by the owner.
    (2) The PHA may not use housing assistance payments or other program 
funds (including any administrative fee reserve) to pay any part of the 
tenant rent or to pay any other claim by the owner. The PHA may not make 
any payment to the owner for any damage to the unit, or for any other 
amount owed by a family under the family's lease or otherwise.
    (d) Utility reimbursement. (1) If the amount of the utility 
allowance exceeds the total tenant payment, the PHA shall pay the amount 
of such excess as a reimbursement for tenant-paid utilities (``utility 
reimbursement'') and the tenant rent to the owner shall be zero.
    (2) The PHA either may pay the utility reimbursement to the family 
or may pay the utility bill directly to the utility supplier on behalf 
of the family.
    (3) If the PHA chooses to pay the utility supplier directly, the PHA 
must notify the family of the amount paid to the utility supplier.

[[Page 626]]



Sec.  983.354  Other fees and charges.

    (a) Meals and supportive services. (1) Except as provided in 
paragraph (a)(2) of this section, the owner 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.
    (2) In assisted living developments receiving project-based 
assistance, owners may charge tenants, family members, or both for meals 
or supportive services. These charges may not be included in the rent to 
owner, nor may the value of meals and supportive services be included in 
the calculation of reasonable rent. Non-payment of such charges is 
grounds for termination of the lease by the owner in an assisted living 
development.
    (b) Other charges by owner. The owner may not charge the tenant or 
family members extra amounts for items customarily included in rent in 
the locality or provided at no additional cost to 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, applicability, and scope.
984.102 Program objectives.
984.103 Definitions.
984.104 Basic requirements of the FSS program.
984.105 Minimum program size.
984.106 Cooperative Agreements.
984.107 FSS award funds formula.

          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 Operations

984.301 Program implementation.
984.302 FSS funds.
984.303 Contract of Participation (CoP).
984.304 Amount of rent paid by FSS family and increases in family 
          income.
984.305 FSS escrow account.
984.306 HCV portability requirements for FSS participants.

                           Subpart D_Reporting

984.401 Reporting.

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

    Source: 87 FR 30047, May 17, 2022, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 984 appear at 65 FR 
16731, Mar. 29, 2000.



                            Subpart A_General



Sec.  984.101  Purpose, applicability, and scope.

    (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 Department of Housing and Urban Development (HUD or 
Department) assistance with public and private resources, to enable 
families eligible to receive HUD assistance to achieve economic 
independence and self-sufficiency.
    (2) The purpose of this part is to implement the policies and 
procedures applicable to operation of an FSS program, as established 
under section 23 of the 1937 Act (42 U.S.C. 1437u).
    (b) Applicability. This part applies to Public Housing Agencies 
(PHAs) administering a public housing program under section 9, a 
project-based and/or tenant-based assistance program under section 8(o) 
of the U.S. Housing Act of 1937 (1937 Act), a Housing Choice Voucher 
(HCV) homeownership program under section 8(y) of the U.S. Housing Act 
of 1937, or Section 8 Moderate Rehabilitation for low-income families 
and Moderate Rehabilitation Single Room Occupancy for homeless 
individuals under 24 CFR part 882. See part 887 of this title for 
program regulations applicable to owners of multifamily assisted 
housing.
    (c) Scope. Each PHA that administers an FSS program must do so in 
accordance with the requirements of this part. See Sec.  984.105 for 
more information concerning PHAs that are required to administer an FSS 
program.
    (d) Non-participation. Participation in an FSS program is voluntary. 
A family's admission to the public housing or

[[Page 627]]

Section 8 programs cannot be conditioned on participation in FSS. A 
family's housing assistance cannot be terminated by reason of such 
election or due to an FSS family's failure to comply with FSS program 
requirements in this part.



Sec.  984.102  Program objectives.

    The objective of the FSS program is to reduce the dependency of low-
income families on welfare assistance and housing subsidies. Under the 
FSS program, HUD assisted 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. The Department 
will evaluate the performance of a PHA's or owner's FSS program using a 
scoring system that measures criteria, such as graduation from the 
program, increased earned income, and program participation, as provided 
by HUD through a Federal Register notice.



Sec.  984.103  Definitions.

    (a) The terms 1937 Act, Fair Market Rent, Head of household, HUD, 
Low income family, Public housing, Public Housing Agency (PHA), and 
Secretary, as used in this part, are defined in part 5 of this title.
    (b) As used in this part:
    Baseline annual earned income means, for purposes of determining the 
FSS credit under Sec.  984.305(b), the FSS family's total annual earned 
income from wages and business income (if any) as of the effective date 
of the FSS contract. In calculating baseline annual earned income, all 
applicable exclusions of income must be applied, except for any 
disregarded earned income or other adjustments associated with self-
sufficiency incentives that may be applicable to the determination of 
annual income.
    Baseline monthly rent means, for purposes of determining the FSS 
credit under Sec.  984.305(b):
    (i) The FSS family's total tenant payment (TTP), as of the effective 
date of the FSS contract, for families paying an income-based rent as of 
the effective date of the FSS contract; or
    (ii) The amount of the flat or ceiling rent (which includes the 
applicable utility allowance), and including any hardship discounts, as 
of the effective date of the FSS contract, for families paying a flat or 
ceiling rent as of the effective date of the FSS contract.
    Certification means a written assertion based on supporting 
evidence, provided by the FSS family or the PHA or owner, as may be 
required under this part, and which:
    (i) Shall be maintained by the PHA or owner in the case of the 
family's certification, or by HUD in the case of the PHA's or owner's 
certification;
    (ii) Shall be made available for inspection by HUD, the PHA or 
owner, and the public, as appropriate; and,
    (iii) Shall be deemed to be accurate for purposes of this part, 
unless the Secretary or the PHA or owner, as applicable, determines 
otherwise after inspecting the evidence and providing due notice and 
opportunity for comment.
    Chief executive officer (CEO) means the elected official or the 
legally designated official of a unit of general local government, who 
has the primary responsibility for the conduct of that entity's 
governmental affairs.
    Contract of Participation (CoP) means a contract, in a form with 
contents prescribed by HUD, entered into between an FSS family and a PHA 
or owner operating an FSS program that sets forth the terms and 
conditions governing participation in the FSS program. The CoP includes 
all Individual Training and Services Plans (ITSPs) entered into between 
the PHA or owner and all members of the family who will participate in 
the FSS program, and which plans are attached to the CoP as exhibits. 
For additional detail, see Sec.  984.303.
    Current annual earned income means, for purposes of determining the 
FSS credit under Sec.  984.305(b), the FSS family's total annual earned 
income from wages and business income (if any) as of the most recent re-
examination of income which occurs after the effective date of the FSS 
contract. In calculating current annual earned income, all applicable 
exclusions of income will

[[Page 628]]

apply, including any disregarded earned income and other adjustments 
associated with self-sufficiency incentives or other alternative rent 
structures that may be applicable to the determination of annual income.
    Current monthly rent means, for purposes of determining the FSS 
credit under Sec.  984.305(b):
    (i) The FSS family's TTP as of the most recent re-examination of 
income, which occurs after the effective date of the FSS contract, for 
families paying an income-based rent as of the most recent re-
examination of income; or
    (ii) The amount of the flat rent (which includes the applicable 
utility allowance) or ceiling rent, including any hardship discounts, as 
of the most recent re-examination of income which occurs after the 
effective date of the FSS contract, for families paying a flat rent or 
ceiling rent as of the most recent re-examination of income.
    Earned income means income or earnings from wages, tips, salaries, 
other employee compensation, and self-employment. Earned income 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 a PHA or owner on behalf of a FSS family.
    Effective date of Contract of Participation (CoP) means the first 
day of the month following the date in which the FSS family and the PHA 
or owner entered into the CoP.
    Eligible families means current residents of public housing (section 
9) and current Section 8 program participants, as defined in this 
section, including those participating in other local self-sufficiency 
programs.
    Enrollment means the date that the FSS family entered into the CoP 
with the PHA or owner.
    Family Self-Sufficiency (FSS) Program means the program established 
by a PHA within its jurisdiction or by an owner to promote self-
sufficiency among participating families, including the coordination of 
supportive services to these families, as authorized by section 23 of 
the 1937 Act.
    FSS escrow account (or, escrow) means the FSS escrow account 
authorized by section 23 of the 1937 Act, and as provided by Sec.  
984.305.
    FSS escrow credit means the amount credited by the PHA or owner to 
the FSS family's FSS escrow account.
    FSS family means a family that resides in public housing (section 9) 
or receives Section 8 assistance, as defined in this section, and that 
elects to participate in the FSS program, and whose designated adult 
member (head of FSS family), as determined in accordance with Sec.  
984.303(a), has signed the CoP.
    FSS family in good standing means, for purposes of this part, an FSS 
family that is in compliance with their FSS CoP; has either satisfied or 
are current on any debts owed the PHA or owner; and is in compliance 
with the regulations in part 5 and chapters VIII and IX of this title 
regarding participation in the relevant rental assistance program.
    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 section.
    FSS slots refers to the total number of families (as determined in 
the Action Plan for mandatory programs in Sec.  984.105) that the PHA 
will serve in its FSS program.
    FSS Program Coordinator means the person(s) who runs the FSS 
program. This may include (but is not limited to) performing outreach, 
recruitment, and retention of FSS participants; goal-setting and case 
management/coaching of FSS participants; working with the community and 
service partners; and tracking program performance.
    FY means Federal fiscal year (starting October 1 and ending 
September 30, and year designated by the calendar year in which it 
ends).
    Head of FSS family means the designated adult family member of the 
FSS family who has signed the CoP. The head of FSS family may, but is 
not required to be, the head of the household for purposes of 
determining income eligibility and rent.
    Individual Training and Services Plan (ITSP) means a written plan 
that is prepared by the PHA or owner in consultation with a 
participating FSS

[[Page 629]]

family member (the person with for and whom the ITSP is being 
developed), and which sets forth:
    (i)(A) The final and interim goals for the participating FSS family 
member;
    (B) The supportive services to be provided to the participating FSS 
family member;
    (C) The activities to be completed by that family member; and,
    (D) The agreed upon completion dates for the goals, and activities.
    (ii) Each ITSP must be signed by the PHA or owner and the 
participating FSS family member and is attached to, and incorporated as 
part of the CoP. An ITSP must be prepared for each adult family member 
who elects to participate in the FSS program, including the head of FSS 
family who has signed the CoP.
    Multifamily assisted housing (also known as project-based rental 
assistance (PBRA)) means rental housing assisted by a Section 8 Housing 
Payments Program, pursuant to 24 CFR parts 880, 881, 883, 884, and 886.
    Owner means the owner of multifamily assisted housing.
    Program Coordinating Committee (PCC) means the committee described 
in Sec.  984.202.
    Section 8 means assistance provided under section 8 of the 1937 Act 
(42 U.S.C. 1437f). Specifically, multifamily assisted housing, as 
defined in this section; tenant-based and project-based rental 
assistance under section 8(o) of the 1937 Act; the HCV homeownership 
option under section 8(y) of the 1937 Act; Family Unification Program 
(FUP) assistance under section 8(x) of the 1937 Act; and the Section 8 
Moderate Rehabilitation (Mod Rehab) for low-income families and Moderate 
Rehabilitation Single Room Occupancy (Mod Rehab SRO) for homeless 
individuals under 24 CFR part 882.
    Self-sufficiency means that an FSS family is no longer receiving 
Section 8, public housing assistance, or any Federal, State, or local 
rent, homeownership subsidies, or welfare assistance. Achievement of 
self-sufficiency, although an FSS program objective, is not a condition 
for receipt of the FSS escrow account funds.
    Supportive services means those appropriate services that a PHA or 
owner will coordinate on behalf of an FSS family under a CoP, which may 
include, but are not limited to:
    (i) Child care. Child care (on an as-needed or ongoing basis) of a 
type that provides sufficient hours of operation and serves an 
appropriate range of ages;
    (ii) Transportation. Transportation necessary to enable a 
participating FSS family member to receive available services, or to 
commute to their place(s) of employment;
    (iii) Education. Remedial education; education for completion of 
high school or attainment of a high school equivalency certificate; 
education in pursuit of a post-secondary degree or certificate;
    (iv) Employment supports. Job training, preparation, and counseling; 
job development and placement; and follow-up assistance after job 
placement and completion of the CoP;
    (v) Personal welfare. Substance/alcohol abuse treatment and 
counseling, and health, dental, mental health and health insurance 
services;
    (vi) Household management. Training in household management;
    (vii) Homeownership and housing counseling. Homeownership education 
and assistance and housing counseling;
    (viii) Financial empowerment. Training in financial literacy, such 
as financial coaching, training in financial management, asset building, 
and money management, including engaging in mainstream banking, 
reviewing and improving credit scores, etc.; and
    (ix) Other services. Any other services and resources, including 
case management, optional services, and specialized services for 
individuals with disabilities, that are determined to be appropriate in 
assisting FSS families to achieve economic independence and self-
sufficiency. Reasonable accommodations and modifications must be made 
for individuals with disabilities consistent with applicable Federal 
civil rights and nondiscrimination laws.
    Unit size or size of unit refers to the number of bedrooms in a 
dwelling unit.
    Very low-income family is defined as set out in Sec.  813.102 of 
this title.
    Welfare assistance means (for purposes of the FSS program only) 
income assistance from Federal (i.e., Temporary

[[Page 630]]

Assistance for Needy Families (TANF) or subsequent program), State, or 
local welfare programs and includes only cash maintenance payments 
designed to meet a family's ongoing basic needs. Welfare assistance does 
not include:
    (i) Nonrecurrent, short-term benefits that:
    (A) Are designed to deal with a specific crisis or episode of need;
    (B) Are not intended to meet recurrent or ongoing needs; and,
    (C) Will not extend beyond four months;
    (ii) Work subsidies (i.e., payments to employers or third parties to 
help cover the costs of employee wages, benefits, supervision, and 
training);
    (iii) Supportive services such as child care and transportation 
provided to families who are employed;
    (iv) Refundable earned income tax credits;
    (v) Contributions to, and distributions from, Individual Development 
Accounts under TANF;
    (vi) Services such as counseling, case management, peer support, 
child care information and referral, financial empowerment, transitional 
services, job retention, job advancement, and other employment-related 
services that do not provide basic income support;
    (vii) Amounts solely directed to meeting housing expenses;
    (viii) Amounts for health care;
    (ix) Supplemental Nutrition Assistance Program and emergency rental 
and utilities assistance;
    (x) Supplemental Security Income, Social Security Disability Income, 
or Social Security; and
    (xi) Child-only or non-needy TANF grants made to or on behalf of a 
dependent child solely on the basis of the child's need and not on the 
need of the child's current non-parental caretaker.



Sec.  984.104  Basic requirements of the FSS program.

    (a) An FSS program established under this part shall be operated in 
conformity with the requirements of this part, including the Action Plan 
at Sec.  984.201, and:
    (1) As applicable to voucher program participants:
    (i) HCV regulations at 24 CFR part 982, for HCV program 
participants; and
    (ii) Project-based voucher (PBV) regulations at 24 CFR part 983, for 
PBV program participants; and
    (iii) HCV Homeownership regulations at 24 CFR 982.625 through 
982.643, for HCV homeownership participants;
    (2) As applicable to Mod Rehab and Mod Rehab SRO participants, 24 
CFR part 882;
    (3) As applicable to public housing program participants, the 
applicable public housing regulations, including the regulations in 24 
CFR parts 5, subpart F, 960, and 966; and,
    (4) The applicable nondiscrimination and equal opportunity 
requirements including, but not limited to, those set forth in 24 CFR 
part 5.
    (b) [Reserved]



Sec.  984.105  Minimum program size.

    (a) FSS program size--(1) Minimum program size requirement. A PHA 
must operate an FSS program of the minimum program size determined in 
accordance with paragraph (b) of this section.
    (2) Exceptions to program operation requirement or to operate a 
smaller mandatory program. Paragraph (c) of this section states when HUD 
may grant an exception to the program operation requirement, and 
paragraph (d) of this section states when an exception may be granted to 
operate a program that is smaller than the minimum program size.
    (3) Option to operate larger FSS program. A PHA may choose to 
operate an FSS program larger than the minimum program size.
    (b) How to determine FSS minimum program size--(1) General 
requirement. Each PHA that was required to administer an FSS program on 
May 24, 2018 (enactment date of the Economic Growth, Regulatory Relief, 
and Consumer Protection Act), shall continue to operate such program 
for, at a minimum, the total number of families the PHA was required by 
statute to serve as of May 24, 2018, subject only to the availability of 
sufficient amounts for housing assistance under appropriations acts and 
the provisions of paragraph (b)(2) of this section.
    (2) Reduction of minimum program size. The minimum program size for 
a PHA's FSS program is reduced by one slot for each family from any 
rental assistance

[[Page 631]]

program (public housing or Section 8, including multifamily assisted 
housing) for which the PHA administers FSS under this section and that 
graduates from the FSS program by fulfilling its FSS CoP on or after 
October 21, 1998. If an FSS slot is vacated by a family that has not 
completed its FSS CoP obligations, the slot must be filled by a 
replacement family which has been 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, a PHA 
will not be required to carry out an FSS program if the PHA provides to 
HUD a certification, as defined in Sec.  984.103, that the operation of 
such an FSS program is not feasible because of local circumstances, 
which may include, but are not limited to, the following:
    (i) Lack of supportive services accessible to eligible families, 
including insufficient availability of resources for programs under 
title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 
et seq.);
    (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) A program operation exception will not be granted if HUD 
determines that local circumstances do not preclude the PHA from 
effectively operating an FSS program that is smaller than the minimum 
program size.
    (d) Exception to operate a smaller mandatory program. Upon approval 
by HUD in its full discretion, a PHA may be permitted to operate an FSS 
program that is smaller than the minimum program size if the PHA 
requests an exception and 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 supportive services available to eligible 
families, including insufficient availability of resources for programs 
under title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 
3111 et seq.);
    (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; or
    (4) Decrease in or lack of interest in participating in the FSS 
program on the part of eligible families.
    (e) Expiration of exception. A full or partial exception to the FSS 
minimum program size requirement (approved by HUD in accordance with 
paragraph (c) or (d) of this section) expires five (5) years from the 
date of HUD approval of the exception. If circumstances change and a 
HUD-approved exception is no longer needed, the PHA is not required to 
effectuate the exception for the full term of the exception. If a PHA 
seeks to continue an exception after its expiration, the PHA must submit 
a new request and certification to HUD for consideration.
    (f) Review of certification records. HUD reserves the right to 
examine, during its management review of the PHA, or at any time, the 
documentation and data that a PHA relied on in certifying to the 
unfeasibility of its establishing and operating an FSS program, or of 
operating one of less than minimum program size.



Sec.  984.106  Cooperative Agreements.

    (a) A PHA may enter into a Cooperative Agreement with one or more 
owners to voluntarily make an FSS program available to the owner's 
multifamily assisted housing tenants.
    (b) A PHA and owner that enter into a Cooperative Agreement to make 
an FSS program available pursuant to paragraph (a) of this section, are 
subject to this part and the following requirements:
    (1) The PHA must open its FSS waiting list to any eligible family 
residing in the multifamily assisted housing covered by the Cooperative 
Agreement.
    (2) The owner must provide, at the request of the PHA, information 
on escrow amounts for participating multifamily assisted housing 
tenants. The Cooperative Agreement must provide that the owner is 
responsible for managing the escrow account for participating 
multifamily assisted housing tenants, including calculating and tracking 
of escrow in accordance with

[[Page 632]]

Sec.  984.305. The Cooperative Agreement must set forth the procedures 
that will be in place for the exchange of escrow information between the 
PHA and the owner.
    (3) The PHA may count multifamily assisted housing families served 
pursuant to a Cooperative Agreement under this subpart as part of the 
calculation of the FSS award under Sec. Sec.  984.107 and 984.302.
    (4) The PHA may use FSS appropriated funds to serve multifamily 
assisted housing tenants subject to a Cooperative Agreement under this 
section.
    (5) The Cooperative Agreement must clearly specify the terms and 
conditions of such agreement, including the requirements of this 
section, and it must include a process for entities for PHAs and owners 
to communicate with each other about changes in their Action Plan.



Sec.  984.107  FSS award funds formula.

    The Secretary may establish a formula by which funds for 
administration of the FSS program are awarded consistent with 42 U.S.C. 
1437u(i), which provides the following:
    (a) Base award. A PHA or owner serving 25 or more participants in 
the FSS program is eligible to receive an award equal to the costs, as 
determined by the Secretary, of 1 full-time family self-sufficiency 
coordinator position. The Secretary may, by notice (including a Notice 
of Funding Opportunity (NOFO)), determine the policy concerning the 
award for an eligible entity serving fewer than 25 such participants, 
including providing prorated awards or allowing such entities to combine 
their programs under this section for purposes of employing a 
coordinator.
    (b) Additional award. A PHA or owner that meets performance 
standards set by the Secretary is eligible to receive an additional 
award sufficient to cover the costs of filling an additional FSS 
coordinator position if such entity has 75 or more participating 
families, and an additional coordinator for each additional 50 
participating families, or such other ratio as may be established by the 
Secretary based on the award allocation evaluation under section 
23(i)(2)(E) of the U.S. Housing Act of 1937.
    (c) State and regional entities. For purposes of calculating the 
award under this section, HUD may treat each administratively distinct 
part of a State or regional entity as a separate entity.
    (d) Determination of number of coordinators. In determining whether 
a PHA or owner meets a specific threshold for funding pursuant to this 
section, the Secretary shall consider the number of participants 
enrolled by the PHA or owner in its FSS program as well as other 
criteria determined by the Secretary.
    (e) Renewals and allocation. FSS awards shall be allocated, as 
established by the Secretary, in the following order of priority:
    (1) First priority. Renewal of the full cost of all FSS coordinators 
in the previous year at each PHA or owner with an existing FSS program 
that meets applicable performance standards set by the Secretary. If 
this first priority cannot be fully satisfied, the Secretary may prorate 
the funding for each PHA or owner, as long as:
    (i) Each PHA or owner that has received funding for at least 1 part-
time coordinator in the prior fiscal year is provided sufficient funding 
for at least 1 part-time coordinator as part of any such proration; and
    (ii) Each PHA or owner that has received funding for at least 1 
full-time coordinator in the prior fiscal year is provided sufficient 
funding for at least 1 full-time coordinator as part of any such 
proration.
    (2) Second priority. New or incremental coordinator funding.
    (f) Recapture or offset. Any FSS awards allocated under this section 
by the Secretary in a fiscal year that have not been spent by the end of 
the subsequent fiscal year or such other time period as determined by 
the Secretary may be recaptured by the Secretary and shall be available 
for providing additional awards pursuant to paragraph (b) of this 
section, or may be offset as determined by the Secretary.
    (g) Incentives for innovation and high performance. The Secretary 
may reserve up to 5 percent of the appropriated FSS funds to provide 
support to or reward FSS programs based on

[[Page 633]]

the rate of successful completion, increased earned income, or other 
factors as may be established by the Secretary.



          Subpart B_Program Development and Approval Procedures



Sec.  984.201  Action Plan.

    (a) Requirement for Action Plan. A PHA or owner must have a HUD-
approved Action Plan that complies with the requirements of this section 
before the PHA or owner operates an FSS program, whether the FSS program 
is a mandatory or voluntary program.
    (b) Development of Action Plan. The Action Plan shall be developed 
by the PHA or owner in consultation with the chief executive officer of 
the applicable unit of general local government and the Program 
Coordinating Committee. Consultation for the Action Plan by the PHA or 
owner shall also include representatives of current and prospective FSS 
program participants, any local agencies responsible for programs under 
title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 
et seq.), other appropriate organizations (such as other local welfare 
and employment or training institutions, child care providers, financial 
empowerment providers, nonprofit service providers, and private 
businesses), and any other public and private service providers affected 
by the operation of the PHA's or owner's program.
    (c) Plan submission--(1) Voluntary program. The PHA or owner must 
submit its Action Plan and obtain HUD approval of the plan before the 
PHA or owner carries out a voluntary FSS program, including a program 
that exceeds the minimum size for a mandatory program, regardless of 
whether the voluntary program receives HUD funding.
    (2) Revision. Following HUD's initial approval of the Action Plan, 
no further approval of the Action Plan is required unless the PHA or 
owner proposes to make policy changes to the Action Plan or increase the 
size of a voluntary program; or HUD requires other changes. In such 
cases, the PHA or owner must submit such changes to the Action Plan to 
HUD for approval.
    (d) Contents of Plan. The Action Plan shall describe the policies 
and procedures for the operation of a PHA's or owner's 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 programs. If 
applicable, the number of families, by program type, who are 
participating in other local self-sufficiency programs and are expected 
to agree to execute an FSS CoP;
    (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 selection procedures ensure that families will be 
selected without regard to race, color, religion, sex (including actual 
or perceived gender identity and sexual orientation), disability, 
familial status, or national origin;
    (5) Incentives to encourage participation. A description of the 
incentives that will be offered to eligible families to encourage their 
participation in the FSS program (incentives plan). The incentives plan 
shall provide for the establishment of the FSS escrow account in 
accordance with the requirements set forth in Sec.  984.305, and other 
incentives, if any. The incentives plan shall be part of the Action 
Plan;
    (6) Outreach efforts. A description of:
    (i) The efforts, including notification and outreach efforts, to 
recruit FSS participants from among eligible families; and,
    (ii) The actions to be taken to assure that both minority and non-
minority groups are informed about the FSS

[[Page 634]]

program, and how this information will be made available;
    (7) FSS activities and supportive services. A description of the 
activities and supportive services to be coordinated on behalf of 
participating 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 coordinate 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 all policies concerning 
termination of participation in the FSS program, or withholding of 
coordination of supportive services, on the basis of a family's failure 
to comply with the requirements of the CoP; 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 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 programs under title I of the Workforce Innovation and 
Opportunity Act (29 U.S.C. 3111 et seq.), and other relevant employment, 
child care, transportation, training, education, and financial 
empowerment programs in the 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 proposed FSS program. This 
may include, and is not limited to:
    (i) Policies related to the modification of goals in the ITSP;
    (ii) The circumstances in which an extension of the Contract of 
Participation may be granted;
    (iii) Policies on the interim disbursement of escrow, including 
limitations on the use of the funds (if any);
    (iv) Policies regarding eligible uses of forfeited escrow funds by 
families in good standing;
    (v) Policies regarding the re-enrollment of previous FSS 
participants, including graduates and those who exited the program 
without graduating;
    (vi) Policies on requirements for documentation for goal completion;
    (vii) Policies on documentation of the household's designation of 
the ``head of FSS family;'' and
    (viii) Policies for providing an FSS selection preference for 
porting families (if the PHA elects to offer such a preference).
    (e) Eligibility of a combined program. A PHA or owner that wishes to 
operate a joint FSS program with a PHA or owner may combine its 
resources with one or more PHAs or owners to deliver supportive services 
under a joint Action Plan that will provide for the coordination of a 
combined FSS program that meets the requirements of this part.
    (f) Single Action Plan. A PHA or owner may submit one Action Plan 
that covers all applicable rental assistance programs (Section 8 
vouchers, PBRA, Mod Rehab, and public housing) served by the FSS 
program.



Sec.  984.202  Program Coordinating Committee (PCC).

    (a) General. Each participating PHA (or joint FSS program) must 
establish a PCC whose functions will be to assist the PHA in securing 
commitments of public and private resources for the operation of the FSS 
program within the PHA's jurisdiction, including assistance in 
developing the Action Plan and in operating the program.
    (b) Membership--(1) Required membership. The PCC must include 
representatives of the PHA, including one or more FSS Program 
Coordinators, and one or more participants from each HUD rental 
assistance program served by the PHA's FSS program. The PHA

[[Page 635]]

may seek assistance from the following groups in identifying potential 
PCC members:
    (i) An area-wide or city-wide resident council, if one exists;
    (ii) If the PHA operates 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; or
    (iii) Any other resident group, which the PHA believes is interested 
in the FSS program and would contribute to the development and 
coordination of the FSS program (such as the Resident Advisory Board or 
tenant association, as applicable).
    (2) Recommended membership. Membership on the PCC may include 
representatives of the unit of general local government served by the 
PHA, local agencies (if any) responsible for carrying out programs under 
title I of the Workforce Innovation and Opportunity Act (29 U.S.C. 3111 
et seq.), and other organizations, such as other State, local, or tribal 
welfare and employment agencies, public and private primary, secondary, 
and post-secondary education or training institutions, child care 
providers, financial empowerment organizations, nonprofit service 
providers, private businesses, and any other public and private service 
providers with resources to assist the FSS program.
    (c) Alternative committee. The PHA may, in consultation with the 
chief executive officer of the unit of general local government served 
by the PHA and one or more residents of each HUD-assisted program served 
by the FSS program, 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 it may 
also include 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. A PHA has the option of 
selecting eligible families for up to fifty (50) percent of its FSS 
slots in accordance with a written policy, provided in the PHA's FSS 
Action Plan, 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 PHA 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. A PHA 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 fifty (50) percent of 
the total number of FSS slots, 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) Selection among families with preference. The PHA may use either 
of the following to select among applicants on the FSS waiting list with 
the same preference status:
    (1) Date and time of application to the FSS program; or,
    (2) A drawing or other random choice technique.
    (c) FSS selection without preference. For those FSS slots for which 
a selection preference is not applicable, 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 PHA must be described in 
the PHA's Action Plan.
    (d) Motivation as a selection factor--(1) General. A PHA may screen 
families for interest, and motivation to participate in the FSS program, 
provided that the factors utilized by the PHA 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

[[Page 636]]

interviews and assigning certain tasks which indicate the family's 
willingness to undertake the obligations which may be imposed by the FSS 
CoP. Any tasks assigned shall be those which may be readily 
accomplishable by the family, based on the family members' educational 
level, capabilities, and disabilities, if any. Reasonable accommodations 
and modifications must be made for individuals with disabilities, 
including, e.g., mobility, manual, sensory, speech, mental, 
intellectual, or developmental disabilities, consistent with applicable 
Federal civil rights and nondiscrimination laws.
    (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 the exclusion, application of different 
eligibility requirements, or other discriminatory treatment or effect on 
the basis of race, color, national original, sex (including actual or 
perceived gender identity and sexual orientation), religion, familial 
status, or disability.



Sec.  984.204  On-site facilities.

    Each PHA or owner may, subject to the approval of HUD, make 
available and utilize common areas or unoccupied dwelling units in 
properties owned by the entity to provide or coordinate supportive 
services under any FSS program.



                      Subpart C_Program Operations



Sec.  984.301  Program implementation.

    (a) Voluntary program implementation. Unless otherwise required 
under a funding notice, there is no deadline for implementation of a 
voluntary program. A voluntary program, however, may not be implemented 
before the requirements of Sec.  984.201 have been satisfied.
    (b) Program administration. A PHA may employ appropriate staff, 
including a service coordinator or FSS Program Coordinator to administer 
its FSS program, and may contract with an appropriate organization to 
establish and administer all or part of the FSS program, including the 
FSS escrow account, as provided by Sec.  984.305.



Sec.  984.302  FSS funds.

    (a) Public housing program. Subject to 42 U.S.C. 1437g, 24 CFR part 
990, and appropriations by Congress, PHAs may use funds provided under 
42 U.S.C. 1437g to cover reasonable and eligible administrative costs 
incurred by PHAs in carrying out the FSS program.
    (b) Section 8 program. Subject to 42 U.S.C. 1437f, 24 CFR part 982, 
and appropriations by Congress, PHAs may use the administrative fees 
paid to PHAs for costs associated with operation of an FSS program.
    (c) FSS funds. FSS funds associated with operation of an FSS program 
are established by the Congress and subject to appropriations. FSS 
appropriated funds will be awarded to and used by PHAs or owners for 
costs associated with families who are enrolled in an FSS program under 
this part, including when an owner operates an FSS program through a 
Cooperative Agreement or on its own.



Sec.  984.303  Contract of Participation (CoP).

    (a) General. Each eligible family that is selected to participate in 
an FSS program must enter into a CoP with the PHA or owner that operates 
the FSS program in which the family will participate. There will be no 
more than one CoP at any time for each family. There may be an ITSP for 
as many members of the family as wish to participate. The CoP shall be 
signed by a representative of the PHA or the owner and the head of FSS 
family, as designated by the family. This head of FSS family does not 
have to be the same as the official head of household for rental 
assistance purposes.
    (b) Form and content of contract--(1) General. The CoP, which 
incorporates the ITSP(s), shall set forth the principal terms and 
conditions governing participation in the FSS program. These include the 
rights and responsibilities of the FSS family and of the PHA or owner, 
the services to be provided to, and the activities to be completed by, 
each adult member of the

[[Page 637]]

FSS family who elects to participate in the program.
    (2) FSS family goals. The ITSP, incorporated in the CoP, shall 
establish specific interim and final goals by which the PHA or owner, 
and the family, measures the FSS family's progress towards fulfilling 
its obligations under the CoP and becoming self-sufficient. For any FSS 
family that is a recipient of welfare assistance at the outset of the 
CoP or that receives welfare assistance while in the FSS program, the 
PHA or owner must establish as a final goal for each FSS participant 
that every member of the family become independent from welfare 
assistance before the expiration of the term of the CoP, including any 
extension thereof. Also, see the employment obligation described in 
paragraph (b)(4) of this section. Aside from the goals specifically 
required in this section, PHAs or owners must work with each participant 
to establish realistic and individualized goals and may not include 
additional mandatory goals or mandatory modifications of the two 
mandatory goals.
    (3) Compliance with lease terms. The CoP shall provide that one of 
the obligations of the FSS family is to comply with the terms and 
conditions of the respective public housing or Section 8 lease. However, 
all considerations allowed for other assisted residents for repayment 
agreements, etc., shall also be allowed for FSS participants.
    (4) Employment obligation--(i) Minimum requirement. Although all 
members of the FSS family may seek and maintain suitable employment 
during the term of the contract, only the head of FSS family shall be 
required under the CoP to seek and maintain suitable employment during 
the term of the contract and any extension thereof.
    (ii) Seek employment. The obligation to seek employment means 
searching for jobs, applying for employment, attending job interviews, 
and otherwise following through on employment opportunities.
    (iii) Determination of suitable employment. A determination of 
suitable employment shall be made by the PHA or owner, with the 
agreement of the affected participant, based on the skills, education, 
job training, and receipt of other benefits of the household member, and 
based on the available job opportunities within the jurisdiction served 
by the PHA or in the community where the PBRA property is located.
    (5) Consequences of noncompliance with the contract. The CoP shall 
specify the consequences of noncompliance with the CoP as described in 
paragraph (i) of this section.
    (c) Contract of Participation term. The CoP shall state that each 
FSS family will be required to fulfill CoP obligations no later than 5 
years after the first re-examination of income after the execution date 
of the CoP.
    (d) Contract of Participation extension. The PHA or owner shall, in 
writing, extend the term of the CoP for a period not to exceed two (2) 
years for any FSS family that requests, in writing, an extension of the 
contract, provided that the PHA or owner 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. 
Extension of the CoP will entitle the FSS family to continue to have 
amounts credited to the family's FSS escrow account in accordance with 
Sec.  984.304. As used in this paragraph (d), good cause means:
    (1) Circumstances beyond the control of the FSS family that impede 
the family's ability to complete the CoP obligations, as determined by 
the PHA or owner, such as a serious illness or involuntary loss of 
employment;
    (2) Active pursuit of a current or additional goal that will result 
in furtherance of self-sufficiency during the period of the extension 
(e.g., completion of a college degree during which the participant is 
unemployed or under-employed, credit repair towards being homeownership 
ready, etc.) as determined by the PHA or owner; or
    (3) Any other circumstance that the PHA or owner determines warrants 
an extension, as long as the PHA or owner is consistent in its 
determination as to which circumstances warrant an extension.
    (e) Unavailability of supportive services--(1) Good-faith effort to 
replace unavailable services. If a social service agency fails to 
deliver the supportive services identified in an FSS family

[[Page 638]]

member's ITSP, the PHA or owner shall make a good faith effort to obtain 
these services from another agency.
    (2) Assessment of necessity of services. If the PHA or owner is 
unable to obtain the services from another agency, the PHA or owner 
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 PHA or owner and the 
family 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 PHA or owner shall revise the ITSP to 
delete these services, and modify the CoP 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, the PHA or owner shall terminate the CoP and 
follow the requirements in paragraph (k) of this section regarding FSS 
escrow disbursement.
    (f) Modification. The PHA or owner and the FSS family may mutually 
agree to modify the CoP with respect to the ITSP and/or the contract 
term in accordance with paragraph (d) of this section, and/or 
designation of the head of FSS family. Modifications must be in writing.
    (g) Completion of the contract. The CoP is considered to be 
completed, and a family's participation in the FSS program is considered 
to be concluded when the FSS family has fulfilled all of its obligations 
under the CoP, including all family members' ITSPs, on or before the 
expiration of the contract term, including any extension thereof.
    (h) Termination of the contract. The CoP shall be terminated if the 
family's housing assistance is terminated in accordance with HUD 
requirements. The CoP 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 
CoP without good cause. This includes an FSS family who has moved out of 
multifamily assisted housing and families receiving tenant-based 
assistance under section 8(o) of the 1937 Act who fail to comply with 
the contract requirements because the family has moved outside the 
jurisdiction of the PHA, and the PHA has not determined that there is 
good cause terminate the CoP with FSS escrow disbursement in accordance 
with paragraph (k)(1)(iii) of this section;
    (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 FSS participation or withhold the 
coordination of supportive service assistance. The PHA or owner may 
withhold the coordination of supportive services or terminate the FSS 
family's participation in the FSS program, if the PHA or owner 
determines, in accordance with the FSS Action Plan hearing procedures, 
that the FSS family has failed to comply without good cause with the 
requirements of the CoP in accordance with this section.
    (j) Transitional supportive service assistance. A PHA or owner may 
continue to offer to a former FSS family that has completed its CoP, 
appropriate coordination of those FSS supportive services needed to 
become self-sufficient if the family still resides in public housing or 
Section 8 housing. If the family no longer resides in public housing, 
Section 8, or other assisted housing, then a PHA or owner may continue 
to coordinate supportive services for a former FSS family that completed 
its CoP using only funding sources that are not HUD funds or HUD-
restricted funds.
    (k) Termination with FSS escrow disbursement. (1) The CoP is will be 
terminated with FSS disbursement when:
    (i) Services that the PHA or owner and the FSS family have agreed 
are integral to the FSS family's advancement towards self-sufficiency 
are unavailable, as described in paragraph (e) of this section;

[[Page 639]]

    (ii) The head of the FSS family becomes permanently disabled and 
unable to work during the period of the contract, unless the PHA or 
owner and the FSS family determine that it is possible to modify the 
contract to designate a new head of the FSS family; or
    (iii) An FSS family in good standing moves outside the jurisdiction 
of the PHA (in accordance with portability requirements at Sec.  982.353 
of this chapter) for good cause, as determined by the PHA, and 
continuation of the CoP after the move, or completion of the CoP prior 
to the move, is not possible. PHAs must be consistent in their 
determinations of whether a family has good cause for a termination with 
FSS escrow disbursement under this paragraph (k).
    (2) Upon termination of a CoP pursuant to paragraph (k)(1) of this 
section, escrow funds must be handled consistent with Sec.  984.305.



Sec.  984.304  Amount of rent paid by FSS family and increases in family income.

    (a) Amount of rent paid by FSS family. The amount of rent paid by an 
FSS family is determined in accordance with the requirements of the 
applicable housing assistance program as specified in paragraphs (a)(1) 
and (2) of this section.
    (1) Public housing program: Calculation of total tenant payment. 
Total tenant payment for an FSS family participating in the FSS program 
is determined in accordance with the regulations set forth in 24 CFR 
part 5, subpart F.
    (2) Section 8 programs: Calculation of rent. (i) For the HCV 
program, rent is determined in accordance with 24 CFR part 982, subpart 
K; and
    (ii) For the PBV program, rent is determined in accordance with 24 
CFR part 983, subpart G.
    (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 an asset for purposes of eligibility of 
the FSS family under any other program administered by HUD.



Sec.  984.305  FSS escrow account.

    (a) Establishment of FSS escrow account--(1) General. The PHA or 
owner shall deposit the FSS escrow account funds of all families 
participating in an FSS program into a single interest-bearing 
depository account. The PHA or owner must deposit the FSS escrow account 
funds in one or more of the HUD-approved investments. The depository 
account may be part of the PHA's or owner's overall accounts or a 
separate account, as long as it is in compliance with paragraph (a)(2) 
of this section. During the term of the CoP, the FSS escrow account 
credit amount shall be determined in accordance with paragraph (b) of 
this section at each re-examination of income occurring after the 
effective date of the CoP. Such escrow credit amount must be deposited 
each month by the PHA or owner to each family's FSS escrow account 
within the PHA's or owner's depository account.
    (2) Accounting for FSS escrow account funds--(i) Accounting records. 
The total of the combined FSS escrow account funds will be supported in 
the accounting records by a subsidiary ledger showing the balance 
applicable to each FSS family.
    (ii) Proration of investment income. The investment income for funds 
in the FSS escrow account must be prorated and credited to each family's 
FSS escrow account based on the balance in each family's FSS escrow 
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 determined 
by the owner or reported by the owner to the PHA in the Section 8(o) 
programs) at the time of final disbursement of FSS escrow funds in 
accordance with paragraph (c) of this section. If the FSS family has 
been found to have under-reported income after the baseline annual 
earned income was set, the amount credited to the FSS escrow account 
will be based on the income amounts originally reported by the FSS 
family. If the FSS

[[Page 640]]

family is found to have under-reported income in the re-examination used 
to set the baseline, the escrow for the entire period of the CoP will be 
re-calculated using the correct income to set the baseline and then 
calculate subsequent escrow amounts.
    (3) Reporting on FSS escrow account. Each PHA or owner will be 
required to make a report, at least once annually, to each FSS family on 
the status of the family's FSS escrow 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 escrow account, during the reporting period;
    (iii) Any deductions made from the account at the time of final 
disbursement of FSS escrow funds (see paragraphs (a)(2)(iii) and (c) of 
this section) for amounts due the PHA or owner;
    (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) Determining the family's baseline information. 
When determining the family's baseline annual earned income and the 
baseline monthly rent amounts for purposes of computing the FSS escrow 
credit, the PHA or owner must use the amounts on the family's last 
income re-examination.
    (2) Computation of amount. The FSS credit amount shall be the lower 
of:
    (i) Thirty (30) percent of one-twelfth (\1/12\) (i.e., two and a 
half (2.5) percent) of the amount by which the family's current annual 
earned income exceeds the family's baseline annual earned income; or
    (ii) The increase in the family's monthly rent. The increase in the 
family's monthly rent shall be the lower of:
    (A) The amount by which the family's current monthly rent exceeds 
the family's baseline monthly rent;
    (B) For HCV families, the difference between the baseline monthly 
rent and the current gross rent (i.e., rent to owner plus any utility 
allowance) or the payment standard, whichever is lower; or
    (C) For PBV, Mod Rehab, including Mod Rehab SRO, and PBRA families, 
the difference between the baseline monthly rent and the current gross 
rent (i.e., rent to owner or contract rent, as applicable, plus any 
utility allowance).
    (3) Ineligibility for FSS credit. FSS families who are not low-
income families (i.e., whose adjusted annual income exceeds eighty (80) 
percent of the area median income) shall not be entitled to any FSS 
credit.
    (4) Cessation of FSS credit. The PHA or owner shall not make 
additional credits to the FSS family's FSS escrow account:
    (i) When the FSS family has completed the CoP, as described in Sec.  
984.303(g);
    (ii) When the CoP is terminated; or
    (iii) During the time an HCV family is in the process of moving to a 
new unit, in accordance with HCV program requirements in part 982 of 
this title, and is not under a lease.
    (c) Disbursement of FSS escrow account funds--(1) General. The 
amount in an FSS escrow account in excess of any amount owed to the PHA 
or owner by the FSS family, as provided in paragraph (a)(2)(iii) of this 
section, shall be paid to the head of FSS family when the CoP has been 
completed as provided in Sec.  984.303(g), and if, at the time of 
contract completion, the head of FSS family submits to the PHA or owner 
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 PHA 
or owner determines that the FSS family has fulfilled its obligations 
under the CoP before the expiration of the contract term, and the head 
of 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 escrow account, in excess of 
any amount owed to the PHA or owner by the FSS family, as provided in 
paragraph (a)(2)(iii) of this section, shall be paid to the head of FSS 
family.
    (ii) If the PHA or owner determines that the FSS family has 
fulfilled certain interim goals established in the

[[Page 641]]

CoP and needs a portion of the FSS escrow account funds for purposes 
consistent with or in support of the CoP, such as completion of higher 
education (i.e., college, graduate school), job training, or to meet 
start-up expenses involved in creation of a small business, the PHA or 
owner may, at the PHA's or owner's sole discretion, disburse a portion 
of the funds from the family's FSS escrow account to assist the family 
in paying those expenses. Unless the interim disbursement was made based 
on fraudulent information from the family, the family is not required to 
repay such interim disbursements if the family does not complete the 
CoP.
    (3) Disbursement in cases of termination of the CoP with 
disbursement of escrow. The PHA or owner must disburse to the family its 
FSS escrow account funds in excess of any amount owed to the PHA or 
owner by the FSS family, as provided in paragraph (a)(2)(iii) of this 
section, under circumstances in which HUD has determined good cause is 
warranted. HUD determines that there is good cause when a CoP is 
terminated in accordance with Sec.  984.303(k). Therefore, if the CoP is 
terminated in accordance with Sec.  984.303(k), the PHA or owner must 
disburse to the family its FSS escrow account funds in excess of any 
amount owed to the PHA or owner by the FSS family, as provided in 
paragraph (a)(2)(iii) of this section, as of the effective date of the 
termination of the contract.
    (4) Verification of family certification. Before disbursement of the 
FSS escrow account funds to the family, the PHA or owner 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 by contacting welfare agencies.
    (d) Succession of FSS escrow account. If the head of 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 PHA or owner, shall have the right to take over 
the CoP or designate another family member to receive the funds in 
accordance with paragraph (c) of this section.
    (e) Use of FSS escrow account funds for homeownership. An FSS family 
may use disbursed FSS escrow account funds, in accordance with Sec.  
984.305(c), after final disbursement 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 escrow account funds--(1) Conditions for 
forfeiture. Amounts in the FSS escrow account shall be forfeited upon 
the occurrence of the following:
    (i) The CoP is terminated, as provided in Sec.  984.303(h); or,
    (ii) The CoP is completed by the family, as provided in Sec.  
984.303(g), but the FSS family is receiving welfare assistance at the 
time the CoP term expires, including any extension thereof.
    (2) Treatment of forfeited FSS escrow account funds. FSS escrow 
account funds forfeited by the FSS family must be used by the PHA or 
owner for the benefit of the FSS participants.
    (i) Specifically, such funds may be used for the following eligible 
activities:
    (A) Support for FSS participants in good standing, including, but 
not limited to, transportation, child care, training, testing fees, 
employment preparation costs, and other costs related to achieving 
obligations outlined in the CoP;
    (B) Training for FSS Program Coordinator(s); or
    (C) Other eligible activities as determined by the Secretary.
    (ii) Such funds may not be used for salary and fringe benefits of 
FSS Program Coordinators; general administrative costs of the FSS 
program, for housing assistance payments (HAP) expenses or public 
housing operating funds; or any other activity determined ineligible by 
the Secretary.



Sec.  984.306  HCV portability requirements for FSS participants.

    (a) Initial period of CoP--(1) First 12 months. During the first 12 
months after the effective date of the FSS CoP,

[[Page 642]]

an FSS family may not move outside the jurisdiction of the PHA that 
first enrolled the family in the FSS program. However, the PHA may 
approve an FSS family's request to move outside of its jurisdiction 
under portability (in accordance with Sec.  982.353 of this chapter) 
during this period. This paragraph (a)(1) applies to a former PBV family 
who received tenant-based rental assistance in accordance with Sec.  
983.261 of this chapter and exercised their right to move.
    (2) After the first 12 months. After the first 12 months of the FSS 
CoP, the FSS family with a tenant-based voucher may move outside the 
initial PHA jurisdiction under portability regulations (in accordance 
with Sec.  982.353 of this chapter). This paragraph (a)(2) applies to 
former PBV families who received tenant-based rental assistance in 
accordance with Sec.  983.261 of this chapter and exercised their right 
to move.
    (b) An FSS family moves to the jurisdiction of a receiving PHA that 
administers an FSS program. (1) Whether the receiving PHA bills the 
initial PHA or absorbs the FSS family into its HCV program, the 
receiving PHA must enroll an FSS family in good standing in its FSS 
program; unless
    (i) The receiving PHA is already serving the number of FSS families 
identified in its FSS Action Plan and determines that it does not have 
the resources to manage the FSS contract; or
    (ii) The receiving PHA and the initial PHA agree to the FSS family's 
continued participation in the initial PHA's FSS program. Prior to the 
PHAs agreeing to the continued participation, the initial PHA must 
determine that the relocating FSS family has demonstrated that, 
notwithstanding the move, it will be able to fulfill its 
responsibilities under the initial or a modified CoP at its new place of 
residence. For example, the FSS family may be able to commute to the 
supportive services specified in the CoP, or the family may move to 
obtain employment as specified in the contract.
    (2) Where continued FSS participation is not possible in accordance 
with paragraph (b)(1) of this section, the initial PHA must clearly 
discuss the options that may be available to the family, depending on 
the family's specific circumstances, which may include, but are not 
limited to, modification of the FSS contract, termination of the FSS 
contract and forfeiture of escrow, termination with FSS escrow 
disbursement in accordance with Sec.  984.303(k)(1)(iii), or locating a 
receiving PHA that has the capacity to enroll the family into its FSS 
program.
    (c) An FSS family moves to the jurisdiction of a receiving PHA that 
does not administer an FSS program. If the receiving PHA does not 
administer an FSS program, the FSS family may not continue participation 
in the FSS program. The initial PHA must clearly discuss the options 
that may be available to the family, depending on the family's specific 
circumstances, which may include, but are not limited to, modification 
of the FSS contract, termination with FSS escrow disbursement in 
accordance with Sec.  984.303(k)(1)(iii), termination of the FSS 
contract and forfeiture of escrow, or locating a receiving PHA that 
administers an FSS program.
    (d) Single FSS escrow account. Regardless of whether the FSS family 
remains in the FSS program of the initial PHA or is enrolled in the FSS 
program of the receiving PHA, the family will have only one FSS escrow 
account. If the receiving PHA is billing the initial PHA, the account 
will be maintained by the initial PHA. If an FSS family will be absorbed 
by the receiving PHA, the initial PHA will transfer the family's FSS 
escrow account funds to the receiving PHA and the receiving PHA will 
maintain the funds in its FSS account.
    (e) FSS program termination; loss of FSS escrow account. (1) If an 
FSS family relocates to another jurisdiction, as provided under this 
section, and is unable to fulfill its obligations under the CoP (or any 
modifications thereto), the PHA, which is a party to the CoP, must 
terminate the FSS family from the FSS program, and the family's FSS 
escrow account will be forfeited. Termination of FSS program 
participation and forfeiture of FSS escrow must be used only as a last 
resort, after the PHA determines, in consultation with the family, that 
the family would be

[[Page 643]]

unable to fulfill its obligations under the CoP after the move, that the 
current CoP cannot be modified to allow for graduation prior to porting, 
and that the current CoP cannot be terminated with FSS escrow 
disbursement in accordance with Sec.  984.303(k)(1)(iii). When 
termination is the only option, the PHA must clearly notify the family 
that the move will result in the loss of escrow funds.
    (2) In the event of forfeiture of the family's FSS escrow account 
funds, the FSS escrow account funds will revert to the PHA maintaining 
the FSS escrow account for the family.
    (f) Contract of Participation (CoP). (1) If the FSS family enrolls 
in the receiving PHA's FSS program pursuant to this section, the 
receiving PHA will enter into a new CoP with the FSS family for the term 
remaining on the contract with the initial PHA. The initial PHA will 
terminate its CoP with the family.
    (2) If the FSS family remains in the FSS program of the initial PHA, 
pursuant to this section, the CoP executed by the initial PHA will 
remain as the contract in place.
    (g) New FSS enrollment into the receiving PHA's FSS program--(1) 
Billing. If the receiving PHA bills the initial PHA, the receiving PHA 
may, consistent with the receiving PHA's FSS enrollment policies, enroll 
a family that was not an FSS participant at the initial PHA into its FSS 
program, provided that the initial PHA manages an FSS program and agrees 
to such enrollment. If the receiving PHA bills the initial PHA, but the 
initial PHA does not manage an FSS program, the family may not enroll in 
the receiving PHA's FSS program.
    (2) Absorption. If the receiving PHA absorbs the family into its HCV 
program, the receiving PHA may, consistent with the receiving PHA's FSS 
enrollment policies, enroll a family that was not an FSS participant at 
the initial PHA into its FSS program.



                           Subpart D_Reporting



Sec.  984.401  Reporting.

    Each PHA or owner that carries out an FSS program 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, 
including the number of families enrolled and graduated and the number 
of established escrow accounts and positive escrow balances;
    (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
    (d) Any recommendations by the PHA or owner 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) AND SMALL
RURAL PHA ASSESSMENTS--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 PHA right of appeal of overall rating.
985.105 HUD SEMAP responsibilities.
985.106 Required actions for SEMAP deficiencies.
985.107 Required actions for PHA with troubled performance rating.
985.108 SEMAP records.
985.109 Default under the Annual Contributions Contract (ACC).

Subpart C--Physical Assessment Component [Reserved]

                  Subpart D_Small Rural PHA Assessment

Sec.
985.201 Applicability.

[[Page 644]]

985.203 Assessment indicators and HUD verification methods.
985.205 Determination of assessment rating.
985.207 Frequency of assessments.
985.209 Troubled small rural PHAs.
985.211 Small rural PHAs assessment records.

    Authority: 42 U.S.C. 1437a, 1437c, 1437f, 1437z-10, and 3535(d).

    Source: 63 FR 48555, Sept. 10, 1998, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 985 appear at 64 FR 
67983, Dec. 3, 1999.



                            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 a system for HUD to 
measure PHA performance in key Section 8 program areas and to assign 
performance ratings. SEMAP provides procedures for HUD to identify PHA 
management capabilities and deficiencies in order to target monitoring 
and program assistance more effectively. PHAs can use the SEMAP 
performance analysis to assess and improve their own program operations.
    (b) Applicability. This rule applies to PHA administration of the 
tenant-based Section 8 rental program (part 982 of this chapter), the 
project-based voucher program (part 983 of this chapter) to the extent 
that PBV 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) (part 984 of this chapter).
    (c) Small rural PHA assessments. Subpart D of this part covers the 
HCV and PBV assessment for a small rural PHA as defined in Sec.  902.101 
of this chapter. Section 985.3 and subparts B and C of this part do not 
apply to small rural PHAs.

[63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40497, July 26, 1999; 
88 FR 30505, May 11, 2023]



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:
    Confirmatory review means an on site review performed by HUD to 
verify the management performance of an PHA.
    Corrective action plan means a HUD-required written plan that 
addresses PHA program management deficiencies or findings identified by 
HUD through remote monitoring or on-site review, and that will bring the 
PHA to an acceptable level of performance.
    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.
    PHA means a Housing Agency.
    PHA's quality control sample means an annual sample of files or 
records drawn in an unbiased manner and reviewed by an PHA supervisor 
(or by another qualified person other than the person who performed the 
original work) to determine if the work documented in the files or 
records conforms to program requirements. The minimum size of the PHA's 
quality control sample is as follows:

------------------------------------------------------------------------
                                             Minimum number of files or
                 Universe                      records to be sampled
------------------------------------------------------------------------
50 or less...............................  5.
51-600...................................  5 plus 1 for each 50 (or part
                                            of 50) over 50.
601-2000.................................  16 plus 1 for each 100 (or
                                            part of 100) over 600.
Over 2000................................  30 plus 1 for each 200 (or
                                            part of 200) over 2000.
------------------------------------------------------------------------


Where the universe is: the number of admissions in the last year for 
each of the two quality control samples under the SEMAP indicator at 
Sec.  985.3(a) Selection from the Waiting List; the number of families 
assisted for the SEMAP indicators at Sec.  985.3(b) Reasonable Rent, and 
985.3(c) Determination of Adjusted Income; the number of units under HAP 
contract during the last completed PHA fiscal year for the SEMAP 
indicator at Sec.  985.3(e) HQS Quality Control Inspections; and the 
number of failed HQS inspections in

[[Page 645]]

the last year for the SEMAP indicator at Sec.  985.3(f) HQS Enforcement.
    Performance indicator means a standard set for a key area of Section 
8 program management against which the PHA's performance is measured to 
show whether the PHA administers the program properly and effectively. 
(See Sec.  985.3.)
    SEMAP certification means the PHA'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 PHA's ratings on 
each SEMAP indicator, its overall SEMAP score, and its overall 
performance rating (high performer, standard, troubled).

[63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40497, July 26, 1999]



Sec.  985.3  Indicators, HUD verification methods and ratings.

    This section states the performance indicators that are used to 
assess PHA Section 8 management. HUD will use the verification method 
identified for each indicator in reviewing the accuracy of an PHA's 
annual SEMAP certification. HUD will prepare a SEMAP profile for each 
PHA 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 PHA's certification 
on the indicator due to the PHA's failure to adequately report family 
data, HUD will assign a zero rating for the indicator. The method for 
selecting the PHA's quality control sample under paragraphs (a), (b), 
(c) and (f) of this section must leave a clear audit trail that can be 
used to verify that the PHA's quality control sample was drawn in an 
unbiased manner.
    An PHA 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 a HUD verification 
method. For those PHAs, 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, PHAs 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 PHA has written policies in its administrative plan for 
selecting applicants from the waiting list and whether the PHA 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 independent auditor (IA) annual 
audit report covering the PHA fiscal year entered on the SEMAP 
certification and on-site confirmatory review if performed.
    (3) Rating: (i) The PHA's SEMAP certification states that:
    (A) The PHA has written waiting list selection policies in its 
administrative plan and,
    (B) Based on the PHA's quality control samples, drawn separately for 
applicants reaching the top of the waiting list and for admissions, 
documentation shows that at least 98 percent of the families in both 
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 PHA's SEMAP certification does not support the statement in 
paragraph (a)(3)(i) of this section. 0 points.
    (b) Reasonable rent. (1) This indicator shows whether the PHA 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; at the HAP

[[Page 646]]

contract anniversary if there is a 10 percent decrease in the published 
fair market rent (FMR) in effect 60 days before the HAP contract 
anniversary. The PHA'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 982.507)
    (2) HUD verification method: The IA annual audit report covering the 
PHA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The PHA's SEMAP certification states that:
    (A) The PHA 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
    (B) Based on the PHA's quality control sample of tenant files, the 
PHA follows its written method to determine reasonable rent and has 
documented its determination that the rent to owner is reasonable in 
accordance with Sec.  982.507 of this chapter 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 
10 percent decrease in the published FMR in effect 60 days before the 
HAP contract anniversary. 20 points.
    (ii) The PHA's SEMAP certification includes the statements in 
paragraph (b)(3)(i) of this section, except that the PHA 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 10 percent 
decrease in the published FMR in effect 60 days before the HAP contract 
anniversary. 15 points.
    (iii) The PHA's SEMAP certification 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 PHA 
verifies and correctly determines adjusted annual income for each 
assisted family and, where the family is responsible for utilities under 
the lease, the PHA 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 IA annual audit report covering the 
PHA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The PHA's SEMAP certification states that, based on 
the PHA's quality control sample of tenant files, for at least 90 
percent of families:
    (A) The PHA 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 PHA properly attributes and calculates allowances for any 
medical, child care, and/or disability assistance expenses; and
    (C) The PHA uses the appropriate utility allowances to determine 
gross rent for the unit leased. 20 points.
    (ii) The PHA's SEMAP certification includes the statements in 
paragraph (c)(3)(i) of this section, except that the PHA 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 PHA's SEMAP certification 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 
PHA maintains an up-to-date utility allowance schedule. (24 CFR 982.517)
    (2) HUD verification method: The IA annual audit report covering the 
PHA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.

[[Page 647]]

    (3) Rating: (i) The PHA's SEMAP certification states that the PHA 
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 PHA's SEMAP certification 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 PHA supervisor or other qualified person reinspects a sample 
of units under contract during the PHA fiscal year, which meets the 
minimum sample size requirements specified at Sec.  985.2 under PHA's 
quality control sample, for quality control of HQS inspections. The PHA 
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 a cross section of inspectors. (24 CFR 
982.405(b))
    (2) HUD verification method: The IA annual audit report covering the 
PHA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The PHA's SEMAP certification states that an PHA 
supervisor or other qualified person performed quality control HQS 
reinspections during the PHA fiscal year for a sample of units under 
contract which meets the minimum sample size requirements specified in 
Sec.  983.2 under PHA's quality control sample. The PHA's SEMAP 
certification 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 PHA's SEMAP certification 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 PHA-approved extension. In addition, if HQS deficiencies are not 
corrected timely, the indicator shows whether the PHA 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 IA annual audit report covering the 
PHA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The PHA's SEMAP certification states that the PHA's 
quality control 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 PHA-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 PHA-approved extension, the 
PHA 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 PHA's SEMAP certification 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 PHAs with jurisdiction in metropolitan FMR areas. The indicator shows 
whether the PHA 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

[[Page 648]]

holders of the full range of areas where they may lease units both 
inside and outside the PHA'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)(4) and 982.301(b)(12))
    (2) HUD verification method: The IA annual audit report covering the 
PHA fiscal year entered on the SEMAP certification and on-site 
confirmatory review if performed.
    (3) Rating: (i) The PHA's SEMAP certification states that:
    (A) The PHA has a written policy in its administrative plan which 
includes actions the PHA 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 PHA 
considers areas of poverty or minority concentration;
    (B) PHA documentation shows that the PHA 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 PHA 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 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 holders 
about the full range of areas where they may look for housing;
    (D) The PHA's information packet for rental voucher holders contains 
either a list of owners who are willing to lease (or properties 
available for lease) under the rental voucher program; or a current list 
of other organizations that will help families find units and the PHA 
can demonstrate that the list(s) includes properties or organizations 
that operate outside areas of poverty or minority concentration;
    (E) The PHA'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) PHA documentation shows that the PHA has analyzed whether rental 
voucher holders have experienced difficulties in finding housing outside 
areas of poverty or minority concentration and, if such difficulties 
have been found, PHA documentation shows that the PHA has analyzed 
whether it is appropriate to seek approval of exception payment standard 
amounts in any part of its jurisdiction and has sought HUD approval of 
exception payment standard amounts when necessary. 5 points.
    (ii) The PHA's SEMAP certification does not support the statement in 
paragraph (g)(3)(i) of this section. 0 points.
    (h) Deconcentration bonus. (1) Submission of deconcentration data in 
the HUD-prescribed format for this indicator is mandatory for a PHA 
using one or more payment standard amount(s) that exceed(s) 100 percent 
of the published FMR set at the 50th percentile rent to provide access 
to a broad range of housing opportunities throughout a metropolitan area 
in accordance with Sec.  888.113(c) of this title, starting with the 
second full PHA fiscal year following initial use of payment standard 
amounts based on the FMR set at the 50th percentile rent. Submission of 
deconcentration data for this indicator is optional for all other PHAs. 
Additional SEMAP points are available to PHAs 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 PHA fiscal year to, low poverty census tracts 
in the PHA's principal operating area. For purposes of this indicator, 
the PHA's principal operating area is the geographic entity for which 
the Census tabulates data that most closely

[[Page 649]]

matches the PHA's geographic jurisdiction under State or local law 
(e.g., city, county, metropolitan statistical area) as determined by the 
PHA, 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 PHA, whichever is greater. The PHA determines the 
overall poverty rate for its principal operating area using the most 
recent available decennial Census data. Family data used for the PHA's 
analysis must be the same information as reported to MTCS for the PHA'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 PHA in its principal operating area at the end of the last completed 
PHA 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 PHA's principal operating area 
during the last completed PHA 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 
PHA fiscal year; or
    (iii) The percent of Section 8 families with children who moved to 
low-poverty census tracts in the PHA's principal operating area over the 
last two completed PHA 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 PHA fiscal year.
    (iv) State and regional PHAs 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 PHA has assisted at least 20 
Section 8 families with children in the last completed PHA fiscal year.
    (2) HUD verification methods: PHA data submitted for the 
deconcentration bonus, the IA annual audit report covering the PHA 
fiscal year entered on the SEMAP certification, and on-site confirmatory 
review if performed.
    (3) Rating: (i) The data submitted by the PHA for the 
deconcentration bonus shows that the PHA met the requirements for bonus 
points in paragraph (h)(1)(i), (ii) or (iii) of this section. 5 points.
    (ii) The data submitted by the PHA for the deconcentration bonus 
does not show that the PHA met the requirements for bonus points in 
paragraph (h)(1)(i), (ii) or (iii) of this section. 0 points.
    (i) Payment standards. (1) This indicator shows whether the PHA has 
adopted a payment standard schedule that establishes voucher payment 
standard amounts by unit size for each FMR area in the PHA jurisdiction, 
and, if applicable, separate payment standard amounts by unit size for a 
PHA-designated part of an FMR area, which payment standards do not 
exceed 110 percent of the current applicable published FMRs and which 
are not less than 90 percent of the current applicable published FMRs 
(unless a higher or lower payment standard amount is approved by HUD). 
(Sec.  982.503 of this chapter.) For purposes of this paragraph, payment 
standards that do not exceed 110 percent of the current applicable 
published FMRs include exception payment standards established by the 
PHA in accordance with 982.503(c)(iii).
    (2) HUD verification method: PHA data submitted on the SEMAP 
certification form concerning payment standards.
    (3) Rating:
    (i) The PHA's voucher program payment standard schedule contains 
payment standards which do not exceed 110 percent of the current 
applicable published FMR and which are not less than 90 percent of the 
current applicable published FMR (unless a higher or lower payment 
standard amount is approved by HUD). 5 points.
    (ii) The PHA's voucher program payment standard schedule contains 
payment standards which exceed 110 percent of the current applicable 
published FMRs or which are less than 90

[[Page 650]]

percent of the current applicable published FMRs (unless a higher or 
lower payment standard amount is approved by HUD). 0 points.
    (j) Annual reexaminations. (1) This indicator shows whether the PHA 
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 PHA'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:
    (i) Fewer than 5 percent of all PHA reexaminations are more than 2 
months overdue. 10 points.
    (ii) 5 to 10 percent of all PHA reexaminations are more than 2 
months overdue. 5 points.
    (iii) More than 10 percent of all PHA reexaminations are more than 2 
months overdue. 0 points.
    (k) Correct tenant rent calculations. (1) This indicator shows 
whether the PHA 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 PHA on Forms HUD-50058. The 
MTCS data used for verification cover only voucher program and regular 
certificate program tenancies, and do not include rent calculation 
discrepancies for manufactured home owner rentals of manufactured home 
spaces under the certificate program or for proration of assistance 
under the noncitizen rule.
    (3) Ratings:
    (i) 2 percent or fewer of PHA tenant rent and family's share of the 
rent to owner calculations are incorrect. 5 points.
    (ii) More than 2 percent of PHA 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 100 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 PHA 
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 PHA'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. The provisions of this paragraph (n) apply to the 
first SEMAP certification due after July 2, 2012.
    (1) The indicator: This indicator shows whether the PHA enters into 
HAP contracts for the number of the PHA's

[[Page 651]]

baseline voucher units (units that are contracted under a Consolidated 
ACC) for the calendar year that ends on or before the PHA's fiscal year 
or whether the PHA has expended its allocated budget authority for the 
same calendar year. Allocated budget authority will be based upon the 
PHA's eligibility, which includes budget authority obligated for the 
calendar year and any portion of HAP reserves attributable to the budget 
authority that was offset from reserves during the calendar year. 
Litigation units and funding will be excluded from this indicator, and 
new increments will be excluded for 12 months from the effective date of 
the increment on the Consolidated ACC. Units assisted under the voucher 
homeownership option and units occupied under a project-based HAP 
contract are included in the measurement of this indicator.
    (2) HUD verification method: This method is based on the percent of 
units leased under a tenant-based or project-based HAP contract or 
occupied by homeowners under the voucher homeownership option during the 
calendar year that ends on or before the assessed PHA's fiscal year, or 
the percent of allocated budget authority expended during the calendar 
year that ends on or before the assessed PHA's fiscal year. The percent 
of units leased is determined by taking unit months leased under a HAP 
contract and unit months occupied by homeowners under the voucher 
homeownership option, as shown in HUD systems for the calendar year that 
ends on or before the assessed PHA fiscal year, and dividing that number 
by the number of unit months available for leasing based on the number 
of baseline units available at the beginning of the calendar year.
    (3) Rating: (i) The percent of units leased or occupied by 
homeowners under the voucher homeownership option, or the percent of 
allocated budget authority expended during the calendar year that ends 
on or before the assessed PHA fiscal year was 98 percent or more. (20 
points.)
    (ii) The percent of units leased or occupied by homeowners under the 
voucher homeownership option, or the percent of allocated budget 
authority expended during the calendar year that ends on or before the 
assessed PHA fiscal year was 95 to 97 percent. (15 points.)
    (iii) The percent of units leased or occupied by homeowners under 
the voucher homeownership option, or the percent of allocated budget 
authority expended during the calendar year that ends on or before the 
assessed PHA fiscal year was less than 95 percent. (0 points.)
    (o) Family self-sufficiency (FSS) enrollment and escrow accounts. 
(1) This indicator applies only to PHAs with mandatory FSS programs. The 
indicator consists of 2 components which show whether the PHA has 
enrolled families in the FSS program as required, and the extent of the 
PHA'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, as determined under Sec.  984.105 of this chapter. 
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 PHAs concerning FSS 
families enrolled in their FSS programs but who have moved under 
portability to the jurisdiction of another PHA.
    (3) Rating:
    (i) The PHA 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 PHA 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 PHA 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 PHA's mandatory FSS slots are 
filled. 5 points.

[[Page 652]]

    (v) The PHA has filled 60 to 79 percent of its mandatory FSS slots, 
but fewer than 30 percent of FSS families have escrow account balances. 
3 points.
    (vi) The PHA 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.
    (p) Success rate of voucher holders. (1) This indicator shows 
whether voucher holders were successful in leasing units with voucher 
assistance. This indicator applies only to PHAs that have received 
approval to establish success rate payment standard amounts in 
accordance with Sec.  982.503(e). This indicator becomes initially 
effective for the second full PHA fiscal year following the date of HUD 
approval of success rate payment standard amounts.
    (2) HUD verification method: MTCS Report.
    (3) Rating (5 points): (i) The proportion of families issued rental 
vouchers during the last PHA fiscal year that have become participants 
in the voucher program is more than the higher of:
    (A) 75 percent; or
    (B) The proportion of families issued rental vouchers that became 
participants in the program during the six month period utilized to 
determine eligibility for success rate payment standards under Sec.  
982.503(e)(1) plus 5 percentage points; and
    (ii) The percent of units leased during the last PHA fiscal year was 
95 percent or more, or the percent of allocated budget authority 
expended during the last PHA fiscal year was 95 percent or more 
following the methodology of Sec.  985.3(n).

[63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40497, July 26, 1999; 
64 FR 67983, Dec. 3, 1999; 65 FR 16733, Mar. 29, 2000; 65 FR 16823, Mar. 
30, 2000; 65 FR 58875, Oct. 2, 2000; 66 FR 50005, Oct. 1, 2001; 77 FR 
32018, May 31, 2012; 81 FR 80583, Nov. 16, 2016]



                       Subpart B_Program Operation



Sec.  985.101  SEMAP certification.

    (a) An PHA 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 PHA board resolution and 
signed by the PHA executive director. If the PHA 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.
    (2) An PHA 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 PHA in support of the PHA's SEMAP certification to HUD. The PHA 
shall retain subcontractor certifications for 3 years.
    (3) An PHA may include with its SEMAP certification any information 
bearing on the accuracy or completeness of the information used by the 
PHA in providing its certification.
    (b) Failure of an PHA 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 PHA will be subject to the 
requirements at Sec.  985.107.
    (c) An PHA'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)

[63 FR 48555, Sept. 10, 1998, as amended at 66 FR 50006, Oct. 1, 2001]



Sec.  985.102  SEMAP profile.

    Upon receipt of the PHA's SEMAP certification, HUD will rate the 
PHA's performance under each SEMAP indicator in accordance with Sec.  
985.3. HUD will then prepare a SEMAP profile for each PHA which shows 
the rating for each indicator, sums the indicator ratings, and divides 
by the total possible points to arrive at an PHA's overall SEMAP score. 
SEMAP scores shall be rounded off to the nearest whole percent.



Sec.  985.103  SEMAP score and overall performance rating.

    (a) High performer rating. PHAs with SEMAP scores of at least 90 
percent shall be rated high performers under SEMAP. PHAs that achieve an 
overall performance rating of high performer

[[Page 653]]

may receive national recognition by the Department and may be given 
competitive advantage under notices of fund availability.
    (b) Standard rating. PHAs with SEMAP scores of 60 to 89 percent 
shall be rated standard.
    (c) Troubled rating. PHAs with SEMAP scores of less than 60 percent 
shall be rated troubled.
    (d) Modified rating on an indicator. A rating on any of the 
indicators at Sec. Sec.  985.3(a) through 985.3(h) will be subject to 
change after HUD receives the PHA's annual audit report or after HUD 
conducts a confirmatory review if the audit report or the confirmatory 
review report contains information that the PHA's SEMAP certification 
concerning an indicator is not accurate.
    (e) Modified or withheld overall rating. (1) Notwithstanding an 
PHA's SEMAP score, HUD may modify or withhold an PHA's overall 
performance rating when warranted by circumstances which have bearing on 
the SEMAP indicators such as an PHA'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 PHA's SEMAP score, if the latest IA report 
submitted for the PHA under the Single Audit Act indicates that the 
auditor is unable to provide an opinion as to whether the PHA'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 PHA will automatically be given an overall performance 
rating of troubled and the PHA will be subject to the requirements at 
Sec.  985.107.
    (3) When HUD modifies or withholds a rating for any reason, it shall 
explain in writing to the PHA the reasons for the modification or for 
withholding the rating.

[63 FR 48555, Sept. 10, 1998, as amended at 64 FR 40498, July 26, 1999]



Sec.  985.104  PHA right of appeal of overall rating.

