[Federal Register Volume 59, Number 108 (Tuesday, June 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13729]


[[Page Unknown]]

[Federal Register: June 7, 1994]


_______________________________________________________________________

Part III





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 291




Single Family Property Disposition; Lease and Sale of HUD-Acquired 
Properties; Final Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner

24 CFR Part 291

[Docket No. R-94-1720; FR-3399-F-02]
RIN 2502-AF96

 
Single Family Property Disposition; Lease and Sale of HUD-
Acquired Single Family Properties for the Homeless

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Final rule.

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

SUMMARY: This final rule amends the Department's regulations governing 
the Single Family Property Disposition program for the lease and sale 
of HUD-acquired properties for the homeless by implementing section 
1407 of the Housing and Community Development Act of 1992 (Pub. L. 102-
550, approved October 28, 1992), with regard to notifying eligible 
applicants of available properties in their areas.

EFFECTIVE DATE: July 7, 1994.

FOR FURTHER INFORMATION CONTACT: David H. Patton, Acting Director, 
Single Family Property Disposition, room 9170, Department of Housing 
and Urban Development, 451 Seventh Street SW., Washington, DC 20410; 
telephone (202) 708-1832; (TDD number for the hearing- and speech-
impaired (202) 708-4594). (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Background

    The Single Family Property Disposition program (24 CFR part 291), 
which disposes of one-to-four family properties acquired by HUD or 
otherwise held by HUD, includes an initiative by the Department for the 
lease and sale of properties to governmental entities, tribes, and 
private nonprofit organizations for use by homeless persons (subpart E 
of part 291).
    Under the current regulations, applicants that have been 
preapproved by HUD are notified of the availability of properties for a 
10-day consideration and inspection period before the properties are 
offered for sale to the general public. (See 24 CFR 291.410(d).) 
Properties are leased or sold to applicants on a first come-first 
served basis. No more than 10 percent of the total inventory, as of 
October 1, may be leased under the program; there is no limitation on 
the sale of properties.
    Applicants may purchase properties, at a discount, either through a 
direct sale or by submitting a competitive bid. Applicants that choose 
to lease properties may purchase them at any time during the leasehold. 
Leases are for a one-year term, renewable for up to four additional 
one-year terms, for $1 a year. Lessees are responsible for all 
utilities, taxes, and other costs associated with operating the 
property. Under 24 CFR 291.415(d), lessees are required to establish an 
escrow account, with HUD as a co-signer, and make monthly deposits to 
the account in an amount sufficient to reimburse HUD for any taxes on 
the property.

II. Amendments by the Housing and Community Development Act of 1992

    Section 1407 of the Housing and Community Development Act of 1992 
(Pub. L. 102-550, approved Oct. 28, 1992; hereafter referred to as 
``1992 HCD Act'') directs the Secretary to make several amendments to 
this discretionary program. Subsection 1407(a) prohibits the Secretary 
from making a property available for lease under the homeless 
initiative program unless the property has first been listed and made 
generally available for sale to the public for at least 30 days.
    Subsection 1407(b) of the 1992 HCD Act provides an exception to 
subsection 1407(a) with respect to any area in which the Secretary 
determines that there will not be a sufficient quantity of decent, 
safe, and sanitary affordable housing available for use under the 
program if properties located in the area are first made generally 
available to the public. In such exception cases, the Secretary will 
make available to preapproved applicants up to 10 percent of the total 
number of properties in the HUD inventory for the area before offering 
those properties to the general public. The Secretary is also directed 
to consult with the unit of general local government for the area in 
determining which properties should be reserved.
    The 1992 HCD Act, in subsection 1407(c), also directs the Secretary 
to identify and describe, upon request by an applicant or lessee, any 
exemptions or reductions related to the payment of property taxes under 
State or local laws that may be applicable to lessees or to the leased 
properties. Finally, subsection 1407(c) of the 1992 HCD Act also 
provides that the Secretary may not require the lessee to make deposits 
for the payment of taxes into an escrow account, where such an 
exemption or reduction is provided.