    An PHA 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) Frequency of SEMAP assessments--(1) Annual review. Except as 
provided in paragraph (a)(2) of this section, HUD shall assess each 
PHA's performance under SEMAP annually and shall assign each PHA a SEMAP 
score and overall performance rating.
    (2) Biennial review for small PHAs. HUD shall assess and score the 
performance of a PHA with less than 250 assisted units once every other 
PHA fiscal year, unless the PHA:
    (i) Elects to have its performance assessed on an annual basis; or
    (ii) Is designated as troubled, in accordance with Sec.  985.103.
    (b) Notification to PHA. No later than 120 calendar days after the 
PHA's fiscal year end, HUD shall notify each PHA 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 PHA certification and the HUD rating 
under any indicator.
    (d) Changing rating from troubled. HUD must conduct an on-site 
confirmatory review of an PHA's performance before changing any annual 
overall performance rating from troubled to standard or high performer.

[[Page 654]]

    (e) Appeals. HUD must review, consider and provide a final written 
determination to an PHA on its appeal of its overall performance rating.
    (f) Corrective action plans. HUD must review the adequacy and 
monitor implementation of PHA corrective action plans submitted under 
Sec.  985.106(c) or Sec.  985.107(c) and provide technical assistance to 
help the PHA improve program management. If an PHA is assigned an 
overall performance rating of troubled, the PHA's corrective action plan 
must be approved in writing by HUD.

[63 FR 48555, Sept. 10, 1998, as amended at 68 FR 37671, June 24, 2003]



Sec.  985.106  Required actions for SEMAP deficiencies.

    (a) When the PHA receives the HUD notification of its SEMAP rating, 
an PHA must correct any SEMAP deficiency (indicator rating of zero) 
within 45 calendar days from date of HUD notice.
    (b) The PHA must send a written report to HUD describing its 
correction of any identified SEMAP deficiency.
    (c) If an PHA fails to correct a SEMAP deficiency within 45 calendar 
days as required, HUD may then require the PHA 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 PHA with troubled performance rating.

    (a) On-site reviews--(1) Required reviews for troubled PHAs. Except 
as provided in paragraph (a)(2) of this section, HUD will conduct an on-
site review of PHA program management for any PHA assigned an overall 
performance rating of troubled to assess the magnitude and seriousness 
of the PHA's noncompliance with performance requirements.
    (2) On-site reviews for small PHAs. Notwithstanding paragraph (a)(1) 
of this section, HUD may elect not to conduct an on-site review of a 
troubled PHA, if:
    (i) The PHA has less than 250 assisted units; and
    (ii) HUD determines that an on-site review is unnecessary to 
determine the needs of the PHA and the actions required to address the 
program deficiencies.
    (b) HUD written report. HUD must provide the PHA 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) PHA corrective action plan. Upon receipt of the HUD written 
report on its on-site review, the PHA 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 PHA 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 PHA board of commissioners chairperson and by 
the PHA executive director. If the PHA 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 PHA and HUD must monitor the PHA's 
implementation of its corrective action plan to ensure performance 
targets are met.
    (e) Use of administrative fee reserve prohibited. Any PHA 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 PHA's 
overall performance rating from troubled to standard or high performer 
if HUD determines that a change in the rating is

[[Page 655]]

warranted because of improved PHA 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)

[63 FR 48555, Sept. 10, 1998, as amended at 68 FR 37672, June 24, 2003]



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)



Sec.  985.109  Default under the Annual Contributions Contract (ACC).

    HUD may determine that an PHA'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]



                  Subpart D_Small Rural PHA Assessment

    Source: 88 FR 30505, May 11, 2023, unless otherwise noted.



Sec.  985.201  Applicability.

    (a) This subpart applies to small rural PHAs as defined in Sec.  
902.101 of this chapter.
    (b) Small rural PHAs shall be assessed and rated on the indicators 
and methodology of this subpart and shall not be subject to the SEMAP 
requirements.



Sec.  985.203  Assessment indicators and HUD verification methods.

    (a) This section describes the performance indicators used to assess 
a PHA's designation as troubled resulting from the small rural PHA 
assessment. HUD will use the verification method identified for each 
indicator. The four indicators are determined on a pass or fail basis.
    (b)(1) Inspection standards. This indicator shows whether the PHA 
applied the correct inspection standards to HCV and PBV unit 
inspections.
    (2) HUD verification method. The PHA's assessment certification and 
on-site HUD review when applicable.
    (3) Rating. The PHA passes the indicator if it applied the correct 
inspection standards for all unit HCV and PBV unit inspections conducted 
during the assessment period. If the PHA applied the incorrect 
inspection standards for any HCV or PBV unit inspection during the 
assessment period, the PHA fails the indicator.
    (c)(1) Initial unit inspections. This indicator determines if the 
PHA conducted the initial HQS inspections within the required time 
period.
    (2) HUD verification method. HUD systems show percent of newly 
leased units where the beginning date of the assistance contract is 
before the date the unit passed the initial unit inspection or, if the 
PHA employed the PHA initial inspection option for non-life-threatening 
deficiencies or alternative inspections, the timing requirements for the 
applicable PHA initial inspection option.
    (3) Rating. The PHA passes the indicator if at least 98 percent of 
units placed under HAP contract during the assessment period passed the 
initial PHA HQS inspection within the required time period. If fewer 
than 98 percent of units placed under HAP contract during the assessment 
period passed the HQS inspection within the required time periods, the 
PHA fails the indicator.
    (d)(1) Frequency of HQS inspections. This indicator shows, for units 
that have been under HAP contract for at least three years, whether the 
PHA re-inspected tenant-based units under HAP contract and the required 
sample of PBV units at least once during the three-year period from the 
last PHA inspection.
    (2) HUD verification method. HUD systems show the percentage of 
units that have been under HAP contract for at least three years that 
have been re-inspected within the required three-year period from the 
last inspection.

[[Page 656]]

    (3) Rating. The PHA passes the indicator if at least 98 percent of 
the units that have been under HAP contract for at least three years 
have been re-inspected within the required three-year period from the 
last inspection. The PHA fails the indicator if fewer than 98 percent of 
these units have been re-inspected within the required three-year 
period.
    (e)(1) Unit condition enforcement. This indicator shows whether, 
following the inspection of a unit under contract where the unit fails 
to meet the required standards, any cited life-threatening and non-life-
threatening deficiencies are corrected within the required cure period 
in accordance with Sec. Sec.  982.404 and 983.103 of this chapter. In 
addition, if HQS deficiencies are not corrected timely, the indicator 
shows whether the PHA 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. (Sec.  982.404 of this chapter)
    (2) HUD verification method. The PHA certification and on-site HUD 
review (if performed), and HUD system data.
    (3) Rating. In order to pass the indicator, the applicable 
verification method, which may include sampling, determines that the PHA 
took corrective action within the required timeframes for at least 98 
percent of inspections with identified life-threatening or other HQS 
deficiencies.
    (f)(1) PHA submission of certifications. The PHA must submit its 
certifications for the applicable indicators within the designated 
timeframe required by HUD, and in the form and manner as required by 
HUD. HUD will issue instructions on the submission of PHA certifications 
by Federal Register notification, which will be subject to public 
comment.
    (2) Failure to submit. Failure of the PHA to submit any 
certification in accordance with this paragraph will result in the PHA 
failing the indicator and being designated as troubled under the small 
rural PHA assessment.



Sec.  985.205  Determination of assessment rating.

    (a) High performer designation. (1) A PHA is designated a high 
performer under the small rural PHA assessment if the PHA has passed all 
four indicators identified in Sec.  985.203 and the PHA:
    (i) Has utilized at least 98 percent of its HCV budget authority in 
the two most recent calendar years, or the percent of HCV units leased 
by renters or occupied by homeowners in the two most recent calendar 
years was at least 98 percent;
    (ii) Did not end that calendar year with excess HAP reserves; and
    (iii) Did not end that calendar year in a funding shortfall or 
receive shortfall prevention funding from HUD.
    (2) HUD shall publish the calculation for determining excess HAP 
reserves in the Federal Register, and such calculation shall provide for 
public comment before becoming effective.
    (b) Standard performer designation. A PHA that passed all four 
indicators but did not meet the funding utilization criteria for a high 
performer designation in paragraph (a) is designated as a standard 
performer.
    (c) Troubled PHA designation. A PHA that failed any of the four 
indicators under Sec.  985.201 is designated as a troubled PHA under the 
small rural PHA assessment.



Sec.  985.207  Frequency of assessments.

    (a) Frequency of small rural PHA assessments--(1) Initial 
assessment. The initial small rural PHA assessment will be effective 
when the PHA's next SEMAP assessment would have been applied. For PHAs 
that qualify for SEMAP biennial review as a small PHA (less than 250 
assisted units), the transition to the small rural PHA assessment will 
occur when the PHA's next biennial SEMAP assessment is required.
    (2) Triennial assessments. HUD shall assess small rural PHAs no more 
than once every three years, except that a troubled small rural PHA 
shall be subject to an annual assessment in accordance with Sec.  
985.209.
    (b) [Reserved]

[[Page 657]]



Sec.  985.209  Troubled small rural PHAs.

    (a) Appeals--(1) HUD action. HUD must review, consider, and provide 
a final written determination to a small rural PHA that appeals its 
designation as a troubled PHA.
    (2) Deciding HUD official. The HUD decision on the PHA appeal shall 
be made by a HUD official who has not been involved in and is not 
subordinate to any person who has been involved in the original 
determination to designate the PHA as a troubled PHA under the small 
rural PHA assessment.
    (b) Corrective action agreement. No later than 60 days after the 
date on which the PHA is designated a troubled PHA, the PHA and HUD will 
enter into a corrective action agreement (CAA) under which the PHA shall 
take actions to correct the deficiencies upon which the troubled PHA 
designation is based. The PHA must comply with HUD requirements for the 
submission of the CAA, including but not limited to the date by which 
the CAA must be submitted to HUD. The CAA must:
    (1) Have a term of one year, and shall be renewable at the option of 
HUD;
    (2) Specify goals to be achieved;
    (3) Identify obstacles to goal achievement and ways to eliminate or 
avoid them;
    (4) Identify resources that will be used or sought to achieve goals;
    (5) Provide, where feasible, for technical assistance to assist the 
PHA in curing its deficiencies;
    (6) Identify a PHA staff person with lead responsibility for 
completing each goal;
    (7) Identify key tasks to reach each goal;
    (8) Specify time frames for achievement of each goal, including 
intermediate time frames to complete each key task;
    (9) Provide for regular evaluation of progress toward improvement;
    (10) Provide for the reconsideration of the PHA's designation as a 
troubled PHA no less than annually, and provide for the termination of 
the CAA when HUD determines the PHA is no longer troubled;
    (11) Provide that in the event of substantial noncompliance by the 
PHA under the CAA, HUD may (i) contract with another PHA or a private 
entity to administer the HCV program; and (ii) withhold funds otherwise 
distributable to the troubled PHA;
    (12) Be signed by the PHA board of commissioners chairperson and by 
the PHA executive director. If the PHA is a unit of local government or 
a State, the CAA 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.
    (c) Monitoring. The PHA and HUD must monitor the PHA's 
implementation of its CAA to ensure performance targets are met.
    (d) Annual small rural assessment. A troubled PHA shall be subject 
to the small rural assessment on an annual basis.
    (e) Use of administrative fee reserve prohibited. Any PHA designated 
as troubled may not use any part of the administrative fee reserve for 
other housing purposes (see Sec.  982.155(b) of this chapter).
    (f) Upgrading poor performance rating. HUD shall change a PHA'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 PHA performance and a standard or high designation on a 
subsequent small rural PHA assessment.
    (g) Default under the Annual Contributions Contract (ACC). HUD may 
determine that a PHA's failure to correct identified deficiencies 
resulting from its small rural PHA assessment or to execute and 
implement a CAA as required by HUD constitutes a default under the ACC.



Sec.  985.211  Small rural PHA assessment records.

    HUD shall maintain small rural PHA assessment files, including 
designations, notifications, appeals, corrective action agreements, and 
related correspondence for at least 3 years.



PART 990_THE PUBLIC HOUSING OPERATING FUND PROGRAM--Table of Contents



       Subpart A_Purpose, Applicability, Formula, and Definitions

Sec.
990.100 Purpose.
990.105 Applicability.

[[Page 658]]

990.110 Operating fund formula.
990.115 Definitions.
990.116 Environmental review requirements.

  Subpart B_Eligibility for Operating Subsidy; Computation of Eligible 
                               Unit Months

990.120 Unit months.
990.125 Eligible units.
990.130 Ineligible units.
990.135 Eligible unit months (EUMs).
990.140 Occupied dwelling units.
990.145 Dwelling units with approved vacancies.
990.150 Limited vacancies.
990.155 Addition and deletion of units.

                 Subpart C_Calculating Formula Expenses

990.160 Overview of calculating formula expenses.
990.165 Computation of project expense level (PEL).
990.170 Computation of utilities expense level (UEL): Overview.
990.175 Utilities expense level: Computation of the current consumption 
          level.
990.180 Utilities expense level: Computation of the rolling base 
          consumption level.
990.185 Utilities expense level: Incentives for energy conservation/rate 
          reduction.
990.190 Other formula expenses (add-ons).

                  Subpart D_Calculating Formula Income

990.195 Calculation of formula income.

        Subpart E_Determination and Payment of Operating Subsidy

990.200 Determination of formula amount.
990.205 Fungibility of operating subsidy between projects.
990.210 Payment of operating subsidy.
990.215 Payments of operating subsidy conditioned upon reexamination of 
          income of families in occupancy.

           Subpart F_Transition Policy and Transition Funding

990.220 Purpose.
990.225 Transition determination.
990.230 PHAs that will experience a subsidy reduction.
990.235 PHAs that will experience a subsidy increase.

                            Subpart G_Appeals

990.240 General.
990.245 Types of appeals.
990.250 Requirements for certain appeals.

                       Subpart H_Asset Management

990.255 Overview.
990.260 Applicability.
990.265 Identification of projects.
990.270 Asset management.
990.275 Project-based management (PBM).
990.280 Project-based budgeting and accounting.
990.285 Records and reports.
990.290 Compliance with asset management requirements.

     Subpart I_Operating Subsidy for Properties Managed by Resident 
                     Management Corporations (RMCs)

990.295 Resident Management Corporation operating subsidy.
990.300 Preparation of operating budget.
990.305 Retention of excess revenues.

    Subpart J_Financial Management Systems, Monitoring, and Reporting

990.310 Purpose--General policy on financial management, monitoring, and 
          reporting.
990.315 Submission and approval of operating budgets.
990.320 Audits.
990.325 Record retention requirements.

    Authority: 42 U.S.C. 1437g; 42 U.S.C. 3535(d).

    Source: 70 FR 54997, Sept. 19, 2005, unless otherwise noted.



       Subpart A_Purpose, Applicability, Formula, and Definitions



Sec.  990.100  Purpose.

    This part implements section 9(f) of the United States Housing Act 
of 1937 (1937 Act), (42 U.S.C. 1437g). Section 9(f) establishes an 
Operating Fund for the purposes of making assistance available to public 
housing agencies (PHAs) for the operation and management of public 
housing. In the case of unsubsidized housing, the total expenses of 
operating rental housing should be covered by the operating income, 
which primarily consists of rental income and, to some degree, 
investment and non-rental income. In the case of public housing, the 
Operating Fund provides operating subsidy to assist PHAs to serve low, 
very low, and extremely low-income families. This part describes the 
policies and procedures for Operating Fund formula calculations and 
management under the Operating Fund Program.

[[Page 659]]



Sec.  990.105  Applicability.

    (a) Applicability of this part. (1) With the exception of subpart I 
of this part, this part is applicable to all PHA rental units under an 
Annual Contributions Contract (ACC). This includes PHAs that have not 
received operating subsidy previously, but are eligible for operating 
subsidy under the Operating Fund Formula.
    (2) This part is applicable to all rental units managed by a 
resident management corporation (RMC), including a direct-funded RMC.
    (b) Inapplicability of this part. (1) This part is not applicable to 
Indian Housing, section 5(h) and section 32 homeownership projects, the 
Housing Choice Voucher Program, the section 23 Leased Housing Program, 
or the section 8 Housing Assistance Payments Programs.
    (2) With the exception of subpart J of this part, this part is not 
applicable to the Mutual Help Program or the Turnkey III Homeownership 
Opportunity Program.



Sec.  990.110  Operating fund formula.

    (a) General formula. (1) The amount of annual contributions 
(operating subsidy) each PHA is eligible to receive under this part 
shall be determined by a formula.
    (2) In general, operating subsidy shall be the difference between 
formula expense and formula income. If a PHA's formula expense is 
greater than its formula income, then the PHA is eligible for an 
operating subsidy.
    (3) Formula expense is an estimate of a PHA's operating expense and 
is determined by the following three components: Project Expense Level 
(PEL), Utility Expense Level (UEL), and other formula expenses (add-
ons). Formula expense and its three components are further described in 
subpart C of this part. Formula income is an estimate for a PHA's non-
operating subsidy revenue and is further described in subpart D of this 
part.
    (4) Certain portions of the operating fund formula (e.g., PEL) are 
calculated in terms of per unit per month (PUM) amounts and are 
converted into whole dollars by multiplying the PUM amount by the number 
of eligible unit months (EUMs). EUMs are further described in subpart B 
of this part.
    (b) Specific formula. (1) A PHA's formula amount shall be the sum of 
the three formula expense components calculated as follows: {[(PEL 
multiplied by EUM) plus (UEL multiplied by EUM) plus add-ons] minus 
(formula income multiplied by EUM){time} .
    (2) A PHA whose formula amount is equal to or less than zero is 
still eligible to receive operating subsidy equal to its most recent 
actual audit cost for its Operating Fund Program.
    (3) Operating subsidy payments will be limited to the availability 
of funds as described in Sec.  990.210(c).
    (c) Non-codified formula elements. This part defines the major 
components of the Operating Fund Formula and describes the relationships 
of these various components. However, this part does not codify certain 
secondary elements that will be used in the revised Operating Fund 
Formula. HUD will more appropriately provide this information in non-
codified guidance, such as a Handbook, Federal Register notice, or other 
non-regulatory means that HUD determines appropriate.



Sec.  990.115  Definitions.

    The following definitions apply to the Operating Fund program:
    1937 Act means the United States Housing Act of 1937 (42 U.S.C. 1437 
et seq.).
    Annual contributions contract (ACC) is a contract prescribed by HUD 
for loans and contributions, which may be in the form of operating 
subsidy, whereby HUD agrees to provide financial assistance and the PHA 
agrees to comply with HUD requirements for the development and operation 
of its public housing projects.
    Asset management is a management model that emphasizes project-based 
management, as well as long-term and strategic planning.
    Current consumption level is the amount of each utility consumed at 
a project during the 12-month period that ended the June 30th prior to 
the beginning of the applicable funding period.
    Eligible unit months (EUM) are the actual number of PHA units in 
eligible categories expressed in months for a

[[Page 660]]

specified time frame and for which a PHA receives operating subsidy.
    Formula amount is the amount of operating subsidy a PHA is eligible 
to receive, expressed in whole dollars, as determined by the Operating 
Fund Formula.
    Formula expense is an estimate of a PHA's operating expense used in 
the Operating Fund Formula.
    Formula income is an estimate of a PHA's non-operating subsidy 
revenue used in the Operating Fund Formula.
    Funding period is the calendar year for which HUD will distribute 
operating subsidy according to the Operating Fund Formula.
    Operating Fund is the account/program authorized by section 9 of the 
1937 Act for making operating subsidy available to PHAs for the 
operation and management of public housing.
    Operating Fund Formula (or Formula) means the data and calculations 
used under this part to determine a PHA's amount of operating subsidy 
for a given period.
    Operating subsidy is the amount of annual contributions for 
operations a PHA receives each funding period under section 9 of the 
1937 Act as determined by the Operating Fund Formula in this part.
    Other operating costs (add-ons) means PHA expenses that are 
recognized as formula expenses but are not included either in the 
project expense level or in the utility expense level.
    Payable consumption level is the amount for all utilities consumed 
at a project that the Formula recognizes in the computation of a PHA's 
utility expense level at that project.
    Per unit per month (PUM) describes a dollar amount on a monthly 
basis per unit, such as Project Expense Level, Utility Expense Level, 
and formula income.
    Project means each PHA project under an ACC to which the Operating 
Fund Formula is applicable. However, for purposes of asset management, 
as described in subpart H of this part, projects may be as identified 
under the ACC or may be a reasonable grouping of projects or portions of 
a project or projects under the ACC.
    Project-based management is the provision of property management 
services that is tailored to the unique needs of each property, given 
the resources available to that property.
    Project expense level (PEL) is the amount of estimated expenses for 
each project (excluding utilities and add-ons) expressed as a PUM cost.
    Project units means all dwelling units in all of a PHA's projects 
under an ACC.
    Rolling base consumption level (RBCL) is the average of the yearly 
consumption levels for the 36-month period ending on the June 30th that 
is 18 months prior to the beginning of the applicable funding period.
    Transition funding is the timing and amount by which a PHA will 
realize increases and reductions in operating subsidy based on the new 
funding levels of the Operating Fund Formula.
    Unit months are the total number of project units in a PHA's 
inventory expressed in months for a specified time frame.
    Utilities means electricity, gas, heating fuel, water, and sewerage 
service.
    Utilities expense level (UEL) is a product of the utility rate 
multiplied by the payable consumption level multiplied by the utilities 
inflation factor expressed as a PUM dollar amount.
    Utility rate (rate) means the actual average rate for any given 
utility for the most recent 12-month period that ended the June 30th 
prior to the beginning of the applicable funding period.
    Yearly consumption level is the actual amount of each utility 
consumed at a project during a 12-month period ending June 30th.



Sec.  990.116  Environmental review requirements.

    The environmental review procedures of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4332(2)(C)) and the implementing 
regulations at 24 CFR parts 50 and 58 are applicable to the Operating 
Fund Program.



  Subpart B_Eligibility for Operating Subsidy; Computation of Eligible 
                               Unit Months



Sec.  990.120  Unit months.

    (a) Some of the components of HUD's Operating Fund Formula are based 
on a measure known as unit months. Unit

[[Page 661]]

months represent a PHA's public housing inventory during a specified 
period of time. The unit months eligible for operating subsidy in a 12-
month period are equal to the number of months that the units are in an 
operating subsidy-eligible category, adjusted for changes in inventory 
(e.g., units added or removed), as described below.
    (b) A PHA is eligible to receive operating subsidy for a unit on the 
date it is both placed under the ACC and occupied. The date a unit is 
eligible for operating subsidy does not change the Date of Full 
Availability (DOFA) or the date of the End of Initial Operating Period 
(EIOP), nor does this provision place a project into management status.



Sec.  990.125  Eligible units.

    A PHA is eligible to receive operating subsidy for public housing 
units under an ACC for:
    (a) Occupied dwelling units as defined in Sec.  990.140;
    (b) A dwelling unit with an approved vacancy (as defined in Sec.  
990.145); and
    (c) A limited number of vacancies (as defined in Sec.  990.150).



Sec.  990.130  Ineligible units.

    (a) Vacant units that do not fall within the definition of Sec.  
990.145 or Sec.  990.150 are not eligible for operating subsidy under 
this part.
    (b) Units that are eligible to receive an asset-repositioning fee, 
as described in Sec.  990.190(h), are not eligible to receive operating 
subsidy under this subpart.



Sec.  990.135  Eligible unit months (EUMs).

    (a) A PHA's total number of EUMs will be calculated for the 12-month 
period from July 1st to June 30th that is prior to the first day of the 
applicable funding period, and will consist of eligible units as defined 
in Sec.  990.140, Sec.  990.145, or Sec.  990.150.
    (b)(1) The determination of whether a public housing unit satisfies 
the requirements of Sec.  990.140, Sec.  990.145, or Sec.  990.150 for 
any unit month shall be based on the unit's status as of either the 
first or last day of the month, as determined by the PHA.
    (2) HUD reserves the right to determine the status of any and all 
public housing units based on information in its information systems.
    (c) The PHA shall maintain and, at HUD's request, shall make 
available to HUD, specific documentation of the status of all units, 
including, but not limited to, a listing of the units, street addresses 
or physical address, and project/management control numbers.
    (d) Any unit months that do not meet the requirements of this 
subpart are not eligible for operating subsidy, and will not be 
subsidized by the Operating Fund.



Sec.  990.140  Occupied dwelling units.

    A PHA is eligible to receive operating subsidy for public housing 
units for each unit month that those units are under an ACC and occupied 
by a public housing-eligible family under lease.



Sec.  990.145  Dwelling units with approved vacancies.

    (a) A PHA is eligible to receive operating subsidy for vacant public 
housing units for each unit month the units are under an ACC and meet 
one of the following HUD-approved vacancies:
    (1) Units undergoing modernization. Vacancies resulting from project 
modernization or unit modernization (such as work necessary to reoccupy 
vacant units) provided that one of the following conditions is met:
    (i) The unit is undergoing modernization (i.e., the modernization 
contract has been awarded or force account work has started) and must be 
vacant to perform the work, and the construction is on schedule 
according to a HUD-approved PHA Annual Plan; or
    (ii) The unit must be vacant to perform the work and the treatment 
of the vacant unit is included in a HUD-approved PHA Annual Plan, but 
the time period for placing the vacant unit under construction has not 
yet expired. The PHA shall place the vacant unit under construction 
within two federal fiscal years (FFYs) after the FFY in which the 
capital funds are approved.
    (2) Special use units. Units approved and used for resident 
services, resident organization offices, and related activities, such as 
self-sufficiency and anti-crime initiatives.

[[Page 662]]

    (b) On a project-by-project basis, subject to prior HUD approval and 
for the time period agreed to by HUD, a PHA shall receive operating 
subsidy for the units affected by the following events that are outside 
the control of the PHA:
    (1) Litigation. Units that are vacant due to litigation, such as a 
court order or settlement agreement that is legally enforceable; units 
that are vacant in order to meet regulatory and statutory requirements 
to avoid potential litigation (as covered in a HUD-approved PHA Annual 
Plan); and units under voluntary compliance agreements with HUD or other 
voluntary compliance agreements acceptable to HUD (e.g., units that are 
being held vacant as part of a court-order, HUD-approved desegregation 
plan, or voluntary compliance agreement requiring modifications to the 
units to make them accessible pursuant to 24 CFR part 8).
    (2) Disasters. Units that are vacant due to a federally declared, 
state-declared, or other declared disaster.
    (3) Casualty losses. Damaged units that remain vacant due to delays 
in settling insurance claims.
    (c) A PHA may appeal to HUD to receive operating subsidy for units 
that are vacant due to changing market conditions (see subpart G of this 
part--Appeals).



Sec.  990.150  Limited vacancies.

    (a) Operating subsidy for a limited number of vacancies. HUD will 
pay operating subsidy for a limited number of vacant units under an ACC. 
The limited number of vacant units must be equal to or less than 3 
percent of the unit months on a project-by-project basis based on the 
definition of a project under Sec.  990.265 (provided that the number of 
eligible unit months does not exceed 100 percent of the unit months for 
a project).
    (b) Exception for PHAs with 100 or fewer units. Notwithstanding 
paragraph (a) of this section, a PHA with 100 or fewer units will be 
paid operating subsidy for up to five vacant units not to exceed 100 
percent of the unit months under an ACC. For example, a PHA with an 
inventory of 100 units and four vacancies during its fiscal year will be 
eligible for operating subsidy for all 100 units. A PHA with an 
inventory of 50 units with seven vacancies during its fiscal year will 
be eligible for operating subsidy for 48 units.

[70 FR 54997, Sept. 19, 2005, as amended at 81 FR 12377, Mar. 8, 2016]



Sec.  990.155  Addition and deletion of units.

    (a) Changes in public housing unit inventory. To generate a change 
to its formula amount within each one-year funding period, PHAs shall 
periodically (e.g., quarterly) report the following information to HUD, 
during the funding period:
    (1) New units that were added to the ACC, and occupied by a public 
housing-eligible family during the prior reporting period for the one-
year funding period, but have not been included in the previous EUMs' 
data; and
    (2) Projects, or entire buildings in a project, that are eligible to 
receive an asset repositioning fee in accordance with the provisions in 
Sec.  990.190(h).
    (b) Revised EUM calculation. (1) For new units, the revised 
calculation shall assume that all such units will be fully occupied for 
the balance of that funding period. The actual occupancy/vacancy status 
of these units will be included to calculate the PHA's operating subsidy 
in the subsequent funding period after these units have one full year of 
a reporting cycle.
    (2) Projects, or entire buildings in a project, that are eligible to 
receive an asset repositioning fee in accordance with Sec.  990.190(h) 
are not to be included in the calculation of EUMs. Funding for these 
units is provided under the conditions described in Sec.  990.190(h).



                 Subpart C_Calculating Formula Expenses



Sec.  990.160  Overview of calculating formula expenses.

    (a) General. Formula expenses represent the costs of services and 
materials needed by a well-run PHA to sustain the project. These costs 
include items such as administration, maintenance, and utilities. HUD 
also determines a PHA's formula expenses at a project level. HUD uses 
the following three factors to determine the overall formula expense 
level for each project:

[[Page 663]]

    (1)The project expense level (PEL) (calculated in accordance with 
Sec.  990.165);
    (2) The utilities expense level (UEL) (calculated in accordance with 
Sec. Sec.  990.170, 990.175, 990.180, and 990.185); and
    (3)Other formula expenses (add-ons) (calculated in accordance with 
Sec.  990.190).
    (b) PEL, UEL, and Add-ons. Each project of a PHA has a unique PEL 
and UEL. The PEL for each project is based on ten characteristics and 
certain adjustments described in Sec.  990.165. The PEL represents the 
normal expenses of operating public housing projects, such as 
maintenance and administration costs. The UEL for each project 
represents utility expenses. Utility expense levels are based on an 
incentive system aimed at reducing utility expenses. Both the PEL and 
UEL are expressed in PUM costs. The expenses not included in these 
expense levels and which are unique to PHAs are titled ``other formula 
expenses (add-ons)'' and are expressed in a dollar amount.
    (c) Calculating project formula expense. The formula expense of any 
one project is the sum of the project's PEL and the UEL, multiplied by 
the total EUMs specific to the project, plus the add-ons.



Sec.  990.165  Computation of project expense level (PEL).

    (a) Computation of PEL. The PEL is calculated in terms of PUM cost 
and represents the costs associated with the project, except for utility 
and add-on costs. Costs associated with the PEL are administration, 
management fees, maintenance, protective services, leasing, occupancy, 
staffing, and other expenses, such as project insurance. HUD will 
calculate the PEL using regression analysis and benchmarking for the 
actual costs of Federal Housing Administration (FHA) projects to 
estimate costs for public housing projects. HUD will use the ten 
variables described in paragraph (b) of this section and their 
associated coefficient (i.e., values that are expressed in percentage 
terms) to produce a PEL.
    (b) Variables. The ten variables are:
    (1) Size of project (number of units);
    (2) Age of property (Date of Full Availability (DOFA));
    (3) Bedroom mix;
    (4) Building type;
    (5) Occupancy type (family or senior);
    (6) Location (an indicator of the type of community in which a 
property is located; location types include rural, city central 
metropolitan, and non-city central metropolitan (suburban) areas);
    (7) Neighborhood poverty rate;
    (8) Percent of households assisted;
    (9) Ownership type (profit, non-profit, or limited dividend); and
    (10) Geographic.
    (c) Cost adjustments. HUD will apply four adjustments to the PEL. 
The adjustments are:
    (1) Application of a $200 PUM floor for any senior property and a 
$215 PUM floor for any family property;
    (2) Application of a $420 PUM ceiling for any property except for 
New York City Housing Authority projects, which have a $480 PUM ceiling;
    (3) Application of a four percent reduction for any PEL calculated 
over $325 PUM, with the reduction limited so that a PEL will not be 
reduced to less than $325; and
    (4) The reduction of audit costs as reported for FFY 2003 in a PUM 
amount.
    (d) Annual inflation factor. The PEL for each project shall be 
adjusted annually, beginning in 2005, by the local inflation factor. The 
local inflation factor shall be the HUD-determined weighted average 
percentage increase in local government wages and salaries for the area 
in which the PHA is located, and non-wage expenses.
    (e) Calculating a PEL. To calculate a specific PEL for a given 
property, the sum of the coefficients for nine variables (all variables 
except ownership type) shall be added to a formula constant. The 
exponent of that sum shall be multiplied by a percentage to reflect the 
non-profit ownership type, which will produce an unadjusted PEL. For the 
calculation of the initial PEL, the cost adjustments described in 
paragraphs (c)(1), (c)(2), and (c)(3) of this section will be applied. 
After these initial adjustments are applied, the audit adjustment 
described in paragraph (c)(4) of this section will be applied to arrive 
at the PEL in year 2000 dollars. After the PEL in year 2000 dollars is

[[Page 664]]

created, the annual inflation factor as described in paragraph (d) of 
this section will be applied cumulatively to this number through 2004 to 
yield an initial PEL in terms of current dollars.
    (f) Calculation of the PEL for Moving to Work PHAs. PHAs 
participating in the Moving to Work (MTW) Demonstration authorized under 
section 204 of the Omnibus Consolidated Rescissions and Appropriations 
Act of 1996 (Pub. L. 104-134, approved April 26, 1996) shall receive an 
operating subsidy as provided in Attachment A of their MTW Agreements 
executed prior to November 18, 2005. PHAs with an MTW Agreement will 
continue to have the right to request extensions of or modifications to 
their MTW Agreements.
    (g) Calculation of the PELs for mixed-finance developments. If, 
prior to November 18, 2005, a PHA has either a mixed-finance arrangement 
that has closed or has filed documents in accordance with 24 CFR 941.606 
for a mixed-finance transaction, then the project covered by the mixed-
finance transaction will receive funding based on the higher of its 
former Allowable Expense Level or the new computed PEL.
    (h) Calculation of PELs when data are inadequate or unavailable. 
When sufficient data are unavailable for the calculation of a PEL, HUD 
may calculate a PEL using an alternative methodology. The 
characteristics may be used from similarly situated properties.
    (i) Review of PEL methodology by advisory committee. In 2009, HUD 
will convene a meeting with representation of appropriate stakeholders, 
to review the methodology to evaluate the PEL based on actual cost data. 
The meeting shall be convened in accordance with the Federal Advisory 
Committee Act (5 U.S.C. Appendix) (FACA). HUD may determine appropriate 
funding levels for each project to be effective in FY 2011 after 
following appropriate rulemaking procedures.



Sec.  990.170  Computation of utilities expense level (UEL): Overview.

    (a) General. The UEL for each PHA is based on its consumption for 
each utility, the applicable rates for each utility, and an applicable 
inflation factor. The UEL for a given funding period is the product of 
the utility rate multiplied by the payable consumption level multiplied 
by the inflation factor. The UEL is expressed in terms of PUM costs.
    (b) Utility rate. The utility rate for each type of utility will be 
the actual average rate from the most recent 12-month period that ended 
June 30th prior to the beginning of the applicable funding period. The 
rate will be calculated by dividing the actual utility cost by the 
actual utility consumption, with consideration for pass-through costs 
(e.g., state and local utility taxes, tariffs) for the time period 
specified in this paragraph.
    (c) Payable consumption level. The payable consumption level is 
based on the current consumption level adjusted by a utility consumption 
incentive. The incentive shall be computed by comparing current 
consumption levels of each utility to the rolling base consumption 
level. If the comparison reflects a decrease in the consumption of a 
utility, the PHA shall retain 75 percent of this decrease. Alternately, 
if the comparison reflects an increase in the consumption of a utility, 
the PHA shall absorb 75 percent of this increase.
    (d) Inflation factor for utilities. The UEL shall be adjusted 
annually by an inflation/deflation factor based upon the fuels and 
utilities component of the United States Department of Labor, Bureau of 
Labor Statistics (BLS) Consumer Price Index for All Urban Consumers 
(CPI-U). The annual adjustment to the UEL shall reflect the most 
recently published and localized data available from BLS at the time the 
annual adjustment is calculated.
    (e) Increases in tenant utility allowances. Increases in tenant 
utility allowances, as a component of the formula income, as described 
in Sec.  990.195, shall result in a commensurate increase of operating 
subsidy. Decreases in such utility allowances shall result in a 
commensurate decrease in operating subsidy.
    (f) Records and reporting. (1) Appropriate utility records, 
satisfactory to HUD, shall be developed and maintained, so that 
consumption and rate data can be determined.

[[Page 665]]

    (2) All records shall be kept by utility and by project for each 12-
month period ending June 30th.
    (3) HUD will notify each PHA when HUD has the automated systems 
capacity to receive such information. Each PHA then will be obligated to 
provide consumption and cost data to HUD for all utilities for each 
project.
    (4) If a PHA has not maintained or cannot recapture utility data 
from its records for a particular utility, the PHA shall compute the UEL 
by:
    (i) Using actual consumption data for the last complete year(s) of 
available data or data of comparable project(s) that have comparable 
utility delivery systems and occupancy, in accordance with a method 
prescribed by HUD; or
    (ii) Requesting field office approval to use actual PUM utility 
expenses for its UEL in accordance with a method prescribed by HUD when 
the PHA cannot obtain necessary data to calculate the UEL in accordance 
with paragraph (f)(4)(i) of this section.



Sec.  990.175  Utilities expense level: Computation of the current
consumption level.

    The current consumption level shall be the actual amount of each 
utility consumed during the 12-month period ending June 30th that is 6 
months prior to the first day of the applicable funding period.



Sec.  990.180  Utilities expense level: Computation of the rolling
base consumption level.

    (a) General. (1) The rolling base consumption level (RBCL) shall be 
equal to the average of yearly consumption levels for the 36-month 
period ending on the June 30th that is 18 months prior to the first day 
of the applicable funding period.
    (2) The yearly consumption level is the actual amount of each 
utility consumed during a 12-month period ending June 30th. For example, 
for the funding period January 1, 2006, through December 31, 2006, the 
RBCL will be the average of the following yearly consumption levels:
    (i) Year 1 = July 1, 2001, through June 30, 2002.
    (ii) Year 2 = July 1, 2002, through June 30, 2003.
    (iii) Year 3 = July 1, 2003, through June 30, 2004.

    Note to paragraph (a)(2): In this example, the current year's 
consumption level will be July 1, 2004, through June 30, 2005.

    (b) Distortions to rolling base consumption level. The PHA shall 
have its RBCL determined so as not to distort the rolling base period in 
accordance with a method prescribed by HUD if:
    (1) A project has not been in operation during at least 12 months of 
the rolling base period;
    (2) A project enters or exits management after the rolling base 
period and prior to the end of the applicable funding period; or
    (3) A project has experienced a conversion from one energy source to 
another, switched from PHA-supplied to resident-purchased utilities 
during or after the rolling base period, or for any other reason that 
would cause the RBCL not to be comparable to the current year's 
consumption level.
    (c) Financial incentives. The three-year rolling base for all 
relevant utilities will be adjusted to reflect any financial incentives 
to the PHA to reduce consumption as described in Sec.  990.185.



Sec.  990.185  Utilities expense level: Incentives for energy 
conservation/rate reduction.

    (a) General/consumption reduction. If a PHA undertakes energy 
conservation measures that are financed by an entity other than HUD, the 
PHA may qualify for the incentives available under this section. For a 
PHA to qualify for these incentives, the PHA must enter into a contract 
to finance the energy conservation measures, and must obtain HUD 
approval. Such approval shall be based on a determination that payments 
under a contract can be funded from reasonably anticipated energy cost 
savings. The contract period shall not exceed 20 years. The energy 
conservation measures may include, but are not limited to: Physical 
improvements financed by a loan from a bank, utility, or governmental 
entity; management of costs under the performance contract; or a shared 
savings agreement with a private energy service company. All such 
contracts shall

[[Page 666]]

be known as energy performance contracts. PHAs may extend an executed 
energy performance contract with a term of less than 20 years to a term 
of not more than 20 years, to permit additional energy conservation 
improvements without the reprocurement of energy performance 
contractors. The PHA must obtain HUD approval to extend the term of an 
executed energy performance contract.
    (1) Frozen rolling base. (i) If a PHA undertakes energy conservation 
measures that are approved by HUD, the RBCL for the project and the 
utilities involved may be frozen during the contract period. Before the 
RBCL is frozen, it must be adjusted to reflect any energy savings 
resulting from the use of any HUD funding. The RBCL also may be adjusted 
to reflect systems repaired to meet applicable building and safety codes 
as well as to reflect adjustments for occupancy rates increased by 
rehabilitation. The RBCL shall be frozen at the level calculated for the 
year during which the conservation measures initially shall be 
implemented.
    (ii) The PHA operating subsidy eligibility shall reflect the 
retention of 100 percent of the savings from decreased consumption until 
the term of the financing agreement is complete. The PHA must use at 
least 75 percent of the cost savings to pay off the debt, e.g., pay off 
the contractor or bank loan. If less than 75 percent of the cost savings 
is used for debt payment, however, HUD shall retain the difference 
between the actual percentage of cost savings used to pay off the debt 
and 75 percent of the cost savings. If at least 75 percent of the cost 
savings is paid to the contractor or bank, the PHA may use the full 
amount of the remaining cost savings for any eligible operating expense.
    (iii) The annual three-year rolling base procedures for computing 
the RBCL shall be reactivated after the PHA satisfies the conditions of 
the contract. The three years of consumption data to be used in 
calculating the RBCL after the end of the contract period shall be the 
yearly consumption levels for the final three years of the contract.
    (2) PHAs undertaking energy conservation measures that are financed 
by an entity other than HUD may include resident-paid utilities under 
the consumption reduction incentive, using the following methodology:
    (i) The PHA reviews and updates all utility allowances to ascertain 
that residents are receiving the proper allowances before energy savings 
measures are begun;
    (ii) The PHA makes future calculations of rental income for purposes 
of the calculation of operating subsidy eligibility based on these 
baseline allowances. In effect, HUD will freeze the baseline allowances 
for the duration of the contract;
    (iii) After implementation of the energy conservation measures, the 
PHA updates the utility allowances in accordance with provisions in 24 
CFR part 965, subpart E. The new allowance should be lower than baseline 
allowances;
    (iv) The PHA uses at least 75 percent of the savings for paying the 
cost of the improvement (the PHA will be permitted to retain 100 percent 
of the difference between the baseline allowances and revised 
allowances);
    (v) After the completion of the contract period, the PHA begins 
using the revised allowances in calculating its operating subsidy 
eligibility; and
    (vi) The PHA may exclude from its calculation of rental income the 
increased rental income due to the difference between the baseline 
allowances and the revised allowances of the projects involved, for the 
duration of the contract period.
    (3) Subsidy add-on. (i) If a PHA qualifies for this incentive (i.e., 
the subsidy add-on, in accordance with the provisions of paragraph (a) 
of this section), then the PHA is eligible for additional operating 
subsidy each year of the contract to amortize the cost of the loan for 
the energy conservation measures and other direct costs related to the 
energy project under the contract during the term of the contract 
subject to the provisions of this paragraph (a)(3) of this section. The 
PHA's operating subsidy for the current funding year will continue to be 
calculated in accordance with paragraphs (a), (b), and (c) of Sec.  
990.170 (i.e., the rolling base is

[[Page 667]]

not frozen). The PHA will be able to retain part of the cost savings in 
accordance with Sec.  990.170(c).
    (ii) The actual cost of energy (of the type affected by the energy 
conservation measure) after implementation of the energy conservation 
measure will be subtracted from the expected energy cost, to produce the 
energy cost savings for the year.
    (iii) If the cost savings for any year during the contract period 
are less than the amount of operating subsidy to be made available under 
this paragraph 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.
    (iv) 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 20-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 be extended only to accommodate 
payment to the contractor and associated direct costs.
    (b) Rate reduction. If a PHA takes action beyond normal public 
participation in rate-making proceedings, such as well-head purchase of 
natural gas, administrative appeals, or legal action to reduce the rate 
it pays for utilities, then the PHA will be permitted to retain one-half 
the annual savings realized from these actions.
    (c) Utility benchmarking. HUD will pursue benchmarking utility 
consumption at the project level as part of the transition to asset 
management. HUD intends to establish benchmarks by collecting utility 
consumption and cost information on a project-by-project basis. In 2009, 
after conducting a feasibility study, HUD will convene a meeting with 
representation of appropriate stakeholders to review utility 
benchmarking options so that HUD may determine whether or how to 
implement utility benchmarking to be effective in FY 2011. The meeting 
shall be convened in accordance with the Federal Advisory Committee Act 
(5 U.S.C. Appendix) (FACA). The HUD study shall take into account 
typical levels of utilities consumption at public housing developments 
based upon factors such as building and unit type and size, temperature 
zones, age and construction of building, and other relevant factors.

[70 FR 54997, Sept. 19, 2005, as amended at 73 FR 61352, Oct. 16, 2008]



Sec.  990.190  Other formula expenses (add-ons).

    In addition to calculating operating subsidy based on the PEL and 
UEL, a PHA's eligible formula expenses shall be increased by add-ons. 
The allowed add-ons are:
    (a) Self-sufficiency. A PHA may request operating subsidy for the 
reasonable cost of program coordinator(s) and associated costs in 
accordance with HUD's self-sufficiency program regulations and notices.
    (b) Energy loan amortization. A PHA may qualify for operating 
subsidy for payments of principal and interest cost for energy 
conservation measures described in Sec.  990.185(a)(3).
    (c) Payments in lieu of taxes (PILOT). Each PHA will receive an 
amount for PILOT in accordance with section 6(d) of the 1937 Act, based 
on its cooperation agreement or its latest actual PILOT payment.
    (d) Cost of independent audits. A PHA is eligible to receive 
operating subsidy equal to its most recent actual audit costs for the 
Operating Fund Program when an audit is required by the Single Audit Act 
(31 U.S.C. 7501-7507) (see 2 CFR part 200, subpart F) or when a PHA 
elects to prepare and submit such an audit to HUD. For the purpose of 
this rule, the most recent actual audit costs include the associated 
costs of an audit for the Operating Fund Program only. A PHA whose 
operating subsidy is determined to be zero based on the formula is still 
eligible to receive operating subsidy equal to its most recent actual 
audit costs. The most recent actual audit costs are used as a proxy to 
cover the cost of the next audit. If a PHA does not have a recent actual 
audit cost, the PHA working with HUD may establish an audit cost. A PHA 
that requests funding for an audit shall complete an audit. The results 
of the

[[Page 668]]

audit shall be transmitted in a time and manner prescribed by HUD.
    (e) Funding for resident participation activities. Each PHA's 
operating subsidy calculation shall include $25 per occupied unit per 
year for resident participation activities, including, but not limited 
to, those described in 24 CFR part 964. For purposes of this section, a 
unit is eligible to receive resident participation funding if it is 
occupied by a public housing resident or it is occupied by a PHA 
employee, or a police officer or other security personnel who is not 
otherwise eligible for public housing. In any fiscal year, if 
appropriations are not sufficient to meet all funding requirements under 
this part, then the resident participation component of the formula will 
be adjusted accordingly.
    (f) Asset management fee. Each PHA with at least 250 units shall 
receive a $4 PUM asset management fee. PHAs with fewer than 250 units 
that elect to transition to asset management shall receive an asset 
management fee of $2 PUM. PHAs with fewer than 250 units that elect to 
have their entire portfolio treated and considered as a single project 
as described in Sec.  990.260(b) or PHAs with only one project will not 
be eligible for an asset management fee. For all PHAs eligible to 
receive the asset management fee, the fee will be based on the total 
number of ACC units. PHAs that are not in compliance with asset 
management as described in subpart H of this part by FY 2011 will 
forfeit this fee.
    (g) Information technology fee. Each PHA's operating subsidy 
calculation shall include $2 PUM for costs attributable to information 
technology. For all PHAs, this fee will be based on the total number of 
ACC units.
    (h) Asset repositioning fee. (1) A PHA that transitions projects or 
entire buildings of a project out of its inventory is eligible for an 
asset-repositioning fee. This fee supplements the costs associated with 
administration and management of demolition or disposition, tenant 
relocation, and minimum protection and service associated with such 
efforts. The asset-repositioning fee is not intended for individual 
units within a multi-unit building undergoing similar activities.
    (2) Projects covered by applications approved for demolition or 
disposition shall be eligible for an asset repositioning fee on the 
first day of the next quarter six months after the date the first unit 
becomes vacant after the relocation date included in the approved 
relocation plan. When this condition is met, the project and all 
associated units are no longer considered an EUM as described in Sec.  
990.155. Each PHA is responsible for accurately applying and maintaining 
supporting documentation on the start date of this transition period or 
is subject to forfeiture of this add-on.
    (3) Units categorized for demolition and which are eligible for an 
asset repositioning fee are eligible for operating subsidy at the rate 
of 75 percent PEL per unit for the first twelve months, 50 percent PEL 
per unit for the next twelve months, and 25 percent PEL per unit for the 
next twelve months.
    (4) Units categorized for disposition and which are eligible for an 
asset repositioning fee are eligible for operating subsidy at the rate 
of 75 percent PEL per unit for the first twelve months and 50 percent 
PEL per unit for the next twelve months.
    (5) The following is an example of how eligibility for an asset-
repositioning fee is determined:
    (i) A PHA has HUD's approval to demolish (or dispose of) a 100-unit 
project from its 1,000 unit inventory. On January 12th, in conjunction 
with the PHA's approved Relocation Plan, a unit in that project becomes 
vacant. Accordingly, the demolition/disposition-approved project is 
eligible for an asset-repositioning fee on October 1st. (This date is 
calculated as follows: January 12th + six months = July 12th. The first 
day of the next quarter is October 1st.)
    (ii) Although payment of the asset-repositioning fee will not begin 
until October 1st, the PHA will receive its full operating subsidy based 
on the 1,000 units through September 30th. On October 1st the PHA will 
begin to receive the 36-month asset-repositioning fee in accordance with 
paragraph (h)(3) of this section for the 100 units approved for 
demolition. (Asset repositioning fee requirements for projects

[[Page 669]]

approved for disposition are found in paragraph (h)(4) of this section.) 
On October 1st, the PHA's units will be 900.
    (i) Costs attributable to changes in Federal law, regulation, or 
economy. In the event that HUD determines that enactment of a Federal 
law or revision in HUD or other Federal regulations has caused or will 
cause a significant change in expenditures of a continuing nature above 
the PEL and UEL, HUD may, at HUD's sole discretion, decide to prescribe 
a procedure under which the PHA may apply for or may receive an 
adjustment in operating subsidy.

[70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015]



                  Subpart D_Calculating Formula Income



Sec.  990.195  Calculation of formula income.

    (a) General. For the purpose of the formula, formula income is equal 
to the amount of rent charged to tenants divided by the respective unit 
months leased, and is therefore expressed as a PUM. Formula income will 
be derived from a PHA's year-end financial information. The financial 
information used in the formula income computation will be the audited 
information provided by the PHA through HUD's information systems. The 
information will be calculated using the following PHA fiscal year-end 
information:
    (1) April 1, 2003, through March 31, 2004;
    (2) July 1, 2003, through June 30, 2004;
    (3) October 1, 2003, through September 30, 2004; and
    (4) January 1, 2004, through December 31, 2004.
    (b) Calculation of formula income. To calculate formula income in 
whole dollars, the PUM amount will be multiplied by the EUMs as 
described in subpart B of this part.
    (c) Frozen at 2004 level. After a PHA's formula income is calculated 
as described in paragraph (a) of this section, it will not be 
recalculated or inflated for fiscal years 2007 through 2009, unless a 
PHA can show a severe local economic hardship that is impacting the 
PHA's ability to maintain some semblance of its formula income (see 
subpart G of this part--Appeals). A PHA's formula income may be 
recalculated if the PHA appeals to HUD for an adjustment in its formula.
    (d) Calculation of formula income when data are inadequate or 
unavailable. When audited data are unavailable in HUD's information 
systems for the calculation of formula income, HUD may use an 
alternative methodology, including, but not limited to, certifications, 
hard copy reports, and communications with the respective PHAs.
    (e) Inapplicability of 24 CFR 85.25 (as revised April 1, 2013). 
Formula income is not subject to the provisions regarding program income 
in 24 CFR 85.25 (as revised April 1, 2013).

[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005; 80 FR 75943, 
Dec. 7, 2015]



        Subpart E_Determination and Payment of Operating Subsidy



Sec.  990.200  Determination of formula amount.

    (a) General. The amount of operating subsidy that a PHA is eligible 
for is the difference between its formula expenses (as calculated under 
subpart C of this part) and its formula income (as calculated under 
subpart D of this part).
    (b) Use of HUD databases to calculate formula amount. HUD shall 
utilize its databases to make the formula calculations. HUD's databases 
are intended to be employed to provide information on all primary 
factors in determining the operating subsidy amount. Each PHA is 
responsible for supplying accurate information on the status of each of 
its units in HUD's databases.
    (c) PHA responsibility to submit timely data. PHAs shall submit data 
used in the formula on a regular and timely basis to ensure accurate 
calculation under the formula. If a PHA fails to provide accurate data, 
HUD will make a determination as to the PHA's inventory, occupancy, and 
financial information using available or verified data, which may result 
in a lower operating subsidy. HUD has the right to adjust any or all 
formula amounts based on clerical, mathematical, and information system 
errors that affect any of the data elements used in the calculation of 
the formula.

[[Page 670]]



Sec.  990.205  Fungibility of operating subsidy between projects.

    (a) General. Operating subsidy shall remain fully fungible between 
ACC projects until operating subsidy is calculated by HUD at a project 
level. After subsidy is calculated at a project level, operating subsidy 
can be transferred as the PHA determines during the PHA's fiscal year to 
another ACC project(s) if a project's financial information, as 
described more fully in Sec.  990.280, produces excess cash flow, and 
only in the amount up to those excess cash flows.
    (b) Notwithstanding the provisions of paragraph (a) of this section 
and subject to all of the other provisions of this part, the New York 
City Housing Authority's Development Grant Project Amendment Number 180, 
dated July 13, 1995, to Consolidated Annual Contributions Contract NY-
333, remains in effect.



Sec.  990.210  Payment of operating subsidy.

    (a) Payments of operating subsidy under the formula. HUD shall make 
monthly payments equal to \1/12\ of a PHA's total annual operating 
subsidy under the formula by electronic funds transfers through HUD's 
automated disbursement system. HUD shall establish thresholds that 
permit PHAs to request monthly installments. Requests by PHAs that 
exceed these thresholds will be subject to HUD review. HUD approvals of 
requests that exceed these thresholds are limited to PHAs that have an 
unanticipated and immediate need for disbursement.
    (b) Payments procedure. In the event that the amount of operating 
subsidy has not been determined by HUD as of the beginning of the 
funding period, operating subsidy shall be provided monthly, quarterly, 
or annually based on the amount of the PHA's previous year's formula or 
another amount that HUD may determine to be appropriate.
    (c) Availability of funds. In the event that insufficient funds are 
available, HUD shall have discretion to revise, on a pro rata basis, the 
amounts of operating subsidy to be paid to PHAs.



Sec.  990.215  Payments of operating subsidy conditioned upon 
reexamination of income of families in occupancy.

    (a) General. Each PHA is required to reexamine the income of each 
family in accordance with the provisions of the ACC, the 1937 Act, and 
HUD regulations. Income reexaminations shall be performed annually, 
except as provided in the 1937 Act, in HUD regulations, or in the MTW 
agreements. A PHA must be in compliance with all reexamination 
requirements in order to be eligible to receive full operating subsidy. 
A PHA's calculations of rent and utility allowances shall be accurate 
and timely.
    (b) A PHA in compliance. A PHA shall submit a certification that 
states that the PHA is in compliance with the annual income 
reexamination requirements and its rent and utility allowance 
calculations have been or will be adjusted in accordance with current 
HUD requirements and regulations.
    (c) A PHA not in compliance. Any PHA not in compliance with annual 
income reexamination requirements at the time of the submission of the 
calculation of operating subsidy shall furnish to the responsible HUD 
field office a copy of the procedures it is using to achieve compliance 
and a statement of the number of families that have undergone 
reexamination during the 12 months preceding the current funding cycle. 
If, on the basis of this submission or any other information, HUD 
determines that the PHA is not substantially in compliance with all of 
the annual income reexamination requirements, HUD shall withhold 
payments to which the PHA may be entitled under this part. Payment may 
be withheld in an amount equal to HUD's estimate of the loss of rental 
income to the PHA resulting from its failure to comply with the 
requirements.



           Subpart F_Transition Policy and Transition Funding



Sec.  990.220  Purpose.

    This policy is aimed at assisting all PHAs in transitioning to the 
new funding levels as determined by the formula set forth in this rule. 
PHAs will

[[Page 671]]

be subject to a transition funding policy that will either increase or 
reduce their total operating subsidy for a given year.



Sec.  990.225  Transition determination.

    The determination of the amount and period of the transition funding 
shall be based on the difference in subsidy levels between the formula 
set forth in this part and the formula in effect prior to implementation 
of the formula set forth in this part. The difference in subsidy levels 
will be calculated using FY 2004 data. When actual data are not 
available for one of the formula components needed to calculate the 
formula of this part for FY 2004, HUD will use alternate data as a 
substitute (e.g., unit months available for eligible unit months, etc.) 
If the difference between these formulas indicates that a PHA shall have 
its operating subsidy reduced as a result of this formula, the PHA will 
be subject to a transition policy as indicated in Sec.  990.230. If the 
difference between these formulas indicates that a PHA will have its 
operating subsidy increased as a result of this formula, the PHA will be 
subject to the transition policy as indicated in Sec.  990.235.

[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005]



Sec.  990.230  PHAs that will experience a subsidy reduction.

    (a) For PHAs that will experience a reduction in their operating 
subsidy, as determined in Sec.  990.225, such reductions will have a 
limit of:
    (1) 5 percent of the difference between the two funding levels in 
the first year of implementation of the formula contained in this part;
    (2) 24 percent of the difference between the two funding levels in 
the second year of implementation of the formula contained in this part;
    (3) 43 percent of the difference between the two levels in the third 
year of implementation of the formula contained in this part;
    (4) 62 percent of the difference between the two levels in the 
fourth year of implementation of the formula contained in this part; and
    (5) 81 percent of the difference between the two levels in the fifth 
year of implementation of the formula contained in this part.
    (b) The full amount of the reduction in the operating subsidy level 
shall be realized in the sixth year of implementation of the formula 
contained in this part.
    (c) For example, a PHA has a subsidy reduction from $1 million, 
under the formula in effect prior to implementation of the formula 
contained in this part, to $900,000, under the formula contained in this 
part using FY 2004 data. The difference would be calculated at $100,000 
($1 million - $900,000 = $100,000). In the first year, the subsidy 
reduction would be limited to $5,000 (5 percent of the difference). 
Thus, the PHA would receive an operating subsidy amount pursuant to this 
rule plus a transition-funding amount of $95,000 (the $100,000 
difference between the two subsidy amounts minus the $5,000 reduction 
limit).
    (d) If a PHA can demonstrate a successful conversion to the asset 
management requirements of subpart H of this part, as determined under 
paragraph (f) of this section, HUD will discontinue the reduction at the 
PHA's next subsidy calculation following such demonstration, as 
reflected in the schedule in paragraph (e) of this section, 
notwithstanding Sec.  990.290(c).
    (e) The schedule for successful demonstration of conversion to asset 
management for discontinuation of PHA subsidy reduction is reflected in 
the table below:

                              Stop-Loss Demonstration Time Line and Effective Dates
----------------------------------------------------------------------------------------------------------------
                                                                            Reduction stopped      Reduction
        Demonstration date by                   Applications due                    at           effective for
----------------------------------------------------------------------------------------------------------------
September 30, 2007..................  October 15, 2007....................  5 percent of the   Calendar Year
                                                                             PUM difference.    2007 and
                                                                                                thereafter.
April 1, 2008.......................  April 15, 2008......................  24 percent of the  Calendar Year
                                                                             PUM difference.    2008 and
                                                                                                thereafter.
October 1, 2008.....................  October 15, 2008....................  43 percent of the  Calendar Year
                                                                             PUM difference.    2009 and
                                                                                                thereafter.

[[Page 672]]

 
October 1, 2009.....................  October 15, 2009....................  62 percent of the  Calendar Year
                                                                             PUM difference.    2010 and
                                                                                                thereafter.
October 1, 2010.....................  October 15, 2010....................  81 percent of the  Calendar Year
                                                                             PUM difference.    2011 and
                                                                                                thereafter.
----------------------------------------------------------------------------------------------------------------

    (f)(1) For purposes of this section, compliance with the asset 
management requirements of subpart H of this part will be based on an 
independent assessment conducted by a HUD-approved professional familiar 
with property management practices in the region or state in which the 
PHA is located.
    (2) A PHA must select from a list of HUD-approved professionals to 
conduct the independent assessment. The professional review and 
recommendation will then be forwarded to the Assistant Secretary for 
Public and Indian Housing (or designee) for final determination of 
compliance with the asset management requirements of subpart H of this 
part.
    (3) Upon completion of the independent assessment, the assessor 
shall conduct an exit conference with the PHA. In response to the exit 
conference, the PHA may submit a management response and other pertinent 
information (including, but not limited to, an additional assessment 
procured at the PHAs' own expense) within ten working days of the exit 
conference to be included in the report submitted to HUD.
    (4) In the event that HUD is unable to produce a list of independent 
assessors on a timely basis, the PHA may submit its own demonstration of 
a successful conversion to asset management directly to HUD for 
determination of compliance.
    (5) The Assistant Secretary for Public and Indian Housing (or 
designee) shall consider all information submitted and respond with a 
final determination of compliance within 60 days of the independent 
assessor's report being submitted to HUD.

[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005, as amended at 
72 FR 45874, Aug. 15, 2007]



Sec.  990.235  PHAs that will experience a subsidy increase.

    (a) For PHAs that will experience a gain in their operating subsidy, 
as determined in Sec.  990.225, such increases will have a limit of 50 
percent of the difference between the two funding levels in the first 
year following implementation of the formula contained in this part.
    (b) The full amount of the increase in the operating subsidy level 
shall be realized in the second year following implementation of the 
formula contained in this part.
    (c) For example, a PHA's subsidy increased from $900,000 under the 
formula in effect prior to implementation of the formula contained in 
this part to $1 million under the formula contained in this part using 
FY 2004 data. The difference would be calculated at $100,000 ($1 
million-$900,000 = $100,000). In the first year, the subsidy increase 
would be limited to $50,000 (50 percent of the difference). Thus, in 
this example the PHA will receive the operating subsidy amount of this 
rule minus a transition-funding amount of $50,000 (the $100,000 
difference between the two subsidy amounts minus the $50,000 transition 
amount).
    (d) The schedule for a PHA whose subsidy would be increased is 
reflected in the table below.

------------------------------------------------------------------------
        Funding period                     Increase limited to
------------------------------------------------------------------------
Year 1........................  50 percent of the difference.
Year 2........................  Full increase reached.
------------------------------------------------------------------------


[70 FR 54997, Sept. 19, 2005; 70 FR 61367, Oct. 24, 2005]



                            Subpart G_Appeals



Sec.  990.240  General.

    (a) PHAs will be provided opportunities for appeals. HUD will 
provide up to

[[Page 673]]

a two percent hold-back of the Operating Fund appropriation for FY 2006 
and FY 2007. HUD will use the hold-back amount to fund appeals that are 
filed during each of these fiscal years. Hold-back funds not utilized 
will be added back to the formula within each of the affected fiscal 
years.
    (b) Appeals are voluntary and must cover an entire portfolio, not 
single projects. However, the Assistant Secretary for Public and Indian 
Housing (or designee) has the discretion to accept appeals of less than 
an entire portfolio for PHAs with greater than 5,000 public housing 
units.



Sec.  990.245  Types of appeals.

    (a) Streamlined appeal. This appeal would demonstrate that the 
application of a specific Operating Fund formula component has a blatant 
and objective flaw.
    (b) Appeal of formula income for economic hardship. After a PHA's 
formula income has been frozen, the PHA can appeal to have its formula 
income adjusted to reflect a severe local economic hardship that is 
impacting the PHA's ability to maintain rental and other revenue.
    (c) Appeal for specific local conditions. This appeal would be based 
on demonstrations that the model's predictions are not reliable because 
of specific local conditions. To be eligible, the affected PHA must 
demonstrate a variance of ten percent or greater in its PEL.
    (d) Appeal for changing market conditions. A PHA may appeal to 
receive operating subsidy for vacant units due to changing market 
conditions, after a PHA has taken aggressive marketing and outreach 
measures to rent these units. For example, a PHA could appeal if it is 
located in an area experiencing population loss or economic dislocations 
that faces a lack of demand for housing in the foreseeable future.
    (e) Appeal to substitute actual project cost data. A PHA may appeal 
its PEL if it can produce actual project cost data derived from actual 
asset management, as outlined in subpart H of this part, for a period of 
at least two years.



Sec.  990.250  Requirements for certain appeals.

    (a) Appeals under Sec.  990.245 (a) and (c) must be submitted once 
annually. Appeals under Sec.  990.245 (a) and (c) must be submitted for 
new projects entering a PHA's inventory within one year of the 
applicable Date of Full Availability (DOFA).
    (b) Appeals under Sec.  990.245 (c) and (e) are subject to the 
following requirements:
    (1) The PHA is required to acquire an independent cost assessment of 
its projects;
    (2) The cost of services for the independent cost assessment is to 
be paid by the appellant PHA;
    (3) The assessment is to be reviewed by a professional familiar with 
property management practices and costs in the region or state in which 
the appealing PHA is located. This professional is to be procured by 
HUD. The professional review and recommendation will then be forwarded 
to the Assistant Secretary for Public and Indian Housing (or designee) 
for final determination; and
    (4) If the appeal is granted, the PHA agrees to be bound to the 
independent cost assessment regardless of new funding levels.



                       Subpart H_Asset Management



Sec.  990.255  Overview.

    (a) PHAs shall manage their properties according to an asset 
management model, consistent with the management norms in the broader 
multi-family management industry. PHAs shall also implement project-
based management, project-based budgeting, and project-based accounting, 
which are essential components of asset management. The goals of asset 
management are to:
    (1) Improve the operational efficiency and effectiveness of managing 
public housing assets;
    (2) Better preserve and protect each asset;
    (3) Provide appropriate mechanisms for monitoring performance at the 
property level; and
    (4) Facilitate future investment and reinvestment in public housing 
by public and private sector entities.

[[Page 674]]

    (b) HUD recognizes that appropriate changes in its regulatory and 
monitoring programs may be needed to support PHAs to undertake the goals 
identified in paragraph (a) of this section.



Sec.  990.260  Applicability.

    (a) PHAs that own and operate 250 or more dwelling rental units 
under title I of the 1937 Act, including units managed by a third-party 
entity (for example, a resident management corporation) but excluding 
section 8 units, are required to operate using an asset management model 
consistent with this subpart.
    (b) PHAs that own and operate fewer than 250 dwelling rental units 
may treat their entire portfolio as a single project. However, if a PHA 
selects this option, it will not receive the add-on for the asset 
management fee described in Sec.  990.190(f).



Sec.  990.265  Identification of projects.

    For purposes of this subpart, project means a public housing 
building or set of buildings grouped for the purpose of management. A 
project may be as identified under the ACC or may be a reasonable 
grouping of projects or portions of a project under the ACC. HUD shall 
retain the right to disapprove of a PHA's designation of a project. PHAs 
may group up to 250 scattered-site dwelling rental units into a single 
project.



Sec.  990.270  Asset management.

    As owners, PHAs have asset management responsibilities that are 
above and beyond property management activities. These responsibilities 
include decision-making on topics such as long-term capital planning and 
allocation, the setting of ceiling or flat rents, review of financial 
information and physical stock, property management performance, long-
term viability of properties, property repositioning and replacement 
strategies, risk management responsibilities pertaining to regulatory 
compliance, and those decisions otherwise consistent with the PHA's ACC 
responsibilities, as appropriate.



Sec.  990.275  Project-based management (PBM).

    PBM is the provision of property-based management services that is 
tailored to the unique needs of each property, given the resources 
available to that property. These property management services include, 
but are not limited to, marketing, leasing, resident services, routine 
and preventive maintenance, lease enforcement, protective services, and 
other tasks associated with the day-to-day operation of rental housing 
at the project level. Under PBM, these property management services are 
arranged, coordinated, or overseen by management personnel who have been 
assigned responsibility for the day-to-day operation of that property 
and who are charged with direct oversight of operations of that 
property. Property management services may be arranged or provided 
centrally; however, in those cases in which property management services 
are arranged or provided centrally, the arrangement or provision of 
these services must be done in the best interests of the property, 
considering such factors as cost and responsiveness.



Sec.  990.280  Project-based budgeting and accounting.

    (a) All PHAs covered by this subpart shall develop and maintain a 
system of budgeting and accounting for each project in a manner that 
allows for analysis of the actual revenues and expenses associated with 
each property. Project-based budgeting and accounting will be applied to 
all programs and revenue sources that support projects under an ACC 
(e.g., the Operating Fund, the Capital Fund, etc.).
    (b)(1) Financial information to be budgeted and accounted for at a 
project level shall include all data needed to complete project-based 
financial statements in accordance with Accounting Principles Generally 
Accepted in the United States of America (GAAP), including revenues, 
expenses, assets, liabilities, and equity data. The PHA shall also 
maintain all records to support those financial transactions. At the 
time of conversion to project-based accounting, a PHA shall apportion 
its

[[Page 675]]

assets, liabilities, and equity to its respective projects and HUD-
accepted central office cost centers.
    (2) Provided that the PHA complies with GAAP and other associated 
laws and regulations pertaining to financial management (e.g., 2 CFR 
part 200it shall have the maximum amount of responsibility and 
flexibility in implementing project-based accounting.
    (3) Project-specific operating income shall include, but is not 
limited to, such items as project-specific operating subsidy, dwelling 
and non-dwelling rental income, excess utilities income, and other PHA 
or HUD-identified income that is project-specific for management 
purposes.
    (4) Project-specific operating expenses shall include, but are not 
limited to, direct administrative costs, utilities costs, maintenance 
costs, tenant services, protective services, general expenses, non-
routine or capital expenses, and other PHA or HUD-identified costs which 
are project-specific for management purposes. Project-specific operating 
costs also shall include a property management fee charged to each 
project that is used to fund operations of the central office. Amounts 
that can be charged to each project for the property management fee must 
be reasonable. If the PHA contracts with a private management company to 
manage a project, the PHA may use the difference between the property 
management fee paid to the private management company and the fee that 
is reasonable to fund operations of the central office and other 
eligible purposes.
    (5) If the project has excess cash flow available after meeting all 
reasonable operating needs of the property, the PHA may use this excess 
cash flow for the following purposes:
    (i) Fungibility between projects as provided for in Sec.  990.205.
    (ii) Charging each project a reasonable asset management fee that 
may also be used to fund operations of the central office. However, this 
asset management fee may be charged only if the PHA performs all asset 
management activities described in this subpart (including project-based 
management, budgeting, and accounting). Asset management fees are 
considered a direct expense.
    (iii) Other eligible purposes.
    (c) In addition to project-specific records, PHAs may establish 
central office cost centers to account for non-project specific costs 
(e.g., human resources, Executive Director's office, etc.). These costs 
shall be funded from the property-management fees received from each 
property, and from the asset management fees to the extent these are 
available.
    (d) In the case where a PHA chooses to centralize functions that 
directly support a project (e.g., central maintenance), it must charge 
each project using a fee-for-service approach. Each project shall be 
charged for the actual services received and only to the extent that 
such amounts are reasonable.

[70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015]



Sec.  990.285  Records and reports.

    (a) Each PHA shall maintain project-based budgets and fiscal year-
end financial statements prepared in accordance with GAAP and shall make 
these budgets and financial statements available for review upon request 
by interested members of the public.
    (b) Each PHA shall distribute the project-based budgets and year-end 
financial statements to the Chairman and to each member of the PHA Board 
of Commissioners, and to such other state and local public officials as 
HUD may specify.
    (c) Some or all of the project-based budgets and financial 
statements and information shall be required to be submitted to HUD in a 
manner and time prescribed by HUD.



Sec.  990.290  Compliance with asset management requirements.

    (a) A PHA is considered in compliance with asset management 
requirements if it can demonstrate substantially, as described in 
paragraph (b) of this section, that it is managing according to this 
subpart.
    (b) Demonstration of compliance with asset management will be based 
on an independent assessment.
    (1) The assessment is to be conducted by a professional familiar 
with property management practices and costs

[[Page 676]]

in the region or state in which the PHA is located. This professional is 
to be procured by HUD.
    (2) The professional review and recommendation will then be 
forwarded to the Assistant Secretary for Public and Indian Housing (or 
designee) for final determination of compliance to asset management.
    (c) Upon HUD's determination of successful compliance with asset 
management, PHAs will then be funded based on this information pursuant 
to Sec.  990.165(i).
    (d) PHAs must be in compliance with the project-based accounting and 
budgeting requirements in this subpart by FY 2007. PHAs must be in 
compliance with the remainder of the components of asset management by 
FY 2011.



     Subpart I_Operating Subsidy for Properties Managed by Resident 
                     Management Corporations (RMCs)



Sec.  990.295  Resident Management Corporation operating subsidy.

    (a) General. This part applies to all projects managed by a Resident 
Management Corporation (RMC), including a direct funded RMC.
    (b) Operating subsidy. Subject to paragraphs (c) and (d) of this 
section, the amount of operating subsidy that a PHA or HUD provides a 
project managed by an RMC shall not be reduced during the three-year 
period beginning on the date the RMC first assumes management 
responsibility for the project.
    (c) Change factors. The operating subsidy for an RMC-managed project 
shall reflect changes in inflation, utility rates, and consumption, as 
well as changes in the number of units in the resident managed project.
    (d) Exclusion of increased income. Any increased income directly 
generated by activities by the RMC or facilities operated by the RMC 
shall be excluded from the calculation of the operating subsidy.
    (e) Exclusion of technical assistance. Any technical assistance the 
PHA provides to the RMC will not be included for purposes of determining 
the amount of funds provided to a project under paragraph (b) of this 
section.
    (f) The following conditions may not affect the amounts to be 
provided under this part to a project managed by an RMC:
    (1) Income reduction. Any reduction in the subsidy or total income 
of a PHA that occurs as a result of fraud, waste, or mismanagement by 
the PHA; and
    (2) Change in total income. Any change in the total income of a PHA 
that occurs as a result of project-specific characteristics when these 
characteristics are not shared by the project managed by the RMC.
    (g) Other project income. In addition to the operating subsidy 
calculated in accordance with this part and the amount of income derived 
from the project (from sources such as rents and charges), the 
management contract between the PHA and the RMC may specify that income 
be provided to the project from other legally available sources of PHA 
income.



Sec.  990.300  Preparation of operating budget.