III. Final Rule

    On August 11, 1993, the Department published a proposed rule (58 FR 
42707) which would implement the changes required by section 1407 of 
the 1992 HCD Act, as well as some additional conforming changes. This 
final rule implements those proposed changes as described below.

30-day Marketing Period and Exception

    In accordance with subsection 1407(a), this final rule amends 24 
CFR 291.400(c) to reflect the statutory requirement that HUD make 
property available for sale to the general public for at least 30 days 
before HUD makes the property available for lease under the program. In 
addition, this final rule also requires that the property be vacant, 
and not under contract or committed to another program for availability 
under the lease program.
    This final rule also adds conforming changes to Sec. 291.410(d) 
regarding notification to applicants of available properties. After the 
public sale period, the HUD Field Office will notify applicants of 
eligible properties available in the ZIP Code areas previously 
designated by them. Specific properties selected by an applicant will 
be held off the market for a 10-day consideration and inspection 
period, which will begin to run upon written notification by the 
applicant to the Field Office. (The Department encourages applicants to 
notify Field Offices by Facsimile (FAX).) Only those properties in 
which an applicant has submitted a written expression of interest will 
be held off the market. If no further communication from the applicant 
is received by the end of the 10-day consideration and inspection 
period, the Field Office will resume offering the properties for sale 
to the public.
    In accordance with section 1407(b) of the 1992 HCD Act, the final 
rule provides an exception to the 30-day listing for general sale in 
Field Offices having 200, or fewer, total properties in inventory as of 
October 1 of each year. HUD has determined that these offices are less 
likely to have properties available for applicants after 30 days on the 
market. HUD will select these ``exception'' field offices based upon 
the number of properties held in inventory as of October 1, of each 
year (initially October 1, 1993), the number of properties the 
Department anticipates acquiring over the ensuing 12-month period and 
the speed with which such properties are selling. In ``exception'' 
Field Offices, if homeless providers have requested to lease 
properties, properties will be offered to them for a 10-day 
consideration and inspection period before the properties are listed 
for sale to the general public. Field Offices subject to this exception 
will notify applicants of properties in designated ZIP Code areas prior 
to public listing until such time as 10 percent of their total 
inventory, as of October 1, has been leased. The Assistant Secretary 
for Housing-Federal Housing Commissioner will supply a list of the 
exception Field Offices to the Assistant Secretary for Community 
Planning and Development and all field offices on an annual basis.
    The final rule also provides that, in those Field Offices subject 
to the exception, HUD will consult with units of general local 
government to identify areas where there is a need for units for 
homeless persons and will make this information available to 
applicants. However, local governments will not have veto-power over 
where properties used by the homeless are located.

Exception From or Reduction of State and Local Property Taxes

    The final rule also amends 24 CFR 291.415(d) to describe HUD's duty 
under subsection 1407(c) of the 1992 HCD Act to provide information to 
applicants or lessees regarding any exemption from or reduction of 
property taxes under State and local laws. Under this final rule, where 
State or local law grants such an exemption or reduction, HUD will not 
require that the applicant establish an escrow account for that portion 
of the payment of property taxes.
    While the amendment necessitated by subsection 1407(c) is included 
in the final rule, the Department previously determined that this 
provision is effective as of October 28, 1992, the date of enactment of 
the 1992 HCD Act. HUD Field Offices were instructed to provide this 
information upon the request of an applicant or lessee.

Miscellaneous Changes

    This final rule also amends part 291 to reflect changes to the 
Department's Supportive Housing program. The 1992 HCD Act terminated 
the Supportive Housing Demonstration (formerly implemented in 24 CFR 
parts 577 and 578), and replaced it with a new Supportive Housing 
program. An interim rule for that program was published on March 15, 
1993 (58 FR 13870), and is codified at 24 CFR part 583.

Changes to the Proposed Rule

    Finally, the Department has made several changes to the proposed 
rule in this final rule. Those changes are as follows:
    A. This final rule requires that applicants submit a certification 
of compliance with fair housing laws, as well as other 
nondiscrimination and equal opportunity requirements, as part of the 
preapproval process.
    B. In Sec. 291.410(d), the references to a 45-day period have been 
changed to 30-day period. The 45-day reference was inadvertently put in 
the proposed rule, and this change reflects a technical correction.
    C. In Sec. 291.410(d), and with regard to re-offering a property to 
an applicant, the rule is changed to provide that an unsold property 
will be re-offered to an applicant if no offer from the public has been 
accepted by HUD, rather than just received by HUD.
    D. Section 291.410(d) is further modified to show that written 
notification of interest in a particular property by the applicant may 
be sent via facsimile, and the Department encourages applicants to use 
this method of notification. Signed leases may also be transmitted in 
this manner, followed by submission of the original.
    E. Section 291.410(e) has been deleted from the final rule. The 
Department believes that this provision was redundant since 
Sec. 291.110, as published on October 20, 1993, in an interim rule 
amending the Single Family Property Disposition program, sets forth the 
same notification procedures. In the interest of simplification and 
readability, the Department has removed this provision.
    F. Paragraphs (b) and (c) of Sec. 291.425 have been changed to 
indicate that the sales price of any HUD-owned property acquired under 
this program will be discounted in an amount determined appropriate by 
the Secretary, but not less than 10 percent. This change will make the 
rule governing the homeless initiative consistent with an amendment to 
Sec. 291.110(a) in the October 20, 1993 interim rule for the Single 
Family Property Disposition program.

IV. Discussion of Public Comments From Interim Rule

    The Department received 38 public comments in response to the 
proposed rule published on August 11, 1993. The following discussion 
summarizes the comments and provides HUD's responses to those comments. 
Every comment was reviewed and considered, although it may not be 
specifically addressed in this preamble.

30-day Public Listing Period: Sec. 291.400(c)(1)

    Comment: The Department received twenty-one comments objecting to 
the regulatory change which requires that HUD offer properties for sale 
to the public for 30 days prior to making them available for leasing to 
homeless providers. These commenters were generally concerned that only 
the least desirable properties would remain in the inventory after the 
30-day public listing period for a variety of reasons: (a) The 
increased costs associated with repairing the least desirable 
properties; (b) the unsuitability of leasing remainder properties 
because of problems with accessibility to supportive services; and (c) 
the location of remainder properties often being in crime ridden areas.
    HUD's response: Section 1407(a) of the 1992 HCD Act requires that 
HUD first offer properties to the general public for at least 30 days 
before HUD makes such properties available for leasing to homeless 
providers. However, HUD believes that homeless providers will have a 
sufficient number of acceptable properties available for their programs 
in most housing markets when the 30 day marketing priority takes 
effect. This belief is based upon the number of single family 
properties currently in the Department's inventory and the number of 
new acquisitions projected throughout any given year. In addition, the 
Department will administer the exception provision of the law with 
attention to valid concerns of the participating homeless providers, 
and if in general a sufficient number of acceptable properties are not 
available to applicants after the public listing period, the Department 
will revisit the exception provision in the future.

Exception to Public Listing Period and Consultation With Units of Local 
Government: Sec. 291.400(c)(2)