    (a) The RMC and the PHA must submit operating budgets and 
calculations of operating subsidy to HUD for approval in accordance with 
Sec.  990.200. The budget will reflect all project expenditures and will 
identify the expenditures related to the responsibilities of the RMC and 
the expenditures that are related to the functions that the PHA will 
continue to perform.
    (b) For 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 
RMC, the PHA will transfer into a sub-account of the operating reserve 
of the PHA an operating reserve for the RMC project. When all 
maintenance responsibilities for a resident-managed project are the 
responsibility of the RMC, the amount of the reserve made available to a 
project under this subpart will be the per-unit cost amount available to 
the PHA operating reserve, excluding all inventories, prepaids, and 
receivables at the end of the PHA fiscal year preceding implementation, 
multiplied by the number of units in the project operated. When some, 
but not all, maintenance responsibilities are vested in the

[[Page 677]]

RMC, the management contract between the PHA and RMC may provide for an 
appropriately reduced portion of the operating reserve to be transferred 
into the RMC's sub-account.
    (c) The RMC's use of the operating reserve is subject to all 
administrative procedures applicable to the conventionally owned public 
housing program. Any expenditure of funds from the reserve must be for 
eligible expenditures that are incorporated into an operating budget 
subject to approval by HUD.
    (d) Investment of funds held in the reserve will be in accordance 
with HUD regulations and guidance.



Sec.  990.305  Retention of excess revenues.

    (a) Any income generated by an RMC that exceeds the income estimated 
for the income categories specified in the RMC's management contract 
must be excluded in subsequent years in calculating:
    (1) The operating subsidy provided to a PHA under this part; and
    (2) The funds the PHA provides to the RMC.
    (b) The RMC's management contract must specify the amount of income 
that is 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 PHA (such as operating 
subsidy under this part, interest income, administrative fees, and 
rents). These income estimates must be calculated consistent with HUD's 
administrative instructions. Income estimates may provide for adjustment 
of anticipated project income between the RMC and the PHA, based upon 
the management and other project-associated responsibilities (if any) 
that are to be retained by the PHA under the management contract.
    (c) Any revenues retained by an RMC under this section may be used 
only for purposes of improving the maintenance and operation of the 
project, establishing business enterprises that employ residents of 
public housing, or acquiring additional dwelling units for lower income 
families. Units acquired by the RMC will not be eligible for payment of 
operating subsidy.



    Subpart J_Financial Management Systems, Monitoring, and Reporting



Sec.  990.310  Purpose--General policy on financial management,
monitoring and reporting.

    All PHA financial management systems, reporting, and monitoring of 
program performance and financial reporting shall be in compliance with 
the requirements of 2 CFR part 200. Certain HUD requirements provide 
exceptions for additional specialized procedures that are determined by 
HUD to be necessary for the proper management of the program in 
accordance with the requirements of the 1937 Act and the ACC between 
each PHA and HUD.

[70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015]



Sec.  990.315  Submission and approval of operating budgets.

    (a) Required documentation:
    (1) Prior to the beginning of its fiscal year, a PHA shall prepare 
an operating budget in a manner prescribed by HUD. The PHA's Board of 
Commissioners shall review and approve the budget by resolution. Each 
fiscal year, the PHA shall submit to HUD, in a time and manner 
prescribed by HUD, the approved Board resolution.
    (2) HUD may direct the PHA to submit its complete operating budget 
with detailed supporting information and the Board resolution if the PHA 
has breached the ACC contract, or for other reasons, which, in HUD's 
determination, threaten the PHA's future serviceability, efficiency, 
economy, or stability. 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 a complete operating budget with detailed 
supporting information to HUD for review and approval.
    (b) If HUD finds that an operating budget is incomplete, inaccurate, 
includes illegal or ineligible expenditures, contains mathematical 
errors or errors in the application of accounting procedures, or is 
otherwise unacceptable, HUD may, at any time, require

[[Page 678]]

the PHA to submit additional or revised information regarding the budget 
or revised budget.



Sec.  990.320  Audits.

    All PHAs that receive financial assistance under this part shall 
submit an acceptable audit and comply with the audit requirements in 2 
CFR part 200, subpart F.

[70 FR 54997, Sept. 19, 2005, as amended at 80 FR 75943, Dec. 7, 2015]



Sec.  990.325  Record retention requirements.

    The PHA shall retain all documents related to all financial 
management and activities funded under the Operating Fund for a period 
of five fiscal years after the fiscal year in which the funds were 
received.



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?
1000.9 How is negotiated rulemaking conducted when promulgating NAHASDA 
          regulations?
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?
1000.21 Under what circumstances are waivers of the environmental review 
          procedures available to tribes?
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 or tribal preference requirements applicable to IHBG 
          activities?
1000.50 What tribal or Indian preference requirements apply to IHBG 
          administration activities?
1000.52 What tribal or 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?
1000.62 What is considered program income?
1000.64 What are the permissible uses of program income?

                 Subpart B_Affordable Housing Activities

1000.101 What is affordable housing?
1000.102 What are eligible affordable housing activities?
1000.103 How may IHBG funds be used for tenant-based or project-based 
          rental assistance?
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 families and model activities?
1000.110 Under what conditions may non-low-income Indian families 
          participate in the program?

[[Page 679]]

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 families or a model 
          housing activity?
1000.116 What should HUD do before declining a proposal to provide 
          assistance to non low-income 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 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?
1000.139 What are the standards for insurance entities owned and 
          controlled by recipients?
1000.140 May a recipient use grant funds to purchase insurance for 
          privately owned housing to protect NAHASDA grant amounts spent 
          on that housing?
1000.141 What is ``useful life'' and how is it related to affordability?
1000.142 How does a recipient determine 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?
1000.143 How does a recipient implement its useful life requirements?
1000.144 What are binding commitments satisfactory to HUD?
1000.145 Are Mutual Help homes developed under the 1937 Act subject to 
          the useful life provisions of section 205(a)(2)?
1000.146 Are binding commitments for the remaining useful life of 
          property applicable to a family member or household member who 
          subsequently takes ownership of a homeownership unit?
1000.147 When does housing qualify as affordable housing under NAHASDA?
1000.150 How may Indian tribes and TDHEs receive criminal conviction 
          information on applicants for employment and on adult 
          applicants for housing assistance, 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 affordable housing developed, acquired, or assisted under 
          the IHBG program subject to limitations on cost or design 
          standards?
1000.158 How will a NAHASDA grant recipient know that the housing 
          assisted under the IHBG program meets the requirements of 
          Sec.  1000.156?
1000.160 Are non-dwelling structures developed, acquired or assisted 
          under the IHBG program subject to limitations on cost or 
          design standards?
1000.162 How will a recipient know that non-dwelling structures assisted 
          under the IHBG program meet the requirements of 1000.160?

                   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 no later than 75 days before the beginning of the 
          tribal program year?
1000.218 Who prepares and submits an IHP?
1000.220 What are the 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?
1000.225 When may a waiver of the IHP submission deadline be requested?
1000.226 Can the certification requirements of section 102(c)(5) of 
          NAHASDA be waived by HUD?

[[Page 680]]

1000.227 What shall HUD do upon receipt of an IHP submission deadline 
          waiver request?
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?
1000.238 What percentage of the IHBG funds can be used for 
          administrative and planning expenses?
1000.239 May a recipient establish and maintain reserve accounts for 
          administration and planning?
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?
1000.244 If the recipient has made a good-faith effort to negotiate a 
          cooperation agreement and tax-exempt status but has been 
          unsuccessful through no fault of its own, may the Secretary 
          waive the requirement for a cooperation agreement and a tax 
          exemption?
1000.246 How must HUD respond to a request for waiver of the requirement 
          for a cooperation agreement and a tax exemption?

                      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?
1000.315 Is a recipient required to report changes to the Formula 
          Current Assisted Stock (FCAS) on the Formula Response Form?
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?
1000.319 What would happen if a recipient misreports or fails to correct 
          Formula Current Assisted Stock (FCAS) information on the 
          Formula Response Form?
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 that an Indian tribe may receive 
          under the need component of the formula?
1000.329 What is the minimum total grant allocated to a tribe if there 
          is carryover funds available?
1000.330 What are the data sources for the need variables?
1000.331 How will the impacts from adoption of a new data source be 
          minimized as the new data source is implemented?
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 or appeal 
          HUD formula determinations?
1000.340 What if an Indian tribe is allocated less funding under the 
          IHBG Formula than it received in Fiscal Year (FY) 1996 for 
          operating subsidy and modernization?
1000.342 Are undisbursed IHBG funds a factor in the grant formula?

 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?
1000.410 What conditions shall HUD prescribe when providing a guarantee 
          for

[[Page 681]]

          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?

      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?
1000.503 What is an appropriate extent of HUD monitoring?
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's review of the Annual Performance 
          Report?
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 Sec.  1000.532?
1000.532 What are the remedial actions that HUD may take in the event of 
          recipient's substantial noncompliance?
1000.534 What constitutes substantial noncompliance?
1000.536 What happens to NAHASDA grant funds adjusted, reduced, 
          withdrawn, or terminated under Sec.  1000.532?
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

[[Page 682]]

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:
    (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 shall 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 shall 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.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71521, Dec. 3, 2012]

[[Page 683]]



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 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.  1000.9  How is negotiated rulemaking conducted when
promulgating NAHASDA regulations?

    The negotiated rulemaking procedures and requirements set out in 
section 106(b) of NAHASDA shall be conducted as follows:
    (a) Committee membership. In forming a negotiated rulemaking 
committee, HUD shall appoint as committee members representatives of the 
Federal Government and representatives of diverse tribes and program 
recipients.
    (b) Initiation of rulemaking. HUD shall initiate a negotiated 
rulemaking not later than 90 days after the enactment of any act to 
reauthorize or significantly amend NAHASDA.
    (c) Work groups. Negotiated rulemaking committees may form 
workgroups made up of committee members and other interested parties to 
meet during committee sessions and between sessions to develop specific 
rulemaking proposals for committee consideration.
    (d) Further review. Negotiated rulemaking committees shall provide 
recommended rules to HUD. Once rules are proposed by HUD, they shall be 
published for comment in the Federal Register. Any comments will be 
further reviewed by the committee and HUD before HUD determines if the 
rule or rules will be adopted.

[77 FR 71521, Dec. 3, 2012]



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:

[[Page 684]]

    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.
    Housing related activities, for purposes of program income, means 
any facility, community building, infrastructure, business, program, or 
activity, including any community development or economic development 
activity, that:
    (1) Is determined by the recipient to be beneficial to the provision 
of housing in an Indian area; and
    (2) Would meet at least one of the following conditions:
    (i) Would help an Indian tribe or its tribally designated housing 
entity to reduce the cost of construction of Indian housing;
    (ii) Would make housing more affordable, energy efficient, 
accessible, or practicable in an Indian area;
    (iii) Would otherwise advance the purposes of NAHASDA.
    Housing related community development:
    (1) Means any facility, community building, business, activity, or 
infrastructure that:
    (i) Is owned by an Indian tribe or a tribally designated housing 
entity;
    (ii) Is necessary to the provision of housing in an Indian area; and
    (iii)(A) Would help an Indian tribe or tribally designated housing 
entity reduce the cost of construction of Indian housing;
    (B) Would make housing more affordable, energy efficient, 
accessible, or practicable in an Indian area; or
    (C) Would otherwise advance the purposes of NAHASDA.
    (2) Does not include any activity conducted by any Indian tribe 
under the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.)
    IHBG means Indian Housing Block Grant.
    Income means annual income as defined in this subpart.

[[Page 685]]

    Indian area means the area within which an Indian tribe operates 
affordable housing programs or the area in which a TDHE, as authorized 
by one or more Indian tribes, operates 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.
    Outcomes are the intended results or consequences important to 
program beneficiaries, the IHBG recipient, and the tribe generally from 
carrying out the housing or housing-related activity as determined by 
the tribe (and/or its TDHE).
    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.
    Tribal program year means the fiscal year of the IHBG recipient.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71522, Dec. 3, 2012]

[[Page 686]]



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 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. The Title VI and Title VIII requirements do not apply to actions 
under NAHASDA by federally recognized Indian tribes and their TDHEs. 
State-recognized Indian tribes and their TDHEs may provide preference 
for tribal members and other Indian families pursuant to NAHASDA 
sections 201(b) and 101(k) (relating to tribal preference in employment 
and contracting).
    (e) The equal access to HUD-assisted or -insured housing 
requirements in 24 CFR 5.105(a)(2).

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71522, Dec. 3, 2012; 81 
FR 80993, Nov. 17, 2016]



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

[[Page 687]]

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.
    (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

[[Page 688]]

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 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. 3141-44, 3146, and 3147) 
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. 3701).
    (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) Paragraphs (a) through (d) of this section shall not apply to 
any contract or agreement for assistance, sale, or lease pursuant to 
NAHASDA, or to any contract for construction, development, operations, 
or maintenance thereunder, if such contract or agreement for assistance, 
sale, or lease is otherwise covered by one or more laws or regulations 
adopted by an Indian tribe that requires the payment of not less than 
prevailing wages, as determined by the Indian tribe. Paragraphs (a) 
through (d) of this section shall also not apply to work performed 
directly by tribal or TDHE employees under a contract or agreement for 
assistance, sale, or lease, that is covered by one or more such laws or 
regulations adopted by an Indian tribe.
    (f) 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).

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71522, Dec. 3, 2012]



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

[[Page 689]]

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 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.  1000.21  Under what circumstances are waivers of the environmental
review procedures available to tribes?

    A tribe or recipient may request that the Secretary waive the 
requirements under section 105 of NAHASDA. The Secretary may grant the 
waiver if the Secretary determines that a failure on the part of a 
recipient to comply with provisions of this section:
    (a) Will not frustrate the goals of the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321 et seq.) or any other provision of 
law that furthers the goals of that Act;
    (b) Does not threaten the health or safety of the community involved 
by posing an immediate or long-term hazard to residents of that 
community;
    (c) Is a result of inadvertent error, including an incorrect or 
incomplete certification provided under section 105(c)(1) of NAHASDA; 
and
    (d) May be corrected through the sole action of the recipient.

[77 FR 71522, Dec. 3, 2012]



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 2 CFR part 200, ``Uniform 
Administrative Requirements, Cost Principles, And Audit

[[Page 690]]

Requirements for Federal Awards'', except for the following sections:
    (1) Section 200.113 applies, except that, in lieu of the remedies 
described in Sec.  200.338, HUD shall be authorized to seek remedies 
under subpart F of this part.
    (2) Section 200.302(a), ``Financial management.''
    (3) Section 200.305, ``Payment,'' applies, except that HUD shall not 
require a recipient to expend retained program income before drawing 
down or expending IHBG funds.
    (4) Section 200.306, ``Cost sharing or matching.''
    (5) Section 200.307, ``Program income.''
    (6) Section 200.308, ``Revision of budget and program plans.''
    (7) Section 200.311, ``Real property,'' except as provided in 24 CFR 
5.109.
    (8) Section 200.313, ``Equipment,'' applies, except that in all 
cases in which the equipment is sold, the proceeds shall be program 
income.
    (9) Section 200.314, ``Supplies,'' applies, except in all cases in 
which the supplies are sold, the proceeds shall be program income.
    (10) Section 200.317, ``Procurement by states.''
    (11) Sections 200.318 through 200.326 apply, as modified in this 
paragraph (a)(11):
    (i) De minimis procurement. A recipient shall not be required to 
comply with 2 CFR 200.318 through 200.326 with respect to any 
procurement, using a grant provided under NAHASDA, of goods and services 
with a value of less than $5,000.
    (ii) Utilizing Federal supply sources in procurement. In accordance 
with Section 101(j) of NAHASDA, recipients may use Federal supply 
sources made available by the General Services Administration pursuant 
to 40 U.S.C. 501.
    (12) Section 200.325, ``Bonding requirements,'' applies. There may 
be circumstances under which the bonding requirements of 2 CFR 200.325 
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.
    (13) Section 200.328(b) through (d) and (f), ``Monitoring and 
reporting program performance.''
    (14) Section 200.333, ``Retention requirements for records.''
    (15) Section 200.338, ``Remedies for noncompliance.''
    (16) Section 200.343, ``Closeout.''
    (b)(1) With respect to the applicability of cost principles, all 
items of cost listed in 2 CFR part 200, subpart E, 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 2 CFR part 200, subpart E and are otherwise eligible under 
this part, except for the following:
    (i) Depreciation method for fixed assets shall not be changed 
without the approval of the Federal cognizant agency.
    (ii) Penalties, damages, fines and other settlements are unallowable 
costs to the IHBG program.
    (iii) Costs of housing (e.g., depreciation, maintenance, utilities, 
furnishings, rent), housing allowances and personal living expenses 
(goods or services for personal use), regardless of whether reported as 
taxable income to the employees (2 CFR 200.445) requires HUD prior 
approval.
    (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

[[Page 691]]

paid for Level IV of the Executive Schedule.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71523, Dec. 3, 2012; 80 
FR 75943, Dec. 7, 2015]



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 2 CFR 200.318 shall apply. In all 
cases not governed by 2 CFR 200.318, 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.

[63 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015]



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.



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

[[Page 692]]

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 
HUD's regulations at part 35, subparts A, B, H, J, K, M and R of this 
title, which implement the Lead-Based Paint Poisoning Prevention Act (42 
U.S.C. 4822-4846) and the Residential Lead-Based Paint Hazard Reduction 
Act of 1992 (42 U.S.C. 4851-4856).

[64 FR 50230, Sept. 15, 1999; 65 FR 3387, Jan. 21, 2000]



Sec.  1000.42  Are the requirements of Section 3 of the Housing
and Urban Development Act of 1968 applicable?

    No. Recipients shall comply with Indian preference requirements of 
Section 7(b) of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 5307(b)), or employment and contract preference laws 
adopted by the recipient's tribe in accordance with Section 101(k) of 
NAHASDA.

[85 FR 61568, Sept. 29, 2020]



Sec.  1000.44  What prohibitions on the use of debarred,
suspended, or ineligible contractors apply?

    In addition to any tribal requirements, the prohibitions in 2 CFR 
part 2424 on the use of debarred, suspended, or ineligible contractors 
apply.

[72 FR 73497, Dec. 27, 2007]



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 2 CFR part 2429 apply.

[76 FR 45168, July 28, 2011]



Sec.  1000.48  Are Indian or tribal preference requirements
applicable to IHBG activities?

    Grants under this part are subject to Indian preference under 
section 7(b) of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450e(b)) or, if applicable under section 101(k) of 
NAHASDA, tribal preference in employment and contracting.
    (a)(1) 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) The following definitions apply:
    (i) 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

[[Page 693]]

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, ``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.
    (b) If tribal employment and contract preference laws have not been 
adopted by the Indian tribe, section 7(b) Indian preference provisions 
shall apply.
    (c) Exception for de minimis procurements. A recipient shall not be 
required to apply Indian preference requirements under Section 7(b) of 
the Indian Self-Determination and Education Assistance Act with respect 
to any procurement, using a grant provided under NAHASDA, of goods and 
services with a value less than $5,000.

[77 FR 71523, Dec. 3, 2012]



Sec.  1000.50  What tribal or Indian preference requirements
apply to IHBG administration activities?

    (a) In accordance with Section 101(k) of NAHASDA, a recipient shall 
apply the tribal employment and contract preference laws (including 
regulations and tribal ordinances) adopted by the Indian tribe that 
receives a benefit from funds granted to the recipient under NAHASDA.
    (b) In the absence of tribal employment and contract preference 
laws, a recipient must, to the greatest extent feasible, give preference 
and opportunities for training and employment in connection with the 
administration of grants awarded under this part to Indians in 
accordance with section 7(b) of the Indian Self-Determination and 
Education Assistance Act (25 U.S.C. 450e(b)).

[77 FR 71523, Dec. 3, 2012]



Sec.  1000.52  What tribal or Indian preference requirements apply
to IHBG procurement?

    (a) In accordance with Section 101(k) of NAHASDA, a recipient shall 
apply the tribal employment and contract preference laws (including 
regulations and tribal ordinances) adopted by the Indian tribe that 
receives a benefit from funds granted to the recipient under NAHASDA.
    (b) In the absence of tribal employment and contract preference 
laws, a recipient must, to the greatest extent feasible, give preference 
in the award of contracts for projects funded under this part to Indian 
organizations and Indian-owned economic enterprises in accordance with 
Section 7(b) of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450e(b)).
    (c) The following provisions apply to the application of Indian 
preference under paragraph (b) of this section:
    (1) In applying Indian preference, each recipient shall:
    (i) Certify to HUD that the policies 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 that was previously approved by HUD for a recipient will meet the 
requirements of this section); or
    (ii) Advertise for bids or proposals limited to qualified Indian 
organizations and Indian-owned enterprises; or
    (iii) 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.
    (2) If the recipient selects a method of providing preference that 
results in fewer than two responsible qualified organizations or 
enterprises submitting a

[[Page 694]]

statement of intent, a bid, or a proposal to perform the contract at a 
reasonable cost, then the recipient shall:
    (i) Readvertise the contract, using any of the methods described in 
paragraph (c)(1) of this section; or
    (ii) Readvertise 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 2 CFR 200.318 through 200.326, 
in order to award the contract to the single bidder or offeror.
    (3) Procurements that are within the dollar limitations established 
for small purchases under 2 CFR 200.320 need not follow the formal bid 
or proposal procedures of since these procurements are governed by the 
small purchase procedures of 2 CFR 200.320. However, a recipient'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 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:
    (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; 
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 
recipient that the prospective contractor has the technical, 
administrative, and financial capability to perform contract work of the 
size and type involved.
    (6) 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:
    (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. 450e(b)) (the 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; shall require subcontractors 
at each level to include this section 7(b) clause in every subcontract 
they execute 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.
    (d) A recipient shall not be required to apply Indian preference 
requirements under Section 7(b) of the Indian Self-Determination and 
Education Assistance Act with respect to any procurement, using a grant 
provided under NAHASDA, of goods and services with a value less than 
$5,000.

[77 FR 71523, Dec. 3, 2012, as amended at 80 FR 75944, Dec. 7, 2015]

[[Page 695]]



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.



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.
    (g) Investments under this section may be for a period no longer 
than 5 years.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71524, Dec. 3, 2012]

[[Page 696]]



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.  1000.532 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.

[77 FR 71524, Dec. 3, 2012]



Sec.  1000.62  What is considered program income?

    (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) If the amount of income received in a single year by a recipient 
and all its subrecipients, which would 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.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71524, Dec. 3, 2012]



Sec.  1000.64  What are the permissible uses of program income?

    Program income may be used for any housing or housing related 
activity and is not subject to other federal requirements.

[77 FR 71524, Dec. 3, 2012]



                 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.  1000.103  How may IHBG funds be used for tenant-based or
project-based rental assistance?

    (a) IHBG funds may be used for project-based or tenant-based rental 
assistance.
    (b) IHBG funds may be used for project-based or tenant-based rental 
assistance that is provided in a manner consistent with section 8 of the 
United States Housing Act of 1937 (42 U.S.C. 1437f).
    (c) IHBG funds used for project-based or tenant-based rental 
assistance must comply with the requirements of NAHASDA and this part.

[72 FR 59004, Oct. 18, 2007]



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 family may receive housing assistance in 
accordance with Sec.  1000.110.
    (c) A family may receive housing assistance on a reservation or 
Indian

[[Page 697]]

area if the 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.
    (d) A recipient may provide housing or housing assistance provided 
through affordable housing activities assisted with grant amounts under 
NAHASDA for a law enforcement officer on an Indian reservation or other 
Indian area, if:
    (1) The officer:
    (i) Is employed on a full-time basis by the federal government or a 
state, county, or other unit of local government, or lawfully recognized 
tribal government; and
    (ii) In implementing such full-time employment, is sworn to uphold, 
and make arrests for, violations of federal, state, county, or tribal 
law; and
    (2) The recipient determines that the presence of the law 
enforcement officer on the Indian reservation or other Indian area may 
deter crime.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71524, Dec. 3, 2012]



Sec.  1000.106  What families receiving assistance under title II
of NAHASDA require HUD approval?

    (a) Housing assistance for non-low-income families requires HUD 
approval only as required in Sec. Sec.  1000.108 and 1000.110.
    (b) Assistance for essential families under section 201(b)(3) of 
NAHASDA 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 
that the family's housing needs cannot be reasonably met without such 
assistance.

[77 FR 71525, Dec. 3, 2012]



Sec.  1000.108  How is HUD approval obtained by a recipient for housing 
for non-low-income 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 families in accordance with section 
201(b)(2) of NAHASDA. Assistance to non-low-income 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 families.

[77 FR 71525, Dec. 3, 2012]



Sec.  1000.110  Under what conditions may non-low-income Indian families participate in the program?

    (a) A family that was low-income at the times described in Sec.  
1000.147 but subsequently becomes a non-low-income family due to an 
increase in income may continue to participate in the program in 
accordance with the recipient's admission and occupancy policies. The 10 
percent limitation in paragraph (c) of this section shall not apply to 
such families. Such families may be made subject to the additional 
requirements in paragraph (d) of this section based on those policies. 
This includes a family member or household member who takes ownership of 
a homeownership unit under Sec.  1000.146.
    (b) A recipient must determine and document that there is a need for 
housing for each family that cannot reasonably be met without such 
assistance.
    (c) A recipient may use up to 10 percent of the amount planned for 
the tribal program year 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 the amount 
planned for the tribal program year for such assistance or to provide 
housing for families with income over 100 percent of median income.
    (d) Non-low-income families cannot receive the same benefits 
provided low-income Indian families. The amount of assistance non-low-
income 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 family cannot be less than: 
(Income of non-low-income family/Income of family at 80 percent of 
median income) x

[[Page 698]]

(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 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).
    (e) The requirements set forth in paragraphs (c) and (d) of this 
section do not apply to non-low-income families that the recipient has 
determined to be essential under Sec.  1000.106(b).

[77 FR 71525, Dec. 3, 2012]



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 families or a model housing activity?

    Whether submitted in the IHP or at any other time, HUD will have 60 
calendar days after receiving the proposal to notify the recipient in 
writing that the proposal to provide assistance to non-low-income 
families or for model activities is approved or disapproved. If no 
decision is made by HUD within 60 calendar days of receiving the 
proposal, the proposal is deemed to have been approved by HUD.

[77 FR 71525, Dec. 3, 2012]



Sec.  1000.116  What should HUD do before declining a proposal to provide assistance to non low-income families or a model housing activity?

    HUD shall consult with a recipient regarding the recipient's 
proposal to provide assistance to non-low-income families or a model 
housing activity. To the extent that 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.

[77 FR 71525, Dec. 3, 2012]



Sec.  1000.118  What recourse does a recipient have if HUD disapproves a proposal to provide assistance to non-low-income families or a model housing activity?

    (a) Within 30 calendar days of receiving HUD's denial of a proposal 
to provide assistance to non-low-income 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 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.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71525, Dec. 3, 2012]



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

[[Page 699]]

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.



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

[[Page 700]]

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.  1000.139  What are the standards for insurance entities 
owned and controlled by recipients?

    (a) General. A recipient may provide insurance coverage required by 
section 203(c) of NAHASDA and Sec. Sec.  1000.136 and 1000.138 through a 
self-insurance plan, approved by HUD in accordance with this section, 
provided by a nonprofit insurance entity that is wholly owned and 
controlled by IHBG recipients.
    (b) Self-insurance plan. An Indian housing self-insurance plan must 
be shown to meet the requirements of paragraph (c) of this section.
    (c) Application. For a self-insurance plan to be approved by HUD, an 
application and supporting materials must be submitted containing the 
information specified in paragraphs (c)(1) through (c)(9) of this 
section. Any material changes made to these documents after initial 
approval must be submitted to HUD. Adverse material changes may cause 
HUD to revoke its approval of a self-insurance entity. The application 
submitted to HUD must show that:
    (1) The plan is organized as an insurance entity, tribal self-
insurance plan, tribal risk retention group, or Indian housing self-
insurance risk pool;
    (2) The plan limits participation to IHBG recipients;
    (3) The plan operates on a nonprofit basis;
    (4)(i) The plan employs or contracts with a third party to provide 
competent underwriting and management staff;
    (A) The underwriting staff must be composed of insurance 
professionals with an average of at least five years of experience in 
large risk commercial underwriting exceeding $100,000 in annual premiums 
or at least five years of experience in underwriting risks for public 
entity plans of self-insurance;
    (B) The management staff must have at least one senior manager who 
has a minimum of five years of insurance experience at the level of vice 
president of a property or casualty insurance entity; as a senior branch 
manager of a branch office with annual property or

[[Page 701]]

casualty premiums exceeding five million dollars; or as a senior manager 
of a public entity self-insurance risk pool;
    (ii) Satisfaction of this requirement may be demonstrated by 
evidence such as r[eacute]sum[eacute]s and employment history of the 
underwriting staff for the plan and of the key management staff with 
day-to-day operational oversight of the plan;
    (5) The plan maintains internal controls and cost containment 
measures, as shown by the annual budget;
    (6) The plan maintains sound investments consistent with its 
articles of incorporation, charter, bylaws, risk pool agreement, or 
other applicable organizational document or agreement concerning 
investments;
    (7) The plan maintains adequate surplus and reserves, as determined 
by HUD, for undischarged liabilities of all types, as shown by a current 
audited financial statement and an actuarial review conducted in 
accordance with paragraph (e) of this section;
    (8) The plan has proper organizational documentation, as shown by 
copies of the articles of incorporation, charter, bylaws, subscription 
agreement, business plan, contracts with third-party administrators, and 
other organizational documents; and
    (9) A plan's first successful application for approval under this 
section must also include an opinion from the plan's legal counsel that 
the plan is properly chartered, incorporated, or otherwise formed under 
applicable law.
    (d) HUD consideration of plan. HUD will consider an application for 
approval of a self-insurance plan submitted under this section and 
approve or disapprove that application no later than 90 days from the 
date of receipt of a complete application. If an application is 
disapproved, HUD shall notify the applicant of the reasons for 
disapproval and may offer technical assistance to a recipient to help 
the recipient correct the deficiencies in the application. The recipient 
may then resubmit the application under this section.
    (e) Annual reporting. An approved plan must undergo an audit and 
actuarial review annually. In addition, an evaluation of the plan's 
management must be performed by an insurance professional every three 
years. These audits, actuarial reviews, and management reviews must be 
submitted to HUD within 90 days after the end of the insuring entity's 
fiscal year and be prepared in accordance with the following standards:
    (1) The annual financial statement must be prepared in accordance 
with generally accepted accounting principles (GAAP) and audited by an 
independent auditor in accordance with generally accepted government 
auditing standards. The independent auditor shall state in writing an 
opinion on whether the plan's financial statement is presented fairly, 
in accordance with GAAP;
    (2) The actuarial review of the plan shall be done consistently with 
requirements established by the Association of Governmental Risk Pools 
and conducted by an independent property or casualty actuary who is a 
member of a recognized professional actuarial organization, such as the 
American Academy of Actuaries. The report issued and submitted to HUD 
must include the actuary's written opinion on any over- or under-
reserving and the adequacy of the reserve maintained for open claims and 
for incurred but unreported claims;
    (3) The management review must be prepared by an independent 
insurance consultant who has received the professional designation of a 
chartered property/casualty underwriter (CPCU), associate in risk 
management (ARM), or associate in claims (AIC), and must cover the 
following:
    (i) The efficiency of the management or third-party administrator of 
the plan;
    (ii) Timeliness of the claim payments and reserving practices; and
    (iii) The adequacy of reinsurance or excess insurance coverage.
    (f) Revocation of approval. HUD may revoke its approval of a plan 
under this section when the plan no longer meets the requirements of 
this section. The plan's management will be notified in writing of the 
proposed revocation of its approval and of the manner and time in which 
to request a hearing to

[[Page 702]]

challenge the determination, in accordance with the dispute resolution 
procedures set forth in this part for model housing activities (Sec.  
1000.118).
    (g) Preemption. In order that tribally owned Indian housing 
insurance entities that provide insurance for IHBG-assisted housing will 
not be subject to conflicting state laws and widely varying and costly 
requirements, any self-insurance plan under this section that meets the 
requirements of this section and that has been approved by HUD shall be 
governed by the regulations of this subpart in its provision of 
insurance for IHBG-assisted housing.

[72 FR 29740, May 29, 2007]



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 
Sec. Sec.  1000.136 and 1000.138.



Sec.  1000.141  What is ``useful life'' and how is it related
to affordability?

    Useful life is the time period during which an assisted property 
must remain affordable, as defined in section 205(a) of NAHASDA.

[77 FR 71525, Dec. 3, 2012]



Sec.  1000.142  How does a recipient determine 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?

    To the extent required in the IHP, each recipient shall describe its 
determination of the useful life of the assisted housing units in 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 NAHASDA and for purposes of 
section 209.

[77 FR 71525, Dec. 3, 2012]



Sec.  1000.143  How does a recipient implement its useful life requirements?

    A recipient implements its useful life requirements by placing a 
binding commitment, satisfactory to HUD, on the assisted property.

[77 FR 71526, Dec. 3, 2012]



Sec.  1000.144  What are binding commitments satisfactory to HUD?

    A binding commitment satisfactory to HUD is a written use 
restriction agreement, developed by the recipient, and placed on an 
assisted property for the period of its useful life.

[77 FR 71526, Dec. 3, 2012]



Sec.  1000.145  Are Mutual Help homes developed under the 1937 Act
subject to the useful life provisions of section 205(a)(2)?

    No.

[63 FR 12349, Mar. 12, 1998. Redesignated at 77 FR 71526, Dec. 3, 2012]



Sec.  1000.146  Are binding commitments for the remaining useful life 
of property applicable to a family member or household member who subsequently takes 
          ownership of a homeownership unit?

    No. The transfer of a homeownership unit to a family member or 
household member is not subject to a binding commitment for the 
remaining useful life of the property. Any subsequent transfer by the 
family member or household member to a third party (not a family member 
or household member) is subject to any remaining useful life under a 
binding commitment.

[77 FR 71526, Dec. 3, 2012]



Sec.  1000.147  When does housing qualify as affordable housing 
under NAHASDA?

    (a) Housing qualifies as affordable housing, provided that the 
family occupying the unit is low-income at the following times:
    (1) In the case of rental housing, at the time of the family's 
initial occupancy of such unit;
    (2) In the case of a contract to purchase existing housing, at the 
time of purchase;
    (3) In the case of a lease-purchase agreement for existing housing 
or for housing to be constructed, at the time the agreement is signed; 
and

[[Page 703]]

    (4) In the case of a contract to purchase housing to be constructed, 
at the time the contract is signed.
    (b) Families that are not low-income as described in this section 
may be eligible under Sec.  1000.104 or Sec.  1000.110.

[63 FR 12349, Mar. 12, 1998. Redesignated at 77 FR 71526, Dec. 3, 2012]



Sec.  1000.150  How may Indian tribes and TDHEs receive criminal 
conviction information on applicants for employment and on adult
applicants for housing 
          assistance, 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.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71526, Dec. 3, 2012]



Sec.  1000.152  How is the recipient to use criminal conviction
information?

    (a) With regard to adult tenants and applicants for housing 
assistance, the recipient shall use the criminal conviction information 
described in Sec.  1000.150 only for applicant screening, lease 
enforcement, and eviction actions.
    (b) With regard to applicants for employment, the recipient shall 
use the criminal conviction information described in Sec.  1000.150 for 
the purposes set out in section 208 of NAHASDA.
    (c) The criminal conviction information described in Sec.  1000.150 
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.

[77 FR 71526, Dec. 3, 2012]



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 affordable housing developed, acquired, or 
assisted under the IHBG program subject to limitations on cost
or design standards?

    Yes. Affordable housing must be of moderate design. For these 
purposes, moderate design is defined as housing that is of a size and 
with amenities consistent with unassisted housing offered for sale in 
the Indian tribe's general geographic area to buyers who are at or below 
the area median income. The local determination of moderate design 
applies to all housing assisted under an affordable housing activity, 
including development activities (e.g., acquisition, new construction, 
reconstruction, moderate or substantial rehabilitation of affordable 
housing and homebuyer assistance) and model activities. Acquisition 
includes assistance to a family to buy housing. Units with the same 
number of bedrooms must be comparable with respect to size, cost and 
amenities.

[66 FR 49790, Sept. 28, 2001]



Sec.  1000.158  How will a NAHASDA grant recipient know that the
housing assisted under the IHBG program meets the requirements of Sec.  1000.156?

    (a) A recipient must use one of the methods specified in paragraph 
(b) or

[[Page 704]]

(c) of this section to determine if an assisted housing project meets 
the moderate design requirements of Sec.  1000.156. For purposes of this 
requirement, a project is one or more housing units, of comparable size, 
cost, amenities and design, developed with assistance provided by the 
Act.
    (b) The recipient may adopt written standards for its affordable 
housing programs that reflect the requirement specified in Sec.  
1000.156. The standards must describe the type of housing, explain the 
basis for the standards, and use similar housing in the Indian tribe's 
general geographic area. For each affordable housing project, the 
recipient must maintain documentation substantiating compliance with the 
adopted housing standards. The standards and documentation 
substantiating compliance for each activity must be available for review 
by the general public and, upon request, by HUD. Prior to awarding a 
contract for the construction of housing or beginning construction using 
its own workforce, the recipient must complete a comparison of the cost 
of developing or acquiring/rehabilitating the affordable housing with 
the limits provided by the TDC discussed in paragraph (c) of this 
section and may not, without prior HUD approval, exceed by more than 10 
percent the TDC maximum cost for the project. In developing standards 
under this paragraph, the recipient must establish, maintain, and follow 
policies that determine a local definition of moderate design which 
considers:
    (1) Gross area;
    (2) Total cost to provide the housing;
    (3) Environmental concerns and mitigations;
    (4) Climate;
    (5) Comparable housing in geographical area;
    (6) Local codes, ordinances and standards;
    (7) Cultural relevance in design;
    (8) Design and construction features that are reasonable, and 
necessary to provide decent, safe, sanitary and affordable housing; and
    (9) Design and construction features that are accessible to persons 
with a variety of disabilities.
    (c) If the recipient has not adopted housing standards specified in 
paragraph (b) of this section, Total Development Cost (TDC) limits 
published periodically by HUD establish the maximum amount of funds 
(from all sources) that the recipient may use to develop or acquire/
rehabilitate affordable housing. The recipient must complete a 
comparison of the cost of developing or acquiring/rehabilitating the 
affordable housing with the limits provided by the TDC and may not, 
without prior HUD approval, exceed the TDC maximum cost for the project.

[66 FR 49790, Sept. 28, 2001]



Sec.  1000.160  Are non-dwelling structures developed, acquired 
or assisted under the IHBG program subject to limitations on cost
or design standards?

    Yes. Non-dwelling structures must be of a design, size and with 
features or amenities that are reasonable and necessary to accomplish 
the purpose intended by the structures. The purpose of a non-dwelling 
structure must be to support an affordable housing activity, as defined 
by the Act.

[66 FR 49790, Sept. 28, 2001]



Sec.  1000.162  How will a recipient know that non-dwelling structures 
assisted under the IHBG program meet the requirements of 1000.160?

    (a) The recipient must use one of the methods described in paragraph 
(b) or (c) of this section to determine if a non-dwelling structure 
meets the limitation requirements of Sec.  1000.160. If the recipient 
develops, acquires, or rehabilitates a non-dwelling structure with funds 
from NAHASDA and other sources, then the cost limit standard established 
under these regulations applies to the entire structure. If funds are 
used from two different sources, the standards of the funding source 
with the more restrictive rules apply.
    (b)(1) The recipient may adopt written standards for non-dwelling 
structures. The standards must describe the type of structures and must 
clearly describe the criteria to be used to guide the cost, size, 
design, features, amenities, performance or other factors. The standards 
for such structures must be able to support the reasonableness and

[[Page 705]]

necessity for these factors and to clearly identify the affordable 
housing activity that is being provided.
    (2) When the recipient applies a standard to particular structures, 
it must document the following: (i) Identification of targeted 
population to benefit from the structures;
    (ii) Identification of need or problem to be solved;
    (iii) Affordable housing activity provided or supported by the 
structures;
    (iv) Alternatives considered;
    (v) Provision for future growth and change;
    (vi) Cultural relevance of design;
    (vii) Size and scope supported by population and need;
    (viii) Design and construction features that are accessible to 
persons with a variety of disabilities;
    (ix) Cost; and
    (x) Compatibility with community infrastructure and services.
    (c) If the recipient has not adopted program standards specified in 
paragraph (b) of this section, then it must demonstrate and document 
that the non-dwelling structure is of a cost, size, design and with 
amenities consistent with similarly designed and constructed structures 
in the recipient's general geographic area.

[66 FR 49790, Sept. 28, 2001]



                   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 a tribal program year an IHP in 
accordance with Sec.  1000.220 to carry out affordable housing 
activities.

[77 FR 71526, Dec. 3, 2012]



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

[[Page 706]]

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 75 days before the beginning of a tribal program year. Grant 
funds cannot be provided until the plan due under this section is 
determined to be in compliance with section 102 of NAHASDA and funds are 
available.

[77 FR 71526, Dec. 3, 2012]



Sec.  1000.216  What happens if the recipient does not submit 
the IHP to the Area ONAP by no later than 75 days before the beginning
of the tribal program year?

    If the IHP is not initially sent by at least 75 days before the 
beginning of the tribal program year, the recipient will not be eligible 
for IHBG funds for that fiscal year. Any funds not obligated because an 
IHP was not received before this deadline has passed shall be 
distributed by formula in the following year.

[77 FR 71526, Dec. 3, 2012]



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 requirements for the IHP?

    The IHP requirements are set forth in section 102(b) of NAHASDA. In 
addition, Sec. Sec.  1000.56, 1000.108, 1000.120, 1000.134, 1000.142, 
1000.238, 1000.302, and 1000.328 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 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.

[77 FR 71526, Dec. 3, 2012]



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 exigent circumstances beyond its control, for a 
period of not more than 90 days. 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), and such waiver shall not be unreasonably withheld.

[77 FR 71526, Dec. 3, 2012]



Sec.  1000.225  When may a waiver of the IHP submission deadline be requested?

    A recipient may request a waiver for a period of not more than 90 
days beyond the IHP submission due date.

[77 FR 71526, Dec. 3, 2012]



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.

[[Page 707]]



Sec.  1000.227  What shall HUD do upon receipt of an IHP submission
deadline waiver request?

    The waiver shall be decided upon by HUD within 45 days of receipt of 
the waiver request. HUD shall notify the recipient in writing within 45 
days of receipt of the waiver request whether the request is approved or 
denied.

[77 FR 71526, Dec. 3, 2012]



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; however, the recipient may use 
either the HUD-estimated IHBG amount or the IHBG amount from their most 
recent compliant IHP;
    (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) 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.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71527, Dec. 3, 2012]



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

[[Page 708]]

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;
    (5) Challenge to and collection of data for purposes of challenging 
the formula; and
    (6) Administrative and planning expenses associated with expenditure 
of non-IHBG funds on affordable housing activities if the source of the 
non-IHBG funds limits expenditure of its funds on such administrative 
expenses.
    (b) Staff and overhead costs directly related to carrying out 
affordable housing activities or comprehensive and community development 
planning activities can be determined to be eligible costs of the 
affordable housing activity or considered as administration or planning 
at the discretion of the recipient.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71527, Dec. 3, 2012]



Sec.  1000.238  What percentage of the IHBG funds can be used for
administrative and planning expenses?

    Recipients receiving in excess of $500,000 may use up to 20 percent 
of their annual expenditures of grant funds or may use up to 20 percent 
of their annual grant amount, whichever is greater. Recipients receiving 
$500,000 or less may use up to 30 percent of their annual expenditures 
of grant funds or up to 30 percent of their annual grant amount, 
whichever is greater. When a recipient is receiving grant funds on 
behalf of one or more grant beneficiaries, the recipient may use up to 
30 percent of the annual expenditure of grant funds or up to 30 percent 
of the annual grant amount, whichever is greater, of each grant 
beneficiary whose allocation is $500,000 or less, and up to 20 percent 
of the annual expenditure of grant funds or up to 20 percent of the 
annual grant amount, whichever is greater, of each grant beneficiary 
whose allocation is greater than $500,000. HUD approval is required if a 
higher percentage is requested by the recipient. Recipients combining 
grant funds with other funding may request HUD approval to use a higher 
percentage based on its total expenditure of funds from all sources for 
that year. 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.

[77 FR 71527, Dec. 3, 2012]

[[Page 709]]



Sec.  1000.239  May a recipient establish and maintain reserve 
accounts for administration and planning?

    Yes. In addition to the amounts established for planning and 
administrative expenses under Sec. Sec.  1000.236 and 1000.238, a 
recipient may establish and maintain separate reserve accounts only for 
the purpose of accumulating amounts for administration and planning 
relating to affordable housing activities. These amounts may be invested 
in accordance with Sec.  1000.58(c). Interest earned on reserves is not 
program income and shall not be included in calculating the maximum 
amount of reserves. The maximum amount of reserves, whether in one or 
more accounts, that a recipient may have available at any one time is 
calculated as follows:
    (a) Determine the 5-year average of administration and planning 
amounts, not including reserve amounts, expended in a tribal program 
year.
    (b) Establish \1/4\ of that amount for the total eligible reserve.

[77 FR 71527, Dec. 3, 2012]



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.



Sec.  1000.244  If the recipient has made a good-faith effort to negotiate
a cooperation agreement and tax-exempt status but has been unsuccessful through no 
          fault of its own, may the Secretary waive the requirement for 
          a cooperation agreement and a tax exemption?

    Yes. Recipients must submit a written request for waiver to the 
recipient's Area ONAP. The request must detail a good faith effort by 
the recipient, identify the housing units involved, and include all 
pertinent background information about the housing units. The recipient 
must further demonstrate that it has pursued and exhausted all 
reasonable channels available to it to reach an agreement to obtain tax-
exempt status, and that failure to obtain the required agreement and 
tax-exempt status has been through no fault of its own. The Area ONAP 
will forward the request, its recommendation, comments, and any 
additional relevant documentation to the Deputy Assistant Secretary for 
Native American Programs for processing to the Assistant Secretary.

[77 FR 71527, Dec. 3, 2012]



Sec.  1000.246  How must HUD respond to a request for waiver of the
requirement for a cooperation agreement and a tax exemption?

    (a) HUD shall make a determination to such request for a waiver 
within 30 days of receipt or provide a reason to the requestor for the 
delay, identify all additional documentation necessary, and provide a 
timeline within which a determination will be made.
    (b) If the waiver is granted, HUD shall notify the recipient of the 
waiver in writing and inform the recipient of any special condition or 
deadlines with which it must comply. Such waiver shall remain effective 
until revoked by the Secretary.
    (c) If the waiver is denied, HUD shall notify the recipient of the 
denial and the reason for the denial in writing. If the request is 
denied, IHBG funds may not be spent on the housing units. If IHBG funds 
have been spent on the housing units prior to the denial, the recipient 
must reimburse the grant for all IHBG funds expended.

[77 FR 71527, Dec. 3, 2012]



                      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.

[[Page 710]]



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 areas are:
    (i) Reservations for federally recognized Indian tribes, as defined 
by the U.S. Census;
    (ii) Trust lands;
    (iii) Department of the Interior Near-Reservation Service Areas;
    (iv) Former Indian Reservation Areas in Oklahoma Indian Areas, as 
defined by the U.S. Census as Oklahoma Tribal Statistical Areas (OTSAs);
    (v) Congressionally Mandated Service Areas;
    (vi) State Tribal Areas as defined by the U.S. Census as State 
Designated American Indian Statistical Areas (SDAISAs);
    (vii) Tribal Designated Statistical Areas (TDSAs);
    (viii) California Tribal Jurisdictional Areas established or 
reestablished by federal court judgment; and
    (ix) Alaska formula areas described in paragraph (4) of this 
definition.
    (2)(i) For a geographic area not identified in paragraph (1) of this 
definition, and for expansion or re-definition of a geographic area from 
the prior year, including those identified in paragraph (1) of this 
definition, the Indian tribe must submit, on a form agreed to by HUD, 
information about the geographic area it wishes to include in its 
Formula Area, including proof that the Indian tribe, where applicable, 
has agreed to provide housing services pursuant to a Memorandum of 
Agreement (MOA) with the tribal and public governing entity or entities 
of the area, or has attempted to establish such an MOA, and is providing 
substantial housing services and will continue to expend or obligate 
funds for substantial housing services, as reflected in its Indian 
Housing Plan and Annual Performance Report for this purpose.
    (ii) Upon receiving a request for recognition of a geographic area 
not identified in paragraph (1) of this definition, HUD shall make a 
preliminary determination. HUD shall notify all potentially affected 
Indian tribes of the basis for its preliminary determination by 
certified mail and provide the Indian tribes with the opportunity to 
comment for a period of not less than 90 days. After consideration of 
the comments, HUD shall announce its final determination through Federal 
Register notice.
    (iii) No Indian tribe may expand or redefine its Formula Area 
without complying with the requirements of paragraphs (2)(i) and (ii) of 
this definition, notwithstanding any changes recognized by the U.S. 
Census Bureau.
    (iv) The geographic area into which an Indian tribe may expand under 
this paragraph (2) shall be the smallest U.S. Census unit or units 
encompassing the physical location where substantial housing services 
have been provided by the Indian tribe.
    (3) Subject to a challenge by an Indian tribe with a Formula Area 
described under paragraph (1)(iv) of this definition, any federally 
recognized Indian tribe assigned Formula Area geography in Fiscal Year 
2003 not identified in paragraphs (1) and (2) of this definition, shall 
continue to be assigned such Formula Area in subsequent fiscal years, 
provided that the Indian tribe continues to provide an appropriate level 
of housing services within the Formula Area as monitored by HUD using 
the definition of substantial

[[Page 711]]

housing services contained in this section as a guideline but not as a 
requirement.
    (4) Notwithstanding paragraphs (1), (2), and (3) of this definition, 
Alaska needs data shall be credited as set forth in Sec.  1000.327 to 
the Alaska Native Village (ANV), the regional Indian tribe, or to the 
regional corporation established pursuant to the Alaska Native Claims 
Settlement Act (33 U.S.C. 1601 et seq.) (ANCSA). For purposes of Sec.  
1000.327 and this definition:
    (i) The formula area of the ANV shall be the geographic area of the 
village or that area delineated by the TDSA established for the ANV for 
purposes of the 1990 U.S. Census or the Alaska Native Village 
Statistical Area (ANVSA) established for the ANV. To the extent that the 
area encompassed by such designation may substantially exceed the actual 
geographic area of the village, such designation is subject to challenge 
pursuant to Sec.  1000.336. If the ANVSA or the TDSA is determined 
pursuant to such challenge to substantially exceed the actual area of 
the village, then the geographic formula area of the ANV for purposes of 
Sec.  1000.327 shall be such U.S. Census designation as most closely 
approximates the actual geographic area of the village.
    (ii) The geographic formula area of the regional corporation shall 
be the area established for the corporation by the ANCSA.
    (iii) An Indian tribe may seek to expand its Alaska formula area 
within its ANCSA region pursuant to the procedures set out in paragraph 
(2) of this definition. Formula Area added in this way shall be treated 
as overlapping pursuant to Sec.  1000.326, unless the Indian tribe's 
members in the expanded area are less than 50 percent of the AIAN 
population. In cases where the Indian tribe is not treated as 
overlapping, the Indian tribe shall be credited with population and 
housing data only for its own tribal member residents within the new or 
added area. All other population and housing data for the area shall 
remain with the Indian tribe or tribes previously credited with such 
data.
    (5) In some cases the population data for an Indian tribe within its 
Formula Area is greater than its tribal enrollment. In general, to 
maintain fairness for all Indian tribes, the tribe's 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. For state-recognized 
Indian tribes, the population data and formula allocation shall be 
limited to their tribal enrollment figures as determined under 
enrollment criteria in effect in 1996.
    (6) 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 to whom the Indian tribe is providing housing assistance (on 
July 30 of the year before funding is sought) divided by the number of 
members to whom the Indian tribe is providing housing assistance. For 
example, an Indian tribe that provides housing to 300 Indians and Alaska 
Natives, of which 100 are members, the Indian tribe 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.

[[Page 712]]

    National per unit subsidy is the Fiscal Year 1996 national per unit 
subsidy (adjusted to full funding level) multiplied by an adjustment 
factor for inflation.
    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.
    Substantial housing services are:
    (1) Affordable housing activities funded from any source provided to 
AIAN households with incomes 80 percent of the median income as defined 
in NAHASDA (25 U.S.C. 4103 (14)) or lower, equivalent to 100 percent or 
more of the increase in the IHBG formula allocation that the Indian 
tribe would receive as a result of adding the proposed geography; or
    (2) Affordable housing activities funded with IHBG funds provided to 
AIAN households with incomes 80 percent of the median income as defined 
in NAHASDA (25 U.S.C. 4104(14)) or lower, equivalent to 51 percent or 
more of the Indian tribe's current total IHBG grant; and either:
    (i) Fifty-one percent or more of the Indian tribe's official 
enrollment resides within the geographic area; or
    (ii) The Indian tribe's official enrollment constitutes 51 percent 
or more of the total AIAN persons within the geography.
    (3) HUD shall require that the Indian tribe annually provide written 
verification, in its Indian Housing Plan and Annual Performance Report, 
that the affordable housing activities it is providing meet the 
definition of substantial housing services.
    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.

[63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20023, Apr. 20, 2007; 
77 FR 71527, Dec. 3, 2012; 81 FR 83680, Nov. 22, 2016]



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 than 5 years from the date of issuance of these 
regulations and periodically thereafter.
    (b) The IHBG Formula shall be reviewed not later than May 21, 2012 
to determine if a subsidy is needed to operate and maintain NAHASDA 
units or if any other changes are needed in respect to funding under the 
Formula Current Assisted Stock component of the formula.

[63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20024, Apr. 20, 2007; 
81 FR 83680, Nov. 22, 2016]



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

[[Page 713]]

applicable law before their implementation.



Sec.  1000.310  What are the components of the IHBG formula?

    The IHBG formula consists of four components:
    (a) Formula Current Assisted Stock (FCAS) (Sec.  1000.316);
    (b) Need (Sec.  1000.324);
    (c) 1996 Minimum (Sec.  1000.340); and
    (d) Undisbursed IHBG funds factor (Sec.  1000.342).

[81 FR 83680, Nov. 22, 2016]



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.  1000.315  Is a recipient required to report changes to the
Formula Current Assisted Stock (FCAS) on the Formula Response Form?

    (a) A recipient shall report changes to information related to the 
IHBG formula on the Formula Response Form, including corrections to the 
number of Formula Current Assisted Stock (FCAS), during the time period 
required by HUD. This time period shall be not less than 60 days from 
the date of the HUD letter transmitting the form to the recipient.
    (b) The Formula Response Form is the only mechanism that a recipient 
shall use to report changes to the number of FCAS.

[72 FR 20025, Apr. 20, 2007]



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 national per 
unit subsidy;
    (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; and
    (3) The number of Mutual Help and Turnkey III FCAS units multiplied 
by the national per unit subsidy.
    (b) Modernization allocation. (1) For Indian tribes with an Indian 
Housing Authority that owned or operated 250 or more public housing 
units on October 1, 1997, the modernization allocation equals 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.
    (2) For Indian tribes with an Indian Housing Authority that owned or 
operated fewer than 250 public housing units on October 1, 1997, the 
modernization allocation equals the average amount of funds received 
under the assistance program authorized by section 14 of the 1937 Act 
(not including funds provided as emergency assistance) for FYs 1992 
through 1997.
    (c) Conversion. Conversion of FCAS units from homeownership (Mutual 
Help or Turnkey III) to low-rent or from low-rent to a home ownership 
program.
    (1) If units were converted before October 1, 1997, as evidenced by 
an amended ACC, then those units will be counted for formula funding and 
eligibility purposes as the type of unit to which they were converted.
    (2) If units were converted on or after October 1, 1997, the 
following applies:

[[Page 714]]

    (i) Funding type. Units that converted after October 1, 1997 will be 
funded as the type of unit specified on the original ACC in effect on 
September 30, 1997.
    (ii) Continued FCAS eligibility. Whether or not it is the first 
conversion, a unit converted after October 1, 1997, will be considered 
as the type converted to when determining continuing FCAS eligibility. A 
unit that is converted to low-rent will be treated as a low-rent unit 
for purposes of determining continuing FCAS eligibility. A unit that is 
converted to homeownership will be treated as a homeownership unit for 
purposes of determining continuing FCAS eligibility.
    (3) The Indian tribe, TDHE, or IHA shall report conversions on the 
Formula Response Form.

[63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20025, Apr. 20, 2007; 
81 FR 83680, Nov. 22, 2016]



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 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)(1) A Mutual Help or Turnkey III unit not conveyed after the unit 
becomes eligible for conveyance by the terms of the MHOA may continue to 
be considered Formula Current Assisted Stock only if a legal impediment 
prevented conveyance; the legal impediment continues to exist; the 
tribe, TDHE, or IHA has taken all other steps necessary for conveyance 
and all that remains for conveyance is a resolution of the legal 
impediment; and the tribe, TDHE, or IHA made the following reasonable 
efforts to overcome the impediments:
    (i) No later than four months after the unit becomes eligible for 
conveyance, the tribe, TDHE, or IHA creates a written plan of action, 
which includes a description of specific legal impediments as well as 
specific, ongoing, and appropriate actions for each applicable unit that 
have been taken and will be taken to resolve the legal impediments 
within a 24-month period; and
    (ii) The tribe, TDHE, or IHA has carried out or is carrying out the 
written plan of action; and
    (iii) The tribe, TDHE, or IHA has documented undertaking the plan of 
action.
    (2) No Mutual Help or Turnkey III unit will be considered FCAS 24 
months after the date the unit became eligible for conveyance, unless 
the tribe, TDHE, or IHA provides evidence from a third party, such as a 
court or state or federal government agency, documenting that a legal 
impediment continues to prevent conveyance. FCAS units that have not 
been conveyed due to legal impediments on December 22, 2016 shall be 
treated as having become eligible for conveyance on December 22, 2016.
    (c) 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.
    (d) 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.

[[Page 715]]

    (e) A unit that is demolished pursuant to a planned demolition may 
be considered eligible as a FCAS unit if, after demolition is completed, 
the unit is rebuilt within one year. Demolition is completed when the 
site of the demolished unit is ready for rebuilding. If the unit cannot 
be rebuilt within one year because of relative administrative capacities 
and other challenges faced by the recipient, including, but not limited 
to geographic distribution within the Indian area and technical 
capacity, the Indian tribe, TDHE or IHA may request approval for a one-
time, one-year extension. Requests must be submitted in writing and 
include a justification for the request.

[63 FR 12349, Mar. 12, 1998, as amended at 81 FR 83680, Nov. 22, 2016]



Sec.  1000.319  What would happen if a recipient misreports or fails 
to correct Formula Current Assisted Stock (FCAS) information on the 
Formula Response Form?

    (a) A recipient is responsible for verifying and reporting changes 
to their Formula Current Assisted Stock (FCAS) on the Formula Response 
Form to ensure that data used for the IHBG Formula are accurate (see 
Sec.  1000.315). Reporting shall be completed in accordance with 
requirements in this Subpart D and the Formula Response Form.
    (b) If a recipient receives an overpayment of funds because it 
failed to report such changes on the Formula Response Form in a timely 
manner, the recipient shall be required to repay the funds within 5 
fiscal years. HUD shall subsequently distribute the funds to all Indian 
tribes in accordance with the next IHBG Formula allocation.
    (c) A recipient will not be provided back funding for any units that 
the recipient failed to report on the Formula Response Form in a timely 
manner.
    (d) HUD shall have 3 years from the date a Formula Response Form is 
sent out to take action against any recipient that fails to correct or 
make appropriate changes on that Formula Response Form. Review of FCAS 
will be accomplished by HUD as a component of A-133 audits, routine 
monitoring, FCAS target monitoring, or other reviews.

[72 FR 20025, Apr. 20, 2007]



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

[[Page 716]]

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 tribe's formula area overlaps 
with the formula area of a Federally recognized Indian tribe, the 
Federally recognized Indian tribe receives the allocation for the 
formula area up to its population cap, and the State recognized tribe 
receives the balance of the overlapping area (if any) up to its 
population cap.
    (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 include tribal enrollment 
lists, the U.S. Census, Indian Health Service User Data, and Bureau of 
Indian Affairs data.
    (c) Upon receiving a request for expansion or redefinition of a 
tribe's formula area, if approving the request would create an overlap, 
HUD shall follow the notice and comment procedures set forth in 
paragraph (2)(ii) of the definition of ``Formula area'' in Sec.  
1000.302.
    (d) 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.

[63 FR 12349, Mar. 12, 1998, as amended at 72 FR 20025, Apr. 20, 2007; 
81 FR 83681, Nov. 22, 2016]



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 that an Indian tribe may 
receive under the need component of the formula?

    (a) Subject to the eligibility criteria described in paragraph (b) 
of this section, the minimum allocation in any fiscal year to an Indian 
tribe under the need component of the IHBG Formula shall equal 0.007826 
percent of the available appropriations for that fiscal year after set 
asides.
    (b) To be eligible for the minimum allocation described in paragraph 
(a) of this section, an Indian tribe must:
    (1) Receive less than $200,000 under the FCAS component of the IHBG 
Formula for the fiscal year; and

[[Page 717]]

    (2) Certify in its Indian Housing Plan the presence of any 
households at or below 80 percent of median income.

[72 FR 20025, Apr. 20, 2007, as amended at 77 FR 71527, Dec. 3, 2012]



Sec.  1000.329  What is the minimum total grant allocated to a tribe
if there is carryover funds available?

    (a) If in any given year there are carryover funds, then HUD will 
hold the lesser amount of $3 million or available carryover funds for 
additional allocations to tribes with grant allocations of less than 
0.011547 percent of that year's appropriations. All tribes eligible 
under this section shall receive a grant allocation equal to 0.011547 
percent of that year's appropriations.
    (b)(1) If the set-aside carryover funds are insufficient to fund all 
eligible tribes at 0.011547 percent of that year's appropriations, the 
minimum total grant shall be reduced to an amount which can be fully 
funded with the available set-aside carryover funds.
    (2) If less than $3 million is necessary to fully fund tribes under 
paragraph (a) of this section, any remaining carryover amounts of the 
set aside shall be carried forward to the next year's formula.
    (c) To be eligible, an Indian tribe must certify in its Indian 
Housing Plan the presence of any households at or below 80 percent of 
median income.
    (d) For purposes of this section, carryover funds means grant funds 
voluntarily returned to the formula or not accepted by tribes in a 
fiscal year.

[81 FR 83681, Nov. 22, 2016]



Sec.  1000.330  What are the data sources for the need variables?

    (a) The sources of data for the need variables shall be data that 
are available and collected in a uniform manner that can be confirmed 
and verified for all AIAN households and persons living in an identified 
area. Until fiscal year 2018, the data used are 2000 U.S. Decennial 
Census data and any HUD-accepted Census challenges. The 2000 U.S. 
Decennial Census data shall be adjusted annually using IHS projections 
based upon birth and death rate data provided by the National Center for 
Health Statistics.
    (b)(1) Beginning fiscal year 2018, the data source used to determine 
the AIAN persons variable described in Sec.  1000.324(g) shall be the 
most recent U.S. Decennial Census data adjusted for any statistically 
significant undercount for AIAN population confirmed by the U.S. Census 
Bureau and updated annually using the U.S. Census Bureau county level 
Population Estimates for Native Americans. For Remote Alaska as 
designated by the U.S. Census Bureau, Alaska Formula Areas in Remote 
Alaska shall be treated as Reservation and Trust Lands, unless the U.S. 
Census Bureau includes Remote Alaska in their Census Coverage 
Measurement or comparable study. The data under this paragraph (b) shall 
be updated annually using the U.S. Census Bureau county level Population 
Estimates for Native Americans.
    (2) Beginning fiscal year 2018, the data source used to determine 
the variables described in paragraphs (a) through (f) of Sec.  1000.324 
shall initially be the American Community Survey (ACS) 5-year Estimates.
    (c) Indian tribes may challenge the data described in this section 
pursuant to Sec.  1000.336.

[81 FR 83681, Nov. 22, 2016]



Sec.  1000.331  How will the impacts from adoption of a new data
source be minimized as the new data source is implemented?

    (a) To minimize the impact of funding changes based on the 
introduction of a new data source under Sec.  1000.330, in fiscal year 
2018 and each year thereafter, if, solely as a direct result of the 
introduction of a new data source, an Indian tribe's allocation under 
the need component of the formula is less than 90 percent of the amount 
it received under the need component in the immediate previous fiscal 
year, the Indian tribe's need allocation shall be adjusted up to an 
amount equal to 90 percent of the previous year's need allocation.
    (b) Nothing in this section shall impact other adjustments under 
this part, including minimum funding, census challenges, formula area 
changes, or an increase in the total amount of funds available under the 
need component.

[[Page 718]]

    (c) In the event of a decrease in the total amount of funds 
available under the need component, an Indian tribe's adjusted 
allocation under paragraph (a) of this section shall be reduced by an 
amount proportionate to the reduced amount available for distribution 
under the need component of the formula.
    (d) Adjustments under paragraph (b) or (c) of this section shall be 
made to a tribe's need allocation after adjusting that allocation under 
paragraph (a) of this section.

[81 FR 83681, Nov. 22, 2016]



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 the Indian tribe or TDHE notice of the data 
to be used for the formula and projected allocation amount by June 1.

[77 FR 71528, Dec. 3, 2012]



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 or appeal HUD formula determinations?

    (a) An Indian tribe, TDHE, or HUD may challenge data used in the 
IHBG Formula and HUD formula determinations regarding:
    (1) U.S. Census data;
    (2) Tribal enrollment;
    (3) Formula area;
    (4) Formula Current Assisted Stock (FCAS);
    (5) Total Development Cost (TDC);
    (6) Fair Market Rents (FMRs);
    (7) Indian Health Service projections based upon birth and death 
rate data provided by the National Center for Health Statistics; and
    (8) The undisbursed funds factor.
    (b) An Indian tribe or TDHE may not challenge data or HUD formula 
determinations regarding Allowable Expense Level (AEL) and the inflation 
factor.
    (c) The challenge and the collection of data and the appeal of HUD 
formula determinations is an allowable cost for IHBG funds.
    (d) An Indian tribe or TDHE that seeks to appeal data or a HUD 
formula determination, and has data in its possession that are 
acceptable to HUD, shall submit the challenge or appeal in writing with 
data and proper documentation to HUD. An Indian tribe or TDHE may appeal 
the undisbursed funds factor no later than 30 days after the receipt of 
the formula determination. Data used to challenge data contained in the 
U.S. Census must meet the requirements described in Sec.  1000.330(a). 
Further, in order for a census challenge to be considered for the 
upcoming fiscal year allocation, documentation must be submitted by 
March 30th.
    (e) HUD shall respond to all challenges or appeals no later than 45 
days after receipt and either approve or deny the appeal in writing, 
setting forth the reasons for its decision.
    (1) If HUD challenges the validity of the submitted data HUD and the 
Indian tribe or TDHE shall attempt in good faith to resolve any 
discrepancies so that such data may be included in the formula 
allocation.
    (2) If HUD denies a challenge or appeal, the Indian tribe or TDHE 
may request reconsideration of HUD's denial within 30 calendar days of 
receipt of HUD's denial. The request shall be in writing and set forth 
justification for reconsideration.
    (3) HUD shall in writing affirm or deny the Indian tribe's or TDHE's 
request for reconsideration, setting forth HUD's reasons for the 
decision, within 20 calendar days of receiving the request. HUD's denial 
of a request for reconsideration shall constitute final agency action.
    (4) If HUD approves the Indian tribe or TDHE's appeal, HUD will 
adjust to the Indian tribe's or TDHE's subsequent fiscal year allocation 
to include only the disputed fiscal year(s).

[[Page 719]]

    (f) In the event HUD questions whether the data contained in the 
formula accurately represents the Indian tribe's need, HUD shall request 
the Indian tribe to submit supporting documentation to justify the data 
and, if applicable, to provide a commitment to serve the population 
indicated in the geographic area.

[72 FR 20025, Apr. 20, 2007, as amended at 81 FR 83681, Nov. 22, 2016]



Sec.  1000.340  What if an Indian tribe is allocated less funding 
under the IHBG Formula than it received in Fiscal Year (FY) 1996 for 
operating subsidy and 
          modernization?

    (a) If an Indian tribe is allocated less funding under the 
modernization allocation of the formula pursuant to Sec.  1000.316(b)(2) 
than the calculation 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, the Indian tribe's modernization allocation is calculated 
under Sec.  1000.316(b)(1). The remaining grants are adjusted to keep 
the allocation within available appropriations.
    (b) If an Indian tribe is allocated less funding under the formula 
than an IHA received on its behalf in FY 1996 for operating subsidy and 
modernization, its grant is increased to the amount received in FY 1996 
for operating subsidy and modernization. The remaining grants are 
adjusted to keep the allocation within available appropriations.

[72 FR 20026, Apr. 20, 2007]



Sec.  1000.342  Are undisbursed IHBG funds a factor in the grant formula?

    Yes, beginning fiscal year 2018. After calculating the initial 
allocation calculation for the current fiscal year by calculating FCAS, 
need, the 1996 Minimum, and repayments or additions for past over- or 
under-funding for each Indian tribe, the undisbursed funds factor shall 
be applied as follows:
    (a) The undisbursed funds factor applies if an Indian tribe's 
initial allocation calculation is $5 million or more and the Indian 
tribe has undisbursed IHBG funds in an amount that is greater than the 
sum of the prior 3 years' initial allocation calculations.
    (b) If subject to paragraph (a) of this section, the Indian tribe's 
grant allocation shall be the greater of the initial allocation 
calculation minus the amount of undisbursed IHBG funds that exceed the 
sum of the prior 3 years' initial allocation calculations, or its 1996 
Minimum.
    (c) For purposes of this section, ``undisbursed IHBG funds'' means 
the amount of IHBG funds allocated to an Indian tribe in HUD's line of 
credit control system on October 1 of the fiscal year for which the 
allocation is made. For Indian tribes under an umbrella TDHE (a 
recipient that has been designated to receive grant amounts by more than 
one Indian tribe), if the Indian tribe's initial allocation calculation 
is $5 million or more, its undisbursed IHBG funds is the amount 
calculated by multiplying the umbrella TDHE's total balance in HUD's 
line of credit control system on October 1 of the fiscal year for which 
the allocation is made by a percentage based on the Indian tribe's 
proportional share of the initial allocation calculation of all tribes 
under the umbrella.
    (d) Amounts subtracted from an initial allocation calculation under 
this section shall be redistributed under the need component among all 
Indian tribes not subject to paragraph (a) of this section (while also 
retaining the 1996 Minimum).

[81 FR 83682, Nov. 22, 2016]



 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

[[Page 720]]

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;
    (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.  1000.410  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 20 years, and the length of the 
repayment period cannot be the sole basis for HUD disapproval;
    (d) Lender and issuer/borrower must certify that they acknowledge 
and agree to comply with all applicable tribal laws; and
    (e) A guarantee made under Title VI of NAHASDA shall guarantee 
repayment of 95 percent of the unpaid principal and interest due on the 
notes or other obligations guaranteed.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012]



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

[[Page 721]]

    (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 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:
    (1) As an affordable housing activity as defined in section 202 of 
NAHASDA; or
    (2) As a housing related community development activity under 
section 601(a) 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) It possesses the legal authority to borrow or issue obligations 
and to use the guaranteed funds in accordance with the requirements of 
this subpart.
    (3) 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.

[[Page 722]]

    (4) The borrower has complied with section 602(a) of NAHASDA.
    (5) The borrower will comply with the requirements described in 
subpart A of this part and other applicable laws.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012]



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 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(c) 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 either:
    (1) Section 202 of NAHASDA; or
    (2) Section 601(a) of NAHASDA.
    (f) The loan or other obligation documents for which a guarantee is 
requested do not meet the requirements of this subpart.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012]



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

[[Page 723]]

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 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.

[[Page 724]]



Sec.  1000.503  What is an appropriate extent of HUD monitoring?

    (a) Subject to any conflicting or supplementary requirement of 
specific legislation, and upon the effective date of this regulation, 
the frequency of HUD monitoring of a particular recipient will be 
determined by application of the HUD standard risk assessment factors, 
provided that when a recipient requests to be monitored, HUD shall 
conduct such monitoring as soon as practicable. The HUD standard risk 
assessment factors may be but are not limited to the following:
    (1) Annual grant amount;
    (2) Disbursed amounts--all open grants;
    (3) Months since last on-site monitoring;
    (4) Delinquent audits under 2 CFR part 200, subpart F;
    (5) Open 2 CFR part 200, subpart F, or Inspector General audit 
findings;
    (6) Conclusions of 2 CFR part 200, subpart F, auditor;
    (7) Open monitoring findings;
    (8) Delinquent Annual Performance Reports or Annual Status and 
Evaluation Reports;
    (9) Status of Corrective Action Plan (CAP) or Performance Agreement 
(PA);
    (10) Recipient Self-Monitoring;
    (11) Inspection of 1937 Act units;
    (12) Preservation of 1937 Act units; and
    (13) Any other additional factors that may be determined by HUD, 
consistent with HUD's Tribal Consultation Policy, by which HUD will send 
written notification and provide a comment period. Such additional 
factors shall be provided by program guidance.
    (b) If monitoring indicates noncompliance, HUD may undertake 
additional sampling and review to determine the extent of such 
noncompliance. The level of HUD monitoring of a recipient once that 
recipient has been selected for HUD monitoring is as follows:
    (1) Review recipient program compliance for the current program year 
and the 2 prior program years;
    (2) On-site inspection of no more than 10 dwelling units or no more 
than 10 percent of total dwelling units, whichever is greater;
    (3) Review of no more than 10 client files or no more than 10 
percent of client files, whichever is greater.
    (c) Notwithstanding paragraph (b) of this section, HUD may at any 
time undertake additional sampling and review of prior program years, 
subject to the records retention limitations of Sec.  1000.552, if HUD 
has credible information suggesting noncompliance. HUD will share this 
information with the recipient as appropriate.
    (d) A recipient may request ONAP to enter into Self-Monitoring 
Mutual Agreements or other self-monitoring arrangements with recipients. 
ONAP will monitor the recipient only in accordance with such agreement 
or arrangement, unless ONAP finds reasonable evidence of fraud, a 
pattern of noncompliance, or the significant unlawful expenditure of 
IHBG funds.

[77 FR 71528, Dec. 3, 2012, as amended at 80 FR 75944, Dec. 7, 2015]



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:
    (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.