    Comment: Three commenters objected to the 200-unit exception to the 
30-day public listing period requirement. One commenter suggested that 
exceptions be determined based upon the current level of usage of the 
homeless leasing program in an area, and input from each field office 
as to where and whether the exception should apply. One commenter 
recommended that the exception to the 30-day public listing period 
should apply whenever the inventory in a field office is less than 500 
units. One commenter recommended that the Community Planning and 
Development Division in each field office work with Property 
Disposition staff to determine whether the exception to the 30-day 
listing period requirement should apply.
    HUD's response: The 200 property threshold, which will determine 
what field offices must offer their inventory to homeless providers on 
a priority basis, is based on HUD's experience administering the 
Homeless Initiative Program nationwide. The Department believes this is 
a reasonable benchmark which will ensure adequate property availability 
for homeless providers; however, if future program experience 
demonstrates a need for modification of this criterion to determine 
exception areas, the Department will respond appropriately.
    Comment: Section 1407(b) of the Housing and Community Development 
Act of 1992 requires that HUD consult with units of local government in 
determining the area in which properties should be reserved for 
disposition under the exception to the 30-day public listing period. 
Several commenters recommended that HUD give local governments more 
input into the program. Eight commenters objected to HUD's exclusion of 
local communities from reviewing and approving of properties for the 
homeless on a case-by-case basis. Eight commenters suggested that HUD 
require that the program be consistent with the local CHAS.
    HUD's response: HUD has no control over which properties enter its 
inventory or where they will be located; therefore, there is no 
guarantee of property availability in areas designated by the locality 
for providing services to the homeless. However, in areas subject to 
section 1407(b), HUD will consult with local officials on an annual 
basis to determine which neighborhoods are targeted by the locality for 
provision of adequate supportive services necessary to conduct homeless 
programs. This consultation will be carried out in a manner to minimize 
any delay in making HUD owned properties available to homeless 
providers. While the language in section 1407(b) of the 1992 HCD Act 
provides for consultation on ``which properties should be reserved,'' 
HUD believes that Congress intended that the Department seek input from 
local governments on the specific geographic areas in these communities 
where the homeless population could best be served rather than seeking 
input on a property-by-property basis. Such a process would be 
administratively burdensome for both HUD and the unit of local 
government. HUD will make every effort to work with local governments 
and applicants; however, the decision on which properties are available 
is ultimately determined by the location of properties coming into 
inventory.

Notification by ZIP Codes: Sec. 291.410

    Comment: Several commenters objected to the exclusive use of ZIP 
codes in Sec. 291.410 for identifying areas of interest by homeless 
providers for leasing properties, and notifying the providers of 
available properties since many communities share the same ZIP codes, 
but not the same housing patterns.
    HUD's response: Property listings must be based upon some generally 
recognized geographic designation that is part of HUD's existing data 
base. The Department currently tracks its property acquisitions by ZIP 
code. Moreover, the Department is not aware of a better method for 
tracking and identifying properties. Finally, the Department has not 
experienced any difficulties using this approach in the past, nor has 
it had any complaints regarding this method from program participants.

Fair Housing Requirements

    Comment: Several commenters objected to the absence of fair housing 
requirements in the rule. These commenters recommended that HUD require 
that the homeless providers submit a fair housing action plan and an 
affirmative marketing plan. One commenter suggested that the Department 
require that homeless providers submit a certification of compliance 
with fair housing laws.
    HUD's response: Since the Department cannot control which 
properties or what geographic areas are represented in its inventory, a 
requirement that participating agencies submit a fair housing action 
plan and an affirmative marketing plan is not appropriate. However, the 
Department requires that all of its programs be administered in a non-
discriminatory manner, and Sec. 291.435 expressly makes applicants 
subject to the Fair Housing Act, as well as other nondiscrimination and 
equal opportunity requirements. The Department agrees that applicants 
should submit a certification of compliance with applicable fair 
housing laws. Accordingly, this final rule amends Sec. 291.410(c) to 
require that applicants submit a certification of compliance with fair 
housing laws, as well as other nondiscrimination and equal opportunity 
requirements, as part of the preapproval process.