[[Page 725]]



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 planned activities 
established for the period;
    (2) The reasons for slippage if established planned activities were 
not met; and
    (3) Analysis and explanation of cost overruns or high unit costs;
    (c) Any information regarding the recipient's performance in 
accordance with HUD's performance measures, as set forth in section 
Sec.  1000.524; and
    (d) Annual performance data to reflect the accomplishments of the 
recipient to include, as specified in the IHP:
    (1) Permanent and temporary jobs supported with IHBG funds;
    (2) Outputs by eligible activity, including:
    (i) Units completed or assisted, and
    (ii) Families assisted; and
    (3) Outcomes by eligible activity.
    (e) As applicable, items required under Sec. Sec.  1000.302 and 
1000.544.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012]



Sec.  1000.514  When must the annual performance report be submitted?

    The annual performance report must be submitted within 90 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 annual performance report.

[72 FR 41213, July 26, 2007]



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's review of the Annual
Performance Report?

    HUD will review each recipient's Annual Performance Report when 
submitted 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 Annual Performance Report of the recipient is 
accurate.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71528, Dec. 3, 2012]

[[Page 726]]



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. 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) The recipient has complied with the required certifications in 
its IHP and all policies and the IHP have been made available to the 
public.
    (b) 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.
    (c) Accurate annual performance reports were submitted to HUD in 
accordance with Sec.  1000.514.
    (d) The recipient has met the IHP-planned activities in the one-year 
plan.
    (e) The recipient has substantially complied with the requirements 
of 24 CFR part 1000 and all other applicable Federal statutes and 
regulations.

[63 FR 12349, Mar. 12, 1998, as amended at 72 FR 41213, July 26, 2007; 
77 FR 71529, Dec. 3, 2012]



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 60 days of the completion of HUD's review. The recipient will 
have at least 60 days to review and comment on the draft report, as well 
as provide any additional information relating to the draft report. Upon 
written notification to HUD, the recipient may exercise the right to 
take an additional 30 days to complete its review and comment to the 
draft report. Additional extensions of time for the recipient to 
complete review and comment may be mutually agreed upon in writing by 
HUD and the recipient. 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 30 days after receipt of the recipient's 
comments and additional information.

[77 FR 71529, Dec. 3, 2012]



Sec.  1000.530  What corrective and remedial actions will HUD request
or recommend to address performance problems prior to taking action under Sec.  1000.532?

    (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

[[Page 727]]

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;
    (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) of this section may result in the imposition of 
sanctions as prescribed in Sec.  1000.532.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71529, Dec. 3, 2012]



Sec.  1000.532  What are the remedial actions that HUD may take in 
the event of recipient's substantial noncompliance?

    (a) If HUD finds after reasonable notice and opportunity for hearing 
that a recipient has failed to comply substantially with any provision 
of NAHASDA or the regulations in this part, HUD shall carry out any of 
the following actions with respect to the recipient's current or future 
grants, as appropriate:
    (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 or these regulations;
    (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) Before undertaking any action in accordance with paragraph (a) 
of this section, HUD will notify the recipient in writing of the action 
it intends to take and provide the recipient an opportunity for an 
informal meeting to resolve the deficiency. Before taking any action 
under paragraph (a) of this section, HUD shall provide the recipient 
with the opportunity for a hearing no less than 30 days prior to taking 
the proposed action. The hearing shall be held 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 
conducted and HUD has rendered a final decision.
    (c) Notwithstanding paragraphs (a) and (b) of this section, if HUD 
makes a determination that the failure of a recipient to comply 
substantially with any material provision of NAHASDA or these 
regulations is resulting, and would continue to result, in a continuing 
expenditure of funds provided under NAHASDA in a manner that is not 
authorized by law, HUD may, in accordance with section 401(a)(4) of 
NAHASDA, take action under paragraph (a)(3) of this section prior to 
conducting a hearing under paragraph (b) of this section. HUD shall 
provide notice to the recipient at the time that HUD takes that action 
and conducts a hearing, in accordance with section 401(a)(4)(B) of 
NAHASDA, within 60 days of such notice.
    (d) Notwithstanding paragraph (a) of this section, if HUD determines 
that the failure to comply substantially with the provisions of NAHASDA 
or these regulations is not a pattern or practice of activities 
constituting willful noncompliance, and is a result of the limited 
capability or capacity of

[[Page 728]]

the recipient, if the recipient requests, HUD shall 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. A recipient's eligibility for technical assistance under this 
subsection is contingent on the recipient's execution of, and compliance 
with, a performance agreement pursuant to Section 401(b) of NAHASDA.
    (e) In lieu of, or in addition to, any action described in this 
section, if the Secretary has reason to believe that the recipient has 
failed to comply substantially with any provisions of NAHASDA or these 
regulations, HUD may refer the matter to the Attorney General of the 
United States, with a recommendation that appropriate civil action be 
instituted.

[77 FR 71529, Dec. 3, 2012]



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 planned activities 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.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71529, Dec. 3, 2012]



Sec.  1000.536  What happens to NAHASDA grant funds adjusted, reduced,
withdrawn, or terminated under Sec.  1000.532?

    Such NAHASDA grant funds shall be distributed by HUD in accordance 
with the next NAHASDA formula allocation.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71529, Dec. 3, 2012]



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?

    Pursuant to NAHASDA section 405(a), the recipient must comply with 
the requirements of the Single Audit Act (chapter 75 of title 31, United 
States Code), implemented by 2 CFR part 200, subpart F, which require 
annual audits of recipients that expend federal funds equal to or in 
excess of an amount specified by the Office of Management and Budget 
(OMB), as set out in 2 CFR 200.501. If applicable, a certification that 
the recipient has not expended federal funds in excess of the audit 
threshold that is set by OMB

[[Page 729]]

shall be included in the recipient's Annual Performance Report.

[77 FR 71529, Dec. 3, 2012, as amended at 80 FR 75944, Dec. 7, 2015]



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?

    No. A copy of the recipient audit under the Single Audit Act 
relating to NAHASDA activities is only required to be submitted to the 
Federal Audit Clearinghouse pursuant to 2 CFR part 200, subpart F.

[80 FR 75944, Dec. 7, 2015]



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 3 years from the end of the tribal program year during which the 
funds were expended.
    (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.

[63 FR 12349, Mar. 12, 1998, as amended at 77 FR 71530, Dec. 3, 2012]



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.





    Sec. Appendix A to Part 1000--Indian Housing Block Grant Formula 
                                Mechanics

    This appendix shows the different components of the Indian Housing 
Block Grant (IHBG) formula. The following text explains how each 
component of the IHBG formula is calculated.
    1. The first step in running the IHBG formula is to determine the 
amount available for allocation in the Fiscal Year (FY). It is the sum 
of:
    (a) The FY appropriation for the IHBG program less amounts in the 
Appropriations Act mandated for purposes other than the formula 
allocation.

[[Page 730]]

    (b) The net amount, if any, made available as a result of 
corrections for over- or under-allocations in prior FYs.
    (c) The amount, if any, made available pursuant to Sec.  1000.536.
    (d) The amounts, if any, made available because tribes voluntarily 
returned, or did not accept, the amounts allocated to them in prior FYs, 
defined as ``carryover'' (see Sec.  1000.329).
    2. If there is carryover as defined in Sec.  1000.329, the amount of 
carryover up to $3 million, is then held aside for allocation under the 
minimum total grant provisions of the formula (see 11 below).
    3. The IHBG formula first calculates the amount each tribe is 
allocated under the Formula Current Assisted Stock (FCAS) component (See 
Sec. Sec.  1000.310 through 1000.322). The FCAS component is comprised 
of two parts, Operating Subsidy (Sec.  1000.316(a)) and Modernization 
(Sec.  1000.316(b)).
    (a) The Operating Subsidy component is calculated in two steps, as 
follows:
    (i) Each tribe's counts of Low Rent, Homeownership (Mutual Help and 
Turnkey III), and Section 8 units are multiplied by the National Per 
Unit Subsidy for operations for that category of unit, which is a 1996 
index for the type of unit that is adjusted for inflation (see Sec.  
1000.302 defining National Per Unit Subsidy). The amounts are summed to 
create an initial calculation of the operating subsidy component.
    (ii) The initial operating subsidy component amount is then adjusted 
for local area costs, using an adjustment factor called the AELFMR. The 
AELFMR factor is calculated for each tribe in three steps. First, an 
Allowable Expense Level (AEL) factor is calculated by dividing the 
tribe's AEL, a historic per-unit measure of operating cost, by the 
national weighted average AEL (see Sec.  1000.302 defining Allowable 
Expense Level). Second, a Fair Market Rent (FMR) factor is calculated by 
dividing the tribe's FMR amount, an area-specific index published 
annually by HUD (see Sec.  1000.302 Fair Market Rent factor), by the 
national weighted average FMR. Third, an AELFMR factor is created by 
assigning each tribe the greater of its AEL or FMR factor, and dividing 
that figure by the national weighted average AELFMR. In all cases, when 
the national average figure is calculated, tribes are weighted by the 
amount of their initial operating subsidy as calculated in 3(a)(i).
    (See Sec.  1000.320).
    (b) The Modernization component is determined using two methods 
depending on the number of public housing units that a tribe's housing 
authority operated prior to the Native American Housing and Self-
Determination Act.
    (i) For all tribes, the number of Low Rent, Mutual Help, and Turnkey 
III units are multiplied by the National Per Unit Subsidy for 
modernization from 1996 adjusted for inflation (see Sec.  1000.302 
defining National Per Unit Subsidy).
    (ii) For Indian tribes with an Indian Housing Authority (IHA) that 
owned or operated fewer than 250 units on October 1, 1997, an 
alternative modernization component is calculated from the amount of 
funds the IHA received under the assistance program authorized by 
Section 14 of the 1937 Act (not including funds provided as emergency 
assistance) for FYs 1992 through 1997 (see Sec.  1000.316(b)(2)). If 
this alternative calculation is greater than the amount calculated in 
paragraph (a) above, it is used to calculate the tribe's modernization 
component.
    (iii) The Modernization component is then multiplied by a local area 
cost adjustment factor based on the Total Development Cost (TDC) for the 
tribe (see Sec.  1000.302) divided by the national weighted average of 
all TDCs weighted by each tribe's pre-adjustment Modernization 
calculation in paragraph (b)(i) or (ii) above as applicable.
    4. The total amounts calculated under the FCAS component for each 
tribe are then added together to determine the national total amount 
allocated under the FCAS component. That total is subtracted from the 
funds available for allocation less the carryover amount held aside for 
allocation under the minimum total grant provision in Sec.  1000.329. 
The remainder is the total amount available for allocation under the 
need component of the IHBG formula.
    5. The first step in calculating need component is identifying 
weighted needs variables and adjusting for local area cost differences.
    (a) Need is first calculated using seven factors, where each factor 
is a tribe's share of the national totals for each of seven variables. 
The data used for the seven variables is described in Sec.  1000.330. 
The person count variable is adjusted for statistically significant 
undercounts for reservations, trust lands and remote Alaska and for 
growth in population since the latest Decennial Census. The Population 
Cap provision in Sec.  1000.302 Formula Area (5) is then applied. Needs 
data are capped if the American Indian and Alaska Native (AIAN) 
population counts exceed twice tribal enrollment unless a tribe can 
demonstrate that it serves more than twice as many non-tribal members as 
tribal members, in which case the cap is adjusted upward.
    The factors are weighted as set forth in Sec.  1000.324, as follows:
    (i) 22 percent of the amount available for allocation under the 
needs component are allocated by the share of the total AIAN households 
paying more than 50 percent of their income for housing and living in 
each tribe's Formula Area (see Sec.  1000.302);

[[Page 731]]

    (ii) 25 percent are allocated by the share of the total AIAN 
households living in overcrowded housing and/or without kitchen or 
plumbing in each tribe's Formula Area;
    (iii) 15 percent are allocated by the share of the total AIAN 
households with an annual income less than or equal to 80 percent of 
Formula Median Income (see Sec.  1000.302) living in each tribe's 
Formula Area less the tribe's number of FCAS.
    (iv) 13 percent are allocated by the share of AIAN households with 
annual income less than or equal to 30 percent of Formula Median Income 
living in each tribe's Formula Area;
    (v) 7 percent are allocated by the share of AIAN households with 
annual income between 30 percent and 50 percent of Formula Median Income 
living in each tribe's Formula Area;
    (vi) 7 percent are allocated by the share of AIAN households with 
annual income between 50 percent and 80 percent of Formula Median Income 
living in each tribe's Formula Area;
    (vii) 11 percent are allocated by the share of AIAN persons living 
in each tribe's Formula Area.
    (b) The result of these calculations for each tribe is then 
multiplied by a local area cost adjustment based on the Total 
Development Cost for the tribe (see Sec.  1000.302) divided by the 
national weighted average of TDCs weighted by each tribe's pre-
adjustment need calculation. (See Sec.  1000.325).
    6. Each tribe's initial need allocation amount is then adjusted 
under the minimum need allocation provision of Sec.  1000.328. Tribes 
that are allocated less than $200,000 under the FCAS component of the 
IHBG formula and that certify the presence of any households at or below 
80 percent of median income in their Indian Housing Plans will be 
allocated no less than a specified minimum under the needs component of 
the formula. The specified minimum amount shall equal 0.007826 percent 
of the appropriation for that FY after set-asides. The increase in 
funding for the tribes allocated the minimum need amount is funded by a 
reallocation from other tribes whose needs allocation exceeds the 
minimum need amount. This is necessary in order to keep the total 
allocation within the appropriation level (See Sec.  1000.328).
    7. Whenever a new Data Source is first introduced, provision is made 
to moderate extreme impacts through phase down adjustments. For purposes 
of these adjustments, new data sources (see Sec.  1000.331) include the 
initial introduction of the American Community Survey and 2010 Decennial 
Census in 2018, and the initial introduction of the 2020 Decennial 
Census when it becomes available. Tribes whose allocation under the need 
component decrease by more than ten percent in the first year of 
introduction will have that decrease moderated by subsequent 
adjustments, as required to prevent a drop of more than ten percent per 
year in the tribes' needs allocation attributable solely to the 
introduction of the New Data Source. After allocation adjustments are 
made under Sec.  1000.331 for a FY, the needs allocation of an Indian 
tribe whose needs allocation increased as a result of the introduction 
of a New Data Source under Sec.  1000.331 shall be adjusted downward 
proportionate to its share of the total increase in funding resulting 
from the introduction of a New Data Source to keep the overall needs 
allocation within available appropriations.
    8. A tribe's preliminary total allocation for a grant is calculated 
by summing the amounts calculated under the FCAS and need components. 
This amount is compared to how much a tribe received in FY 1996 for 
operating subsidy and modernization under the 1937 Housing Act. If a 
tribe received more in FY 1996 for operating subsidy and modernization 
than it does under the IHBG formula allocation, its preliminary total 
allocation is adjusted up to the FY 1996 amount (See Sec.  1000.340(b)). 
Indian tribes receiving more under the IHBG formula than in FY 1996 have 
their grant allocations adjusted downward to offset the upward 
adjustments for the other tribes.
    9. The initial allocation amount for the current FY is calculated by 
adding any adjustments for over- or under-funding occurring in prior FYs 
to the allocation calculated in the previous step. These adjustments 
typically result from late reporting of FCAS changes, or conveyances 
which occur in a timely manner following the removal of units from 
eligibility due to conveyance eligibility.
    10. The Undisbursed Funds Factor component is calculated based on 
the initial allocation amounts calculated above. Tribes with an initial 
allocation of $5 million or more and undisbursed IHBG grant amounts (the 
amount available to the tribe in HUD's line of credit control on October 
1 of the FY for which the allocation is being made) in an amount greater 
than the sum of the prior 3 years' initial allocation calculations will 
have their initial allocation amount adjusted down by the difference 
between the tribe's undisbursed grant amounts and the sum of its prior 3 
years' initial allocation calculations. If this adjustment would bring 
the tribe below its FY 1996 minimum (see Sec.  1000.340(b)), then the 
tribe will be allocated its FY 1996 minimum. The sum of the adjustments 
will be reallocated among the other tribes proportionally under the need 
component.
    11. A final adjustment is made under Sec.  1000.329 which allocates 
available carryover amounts up to $3 million to achieve minimum total 
allocations. Tribes that certify in their Indian Housing Plans the 
presence of

[[Page 732]]

any eligible households at or below 80 percent of median income and 
whose current FY formula allocation after the Undisbursed Funds Factor 
adjustment determined in the preceding step is less than 0.011547 
percent of the FY appropriation after set-asides, will have their 
allocation adjusted upwards to 0.011547 percent of the FY appropriation 
after set-asides, or to a lesser percentage which can be achieved for 
all eligible tribes with available carryover held for this adjustment 
(see 2 above).

[81 FR 83682, Nov. 22, 2016]



    Sec. Appendix B to Part 1000--IHBG Block Grant Formula Mechanisms

    1. The first step in running the Indian Housing Block Grant (IHBG) 
formula is to determine the total amount available for allocation in the 
current Fiscal Year (FY).

ALLOCAMT = APPROP + ADJ1 + ADJ2 + CARRYOVER.

Where:

ALLOCAMT = amount available for allocation under the formula.
APPROP = current FY appropriation for the IHBG program less amounts in 
          the Appropriations Act mandated for purposes other than the 
          formula allocation.
ADJ1= net amount, if any, made available as a result of corrections for 
          over-or under allocations in prior FYs.
ADJ2 = amount, if any, made available under Sec.  1000.536.
CARRYOVER = amounts, if any, made available because tribes voluntarily 
          returned, or did not accept, the amounts allocated to them in 
          prior FYs.

    2. If there is carryover as defined in Sec.  1000.329, the amount of 
carryover up to $3 million, is then held aside for allocation under the 
minimum total grant provisions of the formula (see Step 10), then:

MGHOLD = amount set-aside for allocation under minimum total grant 
          provision.

If CARRYOVER = 0, MGHOLD = 0.
If CARRYOVER  0 and CARRYOVER < = $3 million, MGHOLD = 
          CARRYOVER.
If CARRYOVER  $3 million, MGHOLD = $3 million.

    3. The FCAS component is calculated first. FCAS consists of two 
parts, Operating Subsidy (OPSUB) and Modernization (MOD), such that:

FCAS = OPSUB + MOD.

    a. OPSUB is calculated in two steps, as follows:
    (i) First, the number of Low-Rent, Section 8 and homeownership units 
are multiplied by the applicable national per unit subsidy (Sec.  
1000.302 National Per Unit Subsidy). The amounts are summed to create an 
initial calculation of the Operating Subsidy component.

OPSUB1 = [LR * LRSUB] + [(MH + TK) * HOSUB] + [S8 * S8SUB].

Where:

OPSUB1 = initial calculation of Operating Subsidy component.
LR = number of Low-Rent units.
LRSUB = national per unit subsidy for Low-Rent units ($2,440 * INF).
INF = adjustment for inflation since 1995, as determined by the Consumer 
          Price Index for housing.
MH + TK = number of Mutual Help and Turnkey III units.
HOSUB = national per unit subsidy for Homeownership units ($528 * INF).
S8 = number of Section 8 units.
S8SUB = national per unit subsidy for Section 8 units = ($3,625 * INF).

    (ii) The initial Operating Subsidy component amount is then adjusted 
for local area costs, using an adjustment factor called the AELFMR. The 
AELFMR factor is calculated for each tribe in three steps. First, an AEL 
factor is calculated by dividing the tribe's Allowable Expense Level 
(AEL), a historic per-unit measure of operating cost, by the national 
weighted average AEL (see Sec.  1000.302 defining Allowable Expense 
Level)

AEL FACTOR = AEL/NAEL.

Where:

AEL = local Allowable Expense Level.
NAEL = national weighted average for AEL, where the weight is a tribe's 
          initial calculation of operating subsidy.

    Second, an FMR factor is calculated by dividing the tribe's Fair 
Market Rent amount (FMR), an area-specific index published annually by 
HUD (see Sec.  1000.302 Fair Market Rent factor), by the national 
weighted average FMR.

FMR FACTOR = FMR/NFMR.

Where:

FMR= local Fair Market Rent.
NFMR = national weighted average for FMR, where the weight is a tribe's 
          initial calculation of operating subsidy.

    Third, an AELFMR factor is created by assigning each tribe the 
greater of its AEL or FMR factor, and dividing that figure by the 
national weighted average AELFMR. In all cases, when the national 
average figure is calculated, tribes are weighted by the amount of their 
initial operating subsidy as calculated in 3(a)(i) above. (See Sec.  
1000.320).

AELFMRFACTOR = final local area cost adjustment factor (AELFACTOR or 
          FMRFACTOR)/NAELFMR.

Where:

NAELFMR = national weighted average for greater of AEL Factor or FMR 
          factor,

[[Page 733]]

          where weight is a tribe's initial calculation of operating 
          subsidy

    Finally, the AELFMR factor is used to adjust the initial operating 
subsidy calculation for differences in local area costs.

OPSUB = OPSUB1 * AELFMRFACTOR.

Where:

OPSUB = Operating Subsidy component after adjustment for local cost 
          differences.

    b. The modernization component, MOD, is calculated by two different 
methods, depending on whether the tribe had an Indian housing authority 
(IHA) that owned or operated more than 250 public housing units on 
October 1, 1997.
    (i) MOD1 is calculated for all tribes and considers the number of 
Low-Rent, and Mutual Help and Turnkey III FCAS units. Each of these is 
adjusted by the national per-unit modernization subsidy

MOD1 = [LR + MH + TK] * MODPU.

Where:

LR = number of Low-Rent units.
MH = number of Mutual Help units.
TK = number of Turnkey III units.
MODPU = national per-unit amount for modernization in 1996 adjusted for 
          inflation ($1,974 * INF).
INF = adjustment for inflation since 1995, as determined by the Consumer 
          Price Index for housing.

    (ii) MODAVG is calculated only for tribes that had an IHA that owned 
or operated fewer than 250 public housing units on October 1, 1997, as 
the annual average amount they received for FYs 1992 through 1997 under 
the assistance program authorized by section 14 of the 1937 Act (not 
including emergency assistance). If this alternative calculation is 
greater than the amount calculated in (i), it is used to calculate the 
tribe's modernization component.

MODAVG = Average (FY 1992 to FY 1997) amount received by Section 14 of 
          the 1937 Act.

If MODAVG  MOD1, MOD1 = MODAVG.

    c. The modernization calculation is adjusted for local area costs:

MOD = MOD1 * (TDC/NTDC).

Where:

TDC = Local Total Development Costs defined in Sec.  1000.302.
NTDC = weighted national average for TDC, where the weight is the 
          initial calculation of modernization amount of tribe with CAS.

    4. Now that calculation for FCAS is complete, the amount allocated 
using the need component of the formula can be determined:

NEEDALLOCAMT = ALLOCAMT - MGHOLD - NATCAS.

Where:

NEEDALLOCAMT = amount allocated using the need component of the formula.
ALLOCAMT = amount available for allocation under the formula.
MGHOLD = amount held for allocation under minimum total grant provision.
NATCAS = national summation of FCAS allocation for all tribes.

    5. The first step in calculating needs is identifying weighted needs 
variables and adjusting for local area cost differences.
    a. The basic needs calculation uses seven weighted criteria based on 
population and housing data in a tribe's Formula Area or share of 
Formula Area if Formula Areas overlap (see Sec.  1000.302 Formula Area 
and Sec.  1000.326) to allocate the funds available for the needs 
component. The person count variable is adjusted for statistically 
significant undercounts for reservations, trust lands and remote Alaska 
and for changes in population since the latest Decennial Census.

PERADJ = PER * UCFACTOR * POPCHGFACTOR.

Where:

PER = American Indian and Alaskan Native (AIAN) persons as reported in 
          the most recent Decennial Census.
UCFACTOR= 1+ the percentage undercount identified by the Census by type 
          of land (in 2010 1.0488 for reservation and trust lands only 
          and assumed also to apply to remote Alaska).
POPCHGFACTOR = the ratio of the most recent AIAN Census population 
          estimate for county to the AIAN count for county from the 
          Decennial Census.
    The Population Cap provision in Sec.  1000.302 Formula Area (5) is 
then applied. Needs data are capped if AIAN population counts exceed 
twice tribal enrollment unless a tribe can demonstrate that it serves 
more than twice as many non-tribal members as tribal members, in which 
case the cap is adjusted upward.

POPCAPTEST=1 if PERADJ  TEmultiplier * TE

    If POPCAPTEST=1, (tribes subject to Population Cap) then:

PER = TEmultiplier * TE
POPCAPADJF = PER/PERADJ
    For tribes NOT subject to Population Cap,
PER = PERADJ and POPCAPADJF = 1.

    Where:

POPCAPTEST = an indicator showing whether a tribe's needs data must be 
          adjusted downward because its Formula Area population is 
          disproportionally large relative to tribe's enrollment,
TEmultiplier = 2, or a larger factor if justified by tribe on annual 
          basis.
TE = Tribal enrollment.

[[Page 734]]

POPCAPADJF = factor used to adjust household needs variables.

    An initial calculation of the needs component is then calculated by 
determining each tribe's share of national totals on each variable, and 
applying weights to the variables as specified in regulation.

BASENEED = [(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)] 
          * NEEDALLOCAMT.

Where:

PER = count of AIAN persons after adjustments.
NPER = national total of PER.
HHLE30 = count of AIAN households less than 30% of formula median income 
          multiplied by POPCAPADJF.
NHHLE30 = national total of HHLE30.
HH30T50 = count of AIAN households 30% to 50% of formula median income 
          multiplied by POPCAPADJF.
NHH30T50 = national total of HH30T50.
HH50T80 = count of AIAN households 50% to 80% of formula median income 
          multiplied by POPCAPADJF.
NHH50T80 = national total of HH50T80.
OCRPR = count of AIAN households crowded or without complete kitchen or 
          plumbing multiplied by POPCAPADJF.
NOCRPR = national total of OCRPR.
SCBTOT = count of AIAN households paying more than 50% of their income 
          for housing multiplied by POPCAPADJF.
NSCBTOT = national total SCBTOT.
HOUSHOR = a measure of housing shortage calculated as (HHLE30 + HH30T50 
          + HH50T80)--(LR + MH + TKIII)
NHOUSHOR = national total of HOUSHOR.
NEEDALLOCAMT = amount allocated using the need component of the formula.

    b. The basic needs calculation is adjusted to reflect differences in 
local area costs.

NEED = BASENEED * (TDC/NATDC).

Where:

TDC = Local Total Development Costs defined in Sec.  1000.302.
NATDC = average for TDC for all tribes weighted using BASENEED.

    6. The need allocation computed above is adjusted to take into 
account the minimum needs provision. Tribes allocated less than $200,000 
under the FCAS component of the IHBG formula and that certify the 
presence of any households at or below 80 percent of median income in 
their Indian Housing Plan are allocated an additional amount so their 
needs allocation equals 0.007826 percent of the available appropriations 
for that FY after set-asides.

MINNEED = APPROP * 0.00007826.

Where:

APPROP = current FY appropriation for the IHBG program less amounts in 
          the Appropriations Act mandated for purposes other than the 
          formula allocation.
    If in the first need computation, a qualified tribe is allocated 
less than the minimum needs funding level, its need allocation will go 
up. Other tribes whose needs allocations are greater than the minimum 
needs amount will have their allocations adjusted downward to keep the 
total allocation within available funds:

If NEED < MINNEED and FCAS < $200,000 and income-based need has been 
          identified in a tribe's IHP, then NEED1 = MINNEED.
If NEED  = MINNEED, then NEED1 = NEED1 - {UNDERMIN$ * [(NEED1 
          - MINNEED)/OVERMIN$]{time} .

Where:

MINNEED = minimum needs amount.
UNDERMIN$ = for all tribes qualifying for an increase under the minimum 
          needs provision, sum of the differences between MINNEED and 
          NEED1.
OVERMIN$ = for all tribes with needs allocations larger than the minimum 
          needs amount, the sum of the difference between NEED1 and 
          MINNEED.
7. Whenever a new data source (see Sec.  1000.331) is first introduced, 
          provision is made to moderate extreme impacts through phase 
          down adjustments. Tribes whose allocation under the need 
          component decrease by more than ten percent in the first year 
          of introduction will have that decrease moderated by 
          subsequent adjustments, as required to prevent a drop of more 
          than ten percent per year in the tribes' needs allocation 
          attributable solely to the introduction of the new data 
          source. A phase down adjustment schedule is calculated, 
          containing adjustment amounts (PDADJn) for the 
          first and all subsequent FYs, based on the amount allocated to 
          a tribe under the need component in the FY prior to the 
          introduction of the new data source using the old data source. 
          That is,

If NEED1NewDS < 0.9 * NEED1OldDS, then a tribe qualifies for a phase 
          down adjustment (PDADJ) (see Sec.  1000.331(c)).
PDADJn = (((0.9\n\) * NEED1OldDS)--NEED1NewDS), where n = 1 
          to [infin] provided PDADJn  0 for at 
          least one tribe.

Where:

NEED1NewDS = the amount the tribe would have received in the FY prior to 
          the introduction of the new data source had the new data 
          source been used to determine their need component in that FY.
NEED1OldDS = the amount a tribe actually received in the FY prior to the 
          introduction of the new data source based on the old data 
          source.

[[Page 735]]

PDADJn = the size of the adjustment that qualifying tribes 
          will receive in each year n, where the n represents the number 
          of years elapsed since the introduction of the new data source 
          and is equal to one in the first year.

    After allocation adjustments are made under Sec.  1000.331 for a FY, 
the needs allocation of an Indian tribe whose needs allocation increased 
as a result of the introduction of a new data source shall be adjusted 
downward proportionate to its share of the total increase in funding 
resulting from the introduction of a new data source to keep the overall 
need component within available appropriations. For each tribe which 
benefitted from the introduction of the new data source, their share of 
the total gain is calculated and that share is used to determine the 
amount of contribution they will make in each year following the 
introduction of the new data source to allow the phase down adjustments 
to be made without exceeding the amount available for allocation.

If NEED1NewDS  NEED1OldDS, then tribe gained from the 
          introduction of the new data source and contributes a portion 
          of their gain to offset the phase down adjustments.
GAINSHR = (NEED1NewDS -NEED1OldDS)/TOTGAINYR1.
CONTRIBn = GAINSHR * TOTPDADJn,

Where:

NEEDd1NewDS = the amount the tribe would have received in the FY prior 
          to the of introduction of the new data source had the new data 
          source been used to determine their needs funding in that FY.
NEED1OldDS = the amount a tribe actually received in the FY prior to the 
          introduction the new data source based on the old data source.
GAINSHR = a tribe's share of the total gains realized by all tribes that 
          benefitted from the introduction of the new data source.
TOTGAINYR1 = the sum of the amounts that tribes gain from the 
          introduction of the new data source in year one.
CONTRIBn = the size of the contribution that non-qualifying 
          tribes give in each year n, where the n represents the number 
          of years elapsed since the introduction of the new data source 
          and equal to one in the first year.
TOTPDADJn = the total amount in each year n required to cover 
          the cost of phase down adjustments in that year, i.e. S 
          PDADJn.

    The initial needs allocation for each tribe is adjusted based on the 
phase down adjustments and contribution amounts in the phase down 
schedule.

NEED1PD = NEED1 +__PDADJn - CONTRIBn.

Where:

NEED1PD = a tribe's allocation under the need component after applying 
          the phase down adjustment schedule.
NEED1= the initial calculation of need in the current FY from step 6 
          above.
PDADJn = the size of the adjustment that qualifying tribes 
          will receive in each year n, where the n represents the number 
          of years elapsed since the introduction of the new data source 
          and is equal to one in the first year.
CONTRIBn = the size of the contribution that non-qualifying 
          tribes give in each year n, where the n represents the number 
          of years elapsed since the introduction of the new data source 
          and equal to one in the first year.

    PDADJn and CONTRIBn as calculated in the 
initial phase down adjustment schedule may have to be adjusted downward 
in subsequent FYs if the total amount available for allocation under the 
needs Component (i.e. NEEDALLOCAMT in Step 4) is lower than the amount 
available for that purpose in the FY prior to the introduction of the 
new data source. If so, both PDADJn and CONTRIBn 
will be reduced by a factor which is the ratio of NEEDALLOCAMT in 
current FY to NEEDALLOCAMT in the year prior to the introduction of the 
new data source.
    Furthermore, when the 2020 Decennial Census or other new data source 
is introduced, a new phase down adjustment schedule will be calculated 
in a similar manner as that was calculated for FY 2018.
    8. A tribe's preliminary total allocation is calculated by summing 
the amounts calculated under the FCAS and need components that will 
serve as the basis for further adjustments in accordance with Sec.  
1000.340.

GRANT1 = FCAS + NEED1PD.

Where:

GRANT1 = preliminary total allocation before applying 1996 Operating 
          Subsidy and Modernization minimum funding (see Step 8), 
          Undisbursed Funds Factor (see Step 9) and Minimum Grant 
          provision (see Step 10).
FCAS = Formula Current Assisted Stock component equal to OPSUB + MOD.
NEED1PD = the Tribe's needs allocation after applying the phase down 
          adjustment schedule.

    GRANT1 is compared to how much a tribe received in FY 1996 for 
operating subsidy and modernization under the 1937 Housing Act. If a 
tribe received more in FY 1996 for operating subsidy and modernization 
than its IHBG formula allocation, its preliminary total allocation is 
adjusted up to the FY 1996 amount (See Sec.  1000.340(b)). Indian tribes 
receiving more under the IHBG formula than

[[Page 736]]

in FY 1996 have their grant allocations adjusted downward to offset the 
upward adjustment for the other tribes.

TEST = GRANT1 - OPMOD96.
If TEST is < = than 0, then GRANT2 = OPMOD96.
If TEST is greater than 0 and GRANT1  MINNEED, then:
GRANT2 = GRANT1 - [UNDER1996 * (TEST/OVER1996)].

Where:

TEST = variable to decide whether tribes qualify for adjustments under 
          1996 minimum funding.
GRANT1 = preliminary total allocation before applying 1996 Operating 
          Subsidy and Modernization minimum funding (see Step 8), 
          Undisbursed Funds Factor (see Step 9) and Minimum Grant 
          provision (see Step 10).
OPMOD96 = funding received by tribe in FY 1996 for Operating Subsidy and 
          Modernization.
MINNEED = minimum needs amount.
UNDER1996 = for all tribes with TEST less than 0, sum of the absolute 
          value of TEST.
OVER1996 = for all tribes with TEST greater than 0, sum of TEST.
GRANT2 = preliminary total allocation after applying 1996 Operating 
          Subsidy and Modernization minimum funding (see Step 8) but 
          before applying the Undisbursed Funds Factor (see Step 9) and 
          Minimum Grant provision (see Step 10).

    9. The initial allocation amount for the current FY is calculated by 
adding any adjustments for over- or under-funding occurring in prior FYs 
to the allocation calculated in the previous step. These adjustments 
typically result from late reporting of FCAS changes, or conveyances.

REPGRANT = GRANT2 + ADJUST1.

Where:

REPGRANT = Initial Allocation Amount in current FY (see Sec.  1000.342).
GRANT2 = preliminary total allocation after applying 1996 Operating 
          Subsidy and Modernization minimum funding (see Step 8) but 
          before applying the Undisbursed Funds Factor (see Step 9) and 
          Minimum Grant provision (see Step 10).
ADJUST1 = adjustments for over- or under-funding occurring in prior FYs.

10. The Undisbursed Funds Factor is determined by subtracting the sum of 
          each tribe's Initial Allocation Amount for the prior three FYs 
          from the IHBG amounts in HUD's Line of Credit Control System 
          (LOCCS) on October 1 of the FY for which the new allocation is 
          being determined. If the undisbursed funds factor is 
           $0 and the tribe's initial allocation for the FY 
          exceeds $5 million, its final allocation will be the initial 
          allocation minus the Undisbursed Funds Factor or its 1996 
          minimum, whichever is greater. Reductions to the initial 
          allocation amounts due to the Undisbursed Funds Factor are 
          summed and redistributed to other tribes in proportion to 
          their initial needs allocation, NEED1PD, calculated above.

If REPGRANT  = $5 MILLION and UNDISB$  
          (REPGRANTYR1 + REPGRANTYR2 + REPGRANTYR3), then UDFFtest = 1.

Where:

REPGRANT = Initial Allocation Amount in current FY.
REPGRANTYR1 = Initial Allocation Amount in one year prior to current FY.
REPGRANTYR2 = Initial Allocation Amount in two years prior to current 
          FY.
REPGRANTYR3 = Initial Allocation Amount in three years prior to current 
          FY.
UDFFTest = is an indicator as to whether the tribe will give up a 
          portion of its needs allocation due to an excessive amount of 
          undisbursed funds.

For tribes whose UDFFtest = 1, a reduction will occur as follows:

REPGRANTaftUDFF = (GRANT2 - (UNDISB$ - (REPGRANTYR1 + REPGRANTYR2 + 
          REPGRANTYR3))
Except if, OPMOD96  (GRANT2 - (UNDISB$ - (REPGRANTYR + 
          REPGRANTYR2 + REPGRANTYR3)) then, REPGRANTaftUDFF = OPMOD96.

Where:

REPGRANTaftUDFF = Initial Allocation Amount in current FY adjusted for 
          the Undisbursed Funds Factor.
GRANT2 = preliminary total allocation after applying 1996 Operating 
          Subsidy and Modernization minimum funding (see Step 8) but 
          before applying the Undisbursed Funds Factor (see Step 9) and 
          Minimum Grant provision (see Step 10).
UNDISB$ = amount in HUD's LOCCS on October 1 of the FY.
REPGRANTYR1 = Initial Allocation Amount in one year prior to current FY.
REPGRANTYR2 = Initial Allocation Amount in two years prior to current 
          FY.
REPGRANTYR3 = Initial Allocation Amount in three years prior to current 
          FY.
OPMOD96 = funding received by tribe in FY 1996 for Operating Subsidy and 
          Modernization.

    So the UDFFadj = REPGRANTaftUDFF - GRANT2 and UDFFadjTOT= Absolute 
value of the sum of UDFF adjustments for tribes subject to reduction.
    If UDFFtest is not equal to 1, tribes receive a portion of the funds 
recovered under the UDFF provision based on their share of

[[Page 737]]

total needs excluding any tribes with UDFFtest = 1. For these tribes, 
then:

UDFFadj = (NEED1PD/S Need1PD) * UDFFadjTOT).
REPGRANTaftUDFF = REPGRANT + UDFFadj.

Where:

UDFFadj = amount of the Undisbursed Fund Factor adjustments. Negative 
          amount represents excess undisbursed funds. Positive 
          represents amounts being transferred to other tribes without 
          excess undisbursed funds.
NEED1PD = the Tribe's needs allocation after applying the phase down 
          adjustment schedule.
UDFFadjTOT = absolute value of the sum of Undisbursed Fund Factor 
          adjustments for tribes that meet the criteria for reduction 
          and is equal to the sum available for redistribution among 
          other tribes based on their initial needs allocation.
REPGRANTaftUDFF = Initial Allocation Amount in current FY adjusted for 
          the Undisbursed Funds Factor.
REPGRANT = Initial Allocation Amount in current FY.

    11. A final adjustment is made under Sec.  1000.329 which allocates 
available carryover amounts up to $3 million to achieve minimum total 
allocations. Tribes that certify in their Indian Housing Plans the 
presence of any eligible households at or below 80 percent of median 
income and whose total allocation determined in the preceding step is 
less than 0.011547 percent of the FY appropriation after set-asides, 
will have their allocation adjusted upwards to 0.011547 percent of the 
FY appropriation after set-asides, or to a lesser percentage which can 
be achieved for all eligible tribes with available carryover funds set-
aside for this purpose.

MINGRANT = APPROP * 0.0001547.

Where:

APPROP = current FY appropriation for the IHBG program less amounts in 
          the Appropriations Act mandated for purposes other than the 
          formula allocation.
    If (GRANT2 + UDFFADJ) < MINGRANT and income-based need has been 
identified in a tribe's IHP, then tribe qualifies for MINGRANTADJ. For 
Tribes that qualify, calculate:

MINGRTADJTEST = MINGRANT--(GRANT2 + UDFFADJ).

If the Sum for all tribes of MINGRTADJTEST < MGHOLD, then:

MINGRANTADJ = MINGRTADJTEST.

    If the Sum for all tribes of MINGRANTADJTEST  MGHOLD, 
then:

MINGRANTADJ = MINGRANTADJTEST * (MGHOLD/S MINGRANTADJ)

Where:

GRANT2 is the approximate grant allocation in any given year for any 
          given tribe.
UDFFADJ = amount of UDFF adjustment.
MINGRANT = Minimum total allocation established in Sec.  1000.329.
MINGRANTADJTEST = amount required to bring all qualifying tribes' 
          allocations up to the minimum total allocation amount. This 
          amount can then be compared.
MGHOLD = amount set-aside for allocation under minimum total grant 
          provision (see Step 2).
MINGRANTADJ = actual amount of the minimum grant adjustment that can be 
          accommodated with the amount set aside from carryover for this 
          purpose.
    12. A tribe's final allocation consists of the initial current FY 
formula allocation with three adjustments.

FINALALLOCATION = GRANT2 + ADJUST1 + UDFFadj + MINGRANTADJ

Where:

FINALALLOCATION = total amount a tribe is eligible to receive as a grant 
          in the current FY.
GRANT2 = preliminary total allocation after applying 1996 Operating 
          Subsidy and Modernization minimum funding (see Step 8) but 
          before applying the Undisbursed Funds Factor (see Step 9) and 
          Minimum Grant provision (see Step 10).
ADJUST1 = adjustments for over- or under-funding occurring in prior FYs.
UDFFadj = amount of the Undisbursed Fund Factor adjustments. Negative 
          amount represents excess undisbursed funds. Positive 
          represents amounts being transferred to other tribes without 
          excess undisbursed funds.
MINGRANTADJ = actual amount of the minimum grant adjustment that can be 
          accommodated with the amount set aside from carryover for this 
          purpose.

[81 FR 83682, Nov. 22, 2016]

                       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.

[[Page 738]]

                      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.
1003.209 Prohibition on use of assistance for employment relocation 
          activities.

    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.
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 Equal participation of faith-based organizations.
1003.601 Nondiscrimination.
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,

[[Page 739]]

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 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(l), 
receiving ICDBG funds from the grantee or another subrecipient to 
undertake activities eligible for assistance under subpart C of

[[Page 740]]

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 2 CFR 200.318 through 
200.326.
    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.).

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015]



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 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

[[Page 741]]

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, the reasonableness of the project costs, and the 
administrative capacity of the applicant to complete the activities in a 
timely manner.

[61 FR 40090, July 31, 1996. Redesignated at 62 FR 12349, Mar. 12, 1998, 
as amended at 66 FR 4580, Jan. 17, 2001; 66 FR 8176, Jan. 30, 2001]



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.
    (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:

[[Page 742]]

    (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. 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

[[Page 743]]

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.
    (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:

[[Page 744]]

    (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)].
    (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

[[Page 745]]

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 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

[[Page 746]]

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) Lead-based paint activities in part 35 of this title.
    (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, 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.

[61 FR 40090, July 31, 1996, as amended at 64 FR 50230, Sept. 15, 1999]



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

[[Page 747]]

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 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

[[Page 748]]

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-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 Sec. Sec.  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 Sec. Sec.  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

[[Page 749]]

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 Sec. Sec.  
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:
    (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 for such items in accordance with 2 CFR part 200, subpart E 
, insurance, utilities, office supplies, and rental and maintenance (but 
not purchase) of office space.)
    (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

[[Page 750]]

in accordance with 2 CFR part 200, subpart E.
    (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.

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015]



Sec.  1003.207  Ineligible activities.

    The general rule is that any activity that is not authorized under 
the provisions of Sec. Sec.  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 2 CFR part 200, subpart E, 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 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 or depreciation pursuant to 2 CFR part 200, subpart E, 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

[[Page 751]]

    (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.

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015]



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 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

[[Page 752]]

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
    (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

[[Page 753]]

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. 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

[[Page 754]]

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 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.



Sec.  1003.209  Prohibition on use of assistance for employment relocation activities.

    (a) Prohibition. ICDBG funds may not be used to directly assist a 
business, including a business expansion, in the relocation of a plant, 
facility, or operation from one Identified Service Area to another 
Identified Service Area, if the relocation is likely to result in a 
significant loss of jobs in the Identified Service Area from which the 
relocation occurs.
    (b) Definitions. The following definitions apply to this section:
    (1) Directly assist. Directly assist means the provision of ICDBG 
funds for activities pursuant to:
    (i) Sec.  1003.203(b); or
    (ii) Sec. Sec.  1003.201(a)-(d), 1003.201(k), 1003.203(a), or Sec.  
1003.204 when the grantee, subrecipient, or, in the case of an activity 
carried out pursuant to Sec.  1003.204, a Community Based Development 
Organization (CBDO) enters into an agreement with a business to 
undertake one or more of these activities as a condition of the business 
relocating a facility, plant, or operation to the grantee's Identified 
Service Area. Provision of public facilities and indirect assistance 
that will provide benefit to multiple businesses does not fall under the 
definition of ``directly assist,'' unless it includes the provision of 
infrastructure to aid a specific business that is the subject of an 
agreement with the specific assisted business.
    (2) Area. The relevant definition of ``area'' for a Native American 
economic development project is the ``Identified Service Area'' for the 
eligible applicant, as defined in Sec.  1003.4.
    (3) Operation. A business operation includes, but is not limited to, 
any equipment, employment opportunity,

[[Page 755]]

production capacity, or product line of the business.
    (4) Significant loss of jobs. (i) A loss of jobs is significant if 
the number of jobs to be lost in the Identified Service Area in which 
the affected business is currently located is equal to or greater than 
one-tenth of one percent of the total number of persons in the labor 
force of that area; or, in all cases, a loss of 500 or more jobs. 
Notwithstanding the aforementioned, a loss of 25 jobs or fewer does not 
constitute a significant loss of jobs.
    (ii) A job is considered to be lost due to the provision of ICDBG 
assistance if the job is relocated within 3 years of the provision of 
assistance to the business; or the time period within which jobs are to 
be created, as specified by the agreement between the business and the 
recipient, is longer than 3 years.
    (c) Written agreement. Before directly assisting a business with 
ICDBG funds, the recipient, subrecipient, or a CBDO (in the case of an 
activity carried out pursuant to Sec.  1003.204) shall sign a written 
agreement with the assisted business. The written agreement shall 
include:
    (1) Statement. A statement from the assisted business as to whether 
the assisted activity will result in the relocation of any industrial or 
commercial plant, facility, or operation from one Identified Service 
Area to another, and, if so, the number of jobs that will be relocated 
from each Identified Service Area; and
    (2) Required certification. If the assistance will not result in a 
relocation covered by this section, a certification from the assisted 
business that neither it, nor any of its subsidiaries, has plans to 
relocate jobs, at the time the agreement is signed, that would result in 
a significant job loss as defined in this rule.
    (d) Assistance not covered by this section. This section does not 
apply to:
    (1) Relocation assistance. Relocation assistance under Sec.  
1003.602(b), (c), or (d);
    (2) Microenterprises. Assistance to microenterprises as defined by 
section 102(a)(22) of the Housing and Community Development Act of 1974; 
and
    (3) Arms-length transactions. Assistance to a business that 
purchases business equipment, inventory, or other physical assets in an 
arms-length transaction, including the assets of an existing business, 
provided that the purchase does not result in the relocation of the 
sellers' business operation (including customer base or list, goodwill, 
product lines, or trade names) from one Identified Service Area to 
another Identified Service Area and does not produce a significant loss 
of jobs in the Identified Service Area from which the relocation occurs.

[74 FR 1869, Jan. 13, 2009]



    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

[[Page 756]]

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 requirement. 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 disqualified from the competition.
    (b) Application rating. NOFAs will define and establish weights for 
the selection criteria, will specify the maximum points available, and 
will describe how point awards will be made.

[66 FR 4581, Jan. 17, 2001; 66 FR 8176, Jan. 30, 2001]



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.

    Each project included in an application that meets the threshold 
requirements shall be competitively rated within each Area ONAP's 
jurisdiction under the five following rating factors. Additional details 
regarding the rating factors will be provided in the periodic NOFAs.
    (a) Capacity. This factor will address the applicant's 
organizational resources necessary to successfully implement the 
proposed activities in a timely manner.
    (b) Need/Extent of the problem. This factor will address the extent 
to which there is a need for the proposed project to address a 
documented problem among the intended beneficiaries.
    (c) Soundness of Approach. This factor will address the quality and 
cost effectiveness of the proposed project, the commitment to sustain 
the proposed activities, and the degree to which the proposed project 
provides other benefits to community members.

[[Page 757]]

    (d) Leveraging of resources. This factor will address the level of 
tribal resources and resources from other entities that are used in 
conjunction with ICDBG funds to support the proposed project. HUD will 
evaluate the level of non-ICDBG resources based on the percentage of 
non-ICDBG resources provided relative to project costs.
    (e) Comprehensiveness and coordination. This factor will address the 
extent to which the applicant's proposed activities are consistent with 
the strategic plans or policy goals of the community and further on-
going priorities and activities of the community.

[66 FR 4581, Jan. 17, 2001, as amended at 66 FR 8176, Jan. 30, 2001]



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.



                    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.

[[Page 758]]

    (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 shall comply with the requirements 
and standards of 2 CFR part 200, except for the following sections:
    (1) Paragraph (a) of Sec.  200.302, ``Financial management.''
    (2) Section 200.306, ``Cost sharing or matching.''
    (3) Section 200.307, ``Program income'' applies as modified by Sec.  
1003.503.
    (4) Section 200.308, ``Revisions of budget and program plans.''
    (5) Section 200.311, ``Real property,'' except as provided in Sec.  
1003.600.
    (6) Section 200.313, ``Equipment'' applies, except that in all cases 
in which the equipment is sold, the proceeds shall be program income.
    (7) Section 200.314, ``Supplies,'' applies, except in all cases in 
which the supplies are sold, the proceeds shall be program income.
    (8) Section 200.325, ``Bonding requirements'' applies. However, 
there may be circumstances under which the bonding requirements of 2 CFR 
200.325 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

[[Page 759]]

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.
    (9) Paragraphs (b) through (d) and (f) of Sec.  200.328, 
``Monitoring and reporting program performance.''
    (10) Section 200.333, ``Retention requirements for records'' 
applies. However, the retention period referenced in 2 CFR 200.333 
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.
    (11) Section 200.343, ``Closeout.''
    (b) Cost principles. (1) All items of cost listed in 2 CFR part 200, 
subpart E, 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 2 CFR part 200, subpart E, 
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 the approval of the Federal cognizant agency.
    (ii) Fines, penalties, damages, and other settlements are 
unallowable costs to the ICDBG program.
    (iii) Costs of housing (e.g., depreciation, maintenance, utilities, 
furnishings, rent), housing allowances and personal living expenses 
(goods or services for personal use), regardless of whether reported as 
taxable income to the employees (2 CFR 200.445), require HUD prior 
approval.
    (iv) Organization costs (2 CFR 200.455) require HUD prior approval.
    (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)

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75944, Dec. 7, 2015]



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.  2 CFR 200.307 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

[[Page 760]]

ICDBG funds by religious organizations shall be included in the 
agreement.
    (7) Suspension and termination. The agreement shall set forth 
remedies for noncompliance and provisions on termination in accordance 
with 2 CFR part 200, subpart D.
    (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)

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



Sec.  1003.503  Program income.

    (a) Program income requirements for ICDBG grantees are set forth in 
2 CFR 200.307, 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

[[Page 761]]

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 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 2 CFR 200.307, 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 2 CFR 200.307(e)(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)

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



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

[[Page 762]]

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 the grantee has met the 
requirements of this part. This includes establishing and maintaining 
records demonstrating that the recipient has made the determinations 
required as a condition of eligibility of certain activities, including 
as prescribed in Sec.  1003.209.

[74 FR 1869, Jan. 13, 2009]



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) Program performance. Data on program outputs and outcomes, in a 
form prescribed by HUD.
    (4) 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 October 10, a report on contract and subcontract activity during 
the fiscal year.

(Approved by the Office of Management and Budget under control number 
2577-0191)

[61 FR 40090, July 31, 1996. Redesignated at 62 FR 12349, Mar. 12, 1998, 
as amended at 75 FR 20271, Apr. 19, 2010]



Sec.  1003.507  Public access to program records.

    Notwithstanding the provisions of 2 CFR 200.337, 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.

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



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

[[Page 763]]

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 2 CFR part 200, subpart F. 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 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 2 CFR 200.339. 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 2 CFR 200.342 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.

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



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

[[Page 764]]

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 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 2 CFR 
part 200, subpart D, 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)

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



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

[[Page 765]]

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 2 CFR 200.320, in order to 
award the contract to the single bidder or offeror.
    (3) Procurements that are within the dollar limitations established 
for small purchases under 2 CFR 200.320 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 of2 CFR 
200.320. 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.

[[Page 766]]

    (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 shall constitute final 
administrative action on the complaint.

(Approved by the Office of Management and Budget under control number 
2577-0191)

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



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 2 CFR part 200, subpart D. 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

[[Page 767]]

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.

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



                  Subpart G_Other Program Requirements



Sec.  1003.600  Equal participation of faith-based organizations.

    The HUD program requirements in Sec.  5.109 of this title apply to 
the ICDBG program, including the requirements regarding disposition and 
change in use of real property by a faith-based organization.

[81 FR 19418, Apr. 4, 2016]



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 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.
    (c) A grantee shall comply with the equal access to HUD-assisted or 
-insured housing requirements in 24 CFR 5.105(a)(2).

[61 FR 40090, July 31, 1996, as amended at 81 FR 80993, Nov. 17, 2016]



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

[[Page 768]]

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 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

[[Page 769]]

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, 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.

[[Page 770]]

    (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 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 2 CFR 200.112, 200.318(c), and 200.319(a)(5) 
shall apply.
    (2) In all cases not governed by 2 CFR 200.318, 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.

[[Page 771]]

    (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-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)

[62 FR 12349, Mar. 12, 1998, as amended at 80 FR 75945, Dec. 7, 2015]



Sec.  1003.607  Lead-based paint.

    The requirements of the Lead-Based Paint Poisoning Prevention Act 
(42 U.S.C. 4821-4846), the Residential Lead-Based Paint Hazard Reduction 
Act of 1992 (42 U.S.C. 4851-4856), and implementing regulations part 35, 
subparts A, B, J, K, and R of this title apply to activities conducted 
under this program.

[64 FR 50230, Sept. 15, 1999]



Sec.  1003.608  Debarment and suspension.

    The requirements in 2 CFR part 2424 are applicable. ICDBG funds 
cannot be provided to excluded or disqualified persons.

[72 FR 73497, Dec. 27, 2007]



                      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:

[[Page 772]]

    (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 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.

[[Page 773]]

    (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]



PART 1005_LOAN GUARANTEES FOR INDIAN HOUSING (Eff. until 06	18	24)--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 Guarantee fees.
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?
1005.115 Equal access.
1005.120 Qualified mortgage.

    Authority: 12 U.S.C. 1715z-13a; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).

    Source: 61 FR 9054, Mar. 6, 1996, unless otherwise noted. 
Redesignated at 63 FR 12349, Mar. 12, 1998.

    Effective Date Note: At 89 FR 20056, Mar. 20, 2024, part 1005 was 
revised, effective June 18, 2024. The text in effect June 18, 2024, 
follows this part.



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 the 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. This part provides

[[Page 774]]

requirements that are in addition to those in section 184.

[67 FR 19493, Apr. 19, 2002]



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 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

[[Page 775]]

    (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. (1) Section 1000.20 of this chapter 
applies to an environmental review in connection with a loan guarantee 
under this part. That section permits an Indian tribe to choose to 
assume environmental review responsibility.
    (2) Before HUD issues a commitment to guarantee any loan, or before 
HUD guarantees a loan if there is no commitment, HUD must:
    (i) Comply with environmental review procedures to the extent 
applicable under part 50 of this title, in accordance with Sec.  
1000.20(a) and (c); or
    (ii) Approve a Request for Release of Funds and certification from 
an Indian tribe, in accordance with part 58 of this title, if the Indian 
tribe has assumed environmental review responsibility.
    (3) If the loan involves proposed or new construction, HUD will 
require compliance with procedures comparable to those required by Sec.  
203.12(b)(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; 67 FR 19493, Apr. 19, 
2002]



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.
    (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

[[Page 776]]

    (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 to issue guarantees in 
accordance with paragraph (b)(5)(i) of this section, HUD will 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 
Director, Office of Loan Guarantee (OLG), Office of Native American 
Programs (ONAP). Within 30 days after notification of an adverse 
decision by the OLG Director, the tribe may file a written request for 
review with the Deputy Assistant Secretary for ONAP. Upon notification 
of an 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 
2 CFR part 2424.)

[61 FR 9054, Mar. 6, 1996. Redesignated and amended at 63 FR 12349, 
12373, Mar. 12, 1998; 63 FR 48991, Sept. 11, 1998; 67 FR 19493, Apr. 19, 
2002; 72 FR 73497, Dec. 27, 2007]



Sec.  1005.109  Guarantee fees.

    HUD shall establish and collect, at the time of issuance of the 
guarantee, a fee for the guarantee of loans under this section, in an 
amount not exceeding 3 percent of the principal obligation of the loan, 
or any increase established by statute. HUD shall establish the amount 
of the fee by publishing a notice in the Federal Register, and shall 
deposit any fees collected under

[[Page 777]]

this section in the Indian Housing Loan Guarantee Fund.

[79 FR 12384, Mar. 5, 2014]



Sec.  1005.111  What safety and quality standards apply?

    (a) Loans guaranteed under section 184 must be for dwelling units 
which meet the safety and quality standards set forth in section 184(j).
    (b) The relevant requirements of the Lead-Based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint 
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at part 35, subparts A, B, H, J, K, M, and R of this title 
apply to this part.

[63 FR 48991, Sept. 11, 1998, as amended at 64 FR 50230, Sept. 15, 1999]



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]



Sec.  1005.115  Equal access.

    The equal access to HUD-assisted or -insured housing requirements in 
24 CFR 5.105(a)(2) apply to this part.

[81 FR 80993, Nov. 17, 2016]



Sec.  1005.120  Qualified mortgage.

    A mortgage guaranteed under section 184 of the Housing and Community 
Development Act of 1992 (12 U.S.C. 1715z-13a), except for mortgage 
transactions exempted under Sec.  203.19(c)(2), is a safe harbor 
qualified mortgage that meets the ability-to-repay requirements in 15 
U.S.C. 1639c(a).

[78 FR 75237, Dec. 11, 2013]

    Effective Date Note: At 89 FR 20056, Mar. 20, 2024, part 1005 was 
revised, effective June 18, 2024. At 89 FR 22084, Mar. 29, 2024, in 
section 1005.749(c), paragraphs (7) and (8) were correctly redesignated 
as paragraphs (6) and (7). In section 1005.759, the second paragraph (b) 
was correctly redesignated as paragraph (c) and paragraphs (c) and (d) 
were correctly redesignated as paragraphs (d) and (e), respectively. At 
89 FR 20088, in section 1005.805(b)(4), paragraphs (vi) and (vii) were 
correctly redesignated as paragraphs (v) and (vi). For the convenience 
of the user, the revised text is set forth as follows:



PART 1005_LOAN GUARANTEES FOR INDIAN HOUSING (Eff. 06	18	24)



                 Subpart A_General Program Requirements



Sec.  1005.101  Purpose.

    This part implements the Section 184 Indian Housing Loan Guarantee 
Program (``Section 184 Program'') authorized under Section 184 of the 
Housing and Community Development Act of 1992, as amended, codified at 
12 U.S.C. 1715z-13a. Section 184 authorizes the U.S. Department of 
Housing and Urban Development (HUD) to establish a loan guarantee 
program for American Indian and Alaskan Native families, Tribes, and 
tribally Designated Housing Entities (TDHE). The loans guaranteed under 
the Section 184 Program are used to construct, acquire, refinance, or 
rehabilitate one- to four-family standard housing located on Trust Land, 
land located in an Indian or Alaska Native area, and Section 184 
Approved Program Area. These regulations apply to Lender Applicants, 
Holders, Direct and Non-Direct Guarantee Lenders, Servicers and Tribes 
seeking to or currently participating in the Section 184 Program.



Sec.  1005.102  Severability.

    Any provision of this part held to be invalid or unenforceable as 
applied to any action should be construed so as to continue to give the 
maximum effect to the provision permitted by law, unless such holding is 
that the provision of this part is invalid and unenforceable in all 
circumstances, in which event the provision should be severable from the 
remainder of this part and shall not affect the remainder thereof.

[[Page 778]]



Sec.  1005.103  Definitions.

    The following definitions apply throughout this part:
    Acquisition Cost means the sum of the sales price or construction 
cost for a property and the cost of allowable repairs or improvements 
for the same property, less any unallowable sales concession(s). For the 
purposes of this definition, the term ``sales concession'' means an 
inducement to purchase a property paid by the seller to consummate a 
sales transaction.
    Amortization means the calculated schedule of repayment of a Section 
184 Guaranteed Loan in full, through structured, regular payments of 
principal and interest within a certain time frame.
    Amortization Schedule means the document generated at the time of 
loan approval outlining the Borrower's schedule of payments of principal 
and interest for the life of the loan and the unpaid principal balance 
with and without the financed Upfront Loan Guarantee Fee, where 
applicable.
    Annual Loan Guarantee Fee means a fee calculated on an annual basis 
and paid in monthly installments by the Borrower, which is collected by 
the Servicer and remitted to HUD for the purposes of financing the 
Indian Housing Loan Guarantee Fund.
    BIA means the United States Department of Interior, Bureau of Indian 
Affairs.
    Borrower means every individual on the mortgage application. For the 
purposes of servicing the loan, Borrower refers to every original 
Borrower who signed the note and their heirs, executors, administrators, 
assigns, and approved substitute Borrowers. Borrowers include Tribes and 
TDHEs.
    Claim means the Servicer's application to HUD for payment of 
benefits under the Loan Guarantee Certificate for a Section 184 
Guaranteed Loan.
    Conflict of Interest means any party to the transaction who has a 
direct or indirect personal business or financial relationship 
sufficient to appear that it may cause partiality or influence the 
transaction, or both.
    Date of Default means the day after the Borrower's obligation to 
make a loan payment or perform an obligation under the terms of the 
loan.
    Day means calendar day, except where the term ``business day'' is 
used.
    Default means when the Borrower has failed to make a loan payment or 
perform an obligation under the terms of the Section 184 Guaranteed 
Loan.
    Direct Guarantee Lender means a Lender approved by HUD under Sec.  
1005.21 to Originate, underwrite, close, service, purchase, hold, or 
sell Section 184 Guaranteed Loans.
    Eligible Nonprofit Organization means a nonprofit organization 
established under Tribal law or organization of the type described in 
section 501(c)(3) of the Internal Revenue Code of 1986 as an 
organization exempt from taxation under section 501(a) of the Code, 
which has:
    (1) Two years' experience as a provider of low- or moderate-income 
housing;
    (2) A voluntary board; and
    (3) No part of its net earnings inuring to the benefit of any 
member, founder, contributor or individual.
    Financial Statements means audited financial statements or other 
financial records as required by HUD.
    Firm Commitment means a commitment by HUD to reserve funds, for a 
specified period of time, to guarantee a Loan under the Section 184 
Program, when a Loan for a specific Borrower and property meets 
standards as set forth in subpart D of this part.
    First Legal Action means the first notice or filing required by 
applicable law for any judicial or non-judicial foreclosure process.
    Good and Marketable Title means title that contains exceptions or 
restrictions, if any, which are permissible under subpart D of this 
part; and any objections to title that have been waived by HUD or 
otherwise cleared by HUD; and any discrepancies have been resolved to 
ensure the Section 184 Guaranteed Loan is in first lien position. In the 
case of Section 184 Guaranteed Loans on Trust Land, evidence of Good and 
Marketable Title must be reported in the Title Status Report issued by 
the BIA, or other HUD approved document issued by the Tribe, as 
prescribed by Section 184 Program Guidance and the document evidences 
the property interest rights.
    Holder means an entity that is named on the Promissory Note and any 
successor or assigns for the Section 184 Guaranteed Loan and has the 
right and responsibilities to enforce the Section 184 requirements and 
the Holder's interests arising under the mortgage or deed of trust.
    Identity of Interest means a sales transaction between family 
members, business partners, or other business affiliates.
    Indian means a person who is recognized as being an Indian or Alaska 
Native by a federally recognized Indian Tribe, a regional or village 
corporation as defined in the Alaska Native Claims Settlement Act, or a 
State recognized Tribe eligible to receive assistance under Title I of 
the Native American Housing Assistance and Self-Determination Act of 
1996 (NAHASDA).
    Indian Family means one or more persons maintaining a household 
where at least one Borrower is an Indian.
    Indian Housing Loan Guarantee Fund or Fund means a fund established 
at the U.S. Department of Treasury for the purpose of providing loan 
guarantees under the Section 184 Program.
    Lease or Leasehold Interest means a written contract between a 
Borrower and a Tribe, entity, or individual, whereby the Borrower, as 
lessee, is granted a right of possession of

[[Page 779]]

Trust Land for a specific purpose and duration, according to applicable 
Tribal, Federal or State Law.
    Lender Applicant means:
    (1) A financial institution engaging in mortgage lending that is 
eligible to participate in the Section 184 Program under Sec.  1005.203 
or Sec.  1005.205;
    (2) The financial institution has applied or will apply to HUD for 
approval to participate in the Section 184 Program; and
    (3) Has not received approval from HUD.
    Loan means a loan application or mortgage loan that has not received 
a Loan Guarantee Certificate.
    Loan Guarantee Certificate means evidence of endorsement by HUD of a 
Loan for guarantee issued under Sec.  1005.525.
    Loss Mitigation means an alternative to foreclosure offered by the 
Holder that is made available through the Servicer to the Borrower.
    Non-Direct Guarantee Lender means a Lender approved by HUD under 
Sec.  1005.207 who has selected a level of program participation limited 
to Originating Section 184 Guaranteed Loans.
    Month or monthly means thirty days in a month, regardless of the 
actual number of days.
    Origination, originate, or originating means the process by which 
the Lender accepts a new loan application along with all required 
supporting documentation. Origination does not include underwriting the 
loan.
    Owner of Record means, for fee simple properties, the owner of the 
property as shown on the records of the recorder in the county where the 
property is located. For Trust Land Properties, the current lessee or 
owner of property, as shown on the Title Status Report provided by the 
BIA or other HUD approved document issued by the Tribe, as prescribed by 
Section 184 Program Guidance and the document evidences the property 
interest rights.
    Partial Payment means a Borrower payment of any amount less than the 
full amount due under the terms of the Section 184 Guaranteed Loan at 
the time the payment is tendered.
    Property means one to four-family dwellings that meet the 
requirements for standard housing under Sec.  1005.419 and located on 
Trust Land, land located in an Indian or Alaska Native area, or Section 
184 Approved Program Area.
    Section 184 Guaranteed Loan is a Loan that has received a Loan 
Guarantee Certificate.
    Section 184 Approved Program Area means the Indian Housing Block 
Grant (IHBG) Formula Area as defined in 24 CFR 1000.302 or any other 
area approved by HUD, in which HUD may guarantee Loans.
    Section 184 Program Guidance means administrative guidance documents 
that may be issued by HUD, including but not limited to Federal Register 
documents, Dear Lender Letters, handbooks, guidebooks, manuals, and user 
guides.
    Security means any collateral authorized under existing Tribal, 
Federal, or State law.
    Servicer means a Direct Guarantee Lender that chooses to service 
Section 184 Guaranteed Loans or a Non-Direct Guarantee Lender or a 
financial institution approved by HUD under Sec.  1005.705 to service 
Section 184 Guaranteed Loans.
    Sponsor means an approved Direct Guarantee Lender that enters into a 
relationship with a Non-Direct Guarantee Lender or another Direct 
Guarantee Lender (Sponsored Entity), whereby the Sponsor provides 
underwriting, closing, purchasing, and holding of Section 184 Guaranteed 
Loans and may provide servicing.
    Sponsored Entity means a Non-Direct Guarantee or Direct Guarantee 
Lender operating under an agreement with a Sponsor to Originate Section 
184 Guaranteed Loans in accordance with Sec.  1005.213.
    Tax-exempt Bond Financing means financing which is funded in whole 
or in part by the proceeds of qualified mortgage bonds described in 
section 143 of the Internal Revenue Code of 1986, or any successor 
section, on which the interest is exempt from Federal income tax. The 
term does not include financing by qualified veterans' mortgage bonds as 
defined in section 143(b) of the Code.
    Title Status Report is defined in 25 CFR 150.2, as may be amended.
    Tribe means any Indian Tribe, band, nation, or other organized group 
or community of Indians, including any Alaska Native village or regional 
or village corporation as defined in or established pursuant to the 
Alaska Native Claims Settlement Act (43 U.S.C. 1601, et seq.), that is 
recognized as eligible for the special programs and services provided by 
the United States to Indians because of their status as Indians pursuant 
to the Indian Self Determination and Education Assistance Act of 1975.
    Tribally Designated Housing Entity (TDHE) means any entity as 
defined in the Indian Housing Block Grant Program under the Native 
American Housing Assistance and Self Determination Act at 25 U.S.C. 
4103(22).
    Trust Land means land title which is held by the United States for 
the benefit of an Indian or Tribe or title which is held by a Tribe 
subject to a restriction against alienation imposed by the United States 
or the Tribe. This definition shall include but is not limited to 
Tribal, individual, assigned trust, or restricted fee lands.
    Upfront Loan Guarantee Fee means a fee, paid by the Borrower at 
closing, collected by the Direct Guarantee Lender and remitted to HUD 
for the purposes of financing the Indian Housing Loan Guarantee Fund.

[[Page 780]]



              Subpart B_Lender Eligibility and Requirements



Sec.  1005.201  Lender Applicant approval and participation.

    (a) Approval types. The Section 184 Program has two types of Lender 
Applicant approvals:
    (1) Lender Applicants deemed approved by statute, as described in 
Sec.  1005.203; or
    (2) Lender Applicants required to obtain secretarial approval under 
Sec.  1005.205.
    (b) Lender Applicant participation. In accordance with Sec.  
1005.207, Lender Applicants must select a level of program participation 
and submit a completed application package, as prescribed by Section 184 
Program Guidance, to participate in the Section 184 Program.



Sec.  1005.203  Lender Applicants deemed approved by statute.

    The following Lender Applicants are deemed approved by statute:
    (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 Applicant whose housing loan under chapter 37 of 
title 38, United States Code are automatically guaranteed pursuant to 38 
U.S.C. 3702(d);
    (c) Any Lender Applicant approved by the U.S. Department of 
Agriculture to make Guaranteed Loans for single family housing under the 
Housing Act of 1949; and
    (d) Any other Lender Applicant that is supervised, approved, 
regulated, or insured by any other Federal agency of the United States, 
including but not limited to Community Development Financial 
Institutions.



Sec.  1005.205  Lender Applicants required to obtain Secretarial 
          approval.

    (a) Lender Applicant application process. Lender Applicants not 
meeting the requirements of Sec.  1005.203 must apply to HUD for 
approval to participate in the Section 184 Program by submitting to HUD 
a completed application package, as prescribed by Section 184 Program 
Guidance. The application must establish that the Lender meets the 
following qualifications:
    (1) Business form. The Lender Applicant shall be a corporation or 
other chartered institution, a permanent organization having succession, 
or a partnership, organized under Tribal or State law.
    (i) Partnership requirements. A partnership must meet the following 
requirements:
    (A) Each general partner must be a corporation or other chartered 
institution consisting of two or more partners.
    (B) One general partner must be designated as the managing general 
partner. The managing general partner shall also comply with the 
requirements specified in paragraphs (a)(1)(i)(C) and (D) of this 
section. The managing general partner must have as its principal 
activity the management of one or more partnerships, all of which are 
mortgage lending institutions or property improvement or manufactured 
home lending institutions and must have exclusive authority to deal 
directly with HUD on behalf of each partnership. Newly admitted partners 
must agree to the management of the partnership by the designated 
managing general partner. If the managing general partner withdraws or 
is removed from the partnership for any reason, a new managing general 
partner shall be substituted, and HUD must be notified in writing within 
15 days of the substitution.
    (C) The partnership agreement shall specify that the partnership 
shall exist for a minimum term of ten years, as required by HUD. All 
Section 184 Guaranteed Loans held by the partnership shall be 
transferred to a Lender Applicant approved under this part prior to the 
termination of the partnership. The partnership shall be specifically 
authorized to continue its existence if a partner withdraws.
    (D) HUD must be notified in writing within 15 days of any amendments 
to the partnership agreement that would affect the partnership's actions 
under the Section 184 Program.
    (ii) Use of business name. The Lender Applicant must use its HUD-
registered business name in all advertisements and promotional materials 
related to the Guaranteed Loan. HUD-registered business names include 
any alias or ``doing business as'' (DBA) on file with HUD. The Lender 
must keep copies of all print and electronic advertisements and 
promotional materials for a period of 2 years from the date that the 
materials are circulated or used to advertise.
    (2) Identification and certification of employees. The Lender 
Applicant shall identify personnel and certify that they are trained and 
competent to perform their assigned responsibilities in mortgage 
lending, including origination, servicing, collection, and conveyance 
activities, and shall maintain adequate staff and facilities to 
Originate or service mortgages, or both, in accordance with applicable 
Tribal, Federal, or State requirements, to the extent it engages in such 
activities.
    (3) Identification and certification of officers. The Lender 
Applicant shall identify officers and certify that all employees who 
will sign applications for Guaranteed Loans on behalf of the Lender 
Applicant shall be corporate officers or shall otherwise be authorized 
to bind the Lender in the Origination transaction. The Lender Applicant 
shall certify that only authorized person(s) report on guarantees, 
purchases, and sales of Guaranteed Loans to HUD for the purpose of 
obtaining or transferring guarantee coverage.

[[Page 781]]

    (4) Financial statements. The Lender Applicant shall:
    (i) Furnish to HUD a copy of its most current annual financial 
statements, as prescribed by Section 184 Program Guidance.
    (ii) Furnish such other information as HUD may request; and
    (iii) Submit to examination of the portion of its records that 
relates to its activities under the Section 184 Program.
    (5) Quality control plan. The Lender Applicant shall submit a 
written quality control plan in accordance with Sec.  1005.217.
    (6) Identification of branch offices. A Lender Applicant may 
maintain branch offices. A financial institution's branch office must be 
registered with HUD to originate or submit applications for Guaranteed 
Loans. The financial institution shall remain responsible to HUD for the 
actions of its branch offices.
    (7) Certification of conflict of interest policy. The Lender 
Applicant must certify that the lender shall not pay anything of value, 
directly or indirectly, in connection with any Guaranteed Loan to any 
person or entity if such person or entity has received any other 
consideration from the seller, builder, or any other person for services 
related to such transactions or related to the purchase or sale of the 
property, except that consideration, approved by HUD, may be paid for 
services actually performed. The Lender Applicant shall not pay a 
referral fee to any person or organization.
    (8) Licensing certification. A Lender Applicant shall certify that 
it has not been refused a license or has not been sanctioned by any 
Tribal, Federal, State, or other authority related to any lending 
activity.
    (9) Minimum net worth. Irrespective of size, a Lender Applicant 
shall have a net worth of not less than $1 million, or amount as 
provided in Section 184 Program Guidance.
    (10) Identification of operating area. The Lender Applicant must 
submit a list of states in which they wish to participate in the Section 
184 Program and evidence of Lender Applicant's license to operate in 
those states, as may be prescribed by Section 184 Program Guidance.
    (11) Other qualifications. Other qualifications by notice for 
comment.
    (b) HUD approval. HUD shall review applications under Sec.  
1005.203(a) and any other publicly available information related to the 
Lender Applicant, its officers, and employees. If HUD determines the 
Lender Applicant meets the requirements for participation in this 
subpart, HUD shall provide written notification of the approval to be a 
Non-Direct Guarantee Lender.
    (c) Limitations on approval. A Lender Applicant may only operate in 
the Section 184 Approved Program Area where they are licensed.
    (d) Denial of participation. A Lender Applicant may be denied 
approval to become a Section 184 Lender if HUD determines the Lender 
Applicant does not meet the qualification requirements of this subpart. 
HUD will provide written notification of denial and that decision may be 
appealed in accordance with the procedures set forth in Sec.  1005.909.



Sec.  1005.207  Lender Applicant participation options.

    (a) Levels of participation. Lender Applicants must choose one of 
two levels of program participation, a Non-Direct Guarantee Lender or a 
Direct Guarantee Lender and submit an application to participate on a 
form prescribed by Section 184 Program guidance. A participation level 
must be selected by the Lender Applicant and approved by HUD before 
initiating any Section 184 Program activities.
    (b) Non-Direct Guarantee Lender. (1) A Non-Direct Guarantee Lender 
originates loans.
    (2) A Non-Direct Guarantee Lender must be a Sponsored Entity under 
Sec.  1005.213.
    (3) A Non-Direct Guarantee Lender must submit documentation 
supporting their eligibility as a Lender under Sec.  1005.203 or 
approved by HUD under Sec.  1005.205 and other documentation as 
prescribed by Section 184 Program Guidance to HUD through their Sponsor.
    (c) Direct Guarantee Lender. (1) A Direct Guarantee Lender may 
originate, underwrite, close, service, purchase, hold, and sell Section 
184 Guaranteed Loans.
    (2) A Direct Guarantee Lender may sponsor Non-Direct Guarantee 
Lenders or other Direct Guarantee Lenders in accordance with Sec.  
1005.213.
    (3) To become a Direct Guarantee Lender, Lender Applicants must 
submit additional documentation as provided in Sec.  1005.209 and obtain 
HUD approval under Sec.  1005.211.



Sec.  1005.209  Direct Guarantee Lender application process.

    (a) For purposes of this section, Lender Applicants shall include 
Non-Direct Guarantee Lenders, Lender Applicants and financial 
institutions approved by HUD to only service under Sec.  1005.705. 
Lender Applicants may apply to HUD for approval to participate in the 
Section 184 Program as a Direct Guarantee Lender. Lenders Applicants 
must submit a completed application package in accordance with Section 
184 Program Guidance.
    (b) To be approved as a Direct Guarantee Lender, a Lender Applicant 
must establish in its application that it meets the following 
qualifications:
    (1) Eligibility under Sec.  1005.203 or HUD approval under Sec.  
1005.205, as evidenced by approval documents and most recent 
recertification documents.
    (2) Has a principal officer with a minimum of five years' experience 
in the origination of

[[Page 782]]

Loans guaranteed or insured by an agency of the Federal Government. HUD 
may approve a Lender applicant with less than five years of experience, 
if a principal officer has had a minimum of five years of managerial 
experience in the origination of Loans guaranteed or insured by an 
agency of the Federal Government.
    (3) Has on its permanent staff an underwriter(s) that meets the 
following criteria:
    (i) Two years' experience underwriting Loans guaranteed or insured 
by an agency of the Federal Government;
    (ii) Is an exclusive employee of the Lender Applicant;
    (iii) Authorized by the Lender Applicant to obligate the Lender 
Applicant on matters involving the origination of Loans;
    (iv) Is registered with HUD as an underwriter and continues to 
maintain such registration; and
    (v) Other qualifications as may be prescribed by Section 184 Program 
Guidance.
    (c) The Lender Applicant must submit a list of States or geographic 
regions in which it is licensed to operate, evidenced by submitting the 
active approvals for each State or region, and declare its interest in 
participating in the Section 184 Program.
    (d) The Lender Applicant must submit the quality control plan as 
required by its approving agency, modified for the Section 184 Program.
    (e) If a Lender Applicant wants to service Section 184 Guaranteed 
Loans as Direct Guarantee Lender, they must meet qualifications and 
apply in accordance with Sec.  1005.703.



Sec.  1005.211  Direct Guarantee Lender approval.

    HUD shall review all documents submitted by a Lender Applicant under 
Sec.  1005.209 and make a determination of conditional approval or 
denial.
    (a) Conditional approval. Conditional approval is signified by 
written notification from HUD that the Lender Applicant is a 
conditionally approved Direct Guarantee Lender under the Section 184 
Program subject to the following conditions:
    (1) The Lender Applicant signs an agreement to comply with 
requirements of this part, and any applicable Tribal, Federal, or State 
law; and
    (2) If applicable, the Lender Applicant submits a list of entities 
it currently sponsors under another Federal Loan program and intends to 
sponsor in the Section 184 Program. This list shall include the 
following for each Sponsored Entity:
    (i) Contact information, including mailing address, phone number, 
and email address for corporate officers.
    (ii) The Federal tax identification number (TIN) for the Sponsored 
Entity, and
    (iii) Names and Nationwide Multistate Licensing System and Registry 
numbers for all Loan originators and processors.
    (3) The Lender Applicant certifies it monitors and provides 
oversight of Sponsored Entities to ensure compliance with this part, and 
any applicable Tribal, Federal, or State law.
    (4) The Lender Applicant must, for each underwriter, submit ten test 
endorsement case binders, or a number prescribed by Section 184 Program 
Guidance, which meet the requirements of subparts D and E. 
Unsatisfactory performance by an underwriter during HUD's test case 
review may constitute grounds for denial of approval to participate as a 
Direct Guarantee Lender. If participation is denied, such denial is 
effective immediately and may be appealed in accordance with the 
procedures set forth in Sec.  1005.909; and
    (5) The Lender Applicant will operate only in accordance with the 
Lender's licensing in Section 184 Approved Program Areas.
    (b) Final approval. Final approval is signified by written 
notification from HUD that the Lender Applicant is an approved Direct 
Guarantee Lender under the Section 184 Program without further 
submission of test case endorsement case binders to HUD. HUD retains the 
right to request additional test cases as determined necessary.
    (c) Limitations on approval. (1) A Lender Applicant may only operate 
as a Direct Guarantee Lender in accordance with the Lender's Tribal or 
State licensing and within Section 184 Approved Program Areas.
    (2) The Lender Applicant must employ and retain an underwriter with 
the qualifications as provided in Sec.  1005.209(b)(3). Failure to 
comply with this provision may subject the Lender Applicant to sanctions 
under Sec.  1005.907.
    (d) Denial of participation. A Lender Applicant may be denied 
approval to become a Direct Guarantee Lender if HUD determines the 
Lender Applicant does not meet the qualification requirements of this 
subpart. HUD will provide written notification of denial and that 
decision may be appealed in accordance with the procedures set forth in 
Sec.  1005.909.



Sec.  1005.213  Non-Direct Guarantee Lender application, approval, and 
          Direct Guarantee Lender sponsorship.

    (a) Sponsorship. A Sponsorship is a contractual relationship between 
a Sponsor and a Sponsored Entity.
    (b) General responsibility requirements of a Sponsor. (1) The 
Sponsor must determine the eligibility of a Lender and submit to HUD, as 
prescribed in Section 184 Program Guidance, a recommendation for 
approval under Sec.  1005.207(b) or evidence of HUD approval under 
Sec. Sec.  1005. 205(b) or 211(b).

[[Page 783]]

    (2) Upon HUD approval of eligibility under Sec.  1005.207(b), or HUD 
acknowledgement of the evidence of HUD approval under Sec.  1005.205(b) 
or Sec.  1005.211(b), the Sponsor may enter into a Sponsorship with the 
Sponsored Entity.
    (3) The Sponsor must notify HUD of changes in a Sponsorship within 
10 days.
    (4) The Sponsor must provide HUD-approved training to the Sponsored 
Entity on the requirements of the Section 184 Program before the 
Sponsored Entity may originate Section 184 Guaranteed Loans for the 
Sponsor.
    (5) Each Sponsor shall be responsible to HUD for the actions of its 
Sponsored Entity in Originating Loans. If Tribal or State law requires 
specific knowledge by the Sponsor or the Sponsored Entity, HUD shall 
presume the Sponsor had such knowledge and shall remain liable.
    (6) The Sponsor is responsible for conducting quality control 
reviews of the Sponsored Entity's origination case binders and Loan 
performance to ensure compliance with this part.
    (7) The Sponsor is responsible for maintaining all records for Loans 
Originated by a Sponsored Entity in accordance with this part.
    (c) Responsibilities of the Sponsored Entity. A Sponsor must ensure 
that a Sponsored Entity complies with this part and any other Tribal, 
Federal, or State law requirements.



Sec.  1005.215  Direct Guarantee Lender annual reporting requirements.

    Direct Guarantee Lenders must submit an annual report on Loan 
performance, including reporting on all its Sponsored Entities, where 
applicable, along with any other required reporting under Sec.  1005.903 
and other such reports as prescribed by Section 184 Program Guidance.



Sec.  1005.217  Quality control plan.

    (a) A quality control plan sets forth a Lender Applicant, Direct 
Guarantee Lender, or Non-Direct Guarantee Lender's procedures for 
ensuring the quality of the Direct Guarantee or Non-Direct Guarantee 
Lender's Section 184 Guaranteed Loan Origination, underwriting, closing, 
and/or servicing, as applicable. The purpose of the quality control plan 
is to ensure the Lender Applicant, Direct Guarantee and non-Direct 
Guarantee Lender's compliance with Section 184 Program requirements and 
protect HUD and the entities from unacceptable or unreasonable risks. A 
Lender Applicant, Direct Guarantee Lender, and Non-Direct Guarantee 
Lender must adopt and implement a quality control plan.
    (b) A quality control plan must:
    (1) Be maintained and updated, as needed, to comply with all 
applicable Section 184 Program requirements.
    (2) Cover all policies and procedures, whether performed by the 
Lender or an agent, to ensure full compliance with all Section 184 
Program requirements.
    (3) Provide the Lender with information sufficient to adequately 
monitor and oversee the Lender's compliance and measure performance, as 
it relates to the Lender's Section 184 Guaranteed Loan activity.
    (4) Require the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender to retain all quality control plan related 
documentation, including selection criteria, review documentation, 
findings, and actions to mitigate findings, for a period of three years 
from initial quality control review, or from the last action taken to 
mitigate findings, whichever is later.
    (5) Allow the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender to use employees or agents to perform the quality 
control functions, so long as they do not directly participate in any 
Loan administration processes as outlined in Section 184 Program 
Guidance.
    (6) Ensure the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender assumes full responsibility for any agent's conduct of 
quality control reviews.
    (7) Require the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender to train all staff, agents working with the Section 184 
Program on Loan administration and quality control processes and provide 
staff access to all current Section 184 legal authorities and policy 
guidance. The Lender, Direct Guarantee or Non-Direct Guarantee Lender 
must retain copies of training documentation for all staff working on 
the Section 184 Program in accordance with Sec.  1005.219(d)(3). Failure 
to comply with the training and documentation requirements may subject 
the Direct Guarantee Lender and Non-Direct Guarantee Lender to sanctions 
in accordance with Sec.  1005.907.
    (8) Require the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender to review a random statistical sample of rejected Loan 
applications within 90 days from the end of the month in which the 
decision was made. The reviews must be conducted no less frequently than 
monthly and with the goal of ensuring that the reasons given for the 
rejection were valid and each rejection received concurrence of an 
appropriate staff person with sufficient approval authority. The Lender 
Applicant, Direct Guarantee or Non-Direct Guarantee Lender must submit a 
report of this review in form and timeframe as prescribed in Section 184 
Program Guidance.
    (9) Ensure that the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender's employees and agents are eligible to participate in 
the Section 184 Program. Any employees or agents deemed ineligible

[[Page 784]]

shall be restricted from participating in the Section 184 Program.
    (10) Require the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender to refer any suspected fraud or material 
misrepresentation by any party whatsoever directly to HUD's Office of 
Inspector General (OIG) and the Office of Native American Programs.
    (11) Require the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender to report all material deficiencies and submit a 
corrective action plan to HUD within 30 days, or a timeframe as 
prescribed by Section 184 Program Guidance.
    (12) Require the Lender Applicant, Direct Guarantee or Non-Direct 
Guarantee Lender to conduct appropriate Loan level quality control 
procedures, in accordance with Section 184 Program Guidance.
    (13) Require the Lender Applicant to comply with any other 
administrative requirement as may be prescribed by Section 184 Program 
Guidance.
    (c) Lender Applicants applying to be a Direct Guarantee Lender under 
Sec.  1005.209, must submit a quality control plan in accordance with 
paragraph (b) of this section and include the following additional 
requirements:
    (1) Require the Lender Applicant to collect and forward all Loan 
Guarantee Fees in accordance with the Section 184 Program requirements, 
with sufficient documentation evidencing the timely collection and 
payment of the fees to HUD.
    (2) Require the Lender Applicant to verify that the endorsement case 
binder is submitted to HUD for guarantee within required time frames.
    (3) Require the Lender Applicant to review a random statistical 
sample of its endorsement case binders for potential fraud, material 
misrepresentations, or other findings on a quarterly basis. The Lender 
Applicant must investigate and determine if fraud, material 
misrepresentation or other findings occurred.
    (4) Require the Lender Applicant to perform quality control review 
of its Sponsored Entities in the same manner and under the same 
conditions as required for the Lender's own operation.
    (5) Where applicable, require the Sponsor to apply paragraph (b) of 
this section to its Sponsored Entities.
    (d) All Sponsored Entities shall comply with paragraph (b) of this 
section and provide a quality control plan directly to their Sponsor in 
accordance with their sponsorship agreement.



Sec.  1005.219  Other requirements.

    (a) Tribal, Federal, and State law. All Holders, Direct Guarantee 
Lenders, Non-Direct Guarantee Lenders and Servicers must comply with all 
applicable Tribal, Federal, and State laws which impact mortgage-related 
activities.
    (b) Dual employment. All Non-Direct Guarantee Lenders and Direct 
Guarantee Lenders must require its employees to be exclusive employees, 
unless the Non-Direct Guarantee and Direct Guarantee Lender has 
determined that the employee's other employment, including any self-
employment, does not create a Conflict of Interest.
    (c) Reporting requirements. All Direct Guarantee Lenders must submit 
reports in accordance with Sec.  1005.903. Non-Direct Guarantee Lenders 
must submit required reports to their Sponsor, under this part or any 
requirements as prescribed by Section 184 Program Guidance.
    (d) Records retention. Records retention requirements are as 
follows:
    (1) Direct Guarantee Lenders must maintain an endorsement case 
binder for a period of three years beyond the date of satisfaction or 
maturity date of the Loan, whichever is sooner. However, where there is 
a payment of Claim, the endorsement case binder must be retained for a 
period of at least five years after the final Claim has been paid. 
Section 184 Program Guidance shall prescribe additional records 
retention time depending on the circumstances of the Claim.
    (2) All Direct Guarantee Lenders and Non-Direct Guarantee Lenders 
must retain personnel files of employees for one year beyond the 
employee's separation.
    (3) All Direct Guarantee Lenders and Non-Direct Guarantee Lenders 
must follow the applicable records retention requirements imposed by 
applicable Tribal, Federal, and State laws.
    (4) Direct Guarantee Lenders and Non-Direct Guarantee Lenders must 
maintain the quality control plan records for a period prescribed in 
Sec.  1005.217(b)(4).
    (e) Minimum level of lending on Trust Land. (1) Direct Guarantee 
Lenders must actively market, Originate, underwrite, and close Loans on 
Trust Land. A Sponsor must ensure its Sponsored Entities actively market 
and Originate Loans on Trust Land. HUD may impose a minimum level of 
lending on Trust Land, which may be adjusted periodically, through 
publication in the Federal Register.
    (2) Failure to meet the minimum level of lending on Trust Land may 
result in sanctions in accordance with Sec. Sec.  1005.905 and 1005.907.
    (3) HUD may grant exceptions for Direct Guarantee Lenders and Non-
Direct Guarantee Lenders licensed and doing business in a State or 
States with limited Trust Lands. The process to request the exception 
will be prescribed by Section 184 Program Guidance.

[[Page 785]]



Sec.  1005.221  Business change reporting.

    (a) Within a timeframe as prescribed by Section 184 Program 
Guidance, Direct Guarantee Lenders shall provide written notification to 
HUD, in such a form as prescribed by Section 184 Program Guidance of:
    (1) All changes in the Direct Guarantee Lender or Sponsored Entity's 
legal structure, including, but not limited to, mergers, acquisitions, 
terminations, name, location, control of ownership, and character of 
business;
    (2) Staffing changes with senior leadership and Loan underwriters 
for Direct Guarantee Lenders and Sponsored Entities; and
    (3) Any sanctions by another supervising entity.
    (b) Failure to report changes within a reasonable timeframe 
prescribed in Section 184 Program Guidance may result in sanctions in 
accordance with Sec. Sec.  1005.905 and 1005.907.



Sec.  1005.223  Direct Guarantee Lender Annual recertification 
          requirements.

    (a) All Direct Guarantee Lenders are subject to annual 
recertification on a date and form as prescribed by Section 184 Program 
Guidance.
    (b) With each annual recertification, Direct Guarantee Lenders must 
submit updated contact information, continued eligibility documentation 
and other pertinent materials as prescribed by Section 184 Program 
Guidance, including but not limited to:
    (1) A certification that it has not been refused a license or 
sanctioned by any Tribe, State, or Federal entity or other governmental 
authority related to any lending activity;
    (2) A certification that the Direct Guarantee Lender is in good 
standing with any Tribe, State, or Federal entity in which it will 
perform Direct Guarantee Lender activities; and
    (3) Renewal documents and certification of continued eligibility 
from an authorizing entity listed in Sec.  1005.203.
    (4) Lenders approved under Sec.  1005.205 must submit documentation 
supporting continued eligibility as prescribed by Section 184 Program 
Guidance.
    (c) All Sponsored Entities shall comply with this requirement and 
provide the annual recertification documentation directly to their 
Sponsor in accordance with their sponsorship agreement.
    (d) Direct Guarantee Lenders must also submit the following in 
accordance with Section 184 Program Guidance:
    (1) A certification that the Direct Guarantee Lender continues to 
meet the direct guarantee program eligibility requirements in accordance 
with Sec.  1005.209;
    (2) A list of all Sponsored Entities with which the Direct Guarantee 
Lender has a sponsorship relationship, and a certification of their 
continued eligibility; and
    (3) All reports.
    (e) Direct Guarantee Lenders must retain documentation related to 
the continued eligibility of their Sponsored Entities for a period as 
prescribed by Section 184 Program Guidance.
    (f) Direct Guarantee Lenders may request an extension of the 
recertification deadline, but such a request must be presented to HUD at 
least 30 days before the recertification deadline.
    (g) HUD will review the annual recertification submission and may 
request any further information required to determine recertification.
    (h) HUD will provide written notification of approval to continue 
participation in the Section 184 Program or denial. A denial may be 
appealed pursuant to Sec.  1005.909.
    (1) If an annual recertification is not submitted by a reasonable 
deadline prescribed in Section 184 Program Guidance, HUD may subject the 
Direct Guarantee Lender to sanctions under Sec.  1005.907.
    (2) [Reserved]



Sec.  1005.225  Program ineligibility.

    A Lender Applicant, Direct Guarantee Lender or Non-Direct Guarantee 
Lender may be deemed ineligible for Section 184 Program participation 
when HUD becomes aware that the entity or any officer, partner, 
director, principal, manager or supervisor, loan processor, loan 
underwriter, or loan originator of the entity was:
    (a) Suspended, debarred, under a limited denial of participation 
(LDP), or otherwise restricted under 2 CFR part 2424, or under similar 
procedures of any other Federal agency;
    (b) Indicted for, or have been convicted of, an offense that 
reflects adversely upon the integrity, competency, or fitness to meet 
the responsibilities of the Lender, Direct Guarantee Lender or Non-
Direct Guarantee Lender to participate in the title I or title II 
programs of the National Housing Act, or Section 184 Program;
    (c) Found to have unresolved findings as a result of HUD or other 
governmental audit, investigation, or review;
    (d) Engaged in business practices that do not conform to generally 
accepted practices of prudent Lender Applicants, Direct or Non-Direct 
Guarantee Lenders or that demonstrate irresponsibility;
    (e) Convicted of, or have pled guilty or nolo contendere to, a 
felony related to participation in the real estate or mortgage loan 
industry during the 7-year period preceding the date of the application 
for licensing and registration, or at any time preceding such date of 
application, if such felony involved an act of fraud, dishonesty, or a 
breach of trust or money laundering;
    (f) In violation of provisions of the Secure and Fair Enforcement 
Mortgage Licensing

[[Page 786]]

Act of 2008 (12 U.S.C. 5101, et seq.) or any applicable provision of 
Tribal or State law; or
    (g) In violation of 12 U.S.C. 1715z-13a.



                     Subpart C_Lending on Trust Land



Sec.  1005.301  Tribal legal and administrative framework.

    (a) Tribal requirements. (1) A Tribe seeking to allow eligible 
Borrowers to place a mortgage lien on Trust Land under the Section 184 
Program must apply to HUD for approval to participate in the program.
    (2) Tribes electing to make Trust Land available under the Section 
184 Program must provide to HUD a legal and administrative framework for 
leasing, foreclosure, and eviction on Trust Land to protect the 
interests of the Borrower, Tribe, Direct Guarantee Lender, and HUD.
    (3) When Tribes are notified of the Borrower's default in accordance 
with Sec.  1005.501(j) or when the Tribe receives notice of Tribal right 
of first refusal pursuant to Sec.  1005.759, Tribes must assist, where 
practical, in facilitating loss mitigation and disposition, such as 
assisting with identifying potential purchasers or identifying Tribal 
members who may wish to assume the loan, encouraging Borrower to execute 
Lease-in-Lieu, and providing other general assistance to the Borrower.
    (4) Tribes must notify HUD in writing when the Tribe determines a 
property is vacant or abandoned and the property is not secured by the 
Servicer or HUD.
    (b) Legal and administrative framework. A Tribe may enact legal 
procedures through Tribal council resolution or any other recognized 
legislative action. These procedures must be legally enforceable and 
include the following requirements:
    (1) Foreclosure and assignment. When a Borrower is in default, and 
is unwilling or unable to successfully complete loss mitigation in 
accordance with subpart G of this part; and Servicer either completes 
First Legal Action against the Borrower, or assigns the loan to HUD 
after completing Tribal first right of refusal in accordance with Sec.  
1005.759:
    (i) The Tribe must demonstrate that a foreclosure will be processed 
through the legal systems having jurisdiction over the Section 184 
Guaranteed Loan. A foreclosure must be held in a court of competent 
jurisdiction, which includes Federal courts, when HUD forecloses on the 
property.
    (ii) Foreclosure ordinances must allow for the legal systems with 
jurisdiction to assign Borrower's property interest to HUD or Holder.
    (iii) Where applicable, if the Holder assigns the Section 184 
Guaranteed Loan to HUD without initiating or completing the foreclosure 
process, or the property becomes vacant and abandoned during the loss 
mitigation or foreclosure process, the Tribe may assign the lease to HUD 
to facilitate disposition of the property, so long as the Tribe provides 
due process to the lessee in compliance with Tribal law.
    (2) Property disposition. Once a lease is vacated or reassigned, or 
the property interest has otherwise been conveyed to HUD or the Holder, 
the Tribe or the TDHE shall work with HUD or the Holder to sell the 
property to an eligible party.
    (3) Eviction. The Tribe must have a legal and administrative 
framework implementing eviction procedures, allowing for the expedited 
removal of the Borrower in default, all household residents, and any 
unauthorized occupants of the property. Eviction procedures must enable 
the Servicer or the Tribe to secure possession of the property. Eviction 
may be required upon:
    (i) The completion of a foreclosure;
    (ii) The involuntary termination of the lease;
    (iii) The reassignment of the lease or conveyance of the property 
interest to HUD or the Holder; or
    (iv) The sale of the property.
    (4) Lien priority. Section 184 Guaranteed Loans must be in a first 
lien position securing the property.
    (i) To ensure that each Section 184 Guaranteed Loan holds a first 
lien position, the Tribe must enact an ordinance that either:
    (A) Provides for the satisfaction of the Section 184 Guaranteed Loan 
before any and all other obligations; or
    (B) Follows State law to determine the priority of liens against the 
property. If a Tribal jurisdiction spans two or more states, the State 
in which the property is located is the applicable State law.
    (ii) For lien to be considered valid on Trust Land, the lien must 
be:
    (A) Approved by the Tribe, and BIA as applicable; and
    (B) Recorded by the Tribe and/or BIA, as applicable.
    (5) Lease provisions for Trust Land. Where applicable, the lease 
provisions for Trust Land must meet the following requirements:
    (i) Tribes may use a HUD model lease for Section 184 Guaranteed Loan 
lending on Trust Land. The Tribe may make modifications to the HUD model 
lease, with the approval of HUD and, as applicable, BIA.
    (ii) Tribes may draft their own lease in compliance with Federal 
requirements and contain mandatory lease terms and language as 
prescribed in Section 184 Program Guidance, with approval of HUD and, as 
applicable, BIA. At a minimum the lease must:
    (A) Identify lessor;
    (B) Identify the lessee;
    (C) Provide a legal description of the land and identify the 
property address covered by the lease;

[[Page 787]]

    (D) The lease must have a minimum term of 50 years unless an 
extended term is approved by the Secretary. For refinances or lease 
transfers the lease must have a remaining term which exceeds the 
maturity date of the Loan by a minimum of ten years, or other period as 
prescribed by Section 184 Program Guidance.
    (E) The lease must be executed by all interested parties to be 
enforceable;
    (F) The Tribe shall require HUD consent for any lease termination or 
assignment of the lease when the Section 184 Guaranteed Loan is secured 
by the property.
    (G)(1) The lease must contain the following provision: ``In the case 
of a default on a Section 184 Guaranteed Loan:
    (i) The lessee may assign the lease and deliver possession of the 
leased premises, including any improvements thereon, to HUD; or
    (ii) The lessor may assign the lease and deliver possession of the 
leased premises, including any improvements thereon, to HUD when the 
Tribe has provided due process to lessee in compliance with Tribal law.
    (2) HUD may transfer this lease and the leased premises to a 
successor lessee if the successor lessee is another member of the Tribe 
or Tribal entity, as approved by the Tribe.''
    (H) Lease language as prescribed by Section 184 Program Guidance.
    (I) The lease must also provide that in the event of foreclosure, 
the lease will not be subject to any forfeiture or reversion and will 
not be otherwise subject to termination.



Sec.  1005.303  Tribal application.

    A Tribe shall submit an application on a form prescribed by HUD. The 
application must include a copy of the Tribe's foreclosure, eviction, 
lease, priority lien ordinances, all cross-referenced ordinances in 
those sections, and any other documents in accordance with Section 184 
Program Guidance.



Sec.  1005.305  Approval of Tribal application.

    HUD shall review applications under Sec.  1005.303 and where all 
requirements of Sec.  1005.301 are met, HUD shall provide written 
notification of the approval of the Tribe to participate in the Section 
184 Program. If HUD determines the application is incomplete, or the 
documents submitted do not comply with the requirements of this subpart 
or any process prescribed in Section 184 Program Guidance, HUD will work 
with the Tribe to cure the deficiencies before there is a denial of the 
application.



Sec.  1005.307  Tribal annual recertification.

    A Tribe shall recertify annually to HUD whether it continues to meet 
the requirements of this subpart, on a form and by a deadline prescribed 
by Section 184 Program Guidance. Recertification shall include Tribal 
certification of no changes to the Tribe's foreclosure, eviction, lease, 
and lien priority ordinances. The Tribe shall provide any updated 
contact information and similar information that may be required under 
Section 184 Program Guidance.



Sec.  1005.309  Tribal duty to report proposed changes and actual 
          changes.

    Based on the timeframe as prescribed by Section 184 Program 
Guidance, the Tribe must notify HUD of any proposed changes in the 
Tribe's foreclosure, eviction, lease, and lien priority ordinances or 
contact information. Tribes shall obtain HUD approval of the changes in 
the foreclosure, eviction, lease, and lien priority ordinances. HUD will 
provide written notification to the Tribe of HUD's review of the 
proposed ordinance changes and advise the Tribe whether the updated 
documents meet the requirements of this subpart.



Sec.  1005.311  HUD notification of any lease default.

    In cases where the lessee is in default under the lease for any 
reason, the lessor shall provide written notification to HUD within 30 
days of the lease default.



Sec.  1005.313  Tribal reporting requirements.

    The Tribe shall provide accurate reports and certifications to HUD, 
as may be prescribed by Section 184 Program Guidance.



                         Subpart D_Underwriting

                           Eligible Borrowers



Sec.  1005.401  Eligible Borrowers.

    (a) Eligible Borrowers. Eligible Borrowers are Indian Families, 
Tribes, or TDHEs.
    (b) Documentation. Indian Family Borrowers must document their 
status as American Indian or Alaska Native through evidence as 
prescribed by Section 184 Program Guidance.
    (c) Limitation on the number of loans. An Indian Family Borrower is 
limited to one Section 184 Guaranteed Loan, for primary residence, at a 
time unless the Indian Family Borrower is a non-occupant co-Borrower on 
one other Section 184 Guaranteed Loan. An Indian Family Borrower and/or 
non-occupant co-Borrower must meet all other applicable requirements of 
this subpart and any guidance provided in Section 184 Program Guidance.



Sec.  1005.403  Principal Residence.

    (a) Principal Residence. Means the dwelling where the Indian Family 
Borrower maintains as a permanent place of abode. An Indian Family 
Borrower may have only one Principal Residence at any one time.

[[Page 788]]

    (b) Occupancy requirement. An Indian Family Borrower must occupy the 
property as a Principal Residence. Borrowers who are a TDHE or a Tribe 
do not need to occupy the property as a Principal Residence and are not 
subject to the occupancy requirement.
    (c) Non-occupant co-Borrower. A co-Borrower who does not occupy the 
property as a principal resident is permitted and is not subject to 
paragraphs (a) and (b) of this section. A non-occupant co-Borrower must 
be related by blood, or an unrelated individual who can document 
evidence of a family-type, longstanding, and substantial relationship 
not arising out of the loan transaction. A non-occupant co-Borrower must 
meet all other applicable requirements of this subpart and any 
requirements as may be established in Section 184 Program Guidance.



Sec.  1005.405  Borrower residency status.

    (a) An eligible Borrower who is an Indian must be:
    (1) A U.S. citizen;
    (2) A lawful permanent resident alien; or
    (3) A non-permanent resident alien.
    (b) Documentation must be provided to the Direct Guarantee Lender to 
support lawful residency status as defined in the Immigration and 
Nationality Act, codified at 8 U.S.C. 1101, et seq.



Sec.  1005.407  Relationship of income to loan payments.

    (a) Adequacy of Borrower gross income. (1) All Borrowers must 
establish, in accordance with Section 184 Program Guidance, that their 
income is and will be adequate to meet:
    (i) The periodic payments required by the loan to be guaranteed by 
the Section 184 Program; and
    (ii) Other long-term obligations.
    (2) In cases where there is a non-occupant Co-Borrower, the 
occupying Borrower must meet a minimum qualifying threshold, in 
accordance with Section 184 Program Guidance.
    (b) Non-discrimination. Determinations of adequacy of Borrower 
income under this section shall be made in a uniform manner without 
regard to age, race, color, national origin, religion, sex (including 
gender identity and sexual orientation), familial status, disability, 
marital status, source of income of the Borrower, location of the 
property.



Sec.  1005.409  Credit standing.

    (a) A Borrower must have a general credit standing satisfactory to 
HUD. A Direct Guarantee Lender must not use a Borrower's credit score 
when evaluating the Borrower's credit worthiness. The Direct Guarantee 
Lender must analyze the Borrower's credit history and payment pattern to 
determine credit worthiness.
    (b) If a Borrower had a previous default on a Section 184 Guaranteed 
Loan which resulted in a Claim payment by HUD, the Borrower shall be 
subject to a 7-year waiting period or other period as may be prescribed 
by Section 184 Program Guidance.



Sec.  1005.411  Disclosure and verification of Social Security and 
          Employer Identification Numbers or Tax Identification Number.

    All Borrowers must meet applicable requirements for the disclosure 
and verification of Social Security, Employer Identification Numbers, or 
Tax Identification Numbers.

                           Eligible Properties



Sec.  1005.413  Acceptable title.

    To be considered acceptable title, a Section 184 Guaranteed Loan 
must be secured by an interest in real estate held in fee simple or 
other property interest on Trust Land. Where the title evidences a lease 
that is used in conjunction with the Section 184 Guaranteed Loan on 
Trust Land, the lease must comply with relevant provisions of Sec.  
1005.301.



Sec.  1005.415  Sale of property.

    (a) Owner of Record requirement. The property must be or have been 
purchased from the Owner of Record and the transaction may not involve 
or had not involved any sale or assignment of the sales contract.
    (b) Supporting documentation. The Direct Guarantee Lender shall 
obtain and submit to HUD documentation verifying that the seller is the 
Owner of Record as part of the application for a loan guarantee under 
the Section 184 Program. Documentation must conform with the 
requirements set out in Section 184 Program Guidance. This documentation 
may include, but is not limited to, a property ownership history report 
from the State or local government, a copy of the recorded deed or other 
HUD approved document issued by the Tribe, as provided by Section 184 
Program Guidance and the document evidences the property interest 
rights, as permitted by this subpart from the seller, or other 
documentation (such as a copy of a property tax bill, title commitment, 
or binder) demonstrating the seller's ownership.
    (c) Time restrictions on re-sales--(1) General. The eligibility of a 
property for a Loan guaranteed by HUD is dependent on the time that has 
elapsed between the date the seller acquired the property (based upon 
the date of settlement) and the date of execution of the sales contract 
that will result in the HUD guarantee (the re-sale date). The Direct 
Guarantee Lender shall obtain documentation verifying compliance with 
the time restrictions described in this paragraph and must submit this 
documentation to HUD as part of the application for the Section 184 
Guaranteed Loan, in accordance with Sec.  1005.501.

[[Page 789]]

    (2) Re-sales occurring 90 days or less following acquisition. If the 
re-sale date is 90 days or less following the date of acquisition by the 
seller, the property is not eligible under the Section 184 Program.
    (3) Re-sales occurring between 91 days and 180 days following 
acquisition. (i) If the re-sale date is between 91 days and 180 days 
following acquisition by the seller, the property is generally eligible 
under the Section 184 Program.
    (ii) However, HUD will require that the Direct Guarantee Lender 
obtain additional documentation if the re-sale price is 100 percent over 
the purchase price. Such documentation must include a second appraisal 
from a different appraiser. The Direct Guarantee Lender may also 
document its Loan file to support the increased value by establishing 
that the increased value results from the rehabilitation of the 
property.
    (iii) Additional documentation may be required, as prescribed by 
Section 184 Program Guidance.
    (4) Authority to address property re-sales occurring between 181 
days and 12 months following acquisition. (i) If the re-sale date is 
more than 181 days after the date of acquisition by the seller, but 
before the end of the twelfth month after the date of acquisition, the 
property is eligible under the Section 184 Program.
    (ii) However, HUD may require that the Direct Guarantee Lender 
provide additional documentation to support the re-sale value of the 
property if the re-sale price is 5 percent or greater than the lowest 
sales price of the property during the preceding 12 months (as evidenced 
by the contract of sale). At HUD's discretion, such documentation must 
include, but is not limited to, a second appraisal from a different 
appraiser. HUD may exclude re-sales of less than a specific dollar 
amount from the additional value documentation requirements.
    (iii) If the additional value documentation supports a value of the 
property that is more than 5 percent lower than the value supported by 
the first appraisal, the lower value will be used to calculate the 
maximum principal loan amount under Sec.  1005.443. Otherwise, the value 
supported by the first appraisal will be used to calculate the maximum 
principal loan amount.
    (iv) Additional value documentation may be prescribed by Section 184 
Program Guidance.
    (5) Re-sales occurring more than 12 months following acquisition. If 
the re-sale date is more than 12 months following the date of 
acquisition by the seller, the property is eligible under the Section 
184 Program.
    (d) Exceptions to the time restrictions on sales. The time 
restrictions on sales described in paragraph (b) of this section do not 
apply to:
    (1) Sales by HUD of real estate owned (REO) properties under 24 CFR 
part 291 and of single-family assets in revitalization areas pursuant to 
section 204 of the National Housing Act (12 U.S.C. 1710);
    (2) Sales by an agency of the United States Government of REO single 
family properties pursuant to programs operated by such agencies;
    (3) Sales of properties by Tribes, TDHEs, State, or local 
governments, or Eligible Nonprofit Organizations approved to purchase 
HUD REO single family properties at a discount with resale restrictions;
    (4) Sales of properties that were acquired by the sellers by death, 
devise, or intestacy;
    (5) Sales of properties purchased by an employer or relocation 
agency in connection with the relocation of an employee;
    (6) Sales of properties by Tribes, TDHEs, State and local government 
agencies; and
    (7) Only upon announcement by HUD through issuance of a notice, 
sales of properties located in areas designated by the President as 
federally declared disaster areas. The notice will specify how long the 
exception will be in effect.
    (8) HUD may approve other exceptions on a case-by-case basis.



Sec.  1005.417  Location of property.

    At the time a loan is guaranteed, the property must be for 
residential use under Tribal, State, or local law and be located within 
a Section 184 Approved Program Area.



Sec.  1005.419  Requirements for standard housing.

    (a) General standards. Each dwelling unit located on a property 
guaranteed under the Section 184 Program must:
    (1) Be decent, safe, sanitary, and modest in size and design;
    (2) Conform with International Building Code, applicable general 
construction standards for the region, or other code as prescribed by 
Section 184 Program Guidance;
    (3) Contain a heating system that:
    (i) Has the capacity to maintain a minimum temperature in the 
dwelling of 65 degrees Fahrenheit during the coldest weather in the 
area;
    (ii) Is safe to operate and maintain;
    (iii) Delivers a uniform distribution of heat; and
    (iv) Conforms to any applicable Tribal heating code, or if there is 
no applicable Tribal code, an appropriate local, State, or International 
Building Code, or other code as prescribed by Section 184 Program 
Guidance.
    (4) Contains a plumbing system that:
    (i) Uses a properly installed system of piping;
    (ii) Includes a kitchen sink and partitional bathroom with lavatory, 
toilet, and bath or shower; and
    (iii) Uses water supply, plumbing, and sewage disposal systems that 
conform to any applicable Tribal building code or, if there is

[[Page 790]]

no applicable Tribal code, the minimum building standards established by 
the appropriate local or State code, or the International Building Code, 
or other code as prescribed by Section 184 Program Guidance;
    (5) Contain an electrical system using wiring and equipment properly 
installed to safely supply electrical energy for adequate lighting and 
for operation of appliances that conforms to any applicable Tribal code 
or, if there is no applicable Tribal code, an appropriate local, State, 
or International Building Code, or other code as prescribed by Section 
184 Program Guidance;
    (6) Meets minimum square footage requirements and be not less than:
    (i) 570 square feet in size, if designed for a family of not more 
than 4 persons;
    (ii) 850 square feet in size, if designed for a family of not less 
than 5 and not more than 7 persons;
    (iii) 1020 square feet in size, if designed for a family of not less 
than 8 persons; or
    (iv) Current locally adopted standards for size of dwelling units, 
documented by the Direct Guarantee Lender.
    (v) Upon the written request of a Tribe, or TDHE, HUD may waive the 
minimum square footage requirements under paragraphs (a)(6)(i) through 
(iv) of this section.
    (7) Conform with the energy performance requirements for new 
construction established by HUD under section 526(a) of the National 
Housing Act (12 U.S.C. 1735f-4(a)).
    (b) Additional requirements. HUD may prescribe any additional 
requirements to permit the use of various designs and materials in 
housing acquired under this part.
    (c) One to four dwelling unit properties. Properties containing one 
to four dwelling units:
    (1) Must meet local zoning requirements;
    (2) For 2-4 dwelling unit properties, units may be attached or 
detached; and
    (3) Must have all dwelling unit(s) located on the property and 
included in the parcel legal description recorded under the loan.
    (d) Lead-based paint. The relevant requirements of the Lead-Based 
Paint Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential 
Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and 
implementing regulations at 24 CFR part 35, subparts A, B, H, J, K, M, 
and R shall apply.
    (e) Environmental review procedures. (1) The regulations in 24 CFR 
1000.20 apply to an environmental review for Trust Land and for fee land 
within an Indian reservation, and on fee land owned by the Indian Tribe 
outside of the Tribe's Indian reservation boundaries, in connection with 
a Loan guaranteed under this part. That section permits a Tribe to 
choose to assume environmental review responsibility.
    (2) Before HUD issues a commitment to guarantee any loan, or before 
HUD guarantees a loan if there is no commitment, the Tribe or HUD must 
comply with environmental review procedures to the extent applicable 
under 24 CFR part 58 or 50, as appropriate.
    (3) If the Loan involves proposed or new construction, HUD will 
require the Direct Guarantee Lender to submit a signed Builder's 
Certification of Plans, Specifications and Site (Builder's 
Certification). The Builder's Certification must be in a form prescribed 
by Section 184 Program Guidance and must cover:
    (i) Flood hazards;
    (ii) Noise;
    (iii) Explosive and flammable materials storage hazards;
    (iv) Runway clear zones/clear zones;
    (v) Toxic waste hazards;
    (vi) Other foreseeable hazards or adverse conditions (i.e., rock 
formations, unstable soils or slopes, high ground water levels, 
inadequate surface drainage, springs, etc.) that may affect the health 
and safety of the occupants or the structural soundness of the 
improvements.
    (4) The Builder's Certification must be provided to the appraiser 
for reference before the performance of an appraisal on the property.
    (f) Flood insurance--(1) Special Flood Hazard Areas. A property is 
not eligible for a Section 184 loan guarantee if a residential building 
and related improvements to the property are located within a Special 
Flood Hazard Area (SFHA) designated by a FEMA Flood Insurance Rate Map 
unless insurance under the National Flood Insurance Program (NFIP), or 
notwithstanding 24 CFR 58.6(a), private flood insurance in lieu of NFIP 
insurance is secured for the property.
    (2) Eligibility for new construction in SFHAs. If any portion of the 
dwelling, related structures or equipment essential to the value of the 
property and subject to flood damage is located within an SFHA, the 
property is not eligible for a Section 184 Guaranteed Loan unless the 
Direct Guarantee Lender obtains from FEMA a final Letter of Map 
Amendment (LOMA) or final Letter of Map Revision (LOMR) that removes the 
property from the SFHA; or obtains a FEMA National Flood Insurance 
Program Elevation Certificate (FEMA Form 086-0-33) prepared by a 
licensed engineer or surveyor. The elevation certificate must document 
that the lowest floor including the basement of the residential 
building, and all related improvements/equipment essential to the value 
of the property, is built at or above the 100-year flood elevation in 
compliance with the NFIP criteria, and flood insurance must be 
obtained., notwithstanding 24 CFR 58.6(a),
    (3) Required flood insurance amount. Where flood insurance is 
required under paragraph (f)(1) of this section, flood insurance, 
whether NFIP insurance or private flood insurance in lieu of NFIP, must 
be maintained for the

[[Page 791]]

life of the Section 184 Guaranteed Loan in an amount that is not less 
than the lessor of:
    (i) The project cost less the estimated land cost;
    (ii) The outstanding principal balance of the loan; or,
    (iii) For NFIP insurance only, the maximum amount available with 
respect to the property improvements;
    (4) Required documentation. The Direct Guarantee Lender must obtain 
a Life of Loan Flood Certification for all Properties. If applicable, 
the Direct Guarantee Lender must provide all eligibility documentation 
obtained under paragraph (e)(2) of this section.
    (g) Restrictions on property within Coastal Barrier Resources 
System. In accordance with the Coastal Barrier Resources Act, a property 
is not eligible for a Section 184 Loan Guarantee if the improvements are 
or are proposed to be located within the Coastal Barrier Resources 
System.
    (h) Airport hazards--(1) Existing Construction. If a property is 
Existing Construction and is located within a Runway Clear Zone (also 
known as a Runway Protection Zone) at a civil airport or within a Clear 
Zone at a military airfield, the Direct Guarantee Lender must obtain a 
Borrower's acknowledgement of the hazard.
    (2) New Construction. If a New Construction property is located 
within a Runway Clear Zone (also known as a Runway Protection Zone) at a 
civil airport or within a Clear Zone at a military airfield, the Direct 
Guarantee Lender must reject the property for loan guarantee. Properties 
located in Accident Potential Zone 1 (APZ 1) at a military airfield may 
be eligible for a Section 184 loan guarantee provided that the Direct 
Guarantee Lender determines that the property complies with Department 
of Defense guidelines.



Sec.  1005.421  Certification of appraisal amount.

    A Section 184 Guaranteed Loan must be accompanied by a sales 
contract satisfactory to HUD, executed by the seller, whereby the seller 
agrees that before any sale of the property, the seller will deliver to 
the purchaser of the property a certification of the appraisal, in a 
form satisfactory to HUD, setting forth the amount of the appraised 
value of the property.



Sec.  1005.423  Legal Restrictions on Conveyance.

    (a) Legal Restrictions on Conveyance means any provision in any 
legal instrument, law, or regulation applicable to the Borrower or the 
mortgaged property, including but not limited to a lease, deed, sales 
contract, declaration of covenants, declaration of condominium, option, 
right of first refusal, will, or trust agreement, that attempts to cause 
a conveyance (including a lease) made by the Borrower to:
    (1) Be void or voidable by a third party;
    (2) Be the basis of contractual liability of the Borrower for breach 
of an agreement not to convey, including rights of first refusal, pre-
emptive rights or options related to Borrower efforts to convey;
    (3) Terminate or subject to termination all or a part of the 
interest held by the Borrower in the property if a conveyance is 
attempted;
    (4) Be subject to the consent of a third party;
    (5) Be subject to limits on the amount of sales proceeds retainable 
by the seller; or
    (6) Be grounds for acceleration of the Guaranteed Loan or increase 
in the interest rate.
    (b) Section 184 Guaranteed Loans shall not be subject to any Legal 
Restrictions on Conveyance, except for restrictions in paragraphs (b)(1) 
through (4) of this section:
    (1) A lease or any other legal document that restricts the 
assignment of interest in properties held in trust or otherwise 
restricted to an eligible Indian Family.
    (2) A mortgage funded through tax-exempt bond financing and includes 
a due-on-sale provision in a form approved by HUD that permits the 
Direct Guarantee Lender to accelerate a mortgage that no longer meets 
Federal requirements for tax-exempt bond financing or for other reasons 
acceptable to HUD. A mortgage funded through tax-exempt bond financing 
shall comply with all form requirements prescribed under this subpart 
and shall contain no other provisions designed to enforce compliance 
with Federal or State requirements for tax-exempt bond financing.
    (3) A mortgaged property subject to protective covenants which 
restrict occupancy by, or transfer to, persons of a defined population 
if:
    (i) The restrictions do not have an undue effect on marketability as 
determined in the original plan.
    (ii) The restrictions do not constitute illegal discrimination and 
are consistent with the Fair Housing Act and all other applicable 
nondiscrimination laws under Tribal, Federal, State, or local law, where 
applicable.
    (4) HUD shall require that the previously approved restrictions 
automatically terminate if the lease or title to the mortgaged property 
is transferred by foreclosure, deed-in-lieu/lease-in-lieu of 
foreclosure, or if the loan is assigned to HUD.



Sec.  1005.425  Rental properties.

    (a) When a Borrower is an Indian Family. A Section 184 Guaranteed 
Loan may be used to purchase, construct, rehabilitate, or refinance a 
property, which may contain up to four dwelling units. The Borrower must 
occupy one unit on the property as a Principal Residence and may rent 
the additional units.

[[Page 792]]

    (b) When the Borrower is a Tribe or TDHE. There is no limit to the 
number of properties a Tribe or TDHE may purchase or own with a Section 
184 Guaranteed Loan(s) on or off Trust Land. However, the Tribe or TDHE 
must meet all applicable Section 184 program requirements.



Sec.  1005.427  Refinancing.

    (a) Refinance eligibility. HUD may permit a Borrower to refinance 
any qualified mortgage, including an existing Section 184 Guaranteed 
Loan, so long as the Borrower and property meet all Section 184 Program 
requirements.
    (b) Types of refinances. HUD may guarantee a Rate and Term 
refinance, a Streamline refinance, or a Cash-Out refinance, consistent 
with paragraphs (c) through (f) of this section.
    (c) General requirements. All types of refinances are subject to the 
following requirements:
    (1) The term of the refinancing may not exceed a term of 30 years.
    (2) The Borrower must have a payment history on the existing 
mortgage that is acceptable to HUD.
    (3) The Direct Guarantee Lender may not require a minimum principal 
amount to be outstanding on the loan secured by the existing mortgage.
    (4) If an Up-Front Loan Guarantee Fee was financed as part of the 
existing Section 184 Guaranteed Loan, no refund will be given. However, 
the maximum amount of the refinancing loan computed in accordance with 
Sec.  1005.443 may be increased by the amount of the Up-Front Loan 
Guarantee Fee associated with the new refinancing loan and exceed the 
applicable Section 184 Guaranteed Loan limit as established by HUD for 
an area pursuant to Sec.  1005.441.
    (5) The new loan must meet all other applicable Section 184 
requirements, including maximum loan to value ratios, as prescribed by 
Section 184 Program Guidance.
    (d) Rate and Term Refinance Transaction. (1) Rate and term refinance 
is the refinancing of an existing mortgage for the purpose of changing 
the interest rate or term, or both, of a loan without advancing new 
funds on the loan, with the exception of allowable closing costs.
    (2) A Rate and Term Refinance Transaction must meet the following 
requirements:
    (i) The new loan must be in an amount that does not exceed the 
lesser of the original principal amount of the existing mortgage; or the 
sum of the unpaid principal balance of the existing mortgage plus loan 
closing charges and allowable fees approved by HUD.
    (ii) The new loan must result in a reduction in regular monthly 
payments by the Borrower, except when refinancing a mortgage for a 
shorter term will result in an increase in the Borrower's regular 
monthly payments.
    (iii) The new Loan is not subject to paragraphs (d)(2)(i) and (ii) 
of this section for an existing mortgage used to construct the property 
and where the property has been completed for less than one year. The 
new loan must be in an amount not to exceed the unpaid principal balance 
plus loan closing charges and allowable fees approved by HUD, plus, at 
Borrower's option, additional construction costs paid in cash by the 
Borrower, that were not included in the original construction contract.
    (e) Streamline Refinance Transaction. Streamline Refinance 
Transaction refers to the refinance of an existing Section 184 
Guaranteed Loan requiring limited Borrower credit documentation and 
underwriting.
    (1) The new loan must be in an amount that does not exceed the 
unpaid principal balance of the existing Section 184 Guaranteed Loan.
    (2) The new loan with an appraisal may be in the amount equal to the 
unpaid principal balance of the existing mortgage plus Loan closing 
charges and allowable fees approved by HUD. The new loan must be subject 
to an appraisal.
    (f) Cash-out refinance transaction. (1) A Cash-out refinance 
transaction is when the new Loan is made for an amount larger than the 
existing mortgage's unpaid principal balance, utilizing the property's 
equity.
    (2) A Cash-out refinance Loan amount cannot exceed a maximum loan to 
value ratio, as established by HUD.
    (3) A Borrower may elect to receive a portion of equity in the form 
of cash in an amount up to a maximum allowed amount as prescribed by 
Section 184 Program Guidance.
    (4) All cash advances, except cash amounts to the Borrower, must be 
used for approved purposes in accordance with HUD and BIA requirements, 
and must be supported by verified documentation.
    (5) The Cash-out refinance must meet all other applicable Section 
184 Program requirements.



Sec.  1005.429  Eligibility of Loans covering manufactured homes.

    A Loan covering a manufactured home (as defined in 24 CFR part 
3280), shall be eligible for a Section 184 Guaranteed Loan when the 
following requirements have been met:
    (a) For manufactured homes located on a fee simple property. (1) A 
manufactured home, as erected on the property, must be installed in 
accordance with 24 CFR part 3286; conform with property standards under 
Sec.  1005.419; and shall have been constructed in accordance with 24 
CFR part 3280, as evidenced by the certification label.
    (2) The Loan shall cover the manufactured home(s) and site, shall 
constitute a loan on

[[Page 793]]

a property, and classified and taxed as real estate, as applicable.
    (3) In the case of a manufactured home which has not been 
permanently erected on a site for more than one year prior to the date 
of the application for the Loan Guarantee Certificate:
    (i) A manufactured home shall be erected on a site-built permanent 
foundation and shall be permanently attached thereto by anchoring 
devices adequate for all loads in accordance with 24 CFR part 3286. The 
towing hitch or running gear, which includes axles, brakes, wheels, and 
other parts of the chassis that operate only during transportation, 
shall have been removed. The finished grade level beneath the 
manufactured home shall be at least two feet above the 100-year return 
frequency flood elevation. The site, site improvements, and all other 
features of the property not addressed by the Manufactured Home 
Construction and Safety Standards shall meet or exceed applicable 
requirements of the Minimum Property Standards (MPS).
    (ii) The space beneath a manufactured home shall be enclosed by 
continuous foundation-type construction designed to resist all forces to 
which it is subject without transmitting forces to the building 
superstructure. The enclosure shall be adequately secured to the 
perimeter of the manufactured home and be constructed of materials that 
conform to MPS requirements for foundations.
    (iii) A manufactured home shall be braced and stiffened before it 
leaves the factory to resist racking and potential damage during 
transportation.
    (iv) Section 1005.433 is modified to the extent provided in this 
paragraph. Applications relating to the guarantee of loans under this 
paragraph (a) must be accompanied by an agreement in a form satisfactory 
to HUD executed by the seller or manufacturer or such other person as 
HUD may require, agreeing that in the event of any sale or conveyance of 
the property within a period of one year beginning with the date of 
initial occupancy, the seller, manufacturer, or such other person will, 
at the time of such sale or conveyance, deliver to the purchaser or 
owner of such property the manufacturer's warranty on a form prescribed 
by HUD. This warranty shall provide that the manufacturer's warranty is 
in addition to and not in derogation of all other rights and remedies 
the purchaser or owner may have, and a warranty in form satisfactory to 
HUD warranting that the manufactured home, the foundation, positioning, 
and anchoring of the manufactured home to its permanent foundation, and 
all site improvements are constructed in substantial conformity with the 
plans and specifications (including amendments thereof or changes and 
variations therein which have been approved in writing by HUD) on which 
HUD has based its valuation of the property. The warranty shall also 
expressly state that the manufactured home sustained no hidden damage 
during transportation, and if the manufactured home is a double-wide, 
that the sections were properly joined and sealed. The warranty must 
provide that upon the sale or conveyance of the property and delivery of 
the warranty, the seller, builder, or such other person will promptly 
furnish HUD with a conformed copy of the warranty establishing by the 
purchaser's receipt thereon that the original warranty has been 
delivered to the purchaser in accordance with this section.
    (4) In the case of a manufactured home which has been permanently 
erected on a site for more than one year prior to the date of the 
application for the Section 184 Guaranteed Loan:
    (i) A manufactured home shall be permanently anchored to and 
supported by permanent footings and shall have permanently installed 
utilities that are protected from freezing. The space beneath the 
manufactured home shall be a properly enclosed crawl space.
    (ii) The site, site improvements, and all other features of the 
property not addressed by 24 CFR parts 3280 and 3286 shall meet or 
exceed HUD requirements. The finished grade level beneath the 
manufactured home shall be at or above the 100-year return frequency 
flood elevation.
    (b) For manufactured homes located on Trust Land. Manufactured homes 
on Trust Land shall meet manufactured home installation standards 
pursuant to Tribal laws, if any. In the absence of Tribal laws, the 
requirements in paragraphs (a)(1), (3), and (4) of this section shall 
apply and other such requirements as established by Section 184 Program 
Guidance.



Sec.  1005.431  Acceptance of individual residential water purification.

    If a property does not have access to a continuing supply of safe 
and potable water as part of its plumbing system without the use of a 
water purification system, the requirements of this section apply. The 
Direct Guarantee Lender must provide appropriate documentation with the 
submission for a Section 184 Guaranteed Loan to address each of the 
requirements of this section.
    (a) Equipment. Water purification equipment must be approved by a 
nationally recognized testing laboratory acceptable to Tribal, State, or 
local health authority.
    (b) Certification by Tribal, State, or local health authority. A 
Tribal, State, or local health authority certification must be submitted 
to HUD, which certifies that a point-of entry or point-of-use water 
purification system is used for the water supply, the treatment 
equipment meets the requirements of the Tribal, State, or local health 
authority, and has been determined to meet

[[Page 794]]

Tribal, State, or local health authority quality standards for drinking 
water. If neither Tribal, State, nor local health authority standards 
are applicable, then quality shall be determined in accordance with 
standards set by the Environmental Protection Agency (EPA) pursuant to 
the Safe Drinking Water Act. (EPA standards are prescribed in the 
National Primary Drinking Water requirements, 40 CFR parts 141 and 142.)
    (c) Borrower notices and certification. (1) The prospective Borrower 
must have received written notification, when the Borrower signs a sales 
contract, that the property does not have access to a continuing supply 
of safe and potable water without the use of a water purification system 
to remain safe and acceptable for human consumption.
    (2) Prior to final ratification of the sales contract, the Borrower 
must have received:
    (i) A water safety report identifying specific contaminants in the 
water supply serving the property, and the related health hazard arising 
from the presence of those contaminants.
    (ii) A written good faith estimate of the maintenance and 
replacement costs of the equipment necessary to assure continuing safe 
drinking water.
    (3) The prospective Borrower must sign a certification, 
acknowledging the required notices have been received by the Borrower, 
in the form prescribed by Section 184 Program Guidance, at the time the 
application for mortgage credit approval is signed by the Direct 
Guarantee Lender. The required certification must be submitted to HUD 
with the request for the Loan Guarantee Certificate.



Sec.  1005.433  Builder warranty.

    (a) Applications relating to proposed construction must be 
accompanied by an agreement in a form satisfactory to HUD, executed by 
the seller or builder or such other person as HUD may require, and 
agreeing that in the event of any sale or conveyance of the property, 
within a period of one year beginning with the date of initial 
occupancy, the seller, builder, or such other person will, at the time 
of such sale or conveyance, deliver to the purchaser or owner of such 
property a warranty in a form satisfactory to HUD, warranting that the 
property is constructed in substantial conformity with the plans and 
specifications (including amendments thereof or changes and variations 
therein which have been approved in writing by HUD) on which HUD has 
based on the valuation of the property.
    (b) Such agreement must provide that upon the sale or conveyance of 
the property and delivery of the warranty, the seller, builder, or such 
other person will promptly furnish HUD with a confirmed copy of the 
warranty, establishing by the purchaser's receipt thereon that the 
original warranty has been delivered to the purchaser in accordance with 
this section.

                             Eligible Loans



Sec.  1005.435  Eligible collateral.

    A Section 184 Guaranteed Loan may be secured by any collateral 
authorized under existing Federal law or applicable State or Tribal law. 
The collateral must be sufficient to cover the amount of the loan, as 
determined by the Direct Guarantee Lender and approved by HUD. 
Improvements on Trust Lands may be considered as eligible collateral. 
Trust Land cannot be considered as part of the eligible collateral.



Sec.  1005.437  Loan provisions.

    (a) Loan form. (1) The Loan shall be in a form meeting the 
requirements of HUD. HUD may prescribe loan closing documents. For each 
case in which HUD does not prescribe loan closing documents, HUD shall 
require specific language in the loan which shall be uniform for every 
loan. HUD may also prescribe the language or substance of additional 
provisions for all loans, as well as the language or substance of 
additional provisions for use only in particular jurisdictions.
    (2) Each Loan shall also contain any provisions necessary to create 
a valid and enforceable security interest under Tribal law or the laws 
of the jurisdiction in which the property is located.
    (b) Loan multiples. A Loan, in whole dollars, shall be in an amount 
not to exceed the maximum principal loan amount (as calculated under 
Sec.  1005.443) for the area where the property is located.
    (c) Payments. The Loan payments shall:
    (1) Be due on the first of the month;
    (2) Contain complete Amortization provisions in accordance with 
Sec.  1005.453 and an Amortization period not in excess of the term of 
the loan; and
    (3) Provide for payments to principal and interest to begin no later 
than the first day of the month, 60 days after the date the loan is 
executed. For closings taking place within the first seven days of the 
month, interest credit is acceptable.
    (d) Maturity. The Loan shall have a repayment term of not more than 
the maximum period as approved by HUD and fully amortized.
    (e) Property standards. The Loan must be a first lien upon the 
property that conforms with the requirements for standard housing under 
Sec.  1005.419.
    (f) Disbursement. The entire principal amount of the Loan must have 
been disbursed to the Borrower or to the Borrower's creditors for the 
Borrower's account and with the Borrower's consent.
    (g) Disbursement for construction advances. HUD may guarantee loans 
from which advances will be made during construction

[[Page 795]]

when all applicable Section 184 Program requirements are met and all the 
following conditions are satisfied:
    (1) The Direct Guarantee Lender and Borrower execute a building Loan 
agreement, in the form prescribed by Section 184 Program Guidance, 
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 loan is held by the Direct Guarantee 
Lender in an interest-bearing account, trust, or escrow for the benefit 
of the Borrower, pending advancement to the Borrower or Borrower's 
creditors as provided in the building loan agreement;
    (4) The loan shall bear interest on the amount advanced to the 
Borrower or the Borrower's creditors and on the amount held in an 
account or trust for the benefit of the Borrower.
    (h) Changes to the Loan Agreement. Notwithstanding paragraph (g)(2) 
of this section, changes to the building loan Agreement must be approved 
and documented by the Direct Guarantee Lender prior to the construction 
advance.
    (i) Documentation. Direct Guarantee Lender must submit a 
construction completion package to HUD, as prescribed in Section 184 
Program guidance.
    (j) Prepayment privilege. The Loan must contain a provision 
permitting the Borrower to prepay the Loan in whole or in part at any 
time. The Loan may not provide for the payment of any fee or penalty on 
account of such prepayment.



Sec.  1005.439  Loan lien.

    (a) First lien. A Borrower must establish that, after the loan 
offered for guarantee has been recorded, the property will be free and 
clear of all liens other than such loan, and that there will not be 
outstanding any other unpaid obligations contracted in connection with 
the loan transaction or the purchase of the property, except obligations 
that are secured by property or collateral owned by the Borrower 
independently of the property.
    (b) Junior lien. The property may be subject to a junior lien held 
by a Tribe, Direct Guarantee Lender, TDHE, Federal, State, local 
government, or an Eligible Nonprofit Organization. Where applicable, a 
junior lien when intended to be utilized in conjunction with a Section 
184 loan, must be evaluated in the Section 184 underwriting process by 
the Direct Guarantee underwriter in accordance with Section 184 Program 
Guidance. In cases where a junior lien is recorded after the Section 184 
Loan Guarantee Certificate is issued, the junior lien must comply with 
this section.
    (1) Periodic payments, if any, shall be collected monthly and be 
substantially the same;
    (2) The monthly Loan payments for the Section 184 Guaranteed Loan 
and the junior lien shall not exceed the Borrower's reasonable ability 
to pay, as determined by HUD;
    (3) The sum of the principal amount of the Section 184 Guaranteed 
Loan and the junior lien shall not exceed the loan-to-value limitation 
applicable to the Section 184 Program, and shall not exceed the loan 
limit for the area, except as otherwise permitted by HUD;
    (4) The repayment terms shall not provide for a balloon payment 
before ten years unless approved by HUD;
    (5) The junior lien must become due and payable on sale or 
refinancing of the secured property covered by the Section 184 
Guaranteed Loan, unless otherwise approved by HUD; and
    (6) The junior lien shall contain a provision permitting the 
Borrower to prepay the junior lien in whole or in part at any time and 
shall not require a prepayment penalty.
    (c) Junior liens to reduce Borrower monthly payments. With prior HUD 
acceptance, the property may be subject to a junior lien advanced to 
reduce the Borrower's monthly payments on the Section 184 Guaranteed 
Loan following the date it is guaranteed, if the junior lien meets the 
following requirements:
    (1) The junior lien shall not provide for any payment of principal 
or interest until the property securing the junior lien is sold or the 
Section 184 Guaranteed Loan is refinanced, at which time the junior lien 
shall become due and payable.
    (2) The junior lien shall not provide for any payment of principal 
or interest so long as the occupancy requirements are met; and, where 
applicable, shall provide for forgiveness of the junior lien amount at 
the end of the term of the junior lien.
    (d) Junior liens related to tax-exempt bond financing and low-income 
housing tax credits. HUD approval shall be required when Borrower seeks 
to encumber property with a junior lien pursuant to Sec.  1005.423(b).



Sec.  1005.441  Section 184 Guaranteed Loan limit.

    The Section 184 Guaranteed Loan limit is the level set by HUD for 
the Section 184 Approved Program Area and is based upon the location of 
the property. The limit that is in effect on the date the Section 184 
Program case number is issued in accordance with Sec.  1005.445 shall 
apply, regardless of the closing date. The limit shall be revised 
periodically by HUD and published in Section 184 Program guidance.



Sec.  1005.443  Loan amount.

    (a) Minimum required investment. The Borrower is required to make a 
minimum investment in the property. This investment must come from the 
Borrower's own funds, gifts, or Tribal, State, or local funds awarded

[[Page 796]]

to the Borrower. The minimum investment in the property is the 
difference between the sales price and the base loan amount.
    (b) Calculating base loan amount. (1) The base loan amount is 
determined by calculating:
    (i) 97.75 percent of the appraised value of the property or the 
Acquisition Cost, whichever is less; or
    (ii) 98.75 percent of the lesser of the appraised value or sales 
price when the appraised value or sales price is $50,000 or less.
    (2) The base loan amount cannot exceed the Section 184 Guaranteed 
Loan limits established under Sec.  1005.441.
    (c) Maximum principal loan amount. The maximum principal loan amount 
is the base loan amount and the Up-Front Loan Guarantee Fee. The Section 
184 Guaranteed Loan limit may only be exceeded by the amount of the Up-
Front Loan Guarantee Fee.
    (d) Minimum principal loan amount. A Direct Guarantee Lender may not 
require a minimum loan amount for a Section 184 Guaranteed Loan.



Sec.  1005.445  Case numbers.

    (a) Section 184 case numbers may only be obtained by a Direct 
Guarantee Lender.
    (b) To obtain a case number, the Direct Guarantee Lender must:
    (1) Have an active loan application from a Borrower(s) with an 
identified property;
    (2) Provide evidence of borrower eligibility, as prescribed in Sec.  
1005.401(a);
    (3) Verify that the property is located in a Section 184 Approved 
Program Area;
    (4) Confirm that the Loan does not exceed the Section 184 Loan 
limit; and
    (5) Submit Loan specific information as prescribed in Section 184 
Program Guidance.
    (c) Case numbers are automatically cancelled after a period as 
identified in Section 184 Program Guidance, unless a Firm Commitment is 
issued, or an extension is granted by HUD in accordance with Section 184 
Program Guidance prior to the expiration of the case number.



Sec.  1005.447  Maximum age of Loan documents.

    Documents reviewed at underwriting and at loan closing may not be 
older than the 120 days, or another time period prescribed by Section 
184 Program Guidance. Documents whose validity for underwriting purposes 
is not affected by the passage of time, such as divorce decrees or tax 
returns, are not subject to time limitations.



Sec.  1005.449  Qualified mortgage.

    A Section 184 Guaranteed Loan, except for mortgage transactions 
exempted under 15 U.S.C. 1639c(b)(3)(ii), is afforded safe harbor as a 
qualified mortgage that meets the ability-to-repay requirements in 15 
U.S.C. 1639c(a).



Sec.  1005.451  Agreed interest rate.

    The loan shall bear interest at the rate agreed upon by the Direct 
Guarantee Lender and the Borrower and determined by HUD to be 
reasonable. The agreed upon interest rate may not exceed the rate 
generally charged in the area for mortgage loans not guaranteed or 
insured by any agency or instrumentality of the Federal Government, or a 
rate determined by HUD, whichever is lower. The agreed upon interest 
rate must not take into consideration a Borrower's credit score in 
accordance with Sec.  1005.409 and must not be based on risk-based 
pricing.



Sec.  1005.453  Amortization provisions.

    The loan must contain complete Amortization provisions satisfactory 
to HUD, requiring payments due on the first day of each month by the 
Borrower. The sum of the principal and interest payments in each month 
shall be substantially the same.

                              Underwriting



Sec.  1005.455  Direct guarantee underwriting.

    (a) Underwriter due diligence. A Direct Guarantee Lender shall 
exercise the same level of care which it would exercise in obtaining and 
verifying information for a Loan in which the Direct Guarantee Lender 
would be entirely dependent on the property as security to protect its 
investment. Direct Guarantee Lender procedures that evidence such due 
diligence shall be incorporated as part of the quality control plan 
required under Sec.  1005.219. Compliance with HUD-prescribed 
underwriting guidelines shall be the minimum standard of due diligence 
in underwriting the Loans. Failure to comply with HUD-prescribed 
underwriting guidelines may result in sanctions in accordance with 
Sec. Sec.  1005.905 and 1005.907.
    (b) Evaluating the Borrower(s) qualifications. The Direct Guarantee 
Lender shall evaluate the Borrower's credit characteristics, the 
adequacy and stability of the Borrower's income to meet the periodic 
payments under the loan and all other obligations, the adequacy of the 
Borrower's available assets to close the transaction, the Borrower's 
management capacity and grant performance, if applicable, and render an 
underwriting decision in accordance with applicable regulations, 
policies, and procedures.
    (c) Assumption. Applications for the assumption of an existing 
Section 184 Guaranteed Loan shall be underwritten using the same 
Borrower eligibility and underwriting standards in accordance with this 
subpart.



Sec.  1005.457  Appraisal.

    (a) A Direct Guarantee Lender shall have the property appraised in 
accordance with all applicable Federal requirements, including but not 
limited to the Uniform Standards of Professional Appraisal Practice,

[[Page 797]]

Equal Credit Opportunity Act (15 U.S.C. 1691-1691f), and the Fair 
Housing Act (42 U.S.C. 3601-19). HUD may establish alternative 
requirements to Uniform Standards of Professional Appraisal Practice, 
when necessitated by location and availability of an appraiser, and 
publish such alternative requirements in Section 184 Program Guidance.
    (b) A Direct Guarantee Lender must select an appraiser identified on 
the Federal Housing Administration Appraiser Roster, compiled in 
accordance with 24 CFR part 200, subpart G. The Direct Guarantee Lender 
shall not discriminate on the basis of race, color, religion, sex 
(including gender identity and sexual orientation), disability, familial 
status, national origin, or age in the selection of an appraiser. HUD 
may establish guidance regarding the alternatives to the use of an 
appraiser identified on the Federal Housing Administration Appraiser 
Roster, when necessitated by a rural or remote location and the 
availability of an appraiser.
    (c) A Direct Guarantee Lender and an appraiser must ensure that an 
appraisal and related documentation satisfy Federal Housing 
Administration, Fannie Mae, or Freddie Mac appraisal requirements, and 
both bear responsibility for the quality of the appraisal in satisfying 
such requirements.
    (d) A Direct Guarantee Lender that submits, or causes to be 
submitted, an appraisal or related documentation that does not satisfy 
requirements under paragraphs (a) through (d) of this section may be 
subject to sanctions by HUD pursuant to Sec. Sec.  1005.905 and 
1005.907.
    (e) The validity period of appraisals is 180 days or as provided by 
Section 184 Program Guidance.
    (f) Where the initial appraisal report will be more than 180 days at 
closing, an appraisal update may be performed to extend the appraisal 
validity period prior to closing, in accordance with Section 184 Program 
Guidance. The updated appraisal is valid for one year after the 
effective date of the initial appraisal report; and
    (g) The appraisal shall meet other guidance as prescribed in Section 
184 Program Guidance.



Sec.  1005.459  Loan submission to HUD for endorsement.

    (a) Deadline for submission. Within 60 days after the date of 
closing the loan, a Direct Guarantee Lender must submit an endorsement 
case binder to HUD, in accordance with Sec.  1005.503.
    (b) Late submission. If the endorsement case binder is submitted 
past 60 days, the Direct Guarantee Lender must include, as part of the 
case binder, a late endorsement request with supporting documentation, 
affirming:
    (1) The loan is not currently in default;
    (2) All escrow accounts for taxes, hazard insurance, and monthly 
Loan Guarantee Fees are current;
    (3) Neither the Direct Guarantee Lender nor Servicer provided the 
funds to bring or keep the loan current or to bring about the appearance 
of acceptable payment history; and
    (4) Notwithstanding paragraph (b)(3) of this section, with prior 
approval from HUD, Direct Guarantee Lender or Servicer may provide funds 
to bring or keep the loan current.



Sec.  1005.461  HUD issuance of Firm Commitment.

    HUD may underwrite and issue a Firm Commitment when it is in the 
interest of HUD.



                    Subpart	E_Closing and Endorsement

                                 Closing



Sec.  1005.501  Direct Guarantee Lender closing requirements.