Miscellaneous Comments

    Comment: Several commenters recommended that HUD change the rule to 
require that HUD notify local municipalities of all property 
disposition properties.
    HUD's response: On request, HUD does notify local officials of all 
properties which become available for purchase within their 
jurisdiction.
    Comment: Several commenters suggested that HUD give local 
municipalities an opportunity to purchase homes on a more competitive 
basis. A few commenters recommended that HUD offer substantial 
discounts for bulk purchases.
    HUD's response: The Department believes that the current pricing 
structure is appropriate. HUD offers to public agencies and nonprofits 
wishing to purchase a HUD-owned property the following discounts: a 10 
percent discount off the list price on single purchases, a 15 percent 
discount off the list price on the purchase of five or more properties, 
and a 30 percent discount off the list price for properties located in 
certain designated ``revitalization areas.''
    Comment: Several commenters suggested that HUD change the leasing 
program to place a greater emphasis on supportive services, and require 
that providers set up a reserve account for participants to assist the 
participants in moving toward independence.
    HUD's response: The Department agrees that it is important to place 
a greater emphasis on the availability of appropriate supportive 
services in order to maximize the long term benefits of the Homeless 
Initiative program; however, requiring that homeless providers 
establish reserve accounts to help move tenants towards independence 
seems overly burdensome to homeless providers participating in the 
program at this time.
    Comment: Section 291.400(f) currently provides that, to the extent 
practical and possible, HUD will avoid excessive concentration in a 
single neighborhood of properties leased or sold under this program. 
Although the Department did not propose to change this provision in the 
proposed rule, a number of commenters recommended that the Department 
define ``excessive concentration'' in the final rule.
    HUD's response: The Department previously addressed this issue in 
the final rule published September 16, 1991, where we stated that ``HUD 
believes that the need to avoid excessive concentration in a single 
neighborhood is important to the goal of integrating former homeless 
persons into the community. However, rigid standards * * * would be 
counterproductive, and do not recognize the diversity of communities 
and needs. The need for flexibility outweighs the need to establish 
strict standards to ease delivery of supportive services.'' Based upon 
past experience in this program, the Department continues to believe 
that a rigid definition would be counterproductive. Accordingly, the 
rule is unchanged on this issue. However, if in the future, this proves 
to be a problem, the Department will revisit the issue at that time.
    Comment: One commenter objected to the single family property 
disposition homeless initiative program in general, arguing that it is 
incompatible with local municipal housing patterns, and that leasing PD 
properties to homeless providers causes declining property values.
    HUD's response: There is no evidence that leasing PD properties to 
homeless providers has caused values to decline. However, in most 
housing markets, HUD properties will now be offered first to the 
general public before being made available for lease to homeless 
providers. This should enhance homeownership opportunities, as well as 
provide greater stability in residential neighborhoods.
    Comment: Three commenters supported the proposal that HUD limit the 
number of properties held off market for any applicant at any one time 
based upon the applicant's financial capacity and past performance.
    HUD's response: HUD believes that the number of properties held off 
the market for an applicant should relate to that applicant's prior 
housing experience and demonstrated capacity to administer the program. 
Field offices currently have the discretion to determine the 
appropriate number of properties for any applicant.
    Comment: Two commenters recommended that HUD grant the field 
offices more discretion in the program's administration.
    HUD's response: On November 2, 1993 (58 FR 58560), the FHA 
Commissioner redelegated to field offices the authority to waive 
handbooks, notices, directives and other issuances for Housing programs 
unless a regulatory or statutory provision is involved. As a result of 
this redelegation of authority, field offices now have more flexibility 
in program administration of the single family property disposition 
homeless initiative program.
    Comment: Two commenters recommended that HUD change the way it 
administers the ten percent cap on leasing property to homeless 
providers. These commenters believe that leased properties are counted 
toward the annual ten percent cap each time their annual lease is 
renewed.
    HUD's response: Properties leased to homeless providers are counted 
only once against the ten percent of annual inventory cap. Renewal of a 
lease does not mean that an individual property is counted twice in one 
year towards the limitation on the number of properties which may be 
leased for this purpose. Moreover, in the past, the Department as a 
whole has never leased ten percent of the nationwide inventory to 
homeless providers, so that individual field offices exceeding their 
own ten percent threshold may request reallocation of authority to 
lease from other areas.