    The Direct Guarantee Lender shall close the loan in accordance with 
the following:
    (a) Chain of title/interest. (1) For fee simple Properties, the 
Direct Guarantee Lender must obtain evidence of all prior ownership 
within 12 months of the case number assignment date. The Direct 
Guarantee Lender must review the evidence of prior ownership to 
determine any undisclosed Identity of Interest transactions.
    (i) If an Identity of Interest is discovered, the Direct Guarantee 
Lender must review for any possible Conflict of Interest.
    (ii) As a requirement of closing, all Borrowers must execute a 
Section 184 Borrower's Certification, addressing any Identity of 
Interest and Conflict of Interest.
    (2) For Trust Land transactions, the requirements for the 
determination of ownership title interest shall be prescribed by HUD in 
Section 184 Program Guidance.
    (b) Title/Title Status Report. The Direct Guarantee Lender must 
ensure that all objections to title binder/initial certified Title 
Status Report have been cleared, and any discrepancies have been 
resolved, to ensure that the Section 184 Guaranteed Loan will be in 
first security interest position.
    (c) Closing in compliance with Direct Guarantee Lender approval. The 
Direct Guarantee Lender must instruct the settlement agent to close the 
Section 184 Guaranteed Loan on the same terms or on the same assumptions 
in which it was underwritten and approved.
    (d) Closing in the Direct Guarantee Lender's name. A Section 184 
Guaranteed Loan must close in the name of the Direct Guarantee Lender 
issuing the underwriting approval.
    (e) Required HUD documents at closing. The Direct Guarantee Lender 
must use the forms and language as prescribed in Section 184 Program 
Guidance.

[[Page 798]]

    (f) Projected escrow. The Direct Guarantee Lender must establish an 
escrow account in accordance with Sec.  1005.717 and the Real Estate 
Settlement Procedures Act and any other escrow requirements as 
prescribed under applicable Tribal and Federal laws and regulations.
    (g) Closing costs and fees. The Direct Guarantee Lender may charge 
the Borrower reasonable and customary fees in accordance with Sec.  
1005.515.
    (h) Closing date. The closing date must occur before the expiration 
of the Firm Commitment.
    (i) Per diem interest and interest credits. The Direct Guarantee 
Lender may collect per diem interest from the closing date to the date 
Amortization begins. Alternatively, the Direct Guarantee Lender may 
begin Amortization up to 7 days prior to the closing date and provide a 
per diem interest credit. Any per diem interest credit may not be used 
to meet Borrower's minimum required investment. Per diem interest must 
be computed using a factor of 1/365th of the annual rate.
    (j) Authorization of Tribal notification in the event of default. At 
closing and on a form provided by HUD, the Borrower must elect whether 
to authorize the Direct Guarantee Lender or Servicer to notify the Tribe 
in the event of a default, as prescribed in the Section 184 Program 
Guidance.
    (k) Signatures. Direct Guarantee Lender must ensure that the note, 
security instrument, and all closing documents are signed by the 
required parties.
    (l) Other requirements. Direct Guarantee Lender shall close the loan 
in accordance with any applicable Tribal, State, or Federal 
requirements. Direct Guarantee Lenders must execute any other documents 
as may be required by applicable Tribal, Federal, or State law.



Sec.  1005.503  Contents of endorsement case binder.

    The Direct Guarantee Lender's endorsement case binder shall be 
submitted in a format as prescribed by HUD and contain the documents 
meeting the requirements of Sec.  1005.501 and any other documents 
supporting the Direct Guarantee Lender's underwriting determination.



Sec.  1005.505  Payment of Upfront Loan Guarantee Fee.

    The Direct Guarantee Lender, shall provide evidence of the 
remittance of the Upfront Loan Guarantee Fee, as required under Sec.  
1005.607, in accordance with a process provided by HUD in Section 184 
Program Guidance.



Sec.  1005.507  Borrower's payments to include other charges and escrow 
          payments.

    (a) The Direct Guarantee Lender must include in the Section 184 
Guaranteed Loan monthly payment the following charges and escrow 
payments:
    (1) The ground rents, if any, when the Tribe or TDHE does not have 
an existing withholding or payment policy in place;
    (2) Annual Loan Guarantee Fee, as prescribed in Sec.  1005.607, if 
any;
    (3) The estimated amount of all taxes;
    (4) Special assessments, if any;
    (5) Flood insurance premiums, if flood insurance is required;
    (6) Fire and other hazard insurance premiums, except master policy 
premiums payable to a condominium association or a Tribe and paid 
directly by the Borrower:
    (7) Other charges as allowed in Section 184 Program Guidance.
    (b) The Section 184 Guaranteed Loan shall further provide that such 
payments shall be held by the Direct Guarantee Lender in a manner 
satisfactory to HUD for the purpose of paying such ground rents, taxes, 
assessments, and insurance premiums before the same become delinquent, 
for the benefit and account of the Borrower. The Section 184 Guaranteed 
Loan must also make provisions for adjustments in case the estimated 
amount of such taxes, assessments, and insurance premiums shall prove to 
be more, or less, than the actual amount thereof so paid by the 
Borrower. Such payments shall be held in an escrow subject to Sec.  
1005.717.
    (c) The Borrower shall not be required to pay premiums for fire or 
other hazard insurance which protects only the interests of the Direct 
Guarantee Lender, or for life or disability income insurance, or fees 
charged for obtaining information necessary for the payment of property 
taxes. The foregoing does not apply to charges made or penalties exacted 
by the taxing authority, except that a penalty assessed, or interest 
charged, by a taxing authority for failure to timely pay taxes or 
assessments shall not be charged by the Direct Guarantee Lender to the 
Borrower if the Direct Guarantee Lender had sufficient funds in escrow 
for the account of the Borrower to pay such taxes or assessments prior 
to the date on which penalty or interest charges are imposed.



Sec.  1005.509  Application of payments.

    All monthly payments to be made by the Borrower to the Servicer 
shall be added together, and the aggregate amount shall be paid by the 
Borrower each month in a single payment by the Borrower, in accordance 
with the loan documents. The Servicer shall apply the Borrower's funds 
in accordance with Sec.  1005.715.



Sec.  1005.511  Late fee.

    When the monthly Section 184 Guaranteed Loan payment is 15 or more 
days in arrears, the Servicer may collect from Borrower a late fee of up 
to four percent of the overdue payment of principal and interest, or any

[[Page 799]]

other limit as established by HUD through public notice with an 
opportunity for comment. The late fee provision must appear on the note 
executed at closing.



Sec.  1005.513  Borrower's payments when Section 184 Guaranteed Loan is 
          executed.

    The Borrower must pay to the Direct Guarantee Lender, upon execution 
of the Section 184 Guaranteed Loan, where applicable, the:
    (a) One-time Up-Front Loan Guarantee Fee or any portion payable 
pursuant to Sec.  1005.603; and
    (b) All other applicable monthly charges pursuant to Sec.  1005.507, 
including the Annual Loan Guarantee Fee pursuant to Sec.  1005.607 
covering the period from the closing date to the due date of the first 
installment payment under the Section 184 Guaranteed Loan.



Sec.  1005.515  Charges, fees, or discounts.

    (a) The Direct Guarantee Lender must ensure that all fees charged 
and disclosure requirements at closing to the Borrower comply with all 
applicable Tribal, Federal, State, and local laws.
    (b) The Direct Guarantee Lender may collect from the Borrower the 
following charges, fees, or discounts at closing:
    (1) A charge to compensate the Direct Guarantee Lender for expenses 
incurred in originating and closing the Loan. HUD may establish 
limitations on the amount of any such charge in Section 184 Program 
Guidance.
    (2) Reasonable and customary amounts, but not more than the amount 
actually paid by the Direct Guarantee Lender, for any of the following 
items:
    (i) Recording fees and recording taxes or other charges incident to 
recordation;
    (ii) Credit report;
    (iii) Survey, if required by Direct Guarantee Lender or Borrower;
    (iv) Title examination;
    (v) Title insurance, if any;
    (vi) Fees paid to an appraiser or inspector approved by HUD for the 
appraisal and inspection, if required, of the property;
    (vii) Reasonable and customary charges in the nature of discounts; 
and
    (viii) Interest calculations in accordance with Sec.  1005.501(i).
    (ix) Such other reasonable and customary charges as may be 
authorized by HUD.
    (c) All charges, fees or discounts are subject to review by HUD 
after endorsement.



Sec.  1005.517  Certificate of nondiscrimination by the Direct Guarantee 
          Lender.

    (a) Where applicable, a Direct Guarantee Lender shall certify to HUD 
as to each of the following:
    (1) That neither the Direct Guarantee Lender, nor anyone authorized 
to act for the Direct Guarantee Lender, will refuse to sell, after the 
making of a bona fide offer, or refuse to negotiate for the sale 
otherwise make unavailable or deny the property covered by the Section 
184 Guaranteed Loan to any eligible purchaser or discriminate in making 
a loan or engaging in a residential real estate-related transaction (as 
defined in 42 U.S.C. 3605) because of age, race, color, religion, sex 
(including gender identity and sexual orientation), disability, familial 
status, or national origin, source of income of the Borrower, location 
of the property, or because the Borrower exercised any right under the 
Consumer Credit Protection Act, except as provided by law.
    (2) That any restrictive covenant, other than permissible 
restrictions on Trust Land, on such property relating to race, color, 
religion, sex (including gender identity and sexual orientation), 
disability, familial status, or national origin is hereby illegal, 
unenforceable, or void.
    (b) That civil action for preventative relief may be brought by the 
Attorney General in any appropriate U.S. District Court against any 
person responsible for a violation of this certification.

                      Endorsement and Post-Closing



Sec.  1005.519  Creation of the contract.

    The loan shall be a Section 184 Guaranteed Loan from the date of the 
issuance of a Loan Guarantee Certificate. The Direct Guarantee Lender is 
thereafter bound by the regulations in this subpart with the same force 
and to the same extent as if a separate contract had been executed 
relating to the Section 184 Guaranteed Loan, including the provisions of 
the regulations in this subpart and 12 U.S.C. 1715z-13a.



Sec.  1005.521  Pre-endorsement review and requirements.

    Direct Guarantee Lender must complete a pre-endorsement review of 
the endorsement case binder. This review must be conducted by staff not 
involved in the originating, processing, or underwriting of the Loan. 
This review must also confirm that the loan was underwritten by an 
approved Direct Guarantee Lender. The endorsement case binder must 
contain all documentation relied upon by the Direct Guarantee Lender to 
justify its decision to approve the Loan in accordance with subpart D of 
this part. Upon finalizing the pre-endorsement review, the Direct 
Guarantee Lender must certify that all required documents are submitted 
and meet the requirements of Sec.  1005.503.



Sec.  1005.523  HUD pre-endorsement review.

    (a) Direct Guarantee Lender shall submit to HUD within 60 days after 
the date of the closing of the Loan, or such additional time as 
permitted by HUD, the endorsement case binder.

[[Page 800]]

    (b) Upon submission by a Direct Guarantee Lender of the endorsement 
case binder containing those documents required by Sec.  1005.503, HUD 
will review the documents to ensure that the Loan meets all statutory, 
regulatory, and administrative requirements, including but not limited 
to:
    (1) There is no fee, late charge, or interest due to HUD;
    (2) The Loan was not in default when submitted for the Loan 
Guarantee Certificate, unless otherwise approved by HUD, or if submitted 
for guarantee more than 60 days after the date of closing, the loan 
shows an acceptable payment history; and
    (3) The loan was underwritten by an approved Direct Guarantee 
Lender.
    (c) Upon review, if HUD determines the loan to meet program 
requirements, HUD will issue a Loan Guarantee Certificate. If HUD 
determines the loan is ineligible, HUD will provide the Direct Guarantee 
Lender with a written determination and specify any available corrective 
actions that may be available. If there is information indicating that 
any certification or required document is false, misleading, or 
constitutes fraud or misrepresentation on the part of any party, or that 
the loan fails to meet a statutory or regulatory requirement, HUD will 
conduct a complete audit of the endorsement case binder. Repeated 
submission of deficient endorsement case binders may subject the Direct 
Guarantee Lender to sanctions or civil money penalties pursuant to 
Sec. Sec.  1005.905 and 1005.907.



Sec.  1005.525  Loan Guarantee Certificate.

    (a) HUD shall issue a Loan Guarantee Certificate as evidence of the 
guarantee when HUD completes a review of the Direct Guarantee Lender's 
endorsement case binder and determines the Loan complies with all 
applicable Section 184 Program requirements. HUD's issuance of the Loan 
Guarantee Certificate does not preclude HUD from conducting post-
endorsement reviews under Sec.  1005.527, seeking indemnification under 
Sec.  1005.529, or imposing sanctions from originating Direct Guarantee 
Lender, Holder and/or Servicer under Sec. Sec.  1005.905 and 1005.907.
    (b) HUD may issue a Loan Guarantee Certificate for a loan involving 
a security interest in Trust Land before HUD receives the required 
trailing documents from BIA, where applicable, if the Direct Guarantee 
Lender agrees to indemnify HUD. The indemnification agreement between 
HUD and the Direct Guarantee Lender will terminate only upon receipt of 
the Trailing Documents in a form and manner acceptable to HUD. Trailing 
Documents may include the following documents:
    (1) A final certified TSR that identifies that the BIA or Tribe 
approved and recorded the mortgage instrument and residential lease 
related to the Section 184 Loan, as applicable;
    (2) A certified true copy of the recorded mortgage instrument;
    (3) A certified true copy of the recorded lease, if applicable;
    (4) A certified true copy of the recorded executed mortgage release 
documents for all prior mortgages identified on the initial certified 
TSR, if applicable; and
    (5) A certified true copy of any BIA approved and executed 
subordination agreements;
    (c) The Loan Guarantee Certificate is conclusive evidence of the 
eligibility of the Loan for guarantee under this part. Such evidence 
will be incontestable in the hands of the bearer and the full faith and 
credit of the United States is pledged to the payment of amounts agreed 
to be paid by HUD as security for such obligations.
    (d) This section may not be construed to preclude HUD from 
conducting a post-endorsement review. With respect to the original 
Direct Guarantee Lender, HUD may establish defenses against the original 
Direct Guarantee Lender based on fraud or material misrepresentation. 
This section may not be construed to bar HUD from establishing partial 
defenses to the amount payable on the Section 184 Guaranteed Loan.



Sec.  1005.527  Post-endorsement review.

    (a) HUD may review an endorsement case binder at any time, including 
but not limited to a quality control review of all documents in Sec.  
1005.503.
    (b) Within three business days of a request by HUD, the Direct 
Guarantee Lender must make available for review, or forward to HUD, 
copies of the identified endorsement case binder(s).
    (c) A Direct Guarantee Lender's failure to provide HUD access to any 
files may be grounds for sanctions in accordance with Sec. Sec.  
1005.905 and 1005.907.
    (d) Based on HUD's review under paragraph (a) of this section, if 
HUD determines that:
    (1) The Loan does not satisfy the requirements of subpart F of this 
part;
    (2) The Direct Guarantee Lender or Sponsored Entity committed fraud 
or a material misrepresentation; or
    (3) The Direct Guarantee Lender or Sponsored Entity had known or 
should have known of fraud or a material misrepresentation in violation 
of this part, such that the Loan should not have been approved by the 
Direct Guarantee Lender;
    (e) HUD may request indemnification from the originating Direct 
Guarantee Lender and impose sanctions on the Direct Guarantee Lender and 
Sponsored Entity pursuant to Sec. Sec.  1005.905 and 1005.907.

[[Page 801]]



Sec.  1005.529  Indemnification.

    (a) When HUD conducts a pre- or post-endorsement review and HUD 
determines there is an underwriting deficiency where the Section 184 
Guaranteed Loan should not have been approved, HUD may request the 
originating Direct Guarantee Lender to indemnify HUD.
    (b) Underwriting deficiencies with respect to the Section 184 
Guaranteed Loan may include but is not limited to fraud or 
misrepresentation by the originating Direct Guarantee Lender.
    (c) HUD will notify the originating Direct Guarantee Lender in 
writing when an indemnification is required.
    (d) Under an indemnification, the originating Direct Guarantee 
Lender must reimburse HUD when a subsequent Holder files a Claim and HUD 
suffers a financial loss.
    (e) If the originating Direct Guarantee Lender fails to indemnify 
HUD, HUD may impose sanctions pursuant to Sec. Sec.  1005.905 and 
1005.907.



               Subpart F_Section 184 Guaranteed Loan Fees



Sec.  1005.601  Scope and method of payment.

    HUD shall charge a one-time Section 184 Up-Front Loan Guarantee Fee, 
and a recurring Annual Loan Guarantee Fee where applicable, which will 
be collected by a Direct Guarantee Lender or Servicer as required by 
Sec. Sec.  1005.603 and 1005.607 and remitted to HUD as required by 
Sec. Sec.  1005.605 and 1005.609. The fees collected by the Direct 
Guarantee Lender or Servicer on behalf of HUD shall be payable to HUD in 
cash, in the manner prescribed by Section 184 Program Guidance.



Sec.  1005.603  Up-Front Loan Guarantee Fee.

    At settlement, the Direct Guarantee Lender will collect from the 
Borrower a one-time Up-Front Loan Guarantee Fee in an amount not 
exceeding three percent of the principal obligation of the Section 184 
Guaranteed Loan. The amount will be set by HUD through a notice in the 
Federal Register.



Sec.  1005.605  Remittance of Up-Front Loan Guarantee Fee.

    The Direct Guarantee Lender shall remit the Up-Front Loan Guarantee 
Fee to HUD within 15 days after settlement, using the payment system as 
prescribed by Section 184 Program Guidance. The Direct Guarantee Lender 
shall provide an account reconciliation of the Up-Front Loan Guarantee 
Fee in the time and manner as may be prescribed in Section 184 Program 
Guidance.



Sec.  1005.607  Annual Loan Guarantee Fee.

    (a) Percentage of Annual Loan Guarantee Fee. Where applicable the 
Servicer must collect a monthly installment for the Annual Loan 
Guarantee Fee from the Borrower in an amount not exceeding one percent 
of the principal obligation of the loan. The percentage used to 
calculate the Annual Loan Guarantee Fee amount will be prescribed by 
notice in the Federal Register.
    (b) Payment of Annual Loan Guarantee Fee. Where applicable, the 
Section 184 Guaranteed Loan shall require monthly payments by the 
Borrower to the Servicer in an amount equal to one-twelfth of the Annual 
Loan Guarantee Fee, payable by the Servicer to HUD in accordance with 
the Amortization Schedule issued with the Loan approval.
    (c) Amortization Schedule. The amount of the Borrower's monthly 
installment will be based on an Amortization Schedule as prescribed in 
Section 184 Program Guidance.



Sec.  1005.609  Remittance of Annual Loan Guarantee Fee.

    (a) Where applicable, monthly installment of the Annual Loan 
Guarantee Fee shall be due and payable to HUD no later than the 15th day 
of each month, beginning in the month in which the Borrower is required 
to make the first monthly loan payment. Monthly payments of the Annual 
Loan Guarantee Fee must be submitted using a HUD prescribed payment 
system, as prescribed by Section 184 Program Guidance.
    (b) Where applicable, subject to the exception in paragraph (d) of 
this section, the Servicer shall continue to collect from the Borrower, 
as established by a schedule provided in Sec.  1005.607(b) and pay HUD 
the monthly installment of the Annual Loan Guarantee Fee, without taking 
into account Borrower's default, loss mitigation, prepayments, 
agreements to postpone payments, or agreements to recast the loan. Any 
changes to the Annual Loan Guarantee Fee will be published in the 
Federal Register.
    (c) Where applicable, the Servicer shall adjust the monthly 
installment of the Annual Loan Guarantee Fee in accordance the schedule 
provided in Sec.  1005.607(b). Notwithstanding paragraph (a) of this 
section, the Servicer shall refund to the Borrower any overpayment of 
Annual Loan Guarantee Fees collected from the Borrower, due to a delayed 
adjustment of the Loan Guarantee Fee, within 30 days of the overpayment. 
Failure to refund the Borrower within this timeframe will result in a 
penalty in accordance with Sec.  1005.611.
    (d) Where applicable, the Servicer shall cease collecting the 
monthly installment of the Annual Loan Guarantee Fee when the amortized 
loan to value ratio equals an amount less than the Annual Loan Guarantee 
Fee termination threshold loan-to-value ratio as established by the 
Secretary in the Federal Register and established by a schedule provided 
in Sec.  1005.607(b). Notwithstanding paragraph (a) of this section, the 
Servicer shall refund to the Borrower any overpayment of Annual Loan 
Guarantee

[[Page 802]]

Fees collected when the loan-to-value ratio falls below the threshold 
established by the Secretary in the Federal Register, within 30 days of 
the overpayment. Failure to refund the Borrower within this timeframe 
will result in penalty in accordance with Sec.  1005.611.
    (e) Annual Loan Guarantee Fees paid, if any, in accordance with the 
schedule provided in Sec.  1005.607(b) shall not be refundable to the 
Borrower.
    (f) Where applicable, if the Servicer submits the monthly 
installment of the Annual Loan Guarantee Fee to HUD after the due date, 
the amount paid must include the required payment of penalties pursuant 
to Sec.  1005.611(c).
    (g)(1) When transfer of servicing occurs in accordance with Sec.  
1005.707:
    (i) The schedule of monthly installment payments provided in Sec.  
1005.607(b) must be provided to the new Servicer; and
    (ii) The account reconciliation of the Upfront Guarantee Fee and 
Annual Loan Guarantee Fee due and remitted to HUD must be provided to 
the new Servicer.
    (2) The new Servicer is responsible for compliance with all 
requirements of this part, including, but not limited to, any 
outstanding Annual Loan Guarantee Fee payments and penalties owed to 
HUD, or any Annual Loan Guarantee Fee adjustments or refunds due to the 
Borrower.
    (3) If a transfer results in missed monthly installment(s) of the 
Annual Loan Guarantee Fee, the new Servicer shall pay the overdue 
installment(s) in a lump sum to HUD within 30 days of acquisition of the 
loan and include any applicable penalties in accordance with Sec.  
1005.611.
    (h) The Direct Guarantee Lender shall provide an account 
reconciliation of the Annual Loan Guarantee Fee in the time and manner 
as may be prescribed in Section 184 Program Guidance.



Sec.  1005.611  HUD imposed penalties.

    (a) Prohibited penalty pass through. The Holder, Direct Guarantee 
Lender or Servicer shall not recover or attempt to recover from the 
Borrower any penalties HUD imposes upon the Holder, Direct Guarantee 
Lender or Servicer.
    (b) Failure of Direct Guarantee Lender to timely remit Up-Front loan 
guarantee to HUD. (1) The Direct Guarantee Lender shall include a late 
fee if the Up-Front Loan Guarantee Fee is not remitted to HUD within 15 
days of settlement.
    (2) Failure to remit the Up-Front Loan Guarantee Fee, with a late 
fee where applicable, may result in HUD rejecting the endorsement or 
Claim case binder.
    (c) Failure of Servicer to timely remit the monthly installment of 
the Annual Loan Guarantee Fee to HUD. (1) The Servicer shall include a 
late fee for each monthly installment of the Annual Loan Guarantee Fee 
remitted to HUD after the15th of each month.
    (2) Failure to remit monthly installment of the Annual Loan 
Guarantee Fee to HUD, with late fee, may result in HUD rejecting the 
Claim case binder, where applicable.
    (d) Failure of Servicer to adjust the amount of the Annual Loan 
Guarantee Fee. (1) When a Servicer fails to make the annual adjustment 
to the amount of the monthly installment of the Annual Loan Guarantee 
Fee in accordance with Sec.  1005.607(b), the Holder shall, in addition 
to reimbursing the Borrower as required in Sec.  1005.609(c), pay HUD a 
penalty for each month the Servicer collects an overpayment of the 
Annual Loan Guarantee Fee.
    (2) The Servicer shall provide annual written notice, in the manner 
prescribed by Section 184 Program Guidance to the Borrower prior to the 
scheduled change in the monthly installment of the Annual Loan Guarantee 
Fee, with such advance notice as required by 12 CFR 1026.9, or other 
applicable Federal law.
    (e) Failure to cease collection of the Annual Loan Guarantee Fee. 
When a Servicer fails to cease collection of the monthly installment of 
the Annual Loan Guarantee Fee after the loan to value ratio reaches the 
threshold described in Sec.  1005.609(d), the Holder shall, in addition 
to reimbursing the Borrower as required in Sec.  1005.609(d), pay HUD a 
penalty for each month the Servicer collects an overpayment of the 
Annual Loan Guarantee Fee.
    (f) Late fee and penalty amounts. Late fees and penalty amounts 
under this section shall be prescribed by HUD in Section 184 Program 
Guidance.



                           Subpart G_Servicing

            Servicing Section 184 Guaranteed Loans Generally



Sec.  1005.701  Section 184 Guaranteed Loan servicing generally.

    This subpart identifies the servicing requirements for Section 184 
Guaranteed Loans. All Section 184 Guaranteed Loans must be serviced by 
Section 184 approved Servicers, including Section 184 Guaranteed Loans 
owned by Holders. Holders are responsible for all servicing actions, 
including the acts of its Servicers. Servicers are responsible for their 
actions in servicing Section 184 Guaranteed Loans, including actions 
taken on behalf of, or at the direction of, the Holder. Failure to 
comply with this subpart may result in the reduction of the Claims 
amount in accordance with subpart H of this part or may subject Holder 
and/or Servicer to sanctions pursuant to subpart I. Holders and 
Servicers must comply with all applicable Tribal, Federal, and State 
requirements related to mortgage servicing.

[[Page 803]]



Sec.  1005.703  Servicer eligibility and application process.

    (a) To be eligible to service Section 184 Guaranteed Loans, a Direct 
Guarantee Lender, Non-Direct Guarantee Lender or other financial 
institution must be an approved mortgage Servicer for FHA or another 
agency of the Federal Government.
    (b) All eligible Direct Guarantee Lenders, Non-Direct Guarantee 
Lenders and other financial institutions must apply to become a Servicer 
in accordance with Section 184 Program Guidance.
    (c) Direct Guarantee Lenders servicing Section 184 Guaranteed Loans 
prior to June 18, 2024 may request an exemption from paragraph (a) of 
this section.



Sec.  1005.705  Servicer approval.

    (a) Final approval. Approval is signified by:
    (1) Written notification from HUD that the Direct Guarantee Lender, 
Non-Direct Guarantee Lender, or other financial institution is approved 
as a Servicer under the Section 184 Program; and
    (2) Agreement by the Direct Guarantee Lender, Non-Direct Guarantee 
Lender, or other financial institution to comply with requirements of 
this part and any applicable Federal, State, or Tribal law requirement.
    (b) Limitations on approval. The Direct Guarantee Lender, Non-Direct 
Guarantee Lender or other financial institution may only be approved to 
service Section 184 Guaranteed Loans in areas where the Direct Guarantee 
Lender, Non-Direct Guarantee Lender or financial institution is 
licensed, as applicable.
    (c) Denial of participation. A Direct Guarantee Lender, Non-Direct 
Guarantee Lender or other financial institution may be denied approval 
to become a Servicer if HUD determines the Direct Guarantee Lender, Non-
Direct Guarantee Lender or other financial institution does not meet the 
qualification requirements of Sec.  1005.703. HUD will provide written 
notification of denial and of the right to submit a written appeal in 
accordance with Sec.  1005.909.



Sec.  1005.707  Responsibility for servicing.

    (a) Program compliance. (1) The Servicer must participate in HUD 
training on the Section 184 program.
    (2) A Servicer shall provide written notification to HUD of any 
changes that affect qualifications under this subpart within a timeframe 
prescribed by Section 184 Program Guidance.
    (b) Sub-Servicer. (1) If a Servicer elects to use a sub-servicer, 
the sub-servicer must be an approved Servicer under Sec.  1005.705.
    (2) Servicers are responsible for the actions of their sub-
servicers. The Holder and Servicer shall remain fully responsible to HUD 
for Section 184 Guaranteed Loan servicing in accordance with this 
subpart, and the actions of a sub-Servicer shall be considered the 
actions of the Servicer.
    (c) Change in Servicer. (1) When the responsibility of servicing a 
Section 184 Guaranteed Loan is transferred from one Servicer to another, 
the acquiring Servicer shall assume responsibility for compliance with 
this part, this includes addressing any noncompliance by the former 
Servicer.
    (2) The former Servicer must notify HUD of the change in Servicer 
within 15 days of the transfer, or timeframe as prescribed by Section 
184 Program Guidance.
    (3) The acquiring Servicer shall provide notice to the Borrower of 
the transfer of servicing in accordance with applicable Tribal, Federal 
and/or State laws that may require such notice.
    (4) HUD will hold the acquiring Servicer responsible for errors, 
omissions, and unresolved HUD review findings on the part of the former 
Servicer (or former sub-Servicer), discovered after the transfer is 
reported even when the errors or omissions took place prior to the 
transfer.
    (d) Transfer of servicing rights. The Servicer must submit written 
notification to HUD, within 15 days of transfer, or other time period as 
prescribed by Section 184 Program Guidance, of the transfer of servicing 
rights through the acquisition or sale of any Section 184 Guaranteed 
Loans.
    (e) Reporting requirements. (1) On a date and manner established by 
Section 184 Program Guidance, the Servicer shall report to HUD the 
status of all Section 184 Guaranteed Loans in its Servicing portfolio.
    (2) Where applicable, Servicer shall provide an Annual Loan 
Guarantee Fee reconciliation to the Borrower and HUD, in a manner and 
timeframe as prescribed by Section 184 Program Guidance.
    (3) Servicer must comply with any other reporting requirements under 
Sec.  1005.903.
    (4) The Servicer's failure to submit required reports on time may 
subject the Holder and/or Servicer to sanctions and civil money 
penalties pursuant to Sec. Sec.  1005.905 and 1005.907.
    (f) Business change reporting. Within a timeframe and on a form as 
prescribed by Section 184 Program Guidance, the Servicer shall provide 
written notification to HUD of:
    (1) All changes in the Servicer's legal structure, including, but 
not limited to, mergers, acquisitions, terminations, name, location, 
control of ownership, and character of business;
    (2) Staffing changes related to servicing Section 184 Guaranteed 
Loans; and
    (3) Any sanctions by another supervising entity.
    (4) Failure to report changes within the timeframe prescribed in 
Section 184 Program Guidance may result in sanctions in accordance with 
Sec. Sec.  1005.905 and 1005.907.

[[Page 804]]

    (g) Annual recertification. (1) All Servicers are subject to annual 
recertification on a date and manner as prescribed by Section 184 
Program Guidance. With each annual recertification, Servicers must 
submit updated contact information, current FHA or another Federal 
agency recertification status, and other pertinent documents as 
prescribed by Section 184 Program Guidance.
    (2) Servicers may request an extension of the recertification 
deadline in accordance with Section 184 Program Guidance.
    (3) HUD will review the annual recertification submission and may 
request any further information required to determine recertification. 
HUD will provide written notification of approval to continue 
participation in the Section 184 Program or denial. A denial may be 
appealed pursuant to Sec.  1005.909.
    (4) If an annual recertification is not submitted by the reasonable 
deadline as prescribed in Section 184 Program Guidance, HUD may subject 
the Servicer to sanctions under Sec.  1005.907.
    (h) Program ineligibility. Servicer may be deemed ineligible for 
Section 184 Program participation when HUD becomes aware that the entity 
or any officer, partner, director, principal, manager or supervisor of 
the entity was:
    (1) Suspended, debarred, under a limited denial of participation 
(LDP), or otherwise restricted under 2 CFR part 2424, or under similar 
procedures of any other Federal agency
    (2) Indicted for, or have been convicted of, an offense during the 
7-year period preceding the date of the application for licensing and 
registration, or at any time preceding such date of the application, if 
such indictment or conviction reflects adversely upon the integrity, 
competency, or fitness to meet the responsibilities of the Servicer to 
participate in the title I or title II programs of the National Housing 
Act, or Section 184 Program;
    (3) Found to have unresolved findings as a result of HUD or other 
governmental audit, investigation, or review;
    (4) Engaged in business practices that do not conform to generally 
accepted practices of prudent Servicers or that demonstrate 
irresponsibility;
    (5) Convicted of, or have pled guilty or nolo contendere to, a 
felony related to participation in the real estate or mortgage Loan 
industry during the 7-year period preceding the date of the application 
for licensing and registration, or at any time preceding such date of 
application, if such felony involved an act of fraud, dishonesty, or a 
breach of trust or money laundering;
    (6) In violation of provisions of the Secure and Fair Enforcement 
Mortgage Licensing Act of 2008 (12 U.S.C. 5101, et seq.) or any 
applicable provision of Tribal or State law; or
    (7) In violation of 12 U.S.C. 1715z-13a or any other requirement 
established by HUD.
    (i) Records retention. Servicers must maintain the servicing case 
binder for a period of three years beyond the date of satisfaction or 
maturity date of the Loan, whichever is sooner. However, where there is 
a payment of Claim, the Claim case binder must be retained for a period 
of at least five years after the final Claim has been paid. Section 184 
Program Guidance shall prescribe additional records retention time 
depending on the circumstances of the Claim.
    (ii) [Reserved]



Sec.  1005.709  Providing information to Borrower and HUD.

    (a) Servicers shall provide Section 184 Guaranteed Loan information 
to Borrowers and arrange for individual loan consultation on request. 
The Servicer must establish written procedures and controls to assure 
prompt responses to inquiries. At a minimum, the Servicer must provide 
contact information to the Borrower in accordance with applicable 
Tribal, Federal and/or State laws, including:
    (1) A written address a Borrower can use to request and submit 
information; and
    (2) A toll-free telephone number a Borrower can use to verbally ask 
questions and seek information.
    (b) All Borrowers must be informed of the system available for 
obtaining answers to loan inquiries, the Servicer's office from which 
needed information may be obtained and reminded of the system at least 
annually.
    (c) Within 30 days after the end of each calendar year, the Servicer 
shall furnish to the Borrower a statement of the interest paid, and of 
the taxes disbursed from the escrow account during the preceding year.
    (d) At the Borrower's request, the Servicer shall furnish a 
statement of the escrow account sufficient to enable the Borrower to 
reconcile the account.
    (e) Each Servicer shall deliver to the Borrower a written notice of 
any transfer of the Servicing of the Section 184 Guaranteed Loan. The 
notice must be sent in accordance with applicable Tribal, Federal and/or 
State laws. Servicers must respond to Borrower inquiries pertaining to 
the transfer of Servicing in accordance applicable Tribal, Federal and/
or State laws.
    (f) Servicers must respond to HUD's written or electronic requests 
for information concerning individual accounts within three business 
days, or other timeframe established by Section 184 Program Guidance, or 
the deadline placed by other applicable law, whichever is sooner.



Sec.  1005.711  Assumption and release of personal liability.

    (a) Assumption. Section 184 Guaranteed Loans may be fully assumed by 
an eligible

[[Page 805]]

substitute Borrower(s), based on the following:
    (1) Creditworthiness. At least one person acquiring ownership must 
be determined to be creditworthy under subpart D of this part. If the 
Servicer is approved as a Direct Guarantee Lender, the Servicer performs 
a creditworthiness determination under Sec.  1005.409. If the Servicer 
or Holder is not approved as a Direct Guarantee Lender, then the 
Servicer shall request a creditworthiness determination in a manner 
prescribed by Section 184 Program Guidance.
    (2) Trust Lands. (i) As applicable, a lease approved by HUD, the 
Tribe or the BIA in the new Borrower's name is required. Servicers shall 
not proceed to closing on the assumption until and unless the Tribe has 
consented to assign the property interest to the new Borrower at 
closing. Where applicable, a final certified Title Status Report 
documenting the assignment of the lease or recordation of a new lease is 
required.
    (ii) Where applicable, the lease may contain other conveyance 
restrictions. Servicer must review the lease for conveyance restrictions 
and ensure the lease complies with Sec.  1005.303(b)(2).
    (iii) Other requirements prescribed in Section 184 Program Guidance.
    (b) Fees. The Servicer may collect from the Borrower the following 
fees and costs:
    (1) A charge to compensate the Direct Guarantee Lender for 
reasonable and necessary expenses incurred as part of the assumption 
review and processing. HUD may establish limitations on the amount of 
any such charge.
    (2) Reasonable and customary costs, but not more than the amount 
actually paid by the Direct Guarantee Lender, for any of the following 
items: credit report, verification of employment and the execution of 
additional release of liability forms.
    (3) Additional fees and costs over and above the assumption fee and 
reasonable and customary costs cannot be assessed.
    (c) Release of liability. At closing, the Servicer must release the 
existing Borrower from any personal liability on a form approved by HUD; 
the eligible and approved substitute Borrower assumes personal liability 
of the Section 184 Guaranteed Loan when the release is executed.
    (d) Modification of Loan Guarantee Certificate. Upon completion of 
an assumption, the Servicer shall submit copies of the documentation 
required in this section to HUD, in a manner and form prescribed by HUD. 
HUD will review the assumption for compliance prior to issuing a revised 
Loan Guarantee Certificate.



Sec.  1005.713  Due-on-sale provision.

    A Section 184 Guaranteed Loan shall contain a due-on-sale clause 
permitting acceleration, as prescribed by Section 184 Program Guidance. 
The Servicer shall promptly advise HUD of any prohibited sale or other 
transfer of the property or leasehold interest that occurs. The Servicer 
must request approval from HUD to accelerate the Loan when any 
prohibited sale or transfer occurs. If acceleration is permitted by 
applicable Tribal, Federal, or State law, the Servicer shall certify as 
to the legal authority as part of the request for approval, in a form 
and manner prescribed by Section 184 Program Guidance. Within 30 days of 
receipt of HUD approval to accelerate, the Servicer shall notify the 
Borrower of default and acceleration.



Sec.  1005.715  Application of Borrower payments.

    (a) Servicer shall comply with Sec.  1005.509 with respect to the 
application of Borrower payments. The Servicer shall apply the payments 
in the following order:
    (1) Escrow items, including monthly payments of the Annual Loan 
Guarantee Fee, rents, taxes, special assessments, and if required, flood 
insurance, fire, and other hazard insurance premiums;
    (2) Interest accrued on the Section 184 Guaranteed Loan;
    (3) Principal of the Section 184 Guaranteed Loan; and
    (4) Late charges, if permitted under the terms of the Section 184 
Guaranteed Loan and subject to such conditions as HUD may prescribe.
    (b) Partial Payments shall be applied in accordance with Sec.  
1005.723.



Sec.  1005.717  Administering escrow accounts.

    (a) The Servicer shall not use escrow funds for any purpose other 
than that for which they were received. It shall segregate escrow 
commitment deposits, work completion deposits, and all periodic payments 
received on account of leasehold rents, taxes, assessments, monthly 
payments of Annual Loan Guarantee Fee, and insurance charges or 
premiums, and shall deposit such funds with one or more financial 
institutions in a special account or accounts that are fully insured by 
the Federal Deposit Insurance Corporation or the National Credit Union 
Administration. Leasehold rents on Trust Lands may require additional 
escrow segregation by Servicers, as may be prescribed in Section 184 
Program Guidance.
    (b) It is the Servicer's responsibility to ensure timely escrow 
disbursements and their proper application. Servicers must establish 
controls to ensure that accounts payable from the escrow account or the 
information needed to pay such accounts payable is obtained on a timely 
basis. Penalties for late payments for accounts payable from the escrow 
account must not be charged to the Borrower or HUD unless the Servicer 
can show that the penalty was the direct result

[[Page 806]]

of the Borrower's error or omission. The Servicer shall further comply 
with applicable Tribal, Federal, or State laws, including method of 
calculations related to escrow, the methods of collection and 
accounting, and the payment of the accounts payable for which the money 
has been escrowed.
    (c) The Servicer shall not initiate foreclosure for escrow account 
shortfalls resulting from advances made pursuant to this section.
    (d) When a Loan Guarantee Certificate is terminated voluntarily or 
due to Borrower's prepayment, in total satisfaction of the Section 184 
Guaranteed Loan, amounts in the escrow account designated to pay any HUD 
required program fees shall be remitted to HUD in a form approved by HUD 
at the time of the required reporting related to the voluntary 
termination or prepayment. When a Section 184 Guaranteed Loan is prepaid 
in full, amounts held in escrow for taxes, hazard insurance, or rents, 
if applicable, that are not yet due or incurred, shall be released to 
the Borrower.



Sec.  1005.719  Fees and costs after endorsement.

    (a) After endorsement, the Servicer may collect reasonable and 
customary fees and costs from the Borrower only as provided below. The 
Servicer may collect these fees or costs from the Borrower only to the 
extent that the Servicer is not reimbursed for such fees or costs by 
HUD. Permissible fees and costs include:
    (1) Late fee in accordance with Sec.  1005.511;
    (2) Costs for processing or reprocessing a check returned as 
uncollectible (where bank policy permits, the Servicer must deposit a 
check for collection a second time before assessing an insufficient 
funds charge);
    (3) Fees for processing a change of ownership of the property;
    (4) Fees and costs for processing an assumption of the Section 184 
Guaranteed Loan in connection with the sale or transfer of the property;
    (5) Costs for processing a request for credit approval incurred in 
the course of processing an assumption or substitute Borrower;
    (6) Costs for substitution of a hazard insurance policy at other 
than the expiration of term of the existing hazard insurance policy;
    (7) Costs for modification of the Section 184 Guaranteed Loan 
requiring recordation of the agreement, including those for extension of 
term or re-amortization;
    (8) Fees and costs for processing a partial release of the property;
    (9) Attorney's and trustee's fees and costs actually incurred 
(including the cost of appraisals and advertising) when a Section 184 
Guaranteed Loan has been referred to foreclosure counsel and 
subsequently the Section 184 Guaranteed Loan is reinstated. No 
attorney's fee and cost that exceeds the reasonable limits prescribed by 
Section 184 Program Guidance may be collected from the Borrower, unless 
approved by HUD;
    (10) A trustee's fee, if the security instrument provides for 
payment of such a fee, for execution of a satisfactory release when the 
deed of trust is paid in full;
    (11) Where permitted by the security instrument, attorney's fees and 
costs actually incurred in the defense of any suit or legal proceeding 
wherein the Servicer shall be made a party thereto by reason of the 
Section 184 Guaranteed Loan. No attorney's fee may be charged for the 
services of the Servicer's staff attorney or other employee;
    (12) property preservation costs incurred, subject to reasonable 
limits prescribed by Section 184 Program Guidance, or otherwise approved 
by HUD;
    (13) Fees permitted for providing a beneficiary notice under 
applicable Tribal, Federal and/or State law, if such a fee is not 
otherwise prohibited by the applicable law(s); and
    (14) Such other reasonable and customary costs as may be authorized 
by HUD.
    (b) Reasonable and customary fees must be based upon the actual cost 
of the work performed, including out-of-pocket expenses. HUD may 
establish maximum fees and costs which are reasonable and customary in 
different geographic areas. Except as provided in this part, no fee or 
costs shall be based on a percentage of either the face amount of the 
Section 184 Guaranteed Loan or the unpaid principal balance due.



Sec.  1005.721  Enforcement of late fees.

    (a) A Servicer shall not commence foreclosure when the Borrower's 
only default is his or her failure to pay a late fee(s).
    (b) A late fee that may be assessed under the Section 184 Guaranteed 
Loan but unpaid by the Borrower shall not justify Servicer's return of 
Borrower's payment. However, if the Servicer thereafter notifies the 
Borrower of his obligation to pay a late fee, such a fee may be deducted 
from any subsequent payment or payments submitted by the Borrower or on 
his behalf if this is not inconsistent with the terms of the Section 184 
Guaranteed Loan. Partial Payments shall be treated as provided in Sec.  
1005.723.
    (c) A payment submission may be returned because of failure to 
include a late fee only if the Servicer notifies the Borrower before 
imposition of the charge of the amount of the monthly payment, the date 
when the late fee will be imposed, and either the amount of the late 
charge or the total amount due when the late fee is included.
    (d) During the 60-day period beginning on the effective date of 
transfer of the Servicing of a Section 184 Guaranteed Loan, a late fee 
shall not be assessed. If a payment is received by the prior Servicer on 
or before the due date (including any applicable grace period allowed by 
the Section 184 Guaranteed

[[Page 807]]

Loan), no late fees shall be assessed by the new Servicer.
    (e) A Servicer shall not assess a late fee for failure to pay a late 
fee, as prohibited under 12 CFR 1026.36.



Sec.  1005.723  Partial Payments.

    (a) A Servicer must have a written policy on how it handles Partial 
Payments, in compliance with this section and that policy shall be 
readily available to the public.
    (b) Upon receipt of a Partial Payment, a Servicer must provide the 
Borrower a copy of the Servicer's written Partial Payment policy and a 
letter explaining how it will handle the received Partial Payment. The 
Servicer may:
    (1) Accept a Partial Payment and either apply it to the Borrower's 
account;
    (2) Identify it with the Borrower's account number and hold it in a 
trust account pending disposition; or
    (3) Return the Partial Payment(s) to the Borrower.



Sec.  1005.725  Handling prepayments.

    Notwithstanding the terms of the Section 184 Guaranteed Loan, the 
Servicer shall accept a prepayment at any time and in any amount. 
Monthly interest on the Section 184 Guaranteed Loan must be calculated 
on the actual unpaid principal balance of the Section 184 Guaranteed 
Loan as of the date the prepayment is received, and not as of the next 
payment due date.



Sec.  1005.727  Substitute Borrowers.

    Where an original Borrower requests the substitution of an existing 
Borrower on the Section 184 Guaranteed Loan:
    (a) A Servicer who is Non-Direct Guarantee Lender or financial 
institution must obtain HUD approval for the substitution. A remaining 
original Borrower must be maintained and continue to be personally 
liable for the Section 184 Guaranteed Loan, notwithstanding any 
discharge entered in accordance with applicable Tribal, Federal, or 
State law.
    (b) A Servicer who is a Direct Guarantee Lender may, subject to 
limitations established by HUD, approve an eligible substitute Borrower 
that meets the requirements for Section 184 Guaranteed Loans which they 
own or service, without specific approval from HUD. The remaining 
original Borrower must be maintained and continue to be personally 
liable for the Section 184 Guaranteed Loan, notwithstanding any 
discharge entered in accordance with applicable Tribal, Federal, or 
State law.

             Servicing Default Section 184 Guaranteed Loans



Sec.  1005.729  Section 184 Guaranteed Loan collection action.

    A Servicer shall take prompt action to collect amounts due from 
Borrowers to minimize the number of accounts in default status. The 
Servicer must exhaust all reasonable possibilities of collection, 
including assessing the Borrower's financial circumstances for loss 
mitigation options in accordance with Sec.  1005.739. No Servicer shall 
commence foreclosure, assign the loan to HUD, or acquire title to a 
property until the requirements of this subpart have been completed.



Sec.  1005.731  Default notice to Borrower.

    The Servicer shall provide notice to the Borrower as prescribed by 
applicable Tribal, Federal, or State law.



Sec.  1005.733  Loss mitigation application, timelines, and appeals.

    (a) Servicer response to loss mitigation application. Within five 
days after the Servicer receives the Borrower's loss mitigation 
application, the Servicer must, in writing:
    (1) Acknowledge receipt of the application;
    (2) Determine if the application is complete or incomplete;
    (3) If incomplete, notify the Borrower which documentation is 
required and missing, and that submission of the missing documents is 
required no later than fourteen days from the date of the response to 
provide missing documents to the Servicer. If the Borrower does not 
timely submit the requested documents, the Servicer must initiate live 
contact with the Borrower.
    (b) Servicer timeframe for evaluating complete loss mitigation 
application. Within fourteen days of receipt of a complete application 
from Borrower, the Servicer must evaluate the application.
    (c) Notification of Servicer determination. The Servicer shall 
provide written notification:
    (1) Informing the Borrower of all available loss mitigation options;
    (2) Encouraging the Borrower to review all available loss mitigation 
options and to contact the Servicer with any questions;
    (3) Encouraging Borrowers, when feasible, to consider pursuing 
simultaneous loss mitigation options, to the extent it is offered by the 
Servicer;
    (4) Informing the Borrower that if no loss mitigation option is 
elected or if all elected loss mitigation options fail, the Servicer may 
proceed with Tribal notice under Sec.  1005.757(a) or First Legal Action 
at 180 days of default in accordance with Sec.  1005.757 or Sec.  
1005.761; and
    (5) Informing the Borrower that, upon First Legal Action or the 
assignment of the Section 184 Guaranteed Loan to HUD, the

[[Page 808]]

Servicer may no longer offer or authorize a pre-foreclosure sale as an 
alternative to foreclosure, and that the primary alternative to 
foreclosure shall be a deed-in-lieu/lease-in-lieu of foreclosure, 
subject to applicable Tribal, Federal, or State law or contractual 
requirements. HUD may permit other loss mitigation on a case-by-case 
basis if requested by the Servicer.
    (d) Appeal. (1) If, after the Borrower receives the Servicer's loss 
mitigation options, the Borrower disagrees with Servicer's loss 
mitigation determination, the Borrower may appeal in writing and request 
that the Servicer re-evaluate the Borrower's loss mitigation 
application. The Borrower must submit its appeal no later than 14 days 
from the date of notification of the Servicer's loss mitigation 
determination, or any other deadline as may be prescribed by Section 184 
Program Guidance. Upon receipt of the Borrower's appeal of the 
Servicer's loss mitigation determination, the Servicer shall re-evaluate 
the Borrower's loss mitigation application within thirty days but may 
not use the same staff that made the initial loss mitigation 
determination and shall notify the Borrower of its appeal decision in 
writing.
    (2) If the Borrower submits a timely written appeal, the 180-day 
deadline for First Legal Action shall be suspended during the appeal 
process.



Sec.  1005.735  Occupancy inspection.

    (a) Occupancy inspection. An occupancy inspection is a visual 
inspection of a Section 184 Guaranteed Loan property by the Servicer to 
determine if the property is vacant or abandoned and to confirm the 
identity of any occupants.
    (b) Occupancy follow-up. An occupancy follow-up is an attempt to 
communicate with the Borrower via letter, telephone, or other method of 
communication, other than on-site inspection, to determine occupancy 
when the Section 184 Guaranteed Loan remains in default after the 
initial occupancy inspection that did not result in determination of the 
Borrower's occupancy status.
    (c) Initial occupancy inspection. The Servicer must perform the 
initial occupancy inspection after the 45th day of default but no later 
than the 60th day of the default when:
    (1) A payment has not been received within 45 days of the due date 
or for any other defaults under the Section 184 Guaranteed Loan; and
    (2) Efforts to reach the Borrower or occupant have been 
unsuccessful.
    (d) Occupancy follow-ups and continued inspections. If the Servicer 
is unable to determine the Borrower's occupancy status through the 
initial occupancy inspection, the Servicer must perform occupancy 
follow-ups and, if necessary, occupancy inspections every 25-35 days 
from the last inspection until the occupancy status is determined.
    (e) Occupancy inspections during bankruptcy. When payments are not 
submitted and a Borrower is a debtor in bankruptcy, the Servicer must 
contact either the bankruptcy trustee or the Borrower's bankruptcy 
attorney, if the Borrower is represented, for information concerning the 
occupancy status of the property or if an occupancy inspection is 
necessary or requires authorization. If the Servicer cannot determine 
that the property is vacant or abandoned during the period of the 
automatic stay, the Servicer must document in the servicing case binder 
with evidence that it timely contacted the attorney or trustee.
    (f) Occupancy inspections on Trust Land. Servicers must make an 
initial contact with the Tribe in advance of any occupancy inspection on 
Trust Land to review the Tribe's protocol for conducting occupancy 
inspections. After the initial contact, Servicers must contact the Tribe 
in advance of an occupancy inspection on Trust Land in accordance with 
the Tribe's protocol.
    (g) Alternative deadlines. HUD may prescribe alternative extended 
deadlines to the requirements in paragraphs (c) and (d) of this section 
through Section 184 Program Guidance.
    (h) Conflicts with other law. Nothing in this section shall require 
a Servicer to conduct an inspection when prohibited by applicable 
Tribal, Federal, State, or local law.



Sec.  1005.737  Vacant or abandoned property procedures.

    If the Servicer determines through an occupancy inspection or 
occupancy follow-up that the property is vacant or abandoned, or if the 
Servicer is notified by HUD that the Tribe or the TDHE determined the 
property is vacant or abandoned, the Servicer must send a letter, via 
certified mail or other method providing delivery confirmation, to all 
Borrowers at the property address, or other known address of Borrower, 
informing them of the Servicer's determination that the property is 
vacant or abandoned. This letter must include the Servicer's contact 
information.
    (a) If occupancy is verified through the delivery confirmation, the 
Servicer shall continue pursuing collection efforts and loss mitigation 
as required by Sec. Sec.  1005.729 and 1005.739 until the Servicer has 
the authority to proceed to First Legal Action in accordance with Sec.  
1005.763 or Tribal First Right of Refusal in accordance with Sec.  
1005.759.
    (b) If the Servicer verifies through the delivery confirmation 
process that the property is vacant or abandoned; then the Servicer 
shall:
    (1) Commence first-time vacant property inspection;

[[Page 809]]

    (2) Take appropriate property preservation and protection actions to 
secure and maintain the property;
    (3) For properties on Trust Land:
    (i) Notify the Tribe that the property is vacant or abandoned; and
    (ii) Complete Tribal First Right of Refusal under Sec.  1005.759;
    (4) For fee simple Properties, complete First Legal Action within 30 
days;
    (5) Continue to perform vacant property inspections every 25-35 days 
until the default is cured, the property is disposed of, or the 
bankruptcy court has granted approval for the Servicer to contact the 
Borrower or to take any required property preservation actions; and
    (6) Retain documentation in the servicing case binder providing 
evidence of activities required by HUD in this section or otherwise 
provided in Section 184 Program Guidance.
    (c) Alternative deadlines. HUD may prescribe alternative extended 
deadlines to the time requirements of this section in Section 184 
Program Guidance.
    (d) Conflicts with other law. Nothing in this section shall require 
a Servicer to communicate with a Borrower in a manner prohibited by 
applicable Tribal, Federal, or State law.

Servicing Default Section 184 Guaranteed Loans Under the Loss Mitigation 
                                 Program



Sec.  1005.739  Loss mitigation.

    (a) The purpose of loss mitigation is to attempt to cure the 
Borrower's default and minimize financial loss to HUD.
    (b) The Servicer must offer a loss mitigation option, if applicable, 
to the Borrower and if practical under the circumstances, within 180 
days of the Date of Default, or any extended timeframe prescribed by 
Section 184 Program Guidance.
    (c) Loss mitigation options include:
    (1) A forbearance plan;
    (2) Assumption;
    (3) A loan modification;
    (4) Loss mitigation advance;
    (5) Pre-foreclosure sale;
    (6) A deed-in-lieu/lease-in-lieu of foreclosure; or
    (7) Other options, as may be prescribed in Section 184 Program 
Guidance.
    (d) A loss mitigation review shall, to the greatest extent possible, 
be based on a full financial assessment of the Borrower at time of 
default, and the collection technique(s) must take into account the 
circumstances particular to each Borrower.
    (e) HUD may prescribe conditions and requirements in Section 184 
Program Guidance for the eligibility and appropriate use of loss 
mitigation options.
    (f) Within 180 days of default, or any extended timeframe prescribed 
by Section 184 Guidance, if the Borrower fails to meet their loss 
mitigation option requirements, the Servicer shall have up to 45 days 
from the date of the failure of the loss mitigation to determine whether 
the Borrower should continue with the current loss mitigation option or 
have Borrower enter into an alternate loss mitigation option.
    (g) If a Borrower does not accept, is not eligible for, or fails 
loss mitigation, the Servicer shall complete First Legal Action in 
accordance with Sec.  1005.763 or Tribal First Right of Refusal in 
accordance with Sec.  1005.759.
    (h) Documentation must be maintained for the initial and all 
subsequent evaluations and resulting loss mitigation actions in the 
servicing case binder in accordance with Sec.  1005.219(d)(2).
    (i) A Servicer that is found to have failed to engage in and comply 
with loss mitigation as required under this subpart may be subject to 
enforcement action by HUD, including but not limited to sanctions under 
Sec. Sec.  1005.905 and 1005.907.
    (j) HUD may provide alternative requirements to this section when 
there is a national emergency or disaster and publish such alternative 
requirements in Section 184 Program Guidance.



Sec.  1005.741  Notice to Tribe and BIA--Borrower default.

    (a) When two consecutive Section 184 Guaranteed Loan payments are in 
default or sixty days after other default under the Section 184 
Guaranteed Loan, the Servicer shall provide notice of default to:
    (1) The BIA, where applicable, for Section 184 Guaranteed Loan 
property that is on Trust Land, in accordance with applicable BIA 
requirements; and,
    (2) The Tribe, where applicable, for any Section 184 Guaranteed Loan 
property where a Borrower has provided consent of notification in 
accordance with Sec.  1005.501(j).
    (b) The Servicer shall continue exploring loss mitigation options, 
consistent with the requirements under this subpart, with the Borrower 
during the notification process to the Tribe and/or BIA, as applicable.



Sec.  1005.743  Relief for Borrower in military service.

    (a) Postponement of principal payments. If the Borrower is a person 
in ``military service,'' as such term is defined in the Servicemembers 
Civil Relief Act (50 U.S.C. 3901-4043), the Servicer may, by written 
agreement with the Borrower, postpone for the period of military service 
and three months thereafter any part of the monthly payment which 
represents the Amortization of principal. The agreement shall contain a 
provision for the resumption of monthly payments after such a period in 
amounts which will completely amortize the Section 184

[[Page 810]]

Guaranteed Loan within the maturity as provided in the original loan 
term.
    (b) Forbearance. Forbearance plans may be available to Borrowers in 
military service pursuant to Sec.  1005.745(e).
    (c) Postponement of foreclosure. If at any time during default the 
Borrower is a person in ``military service,'' as such term is defined in 
the Servicemembers Civil Relief Act, the period during which the 
Borrower is in such military service shall be excluded in computing the 
period within which the Servicer shall complete First Legal Action to 
acquire the property or Tribal notice under Sec.  1005.759(a). No 
postponement or delay in the prosecution of foreclosure proceedings 
during the period the Borrower is in such military service shall be 
construed as failure on the part of the Servicer to exercise reasonable 
diligence in prosecuting such proceedings to completion as required by 
this subpart.



Sec.  1005.745  Forbearance plans.

    (a) General. Forbearance plans are arrangements between a Servicer 
and Borrower that may allow for a period of reduced and/or suspended 
payments and specific terms for the repayment plan. During the 
Forbearance period, where Borrower is in compliance with the Forbearance 
plan, the Servicer shall not proceed to First Legal Action or complete 
Tribal First Right of Refusal notice under Sec.  1005.759 until 
expiration or default of the Agreement.
    (b) Informal forbearance. Informal forbearance plans are oral 
agreements, where permitted under Tribal or State law, between a 
Servicer and Borrower allowing for reduced or suspended payments and may 
provide specific terms for repayment.
    (1) Eligibility. The Servicer may offer an informal forbearance plan 
to a Borrower with a delinquent Section 184 Guaranteed Loan who is not 
experiencing a loss of income or an increase in living expenses that can 
be verified.
    (2) Duration. The period shall be three months or less.
    (c) Formal forbearance. Formal forbearance plans are written 
agreements executed by the Servicer and Borrower, allowing for reduced 
or suspended payments and such plans may include specific terms for 
repayment.
    (1) Eligibility. The Servicer may offer a formal forbearance plan 
when:
    (i) The Borrower is not experiencing a loss of income or increase in 
living expenses that can be verified; or
    (ii) If the Servicer determines that the Borrower is otherwise 
ineligible for other loss mitigation options but has sufficient surplus 
income or other assets that could repay the indebtedness.
    (2) Agreement. The Servicer shall execute a written agreement with 
the Borrower outlining the terms and conditions of the formal 
forbearance. The Servicer must include in the formal forbearance 
agreement a provision for the resumption of monthly payments on a date 
certain, with repayment in amounts which will completely reinstate the 
Section 184 Guaranteed Loan no later than the original maturity date. 
The Servicer must retain in the servicing case binder a copy of the 
written formal forbearance agreement postponing principal and interest 
payments.
    (3) Duration. The repayment period shall be equal to or greater than 
three months but not to exceed six months, unless authorized by HUD.
    (4) Required documents. The Servicer must obtain from the Borrower 
any necessary supporting documentation and retain this documentation in 
the servicing case binder.
    (5) Property condition. The Servicer must conduct any review it 
deems necessary, including a property inspection, when the Servicer has 
reason to believe that the physical condition of the property adversely 
impacts the Borrower's use or ability to support the debt as follows:
    (i) Financial information provided by the Borrower indicating large 
expenses for property maintenance;
    (ii) The Servicer receives notice from local government or other 
third parties regarding property condition; or
    (iii) The property may be affected by a disaster event.
    (iv) If significant maintenance costs contributed to the default or 
are affecting the Borrower's ability to make payments under the loan or 
formal forbearance agreement, the Servicer may provide in the formal 
forbearance agreement a period of loan forbearance during which repairs 
specified in the agreement will be completed at the Borrower's expense.
    (d) Special forbearance-unemployment. The special forbearance-
unemployment loss mitigation option is available when one or more of the 
Borrowers has become unemployed and the loss of employment has 
negatively affected the Borrower's ability to continue to make their 
monthly Section 184 Guaranteed Loan payment. It is a formal forbearance 
plan with a written agreement executed by the Servicer and Borrower, 
allowing for reduced or suspended payments and such plan may include 
specific terms for repayment.
    (1) Eligibility. The Servicer must ensure that the Borrower meets 
all the following eligibility requirements:
    (i) The Section 184 Guaranteed Loan must be at least three months in 
default.
    (ii) The Borrower is experiencing a verified loss of income or 
increase in living expenses due to loss of employment.
    (iii) The Borrower must continue to occupy the property as a 
Principal Residence.

[[Page 811]]

    (iv) The Borrower must have a verified unemployment status and no 
Borrower is currently receiving continuous income; or an analysis of the 
Borrower's financial information indicates that special forbearance-
unemployment is the best or only option available for the Borrower.
    (2) Agreement. The Servicer shall execute a written special 
forbearance-unemployment agreement with the Borrower outlining the terms 
and conditions of the special forbearance-unemployment. The Servicer 
must include in the special forbearance-unemployment agreement a 
provision for the resumption of monthly payments on a date certain, with 
repayment in amounts which will completely reinstate the Section 184 
Guarantee Loan no later than the original maturity. The Servicer must 
retain in the servicing case binder a copy of the written special 
forbearance-unemployment agreement postponing principal and interest 
payments.
    (3) Duration. The repayment period shall not exceed six months.
    (4) Required documents. The Servicer must obtain from the Borrower 
such supporting third party documentation, including receipts of 
unemployment benefits or an affidavit signed by the Borrower, stating 
the date that the Borrower became unemployed and stating that the 
Borrower is actively seeking, and is available, for employment. The 
Servicer must retain this documentation in the servicing case binder.
    (5) Property condition. The Servicer must conduct any review it 
deems necessary, including a property inspection, when the Servicer has 
reason to believe that the physical condition of the property adversely 
impacts the Borrower's use or ability to support the debt as follows:
    (i) Financial information provided by the Borrower indicating large 
expenses for property maintenance;
    (ii) The Servicer receives notice from local government or other 
third parties regarding property condition; or
    (iii) The property may be affected by a disaster event.
    (iv) If significant maintenance costs contributed to the default or 
are affecting the Borrower's ability to make payments under the Section 
184 Guaranteed Loan or special forbearance-unemployment agreement, the 
Servicer may provide in the special forbearance-unemployment agreement a 
period of forbearance during which repairs specified in the agreement 
will be completed at the Borrower's expense.
    (e) Special forbearance-servicemember. The Servicer may, by written 
special forbearance-servicemember agreement with the Borrower, postpone 
any part of the monthly Section 184 Guaranteed Loan that represents 
Amortization of principal, for the period permitted by HUD under Sec.  
1005.743.
    (1) Eligibility. The servicemember must be in active-duty military 
service and meet the criteria established in 50 U.S.C. 3911. Dependents 
of servicemembers are entitled to protections in limited situations per 
the Servicemembers Civil Relief Act, as amended.
    (2) Duration. The repayment period shall be for the period of 
military service and three months thereafter.
    (3) Required documents. The Borrower shall provide the Servicer with 
a copy of the servicemember's deployment orders.
    (4) Agreement. (i) The Servicer shall execute a written special 
forbearance-servicemember agreement with the Borrower outlining the 
terms and conditions of the special forbearance-servicemember agreement. 
The Servicer must include in the special forbearance-servicemember 
agreement a provision for the resumption of monthly payments on a date 
certain, with repayment in amounts which will completely reinstate the 
Section 184 Guaranteed Loan no later than the original maturity date. 
The Servicer must retain in the servicing case binder a copy of the 
written special forbearance-servicemember agreement postponing principal 
and interest payments.
    (ii) The Servicer shall comply with all applicable requirements 
under the Servicemembers Civil Relief Act.
    (f) Continued review and re-evaluation. The Servicer shall monitor 
the Borrower's compliance with an agreement under Sec.  1005.743 every 
30 days, until the end of the agreement.
    (g) Other special forbearances. HUD may provide for a special 
forbearance in response to a disaster or other national emergency or 
other circumstances approved by the Secretary.



Sec.  1005.747  Assumption.

    The Servicer shall explore assumption as a loss mitigation option 
with the Borrower in accordance with Sec.  1005.711. Assumptions 
associated with loss mitigation must result in the cure of the default 
and reinstatement of the Section 184 Guaranteed Loan.



Sec.  1005.749  Loan modification.

    (a) General. A Section 184 Guaranteed Loan modification may include 
a change in one or more of the following: interest rate; capitalization 
of delinquent principal, interest, or escrow items; or re-Amortization 
of the balance due. A Section 184 Guaranteed Loan modification may not 
be used as a means to reinstate the Section 184 Guaranteed Loan prior to 
sale or assumption.
    (b) Eligibility. The Servicer must ensure that the Borrower is able 
to support the monthly loan payment after the loan is modified.

[[Page 812]]

    (c) Borrower qualifications. The Servicer must ensure that the 
Borrower meets the following eligibility criteria:
    (1) At least 12 months have elapsed since the closing date of the 
original Section 184 Guaranteed Loan.
    (2) The Borrower has not executed a loan modification agreement in 
the past 24 months. The number of loan modification agreements may be 
limited as prescribed by Section 184 Program Guidance. The Servicer may 
approve the first loan modification agreement under the Loan, and HUD 
must approve any subsequent loan modifications.
    (3) The Borrower's default is due to a verified loss of income or 
increase in living expenses.
    (4) One or more Borrowers receive continuous income sufficient to 
support the monthly payment under the modified rate and term, although 
not sufficient to sustain the original Section 184 Guaranteed Loan and 
repay the arrearage.
    (5) The Borrower's minimum percentage of net income shall be 
prescribed by HUD.
    (6) The Borrower's monthly payment, which consists of principal, 
interest, taxes, insurance, and other escrow, can be reduced by the 
greater of 10 percent of the existing monthly Section 184 Guaranteed 
Loan payment amount but no less than $100, using an agreed upon 
interested rate in accordance with Sec.  1005.451 and amortizing for a 
term up to 30 years or any other period as may be prescribed by HUD.
    (7) The Borrower has successfully completed a three-month trial 
payment plan based on the Section 184 Guaranteed Loan estimated 
modification monthly payment amount.
    (d) Property conditions. The Servicer must conduct any review it 
deems necessary, including a property inspection, when the Servicer has 
reason to believe that the physical conditions of the property adversely 
impact the Borrower's use or ability to support the debt as follows:
    (1) Financial information provided by the Borrower indicates large 
expenses for property maintenance;
    (2) The Servicer receives notice from local government or other 
third parties regarding property condition; or
    (3) The property is affected by a disaster event.
    (e) Trial payment plans. A trial payment plan is a written agreement 
executed by all parties on the Section 184 Guaranteed Loan, for a 
minimum period of three months, during which the Borrower must make the 
agreed-upon consecutive monthly payments prior to execution of the final 
loan modification.
    (1) Trial payment plan terms. The Servicer must ensure that the 
following apply to interest rates and monthly payment amounts under 
trial payment plan:
    (i) The interest rate for the trial payment plan and the loan 
modification must in accordance with Sec.  1005.451.
    (ii) The interest rate is established when the trial payment plan is 
offered to the Borrower.
    (iii) The established monthly loan modification payment must be the 
same or less than the established monthly trial payment.
    (2) Start of trial payments. The Servicer must send the proposed 
trial payment plan agreement to the Borrower at least 30 days before the 
date the first trial payment is due.
    (3) Trial payment plan signatures. (i) All parties on the Section 
184 Guaranteed Loan and all parties that will be subject to the modified 
loan must execute the trial payment plan agreement unless:
    (A) A Borrower or co-Borrower is deceased;
    (B) A Borrower and a co-Borrower are divorced; or
    (C) A Borrower or co-Borrower on the Section 184 Guaranteed Loan has 
been released from liability as the result of an approved substitute 
Borrower.
    (ii) When a Borrower uses a non-Borrower household member's income 
to qualify for a loan modification, the non-Borrower household member 
must be on the modified note and Section 184 Guaranteed Loan and sign 
the trial payment plan agreement.
    (4) Application of trial payments. The Servicer must treat payments 
made under the trial payment plan as Partial Payments, held in a 
suspense account and applied in accordance with procedures in the 
Section 184 Program Guidance and applicable Federal regulations.
    (5) End of trial payment plan period. The Servicer must offer the 
Borrower a permanent loan modification after the Borrower's successful 
completion of a trial payment plan.
    (6) Trial payment plan failure. The Borrower fails a trial payment 
plan when one of the following occurs:
    (i) The Borrower does not return the executed trial payment plan 
agreement within the month the first trial payment is due;
    (ii) The Borrower vacates or abandons the property; or
    (iii) The Borrower does not make a scheduled trial payment plan 
payment by the last day of the month it was due.
    (7) Alternatives to foreclosure after trial payment plan failure. If 
a Borrower fails to successfully complete a trial payment plan, the 
Servicer must:
    (i) Provide notice to the Borrower of the failure to comply with the 
trial payment plan; and
    (ii) Offer the Borrower the opportunity for a deed-in-lieu/lease-in-
lieu of foreclosure, with seven days to respond to the offer.
    (8) Funds remaining at the end of trial payment period. (i) At the 
end of a successful

[[Page 813]]

trial payment plan, any remaining funds that do not equal a full payment 
must be applied to any escrow shortage or be used to reduce the amount 
that would be capitalized onto the principal balance.
    (ii) Trial payment plan failure. If the Borrower does not complete 
the trial payment plan, the Servicer must apply all funds held in 
suspense to the Borrower's account in the established order of priority.
    (9) Reporting of trial payment plans. The Servicer must report the 
trial payment plans to HUD in the manner prescribed in Section 184 
Program Guidance.
    (f) Loan modification documents. HUD does not require a specific 
format for the loan modification documents; however, the Servicer must 
use documents that conform to all applicable Tribal, Federal, and State 
laws.
    (g) Post-modification review and modification of Loan Guarantee 
Certificate. Upon completion of a successful trial payment plan and 
within 30 days of the execution of the loan modification documents, the 
Servicer shall provide copies of the loan modification documents to HUD. 
The Servicer shall comply with additional processing instructions as 
prescribed by Section 184 Program Guidance.



Sec.  1005.751  Loss mitigation advance.

    (a) General. A loss mitigation advance is a reimbursement by HUD to 
the Holder for the advancement of funds on behalf of the Borrower in the 
amount necessary to assist in the reinstatement of the Borrower's 
Section 184 Guaranteed Loan. The loss mitigation advance is a 
subordinate lien in favor of HUD. More than one loss mitigation advance 
may be made to an eligible Borrower.
    (b) Borrower eligibility. To be eligible for a loss mitigation 
advance:
    (1) The Borrower's Section 184 Guaranteed Loan is 90 or more days 
past due:
    (2) The Borrower has the ability to resume making on-time monthly 
loan payments and the property is owner occupied.
    (3) [Reserved]
    (c) Terms. The loss mitigation advance shall:
    (1) Include all arrearages, which refers to any amounts needed to 
bring the Borrower's Section 184 Guaranteed Loan current;
    (2) Provide that all prior loss mitigation advances, if any, in 
total must not exceed 30 percent of the unpaid principal balance as of 
the date of default;
    (3) Include any other terms and conditions, as may be prescribed by 
Section 184 Program Guidance; and
    (4) Along with another loss mitigation, where applicable, fully 
reinstate the Section 184 Guaranteed Loan upon the Borrower's acceptance 
of the loss mitigation advance.



Sec.  1005.753  Pre-foreclosure sale.

    (a) General. A pre-foreclosure sale, also known as a short sale, 
refers to the sale of real estate that generates proceeds that are less 
than the amount owed on the property and any junior lien holders have 
agreed to release their liens and forgive the deficiency balance on the 
real estate.
    (b) Eligibility. To be eligible for a pre-foreclosure sale, a 
Servicer must ensure:
    (1) The Section 184 Guaranteed Loan was Originated at least 12 
months prior to default;
    (2) The default was due to an adverse and unavoidable financial 
situation impacting the Borrower;
    (3) The property has a current fair market value that is equal to or 
less than the unpaid principal balance;
    (4) The Borrower elected the pre-foreclosure sale option within 120 
days, or any other date as prescribed by Section 184 Program Guidance, 
from default; and
    (5) All other requirements of the pre-foreclosure sale loss 
mitigation option under this section are met.
    (c) Surchargeable damages. Surchargeable damage is damage to the 
Section 184 Guaranteed Loan property caused by fire, flood, earthquake, 
tornado, boiler explosion (for condominiums only) or Servicer neglect. 
The Servicer is responsible for the cost of surchargeable damage, and 
these amounts are not reimbursable by HUD. The Servicer must request HUD 
approval before approving the use of the pre-foreclosure sale loss 
mitigation option when the property has sustained surchargeable damage. 
If the damage is not surchargeable damage, the Servicer is not required 
to obtain HUD approval prior to approving the Approval to Participate 
Agreement with Borrower. The Servicer must comply with paragraph (p) of 
this regulation where a hazard insurance claim must be filed.
    (d) Condition of title or Title Status Report. (1) For Section 184 
Guaranteed Loans on fee simple lands, a Servicer must ensure the 
property has Good and Marketable Title. Before approving a pre-
foreclosure sale loss mitigation option, the Servicer must obtain title 
evidence or a preliminary report verifying that the title is not 
impaired by unresolvable title defects or junior liens that cannot be 
discharged.
    (2) For Section 184 Guaranteed Loans on Trust Land, the Servicer 
shall obtain a certified Title Status Report from the BIA. Before 
approving a pre-foreclosure sale loss mitigation option, the Servicer 
must verify that the property is not encumbered by unresolvable title 
defects or junior liens that cannot be discharged.
    (e) Discharge of junior liens. The Servicer must contact all junior 
lienholders to verify the Borrower has secured a discharge of the junior 
liens.