V. Other Matters

A. Executive Order 12866

    This rule was reviewed by the Office of Management and Budget (OMB) 
under Executive Order 12866 on Regulatory Planning and Review. Any 
changes made in this rule as a result of that review are clearly 
identified in the docket file, which is available for public inspection 
in the Office of the Rules Docket Clerk, room 10276, 451 Seventh Street 
SW., Washington, DC.

B. Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made in accordance with HUD regulations at 24 CFR part 50, which 
implement section 102(2)(C) of the National Environmental Policy Act of 
1969 for the proposed rule published on August 11, 1993. The Department 
has determined that the Finding is not affected by the changes in this 
final rule. The Finding is available for public inspection between 7:30 
a.m. and 5:30 p.m. weekdays in the Office of the Rules Docket Clerk, 
room 10276, 451 Seventh Street SW., Washington, DC.

C. Executive Order 12612, Federalism

    The General Counsel has also determined, as the Designated Official 
for HUD under section 6(a) of Executive Order 12612, Federalism, that 
the policies contained in this rule do not have federalism implications 
and, thus, are not subject to review under that Order.

D. Executive Order 12606, the Family

    The General Counsel, as the designated official under Executive 
Order 12606, The Family, has determined that the Single Family Property 
Disposition Homeless Initiative, generally, has a positive and 
beneficial impact on the formation, maintenance, and general well-being 
of homeless families, and the amendments made by this rule will not 
significantly change the overall impact of the rule on families. 
Therefore, the rule is not subject to review under that Order.

E. Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. 
Specifically, the rule modifies the procedures under which HUD makes 
properties available for lease to governmental entities and private 
nonprofit organizations for use by homeless persons.

F. Paperwork

    The amendments made to 24 CFR part 291 by this final rule will not 
add any additional information collection burden to that already 
approved by the Office of Management and Burden under the Paperwork 
Reduction Act and assigned OMB approval numbers 2502-0412 and 2502-
0306.

G. Regulatory Agenda

    This rule was listed as Sequence No. 1606 in the Department's 
Semiannual Agenda of Regulations published at 59 FR 20424, 20452 on 
April 25, 1994, under Executive Order 12866 and the Regulatory 
Flexibility Act.

List of Subjects in 24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    Accordingly, for the reasons stated in the preamble, part 291, 
subpart E, of title 24 of the Code of Federal Regulations is amended as 
follows:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

    1. The authority citation for 24 CFR part 291 is revised to read as 
follows:

    Authority: 12 U.S.C. 1709 and 1715b; 42 U.S.C. 1441, 1441a, and 
3535(d).

    2. In Sec. 291.400, paragraph (b) is amended by removing the word 
``Demonstration''; and paragraphs (c), (d), and (e) are revised to read 
as follows:


Sec. 291.400  Purpose and scope.

* * * * *
    (c) Property available for lease with option to purchase. (1) HUD 
will make available up to 10 percent of its total inventory of 
properties as of October 1, 1993. Thereafter, on October 1 of each 
year, the 10 percent figure will be adjusted upward or downward to 
reflect increases or decreases in the total inventory. Property will be 
available for lease under the terms and conditions described in 
Sec. 291.415, in accordance with the following criteria:
    (i) The property has been listed for sale for at least 30 days, 
except as provided in paragraph (c)(2) of this section;
    (ii) The property is vacant; and
    (iii) A sales contract has not been accepted for the property, or 
the property has not been committed to another program.
    (2) Where a Field Office has 200, or fewer, total properties in 
inventory on October 1 of each year, and where applicants have 
requested to lease properties in certain designated areas, such 
properties will be offered first to applicants for lease before being 
listed for sale to the general public until 10 percent of the total 
inventory of the Field Office has been leased. HUD will also take into 
consideration the number of properties that the Department anticipates 
acquiring over the next 12-month period and the speed with which 
acquired properties are selling in the area. HUD will consult, on an 
annual basis, with units of general local government in the area on 
parts of the area where there is a need for housing for homeless 
persons.
    (d) Property available under a McKinney Act Supportive Housing 
program lease-option agreement. Eligible properties will be available 
under a lease-option to purchase agreement, under the terms and 
conditions described in Sec. 291.420, to Supportive Housing program 
applicants for acquisition grants under 24 CFR part 583.
    (e) Properties available for sale. Eligible properties will be 
available for competitive sale or direct sale for fair market value, 
less a discount determined appropriate by the Secretary but not less 
than 10 percent, under the terms and conditions described in 
Sec. 291.425.
* * * * *