[[Page 814]]

    (f) Property list price and valuation--(1) List price. The Servicer 
must ensure that the Borrower lists the property for sale at no less 
than the ``as-is'' value, as determined by an appraisal completed in 
accordance with the requirements in Sec.  1005.457.
    (2) Appraisals. The Servicer must have the property appraised in 
accordance with Sec.  1005.457 and pursuant to the following 
requirements:
    (i) The appraisal must contain an ``as-is'' fair market value for 
the subject property;
    (ii) A copy of the appraisal must be provided to HUD. A copy of the 
appraisal must be provided to the Borrower or sales agent, upon request;
    (iii) A Servicer must present HUD with a request for a variance to 
approve a pre-foreclosure sale transaction if one of the following 
conditions exists:
    (A) The current appraised value of the property is less than the 
unpaid principal balance by an amount of $75,000 or greater;
    (B) The appraised value is less than 50 percent of the unpaid 
principal balance; or
    (C) The appraisal is deemed unacceptable because the as-is value 
cannot be affirmed using a Broker's Price Opinion or Automated Valuation 
Model within 10 percent of the value.
    (iv) Paragraph (f)(2)(iii) of this section is not applicable to 
property on Trust Land unless there is a viable real estate market;
    (v) Under paragraph (f)(2)(iii) of this section, the Servicer must 
note on the variance request the specific reason for the request and 
attach any supporting documents needed for HUD review;
    (vi) The Servicer must obtain HUD approval before authorizing the 
marketing of the property; and
    (vii) All pre-foreclosure appraisals must be accompanied by a 
broker's price opinion or an automated valuation model unless the 
property is located on Trust Land.
    (g) Required documents. After determining that a Borrower and 
property meet the pre-foreclosure sale eligibility requirements, the 
Servicer shall send to the Borrower:
    (1) Pre-foreclosure sale approval to participate agreement. The 
agreement, on a form prescribed by Section 184 Program Guidance, shall 
list the pre-foreclosure sale requirements, including the date by which 
the Borrower's sales contract must be executed during the pre-
foreclosure sale marketing period; and
    (2) Pre-foreclosure addendum. The addendum shall be in the form 
prescribed by Section 184 Program Guidance. The pre-foreclosure sale 
addendum must be fully executed at closing.
    (h) Delivery of documents to Borrower. Documents listed under 
paragraphs (g)(1) and (2) of this section must be sent to the Borrower 
via methods providing delivery confirmation with a date and time stamp 
of delivery. The Servicer must inform the Borrower that the documents 
must be signed and returned to the Servicer within 10 days of receipt.
    (i) Copies to HUD. The Servicer must send signed copies of the 
documents in paragraphs (g)(1) and (2) of this section to HUD within 15 
days of receipt from the Borrower.
    (j) Tribal Notification for Properties on Trust Land. At the same 
time the Servicer sends the Approval to Participate Agreement to the 
Borrower, in accordance with the requirements as prescribed by Section 
184 Program Guidance, the Servicer shall send a notice to the Tribe and 
the TDHE of the option to assume the Section 184 Guaranteed Loan or 
purchase the property.
    (k) Use of a real estate broker. The Borrower is responsible for 
retaining the services of a HUD-approved real estate broker/agent within 
seven days of the signed Approval to Participate Agreement. For Trust 
Land, the Borrower may request, through the Servicer, an exception to 
this section. If an exception is granted, HUD will work with the 
Borrower, Servicer and Tribe or TDHE to sell the property or pursue 
another loss mitigation option.
    (l) Required listing disclosure. The Servicer shall require the 
listing agreement between the seller and the agent/broker to include the 
following cancellation clause: ``Seller may cancel this Agreement prior 
to the ending date of the listing period without advance notice to the 
Broker, and without payment of a commission or any other consideration 
if the property is conveyed to HUD or the Holder. The sale completion is 
subject to approval by the Servicer and HUD.'' This section is not 
applicable to property on Trust Land unless a HUD-approved real estate 
broker/agent is utilized.
    (m) Pre-foreclosure sale marketing, settlement period, failure to 
complete pre-foreclosure sale. The Borrower has seven days, or other 
timeframe as prescribed by Section 184 Program Guidance from the date of 
the signed approval to participate agreement to market the property in 
the Multiple Listing Service, or other marketing resource if the 
property is on Trust Land.
    (1) The property must be marketed in the Multiple Listing Service or 
other marketing resource for a period of 90 days, or other timeframe as 
prescribed by Section 184 Program Guidance before Borrower may consider 
any offers.
    (2) During the marketing period, Servicers must conduct a monthly 
review of the property's marketing status with the real estate broker/
agent or the Tribe or TDHE, for property on Trust Land.
    (3) The maximum marketing period for the sale of the property is 120 
days from the execution date of the Approval to Participate Agreement 
and the date of the property settlement. If there is a signed contract 
of sale, but property settlement has not occurred by

[[Page 815]]

the end of the 120 Days, the marketing period may be extended up to 60 
days to allow for closing to occur.
    (4) Within 30 days of the end the marketing period, or no earlier 
than 120 days of default, whichever is later, if no settlement has 
occurred, Servicer shall provide electronic or written notice to the 
Borrower of the Borrower's default under the pre-foreclosure sale 
agreement and present the agreed upon deed-in-lieu/lease-in-lieu of 
foreclosure, with title being taken in the name of the Secretary. The 
Borrower shall have ten days from the date of the notice to respond in 
writing or by electronic means. If the Servicer receives no response or 
if the Servicer receives notice of the Borrower's rejection of the 
alternative to foreclosure, the Servicer must complete First Legal 
Action within 30 days or Tribal First Right of Refusal within 14 days of 
the Borrower's deadline to respond or actual rejection response date, 
whichever is sooner.
    (n) Property inspections and maintenance. The Servicer shall inspect 
the property in accordance with Sec.  1005.735 and follow Sec.  
1005.739, where applicable.
    (o) Disclosure of damage after pre-foreclosure sale approval. In the 
event the property becomes damaged, the Borrower must report damage to 
the Servicer in accordance with the pre-foreclosure sale agreement. When 
the Servicer becomes aware that the property has sustained damage after 
a Borrower has received the Approval to Participate Agreement, the 
Servicer must evaluate the property to determine if it continues to 
qualify for the pre-foreclosure sale program or terminate participation 
if the extent of the damage changes the property's fair market value.
    (p) Hazard insurance claim. Where applicable, the Servicer must work 
with the Borrower to file a hazard insurance claim and either: use the 
proceeds to repair the property; or adjust the Claim by the amount of 
the insurance settlement (Non-Surchargeable Damage) or the Secretary's 
repair cost estimate.
    (q) Evaluation of offers. The Servicer must receive from the listing 
real estate broker/agent an offer that yields the highest net return to 
HUD and meets HUD's requirements for bids, as follows:
    (1) Real estate broker/agent to ensure execution of documents. The 
real estate broker/agent must ensure that the accepted offer and the 
pre-foreclosure sale addendum are signed by all applicable parties 
before submitting to the Servicer for approval, and
    (2) Arm's length transaction. The transaction must be between two 
unrelated parties who are each acting in their own best interest.
    (3) Back-up offers. Once an offer has been submitted to the Servicer 
for approval, the real estate broker/agent must retain any offer that 
the seller elects to hold as backup offer until a determination has been 
made on the previously submitted offer.
    (r) Contract approval by Servicer--(1) Review of sales contract. In 
reviewing the contract of sale, the Servicer must:
    (i) Ensure that the pre-foreclosure sale is an outright sale of the 
property and not a sale by assumption.
    (ii) Review the sales documentation to determine that there are no 
hidden terms or special agreements existing between any of the parties 
involved in the pre-foreclosure sale transaction; and no contingencies 
that might delay or jeopardize a timely settlement.
    (iii) Determine that the property was marketed pursuant to HUD 
requirements.
    (iv) Not approve a Borrower for a pre-foreclosure sale if the 
Servicer knows or has reason to know of the Borrower's fraud or 
misrepresentation of information.
    (2) Sales contract review period. After receiving an executed 
contract of sale and pre-foreclosure sale addendum from the Borrower, 
the Servicer must send to the Borrower a Sales Contract Review, on a 
form prescribed by Section 184 Program Guidance, no later than five 
business days after the Servicer's receipt of an executed contract for 
sale.
    (3) Net sale proceeds. (i) Net sale proceeds are the proceeds of a 
pre-foreclosure sale, calculated by subtracting reasonable and customary 
closing and settlement costs from the property sales price.
    (ii) Regardless of the property sale price, a Servicer may only 
approve a pre-foreclosure sale contract for sale if the net sale 
proceeds are at or above minimum allowable thresholds established by 
HUD. The net sale proceeds must conform to the requirements on the Pre-
Foreclosure Sale Approval to Participate Agreement.
    (iii) The Servicer is liable for any Claim overpayment on a pre-
foreclosure sale transaction that closes with less than the required net 
sale proceeds unless a variance has been granted by HUD.
    (4) Unacceptable settlement costs. The Servicer must not include the 
following costs in the Net Sale Proceeds calculation:
    (i) Repair reimbursements or allowances;
    (ii) Home warranty fees;
    (iii) Discount points or loan fees;
    (iv) Servicer's title insurance fee;
    (v) Third-party fees incurred by the Servicer or Borrower to 
negotiate a pre-foreclosure sale; and
    (vi) Any other costs as may be prohibited in Section 184 Program 
Guidance.
    (5) Other third-party fees. (i) With the exception of reasonable and 
customary real estate commissions, the Servicer must ensure that third-
party fees incurred by the Servicer or Borrower to negotiate a pre-
foreclosure sale are not included on the Closing Disclosure or similar 
legal documents unless explicitly permitted by Tribal or State law.

[[Page 816]]

    (ii) The Servicer, its agents, or any outsourcing firm it employs 
must not charge any fee to the Borrower for participation in the pre-
foreclosure sale.
    (s) Closing and post-closing responsibilities. For the purpose of 
this section, with respect to Trust Land, the closing agent may be 
selected by the Tribe or TDHE.
    (1) Closing worksheet. Prior to closing, the Servicer must provide 
the closing agent with a Closing Worksheet, on a form prescribed by HUD, 
listing all amounts payable from net sale proceeds; and a pre-
foreclosure sale addendum signed by all parties.
    (2) Servicer review of final terms of pre-foreclosure sale 
transaction. The Servicer will receive from the closing agent a 
calculation of the actual net sale proceeds and a copy of the Closing 
Disclosure or similar legal document. The Servicer must ensure that:
    (i) The final terms of the pre-foreclosure sale transaction are 
consistent with the purchase contract;
    (ii) Only allowable settlement costs have been deducted from the 
seller's proceeds;
    (iii) The net sale proceeds will be equal to or greater than the 
allowable thresholds;
    (iv) A Closing Worksheet form is included in the claim case binder; 
and
    (v) It reports the pre-foreclosure sale to consumer reporting 
agencies.
    (3) Closing agent responsibilities after final approval. Once the 
Servicer gives final approval for the pre-foreclosure sale and the 
settlement occurs, the closing agent must:
    (i) Pay the expenses out of the Net Sale Proceeds and forward the 
Net Sale Proceeds to the Servicer;
    (ii) Forward a copy of the Closing Disclosure or similar legal 
document to the Servicer to be included in the Claim case binder no 
later than three business days after the pre-foreclosure sale 
transaction closes; and,
    (iii) Sign the pre-foreclosure sale Addendum on or before the date 
the pre-foreclosure sale transaction closes, unless explicitly 
prohibited by Tribal or State statute.
    (4) Satisfaction of debt. Upon receipt of the portion of the net 
sale proceeds designated for Section 184 Guaranteed Loan satisfaction, 
the Servicer must apply the funds to the outstanding balance and 
discharge any remaining debt, release the lien in the appropriate 
jurisdiction, and may file a Claim.
    (5) Discharge of junior liens. The Servicer must verify the pre-
foreclosure sale will result in the discharge of junior liens as 
follows:
    (i) If the Borrower has the financial ability, the Borrower must be 
required to satisfy or otherwise obtain release of liens.
    (ii) If no other sources are available, the Borrower may obligate up 
to a maximum amount from sale proceeds towards discharging the liens or 
encumbrances, such maximum amount will be prescribed by HUD.
    (t) Early termination of pre-foreclosure participation--(1) 
Borrower-initiated termination. The Servicer must permit a Borrower to 
voluntarily terminate participation in the pre-foreclosure sale loss 
mitigation option at any time.
    (2) Servicer-initiated termination. The Servicer shall terminate a 
Borrower's pre-foreclosure sale program participation for any of the 
following reasons:
    (i) Discovery of unresolvable title problems;
    (ii) Determination that the Borrower is not acting in good faith to 
market the property;
    (iii) Significant change in property condition or value;
    (iv) Re-evaluation based on new financial information provided by 
the Borrower that indicates that the case does not qualify for the pre-
foreclosure sale option; or
    (v) Borrower has failed to complete a pre-foreclosure sale within 
the time limits prescribed by Section 184 Program Guidance and no 
extensions of time have been granted by HUD.
    (3) Notification of pre-foreclosure sale Program Participation 
Termination. The Servicer must forward to the Borrower a written 
explanation for terminating their program participation. This letter is 
to include the ``end-of-participation'' date for the Borrower.
    (4) Failure to complete a pre-foreclosure sale. Should the Borrower 
be unable to complete a pre-foreclosure sale transaction, the Servicer 
must proceed with a deed-in-lieu/lease-in-lieu of foreclosure in 
accordance with Sec.  1005.755. If the Servicer is unable to obtain a 
deed-in-lieu/lease-in-lieu of foreclosure, the Servicer must proceed to 
First Legal Action or assignment in accordance with Sec. Sec.  1005.763 
and 1005.765.



Sec.  1005.755  Deed-in-lieu/lease-in-lieu of foreclosure.

    (a) Requirements. In lieu of instituting or completing a 
foreclosure, the Servicer or HUD may acquire a property by voluntary 
conveyance from the Borrowers. Conveyance of the property by deed-in-
lieu/lease-in-lieu of foreclosure is allowed subject to the Servicer's 
compliance with the following requirements:
    (1) The lease-in-lieu of foreclosure for a property on Trust Land 
shall be approved by the Tribe prior to execution and by the BIA at 
recordation.
    (2) The Section 184 Guaranteed Loan is in default at the time of the 
deed-in-lieu/lease-in-lieu of foreclosure is executed and delivered;
    (3) The Section 184 Guaranteed Loan is satisfied of record as a part 
of the consideration for such conveyance;

[[Page 817]]

    (4) The deed-in-lieu/lease-in-lieu of foreclosure from the Borrower 
contains a covenant which warrants against the acts of the grantor and 
all claiming by, through, or under the grantor and conveys Good and 
Marketable Title, or for leases, assigns without objectionable 
encumbrances;
    (5) With respect to Section 184 Guaranteed Loans on fee simple 
lands, the Servicer transfers to HUD Good and Marketable Title 
accompanied by satisfactory title evidence.
    (6) With respect to Section 184 Guaranteed Loans on Trust Lands, the 
Servicer provides to HUD a certified Title Status Report, or other HUD 
approved document issued by the Tribe, as prescribed by Section 184 
Program Guidance evidencing assignment to HUD without any objectionable 
encumbrances.
    (7) The property must meet the property conditions under Sec.  
1005.769. HUD may consent to conveyance of the property by deed-in-lieu/
lease-in-lieu of foreclosure when property does not meet Sec.  1005.769 
in accordance with procedures in Section 184 Program Guidance.
    (b) Required documentation. A written agreement must be executed by 
the Borrower and Servicer which contains all of the conditions under 
which the deed-in-lieu/lease-in-lieu of foreclosure will be accepted.
    (c) Conveyance to Servicer. Upon execution of the deed-in-lieu/
lease-in-lieu of foreclosure document(s), the Servicer must file for 
record no later than two business days from receipt.
    (d) Conveyance to HUD, where applicable. After evidence of 
recordation is available, the Servicer shall convey the property to HUD 
in accordance with Sec.  1005.771.
    (e) Reporting for Credit Purposes. The Servicer must comply with all 
applicable Tribal, Federal, State, and local reporting requirements, 
including but not limited to reporting to credit reporting agencies.



Sec.  1005.757  Incentive payments.

    As an alternative to foreclosure, or eviction where applicable, as 
prescribed by Section 184 Program Guidance, HUD may authorize, an 
incentive payment to:
    (a) Borrowers that complete certain loss mitigation options or for 
their agreement to vacate the property after foreclosure, under the 
terms established by the Secretary;
    (b) Holders or Servicers for their completion of certain loss 
mitigation options; and
    (c) Tribes or TDHEs for their assistance in loss mitigation, sale, 
or transfer of the Trust Land property.

        Assignment of the Loan to HUD; Foreclosure and Conveyance



Sec.  1005.759  Property on Trust Land--Tribal First Right of Refusal; 
          foreclosure or assignment.

    (a) Tribal First Right of Refusal is written notice to the Tribe of 
the options to assume the Section 184 Guaranteed Loan or purchase the 
Note based on the current unpaid principal balance or appraised value 
for any property on Trust Land or other reasonable options as prescribed 
by Section 184 Program Guidance.
    (b) The Servicer shall provide Tribal First Right of Refusal no 
later than 14 days, or any extended timeframe prescribed by Section 184 
Program Guidance, after the earlier of:
    (1) Any lease provision addressing Tribal First Right of Refusal;
    (2) 120 days after default, unless the Borrower is in active loss 
mitigation;
    (3) Failure of loss mitigation after 180 days from default;
    (4) The failure of loss mitigation after an extension of the loss 
mitigation period under Sec.  1005.739(f).
    (5) The date the property was determined vacant or abandoned in 
accordance Sec.  1005.737 or the earliest date the Servicer should have 
known the property was vacant or abandoned.
    (c) The Tribe shall have either the time frame provided in the lease 
or, if not defined in the lease, 60 days, or any extended timeframe 
prescribed by Section 184 Program Guidance, to accept or decline the 
offer of Tribal First Right of Refusal.
    (d) If the Tribe declines or does not respond to the Tribal First 
Right of Refusal within 60 days, or any extended timeframe prescribed by 
Section 184 Guidance, the Servicer must either complete First Legal 
Action or assignment to HUD, within the timeframes prescribed in 
Sec. Sec.  1005.763 and 1005.765.
    (e) Any costs associated with failure to initiate Tribal First Right 
of Refusal may be deemed ineligible for claim payment.



Sec.  1005.761  Fee simple properties--foreclosure or assignment with 
          HUD approval.

    (a) Unless a Borrower has completed a pre-foreclosure sale or a 
deed-in-lieu of foreclosure in accordance with Sec. Sec.  1005.753 and 
1005.755, the Servicer must complete First Legal Action on the Section 
184 Guaranteed Loan pursuant to Sec.  1005.763.
    (b) Under limited circumstances, HUD may approve an assignment of a 
Section 184 Guaranteed Loan to HUD for fee simple land properties.



Sec.  1005.763  First Legal Action deadline and automatic extensions.

    (a) Deadline for First Legal Action. The Servicer must complete 
First Legal Action,

[[Page 818]]

within 180 days of default, unless a later date is authorized under this 
part.
    (b) Automatic extensions to the First Legal Action deadline. HUD 
permits automatic extensions to the First Legal Action deadline for the 
following reasons and HUD approval is not required.
    (1) If Federal law or the laws of the Tribe or State, in which the 
Section 184 Guaranteed Loan property is located, do not permit First 
Legal Action within the deadline designated above, then the Servicer 
must complete First Legal Action within 30 days after the expiration of 
the time during which First Legal Action is prohibited; or
    (2) If the Borrower is in compliance with an approved loss 
mitigation plan at 180 days of default and the Borrower subsequently 
fails loss mitigation, First Legal Action must be completed within 30 
days of the loss mitigation failure or the Borrower's request to 
terminate the loss mitigation plan, whichever is sooner.
    (3) If the Borrower does not continue with their current loss 
mitigation option or enter into an alternative loss mitigation option 
during the 45-day period under Sec.  1005.739(f), the First Legal Action 
must be completed within 30 days or
    (4) If a Tribal First Right of Refusal was offered under Sec.  
1005.759, and the Servicer decides to pursue foreclosure in Tribal 
court, instead of assigning the Loan to HUD, First Legal Action must be 
completed within 30 days of completing the Tribal First Right of 
Refusal.
    (c) Other extensions. Other necessary and reasonable extensions may 
be allowed, as prescribed by Section 184 Program Guidance.
    (d) Notice to HUD. The Servicer must provide notice to HUD, in a 
form as may be prescribed in Section 184 Program Guidance, within 15 
days of completing First Legal Action.
    (e) Submission of claim. The Servicer must submit a claim to HUD 
within 45 days from the date the foreclosure was complete in accordance 
with Sec.  1005.809(a) or (c).



Sec.  1005.765  Assignment of the Section 184 Guaranteed Loan.

    (a) Fee simple land properties. (1) The assignment of Section 184 
Guaranteed Loans involving fee simple land properties requires prior HUD 
approval. The Servicer must submit a request for an assignment within 
135 days of default, or any extended timeframe prescribed by Section 184 
Program Guidance, unless the Servicer has determined the property is 
vacant pursuant to Sec.  1005.737.
    (2) The Servicer shall have five business days from HUD approval, or 
any extended timeframe prescribed by Section 184 Program Guidance, to 
submit the executed assignment for recordation with the appropriate 
jurisdiction.
    (b) Properties on Trust Land. HUD may accept assignment of the 
Section 184 Guaranteed Loan if HUD determines that the assignment is in 
the best interest of the United States. In cases where HUD accepts the 
assignment, upon completing the Tribal First Right of Refusal in 
accordance with Sec.  1005.759, the Servicer shall have five business 
days, or any extended timeframe prescribed by Section 184 Program 
Guidance, to submit the executed assignment for recordation with the 
BIA, as applicable, or other HUD approved document, as prescribed by 
Section 184 Program Guidance, that evidences the assignment.
    (c) Notice to HUD. The Servicer must provide notice to HUD, in a 
form as may be prescribed in Section 184 Program Guidance, within 15 
days of submitting the assignment for recordation.
    (d) Submission of Claim. The Servicer shall have 45 days to submit 
the assignment and evidence of recordation as part of a Claim in 
accordance with 1005.809(b). The Servicer shall submit to HUD evidence 
of the filing and of a Claim in a manner so prescribed by Section 184 
Program Guidance.
    (e) Acceptance by HUD. HUD will accept assignment of the Section 184 
Guaranteed Loan in accordance with 1005.773.



Sec.  1005.767  Inspection and preservation of properties.

    (a) If at any time the Servicer knows or should have known the 
property is vacant or abandoned, the Servicer shall comply with the 
inspection requirements under Sec.  1005.737.
    (b) The Servicer shall take appropriate action to protect and 
preserve the property until its conveyance to HUD, if such action does 
not constitute an illegal trespass or is not otherwise prohibited by 
Tribal, State, or Federal law. Taking ``appropriate action'' includes 
First Legal Action or assignment within the time required by Sec. Sec.  
1005.763 and 1005.765, as applicable.



Sec.  1005.769  Property condition.

    (a) Condition at time of transfer. (1) When the property is 
transferred, or a Section 184 Guaranteed Loan is assigned to HUD in 
accordance with Sec.  1005.765, the property must be undamaged by fire, 
earthquake, flood, tornado, and Servicer neglect, except as set forth in 
this subpart.
    (2) A vacant property must be in broom-swept condition, meaning the 
property is, at a minimum, reasonably free of dust and dirt, and free of 
hazardous materials or conditions, personal belongings, and interior and 
exterior debris.
    (3) A vacant property is secured and, if applicable, winterized.
    (b) Damage to property. The Servicer shall not be liable for 
documented damage to the property by waste, deterioration, or neglect

[[Page 819]]

committed by the Borrower, or heirs, successors, or assigns.
    (c) Servicer responsibility. The Servicer shall be responsible for:
    (1) Damage by fire, flood, earthquake, or tornado;
    (2) Damage to or destruction of property which is vacant or 
abandoned when such damage or destruction is due to the Servicer's 
failure to take reasonable action to inspect, protect, and preserve such 
property as required by Sec.  1005.737; and
    (3) Any damage, whatsoever, that the property has sustained while in 
the possession of the Servicer, when the property has been conveyed to 
HUD without notice or approval by HUD as required by Sec.  1005.765.



Sec.  1005.771  Conveyance of property to HUD at or after foreclosure; 
          time of conveyance.

    (a) At or after foreclosure, the Servicer shall convey the property 
to HUD by one of the following:
    (1) Direct conveyance to HUD. The Servicer shall cause for the deed 
to be transferred directly to HUD. The Servicer shall be responsible for 
determining that such conveyance will comply with all provisions of this 
part, including conveying Good and Marketable Title and producing 
satisfactory title evidence to HUD.
    (2) Conveyance by the Holder to HUD. The Holder shall acquire Good 
and Marketable Title and transfer the property to HUD within 30 days of 
the later of:
    (i) Execution of the foreclosure deed;
    (ii) Acquiring possession of the property;
    (iii) Expiration of the redemption period;
    (iv) Such further time as may be necessary to complete the title 
examination and perfect the title; or
    (v) Such further time as HUD may approve in writing.
    (b) On the date the deed is filed for record, the Servicer shall 
notify HUD, on a form prescribed by HUD, advising HUD of the filing of 
such conveyance and shall assign all rights without recourse or warranty 
any or all claims which the Servicer has acquired in connection with the 
loan transaction, and as a result of the foreclosure proceedings or 
other means by which the Servicer acquired or conveyed such property, 
except such claims as may have been released with the approval of HUD. 
The Servicer must file for record the deed no later than two business 
days after execution. The Servicer must document evidence of the 
submission in the file.



Sec.  1005.773  HUD acceptance of assignment or conveyance.

    (a) Effective date of assignment. HUD accepts the assignment of a 
Section 184 Guaranteed Loan when:
    (1) The Servicer has assigned the Section 184 Guaranteed Loan to 
HUD;
    (2) The Servicer has provided HUD evidence of the recordation; and
    (3) HUD pays a claim for the unpaid principal balance under Sec.  
1005.807(a).
    (b) Effective date of conveyance. HUD accepts conveyance of the 
property when:
    (1) The Servicer has deeded the property to HUD;
    (2) The Servicer has provided HUD evidence of the recordation; and
    (3) HUD pays a claim for the unpaid principal balance under Sec.  
1005.807(a).
    (c) Servicer ongoing obligation. Notwithstanding the assignment of 
the Section 184 Guarantee Loan or the filing of the deed or other legal 
instrument conveying the property interest to the HUD, the Servicer 
remains responsible for ensuring compliance with this part, including 
any loss or damage to the property, and such responsibility is retained 
by the Servicer until the claim has been paid by HUD.



                            Subpart H_Claims

           Claims Application, Submission Categories and Types



Sec.  1005.801  Purpose.

    This subpart sets forth requirements that are applicable to a 
Servicer's submission of an application for a Claim for a Section 184 
Guaranteed Loan benefits to HUD. The Servicer's submission of the Claim 
shall be in compliance with this subpart and must follow the process 
details as set forth in Section 184 Program Guidance. This subpart also 
sets forth requirements for processing and payment of the Claim.



Sec.  1005.803  Claim case binder; HUD authority to review records.

    (a) A Servicer must maintain a claim case binder for each claim 
submitted for payment in accordance with Sec.  1005.219(d)(2). The claim 
case binder must contain documentation supporting all information 
submitted in the claim.
    (b) HUD may review a claim case binder and the associated 
endorsement case binder at any time. A Servicer's denial of HUD access 
to any files may be grounds for sanctions in accordance with Sec. Sec.  
1005.905 and 1005.907.
    (c) Within three business days of a request by HUD, the Servicer 
must make available for review, or forward to HUD, copies of identified 
claim case binders.



Sec.  1005.805  Effect of noncompliance.

    (a) When a claim case binder is submitted to HUD for consideration, 
HUD may conduct a post-endorsement review in accordance with Sec.  
1005.527. If HUD determines that the Section 184 Guaranteed Loan does 
not satisfy the requirements of subpart D, HUD will take one or more of 
the following actions:

[[Page 820]]

    (1) Reject the claim submission when the Holder is the Originating 
Direct Guarantee Lender.
    (2) Pay the claim to the current Holder and demand reimbursement of 
the claim from the Originating Direct Guarantee Lender.
    (3) Reconvey the property or reassign the deed of trust or mortgage 
in accordance with Sec.  1005.849.
    (4) Pursue sanctions against the Originating Direct Guarantee Lender 
or Sponsored Entity pursuant to Sec. Sec.  1005.905 and 1005.907.
    (b) When reviewing a claim case binder, if HUD determines:
    (1) The Servicer failed to service the Section 184 Guaranteed Loan 
in accordance with subpart G of this part;
    (2) The Servicer committed fraud or a material misrepresentation; or
    (3) The Servicer had known or should have known of fraud or a 
material misrepresentation in violation of this part.
    (4) HUD may take one or more of the following actions.
    (i) Place a hold on processing the claim for reimbursement of 
eligible reasonable expenses under Sec.  1005.807(b) and provide the 
Servicer the opportunity to remedy the deficiency.
    (ii) Reject the claim for reimbursement of eligible reasonable 
expenses under Sec.  1005.807(b) partially or in its entirety.
    (iii) Reconvey the property or reassign the deed of trust or 
mortgage in accordance with Sec.  1005.849, where applicable, and 
require the Holder to refund the claim payment of the unpaid principal 
balance under Sec.  1005.807(a) and expenses under Sec.  1005.807(b). 
The Holder may resubmit the claim when the deficiencies identified by 
HUD are cured.
    (iv) Pursue administrative offset for any unpaid amounts owed to HUD 
pursuant to 24 CFR part 17.
    (v) Pursue sanctions against the Servicer or Holder pursuant to 
Sec. Sec.  1005.905 and 1005.907.
    (vi) Pursue other remedies as determined by HUD.
    (c) If a property is reconveyed or the deed of trust or mortgage is 
reassigned to the Holder, the Holder may not be reimbursed for any 
expenses incurred after conveyance or reassignment.
    (d) If a claim is resubmitted after reconveyance or reassignment and 
HUD determines a decrease in the value of the property at the time of 
the resubmission, HUD may reduce the claim payment accordingly.



Sec.  1005.807  Claim submission categories.

    There are three claim submission categories:
    (a) Payment of the unpaid principal balance;
    (b) Reimbursement of eligible reasonable expenses, including 
interest, from the Date of Default to the earlier of the deadlines 
provided in Sec.  1005.839(a) through (e). Allowable reasonable 
exceptions will be provided by Section 184 Program Guidance; and
    (c) Supplemental claim for eligible reasonable expenses incurred 
prior to the earlier of the deadlines provided in Sec.  1005.839(a)(1) 
through (5), for expenses omitted from the Servicer's prior claim or for 
a calculation error made by either Servicer or HUD.



Sec.  1005.809  Claim types.

    HUD recognizes five different claim types. The Servicer must submit 
a claim based upon the type of property disposition. The Servicer shall 
submit claims within timeframes established below or any extended 
timeframe prescribed by Section 184 Program Guidance. The Claim types 
are:
    (a) Conveyance. When the property is deeded to HUD through 
foreclosure:
    (1) The Servicer must submit a claim under Sec.  1005.807(a) to HUD 
no later than 2 business days from the date the deed to HUD is executed.
    (2)(i) Fee simple land. The claim must include the final title 
policy evidencing HUD's ownership through foreclosure or transfer of the 
ownership of the property through deed-in-lieu to HUD, in accordance 
with Sec.  1005.817.
    (ii) Trust Land. The claim must include a certified Title Status 
Report evidencing HUD's property interest through foreclosure.
    (3) In cases where the Servicer is unable to comply with paragraph 
(a)(2)(ii) of this section, the Servicer shall submit the claim pending 
the certified Title Status Report in accordance with the time frame 
specified in paragraph (a)(1) of this section.
    (4) Servicers must submit claims under Sec.  1005.807(b) no later 
than 15 days following the submission of a claim under Sec.  
1005.807(a).
    (b) Assignment of the loan. When the Holder assigns the Section 184 
Guaranteed Loan to HUD:
    (1) The Servicer must submit a claim under Sec.  1005.807(a) and (b) 
no later than 45 days from the date of the assignment of the Section 184 
Guaranteed Loan to HUD is executed.
    (2)(i) Trust Land. The claim must include the recorded assignment 
and a certified Title Status Report evidencing the assignment of the 
mortgage to HUD.
    (ii) Fee simple land. The claim must include the final title policy 
providing coverage through the transfer of the mortgage to HUD.
    (3) In cases where the Servicer is unable to comply with paragraph 
(b)(2)(i) of this section, the Servicer shall submit the claim pending 
the certified Title Status Report in accordance with the time frame 
specified in paragraph (b)(1) of this section.
    (4) At the time of assignment of the Section 184 Guaranteed Loan, 
the Servicer shall certify to HUD that:

[[Page 821]]

    (i) Priority of Section 184 Guaranteed Loan. The Section 184 
Guaranteed Loan has priority over all judgments, mechanics' and 
materialmen's liens, or any other liens, regardless of when such liens 
attached, unless approved by HUD;
    (ii) Amount due. The amount reported to HUD in accordance with Sec.  
1005.707(d) prior to assignment is verified to be due and owing under 
the Section 184 Guaranteed Loan;
    (iii) Offsets or counterclaims and authority to assign. There are no 
offsets or counterclaims thereto and the Holder has the authority to 
assign; and
    (iv) The assignment of the Section 184 Guaranteed Loan to HUD meets 
the requirements of Sec.  1005.765.
    (c) Post-foreclosure claims without conveyance of title. When a 
third-party purchases the property at foreclosure, the Servicer must 
submit a claim under Sec.  1005.807(a) and (b) to HUD no later than 30 
days from the date the property is conveyed to the third-party. If the 
Holder purchases the property at foreclosure and subsequently sells the 
property, the Servicer may submit a claim under this section.
    (d) Pre-foreclosure sale, deed-in-lieu or lease-in-lieu. When a 
property is sold or conveyed prior to foreclosure in accordance with 
Sec.  1005.753 or Sec.  1005.755, the Servicer must submit a claim under 
Sec.  1005.807(a) and (b) to HUD no later than 30 days from the date the 
sale or conveyance is executed.
    (e) Supplemental claim. The Servicer shall be limited to one 
supplemental claim for each Claim under submission categories in 
paragraphs (a) through (d) of this section.
    (1) The supplemental claim shall be limited to:
    (i) Reasonable eligible expenses incurred up to the date of 
conveyance of the property or assignment of the Section 184 Guaranteed 
Loan, when invoices are received after the payment of the claim under 
Sec.  1005.807(b); or
    (ii) Calculation error(s) made by either the Servicer or HUD.
    (2) Supplemental claims must be submitted within six months of the 
claim submission under Sec.  1005.807(b). Supplemental claims received 
after six months of the claim submission will not be reviewed or paid by 
HUD.
    (3) Any supplemental claim paid by HUD shall be considered final 
satisfaction of the Loan Guarantee Certificate.

                          Submission of Claims



Sec.  1005.811  Claims supporting documentation.

    The Servicer shall submit supporting documentation to the 
satisfaction of HUD for each Claim. Such documentation will be provided 
for in Section 184 Program Guidance.



Sec.  1005.813  Up-front and Annual Loan Guarantee Fee reconciliation.

    (a) The Servicer must include in the claims case binder a 
reconciliation evidencing the payment of the Up-front and Annual Loan 
Guarantee Fees to HUD.
    (b) Where the Servicer fails to comply with paragraph (a) of this 
section or the reconciliation shows unpaid amounts owed to HUD, and the 
unpaid amounts, along with late fees, have not been satisfied by the 
Servicer, HUD shall reject the claim.
    (c) The Servicer may resubmit the claim after providing the 
reconciliation required under paragraph (a) of this section or after the 
Annual Loan Guarantee Fee amounts, along with late fees, owed to HUD are 
paid by the Servicer.
    (d) Allowance to resubmit in accordance with paragraph (c) of this 
section shall not be construed to extend any deadlines to file claims 
specified in this subpart.



Sec.  1005.815  Conditions for withdrawal of claim.

    With HUD's consent, a Holder may withdraw a claim. When HUD consent 
is granted, the Holder shall agree, where applicable, in writing that it 
will:
    (a) Accept a reconveyance of the property under a conveyance which 
warrants against the acts of HUD and all claiming by, through or under 
HUD;
    (b) Promptly file for record the reconveyance from HUD;
    (c) Accept without continuation, the title evidence which the 
Servicer furnished to HUD; and
    (d) Reimburse HUD for the expenditures and amounts set forth in 
Sec.  1005.851.

               Property Title Transfers and Title Waivers



Sec.  1005.817  Conveyance of Good and Marketable Title.

    (a) Satisfactory conveyance of title and transfer of possession. The 
Servicer shall tender to HUD a satisfactory conveyance of title and 
transfer of possession of the property. The deed or other instrument of 
conveyance shall convey Good and Marketable Title to the property, which 
shall be accompanied by title evidence satisfactory to HUD.
    (b) Conveyance of property without Good and Marketable Title. (1) If 
the title to the property conveyed by the Holder to HUD does not have 
Good and Marketable Title, the Holder must correct any title defect 
within 60 days after receiving notice from HUD, or within such further 
time as HUD may approve in writing.
    (2) If the defect is not corrected within 60 days, or such further 
time as HUD approves in writing, the Holder must reimburse HUD's costs 
of holding the property. Such holding

[[Page 822]]

costs accrue on a daily basis and include interest on the amount of the 
loan guarantee benefits paid to the Holder at an interest rate set in 
conformity with the Treasury Fiscal Requirements Manual from the date of 
such notice to the date the defect is corrected or until HUD reconveys 
the property to the Holder, as described in paragraph (b)(3) of this 
section. The daily holding costs to be charged to the Holder shall also 
include the costs specified in Sec.  1005.851.
    (3) If the title defect is not corrected within a reasonable time, 
as determined by HUD, HUD will, after notice, reconvey the property to 
the Holder and the Holder must reimburse HUD in accordance with 
Sec. Sec.  1005.849 and 1005.851.



Sec.  1005.819  Types of satisfactory title evidence.

    The following types of title evidence shall be satisfactory to HUD:
    (a) Fee or owner's title policy. A fee or owner's policy of title 
insurance, a guaranty or guarantee of title, or a certificate of title, 
issued by a title company, duly authorized by law and qualified by 
experience to issue such instruments. If an owner's policy of title 
insurance is furnished, it shall show title in HUD's name and inure to 
the benefit of the Department. The policy must be drawn in favor of the 
Holder and HUD, ``and their successors and assigns, as their interests 
may appear'', with the consent of the title company endorsed thereon.
    (b) Policy of title insurance. A Holder's policy of title insurance 
supplemented by an abstract and an attorney's certificate of title 
covering the period subsequent to the date of the loan, the terms of the 
policy shall be such that the liability of the title company will 
continue in favor of HUD after title is conveyed to HUD. The policy must 
be drawn in favor of the Servicer and HUD, ``and their successors and 
assigns, as their interests may appear'', with the consent of the title 
company endorsed thereon;
    (c) Abstract and legal opinion. An abstract of title prepared by an 
abstract company or individual engaged in the business of preparing 
abstracts of title and accompanied by the legal opinion as to the 
quality of such title signed by an attorney at law experienced in 
examination of titles. If title evidence consists of an abstract and an 
attorney's certificate of title, the search shall extend for at least 
forty years prior to the date of the Certificate to a well-recognized 
source of good title;
    (d) Torrens or similar certificate. A Torrens or similar title 
certificate;
    (e) Title standard of U.S., Tribal, or State government. Evidence of 
title conforming to the standards of a supervising branch of the 
Government of the United States or of any Tribe, State or Territory 
thereof; or
    (f) Title Status Report. Certified Title Status Report issued by the 
BIA or other comparable document approved by HUD in accordance with 
Section 184 Program Guidance, shall not be more than sixty (60) days 
from the date of the Sec.  1005.807(a) claim submission. Extensions may 
be granted under certain reasonable circumstances, as prescribed by 
Section 184 Program Guidance.



Sec.  1005.821  Coverage of title evidence.

    (a) Evidence of title or Title Status Report shall include the 
recordation of the conveyance or assignment to HUD. The evidence of 
title, the Title Status Report or direct verification from the Tribe or 
TDHE, shall further show that, according to the public or Tribal 
records, there are no outstanding prior liens, including any past-due 
and unpaid ground rents, general taxes or special assessments, if 
applicable, on the date of conveyance or assignment.
    (b) If the title evidence and Title Status Report are acceptable 
generally in the community in which the property is situated, such title 
evidence and Title Status Report shall be satisfactory to HUD and shall 
be considered Good and Marketable Title. In cases of disagreement, HUD 
will make the final determination in its sole discretion.



Sec.  1005.823  Waived title objections for properties on fee simple 
          land.

    Reasonable title objections for fee simple land properties shall be 
waived by HUD. Reasonable title objections will be prescribed in Section 
184 Program Guidance.



Sec.  1005.825  Waived title objections for properties on Trust Land.

    HUD shall not object to title restrictions placed on the tract of 
Trust Land by the Tribe or the BIA so long as those restrictions do not 
adversely impact the property or marketability.

                        Condition of the Property



Sec.  1005.827  Damage or neglect.

    (a) If the property has been damaged by fire, flood, earthquake, or 
tornado, or if the property has suffered damage because of the Servicer 
's failure to take action as required by Sec.  1005.767 or for any other 
reason, the Servicer must submit a claim to the hazard insurance policy, 
as applicable and the damage must be repaired before conveyance of the 
property or assignment of the Section 184 Guaranteed Loan to HUD.
    (b) If the property has been damaged as described in paragraph (a) 
of this section and the damage is not covered by a hazard insurance 
policy, the Servicer must provide notice of such damage to HUD. The 
property may not be conveyed or assigned until directed to do so by HUD. 
Upon receipt of such notice, HUD will either:

[[Page 823]]

    (1) Allow the Holder to convey the damaged property;
    (2) Require the Holder to repair the damage before conveyance, and 
HUD will reimburse the Holder for reasonable payments, not in excess of 
HUD's estimate of the cost of repair, less any hazard insurance 
recovery; or
    (3) Require the Holder to repair the damage before conveyance, at 
the Holder's own expense.
    (c) In the event the damaged property is conveyed to HUD without 
prior notice or approval as provided in paragraph (a) or (b) of this 
section, HUD may, after notice, reconvey the property and demand 
reimbursement to HUD for the expenses in accordance with Sec. Sec.  
1005.849 and 1005.851.



Sec.  1005.829  Certificate of property condition.

    (a) As part of the claim submission, the Servicer shall either:
    (1) Certify that as of the date of the deed or assignment of the 
loan to HUD the property was:
    (i) Undamaged by fire, flood, earthquake, or tornado;
    (ii) Undamaged due to failure of the Servicer to act as required by 
Sec.  1005.767; and,
    (iii) Undamaged while the property was in the possession of the 
Borrower; or,
    (2) Include a copy of HUD's authorization to convey the property in 
damaged condition.
    (b) In the absence of evidence to the contrary, the Servicer's 
certificate or description of the damage shall be accepted by HUD as 
establishing the condition of the property, as of the date of the deed 
or assignment of the Section 184 Guaranteed Loan.



Sec.  1005.831  Cancellation of hazard insurance.

    The Holder shall cancel any hazard insurance policy as of the date 
of the deed to HUD, subject to the following conditions:
    (a) The amount of premium refund due to the Servicer resulting from 
such cancellation must be deducted from the total amount claimed.
    (b) If the Holder's calculation of the premium refund is less than 
the actual premium refund, the amount of the difference between the 
actual refund and the calculated refund shall be remitted to HUD, 
accompanied by the insurance company's or agent's statement.
    (c) If the Holder's calculation of the premium refund is more than 
the actual refund, the Servicer must include in a supplemental Claim 
submission in accordance with Sec.  1005.809(c), accompanied by the 
insurance company's or agent's statement, the amount of the difference 
as an eligible cost in accordance with Sec.  1005.843(c).

                      Payment of Guarantee Benefits



Sec.  1005.833  Method of payment.

    If the claim is acceptable to HUD, payment of the guarantee benefits 
shall be made by electronic transfer of funds to the Holder or other 
such allowable payment method.



Sec.  1005.835  Claim payment not conclusive evidence of claim meeting 
          all HUD requirements.

    Payment of any claim by HUD is not conclusive evidence of compliance 
with the subparts D or G of this part. HUD reserves the right to conduct 
post-claim payment review of claims. Where non-compliance with any 
requirements of this part is identified, HUD will take appropriate 
action against the Holder, Originating Direct Guarantee Lender and/or 
Servicer, including but not limited to HUD's remedies under Sec.  
1005.805 and sanctions under Sec. Sec.  1005.905 and 1005.907.



Sec.  1005.837  Payment of claim: unpaid principal balance.

    HUD will pay a claim under Sec.  1005.807(a) in the amount of the 
unpaid principal balance less all receipts for the sale or transfer of 
the property, if applicable, in accordance with the requirements of this 
subpart.



Sec.  1005.839  Payment of claim: interest on unpaid principal balance.

    HUD shall pay interest on the unpaid principal balance from the date 
of default to the earlier of the following:
    (a) The execution of deed-in-lieu/lease-in-lieu of foreclosure;
    (b) The execution of the conveyance to either Holder, HUD or a 
third-party;
    (c) The execution of the assignment of the Section 184 Guaranteed 
Loan to HUD;
    (d) The expiration of the reasonable diligence timeframe; or
    (e) Other event as prescribed by Section 184 Program Guidance.



Sec.  1005.841  Payment of claim: reimbursement of eligible and 
          reasonable costs.

    The claim will be paid in accordance with Sec.  1005.807(b) and will 
include eligible and reasonable costs, as prescribed by Section 184 
Program Guidance.



Sec.  1005.843  Reductions to the claim submission amount.

    A Holder shall reduce the claim when the following amounts are 
received or held by the Holder:
    (a) All amounts received by the Holder to the account of the 
borrower after default.
    (b) All amounts received by the Holder from any source relating to 
the property on account of rent, reimbursement or other payments.
    (c) All cash retained by the Holder including amounts held or 
deposited in the account of the Borrower or to which it is entitled

[[Page 824]]

under the loan transaction that have not been applied in reduction of 
the principal loan indebtedness.



Sec.  1005.845  Rights and liabilities under Indian Housing Loan 
          Guarantee Fund.

    (a) No Borrower, Direct Guarantee Lender, Non-Direct Guarantee 
Lender, Holder, or Servicer shall have any vested right in the Indian 
Housing Loan Guarantee Fund.
    (b) No Borrower, Direct Guarantee Lender, Non-Direct Guarantee 
Lender, Holder, or Servicer shall be subject to any liability arising 
under the Indian Housing Loan Guarantee Fund.
    (c) The Indian Housing Loan Guarantee Fund will be credited and 
debited in accordance with 12 U.S.C. 1715z-13a(i)(2).



Sec.  1005.847  Final payment.

    (a) HUD's payment of a claim(s) shall be deemed as final payment to 
the Holder, notwithstanding the Holder's ability to present additional 
claim(s) in accordance with Sec.  1005.807 as applicable. The Holder 
shall have no further rights against the Borrower or HUD when there is a 
final payment. This paragraph does not preclude HUD from seeking 
reimbursement of costs and return of amounts from the Holder or 
Originating Direct Guarantee Lender pursuant to Sec. Sec.  1005.849 and 
1005.851.
    (b) In cases where HUD reconveys the property to the Holder and HUD 
is reimbursed for all expenses and Holder returns all amounts pursuant 
to Sec. Sec.  1005.849 and 1005.851, provisions under paragraph (a) of 
this section shall not apply. However, the resubmission of the Claim, if 
any, shall be subject to Sec.  1005.849(b) and any additional processes 
as prescribed by Section 184 Program Guidance.



Sec.  1005.849  Reconveyance and reassignment.

    (a) HUD may reconvey the property or reassign the deed of trust or 
mortgage to the Holder due to:
    (1) Noncompliance with this part or any requirements as prescribed 
by Section 184 Program Guidance; or
    (2) An authorized withdrawal of a claim in accordance with Sec.  
1005.815.
    (b) HUD may take appropriate action against the Holder associated 
with the reconveyance or reassignment authorized in paragraph (a) of 
this section, including but not limited to, seeking reimbursement of all 
claim costs paid by HUD and carrying costs incurred by HUD in accordance 
with Sec.  1005.851.
    (c) Notwithstanding any other provision in this subpart, in cases 
where HUD has conveyed the property or reassigned the deed of trust or 
mortgage back to the Holder in accordance with Sec.  1005.851, and where 
the Servicer resubmits the claim, HUD will not reimburse the Holder any 
expenses incurred after the date of the HUD conveyance or assignment.
    (d) Additional reasonable and necessary restrictions may be imposed, 
as prescribed by Section 184 Program Guidance.



Sec.  1005.851  Reimbursement of expenses to HUD.

    Where reconveyance or reassignment is sought by HUD pursuant to 
Sec.  1005.849 or when HUD determines noncompliance, the Holder or the 
Originating Direct Guarantee Lender shall reimburse HUD for:
    (a) All Claim costs paid by HUD.
    (b) HUD's cost of holding the property, including but not limited to 
expenses based on the estimated taxes, maintenance and operating 
expenses of the property, and administrative expenses. Adjustments shall 
be made by HUD for any income received from the property.
    (c) The reimbursement shall include interest on the amount of the 
claim payment returned by the Holder or the originating Direct Guarantee 
Lender from the date the claim was paid to the date HUD receives the 
reimbursement from Holder or the originating Direct Guarantee Lender. 
The interest rate set shall be in conformity with the Treasury Fiscal 
Requirements Manual.



    Subpart I_Program Performance, Reporting, Sanctions, and Appeals



Sec.  1005.901  Performance reviews.

    HUD may conduct periodic performance reviews of Direct Guarantee 
Lenders, Non-Direct Guarantee Lenders, Holders, and Servicers. These may 
include analytical reviews, customer surveys and on-site or remote 
monitoring reviews. These reviews may include, but are not limited to, 
an evaluation of compliance with this part. HUD will provide written 
notice of its assessment and any proposed corrective action, if 
applicable.



Sec.  1005.903  Reporting and certifications.

    (a) The Direct Guarantee Lender, Non-Direct Guarantee Lender or 
Servicer shall provide timely and accurate reports and certifications to 
HUD, which may include but is not limited to reports in connection with 
performance reviews under Sec.  1005.901, any special request for 
information from HUD, and any reasonable reports prescribed by Section 
184 Program Guidance, within reasonable time frames prescribed by HUD.
    (b) The Direct Guarantee Lender, Non-Direct Guarantee Lender or 
Servicer's failure to provide timely and accurate reports and 
certifications to HUD may subject the Direct Guarantee Lender, Non-
Direct Guarantee Lender, Holder, or Servicer to sanctions and civil 
money penalties pursuant to Sec. Sec.  1005.905 and 1005.907.

[[Page 825]]



Sec.  1005.905  Notice of sanctions.

    (a) Prior to the notice of sanctions or civil money penalties, HUD 
shall inform the Direct Guarantee Lender, Non-Direct Guarantee Lender, 
Holder, or Servicer of the specific non-compliance with this part and, 
where applicable, afford the Direct Guarantee Lender, Non-Direct 
Guarantee Lender, Holder, or Servicer a reasonable time, as prescribed 
in Section 184 Program Guidance, to return to compliance.
    (b) If it is determined that the Direct Guarantee Lender, Non-Direct 
Guarantee Lender, Holder or Servicer fails to return to compliance 
within the allowed time, HUD shall provide written notice of the 
sanctions and civil money penalties to be imposed and the basis for the 
action.



Sec.  1005.907  Sanctions and civil money penalties.

    (a) Where the Direct Guarantee Lender, Non-Direct Guarantee Lender, 
Holder or Servicer fails to comply with this part, including failure to 
maintain adequate accounting records, failure to adequately service 
loans, or failure to exercise proper credit or underwriting judgment, or 
becomes ineligible to participate pursuant to Sec.  1005.225, or has 
engaged in practices otherwise detrimental to the interest of a Borrower 
or the United States, including but not limited to, failure to provide 
timely reporting, or failure to follow underwriting requirements set 
forth in this part, or failure to comply with Section 184 Program 
Guidance when it specifically provides times, processes, and procedures 
for complying with the requirements of this part, HUD may take any 
combination of the following actions:
    (1) Either temporarily or permanently terminate a Director Guarantee 
Lender or Non-Direct Guarantee Lender's status. If such action is taken 
and the terminated Direct Guarantee Lender wishes to maintain servicing 
rights to the Section 184 Guaranteed Loans, the terminated Direct 
Guarantee Lender must seek HUD approval as prescribed in Section 184 
Program Guidance.
    (2) Bar the Direct Guarantee Lender or Holder from acquiring 
additional Section 184 Guaranteed Loans.
    (3) Require that the Direct Guarantee Lender assume not less than 10 
percent of any loss on further Section 184 Guaranteed Loans made by the 
Direct Guarantee Lender.
    (4) Require that the Direct Guarantee Lender, Non-Direct Guarantee 
Lender, Holder, or Servicer comply with a corrective action plan or 
amend the Direct Guarantee Lender, Non-Direct Guarantee Lender or 
Holder's quality control plan, subject to HUD approval, to remedy the 
non-compliance with this part and any process prescribed by Section 184 
Program Guidance. The plan shall also address methods to prevent the 
reoccurrence of any practices that are detrimental to the interest of 
the Borrower or HUD. The corrective action plan or amended quality 
control plan shall afford the Direct Guarantee Lender, Non-Direct 
Guarantee Lender, or Holder reasonable time to return to compliance.
    (b) HUD is authorized pursuant to 12 U.S.C. 1715z-13a(g)(2) to 
impose civil money penalties upon Direct Guarantee Lenders, Non-Direct 
Guarantee Lender, or Holders as set forth in 24 CFR part 30. The 
violations for which a civil money penalty may be imposed are listed in 
subpart B of 24 CFR part 30.



Sec.  1005.909  Appeals process.

    (a) Lenders denied participation in the Section 184 Program pursuant 
to subpart B of this part, or a Direct Guarantee Lender, Non-Direct 
Guarantee Lender, Holder, or Servicer subject to sanctions pursuant to 
Sec.  1005.907, may appeal to HUD's Office of Loan Guarantee within 15 
days, or other timeframe as prescribed in Section 184 Program Guidance. 
After consideration of the Lender, Direct Guarantee Lender, Non-Direct 
Guarantee Lender, Holder or Servicer's appeal, HUD shall advise the 
Lender, Direct Guarantee Lender, Non-Direct Guarantee Lender, Holder or 
Servicer in writing whether the denial is rescinded, modified or 
affirmed. The Lender, Direct Guarantee Lender, Non-Direct Guarantee 
Lender, Holder, or Servicer may then appeal such decision to the Deputy 
Assistant Secretary for Office of Native American Programs, or his or 
her designee. A decision by the Deputy Assistant Secretary or designee 
shall constitute final agency action.
    (b) Hearings to challenge the imposition of civil money penalties 
shall be conducted according to the applicable rules of 24 CFR part 30.



PART 1006_NATIVE HAWAIIAN HOUSING BLOCK GRANT PROGRAM--Table of Contents



                            Subpart A_General

Sec.
1006.1 Applicability.
1006.10 Definitions.
1006.20 Grants for affordable housing activities.
1006.30 Waivers.

                         Subpart B_Housing Plan

1006.101 Housing plan requirements.
1006.110 Review of plans.

                      Subpart C_Eligible Activities

1006.201 Eligible affordable housing activities.
1006.205 Development.

[[Page 826]]

1006.210 Housing services.
1006.215 Housing management services.
1006.220 Crime prevention and safety activities.
1006.225 Model activities.
1006.227 Tenant-based or project-based rental assistance.
1006.230 Administrative and planning costs.
1006.235 Types of investments and forms of assistance.

                     Subpart D_Program Requirements

1006.301 Eligible families.
1006.305 Low-income requirement and income targeting.
1006.306 Income verification for receipt of NHHBG assistance.
1006.307 Non-low-income families.
1006.310 Rent and lease-purchase limitations.
1006.315 Lease requirements.
1006.320 Tenant or homebuyer selection.
1006.325 Maintenance, management and efficient operation.
1006.330 Insurance coverage.
1006.335 Use of nonprofit organizations and public-private partnerships.
1006.340 Treatment of program income.
1006.345 Labor standards.
1006.350 Environmental review.
1006.355 Nondiscrimination requirements.
1006.360 Conflict of interest.
1006.365 Program administration responsibilities.
1006.370 Uniform administrative, requirements, cost principles, and 
          audit requirements for Federal awards.
1006.375 Other Federal requirements.
1006.377 Other Federal requirements: Displacement, Relocation, and 
          Acquisition.

                 Subpart E_Monitoring and Accountability

1006.401 Monitoring of compliance.
1006.410 Performance reports.
1006.420 Review of DHHL's performance.
1006.430 Corrective and remedial action.
1006.440 Remedies for noncompliance.

    Authority: 12 U.S.C. 1701x, 1701x-1; 25 U.S.C. 4221 et seq.; 42 
U.S.C. 3535(d), Pub. L. 115-141, Pub. L. 116-6, Pub. L. 116-94, Pub. L. 
116-260, Pub. L. 117-103, Pub. L. 117-328.

    Source: 67 FR 40776, June 13, 2002, unless otherwise noted.



                            Subpart A_General



Sec.  1006.1  Applicability.

    The requirements and procedure of this part apply to grants under 
the Native Hawaiian Housing Block Grant (NHHBG) Program, authorized by 
the Hawaiian Homelands Homeownership Act of 2000 (HHH Act), which adds 
Title VIII--Housing Assistance For Native Hawaiians (25 U.S.C. 4221 et 
seq.), to the Native American Housing Assistance and Self-Determination 
Act of 1996 (NAHASDA) (25 U.S.C. 4101 et seq.).



Sec.  1006.10  Definitions.

    The following definitions apply in this part:
    Act means title VIII of NAHASDA, as amended.
    Adjusted income means the annual income that remains after excluding 
the following amounts:
    (1) Youths, students, and persons with disabilities. $480 for each 
member of the family residing in the household (other than the head of 
the household or the spouse of the head of the household):
    (i) Who is under 18 years of age; or
    (ii) Who is:
    (A) 18 years of age or older; and
    (B) A person with disabilities or a full-time student.
    (2) Elderly and disabled families. $400 for an elderly or disabled 
family.
    (3) Medical and attendant expenses. The amount by which 3 percent of 
the annual income of the family is exceeded by the aggregate of:
    (i) Medical expenses, in the case of an elderly or disabled family; 
and
    (ii) Reasonable attendant care and auxiliary apparatus expenses for 
each family member who is a person with disabilities, to the extent 
necessary to enable any member of the family (including a member who is 
a person with disabilities) to be employed.
    (4) Child care expenses. Child care expenses, to the extent 
necessary to enable another member of the family to be employed or to 
further his or her education.
    (5) Earned income of minors. The amount of any earned income of any 
member of the family who is less than 18 years of age.
    (6) Travel expenses. Excessive travel expenses, not to exceed $25 
per family per week, for employment--or education-related travel.
    (7) Other amounts. Such other amounts as may be provided in the 
housing plan for Native Hawaiians.
    Affordable Housing means housing that complies with the requirements 
of the Act and this part. The term includes permanent housing for 
homeless

[[Page 827]]

persons who are persons with disabilities, transitional housing, and 
single room occupancy housing.
    Annual income has one or more of the following meanings, as 
determined by the Department of Hawaiian Home Lands:
    (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) The definition of income as used by the U.S. Census Bureau. 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 HUD's Assistant Secretary for Public and 
Indian Housing.
    Department of Hawaiian Home Lands (DHHL) means the agency or 
department of the government of the State of Hawaii that is responsible 
for the administration of the Hawaiian Homes Commission Act, 1920 (HHCA 
1920) (42 Stat. 108 et seq.).
    Director means the Director of the Department of Hawaiian Home 
Lands.
    Drug-Related Criminal Activity means the illegal manufacture, sale, 
distribution, use, or possession with intent to manufacture, sell, 
distribute, or use a controlled substance (as such term is defined in 
section 102 of the Controlled Substances Act).
    Elderly families; near-elderly families means:
    (1) In general. The term ``elderly family'' or ``near-elderly 
family'' means a family whose head (or his or her spouse), or whose sole 
member, is:
    (i) For an elderly family, an elderly person; or
    (ii) For a near-elderly family, a near-elderly person.
    (2) Certain families included. The term ``elderly family'' or 
``near-elderly family'' includes:
    (i) Two or more elderly persons or near-elderly persons, as the case 
may be, living together; and
    (ii) One or more persons described in paragraph (2)(i) of this 
definition living with one or more persons determined under the housing 
plan to be essential to their care or well-being.
    Elderly person means an individual who is at least 62 years of age.
    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 DHHL.
    Hawaiian Home Lands means lands that:
    (1) Have the status as Hawaiian home lands under section 204 of the 
HHCA 1920 (42 Stat. 110); or
    (2) Are acquired pursuant to the HHCA 1920.
    Homebuyer payment means the payment of a family purchasing a home 
pursuant to a long-term lease purchase agreement.
    Housing area means an area of Hawaiian Home Lands with respect to 
which the DHHL is authorized to provide assistance for affordable 
housing under the Act and this part.
    Housing plan means a plan developed by the DHHL pursuant to the Act 
and this part, particularly Sec.  1006.101.
    HUD means the Department of Housing and Urban Development.
    Income means the term ``income'' as defined in Section 4(9) of 
NAHASDA.
    Low-income family means a family whose income does not exceed 80 
percent of the median income for the area, as determined by HUD with 
adjustments for smaller and larger families, except that HUD may, for 
purposes of

[[Page 828]]

this paragraph, establish income ceilings higher or lower than 80 
percent of the median for the area on the basis of the findings of HUD 
or the agency that such variations are necessary because of prevailing 
levels of construction costs or unusually high or low family incomes.
    Median income means, with respect to an area that is a housing area, 
the greater of:
    (1) The median income for the housing area, which shall be 
determined by HUD; or
    (2) The median income for the State of Hawaii.
    NAHASDA means the Native American Housing Assistance and Self-
Determination Act of 1996 (25 U.S.C. 4101 et seq.).
    Native Hawaiian means any individual who is:
    (1) A citizen of the United States; and
    (2) A descendant of the aboriginal people, who, prior to 1778, 
occupied and exercised sovereignty in the area that currently 
constitutes the State of Hawaii, as evidenced by:
    (i) Genealogical records;
    (ii) Verification by kupuna (elders) or kama'aina (long-term 
community residents); or
    (iii) Birth records of the State of Hawaii.
    Native Hawaiian Housing Block Grant (NHHBG) Funds means funds made 
available under the Act, plus program income.
    Near-elderly person means an individual who is at least 55 years of 
age and less than 62 years of age.
    Nonprofit means, with respect to an organization, association, 
corporation, or other entity, that no part of the net earnings of the 
entity inures to the benefit of any member, founder, contributor, or 
individual.
    Person with a disability, as further explained in 28 CFR 35.108, is 
defined as follows:
    (1) Definition of person with a disability. ``Person with a 
disability'' means a person who:
    (i) Has a physical or mental impairment which substantially limits 
one or more major life activities;
    (ii) Has a record of having such an impairment;
    (iii) Is regarded as having such an impairment;
    (iv) Has a disability as defined in section 223 of the Social 
Security Act; or
    (v) Has a developmental disability as defined in section 102 of the 
Developmental Disabilities Assistance and Bill of Rights Act.
    (2) Definition of physical or mental impairment. For the purposes of 
this definition, the term ``physical or mental impairment'' means:
    (i) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one or more body systems, such as: 
neurological, musculoskeletal, special sense organs, respiratory 
(including speech organs), cardiovascular, reproductive, digestive, 
genitourinary, immune, circulatory, hemic, lymphatic, skin, and 
endocrine; or
    (ii) Any mental or psychological disorder such as intellectual 
disability, organic brain syndrome, emotional or mental illness, and 
specific learning disability.
    (3) Nonexhaustive list of physical and mental impairments. For the 
purposes of this definition, the term ``physical or mental impairment'' 
includes, but is not limited to, contagious and noncontagious diseases 
and conditions such as the following: orthopedic, visual, speech, and 
hearing impairments, and cerebral palsy, epilepsy, muscular dystrophy, 
multiple sclerosis, cancer, heart disease, diabetes, intellectual 
disability, emotional illness, dyslexia and other specific learning 
disabilities, Attention Deficit Hyperactivity Disorder, Human 
Immunodeficiency Virus infection (whether symptomatic or asymptomatic), 
tuberculosis, drug addiction, and alcoholism.
    (4) Nonexhaustive list of major life activities. For the purposes of 
this definition, the term ``major life activities'' includes, but is not 
limited to:
    (i) Caring for oneself, performing manual tasks, seeing, hearing, 
eating, sleeping, walking, standing, sitting, reaching, lifting, 
bending, speaking, breathing, learning, reading, concentrating, 
thinking, writing, communicating, interacting with others, and working; 
and
    (ii) The operation of a major bodily function, such as the functions 
of the

[[Page 829]]

immune system, special sense organs and skin, normal cell growth, and 
digestive, genitourinary, bowel, bladder, neurological, brain, 
respiratory, circulatory, cardiovascular, endocrine, hemic, lymphatic, 
musculoskeletal, and reproductive systems. The operation of a major 
bodily function includes the operation of an individual organ within a 
body system.
    Project-based rental assistance means rental assistance provided 
through an agreement for use of a DHHL property or a contract with the 
owner of an existing structure, where the owner agrees to lease the 
subsidized units to program participants. Program participants will not 
retain the rental assistance if they move from the project.
    Secretary means the Secretary of Housing and Urban Development.
    Tenant-based rental assistance means a form of rental assistance in 
which the assisted tenant may move from a dwelling unit with a right to 
continued assistance. Tenant-based rental assistance under this part 
also includes security deposits for rental of dwelling units.
    Transitional housing means housing that:
    (1) Is designed to provide housing and appropriate 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 
DHHL or project owner before occupancy.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9760, Feb. 12, 2024]



Sec.  1006.20  Grants for affordable housing activities.

    (a) Annual grant. Each fiscal year, HUD will make a grant (to the 
extent that amounts are made available) under the Act to the DHHL to 
carry out affordable housing activities for Native Hawaiian families who 
are eligible to reside on the Hawaiian Home Lands, if:
    (1) The Director has submitted to HUD a housing plan for that fiscal 
year; and
    (2) HUD has determined that the housing plan complies with the 
requirements of Sec.  1006.101.
    (b) Waiver. HUD may waive housing plan requirements if HUD finds 
that the DHHL has not complied or cannot comply with those requirements 
due to circumstances beyond the control of the DHHL.



Sec.  1006.30  Waivers.

    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)).



                         Subpart B_Housing Plan



Sec.  1006.101  Housing plan requirements.

    The DHHL must submit a housing plan each year prior to the start of 
its fiscal year. The housing plan has two components, a five-year plan 
and a one-year plan, as follows:
    (a) Five-year plan. Each housing plan must contain, for the 5-year 
period beginning with the fiscal year for which the plan is first 
submitted, the following information:
    (1) Mission statement. A general statement of the mission of the 
DHHL to serve the needs of the low-income Native Hawaiian families 
eligible to live on the Hawaiian Home Lands to be served by the DHHL;
    (2) Goals and objectives. A statement of the goals and objectives of 
the DHHL to enable the DHHL to serve the needs identified in paragraph 
(a)(1), of this section during the 5-year period; and
    (3) Activities plans. An overview of the activities planned during 
the 5-year period including an analysis of the manner in which the 
activities will enable the DHHL to meet its mission, goals, and 
objectives.
    (b) One-year plan. The housing plan must contain the following 
information for the fiscal year for which the assistance under the Act 
is to be made available:

[[Page 830]]

    (1) Goals and objectives. A statement of the goals and objectives to 
be accomplished by the DHHL with its annual grant allocation that are 
measurable in a quantitative way.
    (2) Statement of needs. A statement of the housing needs of the low-
income families served by the DHHL and the means by which those needs 
will be addressed during the period covered by the plan, including:
    (i) A description of the estimated housing needs and the need for 
assistance for the low-income families to be served by the DHHL, 
including a description of the manner in which the geographical 
distribution of assistance is consistent with:
    (A) The geographical needs of those families; and
    (B) Needs for various categories of housing assistance; and
    (ii) A description of the estimated housing needs for all families 
to be served by the DHHL.
    (3) Financial resources. An operating budget for the DHHL that 
includes an identification and a description of:
    (i) The NHHBG funds and other financial resources reasonably 
available to the DHHL to carry out eligible activities, including an 
explanation of the manner in which NHHBG funds will be used to leverage 
additional resources; and
    (ii) Eligible activities to be undertaken and their projected cost, 
including administrative expenses.
    (4) Affordable housing resources. A statement of the affordable 
housing resources currently available at the time of the submittal of 
the plan and to be made available during the period covered by the plan, 
including:
    (i) A description of the significant characteristics of the housing 
market in the State of Hawaii, including the availability of housing 
from other public sources and private market housing;
    (ii) The effect of the characteristics identified under paragraph 
(b)(4)(i) of this section, on the DHHL's decision to use the NHHBG for:
    (A) Rental assistance;
    (B) The production of new units;
    (C) The acquisition of existing units; or
    (D) The rehabilitation of units;
    (iii) A description of the structure, coordination, and means of 
cooperation between the DHHL and any other governmental entities in the 
development, submission, or implementation of the housing plan, 
including a description of:
    (A) The involvement of private, public, and nonprofit organizations 
and institutions;
    (B) The use of loan guarantees under section 184A of the Housing and 
Community Development Act of 1992; and
    (C) Other housing assistance provided by the United States, 
including loans, grants, and mortgage insurance;
    (iv) A description of the manner in which the plan will address the 
needs identified pursuant to paragraph (b)(2) of this section;
    (v) A description of:
    (A) Any existing or anticipated homeownership programs and rental 
programs to be carried out during the period covered by the plan; and
    (B) The requirements and assistance available under the programs 
referred to in paragraph (b)(4)(v)(A) of this section;
    (vi) A description of:
    (A) Any existing or anticipated housing rehabilitation programs 
necessary to ensure the long-term viability of housing to be carried out 
during the period covered by the plan; and
    (B) The requirements and assistance available under the programs 
referred to in paragraph (b)(4)(vi)(A) of this section;
    (vii) A description of:
    (A) All other existing or anticipated housing assistance provided by 
the DHHL during the period covered by the plan, including transitional 
housing; homeless housing; college housing; and supportive services 
housing; and
    (B) The requirements and assistance available under such programs; 
(viii) A description of:
    (A) Any housing to be demolished or disposed of;
    (B) A timetable for that demolition or disposition;
    (C) A financial analysis of the proposed demolition/disposition; and
    (D) Any additional information HUD may request with respect to that 
demolition or disposition.

[[Page 831]]

    (ix) A description of the manner in which the DHHL will coordinate 
with welfare agencies in the State of Hawaii to ensure that residents of 
the affordable housing will be provided with access to resources to 
assist in obtaining employment and achieving self-sufficiency;
    (x) A description of the requirements established by the DHHL to:
    (A) Promote the safety of residents of the affordable housing;
    (B) Facilitate the undertaking of crime prevention measures;
    (C) Allow resident input and involvement, including the 
establishment of resident organizations; and
    (D) Allow for the coordination of crime prevention activities 
between the DHHL and local law enforcement officials; and
    (xi) A description of the entities that will carry out the 
activities under the plan, including the organizational capacity and key 
personnel of the entities.
    (5) Certifications of compliance. The DHHL must certify that it:
    (i) Will comply with:
    (A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.) and with the Fair Housing Act (42 U.S.C. 3601 et seq.), to the 
extent applicable as described in Sec.  1006.355, in carrying out the 
Native Hawaiian Housing Block Grant Program; and
    (B) Other applicable Federal statutes;
    (ii) Will require adequate insurance coverage for housing units that 
are owned and operated or assisted with NHHBG funds, in compliance with 
the requirements of Sec.  1006.330;
    (iii) Has policies in effect and available for review by HUD and the 
public governing the eligibility, admission, and occupancy of families 
for housing assisted with NHHBG funds and governing the selection of 
families receiving other assistance under the Act and this part;
    (iv) Has policies in effect and available for review by HUD and the 
public governing rents charged, including the methods by which such 
rents or homebuyer payments are determined, for housing assisted with 
NHHBG funds; and
    (v) Has policies in effect and available for review by HUD and the 
public governing the management and maintenance of rental and lease-
purchase housing assisted with NHHBG funds.
    (c) Updates to plan--(1) In general. Subject to paragraph (c)(2) of 
this section, after the housing plan has been submitted for a fiscal 
year, the DHHL may comply with the provisions of this section for any 
succeeding fiscal year with respect to information included for the 5-
year period under paragraph (a) of this section by submitting only such 
information regarding such changes as may be necessary to update the 5-
year period of the plan previously submitted. Information for the 1-year 
period under paragraph (b) of this section must be submitted each fiscal 
year.
    (2) Complete plans. The DHHL shall submit a complete plan that 
includes a new five-year plan under this section not later than 4 years 
after submitting an initial plan, and not less frequently than every 4 
years thereafter.
    (d) Amendments to plan. The DHHL must submit any amendment to the 
one-year housing plan for HUD review before undertaking any new 
activities that are not addressed in the current plan that was reviewed 
by HUD and found to be in compliance with section 803 of NAHASDA and 
this part. The amendment must include a description of the new activity 
and a revised budget reflecting the changes. HUD will review the revised 
plan and will notify DHHL within 30 days whether the amendment complies 
with applicable requirements.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024]



Sec.  1006.110  Review of plans.

    (a) Review--(1) In general. Within 60 days of receipt of the housing 
plan, HUD will conduct a limited review to ensure that the contents of 
the plan comply with the requirements of Sec.  1006.101, are consistent 
with information and data available to HUD, and are not prohibited by or 
inconsistent with any provision of the Act and this part or any other 
applicable law.
    (2) Limitation. HUD will review the housing plan only to the extent 
that HUD considers that the review is necessary.

[[Page 832]]

    (3) Incomplete plans. If HUD determines that any of the required 
certifications are not included in the housing plan, the plan shall be 
considered to be incomplete. HUD may also consider a housing plan to be 
incomplete if it does not address all of the requirements of Sec.  
1006.101, and the DHHL has not requested a waiver of the missing 
requirement.
    (b) Notice--(1) In general. Not later than 60 days after receiving 
the housing plan, HUD will notify the DHHL whether or not the plan 
complies with applicable requirements.
    (2) Notice of reasons for determination of noncompliance. If HUD 
determines that the contents of the housing plan do not comply with the 
requirements of Sec.  1006.101, or are not consistent with information 
and data available to HUD, or are prohibited by or inconsistent with any 
provision of the Act and this part or any other applicable law, HUD will 
specify in the notice under paragraph (b)(1) of this section:
    (i) The reasons for noncompliance; and
    (ii) Any modifications necessary for the plan to be in compliance.
    (3) Effect of HUD's failure to take action. If HUD does not notify 
the DHHL, upon the expiration of the 60-day period described in 
paragraph (a)(1) of this section, the plan shall be considered to have 
been determined to comply with the requirements under Sec.  1006.101 and 
the DHHL shall be considered to have been notified of compliance.



                      Subpart C_Eligible Activities



Sec.  1006.201  Eligible affordable housing activities.

    Eligible affordable housing activities are development, housing 
services, housing management services, crime prevention and safety 
activities, and model activities. Affordable housing activities under 
this part are activities conducted in accordance with subpart D of this 
part to develop, operate, maintain, or support housing for rental or 
homeownership; or provide services with respect to affordable housing 
through the activities described in this subpart. NHHBG funds may only 
be used for eligible activities that are consistent with the DHHL's 
housing plan.

[89 FR 9761, Feb. 12, 2024]



Sec.  1006.205  Development.

    (a) NHHBG funds may be used for the acquisition, new construction, 
reconstruction, or moderate or substantial rehabilitation of affordable 
housing for homeownership or rental, which may include:
    (1) Real property acquisition;
    (2) Acquisition of affordable housing;
    (3) Financing acquisition of affordable housing by homebuyers 
through:
    (i) Down payment assistance;
    (ii) Closing costs assistance;
    (iii) Direct lending; and
    (iv) Interest subsidies or other financial assistance
    (4) New construction of affordable housing;
    (5) Reconstruction of affordable housing;
    (6) Moderate rehabilitation of affordable housing, including but not 
limited to:
    (i) Lead-based paint hazards elimination or reduction;
    (ii) Improvements to provide physical accessibility for disabled 
persons; and
    (iii) Energy-related improvements;
    (7) Substantial rehabilitation of affordable housing, including but 
not limited to:
    (i) Lead-based paint hazards elimination or reduction;
    (ii) Improvements to provide physical accessibility for disabled 
persons; and
    (iii) Energy-related improvements;
    (8) Site improvement, including recreational areas and playgrounds 
for use by residents of affordable housing and on-site streets and 
sidewalks;
    (9) The development and rehabilitation of utilities, necessary 
infrastructure, and utility services;
    (10) Conversion;
    (11) Demolition;
    (12) Administration and planning; and
    (13) Other related activities, such as environmental review and 
architectural and engineering plans for the affordable housing project.
    (b) Multi-unit projects. NHHBG funds may be used to assist one or 
more housing units in a multi-unit project.

[[Page 833]]

Only the actual NHHBG eligible development costs of the assisted units 
may be charged to the NHHBG Program. If the assisted and unassisted 
units are not comparable, the actual costs may be determined based upon 
a method of cost allocation. If the assisted and unassisted units are 
comparable in terms of size, features, and number of bedrooms, the 
actual cost of the NHHBG-assisted units can be determined by pro-rating 
the total NHHBG eligible development costs of the project so that the 
proportion of the total development costs charged to the NHHBG Program 
does not exceed the proportion of the NHHBG-assisted units in the 
project.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024]



Sec.  1006.210  Housing services.

    NHHBG funds may be used for the provision of housing-related 
services for affordable housing, including:
    (a) Housing counseling, as defined in Sec.  5.100, in connection 
with rental or homeownership assistance must be carried out in 
accordance with 24 CFR 5.111;
    (b) The establishment and support of resident organizations and 
resident management corporations;
    (c) Energy auditing;
    (d) Activities related to the provisions of self-sufficiency and 
other services;
    (e) Homelessness prevention activities, which may include short term 
subsidies to defray rent and utility bills of an eligible family;
    (f) Payments to prevent foreclosure on a home;
    (g) Other services related to assisting owners, tenants, 
contractors, and other entities participating or seeking to participate 
in other housing activities assisted pursuant to the Act and this part.

[67 FR 40776, June 13, 2002, as amended at 81 FR 90660, Dec. 14, 2016; 
89 FR 9761, Feb. 12, 2024]



Sec.  1006.215  Housing management services.

    NHHBG funds may be used for the provision of management services for 
affordable housing, including:
    (a) The preparation of work specifications;
    (b) Loan processing;
    (c) Inspections;
    (d) Tenant selection;
    (e) Management of tenant-based rental assistance;
    (f) The costs of operation and maintenance of units occupied by 
NHHBG eligible families; and
    (g) Management of affordable housing projects.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024]



Sec.  1006.220  Crime prevention and safety activities.

    NHHBG funds may be used for the provision of safety, security, and 
law enforcement measures and activities appropriate to protect residents 
of affordable housing from crime, including the costs of:
    (a) Physical improvements for affordable housing to enhance 
security, such as, fences, monitors, locks, and additional lighting;
    (b) Security personnel for affordable housing; and
    (c) Equipment for patrols.



Sec.  1006.225  Model activities.

    NHHBG funds may be used for housing activities under model programs 
that are:
    (a) Designed to carry out the purposes of the Act and this part; and
    (b) Specifically approved by HUD as appropriate for those purposes.



Sec.  1006.227  Tenant-based or project-based rental assistance.

    NHHBG funds may be used for the provision of tenant-based rental 
assistance, which may include security deposits and first month's rent, 
and project-based rental assistance.
    (a) Rental assistance must comply with the requirements of this part 
and be provided to eligible families.
    (b) Rental assistance may be provided to eligible families both on 
and off the Hawaiian Home Lands provided such use is consistent with the 
applicable appropriations acts governing the use of the NHHBG funds.

[89 FR 9761, Feb. 12, 2024]

[[Page 834]]



Sec.  1006.230  Administrative and planning costs.

    Up to such amount as HUD may authorize, or such other limit as may 
be specified by statute, of each grant received under the Act may be 
used for any reasonable administrative and planning expenses of the DHHL 
relating to carrying out the Act and this part and activities assisted 
with NHHBG funds, including:
    (a) General management, oversight and coordination. Reasonable costs 
of overall program management, coordination, monitoring, and evaluation. 
Such costs include, but are not limited to, necessary expenditures for 
the following:
    (1) Salaries, wages, and related costs of the DHHL's staff. In 
charging costs to this category the DHHL may either include the entire 
salary, wages, and related costs allocable to the NHHBG Program of each 
person whose primary responsibilities with regard to the program 
involves program administration assignments, or the prorated share of 
the salary, wages, and related costs of each person whose job includes 
any program administration assignments. The DHHL may use only one of 
these methods. Program administration includes the following types of 
assignments:
    (i) Developing systems and schedules for ensuring compliance with 
program requirements;
    (ii) Developing interagency agreements and agreements with entities 
receiving NHHBG funds;
    (iii) Monitoring NHHBG-assisted housing for progress and compliance 
with program requirements;
    (iv) Preparing reports and other documents related to the program 
for submission to HUD;
    (v) Coordinating the resolution of audit and monitoring findings;
    (vi) Evaluating program results against stated objectives; and
    (vii) Managing or supervising persons whose primary responsibilities 
with regard to the program include such assignments as those described 
in paragraphs (a)(1)(i) through (vi) 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, insurance, utilities, office supplies, and rental and 
maintenance (but not purchase) of office space.
    (b) Staff and overhead. Staff and overhead costs directly related to 
carrying out a project or service, such as work specifications 
preparation, loan processing, inspections, and other services related to 
assisting potential owners, tenants, and homebuyers (e.g., housing 
counseling); and staff and overhead costs directly related to providing 
advisory and other relocation services to persons displaced by the a 
project, including timely written notices to occupants, referrals to 
comparable and suitable replacement property, property inspections, 
counseling, and other assistance necessary to minimize hardship. These 
costs may be charged as administrative costs or as project costs under 
Sec.  1006.205 or service costs under Sec. Sec.  1006.210 or 1006.215, 
at the discretion of the DHHL.
    (c) Public information. The provision of information and other 
resources to residents and citizen organizations participating in the 
planning, implementation, or assessment of projects being assisted with 
NHHBG funds.
    (d) Indirect costs. Indirect costs may be charged to the NHHBG 
Program under a cost allocation plan prepared in accordance with 2 CFR 
part 200, subpart E.
    (e) Preparation of the housing plan and reports. Preparation of the 
housing plan under Sec.  1006.101 and performance reports under Sec.  
1006.410. Preparation includes the costs of public hearings, 
consultations, and publication.
    (f) Other Federal requirements. Costs of complying with the Federal 
requirements in Sec. Sec.  1006.370, 1006.375, and 1006.377 of this 
part. Project-specific environmental review costs may be charged as 
administrative costs or as

[[Page 835]]

project costs, at the discretion of the DHHL.

[67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015; 89 
FR 9761, Feb. 12, 2024]



Sec.  1006.235  Types of investments and forms of assistance.

    Subject to the requirements of this part and to the DHHL's housing 
plan, the DHHL has the discretion to use NHHBG funds for affordable 
housing activities in the form of equity investments, interest-bearing 
loans or advances, noninterest-bearing loans or advances, interest 
subsidies, the leveraging of private investments, and other forms of 
assistance that HUD determines to be consistent with the purposes of the 
Act. The DHHL has the right to establish the terms of assistance 
provided with NHHBG funds.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9761, Feb. 12, 2024]



                     Subpart D_Program Requirements



Sec.  1006.301  Eligible families.

    (a) General. Assistance for eligible housing activities under the 
Act and this part is limited to low-income Native Hawaiian families who 
are eligible to reside on the Hawaiian Home Lands, except as provided 
under paragraphs (b) and (c) of this section.
    (b) Exception to low-income requirement--(1) Other Native Hawaiian 
families. The DHHL may provide assistance for homeownership activities, 
which may include assistance in conjunction with loan guarantee 
activities to Native Hawaiian families who are not low-income families, 
as approved by HUD, to address a need for housing for those families 
that cannot be reasonably met without that assistance. DHHL must 
determine and document the need for housing for each family that cannot 
reasonably be met without such assistance.
    (2) HUD approval. HUD approval is required, except as provided in 
paragraph (b)(3)(i) of this section, if the DHHL plans to use grant 
amounts provided under the Act for assistance in accordance with 
paragraph (b)(1) of this section. HUD approval shall be obtained by DHHL 
submitting proposals in its housing plan, by amendment of the housing 
plan, or by special request to HUD at any time.
    (3) Limitations. (i) DHHL may use up to 10 percent of the amount 
planned in its Housing Plan for its fiscal year for families whose 
income is 81 to 100 percent of the median income without HUD approval. 
HUD approval is required if DHHL plans to use more than 10 percent of 
the amount planned for its fiscal year for such assistance or to provide 
housing for families with income over 100 percent of median income.
    (ii) Non-low-income families cannot receive the same benefits 
provided low-income Native Hawaiian families. The amount of assistance 
non-low-income families may receive will be determined by DHHL as 
established in its written policies.
    (iii) The requirements set forth in paragraphs 3(i) and (ii) of this 
section do not apply to other families who are non-low income that DHHL 
has determined to be essential under paragraph (c) of this section.
    (c) Other families. The DHHL may provide housing or NHHBG assistance 
to a family that is not low-income and is not a Native Hawaiian family 
without HUD approval if the DHHL documents that:
    (1) The presence of the family in the housing involved is essential 
to the well-being of Native Hawaiian families; and
    (2) The need for housing for the family cannot be reasonably met 
without the assistance.
    (d) Written policies. The DHHL must develop, follow, and have 
available for review by HUD written policies governing the eligibility, 
admission, and occupancy of families for housing assisted with NHHBG 
funds and governing the selection of families receiving other assistance 
under the Act and this part.

[89 FR 9761, Feb. 12, 2024]



Sec.  1006.305  Low-income requirement and income targeting.

    (a) In general. Housing qualifies as affordable housing for purposes 
of the Act and this part, provided that the family occupying the unit is 
low-income at the following times:

[[Page 836]]

    (1) In the case of rental housing, at the time of the family's 
initial occupancy of such unit;
    (2) In the case of housing for homeownership, at the time of 
purchase. When DHHL enters into a loan contract with the family for 
NHHBG assistance to purchase or construct a homeownership unit, the time 
of purchase means the time that loan contract is executed;
    (3) In the case of owner-occupied housing units, at the time the 
family receives NHHBG assistance;
    (4) In the case of a lease-purchase agreement for existing housing 
or for housing to be constructed, at the time the lease-purchase 
agreement is signed; and
    (5) In the case of emergency assistance to prevent homelessness or 
foreclosure, at the time the family receives NHHBG assistance.
    (b) Affordability requirements. NHHBG-assisted rental and 
homeownership units must meet the affordability requirements for the 
remaining useful life of the property, as determined by HUD, or such 
other period as HUD determines in accordance with section 813(a)(2)(B) 
of the Act.
    (c) Enforceable agreements. (1) The DHHL, through binding 
contractual agreements with owners or other authorized entities, shall 
ensure long-term compliance with the provisions of this part.
    (2) The agreements referred to in paragraph (c)(1) of this section 
shall provide for:
    (i) To the extent allowable by Federal and State law, the 
enforcement of the provisions of the Act and this part by the DHHL and 
HUD; and
    (ii) Remedies for breach of the provisions of the Act and this part.
    (d) Exception. Notwithstanding the requirements of this section, 
housing assisted with NHHBG funds pursuant to Sec.  1006.301(b) shall be 
considered affordable housing for purposes of the Act and this part.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9762, Feb. 12, 2024]



Sec.  1006.306  Income verification for receipt of NHHBG assistance.

    (a) Initial determination of eligibility. DHHL must verify that the 
family is income eligible based on anticipated annual income. The family 
is required to provide documentation to verify this determination. DHHL 
is required to maintain the documentation on which the determination of 
eligibility is based.
    (b) Periodic verification. DHHL may require a family to periodically 
verify its income in order to determine housing payments or continued 
occupancy consistent with DHHL's written policies. When income 
verification is required, the family must provide documentation which 
verifies its income, and this documentation must be retained by DHHL.

[89 FR 9762, Feb. 12, 2024]



Sec.  1006.307  Non-low-income families.

    A family that was low-income at the times described in Sec.  
1006.305 but subsequently becomes a non-low-income family may continue 
to participate in the program in accordance with DHHL's admission and 
occupancy policies. The 10 percent limitation in Sec.  1006.301(b)(3)(i) 
in this part shall not apply to such families. Such families may be made 
subject to the additional requirements in Sec.  1006.301(b)(3)(ii) of 
this part based on those policies.

[89 FR 9762, Feb. 12, 2024]



Sec.  1006.310  Rent and lease-purchase limitations.

    (a) Rents. The DHHL must develop and follow written policies 
governing rents for rental housing units assisted with NHHBG funds, 
including methods by which rents are determined.
    (1) Maximum and minimum rent. The maximum monthly tenant rent 
payment for a low-income family may not exceed 30 percent of the 
family's monthly adjusted income. DHHL may also decide to compute rental 
or homebuyer payments on any lesser percentage of the adjusted income of 
the family. The Act does not set minimum rent or homebuyer payments; 
however, DHHL may do so.
    (2) Flat or income-adjusted rent. Flat rent means the tenant's rent 
payment is set at a specific dollar amount or specific percent of market 
rent. Income-adjusted rent means the tenant's

[[Page 837]]

rent payment varies based on the tenant's income (i.e., 30 percent of 
monthly adjusted income). DHHL may charge flat or income-adjusted rents, 
provided the rental or homebuyer payment of the low-income family does 
not exceed 30 percent of the family's adjusted income.
    (3) Utilities. Utilities may be considered a part of rent or 
homebuyer payments if DHHL decides to define rent or homebuyer payments 
to include utilities in its written policies on rents and homebuyer 
payments required by section 811(a)(1) of NAHASDA. DHHL may define rents 
and homebuyer payments to exclude utilities.
    (b) Lease-purchase. If DHHL assists low-income families to become 
homeowners of rental housing through a long-term lease (i.e., 10 or more 
years) with an option to purchase the housing, DHHL must develop and 
follow written policies governing lease-purchase payments (i.e., 
homebuyer payments) for rental housing units assisted with NHHBG funds, 
including methods by which payments are determined. The maximum monthly 
payment for a low-income family may not exceed 30 percent of the 
family's monthly adjusted income.
    (c) Exception for certain homeownership payments. Homeownership 
payments for families who are not low-income, as permitted under Sec.  
1006.301(b), are not subject to the requirement that homebuyer payments 
may not exceed 30 percent of the monthly adjusted income of that family.
    (d) Applicability. Low-income families who receive homeownership 
assistance other than lease-purchase assistance are not subject to the 
limitations in paragraphs (a) and (b) of this section.

[89 FR 9762, Feb. 12, 2024]



Sec.  1006.315  Lease requirements.

    Except to the extent otherwise provided by or inconsistent with the 
laws of the State of Hawaii, in renting dwelling units in affordable 
housing assisted with NHHBG funds, the DHHL, owner, or manager must use 
leases that:
    (a) Do not contain unreasonable terms and conditions;
    (b) Require the DHHL, owner, or manager to maintain the housing in 
compliance with applicable local housing codes and quality standards;
    (c) Require the DHHL, owner, or manager to give adequate written 
notice of termination of the lease, which shall be the period of time 
required under applicable State or local law;
    (d) Specify that, with respect to any notice of eviction or 
termination, notwithstanding any State or local law, a resident shall be 
informed of the opportunity, before any hearing or trial, to examine any 
relevant documents, record, or regulations directly related to the 
eviction or termination;
    (e) Require that the DHHL, owner, or manager may not terminate the 
tenancy, during the term of the lease, except for serious or repeated 
violation of the terms and conditions of the lease, violation of 
applicable Federal, State, or local law, or for other good cause; and
    (f) Provide that the DHHL, owner, or manager may terminate the 
tenancy of a resident for any activity, engaged in by the resident, any 
member of the household of the resident, or any guest or other person 
under the control of the resident, that:
    (1) Threatens the health or safety of, or right to peaceful 
enjoyment of the premises by, other residents or employees of the DHHL, 
owner, or manager;
    (2) Threatens the health or safety of, or right to peaceful 
enjoyment of their premises by, persons residing in the immediate 
vicinity of the premises; or
    (3) Involves criminal activity (including drug-related criminal 
activity) on or off the premises.



Sec.  1006.320  Tenant or homebuyer selection.

    As a condition to receiving grant amounts under the Act, the DHHL 
must adopt and use written tenant and homebuyer selection policies and 
criteria that:
    (a) Are consistent with the purpose of providing housing for low-
income families;
    (b) Are reasonably related to program eligibility and the ability of 
the tenant or homebuyer assistance applicant to perform the obligations 
of the lease; and
    (c) Provide for:

[[Page 838]]

    (1) The selection of tenants and homebuyers from a written waiting 
list in accordance with the policies and goals set forth in the housing 
plan; and
    (2) The prompt notification in writing of any rejected applicant of 
the grounds for that rejection.



Sec.  1006.325  Maintenance, management and efficient operation.

    (a) Written policies. The DHHL must develop and enforce policies 
governing the management and maintenance of rental housing assisted with 
NHHBG funds.
    (b) Disposal of housing. This section may not be construed to 
prevent the DHHL, or any entity funded by the DHHL, from demolishing or 
disposing of housing, pursuant to regulations established by HUD.



Sec.  1006.330  Insurance coverage.

    (a) In general. As a condition to receiving NHHBG funds, the DHHL 
must require adequate insurance coverage for housing units that are 
owned or operated or assisted with more than $5,000 of NHHBG funds, 
including a loan of more than $5,000 that includes payback provisions.
    (b) 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 to cover replacement cost.
    (c) Loss covered. The DHHL must provide for or require insurance in 
adequate amounts to indemnify against loss from fire, weather, and 
liability claims for all housing units owned, operated or assisted by 
the DHHL. NHHBG funds may only be used to purchase insurance for low-
income homeowners and only in amounts sufficient to protect against the 
loss of the NHHBG funds at risk in the property. The cost of such 
insurance may not include coverage for a resident's personal property.
    (d) Exception. The DHHL shall not require insurance if the 
assistance is in an amount less than $5000.
    (e) Contractor's coverage. The DHHL shall require contractors and 
subcontractors to either provide insurance covering their activities or 
negotiate adequate indemnification coverage to be provided by the DHHL 
in the contract.



Sec.  1006.335  Use of nonprofit organizations and public-private 
partnerships.

    (a) Nonprofit organizations. The DHHL must, to the extent 
practicable, provide for private nonprofit organizations experienced in 
the planning and development of affordable housing for Native Hawaiians 
to carry out affordable housing activities with NHHBG funds.
    (b) Public-private partnerships. The DHHL must make all reasonable 
efforts to maximize participation by the private sector, including 
nonprofit organizations and for-profit entities, in implementing its 
housing plan.



Sec.  1006.340  Treatment of program income.

    (a) Defined. Program income is income realized from the use of NHHBG 
funds. If gross income is used to pay costs incurred that are essential 
or incidental to generating the income, these costs may be deducted from 
gross income to determine program income. Program income includes income 
from fees for services performed; from the use or rental of real or 
personal property acquired or assisted with NHHBG funds; from the sale 
of property acquired or assisted with NHHBG funds; from payments of 
principal and interest on loans made with NHHBG funds; and from payments 
of interest earned on investment of NHHBG funds pursuant to section 
812(b) of the Act.
    (b) Authority to retain. The DHHL may retain any program income that 
is realized from any NHHBG funds if:
    (1) That income was realized after the initial disbursement of the 
NHHBG funds received by the DHHL; and
    (2) The DHHL agrees to use the program income for affordable housing 
activities in accordance with the provisions of the Act and this part; 
and
    (3) The DHHL disburses program income before disbursing additional 
NHHBG funds in accordance with 2 CFR 200.305.
    (c) Exclusion of amounts. If the amount of income received in a 
single fiscal year by the DHHL, which would otherwise be considered 
program income, does not exceed $25,000, such

[[Page 839]]

funds may be retained but will not be considered program income.

[67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015; 89 
FR 9763, Feb. 12, 2024]



Sec.  1006.345  Labor standards.

    (a) Davis-Bacon wage rates. (1) As described in section 805(b) of 
the Act, contracts and agreements for assistance, sale or lease under 
this part 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 NHHBG 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 NHHBG 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 805(b) of the Act also 
mandates that contracts and agreements for assistance, sale or lease 
under the Act require that prevailing wages determined or adopted 
(subsequent to a determination under applicable State 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. The DHHL, contractors, subcontractors, 
and other participants must comply with regulations issued under the 
labor standards provisions cited in this section, and other applicable 
Federal laws and regulations pertaining to labor standards.



Sec.  1006.350  Environmental review.

    (a) In order to ensure that the policies of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) (NEPA) 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 NHHBG funds, HUD will provide for the 
release of funds for specific projects to the DHHL if the Director of 
the DHHL assumes all of the responsibilities for environmental review, 
decision-making, and action under NEPA and other provisions of Federal 
law which further the purposes of that act (as specified in 24 CFR 58.5) 
that would apply to HUD were HUD to undertake those projects as Federal 
projects.
    (b) An environmental review does not have to be completed before a 
HUD finding of compliance for the housing plan or amendments to the 
housing plan submitted by the DHHL.
    (c) 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 required by sections 
806(b) and 806(c) of the Act, except as authorized by 24 CFR part 58.
    (d) As set forth in section 806(a)(2)(B) of the Act and 24 CFR 
58.77, HUD will:
    (1) Provide for the monitoring of environmental reviews performed by 
the DHHL under this section;
    (2) At its discretion, facilitate training for the performance of 
such reviews by the DHHL; and,
    (3) At its discretion, provide for the suspension or termination of 
the assumption of responsibilities under this section based upon a 
finding of substantial failure of the DHHL to execute responsibilities 
under this section.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9763, Feb. 12, 2024]

[[Page 840]]



Sec.  1006.355  Nondiscrimination requirements.

    Program eligibility under the Act and this part may be restricted to 
Native Hawaiians. Subject to the preceding sentence, no person may be 
discriminated against on the basis of race, color, national origin, 
religion, sex, familial status, or disability, or excluded from program 
eligibility because of actual or perceived sexual orientation, gender 
identity, or marital status. The following nondiscrimination 
requirements are applicable to the use of NHHBG funds:
    (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; and
    (c) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.) and the Fair Housing Act (42 U.S.C. 3601 et seq.), to the extent 
that nothing in their requirements concerning discrimination on the 
basis of race shall be construed to prevent the provision of NHHBG 
assistance:
    (1) To the DHHL on the basis that the DHHL served Native Hawaiians; 
or
    (2) To an eligible family on the basis that the family is a Native 
Hawaiian family.
    (d) The equal access to HUD-assisted or -insured housing 
requirements in 24 CFR 5.105(a)(2).

[67 FR 40776, June 13, 2002, as amended at 81 FR 80993, Nov. 17, 2016]



Sec.  1006.360  Conflict of interest.

    In the procurement of property and services by the DHHL and 
contractors, the conflict of interest provisions in 2 CFR 200.317 (for 
DHHL) and 2 CFR 200.318 (for subrecipients).

[67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015]



Sec.  1006.365  Program administration responsibilities.

    (a) Responsibilities. The DHHL is responsible for managing the day-
to-day operations of the NHHBG Program, ensuring that NHHBG funds are 
used in accordance with all program requirements and written agreements, 
and taking appropriate action when performance problems arise. The use 
of contractors does not relieve the DHHL of this responsibility.
    (b) Agreements with contractors. The DHHL may enter into agreements 
with private contractors selected under the provisions of 2 CFR part 
200, subpart D, for purposes of administering all or part of the NHHBG 
program for the DHHL.

[67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015]



Sec.  1006.370  Uniform administrative, requirements, cost principles,
and audit requirements for Federal awards.

    (a) The DHHL and subrecipients receiving NHHBG funds shall comply 
with the requirements and standards of 2 CFR part 200, ``Uniform 
Administrative Requirements, Cost Principles, and Audit Requirements for 
Federal Awards''.
    (b)(1) With respect to the applicability of cost principles, all 
items of cost listed in 2 CFR part 200, subpart E, 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 2 CFR part 200, subpart E, and are otherwise eligible under 
this part, except for the following:
    (i) Depreciation methods for fixed assets shall not be changed 
without the approval of the Federal cognizant agency.
    (ii) Fines, penalties, damages, and other settlements are 
unallowable costs to the NHHBG program.
    (iii) Costs of housing (e.g., depreciation, maintenance, utilities, 
furnishings, rent), housing allowances and personal living expenses 
(goods or services for personal use) regardless of whether reported as 
taxable income to the employees (2 CFR 200.445).
    (iv) Organization costs (2 CFR 200.455).
    (2) In addition, no person providing consultant services in an 
employer-employee type of relationship shall receive funds. In no event, 
however, shall such compensation exceed the equivalent of the daily rate 
paid for Level IV

[[Page 841]]

of the Executive Schedule. The Executive Pay Schedule may be obtained by 
https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages.

[80 FR 75945, Dec. 7, 2015]



Sec.  1006.375  Other Federal requirements.

    (a) Lead-based paint. The following subparts of HUD's lead-based 
paint regulations at 24 CFR part 35, which implement the Lead-Based 
Paint Poisoning Prevention Act (42 U.S.C. 4822-4846) and the Residential 
Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), 
apply to the use of assistance under this part:
    (1) Subpart A (Sec. Sec.  35.80 through 35.98) for disclosures of 
known lead-based paint hazards upon sale or lease of residential 
property;
    (2) Subpart B (Sec. Sec.  35.100 through 35.175) for general lead-
based paint requirements and definitions;
    (3) Subpart H (Sec. Sec.  35.700 through 35.830) for project-based 
rental assistance;
    (4) Subpart J (Sec. Sec.  35.900 through 35.940) for rehabilitation;
    (5) Subpart K (Sec. Sec.  35.1000 through 35.1020) for acquisition, 
leasing, support services, or operation;
    (6) Subpart M (Sec. Sec.  35.1200 through 35.1225) for tenant-based 
rental assistance; and
    (7) Subpart R (Sec. Sec.  35.1300 through 35.1355) for methods and 
standards for lead-based paint hazard evaluation and Reduction 
activities.
    (b) Drug-free workplace. The Drug-Free Workplace Act of 1988 (41 
U.S.C. 701, et seq.) and HUD's implementing regulations in 2 CFR part 
2429 apply to the use of assistance under this part.
    (c) Audits. The DHHL must comply with the requirements of the Single 
Audit Act and 2 CFR part 200, subpart F, with the audit report providing 
a schedule of expenditures for each grant. A copy of each audit must be 
submitted to the Federal Audit Clearinghouse.
    (d) Housing counseling. Housing counseling, as defined in Sec.  
5.100, that is funded with or provided in connection with NHHBG funds 
must be carried out in accordance with 24 CFR 5.111.
    (e) Section 3. Requirements under Section 3 of the Housing and Urban 
Development Act of 1968 and 24 CFR part 75 apply.
    (f) Debarment and suspension. The nonprocurement, debarment, and 
suspension requirements at 2 CFR part 2424 are applicable.

[89 FR 9763, Feb. 12, 2024]



Sec.  1006.377  Other Federal requirements: Displacement, Relocation,
and Acquisition.

    The following relocation and real property acquisition policies are 
applicable to programs developed or operated under the Act and this 
part:
    (a) Real property acquisition requirements. The acquisition of real 
property for an assisted activity is subject to the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970, as 
amended (42 U.S.C. 4601 et seq.) (URA) and the requirements of 49 CFR 
part 24, subpart B.
    (b) Minimize displacement. Consistent with the other goals and 
objectives of the Act and this part, the DHHL 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 the Act and this part.
    (c) 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 URA 
and the requirements of 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 
et seq.). Whenever possible, minority persons shall be given reasonable 
opportunities to relocate to comparable and suitable decent, safe, and 
sanitary replacement dwellings, not located in an area of minority 
concentration, that are within their financial means. For a displaced 
person with a disability, a unit is not a comparable replacement 
dwelling under the URA unless it is free of any barriers which would 
preclude reasonable ingress, egress, or use of the dwelling by such a 
displaced person in accordance with the definition of ``Decent, safe, 
and sanitary dwelling'' at 49 CFR 24.2. Furthermore, the unit must also 
meet the

[[Page 842]]

requirements of section 504 of the Rehabilitation Act (29 U.S.C. 794) as 
implemented by HUD's regulations at 24 CFR part 8, subpart C.
    (d) Appeals to the DHHL. A person who disagrees with the DHHL'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 DHHL 
in accordance with URA requirements of 49 CFR 24.10.
    (e) Responsibility of DHHL. (1) The DHHL shall certify that it will 
comply with the URA requirements of 49 CFR part 24, and the requirements 
of this section. The DHHL shall ensure such compliance notwithstanding 
any third party's contractual obligation to the DHHL to comply with the 
provisions in this section.
    (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 DHHL from any other source.
    (3) DHHL must provide proper and timely distribution of notices to 
residents in accordance with the URA regulations. This includes the 
General Information Notice (GIN), the Notice of Relocation Eligibility, 
the Notice to Owner, and the 90-Day Notice. All notices must be sent in 
accordance with 49 CFR 24.203 and 24.102. Notices of Relocation 
Eligibility are typically triggered by the Initiation of Negotiation 
(ION).
    (4) The DHHL shall maintain records in sufficient detail to 
demonstrate compliance with this section.
    (f) 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 the Act. 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 a housing 
plan that is later approved;
    (ii) Any person, including a person who moves before the date the 
housing plan is submitted to HUD, that the DHHL 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 execution of the agreement between 
the DHHL 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) Thirty 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:
    (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;
    (B) The tenant-occupant is required to temporarily relocate for more 
than one year; or
    (C) 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.

[[Page 843]]

    (2) Notwithstanding the provisions of this section for the 
definition of ``Displaced Person,'' 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 
housing plan 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 meets the definition of ``persons not displaced'' as 
defined in 49 CFR 24.2; or
    (iii) The DHHL 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 in accordance with 49 CFR 24.2.
    (3) The DHHL may at any time ask HUD to determine whether a specific 
displacement is or would be covered under this section.
    (g) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing assistance 
to be provided to a person displaced from a dwelling as a direct result 
of acquisition, rehabilitation, or demolition of the real property, the 
term Initiation of Negotiations (ION) date means the execution of the 
written agreement covering the acquisition, rehabilitation, or 
demolition (See 49 CFR 24.2).

[89 FR 9763, Feb. 12, 2024]



                 Subpart E_Monitoring and Accountability



Sec.  1006.401  Monitoring of compliance.

    (a) Periodic reviews and monitoring. At least annually, the DHHL 
must review the activities conducted and housing assisted with NHHBG 
funds to assess compliance with the requirements of the Act and this 
part. This review must encompass and incorporate the results of the 
monitoring by the DHHL of all contractors involved in the administration 
of NHHBG activities.
    (b) Review. Each review under paragraph (a) of this section must 
include on-site inspection of housing to determine compliance with 
applicable requirements.
    (c) Results. The results of each review under paragraph (a) of this 
section must be:
    (1) Included in a performance report of the DHHL submitted to HUD 
under Sec.  1006.410; and
    (2) Made available to the public.



Sec.  1006.410  Performance reports.

    (a) Requirement. For each fiscal year, the DHHL must:
    (1) Review the progress the DHHL has made during that fiscal year in 
achieving goals stated in its housing plan; and
    (2) Submit a report in a form acceptable to HUD, within 90 days of 
the end of the DHHL's fiscal year, describing the conclusions of the 
review.
    (3) DHHL may submit a written request for an extension of the 
deadline. HUD will establish a new date for submission if the extension 
is granted.
    (b) Content. Each report submitted under this section for a fiscal 
year shall:
    (1) Describe the use of grant amounts provided to the DHHL for that 
fiscal year;
    (2) Assess the relationship of the use referred to in paragraph 
(b)(1), of this section, to the goals identified in its housing plan;
    (3) Indicate the programmatic accomplishments of the DHHL; and
    (4) Describe the manner in which the DHHL would change its housing 
plan as a result of its experiences administering the grant under the 
Act.
    (c) Public availability--(1) Comments by Native Hawaiians. In 
preparing a report under this section, the DHHL shall make the report 
publicly available to Native Hawaiians who are eligible to reside on the 
Hawaiian Home Lands and give a sufficient amount of time to permit them 
to comment on that report, in such manner and at such time as the DHHL 
may determine, before it is submitted to HUD.

[[Page 844]]

    (2) Summary of comments. The report under this section must include 
a summary of any comments received by the DHHL from beneficiaries under 
paragraph (c)(1) of this section, regarding the program to carry out the 
housing plan.
    (d) HUD review. HUD will:
    (1) Review each report submitted under the Act and this part; and
    (2) With respect to each such report, make recommendations as HUD 
considers appropriate to carry out the purposes of the Act.

[67 FR 40776, June 13, 2002, as amended at 89 FR 9764, Feb. 12, 2024]



Sec.  1006.420  Review of DHHL's performance.

    (a) Objective. HUD will, at least annually, review DHHL's 
performance to determine whether the DHHL has:
    (1) Carried out eligible activities in a timely manner;
    (2) Carried out and made certifications in accordance with the 
requirements and the primary objectives of the Act and this part and 
with other applicable laws;
    (3) A continuing capacity to carry out the eligible activities in a 
timely manner;
    (4) Complied with its housing plan; and
    (5) Submitted accurate performance reports.
    (b) Basis for review. In reviewing DHHL's performance, HUD will 
consider all available evidence, which may include, but not be limited 
to, the following:
    (1) The DHHL's housing plan and any amendments thereto;
    (2) Reports prepared by the DHHL;
    (3) Records maintained by the DHHL, including their retention under 
2 CFR 200.333, noting that the NHHBG Annual Performance Report is the 
program's final expenditure report;
    (4) Results of HUD's monitoring of the DHHL'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.
    (c) Failure to maintain records. The DHHL's failure to maintain 
records may result in a finding that the DHHL failed to meet the 
applicable requirement to which the record pertains.

[67 FR 40776, June 13, 2002, as amended at 80 FR 75945, Dec. 7, 2015; 89 
FR 9764, Feb. 12, 2024]



Sec.  1006.430  Corrective and remedial action.

    (a) General. One or more corrective or remedial actions will be 
taken by HUD when, on the basis of a performance review, HUD determines 
that the DHHL has not:
    (1) Complied with the requirements of the Act and this part and 
other applicable laws and regulations, including the environmental 
responsibilities assumed under Sec.  1006.350;
    (2) Carried out its activities substantially as described in its 
housing plan;
    (3) Made substantial progress in carrying out its program and 
achieving its quantifiable goals as described in its housing plan; 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 similar deficiencies. The following actions 
may be taken singly or in combination, as appropriate for the 
circumstances:
    (1) Issue a letter of warning advising the DHHL 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 DHHL that more serious actions may be taken if the 
performance problem(s) is not corrected or is repeated;
    (2) Request the DHHL to submit progress schedules for completing 
activities or complying with the requirements of the Act and this part;
    (3) Recommend that the DHHL suspend, discontinue, or not incur costs 
for the affected activity;

[[Page 845]]

    (4) Recommend that the DHHL redirect funds from affected activities 
to other eligible activities;
    (5) Recommend that the DHHL reimburse its program account or line of 
credit under the Act in the amount improperly expended and reprogram the 
use of the funds; and
    (6) Recommend that the DHHL obtain appropriate technical assistance 
using existing grant funds or other available resources to overcome the 
performance problem(s).



Sec.  1006.440  Remedies for noncompliance.

    (a) Remedies. If HUD finds that the DHHL has failed to comply 
substantially with any provision of the Act or this part, the following 
actions may be taken by HUD:
    (1) Terminate payments to the DHHL;
    (2) Reduce payments to the DHHL by an amount equal to the amount not 
expended in accordance with the Act or this part;
    (3) Limit the availability of payments to programs, projects, or 
activities not affected by such failure to comply; or
    (4) Adjust, reduce or withdraw grant amounts or take other action as 
appropriate in accordance with reviews and audits.
    (b) Exception. Grant amounts already expended on affordable housing 
activities may not be recaptured or deducted from future assistance 
provided to the DHHL.
    (c) 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.
    (d) Hearing requirement. Before imposing remedies under this 
section, HUD will:
    (1) Take at least one of the corrective or remedial actions 
specified under Sec.  1006.430 and permit the DHHL to make an 
appropriate and timely response;
    (2) Provide the DHHL with the opportunity for an informal 
consultation with HUD regarding the proposed action; and
    (3) Provide DHHL with reasonable notice and opportunity for a 
hearing.
    (e) Continuance of actions. If HUD takes an action under paragraph 
(a) of this section, the action will continue until HUD determines that 
the failure of the DHHL to comply with the provision has been remedied 
and the DHHL is in compliance with the provision.
    (f) Referral to the Attorney General. In lieu of, or in addition to, 
any action HUD may take under paragraph (a) of this section, if HUD has 
reason to believe that the DHHL has failed to comply substantially with 
any provision of the Act or this part, HUD may refer the matter to the 
Attorney General of the United States with a recommendation that an 
appropriate civil action be instituted. Upon receiving a referral, the 
Attorney General may bring a civil action in any United States district 
court of appropriate jurisdiction for such relief as may be appropriate, 
including an action to recover the amount of the assistance furnished 
under the Act that was not expended in accordance with the Act or this 
part or for mandatory or injunctive relief.



PART 1007_SECTION 184A LOAN GUARANTEES FOR NATIVE HAWAIIAN 
HOUSING--Table of Contents



Sec.
1007.1 Purpose.
1007.5 Definitions.
1007.10 Eligible Borrowers.
1007.15 Eligible uses.
1007.20 Eligible housing.
1007.25 Eligible lenders.
1007.30 Security for loan.
1007.35 Loan terms.
1007.40 Environmental requirements.
1007.45 Nondiscrimination.
1007.50 Certificate of guarantee.
1007.55 Guarantee fee.
1007.60 Liability under guarantee.
1007.65 Transfer and assumption.
1007.70 Disqualification of lenders and civil money penalties.
1007.75 Payment under guarantee.
1007.80 Qualified mortgage.

    Authority: 12 U.S.C. 1715z-13b; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).

    Source: 67 FR 40776, June 13, 2002, unless otherwise noted.

[[Page 846]]



Sec.  1007.1  Purpose.

    This part provides the requirements and procedures that apply to 
loan guarantees for Native Hawaiian Housing under section 184A of the 
Housing and Community Development Act of 1992. Section 184A permits HUD 
to guarantee an amount not to exceed 100 percent of the unpaid principal 
and interest that is due on an eligible loan. The purpose of section 
184A and this part is to provide access to sources of private financing 
to Native Hawaiian families who otherwise could not acquire housing 
financing because of the unique legal status of the Hawaiian Home Lands 
or as a result of a lack of access to private financial markets.



Sec.  1007.5  Definitions.

    The following definitions apply in this part:
    Department of Hawaiian Home Lands (DHHL) means the agency or 
department of the government of the State of Hawaii that is responsible 
for the administration of the Hawaiian Homes Commission Act, 1920 (42 
Stat. 108 et seq.).
    Eligible entity means a Native Hawaiian family, the Department of 
Hawaiian Home Lands, the Office of Hawaiian Affairs, and private 
nonprofit or private for-profit organizations experienced in the 
planning and development of affordable housing for Native Hawaiians.
    Family means one or more persons maintaining a household, and 
includes, but is not limited to, a family with or without children, an 
elderly family, a near-elderly family, a disabled family, or a single 
person.
    Guarantee Fund means the Native Hawaiian Housing Loan Guarantee Fund 
under this part.
    Hawaiian Home Lands means lands that:
    (1) Have the status of Hawaiian Home Lands under section 204 of the 
Hawaiian Homes Commission Act (42 Stat. 110); or
    (2) Are acquired pursuant to that Act.
    HUD means the Department of Housing and Urban Development.
    Native Hawaiian means any individual who is:
    (1) A citizen of the United States; and
    (2) A descendant of the aboriginal people, who, prior to 1778, 
occupied and exercised sovereignty in the area that currently 
constitutes the State of Hawaii, as evidenced by:
    (i) Genealogical records;
    (ii) Verification by kupuna (elders) or kama'aina (long-term 
community residents); or
    (iii) Birth records of the State of Hawaii.
    Native Hawaiian family means a family with at least one member who 
is a Native Hawaiian.
    Office of Hawaiian Affairs means the entity of that name established 
under the constitution of the State of Hawaii.



Sec.  1007.10  Eligible borrowers.

    A loan guaranteed under this part may only be made to the following 
borrowers:
    (a) A Native Hawaiian family;
    (b) The Department of Hawaiian Home Lands;
    (c) The Office of Hawaiian Affairs; or
    (d) A private, nonprofit organization experienced in the planning 
and development of affordable housing for Native Hawaiians.



Sec.  1007.15  Eligible uses.

    (a) In general. A loan guaranteed under this part may only be used 
to construct, acquire, or rehabilitate eligible housing.
    (b) Construction advances. Advances made by the lender during 
construction are eligible if:
    (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 are 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 to his or her 
creditors as provided in the loan agreement; and
    (4) The mortgage bears interest on the amount advanced to the 
mortgagor or to his or her creditors and on the amount held in an 
account or trust for the benefit of the mortgagor.

[[Page 847]]



Sec.  1007.20  Eligible housing.

    (a) A loan guaranteed under this part may only be made for one to 
four-family dwellings that are standard housing, in accordance with 
paragraph (b), of this section. The housing must be located on Hawaiian 
Home Lands for which a housing plan that provides for the use of loan 
guarantees under this part has been submitted and approved under part 
1006 of this chapter.
    (b) Standard housing must meet housing safety and quality standards 
that:
    (1) Provide sufficient flexibility to permit the use of various 
designs and materials; and
    (2) Require each dwelling unit to:
    (i) Be decent, safe, sanitary, and modest in size and design;
    (ii) Conform with applicable general construction standards for the 
region in which the housing is located;
    (iii) Contain a plumbing system that:
    (A) Uses a properly installed system of piping;
    (B) Includes a kitchen sink and a partitional bathroom with 
lavatory, toilet, and bath or shower; and
    (C) Uses water supply, plumbing, and sewage disposal systems that 
conform to any minimum standards established by the applicable county or 
State;
    (iv) Contain an electrical system using wiring and equipment 
properly installed to safely supply electrical energy for adequate 
lighting and for operation of appliances that conforms to any 
appropriate county, State, or national code;
    (v) Be not less than the size provided under the applicable locally 
adopted standards for size of dwelling units, except that HUD, upon 
request of the DHHL may waive the size requirements under this 
paragraph; and
    (vi) Conform with the energy performance requirements for new 
construction established by HUD under section 526(a) of the National 
Housing Act (12 U.S.C.A. 1735f-4), unless HUD determines that the 
requirements are not applicable.
    (c) The relevant requirements of the Lead-Based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint 
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at part 35, subparts A, B, and R of this title and 
Sec. Sec.  200.805 and 200.810 of this title apply to housing eligible 
for a loan guaranteed under this part.
    (d) Housing that meets the minimum property standards for Section 
247 mortgage insurance (12 U.S.C. 1715z-12) is deemed to meet the 
required housing safety and quality standards.

[67 FR 40776, June 13, 2002, as amended at 68 FR 66985, Nov. 28, 2003]



Sec.  1007.25  Eligible lenders.

    (a) In general. To qualify for a guarantee under this part, a loan 
shall be made only by a lender meeting qualifications established in 
this part and approved by HUD, including any lender described in 
paragraph (b), of this section, except that a loan otherwise insured or 
guaranteed by an agency of the Federal Government or made by the DHHL 
from amounts borrowed from the United States shall not be eligible for a 
guarantee under this part.
    (b) Approval. The following lenders shall be considered to be 
lenders that have been approved by HUD:
    (1) Any mortgagee approved by HUD for participation in the single 
family mortgage insurance program under title II of the National Housing 
Act (12 U.S.C.A. 1707 et seq.);
    (2) Any lender that makes housing loans under chapter 37 of title 
38, United States Code, that are automatically guaranteed under section 
3702(d) of title 38, United States Code;
    (3) Any lender approved by the Secretary of Agriculture to make 
guaranteed loans for single family housing under the Housing Act of 1949 
(42 U.S.C.A. 1441 et seq.);
    (4) Any other lender that is supervised, approved, regulated, or 
insured by any agency of the Federal Government; and
    (5) Any other lender approved by HUD under this part.



Sec.  1007.30  Security for loan.

    (a) In general. A loan guaranteed under section 184A of the Housing 
and Community Development Act of 1992 and this part may be secured by 
any collateral authorized under and not prohibited by Federal or State 
law and determined by the lender and approved by HUD to be sufficient to 
cover the

[[Page 848]]

amount of the loan. Eligible collateral 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 any restrictions against alienation applicable to Hawaiian 
Home Lands;
    (2) A security interest in non-Hawaiian Home Lands property;
    (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) Hawaiian Home Lands property interest as collateral. If a 
property interest in Hawaiian Home Lands 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 
184A of the Housing and Community Development Act of 1992 must be on a 
form approved by both the DHHL and HUD.
    (2) Assumption or sale of leasehold. The lease form must contain a 
provision requiring the DHHL's consent before any assumption of an 
existing lease, except where title to the leasehold interest is obtained 
by HUD through foreclosure of the guaranteed mortgage or a deed in lieu 
of foreclosure. A mortgagee other than HUD must obtain the DHHL's 
consent before obtaining title through a foreclosure sale. The DHHL's 
consent must be obtained on any subsequent transfer from the purchaser, 
including HUD, at foreclosure sale. The lease may not be terminated by 
the lessor without HUD's approval while the mortgage is guaranteed or 
held by HUD.
    (3) Liquidation. The lender or HUD shall only pursue liquidation 
after offering to transfer the account to another eligible Native 
Hawaiian family or the DHHL. The lender or HUD shall not sell, transfer, 
or otherwise dispose of or alienate the property except to another 
eligible Native Hawaiian family or the DHHL.
    (4) Eviction procedures. Before HUD will guarantee a loan secured by 
a Hawaiian Home Lands property, the DHHL must notify HUD that it has 
adopted and will enforce procedures for eviction of defaulted mortgagors 
where the guaranteed loan has been foreclosed.
    (i) Enforcement. If HUD determines that the DHHL has failed to 
enforce adequately its eviction procedures, HUD will cease issuing 
guarantees for loans under this part except pursuant to existing 
commitments.
    (ii) Review. If HUD ceases issuing guarantees for the DHHL's failure 
to enforce its eviction procedures, HUD shall notify the DHHL of such 
action and that the DHHL may, within 30 days after notification of HUD's 
action, file a written appeal with the Deputy Assistant Secretary, 
Office of Native American Programs (ONAP). Upon notification of an 
adverse decision by the Deputy Assistant Secretary, the DHHL 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 DHHL may resubmit the issue to the Assistant 
Secretary for review at any subsequent time if new evidence or changed 
circumstances warrant reconsideration.

[67 FR 40776, June 13, 2002, as amended at 68 FR 66985, Nov. 28, 2003]



Sec.  1007.35  Loan terms.

    To be eligible for guarantee under this part, the loan shall:
    (a) Be made for a term not exceeding 30 years;
    (b) Bear interest (exclusive of the guarantee fee under Sec.  
1007.55 and service charges, if any) at a rate agreed upon by the 
borrower and the lender and determined by HUD to be reasonable, but not 
to exceed the rate generally charged in the area (as determined by HUD) 
for home mortgage loans not guaranteed or insured by any agency or 
instrumentality of the Federal Government;
    (c) Involve a principal obligation not exceeding:
    (1) 97.75 percent of the appraised value of the property as of the 
date the loan is accepted for guarantee (or 98.75 percent if the value 
of the property is $50,000 or less); or
    (2) The amount approved by HUD under this section; and
    (d) Involve a payment on account of the property:
    (1) In cash or its equivalent; or

[[Page 849]]

    (2) Through the value of any improvements, appraised in accordance 
with generally accepted practices and procedures.



Sec.  1007.40  Environmental requirements.

    Before HUD issues a commitment to guarantee any loan or (if no 
commitment is issued) before 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, HUD will require compliance with procedures similar to 
those required by Sec.  203.12(b)(2) of this title for FHA mortgage 
insurance.



Sec.  1007.45  Nondiscrimination.

    (a) To the extent that the requirements of title VI of the Civil 
Rights Act of 1964 (42 U.S.C. 2000d et seq.) or of the Fair Housing Act 
(42 U.S.C.A. 3601 et seq.) apply to a guarantee provided under this 
part, nothing in the requirements concerning discrimination on the basis 
of race shall be construed to prevent the provision of the guarantee to 
an eligible entity on the basis that the entity serves Native Hawaiian 
families or is a Native Hawaiian family.
    (b) The equal access to HUD-assisted or -insured housing 
requirements in 24 CFR 5.105(a)(2) apply to this part.

[67 FR 40776, June 13, 2002, as amended at 81 FR 80993, Nov. 17, 2016]



Sec.  1007.50  Certificate of guarantee.

    (a) Approval process--(1) In general. Before HUD approves any loan 
for guarantee under this section, the lender shall submit the 
application for the loan to HUD for examination.
    (2) Approval. If HUD approves the application submitted under 
paragraph (a)(1) of this section, HUD will issue a certificate as 
evidence of the loan guarantee approved.
    (b) Standard for approval. HUD may approve a loan for guarantee 
under this part and issue a certificate under this section only if HUD 
determines that there is a reasonable prospect of repayment of the loan.
    (c) Effect--(1) As evidence. A certificate of guarantee issued under 
this part by HUD shall be conclusive and incontestable evidence in the 
hands of the bearer of the eligibility of the loan for guarantee under 
this part and the amount of that guarantee.
    (2) Full faith and credit. The full faith and credit of the United 
States is pledged to the payment of all amounts agreed to be paid by HUD 
as security for the obligations made by HUD under this section.
    (d) Fraud and misrepresentation. This section may not be construed:
    (1) To preclude HUD from establishing defenses against the original 
lender based on fraud or material misrepresentation; or
    (2) To bar HUD from establishing regulations that are (on the date 
of issuance or disbursement, whichever is earlier) partial defenses to 
the amount payable on the guarantee.



Sec.  1007.55  Guarantee fee.

    The lender shall pay to HUD, at the time of issuance of the 
guarantee, a fee for the guarantee of loans under this part, in an 
amount equal to 1 percent of the principal obligation of the loan. This 
amount is payable by the borrower at closing.



Sec.  1007.60  Liability under guarantee.

    The liability under a guarantee provided under this section shall 
decrease or increase on a pro rata basis according to any decrease or 
increase in the amount of the unpaid obligation under the provisions of 
the loan agreement involved.



Sec.  1007.65  Transfer and assumption.

    Notwithstanding any other provision of law, any loan guaranteed 
under this section, including the security given for the loan, may be 
sold or assigned by the lender to any financial institution subject to 
examination and supervision by an agency of the Federal Government or of 
any State or the District of Columbia.



Sec.  1007.70  Disqualification of lenders and civil money penalties.

    (a) In general--(1) Grounds for action. HUD may take action under 
paragraph (a)(2) of this section if HUD determines that any lender or 
holder of a guarantee certificate:
    (i) Has failed:
    (A) To maintain adequate accounting records;

[[Page 850]]

    (B) To service adequately loans guaranteed under this section; or
    (C) To exercise proper credit or underwriting judgment; or
    (ii) Has engaged in practices otherwise detrimental to the interest 
of a borrower or the United States.
    (2) Actions. Upon a determination by HUD that any of the grounds for 
action in paragraph (a)(1)(i), of this section apply to the holder of a 
guarantee certificate, HUD may:
    (i) Refuse, either temporarily or permanently, to guarantee any 
further loans made by such lender or holder;
    (ii) Bar such lender or holder from acquiring additional loans 
guaranteed under this part; and
    (iii) Require that such lender or holder assume not less than 10 
percent of any loss on further loans made or held by the lender or 
holder that are guaranteed under this part.
    (b) Civil money penalties for intentional violations--(1) In 
general. HUD may impose a civil monetary penalty on a lender or holder 
of a guarantee certificate if HUD determines that the holder or lender 
has intentionally failed:
    (i) To maintain adequate accounting records;
    (ii) To adequately service loans guaranteed under this section; or
    (iii) To exercise proper credit or underwriting judgment.
    (2) Penalties. A civil monetary penalty imposed under this section 
shall be imposed in the manner and be in an amount provided under 
section 536 of the National Housing Act (12 U.S.C.A. 1735f-1) with 
respect to mortgagees and lenders under that Act.
    (c) Payment on loans made in good faith. Notwithstanding paragraphs 
(a) and (b) of this section, if a loan was made in good faith, HUD may 
not refuse to pay a lender or holder of a valid guarantee on that loan, 
without regard to whether the lender or holder is barred under this 
section.



Sec.  1007.75  Payment under guarantee.

    (a) Lender options--(1) Notification. If a borrower on a loan 
guaranteed under this part defaults on the loan, the holder of the 
guarantee certificate shall provide written notice of the default to 
HUD.
    (2) Payment. Upon providing the notice required under paragraph 
(a)(1), of this section, the holder of the guarantee certificate shall 
be entitled to payment under the guarantee (subject to the provisions of 
this section) and may proceed to obtain payment in one of the following 
manners:
    (i) Foreclosure. The holder of the certificate may initiate 
foreclosure proceedings (after providing written notice of that action 
to HUD). Upon a final order by the court authorizing foreclosure and 
submission to HUD of a claim for payment under the guarantee, HUD will 
pay to the holder of the certificate the pro rata portion of the amount 
guaranteed (as determined under Sec.  1007.60) plus reasonable fees and 
expenses as approved by HUD. HUD's rights will be subrogated to the 
rights of the holder of the guarantee, who shall assign the obligation 
and security to HUD.
    (ii) No foreclosure. Without seeking foreclosure (or in any case in 
which a foreclosure proceeding initiated under paragraph (a)(2)(i) of 
this section continues for a period in excess of 1 year), the holder of 
the guarantee may submit to HUD a request to assign the obligation and 
security interest to HUD in return for payment of the claim under the 
guarantee. HUD may accept assignment of the loan if HUD determines that 
the assignment is in the best interest of the United States. Upon 
assignment, HUD will pay to the holder of the guarantee the pro rata 
portion of the amount guaranteed (as determined under Sec.  1007.60). 
HUD's rights will be subrogated to the rights of the holder of the 
guarantee, who shall assign the obligation and security to HUD.
    (b) Requirements. Before any payment under a guarantee is made under 
paragraph (a) of this section, the holder of the guarantee shall exhaust 
all reasonable possibilities of collection. Upon payment, in whole or in 
part, to the holder, the note or judgment evidencing the debt shall be 
assigned to the United States and the holder shall have no further claim 
against the borrower or the United States. HUD will then take such 
action to collect as HUD determines to be appropriate.

[[Page 851]]



Sec.  1007.80  Qualified mortgage.

    A mortgage guaranteed under section 184A of the Housing and 
Community Development Act of 1992 (1715z-13b), except for mortgage 
transactions exempted under Sec.  203.19(c)(2), is a safe harbor 
qualified mortgage that meets the ability-to-repay requirements in 15 
U.S.C. 1639c(a).

[78 FR 75238, Dec. 11, 2013]

                       PARTS 1008	1699 [RESERVED]

[[Page 853]]



                              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 855]]



                    Table of CFR Titles and Chapters




                      (Revised as of April 1, 2024)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--599)
        VI  National Capital Planning Commission (Parts 600--699)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
         X  Department of the Treasury (Parts 1000--1099)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Department of Housing and Urban Development (Parts 
                2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)

[[Page 856]]

     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)
      XXIX  Department of Labor (Parts 2900--2999)
       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
     XXXVI  Office of National Drug Control Policy, Executive 
                Office of the President (Parts 3600--3699)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)
       LIX  Gulf Coast Ecosystem Restoration Council (Parts 5900--
                5999)
        LX  Federal Communications Commission (Parts 6000--6099)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)

                   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  Office of Personnel Management and Office of the 
                Director of National Intelligence (Parts 1400--
                1499)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)

[[Page 857]]

      XXVI  Department of Defense (Parts 3600--3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  U.S. International Development Finance Corporation 
                (Parts 4300--4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
     XXXVI  Department of Homeland Security (Parts 4600--4699)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)

[[Page 858]]

    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)
    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
    XCVIII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIX  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)
         C  National Council on Disability (Parts 10000--10049)
        CI  National Mediation Board (Parts 10100--10199)
       CII  U.S. Office of Special Counsel (Parts 10200--10299)
      CIII  Federal Mediation and Conciliation Service (Parts 
                10300--10399)
       CIV  Office of the Intellectual Property Enforcement 
                Coordinator (Part 10400--10499)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--199)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         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)

[[Page 859]]

      VIII  Agricultural Marketing Service (Federal Grain 
                Inspection Service, Fair Trade Practices Program), 
                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)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  [Reserved]
      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)
        XX  [Reserved]
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      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 Policy and New Uses, 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)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and 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]

[[Page 860]]

      XLII  Rural Business-Cooperative Service, Department of 
                Agriculture (Parts 4200--4299)
         L  Rural Business-Cooperative Service, Rural Housing 
                Service, and Rural Utilities Service, Department 
                of Agriculture (Parts 5000--5099)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Agricultural Marketing Service (Fair Trade Practices 
                Program), 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)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      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)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  (Parts 500--599) [Reserved]
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)

[[Page 861]]

        IX  (Parts 900--999)[Reserved]
         X  Consumer Financial Protection Bureau (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research, Department of the 
                Treasury (Parts 1600--1699)
      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  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    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--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 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)

[[Page 862]]

       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  National Technical Information Service, Department of 
                Commerce (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
        XV  Office of the Under-Secretary for Economic Affairs, 
                Department of Commerce (Parts 1500--1599)
            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) [Reserved]

                    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  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)

[[Page 863]]

        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599) [Reserved]

                     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  Office of Workers' Compensation Programs, 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 Service, 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 Agency for Global Media (Parts 500--599)
       VII  U.S. International Development Finance Corporation 
                (Parts 700--799)
        IX  Foreign Service Grievance Board (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  Millennium Challenge Corporation (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)

[[Page 864]]

        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)

                          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 Housing and 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--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799) 
                [Reserved]

[[Page 865]]

       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           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--899)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900--999)
        VI  Office of the Assistant Secretary, Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--799)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       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)

[[Page 866]]

      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            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)
       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  Employee Benefits Security 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  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

[[Page 867]]

                 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 Investment Security, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

                      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)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Department of Defense, Defense Logistics Agency (Parts 
                1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       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)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army, Department 
                of Defense (Parts 200--399)

[[Page 868]]

        IV  Great Lakes St. 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 Career, Technical, and Adult Education, 
                Department of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599) 
                [Reserved]
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799) 
                [Reserved]
            Subtitle C--Regulations Relating to Education
        XI  [Reserved]
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             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)
        VI  [Reserved]
       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)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

[[Page 869]]

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  U.S. Copyright Office, Library of Congress (Parts 
                200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  National Institute of Standards and Technology, 
                Department of Commerce (Parts 400--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)
        IX  Federal Permitting Improvement Steering Council (Part 
                1900)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        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 Service, Department of 
                Labor (Parts 61-1--61-999)
   62--100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)

[[Page 870]]

  103--104  [Reserved]
       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)
  129--200  [Reserved]
            Subtitle D--Federal Acquisition Supply Chain Security
       201  Federal Acquisition Security Council (Parts 201-1--
                201-99)
            Subtitle E [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 (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
   II--III  [Reserved]
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--699)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1099)

                   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 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

[[Page 871]]

                       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 Services, Administration of 
                Families and Services, 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)
        IX  Denali Commission (Parts 900--999)
         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  Administration for Children and Families, 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 of Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Parts 2300--2399)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

[[Page 872]]

                      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)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)
         V  The First Responder Network Authority (Parts 500--599)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  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  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  Broadcasting Board of Governors (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)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)

[[Page 873]]

        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199) [Reserved]
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        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  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (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 (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499) 
                [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        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)

[[Page 874]]

        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)

[[Page 875]]





           Alphabetical List of Agencies Appearing in the CFR




                      (Revised as of April 1, 2024)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     5, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, VIII, IX, X, XI; 9, 
                                                  II
Agricultural Research Service                     7, V
Agriculture, Department of                        2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, VIII, IX, X, XI; 9, 
                                                  II
  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
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 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
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  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 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 of                          32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
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
Architectural and Transportation Barriers         36, XI
   Compliance Board
[[Page 876]]

Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI; 38, II
Army, Department of                               32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
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
  Federal Acquisition Regulation                  48, 19
Career, Technical, and Adult Education, Office    34, IV
     of
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazard Investigation Board    40, VI
Chief Financial Officer, Office of                7, XXX
Child Support Services, Office of                 45, III
Children and Families, Administration for         45, II, IV, X, XIII
Civil Rights, Commission on                       5, LXVIII; 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 of                           2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Affairs, Office of the Under-          15, XV
       Secretary for
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II; 37, IV
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Technical Information Service          15, XI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Secretary of Commerce, Office of                15, Subtitle A
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 Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I
Defense, Department of                            2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III; 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I

[[Page 877]]

  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy, Department of                             32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 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
Denali Commission                                 45, IX
Disability, National Council on                   5, C; 34, XII
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Office of the Under-Secretary   15, XV
     for
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Career, Technical, and Adult Education, Office  34, IV
       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
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Policy, National Commission for        1, IV
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 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                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  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
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99
  National Drug Control Policy, Office of         2, XXXVI; 21, III
  National Security Council                       32, XXI; 47, II
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
     States
[[Page 878]]

Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Families and Services, Administration of          45, III
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
Federal Acquisition Security Council              41, 201
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 2, LX; 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                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
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
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        5, CIII; 29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Permitting Improvement Steering Council   40, IX
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
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
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission of                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
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 Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61

[[Page 879]]

  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  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
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Great Lakes St. Lawrence Seaway Development       33, IV
     Corporation
Gulf Coast Ecosystem Restoration Council          2, LIX; 40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Services, Office of               45, III
  Children and Families, Administration for       45, II, IV, X, XIII
  Community Services, Office of                   45, X
  Families and Services, Administration of        45, III
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 5, XXXVI; 6, I; 8, 
                                                  I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 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
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  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
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Immigration and Customs Enforcement Bureau        19, IV
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Independent Counsel, Offices of                   28, VI
Indian Affairs, Bureau of                         25, I, V

[[Page 880]]

Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
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, XV
Institute of Peace, United States                 22, XVII
Intellectual Property Enforcement Coordinator,    5, CIV
     Office of
Inter-American Foundation                         5, LXIII; 22, X
Interior, Department of                           2, XIV
  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
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Safety and Environmental Enforcement, Bureau    30, II
       of
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  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, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Development Finance Corporation,    5, XXXIII; 22, VII
     U.S.
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
Investment Security, Office of                    31, VIII
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 of                            2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Independent Counsel, Offices of                 28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor, Department of                              2, XXIX; 5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV

[[Page 881]]

  Employment and Training Administration          20, V
  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
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I, VI
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Libraries and Information Science, National       45, XVII
     Commission on
Library of Congress                               36, VII
  Copyright Royalty Board                         37, III
  U.S. Copyright Office                           37, II
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIX
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV, VI
National Counterintelligence Center               32, XVIII
National Credit Union Administration              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           2, XXXVI; 21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Geospatial-Intelligence Agency           32, I
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II; 37, IV
National Intelligence, Office of Director of      5, IV; 32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          5, CI; 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                       2, XXV; 5, XLIII; 45, VI

[[Page 882]]

  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI; 47, II
National Technical Information Service            15, XI
National Telecommunications and Information       15, XXIII; 47, III, IV, V
     Administration
National Transportation Safety Board              49, VIII
Natural Resource Revenue, Office of               30, XII
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy, Department of                               32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Patent and Trademark Office, United States        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                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, IV, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory 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 Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Contracts, Department of Labor             41, 50
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Housing Service                             7, XVIII, XXXV, L
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Safety and Environmental Enforcement, Bureau of   30, II
Science and Technology Policy, Office of          32, XXIV; 47, II
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 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
[[Page 883]]

State, Department of                              2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Tennessee Valley Authority                        5, LXIX; 18, XIII
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Great Lakes St. Lawrence Seaway Development     33, IV
       Corporation
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury, Department of the                       2, X; 5, XXI; 12, XV; 17, 
                                                  IV; 31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
Truman, Harry S. Scholarship Foundation           45, XVIII
United States Agency for Global Media             22, V
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
U.S. Copyright Office                             37, II
U.S. Office of Special Counsel                    5, CII
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs, Department of                   2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I, VI
World Agricultural Outlook Board                  7, XXXVIII

[[Page 885]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2019 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, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.govinfo.gov. For changes to this volume of the 
CFR prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 
1964-1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. 
The ``List of CFR Sections Affected 1986-2000'' is available at 
www.govinfo.gov.

                                  2019

24 CFR
                                                                   84 FR
                                                                    Page
Subtitle B
Chapter IX
Chapter IX Notification............................................54009

                                  2020

24 CFR
                                                                   85 FR
                                                                    Page
Subtitle B
Chapter IX
903.7 (a)(1)(iii) and (o) revised..................................47911
903.15 Revised.....................................................47911
903.23 (f) revised.................................................47911
905.308 (b)(10) amended............................................61568
960.257 (c)(3)(i) amended..........................................27139
964.320 Revised....................................................61568
982.516 (b)(3)(i) amended..........................................27139
983.4 Amended......................................................61568
983.154 (c) introductory text and (1) removed; (c)(2) redesignated 
        as new (c).................................................61568
1000.42 Revised....................................................61568

                                  2021

24 CFR
                                                                   86 FR
                                                                    Page
Subtitle B
Chapter VIII
880.607 (c)(6) added; interim......................................55701
882.511 (d)(1)(i) revised; (d)(2)(iv) added; (d)(3) amended; 
        interim....................................................55701
884.216 (d) added; interim.........................................55701
Chapter IX
903.7 (o) revised; interim.........................................30792
903.15 (c) added; interim..........................................30793
903.23 (f) revised; interim........................................30793
966.8 Added; interim...............................................55701
982 Guidance.......................................................53207
983 Guidance.......................................................53207

                                  2022

24 CFR
                                                                   87 FR
                                                                    Page
Subtitle B
Chapter VIII
880.612 Revised....................................................37997
884.224 Revised....................................................37997
886.130 Revised....................................................37997
886.309 (e) amended................................................37997
886.335 Revised....................................................37997
887 Added..........................................................30046
891.582 Added......................................................37997
Chapter IX
984 Revised........................................................30047

[[Page 886]]

                                  2023

24 CFR
                                                                   88 FR
                                                                    Page
Subtitle B
Chapter VIII
880 Announcement...................................................56764
882.404 (d) removed................................................30499
882.515 (a) amended; (b) and (d) revised; (e) and (f) added; eff. 
        1-1-24......................................................9667
882.516 Heading, (b), (c), and (e) revised.........................30499
882.808 (i)(1) amended; (i)(4) and (5) added; eff. 1-1-24...........9668
884.217 Revised....................................................30499
886.113 (b) and (i) removed........................................30500
886.123 Revised....................................................30500
886.307 (b), (i), and (m) removed..................................30500
886.323 Revised....................................................30500
888 Announcement...................................................56764
891.105 Amended; eff. 1-1-24........................................9668
891.230 Removed; eff. 1-1-24........................................9668
891.410 (g)(1), (2), and (3)(i) revised; eff. 1-1-24................9668
891.435 (a) and (c)(2) revised; eff. 1-1-24.........................9669
891.440 Amended; eff. 1-1-24........................................9669
891.445 (d) amended; eff. 1-1-24....................................9669
891.510 (f)(1)(iii)(A)(2) amended..................................75233
891.520 Amended; eff. 1-1-24........................................9669
    Amended........................................................75233
891.575 (a)(2) amended.............................................75233
891.610 (e), (g)(1), (2), and (3)(i) revised; eff. 1-1-24...........9669
891.655 Amended; eff. 1-1-24........................................9669
    Amended........................................................75233
891.720 (a)(3) revised.............................................75233
891.740 (a)(2) revised.............................................75233
891.750 (b) introductory text, (3), (c)(1), (2), and (3)(i) 
        revised....................................................75234
Chapter IX
902 Authority citation revised.....................................30500
902.3 Amended......................................................30500
902.13 (b)(2) revised..............................................30500
902.20 Removed.....................................................30500
902.21 Revised.....................................................30500
902.22 Revised.....................................................30501
902.24 Removed.....................................................30501
902.26 Removed.....................................................30501
902.68 Removed.....................................................30501
902.101--902.113 (Subpart H) Added.................................30501
903 Announcement...................................................56764
905 Announcement...................................................56764
Chapter IX
960.102 (b) amended.................................................9669
960.201 (a)(1) revised; eff. 1-1-24.................................9670
960.206 (b)(6) added................................................9670
960.253 (a)(3) added; (f)(1) revised................................9670
960.255 (e) and (f) added; eff. 1-1-24..............................9670
960.257 (a)(5) added; (d) amended...................................9670
    (b) revised; (e) and (f) added; eff. 1-1-24.....................9670
960.259 (c)(2) revised; eff. 1-1-24.................................9671
960.261 Removed.....................................................9671
960.507 Added.......................................................9671
960.509 Added.......................................................9671
    Second (b)(6)(xii) redesignated as (b)(6)(xiii)................12560
960.600 Revised.....................................................9675
960.601 (b) amended.................................................9675
964 Announcement...................................................56764
964.125 (a) amended.................................................9675
965.800--965.805 (Subpart I) Removed...............................30503
966.4 (a)(2)(iii) revised; (l)(2)(ii) amended; (l)(2)(iii) 
        redesignated as (l)(2)(iv); (a)(2)(iv) and new (l)(2)(iii) 
        added.......................................................9675
970 Announcement...................................................56764
982.4 (b) amended..................................................30503
982.352 (b)(1)(iv)(A)(3) revised...................................30503
982.401 Revised....................................................30503
982.402 (b)(2) amended.............................................30503
982.405 (a) revised................................................30503
982.516 (a)(3), (c), (d), (e)(1), and (f) revised; (h) added; eff. 
        1-1-24......................................................9675
982.552 (b)(6) added; eff. 1-1-24...................................9676
982.605 (a) revised................................................30503
982.609 (a) revised................................................30504
982.614 (a) and (b)(1) revised.....................................30504
982.618 (b) and (c) revised........................................30504
982.621 Introductory text revised..................................30504
982.628 (a)(4) revised.............................................30504
983 Announcement...................................................56764
983.2 (c)(4) amended...............................................30504
983.3 (b) amended..................................................30504
983.10 (b)(2)(ii) revised..........................................30504
983.101 (a) through (c) revised....................................30504
983.103 (d) heading revised; (d)(4) added..........................30504
985 Authority citation and heading revised.........................30505
985.1 (b) revised; (c) added.......................................30505
985.201--985.211 (Subpart D) Added.................................30505
1000 Notification..................................................87899
1003 Notification..................................................87899
1006 Notification..................................................87899

[[Page 887]]

                                  2024

   (Regulations published from January 1, 2024, through April 1, 2024)

24 CFR
                                                                   89 FR
                                                                    Page
Subtitle A
Chapter IX
Chapter IX Notification.............................................7612
1005 Revised; eff. 6-18-24.........................................20056
1005.749 (c)(7) and (8) correctly redesignated as (c)(6) and (7); 
        eff. 6-18-24...............................................22084
1005.759 Second (b), (c) and (d) correctly redesignated as (c), 
        (d) and (e); eff. 6-18-24..................................22084
1005.805 Correction: (b)(4)(vi) and (vii) correctly redesignated 
        as (b)(4)(v) and (vi); eff. 6-18-24........................22084
1006 Authority citation revised.....................................9760
1006.10 Amended.....................................................9760
1006.101 Introductory text, (c), and (d) revised....................9761
1006.201 Revised....................................................9761
1006.205 (a)(9) revised.............................................9761
1006.210 (g) removed; (h) redesignated as new (g)...................9761
1006.215 (e) revised; (f) redesignated as (g); new (f) added........9761
1006.227 Added......................................................9761
1006.230 (f) amended................................................9761
1006.235 Heading revised............................................9761
1006.301 Revised....................................................9761
1006.305 (a) and (b) revised........................................9762
1006.306 Added......................................................9762
1006.307 Added......................................................9762
1006.310 Revised....................................................9762
1006.340 (a) amended................................................9763
1006.350 (a) amended................................................9763
1006.375 Revised....................................................9763
1006.377 Added......................................................9763
1006.410 (a)(2) and (c)(1) revised; (a)(3) added....................9764
1006.420 (c) heading added..........................................9764


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