Sec. 291.405  [Amended]

    3. In Sec. 291.405, the definition of ``Applicant'' is amended by 
removing the word ``Demonstration'', and by removing the words ``24 CFR 
577.5 or 578.5'' and replacing them with ``24 CFR part 583'' in the 
last sentence; the definition of ``Eligible properties'' is amended by 
adding the word ``vacant'' before ``single family properties''; and the 
definition of ``Supportive Housing Demonstration'' is removed.
    4. Section 291.410 is amended by revising paragraph (c) 
introductory text, adding paragraph (c)(6), and revising paragraph (d), 
to read as follows:


Sec. 291.410  Applicant preapproval; notification of eligible 
properties.

* * * * *
    (c) Applicant data and certification. To obtain preapproval, 
applicants must provide the appropriate HUD Field Office with the 
following data and certification:
    (1) * * *
    (2) * * *
    (3) * * *
    (4) * * *
    (5) * * *
    (6) A certification of the applicant's intent to comply with the 
requirements of the nondiscrimination and equal opportunity 
requirements set forth in Sec. 291.435.
    (d) Notification of eligible properties available for lease. (1) 
Applicants, preapproved by HUD as described in paragraph (a) of this 
section, must designate geographic areas of interest by ZIP Code to the 
appropriate HUD Field Office(s), and must indicate their intention to 
lease properties in those areas.
    (2)(i) Upon request, and after properties have been listed for sale 
to the general public for at least 30 days, except as provided in 
paragraph (d)(2)(ii) of this section, Field Offices will notify 
applicants, in writing, of available eligible properties in the ZIP 
Code areas previously designated by the applicant. Specific properties 
selected by the applicant will be held off the market for a 10-day 
consideration and inspection period beginning to run upon notification 
by the applicant to the Field Office. (Where notification is by mail, 
the 10-day period will begin to run five days after mailing.) Only 
those properties in which the applicant has expressed an interest will 
be held off the market. If a signed lease is not received from the 
applicant by the end of the 10-day consideration and inspection period, 
the Field Office will resume offering the properties for sale. 
(Facsimile (FAX) transmissions are acceptable.)
    (ii) Where properties are made available to applicants before being 
listed for sale to the public, as described in Sec. 291.400(c)(2), upon 
request, Field Offices will notify applicants, in writing, when 
eligible properties become available in the ZIP Code areas previously 
designated by the applicant. Those properties will remain available for 
a 10-day consideration and inspection period before being listed for 
sale to the public. The 10-day period will begin to run upon 
notification of the applicant by the Field Office. (Where notification 
is by mail, the consideration period will begin to run five days after 
mailing.) Applicants must submit a signed lease to the Field Office by 
the end of the 10-day period. (Facsimile (FAX) transmissions are 
acceptable.) If a signed lease is not received by the end of the 10-day 
period, the Field Office will offer the properties for sale to the 
general public. After the initial 10-day consideration and inspection 
period, a property will not be available to applicants for lease again 
until it has been offered to the public for 30 days. If an applicant 
expresses an interest in leasing a property during or after the 30-day 
public sale period, the Field Office will offer the property to the 
applicant for 10 days after the public sale period, provided the 
property is unsold, no offer from the public has been accepted, and the 
property is not in a public bid-offering period or committed to another 
purpose or program.
    (iii) In notifying applicants of available properties, Field 
Offices will coordinate the dissemination of the information to ensure 
that where more than one applicant designates a specific area, those 
applicants receive the list of properties at the same time, based on 
intervals agreed upon between HUD and the applicants. Properties will 
be leased or sold to applicants on a first come-first served basis.
    (iv) HUD may limit the number of properties held off the market for 
an applicant at any one time, based upon the applicant's financial 
capacity and past performance as determined by HUD from information 
provided in the preapproval process and observations made during 
monitoring of a program in progress.
    5. Section 291.415 is amended by redesignating paragraph (d)(1) as 
paragraph (d)(1)(i), by adding paragraph (d)(1)(ii), and by revising 
the first sentence of paragraph (f)(1), to read as follows:


Sec. 291.415  Lease with option to purchase properties for use by the 
homeless.

* * * * *
    (d) Property operating costs and insurance.
    (1)(i) * * *
    (ii) Upon request by an applicant or lessee, HUD will identify and 
describe any exemptions or reductions relating to payment of property 
taxes under State or local laws, for the jurisdiction requested by the 
applicant or lessee, that may be applicable to lessees or to properties 
leased under this subpart. If a lessee of a property under this subpart 
is provided an exemption from any requirement to pay State or local 
property taxes, or a reduction in the amount of any such taxes, the 
lessee will be required to establish an escrow account to cover only 
the amount of taxes owed.
* * * * *
    (f) Purchase of leased properties. (1) Lessees that desire to 
purchase leased properties during the lease term will be offered the 
properties at the lower of the fair market value established at the 
time of the initiation of the lease or at the time of the sale, less a 
discount determined appropriate by the Secretary but not less than 10 
percent, provided lessees agree to use the properties either to house 
low-income tenants for a period of not less than 10 years or to resell 
the properties to low-income buyers. * * *
* * * * *
    6. Section 291.420 is amended by revising the section heading and 
paragraphs (a) (1) and (3), and by removing the word ``Demonstration'' 
from the first sentence of paragraph (b), to read as follows:


Sec. 291.420  Supportive Housing program lease-option to purchase 
properties.

    (a) Lease-option for Supportive Housing program applicants. (1) 
Eligible properties will be available under a lease-option agreement to 
applicants for acquisition grants under the Supportive Housing program, 
as described in 24 CFR part 583. An applicant may enter into a lease-
option agreement with HUD for up to six months while its application 
for Supportive Housing assistance is being reviewed by HUD.
* * * * *
    (3) The applicant may purchase the property for fair market value, 
less a discount determined appropriate by the Secretary but not less 
than 10 percent, at any time during the lease period in accordance with 
the terms of Sec. 291.415(f).
* * * * *
    7. Section 291.425 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec. 291.425  Sale of properties for use by the homeless.

* * * * *
    (b) Direct sales. In accordance with Sec. 291.110(a), the purchase 
price for the property will be at the fair market value established for 
the property in the approved disposition program, less a discount 
determined appropriate by the Secretary but not less than 10 percent.
    (c) Competitive sales. As an alternative to direct sales, an 
applicant, whether or not preapproved, may submit a competitive bid on 
any property listed for sale to the general public, as described in 
Sec. 291.105. If the HUD Field Office accepts the bid, the net amount 
due HUD will be reduced by a discount determined appropriate by the 
Secretary but not less than 10 percent.
* * * * *
    8. Section 291.435(a)(1) is amended by replacing the period at the 
end of the paragraph with a semi-colon, and by adding the following 
language after the final semi-colon:


Sec. 291.435  Applicability of other Federal requirements.

* * * * *
    (a) Nondiscrimination and equal opportunity. * * * and, where 
applicable, the Americans with Disabilities Act (42 U.S.C. 12131) and 
implementing regulations at 28 CFR parts 35 and 36.
* * * * *
    Dated: April 5, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-13729 Filed 6-6-94; 8:45 am]
BILLING CODE 4210-27-P